The Flip Board

The recent bankruptcy filing by short-lived Arlington, Texas, home builder Wall Homes Inc. is bad news for private-equity outfit Warburg Pincus LLC.

Wall Homes owes the firm about $42 million, according to court papers. Warburg Pincus’s investment, which helped launch the closely held builder at the top of the housing market in 2005, is unsecured and “subordinated to secured lenders.” Read the rest of this entry »

An aging mall in Pennsylvania is fighting to reinvent itself amid the toughest climate for retailers in decades.

Despite seeing rents slip by 4%, Hong Kong leapt ahead of London's West End as home of the world's most expensive office space in 2008.

IStar Financial, the commercial-mortgage REIT, is in danger of violating certain bank-debt covenants.

Bank of America avoided the excesses of many rivals during the housing boom, but its performance isn't nearly as impressive with regard to mortgage-backed securities.

The recent sale of an office complex for $230 million highlights the unusual position of a suburban Chicago-based company that is still able to buy.

The Federal Reserve reported that banks have placed more than 2% of the value of commercial-real-estate loans in "charge-off," the first time that has happened since 1992.

(Listen Here 3:33 min)

State of Mind Matters

This podcast is all about the 1031 holding period, which is not really a period but more a state of mind. What I mean by that is when you acquire a property in a 1031 exchange, you need to have the proper intention. This proper intention is to hold the property for either “investment” or for “use in a trade or business”.

How Long Do I Have To Hold It?

Many people ask the following question.  “After, I have completed a 1031 exchange, how long do I have to hold it?” The answer depends. If you buy the property and immediately list it for sale and try to unload the property – then it seems apparent to me that you weren’t holding the property for investment because you have immediately listed it for sale. This is more indicative of holding the property primarily for resale. Remember, that property that you hold primarily for resale is viewed by the IRS as your inventory, your stock in trade. They don’t allow 1031 exchanges on your inventory. So, if you immediately unload the property, it is not necessarily that you violated a holding period, it is that you violated the intention, the (mental) holding requirement.

What are your Intentions?

Thus, we need to think about when we are acquiring the property is, do we have the proper intention.  What if you purchase a property, and after you acquire it, someone comes forward with an unsolicited offer. You did not have the property listed for sale; however, this person just came out of the woodwork. They offered you a great deal of money - more than what you paid for it. In these circumstances, it seems to me that even though you ‘held’ the property for just a short time, you had the proper intention when you acquired it. It doesn’t matter that you disposed of the property shortly after acquiring it. What does matter is that you had the proper intention. If that were my facts and circumstances, I would try to document that when I acquired the property, I intended to hold it.

1031 Tip: If you receive an un-solicited offer to purchase your 1031 replacement property.  You could write a letter to the purchaser saying the following. “Thank you for your offer. When I acquired the property, I intended to hold it for investment purposes, but your unsolicited offer is persuasive, and maybe we can meet a mutually beneficial result. Maybe I will be persuaded it sell it to you.”

In writing this letter, you want to show the IRS that you had the right intention.

General Growth Properties posted declining fourth-quarter results, showing that the recession is hampering the mall owner's operations as it works to avoid bankruptcy.