Real estate maven Tony Thompson falls on hard times

Well-known real estate investor Tony Thompson is facing some bitter truths about the real estate holdings and note programs that he sold to investors.

But struggling with real estate deals isn't part of the upbeat and confident image that he likes to project.

In a recent ad in Southern California newspapers, he said: “Join Tony "the Truth' Thompson at one of his upcoming free seminars.”

The ad continues: “Tony wants you to know what he knows: Hear the truth about the economy, the politics of our banks' lack of lending … the health of our commercial and residential real estate.”

The reality is, however, that Mr. Thompson's businesses have fallen on tough times. Properties in a real estate investment trust that he controls are in danger of default, and he has missed payments to investors in a private-note program that he used to raise capital for a business venture, Thompson National Properties LLC.

But just as Mr. Thompson is being swamped with debts, he also is attempting to prime the pump for sales of his nontraded real estate investment trust, TNP Strategic Retail Trust Inc. Meanwhile, the REIT is negotiating to change its adviser to Glenborough LLC.

MISSED PAYMENT

Mr. Thompson has been struggling since last summer to make payments on various note programs, which he sold through independent broker-dealers in 2008 and 2009, raising at least $31.6 million in capital that was used to launch Thompson National Properties.

Last month, one of Mr. Thompson's note programs, the TNP 2008 Participating Notes Program LLC, missed a payment.

And in a filing with the Securities and Exchange Commission on Jan. 16, his nontraded REIT, the TNP Strategic Retail Trust, said that it was negotiating forbearance agreements for two loans on six real estate properties in an effort to stave off foreclosure.

Meanwhile, against nontraded-REIT industry norms, Mr. Thompson on Jan. 10 sent a notice to broker-dealers hawking that same TNP Strategic Retail Trust.

The note to broker-dealers said that the REIT's net asset value was 6% higher that its share price.

Cash flow, or funds from operation, haven't been used to pay investors in the REIT. A footnote said that all distributions, or dividends, paid to investors so far have been paid from offering proceeds, or money from new investors.

Paying old investors their distributions with money from new investors is a practice that has been widely criticized by the industry.

According to the SEC, selling an investment product above or below its NAV is permissible as long as appropriate “risk factor” disclosures are made to investors.

The nontraded-REIT industry, however, frowns on the practice, which can be dilutive to shareholders and provide brokers with a pitch laden with urgency to sell, industry executives said.

NOT A BEST PRACTICE

The Investment Program Association, an industry trade group, “doesn't consider this a best practice in sales,” president Kevin Hogan said. “This is something we're trying to work the industry away from.”

When asked last week about the discrepancy between the REIT's selling price and its NAV, Mr. Thompson wrote in an e-mail: “Others have sold shares for a period of time at $10 after a revalue at a higher NAV number prior to raising the share price. As you are aware, [Strategic Retail Trust's] offering closes Feb. 7, and the $10.60 estimate was published in mid-Nov.”

Mr. Thompson added: “My family's personal $1 million investment in [the REIT], along with the other shareholders' $105 million of equity of previous investments, also were purchased at $10 a share. Where's the issue?”

Mr. Thompson has his supporters.

“No one should count Tony out,” said H. Thomas Fehn, an industry attorney who is working for the various Thompson businesses.

Mr. Thompson, chief executive of Thompson National Properties, launched his firm in 2008. Earlier, he founded Triple Net Properties LLC, which packaged real estate investments called tenant-in-common exchanges, which were sold through independent broker-dealers during the real estate bubble.

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

Since 2008, Thompson National Properties has launched 17 investment programs, the largest being the nontraded REIT, the TNP Strategic Retail Trust. The REIT has bought retail shopping centers valued at $300 million and raised $108 million from investors.

In another e-mail, Mr. Thompson downplayed the impact of the problems in paying back investor notes and loans for the REIT.

“Actually, our revenue from the other 100-plus properties we manage for various third-party owners, along with other sources of income to TNP from [non-REIT]-related clients and real estate activities, far outweigh the revenue generated to Thompson National Properties from the [REIT's] advisory agreement,” he wrote.

Thompson National Properties' “debt has maturities of one to three years, and we are confident of our ability to meet and/or mutually modify terms satisfactory with our lenders,” Mr. Thompson wrote.

In a setback for investors, however, the REIT also is moving its distributions to quarterly payments, from monthly, due to short-term liquidity problems and has suspended share redemptions except in case of death or disability, according to the SEC filing.

The REIT faced a payment of $1.28 million by last Friday.

In a letter earlier in the week to investment advisers, Mr. Thompson wrote that he was confident of making the loan payment with proceeds from the sale of another property.

In a letter to investors this month, he wrote that the TNP 2008 Participating Notes Program intended to make a payment today.

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