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Waterfalls 101 - Getting Started

The IMS Waterfall module provides a rule-based engine that allows Real Estate Sponsors to calculate distribution amounts due to investors.  The system allows the use to set multiple rules sets at an Entity level, and then combine them into a Project level ruleset for multi-tier structures.  

This document will provide you with detailed instructions on how to setup and maintain your rulesets over the life of your project.  For your convenience, the waterfall IMS Waterfall module contains templates geared towards particular calculations to ensure minimal input on the user’s part.  The current templates available for use are displayed below:

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Before you get started:

When you are ready to setup your rulesets, you will want to have the relevant Operating Agreement or other documentation that clearly describes the order of your waterfall, along with pertinent definitions that may highlight specific preferred return rates, IRR, and Equity Multiples for hurdles.  

To get started, you will need to go to the Waterfall tab within the Equity module for the specific project you want to add Entity level rulesets for.  If you have a multi-tier structure, you will need to add the individual Entity level rulesets prior to creating a Project level ruleset.  To get started, you can either go to “Manage Equity” from the Home Page tile of the Project you wish to work on, or go to the Project Summary page and click on the hyperlink of the applicable Project:

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Once you select a project, you will land on the List View.  From here you can jump to the entities that you want to create rulesets for.  In the example below, we have a multi-tier structure.  You can input in any order you would prefer, but ultimately will need to ensure all of the entities you want to distribute cash through are accounted for before creating a Project Level waterfall.  Simply click on the Entity you want to add rules to:

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Once you click on the entity, you will move into a screen where you can access the CapTable, Waterfalls, and Distributions tab.  Go to the Waterfalls tab and select the “Add Waterfall” button:

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You will be prompted to name the Entity level Waterfall.  You can have multiple waterfalls, so use a name you will recognize (i.e. Quarterly Distribution, Capital Event Waterfall, etc.).  It is completely customizable so use what will make sense to you when you are ready to run your waterfall in the future.

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