Running a Distribution in WaterfallOne

Process a distribution from start to finish, with full visibility into allocations before you finalize.

A distribution is a single cash payout event from your asset. You declare an amount, a date, and a distribution type. WaterfallOne calculates how that cash flows through your waterfall tiers and allocates it to each investor. The process is two-phase: preview and finalize. You can review the math before you lock it in.

Before You Start

You'll need:

• An active asset (see Creating Your First Asset if you haven't set one up)
• The gross distribution amount in dollars
• The distribution date (when the cash is leaving your entity)
• The distribution type (operating, refinance, sale, or other)

Understanding Distribution Types

WaterfallOne supports four distribution types:

Select the type that matches your distribution trigger. It affects reporting and helps you track distribution reasons in your history.

Step 1: Start a Distribution

From your active asset, click "Run Distribution."

You'll see the distribution form with two main sections: Details and Preview / Finalize.

Step 2: Enter Distribution Details

Fill in the following:

Gross Distribution Amount (required)

• Enter the total cash amount you're distributing, in dollars
• Large dollar amounts are supported, with two decimal places
• This is the total before any fees or allocations

Distribution Date (required)

• The date this distribution is happening (or happened)
• Used for preferred return accrual calculations and time-weighting
• Must be after the asset's Economic Start Date
• Must be after the last finalized distribution on this asset (no backdating)

Distribution Type (required)

• Choose: Operating, Refinance, Sale, or Other
• Determines how the distribution is categorized in reporting

Notes (optional)

• Add any internal notes (e.g., "Q4 2025 operating distributions from building A")
• Not visible to LPs; useful for your internal records

Waterfall Version (usually pre-selected)

• WaterfallOne defaults to your active waterfall
• If you've created a new waterfall version since the last distribution, you can select which version to use
• Once you finalize this distribution, it's tied to that waterfall version forever

Once you've entered these details, submit the form to view the allocation preview.

What happens: WaterfallOne calculates allocations using your waterfall tiers. It does not yet save anything. You're taken to a preview calculations page.

Step 3: Review the Preview

The preview shows a detailed breakdown of how your distribution flows through the waterfall:

Distribution Summary Table

At the top, you see:

• Gross amount
• Total allocated to LPs
• Total allocated to GP (carry/promote)
• Any fees or adjustments

Tier-by-Tier Breakdown

For each tier in your waterfall, you see:

• Tier name (e.g., "Return of Capital", "8% Preferred Return")
• Cash available for this tier (amount passed from prior tier)
• Tier allocation rule (pro-rata, sequential, fixed %)
• Total cash allocated at this tier
• Which investors received cash at this tier

Investor-Level Allocations

A table showing, for each LP (and the GP):

• Name
• Initial capital
• Unreturned capital balance before distribution
• Allocation amount they receive
• Their new unreturned capital after the distribution

Distribution: $1,000,000 | Date: 2026-03-27 | Type: Operating

Tier 1: Return of Capital (pro-rata by unreturned capital)
  Available: $1,000,000
  LP A (unreturned $200,000): receives $200,000
  LP B (unreturned $300,000): receives $300,000
  LP C (unreturned $500,000): receives $500,000
  → Tier allocated: $1,000,000 | Remaining: $0

Tier 2: 8% Preferred Return (time-weighted, on unreturned capital)
  Available: $0
  (No cash to allocate; all returned to capital)

GP Carry: $0

In this case, the entire distribution goes to returning capital. No one has unpaid pref, so the pref tier doesn't activate.

Warnings and Validation

Below the preview, WaterfallOne shows any warnings:

• Insufficient cash for hurdle: Your pref is accruing but not being paid. This is usually fine; pref accrues until paid.
• Rounding variance: A penny or two difference between the input and the allocated total (due to decimal precision). WaterfallOne resolves this automatically; no action needed.
• Unreturned capital remaining: After this distribution, some investors still have unreturned capital. Not a problem; just informational.

If any blocking errors appear (e.g., negative allocations, invalid waterfall config), you'll see a red error message. Do not finalize if blocking errors are present. Go back and fix the issue.

What happens: The preview is non-persistent. WaterfallOne is not saving this calculation yet. You can:

• Go back to Details and change the amount, date, or waterfall version, then recalculate
• Proceed to Finalize to lock this distribution in

Step 4: Finalize the Distribution

Once you're satisfied with the preview, click "Confirm Distribution."

What happens: WaterfallOne performs the following in a single, atomic operation:

1. Locks the allocation: Creates a locked distribution event record
2. Persists allocations: Records exactly what each investor received, by tier
3. Updates investor balances: Adjusts unreturned capital, accrued pref, and carry for each investor
4. Creates an audit trail: Stores line-item detail showing the calculation path (which tier, which rule, which result)
5. Marks as finalized: The distribution status changes from draft to finalized

Once finalized:

• You cannot edit this distribution
• You cannot change the amounts
• You cannot change the allocations
• If you made a mistake, you must void this distribution (creating an immutable reversal record) and create a replacement distribution

The finalized distribution is now part of your audit record. Every amount is locked, and the waterfall configuration used is frozen with it.

If You Made a Mistake

If you finalized a distribution and later realize there was an error (wrong amount, wrong investor, wrong date), do NOT create a second distribution to "correct" it.

Instead:

1. Click "Void Distribution" on the finalized distribution record
2. Provide a reason (e.g., "Entered wrong amount; see corrected distribution #0002")
3. WaterfallOne creates an immutable void record (investor balances revert)
4. Create a new, corrected distribution with the right details
5. Finalize the new distribution

Both the original and corrected distributions remain in your audit trail. Auditors can see the correction and the reason.

What's Next

• Understanding Your Allocations Deeper: For a conceptual deep-dive into how waterfall tiers calculate allocations, see Understanding Waterfall Tiers
• Reporting and Exports: Download finalized distributions as PDF or CSV for LP reporting
• Tracking LP Balances: Check the investor detail page to see running balances (unreturned capital, accrued pref, carry) across all distributions