RT Journal Article SR Electronic T1 Are High-Cap-Rate Properties Better Investments? JF The Journal of Portfolio Management FD Institutional Investor Journals SP 162 OP 178 DO 10.3905/jpm.2017.43.6.162 VO 43 IS 6 A1 Eli Beracha A1 David H. Downs A1 Greg MacKinnon YR 2017 UL https://pm-research.com/content/43/6/162.abstract AB 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