EFTA Document EFTA01388633

A key question concerns the future path of cap rates. Capital appreciation was driven more by cap rate compression than NOI growth over the past five years, as sentiment improved following the financial crisis. We believe that it is prudent to assume that cap rates will gradually increase over time as interest rates normalize to higher levels. Yet cap rate spreads to Treasuries are historically wide and have room to narrow. Were Treasury yields to double to 3% and spreads revert to their 20-