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Promote Crystallization in Real Estate Joint Ventures: Agreement Structure, Benefits, Mechanics

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Tuesday, October 31, 2023

Recorded event now available

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This CLE webinar will discuss promote (also known as carried interest) crystallization in real estate joint ventures (JVs). The panel will discuss the benefits of using promote crystallization; the mechanics of promote crystallization, including triggering events, calculating the promote, and how the promote is paid; and negotiating and drafting considerations for promote crystallization provisions.


A promote is a form of incentive or profit-sharing mechanism that is often used in real estate JVs to incentivize and compensate the operating partner for creating value in the form of profit generation. Promote mechanics are built into the distribution waterfall provisions of a JV agreement, and these provisions dictate which of the parties will receive cash returns on their investment and the relative priority and timing of the distribution of such returns. The "waterfall" refers to the order in which available cash is distributed to the parties, and the "promote" is embodied in the waterfall.

A promote is often not paid until a capital event occurs that generates net proceeds, usually from a sale or refinancing of the property. Therefore, an operating partner is typically not able to capitalize on its promote unless and until the property is sold or refinanced and the net proceeds are sufficient to achieve the hurdle return.

To address this timing issue, promote crystallization or freezing the promote is increasingly being used in real estate JVs to allow the operating partner to receive or realize its promote without a capital event. If a JV plans to hold multiple assets, the parties must further decide whether to crystallize the promote on an asset-by-asset basis and whether a clawback mechanism is needed.

If the promote is crystallized, the sponsor will receive its promote early in the life of the JV. As such, the promote will not be affected by later poor performance of the JV, changing economic conditions, or other fluctuations which are outside the control of the sponsor.

Listen as our authoritative panel examines the use of the promote crystallization structure and key considerations when drafting the promote mechanics provisions of a real estate JV agreement.



  1. Overview of the promote crystallization concept in JVs
  2. Typical promote structure
  3. Promote crystallization mechanics
    1. Determining the crystallization trigger
    2. Promote economics and calculation
    3. Liquidity considerations
  4. Benefits of promote crystallization; reasons to include promote crystallization provisions in a JV agreement
  5. Crystallization challenges in the current environment
  6. Tax matters
  7. Practical pointers and key takeaways


The panel will address these and other key issues:

  • What is promote crystallization and how does it work within the context of a JV's distribution waterfall provisions?
  • When should parties consider including promote crystallization provisions in a JV agreement?
  • What is the typical promote structure?
  • What are the mechanics of a promote crystallization?


Fritz, Michael
Michael J. Fritz

Clark Hill

Mr. Fritz practices in the areas of business, corporate, and commercial real estate. He concentrates his practice on...  |  Read More

Mylod, Kathleen
Kathleen M. Mylod


Ms. Mylod is a partner in Dechert’s global finance practice, advising on a range of commercial real estate...  |  Read More

Rosenthal, Alex
Alex Rosenthal, Esq.


Mr. Rosenthal has extensive experience in real estate acquisitions and dispositions, joint venture formations,...  |  Read More

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