5-Tier Waterfall with GP Catch-Up

5 TIER WATERFALL WITH GP CATCH UP FUNCTIONALITIES

This model is a fully flexible GP–LP waterfall engine designed to handle partnership distributions across 2 to 5 tiers, including a detailed and accurate GP catch-up mechanism. It is built to reflect institutional-level promote structures while remaining transparent, customizable, and easy to audit.

Key Functionalities

1. Adjustable Tier Count (2–5 Tiers)

• The user can select how many tiers their deal structure requires.
• Each tier includes customizable hurdle rates and distribution splits.
• Changing tiers automatically updates downstream logic without restructuring the spreadsheet.

2. GP Catch-Up Feature

The model supports two distinct types of GP catch-up calculations:

a. Catch-Up Based on % of Total Distributions

• After the preferred return tier, distributions shift to a GP/LP split.
• The allocation continues until the GP’s cumulative share of total distributions reaches the defined catch-up percentage.

b. Catch-Up Based on % of Total Profit

• The catch-up phase continues until the GP’s cumulative portion of total deal profit aligns with the target catch-up percentage.

This gives users flexibility across different deal structures and LP negotiation requirements.

3. Automated Catch-Up Progression

• After Tier 1 (typically the preferred return), the model initiates a catch-up phase.
• During this phase, cash flow is split between GP and LP in a controlled ratio.
• The split automatically stops once the GP hits the catch-up threshold.
• The model then proceeds to the next promote tier.

This ensures precise catch-up mechanics without manual intervention.

4. Tier-by-Tier Promote Logic

• Each tier includes defined hurdle rates (IRR or equity multiple).
• Once a tier’s hurdle is met, the model moves to the next one seamlessly.
• Promote splits (e.g., 70/30, 60/40, 50/50) update automatically as hurdles are exceeded.

5. Fully Transparent Calculation Engine

• All calculations—capital balances, preferred return accrual, profit splits, and catch-up—are laid out clearly.
• No circular references, hidden macros, or opaque logic.
• Easy for LPs, auditors, and partners to review.

6. Aggregated & Output Views

• Summary tables show total distributions to LP and GP by tier.
• Cumulative totals and final promote percentages are displayed for clarity.
• Easy to integrate with broader underwriting or cash-flow models.

Who This Model Is Designed For

• Real estate GPs
• LP institutions
• Developers
• Syndicators
• Fund managers
• Analysts needing precise waterfall modeling