20-30% typical. 25% mid-market is common.

Catch-up \u2014 meaningful?

Yes \u2014 without it, GP misses promote on early years.

Super-promote attainable?

Only on truly outperforming deals (20%+ IRR).

Multiple LPs different terms?

Yes \u2014 Class A/B/C tranches with different prefs.

Sponsor Promote IRR Split

Sponsor promote: GP carry 20-30% above pref 8%. Hurdle tiers: 8% → 80/20, 15% → 70/30, 20%+ → 60/40 (super-promote).

LP Capital ($)

Project Profit ($)

Hold Years

LP Preferred %

Hurdle 2 IRR %

Sponsor Promote

—

LP Total Return

—

LP IRR

—

LP preferred due	—
Hurdle 2 increment	—
Tier 2 promote (20%)	—
Tier 3 promote (30%)	—
Total sponsor promote	—
LP total profit	—
LP IRR	—

Real estate sponsor promote rewards the GP for exceeding LP performance hurdles. Standard structure: LP gets 8% preferred return first, then 80/20 split to 15% IRR, then 70/30 above. Above 20%+ IRR may trigger 'super-promote' 60/40.

Typical Hurdle Structure

Tier 1: 8% preferred return to LP (often compounded). Tier 2: 80/20 LP/GP split to next hurdle (often 15% IRR). Tier 3: 70/30 split above hurdle 2. Tier 4 (super-promote): 60/40 above 20% IRR — found in highly negotiated deals.

Carried Interest Tax

GP's promote often taxed as long-term capital gain (carried interest, IRC 1061) if held 3+ years. Lower than ordinary income. Recent tax debates have proposed taxing as ordinary income — monitor legislative changes.

Negotiating Position

LP focus: 9-10% pref (higher = more downside protection). 70/30 max promote split. 3-year clawback if deal underperforms. GP focus: simple 8/80/20 structure. Lower pref encourages performance. Catch-up provision for cleaner economics.

Last updated May 2026. Sources: BiggerPockets Promote Structures.