Does anyone have a template for a waterfall in a deal where there are multiple LP’s in the same deal, each of whom have their own distribution schedule?
The part I’m hung up on is how to bifurcate between the deal-level distributions at the top.
Any insight is appreciated.
| +59 | Development Fees > Sponsor Equity Contribution | 18 | 20h |
| +57 | What's an Undergrad to Do? | 21 | 2d |
| +43 | Advice to Job Seekers: Don't Sleep on Asset Management | 13 | 1d |
| +24 | Mid Sized REPE firm for first job in RE | 10 | 17m |
| +10 | Full-Time RE Acquisitions Analyst Recruiting - Class of 2028 | 4 | 1d |
| +3 | Tishman Speyer Debt Fund | 0 | 4d |
| +3 | Debt fund jobs | 1 | 4d |
| +3 | Thoughts on CIM Group today? | 11 | 1d |
| +3 | LDG Development wins $36.3M Lawsuit | 1 | 17h |
| +1 | Equity Waterfall - Market Standard | 2 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
You would need to build out separate waterfalls (or at least sub-sections in each tier) for each LP, and separate inputs for each of their respective distribution structures.
The property level distributions would just be allocated pro rata to each LP, any LP expenses would be deducted from there, and the remaining distributable cash flow would be run through the waterfall.
EDIT: If there is also a deal-level promote above all the individual LP waterfall structures, any LP with promotes further down the waterfall would need to be credited for their pro rata share paid at the deal-level.
Meant to reply to your response directly. See my comment below.
Right, I built out the subsections in each tier. But the question is, how do you pro-ratably allocate the property level distributions to each LP? If the Sponsor also puts up, say, 10% of the equity.
For example:
property level distributions: 50m
LP 1: 60%
LP 2: 30%
GP: 10%
You’re suggesting LP1’s waterfall starts with 30m (60% x 50m) to flow through? That’s undercounting though, because we have to allocate some of the GP 10% contribution somewhere.
It wouldn't be undercounting, the GP would just receive a direct 10% pro rata share at the property level if they put up 10% of the equity.
$50M distributions:
LP1 - 50*0.6 = $30M
LP2 - 50*0.3 = $15M
GP - 50*0.1 = $5M
$50M total distributions. From there, the GP's $5M doesn't need to flow through anything, and the LP shares flow through their respective waterfalls, net of LP expenses.
If the GP has contributed an equity stake, they get their pro rata share of property level distributions.
Assuming both JVs are 90-10, then you allocate a certain % of the GP to each. Gross up the 60% and 30% by .9 and allocate the deal level cash flow 66.66% and 33.33% respectively then feed them into your two different waterfalls. GP has 10% of each deal and 10% of the overall deal.
In nisi omnis sed earum et cupiditate. Eum velit non ut sunt praesentium molestiae aliquid voluptates. Id voluptatibus consectetur voluptatem ipsum quisquam quos quisquam aut.
Corporis nihil nihil rerum qui dolores exercitationem. Iure aut fugiat optio accusantium beatae. Vero numquam architecto quos incidunt fugiat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...