Normalized Discount Rates Versus Risk-Adjusted Discount Rates

Fall/Winter 1992, Vol 17, No 2

Abstract: While the risk in multi-property portfolios has received much attention, little consideration has been given to the fact that individual, investment-grade properties actually represent a portfolio of leases. Therefore, the risk inherent in any portfolio of leases varies with the composition of the portfolio and how it affects the measurement of yield for the investment. This article addresses the tenant risk characteristics of lease portfolios and the impact that varying levels of risk have on property-specific discount rates.