A high cap rate usually stems from a lower sale price. In other words, the property is being sold “cheap” relative to the income it generates. This may sound advantageous, but only makes sense if the location, tenant profile, and income predictability are solid.

Marcos reinforces the need for context:
“You can’t say whether a transaction was good or bad solely based on the cap rate. There are risks, terms, and conditions of the acquisition that need to be considered.”

The market adjusts property values according to their risk and attractiveness: the safer and more desirable the asset, the lower its cap rate tends to be, since more investors are willing to pay a premium for stability.

Therefore, a high cap rate is positive only when associated with a robust asset. As the interviewee explained:
“Sometimes a manager buys a property with a low cap rate and gets criticized, but they’re betting that rents are outdated and will be renegotiated at higher values. The opposite also happens: a high cap rate may be tied to an overstretched contract, near expiration, or with higher credit risk.”

In other words, the cap rate directly reflects the fundamentals of the region and the asset. Structural vacancy, liquidity, default risk, and the market cycle are factors that explain the number — not the other way around.

Another common interpretation is that lower cap rates are always “worse.” This is also not true. Prime assets, such as those in Faria Lima, tend to have lower cap rates because they carry an additional layer of protection: they function as stores of value.

Marcos makes this point clearly:
“When you buy a property on Faria Lima, the chance of losing money is low. The return is not necessarily the highest, but it is stable. It works as wealth protection.”

According to him, this logic applies not only to Class A+ office buildings but also to established shopping centers and well-located logistics warehouses:
“All types of real estate have their premium assets. A warehouse within a 15 km radius or a shopping center with strong, established foot traffic can also have a lower cap rate because they offer patrimonial protection and high liquidity.”

Another important consideration when analyzing real estate transactions is understanding the difference between the entry cap rate and the stabilized cap rate. In many cases, installment purchases or seller financing distort the initial cap rate.

Regarding this, Marcos notes:
“The structured, installment-based purchase creates a difference between the entry cap and the stabilized cap. It usually doesn’t end up as good as the initial number, but it’s not as bad as it seems either.”

He explains that in high interest-rate environments, this type of structuring has become a relevant alternative for funds:
“With the Selic rate at 15%, it doesn’t make sense to allocate capital at a 9% cap rate. The installment structure gives breathing room so that in two years, with lower interest rates, the stabilized asset becomes more aligned with market returns.”