capitalization rate development：资本化率的发展

CapitalizationRateDevelopmentIncomeStreams,RatesandFactorsforDirectCapitalizationWayneFoss,MBA,MAI,CRE,Fullerton,CAUSAEmail:waynefoss@usa.net1TermsandDefinitionsIncomeRate:Theratioofoneyear’sincometothevalueoftheproperty.ExamplesareRO,REandRMDiscountRate:Aninterestrateusedtoconvertfuturepaymentsorreceiptsintopresentvalue.ExamplesareIRRandYOYieldRate:Arateofreturnoncapitalforaspecifictimeperiod.Usuallyexpressedasacompoundannualpercentagerate.2TermsandDefinitionsInterestRates:EffectiveInterestRate(i)interestperdollarperperiod;thenominalannualinterestratedividedbythenumberofconversionperiodsperyear.NominalInterestRate(I) Astatedorcontractrate;aninterestrate,usuallyannual

3DirectCapitalizationAMethodusedtoconvertanestimateofasingleyear’sincomeexpectancyintoanindicationofvalue.Acapitalizationtechniquethatemployscapitalizationratesandmultipliersextractedfromsales4BasicFormulasI=RxVR=I/VV=I/RV=IxFI=V/FF=V/IWhere:I=IncomeR=CapitalizationRateV=ValueF=FactorIRV5IncomeStreamsPotentialGrossIncomeEffectiveGrossIncomeNetOperatingIncomeEquityIncomeMortgageIncomeLandIncomeBuildingIncomeIncometotheLandlord’sleasedfeeinterestIncometothetenant’sleaseholdinterest6IncomeCapitalizationRatesOverall(property)capitalizationrate,feesimple(RO)MortgageCapitalizationRate(RM)EquityCapitalization,orequitydividendrate(RE)LandCapitalizationRate(RL)BuildingCapitalizationRate(RB)CapitalizationRatefortheleasedfeeposition(RLF)CapitalizationRatefortheleaseholdposition(RLH)7IncomeFactorsPotentialGrossIncomeMultiplier(PGIM)CanbeexpressedasamonthlyorannualmultiplierGrossRentMultiplier(GRM)GenerallyexpressedasamonthlymultiplierEffectiveGrossIncomeMultiplier8DerivationoftheOverall(Property)CapitalizationRate(RO)FromComparableSalesWhenNetIncomeisknown: RO=NetOperatingIncome/SalesPriceWhenNetOperatingIncomeisunknownbuttheEffective GrossIncomeMultiplierisKnown: RO=NetIncomeRatio/EGIM9OverallCapitalizationRate(RO)

aWeightedRate

Example:ifNetOperatingIncomeandSalesPriceareknown, thenOverallCapitalizationRate(RO)iscalculatedas:NetOperatingIncome/SalesPrice=RO$100,000

$1,000,000=10.0%

ROisaweightedrate,betweenlandandbuildingsLand: 25%x8.5%=2.1%Improvements: 75%x10.5%=7.9%Total: 100%

10.0%10Modelfor

theDirectCapitalizationTechniqueNetOperatingIncome $xxx,xxx.xxCapitalizationofIncome:IncometoPropertydividedbyRO=OverallPropertyValueIndicatedValueperDirectCapitalizationTechnique $xxx,xxx.xxApplication: $100,000.00¸10.0%=$1,000,000.0011RatesUsedinthe

ResidualTechniquesBuildingCapitalizationRate:InterestRate(returnoninvestment)RecaptureRate(returnofinvestment)LandCapitalizationRate:InterestRate(returnoninvestment)ForAssessmentpurposestheeffectivetaxrateisaddedtoeachcapitalizationrate12Componentsofthe

BuildingCapitalizationRate(RB)ReturnonInvestment(interestrate)ReturnofInvestment(recapturerate)StraightLine:1/remainingeconomiclifeI.e.:1¸20=5.0%CanbecalculatedwithotherrecaptureassumptionsForassessmentpurposesaddtheeffectivetaxrateCalculatedasthenominaltaxratetimestheassessmentratioI.e.:AssessmentRatio50.0%,nominaltaxrate4.0%Effectivetaxrate=50%x4.0%=2.0%RB=Int.Rate+Recap.RateorRB=Int.Rate+Recap.Rate+Eff.TaxRate13Componentsofthe

LandCapitalizationRate(RL)ReturnonInvestment(interestrate)ForassessmentpurposesaddtheeffectivetaxrateCalculatedasthenominaltaxratetimestheassessmentratioI.e.:AssessmentRatio50.0%,nominaltaxrate4.0%Effectivetaxrate=50%x4.0%=2.0%RL=IntRateorRL=IntRate+EffTaxRate14DevelopmentofCapitalizationRatesInterestRateorDiscountRate15DevelopmentofCapitalizationRatesLandCapitalizationRate(RL)andBuildingCapitalizationRate(RB)16DevelopmentofCapitalizationRatesEquityCapitalizationRate(RE)17DevelopmentofCapitalizationRatesMortgageCapitalizationRate(RM)Bydefinition,theMortgageCapitalizationRateistherelationshipbetweenannualdebtserviceandthebalanceoftheloan.Atthebeginningoftheloanterm,theMortgageCapitalizationRateisequaltotheannualmortgageconstant.ForExample:Loan=$650,000.00 Term=30yearsInterestRate=7.0% AmortizationType=MonthlyAmortizationFactor=.006653 AnnualPayment=$51,893.40 RM=$51,893.40¸$650,000.00=7.98%18DevelopmentofCapitalizationRatesLeasedFeeCapitalizationRate(RLF)19DevelopmentofCapitalizationRatesLeaseholdCapitalizationRate(RLH)IfNetOperatingIncomeisEqualtoorGreaterThanMarketNetOperatingIncome,thereisnovaluetotheleaseholdposition.20TheResidualTechniquesTheBuildingResidualTechniqueWhatisKnown:

1.NetOperatingIncome2.LandValueWhatisUnknown:ImprovementValueTheLandResidualTechniqueWhatisKnown:

1.NetOperatingIncome2.DepreciatedValueoftheImprovementsWhatisUnknown:LandValue21Modelfor

theBuildingResidualTechniqueNetOperatingIncome $xxx,xxx.xxLessIncomeAvailabletotheLand:LandValuetimesRL: -$xx,xxx.xxIncomeAvailabletotheImprovements: $xxx,xxx.xxCapitalizationofIncome:IncometoImprovementsdividedbyRB=BuildingValuePlusLandValue $xxx,xxx.xxIndicatedValueperBuildingResidualTechnique $xxx,xxx.xx22Examplefor

theBuildingResidualTechniqueNetOperatingIncome $100,000.00LessIncomeAvailabletotheLand: $250,000.00x8.5%: -$21,250.00IncomeAvailabletotheImprovements: $78,750.00CapitalizationofIncome: $78,750.00¸10.5%= $750,000.00PlusLandValue $250,000.00IndicatedValueperBuildingResidualTechnique $1,000,000.0023Modelfor

theLandResidualTechniqueNetOperatingIncome $xxx,xxx.xxLessIncomeAvailabletotheImprovements:ImprovementsValuetimesRB: -$xx,xxx.xxIncomeAvailabletotheLand: $xxx,x