Framingham office deal marks first for MetroWest
Popular west coast investment method provides tax benefit
A recent real estate deal on a commercial property in Framingham marked the emergence in this market of an investment method popular for years on the west coast.
The office building at One Clarks Hill in Framingham was purchased on March 1 by NPV Direct Invest, an institutional real estate firm, from Clarks Hill Corporate Center LLC for $13.15 million. There are 12 tenants in the building, including MetroWest Medical Center's financial offices, Philips Lifeline and AIS Development.
Direct Invest then offered equity stakes in the property for sale to qualified investors in what is known as a tenant in common sale, or TIC.
TIC deals offer individual investors multiple advantages, said Brad Dwin, a spokesman for Direct Invest.
Most notably, Dwin said, investors in TIC-structured deals can take advantage of section 1031 tax-deferred exchanges, in which proceeds from previous real estate sales can be rolled into other investment properties to avoid capital gains taxes.
The deals also allow investors to buy a piece of properties they wouldn't otherwise be able to afford, Dwin said.
"The company buys the property, and then each investor is a fractional owner of the property," Dwin said. "In a typical scenario, the investor is buying a property he couldn't afford on his own, as an individual investment."
In all, 24 individual investors bought pieces of the Clarks Hill property in June and July, with their shares of ownership determined by the amount they invested. Amounts ranged from $116,850 to $1.6 million, with the total investment coming in at nearly $14 million, according to information obtained from The Warren Group, publishers of Banker & Tradesman. The building has been assessed by the city of Framingham at nearly $12 million. Investors in the deal are based throughout the country, including California.
West coast thing
Deane Navaroli, vice president of asset management at NPV Direct Invest, said he first read about TIC investing in a trade publication years ago.
"I thought, 'That will never catch on here, it's just a west coast phenomenon,'" Navaroli recalled. "But its expanding out here quite a bit, and becoming very popular."
Tyler Ewing, a senior associate at Boston-based commercial real estate firm Grubb & Ellis Co., said TIC investments often make a lot of sense for investors.
"It's a pretty good investment vehicle for people looking for short and long-term opportunities in real estate," Ewing said, noting the extreme popularity of TICs on the west coast.
Navaroli said NPV Direct Invest has been in Boston for three years, and TIC deals have really started to gain traction in the area in the past two to three years. The company owns other TIC properties in Chelmsford and Waltham, and is always looking to expand its portfolio, he said.
When individual investors decide to sell off their own stake in the building, the process can be tricky, said Navaroli. The ownership stake must first be offered to the other group investors before bringing in an outside party, and the deal is subject to transaction costs, he said.
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