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...
September 4, 2024
Is Now the Right Time to Invest in Private Real Estate? Insights from Tim Wallen, Principal & CEO
Why Timing the Market is Hard: Insights from a 35-Year Real Estate Veteran The real estate market has always been a dynamic landscape, filled with challenges and opportunities for both investors and professionals. With over 35 years of experience in the real estate business, I’ve seen numerous cycles and many opportunities arise. One common theme I’ve encountered is the desire among many investors to time the market perfectly. However, timing the market is incredibly difficult, and this approach can often lead to missed opportunities. Market Conditions & Investment Opportunities The real estate market is currently experiencing a shift that has created a favorable environment for buyers: Institutional fund inflows are down approximately 80% from previous years, resulting in reduced competition. This reduced competition allows us to acquire assets at historically favorable cap rates of 5.5% to 6% and significantly below replacement cost. Consistent investment over a long period of time tends to produce the best results. Trying to time the market precisely, aiming to buy at the absolute low, often means missing out on great opportunities. Today’s market presents an interesting scenario where the assets we purchase now are likely to be sold in the future when interest rates are...
July 16, 2024
Investing with MLG Capital’s Dividend Fund Offering; Retirement, Foundation and Endowment Investor Focused
At MLG Capital, we are committed to providing innovative and strategic investment opportunities for our clients across the United States. One compelling offering is the Dividend Fund option that lives within our Series of MLG Private Funds. The Dividend Fund was first announced in 2018 as a parallel offering of MLG Private Fund IV LLC. This Fund option presents a unique pathway to investing in private real estate with retirement accounts, through foundations, endowments, or even cash investors. What Makes the Dividend Fund Special? The Dividend Fund is designed as a secondary pathway to investing in our Private Fund series, offering the same underlying assets, return targets, and investment strategy as our primary Private Fund. This option, however, features a distinct legal structure that can exempt investors from additional taxes typically associated with debt-backed asset investments within retirement accounts, or with foundation or endowment investors, commonly known as Unrelated Business Tax Income (UBTI). This can make it a good choice for those looking to diversify their retirement, foundation, or endowment investment accounts while maintaining compliance requirements for these types of investors. Why Would a Cash Investor Consider the Dividend Fund? Additionally, the Dividend Fund option may be a consideration for...
April 30, 2024
How Investors are Paid: MLG’s Private Fund Return Structure
The series of MLG Private Funds provides investors with access to investment opportunities that aim to produce tax-advantaged cash flow and appreciation over time. The Funds focus on growing investors’ wealth, capital preservation and diversification within private real estate investment. Understanding how and when returns are sent to investors is perhaps one of the most important elements of any investment structure. Within the private markets, there are a myriad of different structures that may exist. These structures can be frequently misunderstood. Our Funds utilize a “European equity waterfall return structure”. This is specifically designed to be an investor friendly return structure. This demonstrates our firm’s commitment to investors and our confidence in our ability to execute. MLG Private Funds Return Structure: Our latest Fund, Private Fund VI, intends to underwrite potential investments to a target internal rate of return of between 11% and 15% (net of Fund expenses and fees), on a leveraged basis. Each of our funds utilizes a three-tiered return structure. 100% of available distributions are paid to investors as follows1; (Tier 1) 8% cumulative preferred return on invested equity (Tier 2) 100% return of original principal invested, after a full 8% cumulative preferred return is paid (Tier...
September 22, 2023
MLG Capital Sells Last Asset In Its First Diversified Fund
Close marks significant milestone for firm 11 years after strategic shift to real estate fund approach Firm’s latest real estate fund – Private Fund VI – approaches halfway point fundraising milestone Brookfield, Wis. (September 22, 2023) – MLG Capital announced a significant milestone for the firm with the sale of the last asset in MLG Private Fund LLC, “Fund I”, the first diversified fund in MLG’s series of real estate funds, established in 2012. Final distributions to investors, and formal closing, will occur in the coming quarters. Fund I raised more than $27 million in investor equity, and throughout its lifetime acquired and sold 13 properties and seven land investments, totaling more than 3,000 multifamily units and nearly 585,000 in commercial square footage. Acquisitions were primarily located in Wisconsin, Florida, Texas, Minnesota and Colorado. The closing of this transaction brought excellent returns for investors in Fund I and II. Overall, fund-level returns of 23.2% IRR and an equity multiple of 2.33X over the hold were achieved, as of 5/30/23.* “From my first meeting with MLG back in 2011, I felt a sense of confidence and trust in doing business with them,” said Norb W., one of the initial Private Fund...
March 1, 2023
How to Prepare for Tax Season: 2022 Edition
It’s that time again, tax season is upon us! At MLG Capital, we understand the benefits that taxes, specifically as they relate to real estate investment, can provide for us and for our investors. 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 2022 Tax outline roadmap for real estate investors to better equip themselves for a successful tax filing year now and for years to come. Tax Estimates: Throughout the 2022 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 2022. For current MLG investors, you should have received tax estimated on December 31st, 2022. The information provided in this blog is subject to and does not alter any investment agreement with MLG. Capital Gain and Loss: As a real estate investor, 1231 capital gains from property sales are usually one of the bigger highlights from the reporting year. 1231Capital Gains are generated from depreciable property and real property used in a business...
February 15, 2023
Valuation Reporting: What Should I Know as an Investor in Private Real Estate?
You’ve made the decision to make an investment in a private real estate offering, congrats! Now, you’re in receipt of quarterly distributions to your bank account along with all the various reporting that measures your investments’ performance. In this article, we’ll highlight some of the most commonly used valuations metrics to help you understand both what they mean and how you can use them to assess your investments’ performance. NAV (Net Asset Value): In real estate investing, NAV is calculated as the estimated value of all assets in a fund (less liabilities) divided by the number of shares or units. It is used to determine the market value of the fund. The fund’s investments in real estate are classified as Level 3 investments, meaning valuations are derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques. It is not based on market, exchange, dealer, or broker-traded transactions. Because of this, the NAV of an illiquid investment, like private real estate, is only an estimate of the current market value and may be subject to change. Valuation: NAV is used to determine the value of a private real estate fund, which is important for both the...
August 9, 2022
Four Ways to Invest in Private Real Estate
The historic allure of alternative investments piques the interest of many investors who are constantly seeking diversification in their overall portfolios. In private real estate, there are a variety of options to consider, but the nuances of each asset type can make it difficult to digest and the considerations for every individual investor vary: Why invest in private real estate? Is there a liquidity option? Am I diversified? What type of ongoing distribution and appreciation occur? What are my tax implications? How do I get involved? As with any investment, each choice has its own unique set of considerations you should review with your advisor team. Here’s a summary of the most common ways to make an allocation into private real estate. Public REITS Real estate investment trusts, better known as REITs, are generally publicly traded investments that own income-producing real estate. REITs were created in the 1960s to give individual investors a vehicle like mutual funds in which they could invest in commercial properties. As with each differing investment vehicle, there are advantages and disadvantages to investing in a REIT. These investments tend to be liquid – meaning they’re more readily available to non-accredited investors, and investors can divest and sell shares in...
May 2, 2022
MLG Capital Continues Its Successful Diversified Fund Series With Launch Of Sixth Private Real Estate Investment Fund
Brookfield, WI (May 2, 2022) MLG Capital today announced it has opened to investors its MLG Private Fund VI, which is the sixth in the firm’s series of private real estate investment funds. Fund VI will be MLG’s largest fund to date, with an equity raise goal of $400 million. The launch of Fund VI comes one month after the close of MLG Private Fund V, which set a record as the firm’s largest fund and fastest equity raise to date – capping off at $350 million and finishing 15 months ahead of schedule. “Our unique sourcing strategy for investment opportunities in a diversified fund structure has led to superior performance within the alternative private real estate space,” said Tim Wallen, Principal and CEO of MLG Capital. “We also have a major focus on creating significant income tax benefits and producing strong after-tax rates of return for our investors. We take great pride in the continued interest and trust from our investors, and we are excited about the opportunity to find smart real estate deals across the country for Fund VI.” Private Fund VI continues the firm’s focus on geographic, asset class and asset type diversification for investors. It targets 25-30+ investments located...
