602 Sawyer and the Death of TICs?
Griffin Partners bought 602 Sawyer, closing out one more tenant-in-common ownership. TICs are fading away, National Asset Services founder Karen Kennedy (who reps more than 90 TIC groups, including this seller) tells us. The ownership format was embraced in the peak market of ’05 to ’07 as an opportunity to bring people together to own property in undivided interest and use it to buy up to bigger properties. That did happen many times, Karen says, but most people didn’t realize what they were getting into. IRS guidelines say up to 35 people within a TIC have to make decisions unanimously. That applies to selling, refinancing, even replacing the management company.
That means even one rogue TIC owner (and most TIC members don’t know each other and have different backgrounds and goals) can completely stymie any activity. That makes all property sales from TICs incredibly difficult, Karen says, and some potential buyers will take advantage of the structure and re-trade. That wasn’t the case with Griffin at 602 Sawyer (an 86k SF office building in Midtown), but it was still a very difficult deal. It had 24 co-owners, and a water leak canceled the original December closing date. Karen and her team got all damage fixed, used the time to increase leasing by 20%, and kept Griffin around to finally close last month. Karen’s heard that TICs are coming back, but she hasn’t seen it, and she expects they’ll die out. If nothing else, most lenders refuse to work with TICs anymore.
