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Inside the Core Plus Fund: After-Tax Performance

4/25/2025

In the current investment environment, delivering consistent income is not sufficient in isolation. Sophisticated investors increasingly recognize that after-tax outcomes - not just gross returns - are a critical component of long-term portfolio performance.

ACD's Core Plus Fund is structured to address this reality. Our strategy focuses on generating income that is not only stable and repeatable, but also optimized for tax efficiency.

A Strategy Grounded in Fundamentals

The Core Plus Fund invests in a portfolio of stabilized, income-producing essential commercial real estate located in select high-growth markets. Our underwriting emphasizes tenant quality, functionality, and cash flow resilience - seeking to mitigate downside risk while capturing durable yield.

Real estate, when structured intentionally, offers access to a range of tax advantages. Through the use of depreciation and other non-cash deductions, we aim to reduce taxable income while preserving distributed cash flow. The result: income that is both distributable and tax efficient.

Performance with Purpose

In 2024, the Core Plus Fund delivered an 11.59% tax-equivalent yield,(1,2) driven by consistent portfolio income and a structure designed with investor outcomes in mind.

Yield Comparison as of December 31, 2024:

This performance compares favorably to traditional fixed income alternatives and was achieved without speculative development exposure.

Navigating Volatility with Discipline and Alignment

In a market environment marked by volatility, elevated borrowing costs, and inconsistent capital flows, investors are right to re-evaluate not just where they’re finding income, but how much of it they’re keeping after taxes.

The Core Plus Fund was designed with that clarity in mind. Our approach emphasizes discipline across asset selection, market location, and asset management, all in service of generating income that holds up in uncertain environments, and a structure that helps investors retain more of what they earn.

When volatility rises, structure matters. And in our view, tax-aware income that is consistent, durable, and deliberately managed isn’t just a feature - it’s the foundation.

In a market where capital efficiency matters more than ever, we believe structure is a differentiator — and after-tax performance is a key component of real return.

Learn more about how we do it. 

Explore the portfolio targets and geographic focus that shape our strategy, and meet the team driving it forward.

Ready to start a conversation? Schedule a call.

This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Certain statements reflect the views and opinions of Armstrong Capital Development as of the date of publication.

  1. As of December 31, 2024. Past performance is not indicative of future results and there can be no assurance that Core Plus Fund will continue to achieve comparable results or that its return objective will be met.
  2. Based on the pre-tax and estimated after-tax rate of the Core Plus Fund Net TTM Cash Yield as of December 31, 2024. The pre-tax rate is 7.30%. See footnote 3 for a description of the methodology used to calculate this return. The estimated after-tax rate of 7.30% and the Tax Equivalent Yield reflect Core Plus Fund’s net taxable income for calendar year 2024. Because 100% of investors’ Core Plus Fund income was shielded from tax in 2024 (i.e., they had no taxable income from Core Plus Fund for calendar year 2024), the pre-tax and after-tax rates are the same. The Tax Equivalent Yield reflects the pre-tax rate an investor in a theoretical fully taxable investment would need to receive to match the after-tax rate of an investment in Core Plus Fund assuming that (i) the investor qualifies to utilize the benefit of the qualified business income deduction, which is currently 20% of net rental income, (ii) all income earned on the theoretical fully taxable investment is taxed at the maximum U.S. federal income tax rate applicable to ordinary income for U.S. taxable individuals, which is currently 37%, without taking into account any other taxes, including the 3.8% net investment income tax or state or local taxes (which would vary by investor and will be significant for residents of certain states) and (iii) the investor is unable to utilize Core Plus Fund’s portfolio deductions, including management fees, and fund level legal fees (the deductibility of which would vary by investor). Actual effective tax rates will vary based on each investor’s income, exemptions and deductions and may change in the future. A lower effective tax rate will result in a lower Tax Equivalent Yield.
    Undue reliance should not be placed on the after-tax rate or the Tax Equivalent Yield because (i) they have not been experienced by any investor and are based on assumptions that may not apply to any particular investor and (ii) the taxable income for 2024 is being compared to the cash yield for 2024. In addition, the after-tax rate and the Tax Equivalent Yield do not take into account, and would therefore be reduced by, other taxes that may be owed when an asset is sold or an investor redeems its interests in Core Plus Fund, including to take into account deferred capital gains tax and depreciation recapture via a reduction in the investor’s tax basis. While investors may initially recognize taxable income that is less than the cash distributions they receive, that is only reflective of a particular tax year and in the future investors may recognize taxable income that represents an increasing percentage of, or exceeds, the cash distributions they receive. Furthermore, if an investor sells or redeems its interest in Core Plus Fund, the investor will recognize a gain or loss equal to the difference between the amount realized and the investor’s tax basis in its interest. Cash distributions received by an investor in excess of the taxable income allocated to the investor will cause the tax basis in the investor’s interest in Core Plus Fund to be reduced by the amount of such excess.  This reduction in tax basis will, in effect, become taxable income to the investor if the interest is sold or redeemed at a price greater than the tax basis in that interest, even if the price the investor receives is less than the original cost of the interest. Cash distributions that exceed the tax basis of an investor’s interest in Core Plus Fund will result in the recognition of taxable gain by the investor.  Investors should consult their own tax advisors.
  3. TTM means trailing twelve months. The Core Plus Fund Net TTM Cash Yield is calculated by dividing (i) the sum of the distributions per partnership interest (which consists of distributions of operating income, but not return of principal or borrowings) during calendar year 2024, net of fund-level management fees and gross of performance participation by (ii) the net asset value per partnership interest as of December 31, 2023. Limited partners of Core Plus Fund pay performance participation by distributing a portion of their units to the general partner on December 31 each year; therefore, performance participation is reflected in the net appreciation rate and not the net distribution rate.
  4. As of December 31, 2024. Source: Ycharts.com
  5. As of December 31, 2024. Source: U.S. Department of the Treasury Daily Treasury Par Yield Curve Rates
  6. As of December 31, 2024. Source: GoBankingRates.com, Top CD Rates Today: December 31, 2024, which tracks the highest advertised annual percentage yields (APYs) by CD term (3-month through 5-year) as of 12/31/2024. The reported yield is a simple average of the highest APYs listed across the following terms: 3-month (4.65%), 6-month (4.75%), 1-year (4.60%), 18-month (4.44%), 2-year (4.61%), 3-year (4.25%), and 5-year (4.25%). This methodology reflects a blended view of top-rate offerings and may not represent the average yields available in the broader CD market. Actual rates vary by issuer and may change without notice.