Capitalization Rate

According to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate rate.

Investopedia Says:
Also known as the cap rate. The relationship between Cap Rate (R), Income (I), and Estimated Value (V) is as follows:

V = I / R
I = V x R
R = I / V

Rate of interest or discount rate used to convert a series of future payments into a single Present Value. In real estate, the rate includes annual capital recovery in addition to interest.

A rate of return used to derive the capital value of an Income Stream. The formula is

Value = annual income

††††††††capitalization rate
Example: The estimated Net Operating Income of an office building is $12,000 per year. An appraiser decides the appropriate capitalization rate is 12%, comprised of a 10% return on investment and 2% for Depreciation. The estimated value of the building is $100,000.