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Preferred return and split calculator for a syndication
Enter LP equity, the preferred return, the yearly distributable cash flow and the LP share above the pref. The calculator shows the yearly LP and sponsor distributions, the LP cash yield and any unpaid pref.
Fund and deal returns
LP distributions a year
$390,000
- Sponsor share a year
- $30,000
- LP cash yield
- 9.75%
- Unpaid pref a year
- $0
- LP cash over the hold
- $1,950,000
Planning estimate from the figures you enter. Not investment, tax or legal advice.
How it is calculated
- Pref owed = LP equity x pref rate.
- LPs get cash up to the pref owed; any gap is unpaid pref.
- Cash above the pref is split: the LP share to LPs, the rest to the sponsor.
- LP cash yield = LP distributions / LP equity.
Worked example: $4 million of LP equity at an 8% pref
| Pref owed | $320,000 a year |
| Cash above the pref | $100,000 |
| LP share (70%) | $70,000 |
| LP total a year | $390,000 (9.75%) |
| Sponsor share | $30,000 |
Operating cash only
This models yearly operating distributions. Sale or refinance proceeds usually run through a separate waterfall with return of capital and IRR hurdles. Show both in the offering documents.
Accrual
Many operating agreements let unpaid pref accrue and be paid from later cash or the sale. Some compound it. State which in the PPM and the summary sheet in the room.
What investors check
Passive investors compare the pro forma cash flow with the rent roll, the T-12 and the loan terms. Put those next to the model in the data room so the numbers can be traced.
Mistakes to avoid
- Projecting pref coverage from a pro forma that ignores debt service.
- Not saying whether unpaid pref accrues.
- A summary split that differs from the operating agreement.
- Hiding the sponsor's fees outside the waterfall.
Questions and answers
Is the pref a guaranteed return?
No. It is a priority in the order of distributions, paid only if cash is available.
What is a typical split?
Splits like 70/30 or 80/20 above an 8% pref are common in syndications, often with higher sponsor shares after IRR hurdles. Terms vary by sponsor and deal.
Which documents go in the room?
The PPM, operating agreement, subscription agreement, model, rent roll, T-12, loan term sheet and property reports. See the checklist for a real estate raise.