Favorable legal stances regarding SCI Real Estate Investments' proprietary TIC real estate structure by two of the largest tenant-in-common (TIC) law firms in the country mean a whole new market for countless real estate brokers, real estate agents and investors. The legal opinions essentially affirm that real estate TIC investments can be classified as securities or real estate.

"All TIC sponsors are real estate sponsors," says Marc Paul, president and co-chairman of SCI. "The only difference is how the distribution channel is handled, how the sponsors go out and bring their investors into the real estate."

The legal views not only further establish TICs as credible investment vehicles, but also enable licensed real estate professionals throughout the nation to receive commissions for referring TIC investors.

"It's just wrong that a commercial real estate broker who's highly trained, skilled and licensed to deal in these types of products is excluded from the process in the securitized TIC world," says Paul.

He concedes that nine out of every 10 TIC deals are properly structured as securities. However, the ability to classify such transactions as real estate gives even more momentum to an already burgeoning industry. TIC sponsors acquired more than $5 billion in property in 2004 alone. Paul says that after just 3 years TIC deals account for approximately 10 percent of the total 1031 exchange volume. Doug Johnston, SCI's CEO, likens the impending growth in TIC investing to that experienced by REITs 15 years ago.

TIC investing allows investors to pool together their funds in acquiring institutional-grade assets. This option levels the real estate investment playing field while facilitating ease of ownership and higher returns. TIC investments are treated as real estate for tax purposes because they involve real property ownership of "fee" title, and owners are directly involved in major property decisions such as when to sell or re-finance. The involvement of real estate professionals in TIC investments offers yet another benefit because the expert advice from these brokers on real property and transactional procedure will enhance investor protection.    

For more than 3 years now, new IRS guidelines have enabled investors to take advantage of TIC opportunities to meet 1031 exchange requirements, allowing them to defer substantial tax expenses while allocating their investment dollars into institutional-grade assets. Would-be investors are able to benefit by owning higher-quality properties with better management than they could achieve by acquiring their own small local properties.

SCI's TIC model allows investors to select the property manager, asset manager and leasing broker. In other words, the TIC investors control their own destiny, which moves the deal structure outside of the security category. This way, commercial real estate brokers, who have assisted investors from the initial listing stage, completed their 1031 exchange down-leg sales and are looking for quality up-leg properties for their clients, can complete the transaction in their area of expertise and be rewarded for it.