I’ve been teaching real estate finance for years, and as a result, people like to send me things that are screwed up and then ask me for my opinion.
See below. It’s an example of how not to write a waterfall structure.
Depending on how you read it, you’re either compounding monthly or daily (e.g., XIRR) or maybe some odd combination of both.
The solution to this is simple. Stop asking lawyers to explain math. Instead of trying to write out what you mean, show what you actually mean with numbers, formulas, and examples. Then, everyone knows what they are agreeing to.
Oh, and why was I sent this? It’s because when you have a poorly written agreement, people argue, and then they hire even more lawyers, and then no one wins.
If this sort of stuff is your sort of thing, or if you want to know more about how to calculate waterfalls, I’m doing my periodic modeling class on Excel for real estate analysis later this week. I’ll also be offering it in June and again about every six weeks for the rest of the year.