Walk me through how we would value a REIT (Real Estate Investment Trust) and how it differs from a “normal” company.

Similar to energy, real estate is asset-intensive and a company’s value depends on how much cash flow specific properties generate.

– You look at Price / FFO (Funds From Operations) and Price / AFFO (Adjusted Funds From Operations), which add back Depreciation and subtract gains on property sales; NAV (Net Asset Value) is also important.
– You value properties by dividing Net Operating Income (NOI) (Property’s Gross Income – Operating Expenses) by the capitalization rate (based on market data).
– Replacement Valuation is more common because you can actually estimate the cost of buying new land and building new properties.
– A DCF is still a DCF, but it flows from specific properties and it might be useless depending on what kind of company you’re valuing.