Real Estate Ventures explains, compares, and quantifies different approaches commonly taken when formulating and interpreting how distributions are shared by a financial partner and an operating partner (when the operating partner is entitled to a "promote" or"carried interest" after a certain level of distributions) including:

• IRRs vs. preferred returns
• Allowing promote hurdle balances to go negative when there is a surplus vs. not doing so
• Using continuous compounding (in effect) vs. discrete compounding with simple returns between compounding
• Employing separate compounding periods for each cash flow vs. fixed compounding periods for all cash flows
• Using timing conventions, such as assuming all cash flows occur at the beginning or end of a period

The book also identifies other points to consider in formulating or interpreting a promote hurdle, pointing out common mistakes to avoid and offering practical solutions. These include:

• Basic financial terminology and some common misconceptions and confusion, such as APRs, annualized IRRs, and effective rates
• The complexities of simple interest and how it may be involved even when there is compounding
• Multiple IRRs and how to avoid them when there are multiple IRR hurdles

The book begins with background on the topic and summarizes the basic issues and concepts related to promote hurdles. Information is presented in four parts:

Part A: An accessible, question-and-answer presentation of the basic issues and highlights about the topic, including the differences between preferred returns and IRRs.

Part B: A summary of the basic issues and concepts relating to promote hurdles, as well as a more detailed treatment of the differences between preferred returns and IRRs, a discussion of soft hurdles, and of recycling profits, one of the key potential differences between IRR and preferred return/return of capital hurdles.

Part C: General background and analysis of three alternative approaches to calculating promote hurdles, how each has arisen historically, and in particular, how these approaches relate to (and may incorporate) preferred returns and IRRs.

Part D: Chapters more technical in nature addressing some of the confusion associated with "multiple IRRs" and "effective rates" along with a practical solution to avoid multiple IRRs in the context of multiple promote hurdles.