https://syndicationbreakdown.com/How US real estate syndications are structured, how the waterfall splits the money, and how to read a sponsor before you wire.en-ushttps://syndicationbreakdown.com/real-estate-syndication-structurehttps://syndicationbreakdown.com/real-estate-syndication-structureA syndication is two things stacked on each other: a piece of commercial property finance, and a securities offering sold under an exemption from registration.Deal Structureshttps://syndicationbreakdown.com/llc-vs-limited-partnershiphttps://syndicationbreakdown.com/llc-vs-limited-partnershipBoth give passive investors limited liability and pass-through taxation. The differences are the sponsor's exposure and which document to ask for.Deal Structureshttps://syndicationbreakdown.com/reg-d-506b-vs-506chttps://syndicationbreakdown.com/reg-d-506b-vs-506cOne exemption forbids advertising and takes your word on accreditation. The other permits public marketing and requires documentary proof.Deal Structureshttps://syndicationbreakdown.com/accredited-investor-rule-501https://syndicationbreakdown.com/accredited-investor-rule-501The definition is a list of mechanical tests, not a judgment about competence. Meeting one gives access to private offerings; it does not confer readiness.Deal Structureshttps://syndicationbreakdown.com/form-d-edgarhttps://syndicationbreakdown.com/form-d-edgarEvery Regulation D offering leaves a public trail on the SEC's filing system. It is the cheapest diligence available on a sponsor, and almost nobody uses it.Deal Structureshttps://syndicationbreakdown.com/capital-stack-explainedhttps://syndicationbreakdown.com/capital-stack-explainedPayment flows from the bottom of the stack up and losses are absorbed from the top down. Everything else about priority follows from that one sentence.Deal Structureshttps://syndicationbreakdown.com/preferred-equity-vs-mezzanine-debthttps://syndicationbreakdown.com/preferred-equity-vs-mezzanine-debtBoth sit between the mortgage and the common equity. They differ in what they are secured by, what remedies they carry, and how fast control can change hands.Deal Structureshttps://syndicationbreakdown.com/class-a-class-b-lp-unitshttps://syndicationbreakdown.com/class-a-class-b-lp-unitsOne class takes a higher preferred return and less upside; the other takes the reverse. Which is better depends on an outcome nobody knows at subscription.Deal Structureshttps://syndicationbreakdown.com/fund-of-funds-spvhttps://syndicationbreakdown.com/fund-of-funds-spvAn aggregator gets you below a sponsor's minimum. It also adds a second layer of fees, a second manager, and a question about who is being paid to introduce you.Deal Structureshttps://syndicationbreakdown.com/syndication-vs-jv-vs-reithttps://syndicationbreakdown.com/syndication-vs-jv-vs-reitThe same real estate reaches investors through three wrappers, and the wrapper decides liquidity, control, taxation and what you can verify.Deal Structureshttps://syndicationbreakdown.com/distribution-waterfall-explainedhttps://syndicationbreakdown.com/distribution-waterfall-explainedThe waterfall is an ordered list, not a formula. Each tier fills completely before the next receives anything, and the order is where the money is.The Distribution Waterfallhttps://syndicationbreakdown.com/return-of-capital-tier-orderhttps://syndicationbreakdown.com/return-of-capital-tier-orderThe tier that repays your principal can sit first in the waterfall or last. Moving it changes whether the sponsor earns a promote on profit or on your own money.The Distribution Waterfallhttps://syndicationbreakdown.com/preferred-return-cumulative-compoundinghttps://syndicationbreakdown.com/preferred-return-cumulative-compoundingFour one-word choices inside a definition decide what "8% preferred" is worth. All four produce the same phrase in the marketing material.The Distribution Waterfallhttps://syndicationbreakdown.com/gp-catch-up-provisionhttps://syndicationbreakdown.com/gp-catch-up-provisionThe tier that pays the sponsor while appearing to pay nobody. It converts a preferred return from a permanent priority into a question of timing.The Distribution Waterfallhttps://syndicationbreakdown.com/the-promote-explainedhttps://syndicationbreakdown.com/the-promote-explainedA disproportionate share of profit, earned on capital the sponsor did not contribute. It is the central incentive and the most negotiable number in a deal.The Distribution Waterfallhttps://syndicationbreakdown.com/hurdle-rates-irr-vs-equity-multiplehttps://syndicationbreakdown.com/hurdle-rates-irr-vs-equity-multipleThe measure a hurdle uses decides what the sponsor is rewarded for. One pays for speed, the other for total dollars, and they disagree where it matters.The Distribution Waterfallhttps://syndicationbreakdown.com/worked-waterfall-examplehttps://syndicationbreakdown.com/worked-waterfall-exampleOne hypothetical deal, five tiers, every intermediate figure printed. The arithmetic is ordinary; what it shows is how much of the outcome the tier order decides.The Distribution Waterfallhttps://syndicationbreakdown.com/european-vs-american-waterfallhttps://syndicationbreakdown.com/european-vs-american-waterfallOne structure pays the sponsor only after every investor is whole across the whole program. The other pays deal by deal and relies on a clawback.The Distribution Waterfallhttps://syndicationbreakdown.com/clawback-provisionshttps://syndicationbreakdown.com/clawback-provisionsA true-up that requires the sponsor to give back promote it should not have received. Its value depends entirely on who owes it and whether anything secures it.The Distribution Waterfallhttps://syndicationbreakdown.com/irr-equity-multiple-cash-on-cashhttps://syndicationbreakdown.com/irr-equity-multiple-cash-on-cashEach measure answers a different question and none answers the others. Quoted alone, any one of them can make an ordinary deal look like a good one.The Distribution Waterfall