James Real Estate RE Inv Criteria Dnvr 2000 3rd Qtr Page 17
JAMES REAL ESTATE SERVICES, INC.
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Terminal Capitalization Rates
The terminal, or residual, capitalization rate is used in discounted cash flow analysis to determine
an asset sale price at the end of a holding period. The terminal rate is generally higher than the
comparable going in capitalization rate because of the greater age and likely inferior condition of the real
estate by the time of sale.
Terminal Capitalization Rates Industrial (%)
1997
1998
1999
2000
1Q 2Q 3Q 4Q
Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den Nat Den
Warehouse
RERC
National
9.4
9.1
9.4
9.3
9.4
West - 1
st
Tier
9.1
9.7
9.7
9.3
West - 2
nd
9.7
10.3
10.3
9.9
West - 3
rd
10.7
11.3
10.9
10.7
C&W
10.1
9.6
KORP
Institut'l
9.4
9.6
9.5
9.5
JF
10.5
10.3
R&D/Other
RERC
National
9.5
9.8
9.7
9.9
West - 1
st
Tier
9.6
9.9
9.6
9.5
West - 2
nd
10.4
10.5
10.5
10.2
West - 3
rd
10.8
11.3
11.2
11.0
C&W
10.3
9.6
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
