(Read more on the TIC market.)
WEST CHESTER, PA-Josh Slaybaugh, former national sales manager with Media-based DeSanto Realty Group, has formed Trade Up 1031. Slaybaugh is president, and Jeff Price, formerly with Wayne-based Trinity Capital Partners, is CFO.
Trade Up 1031 is a financial advisory that deals only in commercial real estate investments and specializes in like-kind exchanges that allow its clients to reinvest their gains from a real estate sale into fractional shares of other income-producing properties and defer capital gains. They are primarily tenant-in-common investments.
In its first full quarter of operation, Slaybaugh says his firm's high-net-worth clients invested $22 million in properties in 11 states. The purchase price of the properties typically ranges between $20 million and $50 million, he tells GlobeSt.com, and the individual investments are generally in excess of $1 million each.
"We work with about 60 real estate companies, which is pretty much all of the US TIC real estate sponsors," he says. The sectors in which there are the most availabilities now are multi-tenant office, retail and hospitality, with multi-tenant office accounting for nearly 30% of his company's recent transactions. "Multifamily has taken a back seat," he says, "because the cap rates are low."
While some of "the newer, smaller" real estate companies "that don't have longstanding relationships with banks" are having trouble getting money, Slaybaugh says, "availability of real estate is pretty good. There are a number of people with properties for sale."
Of his client base, he says, "across some 20 to 25 investors, we've identified about $67 million of anticipated equity that will become available from their existing properties that are under contract to sell. We anticipate exchanges among those investors within the next six months, mostly in the first quarter of 2008."
Trade Up 1031 does have some investors who invest cash. The transactions don't have to be exchange-based, Slaybaugh says, "but 95% of our business is in 1031 exchanges." Of real estate as an investment in general, he says, "it's as least as popular as it has been, if not more so. As the population increases, demand for institutional-grade properties is not going to decrease," and diversification into real estate provides investors with a hard asset, he also points out.
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