Alert!! Possible Collapse of LandAmerica Exchange....

If you, or any one you know, has a pending 1031 exchange with LandAmerica Title, this TeeShot is a must read!

Who LandAmerica Is
LandAmerica Title Company, who trades on the New York Stock Exchange as LandAmerica Financial Group (ticker symbol LFG) is on the verge of collapse following the decision of Fidelity Title to not pursue a merger with LandAmerica. LandAmerica is one of the largest title companies in the United States.

The Problem
According to pages 28 and 29 of the 10Q (this is the quarterly financial report that each publicly traded company is required to file with the SEC) for the quarter ended September 30, 2008, LandAmerica has invested approximately $290 million in Auction Rate Securities (or ARS’s). You can do a Google search to find out more information about ARS’s. But the bottom line is that there are no current buyers for their ARS investments, and they estimate that it may take them approximately 20 years to liquidate this investment

In the meantime LandAmerica exchange will, over the 180 days subsequent to September 30th, have clients requesting the return of their exchange funds. According to the 10Q, by the time it was filed with the SEC, LandAmerica had funded approximately $115 million, leaving an unfunded balance of approximately $175 million. Again, according to the 10Q, LandAmerica’s available cash at September 30th was only $63 million. In other words, LandAmerica was short the cash it need to cover its exchanges by about $100 million. LandAmerica is a large company with lots of offices and lots of employees and it needs that cash for payroll and operating costs as well. In other words, LandAmerica has a severe cash flow crisis.

On November 7, 2008, LandAmerica agreed to merge with Fidelity National Financial (known around the U.S. as Fidelity Title) with Fidelity Title having until Friday, November 21st to complete a “due diligence” analysis of LandAmerica. The merger would have funded the balance of the 1031 exchange obligation, and would have created a title company giant that would have controlled approximately 50% of the title insurance market nationwide. After the close of business on Friday, Fidelity announced that they would not pursue the merger.

How This Affects You
If you, or anyone you know, has an exchange pending with LandAmerica, it is imperative that at a minimum you have them place your money is a separate account for you. Do not let them commingle your exchange funds with those of anyone else. I also suggest that you have them set up your account so that it requires two signatures to move the funds (yours and theirs) and that the account includes the term, "for the benefit of...." In addition, I suggest that you have your attorney review how the account is set up to make sure that you are totally protected. Specifically, you want to make sure that if LandAmerica files for bankruptcy before you complete your exchange, your exchange funds do not become a bankruptcy asset.

To be clear, LandAmerica is a great company and I hope they survive this, but there is no one out there looking out for you and I want to make sure you protect your exchange. If LandAmerica files for bankruptcy, the commingled exchange funds could be tied up until the ARS investments ultimately mature (which could be 20 years from now).

If this affects you – ACT IMMEDIATELY!