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The Build-to-Suit Exchange, also referred to as the Construction or Improvement Exchange, gives the Exchanger the opportunity to add value to the replacement property before the Exchanger acquires title. The Exchanger can use the exchange funds to either
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build improvements on a new Replacement Property or |
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make improvements to an existing property. |
This variation is extremely popular because it also provides the opportunity to purchase properties needing renovation or to acquire bare land and build to an Exchanger's exact specifications. In the most common type of Build-to-Suit Exchange the Exchanger sells the relinquished property, the QI (and the Exchanger) loan money to RES to purchase property, RES makes the improvements and then transfers the upgraded Replacement Property to the Exchanger to complete the exchange. The improvements become part of the exchange value of the Replacement Property.
Advanced planning is essential. Normal construction delays, inclement weather and obtaining government permits can make it a challenge to complete the needed improvements within the 180-day exchange period. If the project will exceed the 180-day "safe harbor", the Exchanger must embark on a non "safe harbor" transaction.
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