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LOS ANGELES-Scott Lunine, formerly managing director at locally based tenant-in-common sponsor SCI Real Estate Investments, has stepped into a new position as EVP and managing director of real estate at investment banking and brokerage firm T.R. Winston & Co. with the assignment of building a national TIC sales network for Bedminster, NJ-based Winston. Lunine, who joined SCI in 2005 and established a network of 23 US offices for the firm, tells GlobeSt.com that the move is timed in large part to take advantage of new regulations that will allow real estate brokers to sell tenant-in-common interests as securities, a change that is expected to vastly enlarge the universe of brokers who can sell TIC interests.

Lunine tells GlobeSt.com that with the US Securities and Exchange Commission set to create an exception to its regulations later this year that will allow commercial real estate brokers to sell any TIC investment, whether it is securitized or not securitized, Winston wants to be ahead of the curve in establishing offices to service the broader brokerage community that will now be able to sell the products offered by TIC sponsors. “The SEC exception is going to really open the door for real estate brokers to sell TICs,” the new T.R. Winston exec says. “We need to have people in markets throughout the country to network with those brokers.”

Lunine, who will be based in T.R. Winston’s Century City office, says that the company initially expects to establish more offices in California and the Northeast, but it is also looking at Florida and the Midwest as possibilities too. “We really want to go where the investors are, and those markets that I mentioned are really the hubs where the most activity has been,” he says.

Leaving SCI “was a really tough decision because it is such a great company,” Lunine comments. He explains that one of the chief factors influencing his decision was the chance to sell TIC products from more than one sponsor. “When you are working for a sponsor, the only product you can make available to brokers and investors is that sponsor’s properties, but working for a broker-dealer, I can not only offer SCI’s product, which I will still be doing, but I can also offer every other sponsor’s product as well.”

Jack Galuchie, president of T.R. Winston & Co., comments that Lunine’s move comes at a time when “We firmly believe that the tenant-in-common industry will continue to grow for the high-tier sponsors” despite the challenges facing the real estate market. Lunine expects that one of the effects of those challenges will be a further winnowing of the number of TIC sponsors.

“I think the next year or two is going to be a make-or-break time for a number of TIC sponsors,” Lunine says. “I think the largest sponsors that are well-financed and have a large pipeline will continue to do well, but I think you are going to see a number of smaller sponsors leave the industry. It wouldn’t surprise me if we are down to 30 or 40 in a year or two.”

The changing economic and credit market conditions represent a mixed bag for TIC investors, according to Lunine. “There is much more inventory available for them now than there was a year ago,” he says, but on the other hand, “It’s a lot tougher to get deals closed.” He explains that demand remains strong from 1031 exchange buyers who want to invest in TICs, but financing can be a challenge because “not all lenders want to do a TIC deal where they have 30 different investors on the note.”

TIC deals look attractive to investors who have sold properties and are looking for a 1031 exchange because those 1031 buyers today typically have between $1 million and $10 million of equity to invest, Lunine notes, compared with an average of $250,000 to $350,000 in the early days of the TIC industry. Most exchange buyers today “either want to upgrade the type of property they own or they just want to get away from the management headaches, and there are very few options for them to get into right now,” that are as attractive as TIC investments, Lunine explains.

Lunine, who spent almost 10 years with Sperry Van Ness before his nearly four years with SCI, says that the contacts he built within the brokerage industry at his SVN and SCI posts should stand him in good stead as he works to build the new T.R. Winston network. Winston, which maintains a retail brokerage and institutional sales team that focuses exclusively on servicing sophisticated investors, is also the exclusive placement agent of tenant-in-common investments sponsored by locally based FORT Properties.

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