The latest success, reports Fykes, was a mall located at one of the five busiest intersections of a city in Florida. “The total project cost is about $32 million. Our investors expect to be in this deal for about 10 years while earning a preferred return of 7.5 percent from the cash flow of the project.” The strategy, says Fykes, should produce an average annual return of 25 percent.

Direct investors may take a more passive approach without losing revenue stream by taking advantage of the U.S. tax code’s 1031 Exchange, notes Tom Jahncke, senior vice president of Passco Real Estate Enterprises in Santa Ana, Calif. Utilizing a 1921 IRS rule that allows an owner to sell one property and buy another of similar value while deferring the payment of capital gains, Jahncke’s firm has structured a tenant-in-common program that gives an investor a common ownership in a retail commercial property. “This would allow someone with $1 million to acquire a 10 percent ownership in a shopping center worth $10 million,” he says. “The owner gets a deed saying he is a tenant-in-common owner of an undivided shopping center. It’s ideal for someone who is tired of managing his own property, since we now do it for him.”  

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