How does a real estate Promote work?

[Astrit Bauta]

I've read a lot about investors pooling money to create a small fund where one is the GP and the investors are the LP. Generally, the GP only invests 1-10% of the acquisition or development costs and structures the deal where the LP's get a fixed IRR. The GP for finding the land/ deal would receive a promote as well as an IRR. I am wondering how this is structured, is there a profit share, what happens during a sale (is everyone prorated their portion invested) and why would an LP agree to pool resources into a deal where there is a ton of upside for the GP with little capital invested?

[Will Barnard]

There is a vast range of structuring options in syndicated deals therefore there is no one answer or one size fits all. Every deal is different and every syndicator is different.

Typical transactions have an equity split between the sponsor and the investors. They also typical have acquisition and disposition fees, management fees, etc, but not always.