An industrial property recently sold for $5,500,000. First-year NOI is $440,000. NOI is expected to increase annually by 4% over the next decade. The expected holding period is 7 years.
1. What would terminal cap rate be appropriate?
2. what is the relationship between today's cap rate and the going out cap rate?
3. In addition to capitalizing income, there is a second method to estimate terminal value describe the method and provide a numerical example.