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REITs in Rising Interest Rate Environments

Given the current low interest rate environment, our real assets research group analyzed Real Estate Investment Trusts (REITs) during periods of rising interest rates. A rise in interest rates can provide a theoretical headwind for REIT strategies due to higher debt servicing costs which subsequently reduce cash flow generated from properties. The table below illustrates historical cap rates during periods of rising interest rates. A “cap rate” is defined as the rate of return on a real estate investment property based on the expected income the property will generate.

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