Asked by: Jianling Lodochnikov
asked in category: General Last Updated: 24th May, 2020

What is a promote structure in real estate?

What is a Waterfall and Promote Structure in Commercial Real Estate? A waterfall and promote structure, also known as a waterfall model, is a method for distributing the profits from a real estate investment in an uneven way.

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Correspondingly, what is a promote structure?

Sponsor “Promote” Interests. The promote involved in the usual equity investment structure is similar to the “carried interest” concept used in the fund context, and is essentially a profits interest that is significantly greater than a sponsor's capital (investment) interest.

Secondly, how do you structure a real estate fund? Sponsor Motivations

  1. Diversify and expand funding sources.
  2. Diversify holdings.
  3. Invest in larger, higher-quality projects.
  4. Obtain better terms from banks and other lenders.
  5. Provide an alternative to mezzanine capital.
  6. Develop projects using fund-level financing in lieu of project-by-project financing.

Similarly one may ask, how does a promote work in real estate?

The key term to a real estate private equity deal is the sponsor “promote”. – for the sponsor's disproportionate share of profits in a real estate deal, provided the project hits certain return benchmarks. The promote is often expressed in the form of a waterfall.

What is equity structure?

In a capital structure, equity consists of a company's common and preferred stock plus retained earnings. This is considered invested capital and it appears in the shareholders' equity section of the balance sheet. Invested capital plus debt comprises capital structure.

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