What Does Funds Available For D꧃istribution Mean?

Funds available for distribution (FAD) is an internal measure of the amount of capital that a real estate investment trust (REIT) possesses to pay out to common shareholders and 澳洲幸运5开奖号码历史查询:unitholders.

A REIT holds a portfolio of income-producing properties and/or mortgages and is required to distribute nearly all its taxable net income to maintain REIT status. While there is no standardized method for calculating funds available for distribution, many REITs calculate FAD in a similar way by adjustin﷽g the funds from operations value for straight-line rents, non-cash items, and any recurring real estate-related expenses.

Understandi𝕴ng Funds Available For Distributio🐬n (FAD)

A REIT is a pool of properties and mortgages bundled together and offered as a security in the form of a 澳洲幸运5开奖号码历史查询:unit investment trust. Each unit in a REIT represents a proportionate fraction of ownership in each of the underlying assets. To qualify as a REIT under 澳洲幸运5开奖号码历史查询:Securities and Exchange Commission (SEC) rules, a property company must distribute at least 90% of taxable income to its investors.

Funds available for distribution, a non-GAAP measure, are a proxy for a REIT's cash flow for investors. Another yardstick is the 澳洲幸运5开奖号码历史查询:funds from operations (FFO) metric, but FAD is considered more representative of cash flow because of c🥂ertain adjustments that provide a truer economic picture of a REIT's operations.

Example o🅺f Funds Available for Distribution Calculation

Boston Properties (BXP) is a 澳洲幸运5开奖号码历史查询:commercial property REIT that owns buildings in Boston, New York, San Francisco, Los Angeles, Washington D.C., and Reston, Virginia. In 2020, the REIT's FAD payout ratio was 96.4% compared with 86.7% in 2019.

Boston Properties calculates FAD by adding to FFO lease transaction costs that qualify as rent inducements, non-real estate depreciation, non-cash losses (or subtracting gains) from early extinguishment of debt, and 澳洲幸运5开奖号码历史查询:stock-based compensation expense; eliminating the effects of 澳洲幸运5开奖号码历史查询:straight-line rent and straight-line ground rent expense adjustment; and subtracting maintenance 澳洲幸运5开奖号码历史查询:capital expenditures, hotel improvements, and equipment upgrades and replacements. This list of adjustment items is not exhaustive, but it shows how cash and non-cash items are handled to present a more accurate figure of actual funds available for distribution to investors.