Public REITs, Private REITs Cap Rate Calcaution
I was doing a coffee chat with a real estate investment banker. He asked me how to get the cap rate for public REITs, and I don't know the answer. I know on the asset level, Cap Rate = NOI / Property Value. But how about REITs level? I was explaining that to calculate a REIT's cap rate, you should use a weighted average based on rental revenue. However, he doesn't think that's correct.
Could someone help me understand the formula for the Cap Rate for Public REITs?
Could someone also help me understand the formula for the Cap Rate for Private REITs?
I tried searching online and asking ChatGPT, but I keep getting the formula NOI/Property Value, which applies to individual assets, not REITs. Any insights you could share would be helpful!
I really appreciate everyone who can provide an answer here.
NOI over Enterprise Value
Is Implied Cap Rate another way to get the cap rate for public REITs?
Curious on this - would you use the total EV or just the value of the properties (excluding any other assets)?
Thank you! Does this formula apply to both public and private REITs?
Also why don’t use Market Cap instead of EV? Is that because debt is such an important part of REITs?
Normally when you take a cap rate, it’s NOI over property value (which is the same thing as enterprise value). For example, if you buy a $100 building with $10 NOI and use a $50 loan, you do 10 / 100, not 10 / (100-50). Yes to both private and public
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