Capital Stacks and Waterfalls in Apartment Syndication

[Brian Geiger]

Let's talk about Apartment Syndications! Curious to hear explanations on what is a waterfall and Capital Stacks in Syndication.

[Evan Polaski]

@Brian Geiger the waterfall is the order of distributions made amongst the LPs and GP.  It will outline how the dollars coming from the property are allocated.  You will typically see at least two breakdowns: operations and disposition, occasionally there may be a third for a refi scenario.

Capital stack is the overall priority of capital in a deal.  Typically, you will see your first mortgage/lien on top, since that gets the first dollars.  Then any second mortgage/lien, preferred equity, common equity. This is another way to visualize a similar idea of the waterfall, but will include mortgages or other loans on the property in it.

There is no single structure for either the capital stack or waterfall.  But the capital stack shows priority of all capital pieces of the deal, and waterfall states how the distributions will actually be split on the equity piece(s).