@article {Beracha162, author = {Eli Beracha and David H. Downs and Greg MacKinnon}, title = {Are High-Cap-Rate Properties Better Investments?}, volume = {43}, number = {6}, pages = {162--178}, year = {2017}, doi = {10.3905/jpm.2017.43.6.162}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In this article, the authors explore whether properties with higher cap rates have better investment performance than those with low cap rates. Using market-adjusted cap rates to classify individual properties, they find evidence of a strong value effect in real estate: High-cap-rate properties exhibit higher returns, outperform on a risk-adjusted basis, and should be preferred by investors. The value effect is consistent across property types, persistent over the cycle, statistically significant, and very large in economic terms. Although the underlying dynamics vary somewhat across property types (especially apartments), the better performance of high-cap-rate (i.e., value) properties appears nearly ubiquitous.TOPICS: Real estate, performance measurement}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/43/6/162}, eprint = {https://jpm.pm-research.com/content/43/6/162.full.pdf}, journal = {The Journal of Portfolio Management} }