Returns

Sample

Project, LP and GP returns, and how each waterfall structure splits every distributed dollar.

Sample deal.

Levered project IRR · pre-promote: 16.85%; 3.14x equity multiple
LP IRR · net of promote: 15.16%; 2.73x equity multiple
GP IRR · co-invest and promote: 37.24%; 16.33x equity multiple
GP promote · over the hold: $7.45M; 13.2% of all distributions

Return metrics

Yield, cash and IRR from the model run.

Untrended yield on cost: 6.51%; Today's rents and costs
Trended yield on cost: 7.26%; Stabilized year 4 NOI
Development spread: +101 bps; Untrended yield over the 5.50% exit cap
Stabilized cash-on-cash: 7.2%; Year 4 operating cash on equity
Average cash-on-cash: 5.7%; 7 operating years
Unlevered IRR: 10.27%; Project, before debt
Levered IRR: 16.85%; Project, before promote
Equity multiple: 3.14x; Project, before promote
Peak equity: $18.27M; Most cash in at once
Payback year: Year 7; Cumulative cash back to zero

How each metric is measured

Yield on cost is NOI over the $52,189,000 total project cost: untrended at today's rents and costs, trended at the year 4 stabilized NOI. Development spread is the untrended yield less the exit cap. Cash-on-cash is a year's operating cash to equity, net of the refinance and the sale, over the equity raised; the average covers the years that pay. Unlevered IRR, levered IRR and the multiple are the model's headline figures on monthly dates. Peak equity is the deepest point of cumulative cash to equity; payback is the first year it is back to zero.

IRR, untrended and trended

Today's rents held flat against the model's growth, on yearly cash flows.

LP and GP rows follow the structure selected below: Sample terms

Project, LP and GP IRR and multiple, untrended and trended
Return	Untrended IRR	Untrended multiple	Trended IRR	Trended multiple
Project, unlevered	8.44%	1.81x	10.27%	2.06x
Project, levered	13.30%	2.43x	16.85%	3.14x
LP	11.78%	2.17x	15.16%	2.73x
GP, co-invest and promote	31.71%	11.07x	37.24%	16.33x

How untrended is computed

The model run states trended returns only, so both columns rerun the Cash flows page's yearly scenario (src/lib/performance.ts). Trended is the base case. Untrended sets rent growth and expense growth to zero from year 5; the lease-up years keep the model's rents, the exit cap stays at 5.50%, and the sale reprices on the lower NOI. Loans, equity and the refinance stay fixed. Each year's cash to equity then runs through the selected structure. The yearly run is set on the model's base: trended under the sample terms is the model's own figure (LP IRR 15.16%, on monthly dates), and every other cell is that figure plus the yearly run's change from the model's base.

Compare waterfall structures

Standard structures run on this deal's cash. The sponsor picks.

Structure

8% pref, GP catch-up, 80/20 to 15%, then 70/30

Suits: This deal's stated terms: an institutional development waterfall

The model's figures.

LP IRR: 15.16%
LP multiple: 2.73x
GP IRR: 37.24%
GP promote: $7.45M

What matters most

Ranked by: LP cash yield during the hold; ties go to the higher LP IRR

7 structures tie on LP cash yield during the hold; LP IRR breaks the tie.

1Straight splitBest fit for this goalLP cash yield during the hold: 5.71%
2Current payLP cash yield during the hold: 5.71%
3Pref, 80/20LP cash yield during the hold: 5.71%
4IRR hurdlesLP cash yield during the hold: 5.71%
5Sample termsLP cash yield during the hold: 5.71%
6Back-end promoteLP cash yield during the hold: 5.71%
7Preferred equityLP cash yield during the hold: 5.71%

All structures side by side

Each structure's LP and GP returns, cash during the hold and at the sale
Structure	LP IRR	LP multiple	LP cash yield, hold	GP IRR	GP promote	GP cash, hold	GP cash, sale	LP before sale
Straight splitStraight split, pari passu	17.06%	3.14x	5.71%	17.06%	$0.00M	$0.61M	$1.09M	35.8%
Pref, 80/208% pref, then 80/20	15.82%	2.87x	5.71%	33.28%	$5.00M	$0.61M	$5.94M	39.3%
Sample terms8% pref, GP catch-up, 80/20 to 15%, then 70/30	15.16%	2.73x	5.71%	37.24%	$7.45M	$0.61M	$8.32M	41.2%
IRR hurdles8% pref, 80/20 to 12%, 70/30 to 15%, 60/40 above	15.56%	2.81x	5.71%	35.01%	$5.98M	$0.61M	$6.89M	40.0%
Current pay7% current pay, operating cash to investors, then 90/10	16.36%	2.98x	5.71%	28.60%	$2.87M	$0.61M	$3.87M	37.7%
Back-end promote6% pref, then 60/40	13.91%	2.49x	5.71%	42.32%	$11.79M	$0.61M	$12.52M	45.2%
Preferred equityPreferred equity, fixed 10% return, no upside	11.29%	2.07x	5.71%	48.47%	$19.52M	$0.61M	$20.02M	54.7%

How the structures are compared

Every structure splits the same yearly cash to equity: the base case's operating cash, the refinance and the sale. All contributed equity is one LP class, the sponsor's co-investment inside it, pari passu; the GP side of each tier is promote. Fees sit outside the waterfall. Sample terms is the deal's own run, trued up to the headline promote; the others are illustrative splits on the same cash, with no true-up.

IRRs, multiples and promote are set on the model's base: the sample terms row is the model's own figures (LP IRR 15.16%, on monthly dates), and every other row is those figures plus the change the yearly run shows from the sample terms, labeled change from the model's base. LP cash yield is the LP class's operating cash, paid ahead of the year's capital events, averaged over the years that pay, over the equity. GP cash is the co-investment's share plus promote, before the sale year and in it. LP before sale is the share of LP class distributions received before the sale year. On this deal operating cash runs below every preferred return, so each structure pays investors the same operating cash.

Waterfall analysis

Every dollar distributed over the hold, tier by tier, under the selected structure.

To investors (LP class)To the sponsor (promote)

Everything distributed

Operating cash, the refinance and the sale

$56.4M

1. Preferred return

Until investors have received an 8% annual return on unreturned capital

$13.2M investors · $0 sponsor

$13.2M

2. Return of capital

Until investors have received all contributed capital back

$18.3M investors · $0 sponsor

$18.3M

3. Sponsor catch-up

Until the sponsor has received 20% of profit distributed to that point

$4.4M investors · $4.4M sponsor

$8.8M

4. Residual to a 15% investor return

Until investors have received a 15% annual return

$13.2M investors · $3.1M sponsor

$16.2M

5. Residual above a 15% investor return

All remaining proceeds

$0, not reached

Where it lands

Investors $49.0M, sponsor $7.5M

Investors $49.0MSponsor $7.5M

Waterfall structure

The selected structure's tiers, in the order cash meets them.

1. Preferred return
$13,420,730
$0$13,420,730
2. Return of capital
$18,598,490
$0$18,598,490
3. Sponsor catch-up
$4,473,577
$4,393,789$8,867,365
4. Residual to a 15% investor return
$13,390,124
$3,060,319$16,450,443
5. Residual above a 15% investor return
$0
$0$0

Waterfall tiers with hurdle, splits and dollars to each side
Tier	Hurdle	LP split	GP split	To LP class	To GP, promote	Tier total
1. Preferred return	Until investors have received an 8% annual return on unreturned capital	100%	0%	$13,420,730	$0	$13,420,730
2. Return of capital	Until investors have received all contributed capital back	100%	0%	$18,598,490	$0	$18,598,490
3. Sponsor catch-up	Until the sponsor has received 20% of profit distributed to that point	50%	50%	$4,473,577	$4,393,789	$8,867,365
4. Residual to a 15% investor return	Until investors have received a 15% annual return	80%	20%	$13,390,124	$3,060,319	$16,450,443
5. Residual above a 15% investor return	All remaining proceeds	70%	30%	$0	$0	$0
Total distributions				$48,993,241	$7,454,108	$56,447,349

LP class and promote

The LP class holds every contributed dollar, the sponsor's co-investment included, pari passu. The GP side of each tier is promote only. Under the sample terms, tier dollars come from the yearly waterfall run, trued up to the headline promote of $7,454,108, with the LP class dollars allocated to the model's $49,882,921 of LP class distributions.

Annual distributions

LP and GP by year under the selected structure, co-invest broken out.

Distributions by year to LP and GP, with cumulative LP multiple
Year	LP distributions	GP co-invest	GP promote	GP total	Cumulative LP multiple
Year 1	$0	$0	$0	$0	0.00x
Year 2	$0	$0	$0	$0	0.00x
Year 3	$0	$0	$0	$0	0.00x
Year 4	$1,296,910	$40,114	$0	$40,114	0.07x
Year 5	$1,387,947	$42,930	$0	$42,930	0.15x
Year 6	$14,559,929	$450,342	$0	$450,342	0.97x
Year 7	$804,615	$24,887	$0	$24,887	1.02x
Year 8	$902,653	$27,919	$0	$27,919	1.07x
Year 9	$1,003,142	$31,027	$0	$31,027	1.13x
Year 10	$28,431,125	$879,382	$7,454,108	$8,333,490	2.73x
Total	$48,386,320	$1,496,601	$7,454,108	$8,950,709	2.73x

How the annual split is drawn

GP co-invest is the LP class's yearly distribution times the co-investment's share of equity. The cumulative LP multiple is LP distributions to date over LP capital. The yearly dollars keep the yearly run's shape and are allocated, to the cent, to the model's LP class distributions, so the last year lands on the total. The total is the model's LP multiple (2.73x under the sample terms, on monthly dates) plus the selected structure's change from the model's base.

Sensitivity

Place a driver in Rows and one in Columns; every cell reruns the scenario.

LP and GP values follow the selected structure: Sample terms

Drivers

Exit capIn Rows
Rent growth after year 4In Columns
Expense growth after year 4
Vacancy at stabilization

Not in this run yet

Hard cost change: equity and loans stay fixed in this run
Construction loan rate: construction interest stays fixed in this run
Lease-up months: occupancy by year stays fixed in this run
Hold period: the sale stays in year 10 in this run
Permanent loan rate: debt service and the refinance stay fixed in this run

Rows

Exit cap

Step, percentage points

Base 5.50%

Columns

Rent growth after year 4

Step, percentage points

Base 2.50%

Values

Base case: 5.50% exit cap, 2.50% rent growth after year 4, LP IRR 15.16%, the model's figure; other cells add the change from the model's base

LowHigh

LP IRR by exit cap (rows) and rent growth after year 4 (columns). Base case: 5.50% exit cap, 2.50% rent growth after year 4, LP IRR 15.16%, the model's figure; other cells add the change from the model's base.
Exit cap / Rent growth after year 4	1.50%	2.00%	2.50%	3.00%	3.50%
5.00%	14.85%	15.84%	16.77%	17.60%	18.36%
5.25%	13.98%	14.99%	15.96%	16.88%	17.67%
5.50%	13.14%	14.18%	15.16%Base	16.10%	17.00%
5.75%	12.31%	13.38%	14.39%	15.35%	16.27%
6.00%	11.50%	12.60%	13.64%	14.62%	15.56%

How each cell is run

Each cell reruns the Cash flows page's scenario with the two drivers moved: rent and expense growth move every revenue or expense line from year 5, vacancy moves revenue from year 4, and the exit cap reprices the year 10 sale. Each year's cash to equity then runs through the selected structure. Loans, equity and the refinance stay fixed. IRRs, multiples and promote are the change from the model's base added to the model's figures, so the base cell is the headline (LP IRR 15.16%). Yield on cost is year 4 NOI over the $52,189,000 total project cost.