CMBS cash-out refinance

A CMBS cash-out refinance is a new CMBS loan larger than the debt it pays off, with the excess returned to the owner. The loan is capped by the lowest of loan-to-value, coverage and debt yield, so the cash available is that loan amount minus the payoff, prepayment costs, closing costs and reserves. Conduit lenders make these loans routinely.

How the cash is calculated

Line	Illustrative amount
New loan (smallest of the three sizing tests)	$20,000,000
Less: payoff of existing loan	($14,500,000)
Less: prepayment cost on existing loan (defeasance or yield maintenance, if any)	($300,000)
Less: closing costs	($600,000)
Less: upfront reserves	($250,000)
Cash to the owner	$4,350,000

The figures are an example, not market data. Every line except the first is set by your existing loan, the new lender and the property: get the prepayment figure from the defeasance calculator or yield maintenance calculator, the closing cost range from CMBS loan closing costs, and the loan amount from the CMBS loan calculator.

Real cash-out loans, from one prospectus

The BANK5 2025-5YR14 prospectus publishes sources and uses for its largest loans. Five were cash-out refinances of meaningful size:

Loan	New loan	Old debt paid off	Cash to the sponsor	Share of proceeds
Southeast Workforce MHC Portfolio (manufactured housing)	$105.0 million	$79.3 million	$19.8 million	18.8%
Logan Cargo Park (industrial)	$120.0 million	$96.8 million	$14.5 million	12.1%
Box House Hotel	$41.0 million	$30.4 million	$8.6 million	21.0%
Redmond Town Center	$121.5 million	$96.4 million	$21.9 million	18.0%
The Spiral (office)	$2.08 billion mortgage plus $773.3 million subordinate debt	$1.56 billion	$990.9 million	34.8% of total sources

Source: sources and uses tables for each loan in the BANK5 2025-5YR14 prospectus (424B2, filed April 2, 2025). The Southeast Workforce loan, for example, closed at a 66.5% loan-to-value on a $157.9 million appraisal, with $5.7 million of closing costs and $0.2 million of upfront reserves.

Two lessons from the table. First, the cash share varies widely; it depends on how much the property has grown in value and income since the last loan. Second, even large cash-outs left the sponsor with meaningful equity, because conduit leverage sits well below the guideline maximums. Recent leverage by property type is on CMBS loan requirements.

What the lender looks at on a cash-out

• Value and income today. The new appraisal and the lender’s own net operating income set the loan, as on any CMBS loan. How CMBS underwriting works.
• Cost basis. What the sponsor paid and has invested. A cash-out that returns more than the sponsor put in, soon after buying, draws questions about the appraisal.
• Equity left in the deal. Lenders and bond investors prefer a sponsor with a real stake. A low loan-to-value after the cash-out helps.
• Coverage after the bigger loan. More debt means a bigger payment; a thin coverage ratio can put the loan close to a cash management trigger from day one. CMBS cash management.
• Debt yield. Debt yield ignores the rate, so it caps cash-outs when values are high relative to income. Debt yield.

The risks of taking equity out

• A larger balloon. Most CMBS loans are interest only, so the whole balance comes due at maturity. Interest-only CMBS loans.
• Less room before a cash sweep. Higher debt service brings the trigger closer.
• Prepayment lock. Once closed, the cash-out loan carries its own lockout and defeasance or yield maintenance. Taking cash out today can make a sale in two years expensive. CMBS prepayment penalties.
• Refinance risk at maturity. If values or income fall, a larger loan is harder to refinance. Test it in the CMBS refinance calculator.

Cash out without a full refinance

If your current CMBS loan is otherwise fine (a low coupon, a long time left), a refinance may cost more in prepayment than it returns. Alternatives:

• Supplemental or mezzanine financing, if the loan agreement permits it. In BANK5 2025-5YR14, The Spiral loan allows future mezzanine debt up to a combined 62.0% loan-to-value, 1.35x coverage and 8.1% debt yield (prospectus, p. 233). CMBS supplemental financing.
• Preferred equity at the ownership level, if the transfer provisions allow it.
• Wait for the open period, then refinance at par.

A cash-out refinance follows the same process as any CMBS refinance. Tax treatment of the proceeds is a question for your tax advisor; nothing here is tax advice.