ABSTRACT
Though often not thought of as a waterfall, the most basic form of waterfall is the order of cash flows which occur in the pro forma models. Rents arrive and are reduced by direct expenses resulting in Net Operating Income (NOI). Net Income is then reduced by Debt Payments which result in Net Income. Net Income is then distributed to the owners. Therefore the capital "waterfalls" from NOI to Debt to Equity. The ultimate division of the capital resultant in equity, to this point, has been percentage of capital provided. The typical pro forma structure, thus far, has been similar to a Syndication model. The chapter focuses on waterfall construction and waterfall incorporation. The Waterfall is constructed as an annual model and therefore have 12 total periods with the first period being the initial cash outflow.
