1031 Exchange - Maintain Property in Same Entity

[Keith Meyer]

We performed a 1031 exchange last year into a multifamily property and are doing an agency cash-out refinance this year (woohoo real estate!). The replacement property we exchanged into is made up of multiple parcels, one of which is across the street and has flexible mixed-use zoning.

We are excluding that parcel from the loan collateral, and we will likely repurpose it for non-residential use. One of the agency's requirements is that the borrowing entity be a single asset entity, so this is presenting a challenge with holding now two assets within the same entity which performed the 1031.

My question is, would transferring this separate parcel to another entity present any issues with the 1031, in terms of keeping relinquished/replacement properties in the same entity? Would this potentially cause any "boot"? I think since we already performed the exchange we should be good. Only complications I see are separating out the tax basis between the two assets, which takes a little work but is straightforward enough. Anything I'm missing?