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 per Share (Funds From Operations) and Price / AFFO per Share (Adjusted Funds From Operations), which add back Depreciation and subtract gains on property sales.

 A Net Asset Value (NAV) model is the most common intrinsic valuation methodology; you assign a cap rate to the company’s forward NOI and multiply to get the value of its real estate, adjust and add its other assets, subtract liabilities and divide by its share count to get NAV per Share, and then compare that to its current share price.

• You value properties by dividing Net Operating Income (NOI) (Property’s Gross Income – Operating Expenses and Property Taxes) 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.