Full Definition
Reversion value is the property's estimated terminal value at the end of an investment hold. In DCF analysis, reversion is typically calculated by applying an exit cap rate to the NOI in the year of sale. For ground leases, reversion refers to the value of improvements that revert to the land owner at lease end.
Related Terms
Ground Lease
Long-term lease of land only — tenant owns building improvements on land owned by the lessor.
Exit Cap Rate (Terminal Cap Rate)
The cap rate used to value a property at the end of an investment hold period — typically 25-50 bps higher than entry cap.
DCF (Discounted Cash Flow)
Valuation method that discounts projected future cash flows (including sale proceeds) back to present value using a target rate of return.