Distributions and Returns: Where the Money Actually Comes From

Target annual return (often expressed as IRR) blends everything — cash distributions plus appreciation at exit — into one annualized number. Cash yield measures only the periodic income: a deal paying 6.5% annually in quarterly distributions has a 6.5% cash yield even if its total target return is 12%.

The equity multiple answers a simpler question: for every dollar in, how many come back? A 1.6x multiple means $10,000 returns $16,000 over the hold. Multiples ignore time, which is why they're always read alongside the hold period — 1.6x over four years is very different from 1.6x over ten.

Each period, the project's manager closes the books: revenue in, expenses out, debt service paid, reserves topped up. What remains is distributable cash. The operating agreement's 'waterfall' then directs that cash — first to any preferred return owed to members (including amounts accrued from prior periods), then split between members and sponsor at the stated ratio.

Your share arrives as a distribution with a statement showing the calculation. On this platform, every distribution appears in your dashboard with its per-unit amount, and annual tax documents summarize the year. Note that early distributions sometimes include return of capital rather than pure profit — the statement will say so.

Never compare a target return on a risky deal to a target return on a safe one as if they were the same thing. A 16% target on a pre-revenue growth company and a 10% target on a fund of collateralized loans are not six points apart — they are different species of risk.

A more honest comparison: What's the downside case? How much of the return is contractual (rent, interest) versus dependent on execution or exit pricing? And is the timeline realistic? Projected returns everywhere on this platform are illustrative estimates — the durable habit is reading the assumptions behind the number, not the number itself.