Calculating IRR for distribution waterfalls - help!

[Ashley Gold]

Hello!

I'm working on a real estate investment project for a class I'm taking and I'm having a little bit of trouble fully understanding the equity distribution calculations (pref and hurdles). When you are calculating the pref payout to see if you've made it to X% of IRR to be able to make it to the promote tiers, how do you calculate that IRR? Is it the equity contributed and the cash flows generated through each year, calculated on an annual basis?

Also, does return OF equity come before the promotes?  

Thank you for any guidance you can give! I know there's a lot to be learned from this community.