RE Waterfall Case Study
Hi guys,
Hope you are fine. I'm actually a student in a good school (but no Ivy League) and I'm doing my end-of-study internship in a little shop where they finance a lot of real estate projects. After a long time of networking, I have passed the first round of a good PERE shop (i.e between 30 and 40 in the PERE50 ranking), and i need to realize an investment case for the second round.
I litteraly don't have any idea on how to modelize the waterfall despite using Real Estate models that i downloaded on the internet.
Could you help me please?
The consigns are below:
**An equity fund has been raised to invest in residential multifamily properties. The capital contributing partners (“Limited Partners”) will contribute all capital to the fund, and will receive a return of their investment along with a preferred return before the manager of the fund (“Manager”) receives any incentive compensation (“Carried Interest”). The calculated fund‐level cash flows are included in Exhibit A, and are shown net of leverage.
Based upon the accompanying net cash flows, build a model that displays what the Manager’s carried interest would be under the
following distribution structure:
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First, 0.0% to the Manager and 100.0% to the Limited Partners until Limited Partners have received a 9.0% internal rate of return on their invested capital, net of distributions received as of such period;
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Second, 15.0% to the Manager and 85.0% to the Limited Partners until the Limited Partners have received a 14.0% internal rate of return on their invested capital, net of distributions received as of such period;
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Third, 50.0% to the Manager and 50.0% to the Limited Partners until the Manager has received an amount equal to 15% of the fund level net profit through such period (as determined on a cash flow basis);
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Fourth, 15.0% to the Manager and 85.0% to the Limited Partners until the Limited Partners have received a 1.80X equity multiple on total Limited Partner invested capital to date;
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Fifth, 100.0% to the Manager and 0.0% to the Limited Partners until the Manager has received an amount equal to 20.0% of the fund level net profit through such period (as determined on a cash flow basis), and thereafter;
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20.0% to the general partner and 80.0% to the capital contributing partners.**
The Exhibit A is : Year 1: Contributions: -127 702 974 ; Distributions: 2 035 024
Year 2: Contributions: -190 652 894 ; Distributions: 9 623 472
Year 3: Contributions: -178 389 545 ; Distributions: 21 465 356
Year 4: Contributions: -157 523 ; Distributions: 31 486 823
Year 5: Contributions: 0 ; Distributions: 38 724 408
Year 6: Contributions: 0 ; Distributions: 257 133 213
Year 7: Contributions: 0 ; Distributions: 358 535 081
Year 8: Contributions: 0 ; Distributions: 323 083 224
The net yearly cash flow is the difference between contributions and distributions.
Thanks a lot for your help,
a Real Estate Student
I built it out but I'm sure there are some errors somewhere in it I didn't spend a ton of time on it. PM me your email if you'd like it.
Thanks ! i have sent my email to you in PM.
Any other help?
Hey - would you be willing to send what you put together my way? Two years of experience at a large industrial REIT. Looking to make a move soon and practicing case studies + waterfalls. If there's any other training/learning materials you have on waterfalls I would be happy to trade a case study. Let me know, thank you.
[email protected] is the best email for me.
Where did you find this material on the internet? I have some interviews coming up to and need to practice
It's a real case study for a full-time position, i didn't find it on the internet
I meant the models you said you downloaded off the internet
You can find models on BIWS, AdventuresinCRE too !
Good luck
Ah this case study takes me back.
It's a little bit harsh to give a college student if you ask me, but if it makes you feel any better I didn't get it 100% right and still got offered the job! - I'll dig around my old inbox and see can I find my workings.
I would appreciate this too! Please pm me!!
Can anyone please share the answers for this case? Would really appreciate it!
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