When property returns are meeting or beating projections TIC owners are not overly interested in communicating with their fellow owners. However, the opposite is true when a deal reverses and distributions get reduced or in the worst case scenario stop all together; leaving owners feeling let down, frustrated, and helpless. The time between sponsor communications or quarterly updates can seem like an eternity; with owners feeling like they are at it alone on a deserted island with no land in site. What’s the next step? How is the leasing activity going? Is there going to be a cash call? All dreaded questions, but how can owners come together and have open discussions as a group real time? Online forums or groups are a great option.

Online forums are a user friendly solution that facilitates communication with multiple people. It allows its members/participants to post questions and comments online in an easy to manage message trail. Messages can be filtered, attachments added, links posted, all the while in a private member-only online environment.

It is a tribute to the quality of the organization that the Federation of Exchange Accommodators (FEA) has grown to nearly 600 member locations nationwide. It is an even greater tribute that the FEA, which promotes the ethics, standards and education for 1031 accommodators and associates, hosted record attendance of 486 participants this year at their 11th Annual Conference in Las Vegas. What was clear through the diversity of topics discussed and speaker’s presentations at this year’s Annual Conference was the strength and solidarity of the organization in promoting industry-wide education. It was also clear that anyone in the 1031 industry who missed the opportunity to attend, was missing a chance to learn from some of the industry’s top leaders and proactive supporters.

Economic Update

Many participants agreed that one of the highlights of the conference was the guest speaker Brian Beaulieu from the Institute of Trend Research. Mr. Beaulieu gave an excellent overview of the state of the economy and how it tied into real estate transactions including the use of the 1031 exchange.

Mr. Beaulieu presented his outlook for the housing industry, construction and the economy in general. Regarding the housing market, the declining trend in prices that began approximately two quarters ago is expected to extend through the first quarter of 2007 before the situation stabilizes. However, Brian doesn’t see the overall trend for housing, prices or activity, beginning an appreciable and sustainable rising trend until the second quarter of 2009. This is about a year later than other people are forecasting noted Brian. His reasoning is that the macroeconomic picture will be deteriorating in 2008 with business-to-business activity on the wane in 2008 and unemployment beginning to edge up and employment coming down.

The Net Leased market can be characterized as a ‘stand off’; buyers are waiting for sellers to lower prices through increased capitalization rates and sellers are waiting for buyers to accept lower cap rates. Fluctuating interest rates are keeping both sides nervous, as neither buyers nor sellers want to be on the wrong side of a pricing decision. Three to five months ago sellers lowered their pricing expectations in response to increasing interest rates. When interest rates dropped during late summer, many of those sellers found themselves on the wrong side of the pricing decision as many buyers took advantage of lowered interest rates to achieve better than expected levered returns.

Having been burned once, sellers are naturally reluctant to sell at the cap rates of last summer. At the same time, increased construction costs have largely eroded the benefit of lowered interest rates to developers; they need to keep property pricing up just to maintain their already thin returns. Buyers, on the other hand, don’t want to accept lower returns and are holding out for better pricing. Finally, overall 1031 activity seems to have declined over the past six months, which reduces the number of investors with a sense of urgency in their purchases. Of course, some see the stand off as equilibrium, others see it as stagnation.

As evidence that the NASD is ready for the wired world, they recently posted a pod cast on TIC interests on their website. You can listen to the pod cast on the “Regulatory Responsibilities in the Sale of TICs” through your computer (you don’t need an iPod or other MP3 player) or you can download it to your portable music device. To listen to the pod cast, go to:

http ://www.nasd.com/RulesRegulation/ComplianceTools/N ASDPodcasts/PodcastIndex/index.htm

By clicking on the link above, you will be transferred to the website for the National Association of Securities Dealers, of which OMNI Brokerage, Inc. is a member.