For simplicity the CAP rate is 5.38% this is a simplified...

For simplicity the CAP rate is 5.38% this is a simplified indication of the dividend yield before the interest expense rate. (or if you like assuming no debt, and just collect the rent without gearing, the dividend should be 5.38%)

So how is the dividend 6.7%, because the historical interest rate expense is only 3.5%
3.5% is lower than 5.38%, hence with gearing the dividend can be higher than 5.38% (positively geared if you like).

But when the 3.5% interest rate expense goes to say 6%, you won't be see that 6.7% dividend yield anymore!!!

Very simplistic, but I prefer to be generally correct than precisely wrong.