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Property value pro forma will be based on contracted rents and expectations. Property value based on cash flows will be based on, well, real cash flows. Take
by sroussey 2y ago
Property value pro forma will be based on contracted rents and expectations.
Property value based on cash flows will be based on, well, real cash flows.
Take the contracted rent or cash flows and divide by the cap rate (tends to follow interest rates) and you get the value.
On the pro-forma plan your lowering rents to one implies lowering others and you just cut your building value in half pretty easily.
- underlipton 2y agoOkay. Your building is now worth half of what it used to be. That's capitalism. Hiding value drops distorts the market and makes the balance sheet of property owners seem stronger than it actually is. This "discount" regime essentially pushes the risk of an economic slowdown, which owners should naturally carry, onto renters instead.