REITs
FFO per Share — Funds From Operations
A REIT's earnings per share before real-estate depreciation and property-sale gains.
Definition
Funds from operations (FFO) is net income with the depreciation of the company's properties added back and the gains (or losses) on property sales taken out. Accounting depreciation charges buildings off over decades even though well-kept property usually holds its value, so a REIT's EPS understates the cash its rents produce. FFO per share divides that figure by diluted shares.
Formula
(Net Income + Real-Estate Depreciation & Amortization − Gains on Property Sales) ÷ Diluted Shares
Why it matters
FFO is the earnings measure the REIT industry itself reports and analysts forecast. Dividends are paid from it, and a REIT's EPS can be near zero or negative while FFO comfortably covers the payout.
How Standard Equity uses it
Takes EPS's place in the main table for REITs. We use the company's reported FFO whenever there is one, because it follows its own reconciliation (impairments, joint ventures); only when none is reported do we compute net income + real-estate depreciation − gains on sales. Analyst EPS estimates stand in for the FFO forecasts we do not have.
The metric
| Category | REITs |
|---|---|
| Unit | $ |
| Applies to | REITs only |