Susan Ryan, an investor, is considering a retail REIT investment. Ryan gathers the following information on the
Question:
Susan Ryan, an investor, is considering a retail REIT investment. Ryan gathers the following information on the REIT:
| Expected cash NOI next 12 months | $950,000 |
| Net income | $600,000 |
| Non-cash rents | $20,000 |
| Other income (gain on sale of properties) | $50,000 |
| Recurring maintenance-type capital expenditures | $40,000 |
| Depreciation and amortization | $150,000 |
| Cash and equivalents | $275,000 |
| Accounts receivables | $200,000 |
| Land held for future development | $500,000 |
| Total liabilities | $2,100,000 |
| Shares outstanding | 200,000 |
Ryan is trying to estimate the value of the REIT. She analyses a set of comparable retail REITs, and determines that a cap rate of 8% is appropriate for this REIT. Furthermore, Ryan determines that the average P/FFO multiple and P/AFFO multiples for retail REITs are 16.5x and 18.4x, respectively.
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8.) What is the REITs net asset value per share (NAVPS)? (1 point)
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9.) What is the estimated value per share of the REIT based on an application of the average P/FFO multiple for retail REITs to the REITs funds from operations (FFO) per share? (2 points)
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10.) What is the estimated value per share of the REIT based on an application of the average P/AFFO multiple for retail REITs to the REITs adjusted funds from operations (AFFO) per share? (1 point)
Expert Answer:
