TIC Alternative: The Delaware Statutory Trust

, Beth Mattson-Teig

Beth Mattson-Teig

The tougher financing climate is prompting some tenant-in-common (TIC) sponsors to pursue a more “lender-friendly” alternative: the Delaware statutory trust. Both investment vehicles are similar in that they allow for a group ownership structure that can be pre-packaged and sold as securities. Unlike a TIC, investors in a Delaware statutory trust don't hold a deed on the property. The trust holds the deed.

Banks and life insurers prefer these trusts because they're lending to one entity — the trust — rather than up to 35 individual co-owners in a TIC. The downside of the Delaware model is that it comes with more restrictions. For example, the trust can't enter into new leases or even renegotiate current leases.

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