Equity Waterfall Calculator
Model promote structures and distribution waterfalls between GP and LP equity partners.
Model how distributions split between general and limited partners through a preferred return and a promote above it. The waterfall determines who actually receives the returns a deal produces, which is frequently more consequential than the deal's headline IRR.
Equity Structure
Cash Flows
Total equity proceeds from exit after debt payoff
Waterfall Terms
What to watch
- Whether the preferred return compounds, and whether it is cumulative, changes LP outcomes substantially over a multi-year hold. Confirm which applies before modelling.
- A single-tier promote is the simplest structure. Multi-tier waterfalls with IRR hurdles shift more upside to the GP as returns rise, so compare structures at several outcome levels rather than at the base case only.
- Whether the promote is calculated on cash flow, on capital events, or on both — and whether there is a clawback — materially affects GP economics.
- Return of capital ordering matters. Whether LPs receive their capital back before the preferred return is satisfied, or alongside it, changes both parties' timing.
Frequently asked questions
What is a promote in a real estate waterfall?
The general partner's disproportionate share of profits above an agreed threshold, usually a preferred return to limited partners. It compensates the sponsor for finding, structuring, and executing the deal beyond their pro-rata co-investment.
What is the difference between a cumulative and non-cumulative preferred return?
A cumulative preferred return accrues any shortfall and carries it forward until paid, so an underperforming year still has to be made up later. A non-cumulative preference does not carry forward — a missed year is simply missed. The difference compounds significantly over a multi-year hold.
How does a promote clawback work?
A clawback requires the GP to return promote already distributed if final results fall short of the agreed thresholds — protecting LPs where strong early distributions are followed by weak later performance. Whether one exists, and how it is secured, is a heavily negotiated point in the joint venture agreement.
Go deeper
The CRE Capital Stack Explained: Priority, Cost, and Control
Senior debt, mezzanine, preferred equity, and common equity each sit in a defined place in the payment waterfall. Position determines cost, and cost is only half of what each layer takes.
Read the articleThis calculator produces estimates from the assumptions you enter. It is not investment, tax, or legal advice, and actual lender terms, pricing, and outcomes will differ. Confirm anything you intend to rely on with advisers engaged on your specific facts.
Need help structuring this deal with real numbers?
Talk to a Capital Advisor