Hotel Acquisition- Calculate IRR w/ owner profit share?
I'm working on my first hotel deal and I'm not really sure what is the best method for calculating the IRR when there is a profit sharing clause included. Can I even include it? I'm hoping someone here can help walk me through this??

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Basics of the deal:

$11M proposed purchase price

$1.5M in necessary owner improvements

Rent years 1-3 at $1.175M, year 4 at $1.2M and year 5-20 at 3% increases

owner to share in profits equal to 10% EBITDA

3 months free rent

assume 65% LTV

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I'd also love some feedback on calculating leveraged IRR after refinancing? 
[{"id": "ei2u08y", "text": "I'm in the hotel industry - so a few questions:\n\n&amp;#x200B;\n\n1. I assume the $1.5M is some type of brand required PIP?  Did you review that scope and/or timing?  Any gotcha's like upgrading fire alarm, etc?\n2. You mention rent and increase at some years.  Is this hotel on a ground lease, or are you just buying the underlying ground lease?  Do you have an operating proforma?\n3. Don't forget about displaced room nights due to room renovations.  That can have an impact on current revenues, but on the flip side hopefully you see a bump in adr/occ post reno.\n4. Need to look at RevPAR increases or trends. for future years.\n5. Cap rate at sale depending on property/location/etc.\n\nA lot of missing variables until you can look at an IRR.", "replies": [{"id": "ei6g18d", "text": "Thanks for the response- and bear with me! I'm way outside my element on this first go.\n\n&amp;#x200B;\n\n1. I assume the $1.5M is some type of brand required PIP?  Did you review that scope and/or timing?  Any gotcha's like upgrading fire alarm, etc?                   It's actually not. It's the estimate we expect it would take to get the existing 76-room hotel to the required 82 rooms to do the deal. It also includes deferred maintenance on the existing building. \n2. You mention rent and increase at some years.  Is this hotel on a ground lease, or are you just buying the underlying ground lease?  Do you have an operating proforma?                   I don't have an operating proforma- but I'm in the process of trying to obtain one. The hotel is 'existing', however we are reviewing a new lease for a different concept that would want a 20 year term, with 1 20 year option. It is not a ground lease. Owner would have some responsibility related to the structure of the building. \n3. Don't forget about displaced room nights due to room renovations.  That can have an impact on current revenues, but on the flip side hopefully you see a bump in adr/occ post reno.       The renovations are expected to be complete before the new operator takes possession of the hotel building. \n4. Need to look at RevPAR increases or trends. for future years.     I've been reviewing this information, using a really great local boutique hotel CRE group that has some good data and quarterly reports on the topic. Thanks! (and if you have any good references for resources I'd, of course, appreciate them as well).\n5. Cap rate at sale depending on property/location/etc.       It's a limited service hotel in a popular downtown location close to (w/in 20 minutes) of Florida's best beaches. I'm comfortable with assuming it would trade at or just below a 7.5% cap rate.\n\n&amp;#x200B;", "replies": [], "depth": 2}], "depth": 1}, {"id": "ei2zesf", "text": "Can you just run it through a single hurdle waterfall? And have the irr calc off of the post waterfall cash flow to the gp?", "replies": [], "depth": 1}]