Clearly, opportunities in this fast-growing and ever-evolving industry abound — as do potential regulatory hurdles and legal pitfalls. To maximize success, access to experienced and knowledgeable legal counsel is essential.

Foley is a leader in the TIC industry. Our experience includes:

• Coordinating the first-ever TIC offering with the golf course industry
• Drafting Placement Memoranda for TIC and Delaware Statutory Trust Offerings
• Serving as counsel to TIC offering sponsors
• Drafting Circular 230 compliant “should” tax opinions
• Representing acquirers in TIC real estate acquisitions
• Closing nationwide TIC financing representations
• Preparing sophisticated third-party due diligence reports

Defining a TIC Offering
A TIC offering is a private placement of interests in income-producing real estate, usually including five to 35 accredited investors. The transaction is structured as a sale of the real estate by the owner/sponsor to the investors. Each investor owns an undivided, fractional interest in the entire property as a TIC.

The Advantages of a TIC Offering
One of the advantages of a properly structured TIC offering is that the investors are considered to have purchased an interest in real estate, which can qualify as like-kind property in a 1031 exchange. In addition, TIC offerings can offer the investor the opportunity to diversify a 1031 exchange into multiple properties. As a TIC owner, an investor receives a separate deed and title insurance policy for his or her percentage interest in the property. For the most part, the TIC investors acting together will have the same rights as a single owner and share a portion of the net income and growth.

In 2002, the IRS Revenue Procedure 2002-22 ruling provided ruling standards for determining whether an arrangement constitutes a tenancy in common. The 2002-22 ruling is generally viewed as a “safe harbor” in that it provides guidelines that, if followed, will achieve the desired like-kind exchange treatment. There are 15 requirements set forth in Revenue Procedure 2002-22. These requirements, however, have proven difficult to satisfy in a commercially reasonable manner, and virtually no current TIC arrangement meets all 15. To compensate, law firms — including Foley — issue “should” opinions, which are opinions that the transaction “should” qualify for the like-kind treatment, even if it does not fully comply with the safe harbor.

A TIC offering can be a very complex and occasionally awkward arrangement for the owners. Historically, one obstacle that TIC owners encounter stems from management concerns. Because a TIC cannot have centralized management, TIC owners generally delegate many of their ongoing management responsibilities to a property manager or master lessee, both of whom are affiliates of the owner/sponsor.

The Experience to Make a TIC Offering Work for You
Foley stands at the forefront of the TIC offering industry. We have the experience and knowledge to guide you through the TIC offering process, and the understanding to help you minimize any potential difficulties. Our tax, real estate, and securities lawyers nationwide have represented sponsors, managing broker-dealers, retail broker-dealers, lenders, and investors. We are a leader in alternative asset class offerings, including hotels, golf courses, senior living facilities, and oil and gas royalties. Additionally, Foley maintains an active program of introducing client sponsors and potential sponsors, managing broker-dealers, lenders, and investors to each other.

To learn more about Foley's TIC offering capabilities, please contact Stephen I. Burr at sburr@foley.com.