COVID-19 Impact Across CRE Sectors

The spread of the novel coronavirus (COVID-19) across the United States has caused all but the most essential businesses to shut down temporarily. Although designations often vary from state to state, the life-sustaining businesses that are currently operating across the country include: supermarkets and grocers; farms and food manufacturers; restaurants (take-out and delivery only); hospitals; healthcare providers (like dentists, veterinarians and physician offices); pharmacies (including CVS); banks and post offices; gas stations and convenience stores; and automotive repair shops.

Many of the strategies being implemented by these retailers—like curb-side pick-up—will most likely continue as customers return to work in the coming weeks and months. Large national tenants are better positioned to weather the storm of COVID-19, but the same cannot be said for neighborhood retailers. Each sector of the commercial real estate market has been affected in different ways. Let’s take a look at how the pandemic is affecting three key sectors: convenience stores, dollar stores and shopping centers.

COVID-19 Impact: Convenience Stores

Due to “shelter in place” orders, many consumers are looking to their local convenience stores for fuel, food and grocery items. Convenience stores have become a go-to for shoppers who want to avoid crowded areas and understocked grocery stores. According to the National Association of Convenience Stores (NACS), 52 percent of convenience store grocery sales have increased during the pandemic, despite the fact that fewer people are leaving their homes.

Convenience stores are resilient assets during economic downturns. Additionally, convenience store retailers were quick to address changes related to COVID-19 in their stores. These retailers continue to pivot and adjust as needed, from offering more items that can be taken home (pre-assembled meals, bulk items and toiletries) to removing self-service stations.

COVID-19 Impact: Dollar Stores

Rural and suburban communities have long relied on retailers like Dollar General and Dollar Tree for affordable, convenient household essentials. Because of this, the discount retail market has proven resilient throughout the COVID-19 pandemic. Their unique real estate footprint, coupled with lower price points, put discount and dollar store retailers at a competitive advantage during times of economic downturn.

Because of COVID-19, many consumers are flocking to discount retailers due to strained finances. Dollar stores are a vital, consistent source for inexpensive staple items, and most accept SNAP benefits. While many retailers are struggling to combat the negative effects of “shelter in place” orders, dollar stores have seen a rise in sales. The market for these discount retailers is strong as tenants see continued demand from both new and existing consumers.

COVID-19 Impact: Shopping Centers

Shopping centers have seen a decrease in foot traffic and an increase in vacancies over the past decade due largely to a change in consumer spending habits. The COVID-19 pandemic has created a new set of challenges for both large and small shopping centers. “Shelter in place” orders mean that foot traffic has become virtually non-existent within shopping centers that do not feature essential businesses like grocery stores or pharmacies.

Open-air shopping centers anchored by grocers, drug stores or home improvement stores should expect gains during the pandemic as these tenants have all been deemed “essential.” Customers have begun to visit their local brick-and-mortar grocery stores because of disruptions to the supply chain for many online and warehouse club retailers. In contrast, regional indoor malls and unanchored strip centers will likely experience the most distress during this economic downturn.

How can Ground + Space help?

The team at Ground + Space are committed to providing up-to-date information and best-in-class services to clients during the COVID-19 pandemic and beyond. The market changes daily, so please contact one of our brokers for specialized guidance during this time.

Are you interested in maximizing your return on a commercial real estate investment? Ground + Space is a leading commercial real estate firm that specializes in single-tenant and retail NNN investments. Contact Michael Zimmerman or Brett Sheldon today to find out more about our current listings and our superior services.

Just Sold: Palmetto Plaza in Miami Gardens, FL

Ground + Space announced today the sale of Palmetto Plaza in Miami Gardens, Florida. Ground + Space Principal Michael Zimmerman exclusively marketed the property, which sold to an all-cash buyer. Michael Zimmerman secured multiple offers for Palmetto Plaza within its first 10 days on the market, as well as several back-up offers. This extremely rare retail center was offered below the average market rent for the Miami metropolitan area.

Palmetto Plaza is a grocery-anchored retail shopping center that sits in one of the densest, high-traffic retail corridors in Miami-Dade County. The shopping center currently houses 38 businesses. The varied mix includes national, franchised and local tenants. The 175,045-square-foot property includes many investment-grade tenants like ALDI, Dunkin’ Donuts, Sherwin-Williams, Dollar Tree and Regions Bank.

This shopping center is just 15 miles from the heart of downtown Miami. Miami is the cultural, economic and financial center of South Florida. Visitors to the site have easy access to Interstate 95, Florida’s Turnpike and Miami International Airport.

About Ground + Space

Ground + Space is a net lease brokerage firm that leads with an emphasis on personalized relationships. Michael Zimmerman, Brett Sheldon and team have curated a brokerage firm and investment sales platform focused on boutique amenities and down-to-earth service. Ground + Space is rooted in more than 20 years of experience aimed at providing the best data, relationships and success rates in the business. Interested in commercial real estate investment? Contact us today to find out more about our current listings!

What is a Sale-Leaseback?

As retailers and commercial real estate property owners look to increase returns on capital investments in an uncertain market, the sale-leaseback option is becoming more popular. So, what exactly is a sale-leaseback, and why is it an enticing option for retailers?

The Basics of a Sale-Leaseback

In a typical sale-leaseback transaction, a property owner (like a chain retailer) sells the real estate used in its business to a separate investor (either private or institutional) while simultaneously leasing that same property from the purchaser. The sale-leaseback transaction can include either or both the land and the improvements, and usually features a triple-net lease arrangement. These transactions also typically accommodate fixed lease payments to provide for amortization of the purchase price over the lease term, options for the seller to renew the lease and, on occasion, an option for the seller to repurchase the property at a future date.

The Benefits of a Sale-Leaseback

There are many advantages to a sale-leaseback for retailers. Gaining capital for things like adding store units or paying off business debt are just some of the many ways a sale-leaseback can provide greater return on investment. With a sale-leaseback, the seller regains use of the capital that went into the purchase of the property. The seller usually receives more cash return with a sale-leaseback transaction than through a conventional mortgage financing plan.

With a sale-leaseback, the seller is often able to structure the initial lease term for a period that meets its needs without having to worry about refinancing, balloon payments, appraisal fees and other substantial costs. For a business looking to expand its footprint, this means there would be little to no need to take out a high-interest loan in order to make improvements or open new locations. Additionally, the seller is in a better position to negotiate rental rates and renewal options at the time of sale with a new property owner. Another bonus: rental payments from the newly established lease are fully tax deductible.

Investing in a Sale-Leaseback

For the investor, a sale-leaseback transaction can offer attractive, steady returns. With a fresh lease in place at the time of the transaction, there is less risk of tenant default. Sale-leaseback transactions also typically result in lower management costs and the associated risks thanks to the longevity of the lease. Depending on the lease term and scheduled rental escalations, the sale-leaseback will likely hedge against any future inflation. Additionally, the investor can now capture any future appreciation in the real estate asset.

Things to Consider

Although a sale-leaseback transaction might at first seem advantageous, it’s important to understand both the benefits and the potential risks of such a transaction. Changes in accounting rules or tax reforms can affect the way income from a sale-leaseback transaction is reflected on a company’s balance sheet. However, the demand for single-tenant properties typically sold via sale-leaseback is on the rise. Lower cap rate trends are driving the market and could result in increased sale-leaseback activity.

Are you interested in selling commercial real estate assets? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. The team at Ground + Space works to analyze current market data to offer clients best-in-class service. Contact us today to learn more about how a sale-leaseback transaction could benefit your business strategy.

Opportunity Zones: A New Way to Invest

The Opportunity Zone (OZ) program is relatively new, having been created by Congress as part of the $1.5 billion Tax Cuts and Jobs Act of 2017. The Internal Revenue Service (IRS) added two new sections to the Internal Revenue Code—Sections 1400Z-1 and 1400Z-2—to codify this new program. The program was designed to encourage robust, long-term capital investments in low-income and economically distressed communities across the nation. There are currently 8,700 Opportunity Zones across the United States and in territories like Puerto Rico. The OZ program is the first new community development program to be created that utilizes tax incentives since the New Markets Tax Credit Program of 2001.

How Does an Opportunity Zone Investment Work?

Like a 1031 Exchange, an OZ investment provides an investor with significant federal tax benefits and acts as an important tool for managing tax liabilities. Any OZ investment requires the investor to procure the investment via a legal entity—like a limited liability company (LLC) or a corporation—or directly into a Qualified Opportunity Zone (QOZ) business property. Most businesses qualify as an OZ business, although some exceptions do exist, including golf clubs and courses, gambling establishments, country clubs and the like. While QOF investments are not limited to real estate, all QOF investments must be in a designated OZ. Twice yearly, the Opportunity Zone Funds (OZF) must certify that a minimum of 90 percent of the funds’ assets are being held in an OZ. The capital gains on the property must then be rolled over into a QOF within 180 days of the realized gain. There is no limit to the amount of capital gains that can be reinvested through a QOF using this program.

What are the Tax Benefits of a Qualified Opportunity Zone?

OZ funds allow for the elimination of any capital gains taxes earned from the OZ investment under certain circumstances. There are two key incentives for OZ investments: Firstly, all capital gains used to fund investments into an OZ are currently eligible for tax deferral until 2026; secondly, if the OZ investment is held for a minimum of 10 years, the gains generated from the OZ are tax-free. Therefore, an investor who opts for an OZ investment can both defer and reduce the initial capital gains bill while also eliminating the payment of any capital gains taxes, depending on the circumstances of the transaction. (However, the elimination of subsequent capital gains taxes is dependent upon the value of the underlying investment in the OZF increasing over time.) If an investor has basis in the property sold, that investor can invest the capital gain—the difference between the sale price and the basis—in the OZF to receive the maximum tax benefits. This provides cash to the investor along with liquidity for the basis of the property sold.

What Determines a “Good” Opportunity Zone Investment?

In many ways, OZ investments are like any 1031 Exchange investment, so potential investors should stick to core investment parameters when making a new OZ investment. Instead of focusing solely on the tax advantages of an OZ investment, factors like supply, location, population density and income growth patterns should carry more weight in the decision-making process. Investors should seek out OZ investment opportunities in areas that are historically resilient when the economy slows down. This is especially important since the minimum investment horizon for an OZ investment is 10 years.

Opportunity Zones in North Carolina: Where Are They?

In North Carolina, there are a total of 2,195 Census tracts. At least 252 of those tracts are designated as Opportunity Zones (roughly 11.5 percent). These Opportunity Zones are scattered throughout the state. Areas considered Opportunity Zones represent a total population of more than 1.1 million, along with over 50,000 business establishments. Land in the downtown centers of both Raleigh and Durham have received the OZ designation, as well as parcels along Franklin Street in Chapel Hill.

Interested in maximizing your Opportunity Zone investment opportunities? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to learn more about the Opportunity Zone opportunities in North Carolina and beyond.

What is a Cash-On-Cash Return?

Investing in commercial real estate requires accurate analysis of profitability and returns to assist with the evaluation of each opportunity. The cash-on-cash return formula is a calculation commonly used by investors and retail real estate leasing brokers to provide valuable insight into a property’s return on investment (ROI). Below is a breakdown of everything you need to know regarding cash-on-cash returns.  

Cash-On-Cash Return Formula

A cash-on-cash return is a simple formula that determines the annual return rate generated on a property compared to the amount invested. To discover the cash-on-cash return rate, divide the annual pre-tax cash flow by the total cash invested.

Cash-On-Cash Return = Annual Pre-Tax Cash Flow / Total Cash Invested

Breaking Down Cash-On-Cash Return

The annual pre-tax cash flow is deduced by subtracting vacancies, operating expenses and mortgage payments from the total amount of revenue generated from tenant lease payments and other forms of income from the current period. This number is the building’s net operating profit.

The total cash invested refers to the amount of money spent in cash throughout the current period. This includes the down payment, any additional closing costs, insurance premiums, maintenance and other various expenses.   

As most commercial real estate investments demand long-term debt borrowing, the actual ROI differs from the yearly liquid return. Determining a commercial property’s cash-on-cash return rate provides a more precise portrayal of the investment’s current cash value because it does not consider debt. The cash-on-cash return rate can also be used to predict the potential cash circulation of a commercial investment opportunity. An investor may then extrapolate the resulting percentage to estimate expected returns on the life of their ideal investment.

Cash-On-Cash Return Example

Suppose an investor wants to assess a single-tenant property to gauge potential profit margins. The proposed lease outlines an agreement that requires the tenant to pay $80,000 in rent. The investor would ultimately pay $50,000 in mortgage payments, including interest premiums. The purchase would require a $90,000 down payment and $10,000 in closing costs from the investor. The annual pre-tax cash flow, in this case, is $30,000 (rent revenue – mortgage payments). The total cash invested in this scenario is $100,000 (down payment + closing costs). This results in a cash-on-cash return rate of 30 percent.

Limitations of the Formula

Though a cash-on-cash return provides valuable intel, its simplicity renders it limited in some regards. Not only does the equation exclude debt, but it also neglects any appreciation or depreciation on the property. Additionally, the cash-on-cash formula fails to account for potentialities such as risks and unforeseen maintenance costs. It’s important to understand that the cash-on-cash formula is best used to calculate simple interest and returns, or the total cash earned in relation to the total cash invested.  

Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!

1033 Exchange: An Overview

When exchanging or investing in properties, it’s important to utilize specific tactics and measures to maximize proceeds. Section 1033 of the Internal Revenue Service (IRS) tax code outlines a regulation regarding the deferral of capital gain taxes resulting from the exchange of property prompted by involuntary conversion. Gain accurate insights into the details of 1033 exchanges to boost the success of your real estate endeavors.

What is a 1033 exchange?

A 1033 exchange is a property investment practice that allows property owners to avoid tax liability on capital gain that occurs as a result of the forced loss of a property. The IRS permits this tax deferral if the owner reinvests the proceeds from their involuntary conversion into like-kind property that is “similar or related in service or use.” Involuntary conversion is defined as loss of property by casualty, destruction, theft, or eminent domain (government seizure). This means that the sale of the property is forced on the property owner and a 1033 exchange omits the owner from tax liability on the revenue from the sale.

What property qualifies for a 1033 exchange?

Replacement property under a 1033 exchange must be like-kind to the property that was involuntarily lost. If the original property is lost due to casualty, destruction or theft, the term “like-kind” is similar to the qualified standard in a 1031 exchange, but with stricter provisions. The use of the new property must be essentially equivalent to that of the lost property. A business owner that lost a retail store cannot replace it with a vacant lot. If the original property is condemned by the government, the more liberal definition of like-kind replacement property is applied from section 1031. In all scenarios, the total value of the replacement property must be equal to or greater than the proceeds gained from the conversion.

Determining the Replacement Period

Several criteria determine the time period the property owner is allotted for replacement. Under circumstances of casualty, destruction or theft, the property owner is given two years from the end of the year in which gain from the conversion is made. Under circumstances of involuntary property loss due to condemnation by eminent domain, the owner is given three years from the end of the year in which the property was seized. Property lost due to a federally declared disaster is given four years for replacement, which begins at the end of the year in which the conversion is made.

Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!

How to Do a 1031 Exchange: 7-Step Guide for 2019

Section 1031 of the tax code outlines a leasing regulation that allows businesses and business owners to exchange property and defer taxes. This principle is known as a 1031 exchange. Under a 1031 exchange, like-kind property may be swapped for property of similar class and nature, thus avoiding taxes until the property is ultimately sold for cash. Executing an exchange can be cumbersome, but it can also allow businesses to maximize capital gains on commercial property. Below is a step-by-step guide designed to simplify and streamline the operations of a standard 1031 exchange.

Step 1. Decide to do a 1031 Exchange

A 1031 exchange can be extremely advantageous, but some purchases are more profitable to perform in a typical manner than in an exchange. This particular leasing regulation has many considerations such as legal requirements, qualifications, document filing, and fees or other associated costs. Deciding to undergo an exchange should be discussed with a qualified commercial real estate firm to clarify these considerations and to ensure a rewarding venture.

Step 2. List the Relinquished Property for Sale

Once the decision is made to administer a 1031 exchange, the next step is to list the relinquished property for sale. Depending on the type of 1031 exchange, several regulations dictate the timeline given for finalizing this step. The real estate agent must include the proper language in the listing to make potential buyers aware of 1031 compliance.

Step 3. Search for Replacement Property

If the desired, new property isn’t previously selected, the business owner must begin search for replacement property while the relinquished property is on the market. As soon as the relinquished property is sold, the 45-day window to identify the replacement property commences. Section 1031 of the tax code offers specific rules and parameters with regards to determining a replacement property.

Step 4. Delegate a Qualified Intermediary

A 1031 exchange often requires the utilization of a qualified intermediary. A qualified intermediary acquires and retains the proceeds or titles from the sale of the properties until they are finalized. Acting as an “in-between,” an intermediary enters into a written exchange agreement with the investors, buyers and sellers that clearly restricts and limits their ability to obtain any benefits of the exchange without the intermediary’s consent.

Step 5. Close the Sale of the Relinquished Property

With the help of the qualified intermediary and the real estate team, the next step of a 1031 exchange involves accepting an offer on the relinquished property. The documents associated with the closing must expressly state the terms and the buyer’s acknowledgment of the 1031 exchange. The close of the sale on the relinquished property is similar to any standard real estate transaction, though the funds are transferred into the intermediary’s account instead of into that of the exchanger.

Step 6. Identify Replacement Property

After finalizing the sale of the relinquished property, the exchanger must identify a like-kind replacement property within 45 days. The identification must be stated in a written document and signed by the investor and intermediary. Identification of replacement property can also be revoked or changed within the identification period. The rules of selecting a replacement property give the business or business owner the ability to identify up to three properties of any value, unlimited properties that total less than 200 percent of the value of the relinquished property or unlimited properties regardless of value as long as 95 percent of them are acquired.

Step 7. Close on Replacement Property and Finalize the Exchange

The investor, intermediary, title company and agent work together to finalize and close the exchange. Closing costs and processes of a 1031 exchange include fees, premiums, security deposits and more. Correctly categorizing these expenses requires all participants’ coordination. Once the acquisition of the replacement property is completed and the title is secured, the intermediary transfers the funds and title to the exchanger, which finalizes the exchange.

Interested in a 1031 exchange to defer taxes and increase your investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!

The 4 Types of 1031 Exchanges

A 1031 exchange is a regulated strategy under the IRS tax code that allows businesses to defer paying taxes on investment property by exchanging one like-kind property for another. Traditionally, a 1031 exchange is designed to occur instantaneously. However, because the probability of such simplicity is low, there are four different types of exchanges that covers a multitude of possibilities and scenarios. Knowing available options of 1031 exchanges prepares a business for a maximum increase in capital gains with minimal taxes.

  1. Simultaneous Exchange

A simultaneous 1031 exchange occurs when the initial property is swapped for the replacement property and both transactions are finalized on the same day. A delay in the operation deems the exchange ineligible and results in the application of full capital gains taxes. A simultaneous exchange can be performed solely by the two parties involved, in which case the deeds and ownership of the property are immediately interchanged. Alternatively, a qualified intermediary may facilitate the entire exchange in a simultaneous manner.

  1. Delayed Exchange

The delayed exchange is the most common form of 1031 exchanges. A delayed 1031 exchange occurs when the business or investor relinquishes the initial property before identifying and acquiring the replacement property. The investor must market and sell the relinquished property before initiating the delayed exchange. From this day, the investor has a 45-day window to identify a replacement property, a part of the regulation that retains its own options and parameters. The closing of the new property must then be finalized within 180 days of the sale of the original property. During this timeframe, a qualified intermediary holds the proceeds of the initial sale and does not transfer the funds to the investor until completing the acquisition.

  1. Reverse Exchange

Similar to a delayed exchange, a reverse 1031 exchange occurs when the replacement property is acquired before the relinquished property is identified or sold. Under an Exchange Agreement, an intermediary typically takes and holds the title of the replacement property until a buyer for the initial property is found. The business or investor has 45 days from the acquisition to identify the property that will be sold and 180 days to finalize the transaction to qualify for a reverse 1031 exchange. Subsequently, the intermediary releases the title and ownership of the replacement property to the investor and closes out the exchange.

  1. Improvement Exchange

An improvement exchange, otherwise known as a construction exchange, allows the business or investor to make improvements on the replacement property prior to the official acquisition. To qualify for total tax deferral, the IRS code does not allow the investor to make improvements after securing ownership. Thus, an intermediary must hold the title until the improvements are complete. The other stipulations are similar to those of a delayed exchange, which allows 45 days to identify and 180 days to finalize. Typical examples include constructing a building on a vacant lot or making other property enhancements to add value and limit boot.

Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!

An Overview of a 1031 Exchange

1031 Exchange: An Overview

When it comes to leasing properties for your business or organization, it’s important to consider specific measures you can take to maximize your investment in any commercial real estate endeavors. A 1031 exchange is a particular leasing regulation which allows a business to profit from exchanging one property for another if carried out properly. Gain accurate insight into the details of 1031 exchanges so your business can improve the outcomes of your commercial real estate investments.

What is a 1031 exchange?

In section 1031 of the tax code, the IRS outlines a principle regarding commercial real estate which allows investors of commercial property to transfer ownership from one space to another without having to pay taxes. Within the provisions of a 1031 exchange, an investor can sell the original property and use the profit to purchase a replacement property of like-kind value all while remaining tax-free. Ideally, a series of 1031 exchanges can allow businesses to make real capital gains on their commercial real estate property by exchanging properties that increase in value over time.

How does a 1031 exchange work?

Under a 1031 exchange, commercial property owners can essentially swap a property for another space by reinvesting the profits made from the original sale to purchase the replacement property. There is no limit to the amount of 1031 exchanges a singular property owner is permitted overtime, which allows investors to significantly increase the net worth of their investments tax-free. Not only does the value roll over from one space to the next, but the property’s worth generally increases. When an investor eventually decides to sell the final property for cash, the profit should be much higher than the amount the first space was purchased for.

What are the considerations of a 1031 exchange?

1031 exchanges have multiple rules and requirements to ensure the details are carried out properly, and at times these regulations can be cumbersome to maintain. Investors should partner with a commercial real estate expert to maximize their 1031 exchange profit.

To qualify as a 1031 exchange, an investor must swap the original property for that of similar assets and value. Additionally, if the investor is not ready to purchase the replacement property immediately after the original property is sold, an intermediary must collect the cash until it is used to buy the new space so the investment can remain tax-free.

Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!

Like-Kind Property in a 1031 Exchange

Like-Kind Property in a 1031 Exchange

A 1031 exchange is a particular real estate regulation that applies to commercial properties where ownership can be transferred from one space to another without having to pay taxes. Ideally, a series of 1031 exchanges can allow a business to profit when the final property is sold for cash. Within the parameters of a 1031 exchange, businesses have the opportunity to make considerable gains from investing in one property and swapping it for another space of a similar nature. These properties are named “like-kind” properties when referring to specific commercial real estate properties that can be swapped under the terms of a 1031 exchange.

What are the qualifications for like-kind property?

Regarding property that meets the qualifications for use in a 1031 exchange, the term “like-kind” refers to the nature of the property itself rather than the form of the investment. According to the IRS, like-kind property is “property of the same nature, character and class” and the “quality or grade does not matter.” The property is considered to be like-kind regardless of improvements.

The types of property that qualify for a 1031 exchange are extremely broad. Any real estate used in a productive manner for business, trade or investment suffice. Some examples include vacant land, commercial buildings, hotels or motels, retail buildings, office buildings and restaurants. An apartment building can be exchanged for a vacant lot, or a business’s property can be exchanged for another corporate space. In most cases, the qualifications for properties to be considered “like-kind” are liberal.

Are there any like-kind property limitations?

When investing in commercial real estate, it’s important to understand the specific restrictions associated with like-kind property since the qualifications are rather broad.

For instance, personal property does not fall within the parameters of like-kind property. In order for the space to be eligible for a 1031 exchange, the real estate or property cannot have solely served a personal function and must have been held for use in a trade, business or investment. This limitation is intended to exclude primary or secondary residences. Additionally, “dealer property,” or property held mainly for resale purposes, is excluded and does not qualify.

Some geographical restrictions also exist. Though state-to-state exchange is permitted and very common, real estate property within the United States is not like-kind to property outside of the United States. Lastly, stocks, bonds, securities and interests in partnerships are excluded from qualifying as like-kind property.

Is there a time limit on like-kind property investments?

The sale and acquisition of a replacement property do not have to be simultaneous. If the 1031 exchange is not simultaneous, the 45-Day Replacement Identification Window Rule requires that the replacement real estate must be selected and identified within 45 days. The 180-Day Purchase Window Rule requires that the investor also closes on the acquired property within 180 days. This is a common type of exchange, known as a delayed like-kind exchange.

Your company must understand these qualifications and parameters of like-kind property to optimize your opportunities to earn a profit on your business’s commercial real estate investments.

Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!