Waterfall Distribution Calculator
Year-by-Year Distributions
| Year | Total CF↕ | LP Dist.↕ | GP Dist.↕ | Cum. LP↕ | Cum. GP↕ |
|---|---|---|---|---|---|
| 1 | $160,000.00 | $128,842.11 | $31,157.89 | $128,842.11 | $31,157.89 |
| 2 | $160,000.00 | $128,842.11 | $31,157.89 | $257,684.22 | $62,315.78 |
| 3 | $160,000.00 | $128,842.11 | $31,157.89 | $386,526.33 | $93,473.67 |
| 4 | $160,000.00 | $128,842.11 | $31,157.89 | $515,368.44 | $124,631.56 |
| 5 | $3,160,000.00 | $2,544,631.58 | $615,368.42 | $3,060,000.02 | $739,999.98 |
A real estate syndication waterfall governs how cash flow and sale proceeds are split between limited partners (the investors) and the general partner (the sponsor) once a preferred return and IRR hurdles are met. This calculator builds the full cash flow series, returns capital first, then distributes the remainder through your preferred return and hurdle tiers, and reports LP and GP IRR, equity multiples, total distributions, and the GP promote earned.
Formula
Equity multiple = total distributions ÷ invested equity; GP promote = total GP distributions − GP pro-rata capital
- preferred return
- The IRR the LPs must receive before the GP shares in profits (e.g. 8%)
- hurdle tier
- An IRR threshold above which a new LP/GP split applies (e.g. 70/30 above 12%)
- project IRR
- Internal rate of return of the full cash flow series, solved via Newton-Raphson
- GP promote
- GP distributions beyond its pro-rata return of co-invested capital — the sponsor's carried interest
How it works
- Enter total equity, the GP co-invest percentage, the preferred return, and one or more IRR hurdle tiers with their LP/GP split (for example 8% pref, then 70/30 above a 12% hurdle).
- Provide the hold period, the annual cash flows for each year, and the exit proceeds, which are added to the final year. The tool assembles a cash flow series starting with negative equity.
- The engine computes the project IRR, selects the active tier based on that IRR, returns capital, then splits the excess by the tier's LP/GP shares, and finally derives LP IRR, GP IRR, equity multiples, and the GP promote above its pro-rata capital.
Worked example
$1,000,000 equity, 10% GP co-invest, 8% preferred return, a 70/30 split above a 12% hurdle, 5-year hold, annual cash flows of $60k/$65k/$70k/$75k/$80k, and $1,400,000 exit proceeds.
- Cash flow series: −1,000,000, then 60k, 65k, 70k, 75k, and 80k + 1,400,000 = 1,480,000 in year 5.
- Project IRR solves to about 13.05%, which clears the 12% hurdle tier.
- Capital is returned, then the excess is split 70% LP / 30% GP; total LP distributions ≈ $1,425,000 and total GP ≈ $325,000.
- GP co-invested $100,000, so promote = 325,000 − 100,000 = $225,000.
LP IRR ≈ 10.6% with a 1.58x equity multiple, project IRR ≈ 13.1%, and the GP earns about a $225,000 promote on top of returned capital.
Frequently asked questions
- What is a preferred return in a waterfall?
- The preferred return (or "pref") is a minimum annual return — often around 8% — that limited partners receive before the general partner shares in any profits. Below the pref, LPs typically receive 100% of available distributions.
- What is the GP promote?
- The promote (carried interest) is the disproportionate share of profits the sponsor earns above their pro-rata capital once hurdles are met. In this calculator it is computed as total GP distributions minus the GP's pro-rata return of co-invested capital.
- What is the difference between IRR and equity multiple?
- IRR is a time-weighted annualized return that accounts for when cash arrives, while the equity multiple is simply total distributions divided by invested capital and ignores timing. A 1.58x multiple over five years can correspond to a roughly 10% IRR.
- Does this model European or American waterfalls?
- The engine uses a European-style, whole-fund structure: capital is returned first across the entire investment, then profits are split by the tier matched to the overall project IRR. It is a planning model and may simplify the tier-by-tier sequencing of a fully drafted operating agreement.