Tenant in Common

Tenant-in-Common (TIC) investments are rapidly becoming the replacement property of choice for investors whose primary objective is to defer capital gains taxes through a 1031 exchange. TIC ownership allows investors to own an undivided fractional interest in institutional quality commercial property. All properties are carefully selected by experienced real estate professionals who are able to identify exceptional investment opportunities in the best markets across the country. Separate deeds are issued for each individual investor's undivided interest and he or she receives a pro-rata share of the cash flow, depreciation and interest deductions, and appreciation upon sale.

TIC investments offer the same benefits of individual property ownership minus the headaches associated with management. When an investor decides to sell his or her interest, or when the property is sold in its entirety, the investor is able to continue deferring tax through a subsequent 1031 exchange.

T.R. Winston has been involved with the top leaders of the TIC programs in the country. As a Charter Member of the Tenant-in-Common Association, we are able to take on an active role in advancing in the TIC industry. Through our network of TIC sponsors, real estate, legal and tax professionals, we have access to the best products available in the industry. T.R. Winston has built unique expertise across all facets of this dynamic new industry. In addition to building relationships among professionals and investors, T.R. Winston is involved in several industry associations.

Benefits of TIC Ownership

Potentially higher cash flow: Properties producing little or no cash flow can be exchanged for professionally managed, institutional quality properties. TIC investments are designed to provide stable, predictable cash flow.

No management burden: TIC investments provide all of the benefits of real estate ownership without the need to personally oversee its daily operation. Properties are managed by professional property managers.

Institutional quality assets: Purchasing investment property under the TIC model allows smaller investors the opportunity to invest in institutional quality properties.

Diversification: TIC ownership provides the ability to diversify investment dollars across multiple markets and asset types, potentially increasing both the value and safety of the investment.

1031 exchange deadlines: Readily available TIC properties take the risk out of meeting 1031 exchange timing deadlines. Prearranged financing limits the amount of time it takes to close.

Capitalizing on overpriced markets: TIC investments provide investors with the opportunity to exchange highly appreciated properties in overpriced markets for properties in markets with future growth potential.

Risks Associated with TIC Ownership

There is a degree of risk associated with real estate ownership and operation. It is impossible to accurately predict the results of an investment to an investor. Specific risks associated with a private securities offering include, but are not limited to, the use of leverage, risks associated with a private securities offering, certain tax risks, vacancy risks, expiration of leases, performance of lessees and loss of principal.

An investor should be aware of the Internal Revenue Code restrictions that apply to 1031 Exchanges. For example:

• Properties must be held for productive use in a trade, a business or as an investment.
• The investor must identify the replacement property or properties within 45 days from closing on the sale of a relinquished property, and the new property must be acquired within 180 days of this original sale.
• Properties must be exchanged solely for a “Like-Kind” property. Like-Kind properties include developed or undeveloped real estate (but need not be identical in type).  The value, equity and/or debt on the replacement property must be equal to or greater in value than that of the relinquished property.
• The seller must not directly receive funds from the sale of his or her relinquished property.  The IRS allows an investor to use a “Qualified Intermediary” to affect the exchange, serving in effect as an escrow agent that performs the exchange within the 180-day closing period.
• Properties that do not qualify for a 1031 exchange include stocks, notes and bonds, partnerships and a variety of other investment vehicles.

It is important for an investor to understand:

• An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities, including tax penalties.
• TICs are generally considered to be illiquid.
• Form of ownership may require unanimous consent of the other investors in the TIC to sell a TIC interest.
• In the even that a TIC property unexpectedly loses tenants or sustains substantial damage, there is a potential for suspension of cash flow distributions (or rent).
• Costs associated with the TIC transaction may impact investor returns and may outweigh the tax benefits. Examples of such costs include upfront charges and fees imposed by the sponsor, qualified intermediary, leasing/real estate agent, accountant, lawyer and property manager.
• TIC properties employ professional asset and property management, so while TIC co-owners vote on major issues (such as selling the property), they do not have direct say over the day-to-day property management situations.

The statements contained herein are for educational purposes only.  The Private Placement Memorandum ("PPM") should be carefully reviewed for each offering and are for Accredited Investors only. These risks, among other risks, should be discussed with your own legal, tax, and financial advisers.  For more specific information on Risk Factors, please refer to the PPM.

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