Poor Charlie Posted December 8, 2018 Share Posted December 8, 2018 I have a question for the real estate / retail people: Why do most companies use 6-7x to capitalize their leases? Assuming it’s a net lease, the tenant’s rent expense should be close to the owner’s NOI. Owners capitalize their property at 16-17x (cap rate of 6% for Class A), so why should the tenant capitalize their lease at 6x for ROIC calculations? Link to comment Share on other sites More sharing options...
Spekulatius Posted December 9, 2018 Share Posted December 9, 2018 I have a question for the real estate / retail people: Why do most companies use 6-7x to capitalize their leases? Assuming it’s a net lease, the tenant’s rent expense should be close to the owner’s NOI. Owners capitalize their property at 16-17x (cap rate of 6% for Class A), so why should the tenant capitalize their lease at 6x for ROIC calculations? The 6-7x capitalization is due to the lease duration. 6-7x lease capitalization equates to an duration or roughly 10 years discounted. Link to comment Share on other sites More sharing options...
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