What Is Implied Cap Rate?
Implied cap rate is a cap rate back-calculated for a portfolio, REIT, or public company by dividing its net operating income by its total enterprise or real estate value (based on market capitalization, debt, and other adjustments), rather than by an appraised value.
Why It Matters
Investors watch a REIT's implied cap rate against private-market transaction cap rates to gauge whether public real estate stocks are trading at a premium or discount to the value of their underlying properties.