class 10: REITs Flashcards
Real Estate Investment Trusts (REIT’s)
Special purpose legal entities whose primary business is real estate investment
types or REITs
Equity REIT
Mortgage REIT
Hybrid REIT
Equity REIT
Purchase, own and manage income producing properties
Mortgage REIT
focus their investment in real estate debt
Hybrid REIT
Combination of equity and mortgage REITs
“Qualified REIT properties” must account for how much?
for at least 90%
At least 90% of the trust’s revenue must come from what?
from rent or mortgage interest and capital gains from real or immovable properties in Canada
At least 75% of the total fair market value of all trust properties that the REIT holds must be where?
in Canada
In Canada, are REITs private or public?
public
REIT Structure
REIT owns properties that give it income
REIT obtain management services and pay management fees
REITs make distributions to unit holders who are investing in the REITs
Trustees acts on behalf of unit holders sand the REITs pay trustee fees
what makes REITs exempt from taxation?
Income is not taxed within the trust as long as it is distributed to unitholders
tax flows through to the Unitholders
income statement of a REIT
Real estate revenues
- Real estate expenses
- Depreciation
+ Gain/loss from real estate sales
= Income from real estate
- Interest expense
+ Other income - General & administrative expenses
= Net income
Funds from Operations (FFO)
Net income
- Gain/loss from real estate sales
+ Depreciation & amortization
= Funds from operations
Adjusted Funds from Operations (AFFO)
Funds from operation
- Recurring capital expenditures (non-revenue generating)
- Amortization of tenant allowances
- Amortization of leasing Commissions
- Adjustment for Rent Straight-lining
= Adjusted funds from operation
Net Asset Value (NAV)
Market value of assets
- Market value of liabilities
= Net asset value
If NAV per unit > unit trading price
trading at a discount
If NAV per unit < unit trading price
trading at a premium
FFO payout ratio
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 ∕𝐹𝐹𝑂 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
AFFO payout ratio
〖𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 〗∕〖𝐴𝐹𝐹𝑂 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡〗
G&A Ratio
〖𝐺 & 𝐴 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠〗∕ 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
Debt to market capitalization
〖𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠〗∕〖𝑚𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛〗
Debt to total market capitalization
〖𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠〗∕〖(𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 + 𝑚𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)〗
REITMetrics
LTV
Interest coverage
DSCR
Property statistics
