YOU ASK
How do I test an 8% reduction in market rent in Rockport VAL while preserving the base case?
The short answer
Use a Market Rent Shock and check its displayed unit before entering the change. A percent reduction in rent is a different input from a basis-point change in a capitalization rate. Apply the Shock to the intended properties and compare against the same scope without that adjustment.
Work through the checks
- Create a named Shock, enable Market Rent and check its grouping and Applies to choices.
- Save the definition before entering parameters. Confirm the grid is for Market Rent and the displayed unit is % change.
- For an 8% reduction, enter the negative percent change in the applicable rows. Keep a simple independent arithmetic check beside the model.
- Check the portfolio selection and every relevant property override before interpreting the results.
- Compare the same version, scenario, dates and reports. The market-rent adjustment does not imply the same percentage change in property value.
| Original assumption | Change | Adjusted assumption |
|---|---|---|
| Market rent: 250 per area unit | −8% | 250 × 0.92 = 230 |
| Capitalization rate: 5.00% | +50 bps | 5.50%, a different variable and unit |
Independent unit arithmetic only. These are not calculated Rockport valuations or forecasts.
THE EASY MISTAKE
An 8% market-rent reduction does not establish an 8% decrease in cash flow or value.