In commercial real estate, pari passu simply means that two investors, creditors, or assets are on equal footing— that is, without preference to one or the other. Pari passu is most commonly used to describe the way that CRE investors receive payouts, especially when waterfall structures are being used. It’s also sometimes used to indicate that two creditors or investors have an equal claim on a borrower’s assets, especially in the case of a borrower default.
A waterfall and promote structure, also known as a waterfall model, is a method for distributing the profits from a real estate investment in an uneven way. Typically, the project's sponsor (the individual or group putting most of the work in to identify, acquire, and manage the property) will receive a disproportionate share of the profits, known as a promote, as long as the project hits certain profitability benchmarks.