Technical question. Can anyone, maybe someone who works in REIB or has dealt with corporate PERE, explain how to calcualate a REITs impled cap rate? It would be great if there is a formula or step by step way to do it. Thanks!
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Simple. NOI / Market Cap
Not sure why this is getting MS. It’s literally just TTM or full year NOI divided by whatever the current market capitalization is of the company.
Haha can’t tell if you’re trolling or not.
it’s NOI divided by the enterprise value of the REIT.
EV = total debt/pref plus market cap of company less any cash on balance sheet
you will also have to adjust for any JV’s or partial ownership of certain assets.
This
Thank you (and I hope above commenters were joking for their own sake). Could you elaborate on the JV adjustments, maybe in an example? What if they have development land on their BS, do you still count that in for EV?
Also, some REITs don't have NOI projected as a simple line item. How do you back that out from the IS?
Keep in mind there may be other B/S or I/S adjustments you need to make:
- one off/ non recurring expenses in NOI
- revenue for acquisitions made but not yet recognized
- platform value of the REIT (but also the costs of the REIT. Are you looking at EBITDA yield or NOI yield?)
- land banks or development in progress (could be that there is a lot of value in that but that is not yet income generating)
- value embedded within derivatives or fixed coupon debt
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