REIT model: FFO, AFFO and NAV
FFO, AFFO, NAV per share and the cost of new equity. Build same-store and acquisition NOI, reconcile net income to FFO and AFFO, fund acquisitions with debt and new shares, and say what the REIT is worth against its NAV and whether its next acquisition is accretive.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: reit model: ffo, affo and nav.Updated 2 October 2026
Who builds it, and for whatThe model a REIT analyst keeps for every name in coverage, on the sell side, at a dedicated real estate securities fund or in a REIT’s own investor relations team. It answers the questions REIT investors ask instead of the ones they ask of other companies: how fast income grows on the buildings already owned, what the company earns on FFO and AFFO per share, whether the dividend is covered, what the buildings would fetch one by one, and whether issuing shares to buy more of them adds to per-share income or takes from it.
| A | B | C | D | E | F | G | H | I | |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | ||||||||
| 2 | Blue cells only. $ millions except per-share figures; shares in millions. FY0 is the base year; FY1 to FY5 are forecast. The REIT is invented. | ||||||||
| 4 | Year | Unit | FY0 | FY1 | FY2 | FY3 | FY4 | FY5 | |
| 5 | Year number | # | 0 | 1 | 2 | 3 | 4 | 5 | |
| 7 | The shares | ||||||||
| 8 | Share price ($) | $ | 55.00 | ||||||
| 9 | Shares outstanding at the end of FY0 (m) | # | 100 | ||||||
| 10 | Dividend per share, FY0 ($) | $ | 2.00 | ||||||
| 11 | Dividend per share growth a year | % | 3.0% | ||||||
| 13 | The portfolio | ||||||||
| 14 | Run-rate cash NOI of the portfolio at the end of FY0 | $m | 400.0 | ||||||
| 15 | Same-store cash NOI growth | % | 3.0% | 3.0% | 2.5% | 2.5% | 2.5% | ||
| 16 | Acquisitions (closed at mid-year) | $m | 500.0 | 500.0 | 300.0 | 300.0 | 300.0 | ||
| 17 | Acquisition cap rate (first-year cash NOI / price) | % | 6.0% | ||||||
| 18 | Disposals: sale proceeds (closed at mid-year) | $m | - | 200.0 | - | - | - | ||
| 19 | Disposal cap rate (NOI given up / proceeds) | % | 5.5% | ||||||
| 20 | Disposals: original cost of the buildings sold | $m | - | 160.0 | - | - | - | ||
| 21 | Disposals: accumulated depreciation on the buildings sold | $m | - | 40.0 | - | - | - | ||
| 22 | Straight-line rent: reported rent above cash rent, % of cash NOI | % | 2.0% | ||||||
| 24 | Costs and capital spending | ||||||||
| 25 | General and administrative expense, FY1 (including share-based pay) | $m | 30.0 | ||||||
| 26 | Share-based pay within it, FY1 (non-cash) | $m | 5.0 | ||||||
| 27 | Growth in G&A and share-based pay a year | % | 3.0% | ||||||
| 28 | Gross real estate at cost, end of FY0 | $m | 6,000.0 | ||||||
| 29 | Real estate depreciation, % of average gross real estate | % | 3.0% | ||||||
| 30 | Depreciation of non-real-estate assets (offices, systems) a year | $m | 3.0 | ||||||
| 31 | Capital spending on non-real-estate assets a year | $m | 3.0 | ||||||
| 32 | Recurring capital spending: maintenance capex, tenant improvements and leasing commissions, % of cash NOI | % | 12.0% | ||||||
| 34 | Debt and new equity | ||||||||
| 35 | Debt at the end of FY0 (net of cash) | $m | 2,200.0 | ||||||
| 36 | Interest rate on debt | % | 4.5% | ||||||
| 37 | Share of net investment funded with new debt | % | 40.0% | ||||||
| 38 | Cost of issuing new shares, % of gross proceeds | % | 2.0% | ||||||
| 39 | REIT distribution requirement, % of taxable income | % | 90.0% | ||||||
| 41 | Net asset value | ||||||||
| 42 | Cap rate the portfolio is valued at | % | 5.8% | ||||||
| 43 | Growth from year-end run-rate to forward NOI | % | 2.5% | ||||||
| 44 | Other assets at book: land, development, joint ventures | $m | 200.0 | ||||||
| 45 | NAV cap rate sensitivity step | % | 0.3% |
Click any cell. The inspector names the line, the schedule it belongs to and what kind of cell it is; blue on cream is an input, black a calculation, green a value from another sheet. Scroll sideways to see every year.
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REIT model: FFO, AFFO and NAV: the workbook
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What the base case says
- FFO per share, FY1
- 2.91
- AFFO per share, FY1
- 2.38
- AFFO payout ratio, FY1
- 86.7%
- Price / AFFO, FY1
- 23.1x
- NAV per share, FY0
- 51.30
- Premium (discount) to NAV
- 7.2%
- Implied cap rate
- 5.5%
- Investment spread on acquisitions
- 0.8%
Read from the workbook as served, every input at its default. Periods: FY0, FY1, FY2, FY3, FY4, FY5. The figures are invented and move with whatever you type in.
What this model is
A listed real estate investment trust, five years forward: same-store NOI growth, acquisitions and disposals, net income, funds from operations (FFO) and adjusted FFO (AFFO), the dividend, leverage, and net asset value per share.
REITs are priced on FFO and AFFO per share and on their discount or premium to NAV, not on earnings, because depreciation on buildings that hold their value makes net income understate what a REIT earns. The model carries all three and reconciles them.
Change the share price and watch the cost of new equity, the investment spread and the AFFO per share growth move: a REIT trading above NAV can buy buildings and grow per-share income; one trading below cannot without shrinking it.
Seats: Equity research and hedge funds, Investment banking, Private equity.
Careers that do this work: infrastructure & real assets, private equity, equity research, asset management.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Same-store NOI and portfolio growth
Growth on buildings owned, plus what was bought and sold
Assumptions, rows 14–21 · Portfolio, rows 6–12
FFO and AFFO
From net income to the measures REITs are priced on
Assumptions, row 22 · Assumptions, rows 25–32 · Portfolio, rows 15–20 · Earnings, rows 6–16 · Earnings, rows 19–21 · Earnings, rows 24–27 · Earnings, rows 30–35
REIT capital allocation
Funding deals, the dividend, leverage and the investment spread
Assumptions, rows 8–11 · Assumptions, rows 35–39 · Capital, rows 6–10 · Capital, rows 13–15 · Capital, rows 18–19 · Capital, rows 22–26 · Capital, rows 29–34 · Valuation, rows 11–14 · Valuation, rows 17–21
REIT net asset value
NAV per share, the premium or discount, the implied cap rate
Assumptions, rows 42–45 · NAV, rows 6–11 · NAV, rows 14–16 · NAV, rows 19–20 · Valuation, rows 6–8
What you should be able to explain
- Why REITs are valued on FFO and AFFO rather than earnings: depreciation on buildings that hold their value makes net income understate what a REIT earns.
- What FFO adds back and takes out under the NAREIT definition, and why AFFO also deducts recurring capital spending and straight-line rent.
- How NAV values the portfolio at a private-market cap rate, and what a premium or discount to NAV says about the cost of new equity.
- Why an acquisition adds to AFFO per share only if its yield after recurring capital spending beats the cost of the debt and equity raised to buy it, and why that is a different question from whether it adds to NAV per share.
- Why a REIT pays out more than the 90% of taxable income it must: depreciation shelters most of it.
What a reviewer looks for
- Adding back all depreciation in FFO, including on offices and systems, rather than real estate depreciation only.
- Leaving gains on property sales inside FFO.
- An AFFO that deducts no recurring capital spending, which flatters the payout ratio.
- Counting a whole year of income from an acquisition that closed mid-year, but only half a year of the shares issued to fund it, or the reverse.
- Quoting a NAV on trailing rather than forward NOI.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Acquisitions, disposals and the debt and equity that fund them close at mid-year, so a deal earns half a year of income in the year it closes and its new shares count half in the weighted average.
- Interest is charged on opening debt plus half the new borrowing, which depends only on inputs, so the model has no circular reference. Cash retained after dividends and capital spending repays debt at the year end.
- FFO follows the NAREIT definition: net income plus real estate depreciation and amortisation, less gains on the sale of real estate. Depreciation of offices and systems is not added back.
- AFFO deducts straight-line rent (reported rent above cash rent) and recurring capital spending (maintenance capex, tenant improvements and leasing commissions), and adds back share-based pay. REITs define it differently; this is the common form.
- NAV values forward cash NOI at a single cap rate, adds other assets at book and deducts net debt. A real NAV values each segment at its own cap rate; one rate keeps the mechanics visible.
- Taxable income is approximated by net income less gains. The real figure uses tax depreciation and differs, but the test it feeds (a REIT must distribute at least 90% of taxable income) rarely binds, because depreciation shelters most of it.
Build it yourself
The starter workbook
The FFO and AFFO build has been cleared: real estate at cost and its depreciation, the gain on sale, net income, the NAREIT FFO reconciliation, the adjustments to AFFO and the per-share figures. Build it so that the Valuation sheet shows price to FFO and AFFO and the payout ratio, and the Checks sheet confirms FFO reconciles to net income.
Blanks: FFO and AFFO. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Read · Guide · 13 min
Real Estate Financial Modelling: Why Corporate Finance Mechanics Break Here
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Equity Research Interview Questions: The Coverage Mindset
Read · Guide · 11 min
Financial Modelling Best Practices: The Conventions That Make a Model Auditable
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Model Audit
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Vocabulary: Real Estate Investment Trust (REIT), Funds From Operations (FFO), Adjusted Funds From Operations (AFFO), Same-Store NOI, REIT Net Asset Value (NAV), Implied Cap Rate, Straight-Line Rent, Net Operating Income (NOI), Cap Rate (Capitalisation Rate), Dividend Yield.
Questions about this model
What is the difference between FFO and AFFO?
FFO (funds from operations) is net income with real estate depreciation added back and gains on property sales taken out, the industry’s standard measure. AFFO adjusts FFO towards cash: it deducts the recurring capital spending a REIT needs to keep its buildings let (maintenance capex, tenant improvements, leasing commissions) and the straight-line rent that is reported but not yet received, and adds back share-based pay. In the base case FFO is $2.91 a share in FY1 and AFFO $2.38.
Why does the share price matter to the forecast?
Because acquisitions are funded partly with new shares, and the price those shares are sold at decides how many are issued. At $55 the REIT trades at a 7% premium to NAV and new equity costs about 4.4% (AFFO per share over the net issue price). Buildings bought at a 6% cap rate yield 5.3% after recurring capital spending, 0.8 points more than the debt and equity raised to pay for them, so they add to AFFO per share. Below NAV, every new share dilutes NAV per share, but the same acquisitions keep adding to AFFO per share until the price falls to about $41, a 19% discount, where the spread reaches zero.
How is NAV calculated here?
Forward cash NOI (the year-end run-rate grown one year) divided by the cap rate private buyers would pay, plus other assets at book, less net debt, divided by shares. One cap rate keeps the mechanics visible; a published NAV values each segment at its own rate.
What is the implied cap rate?
The cap rate the share price is paying: forward NOI divided by the market value of equity plus net debt, less other assets. If it is above the cap rate private buyers pay for the same buildings, the shares are cheaper than the buildings.
What does it cost?
Nothing to inspect: the whole workbook is on this page. A free account chooses one worked model to keep, and downloads every starter workbook. L3VLUP Pro ($25/month) downloads the whole library and opens every model’s formulas in the inspector.
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