Modeling Promote Question
Usually when I am modeling a waterfall, the structures I have seen show a return of capital followed by a preferred return and then the subsequent hurdles. My question is how would you model a situation where the distributions go in an order similar to this: preferred return of an 8% to the LP, followed by a return of capital to the partners and then a subsequent CF split? Specifically, how do you model the preferred return of an 8% prior to the return of capital if you have a series of cash flows that alternate between positive and negative before you get to your reversion value? Thanks in advance of any help.