Equity Waterfall Monthly Quarterly Annual Compounding
Originally published: 25/06/2021 09:11
Publication number: ELQ-29956-1
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Equity Waterfall Monthly Quarterly Annual Compounding

With the choice of compounding and distribution period

This is an extended version of my free waterfall template which additionally includes monthly and quarterly IRR compounding and distributions.
Template description:

The template considers 3 hurdles, where the last 3rd hurdle will distribute income proceeds pro-rata between equity partners. The first hurdle is a preferred return. The General Partner might contribute an equity share of the initial capital or you might choose to set zero equity contribution from the side of General Partner (Sponsor) and the template will still work perfectly. The proceeds will be distributed to both partners based on the distribution participation you choose for each of the three hurdles.

This waterfall template can be easily integrated into any type of real estate financial model which has monthly cash flow calculation. What you must do is to:
1) link the area which I highlighted in yellow to your cash flow;
2) change blue font cells/assumptions for the equity contributions in % and IRR hurdles.

That's it! The rest will calculate automatically.

Waterfalls are considered challenging and often hard to read. Therefore I have created this version for my clients which is clear, transparent, 100% reliable, easy to understand and use for an investor with any level of experience.

Of course, this is a standardized version and you would have to adjust it for any specific clauses (if any) in your term sheet. However, if the terms of the deal are not yet clear and you are looking to underwrite potential income split - this the best template to use for your estimates.

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Further information

distribute cash flow based on different compounding periods

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