It All Started With Exchanges

Over the past five decades, The CCIM Institute has become synonymous with CRE investment education.  But did you know that it all started with “Exchanges”?

When the National Association of Realtors (NAR) was formed in 1908, it was called the National Association of Real Estate Exchanges (NAREE). It had 1,646 members and charged annual dues of $1.   Brokers of real estate were called “Exchangers” and sales and leases were consummated with a handshake.

The organization quickly grew in membership and lobbying power, encouraging its members to take a model licensing law to their state legislatures for adoption.  In 1913 a Code of Ethics was approved, followed three years later by a requirement that every member use a uniform “Exclusive Agency Agreement.”   That same year, 1916, the term “Realtor” was coined for member brokers, their agents called Realtor Associates. The word “Realtor” was officially registered as a copyrighted trademark, but it soon became synonymous with any agent or broker who practiced real estate. For years NAR rigorously fought this generic usage by the public and media, but to no avail.

The term “exchanger” took on a new meaning after 1954 when the IRS instituted a new law deferring capital gains taxes on the sale of property when replacement property was immediately purchased with the proceeds of the sale.  “Property” included all sorts of things: equipment, supplies, even cattle.  Politicians saw an untapped, and in some circles, an unpopular revenue stream and in 2017 tightened this “tax loophole” to exclude anything but real estate.  Guess who saved the day? NAR.

 “Like-kind,” or “1031” tax exchanges have been a valuable instrument in the real estate investor’s tool kit since the IRS adopted the provision in 1954. However, in the 1950’s and 1960’s few commercial real estate brokers and agents were versed in the application of this tax strategy.

Jay W. Levine, a Southern California “exchanger/Realtor” who brokered residential and commercial properties, set off to change all of that.  He and a colleague, Jim McMichael, decided that the profession needed standardized teaching in the complexities of the 1031 Exchange process.  They developed a 5-day course and took it on the road around Southern California.  Word spread and they were invited to Washington state where they partnered with two successful students, Victor “Rick” Lyon and Palmer Berge. Meanwhile, back in California, Levine joined the fledgling Exchange Division of the California Association of Realtors and helped start the Real Estate Exchange Group.  The team’s curriculum was adopted as a UCLA Extension Course and graduates were proclaimed Certified Property Exchangers (CPE).

The interest in training exchangers went national and in 1967 the CPE designation was adopted by NAR.  Two years later, the designation was renamed CCIM (Certified Commercial Investment Member).

Subsequently, a new business arose — deferred tax exchange companies. They effectively, and efficiently, took over the mechanics of the exchange process.  And, their business plans featured a significant marketing component: teaching brokers and agents how to advise their investors about the tax benefits of 1031 exchanges.  For over 20 years, two of these companies, Chicago Deferred Exchange, represented by Teresa Fleugal, and IPX 1031 Exchange, represented by Ron Ricard, have been loyal sponsors and supporters of the Northern California Chapter.

Since its conception in the early 1950’s, protecting the 1031 tax provision has been a top priority for NAR, and later CCIM. Every year members converge on Capitol Hill to meet with their elected officials to underscore the value of the 1031 Exchange to the market and to the nation’s economy.

Levine told his story about his exchanger roots in a video interview released when CCIM celebrated its 50^th Anniversary in 2017.  View it here.  We’ll learn much more about this CCIM pioneer, his contributions to the CCIM Foundation and the development of his namesake leadership development program in future posts.  Stay tuned.

By Terry Shores
March, 2024