Real Estate & REITs
Two REITs own identical portfolios but one runs 30% leverage and the other 60%. How does that distort a P/FFO comparison?
Model answer
FFO is calculated AFTER interest expense, so leverage is embedded in the metric - unlike EV/EBITDA, P/FFO is a levered multiple. The 60%-levered REIT converts the same property NOI into higher FFO…
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