Funds from Operations (FFO) Calculator

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Funds from operation (FFO)

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Table of Contents

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What is FFO Calculator?

Funds from operations, usually shortened to FFO, is a supplemental performance measure widely used for equity real estate investment trusts. It starts with net income under generally accepted accounting principles, adds back depreciation and amortization associated with depreciable real estate, and removes gains or losses from selling qualifying real estate assets. The purpose is to reduce two items that can make property-company net income difficult to compare across periods.

This calculator follows the basic Nareit definition represented by the available fields. It does not calculate adjusted FFO, cash available for distribution or cash flow from operations. Those measures can include different adjustments and should not be treated as interchangeable.

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How to Use This Calculator

  1. Choose one currency and use it for every amount.
  2. Enter net income for the reporting period. A reported loss may be entered as a negative number.
  3. Enter real-estate depreciation and amortization, gains on property sales and losses on property sales as positive magnitudes in their labeled fields.
  4. Select Calculate to see FFO for that same period.

The calculation adds depreciation and amortization because accounting depreciation reduces net income even when a well-maintained property may not lose value in the same pattern as equipment. It subtracts gains from property dispositions and adds disposition losses because selling a property is not part of recurring rental operations in the basic definition.

All figures must cover the same quarter or year and use the same currency scale. If a report presents amounts “in thousands,” keep every entry in thousands; the numerical result will also be in thousands. The currency selector labels the result and does not perform foreign-exchange conversion.

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Formula Used

FFO = net income + real-estate depreciation and amortization − gains on sales of real estate + losses on sales of real estate

The full industry definition contains details for unconsolidated partnerships, impairment adjustments and items attributable to noncontrolling interests. This compact equation fits the fields on this page and is best suited to a straightforward worked example or a report where the relevant amounts are already identified. Interest income is not removed by the standard basic formula.

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Variables Explained

Amounts used in the basic FFO calculation
InputWhat to enterSign treatment
Net incomeConsolidated net income for the selected reporting period.Enter profit as positive or a net loss as negative.
Depreciation and amortizationThe amount associated with depreciable real estate for that period.Enter the reported expense as a positive amount; it is added back.
Property-sale gainsGains from dispositions covered by the FFO definition.Enter a positive magnitude; it is subtracted.
Property-sale lossesLosses from dispositions covered by the FFO definition.Enter a positive magnitude; it is added.
CurrencyThe common unit for every monetary input.The selection labels the answer and does not convert values.
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Worked Example

Suppose a REIT reports annual net income of $120 million, real-estate depreciation and amortization of $45 million, a $12 million gain on a property sale and a $3 million loss on another sale. Using millions for every field:

FFO = 120 + 45 − 12 + 3 = $156 million.

If the filing instead lists figures in thousands, enter 120,000, 45,000, 12,000 and 3,000. The result becomes 156,000 thousand dollars, which represents the same $156 million. Keeping the scale consistent is more important than choosing a particular scale.

The $36 million difference between net income and FFO comes from the net effect of adding back $45 million, removing the $12 million gain and restoring the $3 million loss.

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Why Use This Calculator?

FFO of $156 million means the selected adjustments turn reported net income of $120 million into a $156 million supplemental measure for the period. A larger number does not by itself establish that a REIT is inexpensive, financially strong or producing enough cash for its dividend.

For comparison, use the same issuer’s definition over several periods and review the reconciliation in its filing. Analysts often divide FFO attributable to common shareholders by weighted-average shares to obtain FFO per share, but this page returns the total amount only. Compare companies cautiously because adjusted versions may remove acquisition costs, debt-extinguishment charges, straight-line rent or other items.

Read FFO beside operating cash flow, debt, occupancy, same-property results, capital expenditure needs and dividend coverage. The measure is an accounting adjustment, not the balance available to distribute.

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Common Mistakes

    • Subtracting interest income: basic FFO does not make that adjustment merely because interest income appears in the accounts.
    • Mixing currencies or scales: dollars and thousands of dollars cannot be added without conversion.
    • Entering a gain as negative: the labeled gain field already subtracts the positive amount.
    • Adding all depreciation: the definition focuses on depreciation and amortization of depreciable real estate, subject to its detailed rules.
    • Calling FFO cash flow: working-capital changes and capital spending are not captured by this short equation.
    • Comparing unlike definitions: company-reported adjusted FFO can differ materially from basic Nareit FFO.
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Frequently Asked Questions

Is FFO the same as operating cash flow?

No. FFO adjusts net income for selected real-estate depreciation and sale items. Operating cash flow follows the cash-flow statement and reflects changes such as receivables, payables and other working-capital movements.

Should I subtract dividends from FFO?

No. Dividends are distributions to investors, not an input to the basic FFO definition. Dividend coverage can be assessed separately by comparing distributions with an appropriate per-share measure.

Can net income be negative?

Yes. Enter a reported net loss as a negative value, then apply the listed additions and subtractions. The resulting FFO may be positive or negative depending on the adjustments.

What currency scale should I use?

Any consistent scale works. Enter every amount in units, thousands or millions from the same currency and period; interpret the output in that same scale.

Does this calculate FFO per share?

No. It returns total FFO. Per-share analysis also needs the appropriate weighted-average share count and attention to whether diluted or basic shares are used.

Why are property-sale gains removed?

The basic measure seeks a view centered on ongoing real-estate operations. A gain or loss from disposing of property can be large and episodic, so the definition reverses it.

Can I compare FFO from two REITs directly?

Only after checking their reconciliations, reporting periods, ownership adjustments and whether each number is basic or adjusted FFO. Similar labels can hide different exclusions.

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Sources & References

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