ABC REIT is an equity REIT which owns a number of properties operated as Australian- branded...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
"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:
Students also viewed these finance questions
-
Task 1 - Counting Twos.java Write a program that will ask the user to enter an integer and calculate the power of two. Output the number of twos in this number. Input Enter an integer: 5 Enter an...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Josie Inc. collects cash from customers two ways: 1. Accrued Revenue. Some customers pay Josie after Josie has performed service for the customer. During 2017, Josie made sales of $50,000 on account...
-
Draw structures corresponding to the following names: (a) 3-Methylbutanal (b) 4-Chloro-2-Pentanone (c) Phenyl acetaldehyde (d) cis-3-tert-Butylcyclohexanecarbaldehyde (e) 3-Methyl-3-butenal (f)...
-
Two \(0.25-\mathrm{kg}\) carts, one red and one green, are stationary on a low-friction track. The carts are initially separated by \(0.50 \mathrm{~m}\). You push on the red one with a constant force...
-
Use supply and demand curves to illustrate how a central bank conducts monetary policy using open market operations, a discount window and altering reserve levels.
-
On May 27, Hydro Clothing Inc. reacquired 75,000 shares of its common stock at $8 per share. On August 3, Hydro Clothing sold 54,000 of the reacquired shares at $11 per share. On November 14, Hydro...
-
What are some benefits of holding FX reserves ( recall the Asian financial crisis of 1 9 9 7 ) ? Are any cost and problems associated with holding too many FX reserves?
-
The return on equity (ROE) of Child SA is 14 per cent and it has a payout ratio of 0.5. Current book value per share is 50 and the book value will grow as the firm reinvests earnings. Assume that the...
-
INVENTORY & SERVICES Module Setup and Transactions Review: G/L, A/P, A/R Challenge Exercise 05 C5-2, Charlie's Hair Styling COMPANY, RECEIVABLES, PAYABLES, INVENTORY & SERVICES 5-373 Charlie's Hair...
-
For the daily yield volatility computed in Question 5, what is the annual yield volatility assuming the following number of trading days in the year: 250, 260 and 365.
-
Economics is as much a science as any other science and has much in common with physics. a. Consider the approach taken to research and investigation in economics and that in physics. To what extent...
-
Suppose that you could buy a one-year bond today, which has an interest rate of \(3 \%\). If you wait a year and buy a one-year bond then, the interest rate will be \(4 \%\). Two years from now, a...
-
If the money supply is increased, which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?
-
During the period 1973-1975, the United States experienced a deep recession with a simultaneous sharp rise in the price level. Would you conclude that the recession was the result of a supply shock...
-
Consider the anticipated economic impact of the tax that you designed i . Who do you think will bear the tax incidence and why? Do you think that the tax incidence will change over time? Compare the...
-
r = 0.18 Find the coefficients of determination and non-determination and explain the meaning of each.
-
On January 1, 20X1, Trask Co. signs an agreement to lease office equipment from Coleman Inc. for three years with payments of $193,357 beginning December 31, 20X1. The equipments fair value is...
-
For the year ended December 31, 20X1, Tyre Company reported pre-tax financial statement income of $750,000. Its taxable income was $650,000. The difference was due to the use of accelerated...
-
In January 20X1, Harold Corporation acquired 20% of Otis Companys outstanding common stock for $400,000. This investment gave Harold the ability to exercise significant influence over Otis. The book...
-
Match each of the following roles of a cost management system, 1 through 6 , with the most appropriate example, a through \(f\). Cost Management System Role 1. Develop accurate product/ service costs...
-
A cost management system is made up of three primary elements: (1) motivational elements, (2) informational elements, and (3) reporting elements. Classify each of the following items, a through...
-
Stock options and stock grants are often utilized to compensate executives. The general rule is that the fair value of the compensation award is determined at the grant date and expense is recognized...
Study smarter with the SolutionInn App