A promote (or promoted interest) is the disproportionate share of profits that a deal sponsor or general partner earns after delivering a minimum return to investors. The concept is functionally identical to carried interest, but the term "promote" is predominantly used in real estate, while "carry" is standard in private equity and venture capital. In a typical promote structure, the sponsor earns 20–30% of profits above a preferred return hurdle, despite having contributed only 5–10% of the equity.
Promote Structures in Real Estate
Real estate promotes often use multi-tier structures with escalating splits. For example: (1) LP receives 100% of distributions until achieving an 8% preferred return, (2) then a 70/30 LP/GP split until a 12% IRR, (3) then a 60/40 split until a 15% IRR, (4) then a 50/50 split above 15%. Each tier is called a "promote level" or "hurdle tier." These multi-tier structures create significant waterfall calculation complexity, especially across per-property SPV structures where each property may have different promote terms.
Promote Calculation Complexity
Promote calculations in real estate are among the most complex waterfall computations in private markets. Per-property SPVs may have different promote terms than the master fund. Catch-up provisions, lookback calculations, and return-of-capital definitions vary by deal. Manual promote calculations across a portfolio of 10+ properties with different structures, different investors, and different vintage dates is a common source of error in real estate fund administration.