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If a company has negative enterprise value, what does that mean?

This means that the company must have more cash than the equity value, debt, and preferred equity combined together. Cash is subtracted from the enterprise value, so the larger cash is, the lower the enterprise value. The company also likely has a suppressed equity value due to negative investor sentiment. Investors are expecting the company […]

What is adjusted funds from operations (AFFO)?

Adjusted Funds From Operations (AFFO) is calculated as: AFFO = FFO + rent increases – capital expenditures – routine maintenance amounts For reference, the formula for Funds from Operations (FFO) is:FFO = net income + depreciation & amortization + property sales losses – property sales gains – interest income Compared to FFO, AFFO provides a […]

What is funds from operations (FFO)?

Funds From Operations (FFO) is calculated as: FFO = net income + depreciation & amortization + property sales losses – property sales gains – interest income FFO measures the cash flows generated from a real estate company’s core operations. Unlike net operating income, FFO is levered metric which is after the effects of debt, which […]

What is net operating income (NOI)?

Net operating income (NOI) measures the core profitability of real estate properties. It’s calculated as: NOI = revenue generated from property – operating expenses NOI is before any cost of financing (such as debt or mortgage interest expense) as well as income taxes. It focuses only on the core revenues and expenses directly related to […]

Why do we write-down existing goodwill in an LBO?

The write-down of existing goodwill on the balance sheet increases the excess purchase price. Sometimes, a % of the excess purchase price can be allocated to a PP&E and / or intangible asset write-up. In this scenario, it would be important to write-down existing goodwill since it would impact the amount of the write-up. Excess […]