An improvement exchange (also called build-to-suit) is a 1031 structure where the replacement property undergoes construction or major renovation during the exchange period, with the improvements included in the exchange value.
The Exchange Accommodation Titleholder (EAT) takes title to the replacement property and oversees construction during the 180-day exchange period. Completed improvements are included in the replacement property's value for exchange purposes. Allows exchangers to "upgrade" their position.
Improvement exchanges for LA multifamily are rare but occasionally valuable — typically when the exchanger needs to add value to a replacement property to satisfy equal-or-up requirements or achieve a specific post-exchange profile. Complex execution; specialized accommodators required.
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