Cap rate is a shorthand for comparing deals—not the arithmetic of your LP distributions once leverage, reserves, fees, and waterfalls enter the picture.
At a glance
- Definition: Often quoted as stabilized NOI divided by price or value—numerator and denominator both require diligence on what “NOI” includes.
- Going-in vs exit: Sponsors separate acquisition yield from terminal cap assumptions; small exit-cap changes can swing modeled proceeds materially.
- Beyond the headline: Tenant credit, lease term, rollover, and debt terms drive risk more than a single cap figure.
- Stoneforge: We emphasize underwriting discipline and target going-in yields consistent with strategy—specific numbers appear only in deal materials.
Going-in versus exit
Sponsors may cite going-in yield at acquisition and different assumptions at exit (terminal cap rate). Small changes in exit cap assumptions can materially affect modeled proceeds. Treat any illustrative yield as hypothetical unless disclosed otherwise in writing.
Why Stoneforge references cap discipline
Our strategy emphasizes conservative underwriting and target going-in yields on acquisitions as described on the investment strategy page. Specific targets for any deal appear only in that deal’s diligence materials.
Limits of the metric
- NOI quality (in-place vs pro forma) varies.
- Tenant credit and lease term affect risk more than a single cap number.
- Debt service and investor waterfalls determine cash to equity—not cap rate alone.
Linking cap rate to NOI quality
Before comparing caps across centers, reconcile how NOI is built: in-place trailing operations versus pro forma adjustments; treatment of recoveries, vacancy, and non-recurring expenses. Two deals at the same cap can imply different risk if one NOI is heavily normalized upward. Pair this review with NOI & operating expenses diligence habits.
Stress testing versus benchmarks
Market brokers quote caps as benchmarks; your underwriting should stress rollover, refinance timing, and downside occupancy—not only reversion to a median market cap. Investor outcomes flow through the waterfall after debt and reserves; see syndication waterfall basics for how headline yield differs from LP cash flow.
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This page does not describe any current offering. Verify all economics in the PPM and supporting exhibits.