Question

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The next few questions relate to the discussion we had in class concerning a REITs financial...

The next few questions relate to the discussion we had in class concerning a REITs financial statements. For reference, please refer to the Excel file Problem Set 2, Tab FFO. So, getting on, let's make the following assumptions about a simplified REIT income statement. (All of the numbers are in millions). 250 in revenues; 100 in operating expenses; 50 in depreciation; 50 shares outstanding; 10 in Cap Expenditures; 40% tax rate.

What is the REITs Adjusted Funds from Operations?

140

105

110

52

What is the REITs taxable income on a GAAP basis?

105

100

48

46

What are the Adjusted Funds from Operations per Share?

5.00

2.8

5.50

14

Solutions

Expert Solution

Answer :

1. 140

REITs Adjusted Funds from Operations :

= Revenue - operating expense - capital expenditure

= 250 - 100 - 10

= 140

2. 100

REITs taxable income on a GAAP basis :

= Revenue - operating exoense - depreciation

= 250 - 100 - 50

= 100

3. 2.80

Adjusted Funds from Operations per Share :

= Adjusted funds from operation / shares outstanding

= 140 / 50

= 2.80


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