Investors like REITs for the current income that they produce. Knowledgable real estate investors know that leasing commissions and capital expenditures take a big bite out of cash flows. Adjusted Funds from Operations is the measure of cash flow for a REIT that is net of capital expenditures. Green Street Advisors reports that for an industrial REIT, Cap Ex averages 15% of Net Operating Income. Assume a portfolio of industrial properties has an NOI of $100M. What would be a fair estimate of the AFFO in $M?

		95
		100
		85
		15

This question and the one that follows pertains to the discussion we had in class about valuing a REIT on an Net Asset Value basis. For reference, you may want to refer to the Excel file for Problem Set 2, Tab NAV. Assume a REIT has an annual NOI of $200M. Net debt equals $1000M. The company has 100M shares outstanding. If the stock trades at $5 per share, and the stock price is equal to the value of NAV per share, what is the implied cap rate?

		8.07%
		13.33%
		10.0%
		7.5%

On the asset side of a REIT balance sheet, the largest line item is normally the net book value of properties. This means that properties are recorded at cost and then net of the depreciation charges over time.

True

False