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Concepts

December 31, 2017

5 min read

Understanding Private Equity Waterfalls, Clawbacks, and Catch-Up Clauses

In private equity, a 'waterfall' refers to the priority sequence in...

In private equity, a 'waterfall' refers to the priority sequence in which profits from an investment are distributed among the general partners (GPs) and limited partners (LPs). It's akin to a multi-tiered waterfall, where the water - the profits in this analogy - cascades down different levels, each representing a phase in the profit distribution process.

Consider an example: A real estate fund acquires a property, invests in improvements, and then sells it at a profit. According to a typical 'European Waterfall' structure, the first tier - the top of our waterfall - ensures the return of the original capital to the LPs. The second tier provides the LPs with their preferred return, a predefined percentage on their initial investment.

Only after these two levels are satisfied does the waterfall flow to the third tier. Here, the remaining profits, often called 'excess profits,' are divided between the LPs and GPs. It's common for this split to favor the GPs, typically around an 80-20 LP-GP ratio, incentivizing fund managers to exceed the preferred return threshold.

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April 27, 2019

5 min read

Safeguarding Your Real Estate Legacy: Asset Protection and Estate Planning

As an investor, your journey doesn't end with just acquiring properties...

As an investor, your journey doesn't end with just acquiring properties and generating a steady cash flow. An often overlooked but crucial aspect of your investment strategy involves safeguarding your investments for the long term and planning how they will be handled after your lifetime. This blog explores key strategies for both active and passive investors to protect their real estate assets and set up their estate for a seamless transition.

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