READING BETWEEN THE LINES
What The Wall Street Journal DIDN’T Tell You

  
Recently, The Wall Street Journal explored a 2006 tenant-in-common investment that was unsuccessful for its investors due to fraud on the part of the building’s only tenant, Le Nature. While The Wall Street Journal explored the situation solely from the standpoint of the investment strategy, the made-for-television drama really lies in the web of deceit drawn by Le Nature—from secret rooms to fraudulent accounting records.

This situation underscores the importance of transparency. When evaluating the main components of any TIC—the sponsor, the deal and the tenants—investors must take the extra steps to thoroughly understand each. Does the sponsor own the property or is the offering a way to raise funds for the acquisition? How many years of commercial real estate experience does the sponsor have? Are the fundamentals in line for the property, or is the sponsor being far too optimistic? How stable are the tenants? Are the tenants private or public companies? These are just a handful of the questions that should be asked—and answered comprehensively—before you enter into any TIC deal.

At FORT, we frequently turn away deals that our executive team believes to lack objective and verifiable financials or that would be challenging to lease based on configuration or market realities. FORT’s executive team has more than a century of combined, high-level commercial real estate experience, which is invaluable when evaluating deals and red-flagging those that do not meet our gold standard.

Read more about The Wall Street Journal article and our analysis of what went wrong.