Monogram valued its operating properties using forward cap rates and rental growth assumptions based on various markets across the country. Rental growth rates ranged from 1.7% to 4.9%, with an average of 3.4% annually. Cap rate assumptions ranged from 5.0% on the high end to a low of 4.2%. Properties under development were valued using similar methodologies:
These inputs included construction costs, completion dates, lease up rates, rental growth rates, operating expenses, occupancy, capital expenditures, exit capitalization rates, and discount rates.The question I have is how does this REIT come up with a value of only $10.41 per share when it uses forward projections with rental growth rates over 3% and cap rates under 5%?