Thank you for the opportunity to share general information relating to the commercial real estate finance industry and letting you know what's new at Cornerstone Commercial Mortgage. We value your relationship and believe better communication is another way we can serve you. |
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What Factors Determine a Cap Rate and What's the Future Prognosis?
We all know the basic definition of a cap rate and how it is calculated (Cap rate= annual NOI/cost or value), but what really makes up the cap rate? The cap rate is similar to a discount rate or yield an investor expects to receive. It is derived from a combination of a risk-free rate (US Treasury rate or equivalent), plus a premium for each additional risk factor inherent in the real estate: local market risk, inflation, illiquidity, management of the property and of course, an appropriate return on the capital employed by the investor.
Why were cap rates so low during the real estate bubble mid 2004-2007? The risk free rate (Treasuries) was fairly low and stable, people perceived real estate to be less risky, strong occupancy/rents, commercial real estate was fairly liquid (a lot of buyers/sellers and available debt), inflation was low and returns on alternative investment opportunities were on the low end. Therefore this translated into lower cap rates and higher real estate prices.
Several of the factors that make up a cap rate have not changed much over the last several years and even gotten better, i.e. the risk free rate is lower (artificially though), inflation is still low, alternative investment opportunities are still on the low end; however, investors believe this to be rather temporary than long term. What has really changed drastically in the past year and skewed the cap rate higher are real and perceived market risks (higher vacancy/lower rents) as well as the illiquidity of real estate. The combination of increased market risk, fewer buyers/sellers and limited availability of debt has resulted in higher cap rates and lower real estate prices.
Given what we know about how cap rates are derived, the determining factors continue to point to higher rates; therefore, looking forward commercial real estate values will continue to be compressed for several more years.
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CB Richard Ellis
Special Report
Capital Markets First Half 2009 Cap Rate Survey
Office & Industrial
Capital Markets and CBRE Research are pleased to provide you with the
first edition of what will be a bi-annual CBRE Cap Rate Survey, This
inaugural edition covers the office and industrial sectors for all key
markets, nationally, and complimenting the Multi-Housing Cap Rate
Survey published by the Multi-Housing Group earlier this year. The
second edition, scheduled for release at the end of 2009, will be
expanded to include all property sectors: office, industrial,
multi-housing, and retail.
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6 Easy Ways to Make Exercise a Routine
You know you're more productive if you exercise regularly. But if overwork or boredom keep you sedentary these six techniques will encourage you to get off your duff:
1. Try a new challenge. Fencing anyone?
2. Go for convenience. Walking -- even up and down the stairs -- is great exercise...and it's convenient.
3. Find a partner. Regular morning walks with a neighbor or a lunchtime walk with a colleague will reinforce your commitment.
4. Make it a group. One group of co-workers hired a personal trainer to lead lunchtime workouts. A J.P. Morgan Chase exec meets with fellow ex- Navy SEALs daily for rigorous workouts in New York's Central Park.
5. Bribe yourself. Kate puts $2 in the kitty at the end of each workout. When she has saved $100 (50 workouts!) she buys herself something fun.
6. Distract yourself. Read, listen to music or book tapes, or watch TV while on the treadmill.
From The Organized Executive, June 2002, Vol. 7, No. 6
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 Integrity is the Cornerstone of our business
Cornerstone Commercial Mortgage specializes in commercial real estate finance. We act as mortgage consultants, focusing on providing the appropriate financing solutions for each client.
Contact John Lloyd at 702-379-3468 or
619-293-3919 E-mail - John.lloyd@cmlv.net
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 Quality Customer Service is our Guarantee
Kevin Moore
Vice President
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San Diego Office:
2356 Moore Street, Suite 201
San Diego, CA 92110
Las Vegas Office:
316 E. Bridger Ave. Suite 202
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| Click on above rates for more detailed infomamtion including charts and graphs
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"Nothing in this
world can take the place of persistence. Talent will not; nothing is
more common than unsuccessful people with talent. Genius will not;
unrewarded genius is almost a proverb. Education will not; the world is
full of educated derelicts. Persistence and determination alone are
omnipotent. The slogan "press on" has solved and always will solve the
problems of the human race"
Calvin Coolidge
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Please join Cornerstone Commercial Mortgage and Team Good Friends to help find a cure for MS!
On October 10, 2009 Team Good Friends and 1,000's of other riders will be pedaling from Irvine, CA to San Diego, CA. 100 miles to raise money for this great cause!
To make your contribution click here
Thank you for supporting us and the National MS Society, Pacific South Coast Chapter. Your contribution is greatly appreciated.
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