Carried Interest
See Promote.
Frequently Asked Questions about Carried Interest in Real Estate
What is carried interest in real estate?
Carried interest, also referred to as the “promote,” is the share of profits a sponsor receives in a real estate deal after returning capital and preferred returns to investors. It serves as performance-based compensation for the sponsor.
Is carried interest the same as promote?
Yes. In real estate finance, “carried interest” and “promote” are used interchangeably to describe the sponsor’s share of profits above certain return thresholds.
How is carried interest structured in a deal?
Carried interest is typically defined within an equity waterfall structure. Once initial capital and preferred returns are returned to investors, any remaining profits are split between the sponsor and the investors according to pre-agreed promote tiers.
What are common styles of equity waterfalls involving carried interest?
The most common structures are the American-Style Waterfall and European-Style Waterfall. These define how and when the sponsor earns carried interest relative to investor returns.
Where can I learn more about modeling carried interest?
Refer to the tutorials and tools linked in the Related Content section, such as “Real Estate Equity Waterfall Model – Monthly Periods” and “Watch Me Build – American-Style Real Estate Equity Waterfall.”
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