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 $4\mathrm{.}0$x$+$ 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. $(2$ 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 be split $80/20?$ 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