October 10, 2024
What is the J-Curve?
The term “J-curve” is a concept often used to describe the typical investment performance trajectory of private equity and real estate funds over time. It represents the pattern of cash flows and returns that investors can usually expect during the lifecycle of these types of funds. The J-curve’s name is derived from the shape of the curve, which resembles the letter “J” when plotted on a graph, with time on the horizontal axis and returns on the vertical axis. When applied to real estate funds, the typical J-curve illustrates an initial dip in performance, a gradual increase, and eventual positive returns (as demonstrated on the graph below). Understanding the J-curve is important for investors, fund managers, and related parties as it provides insights into the expected timing of returns and the associated risks of investing in private real estate. The Stages of the J-Curve Stage 1: Investment Period (Capital Deployed into Markets) Stage 2: Value Creation (Operational, Financial, and Managerial Improvements) Stage 3: Harvest Period (Exit Investments to Realize Gains) Stage 1: Investment Period This initial downturn is primarily due to the upfront costs associated with establishing the fund and acquiring real estate, such as organizational costs, administrative costs, acquisition...
September 17, 2024
2024 MLG Market View: Navigating the Private Real Estate Investment Market
2024 Insights The real estate market is constantly evolving, influenced by macroeconomic pressures, shifting work habits, and changing investor sentiment. Each Fall we share our insights on the multifamily, industrial, retail, and office sectors, along with the current trends in capital markets. Above you’ll find a quick video of Tim Wallen, Principal & CEO, Billy Fox, Senior Vice President and Dan Price, Senior Vice President, sharing their core takeaways. If you’d like, you can download a full explanation of our Market View by asset class and full deck presentation below in this post. Here’s a breakdown of the key takeaways from the MLG Capital 2024 Market View: Multifamily Sector: Long term stability amid short term supply wave The multifamily sector continues to demonstrate resilience, even as broader economic challenges persist. Our analysis underscores the enduring appeal of multifamily investments: Sustained Demand: Demand for multifamily housing remains strong. Continued population and household formation growth combined with increasing unaffordability of single-family homes, driven by higher mortgage rates and home prices, is pushing more people into renting. Further, many renters are renting for longer as marriage and having children are pushed out to later ages, bolstering the multifamily market. Short–Term Supply...
March 25, 2024
How to Prepare for Tax Season: 2023 Edition
Tax season is upon us! At MLG Capital, we know how important the benefits of tax can be for real estate investments. It’s important to us that our investors understand these benefits and how they may be able to use them to their advantage. This article provides a 2023 tax overview for real estate investors to better equip themselves for a successful tax filing year now and for years to come. Please note that the information provided in this article is not to be considered tax, legal or financial advice and MLG and the authors do not represent any recipient of this article. Please consult your tax professional regarding your personal tax situation. Tax Estimates: Throughout the 2023 tax year, you may have had tax estimates distributed to you or your financial professional (or both). As a passive investor, this will be a key starting point in understanding what your tax exposure looks like for 2023. For MLG Investors, we take great pride in issuing our tax estimates by December 31st each year. This is completed so that you and your tax advisors can plan accordingly as you await your formal K1s. Capital Gain and Loss: For real estate investors, 1231...
February 28, 2024
Supply and Demand in Private Real Estate
Hearing “supply and demand” likely evokes memories, good or bad, from your high school economics course. As a focal point of basic economic theory, it is a concept that follows us far beyond the classroom. The supply curve depicts how much of a good (product) will be provided at various price points, while the demand curve depicts how much of that good the consumer will desire at those price points. In a competitive market, the price is set where supply and demand are in equilibrium, or where the quantity demanded equals the quantity supplied. The real estate market is no stranger to the concept of supply and demand. The applications and significance of the concept are perpetual considerations in the analysis and decision-making process for every potential acquisition. Smart real estate investors will analyze the supply and demand equation prior to investing and consider how that relationship persists over the investment horizon. Supply and Demand Drivers in Real Estate Before diving into the significance of this economic law in real estate, let’s first consider some of the relevant drivers for both supply and demand. Real estate is relatively illiquid; after all, these transactions are usually not quick, and when owned,...
January 31, 2024
January 2024 – Why Invest Now?
In the current market landscape, we have outlined three compelling reasons why now is a favorable time to consider an investment in our diversified private real estate fund. Disruption breeds opportunity and uncertainty creates volatility. Investing during these periods of time are when outsized returns could be achieved. Limited Competition on the Buyside: Over the past two years, we have witnessed a unique convergence of events that has created an unprecedented opportunity in the real estate market resulting in less competition and capital flows into all commercial real estate investments. Institutional capital, adhering to strict asset allocation models, are redirecting capital into bonds due to the significant fall in bond prices caused by a surge in interest rates. Syndicators have found capital raising more challenging in the current environment often due to struggles within their existing portfolio from short term floating rate debt combined with higher leverage, further reducing buyside competition. This has resulted in a scarcity of fresh capital on the buyside, creating an environment with the lowest competition in decades. Invest now before capital begins to flow back into our favored sectors later in 2024. Focused Strategy on High-Quality Multifamily Assets: In today’s marketplace, limited competition allows...
November 14, 2023
2023 Economic Outlook with CEO, Tim J. Wallen
“Smart Real Estate Investments:” At MLG this is more than just a phrase. To us, Smart Real Estate Investments is all we do. We study the economics of real estate to understand current metrics, past trends, and future projections affords the opportunity to capitalize on unique opportunities and in doing so provide exceptional returns to our investors. – Tim J. Wallen We are excited to present our Q3 2023 Economic Outlook. Our team at MLG has collaborated to create a comprehensive presentation that highlights our perspectives on the real estate investing landscape as we look forward to another year of profitable investing. You can watch the full presentation above, or continue reading for a summary below. Summary The Q3 2023 Economic Outlook delves deep into the economics of supply and demand in real estate. Supply and demand are the focal points of basic economic theory, depicting how changes in the price and availability of a resource impact its value as an investment both now and in the future. Understanding the factors that drive supply and demand is imperative in the analysis and decision-making process for every potential acquisition. Below we’ll address three key questions closely related to supply and demand...
October 3, 2023
Smart Investing: Preferred Qualities in Multifamily Acquisitions
When considering a potential multifamily acquisition, there are a number of factors to consider. Where is the property located? What school district is it in? When was the property built? These are just a few questions to consider when determining whether a property might be a good investment. Before looking at the specific attributes and factors we review when evaluating a multifamily property, it’s important that we consider the fundamental goals of our multifamily investments: to maintain and grow net operating income that will, in turn, produce stable cash-flow during ownership and maximize the property value upon sale — all with the lowest possible risk profile and in the most tax-efficient manner. The following, and all attributes we review, are considered with that goal in mind: Cost Basis, Potential for New Supply When looking at a potential multifamily acquisition, you’ll often hear the phrase ‘price per unit’ mentioned. While the total number of units is relevant, it’s more important to consider the price you’re paying or selling each individual unit for. At MLG, we are a ‘basis conscious’ firm, meaning that we pay significant attention to price per unit (or per square foot). We compare these values to recent sales...
September 29, 2023
2023 Annual Fall Event
Last week, we had the privilege of hosting investors, partners, and team members at our headquarters for our Annual Fall Event! With nearly 400 registrants, the event was a resounding success, and it was made even more special by the enthusiastic participation of all who were able to join us. From start to finish, the evening was filled with excitement, inspiration, and meaningful connections. One of the highlights of the night was the keynote address delivered by our esteemed CEO, Tim Wallen. He provided insight into what makes MLG unique, our sought-after product offerings and our view on the current state of the market. His insightful words resonated with everyone, reminding us of the importance of innovation, partnership, and smart real estate investments. Another highlight of the night was the much-anticipated Golden Giveaway and the opportunity to toast to innovation and partnership alongside all of you! Throughout the event, there were countless opportunities for networking, sparking conversations, and discovering new partnerships. The energy in the room was electric as individuals and industry leaders shared ideas, exchanged experiences, and celebrated each other’s successes. For those who couldn’t attend, below is a copy of the presentation: As we reflect on this remarkable...
June 27, 2023
Bonus Depreciation: What is it and where is it going?
The contents of this article are not to be considered as tax advice and individuals should consult their own tax advisor as to tax advice. Recipients of the information contained in this article agree that MLG Capital, its affiliates and respective partners, members, employees, officers, directors, agents, and representatives shall have no liability for any misstatement or omission of fact or for any statement expressed herein. Starting in 2023, the powerful tax benefits of bonus depreciation that were provided by the Tax Cuts and Jobs act in 2017 will begin to phase out by 20% each year, for 5 years, until they reach 0% in 2027. As this benefit begins to phase out this year, individuals from all backgrounds should understand what this means for their current investment, future investments, and personal financial plan. This article will discuss what depreciation is, how it’s used in real estate to create tax efficiencies, and how the bonus depreciation phase out will potentially impact the real estate investing landscape in the coming years. Real Estate Depreciation 101: The IRS allows owners of real estate to deduct specific costs associated with buying and improving an asset from the owners’ income taxes, this practice is...
June 14, 2023
Investment Outlook: Evaluating U.S. Treasuries and Private Commercial Real Estate
A thought on many investors' minds today is whether to invest in U.S. Treasuries in place of private real estate, or any other investment opportunity for that matter.
