Southwest Exchange and Nevada National Exchange
announce merger

November 23, 2004 - Two Nevada companies specializing in 1031 real estate transactions have merged, forming one of the major independent exchange companies on the West Coast, an executive said Monday.

Southwest Exchange Corp. merged with Nevada National Exchange and will retain the name of Southwest Exchange, said David Keys, chief executive officer of the new company.

The merger is a logical step in the company's plan to expand and centralize the 1031 exchange process, he said. Nevada National Exchange will initially act as a wholly owned subsidiary of Southwest Exchange.

The company's role is to act as a qualified intermediary in 1031 exchanges, holding the money and charging a fee for its services.

Section 1031 of the IRS tax code allows investors to buy and sell real estate properties of like kind without paying capital gains taxes.

It has become an increasingly popular method of investment at a time when real estate has overtaken the stock market for return on investments.

"In the past 24 to 36 months, investors have been pulling their wealth out of the stock market and (moving it) into real estate," said Jeremy Aguero, principal of Applied Analysis in Las Vegas.

He said the increasing amount of activity in 1031 exchanges is largely in response to four major factors: the relatively moderate to poor performance of the stock market; lower-than-average interest rates; a favorable national tax policy; and the general economic recovery.

As an exchange intermediary, Southwest Exchange enters agreements with property owners to trade their existing investment or business property for like-kind replacement property.

The property owner has 45 days from the close of a sale to identify a replacement property and 180 days to close on the new property.

One form of 1031 exchanges is tenant-in-common investment, which gives investors a fractional interest in a commercial property.

It's the perfect vehicle for investors who want a fluid cash-flow stream without the headaches of property management, some say.

"You don't have to worry about the four T's - tenants, toilets, trash and turnover," Tim Snodgrass, president and chief operating officer of Argus Realty Investors, said at a conference on real estate investment.

Argus purchased the 165,000-square-foot Silverado Distribution Center in North Las Vegas in November 2002 for tenant-in-common investors for $9.8 million.

Jeff Keech of Christopher Commercial said some residential real estate investors in Las Vegas are now turning to the commercial market, which has spurred sales at Christopher's Mountain View Professional Park.

"In the past, many investors shied away from commercial property because it was so diverse and difficult to understand," Keech said.

Residential investors don't have a lot of options right now, he said. The resale market has flattened out and the new home market has shut them out with owner-occupancy requirements and other stipulations.

"And predictably, these investors have begun to take a closer look at what a property like Mountain View offers, which is a brand new building, a very attractive business park environment and perhaps most importantly, a way to invest in commercial real estate with less liability and management responsibilities," Keech said.

Keys of Southwest Exchange said one of the factors often overlooked in the growth of 1031 transactions is the increased awareness of the code.

"Basically, real estate is very broad, so you can go from raw land to rental, from office to residential," he said. "When you get into tangible properties, it becomes very specific. For example, airplane to airplane or restaurant to restaurant."

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