Consider the analysis of Nairobi REIT. The information relating to Nairobi REIT and its comparable REIT is as follows:

	Nairobi REIT	Comparable REIT
Total equity value	?	48,000,000
Number of shares	200,000	300,000
Gross Income	10,000,000	15,000,000
Gain on sale of property	2,000,000	3,000,000
Property management expense	3,000,000	5,000,000
Depreciation	1,000,000	1,500,000
Interest	1,500,000	1,500,000

Required

a) Calculate the equity value of Nairobi REIT using (i) FFO multiple method and (ii) Capitalisation approach. (19 marks)

b) Suppose an investor is offered to buy Nairobi REIT for Sh. 170 per share, would you recommend the purchase

Answer rating: 100% (QA)

a FFO multiple method FFO Gross income Property expenses Gain on sale Depreciation 10000000 3000000 ... View the full answer