Commentary: FFO often a fallacy in measuring REITs

10/10/2008 | Seeking Alpha

Richard Woon breaks down what he calls the fallacy of funds from operations reporting when it comes to REITs in a commentary for Seeking Alpha. "Analysts' continued emphasis on FFO has incented REITs to continue to acquire assets without regard to long-term cash profitability because a REIT will get more depreciation reversal if it grows its balance sheet. This motivation combined with the availability of credit over the past few years has resulted in irresponsible acquisitions from a sustainable business standpoint," Woon writes.

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