Return of Capital
Your capital may come back. Your participation doesn't have to end.
Imagine investing $100,000 with Sonos Capital. As a community grows in value, a refinance may allow us to return your original investment without selling the property, while you continue participating in the asset. Hypothetical illustration only.
What Happens When We Refinance
A refinance may return capital without selling the property.
We use investor capital to acquire manufactured housing communities that we believe have opportunities to improve operations, increase income, and create long term value. As a property grows in value, we may have opportunities to refinance it.
A refinance may allow us to return a portion of your original investment while the Fund continues to own the asset. Refinancing may not occur, may not generate sufficient proceeds, and may increase leverage and investment risk.
You Invest
$100,000
Capital is deployed into community acquisitions.
First Refinance
$40,000 returned
A portion of original capital may be returned without selling.
Second Refinance
$60,000 returned
The remaining original capital may be returned.
Original $100,000 Returned
$0 remaining
Participation does not necessarily end.
Hypothetical illustration only.
Continued Participation
Returning capital does not necessarily end your participation.
Under the Fund's distribution structure, returning your original capital does not necessarily require Sonos to sell a strong property or automatically terminate your continuing economic participation. If the Fund continues to own the property, you may continue participating in:
Ongoing Cash Flow
Your share of distributable property cash flow, subject to available funds and manager discretion.
Future Refinance Proceeds
Any additional proceeds a later refinancing may generate.
Additional Appreciation
Continued exposure to value created through operations and market growth.
Eventual Sale Proceeds
Applicable proceeds if the Fund ultimately sells the property.
An Analogy
Think of it like owning an apple tree.
- 01
You invest money to buy an apple tree.
- 02
The tree produces apples, and you receive your share.
- 03
As the tree becomes more valuable, we may be able to return your original investment.
- 04
You could receive your entire investment back and still participate in the apples the tree produces.
We seek to acquire quality manufactured housing communities, improve them, generate cash flow, return investor capital when opportunities allow, and continue owning strong assets when we believe long term ownership creates more value than selling.
Analogy provided for explanation only.
Hypothetical Illustration
A simple $100,000 illustration
| Original Investment | $100,000 |
| Capital Returned Through Refinancing | $100,000 |
| Original Capital Remaining | $0 |
| Continuing Participation | Yes* |
*Subject to the Fund's governing documents and distribution waterfall. If the property continues producing distributable cash flow after your original capital has been returned, you may continue receiving your share. If the property is ultimately sold, you may participate in the applicable sale proceeds.
Detailed Illustration
Hypothetical 10-year cash flow on a $100,000 investment
This table shows how distributions, refinancing events, and continued participation might look over time. It is a hypothetical illustration, not a projection or guarantee.
| Year | Event | Cash Flow | Cumulative | Notes |
|---|---|---|---|---|
| 0 | Initial investment | ($100,000) | ($100,000) | Capital deployed into Fund acquisitions |
| 1 | Quarterly distributions | $8,000 | ($92,000) | Illustrative 8% preferred return on invested capital |
| 2 | Quarterly distributions | $8,000 | ($84,000) | Preferred return continues while capital is invested |
| 3 | Quarterly distributions | $8,000 | ($76,000) | Cash flow before any capital return |
| 4 | First refinance + distributions | $48,000 | ($28,000) | $40,000 capital returned + $8,000 distributions |
| 5 | Ongoing distributions | $4,800 | ($23,200) | 8% preferred return on remaining $60,000 capital |
| 6 | Ongoing distributions | $4,800 | ($18,400) | Continued participation in cash flow |
| 7 | Second refinance + distributions | $64,800 | $46,400 | $60,000 capital returned + $4,800 distributions |
| 8 | Ongoing distributions | $4,000 | $50,400 | Original capital fully returned; cash flow from continued ownership |
| 9 | Ongoing distributions | $4,000 | $54,400 | Continued ownership participation |
| 10 | Distributions + exit proceeds | $4,000+ | $58,400+ | Hypothetical; depends on sale price and waterfall |
Hypothetical illustration only. Assumes an 8% preferred return on the remaining invested capital, refinancing events returning $40,000 in year 4 and $60,000 in year 7, and continued cash flow distributions after the original capital is returned. Actual results, timing, and amounts will vary materially. Refinancing may not occur, may not return all capital, and may increase leverage and investment risk. Distributions are not guaranteed. Return of capital is not guaranteed.
The Goal Is Simple
- 1Invest.
- 2Improve the properties.
- 3Generate cash flow.
- 4Return capital when possible.
- 5Keep participating in quality assets.
"We don't believe a great property should necessarily be sold simply because an arbitrary number of years has passed."If an asset continues to perform and we believe continued ownership is in the best interests of the Fund, our goal is to have the flexibility to keep owning it.
Common Questions
Frequently asked questions
Is this guaranteed?
No. The return of capital examples shown on this page are hypothetical illustrations, not projections or promises. Refinancing may not occur, may not generate enough proceeds to return capital, and may happen later than shown—or not at all. Distributions, preferred returns, appreciation, and exit proceeds are also not guaranteed. Any actual investment will be governed solely by the Fund's definitive offering documents.
What if a refinance doesn't happen?
If refinancing does not occur, the Fund may not be able to return your original capital prior to a sale or other liquidity event. In that case, your capital would generally remain invested until the Fund sells, refinances, or distributes proceeds in another manner. That longer capital deployment could mean your investment stays subject to market, leverage, and operational risks for a longer period.
How does this affect my K-1?
This page discusses return OF capital (getting your original investment back), which is different from return ON capital (profit or income). The tax treatment of distributions can change once your original capital has been returned. Before your capital is returned, distributions may be treated as taxable income. After your full capital basis has been recovered, later distributions may be treated differently and could be reported as capital gains or other categories depending on the Fund's actual operations and your individual tax situation. Investors should consult their own tax advisors, as Sonos Capital does not provide tax advice.
Is this early liquidity or an exit guarantee?
No. Return of capital through refinancing is not early liquidity, an exit, or a guarantee that you can withdraw from the investment. The Fund continues to own the property, your ownership interest generally remains in place, and your capital is still subject to real estate risk, leverage risk, and market risk. Refinancing depends on property performance, lender availability, interest rates, and other factors outside Sonos Capital's control.
Risks to Understand
Return of capital is not guaranteed
The cash flow table and examples on this page are hypothetical illustrations, not projections or promises. Refinancing may not occur, may not generate enough proceeds to return your original capital, and may happen later than shown—or not at all.
Educational and hypothetical only
SEC and state regulators closely scrutinize language that could sound like a guarantee of future returns or liquidity. We present this concept as an educational illustration of how a structure may work, not as a forecast, promise, or investment recommendation.
Return OF capital vs. return ON capital
Return of capital means getting back the original amount you invested. It is different from profit or income. Once your full capital basis has been recovered, the tax treatment of later distributions may change. Consult your own tax advisor; Sonos Capital does not provide tax advice.
Not early liquidity or an exit guarantee
Receiving a return of capital through refinancing does not mean the Fund has sold the property, that you have exited the investment, or that you can withdraw on demand. The Fund typically continues to own the asset, and your capital remains subject to real estate, leverage, and market risks.
Important Disclosure
This example is hypothetical and is provided solely to illustrate how a potential investment structure may operate. It is not a projection, guarantee, or promise of future performance, distributions, refinancing, return of capital, tax benefits, appreciation, or investment results. Actual results may differ materially. Refinancing may not occur, may not generate sufficient proceeds to return investor capital, and may increase leverage and investment risk. Distributions are not guaranteed. Depreciation and other tax benefits depend on the Fund's actual investments and each investor's individual tax circumstances. Any investment will be governed exclusively by the Fund's definitive offering documents, including the Private Placement Memorandum, Limited Partnership or Operating Agreement, and Subscription Agreement. Prospective investors should review the offering documents and consult their own legal, tax, and financial advisors before investing.
Free Investor Guide
Download the Investor Guide: How Your Capital Can Come Back
A short guide covering the four ways a private real estate investment pays you, return OF capital vs. return ON capital, a hypothetical $100,000 year by year illustration, K-1 considerations, and the risks involved.
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