A key term to a real estate private equity deal is the sponsor “promote.” This term is really just industry jargon for the sponsor’s disproportionate share of profits in a real estate deal above a predetermined return threshold.
What is a promote in an investment?
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. …
What is promote in private equity?
A real estate private equity deal is referred to as a “promote” deal by its sponsor. If certain return benchmarks are met, the sponsor will receive a disproportionate share of profits from a real estate deal. A waterfall is often used to express the promote.
What is promote calculation?
A promote generally takes the form of extra distributions made to the service partner over and above the distributions attributable to its capital contributions to the partnership. Exactly what those “extra” distributions are depends upon how the promote is calculated.
What is a promote member?
Promote Member means the Company, in its capacity as the “Equity Member”, as such term is used in the NIP JV Operating Agreement.
What is a 10% promote?
The amount of money paid to the sponsor above the amount earned on his/her contributed capital to the deal is the promote. Example: A sponsor contributes 10% of his own capital as part of the total equity required to acquire a property and raises the remaining 90% of total equity from other investors.
Is promote the same as carried interest?
Carried interest, also known as a promote, is an ownership interest in a partnership or Limited Liability Company (LLC). … A carried interest owner participates in future appreciation of a fund with no risk, no immediate recognition of income, and no upfront investment of capital.
What is promote fee?
Promote Fees means distributions paid as “incentive fees,” “incentive allocations” or “promote fees” pursuant to any Management Agreement or any Organization Document of a Fund. Sample 2. Sample 3. Promote Fees means proceeds of Carried Interests.
What is sponsor promote SPAC?
The divergence results from the varying methods SPAC creators use to share the lucrative incentives known as the “sponsor promote.” It typically consists of deeply discounted shares and other securities executives receive for risking capital to set up the SPAC and vet a company to take public.
What is a partner promote?
an alliance between a manufacturer of a product and another company for the purposes of promotion; for example, Coca-Cola Co. may form a promotional partnership with 20th Century Fox Film Corp., agreeing to pay that company to display the soft drink prominently in a forthcoming feature film.
What are promote distributions?
Promote Distributions means any direct or indirect distributions, payments, allocations or accruals in respect of any carried interest, incentive fees, promoted interest, performance fee or similar rights of participation or profit-sharing (net of any applicable expenses, deductions or withholdings borne pro rata by …
How do real estate sponsors make money?
As in any business partnership that involves an active investor and several passive investors, the active investor receives (and deserves) compensation for their efforts. There are two main ways a crowdfunded real estate deal’s sponsor gets paid — acquisition fees, and a compensation method known as sponsor return.