The sale of the 40-unit College Apartments across from Fresno State were the final leg of a complex six-property reverse 1031 Exchange. Photo contributed

The Mogharebi Group has completed a $41.1 million reverse 1031 Exchange with the sale of a 40-unit apartment community in Fresno. 

Brokers arranged the $4.6 million sale of the 40-unit College Apartments across Shaw Avenue from Fresno State on behalf of the David Hussain Family Trust as the final piece of a complex, six-property reverse 1031 Exchange transaction. 

Mogharebi Group Senior Vice President Robin Kane and Vice President Brendan Kane worked with the Trust to sell four small multifamily assets in Fresno, Visalia and Martinez and move the equity into larger, newer properties as part of a 1031 Exchange, which allows real estate investors to swap one property for another to defer capital gains taxes.

The Kanes advised their client on the acquisition of two larger apartment communities in Fresno totaling 137 units in separate transactions totaling about $20 million. 

“A reverse 1031 Exchange can be extremely difficult, especially in this challenging market. If we don’t close on time, the client could face a severe liquidity problem while incurring a potential tax liability,” said Robin Kane in a new release. “With the 1031 upleg complete, it was now on us as brokers to sell all four existing properties to create a non-taxable event and use the proceeds to return equity back to the client.”

With this particular reverse 1031 Exchange, the investor had to sell all four properties within a 180-day time limit. So, before selling the four properties, another investment property was purchased beforehand, hence the “reverse” part.

Help also came via an extension to Oct. 16 to identify and close 1031 Exchanges in California due to severe winter storms, flooding and mudslides.

The fourth and final piece of the 1031 Exchange was the sale of the 40-unit College Apartments in Fresno near the asking price of $4.695 million. Located at 4550-4596 East Sierra Madre Avenue, College Apartments features a mix of one- and two-bedroom floor plans ranging from 650 to 950 square feet. 

The property was built in 1957 on .36 acres of land directly across the street from Fresno State. The sale was facilitated by the assumption of a 30-year loan at 4%.  All four properties, which were sold in separate transactions to separate buyers, totaled nearly $21 million. Including the acquired properties, the total number of units involved was 264 units.

“A lot of credit goes to John Caulfield of Mechanics Bank, who had faith in us and our client to execute its business plan,” added Robin Kane.