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Yield On Stabilized Cost Calculator
Development yield on stabilized cost reveals pro forma economics. This calculator runs the metric and spread.
Yield on cost
7.93%
Development spread (bps)
218
Implied stabilized value
$20,000,000
How the math works
Yield on cost = NOI ÷ basis. Spread = yield on cost − market cap rate.
Budget basis to stabilized, not CO. Including first-year operating ramp, lease-up concessions, and pre-opening staff keeps the NOI number honest — yield on cost measured at CO lies about two full years of real economics.
How to Use
- Enter pro forma stabilized NOI.
- Enter capitalized basis.
- Enter market cap rate at stabilization.
- Read yield on cost and spread.
Frequently Asked Questions
Yield on cost vs cap rate?
Yield on cost = NOI ÷ total development cost. Cap rate = NOI ÷ market value. Development spread = yield on cost − cap rate. Captures the profit margin above just buying stabilized.
Minimum spread?
150 bps is threshold; 200-300 bps is healthy. Spread <100 bps signals over-paying for basis or over-optimistic rent. Spread >300 bps in normal markets signals mispriced acquisition or exceptional execution opportunity.
Capitalized basis?
All-in development cost PLUS capitalized pre-opening expenses (marketing, staffing ramp, opening inventory). Often 1-3% of hard costs. Exclude from cost ratios at peril — pushes yield 20-50 bps higher than reality.
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