4-Tier IRR Pari Passu Equity Waterfall Model
A free Excel equity waterfall model for real estate private equity deals, with four IRR hurdles and no GP catch-up. The limited partner and general partner share distributions pari passu, in proportion to committed capital, and the general partner earns promote only on dollars above each hurdle rather than on total profit.
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.
Pari Passu Distributions
LP and GP receive distributions side by side in proportion to capital contributed.
No GP Catch-Up
Promote is earned only on dollars above the hurdle, not retroactively on the full profit pool.
Promote Tiers Above the Hurdle
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, and promote splits are all inputs.
Which version fits
How This Differs from the GP Catch-Up Version
This model has no catch-up tier, so the general partner earns promote only on dollars above each hurdle. In a catch-up structure the general partner instead receives a disproportionate share of distributions after the preferred return is paid, until it has reached its full negotiated share of total profit, which produces a materially larger promote on the same deal.
If your structure includes a catch-up tier, use the 4-Tier IRR GP Catch-Up Waterfall instead.
How it works
How a Pari Passu 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). In a pari passu structure both partners are paid side by side in proportion to the equity each contributed until the promote begins. This model runs four steps:
- 01
Return of Capital
Both partners get their contributed equity back, pro rata.
- 02
Preferred Return
Both partners earn the preferred return on their capital, for example 8 percent, pro rata.
- 03
First Promote Tier
Once the LP clears the first IRR hurdle, cash above it splits at the first promote, for example 80/20.
- 04
Higher Promote Tiers
Splits step up as the LP clears higher IRR hurdles, for example 70/30 above 12 percent and 60/40 above 15 percent.
Because there is no catch-up, the GP's promote applies only to dollars above each hurdle. The model shows each partner's dollars, IRR and equity multiple at every tier, so both sides can see what the promote is worth at different levels of performance.
Who it’s for
Who Uses This Model
CRE firms, developers and investors raising LP equity for a syndication or joint venture, LPs comparing a GP’s proposed terms against market structures, and analysts reconciling a waterfall to the distribution section of an operating agreement. Pari passu structures with a straight preferred return are common in deal-level syndications, which makes this a useful starting point for most first-time JV negotiations.
Questions
Frequently Asked Questions
What does pari passu mean in a real estate waterfall?
Pari passu means on equal footing. The LP and GP receive distributions side by side in proportion to the capital each contributed, rather than one partner being paid ahead of the other.
What is the difference between a pari passu waterfall and a GP catch-up waterfall?
In a pari passu waterfall the GP earns promote only on cash above each hurdle. In a catch-up structure the GP receives a disproportionate share after the preferred return until it holds its full share of total profit, which produces a larger promote on the same deal. Use the 4-Tier IRR GP Catch-Up Waterfall if your deal has a catch-up.
Which hurdles and splits can I change?
All of them. The preferred return, the IRR hurdle for each tier and the promote split at each tier are inputs, and the model recalculates distributions and returns for both partners.
Is this distribution 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.