What Real Estate Professionals need to know about Securitized TIC Transactions

Slide 2 - Since 2002, when the IRS issued official guidance in Revenue Procedure 2002-22 on how Tenant In Common investments would qualify for replacement property under Section 1031, the TIC Industry has exploded into a multi-billion dollar a year business. However, ever since 2002, the vast majority of TIC investments have been sold through the securities industry by licensed securities representatives and broker-dealers, not though the traditional means of licensed real estate professionals.

Slide 3 -Needless to say since 2002, the National Association of Realtors (NAR) and the real estate community has felt left out on these transactions and on October 11, 2007, NAR issued an exemption request letter to the SEC on behalf of it’s 1.3 million members. The original exemption request to the SEC, if adopted, would grant commercial real estate professionals with “substantial experience” in commercial real estate transactions, exemption from broker-dealer registration requirements of Section 15(a)(1) of the Securities Exchange Act of 1984.

Slide 4- In a recent teleconference with members of the Tenant In Common Association (TICA), NAR’s Associate General Council reviewed some of the revisions made to the original exemption request following meetings with the SEC. While all of the revisions of the request by NAR are not publicly known, many points were discussed on the TICA call. According to the representative of NAR, the revised exemption request, if adopted, would allow real estate professionals to obtain one of two types of fees for their part in referring or advising a client on a securitized TIC investment.

Slid5 -The first, a “TIC Referral Fee” would permit “all” real estate professionals (commercial or residential) a referral fee for their role in introducing a potential investor-client to a licensed securities representative engaged in selling a TIC investment. According to NAR, a client acknowledgement form and compensation agreement (or client disclosure) would need to be completed by the real estate professional along with a letter to selling broker dealer stating that he/she is legal to do business in that particular state (in other words a statutory qualification with the state).

Slide 6 -Finally, the real estate professional may have to complete a form with the selling broker dealer stating that the agent is predominately engaged in the real estate business or other business, not just the TIC referral business.

Slide 7 - The second fee a real estate professional may obtain is a “TIC Advisory Fee”. This type of fee would be limited to real estate professionals with a “substantial” real estate background, for example a CCIM or other designation or perhaps a real estate degree. Again, according to NAR, a form would need to be presented with an acknowledgement of “substantial experience” as well as a letter or form to the selling broker dealer stating that he/she is predominately engaged in the real estate business or other business, not just the TIC referral business.

Slide 8 - The real estate professional would need statutory qualification with the state like the “TIC Referral Fee”, however, these real estate professionals may advise an investor-client on the real estate characteristics of specific properties once the investor-client was deemed suitable by the licensed securities representative engaged in selling the TIC investment.

Click Here to view the NAR/SEC Exemption Letter in its entirety

Slide 9 - As the TIC Industry and its new regulations evolve, 1031 Alternatives Group remains committed as your Tenant In Common (TIC) strategic planning partner. Our website www.1031alternatives.net will be available to bring you the latest news and updates on this proposed exemption.

Slide 10 - As a cooperative effort to educate the professional real estate community on the benefits and risks associated with TIC investments, 1031 Alternatives Group would be honored to conduct either an in-office educational presentation or a personal/small group consultation on TIC investments. Please feel free to contact our offices directly 866.405.1031 to schedule a date and time.

Slide 11 - Educational Presentations may illustrate the following:

Slide 12 - HOW TO ACQUIRE NEW LISTINGS WITH TIC INVESTMENTS

• Deferring taxes encourages investors to sell their properties and build wealth by
reinvesting undiminished gains

• Investors can avoid the day to day property management headaches

• Investors may diversify their real estate portfolio geographically potentially avoiding high property taxes and skyrocketing insurance costs

Slide 13 - • Investors may diversify real estate holdings by property type or asset class

• Investors may be provided the opportunity to earn higher returns and maximize their investment dollars

There are risks associated with TIC investments which are outlined in the Private Placement Memorandum.

Slide 14 -Thank you for tuning into the 1031 Alternatives Group’s podcast on the National Association of Realtors (NARs) exemption request to the SEC on securitized tenant in common (TIC) investments. The 1031 Alternatives Group is Your Tenant In Common (TIC) strategic planning partner and is committed to educating the professional real estate community on the benefits and risks associated with TIC investments.

Securities offered through Pacific West Securities, Inc. Member FINRA/SIPC. The material is neither an offer to sell nor the solicitation to purchase any security. This information is for discussion and informational purposes only and is not intended to replace any competent tax, legal or financial planning advice nor is it binding information on the recent NAR exemption request to the SEC on securitized TIC investments as the recent request has not been officially granted by the SEC.