Definition of Home tab items, including NPV

UNLEVERED ANALYSIS SECTION
Note: click here to learn how to change inputs

Unlevered Summary Table


Cash Flow Before Debt Service = Net Operating Income - Total Leasing & Capital Costs

Cap Rate = the % yield by which the NOI is divided to determine property Gross Valuation for sale. For example, a $1MM NOI divided by an 8% cap rate equals a $12.5MM property value.

Gross Valuation = current year's Net Operating Income / current year's Cap Rate

Unlevered Income Return = current year's Net Operating Income / Cumulative Capital Costs

Unlevered Cash Return = current year's Operating Net Cash Flow / Cumulative Capital Costs

Unlevered IRR = Internal Rate of Return, on an all-cash purchase basis, assuming sale at the end of the current year, where the IRR is measured using monthly cash flows

Unlevered Cash Flow = net cash flow assuming an all-cash purchase of the property (i.e., no use of debt financing)

Operating Cash Flow = Unlevered Cash Flow - Disposition Net Proceeds


Purchase box


Occupancy = current property occupancy %. This variable does not drive anything in the application, it is just informational and for presentation purposes

Purchase Price = negotiated property purchase price, exclusive of any transaction costs. Changing the Purchase Price here will override the Purchase Price input on the Purchase/Sale tab, and vice versa.

Year 1 NOI = the Net Operating Income in the first year of property ownership.

Year 1 Cap Rate = the Year 1 NOI yield on the Purchase Price, expressed as a %.



Sale box

Holding period = the length the property is held from acquisition through sale. Changing the Holding period here will override the Holding period input on the Cash Flows and Purchase/Sale tabs, and vice versa.

Sale Capitalization Rate = the rate by which the Sale Year or Forward Year NOI is divided to calculate the Gross Valuation (sale price) of the property. Changing the value here will override the Sale Cap Rate input on the Purchase/Sale tab, and vice versa.


Click here to understand how Sale Cap Rates work in Valuate

Sale Capitalization NOI =
 the NOI off of which the sale year Gross Valuation is calculated. Choices are Sale Year, or Forward Year (the year after the year in which the sale occurs). Changing the input here will override the input for Sale Capitalization NOI on the Purchase/Sale tab, and vice versa.



Unlevered Returns box

Equity Multiple = the number of times the transaction returns the original equity investment, assuming an all-cash purchase of the property (i.e., no use of debt financing). A 1.0x Equity Multiple is breakeven (no profit). Anything less than 1.0x means equity investment was lost. Anything above 1.0x means that all capital invested was returned, and profit was achieved as well.

NPV = Net Present Value of unlevered transaction cash flows, calculated using monthly cash flows, at the ANNUAL discount rate input made.

The annual discount rate is the rate at which future cash flows are discounted to their Present Value before being added to the negative Time 0 investment amount, (the result of which is the Net Present Value). The higher the discount rate used, the more aggressively that future cash flows will be discounted. A positive NPV (i.e., any value greater than $0) represents an investment that creates value as measured in today's dollars. The higher the positive NPV value, the more value that is perceived as being created. A negative NPV (i.e., any value less than $0) represents an investment that destroys value as measured in today's dollars. You do not want to proceed with any investment that shows a negative NPV.

% NCF From Residual = % of total transaction Net Cash Flow (as of the end of the transaction) that comes from the sale of the asset (vs. the operation of the asset)

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