Mogharebi Group Closes $41M Reverse 1031 Exchange in California

The complex deal involved six properties and a total of 264 multifamily units in Fresno, Visalia and Martinez, Calif.

College Apartments in Fresno, Calif. Image courtesy of The Mogharebi Group

The Mogharebi Group, a real estate investment and advisory firm specializing in multifamiliy properties in the western U.S., has completed a six-property, $41.1 million reverse 1031 exchange that culminated with the sale of a 40-unit apartment property in Fresno, Calif.

The $4.7 million sale of College Apartments, located at 4550-4596 East Sierra Madre Ave., to an undisclosed buyer was the fourth and final piece of the 1031 downleg that involved a total of 264 multifamily units across six properties, including two acquisitions. The property, located across from Fresno State University, was built in 1957 on 0.36 acres and has a mix of one- and two-bedroom units ranging in size from 650 to 950 square feet. The sale was facilitated by an assumption of a 30-year loan at 4.0 percent.

Complex process

TMG Senior Vice President Robin Kane and Vice President Brendan Kane, both of the firm’s Fresno office, were engaged by a Central Valley-based investor who wanted to sell four small multifamily assets in Fresno, Visalia and Martinez, Calif., and move the equity into larger and newer properties as part of a 1031 exchange. While they were marketing the properties, the Kanes identified two larger multifamily properties in Fresno, totaling 137 units, for the seller to buy. They advised the client on the two separate acquisitions, which totaled approximately $20 million.

Robin Kane said in a prepared statement that a reverse 1031 exchange can be extremely difficult, especially in a challenging market. In a reverse 1031 tax-deferred exchange transaction, the investor acquires the replacement property before selling its current property or, in this case, properties. Kane said if they did not close on time, the client could face a severe liquidity problem while incurring potential tax liability.

Once the 1031 upleg was completed, all four existing properties had to be sold to create the non-taxable event and the proceeds used to return equity back to the client. Once the downleg was completed, the four properties were sold to separate buyers in four transactions totaling nearly $21 million.

Other TMG deals

In May, the firm arranged the sale of The Landing Apartments, a 156-unit community in Ontario, Calif., that was sold to a Los Angeles-based investor for $50.5 million. TMG worked on behalf of the seller, an Orange County-based family that had acquired the community in 2002 for $11.4 million, according to Yardi Matrix data. Also in May, TMG represented Positive Investments in the $15.8 million sale of Continental Terrace, 142-unit community in South Sacramento, Calif., to a private investor. In March, the company arranged the $28.5 million sale of Wildomar Senior, a 284-unit senior housing community in Wildomar, Calif.

You May Also Like