4-Tier IRR GP Catch-Up Equity Waterfall Model
A free Excel equity waterfall model for real estate private equity deals, built around four IRR hurdles with a full GP catch-up tier. It distributes operating cash flow and capital events between the limited partner and general partner, and reports what each party earns at every level of deal performance.
What’s inside
Model Features
Four IRR-Based Distribution Tiers
Each tier triggers once the limited partner clears a defined IRR hurdle.
Return of Capital
Contributed equity is returned before any profit is split.
Preferred Return Accrual
Tracks the preferred return as it accrues and is paid down.
GP Catch-Up Tier
Brings the general partner up to its full negotiated share of profit once the preferred return is satisfied.
Tiered Promote Splits
Promote percentages step up as the deal clears successive hurdles.
Per-Tier Return Reporting
LP and GP IRR and equity multiple shown at each tier.
Editable Assumptions
Hurdle rates, preferred return, catch-up percentage, and promote splits are all inputs.
Which version fits
How This Differs from the Pari Passu Version
The catch-up tier is the difference. With a catch-up, the general partner receives a disproportionate share of distributions once the preferred return is satisfied, until it has reached its full negotiated share of total profit. Without one, the general partner earns promote only on dollars above each hurdle, which leaves more of the profit with the limited partner.
If your structure has no catch-up tier, use the 4-Tier IRR Pari Passu Waterfall instead.
How it works
How a GP Catch-Up Equity Waterfall Works
An equity waterfall, also called a distribution waterfall, sets the order in which a real estate deal's cash flow is paid to the limited partner (LP) and the general partner (GP). This model runs four steps:
- 01
Return of Capital
Both partners get their contributed equity back first.
- 02
Preferred Return
The LP, and the GP on its co-invest, earn the preferred return, for example 8 percent.
- 03
GP Catch-Up
Most or all of the next dollars go to the GP until it holds its negotiated share of total profit, for example 20 percent.
- 04
Promote Tiers
Remaining cash splits at promote percentages that step up as the LP clears higher IRR hurdles, for example 70/30 above a 12 percent IRR and 60/40 above 15 percent.
The model shows each partner's dollars, IRR and equity multiple at every tier, so you can see exactly where the promote is earned and what it costs the LP.
Who it’s for
Who Uses This Model
CRE firms, developers and investors structuring a joint venture or syndication, LPs testing a GP’s proposed promote, and analysts checking the distribution provisions of an operating agreement. It works for multifamily, industrial, retail, office, hospitality and ground-up development deals, since the waterfall only needs a cash flow stream.
Questions
Frequently Asked Questions
What is a GP catch-up in a real estate equity waterfall?
A catch-up is a tier that follows the preferred return. It sends most or all of the next distributions to the general partner until the GP has received its negotiated share of total profit, for example 20 percent. After the catch-up, cash splits at the promote percentages.
How is a GP catch-up different from a pari passu waterfall?
In a pari passu structure the GP earns promote only on dollars above each hurdle. With a catch-up, the GP is brought up to its full share of all profit, so the promote is larger on the same deal. Use the 4-Tier IRR Pari Passu Waterfall if your deal has no catch-up.
Which hurdles and splits can I change?
All of them. The preferred return, catch-up percentage, IRR hurdle for each tier and promote split at each tier are inputs, and the model recalculates distributions and returns for both partners.
Is this equity waterfall model really free?
Yes. Enter your name and email and the Excel template downloads with live formulas. Nothing is locked or hardcoded.
Can Reina Property Group build a waterfall to match our operating agreement?
Yes. RPG's investment team builds custom waterfalls, development models and acquisition models for CRE firms, and can review proposed JV terms before they are signed.
Custom models
Need a Waterfall Built to Your Operating Agreement?
Free templates cover standard structures. When your deal has its own hurdles, fees, clawbacks or partner splits, Reina Property Group's investment team builds the model to match the documents. See our real estate financial modeling services, or, if you are raising LP or JV equity for the deal, our capital raising advisory. More free templates are in the model library.
Free download
Download the Model
Enter your name and email below and the Excel file is yours. Live formulas, nothing locked.