The terminal (reversion) capitalization rate
is calculated by adjusting a typical
stabilized overall capitalization rate for
the loss in the competitive market standing
realized by
properties over the holding period due to
the nominal aging of the property. Taking
into account information in the previous
sections, specifically the capitalization
rates byproperty
type, a determination can be made using the
spread between the terminal and the going-in
capitalization rates. Typically, this has
been around 50 to 100 basis points,with the average around 50 basis
points. After adjusting the data for the
time horizon and relative earning rates for
different properties, of say 50 to 100 basis
points, the
indicated terminal ranges located below have
been deemed appropriate for the different
property types.
Institutional Investors 8.0 -
11.2%
Regional Respondents 8.3 - 10.6%
Institutional Average
Going-In/Terminal Spread 50 - 60
basis points
Regional Average
Going-In/Terminal Spread 50 - 60
basis points
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