The 1031 Exchange: Tenant in Common Industry Continues Toward Record Growth in 2005

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Triple Net Properties, LLC, announced the sale of 801 K Street in Sacramento, California, on behalf of tenant in common investors.

Triple Net Properties, LLC, announced the sale of 801 K Street in Sacramento, California, on behalf of tenant in common investors.

801 K Street was sold for $79,350,000 to an undisclosed buyer. 801 K street was originally purchased in March 2004 for $65,780,000.

801 K Street is a stunning Class A, 28-story, approximately 336,000 square-foot office tower in Sacramento, California. With a central downtown location, this building provides high-visibility and distinction. 801 K Street is approximately 77% leased, with 72% of the building leased by the California State Department of Conservation.

This transaction highlights the evolution of the 1031 Tenant-in-Common (TIC) Industry and its appeal for investors seeking the benefits of 1031 exchange, and the Q2 2005 Edition of OMNI NEWS offers a glimpse of where this market is heading.

Specifically, the securitized TIC marketplace has grown from placing close to $167 million TIC equity in 2001 to placing $1.73 billion in 2004, and it is estimated that over $4.27 billion TIC dollars will be placed this year. This is why seasoned investors, "baby boomers" seeking to build extra retirement income, and others are turning to TICs to meet their 1031 exchange requirements. Further details on the industry are available at http://www.1031street.com.

TIC properties may be any of the major property types (including office, retail, apartment or industrial) and may be located all across the nation. As a TIC owner, each investor owns an undivided, fractional interest in an entire property and shares proportionately in the net income, depreciation, interest deductions, and gains or losses. The second quarter has also seen the emergence of Sponsors designing Oil & Gas programs to integrate into the 1031 TIC marketplace. These new programs will allow further diversification and higher yields to blend into traditional RE TIC programs.

Each TIC owner receives a separate property deed and title insurance for their portion in the property investment. This provides the same rights of ownership that a single owner would enjoy. Additionally, because TICs are often "packaged" with management and financing in place they (TICs) may simplify the 1031 process for the passive real estate investor.

Investors should also take note that TIC investments do have their drawbacks such as additional fees (mostly legal and marketing fees), less liquidity compared with wholly owned investments in real estate, tax risks, and real estate market risks.

However, TIC investments provide simplicity by eliminating active management headaches. Individuals who are ready to relinquish the day-to-day burdens of being a landlord, or who own land and would like an income producing property, may benefit from TIC investments. TIC programs provide a "mailbox management" investment that may save you time and money.

About the author: Brian W. Topley, CCIM is a real estate investment adviser specializing in 1031 TICs (offered through ePlanning Securities Member NASD/SIPC). He can be reached at (415) 274-2521.

This information is intended merely to be a general discussion, not deemed to be investment or legal advice. Real estate and TIC investments are not suitable for all investors and involve risks. Individual investors should consult their tax adviser, CPA, and financial advisers prior to making any investment decisions.

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