REIT VALUATION Congratulations! You have been hired as an Equity Research Analysts for one of the leading investment banks. Your boss asked you to analyze a REIT company that she heard might be a good investment opportunity. The properties underlying the REIT generate and NOI of $8 million (See income statement below) and the implied capitalization rate (caprate) for all assets is 6.5%. The growth in the market is 2.5% and the required return for the REIT stock is 9%. Your analysis shows that the current FFO multiple for other REITs of similar characteristics is 11 . Assume that the all earnings are paid as dividend and that the REIT has $36 million in Debt. a) Estimate the price of the REIT stock using the Gordon Dividend Discount Model, the Income (FFO) multiple and the net Asset Value approach. (4 points) b) Your boss requested a recommendation of whether to add or not this REIT to the portfolio based solely on price consideration (Leave other considerations like portfolio and diversification benefits aside). The market price of the REIT at the moment you present your analysis to the board is $59 dollars per share, what would your recommendation be? ( 2 points)