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TIC Flip

Just two-and-a-half years after 32 tenant-in-common investors bought the Puente Hills Mall in the City of Industry, Calif., for $148 million in the (then) largest TIC transaction, the investors have agreed to cash out, and will clear $170 million. Glimcher Property Trust is the buyer on the deal, which is scheduled to close before the end of the year.

The original TIC transaction, syndicated by Passco Real Estate Enterprises Inc., was one of the first TIC deals to include more than 10 buyers. Passco wouldn't comment because the sale hasn't yet closed.

Under terms of the deal, which Glimcher says works out to a 7 percent cap rate, the REIT will pay $81 million in cash and assume $89 million in debt on a non-recourse, fixed-rate mortgage.

In the original sale, each of the 31 individual investors, most of whom were 1031 exchangers, put up an average of $1.5 million cash (about $46 million in total). Another $10 million in equity was put up by a limited liability corporation. The cap rate on the original deal was 9.5 percent and, at the time, Passco said the plan was to hold the property for three to five years.

Richard Walter, president of Faris Lee Investments, a broker who worked the current deal and the 2003 transaction, says cap rate compression made the mall too attractive to hold on to.

“In a normal market, without such appreciation, I think we would see them holding on longer,” Walter says. “But this is a unique time … It was a good buy going in and it was the right time to sell now.”

Walter says that many of the investors in the Puente Hills deal would likely be recycled into other Passco syndications, though he says he could not discuss specifics.

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