From Residential to Industrial: How a Multi-Stage 1031 Exchange Strengthened a Client’s Portfolio

For more than 30 years, a residential investor had entrusted GM Properties with the management of their Southern California portfolio. In late 2021, the client approached the firm for assistance with repositioning their holdings for greater stability and cash flow. This led to a multi-phase strategy that ultimately resulted in a full transition into industrial assets through two well-executed 1031 exchanges.

GM PROPERTIES’ STRATEGIC APPROACH

GM Properties leveraged decades of experience managing the client’s assets to confidently lead the repositioning of the portfolio. The transition began with the sale of two long-held residential properties: a five-unit apartment building in South Gate and a residential income condominium in Azusa. Vice President of Brokerage, Dustin Wheelan, together with Marcy Monaco, Director of Property Management, oversaw the initial dispositions—navigating the stringent inspection and repair requirements imposed by both the City of South Gate and the City of Azusa.

While both assets were in escrow, the team identified the upleg property in Santa Fe Springs, minimizing the stress and urgency typically associated with the 45-day identification period required for a 1031 exchange. Because proceeds from both downleg properties were being consolidated into the exchange, GM Properties coordinated the escrows to close on the same day, enabling a unified 1031 timeline.

After both properties were sold in late 2021, the team successfully closed on the replacement property, a 6,500 SF single-tenant NNN industrial asset in Santa Fe Springs, acquired in February 2022. The client sought to transition from management-intensive residential holdings into a property with lower operational demands and more predictable income. A triple-net (NNN) industrial asset met these objectives by offering long-term stability while shifting responsibility for expenses such as taxes and insurance to the tenant.

Approximately 18 months later, the existing tenant exercised their purchase option. After a lengthy negotiation process, a sale price was finally agreed to, with the buyer having taken a firm position throughout the process. To support a smooth transition, the GMP team negotiated an extended escrow period, allowing sufficient time to identify and secure a replacement property for the sellers before triggering the 1031 deadlines. Escrow on the replacement asset was opened prior to closing the downleg.

The new exchange resulted in the acquisition of a 9,440 SF multi-tenant industrial property—also located in Santa Fe Springs—purchased in May 2025. The building comprises eight individual units and is currently managed by GM Properties.

RESULTS & CLIENT BENEFIT

Through two carefully timed 1031 exchanges, GM Properties helped the client shift from residential to industrial real estate, reducing operational burdens and improving long-term income potential. The final acquisition diversified the tenant base, strengthened portfolio stability, and aligned with the client’s evolving investment goals.

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