Cash Flow Waterfall (Real Estate)

WWW.FARIDIGROUP.COM/KCC/
Annual IRR
Equity Contribution

Investor
90%

Developer
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. prop
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 re

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 un
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:

Month
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Total
Cash Flow
(1,550,000)
(110,500)
(120,000)
(155,000)
(85,000)
12,500
17,550
126,000
111,000
115,400
100,455
123,456
55,678
124,211
145,678
131,222
89,700
200,000
45,679
110,800
255,700

CF Available
to Investor
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

Preferred Return
CF Available
Preferred Return to Developer
CF to Investor at

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

CF to Developer at
Preferred Return

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Total
NPV Check
IRR (Mthly)
IRR (Annual)

114,600
210,988
245,678
312,446
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

103,140
189,889
221,110
281,201
100,609
198,000
222,201
179,710
240,099
220,000
259,999
270,101
109,800
41,301
19,350
7,785

2,704,858
Total

2,434,372

4.2153%
64.13%

103,140
189,889
192,895
0
0
0
0
0
0
0
0
0
0
0
0
0

11,460
21,099
24,568
31,245
11,179
22,000
24,689
19,968
26,678
24,444
28,889
30,011
12,200
4,589
2,150
865

11,460
21,099
21,433
0
0
0
0
0
0
0
0
0
0
0
0
0

256,000
270,486
Preferred Return
0
0.8735%
11.00%

28,444
0
0.8735%
11.00%

WWW.FARIDIGROUP.COM/KCC/DOCUMENTS
Annual IRR

Rate Conversion:
mthly to annual
((1 + r) ^ 12 ) - 1
annual to mthly
(( r + 1 ) ^ 1/12) - 1

11.00%

he pref yield is split "equally" ie. proportional to their respective equity contributions.
preferred return rate, ie. until each receives a 11% annual yield.

15.00%
es 65% of the monthly cash flows until the Investor achieves 15% IRR.

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

18.00%
until the Investor achieves 18% IRR.
24.00%
until the Investor achieves 24% IRR.

Hurdle 1
Balance - Post CF Available CF to InvestorAddl CF to DeveloperCF to Developer Balance - Post CF Available
to Investor at Hurdle 1
at Hurdle 1
at Hurdle 1
Hurdle 1
to Investor
Preferred Return
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

Hurdle 2

0
0
31,350
312,446
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

103,140
189,889
213,273
203,090
72,662
143,000
160,479
129,791
173,405
158,889
187,777
195,073
79,300
29,829
13,975
5,623

103,140
189,889
213,273
82,768
0
0
0
0
0
0
0
0
0
0
0
0

0
0
10,973
44,567
0
0
0
0
0
0
0
0
0
0
0
0

11,460
21,099
32,405
44,567
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
185,110
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

103,140
189,889
213,273
193,834
67,073
132,000
148,134
119,807
160,066
146,666
173,333
180,067
73,200
27,534
12,900
5,190

2,420,413

1,829,269

359,146
Hurdle 1
0
1.1715%
15.00%

55,540

83,985

2,261,727

1,716,182
Hurdle 2

2.1317%
28.80%

h flows based on a "waterfall" structure.

ine how cash flows at each level are split.
pital structure where the developer is usually the minority investor.
elds (IRRs) as hurdles.
ate share of the cash flow after the first hurdle is hit. This is known
no longer pari-passu above the preferred implies him being "promoted".
ONLY. All mandatory.
wed by +ive values (cash flows / profits). This is mandatory.
e model is dynamic and amenable to deal variation.
r feedback to info@globaliconnect.com.
Hurdle 2

Hurdle 3

CF to InvestorAddl CF to DeveloperCF to Developer Balance - Post CF Available CF to InvestorAddl CF to Developer

at Hurdle 2
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

at Hurdle 2

at Hurdle 2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

Hurdle 2

to Investor
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

at Hurdle 3
(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

at Hurdle 3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

103,140
189,889
213,273
163,847
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
54,052
0
0
0
0
0
0
0
0
0
0
0
0

11,460
21,099
32,405
98,620
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
49,980
111,788
220,000
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

103,140
189,889
213,273
191,335
61,483
121,000
135,790
109,823
146,727
134,444
158,888
165,062
67,100
25,240
11,825
4,758

103,140
189,889
213,273
191,335
61,483
86,512
0
0
0
0
0
0
0
0
0
0

0
0
0
22,491
50,305
70,783
0
0
0
0
0
0
0
0
0
0

440,224
Hurdle 2
0
1.3888%
18.00%

54,052

138,037

2,126,597

1,609,853

615,709
Hurdle 3
0
1.8088%
24.00%

143,578

3.0425%
43.28%

Final Split
CF to Developer Balance - Post CF to Investor CF to Developer Cash Flow
at Hurdle 3
Hurdle 3
Check
at Final Split
at Final Split

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

(1,395,000)
(99,450)
(108,000)
(139,500)
(76,500)
11,250
15,795
113,400
99,900
103,860
90,410
111,110
50,110
111,790
131,110
118,100
80,730
180,000
41,111
99,720
230,130

(155,000)
(11,050)
(12,000)
(15,500)
(8,500)
1,250
1,755
12,600
11,100
11,540
10,046
12,346
5,568
12,421
14,568
13,122
8,970
20,000
4,568
11,080
25,570

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

11,460
21,099
32,405
121,111
50,305
70,783
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
62,705
246,890
199,678
266,777
244,444
288,888
300,112
122,000
45,890
21,500
8,650

281,615

1,807,534

4.6716%
72.96%

103,140
189,889
213,273
191,335
61,483
117,865
123,445
99,839
133,389
122,222
144,444
150,056
61,000
22,945
10,750
4,325

11,460
21,099
32,405
121,111
50,305
102,135
123,445
99,839
133,389
122,222
144,444
150,056
61,000
22,945
10,750
4,325

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

1,519,476
1,185,382
Final Split

3.2262%
46.38%

8.2199%
158.04%