Reference no: EM133070449
Worksheet - Waterfall Distribution (Please show all work)
Case Problem - Belmont Real Estate Fund II
Belmont Real Estate Fund II (BRE II) is an opportunistic real estate fund that invests in all five real estate sectors - Industrial, Office, Apartments, Retail and Hotels. The Fund invested $400 million in equity. BRE II was projected to return a 20%+ IRR and a 4.0x+ equity multiple. The fund terms are as follows:
- European Waterfall
- LP Preferred Return of 10%
- Catch up is 50/50
- Carried Interest split is 80/20
- Management Fees are outside the commitment (they do not need to be paid back before carried interest is paid)
The Fund was a 10-year fund and was fully liquidated after Year-10 for total proceeds of $1,700 million.
Question 1 After Year-10, calculate the fund's value based on the hurdle (10%) that must be achieved before the GP participates in any carried interest.
Question 2 At the Catch-up of 50/50, both the GP and LP get 50% of the following amount, which equals what?
Question 3 Now that the 80/20 split of profits has been achieved what are the remaining profits to be split 80/20? What is the LP portion and what is the GP portion?
Question 4 What are the total dollars and percentage of the LP and GP profits?
Question 5 What is annualized return of the BRE II?
Question 6 What is the Breakeven IRR on BRE II (the IRR that gets GP to full 20% carried interest)?
Bonus Question What is the equity multiple (TVPI - Total Value to Paid In) for BRE II?
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