Calculate Adjusted Funds From Operations (AFFO), a key performance metric for Real Estate Investment Trusts (REITs).
💡
Pro Tips
What is AFFO?: AFFO stands for Adjusted Funds From Operations. It is considered a more accurate measure of a REIT’s residual cash flow available for shareholders than simple FFO, as it subtracts recurring capital expenditures needed to maintain property quality.
Why is FFO not enough?: FFO adds back depreciation but doesn't account for the actual cash costs required to keep properties running (like replacing a roof or paying leasing brokers). AFFO corrects this.
How does 'Straight-line Rent' affect AFFO?: Straight-line rent recognizes the average rent over a lease term. AFFO typically subtracts the non-cash portion of this to show actual cash collected.
!
Fun Facts
"AFFO is often called 'CAD' (Cash Available for Distribution) or 'FAD' (Funds Available for Distribution)."
"REITs are required by law to distribute at least 90% of their taxable income as dividends; AFFO is a primary driver of those dividends."
"Analysts often use the AFFO Payout Ratio to determine if a REIT's dividend is sustainable."
