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Cash Flow Waterfall (Real Estate) Model

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Annual IRR Investor Developer
Equity Contribution 90% 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. proportional to thei
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 receives a 11% a

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 until the Investor
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:
Preferred Return
Total CF Available CF to Investor at CF Available CF to Developer at
Month Cash Flow to Investor Preferred Return to Developer Preferred Return

0 (1,550,000) (1,395,000) (1,395,000) (155,000) (155,000)


1 (110,500) (99,450) (99,450) (11,050) (11,050)
2 (120,000) (108,000) (108,000) (12,000) (12,000)
3 (155,000) (139,500) (139,500) (15,500) (15,500)
4 (85,000) (76,500) (76,500) (8,500) (8,500)
5 12,500 11,250 11,250 1,250 1,250
6 17,550 15,795 15,795 1,755 1,755
7 126,000 113,400 113,400 12,600 12,600
8 111,000 99,900 99,900 11,100 11,100
9 115,400 103,860 103,860 11,540 11,540
10 100,455 90,410 90,410 10,046 10,046
11 123,456 111,110 111,110 12,346 12,346
12 55,678 50,110 50,110 5,568 5,568
13 124,211 111,790 111,790 12,421 12,421
14 145,678 131,110 131,110 14,568 14,568
15 131,222 118,100 118,100 13,122 13,122
16 89,700 80,730 80,730 8,970 8,970
17 200,000 180,000 180,000 20,000 20,000
18 45,679 41,111 41,111 4,568 4,568
19 110,800 99,720 99,720 11,080 11,080
20 255,700 230,130 230,130 25,570 25,570
21 114,600 103,140 103,140 11,460 11,460
22 210,988 189,889 189,889 21,099 21,099
23 245,678 221,110 192,895 24,568 21,433
24 312,446 281,201 0 31,245 0
25 111,788 100,609 0 11,179 0
26 220,000 198,000 0 22,000 0
27 246,890 222,201 0 24,689 0
28 199,678 179,710 0 19,968 0
29 266,777 240,099 0 26,678 0
30 244,444 220,000 0 24,444 0
31 288,888 259,999 0 28,889 0
32 300,112 270,101 0 30,011 0
33 122,000 109,800 0 12,200 0
34 45,890 41,301 0 4,589 0
35 21,500 19,350 0 2,150 0
36 8,650 7,785 0 865 0

Total 2,704,858 2,434,372 256,000 270,486 28,444


Total Preferred Return
NPV Check 0 0
IRR (Mthly) 4.2153% 0.8735% 0.8735%
IRR (Annual) 64.13% 11.00% 11.00%
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Annual IRR Rate Conversion:


mthly to annual ((1 + r) ^ 12 ) - 1
11.00% annual to mthly (( r + 1 ) ^ (1/12)) - 1

yield is split "equally" ie. proportional to their respective equity contributions.


d return rate, ie. until each receives a 11% annual yield.

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

Waterfall Model:
18.00% - The waterfall assumes two parties who split cash flows based on a "waterfall" structur
he Investor achieves 18% IRR. - The waterfall is really IRR hurdles which determine how cash flows at each level are s
- The waterfall structure is a typical real estate capital structure where the developer is
24.00% - The primary investor sets progressive target yields (IRRs) as hurdles.
he Investor achieves 24% IRR. - The Developer typically receives a disproportionate share of the cash flow after the fir
as the "promote." The fact that the developer is no longer pari-passu above the prefe
- Enter fields marked in blue font, yellow cells, ONLY. All mandatory.
- One or more -ive values (investments) are followed by +ive values (cash flows / profit
- To skip a particular hurdle, enter zero values. The model is dynamic and amenable to
- To help us improve this model, please send your feedback to info@globaliconnect.com

Hurdle 1 Hurdle 2
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 (1,395,000) (1,395,000) 0 (155,000) 0 (1,395,000)


0 (99,450) (99,450) 0 (11,050) 0 (99,450)
0 (108,000) (108,000) 0 (12,000) 0 (108,000)
0 (139,500) (139,500) 0 (15,500) 0 (139,500)
0 (76,500) (76,500) 0 (8,500) 0 (76,500)
0 11,250 11,250 0 1,250 0 11,250
0 15,795 15,795 0 1,755 0 15,795
0 113,400 113,400 0 12,600 0 113,400
0 99,900 99,900 0 11,100 0 99,900
0 103,860 103,860 0 11,540 0 103,860
0 90,410 90,410 0 10,046 0 90,410
0 111,110 111,110 0 12,346 0 111,110
0 50,110 50,110 0 5,568 0 50,110
0 111,790 111,790 0 12,421 0 111,790
0 131,110 131,110 0 14,568 0 131,110
0 118,100 118,100 0 13,122 0 118,100
0 80,730 80,730 0 8,970 0 80,730
0 180,000 180,000 0 20,000 0 180,000
0 41,111 41,111 0 4,568 0 41,111
0 99,720 99,720 0 11,080 0 99,720
0 230,130 230,130 0 25,570 0 230,130
0 103,140 103,140 0 11,460 0 103,140
0 189,889 189,889 0 21,099 0 189,889
31,350 213,273 213,273 10,973 32,405 0 213,273
312,446 203,090 82,768 44,567 44,567 185,110 193,834
111,788 72,662 0 0 0 111,788 67,073
220,000 143,000 0 0 0 220,000 132,000
246,890 160,479 0 0 0 246,890 148,134
199,678 129,791 0 0 0 199,678 119,807
266,777 173,405 0 0 0 266,777 160,066
244,444 158,889 0 0 0 244,444 146,666
288,888 187,777 0 0 0 288,888 173,333
300,112 195,073 0 0 0 300,112 180,067
122,000 79,300 0 0 0 122,000 73,200
45,890 29,829 0 0 0 45,890 27,534
21,500 13,975 0 0 0 21,500 12,900
8,650 5,623 0 0 0 8,650 5,190

2,420,413 1,829,269 359,146 55,540 83,985 2,261,727 1,716,182


Hurdle 1 Hurdle 2
0
1.1715% 2.1317%
15.00% 28.80%
s based on a "waterfall" structure.
ow cash flows at each level are split.
tructure where the developer is usually the minority investor.
RRs) as hurdles.
hare of the cash flow after the first hurdle is hit. This is known
nger pari-passu above the preferred implies him being "promoted".
Y. All mandatory.
y +ive values (cash flows / profits). This is mandatory.
del is dynamic and amenable to deal variation.
back to info@globaliconnect.com.

Hurdle 2 Hurdle 3
CF to Investor Addl CF to Developer CF to Developer Balance - Post CF Available CF to Investor Addl CF to Developer
at Hurdle 2 at Hurdle 2 at Hurdle 2 Hurdle 2 to Investor at Hurdle 3 at Hurdle 3

(1,395,000) 0 (155,000) 0 (1,395,000) (1,395,000) 0


(99,450) 0 (11,050) 0 (99,450) (99,450) 0
(108,000) 0 (12,000) 0 (108,000) (108,000) 0
(139,500) 0 (15,500) 0 (139,500) (139,500) 0
(76,500) 0 (8,500) 0 (76,500) (76,500) 0
11,250 0 1,250 0 11,250 11,250 0
15,795 0 1,755 0 15,795 15,795 0
113,400 0 12,600 0 113,400 113,400 0
99,900 0 11,100 0 99,900 99,900 0
103,860 0 11,540 0 103,860 103,860 0
90,410 0 10,046 0 90,410 90,410 0
111,110 0 12,346 0 111,110 111,110 0
50,110 0 5,568 0 50,110 50,110 0
111,790 0 12,421 0 111,790 111,790 0
131,110 0 14,568 0 131,110 131,110 0
118,100 0 13,122 0 118,100 118,100 0
80,730 0 8,970 0 80,730 80,730 0
180,000 0 20,000 0 180,000 180,000 0
41,111 0 4,568 0 41,111 41,111 0
99,720 0 11,080 0 99,720 99,720 0
230,130 0 25,570 0 230,130 230,130 0
103,140 0 11,460 0 103,140 103,140 0
189,889 0 21,099 0 189,889 189,889 0
213,273 0 32,405 0 213,273 213,273 0
163,847 54,052 98,620 49,980 191,335 191,335 22,491
0 0 0 111,788 61,483 61,483 50,305
0 0 0 220,000 121,000 86,512 70,783
0 0 0 246,890 135,790 0 0
0 0 0 199,678 109,823 0 0
0 0 0 266,777 146,727 0 0
0 0 0 244,444 134,444 0 0
0 0 0 288,888 158,888 0 0
0 0 0 300,112 165,062 0 0
0 0 0 122,000 67,100 0 0
0 0 0 45,890 25,240 0 0
0 0 0 21,500 11,825 0 0
0 0 0 8,650 4,758 0 0

440,224 54,052 138,037 2,126,597 1,609,853 615,709 143,578


Hurdle 2 Hurdle 3
0 0
1.3888% 3.0425% 1.8088%
18.00% 43.28% 24.00%
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) 0 (1,395,000) (155,000) 0


(11,050) 0 (99,450) (11,050) 0
(12,000) 0 (108,000) (12,000) 0
(15,500) 0 (139,500) (15,500) 0
(8,500) 0 (76,500) (8,500) 0
1,250 0 11,250 1,250 0
1,755 0 15,795 1,755 0
12,600 0 113,400 12,600 0
11,100 0 99,900 11,100 0
11,540 0 103,860 11,540 0
10,046 0 90,410 10,046 0
12,346 0 111,110 12,346 0
5,568 0 50,110 5,568 0
12,421 0 111,790 12,421 0
14,568 0 131,110 14,568 0
13,122 0 118,100 13,122 0
8,970 0 80,730 8,970 0
20,000 0 180,000 20,000 0
4,568 0 41,111 4,568 0
11,080 0 99,720 11,080 0
25,570 0 230,130 25,570 0
11,460 0 103,140 11,460 0
21,099 0 189,889 21,099 0
32,405 0 213,273 32,405 0
121,111 0 191,335 121,111 0
50,305 0 61,483 50,305 0
70,783 62,705 117,865 102,135 0
0 246,890 123,445 123,445 0
0 199,678 99,839 99,839 0
0 266,777 133,389 133,389 0
0 244,444 122,222 122,222 0
0 288,888 144,444 144,444 0
0 300,112 150,056 150,056 0
0 122,000 61,000 61,000 0
0 45,890 22,945 22,945 0
0 21,500 10,750 10,750 0
0 8,650 4,325 4,325 0

281,615 1,807,534 1,519,476 1,185,382 0


Final Split

4.6716% 3.2262% 8.2199%


72.96% 46.38% 158.04%