Question

In: Finance

For each of the factors listed below indicate whether the factor, independently, is likely to cause...

  1. For each of the factors listed below indicate whether the factor, independently, is likely to cause a particular income producing property to trade for a lower or higher CAP rate compared with an average property. For this question, no explanation is needed. Indicating “higher”, “lower” or “irrelevant” for factors a through g

is sufficient.

  1. Lower volatility in rent prices and occupancy rates.

  2. Worse location

  3. High inflation environment

  4. High risk premium environment

  5. Market general higher than normal expected NOI growth

  6. Lower construction quality

  7. High quality tenants

Solutions

Expert Solution

  1. Lower volatility in rent prices and occupancy rates. -----Lower CAP rate
  2. Worse location----- lower CAP
  3. High inflation environment -------higher CAP

  4. High risk premium environment---------higher CAP

  5. Market general higher than normal expected NOI growth -------higher CAP

  6. Lower construction quality------lower CAP

  7. High quality tenants--------lower CAP


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