Liquidation Strategy and Performance Impact in Starlight U.S. Multi-Family (No. 2) Core Plus Fund

The Starlight U.S. Multi-Family (No. 2) Core Plus Fund has entered the final phase of its liquidation strategy, with the dissolution of its portfolio of investment properties expected to conclude by year-end 2025. This process, marked by the sale of key assets and debt restructuring, has delivered both capital returns and financial headwinds for unitholders. A closer examination of the fund’s asset disposition practices, performance metrics, and industry context reveals a complex interplay of strategic execution and market dynamics.

Asset Disposition and Debt Management

The fund has systematically unwound its holdings, completing the sale of Montane Apartments and Hudson at East in Q3 2025. Proceeds from these transactions were used to fully repay outstanding mortgages and unsecured loans, including a $96,000 first mortgage at Montane and a $67,000 loan at Hudson at East [1]. Additionally, the fund transferred ownership of the Summermill at Falls River property to its lender, extinguishing $85,639 in debt and generating an estimated $13,000 gain in Q3 2025 [1]. These actions align with the fund’s objective of returning capital to unitholders through special distributions, such as the $21,974 payout in Q2 2025 [1].

However, the liquidation has not been without costs. The fund reported a net loss of $32,851 in Q2 2025, driven by fair value losses on investment properties and the special distribution [1]. These losses reflect broader market pressures, including expanding capitalization rates that have depressed property valuations. Despite this, the fund maintained strong operational performance, with 95.6% physical occupancy as of June 30, 2025, and light value-add upgrades at Summermill generating an 18.4% return on cost [2].

Financial Performance and Unitholder Implications

The fund’s liquidation has led to a significant decline in its share price, which has reached a 52-week low [3]. This drop underscores the challenges of transitioning from an active management strategy to a wind-down phase. While unitholders have received special distributions, the fund’s year-to-date net loss of $43,773—compared to a target internal rate of return (IRR) of at least 11%—suggests unmet expectations [1]. The final liquidating distribution, to be issued after resolving remaining liabilities, will determine whether the fund’s overall returns align with its original objectives.

Comparisons with peer funds highlight the fund’s unique position. For instance, the Starlight Global Real Estate Fund returned 14.7% in Q3 2024, outpacing the Core Plus Fund’s more moderate performance [4]. This disparity reflects the Core Plus Fund’s focus on liquidation rather than growth, as well as the drag from debt restructuring and fair value adjustments.

Industry Context and Strategic Rationale

The multifamily sector in 2025 is navigating a stabilization phase, with vacancy rates projected to improve to 4.9% by year-end and a 25% cost advantage for rentals over homeownership [5]. These trends support rental demand but also create a challenging environment for liquidation, as capitalization rates expand and valuations contract. The fund’s strategy of light value-add upgrades and active asset management has mitigated some of these pressures, but the broader market’s shift toward a $1.5 trillion debt maturity wave has limited acquisition opportunities [5].

Conclusion

The Starlight U.S. Multi-Family (No. 2) Core Plus Fund’s liquidation strategy has delivered partial capital returns to unitholders while navigating a challenging market environment. The successful repayment of debt and execution of special distributions demonstrate disciplined asset management, but the fund’s financial losses and declining share price highlight the risks of a wind-down strategy in a volatile sector. Unitholders must weigh the immediate returns from distributions against the long-term implications of reduced unit value and the fund’s ability to meet its IRR target. As the dissolution nears completion, the final liquidating distribution will serve as a critical metric for assessing the fund’s overall success.

**Source:[1] STARLIGHT U.S. MULTI-FAMILY (NO. 2) CORE PLUS FUND [https://finance.yahoo.com/news/starlight-u-multi-family-no-210700796.html][2] Starlight U.S. Multi-Family (No. 2) Core Plus Fund [https://www.starlightinvest.com/invest-with-us/investment-vehicles/starlight-u-s-multi-family-no-2-core-plus-fund][3] Starlight US Multi-Family (No 2) Core Plus Fund - Markets data [https://markets.ft.com/data/funds/tearsheet/summary?s=SCPT.A:CVE][4] Fund Commentaries [https://starlightcapital.com/en/insights/fund-commentaries][5] The Multifamily Market in 2025: Key Trends and ... [https://www.investnext.com/blog/multifamily-market-2025/]