Bill Winn: Times Are Tough, Not Impossible

CPN Contributing Editor Dees Stribling caught up with William Winn— president-elect of the Tenant-In-Common Association and president & partner in Passco Cos., a specialist in commercial real estate acquisition and management that in recent years has also developed a thriving subspecialty in sponsoring TIC deals. Like pretty much every corner of the real estate industry, TICs have seen better days, but Winn holds out long-term hope.CPN: Next year is going to be another tough year for TIC deals, isn’t it?Winn: Properties aren’t performing as well as they were, and I expect that to continue into 2009, so we’re having the same experiences in that regard as other forms of real estate ownership. Unique to the TIC industry is that it’s largely based on 1031 exchangers looking for investments. And that market has been contracting ever since the beginning of the credit squeeze, so yes, it’s a tough market, and it’s going to stay that way for a while. Still, though TIC volume has shrunk, the industry is getting a larger share of the 1031 exchanges that are getting done. We’re getting an increasing share of a smaller pie. That’s because investors have difficulty finding replacement properties, and the tenant-in-common market offers them options for the exchange, so we’ve captured more market share.CPN: Then there’s still investor interest in TICs?Winn: Yes. It’s challenging to do a 1031 exchange, but even so, there’s activity and so interest in TICs. Certainly the long-term interest is there because as Baby Boom property owners get older, many of them are going to want to put their investment in something less management intensive. That interest is going to outlast the bad economy. Passco’s volume this year is actually higher than in 2007, which isn’t going to be the case with most TIC sponsors out there. We specialize in multi-family, which is easier to get financing for than any other product type.CPN: But for now, there’s a shakeout among TIC sponsors?Winn: Some sponsors haven’t done any TIC transactions at all in 2008. Most of them are real estate companies that once did TIC deals, so they aren’t necessarily out of business, just out of the TIC business for now. Few companies have their sole business in tenant-in-common. I’m not going to make economic predictions, but it could be late 2009 before liquidity gets going. Until then, things are going to be flat, and it will take time to improve. It’s a recessionary time and at the beginning, not the middle or end. Our advice to clients is to hunker down and get through the recession.