One of the more useful — and frequently misunderstood — tools for valuing a REIT is its net asset value, or NAV. NAV is an estimate of what a REIT's real estate would be worth if you valued the properties at market and subtracted the REIT's liabilities, expressed per share. A publicly traded REIT, though, isn't priced by appraisers — it's priced by the market, so its share price can trade above its NAV (a premium) or below it (a discount). Those gaps carry information: a persistent discount can reflect pessimism about a sector, concerns about the balance sheet or management, or a potential value opportunity, while a premium can reflect growth optimism, perceived quality, or possible overvaluation. This guide explains what NAV represents, how premiums and discounts work, what discounts signal, how to use NAV alongside FFO/AFFO and the balance sheet, and the real limitations of NAV analysis. NAV is an estimate, not a fact — verify the current figures and assumptions, and treat this as educational information, not investment advice.
What NAV Represents
Net asset value (NAV) represents an estimate of what a REIT's underlying real estate is worth, net of its debts, on a per-share basis. Conceptually, you take the market value of all the REIT's properties, subtract its liabilities (mortgages, other debt, and obligations), and divide by the shares outstanding. The result is a 'private-market' value per share — roughly what each share would be worth if the REIT sold its properties at market prices and paid off its debts.
The hardest part of an NAV estimate is valuing the properties themselves, since real estate doesn't have a continuously quoted price. Analysts typically estimate property value using a capitalization-rate (cap-rate) approach: they divide each property's net operating income (NOI) by an assumed market cap rate to arrive at a value, then sum across the portfolio. Because the assumed cap rate drives the result, NAV is sensitive to that assumption — a small change in the cap rate can move the estimated property value, and therefore the NAV, meaningfully. Liabilities, by contrast, are usually easier to pin down from the balance sheet.
So NAV represents the estimated per-share private-market value of a REIT's real estate net of its liabilities — a useful anchor for what the underlying assets are worth. What NAV represents — an estimate of the market value of a REIT's properties (often derived by dividing net operating income by an assumed cap rate) minus its liabilities, divided by shares outstanding to give a per-share figure — frames the whole premium-and-discount discussion. It is an appraisal-style, private-market value, not a market price. Because it depends on an assumed cap rate, it is an estimate rather than a fact. Understanding what NAV represents is the foundation for interpreting how a traded REIT's price compares to it. NAV is the estimated per-share value of a REIT's real estate (cap-rate-based) minus liabilities — a private-market anchor for the underlying assets.
Premiums vs. Discounts to NAV
Because a publicly traded REIT's share price is set by the market rather than by appraisal, that price can diverge from the REIT's estimated NAV. When the share price is higher than NAV, the REIT trades at a premium to NAV; when the share price is lower than NAV, it trades at a discount. The premium or discount is usually expressed as a percentage — for example, a REIT trading at 10% below its NAV is at a 10% discount, while one trading 15% above is at a 15% premium.
A premium generally reflects optimism: the market is willing to pay more than the appraised private-market value of the properties, often because it expects growth in rents or NOI, values the quality of the management team or portfolio, or anticipates value creation through development or acquisitions. A discount generally reflects the opposite — the market is paying less than the estimated property value, which can signal pessimism about the sector, concerns about the balance sheet or strategy, or simply a market that's out of favor. Premiums and discounts also shift with interest rates and sentiment across the whole REIT market.
So a premium means the market values the REIT above its estimated NAV, and a discount means below it — a real-time read on how the market sees the REIT relative to its appraised real estate. Premiums vs. discounts to NAV — a premium being a share price above estimated NAV (reflecting growth optimism, perceived quality, or possible overvaluation) and a discount being a price below NAV (reflecting pessimism, balance-sheet or sector concerns, or a potential value opportunity) — capture the gap between market pricing and appraisal-based value. The percentage gap shows how far price sits from NAV. Both move with rates and sentiment. Understanding the premium/discount distinction is the key to reading the signal. A premium is a price above NAV (optimism); a discount is a price below NAV (pessimism or opportunity).
A publicly traded REIT is priced by the market, not by appraisers — so its share price can sit above or below the estimated value of the very real estate it owns, and that gap is information worth reading.
What Discounts Signal
A discount to NAV is the case investors tend to scrutinize most, because it can mean very different things. Sometimes a discount signals genuine concern: the market may doubt the carrying values, worry about a stretched balance sheet or near-term debt maturities, question management or strategy, or simply have soured on the whole sector (as happened with some office and retail REITs in recent cycles). In those cases, the discount is the market pricing in risks that the appraisal-based NAV doesn't fully capture.
Other times, a discount can signal a potential value opportunity — a REIT whose properties and cash flows are sound, but whose shares have been dragged down by broad market pessimism, rate fears, or sector rotation rather than by anything wrong with the company. In that scenario, a patient investor might be buying real estate exposure for less than its estimated private-market value. The challenge is telling the two cases apart, which is why a discount is a starting point for analysis, not a conclusion: you have to look at why the discount exists.
So a discount can signal real trouble (balance-sheet, sector, or management concerns) or a potential bargain — and distinguishing the two requires digging into the cause. What discounts signal — sometimes market pessimism, balance-sheet or refinancing concerns, management or strategy doubts, or a sector that's out of favor, and other times a potential value opportunity where sound real estate is mispriced by broad sentiment — depends entirely on the reason behind the discount. A discount is a question, not an answer. You have to investigate why the gap exists. Understanding what discounts can signal keeps you from treating every cheap-looking REIT as a bargain or every discount as a red flag. A discount may signal genuine risk or a real opportunity — the cause determines which.
Using NAV in Valuation
NAV is most useful as one input alongside others, not as a standalone verdict. The strongest approach pairs NAV with the cash-flow metrics that drive REIT value — funds from operations (FFO) and adjusted funds from operations (AFFO) — and with a hard look at the balance sheet. A REIT trading at a discount to NAV looks more attractive if it also has solid, growing FFO/AFFO, a well-covered dividend, and a conservative, well-laddered balance sheet; the same discount looks more like a warning if cash flow is shrinking and leverage is high.
Practically, investors use the premium/discount to NAV as a relative gauge — comparing where a REIT trades versus its own history and versus peers in the same sector. A REIT trading at a wider discount than its historical norm or its peers warrants a closer look at why. NAV also helps frame whether a premium is justified: a high-quality REIT with strong growth may reasonably trade at a premium, but an unusually large premium invites the question of whether the market has gotten ahead of itself. The point is to use NAV as a triangulation tool, cross-checked against cash flow and the balance sheet.
So NAV works best in combination — alongside FFO/AFFO and balance-sheet quality, and compared to a REIT's own history and its peers — to judge whether a premium or discount is justified. Using NAV in valuation — pairing it with FFO/AFFO and the balance sheet, comparing the premium or discount to the REIT's own history and to sector peers, and asking whether a given premium or discount is justified by growth, quality, and risk — turns a single estimate into a useful triangulation tool. NAV alone isn't a verdict. It's strongest cross-checked against cash flow and leverage. Understanding how to use NAV in valuation keeps it in proper context. Use NAV alongside FFO/AFFO and the balance sheet, and compare the premium or discount to history and peers — not in isolation.
NAV is a triangulation tool, not a verdict: a discount means more when paired with strong, growing cash flow and a conservative balance sheet — and far less when cash flow is shrinking and leverage is high.
- NAV is the estimated per-share market value of a REIT's properties (often cap-rate-based) minus its liabilities — a private-market anchor.
- A traded REIT can trade above NAV (a premium, signaling optimism or overvaluation) or below it (a discount, signaling pessimism or opportunity).
- A discount is a question, not an answer — it can mean real balance-sheet or sector trouble, or a mispriced bargain; investigate the cause.
- Use NAV alongside FFO/AFFO and the balance sheet, and compare premiums and discounts to a REIT's own history and its sector peers.
Limitations of NAV Analysis
For all its usefulness, NAV analysis has real limitations that you have to keep in mind. The first is that NAV is an estimate, and a sensitive one: because property values are usually derived by applying an assumed cap rate to net operating income, the entire figure hinges on that cap-rate assumption. Reasonable analysts can assume different cap rates and arrive at materially different NAVs for the same REIT, so an NAV is a range of plausible values rather than a single precise number.
Second, NAV can be stale. Real estate values change continuously with rates, demand, and conditions, but appraisal-based NAV estimates are updated periodically and can lag the market — so a published NAV may not reflect current reality, especially in a fast-moving rate environment. Third, private-market values and public-market pricing genuinely differ: the price at which a portfolio could be sold privately isn't always what the public market will pay, and the two can diverge for long stretches. Persistent discounts or premiums don't always 'close,' so NAV is not a guaranteed price target.
So NAV analysis is valuable but imperfect — an estimate sensitive to cap-rate assumptions, potentially stale, and not a guaranteed convergence point with market price. Limitations of NAV analysis — NAV being an estimate that is highly sensitive to assumed cap rates (so different assumptions yield different NAVs), potentially stale because appraisal-based values lag fast-moving markets, and reflecting private-market values that may persistently differ from public pricing — mean NAV should be used with humility. It is a range, not a precise figure. Discounts and premiums need not close. Understanding NAV's limitations keeps you from over-relying on a single estimate. NAV is an estimate (cap-rate-sensitive), can be stale, and may differ from public pricing — useful, but not a precise or guaranteed value.
When Discounts Attract Buyers
One reason a persistent discount to NAV matters beyond pure valuation is that it can attract buyers. When a REIT's shares trade well below the estimated private-market value of its real estate, the gap creates an arbitrage opportunity: a private buyer, another REIT, or a private-equity firm can potentially acquire the company (or its assets) for less than the properties would fetch in a private sale. That dynamic means deep, sustained discounts sometimes resolve not through a slow recovery in the share price but through a takeover, a privatization, or asset sales that crystallize the underlying value.
This is why a discount isn't only a signal about risk or sentiment — it can also be a signal about potential corporate action. A REIT with quality assets, a manageable balance sheet, and a wide discount can become a takeover candidate, and the market sometimes prices in that possibility. It cuts the other way too: management teams may respond to a stubborn discount by selling assets, buying back shares, or pursuing strategic alternatives to close the gap between price and NAV. For an investor, the discount is therefore worth reading alongside the question of whether anything is likely to force the value to be realized.
So a wide, persistent discount to NAV can draw acquirers or prompt corporate action that crystallizes value — another reason discounts deserve careful attention. When discounts attract buyers — a deep, sustained discount to NAV creating an arbitrage that can draw private buyers, other REITs, or private-equity firms to acquire the company or its assets below private-market value, and potentially prompting management to sell assets, buy back shares, or pursue strategic alternatives — shows that discounts can resolve through corporate action, not just price recovery. Quality assets at a wide discount can become takeover candidates. The realization mechanism matters. Understanding this adds a corporate-action lens to NAV analysis. A wide, persistent discount can attract acquirers or prompt asset sales and buybacks that crystallize NAV — so discounts can resolve through deals, not just a price rebound.
How Baker 1031 Helps You Use NAV in REIT Analysis
Baker 1031 Investments helps investors use NAV the right way in REIT analysis — understanding what NAV represents, how premiums and discounts to NAV work, what a discount can and can't signal, how to use NAV alongside FFO/AFFO and the balance sheet, and where NAV analysis falls short — so you can interpret a REIT's pricing without over-relying on a single estimate.
REIT and non-traded-REIT interests and related securities are offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), and any recommendation follows a suitability review — non-traded and private REITs typically require accredited or otherwise suitable investors, while publicly traded REITs trade through ordinary brokerage accounts. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific tax situation, including how REIT dividends are taxed. We help you read NAV in context — pairing it with cash-flow metrics and balance-sheet quality, comparing premiums and discounts to a REIT's history and peers, and staying mindful that NAV is a cap-rate-sensitive estimate that can be stale and may differ from public pricing. We make no promises about future prices or whether a discount will close — past performance does not guarantee future results, and verifying the current figures and assumptions is essential. Our role is to help you analyze REITs clearly and invest only when suitable for your goals.
Frequently Asked Questions
What is a REIT's net asset value (NAV)?
A REIT's net asset value (NAV) is an estimate of what its underlying real estate is worth, net of its debts, on a per-share basis. You take the estimated market value of all the REIT's properties, subtract its liabilities (mortgages and other debt), and divide by the shares outstanding to get a per-share figure. The hardest part is valuing the properties, since real estate isn't continuously quoted; analysts usually estimate value with a cap-rate approach — dividing a property's net operating income (NOI) by an assumed market cap rate. Because that assumed cap rate drives the result, NAV is sensitive to the assumption and is genuinely an estimate, not a fixed fact. So NAV represents the estimated per-share, private-market value of a REIT's real estate after subtracting its liabilities. It's a useful anchor for what the underlying assets are worth — and the reference point against which a traded REIT's market price is compared to find a premium or discount.
What does it mean for a REIT to trade at a premium to NAV?
A REIT trades at a premium to NAV when its market share price is higher than its estimated net asset value per share. In other words, the market is willing to pay more than the appraised private-market value of the REIT's properties net of debt. A premium usually reflects optimism — the market may expect growth in rents and net operating income, value the quality of the management team or the portfolio, or anticipate value creation through development and acquisitions. A modest premium for a high-quality, growing REIT can be reasonable. But an unusually large premium raises the question of whether the market has gotten ahead of itself and the shares have become overvalued relative to the underlying real estate. So a premium signals that the market values the REIT above its estimated NAV — often for good reasons like growth and quality, but sometimes a sign of overvaluation. Judge a premium against the REIT's growth prospects, quality, and its own history.
What does a discount to NAV mean?
A REIT trades at a discount to NAV when its market share price is lower than its estimated net asset value per share — the market is paying less than the appraised private-market value of the REIT's properties net of debt. A discount can mean different things. Sometimes it signals genuine concern: the market may doubt the carrying values, worry about a stretched balance sheet or near-term debt maturities, question management or strategy, or have soured on the whole sector. Other times, a discount can signal a potential value opportunity — sound real estate and cash flows whose shares were dragged down by broad pessimism, rate fears, or sector rotation rather than by anything wrong with the company. So a discount is a starting point for analysis, not a conclusion. You have to investigate why the discount exists before deciding whether it reflects real risk or a mispriced bargain. The cause determines the meaning.
Why does a traded REIT's price differ from its NAV?
A traded REIT's price differs from its NAV because the two are produced by completely different mechanisms. NAV is an appraisal-style, private-market estimate — analysts value the properties (often by applying an assumed cap rate to net operating income) and subtract liabilities. The share price, by contrast, is set continuously by the public market, reflecting investor sentiment, interest-rate expectations, growth assumptions, liquidity preferences, and broad market swings, not just the appraised value of the buildings. So the market price can run ahead of NAV (a premium) when optimism is high or fall below it (a discount) when pessimism dominates — even though both supposedly describe the same underlying real estate. Private-market and public-market values genuinely diverge, sometimes for long stretches. So the gap between price and NAV isn't an error; it's the difference between how the market prices a REIT today and how appraisal-based methods estimate its real estate is worth. That gap is itself a piece of information.
How is NAV calculated for a REIT?
NAV is calculated by estimating the market value of a REIT's real estate, subtracting its liabilities, and dividing by shares outstanding. The challenging step is valuing the properties. Analysts most often use a capitalization-rate (cap-rate) approach: for each property (or the portfolio), they take the net operating income (NOI) and divide it by an assumed market cap rate to estimate value — a lower cap rate implies a higher value, and vice versa. They sum those property values, add any other assets, then subtract debt and other liabilities from the balance sheet. Dividing the resulting net value by the shares outstanding gives NAV per share. Because the cap-rate assumption drives the property values, the NAV is highly sensitive to it — different reasonable assumptions yield different NAVs. So NAV calculation combines a cap-rate-based property valuation with balance-sheet liabilities to reach a per-share figure. Understanding the cap-rate step explains why NAV is an estimate, and a range, rather than a single precise number.
Is a REIT trading below NAV always a good buy?
No — a REIT trading below NAV (at a discount) is not automatically a good buy. A discount can mean the market has correctly identified problems the appraisal-based NAV doesn't fully capture: a stretched balance sheet, looming debt maturities, declining occupancy or rents, weak or conflicted management, or a structurally challenged sector. In those cases, the 'cheap' price reflects real risk, and the NAV itself may be overstated. A discount can also reflect a genuine opportunity — sound real estate mispriced by broad pessimism — but you can't tell which case you're in without investigating the cause. So treat a discount as a question, not an answer. Look at FFO/AFFO trends, dividend coverage, leverage and maturities, sector conditions, and why the discount exists. So a below-NAV price can be a bargain or a value trap; only analysis of the underlying business and balance sheet reveals which. Don't buy a REIT simply because it trades below NAV.
How should I use NAV alongside FFO and AFFO?
NAV and the cash-flow metrics FFO and AFFO answer different questions, and they're strongest together. NAV estimates what the REIT's real estate is worth (an asset-value view), while funds from operations (FFO) and adjusted funds from operations (AFFO) measure the recurring cash the REIT generates and can distribute (an earnings/cash-flow view). A discount to NAV is far more attractive when paired with solid, growing FFO/AFFO and a well-covered dividend — you'd be buying sound cash flow at less than estimated asset value. The same discount is a warning if FFO/AFFO is shrinking and the dividend is stretched. Conversely, a premium to NAV may be justified by strong FFO/AFFO growth. So use NAV to gauge asset value and FFO/AFFO to gauge cash-flow quality and dividend safety, then read the premium or discount in light of both. Combining the asset view (NAV) with the cash-flow view (FFO/AFFO) and the balance sheet gives a far more complete picture than any single metric alone.
Do non-traded REITs have NAV premiums or discounts?
Non-traded REITs are priced differently, so the premium/discount concept works differently for them. A publicly traded REIT has a market price set continuously by an exchange, which can diverge from its appraisal-based NAV — producing the premiums and discounts this article describes. A non-traded REIT, by contrast, isn't exchange-listed; it's typically sold and redeemed at a periodically published NAV. So there generally isn't a continuous market price diverging from NAV the way there is for a traded REIT — the NAV essentially is the transaction price, updated periodically. That said, the NAV of a non-traded REIT is still an estimate sensitive to assumptions and can lag actual market conditions, and the price at which you could actually exit (subject to capped, sometimes-suspended redemptions) may differ from headline NAV. So premiums and discounts to NAV are mainly a traded-REIT phenomenon, while non-traded REITs transact at periodic NAV — but in both cases NAV remains an estimate to scrutinize, not a guaranteed value.
Why is NAV considered an estimate rather than a fact?
NAV is an estimate because its largest component — the value of the REIT's real estate — can't be observed directly the way a stock price can. Real estate doesn't trade continuously, so analysts estimate property value, most often by applying an assumed capitalization rate to net operating income. That cap-rate assumption drives the result: reasonable analysts can choose different cap rates and arrive at materially different property values, and therefore different NAVs, for the same REIT. NAV is also a snapshot in time — values change with rates, demand, and conditions, and appraisal-based estimates are updated periodically, so they can lag the market. Add in judgment calls about which assets and liabilities to include and how to value them, and you get a figure that is genuinely a range of plausible values rather than one precise number. So NAV should be treated as an informed estimate, useful for context and comparison, not as a hard fact or a guaranteed price. Always check the assumptions behind a published NAV.
Can NAV become stale or outdated?
Yes — NAV can become stale, and this is one of its key limitations. Real estate values move continuously with interest rates, capital-market conditions, supply and demand, and tenant health, but appraisal-based NAV estimates are produced periodically rather than continuously. So a published NAV reflects the assumptions and conditions as of when it was prepared, which can lag the current market — sometimes meaningfully, especially in a fast-moving rate environment where cap rates and property values are shifting quickly. In such periods, a REIT's true private-market value may have changed before the NAV is updated, so the stated NAV may overstate or understate reality. This staleness is part of why a traded REIT's market price (which updates in real time) can diverge from its NAV: the market may already be pricing in changes the NAV hasn't yet captured. So always consider how recent an NAV estimate is and whether conditions have shifted since. A stale NAV can give a false sense of precision, so weight it accordingly in your analysis.
How do interest rates affect REIT NAV and premiums or discounts?
Interest rates affect both NAV and the premium or discount in important ways. On NAV: rising rates tend to push cap rates higher, and a higher cap rate applied to the same net operating income produces a lower estimated property value — so rising rates generally pressure NAV downward (and falling rates can lift it). On the premium/discount: REIT share prices are sensitive to rates and often react faster than appraisal-based NAVs update, so when rates rise, traded REITs frequently fall to discounts as the market prices in higher cap rates before NAVs are revised; when rates fall, REITs may swing to premiums. This timing mismatch is a common reason discounts widen in rising-rate environments and narrow when rates ease. So interest rates influence the appraised value (through cap rates) and the market's pricing (often faster), which is why rate moves drive much of the variation in REIT premiums and discounts. Understanding the rate sensitivity helps you interpret whether a discount reflects rates, fundamentals, or both.
What's the difference between NAV and book value for a REIT?
NAV and book value are different measures, and the distinction matters for REITs. Book value (or shareholders' equity) comes from the balance sheet under accounting rules, where real estate is generally carried at historical cost less accumulated depreciation. Because real estate often appreciates over time while accounting depreciation steadily reduces its carrying value, a REIT's book value can sit well below the actual market value of its properties — making book value a poor proxy for what the real estate is worth. NAV addresses this by re-estimating the properties at current market value (typically via a cap-rate approach) rather than depreciated cost, then subtracting liabilities. So NAV aims to reflect today's private-market value of the assets, whereas book value reflects depreciated historical cost. For REITs, NAV is generally the more meaningful asset-value gauge precisely because depreciation distorts book value. So when valuing a REIT's assets, lean on NAV rather than book value — but remember NAV is still an estimate dependent on assumptions.
Should I compare a REIT's discount to its peers?
Yes — comparing a REIT's premium or discount to its sector peers (and to its own history) is one of the most useful ways to use NAV. An NAV gap in isolation tells you little; in context, it tells you a lot. If a REIT trades at a much wider discount than similar REITs in the same sector, that gap warrants investigation — it may flag specific concerns about that REIT's balance sheet, management, or assets, or it may flag an opportunity if the discount looks unjustified. If most REITs in a sector trade at discounts, the issue may be sector-wide (rates, sentiment, structural headwinds) rather than company-specific. Comparing to the REIT's own historical premium/discount range adds another reference point: a REIT trading far below its typical level invites a closer look at what changed. So use peer and historical comparison to turn a raw premium or discount into a relative signal. Context — versus comparable REITs and versus the REIT's own history — is what makes NAV analysis actionable rather than abstract.
Does a premium to NAV mean a REIT is overvalued?
Not necessarily — a premium to NAV doesn't automatically mean a REIT is overvalued. A premium means the market is paying more than the estimated appraisal value of the properties net of debt, and that can be entirely rational. High-quality REITs with strong, growing funds from operations, durable competitive advantages, skilled management, and development pipelines often trade at premiums because the market is paying for future growth and value creation that a static, asset-based NAV doesn't capture. In those cases, the premium reflects expected earnings growth, not overvaluation. That said, an unusually large premium — well above the REIT's history or its peers — does raise the question of whether the market has gotten ahead of itself, pricing in growth that may not materialize. So a modest, justified premium can coexist with a fairly or even attractively valued REIT, while an extreme premium warrants caution. So judge a premium against the REIT's growth, quality, and historical range rather than assuming any premium signals overvaluation. NAV is one input, not the whole verdict.
How does Baker 1031 help me use NAV in REIT analysis?
We help investors use NAV the right way — understanding what NAV represents, how premiums and discounts to NAV work, what a discount can and can't signal, how to pair NAV with FFO/AFFO and the balance sheet, and where NAV analysis falls short. REIT and non-traded-REIT interests are offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), and any recommendation follows a suitability review; non-traded and private REITs typically require accredited or otherwise suitable investors, while publicly traded REITs trade through ordinary brokerage. We help you read NAV in context — comparing premiums and discounts to a REIT's history and peers, and staying mindful that NAV is a cap-rate-sensitive estimate that can be stale and may differ from public pricing. Baker 1031 does not provide tax or legal advice — your CPA handles your specific situation, including how REIT dividends are taxed. We make no promises about future prices or whether a discount will close; past performance doesn't guarantee future results. Our role is to help you analyze REITs clearly and invest only when suitable for your goals.
Glossary
- Net Asset Value (NAV)
- Estimated per-share market value of a REIT's real estate minus liabilities.
- Premium to NAV
- A share price trading above the REIT's estimated NAV.
- Discount to NAV
- A share price trading below the REIT's estimated NAV.
- Capitalization Rate (Cap Rate)
- Net operating income divided by property value; drives NAV estimates.
- Net Operating Income (NOI)
- Property income after operating expenses, before debt and taxes.
- Funds From Operations (FFO)
- Net income plus real estate depreciation, minus gains on sales.
- Adjusted FFO (AFFO)
- FFO less recurring capex and straight-line rent adjustments.
- Private-Market Value
- What a portfolio could fetch in a private sale, versus public pricing.
- Public-Market Pricing
- The continuous share price set by an exchange.
- Book Value
- Accounting equity, with real estate at depreciated historical cost.
- Mark to Market
- Continuous market pricing of a traded REIT's shares.
- Stale NAV
- An NAV estimate that lags current market conditions.
- Value Trap
- A cheap-looking discount that reflects genuine underlying problems.
- Sector Rotation
- Capital moving in or out of a property sector, shifting discounts.
- Balance Sheet
- A REIT's assets, liabilities, and equity used to assess leverage.
- Triangulation
- Using NAV with FFO/AFFO and the balance sheet to value a REIT.
Sources & References
- U.S. Securities and Exchange Commission. Investor.gov — Real Estate Investment Trusts (REITs)
- Nareit. What's a REIT (Real Estate Investment Trust)?
- FINRA. Real Estate Investments
- Cornell Legal Information Institute. 26 U.S. Code § 856 — Definition of real estate investment trust
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
