Companies may also invest in redundant assets such asreal estateand hotels as a way of earning income even after disposing of the business. For example, where the seller owns various commercial buildings that are not part of the company’s operations, the seller may continue leasing them out e...
Real Estate Investment Trusts are companies that own and operate real estate assets. You can invest in them just like a stock (such as the Vanguard REIT). You can buy and sell shares of REITs on the open stock market at any time. Traditional real estate investmentThe traditional way means...
Instead of using the traditional ratio of price and value (the price-to-earnings ratio), REIT analysts often use a slightly different variation: the price-to-FFO ratio (or P/FFO ratio). The ‘FFO’ in the price-to-FFO ratios stands forfunds from operations, which is a non-GAAP financia...
Physicalreal estatein addition toreal estate investment trust (REIT)vehicles may be used as a tax shelter. Taxpayers may receive favorable treatment due todepreciationdeductions. Taxpayers may also receive benefits by performing1031 like-kind exchangesthat allow for the sale of a property and avoidance...
Cap Rate Definition:In real estate, theCap Rate(Capitalization Rate) of a property equals its projected, stabilized Net Operating Income divided by its current price or estimated value; the Cap Rate is the reciprocal of the EBITDA multiple commonly used to value companies. ...
Ongoing costs and revenues from usage fees, rentals, sales, etc., may be allocated pro rata to co-owners, depending on the terms of the fractional agreement. Most fractional ownership deals use legal entities like limited partnerships and limited liability companies. This formally divides economic...
The Statement of Owner’s Equity provides additional useful information in certain contexts, but it’s unimportant for ~90% of companies in real-life analyses. We almost always consolidate this entire section of the financial statements into a single line item in financial models: ...
(1996). A seminal work that is invaluable as a source of data on prices, albeit one in which some of the conclusions now seem very dated and betray the prejudices of a partisan observer writing in the 1960s, isGerald Reitlinger,The Economics of Taste: The Rise and Fall of Picture ...
Office REITs.This subgroup includes skyscrapers and office parks. Some may specialize in certain locations, such as central business districts or suburbs. Examples includeBrandywine Realty Trust(BDN) andCity Office REIT, Inc.(CIO). Health care REITs.These companies own hospitals, medical office buildi...
Unlike investing in a REIT, investing in a REOC is like investing in any other company in which the cash flow is derived from several activities. In the case of Real Estate Operating Companies, cash flow is derived from rent, buying and/or developing properties, and then selling them, and...