Gray Property Group recently completed a cashout refinance of Bayberry Green Apartments, an 8-unit townhouse community located in Epping, New Hampshire. In doing so, we returned significant investor capital while maintaining long-term ownership of a well-performing asset.
Gray acquired Bayberry Green in 2020 for $850,000 and invested ~$200,000 of internal capital into a full renovation and repositioning of the property between 2020 and 2021. Following completion of the renovation program, the asset was stabilized and operating as a cash-flowing investment.
In 2021, Gray brought in investor partners at a $1.375M valuation, with ~$400,000 of total investor equity. Investors entered the project after the renovation was complete and the property had already been repositioned into a stabilized asset with in-place cash flow. Over the past five years, Bayberry Green has delivered an average annual cash return of 11.8%, net of all sponsor fees.
The property recently appraised at $1.8M, or $225,000/unit, and Gray agreed to terms with Primary Bank on a conservatively sized $1.2M mortgage (67% LTV). That new mortgage paid off our ~$875,000 mortgage and resulted in a ~$320,000 cashout.
Through this refinance, Gray returned 70% of investors’ capital contributions, increased capital reserves, and preserved ownership and operational control of the property. For investors who participated in the 2021 raise, the 5-year equity multiple was ~3.0x, driven by ~$300,000 of returned investor capital, ~$240,000 in cash flow distributions, and ~$650,000 in remaining equity, based on a $400,000 initial investment. This equates to a ~25% internal rate of return.
Importantly, investors remain in the deal after having recouped 135% of their original investments between operating cash flow and refinance proceeds. Although cash flow is expected to moderate at ~$22,000/year due to today’s higher interest rate environment and the property’s increased loan balance, that represents more than a 20% cash return on investors’ unreturned capital. That, combined with loan amortization and future appreciation, are projected to generate annual returns of >50% on unreturned capital going forward.
This refinance reflects Gray Property Group’s disciplined investment approach: acquiring underperforming assets at a low basis, executing targeted renovations to drive income and value, implementing effective hands-on management to improve operations and control expenses, and returning investor capital while maintaining long-term ownership and upside.
