Quick waterfall model question
Building my first waterfall and I've been looking at samples on the internet to help out. One of them multiplies the promote at a given hurdle by the original equity split to calculate the cash flow distribution, which seems wrong to me but I just wanted confirmation if anyone can chime in.

e.g. Say you have a 90-10 LP-Sponsor split and the promote at the third hurdle is 50-50, with 100 of CF left to be distributed at this hurdle. This model would calculate the LP's share by doing (100)(.9)(.5) instead of just (100)(.5)


Is this model wrong or am I just missing something? Thanks in advance
[{"id": "d3lrmtg", "text": "Depends on the wording of the promote. It'd be easier to understand with the excel file and/or the exact promote wording.", "replies": [{"id": "d3lrzyq", "text": "Link to the model in question: http://www.adventuresincre.com/real-estate-equity-waterfall-model/\n\nThe part that I'm confused about is the 'Distribution as a %' table, which it uses as a reference for all the CF splits ", "replies": [{"id": "d3lts9c", "text": "It makes sense if the promote says that if the deal does better than expected (better than a 10% IRR) then the sponsor should make more money than the original split. And this is what the 50% does, it dilutes the split of the LP for that amount in that hurdle. I admit it is a bit odd to have the distribution linked to an incentive % like it is in the model, but if it is how it is worded in the legal then that is how it should be modeled. \n\nTL;DR The model is working correctly ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d3luri6", "text": "Not really answering you questions, but figured I would provide another resource here: http://www.propertymetrics.com/blog/2016/05/04/what-you-should-know-about-equity-waterfall-models-in-commercial-real-estate/\n", "replies": [], "depth": 1}, {"id": "d3lzp6x", "text": "I checked out the link. I agree, he configures the model in a way I'm not used to seeing. He is just based each promote structure off of the original equity distributions rather than from scratch. So its technically not wrong, just a little different. ", "replies": [{"id": "d3m4pkr", "text": "Checked it out and second this. His example is taking shortcuts for the sake of brevity in order to demonstrate a point rather than to present a model in a format that most institutional players would be familiar with.", "replies": [], "depth": 2}], "depth": 1}, {"id": "d3mb2mn", "text": "Hi, I'm actually the author of the model you reference, and this is a common question I get - and a good one. I recommend reading [Stevens A. Carey's \"Real Estate JV Promote Calculations: Basic Concepts and Issues.\"](http://www.pircher.com/media/publication/50_SACArticle.pdf) to get a better understanding for different promote structures and for why I chose to include the \"Distribution as %\" table in this model.\n\nIn Carey's paper (see page 31), he discusses a problem of ambiguity around promote structures when we use industry shorthand phrases such as \"20 over a 12\" - 20% of what, and who pays the 20%, the partnership or the financial partner? The \"Distribution as %\" table, while I admit not common to see in waterfall models, was meant to make it clear to the user how the promote is structured.\n\nHope that adds some clarity to the issue!", "replies": [], "depth": 1}]