The Model · 5.1
Returns &
Scenarios
Net to LP, across a base, an upside and a downside. Distributions begin in year 3.
Illustrative fund model · Targets, not guarantees
1.8xBase net multiple
13%Base net IRR
Returns are shown net of the 1.5% management fee, 20% carried interest and fund costs. The downside still returns capital and a profit because the fund enters at a repriced basis and does not rely on yield compression.
Net cash is negative through year 2 as capital is called and deployed. The curve inflects in year 3 as the first stabilised assets refinance and return capital, so the trough is shallower and earlier than a develop-and-sell fund.
Distributions to paid-in capital reach roughly 0.4x by year 4 and 0.9x by year 6 as refinancings and stabilised income flow through, then the full multiple crystallises on exit.
The bridge from gross to net is the 1.5% management fee, 20% carried interest above the 8% preferred return, and fund operating costs. Carry is only paid after LPs receive all capital plus the preferred return, whole-fund.
Exit yield is the single biggest swing factor. Even a 100 bps expansion, a severe move, still returns 1.35x net. Entering at a repriced 2027 basis is the buffer: the plan does not need cap-rate compression to work.