The ratio of net operating income to value; a lower cap rate implies a higher price for the same income.
Related terms
- Cash-on-cash return
Annual pre-tax cash flow divided by the equity invested.
- Clawback
A provision requiring the sponsor to return promote it was paid earlier if later losses mean the LPs did not ultimately receive their agreed preferred return.
- Closed-ended fund
A fund with a fixed life and committed capital raised in a defined window, deploying then exiting assets over a set term — the standard structure for value-add…
- Co-investment
An opportunity for an LP to invest additional capital directly into a specific deal alongside the fund, usually at reduced or no fees and promote.
- Common equity
The most junior, highest-risk layer of the capital stack; it absorbs first losses but captures all residual upside after debt and preferred equity are paid.
- Core
A low-risk strategy targeting stabilised, well-let assets in prime locations.
- Core-plus
A moderate-risk strategy on largely stabilised assets with some upside from light improvement.
- Distribution waterfall
The contractual order in which cash is split between investors and sponsor — typically return of capital, then a preferred return, then a catch-up, then a prom…