Audited total assets

• Value of the fund’s total assets based on last audited values.

Adjusted Funds From Operations (AFFO)

• This term refers to a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations. AFFO is usually calculated by subtracting from Funds from Operations (FFO) both (1) normalized recurring expenditures that are capitalized by the REIT and then amortized, but which are necessary to maintain a REIT’s properties and its revenue stream (e.g., new carpeting and drapes in apartment units, leasing expenses and tenant improvement allowances) and (2) “straight-lining” of rents. This calculation also is called Cash Available for Distribution (CAD) or Funds Available for Distribution (FAD).

Capitalization Rate

• The capitalization rate (or “cap” rate) for a property is determined by dividing the property’s net operating income by its purchase price. Generally, high cap rates indicate higher returns and greater perceived risk.

Cash (or Funds) Available for Distribution

• Cash (or Funds) available for distribution (CAD or FAD) is a measure of a REIT’s ability to generate cash and to distribute dividends to its shareholders. In addition to subtracting from FFO normalized recurring real estate-related expenditures and other non-cash items to obtain AFFO, CAD (or FAD) is usually derived by also subtracting nonrecurring expenditures.

Cashflow

• With respect to real estate and real estate portfolios: rental income minus all expenses for current operations of an estate. Loan interests and repayments as well as depreciations are not taken into account.

Corporation tax

• Income tax on corporate bodies. Calculation is based on the taxable income of the company.

Cost of Capital

• The cost to a company, such as a REIT, of raising capital in the form of equity (common or preferred stock) or debt. The cost of equity capital generally is considered to include both the dividend rate as well as the expected equity growth either by higher dividends or growth in stock prices. The cost of debt capital is merely the interest expense on the debt incurred.

Dividend

• the part of profit that is distributed periodically (normally annually) to its shareholders.

Dividend yield

• REITs dividend divided by current market price.

DownREIT

• A DownREIT is structured much like an UPREIT, but the REIT owns and operates properties other than its interest in a controlled partnership that owns and operates separate properties.

Earnings per share (EPS)

• Profit per share. Indicates what share of the total company profit can be attributed to a single share unit. The value makes it possible to compare the profit-earning capacity of companies with varying numbers of shares.

Equity yield

• Also known as Return on Equity, RoE

• The RoE is obtained by dividing profits (before or after tax) by the equity capital.

EBITDA

• Earnings before interest, taxes, depreciation and amortization. This measure is sometimes referred to as Net Operating Income (NOI).

Equitization

• The process by which the economic benefits of ownership of a tangible asset, such as real estate, are divided among numerous investors and represented in the form of publicly-traded securities.

Equity Market Cap

• The market value of all outstanding common stock of a company.

Equity REIT

• A REIT which owns, or has an “equity interest” in, rental real estate (rather than making loans secured by real estate collateral).

Fair Value

• Value amount stated used by a company to report financial instruments (security or derivative) according to the International Financial Reporting Standards (IFRS). The fair value indicates the „fair price“ – the price for which the respective financial instrument can be sold under the current market conditions. Market prices are used to ascertain the fair value, or it is determined via internal evaluation models.

Funds From Operations (FFO)

• The most commonly accepted and reported measure of REIT operating performance. Equal to a REIT’s net income, excluding gains or losses from sales of property, and adding back real estate depreciation.

Hybrid REIT

• A REIT that combines the investment strategies of both equity REITs and mortgage REITs.

Gearing level

• amount of borrowed money used by the Reit company
• read my articles in other blogs -(1)gearing ratio (2) determinants of gearing level
• example on article on gearing concern in Reit companies

Hidden reserve

• Difference between the book values recorded on the balance sheet and the market value of fixed assets. The book value is above the market value for assets and below the market value for liabilities. If the reverse is true, the term used is ‘hidden liabilities’.

Implied Equity Market Cap

• The market value of all outstanding common stock of a company plus the value of all UPREIT partnership units as if they were converted into the REIT’s stock. It excludes convertible preferred stock, convertible debentures and warrants even though these securities have similar conversion features.

IFRS / IAS

• Abbreviation for International Financial Reporting Standards. IFRS are international accounting standards for capital market oriented companies. IFRS allow for better worldwide comparison of annual statements. They have replaced the International Accounting Standards (IAS). Abbreviation for International Financial Reporting Standards. IFRS are international accounting standards for capital market oriented companies. IFRS allow for better worldwide comparison of annual statements. They have replaced the International Accounting Standards (IAS).

Liquid assets

• include cash; deposits with banks and licensed institutions and/or other institutions licensed or approved to accept deposits; government securities, treasury bills, Central bank certificates and goverment investment certificates, bankers acceptances and negotiable certificates of deposits; and any other instrument capable of being converted into cash within X days as may be approved by the trust as may be approved by the trustee;

Leverage

• The amount of debt in relation to either equity capital or total capital.

Mortgage REIT

• A REIT that makes or owns loans and other obligations that are secured by real estate collateral.

Net asset value of the fund

• determined by deducting the value of all the fund’s liabilities from the value of all the fund’s assets at the valuation point

Non-real property assets

• listed shares issued by non-property companies

Positive Spread Investing (PSI)

• The ability to raise funds (both equity and debt) at a cost significantly less than the initial returns that can be obtained on real estate transactions.

Property companies

• companies whose core activities are in property and classified as falling under the property sector

Property trust fund

• generally means an investment vehicle that invests or proposes to invest at least 50% of its total assets in real estate. An investment in real estate may be by way of direct ownership or a shareholding in an unlisted company whose principal assets comprise real estate

Price earnings ratio (P/E ratio)

• Ratio of a share price to the net income per share. The P/E ratio is an important ratio in evaluating the price of a share

Real estate funds

• Investment funds in which fund assets consist of real estate. Differentiation is made between open-end and closed-end real estate funds, as well as special funds. With open-end real estate funds, the number of buyers is unlimited and the monies paid in by the investors are mainly invested in commercial land, buildings and own construction projects in accordance with the principle of risk spreading. In contrast to closed-end real estate funds, shares can be sold or returned at any time. With closed-end real estate funds, the number of shareholders is limited and usually relate to a set object. As soon as the target capital is subscribed, the fund is considered closed. Special funds are funds designed for special institutional investors. Special funds may not be accessible to more than ten unit-holders.

Real estate

• physical land and those human-made items which are attached to the land.

Real property

• the ownership of all rights, interests and benefits related to the ownership of real estate

Real property-related assets

• include units of other property trust funds, listed securities of and issued by property companies, listed or unlisted debt securities of an issued by property companies, and mortgage-backed securities

Real Estate Investment Trust (REIT)

• A REIT is a company dedicated to owning, and in most cases, operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. Some REITs also engage in financing real estate.

Securitization

• Securitization is the process of financing a pool of similar but unrelated financial assets (usually loans or other debt instruments) by issuing to investors security interests representing claims against the cash flow and other economic benefits generated by the pool of assets.

Straight-lining

• Real estate companies such as REITs “straight line” rents because generally accepted accounting principles require it. Straight lining averages the tenant’s rent payments over the life of the lease.

Shareholder Value

• “Value for shareholders” – the goal of a shareholder value orientated company management is to maximise the interest value of individual shareholders. All management decisions are subject to this goal. In the narrow sense, this means considerably increasing share prices, in the broader sense, to optimise the competitiveness and profitability of the company in the long-term.

Spread

• Share difference between purchase and sale price of a security. A widespread parameter to evaluate money and capital market efficiency: when margins are narrow, market liquidity is high and transaction costs are low.

Total Returns

• pertaining to the “net profit” after deducting the original investment
• consist of the sum of capital appreciation + income distribution since investing in the listed REIT
• also considers as the total yield from your investment.

Total Market Cap

• The total market value of a REIT’s (or other company’s) outstanding common stock and indebtedness.

UPREIT

• In the typical UPREIT, the partners of the Existing Partnerships and a newly-formed REIT become partners in a new partnership termed the Operating Partnership. For their respective interests in the Operating Partnership (”Units”), the partners contribute the properties from the Existing Partnership and the REIT contributes the cash proceeds from its public offering. The REIT typically is the general partner and the majority owner of the Operating Partnership Units.

• After a period of time (often one year), the partners may enjoy the same liquidity of the REIT shareholders by tendering their Units for either cash or REIT shares (at the option of the REIT or Operating Partnership). This conversion may result in the partners incurring the tax deferred at the UPREIT’s formation. The Unitholders may tender their Units over a period of time, thereby spreading out such tax. In addition, when a partner holds the Units until death, the estate tax rules operate in a such a way as to provide that the beneficiaries may tender the Units for cash or REIT shares without paying income taxes.