• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Nevada Business Magazine

The Decision Maker's Magazine

Subscribe Now!

  • Subscriptions
    • Print
    • Mobile App
    • Email
    • Nevada News & PR Wire
  • Features
    • New This Month
    • View Issues
    • Cover Stories
    • Feature Stories
    • Industry Focus
    • Building Nevada
    • Special Reports
    • Meet the Decision Maker
    • Press Release Wire
    • Nevada Industries
  • Departments
    • A Matter of Opinion
    • Around the State
    • Business Indicators
    • Commentary
    • Commercial RE Report
    • Crossfire
    • Expert Advice
    • Face to Face
    • Free Market Watch
    • Inside Politics
    • Power of Attorney
    • Profit & Loss
    • Speaking for Nevada
    • Tech.knowledge.me
    • The Last Word
    • Vital Signs
  • Planning Calendar
  • Advertising
    • Advertising Info
    • Advertising Staff
    • Submission Requirements
    • Online Advertising
  • Events
    • NBM Events
  • About
    • About the Magazine
    • Contact the Staff
  • Connect
    • Business Directory
    • Press Release Wire
    • Business Calendar
    • Submit Listing
    • Post Press Release
    • Add Your Event
    • Sign Up
    • Log In
You are here: Home / Departments / Profit & Loss / Delayed Debt Restructuring Exerts Downward Pressure on Nevada Commercial Real Estate: Tenant-in-Common Properties Generate Drag

Delayed Debt Restructuring Exerts Downward Pressure on Nevada Commercial Real Estate: Tenant-in-Common Properties Generate Drag

December 3, 2012 By Phil Jemmett 2 Comments

Despite slightly improving economic conditions, Nevada’s commercial real estate market continues to face downward pressure as a result of poorly underwritten and grossly overleveraged legacy deals from 2005 to 2007, which are now coming to maturity. This same scenario is playing out in virtually every region across the country. According to data service provider Trepp LLC, U.S. commercial real estate loans totaling more than $1.73 trillion will mature from 2012 through 2016. Two-thirds of this maturing debt is currently underwater or close to it, with 56 percent of the 2016 maturities underwater by more than 10 percent. Over the past 12 months, only 42.8 percent of the commercial mortgage-backed securities with balloon loans were paid off on their maturity date.

Underwater loans that have hit maturity and/or don’t generate enough cash to cover debt service cannot be refinanced without new equity, lender write-offs or, in some instances, both. As underwater properties go through voluntary or involuntary restructurings, they often drag down other, currently financially stable, buildings by negatively impacting rents in the region. This downward valuation spiral will create the most stress on properties located in secondary markets such as Las Vegas and negatively influence properties currently thought to be relatively safe and stable.

Many of the reasons for the particularly difficult conditions in Nevada’s commercial real estate market have been widely discussed: overbuilding was rife, and local lenders were wildly aggressive on their underwriting criteria, with the effects of both exacerbated by the recessionary pressures on gaming and hospitality. One other contributing factor has not received much attention, however: the disproportionate number of properties in Nevada that were purchased through tenant-in-common (TIC) syndications.

TIC syndications gained popularity in the early-to-mid 2000s as a way for up to 35 small “mom-and-pop” investors to pool their money and purchase large-scale commercial properties, opportunities which previously had been largely unavailable to them. Additionally, the TIC structure allowed these same investors to leverage a TIC-specific 1031 like-kind tax deferral ruling by the Internal Revenue Service in 2002. Some of the TIC transactions in Las Vegas involved properties with values in excess of $80 million.

Enticed by sponsors with the promise of compelling yields, these TIC investors, many of them senior citizens, could not foresee the potential pitfalls associated with the transactions. These deals were often loaded with excessive fees. There have been some types of troubled loans with “loads,” or upfront fees, of up to 27 percent. Such a fee would mean that for every dollar used to acquire the property, only 73 cents actually went to work in the investment.

Most of these TIC investments were made between 2005 and 2007, at the absolute top of the real estate market. A number of investors allege some Las Vegas TIC deals included blatant fraud. The investors of one TIC property in Henderson claim the deal’s sponsor didn’t tell them that the property was part of an infamous Ponzi scheme. In another deal located in Downtown Las Vegas, the sponsor allegedly claimed that the building’s mechanical systems were brand new, but the investors say the systems were about 40 years old. Naturally, the adversely affected TIC investors are incensed by what they believe are unscrupulous practices by these sponsors.

For these reasons, TIC deals often end up in court, congesting securities fraud, litigation and bankruptcy dockets. The Clark County Superior Court is overwhelmed with civil litigation as it plows through years of backlog to get through discovery and into trial. The federal court is understaffed, and the bankruptcy court is swamped. In the meantime, the commercial real estate market can’t reach equilibrium until the borrowers and lenders complete the debt resolution process and remove this impediment to economic recovery.

As property values continue to decline, one can see a long stream of underwater Nevada loans facing either maturity defaults or payment defaults as a result of decreased rental income. This overhang will prolong the market malaise and contribute to under-investment as borrowers facing default will resist putting money back into the under-performing properties. Ultimately, the community suffers as maintenance is ignored, capital improvements are deferred, and scarce resources are expended on litigation and bankruptcy.

The market will improve more quickly if borrowers, lenders, the courts and the community began acting in such a way as to accelerate the debt restructuring process. While this process may be painful in the short term, everyone ultimately benefits when the market regains its footing.

Phil Jemmett is CEO of Breakwater Equity Partners.

Filed Under: Profit & Loss Tagged With: Clark County Superior Court, Downtown Las Vegas, Internal Revenue Service, Las Vegas, Nevada commercial real estate market, tenant-in-common, TIC, Trepp LLC, U.S. commercial real estate loans

Paul Krakovitz: Intermountain Healthcare

Edward Vance: EV&A Architects

Scott Arkills: Silver State Schools Credit Union

Terry Shirey: Nevada State Bank

Online Advertorials

Online Advertorials

SNWA’s Infrastructure InvestmentsHelp Secure Access to Water Supply

Bank of NevadaFunding Will Provide Nevada Students With Financial Literacy Education

Infrastructure InvestmentsAssure Our Community’s Water Future

Roseman’s College of MedicineAddressing the Physician Workforce Shortage

Advertise With Us

Advertise With Us. more details ►

Primary Sidebar

Get important updates from Nevada Business Magazine, directly to your inbox.
Subscribe

Wild at HeartEconomic Development in Rural Nevada

Industry FocusBankers

Residential NevadaMarket Shifts

Southern Nevada CCIMPassing the Torch to the Next Generation of Professionals

Nevada News & PR Wire

  • Registration for AngelNV Entrepreneur Bootcamp Opens Sept. 1

  • Renewable Diesel Plant Set to Launch Operations in Northern Nevada with Potential to Save 880 Million Pounds of Carbon Emissions Per Year

  • Hope Means Nevada and Silversummit Healthplan Launch Campaign to Connect Youth at Risk for Suicide to Mental Health Resources

  • Aha! Inaugurates New Nonstop Service Between Idaho Falls and Reno-Tahoe with Free Tickets for the First 100 Passengers

  • Food Hall Vendors Announced at Reno Public Market

  • NSB’s Private Bank Report Explores Trends in Wealth Growth

  • Nugget Casino Resort Earns Top Safety Designation from the Nevada Safety Consultation and Training Section

  • NVO Construction Hires Industry Veteran Aaron West as Chief Strategy Officer

  • TheOfficeSquad Opens Henderson Location, Now Serves Businesses in Southeast Las Vegas Valley

  • Downtown Reno Partnership Names New Executive Director

  • Northcap Commercial Arranges Sale of Nevso Cove Apartments for $16,280,000

  • Free Social Events, Wellness Workshops and Fitness Classes at Optum Community Centers

  • Don’t Miss Kamer Zucker Abbott’s Next Webinar!

  • Nawbo Southern Nevada Now Accepting 2022 Women of Distinction Awards Nominations

  • CAMCO Nevada Promotes Bree McRae to Regional Director of its Portfolio Division

  • CSN Launches Six New Programs

  • Las Vegas Area Home Prices Dip for Second Straight Month

  • Faith Lutheran Begins 2022-23 Academic Year with New Principal

  • Grand Sierra Resort and Casino Honors a Selfless Medical Assistant as the Most Recent “Grand Hero”

  • Downtown Reno Partnership Announces New Marketing Manager and Office Manager

  • Kamer Zucker Abbott Elevates Kaitlin Paxton to Partner

  • KPS3 Hires Chelsea Bosco as Designer

  • Lipson Neilson’s Joseph Garin and Megan Thongkham Named 2022 Mountain States Super Lawyers

  • Open Enrollment for Upcoming Miss Silver State Pageant

  • Move 4 Less Recognizes Dream Home Art Contest Youth Winners with Party and Prizes

  • LumiZen Wellness Debuts Premier CBD Products for People and Pets Alike

  • Celebrate International Coworking Day at The Coop and Test Drive the Coworking Experience for Free!

  • aha! Reports Exceptional Operating Performance for July 2022

  • ioneer Signs Binding Lithium Offtake Agreement with Prime Planet Energy & Solutions

  • The Problem Solver Show to Interview Man Who Discovered Third Body in Lake Mead

  • Aug. 18 NAIOP Southern Nevada Breakfast Presents “The Future of the Las Vegas Strip Is Here”

  • Pilots Revealed for 2022 STIHL National Championship Air Races

  • Preparing for End of Life Workshop

  • Las Vegas Attorney Offers Free Workshop on Protecting Children’s Inheritance and More

  • CVMC Welcomes Lisa McKinney, APRN to Ironwood Primary Care

  • Realtor Nate Strager Releases Weekly Market Update as Part of His Information Campaign

  • Entertainment and Supper Club Summer Schedule at the Stirling Club Continues to Sizzle

  • Community Leader Don Snyder Elected Chairman of the United Way of Southern Nevada Board

  • Lexicon Bank Sponsors Scleroderma Sprint Event, Fueling Efforts For A Cure

  • Optum Care Cancer Care Adds a New Physician

  • Southwest Medical Adds Three New Healthcare Providers

  • International Celebrity Vocal Coach Romeo Johnson Offers Vocal Lessons To Clark County Residents

  • Team From The Problem Solver Show to Sponsor Free Ice Cream and T Shirt Give Away For Kids

  • Las Vegas Orthopedic Surgeon Offers New Treatment For Limb Lengthening

  • TSK Celebrates O’Brien Middle School Redesign Ribbon Cutting in Partnership With Cumming Group

  • Godspeed Capital-backed Huckabee Architects Invests in TSK Architects

  • Dunkin’ Presents $4,000 to Cure 4 The Kids Foundation From Funds Raised on Iced Coffee Day

  • Nevada Bankers Association Announces 2022-23 Board of Directors

  • Annie Wagner of KPS3 Earns Certificate in Principles of Public Relations

  • NAR Tabs Nevada REALTORS®­ Leaders to Serve in National Leadership Roles

  • Kamer Zucker Abbott Attorneys Selected to the 2022 Mountain States Super Lawyers® List

  • Kamer Zucker Abbott’s Next Webinar: Balancing Employee vs. Employer Rights in Divisive Times

  • Henderson Chamber of Commerce Announces 2022 Board of Directors Additions

  • De Castroverde Law Group and Findlay Subaru of Las Vegas Award $10,000 College Scholarship to Allison Hill

  • Karma and Luck Supports Ukraine Through Donation to Doctors Without Borders

  • Support Local Students and Teachers During the Greater Schools Supplies Drive

  • KPS3 Welcomes Lauren Davis to Team

  • Las Vegas-Based Neteffect Named a Top Firm by Clutch

  • Bank of Nevada Welcomes Michael Pizzi as Managing Director of Commercial Banking

  • Following Nevada Osha’s Adoption of Heat Guidelines, There Are Free Resources for Employers to Protect Employees From Heat-Related Illness and Injuries

  • aha! Launches 50% Off End of Summer Super Sale – Book Now!

  • Evolution of Healthcare with RESET IV

  • Mark Wiley Group Announces Buck Hujabre as New President of Commercial Division

  • Jim Seebock Announces Run for Henderson City Council Seat Ward One

  • WestCor Announces New Director of Marketing and Business Development

  • Home At Last™ by Nevada Rural Housing Launches New 4% Advantage Down Payment Assistance Option

  • Tilt-up construction is complete at Mountain West Industrial Park

  • Grow with Google Provides Nevada Small Businesses With Tools to Reach Customers in Changing Economy

  • Facebook Launches New “Feeds” Tab Connecting Users More Than Ever

  • Trosper Public Relations Announces New Hire in Northern Nevada

  • Emerald Island and Rainbow Club Casinos Partner With Local Woman-Owned Spirits Company to Offer ‘Super Premium Well’ Vodka

  • Greater Nevada Mortgage Provides Down Payment Assistance for Eligible First-Time Homebuyers

  • Education Non-Profit CORE Names Jordan Ashley Berkowitz as Development Director

  • ioneer Signs Binding Lithium Offtake Agreement with Ford

  • Two attorneys from De Castroverde Law Group honored as 2022 Mountain States Super Lawyers Rising Stars®

  • Grow With Google Provides Nevada Small Businesses With Tools to Reach Customers in Changing Economy

  • The NCJFCJ Recognizes the Honorable Linda Marie Bell As the 2022 Impact of the Year Recipient at Annual Justice Innovation Awards

  • Broadbent & Associates, Inc. Donates to Local Youth Hockey Team

  • Goodwill® of Southern Nevada Spreads Mid-Year Cheer with Second Annual ‘Christmas in July’ Event

  • CALVPresenting Sept. 21 Educational Symposium for Real Estate Pros Featuring Cyber Security Expert Frank Abagnale of “Catch Me if You Can” Fame

  • Goodwill® of Southern Nevada Promotes from Within

  • STIHL National Championship Air Races Participating in “A Community Thrives” Fundraising Initiative

  • Northcap Commercial Arranges Sale of Mark & Daisy Apartments for $3,800,000

  • MDX Labs Expands Operations to Include Saturdays, in Response to Clark County’s Elevated Level of COVID-19

  • Downtown Reno Partnership Announces Key Performance Indicators for Fiscal Year 2021-2022

  • Meruelo Family Scholarship Awards $12,500 to Children of Grand Sierra Resort Team Members

  • aha! Inaugurates Nonstop Flights From Reno-Tahoe to Santa Rosa

  • Helix Electric Raises Over $24,000 to Benefit Reno Charities

  • 20 Recent CCSD Grads Offered Apprenticeships at Tesla

  • REMSA Health announces promotion of four leaders within the organization

  • TEDx Speaker at NCET Biz Bite Luncheon in Reno

  • The National Council of Juvenile and Family Court Judges 85th Annual Conference Brings Participants to Northern Nevada From Across the Nation

  • Northcap Commercial Arranges Sale of 239 W. New York Ave Apartments for $1,015,000

  • LVR Announces Newly Elected Officers and Board Members for 2023

  • JA Worldwide Nominated for 2022 Nobel Peace Prize — Junior Achievement of Southern Nevada Celebrates Prestigious Honor —

  • aha! announces additional flying from Ontario, California to Reno-Tahoe for “Burners”

  • Optum Care Anesthesia adds two new health care providers

  • American Bar Association Appoints Lipson Neilson Shareholder Sandra D. Glazier as a Member of the Commission on Law and Aging

  • CALV President Angelina Scarcelli earns NAR leadership appointment

  • Pacific West Injury Law’s Attorney Visits Children At Sunrise Hospital As Mascot Blue Bear



 
Submit Your News & PR | Subscribe
Submit Your News & PR

Business Connection

Business Connection Portal

Log In Sign Up

Business Connection Portal

Log In Sign Up

Nevada Business Calendar

  • Kamer Zucker Abbott Webinar on Crossing the Line? Balancing Employee vs. Employer Rights in Divisive Times
    August 18, 2022 10:00 am

    More details...
  • Special Olympics Nevada Bowl for the Gold
    August 20, 2022 11:00 am

    Location: 1301 W Sunset Rd, Henderson, NV 89014, USA

    More details...
View Full Calendar ►

Nevada Business Directory

Featured Businesses
Find a Nevada-Based Business Submit Your Business Subscribe to the Nevada News & PR Wire

Nevada Industries

Architects & Engineers
Arts & Culture
Banking
Commercial Real Estate
Construction
Credit Unions
Economic Development
Education
Financial Management
Healthcare
Human Resources
Insurance
Law
Manufacturing
Marketing
Media
Mining
Philanthropy
Residential Real Estate
Rural Nevada
Sports
Tax Planning and Accounting
Technology
Telecom
Tourism
Transportation
Utilities

Footer

Subscriptions

  • Print Subscription
  • Mobile App
  • E-mail Subscription

Editorial

  • Features
  • Departments
  • Events

Advertising

  • Advertise
  • Submission Requirements

Connect

  • Contact
  • LinkedIn
  • Facebook
  • Twitter

Copyright © 2022, Business Link LLC dba Nevada Business Magazine and Nevada Business Journal. Privacy Policy | Terms & Conditions
Nevada Web Design services by Nevada Central Media using Genesis Framework by StudioPress

    *Your Name

    *Your Email

    Phone Number

    Company

    *Subject

    *Your Message

      *Your Name

      *Your Email

      Phone Number

      Company

      *Subject

      *Your Message

        *Your Name

        *Your Email

        Phone Number

        Company

        *Subject

        *Your Message

          *Your Name

          *Your Email

          Phone Number

          Company

          *Subject

          *Your Message

            *Your Name

            *Your Email

            Phone Number

            Company

            *Subject

            *Your Message

              *Your Name

              *Your Email

              Phone Number

              Company

              *Subject

              *Your Message

                *Your Name

                *Your Email

                Phone Number

                Company

                *Subject

                *Your Message

                  *Your Name

                  *Your Email

                  Phone Number

                  Company

                  *Subject

                  *Your Message

                    *Your Name

                    *Your Email

                    Phone Number

                    Company

                    *Subject

                    *Your Message