Elementary question
For your mixed-use assets or portfolio assets, how do you weight your exit cap? By value, or residual CF, or residual value?
For your mixed-use assets or portfolio assets, how do you weight your exit cap? By value, or residual CF, or residual value?
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Just closed on a mixed used deal using 3 different exit caps on a single asset(one for apartment units, one for office space, and another for public parking garage). This was simply applied to respective NOI’s. There may be some gray area allocating various operating expenses but the impact on valuation / returns shouldn’t be significant.
I mean, if you can segregate your NOI by asset type (which should not be hard), just apply the appropriate cap rate to each stream of NOI, then sum for value. Better than trying to blend IMHO, if you need to allocate certain expenses by value or SF, that's something else, but still, I'd find NOI attributable to each asset class if truly mixed use. If just like a few retail units in the ground floor of an apartment tower, I wouldn't bother, just use the main cap rate.
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