Cap Rate = NOI / Property Value. Small differences translate to large value changes.
Property type, location quality, asset quality, interest rates, and market sentiment.
YOC = Stabilized NOI / Total Development Cost. The spread between YOC and market cap rate is the development premium. Target 100-150 bps minimum.
Rising cap rates during 18-36 month development period can eliminate profit margins. Build to higher YOC, shorten timelines, lock financing early.