In a stabilized pro forma, how is exit value typically estimated?

• A. Exit value equals purchase price.
• B. Exit value equals stabilized NOI / exit cap rate.
• C. Exit value ignored.
• D. Exit value commonly estimated as stabilized NOI divided by a selected exit cap rate, reflecting market conditions at sale.

Answer: (D)

The main idea is to convert the property’s stable earnings into a sale price using cap rate math. In a stabilized pro forma, you take the stabilized net operating income and divide it by a chosen exit cap rate that reflects the market conditions expected at sale. This captures two things: the income the property will reliably produce once fully stabilized, and the return investors expect when selling in that market environment. It’s the standard way to estimate terminal value because price at sale is driven by NOI and the cap rate buyers would pay for that level of income. It isn’t the purchase price, and it isn’t ignored; the exit value is explicitly tied to stabilized NOI and an assumed market-based exit cap rate.