SmartHelping / Joint Venture Waterfalls / Excel
Simple-Interest Preferred Return
Model a non-compounding preferred return with three hurdle rates and four distribution tiers. Set the LP/GP split at each tier, enter capital contributions and repayments separately, and review the resulting partner cash flows and IRRs.
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See the model in action
Follow the accrued return through the distribution tiers.
Watch the walkthrough to see the hurdle rates, cash splits and separate capital-return row. Open the screenshots below to preview the spreadsheet.
What the template includes
Configure the return hurdles and partner allocations.
Use the template for GP/LP joint ventures with simple-interest preferred returns, one or more equity contributions and distributions over time.
Three hurdles, four tiers
Define three preferred-return hurdle rates and a fourth tier for cash remaining after those hurdles are met.
LP and GP splits by tier
Set how available cash is split between the limited partner and general partner at each hurdle and in the final tier.
Non-compounding accrual
Preferred return accrues using simple interest. Unpaid preferred return does not compound into the equity balance.
Separate capital repayments
Use the dedicated row to specify return of invested capital. These repayments reduce the cash available for the hurdle distributions.
Contributions over time
Enter initial and additional investments and separate capital repayments. Changes to the invested balance affect the return due.
Partner returns and optional GP capital
Review the final LP and GP IRRs. The structure can be used when the GP contributes no capital.
Understanding the structure
Keep accrued return, capital repayment and IRR distinct.
Simple-interest hurdles
The hurdle rates determine the accrued preferred return. The resulting LP and GP IRRs are separate outputs and can differ from those rates.
Return of invested capital
This template models a preferred return with capital repayment entered separately. Use that row to reflect the agreed repayment schedule; the return hurdles do not replace it.
Cash moves through the tiers
Distributions first work through the accrued return in the current hurdle, using that tier’s LP/GP split. If cash is insufficient to meet the hurdle, the waterfall stays in that tier until the available cash is used.
Worked distribution example
See a $50 million distribution move through all four tiers.
The example uses 9%, 15% and 20% simple-interest hurdles, followed by a 55% LP / 45% GP residual split.
| Distribution tier | Cash split | To LP | To GP | Cash remaining |
|---|---|---|---|---|
| Tier 1 · 9% hurdle | 100% LP / 0% GP | $9,000,000.00 | $0.00 | $41,000,000.00 |
| Tier 2 · 15% hurdle | 90% LP / 10% GP | $6,000,000.00 | $666,666.67 | $34,333,333.33 |
| Tier 3 · 20% hurdle | 80% LP / 20% GP | $5,000,000.00 | $1,250,000.00 | $28,083,333.33 |
| Tier 4 · Above 20% | 55% LP / 45% GP | $15,445,833.33 | $12,637,500.00 | $0.00 |
| Total distributed | All four tiers | $35,445,833.33 | $14,554,166.67 | $0.00 |
Illustration assumes $10,000,000 of LP capital remains invested for 10 years, the GP contributes no capital, and there are no interim distributions or capital repayments. In Year 10, $50,000,000 is available for the four-tier waterfall. Any separately designated capital repayment would reduce the available cash before these allocations. Amounts are rounded to cents.
First hurdle: 9%
The LP’s accrued preferred return is 9% × $10,000,000 × 10 years = $9,000,000. The 100% LP / 0% GP split leaves $41,000,000 available for the next tier.
Second hurdle: 15%
The LP’s cumulative preferred-return target is $15,000,000. After the $9,000,000 paid in Tier 1, the LP needs another $6,000,000. At a 90% / 10% split, the GP receives $666,666.67 and $34,333,333.33 remains.
Period setup and spreadsheet format
Extend the schedule and match the rate to the period.
The template is delivered in Excel and can be uploaded to Google Sheets. The schedule can be extended for as many periods as your analysis needs.
Annual periods
Use the annual simple-interest hurdle rate directly when each period represents one year.
Monthly periods
For a monthly schedule, divide the annual simple-interest hurdle rate by 12.
Quarterly periods
For a quarterly schedule, divide the annual simple-interest hurdle rate by 4.
Excel with Google Sheets compatibility
Download the Excel spreadsheet after purchase. Upload it to Google Sheets if you prefer to work there.
These rate adjustments apply to this non-compounding simple-interest structure. Use the period-conversion guide below when adapting the waterfall’s timing.
How to use the template
Translate the distribution terms into a cash flow schedule.
Enter contributions and distributable cash
Add initial and subsequent equity contributions and the distributions available in each period.
Specify capital repayments
Use the separate capital-return row for any invested capital that should be repaid under the deal terms.
Set the hurdles and splits
Enter the three simple-interest rates, the LP/GP split at each hurdle and the final residual split. Match the rates to the period length.
Review the allocation and partner returns
Follow the cash through the four tiers and review the LP and GP IRRs. Change timing, amounts or split assumptions to compare another case.
Who this template is for
For sponsors, investors and joint venture modelers.
GPs and sponsors
Model a non-compounding preferred-return structure with multiple hurdles and tier-specific distribution splits.
LPs and financial analysts
Review accrued return, designated capital repayments and partner outcomes using the proposed cash flow schedule.
Also available in these bundles
Need more waterfall or real estate models?
This template is included in the Joint Venture Waterfall and Real Estate bundles. The Super Smart Bundle includes the complete public SmartHelping template collection.
Joint Venture Waterfall Templates
Explore preferred returns, IRR hurdles, equity multiples and partner-distribution models.
View the Joint Venture bundleReal Estate Financial Models
Explore models for property acquisitions, development and real estate investment structures.
View the Real Estate bundleSuper Smart Bundle
Access the complete public SmartHelping template collection across industries and financial-analysis needs.
View the Super Smart BundleRelated modeling guides
Explore timing, hurdle design and equity considerations.
Annual, Monthly & Quarterly Waterfalls
Read the guide to adapting waterfall periods and matching the hurdle-rate calculation to the timing.
Read the guideMore Hurdles or Fewer Hurdles?
Read the discussion of how hurdle design affects an investment waterfall.
Read the articleEquity Ownership Considerations
Read the discussion of considerations when giving up equity in a business.
Read the articleQuestions before you buy
A few useful details.
Does unpaid preferred return compound?
No. The preferred return accrues using simple interest and does not compound into the equity balance.
How many hurdle rates and distribution tiers are included?
There are three preferred-return hurdle rates and four distribution tiers, with LP/GP splits defined for each tier.
Does the hurdle rate equal the LP’s IRR?
The simple-interest hurdle determines the accrued preferred return. The resulting LP and GP IRRs are calculated separately and can differ from the hurdle rates.
How is invested capital returned?
A separate row lets you specify capital repayments. Those repayments reduce cash available for the hurdle waterfall and affect the invested balance used for return calculations.
Does the GP have to contribute capital?
No. The template supports a structure in which the GP contributes no capital.
Can I extend the schedule or change the period length?
Yes. Extend the schedule as needed. For this simple-interest structure, divide the annual hurdle rate by 12 for monthly periods or by 4 for quarterly periods; use the annual rate directly for annual periods.
Can I use it in Google Sheets?
Yes. The purchase provides an Excel download that can be uploaded to Google Sheets.
Make the distribution mechanics clear
Model simple-interest hurdles and partner cash flows.
Get the Preferred Return Financial Model for $45, with three non-compounding hurdles, four tiers and a separate return-of-capital input.
