Promote is the general partner's share of profits above the preferred return in a syndicated real estate deal. Typical structure: GP receives 20–30% of profits above the pref.
The promote is the GP's performance-based upside. After LPs receive their pref and capital back, the remaining profits split according to the waterfall — typically 70/30 or 80/20 LP/GP at the first tier, sometimes with escalating GP share at higher return hurdles.
LA multifamily promote structures range widely. Aggressive structures (30% GP share at low hurdles) can misalign incentives. Tiered structures with higher GP share at higher returns tend to align interests better. LPs should evaluate promote structure carefully.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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