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The JV Equity Waterfall

Master LP/GP cash flow distributions using a six-tier European (whole-fund) promote: return of capital, preferred return, GP catch-up, and three escalating IRR-hurdle promote tiers.

REPE · VP Level · about 90 minutes · 22 guided steps

Lesson outline

Capital Structure

  1. Step 1: LP Capital
  2. Step 2: GP Capital

Tier 2 — Preferred Return

  1. Step 3: Total Preferred Return (checkpoint)
  2. Step 4: LP Preferred Return
  3. Step 5: GP Preferred Return
  4. Step 6: Remaining After Return of Capital & Pref (checkpoint)

Tier 3 — GP Catch-Up

  1. Step 7: GP Catch-Up (checkpoint)
  2. Step 8: Remaining After Catch-Up

Tier 4 — Hurdle 1 to Hurdle 2 Promote

  1. Step 9: Cumulative Distribution at Hurdle 2 (checkpoint)
  2. Step 10: Tier 2 LP Distribution
  3. Step 11: Tier 2 GP Distribution

Tier 5 — Hurdle 2 to Hurdle 3 Promote

  1. Step 12: Cumulative Distribution at Hurdle 3 (checkpoint)
  2. Step 13: Tier 3 LP Distribution
  3. Step 14: Tier 3 GP Distribution

Tier 6 — Residual Split (Above Hurdle 3)

  1. Step 15: LP Residual Split
  2. Step 16: GP Residual Split

Total Distributions & Returns

  1. Step 17: Total LP Distribution (checkpoint)
  2. Step 18: Total GP Distribution (checkpoint)
  3. Step 19: LP MoIC (checkpoint)
  4. Step 20: LP IRR (checkpoint)
  5. Step 21: GP MoIC (checkpoint): the promote payoff
  6. Step 22: GP IRR (checkpoint): the escalating promote in one number