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Capital Square 1031 Assembles Restructuring Team on Behalf of Challenged TICs


Capital Square 1031 LLC, a leading sponsor of 1031 Delaware statutory trusts offerings, has compiled a new team to assist with the restructuring, management, refinancing and sale of challenged real estate, including real estate owned by tenant-in-common programs.

Capital Square’s new turnaround management and restructuring team is led by Mike Waddell, Capital Square’s head of asset and property management. Waddell has more than 30 years of acquisition, management, disposition, and finance experience.

Other team members include: Capital Square chief executive officer Louis Rogers, an attorney with more than 30 years of entity structuring and tax experience; Jeff Gregor, general counsel, who has structured hundreds of real estate transactions; and Doug Britton, independent manager and attorney, who specializes in satisfying lender requirements for special purpose entities.

The team members have worked together for more than a decade in the acquisition, management, finance disposition and restructuring of more than $3 billion of real estate owned by TIC programs, Delaware statutory trusts, real estate investment trusts and private real estate funds.

Securitized tenant-in-common 1031 exchanges vehicles grew in popularity exponentially beginning in 2002, when the Internal Revenue Service issued guidance on the matter. In 2007, the CMBS market, which was the primary source of financing for TICs, collapsed. During the height of the TIC market, from 2006 to 2007, billions of dollars of transaction were financed utilizing 10-year CMBS debt – and most of those TIC-owned properties are now facing loan maturity and must either seek new financing or be sold.

According to Rogers, “A number of these properties are challenged and need to be restructured and turned around before being refinanced or sold. In many cases, the TIC owners do not want to sell but would rather refinance and hold the property. However, the TIC structure has fallen out of favor with lenders, while the DST structure has become the entity of choice due to its many advantages.”

According to Capital Square, the company “aids in the turnaround, management, restructure, refinance, and eventual sale of challenged or underperforming properties,” and has been approved by many lenders due to its strong balance sheet and successful track record as a sponsor of 30 DST programs. Also, in appropriate circumstances, Capital Square will sign “carve out” guarantees required by most lenders.

“Capital Square satisfies new lender requirements by converting existing TIC structures into the more modern DST structure preferred by lenders. This can be accomplished without triggering any of the TIC owners’ tax liabilities from the original exchange,” added Waddell. “Also, by converting to a DST structure, each owner should retain the ability to exchange again on a tax-deferred basis when the property is sold. By restructuring in this way, Capital Square is able to preserve all the past and future tax benefits of Section 1031 for investors.”

Capital Square 1031 specializes in the creation and management of commercial real estate investment programs for Section 1031 exchange investors and cash investors using the Delaware Statutory Trust structure. The company oversees a growing national portfolio of 39 real estate assets valued at approximately $370 million, based on investment cost.

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