1031 Transactions on the Rise, Halloran Says

Michael Halloran, president and CEO of NES Financial, joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Halloran described the trends that he is seeing in terms of REITs using 1031 transactions.

“In 2013, the overall activity level within REITs doing 1031 exchanges, disposing of property and buying new property, has actually been up,” he said. “This past 12-month window, we’ve processed around $85 billion in 1031 transactions – that’s definitely a significant upward trend from where it was a year ago. We expect that’s going to continue as we go into 2014. We’re seeing much more activity in the commercial real estate sector. There’s much more in the way of lending. There’s new development. It feels like it’s starting to become a healthy market again.”

Halloran shared his outlook on commercial real estate transaction volume for 2014.

“We see things picking up across the board,” he said. “Probably the biggest development that we’ve experienced directly has been the utilization of what’s called EB-5 to create an additional method within the capital stack to raise capital. EB-5 is a program with the U.S. Immigration Service, where basically, if someone wants to immigrate to the United States, we make a $500,000 investment – it has to go through one of the authorized regional centers in the country. If that investment creates the necessary number of jobs over a two-year period, then they get to immigrate here and get permanent residency. This has become a mainstream source of capital now for larger developers.”

NES specializes in providing technology-based solutions for complex financial transactions. Halloran discussed potential new developments in the commercial real estate sector that his products will need to address in 2014.

“I think it’s in the sweet spot of what we’re doing right now,” he said. “What we’ve developed really addresses these complex financial processes and workflows, creating audit trails from cradle to grave on any project – and that’s really more of a funds administration role.”