THE EXIT MATH
Selling costs at exit—
Net sale proceeds after loan payoff—
TOTAL CASH TO DISTRIBUTE—
Total equity in the deal—
Profit above returned capital—
LP share of the equity
WHAT ACCRUES BEFORE ANYTHING SPLITS
Pref earned over the whole hold—
Preferred return accrued to the LP—
Preferred return accrued to sponsor co-invest—
Total preferred return owed—
LP share of that pref
Cash the catch-up tier needs—
LP dollars that equal hurdle 1—
LP dollars that equal hurdle 2—
TIER 1 — RETURN OF CAPITAL
Cash into this tier—
to the LP—
to the sponsor—
Cash still unallocated—
LP IRR if the money stopped here—
TIER 2 — PREFERRED RETURN
Cash into this tier—
to the LP—
to the sponsor, on its own capital—
Cash still unallocated—
LP IRR if the money stopped here—
TIER 3 — SPONSOR CATCH-UP
Cash into this tier—
to the sponsor — the first promote dollars—
to the LP—
Cash still unallocated—
LP IRR if the money stopped here—
TIER 4 — SPLIT UP TO HURDLE 1
Cash into this tier—
to the sponsor — promote—
to the LP—
Cash still unallocated—
LP IRR if the money stopped here—
TIER 5 — SPLIT UP TO HURDLE 2
Cash into this tier—
to the sponsor — promote—
to the LP—
Cash still unallocated—
LP IRR if the money stopped here—
TIER 6 — EVERYTHING ABOVE HURDLE 2
Cash into this tier—
to the sponsor — promote—
to the LP—
Cash still unallocated—
THE ANSWER
LP TOTAL DOLLARS BACK—
LP equity multiple—
LP IRR—
SPONSOR TOTAL DOLLARS BACK—
Of which promote, above capital and pref—
Sponsor equity multiple on its co-invest—
Sponsor IRR on its co-invest—
Sponsor's share of the total profit
Check: the tiers add up to the cash (must be 0)—
LEVERAGE CHECK
Loan-to-value at origination—
Room left to the 85% supervisory limit—
Exit Scenarios
Type sale prices in the blue column. Every other column uses the terms and hold period from THE WATERFALL tab.
| Gross sale price | Cash to distribute | Tier 1 return of capital | Tier 2 preferred return | Tier 3 catch-up | Tier 4 to hurdle 1 | Tier 5 to hurdle 2 | Tier 6 residual | LP dollars | Sponsor dollars | LP IRR | LP multiple | Sponsor promote | Sponsor % of profit | What this scenario assumes | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 2 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 3 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 4 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 5 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 6 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 7 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 8 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 9 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 10 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 11 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 12 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 13 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 14 | — | — | — | — | — | — | — | — | — | — | — | — | — | ||
| 15 | — | — | — | — | — | — | — | — | — | — | — | — | — |