JAMES REAL ESTATE SERVICES, INC.
·
·
·
10
Discount Rates Apartment (%)
1997
1998
1999
2000
1Q 2Q 3Q 4Q
Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den
RERC
National
11.1
10.9
11.1
11.3
11.2
West - 1
st
Tier
11.1
11.1
11.3
11.1
West - 2
nd
11.9
11.8
12.0
12.0
West - 3
rd
12.1
12.7
13.7
13.5
C&W
11.6
13.1
KORP
Institut'l
11.2
11.4
11.5
11.5
11.5
- Non-Inst
12.6
12.9
12.7
JF
12.0
10.5
Discount Rates Hotel (%)
1997
1998
1999
2000
1Q 2Q 3Q 4Q
Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den
RERC
National
11.6
12.6
13.1
14.1
West - 1
st
Tier
11.8
11.8
12.4
13.0
West - 2
nd
12.7
13.1
13.2
12.1
West - 3
rd
15.6
14.0
15.4
14.2
KORP
13.7
13.0
13.2
13.1
14.1
JF
14.0
13.0
Data Sources:
RERC
Real Estate Research Corp
KORP
Korpacz R E Investor Survey C&W
Cushman
&Wakefield
NREI
National Real Estate Index
NREIM
Nat'l R E Investor Magazine
IJF
Integra/Joseph Farber
Discount Rates Land Development. Discussions with local developers and investors as well
as those participating nationally have indicated equity yield rates for land development, lot
development, and major rehabilitation projects increased dramatically after the real estate crash of the
1980s. Costs associated with infrastructure, the growing capital requirements, and lack of equity
financing all contributed to higher expected returns for developers. As recently as 1992 and 1993,
discount rates for these types of projects were in the 20% to 30% range and even higher for difficult or
outlying projects. However, as the oversupply of residential lots in the metro Denver area has largely
been absorbed, the opportunities for these high yields for subdivision development have declined. With
financing more readily available, equity investors and larger home builders have again begun small and
larger scale lot development projects. There is some indication of a potential for an oversupply of lots
but home builders are still willing to develop lots in order to guarantee a supply for future construction.
Integra/Joseph Farber & Company reports discount rates for development of raw residential land at 12%
to 14%, for finished residential land at 12% to 14%, and for commercial land at 12% to 14%. The Korpacz
Real Estate Investor Survey, 2nd Q 2000, reports discount rates and profit on land development as follows:
LAND DEVELOPMENT DISCOUNT RATES & PROFIT
Discount Rate
Discount Rate
Profit as % of
Profit as % of
