So far, we've discussed some of the concerns we have with TIC investments and shown how to use discounted cash flow analysis to value a TIC interest with our handy spreadsheet. But you might be asking, just how prevalent are these concerns across all TICs?
To answer that, we examined 194 sets of offering documents for TICs sold from 2004-2009. This totaled $2.2 billion in equity, which amounts to approximately 19% of all equity issued by TICs in that period, and included properties from 32 states.
Year | Name | Issuer | State | Equity (MM) |
2005 | Atlantic Boulevard | DBSI | Florida | $4.99 |
2007 | Beacon Point | DBSI | Ohio | $3.60 |
2008 | Belton Town Center | DBSI | Missouri | $3.62 |
2006 | Colonnade at West Lake | DBSI | Texas | $4.95 |
2007 | Colony Commons | DBSI | Texas | $3.67 |
2008 | Houston Levee Galleria | DBSI | Tennessee | $9.80 |
2004 | Southtrust Tower | DBSI | Florida | $34.24 |
2006 | East 21st Street Buildings | DBSI | Kansas | $11.28 |
2005 | Friar's Branch Crossing | DBSI | Tennessee | $7.82 |
2007 | Goshen Village | DBSI | Indiana | $4.74 |
2007 | Haverford Place | DBSI | Kentucky | $7.15 |
2005 | Lakeview & Sojourn Centers | DBSI | Texas | $16.65 |
2008 | Landmark Towers | DBSI | Minnesota | $16.50 |
2008 | North Stafford | DBSI | Virginia | $13.22 |
2006 | Northpointe Tower | DBSI | Missouri | $6.74 |
2007 | Park Plaza Retail Center | DBSI | Texas | $8.30 |
2008 | Peachtree Corners Pavilion | DBSI | Georgia | $3.95 |
2008 | Pinehurst Square East | DBSI | North Dakota | $10.15 |
2008 | Pinehurst Square West | DBSI | North Dakota | $6.36 |
2005 | Renaissance Center | DBSI | Tennessee | $13.21 |
2004 | Republic | DBSI | Texas | $18.10 |
2008 | Romence Village | DBSI | Michigan | $6.51 |
2007 | Sherwood Village | DBSI | Texas | $1.94 |
2008 | Shoppes at Trammel | DBSI | Georgia | $3.72 |
2007 | Shops @ Katy | DBSI | Texas | $4.88 |
2006 | Silver Lakes | DBSI | Florida | $7.10 |
2007 | Village at Old Trace | DBSI | Georgia | $9.42 |
2007 | Willow Bend | DBSI | Tennessee | $2.87 |
2008 | Wisdom Pointe | DBSI | Georgia | $3.35 |
2006 | Bridford Lake Apartments | Core Realty Holdings | North Carolina | $10.13 |
2006 | Brookfield Lakes Corporate Center | Core Realty Holdings | Wisconsin | $32.00 |
2006 | Cardinal Apartments | Core Realty Holdings | North Carolina | $6.34 |
2006 | Chatham Wood Apartments | Core Realty Holdings | North Carolina | $4.39 |
2007 | Governor's Pointe | Core Realty Holdings | Ohio | $8.13 |
2006 | Hickory Creek Apartments | Core Realty Holdings | Virginia | $10.90 |
2007 | Hidden Lakes Apartments | Core Realty Holdings | North Carolina | $10.50 |
2008 | Hunters Chase Apartments | Core Realty Holdings | North Carolina | $4.93 |
2006 | Madison at Adams Farm Apartments | Core Realty Holdings | North Carolina | $11.62 |
2008 | Minneapolis Industrial Portfolio | Core Realty Holdings | Minnesota | $14.81 |
2007 | Promenade at Northridge | Core Realty Holdings | California | $11.13 |
2006 | Park West Apartments | Core Realty Holdings | Virginia | $9.89 |
2007 | Revere Holdings | Core Realty Holdings | Nevada | $17.50 |
2006 | Riverbend Apartments | Core Realty Holdings | Indiana | $30.50 |
2007 | San Antonio Airport Industrial | Core Realty Holdings | Texas | $15.10 |
2006 | Sonoma Ridge Apartments | Core Realty Holdings | California | $16.00 |
2005 | West Michigan Industrial | Core Realty Holdings | Michigan | $23.60 |
2005 | Westridge Executive Plaza | Core Realty Holdings | California | $8.50 |
2006 | Westwind Office Park | Core Realty Holdings | California | $17.48 |
2007 | Griffin Capital (Independence) Investors | Griffin Capital | Ohio | $13.10 |
2006 | Griffin Capital (Naperville) Investors | Griffin Capital | Illinois | $14.33 |
2006 | Griffin Capital (Q Street) Investors | Griffin Capital | California | $21.28 |
2006 | Griffin Capital (St. Paul) Investors | Griffin Capital | Minnesota | $19.73 |
2006 | Griffin Capital (Naperville) Investors | Griffin Capital | Illinois | $14.33 |
2007 | Marriott Courtyard-Columbus Airport | Moody National Companies | Ohio | $10.81 |
2007 | Marriott Courtyard-Columbus Downtown | Moody National Companies | Ohio | $5.85 |
2007 | Marriott Courtyard-Lyndhurst | Moody National Companies | New Jersey | $19.22 |
2007 | Marriott Fairfield Inn Meadowlands | Moody National Companies | New Jersey | $11.51 |
2007 | Marriott Residence Inn-Perimeter Center | Moody National Companies | Georgia | $7.08 |
2007 | Marriott Residence Inn-Torrance | Moody National Companies | California | $23.02 |
2007 | Marriott SpringHill Suites | Moody National Companies | Washington | $5.83 |
2008 | Marriott TownePlace Suites-Portland | Moody National Companies | Maine | $9.69 |
2007 | Fairfield Inn Denver (Denver One) | Moody National Companies | Colorado | $8.63 |
2006 | Philips Office | Moody National Companies | New Jersey | $21.04 |
2007 | Renaissance Meadowlands | Moody National Companies | New Jersey | $22.39 |
2007 | TownePlace Suites Fort Worth | Moody National Companies | Texas | $4.58 |
2007 | TownePlace Suites Mount Laurel | Moody National Companies | New Jersey | $5.60 |
2006 | Weatherford Plaza | Moody National Companies | Texas | $9.53 |
2007 | Beamer Place Apartments | Geneva | Texas | $10.16 |
2005 | Bridle Creek Apartments | Geneva | Kentucky | $13.79 |
2006 | Chesterfield Valley Medical Office Building II | Geneva | Missouri | $8.15 |
2008 | Cooper Glen Apartments | Geneva | Texas | $6.44 |
2005 | Honey Creek Corporate Center II | Geneva | Wisconsin | $11.92 |
2006 | Honey Creek Corporate Center III | Geneva | Wisconsin | $10.45 |
2007 | International Market Square | Geneva | Minnesota | $13.63 |
2007 | Carrington Ridge Apartments | TIC Properties | Georgia | $8.55 |
2007 | Duncan Distribution Center | TIC Properties | South Carolina | $7.25 |
2007 | TIC N. Central Dallas Investors | TIC Properties | Texas | $5.95 |
2007 | SBC Fenton | TIC Properties | Missouri | $6.90 |
2006 | Acropolis Office Park | TIC Properties | Ohio | $11.95 |
2005 | Southfield Office Building | TIC Properties | Texas | $8.85 |
2006 | 302 West Third Street | TIC Properties | Ohio | $8.54 |
2007 | NNN 824 North Market Street | Triple Net Properties | Delaware | $15.00 |
2007 | NNN Central Plaza | Triple Net Properties | Arizona | $32.80 |
2007 | NNN Darien Business Center | Triple Net Properties | Illinois | $13.20 |
2007 | NNN Eastern Wisconsin Medical Portfolio | Triple Net Properties | Wisconsin | $12.94 |
2007 | NNN Exchange South | Triple Net Properties | Florida | $12.34 |
2007 | NNN Harbour Landing | Triple Net Properties | Texas | $7.38 |
2008 | NNN Jacksonville Medical Plaza | Triple Net Properties | Florida | $14.04 |
2007 | NNN Mainstreet at Flatiron | Triple Net Properties | Colorado | $5.85 |
2007 | NNN Old Line Professional Centre | Triple Net Properties | Maryland | $6.65 |
2007 | NNN One Ridgmar Centre | Triple Net Properties | Texas | $11.85 |
2007 | NNN River Ridge | Triple Net Properties | North Carolina | $10.85 |
2008 | NNN Six Forks Station | Triple Net Properties | North Carolina | $11.70 |
2007 | NNN Three Resource Square | Triple Net Properties | North Carolina | $11.48 |
2008 | NNN Washington Park | Triple Net Properties | Ohio | $12.07 |
2006 | 116 Defense Highway | Direct Invest | Maryland | $7.62 |
2007 | 246 Omni Way | Direct Invest | Massachusetts | $12.59 |
2007 | 2810 North Parham Road | Direct Invest | Virginia | $7.82 |
2007 | 500 East Main | Direct Invest | Virginia | $16.90 |
2007 | Braintree Park | Direct Invest | Massachusetts | $21.94 |
2008 | Heron Cove | Direct Invest | New Hampshire | $10.63 |
2007 | Cummings Research Park - Portfolio II | Bluerock Real Estate | Alabama | $21.28 |
2007 | Summit at Southpoint | Bluerock Real Estate | Florida | $13.55 |
2008 | 1600 Barberry Lane | Grubb & Ellis | Georgia | $19.07 |
2008 | 5001 Enclave | Grubb & Ellis | Texas | $11.22 |
2008 | Oak Park Office Center | Grubb & Ellis | Texas | $18.65 |
2008 | 2650 Old Norcross | Grubb & Ellis | Georgia | $13.66 |
2008 | One Live Oak | Grubb & Ellis | Georgia | $17.49 |
2008 | Plantations at Haywood | Grubb & Ellis | South Carolina | $21.36 |
2008 | 7207 Snowden Road | Grubb & Ellis | Texas | $12.36 |
2008 | 1650 Sunflower | Grubb & Ellis | California | $14.93 |
2008 | 5200 Upper Metro | Grubb & Ellis | Ohio | $6.33 |
2007 | Houston Office Buildings | Argus Realty Investors | Texas | $13.62 |
2008 | IBP | Argus Realty Investors | Texas | $55.00 |
2007 | Hendersonville | Desanto Realty Group | Tennessee | $13.32 |
2007 | Cypress Medical | Desanto Realty Group | Kansas | $10.81 |
2007 | Clearview | Desanto Realty Group | Michigan | $9.91 |
2007 | Fox Chase | Desanto Realty Group | Ohio | $9.77 |
2008 | Hunter’S Chase | Desanto Realty Group | Ohio | $11.44 |
2007 | Perry's Crossing | Desanto Realty Group | Ohio | $10.07 |
2007 | Ashtabula Acquisition | Cabot | Ohio | $15.10 |
2007 | Northpark Southland Acquisition | Cabot | Indiana | $22.00 |
2007 | Creekside Acquisition | Cabot | Georgia | $17.50 |
2005 | Trafalgar/Avion Acquisition | Cabot | Florida | $10.70 |
2007 | Fontaine Business Park | U.S. Advisors | South Carolina | $11.50 |
2004 | North Valley Tech Center | Argus Realty Investors | Colorado | $20.20 |
2006 | Triwest Plaza | Argus Realty Investors | Texas | $17.00 |
2005 | Covington Lansing Acquisition | Direct Capital Securities Inc. | Michigan | $7.38 |
2005 | Covington Montelago Acquisition | Direct Capital Securities Inc. | Texas | $9.72 |
2007 | Courtyard Matthews & Courtyard Rock Hill | Oxford Capital Group | North Carolina | $10.33 |
2007 | Residence Inn & Courtyard by Marriott | Oxford Capital Group | South Carolina | $11.68 |
2006 | Residence Inn by Marriott - Chantilly | Oxford Capital Group | Virginia | $13.05 |
2007 | Residence Inn Charleston | Oxford Capital Group | South Carolina | $7.50 |
2007 | SpringHill Suites Riverview | Oxford Capital Group | South Carolina | $5.52 |
2007 | Crystal Lake & Pelican Pointe | Cabot 1031 | Florida | $13.00 |
2007 | East Town Acquisition | Cabot 1031 | Wisconsin | $7.10 |
2006 | Oak Grove Acquisition | Cabot 1031 | Florida | $8.65 |
2007 | Turfway Ridge Acquisition | Cabot 1031 | Kentucky | $11.75 |
2007 | Portland Senior Properties | Christopher Place | Oregon | $4.60 |
2007 | Traverse Bay Senior Properties | Christopher Place | Michigan | $4.00 |
2006 | DFW Office/Flex I | Equitable Companies | Texas | $10.85 |
2008 | Evanston Portfolio | Equitable Companies | Illinois | $9.49 |
2006 | DFW Office/Flex II | Equitable Companies | Texas | $12.75 |
2006 | Barrett Woods Corporate Center | Exchange Point Properties | Missouri | $9.49 |
2008 | Cameron Brook Apartments | Exchange Point Properties | Georgia | $17.17 |
2007 | Mapleridge Shopping Center | Exchange Point Properties | Minnesota | $7.72 |
2007 | Southridge Plaza | Exchange Point Properties | Texas | $6.47 |
2007 | Dobson Ranch | Geyser Holdings | Arizona | $4.90 |
2009 | Keaau Hawaii | Geyser Holdings | Hawaii | $4.33 |
2008 | Showplace | Geyser Holdings | Indiana | $5.59 |
2007 | Yuma | Geyser Holdings | Arizona | $6.00 |
2006 | Springs - Office Investors | Meridian | Kentucky | $15.39 |
2006 | Atlanta One | Moody National Companies | Georgia | $7.21 |
2006 | Memphis Residence Inn | Moody National Companies | Tennessee | $6.93 |
2006 | Residence Inn Lebanon | Moody National Companies | New Hampshire | $9.36 |
2006 | Texas Two | Moody National Companies | Texas | $9.30 |
2008 | Madison At Fairwood Apartments | Passco Companies | Washington | $16.90 |
2006 | 121 Airport Centre I & II | Principle Equity Management | Texas | $16.87 |
2007 | Johns Creek Office Portfolio | Principle Equity Management | Georgia | $12.64 |
2007 | Technology Parkway Office Portfolio | Principle Equity Management | Georgia | $13.30 |
2005 | Thistle Landing | Principle Equity Management | Arizona | $22.35 |
2007 | University Shopping Center | Principle Equity Management | Texas | $7.56 |
2005 | Baylor Garland Medical Plaza | Rainier Capital Management | Texas | $5.60 |
2006 | Business Exchange | Rainier Capital Management | Missouri | $3.19 |
2007 | Enclave Parkway | Creekstone Partners | Texas | $11.54 |
2007 | Woodlands | Creekstone Partners | Texas | $7.36 |
2004 | Cypress Pointe IV | Mammoth Equities | California | $14.65 |
2005 | Professional Building - Roseville | Mammoth Equities | California | $7.72 |
2007 | Vista Ridge | Sequoia | Texas | $9.39 |
2007 | Forum | Sequoia | Texas | $12.00 |
2006 | The Best Western Airport Inn Fort Myers | Gibralter Holdings | Florida | $10.69 |
2006 | Maunakea Marketplace | Gibralter Holdings | Hawaii | $6.30 |
2008 | Algonquin Galleria | Nelson Bros. | Illinois | $9.54 |
2006 | Pueblo Crossing I | ORIX EMPIRE | Colorado | $6.00 |
2007 | Kansas City | ORIX EMPIRE | Missouri | $8.60 |
2007 | Battle Creek I | ORIX EMPIRE | Oklahoma | $14.00 |
2006 | Fountains II And Fountains III | Wilkinson | Illinois | $7.01 |
2006 | State Of Michigan Building | APCA | Michigan | $3.69 |
2007 | Landmark/Laumeier Office Portfolio | Bluerock Landmark | Missouri | $7.53 |
2008 | Meadow Green Apartments | Delmar Equity Partners | Texas | $2.40 |
2007 | Colonnade At King’S Grant Shopping Center | Kodiak | North Carolina | $3.85 |
2007 | Hotel Indigo Peachtree Street | Pennbridge Capital | Georgia | $8.40 |
2006 | RMC AutoSonic BMWN League City | RMC Property | Texas | $9.95 |
2007 | Selina Plaza | TIC Capital | Florida | $2.54 |
2006 | State Farm Insurance Building | TIC Capital | California | $7.05 |
2008 | 2801 East Enterprise Drive | Whitecap Real Estate | Wisconsin | $2.38 |
2006 | Rambling Oaks Assisted Living And Rambling Oaks Courtyard | Wilkinson 1031 | Oklahoma | $7.20 |
2007 | Northgate Business Center And Blackhawk Corporate Center | Argus Realty Investor | Arizona | $20.55 |
2006 | 220 Virginia Avenue | Triple Net Properties | Indiana | $20.76 |
2005 | Sixth Avenue West | Triple Net Properties | Colorado | $6.60 |
2005 | Woodside Corporate Park | Triple Net Properties | Oregon | $24.65 |
2006 | Las Colinas Highlands | Triple Net Properties | Texas | $15.40 |
2007 | Laveen Village Marketplace | Passco Companies | Arizona | $8.50 |
2005 | Legacy | RMC Property | Texas | $9.78 |
After we compiled this information, a couple of things stood out. We have said before that TICs tend to have high upfront fees. In our database, the average upfront fees totaled 28% (!) of total equity. The lowest upfront fees were a still-high 17%, and the highest was a remarkable 72%. We have also said that TICs tend to be highly leveraged (i.e., use a lot of debt). Some TICs had no leverage, but both the average and median debt-to-equity ratio (total debt / total equity) across our sample was 1.56.
We've also talked about how TICs tend to have low net present values, even taking a sponsor's projected cash flows at face value. When we valued all the sponsor's projections in our database, we found that the average TIC was worth only 83.6 cents on the dollar.1 But were the sponsors' assumptions valid?
For each property, we compared the cap rate used by the sponsor to cap rates published by a real estate market analysis firm. Cap rates are used to estimate the final value of the property at sale. The lower the cap rate, the higher the resulting property value. We found that sponsors tended to use cap rates that were lower than market rates, inflating the property value at sale, as shown in the figure below (Figure 10 in the paper):
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1 Sponsors often include multiple projections, especially for cap rate assumptions. We valued each of these alternative projections and averaged the resulting values.
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