Refinancing replaces debt while retaining ownership; selling exits the property. Compare net proceeds, remaining risk, costs and the owner’s business plan.
By H Equities. Numerical examples and rate ranges are educational illustrations, not current financing quotes.
Reference: OCC Commercial Real Estate Lending handbook. Actual rights and obligations depend on the transaction documents.
Quick Comparison
Key attributes side by side.
| Attribute | Refinancing | Selling a CRE Property |
|---|---|---|
| Ownership | Retained after the new financing | Transferred to the buyer |
| Cash proceeds | New loan less payoff, costs and holdbacks | Sale price less debt, selling costs and applicable taxes |
| Future exposure | Operating, financing and exit risk remain | Most property exposure ends, subject to retained obligations |
In Depth
A refinance can extend the holding period, replace a maturing loan or fund a revised plan. Its proceeds depend on the lender’s value, income, leverage and coverage constraints. A funding gap may remain even when the property has gained value.
Retaining ownership also retains operating obligations, capital needs and the eventual exit risk. Model the new debt under a downside case.
In Depth
A sale converts the property interest into proceeds and may suit an owner seeking liquidity, reduced exposure or the end of a business plan. Net proceeds depend on more than the headline purchase price.
Review selling costs, prepayment obligations, timing and tax consequences with the relevant advisers. A proposed sale is not completed liquidity until the buyer closes.
Key Differences
Ownership: Retained after the new financing; compared with transferred to the buyer.
Cash proceeds: New loan less payoff, costs and holdbacks; compared with sale price less debt, selling costs and applicable taxes.
Future exposure: Operating, financing and exit risk remain; compared with most property exposure ends, subject to retained obligations.
Decision Guide
Practical scenarios to help you decide.
Going deeper
Use the same valuation date, payoff amount and operating assumptions. Separate cash available at closing from future projected cash flow. Include selling costs for a sale and reserves, financing fees and any required equity contribution for a refinance.
Partners may have different liquidity needs, tax positions or remaining investment horizons. A refinance that works at the property level may still leave a partner seeking an exit. Identify consent and distribution requirements before assuming all proceeds can be distributed.
If neither path closes by the debt maturity, calculate carry, extension requirements and contingency capital. A planned sale needs a credible buyer process; a refinance needs supportable lender sizing. Keep the downside case visible when comparing projected upside from continued ownership.
A $13 million refinance against a $14 million payoff and $300,000 in costs requires $1.3 million of additional capital. A hypothetical $20 million sale less the same payoff and $600,000 of selling costs produces $5.4 million before taxes and other obligations. The figures answer different questions: capital needed to retain the asset versus proceeds from exiting it.
All figures in this example are illustrative. They are not a quote, investment return forecast or statement of H Equities terms.
Our Role
H Equities evaluates senior bridge loans, structured capital and equity opportunities. Share the property, existing capital, requested role and timing. Product availability, economics and approval depend on a transaction-specific review.
FAQ
No. Compare the additional capital and risk of holding with supported net sale proceeds and the owner’s objectives. A shortfall quantifies one financing constraint; it does not establish the best investment decision.
Compare net proceeds, total costs, current cash obligations, control rights, downside exposure and the exit. Identify all required approvals and distinguish an indicative proposal from a binding funding commitment.
Related
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