Large Sample Valuations of Tenancies-in-Common

We value a large sample of tenant-in-common (TIC) investments covering approximately 20% of the TIC industry from 2004 to 2009. Based on the sponsor's projections, we find that the TICs on average were worth 83.6 cents per $1 paid by investors. Adjusting capitalization rates alone to rates reflecting market conditions lowers the average valuations by 9.5 cents to 74.1 cents per $1. Adjusting the sponsors’ unrealistic rental growth and vacancy assumptions lowers the average value further. Our results show that private placement sponsors have considerable latitude in their projections, and that investors should view projected returns with skepticism.