1031 Exchange Momentum Shows No Signs of Braking
There have been year-over-year increases in 1031 exchanges throughout 2019 and that trend is expected to continue to tick upward in 2020, driven by an influx of investors seeking trade-up product.
SAN FRANCISCO—With 10 recent Bay Area trades, Levin Johnston of Marcus & Millichap directed 1031 exchanges with a total year-to-date transaction volume of more than $360 million. Levin Johnston recently directed the sale of a mixed-use property featuring three retail suites and seven multifamily units in San Francisco and the acquisition of Broadway Apartments, an eight-unit multifamily property in Burlingame on behalf of a single client in a 1031 exchange transaction, according to Adam Levin, executive managing director of Levin Johnston. The closing of Broadway Apartments was within six weeks of the sale of the mixed-use asset.
“With this 1031 exchange, we were able to help the buyer of Broadway Apartments trade out of a multifamily and retail property, subject to San Francisco’s tight rent regulations, and into an apartment community in a highly affluent submarket that offers significant upside potential,” notes Levin Johnston’s senior managing director Robert Johnston.
Broadway Apartments offers residents proximity to tech employers including Oracle, GoPro, EA, Facebook, Cisco Systems, Visa and Sony. The property is also in short walking distance of both a Caltrain station and a free trolley service that provides transportation to and from nearby downtown Burlingame’s shopping, dining and entertainment options. It features eight studio apartments with a one-to-one parking ratio.
The mixed-use asset is located at 310 Otsego Ave. in San Francisco and Broadway Apartments is located at 1123 Chula Vista Ave. in Burlingame. Levin Johnston also represented the seller of Broadway Apartments.
Additional 1031 exchange transactions completed by Levin Johnston this year include the $40 million acquisition of 926 Woodside and the sale of four multifamily communities with a combined value of $31.875 million. In addition, the team completed the $22.5 million sale of Woodgate Apartments in Mountain View and the $13.5 million acquisition of a medical office building in San Jose. These deals demonstrate the popularity of 1031 exchanges for properties in the Bay Area, according to Levin.
“These transactions are a tried-and-true method for private investors to build and preserve wealth through the real estate market,” he says. “The number and magnitude of the 1031 exchanges we’ve completed within the Bay Area market this year are a testament to the strength and performance of assets in this highly desirable market.”
And, this sale momentum shows no signs of slowing down, Levin observes.
“We have seen year-over-year increases in 1031 exchange momentum in this market throughout 2019, and we expect that trend to continue to tick upward in 2020,” he tells GlobeSt.com. “Driving this is an influx of investors seeking exchange transactions through which they can trade up to product that will deliver long-term cash flow and stability in preparation for any correction that may be on the horizon.”
Tom McGee, president and CEO of ICSC, says like-kind exchange transactions are critical for communities. In a recent Forbes post, he says these exchanges promote savings, investment, allow capital to flow more efficiently, encourage commerce, and ultimately stimulate US economic growth and job creation. A recent study confirmed that these 1031-exchanges have led to a more dynamic real estate sector that encourages reinvestment and building improvement, he pointed out.