1031- Defining proceeds from relinquished property

[Dave Limbocker]

Two rules as I understand it are in order to defer all taxes in a 1031, newly purchased property must be equal or greater in value of the net sales price of relinquished property and carry the same leverage (loan) of the relinquished property.  

Do all proceeds have to move to new property regardless of actual capital gain?  For example we have done capital improvement to the property, can we get that $ back in the exchange?