Promote on Paper, Cash in Reality: How Fast Funds II and III Can Move Cash Upstream

What This Follow-Up Is Actually Testing

The main article already framed the large gap between accrued promote on paper and the cash that actually remains at the parent company. This continuation isolates only that question: how fast Funds II and III can turn that value into cash that truly reaches the parent, rather than more revaluation gains, sale profits, or receivable balances.

The good news is that the local evidence shows the pipeline has in fact reopened. There are signed deals, completed closings, and even one explicit disclosure of promote received after the balance sheet date. The less comfortable point is that, at the parent-company level, the money still has to pass through several filters: asset-level debt, distributions to limited partners, fund-level return hurdles, and only then promote and dividends that can move up the structure.

Three things matter from the outset:

• Of roughly $126 million of accrued promote receivable at the end of 2025, about $121 million sits in Funds II and III. This is almost the whole issue.
• The accounting definition of promote itself slows the move into cash: when the investment is held through a fund, the minimum return hurdle is tested at the whole-fund level, not only at the level of the single asset that was sold.
• Even in a year when the company actually received $25.3 million of GP promote cash, consolidated operating cash flow was only $3.3 million, and in the solo statements the board still had to assess liquidity for the next 24 months.

That split is the core of the analysis. Funds II and III together account for about 96% of accrued promote. So the question is no longer whether the broader platform can create value. The question is whether the two mature harvest funds can generate cash that actually moves upstream, not just value that remains visible in the notes.

$126 Million on Paper, Much Less in Clean Parent Cash

Note 7 gives two very different readings at once. On the one hand, as of December 31, 2025, the multifamily investments included about $126 million of accrued promote receivable, of which roughly $48 million came from Fund II and roughly $73 million from Fund III. On the same page, the company also shows cash it actually received during the year from the platform: $17.6 million of management and acquisition fees as GP, about $25.3 million of promote as GP, and about $26.1 million of LP cash flows. In total, that is $68.9 million received by the company from the platform.

But the key number sits in the cash-flow statement. In 2025, cash from operating activities was only about $3.3 million. That line included, among other things, $17.6 million of management fees and about $29.7 million of dividends, promote and interest received from equity-method entities. In other words, even after cash begins to come down from the funds and affiliated entities, a large part of it is still absorbed on the way by recurring uses and finance costs.

This is not the same accounting layer, and that is exactly the point. Accrued promote, promote already received, fund-level cash flow, and clean parent operating cash are not the same thing. Any reading that jumps too quickly between those layers is making the cash-conversion story look easier than it is.

The board effectively confirms that reading. In its March 22, 2026 discussion of liquidity and debt-servicing capacity, against a background of ongoing negative operating cash flow in the solo statements, the company concluded that there was no liquidity problem. But the sources it counted were not only promote waiting to be collected. They included unused bank lines, expected proceeds from asset sales, ongoing management fees, and collections from affiliates and other obligors. That is the language of practical funding, not of theoretical value.

What Was Already Near the Front of the Queue

If the goal is to understand what was truly close to cash, it is better to start not with the $126 million number but with the much narrower bucket the report already classified as more immediate. In the table of held-for-sale investments, the company recorded $12.307 million of receivables at year-end 2025. This is no longer a broad accrued-promote balance across the funds. It is a much more focused pool of amounts that were already standing near monetization.

Its composition is revealing: $5.252 million of promote receivable, $2.4 million tied to Elite99 West, about $1.096 million tied to Presley Oaks, about $971 thousand tied to Bryant at Summerville, and about $2.588 million tied to Elevate at Nexton Park. In the footnote, the company adds the most important sentence in the whole discussion: those promote fees were received after the balance sheet date from Fund II realizations.

So there is hard evidence that at least part of the promote that was still recorded as receivable on December 31, 2025 did in fact convert into cash shortly afterward. But scale still matters. Even if the full $5.252 million moved after year-end, that is still a narrow slice of the roughly $121 million of combined accrued promote sitting in Funds II and III.

That is why the next leg of the story should not be measured simply by whether there are exits. It should be measured by whether the company keeps repeating the same small but crucial transition: from signing, to closing, to collection, and finally to cash that is visible at the parent.

Funds II and III Already Show That Signed Deals Can Close Quickly

The annual report offers a very clean comparison:

That table captures two opposing truths at once. On one hand, both funds already provide real execution proof: transactions are signed, closed, and converted into free cash flow at the fund level. On the other hand, even after a meaningful round of sales, both funds still hold a large inventory of assets. There is no basis here for a reading that treats all accrued promote as if it were only weeks away from the parent’s cash balance.

Fund II: the strongest proof is hidden in the small detail

Fund II provides the clearest evidence set. The report states that during 2025 and through the date of the annual report, the fund signed sale agreements for ten multifamily assets, and that all ten had already closed by the report date. Aggregate fund-level free cash flow from those realizations totaled $23.8 million.

The late-2025 and early-2026 sequence is especially telling. In Charlotte, North Carolina, the sale of The Oaks was completed on December 29, 2025, and the company said the investee received the full consideration. From acquisition to exit, NOI at the property rose 54%, with a final IRR of about 14.4% and a 2.0x equity multiple. That is a full realization already completed before year-end.

The more interesting case is Katy, Texas. On January 14, 2026, the company signed the sale of Elite99 West for $74.5 million. In that signing report, it did not stay only at the fund level. It also disclosed what was expected to reach the company itself: the original LP investment was about $1 million, and free cash flow expected to be received by the company from the sale was about $2.3 million, on top of about $0.5 million of distributions already received during the holding period, or about $2.8 million in total. By February 18, 2026, the closing had already occurred, full consideration had been received, and the final asset-level IRR was updated to about 15.5%, with a 2.21x equity multiple and a 73% increase in NOI.

What matters most here is not only the return. It is the timing. Only 35 days passed between signing and closing. That means that once an asset moves into the signed side of the pipeline, the last stretch to cash can be relatively short. Together with the footnote in the annual report on promote received after the balance sheet date, Fund II already offers practical proof, not only accounting proof.

Fund III: closing is fast, but the promote proof is weaker

Fund III looks similar, but somewhat less clean at the parent-cash level. The annual report again states that during 2025 and through the report date, the fund signed six sale agreements, and that all six had already closed by the time the report was published. Aggregate fund-level free cash flow from those realizations totaled $10 million.

The central transaction in that sequence is Summerville, South Carolina. On December 30, 2025, the company signed the sale of Elevate at Nexton Park for $89.75 million. Again, it disclosed what was expected to reach the company: the original LP investment was about $1.2 million, and free cash flow expected to be received by the company from the sale was about $2.5 million, on top of about $0.6 million of prior distributions, or about $3.1 million in total. By January 30, 2026, the deal had already closed, full consideration had been received, and the final asset-level IRR rose to about 17.7%, with a 2.30x equity multiple.

Again, the timing is short, only 31 days from signing to closing. More than that, the held-for-sale table at year-end already included receivables of about $971 thousand for Bryant at Summerville and about $2.588 million for Elevate at Nexton Park. So Fund III, too, shows a layer of amounts already standing close to the front of the queue.

But there is one important difference versus Fund II. The annual report does not contain the same explicit statement that promote from Fund III had already been collected after the balance sheet date. There is proof of closing, and there is proof of full asset-level consideration, but less direct proof of GP-level promote cash already received. So Fund III clearly supports the argument that the path from signing to closing can be quick, but it provides a weaker direct proof on the timing of promote moving all the way into parent cash.

That chart matters because of what it does not show. It does show that deals can close quickly and that deal-level cash to the company’s LP layer is meaningful. It does not show that the entire $121 million of accrued promote is on the same short path.

The Real Bottleneck Still Sits at the Top

This is where a simple real-estate reading and a holdco reading part ways. At the asset and fund levels, 2025 and early 2026 already provide fairly good proof that realizations are back. At the parent-company level, the harder question is how much of that becomes a funding source that can truly be relied on.

The annual report itself answers this carefully. Promote is not paid simply because one asset was sold well. It is paid only after the agreed minimum return has first been delivered to the limited partners, and when the investment sits inside a fund, that hurdle is tested at the level of the entire fund across its assets. That is the friction point missing from any casual reading of the $126 million accrued-promote number. Value may well have been created. That still does not mean all of it is already free for rapid distribution.

That has to be read together with the parent’s own liquidity profile. At the end of 2025, the company and its U.S. subsidiary had total credit facilities of $280 million, with maturities of $70 million in 2026, $170 million in 2027, and $40 million in 2028. The company met its financial covenants, and the board concluded that sources were sufficient. This is not an immediate stress case. But it is a situation in which repayment capacity is still framed as a blended basket of credit, realizations, management fees, and collections, not as a cash balance already driven mainly by promote receipts.

Put differently, the problem is no longer whether the funds know how to create value. The problem is the speed at which cash can move up the structure. The evidence from early 2026 shows that the pipeline works. It still does not show that the pipeline is wide enough to treat the whole accrued-promote balance as something close to cash.

Conclusion

The clean reading from the local evidence is two-sided. On the positive side, Funds II and III already prove that the path from signing to closing can be quick, and Fund II even includes an explicit disclosure of promote received after the balance sheet date. On the cautious side, the same evidence still does not justify treating the $121 million of accrued promote sitting in those two funds as if it were almost in the parent company’s cash balance.

That is why the right metric for 2026 is not another rise in accrued promote, and not another flashy asset sale at the property level. The right metric is a repeated string of small but hard-to-fake proofs: promote already collected, distributions already moved upstream, and less dependence on bridge funding and external sources to carry the parent between one realization and the next.