What a year it has been! As I sit and reflect on where things are mid-year and where they’re heading, I found it fitting to send a note to our expansive network of MLG friends & family.   

Blog

A Mid-Year Update From CEO, Tim Wallen

Dear Extended MLG Family, 

What a year it has been! As I sit and reflect on where things are mid-year and where they’re heading, I found it fitting to send a note to our expansive network of MLG friends & family.   

First, Thank You. Thank You for your continued dedication and support. Thank you to our 400+ team members across our business lines working diligently to remain safe, productive and remarkable during these unprecedented times. We truly appreciate everyone’s effort and commitment to serving our investors, tenants and clients.  

COVID-19 continues to impact the way in which organizations conduct business. While there is uncertainty about the longer-term effects of COVID-19 on the economy and day-to-day life, MLG is proactively working to ensure we remain focused on the continued success of our business for our investors and our family of staff. Because private real estate is less correlated to the public market, we’ve experienced less volatility, which has allowed us to focus our time and efforts on our clients, tenants and employees, while at the same time continuing to execute on opportunities presented in the marketplace 

Here are a few highlights want to share with you: 

We’re still closing deals, and we will continue to do so. 

  • The key to buying assets in all cycles is being realistic in making your assumptions. Today, we must consider the impact of COVID-19, which means assuming lower collections than we would have assumed 12 months ago. At MLG, our focus is on making “smart” investments. We define smart investments as deals with believable and achievable assumptions that hit our target returns. 
  • Our job is to find these “smart” real estate investments. It’s an investor’s job to decide whether to stay in cash and avoid any risk or invest in real estate Today, if we can obtain a 5% discount on a property value due to COVID19we should be able to obtain 15% equity growth if we can increase the property’s value to its  preCOVID value, plus receive annual cash flow of 5-6% per year from operations. 
  • We believe that the apartment investment market story is intact and long term. Fund IV is currently 95% multifamily. Supply growth will likely slow with tighter bank funds available for new construction and population growth trends still show demand growth into the future. 
      • We continue to find opportunities in the “Class A” space where we can focus on acquiring an asset with a preferable basis (generally due to some operational inefficiency to correct or lease-up potential in a well located area) and “Class B” space where we can invest improvement dollars into an asset to increase overall cashflow of an asset 
  • Year to date, the organization has acquired:  
      • Nearly $250M of assets 
      • 6 Assets across 4 states and 6 cities 
      • Over 1,600 apartment units 
      • Nearly 1.5M of total SF 

We’ve maintained our target fund leverage of 65 – 70% LTCa critical component in managing times like these 

  • As it relates to leverage, we finance our acquisitions with a mix of fixed and floating rate debt.  
  • Approximately 40% of deals in Fund IV that we’ve acquired have benefitted from significant interest rate savings as they were financed with floating rate debt (with rate caps to mitigate unforeseen increases).  
      • One example: a 10-asset apartment portfolio in the Fund realized a reduction of interest payments of approximately $3M! 

Our assets are operating successfully.  

  • Since March, our average collections across the portfolio have been more than 95%. 
  • A recent article posted by NMHC this past week (link here) found that 94.2% of apartment households made a full or partial rent payment for the week of 6/27/2020. For the same week in 2019, the figure was 94.7% demonstrating strength  and further supporting our confidence in the multifamily asset class. 

We believe it is wise to invest at all points in the cycle, live the concept of diversification, have a deep sourcing network to allow for opportunity at any time and maintain low to moderate leverage. Our funds are positioned to take advantage of the opportunities that arise as a result of COVID-19, as well as future cycles not yet known. MLG Capital bases its real estate investing strategy on the dynamics of the market at the time of purchase, viewed through a local and national lens, combined with a critical concentration of targeting NOI growth. Most opportunities come from human error in operations of a property, which we hope to fix and create value. This strategy allows us to find opportunities no matter what part of the market cycle we happen to be experiencing.  

MLG Private Fund IV, our latest offering, is still open for subscription. We are currently over 75% committed from our equity raise target of $200M and plan to fill the balance over the next 6 months. We expect this to go quickly due to interest.  Now is the time to add to your Fund IV investment or make your first allocation to get into the queue for upcoming closings.  The fund currently holds over 6,400 multifamily apartments and 1.5M SF of commercial industrial space across 11 states.  

Personally, I remain thankful to have a material personal investment in private real estate versus the incredibly volatile public financial markets. I remain hopeful that this virus will get under control and we continue to advance in research and future preventative measures. In the meantime, we will work diligently to grow the value of the assets that we own, continue our quest to acquire “smart” real estate deals and maximize the after-tax cash flows to all investors 

We wish you a Happy and safe 4th of July.  

Talk soon, 

Tim 

Timothy J Wallen

Tim Wallen, CEO
MLG Capital

 

About Tim: As a Principal & CEO, I sit on our investment committee and am involved with daily, integral functions of the investment and development segments, including long-term and short-term business strategies, innovative concepts to debt financing, & complex partnership structures. 

I am passionate in helping our clients, who are typically those looking for alternatives to the stock market & interested in real estate investing. Our company has helped them invest in smart commercial & multi-family properties across the USA since 1987

Menu