May
05
The term “waterfall” is used in partnership agreements, limited liability company agreements and real estate funds (which can be either partnerships or LLCs) to define the manner in which distributions flow from the investment to the limited partners/members, and dictate the terms of the sponsor’s incentive fee.
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Agreements also frequently include “clawback” provisions that may come into effect when things don’t go as planned. There are many different structures and variations for defining waterfalls and clawbacks, each leading to different economic consequences for limited partners/members. It is important to understand how these mechanisms work, as an unfavorable waterfall can tilt risk towards the limited partners/members. We will cover different waterfall structures, demonstrate how variations in the structure can alter the economic results, and delve into related waterfall and clawback terms that can impact the overall economic deal.
The ABA will seek 1.5 hours of CLE credit in 60-minute states and 1.8 hours of CLE credit for this program in 50- minute states. Credit hours are estimated and are subject to each state's approval and credit rounding rules. Please visit americanbar.org/mcle for general information on CLE at the ABA.
90
Web
May 05, 2021
The term “waterfall” is used in partnership agreements, limited liability company agreements and real estate funds (which can be either partnerships or LLCs) to define the manner in which distributions flow from the investment to the limited partners/members, and dictate the terms of the sponsor’s incentive fee.
Section of Real Property, Trust and Estate Law
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