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Waterfall 202 - Catch Up Template

The Catch Up Template is commonly used where a Managing Member Class or GP Class is entitled to receive funds from the general Members or LP’s in the Project after those members have received a predetermined amount of cash which can be one stream such as their preferred return, or multiple including up to all distribution amounts. 

Pre-Conditions for use:

Must have at least two distinct Classes in the Entity to build

 

The screen shot below shows the template and the five (5) mandatory fields and one optional field to complete.CU_1.png

Input Fields:

Class to receive:  Pick the class that will receive the dollars generated by this rule.  You can pick more than one class if you have three or more classes in your project

Percent (%): Input the percent that the Class is entitled to receive

Bucket (as a): Select from the drop down the most appropriate bucket that describes what this cash is to be attributed to (often Promote or Excess Cash)

Of Class: Select the class that you need to evaluate to base your Catch Up

Select Distribution Sub-Type: Select the bucket(s) that contain the cash flow you need to base your percentage on.  You can select more than one up to all options if the Catch Up is based on all Distributed Cash Flow.

Gross up the cashflow for total amount to be split: This is an optional check box that will drive how the Catch up is calculated.  A sample follows and is available for reference in the application by selecting the “?”.

Gross Up Example

Waterfall

  • Investor invests $100,000
  • Rule 1: Investor is entitled to an 8% Preferred Return Rate
  • Rule 2: Manager is entitled to a 20% Catch up

Distribution

  • Rule 1: Let’s say the Investor receives $8,000 of Preferred Return as stated in Rule 1.
  • Rule 2: 
    • If the checkbox is not selected: cu_2.png
    • The calculations will not include the cashflow from this rule. In this example the Sponsor would then receive the following: 
      $1,600 (20% of $8,000)
    • If the checkbox is selected: cu_3.png
    • The calculations will include the cashflow from this rule. In this example the Sponsor would then receive the following: 
      $2,000 (20% x ($8,000 + $2,000))
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