Funds from operations (FFO)

Also called: reit, p/ffo, funds from operations

The property world's version of earnings: net income with depreciation added back, because buildings often hold their value even as accounts depreciate them.

Formula

FFO = Net income + Depreciation (− gains on property sales)

Worked example

1. Net income $300m + depreciation $400m = FFO $700m
2. Market value $10.5bn ÷ $700m = 15× price/FFO

Result: 15× P/FFO

How to read it

Compare property companies on price/FFO, not P/E. Dividends above ~90% of FFO leave little room.

See it with real numbers: Property company pages → (free account)