Why does the CCIM discounted cash flow template use "value using acquisition cap rate" in the measures calc.

It would seem this is not an accurate way to measure the future value of a property.? What correlation is there really between the cash flow cap rate of market appreciation?
In Market Conditions - Asked by Philip F. - Aug 14, 2011
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Rob M.
Seymour, IN

Hello Phil,
You actually have a couple of questions here. First of all, the reason for the acquistion CAP rate is some investors have a target yield based upon a desired CAP rate and the template allows the investor the ability to adjust the price based upon the yield as a simple method of calculation. The investor then can determine their sales proceeds after tax correlated with the acquisiton price. I may be mistaken, but the second portion of your question is based upon the disposition CAP rate. Depending upon your lender, the analyst will set a projected disposition price based upon an increase of 'X' amount of basis points in the CAP rate. The disposition sales price cell allows you to choose a CAP rate, a growth rate or simply a price. In regard to correlation of CAP rate and a growth rate, which is what I think you are referring, the lower the growth rate, the higher the CAP rate, the greater the growth rate, the lower the CAP rate because the value of the property changes as the NOI remains the same. Hope this is helpful!

Aug 22, 2011
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