Loans for Tenants In Common structures.
In the early 2000’s Tenant In Common (“TIC”) were often utilized in 1031 Exchange transactions. CMSB Lenders allowed for TIC structures in the early 2000’s. These loans, as most CMBS (Conduit) loans were referred to as Non-Recourse loans. Most lenders require a warm-body limited guaranty for fraud, waste, misappropriation of proceeds, environmental and bankruptcy. These items are known as “Bad-Boy Carve-outs.” The Syndicator’s of TIC would sign the limited guaranty.
Converting to LLC:
Many of the Syndicators and Organizers of these TIC structures have been removed from the daily activities of the underlying asset. At the loan maturity the investors can either liquidate or seek to refinance the property. Today most lenders frown on the TIC structures. The lenders will ask that the TIC ownership consider conveying ownership into a Limited Liability structure. After conveying to an LLC who will sign for the Bad-Boy Carve-Outs remains? Many of the investors do not know the fellow investors. No one investor holds a controlling interest. None of the investors are willing to step up and sign for this limited guaranty as described above. Investors did not initially intend on becoming involved in the actual management of the real estate.
No Guaranties required:
A nationwide lender will provide tenants in common loans once converted to an LLC. With this loan warm-body guaranties are not required. The loan amount for this lender range from $1,000,000 to $65,000,000. The preferred property types are Industrial, Office, Retail and to a lesser extent Multifamily. If you are considering refinancing a property with an existing TIC structure please visit our web site at. https://www.caffreyloans.com/ or contact Mike Caffrey (913) 402-7077 or email: Mike@CaffreyLoans.com
In summary, the first step is to see if the lender would be interested in the loan. If they are the lender will provide specific loan terms.