New to underwriting and structuring deals/waterfalls for new ground up development, not new to real estate. What's preferred in a waterfall hurdle; running the promote hurdles by the deal IRR or COC return? Feel like i've only ever seen IRR, but have come across some with COC hurdles.
Scenarios where one makes more sense over the other?
TIA.
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Depends if you're the GP or LP. If I'm the GP, I'd prefer CoC so I can participate earlier. If I'm an LP, I'd prefer IRR so I get my capital back before GP gets a cut.
Pension Fund/Large Client = Almost exclusively IRR hurdles
Family Office/Syndication = Mix of both but CoC hurdles are common.
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