A stabilized cap rate is the ratio between the net operating income produced by a property upon achieving target occupancy and its purchase value. Capitalization rates, or cap rates, fluctuate due to various factors, including asset quality, the consistency of revenue streams, geographical location, and the type of asset. For stabilized assets, cap rates tend to align with the prevailing market conditions and the risk associated with the asset. Such assets are characterized by full occupancy and rental rates in line with the current market rates.
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