Megaproject Developer Launches 1031 Exchange-Focused Wealth Management Arm

MCB Real Estate, a Baltimore-based development and investment firm with a $4B, 22M SF U.S portfolio, is hoping to capture demand from the buzzy 1031 exchange marketplace via a new wealth management arm.

The firm, led by founder and CEO David Bramble, has been making bold moves in recent years and months in the pursuit of growth, taking over stalled mixed-use projects and pursuing big acquisitions of retail operators.

Now, the company is adding a new string to its bow with MCB Wealthbridge, hiring industry veteran and 1031 exchange specialist Mike Waddell to head up operations.

“I look at it as it's a new source of capitalization with a new source of investors,” Waddell, who previously headed real estate investment and management firm Capital Square 1031 and is now CEO of MCB Wealthbridge, told Bisnow in an interview.

MCB Wealthbridge is targeting baby boomers who own commercial real estate and are interested in selling but aren’t interested in taking a big tax hit on their asset or buying a new property. 

MCB Wealthbridge’s offering will work in a similar way to the fund established earlier this year by Fortress Investment Group, giving investors the opportunity to defer capital gains taxes on property sales by selling them into a fund called a Delaware statutory trust.

In exchange, sellers receive shares in the trust that satisfy the “like-kind” exchange requirement of Section 1031 of the U.S. Internal Revenue Code.

Choosing a DST over buying a new asset saves sellers the hassle of finding an exchange property within the tight timeline required by Section 1031, which gives them just 45 days to find a replacement property and 180 days to close a deal.

DSTs’ popularity exploded in early 2024 as the growing U.S. baby boomer population looked to 1031 exchanges to continue earning income from their properties and stop being personally involved in property management. 

That led to DST funds hitting their highest-ever equity inventory at $3.9B earlier this year, placing them on track to exceed last year’s volume, according to Mountain Dell Consulting.

While some sellers are running into challenges linked to the macroeconomic environment and a lack of inventory to invest in, high interest rates are the biggest barrier for getting deals across the finish line, Waddell said.

“It's made it more expensive to finance,” he said. “That means that finding the real estate is a bit tougher, but you can find it.”

MCB Wealthbridge is looking for sellers with stabilized, institutional-quality assets that it can add to its portfolio, Waddell said. The firm is looking for multifamily and student housing assets that are more than 90% leased, as well as commercial assets that have long-term leases with strong credit-quality tenants or triple-net deals. 

“A small real estate investor may have a four-unit apartment complex, and they've had it for 15 or 20 years, and they're tired of managing it,” he said. “The 1031 gives them the opportunity to defer capital gains and roll into additional real estate. That's where this sponsor segment that we're in really comes into play.”

In return, investors selling their properties to MCB Wealthbridge via 1031 exchanges will be able to invest the proceeds into equity in MCB Real Estate’s portfolio, including industrial, multifamily, student housing and retail, Waddell said.

“This literally connects MCB Real Estate, via the sales channel, to the high net worth investors for capitalization of real estate,” he said. 

MCB Wealthbridge’s launch follows a slew of deals and aggressive pushes for growth by its parent company, which has a 6M SF development pipeline in addition to existing assets. 

In March, the company signed a 162K SF lease with Costco to anchor the planned 280-acre Viva White Oak, a mini-city in Washington, D.C.'s Maryland suburbs that MCB Real Estate took over in 2023 after planned developments stalled for more than a decade under its former developer.

MCB Real Estate announced a $900M makeover this spring of Baltimore’s Inner Harbor waterfront, which it acquired out of receivership from Ashkenazy Acquisitions in 2022.

MCB Real Estate spent more than a year pursuing an acquisition of shopping center owner Whitestone REIT, making a second offer in November. MCB ultimately lost out on that deal to Ares Management Corp., but in January, it bought Austin-based Epic Real Estate Investments and its 2.2M SF grocery-anchored retail portfolio for $525M.

The firm’s new investment arm gives MCB the opportunity to unlock value in stabilized institutional-quality real estate that it wouldn’t otherwise target for acquisition, Waddell said. 

“MCB has found a lot of great real estate opportunities on the institutional and private equity side,” he said. “This is a real opportunity for MCB Wealthbridge to be able to take advantage of the acquisition pipeline that MCB Real Estate sees.”