📊 AFFO Calculator
Adjusted Funds From Operations Calculator
Enter the Funds From Operations amount
Enter recurring maintenance and capital expenditures (optional)
Enter leasing commissions (optional)
Enter tenant improvement costs (optional)
How to Use This Calculator
Enter FFO
Input the Funds From Operations (FFO) value. This is typically found in REIT financial statements.
Enter Adjustments (Optional)
Input recurring maintenance, leasing commissions, and tenant improvements. Leave blank if not applicable.
Calculate AFFO
Click the calculate button to get the Adjusted Funds From Operations value.
Formula
AFFO = FFO - Recurring Maintenance - Leasing Commissions - Tenant Improvements
Example 1: Basic Calculation
FFO = $1,000,000
Recurring Maintenance = $50,000
Leasing Commissions = $30,000
Tenant Improvements = $20,000
AFFO = $1,000,000 - $50,000 - $30,000 - $20,000 = $900,000
Example 2: With Only Maintenance
FFO = $2,500,000
Recurring Maintenance = $150,000
AFFO = $2,500,000 - $150,000 = $2,350,000
Example 3: No Adjustments
FFO = $500,000
No adjustments
AFFO = $500,000 - $0 = $500,000
When there are no adjustments, AFFO equals FFO.
About AFFO Calculator
The AFFO (Adjusted Funds From Operations) Calculator is a specialized financial tool designed for real estate investment trusts (REITs) and real estate investors. AFFO is a refined metric that provides a more accurate picture of a REIT's cash-generating ability by adjusting FFO for recurring capital expenditures and other costs that are necessary to maintain the quality and income-generating capacity of the property portfolio.
While FFO (Funds From Operations) is a widely used metric in the REIT industry, AFFO takes the analysis a step further by subtracting recurring expenses that aren't captured in FFO calculations. These adjustments include recurring maintenance and capital expenditures, leasing commissions paid to secure new tenants, and tenant improvement costs required to make spaces rentable. AFFO is considered by many analysts to be a better indicator of a REIT's true cash flow and dividend-paying capacity.
This calculator helps investors, analysts, and financial professionals quickly compute AFFO from FFO by accounting for these essential adjustments. Understanding AFFO is crucial for making informed investment decisions in REITs, as it provides insight into the actual cash available for distribution to shareholders after accounting for necessary property maintenance and tenant acquisition costs.
When to Use This Calculator
- REIT Analysis: Evaluate REIT performance and cash flow generation
- Investment Decisions: Compare AFFO across different REIT investments
- Dividend Analysis: Assess a REIT's ability to sustain and grow dividends
- Financial Modeling: Build financial models for real estate investments
- Portfolio Management: Monitor AFFO trends for REIT holdings
- Due Diligence: Perform thorough analysis before REIT investments
Why Use Our Calculator?
- ✅ Accurate Calculations: Precise AFFO computation based on industry standards
- ✅ Easy to Use: Simple interface for quick calculations
- ✅ Flexible Inputs: Optional fields for various adjustment scenarios
- ✅ Free Tool: No registration or subscription required
- ✅ Professional Grade: Suitable for investors and financial analysts
- ✅ Mobile Friendly: Accessible on all devices
Understanding AFFO vs FFO
FFO (Funds From Operations) is calculated by adding depreciation and amortization back to net income and subtracting gains from property sales. However, FFO doesn't account for recurring capital expenditures that are necessary to maintain properties. AFFO adjusts FFO by subtracting these recurring costs, providing a more conservative and realistic measure of cash flow available for distribution.
The key adjustments in AFFO include: (1) Recurring maintenance and capital expenditures needed to keep properties in good condition, (2) Leasing commissions paid to brokers when securing new tenants, and (3) Tenant improvement allowances provided to make spaces suitable for tenants. These costs are essential for maintaining revenue streams but aren't captured in traditional FFO calculations.
Real-World Applications
REIT Investment Analysis: An investor analyzing a retail REIT with $10 million in FFO might find that after subtracting $500,000 in recurring maintenance, $200,000 in leasing commissions, and $300,000 in tenant improvements, the AFFO is $9 million. This $9 million represents the true cash available for dividends.
Dividend Sustainability: If a REIT pays $8.5 million in dividends but has an AFFO of $9 million, it has a 94.4% payout ratio, indicating sustainable dividends. However, if AFFO were only $8 million, the 106% payout ratio would signal potential dividend risk.
Comparative Analysis: When comparing two office REITs, one might have higher FFO but lower AFFO due to higher maintenance costs. The AFFO metric helps identify which REIT is more efficient at generating distributable cash flow.
Important Considerations
- AFFO is not a GAAP measure and can vary between companies
- Different REITs may calculate AFFO differently, so compare consistently
- One-time capital expenditures should not be included in AFFO calculations
- AFFO should be used alongside other metrics like FFO, NAV, and debt ratios
- Consider AFFO per share for better comparison across different REIT sizes
- Review REIT financial statements for their specific AFFO calculation methodology
Frequently Asked Questions
What is the difference between FFO and AFFO?
FFO (Funds From Operations) adds back depreciation to net income, while AFFO (Adjusted Funds From Operations) further adjusts FFO by subtracting recurring capital expenditures, leasing commissions, and tenant improvements. AFFO provides a more accurate picture of distributable cash flow.
Why is AFFO important for REIT investors?
AFFO is important because it shows the actual cash available for dividend payments after accounting for necessary property maintenance and tenant acquisition costs. It's a better indicator of a REIT's ability to sustain and grow dividends than FFO alone.
What expenses are included in AFFO adjustments?
AFFO adjustments typically include recurring maintenance and capital expenditures, leasing commissions paid to secure tenants, and tenant improvement costs. These are ongoing expenses necessary to maintain revenue streams.
Is AFFO a standardized metric?
No, AFFO is not a GAAP measure and can vary between REITs. Different companies may include or exclude different items in their AFFO calculations. It's important to understand each REIT's specific methodology when comparing AFFO across companies.
What is a good AFFO payout ratio?
A healthy AFFO payout ratio is typically below 90%, allowing the REIT to retain cash for growth and maintain a safety buffer. Ratios above 100% indicate the REIT is paying out more than it generates in AFFO, which may not be sustainable long-term.
Should I use AFFO or FFO for REIT analysis?
Both metrics are valuable. FFO is more standardized and widely reported, while AFFO provides deeper insight into distributable cash flow. Many analysts use both metrics together, with AFFO being particularly useful for assessing dividend sustainability and growth potential.