Prior to 2002, real estate syndicators used the TIC structure to purchase larger buildings with other 1031 investors but the IRS had not yet legitimized this investment vehicle for 1031 purposes. In 2002, the IRS finally approved this structure (Rev. Proc. 2002-22) and a newly legitimized industry/1031 strategy was born. While the TIC structure has its pros it is seldom used today by 1031 sponsors for one main reason: FINANCING. To structure a TIC every co-borrower needs to be individually approved by the lender and the few lenders offering these loans are now (post-recession) placing limitations on the number of co-borrowers (approx. 2-10 from 35). This often caps the total purchase price for a TIC at around $20-30 million.
The benefit to this structure is the flexibility it provides the sponsor and co-owners. In particular, the flexibility to do major renovation work (not allowed in a DST). Additionally, each investor receives a deeded title for their prorated property ownership and has the ability to vote on management decisions (also not allowed in a DST).
Most TICs currently being structured today are single-property (non-portfolio) apartments and student housing with $300,000 to $700,000 minimum investment requirements. There is usually a value-add business plan where the property is purchased, improved, stabilized and then sold in approximately 3-7 years.