Prison Realty Trust (NYSE: PZN) http://www.prisonreit.com Message Board

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Strategies & Market Trends : Prison Realty Trust (NYSE: PZN) http://www.prisonreit.com

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To: Zeev Hed who wrote (4)	3/28/1999 3:05:00 AM
From: GlobalMarine	Read Replies (1) of 23

Zeev: Whereas most companies are valued on the basis of earnings, REITs are valued on funds from operations (basically cash flow from operations). You start with earnings and add back non-cash items such as depreciation. For instance, a REIT may have earnings of $1 a share but cash flow of, say, $1.50 a share. REITs these days have a pretty reasonable FFO multiple, say, 10 or less. So in this case, the REIT's share price (actually, they tend to call them units, not shares) would be $1.50 X 10 = $15 a share. According to Zack's earnings estimates on Yahoo, PZN has a FFO estimate of $2.66 per share for this year. Since the share price is $17 and change, you can see that the FFO multiple is quite reasonable. REITs are required to pay out a minimum of about 75% of their FFO as dividends/return of capital, and thus far, PZN's payouts work out to an annualized payout of something like 10% or better. Quite attractive, IMO.

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