Tenancies In Common
The Tenancies In Common Group of Kennerly Lamishaw & Rossi is recognized as one of the nation’s leading firms providing advice and counseling to tenancy-in-common (TIC) investors. Our TIC clients have invested in a widerange of property types located throughout the country, including multi-family, office, industrial, hotel, and even golf course properties. We provide advice regarding dispositions, re-financings, workouts, and restructuring of management vehicles. The majority of the investors that we represent participate as TIC co-owners of their properties, but some derive their ownership through the more complex Delaware Statutory Trust structure. Some of our clients’ properties are operated by the original investment sponsor (or their successors) through asset and property management arrangements, while others are master leased by a sponsor who operates the property and is obligated to send monthly payments to the investors.
Handling TIC projects presents a lawyer with several unique challenges. The first is that TIC work is a new practice area for the legal profession. Promoting and investing in TIC projects is a fairly recent phenomenon; working out and disposing of TIC projects is even newer and basically uncharted territory for most law firms. Legislation and case law governing TICs is still evolving. It is not a “one size fits all” type of practice. There are no standard form agreements or boilerplate provisions to deal with a distressed TIC property. However, the biggest challenge which a lawyer faces in a TIC project is how to bring a diverse group of TIC owners together as a cohesive group capable of acting in the best interests of the individuals involved and for the collective good of the project. KLR has been a pioneer in representing
Over the past several years, we have been involved in:
- 50 or more performing projects owned by TIC owners who were refinancing or selling their properties; and
- more than 40 “distressed” TIC projects (which are projects that need assistance because the sponsor can no longer make monthly Master Lease payments, or the investors can no longer make monthly debt service, or the original acquisition loan has matured and the TIC owner or their sponsors are desperately seeking replacement financing).
To compensate for the impediments to financeability inherent in a TIC structured property and/or to address what is the prerequisite of many lenders to the refinancing of the original acquisition loan (which loan in many cases is delinquent or immediately maturing in a distressed TIC project), we routinely represent TIC owners in the “roll-up” of their TIC interests into a limited liability company (i.e., exchanging individual TIC interests for membership interests in a limited liability company).
With each TIC project having between 15 and 50 TIC investors, KLR has the unique ability to work with large numbers of TIC owners at any one time. Our goals are always to:
- coalesce the group
- build consensus
- find the creative and workable solution
- work for the collective good of the group and the project
During the past 12 – 24 months and as a result of the current real estate crisis, we have worked on the following TIC transactions of note:
Geographic and Property Diversity: KLR has worked on TIC projects as diverse as non-performing hotels in the Mid-Atlantic region, office buildings in Texas, and large scale apartment projects in Arizona, South Carolina and Kansas. We recently assisted a group of TIC owners in a Florida apartment investment who desperately needed time to explore the refinancing or sale of their property. We rolled up the TIC interests into a LLC and negotiated a one-year term extension of a +$15 Million note with the lender. Last month, we represented that same group of owners in the sale of the subject property which enabled them to recover a significant proportion of their initial investment.
Strong Leadership: KLR has the experience to recognize patterns in a property’s performance and its management and to recommend courses of action that are effective and cost efficient. Recently, a group of TIC owners came to KLR complaining that their sponsor was more than a year delinquent in payments to them and apparently engaged in some questionable practices. KLR stepped in and assisted the TIC investors in:
- evicting the sponsor/Master Tenant
- reorganizing the group as a limited liability company with a structure that allowed the owners to operate the property themselves
- recapitalizing the company for their own benefit, all with lender consent and approval.
Practical Solutions: KLR understands all aspects of real estate investments – from the perspective of the sponsors, investors and lenders. This allows us to structure workable, practical, and mutually
beneficial solutions. We recently represented a group of TIC owners owing seven different multi-family projects in Texas. We successfully negotiated modifications to the master lease arrangements with the sponsor whereby the sponsor agreed to invest additional money to meet the properties’ current capital needs in exchange for a reduction in the payment obligations to owners so that the same were more in line with the properties’ actual and projected cash flows. It was a result that worked for all parties and the good the projects.