Starlight Fund Winds Down, Leaving Early Investors with Capital Losses

TORONTO, ON – November 25, 2025 – The journey for Starlight U.S. Multi-Family (No. 2) Core Plus Fund (TSXV: SCPT.A, SCPT.U) has reached its definitive end. The real estate investment vehicle announced today it will make a final distribution to unitholders on or about December 18, 2025, before dissolving and delisting from the TSX Venture Exchange. While the wind-up provides a final, albeit modest, payout, it closes a chapter that will see investors who joined at the 2021 initial public offering realize a capital loss, a stark reminder of how dramatically the real estate investment landscape has shifted.

"The Fund has completed the disposition of its investment properties with the final distribution scheduled for on or about December 18, 2025," commented Evan Kirsh, the Fund's President, in a statement. "We thank all of our investors and partners for their support throughout the Fund's term."

The Final Payout

The fund has outlined its final distribution amounts, which will be paid to unitholders of record as of December 15, 2025. Upon payment, all outstanding units will be cancelled. The approximate payouts are C$0.2685 per class A unit and US$0.2500 per class U unit, with varying amounts for other classes. To facilitate this process, the TSX Venture Exchange will implement "due bill" trading procedures from December 15 to December 18, ensuring buyers during this period receive the final distribution. The fund’s publicly traded units are expected to be delisted as of the close of trading on December 18, 2025.

Critically for investors, the fund explicitly noted that the final T5013 tax slip, expected by March 2026, will likely include a U.S. source capital loss. For those who invested in the IPO and held their units through to this final distribution, a capital loss is the anticipated outcome—a far cry from the double-digit returns originally targeted.

From Boom to Bust: A Market Reversal

The fund's dissolution is a story of market timing and the profound impact of monetary policy. Launched in early 2021, the Starlight U.S. Multi-Family (No. 2) Core Plus Fund entered a booming U.S. multi-family real estate market. Its thesis was clear: acquire, own, and operate value-add, income-producing rental properties in growing U.S. sunbelt markets, targeting an impressive pre-tax investor internal rate of return (IRR) of over 11%.

Initial performance was strong. By late 2021, the fund reported significant fair value gains on its properties, driven by robust rent growth and high occupancy rates that outpaced initial forecasts. Its portfolio, which included the Montane, Hudson, and Summermill apartment complexes, seemed perfectly positioned to capitalize on the post-pandemic housing demand.

However, the tide began to turn in 2022 as the U.S. Federal Reserve initiated an aggressive campaign of interest rate hikes to combat soaring inflation. This pivot had a chilling effect on the real estate sector. By November 2022, Starlight made the difficult decision to pause monthly distributions for this fund and another of its U.S. vehicles. The move, intended to preserve capital and maximize total return upon the eventual sale of its assets, was the first clear signal of the financial pressures mounting from the higher-rate environment.

The Debt Wall and Forced Dispositions

The challenges came to a head in 2025. The loans secured by the Hudson and Summermill properties matured in May, and the fund found itself unable to meet the conditions required for an extension. According to research on the fund's history, lenders were unwilling to modify terms without significant principal paydowns—capital the fund simply could not provide. This financing crisis forced Starlight's hand, triggering the liquidation of its entire portfolio.

The disposition of assets was a mixed bag. The Montane property was sold in June 2025, with proceeds used to repay its mortgage and other debts. But the resolution for the other two properties reveals the severity of the situation. In August, the Hudson at East property was sold for $68.4 million, with the proceeds immediately used to repay its $67.0 million loan. On the same day, the Summermill at Falls River property was transferred directly to its lender, with no cash proceeds received by the fund. This move, effectively a deed in lieu of foreclosure, allowed the fund to discharge an $85.6 million mortgage. While this resulted in a non-cash accounting gain of $12.9 million on the extinguishment of debt for Q3-2025, it underscores the property's underwater valuation in the current market.

These dispositions decimated the fund's operating revenue, which fell 68.4% in the third quarter compared to the prior year. The fund's journey from a portfolio of 995 suites at the end of 2024 to zero by September 2025 illustrates the rapid and forced nature of its wind-down.

Broader Strategy in a Tough Market

The dissolution of the Starlight U.S. Multi-Family (No. 2) Core Plus Fund is not an isolated incident but rather reflects a broader strategic realignment by its parent company, Starlight Investments, in response to a difficult market. On the same day, the Starlight U.S. Residential Fund (SURF) announced a major reorganization to contend with similar pressures, including property sales and challenging loan negotiations.

This stands in stark contrast to the fate of the Starlight U.S. Multi-Family (No. 1) Core Plus Fund, which successfully sold its portfolio and delisted in October 2021, delivering significant returns to its investors in a far more favorable market. The divergent outcomes of the 'No. 1' and 'No. 2' funds starkly illustrate the difference a few years can make. The current environment of high interest rates and cautious lenders has created a 'wall of maturities' that many real estate investment vehicles are struggling to scale. For the Starlight U.S. Multi-Family (No. 2) fund, that wall proved insurmountable, forcing a final liquidation that serves as a cautionary tale for investors in a market still grappling with the end of an era of cheap money.