FFO (Funds From Operations)

How FFO Is Calculated

The NAREIT-standard formula:

FFO = Net Income + Depreciation + Amortization − Gains on Property Sales + Losses on Property Sales

Optional adjustments per the 2018 NAREIT redefinition: changes in fair value, impairment charges, and certain non-cash items. The full NAREIT methodology is maintained at reit.com.

Example: A Florida multifamily REIT with $50M net income, $40M depreciation, $5M amortization, and $8M gains on property sales: FFO = $50M + $40M + $5M − $8M = $87M. The same REIT would show $50M net income on its GAAP financials — FFO is 74% higher because depreciation is added back.

FFO vs Net Income vs EBITDA

• Net Income reflects accounting earnings after depreciation, taxes, interest. Useful for taxable income but not for real estate cash flow — depreciation alone often equals 50-100% of net income
• FFO adds back real estate D&A and excludes one-time sale gains. Closest proxy for recurring property cash flow. Standard REIT metric
• EBITDA adds back D&A but does NOT subtract sale gains. Often higher than FFO for REITs with active disposition programs
• AFFO further refines FFO by subtracting recurring capex and lease commissions. See the AFFO guide
• Net Operating Income (NOI) is property-level (pre-debt-service); FFO is entity-level (post-debt-service). See NOI guide

Why Florida REITs Use FFO Heavily

Florida is overrepresented in publicly-traded REIT real estate exposure relative to its share of national GDP — major REITs hold meaningful Florida multifamily, industrial, hotel, and self-storage exposure. Florida-headquartered or Florida-heavy REITs (Ventas, Welltower, EastGroup, CubeSmart, Public Storage, Equity Lifestyle Properties, Sun Communities) all report FFO as their primary earnings metric.

Florida-specific considerations affecting FFO: insurance escalation (operating expense pressure), hurricane recovery costs (one-time charges that may be excluded from FFO), property tax reassessment on acquisition (NOI impact), and Florida\'s structural population growth (NOI growth tailwind).

FFO Per Share — The REIT Valuation Metric

FFO per share is what REIT investors use to value publicly-traded CRE companies. A REIT trading at $40 per share with $4 FFO per share has a Price/FFO multiple of 10x. This is the REIT analog to Price/Earnings ratios for non-REIT stocks. Quality Florida REITs typically trade at 12-22x FFO depending on growth profile, asset class, and balance sheet leverage.

Private Florida CRE sponsors benchmark FFO yield (FFO / market value) against the comparable public REIT yield — if private market FFO yield exceeds public REIT FFO yield by 200+ bps, private sponsors are buying below the public REIT replacement-cost benchmark. This is often the case in Florida value-add and core-plus opportunities.

FFO in Private Florida CRE Underwriting

• Sponsor reporting: Quarterly FFO reports to LPs benchmark private deal performance against public REIT comps
• Performance fees: Many Florida CRE syndications calculate sponsor promote off cumulative FFO (not net income or cap-rate-implied value)
• Refinance analysis: FFO trajectory determines refinance capacity — lenders increasingly use trailing-12 FFO instead of trailing-12 NOI for value-add property refinances
• 1031 exchange replacement: Comparing 1031 exchange replacement properties on FFO yield basis isolates real cash flow from tax/depreciation distortions
• Florida-specific reporting nuance: Hurricane-related impairments should be disclosed but typically excluded from FFO; insurance premium escalation should flow through normal FFO

Compute Property-Level Cash Flow

FFO is entity-level; for property-level cash flow analysis on any Florida CRE deal, model NOI, debt service, and cash-on-cash with the LGS underwriting calculators.

What is FFO (Funds From Operations)?

Funds From Operations (FFO) is the standardized commercial real estate earnings metric developed by NAREIT — net income plus real estate depreciation and amortization, less gains (or plus losses) on property sales. FFO corrects a fundamental flaw in GAAP net income for property owners: real estate depreciation is a non-cash accounting charge that distorts how much actual cash flow a property generates. FFO is the primary measure of operating performance for publicly-traded REITs and the most common analog used by private CRE owners benchmarking against the public market.

How is FFO calculated?

FFO = Net Income + Depreciation + Amortization − Gains on Property Sales + Losses on Property Sales. Optional adjustments per the 2018 NAREIT redefinition include changes in fair value, impairment charges, and certain non-cash items. Example: A REIT with $50M net income, $40M depreciation, $5M amortization, and $8M gains on property sales: FFO = $50M + $40M + $5M − $8M = $87M. The same REIT would show $50M net income on GAAP financials — FFO is materially higher because depreciation is added back.

How is FFO different from net income?

Net income reflects accounting earnings after deducting real estate depreciation — a non-cash charge that often equals 50-100% of net income for property-heavy companies. FFO adds depreciation back, producing a closer proxy for actual recurring property cash flow. For a Florida REIT, FFO is typically 1.7-2.5x net income because real estate depreciation is so large. Investors use FFO (not net income) to value REITs and to compare CRE performance year-over-year.

How is FFO different from EBITDA?

Both metrics add back depreciation and amortization. The key difference: EBITDA does NOT subtract one-time gains on property sales, but FFO does. For REITs with active disposition programs, EBITDA is typically higher than FFO. EBITDA includes one-time disposition gains in the headline number; FFO presents only recurring property performance. FFO is preferred for REIT analysis precisely because it filters out non-recurring transaction gains.

What is FFO per share?

FFO per share equals total FFO divided by weighted-average shares outstanding. Quality Florida REITs typically trade at 12-22x FFO per share. A REIT trading at $40 with $4 FFO per share has a Price/FFO multiple of 10x — the REIT analog to Price/Earnings ratios for non-REIT stocks. FFO per share is the standard REIT valuation metric used by Wall Street analysts.

Who can help me benchmark FFO on my Florida CRE portfolio?

Michael R. Linton at Linton Global Solutions models FFO, AFFO, NOI, IRR, equity multiple, cap rate, and cash-on-cash on every Florida CRE underwriting across multifamily, office, industrial, retail, hospitality, land, mixed-use, special-purpose, self-storage, and life sciences. With 39 years of Florida CRE transaction experience and deep familiarity with the public REIT universe (Ventas, Welltower, EastGroup, CubeSmart, Public Storage, ELP, Sun Communities), Linton Global Solutions delivers FFO benchmarking that compares private Florida deals against public REIT comparables. Call (312) 612-1031.

Article Summary

Funds From Operations (FFO) is the standardized REIT earnings metric: Net Income + Depreciation + Amortization − Gains on Property Sales. FFO corrects accounting depreciation's distortion of real-estate cash flow. Florida REITs report FFO as their primary earnings metric. FFO per share at 12-22x is the standard REIT valuation multiple. Private Florida CRE sponsors benchmark deal performance against public REIT FFO yields — when private FFO yields exceed public by 200+ bps, sponsors are buying below replacement-cost benchmark. Florida-specific FFO considerations include insurance escalation, hurricane impairments, property tax reassessment, and Florida population-growth tailwinds. Mike Linton benchmarks FFO on every FL CRE underwriting.

Key Takeaways

• ✓FFO = Net Income + D&A − Gains on Property Sales (NAREIT standard).
• ✓FFO is 1.7-2.5x net income for property-heavy REITs.
• ✓FFO is recurring; EBITDA includes non-recurring sale gains.
• ✓FFO per share is the REIT analog to Price/Earnings.
• ✓Quality FL REITs trade at 12-22x FFO multiples.
• ✓Private FL CRE benchmarks deal performance vs public REIT FFO.
• ✓Insurance escalation flows through normal FFO.
• ✓Hurricane impairments typically excluded from FFO.
• ✓NOI is property-level; FFO is entity-level (post-debt service).

About Michael R. Linton

Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.

Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving 500+ banks.

Ready to Talk About Your FFO (Funds From Operations) Deal?

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Works Cited

1. National Association of Real Estate Investment Trusts. "NAREIT FFO Definition (2018 Revision)." NAREIT, https://www.reit.com/. Accessed Jul 20, 2026.
2. CCIM Institute. "Commercial Real Estate Performance Metrics." CCIM, https://www.ccim.com/. Accessed Jul 20, 2026.
3. Urban Land Institute. "ULI Investment Performance Resources." ULI, https://americas.uli.org/research/. Accessed Jul 20, 2026.
4. S&P Global. "S&P REIT Sector Analysis." S&P Global, https://www.spglobal.com/. Accessed Jul 20, 2026.

Disclosure & Compliance

Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.

Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.