A partner-buyout refi uses new loan proceeds to buy out one or more equity partners. The exiting partner is paid from refi proceeds; the remaining partners take title to the property and the new loan. Lender scrutiny is higher than rate-and-term; expect to document the buyout, provide updated key-principal financials, and satisfy ownership-change covenants.
Process and structuring considerations
Loan-sizing math: the new loan must cover the existing loan payoff (including prepay penalty) plus the buyout amount plus closing costs. Lender LTV and DSCR tests apply to the new loan amount, so cash-out for the buyout effectively counts as cash-out leverage.
Lender documentation requirements: executed buyout agreement showing the price and the closing mechanics, updated entity org chart showing the post-buyout ownership, updated key-principal financials for the remaining partners, and confirmation that the buyout satisfies any consent rights of the existing lender (usually requires lender consent or a refi).
Existing-lender consent vs. refi: some existing lenders will consent to a partner buyout without requiring a refi (typically requires a 1.0% assumption fee and the new key principal to satisfy the lender's net-worth and liquidity tests). Refi is required when the existing lender is unwilling to consent, when the buyout exceeds the loan's permitted-transfer language, or when the borrower wants to use the buyout as an opportunity to restructure the loan.
Tax considerations: partner buyouts are taxable events for the exiting partner. Coordinate the buyout structure (sale of partnership interest vs. distribution from refi proceeds vs. property-level sale to a new entity) with the tax counsel of both the exiting and remaining partners. The structure can materially change the after-tax outcome for both sides.
Lender choice for buyout refis: agency multifamily and life-co perm are typically the cleanest executions because they have established frameworks for ownership changes. Bank perm is workable if the bank has a relationship with the remaining partners. CMBS is the hardest because securitization-trust mechanics complicate ownership changes.
Timeline: 60 to 90 days from term sheet to close on a clean partner-buyout refi. Add 2 to 4 weeks if the buyout terms are still being negotiated at the time of refi launch.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1