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LandAmerica 1031 Terminates Operations

WASHINGTON, DC-In general 1031 activities are coming to a standstill, at least in the DC area, as commercial activity continues to fall.

By Erika Morphy | Updated on November 25, 2008

WASHINGTON, DC-LandAmerica Financial has sent a notice to its 1031 exchange customers this morning informing them that it was terminating these operations. The problem, it said, was that a portion of the 1031 funds are invested in illiquid auction rate securities that it cannot access. “Our inability to sell or borrow against these securities have precipitated our decision to terminate operations,” according to the letter.

LandAmerica is struggling to figure out its next steps now that Fidelity National Financial has decided to call off its offer to acquire LandAmerica–a $128-million deal that was first proposed two weeks ago. After the due diligence period, Fidelity decided to pull out of the deal.

LandAmerica’s 1031 exchange problems are a reflection of the greater liquidity issues it has–but they are also reflective of the dearth of 1031 exchange transactions in general, says Ari Firoozabadi, director of the National Multifamily Housing Group and associate vice president of Investments at Marcus & Millichap in DC.

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