Securitized 1031 exchange programs raised a record-breaking $7.4 billion in equity in 2021, more than double the $3.2 billion equity raise in 2020, according to a report by Mountain Dell Consulting, a market research and analytics firm focused on the securitized 1031 exchange marketplace.
In November 2021, Mountain Dell projected that the market could reach a record annual raise of $6 billion, which was smashed by more than $1.4 billion by year-end. There was close to $519 million raised in the last two weeks of the year alone.
The two previous highest fundraising years on record were 2006 and 2019, with nearly $3.7 billion and $3.5 billion raised, respectively. At the beginning of 2021, the firm anticipated a $4 billion raise, which was twice increased to $5.2 billion and $5.5 billion following the release of the first and second quarter totals.
At year end, the top sponsors by market share were Inland Private Capital (18 percent), Ares Real Estate Exchange (11 percent), Capital Square (10 percent), Cantor Fitzgerald Investors (7 percent), Passco Companies (7 percent), and ExchangeRight (7 percent).
Inland Private raised a whopping $1.32 billion during the year, followed by Ares with $839.3 million and Capital Square with $776.7 million. Rounding out the top sponsors were Cantor Fitzgerald with $504.6 million, Passco with $495.7 million, and ExchangeRight with $490.6 million.
Section 1031 of the Internal Revenue Code allows investors to defer paying capital gains taxes on investment property sales by reinvesting the proceeds into a similar investment property within a specified time frame. Securitized 1031 exchange programs are structured as securities and sold to retail investors, mainly as Delaware statutory trust offerings.