iStar WACC - Weighted Average Cost of Capital
The WACC of iStar Inc (STAR) is 6.9%.
| Range | Selected | |
| Cost of equity | 7.6% - 12.9% | 10.25% |
| Tax rate | 0.5% - 1.8% | 1.15% |
| Cost of debt | 4.3% - 7.0% | 5.65% |
| WACC | 5.2% - 8.6% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.68 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 12.9% |
| Tax rate | 0.5% | 1.8% |
| Debt/Equity ratio | 2.54 | 2.54 |
| Cost of debt | 4.3% | 7.0% |
| After-tax WACC | 5.2% | 8.6% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| STAR | iStar Inc | 2.54 | 1.28 | 0.36 |
| AHH | Armada Hoffler Properties Inc | 1.94 | 0.82 | 0.28 |
| AX.UN.TO | Artis Real Estate Investment Trust | 1.51 | 0.8 | 0.32 |
| CUF.UN.TO | Cominar REIT | 1.65 | 1.37 | 0.52 |
| ESRT | Empire State Realty Trust Inc | 1.8 | 0.91 | 0.33 |
| GNL | Global Net Lease Inc | 2.7 | 0.12 | 0.03 |
| MDRR | Medalist Diversified Reit Inc | 2.02 | 0.16 | 0.05 |
| MR.UN.TO | Melcor Real Estate Investment Trust | 5.56 | 0.62 | 0.1 |
| MRT.UN.TO | Morguard Real Estate Investment Trust | 3.3 | 0.22 | 0.05 |
| SQFT | Presidio Property Trust Inc | 17.4 | -0.33 | -0.02 |
| Low | High | |
| Unlevered beta | 0.08 | 0.3 |
| Relevered beta | 0.52 | 1.43 |
| Adjusted relevered beta | 0.68 | 1.29 |
iStar's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for iStar:
cost_of_equity (10.25%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.68) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.