When the operating agreement says "net proceeds" but does not define net, the split math is open to interpretation at exit
I am sitting with a term sheet where the promote calculation reads "70/30 of net proceeds after return of capital and pref." The word "net" is carrying a lot of weight there, and the document says nothing else. Gross sale price minus the mortgage balance gives one number. Gross sale price minus the mortgage, the broker commission, closing costs, any deferred fees the operator has been accruing, and the property management termination penalty gives a materially different one. On a $1.2M exit with $180k in those line items, the difference in my promoted share runs past $50k depending on which interpretation the operator applies first. I have seen deals where the operating agreement listed every deduction explicitly, and deals where "net" got litigated by partners who both believed they were reading the same sentence. The riskier version is when the operator controls the books and cuts the distribution check before you see a closing statement. What I want to understand from anyone who has sat on the money side at exit: did your agreement enumerate the deductions, and if it did not, how did that conversation go when the numbers landed?
