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Giving the 411 on 1031s
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| Giving the 411 on 1031s - by Nicholas Hamner Kimco Exchange Place is a taxable REIT subsidiary of Kimco Realty Corporation. Headquartered in New York City, Kimco Exchange Place is a brokerage firm specializing in NNN properties sold to taxpayers completing like-kind exchanges under 26 U.S.C. §1031. The brokerage entity facilitates transactions between sellers and buyers motivated by federally-enacted time limits and tax consequences. Kimco Exchange Place (KXP), like other taxable REIT subsidiaries, benefits its parent by creating retained earnings. KXP acts as a brokerage entity for the disposition of properties owned by Kimco Realty Corporation and Kimco Developers, Inc., as well as third party sellers. Kimco Exchange Place’s business is reported to Kimco Realty through David Henry. Henry is Kimco Realty’s vice chairman and chief investment officer. Kimco Exchange Place was founded by Robert James in 2000, although the REIT Modernization Act, which authorized taxable REIT subsidiaries, did not become effective until 2001. James acts as managing director and orchestrates Kimco Exchange Place’s continued growth. He is assisted by Douglas McCulloch and Rita Kramer, the company’s sales and marketing directors. Daniel de Sa’ serves as the exchange group’s sales manager. Additional support is provided by Monica Lawrence. Kimco Realty Corporation is the largest owner of neighborhood and community shopping centers in North America. KXP, therefore, dedicates a substantial amount of time selling properties owned and developed by the REIT. Where Kimco Exchange has made its largest impact, however, is through its §1031 exchange network and the Kimco Exchange Place Web site, accessed at either www.KimcoExchangePlace.com or www.Kimco1031.com. KXP consistently lists upwards of 75 properties available for sale from the REIT and third party sellers. The Web site receives approximately 270,000 investor hits per month, and its notification service reaches 10,000 people through email and fax broadcasts. Properties offered for sale appeal to a broad market with prices typically ranging from $1 million to $30 million, though properties have moved through the Exchange Group for as little as $300,000 and for as much as $50 million. At press time, a transaction for an office building in Florida totaling $76 million is being processed. The properties listed on Kimco1031.com are largely from third parties but Kimco Realty Corp. properties are routinely listed and account for approximately 25% of total transactions. Although the Web site was created primarily to facilitate like-kind exchanges, a full 45% of transactions involve traditional investors not interested in §1031 transactions. The Web site excels at bringing out-of-region buyers and sellers, who would normally only operate in a regional theater, together in a national marketplace. Market pricing is determined by a panel of highly qualified valuation experts within KXP. Sellers can give their properties national exposure, allowing buyers to invest in properties far outside their traditional control areas. The Kimco Exchange Place Web site cultivates a competitive bidding environment with an expanded reach. Kimco Exchange Place provides opportunities for investors of all levels and price brackets. Although 60% of the business is conducted with regional property owners or developers, small individual investors make up 20% of the business. The remaining 20% are institutional transactions. KXP has chosen to refrain from only one area of §1031 exchanges. Although IRS clarifications in 2002 concerning tenancy in common took the tax risk out of these deals, there is still considerable debate as to whether tenancy in commons should be sold as securities or real estate. Given the gray area inherent in tenancy in common properties, Kimco Exchange Place does not actively market them. Like-kind exchanges under §1031 are subject to two deadlines: a 45-day deadline from the initial sale’s closing to formally identify the replacement property and a 180-day deadline from the initial sale’s closing to close on the replacement property. The exchange group reacts quickly. Sellers interested in listing a property with the exchange group generally see the property listed two weeks after making the initial inquiry, as the property must be evaluated and marketing materials created. Once listed on the Web site, multiple letters of intent are typically received within three weeks. Contract formation usually occupies another 10 days to two weeks, followed by a 21-day due diligence and a 30-day close. The 180-day close deadline is rarely an issue. Kimco Exchange Place is able to facilitate what are known as reverse §1031 exchanges, where a buyer closes on a replacement property, is given 45 days to identify a relinquished one and 180 days to sell it. The company can also assist buyers with identification using the three property rule and the 200% rule; the latter allows a buyer to identify an unlimited number of properties within 45 days, provided the total value of the identified properties does not exceed 200% of the relinquished one. The three property rule allows for the identification of three properties of any value. Mirroring the movement of the real estate field in general, KXP operates cooperatively with other brokers to best facilitate their customers’ sales. This translates to a shared commission, co-brokerage-friendly platform wherein Kimco Exchange Place works seamlessly with other brokerage houses throughout the U.S. to match the property and buyer best suited for one another. Kimco Exchange Place refers to its database of buyers as the "mother of all Rolodexes." This, coupled with the firm’s analytical abilities to appraise and price properties appropriately and a turbo-charged support staff that packages and presents sites to the investor audience, explains their success in bringing in high offers and more transactions with lightning speed. For more information, contact Robert James, Managing
Director, Kimco Exchange Place, 280 Park Avenue, 11th Floor West, New
York, NY 10017; 212-972-7457, Fax 212-972-7496; |