FFO Calculator
From net income, depreciation & amortisation, and gains/losses on asset sales, compute Funds From Operations (FFO) for REITs and similar firms.
Input Data
Results
At a glance:FFO = net income + depreciation & amortisation + losses on sales − gains on sales. Real estate depreciation is a large non-cash expense that depresses net income yet does not reflect the property's true cash generation; one-off sale gains/losses are non-recurring. FFO adds back D&A and removes sale gains/losses to show ongoing operating cash. It is the most common REIT profitability metric, used for FFO per unit, payout capacity and 'price ÷ FFO' valuation. FFO is non-GAAP and excludes maintenance capex; AFFO is closer to distributable cash.
Formula
FFO = net income + depreciation & amortisation + losses on sales − gains on sales.
$$FFO = NetIncome + D\&A + Losses_{sales} - Gains_{sales}$$$$FFO\ per\ unit = \dfrac{FFO}{Units\ outstanding}$$How to Use
- Enter the accounting net income.
- Enter depreciation & amortisation.
- Enter gains and losses on asset sales, then view FFO.
At net income HK$800,000 and no sale gain/loss, depreciation's effect on FFO (showing add-back)
| Net income (HK$) | D&A (HK$) | Sale gain (HK$) | FFO (HK$) |
|---|---|---|---|
| 500,000 | 400,000 | 0 | 900,000 |
| 800,000 | 300,000 | 100,000 | 1,000,000 |
| 300,000 | 900,000 | 0 | 1,200,000 |
| 1,200,000 | 600,000 | 300,000 | 1,550,000 |
Case Studies
Case 1: Depreciation-heavy REIT, FFO >> net income
Mr Chan studies a Hong Kong mall REIT; the annual report shows net income only HK$300,000 — looks mediocre. But property D&A is HK$900,000 and no property was sold that year.
FFO = 300,000 + 900,000 + 0 − 0 = HK$1,200,000.
FFO is four times net income — accounting depreciation heavily suppressed book profit while core operating cash is ample. Mr Chan realises: judging a REIT by net income alone understates its payout ability; FFO is the closer picture.
Case 2: One-off sale gain excluded from core operations
A REIT: net income HK$1,200,000 including a HK$300,000 gain from selling an old property; D&A HK$600,000; also a HK$50,000 loss on another sale.
FFO = 1,200,000 + 600,000 + 50,000 − 300,000 = HK$1,550,000.
The sale gain HK$300,000 is removed and the loss HK$50,000 added back, keeping only continuing operations. This avoids one-off transactionswindow-dressing (or dragging) results, so investors see sustainable operating cash — without the adjustment you might wrongly assume next year holds the same level.
FAQ
Why use FFO instead of net income for REITs?
Annual real-estate depreciation is a large non-cash expense that heavily depresses net income, yet properties often do not lose book value and may appreciate — so net income understates a REIT's true cash generation. FFO adds back D&A and strips one-off sale gains/losses, better reflecting ongoing operating cash, hence the industry-standard REIT metric.
FFO vs AFFO?
FFO is the basic operating cash flow; AFFO (Adjusted FFO) further deducts recurring capital expenditures to maintain properties (repairs, tenant improvements) and straight-line rent adjustments, so it is closer to truly distributable cash. Investors often weigh AFFO more for payout sustainability; this calculator gives basic FFO.
Why strip gains/losses on sales?
Gains/losses on selling properties are one-off, non-recurring items, not core ongoing results. Leaving them in distorts comparability across periods. FFO subtracts gains and adds back losses, keeping only the continuing operations for cross-period and cross-company comparison.
Where do Hong Kong REITs disclose FFO?
Hong Kong-listed REITs are regulated by the REIT Code and disclose financial statements periodically. Although FFO is not a mandatory HKAS line, most REITs voluntarily disclose FFO, FFO per unit or distributable income in results announcements or the annual report's MD&A, for payout assessment. Check HKEXnews for annual/interim reports, and watch whether each REIT's FFO definition is consistent to avoid mismatched comparisons. This calculator is for concept teaching and estimation; rely on audited statements for formal analysis.
Does higher FFO mean a better REIT to buy?
Not by absolute FFO alone. FFO shows the scale of operating cash, but 'worth buying' needs more angles: (1) FFO per unit, not total — if a REIT issues units to raise capital, total FFO rises but per-unit FFO may be diluted; (2) valuation multiple — 'price ÷ FFO per unit' (like P/E) vs peers; too high may already price in optimism; (3) payout sustainability — AFFO (after maintenance capex) is closer to distributable cash; high FFO with huge repair costs may not mean high payout; (4) rate environment — REITs are rate-sensitive, hikes raise financing cost and compress valuation. So FFO is a key start but must be weighed with per-unit data, valuation, debt and market context; seek professional advice before investing.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.