| TIC MONTHLY |
Volume 4 - Number 5 | May 9, 2008
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Los Angeles—With a plan “to expand and diversify the company’s sources of investment capital, range of products and brand development,” Los Angeles-based SCI Real Estate Investments LLC has hired Daniel Oschin as president of its affiliate SCI Capital Group LLC. Oschin, who was previously EVP and director of real estate services at AFA Financial Group LLC of Calabasas, CA, is also a principal of the company and managing director of SCI Real Estate Investments.
The company’s expansion and diversification plans include products focused on specific asset types, joint venture programs, ground-up development, and value-add investment opportunities--all designed to leverage off of SCI’s brand and reputation, says Oschin. Two specific programs in the works include one that will tap German investor equity, and another that will invest with capital from Korean, Japanese, Chinese and Middle Eastern capital sources in a number of ventures, including, potentially, a student housing property fund.
“We’re going to build the company into the best TIC sponsor and one of the best real estate investment companies in the country,” Oschin says. TICs have been and will continue to be a mainstay of SCI’s business, he adds. “But as dynamics change, they’re going to change as well,” he says.
“I think that the world of securitized real estate is changing, especially with TICs,” Oschin tells TIC Monthly. “When the whole credit crisis is over, the question is, who will still be left standing? He later adds, “We are going to take a much more active role in developing securitized programs for the securities industry.”
SCI Capital was launched last year to sponsor securitized real estate investments--a departure from SCI Real Estate Investments’ history in the non-securitized side of the TIC investment business--and AFA was tapped to be its managing broker-dealer. Its first non-TIC product was a mezzanine fund.
“We are excited to have Daniel join us in such a key role,” Marc Paul, president and co-founder of SCI Real Estate Investments, says. “His leadership and broad range of experience and expertise in the real estate and securities industries will help to continue our successful transformation from one of the finest tenant-in-common sponsors in the market into one of the premier real estate companies in the country.”
Oschin’s 20 years of experience include owning, operating and managing businesses in a number of industries, including real estate, asset management, securities and financial services. He has been involved in the acquisition, development, property and asset management, redevelopment, divestment and syndication of more than $500 million of commercial real estate investments, and has been responsible for equity procurement that has resulted in more than $2 billion of syndicated real estate investments since 2005.
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Dividend Capital Group
Denver
Denver-based Dividend Capital Group was founded in 2002 by a group of partners that brought to the company private and institutional real estate investment experience. It started with a non-traded REIT, the former Dividend Capital Trust, which today is the publicly traded DCT Industrial Trust Inc., and has been expanding into other forms of commercial real estate investment products ever since.
In addition to raising capital from shareholders, that original industrial REIT also tapped equity in the tenant-in-common investment market, and by doing so built the foundation of Dividend Capital Group’s involvement in the TIC industry today. Currently, through its Dividend Capital Exchange division, the company sells TIC interests in properties from its more recently launched non-traded REIT-- Dividend Capital Total Realty Trust Inc. While it sells a small percentage of its TIC product through BDs that specialize in TICs, it sells a significant amount through more typical independent BDs, company executives say.
The platform makes the company unique among TIC sponsors in several ways: for one, TIC sales essentially raise capital for the REIT. In addition, TIC investors purchase interests in properties that have been underwritten and acquired by a REIT which currently has $1.5 billion of assets, comprised of more than 10 million sf in 19 markets coast to coast. Also unusual is that with each TIC offering, the REIT maintains a purchase option to acquire the TIC interests from their owners beginning two years after the last investor closed on their interest. Should the option be exercised, investors receive operating partnership units in the REIT through its upREIT structure, taking advantage of a tax-deferred 721 exchange and receiving an ownership interest in the REIT’s entire diversified portfolio.
The industrial REIT sponsored 27 TIC programs, and so far Dividend Capital Total Realty Trust has sponsored 12 programs. The latter, a diversified REIT with assets representing a number of different property types, “looks for properties that meet the REIT’s investment criteria,” regardless of whether or not it will work well for a TIC program, explains Jill Mozer, SVP and managing director of Dividend Capital Exchange. Once acquired, the Exchange team will look at the properties to determine whether they might be appropriate for the TIC market.
“At the REIT level, we underwrite these properties as if we’re going to own them, so the real estate underwriting is the same,” says the REIT’s president, Guy Arnold. “We make the assumption on every single property that we are going to own it outright.”
“We’re real estate owners and operators,” Arnold adds. “We have a large portfolio that’s growing, and we understand these properties well.”
Building on its TIC industry history thus far, Dividend Capital is exploring some new products that will also target the co-ownership investment market. One is the possible use of the DST structure for multiple-property offerings; another is a possible TIC structure with a longer-term holding structure, through which the REIT will maintain an ownership interest and which, unlike the programs the company has done to date, would not be subject to a master lease. “We’re constantly looking at other investment products,” says Mozer. Regarding the different structure, she adds, “we’re just waiting for the right properties for that program.”
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2006 Equity Raised: $159 million of equity.
2007 Equity Raised: $68 million of equity.
2008 Projections: The company has raised $25.2 million of equity to date this year, and is projecting that it will raise $160 million of capital this year in the TIC market. “We definitely have felt the slowdown in the marketplace,” says Mozer, “with investors not being able to sell their relinquished properties.”
TIC Properties Gone Full Cycle? Yes. All 27 of the industrial REIT’s TIC programs have gone full cycle through its purchase option, and those TIC investors now own OP units in DCT Industrial Trust. Of the 12 Dividend Capital Total Realty Trust TIC programs, two have gone full cycle and several more are in the process.
Property Type Focus: While clearly the industrial REIT’s programs were exclusively industrial assets, Dividend Capital Total Realty Trust’s TIC offerings reflect that REIT’s diversification: six have been with industrial properties, two office and four retail.
Regional Focus: National.
Recent Transactions: Dividend Capital Total Realty Trust recently acquired a two million-sf portfolio of 26 grocery-anchored retail properties in the Boston and Cape Cod markets. “These are locations where it’s almost impossible to come in and build competing properties,” notes Arnold, stressing the high-barrier-to-entry nature of the properties that made them such an attractive acquisition target. Three of the properties have been sold in the TIC market, and several more may be as well.
Securitized Investment: Given that its TIC program grew out of a publicly registered, non-traded REIT, securities were the only way for the company to go. “Because we started in conjunction with our first non-traded REIT, it wasn’t an issue for us,” says Mozer. “It was a non-starter to consider going down the real estate path.”
Master Lease or Management Agreement: Dividend Capital’s TIC properties are subject to what Mozer describes as a true bondable master lease--typically for 15 years--backed by the REIT’s balance sheet. The master lessee is a subsidiary of the REIT’s operating partnership LP.
TIC vs. DST: So far, Dividend Capital has only sponsored TIC programs, but it is currently looking at the DST structure for possible future co-ownership deals. “The REIT has opportunities to acquire large portfolios,” she notes, which could lend themselves to multiple-property offerings with smaller minimum investment requirements due to the larger number of investors the DST structure can accommodate.
Closings & Debt Financing: The sponsoring REIT purchases a property first, all-cash, then places debt on it, prior to any syndication to TIC investors. At the REIT level “we’re always thinking about our capital structure,” says Arnold. “We’re not a group that likes to take interest rate risk.” He adds, “We have a low cost of capital, and really no debt maturing in the next couple of years.”
Other relevant investment vehicles: The Dividend Capital Group encompasses a number of different investment entities and vehicles in addition to Dividend Capital Exchange and Dividend Capital Total Realty Trust, including: Black Creek Global Advisors; Dividend Capital Investments, which manages open- and closed-end funds and institutional separate accounts; Dividend Capital Global Real Estate Fund of Funds; Dividend Capital Securities LLC; and First Dominion Capital Corp. The company also sponsored Dividend Capital Trust, its first non-traded REIT, in 2002. It is now a publicly traded company called DCT Industrial Trust Inc.
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Glen Allen, VA—Spectrum Realty Advisors LLC is in the midst of fundraising for its newest venture, Spectrum Realty Mezzanine Fund I LLC, and already has the fund’s first two loans in the works.
The fund is a result of the investment banking services Spectrum Realty has sought to offer TIC sponsor clients since its formation last year by locally based CEO Louis Rogers and New York City-based president Steve Waldman. From the company’s earliest days, “The one thing that came up in virtually every sponsor meeting was the need for mezzanine financing,” says Rogers. But he says he found introducing sponsors and the TIC structure to Wall Street money sources to be a dead-end. “After bringing lots of people to the money and the money liking their deals,” Rogers adds, “none of them could understand it.”
So with their knowledge of the TIC industry’s sponsors and the deal structure itself, Rogers and Waldman decided to form their own fund. “We can cut to the chase much more efficiently,” he says.
Since it’s still in fundraising mode, Rogers is limited in commenting on some details, but he tells TIC Monthly that Spectrum expects the mezz fund to have three to five loans outstanding at any given time, with a typical turnover for TIC loans in the 90-day range. It will aim to be diversified, he says, by sponsor, property, asset type and geographic markets. It will also make two kinds of loans: mezzanine loans for TIC sponsors, to bridge the gap between property purchase and completed syndication, and preferred equity pieces or secured loans that are junior to first mortgages in opportunistic plays.
Its first loan, which Rogers says is expected to close within the next few weeks, is of the latter type, helping to finance a new owner’s turnaround of an apartment community near Atlanta that Rogers says “has an enormous profit potential but needs to be renovated and stabilized.” A second loan--with what Rogers describes as “a household name TIC sponsor”--is also in the works.
The CEO says that while the dramatic slowdown in senior lending for real estate deals has had an impact on demand for mezzanine financing, there are few sources of “inventory financing” available for the needs that exist among TIC sponsors. He also notes the senior financings that are getting done today are requiring lower loan-to-value ratios, so “not only do the sponsors need mezzanine to finance their inventory, they need more mezz,” Rogers observes.
Sponsors may be needing that financing for a longer period of time, as well, as the market’s sales velocity moves at a slower pace than in prior years. According to the latest TIC market data from Salt Lake City-based Omni Consulting & Research LLC, the average syndication time in the fourth quarter of 2007 was 129 days--up from the third quarter’s 92 days, the second quarter’s 116 days and the first quarter’s 96 days.
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Arnold S. Harrison is a partner in Jenner & Block LLP’s Chicago office and is a leading authority on the use of the Delaware Statutory Trust in co-ownership investments. TIC Monthly recently asked Harrison to discuss industry interest in DSTs given the current debt market environment.
Q: You’re hearing from sponsors who haven’t been your clients and perhaps have not used the DST before, but are now interested in structuring these deals. Anecdotally, what kind of new interest are you seeing in the DST?
A: Most of the conversations I’ve had usually happened at a TICA or other conferences, where sponsors have come up to me and asked me some questions. But I found recently that at the Salt Lake City conference in March, there were a number of sponsors, who know me from speaking, that told me that they’re very interested in doing DSTs and would like to engage me because of some of the nuances and the practical aspects which you pick up on when you do a lot of these deals. Interestingly enough, I just got off the phone with a law firm that had a call from one of its lending clients--they’re looking to do a DST loan and the law firm hadn’t done any of these before. So they asked if they could engage me to advise them on how a lender should look at this. Of course, I told them we have to make sure that I have no conflict issues.
Q: And what’s causing this new interest--is it solely a function of the debt markets or are there other factors at play?
A: I think primarily the interest is a function of what’s happening in the debt markets. There have been three basic types of lenders. There are the traditional portfolio lenders such as--insurance companies and banks that are holding the debt for their own accounts. Then there’s the CMBS originators who place and underwrite the debt with the intent of selling it off in a secondary market. And then there are financings done with assumable debt. Recently, with the credit crunch, there really is no secondary market anymore so CMBS lending has totally dried up. That market was the basic market financing TIC deals. They did some DST deals, but a lot of the B-piece buyers and special servicers weren’t comfortable with the Delaware Statutory Trust or didn’t want to make any effort to try to learn it. But that market is totally gone now.
That leaves the two other sources. My experience with portfolio lenders, insurance companies and the like, is that they prefer a DST to a TIC loan for various reasons, mainly being that they don’t have to do 35 loans and have only one entity owning the property. Also, I’ll lump them with the portfolio lenders, Fannie Mae and Freddie Mac. Fannie Mae does not like TIC deals; and they won’t do a TIC loan with more than three or five TICs. I think Freddie views this in the same way. Fannie will lend to DSTs if they are otherwise willing to do the loan, and have generally not looked unfavorably on the DST. I’ve done about six loans with them recently. The other source of sponsor funding is trying to buy property with assumable debt. It’s been my experience that a lender is very unlikely to allow 35 different parties to assume their loan. It is possible however, to get a lender to look at a DST if the loan is to be assumed.
Q: What types and terms of loans can a sponsor expect to get in the marketplace right now for DST deals?
A: A lot of lenders just don’t want to make loans because they have too much debt on their balance sheets, and because of accounting write-offs, their net worth and their capital have been reduced. But to the extent they’re being done, we’re seeing most of the loans go out anywhere from seven to 10 years before they balloon. However, where until recently there were interest-only loans, or long interest-only periods, what I’m seeing now is that most loans will either have to begin immediately amortizing principal, usually on a 30-year basis, or begin amortization in two to three years. Obviously there continues to be strong underwriting with respect to the properties, and it appears that the lenders are requiring more reserves and more equity in the properties. The best way to get a loan is to have a very strong banking relationship, either local or regional, where the lender trusts the sponsor and wants to do business.
Q: Are there any other limitations that a sponsor should consider?
A: A DST loan, when it’s done right, very much resembles a loan to a limited liability company, so you really have just the kind of limitations you’d have on a limited liability company. The banks generally prohibit anyone owning greater than 49% of the total equity. They will only underwrite the investor if he or she owns 20% or more of the investment (that’s the ‘know your borrower’ rule). Obviously they want to make sure that all the beneficiaries are accredited and that they pass muster under the Patriot Act. Other than that, they’re really O.K. with it. Of course, the DST must be a special purpose entity and must be bankruptcy-remote, but that’s no problem because the documents and Delaware law provides for that.
Q: Does recourse come into play at all?
A: That’s another benefit to a DST investor. In a TIC deal, there is recourse to the investors on the ‘bad-boy and environmental carve-outs.’ Now, I’ve never thought this a very a big deal because the TICs shouldn’t do any of the things which would trigger a bad-boy carve-out. It really requires willful malfeasance, or 'being bad' in layman’s terms. And the environmental issues--I think it’s been 10 or 15 years since I’ve even heard of a case where a lender ended up having environmental problems just by making a loan. The days of those Superfund cases are over. So I’ve never thought it should be an issue, but investors get nervous about these kinds of things. But in a DST structure, the beneficiaries don’t have to sign any of the carve-outs; the lender will ask the sponsor to sign on both of those, and the sponsor is usually pretty comfortable with that. Other than that, the loan will be totally non-recourse.
Q: What’s your sense of how BDs, reps and investors receive the DST versus TICs or other exchange options?
A: That’s a hard question. I would think an investor would rather be in a DST, because it’s so much less work for them, less things to sign, less upfront and continuing fees, and they’re not on the carve-outs or exposed to wrongful conduct of the other owners. One concern BDs and reps have had in the past is that the investors have no say on property operations. But I think investors are starting to see that they’re much better off having a sponsor who can act when something comes up that needs immediate attention, rather than having to rely upon the unanimous agreement of 34 other people that they’ve never met. There have been difficult situations because a TIC structure prevented quick action that would not have happened in a DST structure.
I think BDs have generally been O.K. with the DST structure. It’s simpler for them because there are no separate real estate and loan closings. In the past, I’ve found there’s been a great deal of reluctance with investor reps. I think a majority of it was a lack of understanding. There are some weaknesses--it’s not a perfect structure, but it is better than a TIC structure. And lately what I’m seeing is the investor reps are really coming around because they’re concerned that if they don’t do a DST, they’ve got nothing to sell in the 1031 market.
We shouldn’t short-shrift those sponsors who don’t want to do DSTs. I think one main reason has been that unless the investment is a single credit tenant, triple-net lease, in order for the DST to work under tax law there must be a master lease structure. This puts extra exposure on the sponsor because they have to make the master lease rental payments regardless of how the property does. Many sponsors just haven’t wanted to do master leases, and if that’s the case they can’t do a DST. Some BDs and reps also didn’t like doing master lease deals, but they didn’t realize that what they didn’t like was the master lease, it wasn’t the DST structure. If you’re a lender, you should love a master lease, because it makes another party liable for making those debt payments, regardless of how the property goes. And although the master tenants may not be greatly capitalized, there is capitalization, which can be used to support the property.
Q: Do you have an estimate of how many DST deals have been done in the market since the Revenue Ruling 2004-86 and how much it might grow?
A: I’ve done more than 75, and I assume other attorneys, as a group, have done more. Most DSTs are with triple-net lease properties; those are easy and even the lenders seem comfortable with it. But with sponsor/master leases it takes more planning and thoughtfulness to reach a balance in allocation of risks between the sponsors and the investors. I don’t know that you’ll see more DSTs, but you’re certainly going to see DST deals as a greater percentage of all 1031 deals than you did before, at least until there’s a resurgence in the credit markets.
Q: So does the DST represent the best area of opportunity for sponsors right now?
A: I think it does because there’s few lenders out there making TIC loans. What’s key about this is that sponsors understand what they’re getting into, that they’re willing to take more operational risk and do a master lease. But they can try to build some upside into it, too. I think there are now more possibilities for doing a DST for much larger properties. When you start talking about a property in the $100-million range, a TIC deal is problematic because the minimum investment becomes so high. But in a DST there’s really no limit on the number of investors, other than staying below 500 to avoid the DST becoming a public reporting company. There are sponsors who are looking to do a DST with large retail and office properties, with hotels, and with self-storage properties. The ability to sell much smaller minimums, which allows the investor more diversification, is a big plus for everybody.
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Salt Lake City—Locally based Omni Brokerage Inc. and Orchard Securities LLC now have a new third affiliate in Omni Real Estate Services LLC. ORES, for short, officially launched on May 1 combines the due diligence, underwriting and research and consulting capabilities of Omni and Orchard into one organization. It also expands the services it can offer to Omni reps, their retail clients and the sponsors for which Orchard acts as managing broker-dealer.
“We want to make sure we’re as full-service for those constituents as possible,” Jim Shaw, president of the new ORES entity and president and CEO of Beverly Hills, CA-based CapHarbor LLC, tells TIC Monthly.
The new services will focus on making available sole-ownership property opportunities--which will be a complement to TIC product for Omni’s reps--and mortgage brokerage services. Shaw’s real estate brokerage and mortgage brokerage licenses have been transferred to ORES. In addition to Shaw, the management team is led by chairman Greg Paul and CEO Charlie Badalamenti, who, along with Kevin Bradburn, are also executives of Omni and Orchard. Shaw has also been named chairman of the Omni investment committee, of which he was previously a member.
Shaw says launching the new entity and consolidating the due diligence, underwriting and research capabilities was a result of several factors, one of which was a desire for the teams at both the Omni and Orchard organizations to be able to share best practices, a matter of efficiency particularly important at a time when the industry is going through some consolidation. Another is that company chairman Gary Beynon and his wife Robyn depart in June for a three-year voluntary church mission to Brazil. Benyon remains chairman of Omni, though he will not be involved in day-to-day management until he returns.
In light of this, several changes have also been made at the top levels of Omni Brokerage’s senior management team--Paul is taking over the CEO role and Badalamenti is taking over the president’s position. Paul is also CEO of Orchard and Bradburn is its president.
“This is a major milestone for Omni,” Badalamenti says in an company announcement about ORES. “We strive to remain at the forefront of this growing industry by providing quality investment products and professional investment services. This new entity will strengthen our position in the marketplace, better serve investors and position us for continued growth in the real estate industry.”
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New York City—New data has confirmed what anecdotally appeared to be the trend in 1031 exchange volume: a significant drop off has occurred in 1031 exchange activity.
The number of such tax-deferred exchanges undertaken during 2007 was less than half that of the peak year of 2005, according to preliminary numbers researched by Lou Weller, San Francisco-based director of real estate transaction planning services at Deloitte Tax LLP. Releasing the data for the first time at the April 29 RealShare Net Lease conference in New York City, Weller characterized the decline in exchange activity in 2007 as “dramatic.”
The new data updates Weller’s prior studies with preliminary 2007 numbers that are based on a recent survey of the country’s largest qualified intermediaries. The RealShare conference series is produced by Real Estate Media, publisher of TIC Monthly.
While not quite as drastically, the dollar value of both relinquished and replacement properties were down in 2007 as well. In addition to recent changes in the real estate market that have slowed down investment activity, one factor impacting individual taxpayer exchanges, said Weller, is that some people are opting to pay taxes now rather than risk an increase in the capital gains tax in the future, which many believe is likely after the next election.
Among Weller’s other findings from his recent survey of QIs:
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A snapshot of properties available in the 1031 exchange co-ownership market on March 31 show that TIC deals with property management agreements constituted the majority of the marketplace at 65%. Master lease deals, according to the data from Salt Lake City-based 1031PropertyWatch, represented 30%, and DST deals represented just 5%.
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Irvine, CA—An “Up Close” interview with Grubb & Ellis Realty Investors LLC president and chief investment officer Jeff Hanson and a special presentation of key TIC market statistics and trends by Omni Consulting & Research LLC VP Manny Nogales will headline the third annual RealShare TIC conference next month. Taking place on June 3 at the Hyatt Regency Irvine in Irvine, CA, the full-day educational and networking event will also have industry leaders take the pulse of the TIC market at a special “Town Hall Meeting,” a panel focused on “Debt Financing in Today’s Environment for TIC & DST Deals,” the latest examination of the “SEC Exemption: Opportunities and Challenges for the TIC Market,” and discussions of the pros and cons of the master lease structure, alternative investment products for sponsors and reps, and whether the DST is poised to gain momentum in the co-ownership market. Another feature of the conference will be two breakout sessions specifically geared to commercial real estate brokers who want to learn about the TIC market in anticipation of a possible SEC exemption that could affect them.
“RealShare TIC will once again offer the fresh and forward-looking kind of agenda that has made it stand out on tenant-in-common pros’ calendars and become a must-attend event,” says Richard Kelley, executive director of the RealShare Conference Series. “We will be interviewing one of the leading newsmakers in the industry in Jeff Hanson of Grubb & Ellis, have a consistent focus on how the liquidity and credit crunch are impacting the market and when and what it will take for the situation to change, and feature two panels designed to appeal to commercial real estate brokers who we are aggressively recruiting to come to the event in anticipation of the NAR exemption becoming a reality. Couple all that with up-to-the-minute market data from Omni Consulting & Research and high-level networking and you can’t afford to not be at RealShare TIC if you are a serious player in the TIC universe.” The RealShare conference series is produced by Real Estate Media, publisher of TIC Monthly. More information about the conference can be found at the RealShare website.
New Sponsor Nelson Bros. Hires Morales
Aliso Viejo, CA—Locally based Nelson Brothers Professional Real Estate LLC, a new TIC investment sponsor, announced that it hired Karen Morales as VP of real estate and TIC programs. Previously, Morales was VP of real estate closing at Argus Realty Investors LP. She has also worked for Chicago Title Co., Fiscal Federal Credit Union and Vista Federal Credit Union during her career. Nelson Bros. was founded by Brian Nelson, deputy director, and Patrick Nelson, executive director, in 2007. It has not closed a TIC offering yet, but according to a recent announcement intends to syndicate eight to 12 properties during 2008. The Nelsons also work at the sponsor’s managing broker-dealer, San Francisco-based White Pacific Securities Inc. Patrick Nelson is a partner and the managing director of White Pacific’s 1031 exchange program, and Brian Nelson runs White Pacific’s 1031 exchange desk.
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Exeter 1031 Opens New York Office
East Northport, NY—Qualified intermediary Exeter 1031 Exchange Services LLC expanded its East Coast presence recently with the opening of its first New York branch office here. This brings San Diego-based Exeter’s number of branch offices to 10. “We are very excited about our long-term prospects for 1031 exchange business on the East Coast, especially in the New York real estate market,” president and CEO William L. Exeter says.
Thompson Launches TNP
Irvine, CA—It’s official: Tony Thompson, a tenant-in-common industry pioneer and the founder of the former Triple Net Properties LLC, has established his new company. Thompson National Properties LLC, based in Irvine, CA with additional offices in Denver and Las Vegas, is focused on “providing value-added real estate investment opportunities and asset management to high-net worth domestic, foreign and institutional investors,” according to an announcement. There are no plans for TNP to sponsor TIC deals at this time, says a spokesperson, but Thompson is investing $10 million in the company’s first value-add fund. “Buy into fear and sell into greed has never been more appropriate,” the TNP chairman and CEO says. “As a survivor of four recessions, we believe our experience and acquired good judgment provide our investors with a disciplined team geared for extraordinary results.” Among the senior executives joining Thompson at the new company is Jack Maurer, who has been named vice chairman, partner and founding member. Maurer was a co-founder of Triple Net Properties and held various senior positions with it and its affiliates over the years. Thompson resigned his post as chairman of Grubb & Ellis Co. in early February, just two months after the merger of Triple Net parent NNN Realty Advisors Inc. with Grubb & Ellis was completed.
TIC Sponsors Queue Up New Non-Traded REITs
Ladera Ranch, CA—U.S. Commercial LLC, based here and an affiliate of Napa, CA-based U.S. Advisors LLC, is sponsoring a new nontraded REIT focused on the self-storage property sector. According to a filing with the SEC, Strategic Storage Trust Inc. is looking to raise as much as $1 billion to invest in self-storage properties and related real estate investments in the US and possibly outside of the country. Its offering registration became effective in March. The REIT is headed by chairman and president H. Michael Schwartz, who is also president of U.S. Commercial; EVP and secretary Paula Mathews, who is VP of commercial operations at U.S. Commercial; and CFO and treasurer Michael S. McClure. While the REIT itself does not plan to sponsor tenant-in-common or DST offerings, according to its filing, it may purchase co-ownership interests “from an affiliate of our advisor, generally at the cost of the property paid by such affiliate.” Meanwhile, another REIT may be forthcoming from another tenant-in-common sponsor. According to its most recently amended prospectus, filed in late December, Green Realty Trust Inc. could raise up to $1.65 billion to invest in “green” or “environmentally-friendly” properties, such as those that have achieved LEED status. Green Realty Trust is sponsored by Chicago-based Insight Real Estate LLC, which is owned and managed by Wayne R. Hannah III, better known as Rob Hannah, who is also president and CEO of TIC sponsor TSG Real Estate LLC. According to the filing, Hannah is president of Chicago-based Green Realty Trust and Lawrence Skibo is its VP and national sales director.
FactRight Adds Research Analyst to Team
Minneapolis—Locally based FactRight LLC added a research analyst to its team with the hiring of Brandon L. Raatikka, who will oversee the company’s third-party due diligence of TIC property reports. An attorney, Raatikka “will mange the compilation, completion and distribution of all TIC property reports to broker-dealers and other advisors who represent these transactions.”
Wachovia 1031 Seminar on Tap May 15-16
Orlando—Wachovia Exchange Services’ annual 1031 Like-Kind Exchange Seminar will take place at the Ritz-Carlton Orlando, Grande Lakes May 15-16. Agenda topics and speakers for the ninth annual conference will include “Recent Developments and Legislative Highlights” with David Shechtman of Drinker Biddle & Realth LLP and Louis Weller of Deloitte Tax LLP; an economic overview by Wachovia senior economist Mark Vitner; “TICs-Development of the Market After RevProc 2002-22” with Terence F. Cuff of Loeb & Loeb LLP, Richard M. Lipton of Baker & McKenzie LLP and Robert D. Schachat of Ernst & Young LLP; “State and Local Issues Affecting Exchanges” with Adam Handler of PricewaterhouseCoopers LLP and Weller; and a discussion of “Security of Exchange Funds” by Cuff and Shechtman. Other speakers at the conference will include the Real Estate Roundtable’s Stephen M. Renna and keynote speaker Ken Mattingly, the veteran Apollo and space shuttle astronaut.
Hutchison Named President of Evergreen Property Management Affiliate
Pasadena, CA—Evergreen Realty Group has recruited Kay Hutchison as president of Evergreen Real Property Management LLC, the new affiliate formed to manage current properties and future acquisitions for the Pasadena, CA-based sponsor. Hutchison was most recently portfolio manager for Real Property Systems, which previously provided property management for most of Evergreen’s portfolio. “We are adding new types of real estate securities offerings to our main product line of TIC 1031 exchanges, and it is time to bring tight internal control over all property management and administrative functions inside the organization,” Evergreen CEO Luke V. McCarthy says.
Waddell Promoted at Grubb & Ellis Realty Investors
Santa Ana, CA—Michael Waddell was promoted to SVP of asset management at Grubb & Ellis Realty Investors LLC, based here. He is responsible for overall management of the company’s real estate assets, including TIC properties, and overseeing regional asset managers. Waddell joined the company in 2005 as senior asset manager and was later promoted to VP of asset management.—Michelle Napoli
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Memphis—TIC Properties LLC purchased 5350 Poplar, a 163,446-sf office building in East Memphis. The purchase price was $20.43 million and the seller was Alladin Investment Partnership. The building is 92% occupied by tenants that include Evergreen Packaging Inc., Southern Eye Associates and SunTrust Bank.
MIDWEST
Dublin, OH—Grubb & Ellis Realty Investors LLC purchased a 96,000-sf office building in this Columbus suburb for TIC investors. The property, 5200 Upper Metro Place, was built in 1999 and is 90% leased to tenants that include CoreSource Inc. and Smith’s Medical. Financing was arranged by Jeff Morris of Morris, Smith & Feyh. The seller, Upper Metro LLC, was represented by George Stecz of CB Richard Ellis Group Inc.
Geneva, IL—The Private Bank Building, a 14,375-sf newly constructed office building here, is a new offering from American Investment Exchange. The Private Bank occupies approximately 65% of the fully leased building, according to information on AIE’s website, with Era Consulting, Prana Yoga and AIE among the other occupants.
SOUTH
Keller, TX—Enclave on Golden Triangle, a 273-unit apartment property in this Dallas-Fort Worth suburb, was purchased for TIC investors by Grubb & Ellis Realty Investors LLC. Built in 2007 and 97% leased, the property features such amenities as a fitness center, a media library and outdoor recreation facilities. It was purchased from Integrated Real Estate Group, which was represented by Hendricks & Partners. Financing was arranged by Capmark Finance’s Mike Bryant and Don Marshall.
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Waco, TX—The Outpost@Waco, a 195-unit, 543-bed student housing property here, was purchased by Woodlark Capital LLC, GlobeSt.com reports. The seller was Royal Properties and the purchase price is said to be roughly $30 million. The property, completed last fall, is across from Baylor University and features such amenities as a computer lab, gym and swimming pool. —Michelle Napoli
