My operator is reforecasting the exit cap rate six months before close and the new number changes my return by 40 points

The 40-basis-point cap shift is worth scrutinizing carefully, and you are right that the promote math amplifies it at your tier more than the IRR headline suggests.

The assumption doing the most work here is whether the 6.2 is market-derived or operator-derived. Those are different things. If the operator pulled recent comp sales in the Stockton submarket and they genuinely transacted at 6.2 or wider, that is a conservative but defensible update. If the number comes from the operator's own read on buyer appetite with no comp support, you are looking at a narrative being built, and the question is what it benefits.

The risk you did not name: a soft reforecast six months before exit sometimes precedes a request to extend the hold. The operator gets more runway, the promote clock resets in some waterfall structures, and the original exit pressure eases. Check your JV agreement for what triggers an extension, who has the right to call it, and whether the hurdle rate resets or accrues through any extension period. That is where the real exposure sits.

On whether this pattern is common: operators do update assumptions as a market approaches, and responsible ones update them in writing before close rather than after. The timing is not inherently suspicious. What matters is whether the update is accompanied by an ask, a proposed change to structure, or a suggestion that a lower bid should be accepted. If it is a standalone update with no attached request, treat it as information and push back with comp data.

Request the actual sale comps the operator used to arrive at 6.2. If they cannot produce three closed transactions in the submarket at that range, the number is a forecast, and forecasts six months before exit deserve scrutiny proportional to what they cost you at the promote split.

What does your JV agreement say about approval rights on the sale price, and does the operator need your sign-off to accept a bid below a floor?

The promote math is where I'd focus first, and you've already identified the right place to look. When a cap rate revision happens six months before exit, the question is whether the operator is adjusting the valuation or adjusting the hurdle story. If your waterfall has a preferred return that the promote kicks in above, a lower projected sale price can mean the GP's promote shrinks alongside your return, which keeps the relationship proportionate. If instead the promote is calculated on equity multiple or IRR at a fixed threshold and the reforecast keeps that threshold just barely cleared while your dollar distribution compresses, then the revision is doing asymmetric work, and that asymmetry deserves a direct conversation with the operator about the current broker opinion of value, not just their internal model.

The thing worth pressing on is whether they have a signed listing agreement or a current BPO from an independent broker. An operator who is genuinely being conservative six months out can produce a third-party number to support the 6.2 assumption. An operator who is narrating toward a soft offer they have already decided to accept usually cannot, because the revised cap rate is built backward from the offer rather than forward from market comps. The 40 basis point move on a 12-unit in Stockton is not wild in isolation, but the timing and the promote impact together create a reasonable basis to ask for the supporting comparable sales. What does your LP agreement say about operator obligations to share marketing materials or listing decisions before the asset goes to market?

The reforecast itself is not automatically a red flag, but the timing six months out is when an operator who already has a buyer in conversation would want the LP's expectations calibrated downward before a number lands in writing. That is the scenario worth pressing on. Ask for the specific comps driving the 6.2 assumption, the sale dates, the addresses, and the cap rates, because a legitimate market update can produce those in an afternoon. If the operator hedges or sends a broker opinion of value that leans on distressed or off-condition sales, that tells you more than the cap rate revision does. The waterfall mechanics matter here too: check whether your preferred return accrues on contributed capital through the hold period and whether a soft exit price compresses the equity split at the promote threshold or just reduces the residual everyone shares, because those two structures hit you very differently at a 6.2 versus a 5.8 exit on a 12-unit in a secondary market. Stockton specifically has seen cap rate movement in the 6.0 to 6.5 range on smaller multifamily depending on condition and submarket, so the 6.2 is not implausible on its face, but plausibility is not the same as accuracy.

What does your operating agreement say about the valuation methodology the operator must use to support a reforecast, and did they provide anything beyond their own narrative to justify the number?

The timing is what gets me. Six months out is exactly when a soft sale narrative starts getting built, because by the time you close, the reforecast is already six months old and feels like it was responsible disclosure rather than expectation management. I ran payment books for land note sellers, not equity deals, but I watched the same move happen with payoff projections getting quietly revised downward in month 10 of a 12-month note. The revision was always accurate by the time it mattered, which made it very hard to argue with.

What I would want to know before I accepted this as conservative underwriting: has the operator already engaged a broker for the listing, and if so, what cap rate is that broker using in their opinion of value? If the broker's BOV is sitting at 5.9 and your operator is telling you 6.2, that gap is the whole story. The reforecast and the actual sale process should rhyme. If they don't, the 40 basis point move is not a market update, it's a floor being set so the promote clears on whatever price they can get. What does your LLC agreement say about the operator's approval rights on the sale price relative to the preferred return threshold?

The part that caught my eye was "market update" in quotes, like the operator themselves knows it's a soft justification. That phrasing in an email from someone managing your money is not nothing. I have not done a JV at this scale but I did a small partnership on one of my Cleveland Heights fourplexes where my partner reframed the exit strategy four months before we sold, and the reframe was 100% about softening my expectations before he brought me a low offer from a buyer he already had a relationship with. The 6.2 cap might be completely defensible for Stockton right now, I genuinely do not know that market, but the question I would be asking is whether he showed you comps that actually closed at 6.2 or whether he is citing "market sentiment" and broker opinions.

What does the actual operating agreement say about how exit price gets determined and whether the GP has discretion to accept an offer without LP approval? Because if he can take a soft offer at a 6.2 implied cap without your sign-off, the reforecast is not just a memo, it's him pre-loading the record so you can't come back later and say you weren't warned. I would be less focused on the IRR delta, 14.1 to 13.7 is not what's hurting you, and more focused on what dollar figure triggers the promote threshold and whether a buyer he's already talking to happens to land just below it.

The question that decides this is what the current in-place NOI is, not what the cap rate moved to, because if NOI is also being quietly revised down alongside the cap rate, the two adjustments compound and the implied sale price drops far more than 40 basis points of cap expansion alone would cause.

What is the operator's current NOI figure versus the one in original underwriting?

The gap between your stated IRR drop (14.1 to 13.7) and your actual dollar loss at the waterfall is the more important number, and the fact that you noticed it suggests the promote threshold sits close to where the reforecasted exit price lands, which is exactly where operators have an incentive to manage expectations downward before a buyer's broker runs comps. Pull the waterfall model and find the gross sale price at which your preferred return stops being fully covered before the promote kicks in, then compare that to what 6.2 implies on current NOI. What is the operator's stated NOI going into the exit, and has that number moved since month 12?

The promote math explains more than the cap rate shift here. If the waterfall has a pref hurdle before the promote kicks in, a lower exit price can keep the GP in the promote band while compressing your absolute dollar return, because the pref absorbs the loss first and the promote percentage applies to a smaller residual. Run the two scenarios with the actual distribution waterfall, not just the IRR line, and find the price at which the GP drops out of the promote entirely. If that price is below the reforecast exit value, the GP has no economic incentive to push for a higher sale price, and that is the structural condition that turns a conservative reforecast into a soft-sale setup.

The related dynamic worth bringing in is what a one-year extension does to your position. Operators who reforecast conservatively six months before a planned exit sometimes use the new numbers to justify a hold extension, arguing the market needs time to absorb the cap rate softness. On a 12-unit in Stockton, an extra year of hold costs you a year of liquidity on your capital and may cost you nothing in promote if the GP's hurdle is already met, meaning the extension benefits the GP's fee stream more than it benefits your return. Ask the operator for the IRR sensitivity table at 6.2 with a 36-month hold versus selling now at the lower price, and compare how the promote changes between those two outcomes. That math will tell you whether this reforecast is positioning for a sale or positioning for a hold.

The IRR headline is a distraction; the promote threshold is the sentence that matters.

If the waterfall has a preferred return hurdle before the promote kicks in, a lower exit price can keep the operator in the promote while your absolute dollar return shrinks, because the preferred gets paid first and the promote eats into what remains above it. Run the math at 6.2 with the actual projected sale price, not the IRR, and check whether the operator's carried interest as a dollar figure changes meaningfully between the two scenarios. If their carry barely moves while yours drops several thousand dollars, that tells you something about which scenario they are indifferent to.

The reforecast six months out is not unusual in a rising-rate environment, but the specific mechanism to watch is whether the operator controls the broker selection for the sale. An operator who picks a broker, sets the listing price, and also just revised the cap rate assumption upward has three consecutive points of influence over the exit number. That is not evidence of bad faith, but it is where misaligned incentives can produce a soft sale without anyone technically lying.

Ask them to show you comparable closed sales in Stockton at or near a 6.2 cap in the last 90 days. If the comps support 6.2, this is conservatism. If the comps are still clearing 5.8 to 6.0, the question becomes why they moved the assumption rather than held it pending actual broker feedback.

What does the operating agreement say about who selects the disposition broker and whether LP consent is required on the listing price?

Six months out and they are moving 40 bps on the exit cap without you asking them to, that is not conservatism, that is positioning. I had an operator do almost the exact same thing on a 16-unit in Murfreesboro in 2021, sent a "market conditions update" at month 20, and when I pushed back and asked for the three most recent comp sales in the submarket, he had one, and it was a distressed deal that closed eight months prior. So ask for the actual sales data behind the 6.2, not a broker opinion, not a Marcus and Millichap report, actual closed transactions in Stockton at that price point in the last 90 days. If he cannot produce three comps that justify the new cap rate assumption, you have your answer about what this reforecast is really doing. What does your LLC agreement say about disposition approval rights, because that is where I would be reading right now, not the waterfall math.

Pull the trailing twelve month rent roll and ask what the actual NOI is today versus what was underwritten.

Pull the trailing twelve on the property's actual NOI before you accept the new exit cap as the story.

If the operator adjusted both the NOI assumption and the cap rate in the same update, the two moves compound against your preferred return in a way the headline IRR number hides. A 6.2 cap on a trimmed NOI is a much softer exit price than a 6.2 cap on the real trailing number, so ask them to show you the gross sale price implied by each scenario, not just the rate. Then compare that implied price to current closed comps in the submarket, which you can pull from CoStar or county transfer records yourself. If the implied exit price in the new model sits ten or fifteen percent below what 12-units are actually clearing in Stockton right now, the reforecast is not conservatism, it is narrative construction for a buyer they may already be talking to. Ask them directly for the current broker opinion of value and whether a listing agreement or any letter of intent is in place.

What does the waterfall look like at the catch-up tier specifically, because that is where the 40-basis-point shift tends to do disproportionate damage relative to what shows up in the blended IRR?

What's the actual NOI trend over the last six quarters, flat, up, or bleeding? Operators setting up a soft-sale narrative usually let the income story drift first and use the cap rate move as cover. If NOI is holding and only the exit cap moved, that's a different conversation than if both numbers are softening at the same time.

Six months out is also when a tired operator stops pushing the market and starts negotiating with it, so ask them right now what their broker's current opinion of value is and who they're planning to list with.

What does the operator's listing broker say the cap rate is on comparable closings right now?

What comps is he pulling for that 6.2?

Pull the actual Stockton comp sales from the last 90 days yourself before you respond to him, because if 6.2 is not supported by closed transactions he has no leg to stand on and you can say so in writing. Every time I have seen an operator pre-soften the exit number this close to close, the sale price came in below even the new forecast, not above it, and the narrative was already baked in to protect the promote on a deal they knew was going sideways.

What does your LP agreement say about who controls the sale decision and at what price threshold either party can force or block it?

Pull the actual comps for Stockton 12-units that closed in the last 90 days and see where they traded.

If comparable assets are printing at 6.0 to 6.1, a 6.2 reforecast is defensible conservatism. If they are still clearing at 5.8 to 5.9, the operator is building a cushion that benefits them, not you. The promote structure is where this matters most: say the waterfall pays you preferred at 8 percent and the promote kicks in above a 12 percent IRR. At 14.1 percent, the sponsor earns carry on everything above that 12 percent hurdle. At 13.7 percent, they still earn carry, but if the reforecast creates cover for a sale at a price that actually produces 12.8 percent, your preferred gets paid and they still take a promote while you absorb the shortfall versus original underwriting. The cap rate number on the memo is not the risk. The risk is that a soft sale price lands you just above your preferred return floor while the operator clears their promote and moves on.

Ask for the marketing broker's current BOV and the last two closed comps they are using to support 6.2, in writing, before the listing goes live.

What broker pulled comps for the 6.2, and did the operator name them?

Six months out they absolutely know what buyers are quoting in Stockton right now, so "market update" is either a real number from a real broker or it's cover. What I'd want to see is the actual comp sales they used to move from 5.8 to 6.2, because if those comps are six-plus months old they're managing your expectations backward in time.

The thing that would tell me which way this goes: has the operator already engaged a broker for disposition, and if so what's that broker's opinion of value at current market?

The piece I want to focus on is the gap between what the IRR shows and what actually lands in your pocket, because that gap tells you whether the 6.2 reforecast is cosmetic or structurally damaging. Take a simple waterfall: say the deal generates $1.2M in net proceeds at a 5.8 cap exit, your preferred return is 8% cumulative on a $500K check over 24 months, that's $80K owed before the promote splits. At 5.8 the sale might clear enough that the promote threshold gets hit and the operator takes 20% of the upside above your pref. At 6.2, if the exit value compresses enough that the spread between proceeds and your pref stack narrows, the promote may still trigger at the same threshold but on a smaller number, so the operator loses almost nothing in absolute dollars while your residual share shrinks because there is less upside to split. That is the structural asymmetry worth quantifying before you respond to their memo.

The behavioral read I would add is this: operators who are genuinely being conservative usually send a reforecast with current comparable sales attached, not a "market update" memo with a new assumption and no supporting transactions. Ask them for the three or four closed cap rate comps in Stockton from the last 90 days that drove the revision. If those comps exist and cluster around 6.2, the operator is doing their job. If the memo has no comps, or if the comps they cite are for asset classes or submarkets that do not match a 12-unit in that corridor, the reforecast is narrative construction ahead of a soft offer they already have in hand. What does the extension clause in your operating agreement say about the hold period, and have they mentioned any flexibility on timing?

The misconception worth clearing up: a 40 basis point cap rate move does not mechanically produce a 40 basis point IRR move, so the asymmetry you are describing between the headline IRR change and your actual dollar shortfall is not a waterfall quirk to investigate later. It is the first thing to run cold numbers on right now, because the promote structure determines whether the operator absorbs any of that compression or whether it lands entirely in your preferred return bucket.

Here is the specific dynamic that tends to get missed at this stage. If your waterfall pays the LP preferred first and then splits the residual, a lower exit price compresses the residual pool, which means the promote the operator earns shrinks in dollar terms alongside yours. That is alignment working as intended. The scenario that should concern you is if the deal was underwritten with a catch-up provision or a tiered promote that steps up after a certain IRR hurdle, because a reforecast that keeps the projected IRR just above a promote threshold while the actual sale price comes in below it means the operator's percentage take stays intact while your absolute dollar return takes the hit. Ask your operator to send you the waterfall calculation at the new 6.2 exit cap alongside the original, not just the IRR comparison, because the two numbers that matter are the gross exit proceeds and the exact dollar amount reaching the LP after the promote. On the narrative question, operators do legitimately reforecast six months out when market data shifts, but the tell is whether the new cap rate is sourced to actual comparable sales in Stockton or whether it is a round number with a qualitative explanation attached. What comparable sales is the operator citing to support the 6.2?

The number I'd want from you is the current in-place NOI versus what was underwritten at month 18, because that tells you whether the cap rate revision is doing real work or cosmetic work. If NOI is tracking within a few percent of projections, a 40 basis point cap expansion that the operator volunteered six months early reads more like positioning than honest conservatism, since an operator genuinely worried about market conditions would typically pair it with a revised disposition timeline or a note on broker opinions of value. The promote structure is where this gets expensive for you: if the waterfall has a preferred return hurdle before the promote kicks in, a softer exit price compresses the pool the promote is calculated on, which is why your dollar return moves more than the IRR percentage suggests. I've seen this pattern used to soften a capital provider's expectations before a sale that closes below the original basis assumptions, and I've also seen it reflect a genuinely weaker Stockton market for that asset class, so the question is which one fits your actual rent roll and expense performance right now.

What does the current trailing three-month NOI annualize to compared to the pro forma figure, and has the operator provided any broker opinion of value alongside the reforecast?

What are actual closed comps showing in Stockton right now, because that market has been soft on the institutional side and 6.2 might even be optimistic depending on the submarket and unit mix. The reforecast isn't the problem, it's whether the number tracks reality or tracks whatever sale price the operator already has in mind from a buyer they've been talking to. Six months out with a preferred waterfall, I'd be asking for the full promote recalculation in writing before they're in a room with a buyer, not after.

The reforecast six months out is not unusual in Stockton specifically, because that market has seen cap rate drift wider than most Central Valley metros since mid-2023, so the 6.2 number may be defensible on comps. The structure question matters more: ask the operator for the three most recent closed sales on comparable 10-to-15-unit product within a mile, and if the comps support 6.2 or tighter, the narrative is probably honest conservatism rather than softening you for a disappointing number. If the comps are sitting at 5.9 or 6.0, the 6.2 assumption is doing work that benefits the operator by compressing the promote threshold, and that is worth a direct conversation before they engage a broker.

What is the promote structure on the back end, specifically whether the operator takes their carried interest on cash proceeds above the preferred return or on IRR above a hurdle, because those two mechanics respond very differently to a 40-basis-point cap shift?

Six months before close is when operators either show you their work or start managing your expectations down so the final number feels like a relief by comparison. I've seen it go both ways on longer holds, and the tell is usually whether they showed you comp sales data with the reforecast or just sent a paragraph. What did they actually attach to that market update?

What is the operator's current asking rent versus the rent the exit comp sales are actually trading on?

That spread decides whether 6.2 is a honest read of buyer appetite or a cushion being built ahead of a price negotiation they already expect to lose.

What does the operating agreement say about who controls the disposition decision and at what price the promote threshold resets?

What's the operator's current asking rent on vacant units versus what they underwrote at origination, because if rents came in close to pro forma the 6.2 cap is harder to justify on fundamentals and starts looking like expectation management before a soft offer.

Stockton multifamily has been lumpy but not 40bps worth of lumpy in 18 months on a 12-unit, at least nothing I've seen out of the central valley comps.

The dollar return gap you are describing is the right place to look, and the mechanism is worth spelling out. If your preferred return is fully covered but the promote threshold sits just above where the new exit price lands, the operator captures a smaller promote slice while your absolute dollar return also compresses, because the total pie shrank. A 40 basis point cap shift on a 12-unit in Stockton probably moves value by somewhere between 150k and 250k depending on NOI, and that range matters a lot when the waterfall has a hard tier.

The question I would want answered before reading intent into this: did the operator send you comparable sales data with the update, or just the new number? A reforecast with comps is conservatism. A reforecast with a narrative paragraph and no transaction evidence is positioning.

What does your operating agreement say about the sale price decision process, specifically whether the GP needs LP consent or simply notice when the sale price falls below a stated threshold?

The piece worth pulling apart is what a 40-basis-point cap shift actually does to the gross sale price at the asset level, because on a 12-unit in Stockton the NOI is probably somewhere in the $80,000 to $110,000 range, and moving from 5.8 to 6.2 on $95,000 of NOI takes the implied value from roughly $1.64M down to $1.53M. That is about $110,000 off the top before the waterfall even runs. If your preferred return has already been accruing and the GP structured a catch-up provision before the split, a six-figure reduction in proceeds can hit the LP side disproportionately because the promote math compresses your share of residual more than the IRR headline suggests. The question I would put directly to the operator is what the current rent roll looks like against the NOI assumption baked into that 6.2 cap, because a reforecast that moves the cap rate without also showing you a revised NOI is only telling you half the story and the half that is easier to massage.

The related mechanic that changes the picture here is what happens if the operator is considering a delayed sale or a refinance-and-hold past month 24. Some JV agreements allow an extension period with a step-up in preferred rate, some do not, and an operator who is building a narrative around a soft market six months out may be testing whether you push back or accept the reforecast quietly enough that an extension feels palatable later. Pull the operating agreement and find the disposition clause, specifically whether the GP has sole discretion to set the listing price or whether the LP has approval rights at a price floor tied to the original underwriting. If it is sole discretion with no floor, the reforecast is not just a data point

The number I want from you is the reversion value in both scenarios, stated in dollars, not percentages. A 5.8 to 6.2 shift on a 12-unit in Stockton does not move the same way depending on where NOI landed versus underwriting. If NOI grew even modestly over 18 months, the operator may be applying a higher cap to a larger income figure, which compresses the reversion value less than the cap rate move implies in isolation. If NOI is flat or below pro forma, the 6.2 cap is doing double damage, and that changes what I think is happening here.

The soft-sale-narrative possibility is real but it requires a specific setup to be worth worrying about. Operators who want room to accept a lower bid without LP pushback do tend to soften the benchmark in advance, and doing it at month 18 gives them six months for the number to feel settled before anyone disputes it at closing. What I would ask the operator for is their current broker opinion of value and whether it was ordered before or after the reforecast. If the BOV came first and the cap rate followed, the reforecast is probably just calibration. If the cap rate moved first and the BOV is still pending, the sequencing suggests the operator is building a story rather than reading the market. What does your operating agreement say about LP consent rights at disposition, specifically whether you have a minimum price threshold or approval right before the asset goes to market?

Stockton 12-unit, so I actually have a feel for that submarket. Six months out is exactly when a soft operator starts papering the file with "conservative" language so the LP has nowhere to go when the sale closes $200k light. The tell is not the 40bps cap move itself, it is whether they gave you comparable sales data with the update or just a narrative paragraph. If it was just prose, ask for the three closed comps they used to justify 6.2 and watch how fast that answer comes back. I had a cold storage deal in Stockton that took twelve months to lease and I still gave my LPs a comp sheet every single quarter, because that is what you do when you are managing someone else's capital seriously.

The thing I have never seen work is an operator sending a vague "market update" memo six months before exit without comps attached. What happens instead is that memo becomes the foundation for a low-ball listing price, and when you push back at closing you get "we told you in writing back in month 18." That document is not conservative underwriting, it is paperwork. Ask for the specific sales from the last 90 days in Stockton that justify 6.2, because the Central Valley cap rate picture is not uniform right now and 12-unit product there trades differently than the 20-plus unit stuff that dominates most market reports. If he cannot name three closed comps at that cap rate he is not reforecasting, he is repositioning his story.

The 40-basis-point move is almost nothing on a 12-unit if the rent roll and NOI held. What moves your dollar return more than the cap rate assumption is whether he is quietly adjusting the stabilized NOI in the same model he sent you, because that is where promote math actually breaks against you. Run your own exit value using the original NOI and 6.2, then run it with whatever NOI he is now using, and see which variable is doing more damage. I have read enough of these decks to know that operators who reforecast cap rates solo, without touching NOI, are usually being straight with you. Operators who move both numbers in the same memo are setting up the promote to stay whole while your preferred takes the hit. What does the rent roll look like right now compared to month one?

The misconception worth correcting first: a 40 basis point cap rate move does not mechanically produce only 40 basis points of IRR erosion, and the fact that your dollar return drops more than your IRR suggests the promote threshold sits very close to where the new exit price lands, which is where this gets interesting. When an operator reforecasts six months out, the question is not whether the number is conservative, it is whether the new exit price happens to fall just below a promote hurdle, because that shifts carry from you to them even if the gross sale proceeds are identical. Pull the waterfall and find the dollar figure at which the promote triggers, then back-calculate what exit cap rate produces a sale price that lands just above versus just below that threshold. If the 6.2 cap conveniently keeps the proceeds below the promote attachment point while a 6.0 cap would have crossed it, that is a different conversation than ordinary conservatism. What does the JV agreement say about how exit price disputes get resolved if you and the operator disagree on a listing strategy?

The assumption doing the most work here is that the operator controls the narrative but not the data, so ask for the comp set they used to arrive at 6.2. If they can show you three to five closed sales of similar vintage 10-to-20-unit product in the Stockton submarket from the last 90 days that support that number, the reforecast is defensible. If the comps are thin, dated, or from a different asset class, the 6.2 is a number chosen for a reason.

What does your JV agreement say about valuation methodology at exit, specifically whether the operator has discretion to set the listing price unilaterally or whether you have approval rights or a broker selection process that gives you a check on that?

Pull the current rent roll and run your own comp sales from the last 90 days in Stockton to see where 6.2 actually sits versus what traded.

The risk nobody has flagged is that a soft exit cap reforecast six months out can shift negotiating leverage internally: if the operator anchors the buyer conversation around 6.2, they have already framed a 6.0 offer as a win, which protects the promote and costs you basis points on the preferred before the waterfall even runs.

What does your agreement say about operator discretion on listing price, and does it require LP consent below a floor multiple?

The misconception I'd push back on: a 40bp cap rate move does not mechanically produce a 40 basis point IRR shift unless the promote threshold sits exactly at the boundary, which is what makes your situation worth pulling apart carefully rather than treating as a rounding error.

What you're actually describing is an operator who, six months from a sale they need to market, has handed you a document that simultaneously lowers the expected exit price and, through the waterfall, shifts dollars from your return column into a buffer that protects their promote if the deal closes soft. Run the promote math at both cap rates and find the exact sale price where your preferred return is fully satisfied before the promote kicks in. If 6.2 puts the exit price within 5 to 8 percent of that threshold, the reforecast is not conservative positioning, it's the operator pre-explaining why the promote still triggers on a weaker sale. The question I'd put directly to the operator is not whether the market has moved, it's whether they have a broker opinion of value dated in the last 60 days, and whether that BPO underwrote at 6.2 or somewhere else entirely, because the gap between those two numbers will tell you whether the narrative is built around a real comp set or around a promote they want to protect.

Ask them what comparable sales in the last 90 days support 6.2.

If they cannot name three closed transactions within a mile and within six months, the reforecast is a narrative, and what you should watch for is whether the marketed list price, when it surfaces, lands at a number that just clears the promote threshold while leaving your preferred return technically whole but thin.

What does your agreement say about operator consent rights over the sale price?