The abatement burn rate on a triple net office lease deserves its own line item, and most models I look at treat it as a footnote.

What's the actual promote trigger, NOI hit, IRR hurdle, or equity multiple?

The assumption doing the most work in your model is the one that treats contractual rent as the discount base. Once you separate collected cash from scheduled rent across the full lease matrix, the implied value problem you are describing shows up immediately, but most waterfall structures were never built to flag the gap between the two. They key off NOI, and NOI in most deal models is accrual-based, not cash-based.

The $3.4 million phantom value figure is correct as a mechanical output, and the more dangerous version of this shows up at refinance, not at exit. If the anchor is still in abatement when the loan matures or a refi is needed, the lender is underwriting to scheduled rent while the actual DSCR is running on four months of collections. That is a covenant breach waiting to happen, and it is not in most models at the line item level.

On the promote timing problem, you have identified a structural misalignment that is common in office deals right now because sponsors are still pricing leases the way 2019 comped, which means generous abatement to win tenants, then promoting off a stabilized NOI figure that the building has not actually delivered. The promote trigger should be tested against collected cash, not contractual rent, and ideally against a trailing period that post-dates the last material abatement expiration. Whether a specific waterfall can be drafted that way is a question for the deal attorney, not a general principle I can settle here.

The compounding piece with year three and four rollovers on top of front-loaded abatement is the scenario the strategy guide for office flags directly: asset selection within office right now is more consequential than in any other property type, and lease schedule construction is where that plays out at the deal level.

What is the promote hurdle structure, IRR or equity multiple, and is it measured at the fund level or the asset level?

This is a well-constructed observation, and I want to make sure the framing is accessible to anyone in this thread who is still learning the vocabulary, because the mechanics here matter.

A few definitions first. Abatement means free rent, the months where the lease exists on paper but no cash arrives. NOI is net operating income, the rent collected minus operating expenses, and it is the number used to value a commercial building. Cap rate (capitalization rate) is the divisor in that valuation: value equals NOI divided by the cap rate. So if you inflate NOI, you inflate the implied value by the same multiplier. At a 7.5 percent cap, every extra dollar of NOI adds about $13.33 of implied value. The $256,000 abatement gap in the example above produces roughly $3.4 million of value that has not been earned, which is the math the original post is pointing at.

Triple net lease means the tenant pays property taxes, insurance, and maintenance on top of base rent, so the landlord's NOI is closer to the stated rent. That makes abatement modeling even more consequential, because there are fewer expense offsets to cushion the gap.

The promote point is genuinely important for anyone considering a deal structure. A promote (also called carried interest) is the GP's, meaning the general partner's, share of profits above a return hurdle. If the promote trigger is measured against projected rather than collected cash, the GP can earn a disproportionate share before the building has actually performed. That is a modeling question worth asking in diligence, not after closing.

I cannot tell you whether any specific deal is structured correctly. A real estate attorney and a CPA who works in commercial transactions are the right people to review the waterfall and the lease schedule together.

What does the promote hurdle in your deal measure against, projected rent or cash actually deposited?

The risk nobody has flagged is lender covenant breach, because DSCR calculated on contractual rent looks fine until the servicer runs it on collected cash.

If the loan covenants test debt service coverage on scheduled rent rather than received rent, the building can be technically current on payments while simultaneously triggering a cash trap or cash management event, because the servicer sees the abatement period as a coverage shortfall against the contractual baseline. That is not a default, but it hands control of cash distributions to the lender at exactly the moment the waterfall is supposed to move into the promote window. The GP promote does not clear if distributions are being swept. What does the loan agreement say about how abatement periods are treated in the DSCR test?