Cash Flow Waterfall (Real Estate)

http://www.globaliconnect.com/exce
Annual IRR
Equity Contribution

Investor
90%

Developer
10%

Mthly IRR

Preferred Return
11%
90%
10%
0.8735%
Both parties get return of capital pari passu.
Technically, the preferred return rate is the first hurdle, and all dollars necessary to return the pref yield is split "equally" ie. propo
In a pari-passu deal, all dollars distributed are split at the same ratio as invested up to the preferred return rate, ie. until each rec

Hurdle 1
15%
65%
35%
1.1715%
Hurdle 1 (after the return of equity to both investors & preferred return), the Investor receives 65% of the monthly cash flows unt
All IRR's are calculated from the very start ie. wef initial investment.

Hurdle 2
18%
60%
40%
1.3888%
Hurdle 2 (after Hurdle 1 is completed), the Investor receives 60% of the monthly cash flows until the Investor achieves 18% IRR

Hurdle 3
24%
55%
45%
1.8088%
Hurdle 3 (after Hurdle 2 is completed), the Investor receives 55% of the monthly cash flows until the Investor achieves 24% IRR
Final Split
50%
50%
Final Split (after Hurdle 3 is completed) allocates monthly cash flow 50% to each party.

Waterfall:

Month
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Total
Cash Flow
(1,550,000)
(110,500)
(120,000)
(155,000)
(85,000)
12,500
17,550
126,000
111,000
115,400
100,455
123,456
55,678
124,211
145,678
131,222
89,700
200,000
45,679
110,800
255,700
114,600
210,988
245,678

CF Available
to Investor
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
221,110

Preferred Return
CF Available CF to Developer at
Preferred Return to Developer Preferred Return
CF to Investor at

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
192,895

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
24,568

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
21,433

24
25
26
27
28
29
30
31
32
33
34
35
36
Total
NPV Check
IRR (Mthly)
IRR (Annual)

312,446
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

281,201
100,609
198,000
222,201
179,710
240,099
220,000
259,999
270,101
109,800
41,301
19,350
7,785

2,704,858
Total

2,434,372

4.2153%
64.13%

0
0
0
0
0
0
0
0
0
0
0
0
0

31,245
11,179
22,000
24,689
19,968
26,678
24,444
28,889
30,011
12,200
4,589
2,150
865

0
0
0
0
0
0
0
0
0
0
0
0
0

256,000
270,486
Preferred Return
0
0.8735%
11.00%

28,444
0
0.8735%
11.00%

http://www.globaliconnect.com/excel_models.php
Annual IRR

Rate Conversion:
mthly to annual
((1 + r) ^ 12 ) - 1
annual to mthly
(( r + 1 ) ^ 1/12) - 1

11.00%

he pref yield is split "equally" ie. proportional to their respective equity contributions.
preferred return rate, ie. until each receives a 11% annual yield.

15.00%
es 65% of the monthly cash flows until the Investor achieves 15% IRR.

Waterfall Model:
- The waterfall assumes two parties who split cash flows based on a "waterfall"
- The waterfall is really IRR hurdles which determine how cash flows at each lev
- The waterfall structure is a typical real estate capital structure where the deve
- The primary investor sets progressive target yields (IRRs) as hurdles.
- The Developer typically receives a disproportionate share of the cash flow afte
as the "promote." The fact that the developer is no longer pari-passu above th
- Enter fields marked in blue font, yellow cells, ONLY. All mandatory.
- One or more -ive values (investments) are followed by +ive values (cash flows
- To skip a particular hurdle, enter zero values. The model is dynamic and ame
- To help us improve this model, please send your feedback to info@globalicon

18.00%
s until the Investor achieves 18% IRR.

24.00%
s until the Investor achieves 24% IRR.

Hurdle 1
Balance - Post CF Available CF to InvestorAddl CF to DeveloperCF to Developer Balance - Post CF Available
Preferred Return
to Investor at Hurdle 1
at Hurdle 1
at Hurdle 1
Hurdle 1
to Investor
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
31,350

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10,973

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
32,405

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

Hurdle 2

312,446
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

203,090
72,662
143,000
160,479
129,791
173,405
158,889
187,777
195,073
79,300
29,829
13,975
5,623

2,420,413

1,829,269

82,768
0
0
0
0
0
0
0
0
0
0
0
0
359,146
Hurdle 1
0
1.1715%
15.00%

44,567
0
0
0
0
0
0
0
0
0
0
0
0

44,567
0
0
0
0
0
0
0
0
0
0
0
0

185,110
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

193,834
67,073
132,000
148,134
119,807
160,066
146,666
173,333
180,067
73,200
27,534
12,900
5,190

55,540

83,985

2,261,727

1,716,182
Hurdle 2

2.1317%
28.80%

h flows based on a "waterfall" structure.

ne how cash flows at each level are split.
pital structure where the developer is usually the minority investor.
elds (IRRs) as hurdles.
ate share of the cash flow after the first hurdle is hit. This is known
no longer pari-passu above the preferred implies him being "promoted".
ONLY. All mandatory.
wed by +ive values (cash flows / profits). This is mandatory.
he model is dynamic and amenable to deal variation.
r feedback to info@globaliconnect.com.
Hurdle 2

Hurdle 3

CF to InvestorAddl CF to DeveloperCF to Developer Balance - Post CF Available CF to InvestorAddl CF to Developer

at Hurdle 2
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

at Hurdle 2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

at Hurdle 2
(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
32,405

Hurdle 2

to Investor
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

at Hurdle 3
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

at Hurdle 3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

163,847
0
0
0
0
0
0
0
0
0
0
0
0

54,052
0
0
0
0
0
0
0
0
0
0
0
0

98,620
0
0
0
0
0
0
0
0
0
0
0
0

49,980
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

191,335
61,483
121,000
135,790
109,823
146,727
134,444
158,888
165,062
67,100
25,240
11,825
4,758

440,224
Hurdle 2
0
1.3888%
18.00%

54,052

138,037

2,126,597

1,609,853

3.0425%
43.28%

191,335
61,483
86,512
0
0
0
0
0
0
0
0
0
0

22,491
50,305
70,783
0
0
0
0
0
0
0
0
0
0

615,709
Hurdle 3
0
1.8088%
24.00%

143,578

Final Split
CF to Developer Balance - Post CF to Investor CF to Developer Cash Flow
at Hurdle 3
Hurdle 3
at Final Split
at Final Split
Check

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
32,405

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130
103,140
189,889
213,273

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570
11,460
21,099
32,405

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

121,111
50,305
70,783
0
0
0
0
0
0
0
0
0
0

0
0
62,705
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

281,615

1,807,534

4.6716%
72.96%

191,335
61,483
117,865
123,445
99,839
133,389
122,222
144,444
150,056
61,000
22,945
10,750
4,325

121,111
50,305
102,135
123,445
99,839
133,389
122,222
144,444
150,056
61,000
22,945
10,750
4,325

0
0
0
0
0
0
0
0
0
0
0
0
0

1,519,476
1,185,382
Final Split

3.2262%
46.38%

8.2199%
158.04%