- Commercial Real Estate Investment, Financial and Market Data - Cap and Discount Rates

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 FAQ - Frequently Asked Questions

When are new surveys available?
All surveys are published 25-45 days after the close of the quarter. Notice of publication is made via our free e-mailed newsletter, the RealtyRates XTRA.

What property types does survey?
The Investor Survey encompasses a total of 32 income producing property types in 11 categories including: apartments, golf courses and country clubs, health care and senior housing, industrial buildings, lodging facilities, mobile home and RV parks, office buildings, restaurants, special purpose properties, retail centers. and self-storage facilities. The Developer Survey encompasses a total of 22 sell-out property types in three major categories including: Subdivisions and PUDs, Condominiums and Co-OPs, and Business and Industrial Parks. The Market Survey encompasses a total of seven income-producing property types in four major categories including: Apartments, Industrial, Office, and Retail.

Where does get its data?
Data for all surveys are provided by more than 300 lenders, investors, brokers and property managers nationwide. They range from individuals to very large corporations but long experience indicates they are all extremely reliable. In fact, some of our relationships go back more than 30 years.

What is the quality of the properties surveyed?
In all instances, our survey respondents are asked to provide data on Class A and B properties which we define as:

  • Class A Properties: The most prestigious properties that compete for premier users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

  • Class B Properties: Properties that compete for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building cannot directly compete with Class A at the same price.

How are surveyed OAR's derived?
We do not calculate OARs; they are calculated by our survey repondents by dividing actual NOI at the time of sale by the actual sale price.

Do NOI's include reserves?
No. However, we do survey lender-specified reserves by property type and this information is included in the Investor Survey.

How are equity dividend rates derived?
Surveyed returns to equity represent current required target rates reported by investors. This information is included in the Investor Survey.

How are surveyed discount rates derived?
Investor Survey discount rates are actual end of period rates of return reported by survey respondents on consummated transactions and re-capitalizations; new construction are proforma rates. Developer Survey discount rates are presented in two forms, actual (historical) and proforma (forward-looking).

Aren't Your discount rates the same as IRRs (Internal Rates of Return)?
No. Discount rates are the competitive rates utilzed to calculate Net Present Value (NPV), while IRRs are discount rates that assume a NPV of "0".

Discount rates are a necessary element in property valuation via discounted cash flow analysis. The the usefulness of the IRR measurement, on the other hand, lies in its ability to represent an investment opportunity's return and to compare it with other possible investments. Given our orientation toward providing valuation as opposed to investment oriented data, we do not track IRRs, and again, they are not the same thing.

What relevance do national rates have to local markets?.
National rates devolve from many local markets thus, there is a clear relationship and, while national rates do not mirror any given local market, they encompass virtually all of them. We have twice at client request (1994 and 2001), analyzed our Investor Survey data on a regional basis. Not only were no significant variations noted with regard to the classes and property types we survey but, largely due to the growing influence of large national and regional banks, as well as the development and growth of the commercial secondary market, the variations that do exist are becoming less pronounced. It should be noted that Developer Survey data is presented both nationally, as well as for 13 geographical regions encompassing all 50 states, Puerto Rico, the U.S. Virgin Islands, and Guam, and Market Survey data is presented nationally, for 11 regions encompassing the continental United Sates in its entirety, and for 41 metro market areas. And finally, the infered cap rates presented in the Market Survey tend to support the absence of significant geographical variations in cap rates for the type and quality of properties involved.

Do Developer Survey Discount Rates Include Developer's Profit and Interim Financing?
With regard to Subdivisions and PUDs and Business and Industrial Parks developer's profit is not expensed and is therefore incorporated into the discount rates. With regard to Residential and Commercial/Industrial Condominiums, developer's profit is treated as an expense. In all cases, interim interest is treated as an expense.

Is historical data available and what is the cost?
All subscribers have free access to all previously published editions. For all others, individual quarterly copies in PDF are available at regular prices. Note, however, thst PDF versions were not always produced and therefore are not available for all editions.

As a subscriber, can I put the charts on my own Web site?
No. As a subscriber, you may insert the charts in appraisals and other business reports but may not reproduce them for general circulation such as Web sites, newsletters and so on.

 Contact Information

Robt. G. Watts
Robt. G. Watts /
P. O. Box 14970
Bradenton, Florida 34280-4970
Telephone: 941.281.2716
E-Mail: Contact / Feedback


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