Private Markets - Real Estate Question
Going over my mocks as one thing I don't understand conceptually is why the growth rate doesn't factor into the valuation of the property value in this question
This is the correct answer explanation
It uses the cap rate to calculate the property value of the buildings because it does say the NOI is stabilized in the beginning of the question. Value = NOI/Cap rate. But they also include the constant growth rate of 3% which isn't factored into the valuation. NOI/Cap Rate is a variation on the Gordon Growth model for a perpetuity where r is the interest rate (required return) and NOI is the periodic cashflow. If that is the case, wouldn't the value of the building be equal to (NOI/(Cap rate - growth rate)) to factor in the constant growth rate over time. I took stabilized in the first part of the question to mean stabilized at the steady growth rate later.
Am probably over thinking it but is there a specific reason growth rate isn't factored into the valuation.
Posted Aug 13, 2026, 4:52 PM UTC