Adjusted Funds from Operations (AFFO)

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Visit StreetInsider.com at http://www.streetinsider.com/Earnings/Ashford+Hospitality+Trust+%28AHT%29+Posts+Q3+AFFO+of+%240.33%2C+Beats+by+5c/6074754.html for the full story.
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Visit StreetInsider.com at http://www.streetinsider.com/Earnings/W.+P.+Carey+%26+Co.+%28WPC%29+Posts+Q2+AFFO+of+%240.98%2C+Tops+YY%3B+Revs+Heavy/5868048.html for the full story.
Sydney Morning Herald  Nov 1  Comment 
Nowadays, reading a property report is like trying to make sense of a prescription from a doctor. It's all long words and jargon, which at the end of the day boils down to either a profit or a loss.




 

A measure of a Real Estate Investment Trust (REIT)'s financial performance. This metric takes into account a REIT's Funds From Operations (FFO) and adjusts for recurring spending the company does to maintain the quality of its underlying real estate assets.

This measure was used instead of FFO because it was found that AFFO overstates the economic profitability over time of a REIT. Theere are expenses like real depreciation and cap-ex which also need to be considered to find the true earnings power of a real estate asset. Whether its the replacement of carpets, doors etc. in apartments or concession given to the tenants in form of Tenant improvements, these are economic expenses and thus need to be deducted from FFO for a true earnings measure.

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