MCB Real Estate, a Baltimore-based development and investment firm with a $4 billion, 22 million square foot U.S. portfolio, has launched a wealth management arm focused on capturing demand from the 1031 exchange marketplace. The firm has hired Mike Waddell, who previously headed Capital Square 1031, to run the new venture as CEO of MCB Wealthbridge.

The platform targets baby boomers who own commercial real estate and want to sell without incurring immediate capital gains tax liability or the operational burden of acquiring replacement properties. MCB Wealthbridge will offer sellers the ability to roll proceeds into a Delaware statutory trust, satisfying Section 1031 like-kind exchange requirements while avoiding the compressed timelines that typically govern replacement property purchases.

Section 1031 of the Internal Revenue Code gives sellers just 45 days to identify a replacement property and 180 days to close a transaction. By selling into a DST fund instead, investors can defer capital gains taxes and receive shares in a trust without the logistical challenges of sourcing and closing on a new asset within those tight windows.

DST popularity surged in early 2024 as the growing baby boomer population sought ways to maintain income from their properties while stepping back from direct management responsibilities. DST funds reached their highest-ever equity inventory at $3.9 billion earlier this year, placing them on track to exceed last year's volume, according to Mountain Dell Consulting.

Waddell acknowledged that high interest rates remain the biggest barrier to closing deals in the current environment. "It's made it more expensive to finance," he told Bisnow in an interview. "That means that finding the real estate is a bit tougher, but you can find it." Some sellers are encountering challenges linked to macroeconomic conditions and a scarcity of suitable inventory to invest in, he noted.

MCB Wealthbridge is seeking stabilized, institutional-quality assets to add to its portfolio. The firm is targeting multifamily and student housing properties that are more than 90 percent leased, as well as commercial assets with long-term leases backed by strong credit-quality tenants or triple-net arrangements. Waddell described the typical seller as a small real estate investor who has owned a four-unit apartment complex for 15 or 20 years and has grown tired of managing it.

In exchange for selling their properties to MCB Wealthbridge via 1031 exchanges, investors will gain equity exposure to MCB Real Estate's broader portfolio, which spans industrial, multifamily, student housing, and retail sectors. "This literally connects MCB Real Estate, via the sales channel, to the high net worth investors for capitalization of real estate," Waddell said.

The wealth management arm launch follows a series of aggressive growth moves by MCB Real Estate, led by founder and CEO David Bramble. The firm has a 6 million square foot development pipeline in addition to its existing assets. In March, MCB signed a 162,000 square foot lease with Costco to anchor Viva White Oak, a planned 280-acre mixed-use development in Washington, D.C.'s Maryland suburbs that MCB took over in 2023 after prior developments stalled for more than a decade.

MCB Real Estate announced a $900 million makeover of Baltimore's Inner Harbor waterfront this spring, having acquired the property out of receivership from Ashkenazy Acquisitions in 2022. The firm spent more than a year pursuing an acquisition of shopping center owner Whitestone REIT, making a second offer in November, but ultimately lost that deal to Ares Management Corp. In January, MCB bought Austin-based Epic Real Estate Investments and its 2.2 million square foot grocery-anchored retail portfolio for $525 million.

Waddell said the new investment arm gives MCB the opportunity to unlock value in stabilized institutional-quality real estate that the firm would not otherwise target for acquisition. "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."