GP Catch Up Clauses in Private Equity Real Estate Explained

GP Catch Up Clauses in Private Equity Real Estate Explained // If you've worked in real estate private equity, especially if you've worked for a real estate private equity fund, you've likely heard the catch up waterfall structure discussed or used in a real estate partnership structure. But what is the GP catch up clause in private equity real estate, and how is it used? That's what we're going to cover in this video.

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[BreakIntoCRE]

Any other waterfall structures you want to see a video on? Let me know in the comments. Thanks for watching!

[jac]

I like that you keep it short and sweet to the point that keeps me interested

[anthonyrobertaziz]

New to this channel and many of these concepts (from a different field, kind of) and after having seen comparable videos on other channels, I have to say that your explanations are very clear, fairly succinct and easily digestible. Keep up the great content - love it!

[chiewsaetern]

I’m just started providing financing for CRE and other types of deals and your channels has really helped me understand the financial lingo!!! Thanks!!!

[marinawong]

Having invested in syndication deals for a few years and looked at many discounted cash flow models, I have to say your video is one of the most detailed one though I would prefer to see some actual numbers in these videos. I am learning some jargons in co-GP deals and came across this video. Will definitely look thru your other videos to see what you have. Thank you.

[nikolaidoinikov]

Thanks for this explanation! Will use this notion to crack the CAIA exam soon.

[dilsaj]

Will you launch content on private equity (not only real estate)?

[unguyenvan]

You try to give the video more brightness it will be great if you do

[guyhakim]

Hey,
what do u mean "the overall cash flow" ?
it's the overall net cashflow from rent ?
what about sale ?

thanks

[shashankc.r]

In pyramid top cashflows are split 80:20 how is it derived on what basis please explain

[marinawong]

In your example of 8% pref, since the GP has invested 10% of the total equity, is this 10% of equity treated like any LP investment? In another word, this 10% earns exactly what the 90% would earn and is not part of the GP economics. Once the pref is achieved (by both the 90% LP capital AND the 10% GP capital) and there is the 50/50 split, the GP is really getting 10% of the LP economics (since it represents 10% of the total capital), which is 5% of the entire capital undergoing the 50/50 split, plus the GP economics, which is half of the capital being split, resulting in 55% of the capital being split. Is this calculation correct?

[penwille]

Are clawbacks and catchups the same thing?

[balrajvishnu]

Is hurdle rate and preffered return the same ??

[cc]

Will there typically be anything going into the cash reserve? for maintenance, emergency fund etc? Also are most of these structures you see on a personal basis typically financed 100% privately or are there some form of bank financing involved?

[shaimosc]

Have you ever seen a waterfall structure where the GP/LP start to split cash flow disproportionately after the pref, BEFORE either party gets their original investment back ? Under that scenario, what happens if the property cash flows well during a 5 year hold, but then tanks on a sale. Does the GP pay back some/all of the disproportionate cash flows that he took in years leading up to the sale ?

[Mr.Moneybags]

so it is accurate to think the catch up is like the gp falling behind in profit for himself, and the catch up is him "catching up" on the profit level???....

[pammi]

how would you model a 2-layered catchup? meaning if 8% pref, 20% catchup; 12% pref, 30% catchup? Thank you!