From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework

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Modeling out the catch-up

Modeling out the catch-up

From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework

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Modeling out the catch-up

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- [Instructor] All right, welcome back. So, earlier we talked about the second hurdle, the IRR and the cash multiple, and how we take the greater of the two in order to calculate this in the worksheets. Now, after that what we have is the catch-up, right. So, how does the catch-up work? Well, let's go back to the calc sheet. So in the last two lectures, first we did the preferred return calculations here, after all the preferred return calculations, we have the cash at the end here, 1.9 million, it's a little bit small. I just want to show you kind of what we went over, and then we have this section with the second hurdle, and then this one, it took about 1.2 out of the 1.9 million to distribute during this tier. So then there's about 700,000 left. Okay, now out of this 700,000, the next part is the catch-up. So the catch-up is now going to be from here, from rows about 70 to 82. All right, so this is how we calculate the catch-up. I'm going to zoom in now to do the catch-up for…

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