Preferred Return vs Promote Calculator
How much does a higher promote really cost LPs? Compare LP IRR at 8/20, 8/25, 8/30, and 7/30 structures so you can negotiate from data instead of vibes.
| Total project proceeds (LP × (1+IRR)^hold) | — |
| Pref accrued (8% × LP × hold) | — |
| Structure: 8% pref / 20% promote | |
| LP total | — |
| GP total | — |
| LP IRR | — |
| Structure: 8% pref / 30% promote | |
| LP total | — |
| GP total | — |
| LP IRR | — |
| Structure: 7% pref / 30% promote | |
| LP IRR | — |
Two main levers control how a syndication splits returns between LP and GP: the preferred return (the IRR LP earns before GP gets paid) and the promote (the GP's share of upside above the pref). Small changes — 8/20 vs 8/30, 8% pref vs 7% — meaningfully change LP IRR over a 5-year hold.
Pref vs Promote: Different Levers
The preferred return is the IRR LP earns first before GP earns promote. It applies only up to the pref rate — once cleared, all excess goes to the promote split. Higher pref = better for LP. The promote is GP's share of profits above the pref. Higher promote = worse for LP, but applies to ALL upside.
Negotiation Math
If the deal IRR is 18%, the 8% pref clears quickly — most of the value sits in the promote tier. So a higher promote (8/30 vs 8/20) hurts LP more than a lower pref (7/20 vs 8/20). Push back on promote first.
Multi-Tier Promotes
Some structures escalate: 8% pref → 20% promote to 15% IRR → 30% promote above 15% IRR. This rewards GP only for outperformance — fairer than a flat 30% promote. Watch for hidden multi-tier structures that compound aggressively (sponsor can capture 40-50% above 20% IRR).
Last updated May 2026. Sources: BiggerPockets Syndication Guide, NAREIT.