Cap Rate Spread Analysis

Assess the risk premium of a specific real estate acquisition relative to the risk-free rate (proxied by the US 10-Year Treasury).

Asset Entry Cap Rate (%)

Current 10-Yr Treasury Yield (%)

Calculated Risk Premium (Spread)

Basis Points (bps): 100 bps equals 1.00%.
The Risk Premium: Investors demand a premium over government bonds to compensate for the illiquidity and operational risk of real estate. Historically, a healthy spread for stabilized core assets is 150 to 200 bps.
Value-Add: For value-add or opportunistic assets with higher execution risk, investors typically demand spreads exceeding 250 bps.