Lawyers
Real estate partner Peter Fisch and associate Ruobing Chen authored a practice note for Thomson Reuters Practical Law, “Promote Crystallization in Real Estate Joint Ventures,” which focuses on the benefits and mechanics of promote crystallization provisions, including drafting and negotiating considerations.
A promote, also known as carried interest, is often used in real estate joint ventures to incentivize and compensate the operating partner for creating value in a certain project. However, the operating partner often does not control the timing of the payment of the promote, which often takes place following a capital event, such as a sale or refinancing of the property. Therefore, real estate JVs increasingly use promote crystallization (or freezing the promote), which “allows the operating partner to receive or realize its promote without a capital event,” as the authors discuss.
