Recapitalization is not a common way to cash out the first round of investors in a MF syndication, but when it is used, what is the process for determining net gain on the investment? In a Recap, the GP refinances the property with a new core investor, and the initial equity LPs should receive a distribution based on their split of the market value of the property, less deductions.

How is the market value determined? Appraisal? BPO? Assuming the Operating Agreement is silent on the matter, what deductions are allowed from net gain before the distribution waterfall. Obviously, the original loan payoff, but should there be any fees, loan costs, lender reserves or closing costs (for the refinance), RE broker fees, etc. deducted, or should that all fall on the new replacement capital?

What documentation of final expenses and deductions should the LPs expect from the GP? I would assume: the appraisal, a detailed breakdown of any reimbursements and deductions, and perhaps the settlement statement from the refi to document any closing costs?  Any insight from one of the BP syndicators would be appreciated.