Lesson 1Property-level due diligence inputs: rents, expense ratios, lease expirations, tenant concentration, and geographic diversificationFocus on property-level underwriting inputs for REIT valuation. Analyse rents, operating expenses, lease expiries, tenant mix, and geographic spread to assess cash flow durability and concentration risks.
Market rents, in-place rents, and mark-to-marketOperating expense ratios and recoveriesLease rollover schedules and downtimeTenant credit quality and concentration riskGeographic and asset-class diversificationLesson 2NAV and asset-based valuation: estimating property-level values, cap rates, and discounting residual land/value adjustmentsDevelop NAV and asset-based valuation for REITs. Estimate property values using NOI and cap rates, adjust for development and land, reconcile gross asset value to equity NAV per share with discounts.
Property-level NOI and market cap rate selectionStabilized versus in-place income assumptionsValuing development, land, and air rightsReconciling GAV to equity NAV per shareNAV premiums, discounts, and catalystsLesson 3Valuation adjustments for taxes, preferred equity, minority interests, and non-core assetsRefine equity value with structural adjustments. Treat taxes, preferred equity, minority interests, non-core assets so enterprise value and NAV reflect common shareholder claims accurately.
Adjusting for deferred and contingent tax liabilitiesValuing and subtracting preferred equity claimsAccounting for noncontrolling interests in NAVTreatment of non-core and held-for-sale assetsBridging enterprise value to equity per shareLesson 4Income-based approaches: dividend discount models for REITs and cash flow available for distributionApply income-based valuation for REITs. Cover dividend discount and cash flow models, forecast cash available for distribution, align payout, reinvestment, leverage with growth and risk.
Dividend discount models for REIT equitiesModeling cash available for distributionPayout ratios, retention, and growth linksTerminal value and cost of equity estimationComparing DDM and discounted cash flow outputsLesson 5Macro and sector drivers: interest rate sensitivity, cap rate compression/expansion, occupancy, rental growth, and lease structuresLink REIT performance to macro and sector forces. Study interest rate sensitivity, cap rate moves, occupancy, rent trends, lease structures shifting risk between landlords, tenants, lenders across property types.
Interest rate channels and REIT pricingCap rate compression and expansion dynamicsOccupancy, rent growth, and NOI resilienceLease term, indexation, and escalation clausesSector-specific demand and supply conditionsLesson 6Stress testing REIT valuations: recession scenarios, rising rates, and liquidity constraintsStress test REIT valuations under adverse conditions. Build recession, rate shock, liquidity squeeze scenarios, model impacts on NOI, cap rates, funding access, equity value for downside risk and resilience.
Designing macro and property stress scenariosModeling NOI declines and higher cap ratesRefinancing risk and liquidity crunch analysisCovenant breach and dilution risk assessmentInterpreting stress test outputs for investorsLesson 7Funds from operations (FFO) and adjusted FFO (AFFO): calculation, normalization, and limitationsDefine FFO and AFFO, calculate and normalise them, highlight adjustments for recurring vs nonrecurring items. Examine limitations using FFO and AFFO as valuation and payout metrics.
GAAP net income to FFO reconciliation stepsCommon FFO and AFFO adjustment categoriesNormalizing one-time and nonrecurring itemsAFFO as a proxy for sustainable cash flowsPitfalls of using FFO and AFFO in valuationLesson 8Relative valuation for REITs: FFO multiples, AFFO multiples, and peer/sector benchmarkingCover relative valuation tools for REITs. Apply FFO and AFFO multiples, compare issuers within sectors, adjust for growth and risk, interpret spreads vs peers, indices, private market metrics.
Selecting peer groups and sector benchmarksFFO and AFFO multiple constructionGrowth, risk, and quality multiple adjustmentsPremium and discount analysis versus peersLinking public multiples to private market dataLesson 9Balance sheet and financing: leverage metrics (debt/EBITDA, loan-to-value), covenant analysis, and maturity schedule implicationsAnalyse REIT balance sheets and financing. Interpret leverage ratios, loan-to-value, debt service metrics, review covenants, assess maturity ladders and refinancing risk on equity valuation.
Debt/EBITDA, LTV, and fixed-charge coverageSecured versus unsecured debt structuresKey financial and operational covenantsDebt maturity ladders and refinancing cliffsHedging interest rate and currency exposuresLesson 10REIT fundamentals: REIT structure, tax rules, distribution requirements, and types of equity REITsReview core REIT fundamentals underpinning valuation. Examine legal structure, tax treatment, distribution rules, main equity REIT categories, linking to cash flow stability, growth, risk profile.
Legal definition and qualification testsPass-through taxation and investor impactsDistribution requirements and payout policyEquity REIT property-type classificationsImplications for growth, leverage, and risk
