Katie and Dave Brown have moved out of the shadows of the propety exchange business with the purchase of a company they consider a legend. Photo by Kent Darr
Katie and Dave Brown have moved out of the shadows of the propety exchange business with the purchase of a company they consider a legend. Photo by Kent Darr

The largest name in an obscure real estate process has acquired the oldest name in the business.

Iowa Property Exchange LLC purchased Iowa Exchange Corp. in a deal that closed Sept. 30, consolidating two companies that work in the shadows of real estate transactions and business acquisitions where capital gains taxes come into play.

David and Katie Brown are the owners of Iowa Property Exchange, which operates as IPE 1031 at 1922 Ingersoll Ave.

The Browns said that when their business was launched seven years ago, Iowa Exchange was the one competitor they looked up to.

Both companies operate as qualified intermediaries, a business title created by the Internal Revenue Service in 1991 to deal with the nuances of a section of the tax code - Section 1031 - that allows landowners to avoid capital gains taxes if they sell one piece of property and acquire another of like value.

It is a touchy process that also applies to the sale of any investment property. A personal residence does not qualify.

Iowa Exchange was founded in 1991 by Jo Kline Cebuhar. The Browns call her a pioneer in launching the service in Iowa. Scott and Kristine Modica bought Iowa Exchange in 2007 and decided to sell after Scott accepted a job in Virginia.

"The chance to acquire our largest competitor was too good to pass up," Katie Brown said.

Dave and Katie Brown met while attending Drake University Law School. Dave went on to become an assistant county attorney in Boone County and Katie entered private law, working as a civil litigator.

Dave said that even as a law student he was intrigued by marketing and entrepreneurship and considered operating a business after leaving the practice of law. A relative suggested the opportunities available in 1031 transactions.

"I always had a passion for business and definitely knew that this was the direction I wanted to go in terms of stepping away from the practice itself," Dave said.

Although not all qualified intermediaries are attorneys, it helps to have a fine sense of detail and process to complete 1031 transactions. Intermediaries hold the proceeds of a sale for a specified number of days until a similarly priced piece of property is identified, then purchased by the original seller.

Timing is crucial in a 1031 exchange. An investor must identify three properties for purchase within 45 days of selling a piece of real estate. The replacement property must be acquired within 180 days of transferring the original property.

In a twist in the process called a reverse exchange, qualified intermediaries also hold the title to property that is purchased in advance of a sale of another property.

Dave Brown launched Iowa Property Exchange and Katie joined the business a little more than three years ago.

Over the years, they have taken a "beneath the radar" approach to growing the business. In the early days, marketing amounted to Dave conducting seminars for real estate agents, attorneys and accountants.

Although the business was a small player, it eventually became the largest business offering 1031 exchanges in Greater Des Moines, if not the state, by the couple's estimate.

Acquiring Iowa Exchange solidified that position.

"This acquisition makes us pretty much it - far and away the largest player," Dave Brown said.

The Browns are attempting to decide how to treat the Iowa Exchange name. It holds significant value as the oldest and best-known name in the business, and they hold the company in such high regard that they are reluctant to demonstrate any disrespect.

"We don't want to sweep it away," Dave said. "Iowa Exchange has been the name for years and years, so I think it would be naïve and probably not prudent to not utilize it."

The Browns said they were prohibited by a confidentiality agreement from discussing the purchase price.