Private Equity Waterfall

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Overview of the Private Equity Waterfall Model

This distribution waterfall engine allows you to calculate private equity investment structures. The model can be used for private equity real estate funds or any type of individual transaction on a deal-by-deal basis.

On the Cash Flows tab, you can import cash flows from 3rd-party platforms, or use one of our sample deals.

The Assumptions tab allows you to set contributions for the General Partner (GP) and Limited Partners (LPs) as well as the preferred return. You can also set hurdle rates and carried interest at up to four investment tiers.

The preferred return supports both simple and compounding interest, as well as IRR and equity multiple calculations. Investment tiers support simple and compounding interest, and also IRR.

All compounding can be done on a monthly, quarterly, semi-annual, or annual basis.

A Residual Split is included to handle any remaining excess cash flows.

After calculation, you can view a dynamic waterfall diagram, as well as return metrics for the project, investors, and the manager. A detailed distribution waterfall outlines the cash flows on a yearly basis and performs annual cash flow checks.

You can also export the final private equity waterfall model to Microsoft Excel for further analysis.

If you have any questions or feedback please reach out to us using the chat window. We have live analysts and support technicians available to help walk you through any questions.

Also, don't forget to check out our private equity real estate services.

There are 3 ways to get started with the Investor Waterfall Calculator:

You can copy/paste directly from Excel into this box (don't worry if it's not pretty)
Click here for Import Instructions
Import Notes:
  • Please import monthly levered cash flows in a single row with the initial purchase (ie - time 0) in the first column
  • The first cell should be a negative number to represent the initial equity investment for the project
  • This app supports an initial equity amount plus 190 months of cash flows
  • The cash flow report and project cash flow chart shows a maximum of 15 years
2) Load a sample deal
3) Upload a model that's been configured for use with the CRE Suite
Click here for an Excel template that can make your model's cash flows compatible with the file upload feature.
Import Instructions:

  1. Open your monthly cash flow model
  2. Click here to download the excel template and open the file
  3. Right click the tab in this excel template and select “Move or Copy…”
  4. A new dialog box will open. In the dropdown menu select your cash flow model and click OK.
  5. Place your LEVERED CASH FLOW (including initial equity and all distributions from operations, refinance, and sale) into the BLUE Monthly Cash Flows section. This can be a formula reference or hard coded
  6. Save your monthly cash flow model. This model will now be compatible for future uploads of any deal
  7. Drag that file into the section called “Upload a CRE Suite enabled file.” OR click “Browse” and select the file you have saved to your computer

  1. Download the deal you would like to view from the CRE Suite Excel Add-In
  2. Save that file to your desktop on your computer
  3. Drag that file into the section called “Upload a CRE Suite enabled file.” OR click “Browse” and select the file you have saved to your computer

  1. Save your CRE Suite compatible model to a folder on your computer
  2. Navigate to the waterfall application online
  3. Drag that file into the section called “Upload a CRE Suite enabled file.” OR click “Browse” and select the file you have saved to your computer

  1. Verify your ARGUS Enterprise reports are on a monthly basis. - You may need to change your report settings by setting "Print Amounts per Area", "Print Annual Totals", and "Print Final Totals" to "No"
  2. Select the Sources and Uses report and copy all data in the report - If you are on a PC you can use "CTRL + A" to select all and "CTRL + C" to copy
  3. Navigate back to the CREModels Waterfall Calculator and locate the Cash Flows tab
  4. Once you are on the Cash Flows tab locate the Import Data text box
  5. Click in the text box and paste your data - If you are on a PC you can right click then select paste or use "CTRL + V"
  6. Click the blue Import button to import the data

  1. Export monthly cash flows from your underwriting software into Microsoft Excel®
  2. Find the MONTHLY levered cash flows row. The first value MUST be the initial equity amount with the following value being the first month of the analysis with the last value being the sale month (This can either be in a single row OR a single column)
  3. Highlight all monthly values and press "CTRL + C" to copy
  4. Navigate back to the CREModels Waterfall Calculator and locate the Cash Flows tab
  5. Once you are on the Cash Flows tab locate the Import Data text box
  6. Click in the text box and paste your data - If you are on a PC you can right click then select paste or use "CTRL + V"
  7. Click the blue Import button to import the data

Here are the cash flows you have imported. Confirm they look like you expect and the next step is to set assumptions.

The above chart shows the annual cash flows (based on investment year) that have been imported to the model.

200/200
Equity Contribution
GP: $515,060
$4,635,540 :LP
Preferred Return Options
Catch-Up Percentage
0%

Investment Tier Options
Compounding Frequency
First, pay the Preferred Return...
Add Tier 2
Then, split cash flows at Tier 2... Remove Tier 2
Add Tier 3
Then, split cash flows at Tier 3... Remove Tier 3
Add Tier 4
Then, split cash flows at Tier 4... Remove Tier 4
Finally, follow the residual split...
Property Info
Demographics 
Extra Space Storage
Self Storage Acquisition
1501 2nd Avenue North
St Petersburg, FL 33705
Investment Summary
Cash Investors earn a 8% IRR Pref and Return of Equity. GP will earn a 20% promote until the LP earns a 12 IRR%; 30% promote until LP earns a 15% IRR; then GP splits 40/60 thereafter.

Extra Space Storage  (Self Storage Acquisition)

1501 2nd Avenue North
St Petersburg, FL 33705
Investment Summary
Cash Investors earn a 8% IRR Pref and Return of Equity. GP will earn a 20% promote until the LP earns a 12 IRR%; 30% promote until LP earns a 15% IRR; then GP splits 40/60 thereafter.
Project Cash Flow
Project Cash Flow 
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CRE Suite
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Project Returns

Profit 

$8,786,848

IRR 

25.23%

Multiple 

2.71x

Cash-on-Cash 

10.01%

Investor Returns

Profit 

$5,848,379

IRR 

20.58%

Multiple 

2.26x

Cash 

$10,483,919

General Partner Returns

Profit 

$2,938,469

IRR 

50.50%

Multiple 

6.71x

Cash 

$3,453,529

Extra Space Storage  (Self Storage Acquisition)

1501 2nd Avenue North
St Petersburg, FL 33705
Investment Summary
Cash Investors earn a 8% IRR Pref and Return of Equity. GP will earn a 20% promote until the LP earns a 12 IRR%; 30% promote until LP earns a 15% IRR; then GP splits 40/60 thereafter.
Private Equity Waterfall Diagram
Export XLS
Detailed Private Equity Waterfall
Annual Cash Flows
Initial Equity Y1 Y2 Y3 Y4 Y5
Levered Cash Flows ($5,150,600) $515,487 $512,173 $313,850 $379,428 $12,216,511
Investor Pref and Equity ($4,635,540) $463,938 $460,956 $282,465 $341,485 $4,818,226
GP Co-Investment Pref and Equity ($515,060) $51,549 $51,217 $31,385 $37,943 $535,358
Cash Flow After Pref $6,862,927
Distributions Up to First Hurdle
Investor CF $1,102,634
GP Co-Investment CF $122,515
GP Promote $306,287
Cash Flow After First Hurdle $5,331,491
Distributions Up to Second Hurdle
Investor CF $946,479
GP Co-Investment CF $105,164
GP Promote $450,704
Cash Flow After Second Hurdle $3,829,144
Investor Residual Split $2,067,738
GP Co-Investment Residual Split $229,749
GP Promote Residual Split $1,531,658
Total Investor Cash Flow ($4,635,540) $463,938 $460,956 $282,465 $341,485 $8,935,076
Total GP Co-Investment Cash Flow ($515,060) $51,549 $51,217 $31,385 $37,943 $992,786
Total GP Promote Cash Flow $2,288,649
Total GP Cash Flow w/o Fees ($515,060) $51,549 $51,217 $31,385 $37,943 $3,281,435
Annual Cash Flow Check