What is FFO for REITs?
Funds from operations is the standard REIT profit measure. Accounting rules depreciate buildings toward zero, but well-maintained property often holds or gains value, so net income understates what a REIT earns. FFO adds depreciation back and removes one-off gains on property sales, leaving the recurring rental result.
How it works
Depreciation is an assumption that an asset is being used up. For machinery that is broadly true. For a well-located, well-maintained building it frequently is not — the asset can be worth more after twenty years than it cost — and yet the income statement has been charging it down the whole time.
For a company whose assets are almost entirely buildings, that assumption dominates reported profit. A REIT can collect rent reliably, cover its interest comfortably and still report thin or negative net income, purely because of a depreciation charge nobody wrote a cheque for. Funds from operations adds it back.
The second adjustment is removing gains and losses on property sales. Selling a building at a profit is a real event, but it is not the rental business repeating next year, and leaving it in makes a lumpy series look like an operating trend. FFO is meant to be the recurring number, so the one-offs come out.
Adjusted FFO goes one step further and subtracts the capital spending a property portfolio genuinely needs to stay competitive — roofs, systems, the cost of re-letting space. Depreciation overstates that upkeep; assuming it is zero understates it. AFFO is the attempt to charge the real figure, and it is the one closest to what a REIT can actually distribute.
The measure is a convention published by the industry's own trade body, and issuers apply it with some latitude, so comparisons across REITs are looser than they look. It is a better starting point than net income, not a number to read to the decimal.
Where you see this in the terminal
Screenerthe price-to-FFO and FFO-yield columns, blank by design on every name that is not a REIT
Sector dashboardsthe real-estate cut, where a REIT sits beside the peers it is read against
The valuation enginewhy the sector-correct measure replaces the generic one for REITs
The conventions behind it
What this page explains in plain language, the methodology documents state as conventions: the inputs, what is rejected, and the stated limits.
More of these: every concept page. The full transparency index is at Methodology.