Frequently Asked Questions
Take a deep dive into the world of commercial real estate and MLG. We’ve curated answers to common questions we’ve received from our investors and partners below.
When and where was MLG Capital founded?
Founded on the principals of absolute integrity and making a difference while making a living, MLG Companies was founded in January 1987 as a vertically integrated commercial real estate company.
The company headquarters is in Brookfield, Wisconsin, though we now have offices in Dallas, Texas & Sarasota, Florida. We have a satellite location and team member in Nashville, Tennessee.
In addition to MLG Capital, there are 5 other lines of business among the MLG Companies brand – MLG Development, MLG Management, Point Real Estate Management, Point Real Estate, and Valiant Residential.
How many employees does MLG Capital have?
MLG is an affiliation of companies with 650+ total employees. The management team consists of six principals who have been making real estate investments together at MLG for 28 years on average. The team has extensive experience in the real estate industry with skills in real estate investment, real estate tax advisory, mortgage banking, capital markets, asset management, property management, brokerage, securities and development fields. The investment division of MLG, MLG Capital has 55+ core team members with focus on our series of investment offerings.
What is MLGs historical track record of investing?
In our 35+ year history our average equity multiple on sold assets has realized an 2.62x total return equity multiple3 with an average hold of ±7 years.
Since its inception in 1987, the firm and associated entities have had active, exited, or pending investments totaling approximately ±42.6 million square feet of total space across the United States4, inclusive of more than 35,600 apartment units1, with a market value exceeding $6.1 billion, as of 3/31/23.
Does MLG invest in the funds/assets alongside investors?
Yes, MLG employees invest independently into our offerings. Historically, our allocations from the MLG team have accounted for ±3-5% of a funds equity, though that number varies upon individuals personal liquidity and is not mandated at any certain level.
How does your return structure work?
We use a European Equity Waterfall structure for our private funds, equity waterfalls are very common in these types of private real estate investments but can be difficult to understand for individuals who are new to real estate investing. The three tiers to our waterfall structure are (1) an 8% preferred return, (2) 100% return of original capital, and (3) 70/30 profit sharing split5.
When you make an investment with MLG you will immediately accrue the first tier of the return structure, the 8% preferred return. This means that you will accrue an 8% return on your invested equity, because this is a preferred return we may not pay the full 8% in every quarterly distribution. Instead, you will accrue what we do not pay you, which sits on our books and earns interest for you – ultimately incentivizing us to pay make you whole on this 8% as quickly as possible. As the fund proceeds in its lifecycle, we will begin to sell off assets. These sales produce liquidity for the fund, which in turn will be used to catch investors up on any unpaid preferred returns.
Once all investors have been paid their 8% preferred return, we will enter into tier two of the return structure. In this tier, distributable cash is sent to investors until they’re received a full return of their invested capital.
After all investors have been paid a full 8% preferred return (tier 1) and have a full return of original capital (tier 2) we can enter into the third and final stage of the return structure, the 70/30 (investor/MLG) profit sharing split. MLG intentionally puts our share of profits last so that we remain focused on execution for the investor5.
Read: Should the European Equity Waterfall be the New Standard?
What types of assets does MLG buy and why?
Our Private Funds focus specifically on multifamily, industrial, retail and office investments, though we may not be able to acquire assets in all four categories due to variable market conditions. We focus on building a portfolio of smart real estate assets that minimize risk will still providing a profitable return for our investors.
How are the funds and assets diversified geographically?
For over 35 years, MLG has focused on acquiring assets in locations with job and population growth, strong municipalities and supply and demand imbalances. As an opportunistic buyer having assets in 20+ states, we tend to purchase assets where we find the best deals first, without putting mandates on any individual markets. To garnish diversity, we capitalize upon our historic networks in our “home” markets of Wisconsin, Texas and Florida. Outside of these markets, we seek to partner with sponsors who have deep experience and “boots on the ground” in markets we wish to participate in.
Each of our funds target to acquire assets in 10-15 different states.
When we are looking to purchase an asset, we consider factors that are unique to that state and metropolitan area such as taxes, supply and demand, population growth and job growth as this helps us ensure that we do not over allocate to a specific market, spreading risk our over multiple geographic locations.
How does MLG source new acquisitions for investment?
MLG utilizes a dual-sourcing strategy to discover new investment opportunities – resulting in the review and analysis of over 100 deals each month. We source about half of our acquisitions through direct relationships that we have with sellers and brokers, with the other half being sourced through relationships we have with joint venture partners across the country.
Our joint venture partners allow us to source more deals specifically in markets where we historically do not have a physical presence. Purchasing deals with a local joint venture sponsor also gives us the confidence and boots on the ground insight that we would not have without these relationships.
How do you manage your portfolio of investments?
MLG is vertically integrated, meaning that we use our internal teams to manage our portfolio of assets directly. This allows us to keep hands on control of our asset strategies and timelines while also providing transparency into asset performance and progress for our investors. Our core team consists of over 55 individuals with expertise in real estate investment, real estate tax, mortgage banking, capital markets, asset management, property management, real estate brokerage, securities and land developments.
How do I know which fund (the private fund or the dividend fund) is right for me?
Our series of diversified private funds offer two ways to participate. The MLG Private Funds and the MLG Dividend Funds will invest side-by-side in each investment. Each have their respective attributes and have the same overall pre-tax investment objectives.
The private fund is generally structured for investors seeking capital gain and net rental income (loss). The dividend fund was formed for retirement, foundation or endowment investors seeking real estate investments without the complication of UBTI tax, and targets capital gain/ordinary REIT dividends as income. Cash investors can also participate into the dividend fund but may want to work with their CPA on the tax efficiencies or implications that may arise.
Some questions to work with your CPA on:
- Do you have other passive sources of income or losses? An investment in the private fund may produce a taxable passive loss through depreciation practices in the first year of investment which can be used to offset other forms of passive income. The dividend fund does not produce a passive loss for investors.
- Do you currently file taxes in multiple states each year? An investment into the private fund can produce K1s for ~10-15 states, one for each state the fund holds an asset in. The dividend fund only produced one state level K-1.
- Would my portfolio be positively impacted by adding real estate to the mix?
- How will multi-state tax filings impact my portfolio?
Can I invest using a retirement account such as a 401k or an IRA?
Yes! We have two different paths to invest in our Funds – we call these two paths the Private Fund and the Dividend Fund. It’s important to note that both investment paths roll up to the same investment vehicle and therefore share the same underlying assets and the same pre-tax return return for investors. The major differences in the two investment paths relate to the structuring of the investment to enable retirement, foundation or endowment monies to participate.
With this structure investors can maintain tax efficiency of their pre-taxed dollars. The dividend fund targets to operate without UBTI (unrelated business taxable income) and within ERISA compliance.
The Real Estate Markets
How does MLG decide when to sell assets within a fund’s lifecycle?
Decisions to sell an investment start with our Investment Committee, made up of MLGs principals and experienced senior leaders. Decisions on when to sell an asset are driven by the overall goal to protect investor equity and create profitable investments both for MLG and for our Investors. Upon acquisition, we have a documented strategy and business plan for each asset and an estimated hold period (commonly referred to as the “proforma”). This proforma is a guide to hit investment objectives and an indicator of when an asset will be ready for sale.
How have rising interest rates impacted your ability to source new deals?
Can real estate handle higher interest rates from inflation? MLG believes it can. But first, one must ask “Why are interest rates going up?” Generally, higher interest rates are driven by a stronger economy triggering inflation. We believe that unlike bonds, private real estate is uniquely positioned to handle a growing economy. A stronger economic growth outlook may lead to the following enhancements to revenue:
- Growing Rents
- Increased Occupancies (supply and demand)
- Lower concessions and delinquency
- Great opportunity to create value
- Rising asset prices
Rising interest rates can impact multifamily properties in a few different ways. First, higher interest rates can make it more expensive for potential buyers to obtain financing for a multifamily property, which could reduce demand for such properties and potentially lead to lower prices. Additionally, if the owner of a multifamily property has a floating rate mortgage on the property, higher interest rates could increase the monthly mortgage payment, which could make it more difficult for the owner to turn a profit on the property.
However, it’s worth noting that there are many other factors that can influence the value and performance of multifamily properties, including supply and demand in the local real estate market, rental growth, the overall health of the economy, and the condition and amenities of the property itself.
Read: How Real Estate can Handle Higher Interest Rates caused by Inflation
How does MLG approach buying assets during recessions and market cycles?
As an experienced investment manager for over 35 years, we believe it is imperitive to make investments through any and all investment cycles that may occur.
Are fund assets financed?
MLG targets low to moderate leverage of 60-65% LTC on acquisitions. In real estate, we’ve targeted this range to mitigate risk to the investor.
Our debt on assets ranges, but generally conform to the business plan of an asset. For example, if we are buying a multifamily asset with a renovation story, we may do 7-10 year fixed financing. If we are looking through the merchant lens and reviewing an under-leased retail strip center, we may utilize shorter term financing as we would be seeking to fix a problem and then exit the asset in short order.
Read: Leverage and Private Real Estate: Finding the Right Balance
What to Know Before Investing
How involved am I in the active management of the investments?
Investors with MLG have transparency into the operations of their investments, but will play no role in the active management of the company, the fund or the investments. Investors liabiliy is limited to their investment only.
Where can I see information about the performance of my investments?
Once becoming an investor, investors will be granted access to our virtual investor portal. The investor portal houses all current and historical information on MLG and your investment with us. Quarterly reporting, tax forms, financials and transaction history for your investments are distributed to investors through the portal. Investors may also add their CPA, Attorney, Investment Manager or other family members to their portal for ease and transparency of communications.
What is the minimum investment?
Our average investment is ±$240,000. The minimum investment into our private fund is $50,000, though if you are investing through a benefit account such as a 401(k) or IRA then the minimum increases to $100,000.
We function with a investment banking mindset by developing and executing tax efficient exit strategies and 1031 exchanges for our clients, we maintain a $3,000,000 minimum for these transactions.
What is an accredited investor and why do I need to qualify as one?
An accredited investor is a SEC designation which states that an individual meets a certain set of qualifications involving their net worth, annual income level, or professional financial license. MLGs investments are 506(C) offerings, which are required by the SEC to accredit all investors. The current thresholds for becoming an accredited investor can be found on the SECs website.
Accreditation can be done internally by our legal team at MLG or through some 3rd party services. Please reach out for more information.
For more information on accredited investors visit the SECs website site.
What do I need to do to move forward with an investment?
Taking the next steps and securing an investment with MLG requires two things. First, we need you to fill out the subscription documents which is a set of documents outlining the legal agreement that you will be entering into with MLG. Second, we need to prove your status as an accredited investor.
Subscription documents are filled out via your investor portal (current investors) or our Fund VI data room (new investors) and accreditation can be proved through one of many different paths. Please reach out to your MLG contact or Investors@mlgcapital.com for more information on accessing the subscription documents and turning accreditation materials.
How and when do I deposit my money for this investment (capital calls)?
MLG calls capital into their funds on a first in first out basis based on the date and time that an investors subscription document is approved. Capital calls are commonly sent out between 30-90 days after your subscription documents are signed and approved. This general timing guidance may vary depending on upcoming deal pipeline (a more specific estimate of your capital call date may be available upon request at any time).
Capital Calls (when your funds are due to the fund) are communicated via your investor portal, email, and phone call – we generally provide investors ±10 days to fund.
We call 100% of your subscription amount, no optional calls. We do not have future capital call provisions and will never ask for additional capital calls exceeding the amount of your original commitment.
Many investors contribute multiple times to each of our funds. This is due to the fact that our funds are generally open for new investments for ±2 years. Some investors enjoy entering early to begin accruing their preferred return. And many others re-commit as the fund acquires assets.
Who can I talk to in order to ask questions and learn more about investing?
Our Investor Relations team’s primary focus is working with current and prospective investors, ensuring that you have everything you need to do your due diligence before making an investment decision.
If you are a new investor to MLG please reach out to our investor relations team by emailing Investors@MLGcapital.com or filling out the form through this link – Get Started with MLG Capital.
If you have invested with MLG in the past you may reach out to your MLG Investor Relations contact, visit your portal, or visit this link – Get Started with MLG Capital.
All questions and answers noted on this page are generated by MLG Marketing LLC and are not assumed to be fully correct. If there is any inconsistency between these Q+As and any offering Private Placement Memorandum, Subscription Document Booklet, all which can be amended from time to time, the Private Placement Memorandum of MLG Private Fund VI LLC, will govern.
Recipients are encouraged to review the entire PPM of Fund VI and relevant fund supplements, which are available upon request.
“Manager” means MLG Fund Manager LLC, the managing member of Fund VI
“Fund” means MLG Private Fund VI LLC, a Delaware limited liability company
“PPM” means the Confidential Private Placement Memorandum for the Fund (Version 1.0), as updated by the most current Supplement
“MLG Capital” or “MLG” means the Manager’s investment Affiliates, as more fully defined in Section IV of the PPM.