SEC Considers Exemption
For Brokers Who Want In
On TIC Action
Despite the challenges
of bringing together
the real estate and
securities industries,
many believe that the
new rules will mean
more business for
everyone
By Michelle Napoli
With most tenant-in-common
deals structured and sold as securities, investors looking to
acquire TIC interests have essentially had to
leave their real estate brokers behind for
securities reps and broker-dealers.
However, that may soon change if the
Securities and Exchange Commission
approves a proposed exemption from normal registration requirements.
For several years, there have been discussions on how real estate agents could be
involved in and compensated for the sale of
securitized TIC investments, which provide
owners with a fractional, undivided interest
in a property. However, the effort took a
major leap forward last October when attorneys representing the National Association
of Realtors submitted its most recent, formal
request to the SEC. The SEC began the following month soliciting public input on the
request during a comment period that ended
in mid-December. Now, the real estate brokerage and TIC communities are waiting for
the final word from the SEC. Nothing is definite until, well, it’s definite, but many industry experts believe the exemption’s approval
is a matter of when, not if.
“The SEC has to go through its due diligence,” says H. Blaine Walker, president of
Walker & Co. Real Estate in Salt Lake City
and chairman of NAR’s TIC work group. “I
would say it’s in the final stages of review.”
Although the details are still being
worked out, based on NAR’s request and
the SEC’s notice from last fall, the exemption would allow commercial real estate
agents and brokerage firms to receive compensation for advising clients on the real
estate aspects of TIC deals sold through
securities sales channels, without the real
estate professional and/or firm being
required to have securities registrations.
(The full request, notice and submitted comments can be read on the SEC’s website,
www.sec.gov.)
The following are some key points and
limitations of the proposed exemption to
keep in mind:
• The exemption would only be available
to commercial property professionals who
are “predominantly engaged” in the sale
of real estate other than TIC securities.
Exactly how “predominantly engaged”
will be defined has yet to be determined,
but the exemption is clearly meant for real
estate professionals who would only be
involved in a few securitized TIC transactions a year; anyone wanting to make it a
significant portion or full-time focus of
their business would be expected to get
the appropriate securities license and registration. Property sales experience will
