What is the difference between FFO and Affo?

AFFO is a superior measure compared to FFO because the former considers the maintenance costs of the real estate property over its life. The value of AFFO is obtained by making adjustments to the FFO figure to deduct recurring expenditures required to keep the real estate property running and generating revenues.

What is Affo & why is it important?

AFFO is a nuanced and comprehensive measure that offers investors a deeper understanding of a real estate asset's financial viability. By considering the full spectrum of operating costs and capital expenditures, AFFO presents a more transparent picture of the income-generating potential, which is crucial for making informed investment decisions.

What does 8% mean for XYZ's FFO/Affo?

For example, 8% implies that investors are generally paying about 12.5 times (1 divided by 8%) the net operating income of each real estate property. Let’s assume that the market’s capitalization rate is about 7%, and our anticipated growth for XYZ’s FFO/AFFO is a heady 5%.