Real estate big suspends interest payments on private placement

Tony Thompson halts payouts on notes funding his latest venture; the TIC king

Jul 10, 2012 @ 3:17 pm

By Bruce Kelly

Tony Thompson, one of the best-known real estate investors in the independent broker-dealer industry, is facing a hurdle in his latest business venture.

That venture, Thompson National Properties LLC, has suspended interest payments to investors in a private placement designed to raise capital for the firm. Clients were informed within the past week that the private placement — called the TNP 12 Percent Notes Program LLC — would halt interest payments with the intention of restarting payments on the notes in 2013, according to Joe Miller, chief executive of Independent Financial Group LLC, an independent broker-dealer.

The TNP 12 Percent Notes Program LLC raised $21.5 million from 418 investors in 2008 and 2009, according to a filing with the Securities and Exchange Commission.

The purpose of the notes program was to meet general obligations of the sponsor, Thompson National Properties, Mr. Miller said.

A spokeswoman for Thompson National Properties, Jill Swartz, said Mr. Thompson was traveling Tuesday morning and was not available for an interview. But in an e-mail to InvestmentNews, she wrote that TNP had taken steps to reduce overhead costs and increase revenues. These steps will strengthen the company's finances and benefit thousands of investors, she wrote.

“One of these steps was to defer payments related to the TNP 12% Notes program through the end of 2012,” Ms. Swartz wrote. “We fully intend to pay investors in this program all remaining interest and principal on or prior to the maturity date of June 10, 2013.”

Mr. Thompson, chief executive of Thompson National Properties, launched his firm in 2008. Earlier, he had founded Triple Net Properties LLC, which packaged real estate investments known as tenant-in-common exchanges, or TICs, which were sold through independent broker-dealers.

A related company, NNN Realty Advisors, merged in 2007 with Grubb & Ellis. Burdened by debt, that once-iconic commercial real estate company filed for bankruptcy protection earlier this year and subsequently sold its remaining assets for $30 million.

Since 2008, Thompson National Properties has launched 17 investment programs, with the largest being a nontraded real estate investment trust, TNP Strategic Retail Trust, according to a filing with the SEC. That REIT has acquired grocery and necessity-anchored retail shopping centers valued at $200 million and raised almost $91 million from investors.

Mr. Miller said he was surprised by the TNP 12 Percent program's suspension of interest payments. Registered reps with Independent Financial Group sold about $500,000 to $600,000 of the notes, Mr. Miller said.

Investors in the TNP 12 Percent Notes Program have gotten back about 35% of their initial investments, Mr. Miller said, adding that Thompson National Properties has been “a little aggressive” in its assessment of the real estate recovery.

Note programs typically are linked to real estate, said Bryan Mick, president of Mick & Associates PC LLO, a due-diligence firm for broker-dealers and registered investment advisers.

It's important for broker-dealers to understand the structure of such note programs. Pivotal information includes the value on the assets, whether such deals contain an “equity cushion” — meaning the property values is greater than the amount of money raised — and if the debt service on the note is manageable.

Twenty-two independent broker-dealers had agreements to sell the notes, which required a minimum investment of $50,000, according to the SEC filing. Brokers earned a 7% commission on the sale of the notes, according to the filing.

Ten of the broker-dealers listed as sellers of the notes have shut down. Those firms are Pacific West Securities Inc., Omni Brokerage Inc.,Empire Securities Corp., MCL Financial Group Inc., United Equity Securities LLC, Boogie Investment Group Inc., GunnAllen Financial Inc., Cullum and Burks Securities Inc., Workman Securities Corp. and Direct Capital Securities Inc.

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