Mid Atlantic Real Estate Journal — September 13 - 26, 2013 — A


M id A tlantic R eal E state J ournal By Stan Freeman, Exchange Strategies Corporation The Optimal Exchange Strategy – Transaction Timing Control


his is the first in a series of articles on the sub- ject of optimizing 1031

kets for multi-family hous- ing and triple-net properties, for example, are intensively competitive and significant cap-rate compression is nor- mal in these locations. With the likely continuation of low interest rates for (near-) cash investments and the attractive arbitrage between CAP rates and the cost of leverage, this type of competition and pres- sure is not expected to abate in the near-term. If you are contemplating a 1031 exchange in order to achieve an investment objec- tive, this market - favoring sellers to an unusual extent

- must be navigated carefully in order to achieve your in- vestment goals and keep your capital continuously deployed, that is, defer the tax on the gain from the sale. Hence, the first aspect of optimizing a 1031 exchange that I describe is “transaction control” and relates to the timing of the acquisition of the Replace- ment (or “New”) Property in an exchange. Here is the danger: if you start a “forward” or “delayed” 1031 exchange, you’ll likely be able to sell what you are plan- ning to exchange with rela- continued on page 26A

exchanges in today’s CRE marketplace. Th i s t op i c should be of keen interest to real estate owners and investors as well as the

Stan Freeman

brokerage, legal and account- ing communities that assist them. Most experienced CRE professionals have some ex- perience with 1031 exchanges but many do not appreciate the full range of sound options that are available. In challenging market conditions, it makes sense to understand and use all of the available tools to help ensure success and reduce risk. The first set of articles will address optimizing in terms of transaction timing and control, return on investment and the integration of 1031 exchange with lending and cost segrega- tion. The second set of articles will describe several popular and effective 1031 strategies for increasing tax deferment potential in today’s CREworld. Our thoughts are informed by information gathered at scores of meetings with investors and CRE professionals all over the country. We promise to keep the discussion pithy (not too much detail) and avoid ir- relevance (e.g. vacation home exchanges). Any reader who wishes to discuss any topic in more detail or to jump forward to a topic of interest is encour- aged to contact me as indicated elsewhere in this publication. The term “optimization” means getting maximal benefit – strategically and financially - from an exchange for you, the person or entity doing the ex- change. This implies that the form of the exchange used (for- ward or reverse) is determined only by what is best for you and not what is best for your QI. As simple as this may seem, it is often an approach that is not encouraged by QIs. In today’s CREmarket, there is a consistent and sometimes overwhelming shortage of high-quality property for sale. The market is strongly aligned in favor of sellers. This short- age is perhaps most acute in the segment consisting of investment-grade, income- producing assets. The primary and secondary regional mar-

Intelligent 1031 Exchange Strategies Involve A Lot More Than Safe Cash. PUT TIME ON YOUR SIDE. Get The Most From Your Capital. OPTIMIZE YOUR STRATEGY.

• Unique optimization methods based on transaction timing control, ROI, asset utilization and deferment potential • Improvement exchanges, multiple-property exchanges, exchanges of air rights and TDRs • Reverse exchanges which deal efficiently with the Pennsylvania Realty Transfer Tax • Exchanges of heavy equipment and vehicles that provide incremental sales tax efficiencies • Non-safe-harbor reverse exchanges

Exchange Strategies Corporation 877-487-1031 www.exstra1031.com


Made with FlippingBook Annual report