A property generates $5M of NOI and is worth $100M at a 5% cap rate. If cap rates expand 100 bps with NOI flat, what happens to value - and how much NOI growth would fully offset the move?

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At a 6% cap rate, value falls to $5M / 0.06 = $83.3 million - a decline of roughly 16.7% from a single 100 bps move. To hold value at $100 million at a 6% cap you would need NOI of 6% x $100M = $6 million, i.e. 20% NOI growth just to stand still. The takeaways: (1) value sensitivity to cap rates is convex and largest when starting cap rates are low - 100 bps off a 5% cap destroys far more value than 100 bps off an 8% cap; (2) modest cap rate expansion can overwhelm years of rent growth, which is exactly what happens to low-cap-rate sectors when rates rise.