Real estate financial modeling can be complex, especially when it comes to structuring partnership cash flows. As highlighted in our Watch Me Build series, mastering these models is crucial for real estate professionals. One of the more intricate aspects is the Equity Waterfall With 3 Partners, a structure that dictates how profits are distributed among partners in a real estate deal.
If you’re looking to deepen your understanding of equity waterfalls with 3 partners, you’re in the right place. Whether you’re a student tackling a project, preparing for a real estate technical interview, or a professional working on a live deal, understanding the nuances of a three-partner equity waterfall is essential. Alongside this article, we encourage you to explore other resources available here at A.CRE to enhance your knowledge of real estate finance.
Diving into the 3-Partner Equity Waterfall Structure
This article and accompanying video aim to provide insights into building an equity waterfall with 3 partners. It’s designed to offer practical methods and approaches to real estate financial modeling, rather than being an exhaustive guide to Excel or real estate finance. If you’re keen on discovering different modeling techniques, you’ll find valuable tips here to apply to your own models.
In the video demonstration, I walk through the process step-by-step, explaining the rationale behind each formula and decision. While there’s a brief moment where the recording paused during the second hurdle (approximately 30 seconds, involving adding labels and linking assumptions), the core content remains intact. If any questions arise, please feel free to ask for further clarification.
To aid your learning, the completed model demonstrated in the video is available for download below. The zip file contains two Excel workbooks: one fully completed model as seen in the video and a blank template with formatting, allowing you to follow along and build the model yourself. We are always here to help, so if you have any questions or feedback, please reach out.
Expanding Your Knowledge with Additional Resources
For those interested in the subtle differences between preferred return and return of capital, topics often relevant in equity waterfall with 3 partners scenarios, the A.CRE AI Assistant is an excellent tool. This custom GPT is specifically designed to help you navigate real estate financial modeling concepts and A.CRE resources more efficiently. It allows you to delve deeper into specific areas, clarify doubts, and broaden your understanding without extensive manual searching.
Furthermore, our A.CRE Accelerator Core and Advanced Curricula offer comprehensive coverage of Equity Waterfalls and Partnership Cash Flow Modeling, crucial knowledge for mastering equity waterfall with 3 partners. If you’re looking for structured learning, consider joining today to access these resources.
Downloadable Template and Completed Files
To ensure these resources are accessible to everyone, we offer the template and completed files on a “Pay What You’re Able” basis. There’s no minimum (enter $0 if you wish) or maximum contribution, and your support helps us continue providing valuable content. Similar real estate training materials often retail for $100 – $300+. Simply enter your chosen price and email address to receive the download link, then click ‘Continue’. If you have any questions about our “Pay What You’re Able” program or our pricing approach, please contact either Mike or Spencer.
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Version Updates
v1.1
- Corrected an error in the ‘Sponsor Contribution’ row, ensuring the formula correctly pulls Sponsor contribution for periods 1-5 instead of LP contribution.
- Implemented minor formatting enhancements.
About the Author: Spencer Burton, with over 20 years of experience in residential and commercial real estate, has underwritten over $30 billion in commercial real estate transactions at leading institutional firms. He is currently President and a founding member of Stablewood. Spencer holds a BS in International Affairs from Florida State University and a Masters in Real Estate Finance from Cornell University.
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