ABC REIT is an equity REIT which owns a number of properties operated as Australian- branded...
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"ABC REIT" is an equity REIT which owns a number of properties operated as Australian- branded children's theme parks called "Wombat World". The REIT has been operating for six years now. Overall commercial real estate prices in the markets in which this REIT operates have been fairly flat / constant over that time period. The REIT has the following financial information in the current year: Income statement ($m) Net operating income (NOI) Head office expenses and executive compensation (Corporate G&A) Depreciation Loss on property sale Mortgage interest Net income Balance sheet ($m) Assets: Commercial real estate Depreciation Cash Liabilities and equity: Mortgage debt (interest only mortgage) Equity $30 ($6) ($20) ($5) ($15) ($16) $600 ($120) $20 $300 $200 Assume that the market capitalization at today's stock price of the REIT is $110MM (i.e. this is the market value of the equity of the REIT based on its current stock price). (a) This REIT has negative net income. Does this necessarily mean that it had negative net cash flows from operating activities and/or negative AFFO? Why or why not? (Explain in a couple of sentences) (b) Could you calculate cash flows from operating activities and/or AFFO directly from the above information? Why or why not? "ABC REIT" is an equity REIT which owns a number of properties operated as Australian- branded children's theme parks called "Wombat World". The REIT has been operating for six years now. Overall commercial real estate prices in the markets in which this REIT operates have been fairly flat / constant over that time period. The REIT has the following financial information in the current year: Income statement ($m) Net operating income (NOI) Head office expenses and executive compensation (Corporate G&A) Depreciation Loss on property sale Mortgage interest Net income Balance sheet ($m) Assets: Commercial real estate Depreciation Cash Liabilities and equity: Mortgage debt (interest only mortgage) Equity $30 ($6) ($20) ($5) ($15) ($16) $600 ($120) $20 $300 $200 Assume that the market capitalization at today's stock price of the REIT is $110MM (i.e. this is the market value of the equity of the REIT based on its current stock price). (a) This REIT has negative net income. Does this necessarily mean that it had negative net cash flows from operating activities and/or negative AFFO? Why or why not? (Explain in a couple of sentences) (b) Could you calculate cash flows from operating activities and/or AFFO directly from the above information? Why or why not?
Expert Answer:
Answer rating: 100% (QA)
a The fact that the REIT has negative net income does not necessarily mean it had negative cash flow... View the full answer
Related Book For
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
Posted Date:
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