SmartHelping / Preferred Equity / Cash Flow Waterfalls
Preferred Equity Model with a Common Equity Waterfall
Model up to 10 years of distributions across preferred equity, common equity investors, and the sponsor. Define the preferred return and profit kicker, then follow capital repayment and the remaining distributions through an optional common equity waterfall.
The template is available to download immediately after purchase. By purchasing, you agree to the Terms of Service.
Video walkthrough & spreadsheet preview
See how preferred and common equity share the cash flow.
Preferred equity distribution logic
Follow the cash from the preferred claim to the common equity waterfall.
Set the preferred equity terms and use the optional common equity waterfall to model how cash remaining after the preferred distributions is allocated.
Set the funding mix and project cash flows
Define contributions from preferred equity, common equity investors, and the sponsor across the modeled years. Enter the cash available for distribution, including any exit proceeds.
Calculate the preferred return and capital repayment
When a preferred return is enabled, available cash first covers that return, then repays preferred equity. You can also model preferred equity without a preferred return.
Apply the optional preferred equity kicker
Optionally set a share of subsequent profits for preferred equity after its capital has been repaid. This lets the preferred participant retain a defined share of the remaining upside.
Allocate the remaining common equity distributions
Use the optional IRR hurdle waterfall to split remaining cash between common equity investors and the sponsor. Review each participant's distributions and resulting returns.
Return settings & reporting
Compare the timing and value of each participant's cash flows.
Compounding or non-compounding accrual
Unpaid preferred returns can accrue with or without compounding. Under the compounding option, unpaid returns increase the balance used to calculate future preferred returns.
Annual and cumulative cash flow
Review charts for each entity or equity pool showing annual cash flows and cumulative cash flows over the modeled period.
IRR and equity multiple
Compare IRR and equity multiple metrics for each pool to understand how the selected funding structure affects participant outcomes.
DCF analysis for each participant
The model includes discounted cash flow analysis for each participant in the deal. See the related DCF analysis template for a separate valuation tool.
Flexible funding structures
Use the equity pools your scenario needs.
Set unused contributions to zero to compare simpler structures alongside a full preferred-and-common equity setup.
Preferred equity plus common equity
Model preferred equity alongside common equity investors and the sponsor, with the common equity waterfall below the preferred distributions.
100% preferred equity funding
Model zero contributions from common equity investors and the sponsor. Cash remaining after the preferred equity distributions and any kicker flows to the sponsor.
Preferred equity and a sponsor
Use preferred equity with a sponsor and no common equity limited partner. Adjust the contribution mix to match the scenario.
Common equity waterfall only
Remove preferred equity and use the IRR hurdle waterfall between the common equity participants. The model also supports scenarios with only one contributing pool.
Updates included in the model
Review the accrual options and model refinements.
The updates add non-compounding accrual for unpaid preferred returns, participant DCF analysis, and a key with clearer formulas and explanatory text.
Non-compounding preferred returns
Watch the update explaining the option to accrue unpaid preferred returns without compounding.
Model key and calculation clarity
Watch the walkthrough of the added key and changes that make the model easier to follow.
Recording notes: the division error shown for 100% preferred equity and 0% common equity has been fixed. Preferred equity contributions in later years also now reference the correct preferred equity percentage.
Compare the distribution outcomes
See what changes when the funding terms change.
Adjust contributions, preferred returns, accrual settings, and the preferred equity kicker to see how distributions change across the participants. Use the common equity waterfall when your scenario also needs IRR-based allocation of the remaining cash.
The model starts with up to 10 years. For a longer period, extend the final year's columns to the right.
More templates in one purchase
Explore the bundles that include this model.
Questions before you start
A few useful details.
Why does the common equity tab show “Preferred Return Due”?
That row calculates the return due for the applicable common equity IRR hurdle. It is part of the common equity waterfall calculation. Unpaid amounts compound within that hurdle's balance so the model can calculate the distribution needed to satisfy the hurdle.
How does the common equity waterfall move between tiers?
Each tier limits its distribution to the cash available and the amount needed to satisfy its return and outstanding balance. Once that tier's balance reaches zero, its hurdle has been met. Later tiers account for contributions and distributions from the tiers above, and the bottom summary brings the distributions together.
Can unpaid preferred returns accrue without compounding?
Yes. The preferred equity settings include both compounding and non-compounding accrual of unpaid returns. This choice is separate from the compounding calculations used to track the common equity IRR hurdles.
Can I use preferred equity without a preferred return?
Yes. Cash can go toward repaying preferred equity without an annual preferred return. After repayment, the preferred participant can still receive a defined profit kicker.
Can preferred equity provide all of the funding?
Yes. The model supports 100% preferred equity with zero common equity or sponsor contributions. Cash left after the preferred equity distributions and any kicker goes to the sponsor.
Can I model more than 10 years?
Yes. Extend the final year's columns to the right to add more years to the model.
How do I get the template?
The template is available to download immediately after the $45 USD one-time purchase. It is also included in the Real Estate and Joint Venture bundles linked above. For questions about your setup, contact SmartHelping.
Preferred equity & common equity distributions
Model the cash flow for each participant.
Preferred Equity Model — $45, one-time purchase.
