Run a NAV sensitivity that tells a story
Calculate a simple NAV sensitivity and explain the effect of cap-rate movement on equity value.
A REIT portfolio has $180M stabilized NOI. Base cap rate is 5.50%. Net debt is $1.35B. Shares outstanding are 103M. NOI / cap rate = asset value; asset value - net debt = equity value; equity value / shares = NAV per share The common trap is debating NAV discount without testing whether the base cap rate is still a market-participant assumption. Step 1 Base asset value = $180M / 5.50% = $3.273B Cap rate converts recurring NOI into an asset-value estimate. Step 2 Equity value = $3.273B - $1.350B net debt = $1.923B Debt is deducted after asset value.…
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