🚨Dallas-based Milestone Group closed its $1.1 billion Fund VI, one of 2025’s largest multifamily raises, focused on Sun Belt and Mid-Atlantic apartments. Despite a tight fundraising climate, global pensions, insurers, and a sovereign fund oversubscribed the vehicle. Milestone is buying at 20–25% discounts to replacement cost, assuming low-rate debt where possible, and underwriting conservatively at sub-60% leverage. For CRE, this signals that institutional capital is firmly behind disciplined, value-add multifamily strategies — boosting liquidity for distressed sellers and sharpening competition for well-located suburban deals.
Fund VI equity raised: $1.1 B hard cap (Sept 2025) — [Source: PR Newswire].
Recent acquisitions: South Florida & Denver, ~75–80% of replacement cost — [Source: PR Newswire].
Target leverage: ≤60% LTV; DSCR ≥1.3x — [Source: PR Newswire].
Investor survey: 74% of LPs maintaining or increasing value-add allocations in 2025 — [Source: PERE].
Loan Performance. Conservative leverage plus assumed low-rate loans enhance DSCR buffers. Renovation-driven NOI lifts cushion refinancing risk.
Demand Dynamics. Sun Belt/Mid-Atlantic metros with 95%+ occupancy and job growth sustain rent bumps. Rent growth assumed at 5–10% post-reno, tapering to 2–3%.
Asset Strategies. $10k–15k per unit renovations and amenity upgrades; avoid gut rehabs. Quick stabilization with embedded upside.
Capital Markets. $1.1B equity equates to ~$3B firepower with debt, preventing fire-sales but intensifying bid competition for value-add stock.
Capital is flowing selectively to multifamily, not broadly to CRE.
Growth markets (Sun Belt, Mid-Atlantic) remain favored.
Financing: moderate leverage, assumed loans, rescue capital.
Competitive bid pressure will rise for quality suburban assets.
🛠 Operator’s Lens
Refi. Assume rate caps and sub-60% LTV. Stabilized DSCR >1.3x required.
Value-Add. Light-to-moderate CapEx, phased upgrades to protect cash flow.
Development. Fund unlikely to back new builds; acquisitions priced at 20%+ discounts safer.
Lender POV. Banks and agencies reward conservative leverage, strong in-place cash flow.
Expect rapid deployment in 18–24 months; watch for large portfolio trades in 2026.
More funds to follow — investor appetite could compress cap rates in top markets by 2027.
Execution risk: rent growth and capex timing must deliver mid-teens IRRs.
Costar, PR News Wire, Pere
