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Not sure what difference GBP, USD, or Euro makes in a cap rate,

It matters because corporate borrowing in a currency in that currency’s home country is generally done at a premium to sovereign debt of that country issued in that currency.

If the sovereign debt rate and corporate premiums are low enough, a company can still make money even at an otherwise low cap rate.

Bloomberg indicates that 10-year British government debt is yielding 1.22% right now, and what little I can find with a quick Google seems to indicate 10-year investment grade corporate bond rates in the U.K. are somewhere between 2% and 3.5% depending on how investment grade we’re talking about.

That makes a 5.3% U.K. cap rate less ugly than it would otherwise look, if rates were higher.


Discovery/HR Home Fool
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