Price to funds from operations (real estate)
P/FFO
What it is
The real-estate equivalent of the price-to-earnings ratio. FFO (funds from operations) starts from net income, adds back property depreciation and strips out gains on sales.
How to read it
The price-to-earnings ratio is unusable in real estate: accounting depreciation is enormous while buildings often appreciate. P/FFO corrects that distortion and makes trusts comparable with each other.
Common reference points
- Cheap for the sector< 12
- Normal12 – 18
- Expensive18 – 25
- Very expensive> 25
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
FFO is NOT a standardised measure: every trust computes it its own way. It also excludes recurring maintenance spending on the properties — hence AFFO, the more conservative figure, where it is published.
Other measures — Valuation
Educational content. Polaris is not a registered investment adviser and makes no recommendation.