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REIT Share Value Calculation Using Net Asset Value, P/FFO, P/AFFO, and Discounted Cash Flow Approaches

Calculating the Value of a REIT Share Example Tysons Limited, a real estate asset management company, is keen on diversifying its portfolio through an office lease REIT investment. The company needs to value the potential investment as of the end…

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REIT Valuation Using Funds From Operations (FFO) and Adjusted Funds from Operations (AFFO).

Funds from Operation (FFO) FFO amends reported earnings and is a popular measure of the ongoing operating income of a REIT or REOC. It is calculated as follows: $$\small{\begin{array}{l|l|l|l|l|l}\textbf{}&{\textbf{}\\ \textbf{}_{\textbf{}}}& \\ \hline\text{Accounting Net Earnings} & XX \\ \hline\text{Add:Depreciation expense} &…

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Net Value Per Share (NAVPS) in REIT Valuation

NAVPS refers to the (per-share) amount by which assets exceed liabilities. The amount is computed using current market values, as opposed to accounting book values, divided by the number of shares outstanding. NAVPS is generally considered the most appropriate measure…

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Types of REITS

 The primary type of REITs, the equity REITs, are keenly managed enterprises that seek to maximize returns from their property portfolios by applying management skills in operations and finance. Retail or Shopping Center REITs This class comprises shopping malls…

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Basic Forms of Real Estate Investments

 Basic Forms of Real Estate Investments Real estate can be categorized either as non-residential (commercial) or residential property. It can also be classified as for rent or owner-occupied. Commercial real estate refers to four large rental types: shopping centers,…

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Pricing and Valuing Equity Swap Contracts

Equity Swaps An equity swap is an OTC derivative contract in which two parties agree to exchange a series of cash flows. In this arrangement, one party pays a variable series determined by equity. The other party, on the other…

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Pricing and Valuing Currency Swap Contracts

A currency swap is an agreement between two counterparties to exchange future interest payments in different currencies. The payments can be based either on a fixed interest rate or a floating interest rate. By swapping future interest obligations, the two…

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Pricing and Valuing Interest Rate Swap Contracts

Swaps are typically derivative contracts in which two parties exchange (swap) cash flows or other financial instruments over multiple periods for a give-and-take benefit, usually to manage risk. Both swap contract parties have future obligations. Therefore, similar to forwards and…

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Pricing Fixed-Income Forward and Futures

A coupon-paying bond’s pricing and valuation are the same as those of a dividend-paying stock. The difference is that the cash flows are coupons and not dividends. Fixed income forward and futures have several problems that are related to the…

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Interest Rate Forward and Futures Contracts

The most used interest rate in the derivatives market is the LIBOR which stands for London Interbank Offered Rate. LIBOR is the rate at which London banks can borrow from one another. When the loans are in dollars, they are…

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