1. Consider a private equity fund that invests simultaneously in two 24 month projects with the intent of liquidating them both on completion. The first project is identical to the project in problem ; assume both costs and NOI equal forecasted values upon completion. The second project requires $20 million in equity, has a total (forecasted and realized) cost of $60 million, and has a forecasted dev cap rate of 10% but on completion falls short of NOI projections. Realized return on cost = NOI/total cost = 8.44%. As in 10% of the equity comes from the operating partner and 90% from the capital partners. Find the total cash flow to the equity investors at the end of 24 months given the following cash distribution rules: pari pasu project cash splits until a 12% pref IRR, 20%/80% operating partner/capital partner splits thereafter:

1. assuming that the cash distribution rule is applied to the total equity investment across the two projects (a European waterfall);
2. assuming that the rule is applied to the equity investment is each project separately (an American waterfall).