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Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..
by potatopatch 3y ago
Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..
- bequanna 3y agoI don’t follow. There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.
- potatopatch 3y ago> NEMA’s debt-service coverage ratio, which measures the ability of a property’s cash flow to pay its debt, has been below 1 since 2020, a troubling sign for the ability of the developer to control the building. The cap calculation on the property has also been fixed by cutting the price in half, but more importantly a new commercial owner would at least be able to service a loan based on the new value.. While the cap rate could be such that expectations are insufficient for debt service, I think that means there are no realistic buyers.