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 funds value based on the hurdle (10%) that must be achieved before the GP participates in any carried interest. (2 pts).

Question 2 At the Catch-up of 50/50, both the GP and LP get 50% of the following amount, which equals what? (4 pts)

Question 3 Now that the 80/20 split of profits has been achieved what are the remaining profits to besplit 80/20? What is the LP portion and what is the GP portion? (6 pts)

Question 4 What are the total dollars and percentage of the LP and GP profits? (4 pts)

Question 5 What is annualized return of the BRE II? (2 pts)

Question 6 What is the Breakeven IRR on BRE II (the IRR that gets GP to full

20% carried interest)? (2 pts)

Bonus Question What is the equity multiple (TVPI Total Value to Paid In) for BRE II? (2 pts)