What the operating agreement says, and what the model computes.

“The waterfall in the model is not the waterfall in the operating agreement.”

The buildings are one business and the capital structure is another, and the second is where the money is actually decided. Waterfalls, capital accounts and covenant definitions are agreed once, then computed for years by a spreadsheet nobody else can read. A review reconciles the computation to the document.

waterfall
promote
preferred return
capital account
DSCR
debt yield
clawback
cost to complete
related-party fees

Your words, not ours.

Where it concentrates here

7 places the money tends to go in a real estate sponsor. Each one is concentrated — a single agreement, a single queue, a single account nobody reviews — which is why sampling walks straight past them.

A distribution waterfall computed by a spreadsheet that has never been reconciled, clause by clause, to the operating agreement it implements.
Preferred return accruing at a rate and compounding on a basis that the model and the agreement describe differently, discovered at the crystallization event.
Covenant ratios reported against a definition borrowed from another loan — DSCR and debt yield are defined per document, and the definitions differ.
Affiliated fees — asset management, construction management, acquisition — charged to deals at rates that were never re-consented as the platform grew.
Investor capital accounts maintained in the fund system and in the tax return with no reconciliation between them.
Development budgets reforecast informally while the lender still holds the original, making a routine overrun a covenant event nobody flagged.
Promote already distributed against a clawback that has never been modeled under a downside case.

Not every real estate sponsor is the same business

Sponsors and syndicatorsDeal-by-deal entities, each with its own waterfall, promote and capital accounts, and no consolidated view of what the sponsor actually earned.
Funds and programmatic capitalPreferred return accruals and clawback exposure that is computed once a year, usually by the person who built the model.
Property management armsManagement and construction management fees earned from affiliated entities, which is exactly where a related-party question lands.
DevelopmentCapitalized interest, draw schedules and cost-to-complete, where a budget reforecast is a covenant event.
Affordable and tax-credit housingLIHTC compliance periods, investor reporting and recapture exposure that survives long after the deal closes.

Where this data actually lives

Yardi Voyager or MRI at the property level; Investran or Juniper Square for the fund and investor layer
Excel for the waterfall — almost always, and almost always unreconciled to the operating agreement
AppFolio or Entrata in the smaller property management operations
A separate lender reporting pack per loan, assembled by hand each quarter

Named because it changes what the intake asks for. An extract from one of these has known gaps, and the review is built around them rather than surprised by them.

Reported in your numbers, not ours

DSCR
debt yield
IRR and equity multiple
preferred return accrual
NOI bridge
capital account balances
cost to complete
management fee capture

The obligations that set the deadlines

Lender covenant certificates — DSCR, debt yield, LTV — and the calculation definitions that differ per loan document
Investor capital account statements and K-1s, tied to the operating agreement
SEC Regulation D filings and, where relevant, Form D amendments
LIHTC and HUD compliance reporting where applicable
Property tax appeals and the deadlines that cannot be extended

What the review would ask you for

9 requests written for a real estate sponsor and asked of nobody else — 6 of them core. They sit alongside the operating spine every business has — finance, revenue, receivables, payables, contracts, people, IT, operations, risk, commercial and governance — which is 107 further requests.

Entity map: sponsors, funds, JVs and property SPEs Core Ownership percentages and who controls each. This is usually the first thing nobody has current.
Operating agreements and the distribution waterfall for each deal Core The agreement itself, alongside the model that computes it.
Investor capital accounts and contribution/distribution history Core Per investor per entity, reconciled to the agreement.
Loan schedule with covenant definitions per facility Core DSCR and debt yield are defined differently in different loan documents; the definitions matter more than the ratios.
Most recent covenant compliance certificates Core As submitted, with the supporting calculation.
Affiliated and related-party fees charged to deals Core Asset management, property management, construction management, acquisition and disposition.
Development budgets, draw schedules and cost to complete Original budget against current reforecast, per project.
Promote and carried interest calculations, and any clawback exposure Including what has already been distributed against it.
LIHTC, HUD or other program compliance where applicable Compliance period status and any findings.

Anything you do not have can be skipped in one click, with a reason. The intake is completed in the client portal, which saves each answer as it is given and can be returned to as often as you like.

When this stops being interesting and becomes urgent

A refinancing or a loan maturity, where covenant definitions get read closely
An investor asking a question about their capital account that takes a week to answer
A fund audit, or the first audit the sponsor has had
A partner separation, where the waterfall becomes contested rather than academic
A promote crystallization event

Who this involves

Signs it: Principal or CFO of the sponsor
Resists it: Whoever built and owns the waterfall model
Has been asking for it: The investor relations lead, who fields the questions

Who commissions it

Principals, sponsor CFOs and investor relations leads. Phase one is priced before phase two is discussed, the report is yours either way, and we take no vendor commissions or referral fees on anything we recommend.

See the proposal and the price Talk it through first

The proposal sets out the sequence week by week, what we would need from you, and what it costs for your number of operating units. No call required to see the number.

Closest to this

Operations that share more with a real estate sponsor than the sector label suggests.