16 — September 2025 — 1031 Exchange — Financial — M id A tlantic Real Estate Journal
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1031 Exchange By Francis McCauley, Kearny Bank 1031 Exchanges: Key benefits to Commercial Real Estate Inves tors
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1031 exchange is a tax- deferral strategy that allows real estate in-
opportunity to build wealth by deferring taxes. Under the 1031 exchange an investor can reinvest the proceeds from the sale of a property. Under a normal sales scenario the pro- ceeds would otherwise be paid to the government in the form of taxes. The 1031 tax defer - ment allows for the full use of your equity from the sale, thus increasing your purchasing power and allowing an inves- tor to acquire a more valuable replacement property, often financed through a commercial real estate loan. There are three main 1031 profiles and realign assets into exchange buckets that met financing and tax objectives. The process demanded seam- less communication across multiple states, creative structuring and contingency planning to complete five ex - changes on the same timeline. Outcome: All five exchanges were completed successfully. The client achieved full capital gains deferral, improved cash flow and built a strategically aligned healthcare portfolio. Retail Sale in the Puget Sound Region Client Objective: Transition out of active management and into a stabilized, lower- maintenance asset. Structure: • Single-property exchange • Downleg value: approx. $8M • Upleg under contract with multiple vetted backup options Northmarq’s Role: The Northwest Retail team guid- ed a long-time client through the process of selling an ac- tively managed retail prop- erty and transitioning into a stabilized, higher-credit asset. They launched a broad marketing process to secure a qualified buyer for the down - leg, while simultaneously activating sourcing efforts for the upleg through inter- nal databases, long-standing market relationships and targeted off-market outreach. To protect the client under the exchange clock, the team built in extensions and timing flexibility during negotia- tions. Running both legs in parallel allowed the client to secure their preferred upleg before closing the sale, while also maintaining multiple
exchange rules. First, the inves- tor needs to establish that the property will be sold through a 1031 exchange. This is typically done with the assistance of a professional intermediary who is familiar with and manages the 1031 exchange process. Second, the property being sold and the property being purchased must be “like-kind,” typically income producing in- vestment properties and not a personal residence. Finally, the replacement property must be of equal or greater value than the property being sold. The exchange must occur backup options. Outcome: The exchange re - mains on track. The client is positioned to transition into a stronger, more predictable asset, with timing flexibility and contingencies in place to ensure certainty of execution. Looking Ahead: Trends Shaping 1031 Exchanges Over the next 12 to 18 months, several factors could reshape exchange strategies: Selective but stabilizing supply: Durable-income assets remain most resilient, with pricing holding firm. A mod - est increase in inventory could expand buyer optionality. Shifting buyer focus: Inves- tors are prioritizing income durability, reset rent to mar- ket potential and tenant credit quality over headline yields. Geographic re-weighting: Capital is reallocating in both directions—toward landlord- friendly jurisdictions and into high-barrier, supply- constrained metros. Interest rate impact: With potential Fed rate cuts later this year, sidelined investors may re-enter, sparking more exchange activity. Final Thoughts Investors are no longer chas- ing yield for its own sake. The focus has shifted to income durability, tenant credit and the ability to reset rents to market. With the rules intact and financing clarity improv - ing, 1031 exchanges are re - gaining momentum. Success will come to those who prepare early and stay flexible under the exchange clock. Chris Hall is vice president, and leads the Northmarq defeasance
within a strict timeline. An investor needs to identify a replacement property within 45 days of the sale of the relinquished property. In addition, the purchase of the replacement property must occur by within 180 days from the date of closing on the sale of the first property. Proceeds from the sale are usually held in escrow with a professional intermediary who manages the entire process, from the sale of the relinquished prop - erty to the purchase of the replacement property. Real estate investors utilize consulting team and the 1031 exchange team. David Annett is an as- sociate vice president in Northmarq’s Tulsa, Okla- homa office. Joe Dugoni is an associ- ate of Retail Investment Sales in Northmarq’s Se- attle office with a focus on the Pacific Northwest and
1031 exchanges as a powerful strategy to grow their portfolios and defer taxes, allowing them to leverage the full sale pro- ceeds into new higher quality and more valuable investment. Francis McCauley is a VP/ commercial loan officer at Kearny Bank. McCauley is a seasoned com - mercial loan officer who has worked at Kearny Bank since 2015. Francis focuses on originat - ing commercial real estate mort- gages for the bank with property types comprised of multifamily, mixed use, retail, industrial and office buildings. MAREJ
vestors to sell an investment property and reinvest the proceeds into a “like-kind” p r o p e r t y while defer- ring federal capital gains
Francis McCauley
taxes. The 1031 Exchange is named after Section 1031 of the Internal Revenue Code. A tax-deferred exchange allows a property owner the
1031 Exchanges in 2025: Execution, Cash Flow & Tax Strategy in . . . continued from page 14 Intermountain West.
more negotiable than a year ago. Deals listed at a 5.5% cap rate may still deliver investor goals if the lease structure, credit and real estate funda- mentals align. Many buyers are prioritizing downside pro- tection and income durability over chasing nominal yield. Strategic repositioning is the opportunity. Investors are moving away from chasing headline yields and instead focusing on income durability, tenant credit and mark-to- market potential. Many are accepting tighter pricing in exchange for stronger lease structures and more predict- able operating environments. Case Study: Real Deals, Real Impact Healthcare Portfolio Ex- change Across Four States Client Objective: Scale into a diversified healthcare port - folio while deferring capital gains and aligning assets with financing and tax goals. Structure: • Five simultaneous 1031 exchanges, ~$38M total value • Portfolio included eight healthcare properties across four states • Standard 45-day identifi - cation and 180-day closing timelines met Northmarq’s Role: Invest - ment Sales in Tulsa, Debt + Equity in St. Louis and our 1031 Exchange and Triple Net Lease Financing teams worked side by side to deliver on the client’s strategy. More than a dozen professionals collaborated across valuation, marketing, debt placement and exchange structuring to optimize returns, balance risk
Lanie Beck is senior di- rector of Content and Mar- keting Research at North- marq and is responsible for developing and defining the Northmarq content strategy and editorial ap- proach to elevate the brand and thought leadership of the organization. MAREJ
Marcus & Millichap closes $27M Wawa portfolio sale in a 1031 Exchange
Wawa Newton
sellers are large regional devel- opers, local private owners and developers, and East Coast- based owners and operators. In March 2025, Woodard and Dougherty brokered the sales of Goodnoe’s Corner, a 34,660 s/f town center in Newton, and Village Center, an 87,705 s/f grocery-anchored shopping center in Bensalem to begin the 1031 exchange process on behalf of their client. The properties in Newtown and Pottstown are 5,000 s/f as - sets built in 2025. The Wawa in Warrington was construct- ed in 2025 on 5,585 s/f, and the Fairless Hills Wawa was built in 2023 on two acres. MAREJ
PHILADELPHIA, PA — Marcus & Millichap an- nounced the $27,142,794 sale of a four-property Wawa portfolio in Newtown, Pottstown, War- rington, and Fairless Hills, PA. “Earlier this year, we repre - sented a client in the sale of two well-located shopping centers in Bucks County and this sale completes a 1031 exchange into four Wawa assets,” said Scott Woodard , senior direc- tor investments in Marcus & Millichap’s Philadelphia office. Woodard and Derrick Dough- erty , senior managing director investments with Marcus & Millichap, brokered the sales on behalf of the buyer. The
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