Reasoning behind reversion cap rates?
Hi all,
Does anybody have a reason why we use a higher reversion cap rate in our analyses besides for the sake of being conservative?
I've heard that one should add 10 basis points per year to the purchase cap rate to derive a reversion cap rate. Is this just a rule of thumb, or is there an explanation (in a micro- or macroeconomic sense) for this calculation?
If anybody has a reason beyond "better safe than sorry" or "I like to be conservative," please share!
Thanks so much!