A syndication distributes cash flow in a specific priority order — limited partners get their preferred return first, and only cash flow above that gets split with the sponsor.
How it works
The preferred return is the LP’s invested capital times the preferred rate. Available cash flow pays that first; anything left over splits between LP and sponsor at the promote ratio.
What this does not include
Real syndication waterfalls often have multiple promote tiers (e.g. 80/20 up to an 8% IRR, then 70/30 above that) — this calculator models a single-tier waterfall, not a multi-tier structure.
How to use this calculator
- Enter LP capital, the preferred return rate, and available cash flow.
- Enter the LP’s share of cash flow above the preferred.
Frequently asked questions
What happens if cash flow doesn’t cover the full preferred return?
The LP receives all available cash flow up to that shortfall, and the sponsor receives nothing from this tier until the preferred is fully current.
What is the “promote”?
The sponsor’s share of profits above the preferred return — compensation for finding, managing, and executing the deal, on top of any fees charged separately.
Does an unpaid preferred return accrue to future periods?
In many structures, yes — a cumulative preferred return carries forward any shortfall to be paid from future cash flow or at sale, a detail this single-period calculator doesn’t track across periods.
