I’ve always enjoyed the end of the year, the holidays, and now more than ever, spending time with my young children. Seeing their eyes light up as they experience Christmas provides such a fitting opportunity to reflect, specifically on MLG Capital and our Asset Management team (go team!). I’m hopeful that my recap and insights are more entertaining than my 2021 Spotify Recap Playlist. Who would have thought my top songs of the year would consist of the majority of the Frozen 2 soundtrack?
Portfolio Growth:
This year, we added 40 new assets to the MLG portfolio, totaling nearly 7,000,000 sf of commercial assets which includes over 6,600 new multi-family apartment units. Based on purchase price, this represents over $1 billion in purchase price of property added to MLG’s assets under management.
Part of reaching this new milestone is due to introducing a new fund structure to our offerings, the Legacy Fund. This fund was specifically designed for owners of appreciated real estate seeking the answer to their two largest questions: “What exit strategy do I use?” and “What are my tax implications?” My colleague, Tom Pugh, has a couple of points to make on why it’s a superior exit strategy for appreciated assets.
All of this would not be possible without our commitment to being a team. From our acquisition team finding new deals across the country, to our investor relations team sourcing the equity needed to acquire them, to our asset management team overseeing the operations of the assets and everyone in between. This growth in our assets under management was proof our asset management team needed to grow. We added two teammates to the group in 2021 – Taylor Schoessow, Investment Portfolio Analyst and Phil Natkins, AVP of Asset Management, and we could not be more excited for the addition of their expertise to the team as we to continue to fuel our ambitious growth as an organization.
Notable MLG Fund Dispositions:
Our series of MLG Private Funds are structured to provide investors with geographic, asset class and even manager diversification. Funds II and III, which began in 2014 and 2016 respectively, dispossessed over $150 million of assets in 2021. This figure is comprised of 6 dispositions, all which returned greater than our fund targeted returns, with some notable outliers above 15% IRR. Most notably are the Northern Lights Industrial portfolio and Camelback Flats Apartments assets.
The Northern Lights Portfolio is a 3-property industrial/flex portfolio located throughout the Minneapolis, MN MSA. The business plan was simple: fill the vacancy that existed at purchase and bring existing tenants up to market rent to create value. I’m happy to report that upon exit, occupancy increased to ±96% at sale. This portfolio sale closed on December 22, 2021 and exceeded our initial targeted returns to investors.
Camelback Flats is a 395-unit apartment complex located within the Phoenix, AZ MSA. The business plan for Camelback Flats was a bit more involved: expand upon the common areas, renovate the clubhouse, add highly sought-after amenities such as a brand-new fitness facility, improve property management, and renovate the largely untouched 1970’s apartment interiors. If this sounds like a lot of work, it was! The hard work paid-off. Camelback Flats also closed on December 22nd, 2021, with overall returns exceeding our initial targeted returns to investors.
Portfolio Highlights:
In addition to acquisitions and dispositions in 2021, the existing portfolio, including properties from our series of fund offerings, co-investments and separately managed accounts, have had some exciting updates.
Botanica Cottages Apartments located outside of the Philadelphia, PA MSA, Grove Parkview Apartments located in the Atlanta, GA MSA, and Tempe Metro Apartments in Tempe, AZ MSA all received full clubhouse renovations complementing our original and ongoing value-add strategies. Significant exterior amenities are being added to our New Mexico assets: Broadstone Ladera and Diamond Mesa Apartments, both located in the Albuquerque, NM MSA. These exterior amenities include sport courts, new firepit/grilling stations, and renovating all the pool areas of all three assets.
Our commercial assets are seeing positive momentum as well. For example, Park Industrial, a FLEX/Industrial asset located in Minneapolis, MN was re-financed this year and we were able to return 100% of the original capital. Southtech II, another FLEX/Industrial asset located in Bloomington, MN (Minneapolis MSA) was acquired with the aim to fill a large vacancy. With that goal in mind, we’ve taken occupancy to 60% and climbing, within our first year of ownership. The MSP Portfolio, an Industrial/FLEX set of assets comprised of five buildings spread across the Minneapolis, MN MSA, witnessed the sale of one building which makes up nearly 50% of the portfolio square footage. After renewing and expanding our tenant into more space that they needed, MLG was able to sell the asset above the targeted sale price.
We have plenty to be thankful for this year: growth of the portfolio, great additions to the team, and continued success of our business plans. While I’ve only highlighted a few big wins, there’s been a lot of momentum throughout our offerings, and I am confident that we will be able to continue to produce great results as a team. Cheers to a great 2021. May 2022 be equally as bright. Maybe with a little less Frozen 2 soundtrack though.
Alex Brackman is the VP of Asset Management, with a focus on managing the MLG Capital portfolio. Outside of work, Alex pretends to golf and can smoke a mean rack of ribs.
