Preferred Equity Waterfall ModelFree Financial Model Download

Allocate exit proceeds through a multi-class equity waterfall with preferred return compounding, return-of-capital priority, sponsor catch-up, and residual split mechanics. This template models Class A, B, and C preferred equity alongside common equity (sponsor), with each class accruing a preferred return (e.g., Class A at 6%, Class B at 10%) on unreturned capital, and distributions flowing through strict tiers. The model handles preferred return compounding when operating cash flows are insufficient for full payment in a given year.

The workbook includes a project cash flow sheet (NOI growth and exit proceeds based on entry/exit cap rates), capital account tracking for each class (contributed capital, returned capital, accrued but unpaid preferred, distributions received), and a full waterfall schedule showing cash allocation each year. The model validates that Class B receives zero preferred until Class A's accrued preferred is satisfied, and that catch-up payments properly equalize GP share of cumulative profits. Returns sheets calculate IRR and equity multiple for each class and document the J-curve effect (common equity receiving nothing until preferred classes are made whole).

Target users are real estate sponsors structuring joint ventures, institutional LPs evaluating preferred equity tranches, and capital markets teams modeling multi-tranche equity offerings in the $10M to $500M equity range.