Question

Colonial Apartments REIT reports the following financial information on a per-share basis: GAAP Net Income [Earnings...

Colonial Apartments REIT reports the following financial information on a per-share basis:

GAAP Net Income [Earnings per Share (EPS)]=$4.00

GAAP Depreciation and Amortization =$3.00

Reserves for property capital expenditures=$0.80

Dividend paid= $4.50

Debt=$50, with an average interest rate on debt=7%

AFFO yield of 6.9% based on current share price -- Keep in mind that AFFO/Share Price=Yield

Estimated weighted average firm-level private property market cap rate of 8% .

(a) Determine Colonial’s EBITDA

(b) Determine the current (public) price of a share of Colonial REIT common stock

(c) Determine the current share price premium (or discount) to NAV for the REIT

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Homework Answers

Answer #1

(a) EBITDA = Net Income + Depreciation + Interest

= $4.00 + $3.00 + ($50*7%)

= $10.5

(b) Current (public) share price

AFFO = Net income + Depreciation & Amortisation - capital expenditure

= $4.00 + $3.00 + $0.80

= $7.80

Current share price = AFFO / AFFO yield

= $7.80 / 6.9%

= $113.04

(c) current share price premium (or discount) to NAV:

Share price based on market cap = EBITDA / Market cap rate

= $10.5 / 0.08

= $131.25

Premium (or Discount) = $113.04 - $131.25

= $18.21

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