Question

When valuing REITs, funds from operations (FFO) is best defined as:

a) Net operating income - G&A expenses - Interest expense.
b) Net Income + Noncash charges.
c) Net income + Noncash charges - Gains(losses) from property disposals - Noncash rent - Maintenance capex - Leasing costs.
d) Earnings before interest and taxes (EBIT).

Answer 1

Funds from Operations (FFO) is best defined as Net income + Noncash charges - Gains(losses) from property disposals - Noncash rent - Maintenance capex - Leasing costs. FFO is commonly used to evaluate the performance of REITs.

Step-by-step explanation:

Funds from Operations (FFO) is best defined as Option C: Net income + Noncash charges - Gains(losses) from property disposals - Noncash rent - Maintenance capex - Leasing costs. FFO is a financial metric commonly used to evaluate the performance of Real Estate Investment Trusts (REITs). It provides a more accurate representation of a REIT's operating performance by adding back certain noncash charges and subtracting one-time gains or losses from property disposals, noncash rent, maintenance capital expenditures, and leasing costs.