AFFO / FFO Calculator (REIT Funds from Operations)
Compute a REIT's Funds From Operations (FFO) and Adjusted FFO (AFFO): FFO = net income + depreciation & amortisation - gain on property sales; AFFO = FFO - recurring capex - straight-line rent adjustment.
Input Data
Results
At a glance:FFO = net income + depreciation & amortisation - gain on property sales. AFFO = FFO - recurring capital expenditure - straight-line rent adjustment. They restore the cash-generating ability hidden by large non-cash depreciation in REIT net income; AFFO is closest to distributable cash for dividend assessment.
Formula
FFO = net income + depreciation & amortisation − gain on property sales.
AFFO = FFO − recurring capital expenditure − straight-line rent adjustment.
How to Use
- Enter the REIT's net income, depreciation & amortisation and gain on sales.
- Enter recurring capex and the straight-line rent adjustment.
- View FFO and the more distributable-cash-like AFFO.
FAQ
Why use FFO/AFFO instead of net income for a REIT?
REIT net income is depressed by large non-cash depreciation on property, yet quality real estate often appreciates — so net income understates cash flow. FFO adds depreciation back and removes one-off sale gains; AFFO further deducts recurring capex, nearer to cash available for distribution. FFO/AFFO are the core metrics for REIT profitability and dividends, far more relevant than net income.
What is the difference between FFO and AFFO?
FFO = net income + depreciation & amortisation - gain on sales (restores operating cash flow; has NAREIT's standard definition, so comparable across firms). AFFO = FFO - recurring capex - straight-line rent adjustment (deducts real cash to maintain properties, closest to distributable cash). Use FFO for cross-firm comparison and trends; use AFFO payout ratio to judge dividend sustainability. WARNING: AFFO has no uniform standard, so definitions vary.
What traps should I avoid with FFO/AFFO?
First, AFFO has no standard definition — firms differ on what counts as recurring capex and adjustments, so never compare AFFO figures blindly. Second, capitalising vs expensing is subjective (maintenance vs growth capex). Third, metrics cannot replace asset-quality judgement (location, tenant credit, lease expiry, leverage, rate risk). Fourth, check one-off items are properly excluded. Treat FFO/AFFO as a start, not an end — pair with balance sheet, rent growth, occupancy and dividend cover.
What Hong Kong REITs exist, and what to note?
Hong Kong-listed REITs are governed by the SFC's Code on Real Estate Investment Trusts and must distribute at least 90% of after-tax net income to unitholders, so dividends are the core return. When analysing with FFO/AFFO: note each REIT's differing definitions of recurring capex (no uniform AFFO standard); Hong Kong REITs often hold malls and offices where depreciation heavily depresses net income, making FFO/AFFO essential; and still combine with occupancy, rent growth, leverage and rate risk. Consult the fund's reports and offering documents.
How does FFO/AFFO differ from free cash flow (FCF)?
Both aim to show real available cash but differ in scope. FCF (general firms) = operating cash flow minus all capex including growth; FFO/AFFO are REIT-specific, adding back property depreciation (since quality property seldom falls in value) and deducting only recurring (maintenance) capex, not acquisition growth capex. For REITs, FFO/AFFO better reflect ongoing operations and dividends; use FCF as supplementary.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.