Dear Investor,
In this email MLG Capital explains that private equity focuses on owning and actively managing properties to drive long-term value and appreciation, while private credit centers on lending against real estate to generate steadier, interest-based returns with lower risk. Together, these approaches can complement each other in a diversified portfolio, balancing income, growth potential, risk, and investment horizon.
By way of disclosure, we have an advertising relationship with this MLG Capital, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.
What is an alternative investment?
An alternative asset is any investment that falls outside traditional investment categories like stocks and bonds, casting a wider net and encompassing diverse assets such as private equity, real estate, commodities, hedge funds, private credit, and digital assets (cryptocurrency).
Within real estate, we want to focus on and distinguish two primary structures that are becoming increasingly more important in playing a role in portfolio allocation and diversification decisions: Private Equity and Private Credit.
Private Equity: Private real estate equity involves acquiring properties to generate returns through active property management, property improvements, and an eventual sale at a potentially higher value.
Most firms in the private real estate space acquire properties directly or through a joint venture and focus on creating value through active management, renovation, or development.
Three main strategies firms use that represent different levels of risk and return are:
- Core-Plus: Targets relatively stable properties with minimal improvements needed and usually associated with generating steady income and appreciation using moderate debt.
- Value-Add: Focuses on slightly older vintage properties with opportunities to enhance value through unit and exterior upgrades, operational improvements, and prudent use of leverage to drive rent growth and returns.
- Opportunistic: Targets assets requiring significant repositioning or redevelopment, where elevated execution and capital risk creates the potential for outsized returns.
Private Credit: Private real estate credit involves providing direct loans to the property owners, secured by commercial properties. In this structure, investors act as lenders and earn returns through interest and return of principal.
This has been a rapidly growing segment as traditional bank lending has pulled back. With banks providing less financing for real estate transactions, private credit has emerged as a critical source of capital. Non-bank lenders are stepping in to fund acquisitions, developments and refinancing, often taking on higher-risk projects in exchange for the potential to earn higher yields.
Three main forms of private credit structures are:
- Senior Debt: Loans secured by the property and positioned at the top of the capital stack, meaning they are paid first in a default or sale, providing strong downside protection and more stable, lower-risk returns.
- Mezzanine Debt: Considered a "hybrid" lending vehicle that bridges the gap between senior debt and equity. If the loan is not paid back on time and in full, it gives the lender the right to convert to an ownership or equity interest.
- Bridge Loans: Short-term loans used to finance transitional properties, renovations, lease-up, or ground-up development. These loans carry higher risk due to execution and market uncertainty but offer higher potential yields.
Now that we've defined Private Equity and Private Credit within the real estate space, let's highlight key differences:
Differences:
Investment Structure:
- Private Equity: Investors participate directly in property's cash flow and appreciation, providing uncapped return potential. However, they assume higher risk because equity sits lower in the capital stack and is paid only after the debt obligations have been funded.
- Private Credit: Investors receive regular interest payments throughout the loan term and the return of principal at maturity. Because returns are limited to the stated interest rate and fees, the upside is generally capped. Investors, however, benefit from lower risk because their priority position in the capital stack gives them a priority claim on the capital in the event of default.
Risk Profile:
- Private Equity: Investors face direct exposure to market conditions, property performance, and execution risks within the business plan. Equity holders absorb first loss in property value and cash flows. These risks can be mitigated by high underwriting standards, active asset management, and conservative debt assumptions.
- Private Credit: Risk is primarily driven by borrower performance and the value of the underlying real estate collateral. These risks are mitigated through conservative loan-to-value ratios, strong debt service coverage, robust covenants, and senior or well-structured collateral positions.
Control:
- Private Equity: Firms maintain direct control over property operations, capital improvements and timing.
- Private Credit: Investors typically exercise control through loan covenants and monitoring rights.
Portfolio Considerations:
Both real estate equity and real estate private credit can play complementary roles in a diversified investment portfolio. Private credit typically provides steady, asset-backed income streams with shorter duration, while private equity offers higher return potential but requires longer holding periods. It's worth noting that because equity sits in the first‑loss position in the capital stack, it must offer a higher expected return to compensate for that additional risk. As you move down the capital stack, required returns decrease, meaning that for debt to achieve equity‑like returns, it would generally need to be tied to lower‑quality or higher‑risk assets, which is an important distinction for investors.
Both asset classes involve meaningful illiquidity, so when determining the right fit, investors should consider income needs, sponsor selection, risk tolerance, and investment horizon to assess suitability within their broader portfolio. Learn how private equity can enhance your portfolio by working with a sponsor backed by nearly four decades of experience.
If you'd like to learn more or have questions, please reach out to your MLG representative or feel free to connect with our team at investors@mlgcapital.com
Best Regards,
The MLG Capital Team
MLG is a private real estate investment manager that manages assets primarily for high net worth individuals, investment advisors, and family offices. Since its inception in 1987, the firm and associated entities have had active, exited, or pending investments totaling over 50 million square feet of total space across the United States, inclusive of more than 40,000 apartment units, with exited and estimated current value exceeding $7.9 billion (as of March 31, 2025).
MLG is an affiliation of vertically integrated companies with more than 850 total employees. The management team consists of ten principals with five of the principals being CPAs, bringing a unique tax and accounting lens to real estate investing. The team has extensive experience in the real estate industry with skills in real estate investment, tax advisory, capital markets, asset management, property management, brokerage, and development.
Our primary investment offerings today are Private Fund VII (the latest value-add fund in our closed-end fund series), the Legacy Fund (a tax-deferred exit solution for long-term owners of appreciated real estate), managed accounts solutions, and co-investments.
Learn more about MLG Capital today
Thank you for your time, and as always, your feedback is welcome and appreciated.
Jim and Brett
James M. Dahle, MD, FACEP
Founder, The White Coat Investor
Brett Stevens, MBA
COO, The White Coat Investor
Disclosures: Private investments are illiquid and speculative; past performance is not indicative of future results. Risks include market, operational, interest rate, occupancy, inflationary, capitalization-rate, regulatory, tax and other risks.
Disclosures: Private investments are illiquid and speculative; past performance is not indicative of future results. Risks include market, operational, interest rate, occupancy, inflationary, capitalization-rate, regulatory, tax and other risks.
Dr. Jim Dahle is an investor in MLG's series of private real estate funds and is being compensated for sharing this communication, which is a paid advertisement.Any compensation creates a conflict of interest and may not be representative of any other person's experience with MLG Capital or a particular investment. This testimonial may not be representative of the experience of other investors and there is no guarantee of future performance or success.
Securities offered through North Capital Private Securities, Member FINRA/SIPC. Its Form CRS may be found here and its BrokerCheck profile may be found here. NCPS does not make investment recommendations and no communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform.
This communication is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the "Memorandum") of MLG Private Fund VII LLC (the "Main Fund"), MLG Dividend Fund VII LLC (the "Parallel Fund"), (and together with the Main Fund, the "Fund"), the limited liability company agreements ("LLCAs") of the Main Fund, and the Parallel Fund, as each as may be amended and/or modified from time to time, and a subscription agreement related thereto, copies of which will be made available upon request and should be reviewed before purchasingunits in the Fund. The Fund reserves the right to modify any of the terms of the offering and the membership interests described herein. Capitalized terms not defined herein shall have the meaning giving to them in the Memorandum and LLCAs.
This communication is intended solely for qualified investors. Investments in private offerings are speculative, illiquid, and may result in a complete loss of capital. Past performance is not indicative of future results. Prospective investors should conduct their own due diligence and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help them to understand and assess the risks associated with any investment opportunity. This offering includes risks and uncertainty many of which are not outlined herein including, without limitation, risks involved in the real estate industry such as market, operational, interest rate, occupancy, inflationary, natural disasters, capitalization rate, regulatory, tax and other risks which may or may not be able to be identified at this time and may result in actual results differing from expected.
This communication contemplates complex tax concepts that each recipient should review with their professional tax advisor for further guidance. This communication should not be considered tax advice and each recipient should consult with their tax advisor regarding the content, definitions and assumptions outlined herein.
Advisory services offered through MLG Fund Manager LLC, an investment adviser registered with U.S. Securities & Exchange Commission.
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