Problem $21-3$

Atlantis REIT expects an income of $$10$ per share. This includes a deduction of $$4$ per share for depreciation. Atlantis did not have any

gains from the sale of real estate. Its properties are mainly apartments, and you believe that apartments are currently selling on

average at about an $8$ percent cap rate. Atlantis has $1$ million shares outstanding and its balance sheet shows liabilities of $$48$ million.

Comparable REITs have FFO multiples of about $10.$ Atlantis is expected to pay a dividend during the next fiscal year of $$6$ per share

and to increase those dividends at about $2$ percent per year in the future. Investors in REITs like Atlantis usually expect a return of

about $12$ percent.

Required:

a$.$ What is the FFO and value per share based on an FFO multiple?

b$.$ What value per share is indicated using a dividend discount model?

c$.$ What is the value per share implied by the net asset value of the properties?