Promote crystallization at refi: taking it at the cash-out or waiting for the sale

Working through a 128-unit heavy value-add where the plan is a 24 month reposition, agency refi in month 30, then hold to year 7. Purchase 14.2M, 3.9M of capex, all-in basis around 18.6M. If the interior program hits and the trailing NOI supports it, the refi returns roughly 70% of LP capital and the deal is well above the 8% pref on an aggregate basis at that point.

Question is what the promote does at that event, and I've written the LPA both ways for two different deals.

Version one crystallizes. The refi is a capital event, waterfall runs, GP takes 20% of the excess above return of capital and accrued pref, which on my model is a payment somewhere near 900k in month 30. LPs still have 30% of capital in and the pref keeps accruing on the reduced basis. The argument for it is that the value was created in months 1 through 24 and the team that created it gets paid when it's proven by a lender's appraisal and a new loan. Waiting four more years for a sale to pay for work already done is how good asset managers leave to go start their own shop.

Version two defers everything to sale. No promote at any refi, full return of capital plus pref first. The argument is that a refi appraisal is a valuation opinion, not a price, and 2021 taught everyone what happens when you pay promote off a valuation and the exit comes in 20% under it. The lookback and clawback exist for exactly this, but as fathom's thread got into, an unfunded clawback against a thin GP entity is a promise.

The middle version I've seen twice: promote crystallizes at refi but only a portion, say 50%, releases in cash and the rest converts to a subordinated GP interest that pays at sale. Keeps the team paid, keeps skin in the outcome. It's also harder to explain to investors than either clean version, and I've had one LP tell me the complexity itself is a red flag.

My honest position depends on which risk I think is bigger, the sponsor team walking or the promote getting paid off an appraisal that doesn't hold. Interested in how the underwriters here weigh it.