152 units, 8% pref, 50/50 back end. The promote nearly doubles at year 7 and the LP IRR falls.

Your year 7 case isn't a hold decision, it's a refinance decision, and you're underwriting the refinance at today's picture. Sizing an agency takeout in month 30 means the lender looks at trailing three months annualized, not your pro forma stabilized. If your $1.42M NOI shows up in month 34 instead of month 30 you're refinancing off maybe $1.28M and the proceeds gap gets funded by somebody. Usually the LPs, through a call.

Also price the extension properly. Both extension options typically want a new cap struck at the then-forward curve, and that cost isn't small on a $13-14M loan. Get your lender to put the extension conditions and the cap requirement in writing before you print anything, because those tests are where first-time sponsors discover they don't actually control the hold period at all.

The part I'd want explained if I were writing you a check: in your year 7 case the LPs get less per year and you get more in total. Not saying that's wrong, the promote sits above a 13% hurdle either way. But someone will ask it in exactly those words on your webinar and the answer needs to be a sentence, not a spreadsheet.

How do sponsors usually handle that? Is there a version where the hurdle steps up over time so the longer hold costs you something too?

@sable that's the step-up hurdle, some deals move the pref from 8 to 9 in year 5 or 6 exactly to stop the GP sitting on the asset. I've seen it maybe twice in a dozen decks.

@sextant as an LP I'd take the 13.4 at year 5 over the 12.1 at year 7 without much thought, because the year 7 number depends on a refi that hasn't happened and a cap rate two years further out. The multiple doesn't tempt me. My money isn't idle if you give it back.

And I'd rather you write 5 with disclosed extension rights than write 7 to look conservative. Tell me the shape you actually intend. If you say five and hold seven with a good reason, I'll listen. If you say seven up front, half your allocation goes to someone else's deal.

Some of these numbers need a harder look before you argue about hold periods.

What's the going-in cap? $18.2M on 152 units is $120k a door, so at a 5.5 exit you need in-place NOI around $1.0M today to make the entry pencil at anything like a 5.5 to 5.75. If you're buying at a 5.2 and exiting at a 5.5 you're already conservative, fine. If you're buying at 4.9 you're not conservative anywhere in that model.

NOI going $1.42M to $1.56M is 4.8% a year, two years after your capex is done and units are all turned. That's a rent growth assumption, not an operations assumption. Cut it to 3% and your year 7 gross is $27.8M, promote drops maybe $180k, and the LP IRR falls under 12.

2% cost of sale is thin. Broker plus title plus whatever your state charges on transfer, and transfer tax varies a lot by state, so check yours. I use 2.5 to 3.

Last thing, is 13.4% net of the asset management fee and your acquisition fee, or gross? People fudge that line constantly and it moves the whole comparison.

Read your own extension language out loud before the raise. The two 12-month options in most bridge documents I've read aren't options, they're requests with tests attached, and one of the tests is often a debt yield that your capex plan temporarily wrecks while units sit vacant. If you miss it in month 34 you're selling in a window you didn't choose.

On crystallization: the mechanic is that you value the asset at refi, compute the promote as if you sold, and pay it out of refi proceeds. Two things follow. You need a valuation method spelled out (appraisal, not GP estimate), and you need a clawback with real teeth, because the promote you take in year 4 can turn out to have been unearned at the year 7 sale. If the clawback is unsecured and you've spent the money it's a sentence in a document and nothing else.

@ledger's point about net vs gross is the one I'd fix first. If your 13.4 is before the 1.5 or 2 percent asset management fee, your investors will recompute it themselves and the difference reads as a misrepresentation even when it was sloppiness.

If you're worried about looking grabby, the structural answer is a European waterfall on the refi only. All refi proceeds go back to LPs until they've had capital plus accrued pref, then the split starts. You get paid at refi, but only after they're whole, and nobody can accuse you of taking promote off borrowed money.

The other thing to write down now: who signs the loan and what they get for it. If it's your name on the recourse carve-outs and the completion guaranty, that's a real exposure and it's worth naming in the offering, partly because it explains exactly why the promote exists. I've read plenty of deals where the guarantor got a separate fee and it was disclosed in one line nobody objected to.

Securities counsel in your state has to draft the hold-period language and the fee disclosures anyway, so bring them the 5-with-extensions version and the 7 version and see which one they can describe without three pages of caveats.