Free equity waterfall calculator
Enter the LP and GP equity, the cash flow to equity each year, and up to four hurdle tiers. See what each partner receives, their IRR and multiple, and what the promote costs the LP.
The LP gets $27,633,610; the GP gets $7,506,390.
$1,979,668 of the GP's share is promote. Without it, the LP would get $1,649,723 more.
LP $21,967,921 · GP capital $4,393,584 · promote $0
LP $4,359,204 · GP capital $871,841 · promote $1,307,761
LP $1,306,485 · GP capital $261,297 · promote $671,907
LP $0 · GP capital $0 · promote $0
LPGP capitalGP promote
| Year | Cash flow | To LP | To GP capital | GP promote | GP total |
|---|---|---|---|---|---|
| 0 | -$18,000,000 | -$15,000,000 | -$3,000,000 | $0 | -$3,000,000 |
| 1 | $0 | $0 | $0 | $0 | $0 |
| 2 | $0 | $0 | $0 | $0 | $0 |
| 3 | $0 | $0 | $0 | $0 | $0 |
| 4 | $1,080,000 | $900,000 | $180,000 | $0 | $180,000 |
| 5 | $34,060,000 | $26,733,610 | $5,346,722 | $1,979,668 | $7,326,390 |
The defaults are the illustrative deal from an offering memorandum template. Annual periods; hurdles are measured on the LP and compound annually. General information, not financial, legal or investment advice.
A waterfall decides who gets each dollar the deal returns. This one uses IRR hurdles measured on the LP, the most common structure in development deals.
Year 0 The LP and the GP put in their equity. Their shares of the total set the pro rata split.
Each year Every open hurdle balance starts at the LP’s equity and grows by its hurdle rate. Cash runs down the tiers in order.
In each tier The GP takes the tier’s promote %. The rest is split pro rata between LP and GP capital. The tier fills when the LP has received enough to bring its balance to zero, that is, when the LP’s IRR reaches the hurdle.
Every LP dollar reduces every open hurdle balance, so a later tier only starts once the LP has passed the earlier hurdle.
The last tier has no hurdle. Everything left goes through it at its promote %.
IRR is the rate that brings each partner's cash flows to zero, solved by bisection. Equity multiple is total distributions ÷ equity in.
Most offering memoranda present annual cash flows, and an annual waterfall is easy to check by hand. Real agreements often compound hurdles monthly or daily and distribute quarterly, which moves the split a little. Your operating agreement controls.
It is what the LP gives up for the promote: the LP’s pro rata share of every dollar distributed, minus what the LP actually receives through the tiers. It is lower than the promote itself, because part of each promoted dollar would have gone to the GP’s own capital anyway.
No. Equity goes in once, in year 0, and cash flows after that cannot be negative. There is no GP catch-up and no clawback. Use it to sanity-check a structure, then model the agreement as written.
No. It is arithmetic on the numbers you enter. It does not know your deal, your partners or your agreement. Have your counsel and accountant review any structure before you sign.
General information, not financial, legal or investment advice.
The split only matters if the project works. Get the zoning, lot size, setbacks and height for the address, with sources.