A deal that returned the projected 1.9x but with a two-year extension nobody modeled
A 200-unit deal closes with a five-year hold in the deck, 7 percent pref, 70/30 split above an 8 percent IRR hurdle. Year four, the sponsor cannot hit the exit cap needed to protect LP returns, so they extend the hold and refinance to buy time. The refi pulls out enough to pay accrued pref and return a slice of capital, which feels like progress, but the promote clock restarts on the remaining equity because the operating agreement defined the hurdle on a deal-level IRR, not a time-weighted one. LPs who modeled a year-five exit with a clean 1.9x end up at roughly the same multiple two years later, which sounds fine until you account for what that capital could have done in the gap. The projected return was not wrong, the timeline assumption carried all the weight. What is the hold extension clause in your current deal, and does it require an LP vote or just sponsor discretion to trigger?
