Funds From Operations Input Form
Formula Used
Base FFO = Net Income + Depreciation and Amortization + Impairment + Loss on Property Sale - Gain on Property Sale + Other FFO Adjustments.
Common FFO = Base FFO - Preferred Dividends.
AFFO = Common FFO - Straight-Line Rent Adjustment - Recurring Capital Expenditures - Leasing Costs - Maintenance Reserve + Non-Cash Compensation + Other AFFO Adjustments.
FFO Per Share = Common FFO ÷ Weighted Average Common Shares.
AFFO Payout Ratio = Common Dividends Paid ÷ AFFO.
Company definitions may differ. Always compare the output with reported notes, filings, and management adjustments.
How to Use This Calculator
- Enter net income from the income statement.
- Add real estate depreciation, amortization, impairment, and property sale losses.
- Subtract gains from property sales.
- Deduct preferred dividends to get common FFO.
- Add AFFO adjustments, including recurring capital spending and leasing costs.
- Enter common shares, dividends, period length, and share price.
- Press the calculate button.
- Use CSV or PDF export for reporting.
Example Data Table
| Scenario | Net Income | D&A | Gain on Sale | Preferred Dividends | Common FFO |
|---|---|---|---|---|---|
| Stable Office REIT | $12,500,000 | $18,200,000 | $1,200,000 | $850,000 | $29,300,000 |
| Retail Portfolio | $8,900,000 | $11,400,000 | $0 | $400,000 | $19,900,000 |
| Industrial Assets | $22,700,000 | $24,800,000 | $3,500,000 | $1,100,000 | $42,900,000 |
Funds From Operations Guide
What FFO Shows
Funds from operations is a key cash performance measure for real estate companies. It is widely used for REIT analysis. Net income can look low when depreciation is large. Real estate often depreciates on paper. Yet properties may still keep value. FFO adjusts net income for that issue. It adds back real estate depreciation and amortization. It also removes many property sale gains and losses.
Why Adjustments Matter
A clean FFO figure helps compare companies. It focuses on recurring property operations. It does not replace full financial statements. It supports deeper review of dividends and valuation. Preferred dividends are important. They reduce cash available to common shareholders. This calculator deducts them from base FFO.
Using AFFO
AFFO goes one step further. It tries to estimate sustainable cash flow. It subtracts recurring capital spending. It also removes leasing costs and tenant improvements. These items may be needed to keep properties competitive. AFFO can be useful for dividend coverage. A lower payout ratio may show more safety. A high ratio may signal pressure.
Per Share Review
Per share figures make results easier to compare. They are useful when share counts change. Annualized values help review short reporting periods. Valuation multiples compare market value with recurring cash flow. Strong FFO does not always mean low risk. Debt, occupancy, rent growth, rates, and asset quality still matter. Use this calculator as a structured screening tool. Then review filings before making decisions.
FAQs
1. What is funds from operations?
Funds from operations is a real estate cash performance measure. It starts with net income, adds back depreciation, and adjusts for property sale gains or losses.
2. Why is FFO used for REITs?
REITs own depreciable real estate. Accounting depreciation can reduce net income, even when property cash flow remains strong. FFO helps normalize that effect.
3. What is AFFO?
AFFO means adjusted funds from operations. It usually subtracts recurring capital costs, leasing costs, and other maintenance-related items from common FFO.
4. Is AFFO better than FFO?
AFFO is often closer to recurring cash flow. FFO is more standardized. Many analysts review both numbers before judging dividend safety.
5. What is a good AFFO payout ratio?
A lower ratio is usually safer. Many investors prefer AFFO payout below 80% to 90%, but acceptable levels depend on property type and growth needs.
6. Should gains on property sales be removed?
Yes, many FFO methods remove property sale gains. These gains are often non-recurring and can distort ongoing operating performance.
7. Why include preferred dividends?
Preferred dividends reduce cash available to common shareholders. Deducting them gives a clearer view of common shareholder FFO.
8. Can I export the calculation?
Yes. Use the CSV button for spreadsheet work. Use the PDF button for a simple report that can be saved or shared.