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Strategies & Market Trends : Value Investing
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To: Oblomov who wrote (32921)12/2/2008 3:07:50 PM
From: Spekulatius   of 78676
 
Oblomove. I prefer EV/EBITDA as a metric because it accounts for leverage. Many folks use FFO/share (or better even AFFO/share price) price. FFO/share price accounts for leverage as well in the sense that the cost of interest is subtracted when calculating FFO. However the FFO/share price metric could in the past be boosted by increasing leverage (since interest rates were low) which as we all are finding out increases risk as well.

EV/EBITDA should scale well with the intrinsic cap rate of the RE portfolio a REIT owns which incidentally is an important valuation metric.

Of course debt maturity etc and financing matter a great deal as well. When you do go through leverage adjusted metrics you will find out that chasing yields with REIT is not a good idea in many case - the twin sister REITS CLI and BDN being a good example.
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