Map the cash engine
Write a short description of the assets, customers and contracts before collecting ratios. Identify the property sectors, geographic exposure and tenant concentration. Note the revenue model: contractual lease payments, short-term rentals, operating revenue or financing spreads. A good description explains who pays, why they keep paying and what would interrupt the payment. If you cannot explain the revenue driver, a precise valuation multiple is premature.
Reconcile the operating result
Record revenue, property-level income and the issuer's preferred performance measures with matching periods. For equity REITs, inspect the FFO reconciliation and the full AFFO definition where supplied. Separate total-company growth from per-share growth. Compare cash collection with reported rent and ask what recurring capital spending sits outside an adjusted measure. A checklist should surface uncertainty rather than convert every missing disclosure into an assumed zero.
Place the dividend inside the capital structure
Use an appropriate common-share earnings or cash measure and a consistent dividend period. Inspect preferred claims, secured and unsecured debt, maturity concentrations, floating-rate exposure and available liquidity. Consider whether distributions, development and acquisitions compete for the same cash. A comfortable current payout ratio may coexist with a difficult refinancing year. Conversely, a temporarily weak ratio may reflect a transition that deserves further investigation rather than an automatic conclusion.
Write two interpretations and a verification plan
State the strongest reasonable explanation for improvement and the strongest plausible reason it could disappoint. For example, contractual escalators may support growth, while lease expirations and tenant incentives could absorb it. List the next disclosures that would distinguish those outcomes: cash rent collection, renewal spreads, capex or the final financing terms. Keep historical facts, your calculations and your inferences separate. This produces a reusable research note rather than a buy-or-sell label that hides its assumptions.
Hypothetical: the missing denominator
A company reports AFFO rising from $100 million to $110 million, while diluted shares rise from 50 million to 60 million. AFFO per share falls from $2.00 to about $1.83 despite 10% total growth. The next question is whether the new capital's earnings contribution is fully reflected in the period, not simply whether total AFFO rose.
A common mistake
A checklist is a way to organize evidence. Passing a chosen number of checks is not a probability of safety, a credit rating or an investment recommendation.
What to check in the disclosures
- Business: assets, tenants, lease structure and concentrations.
- Operations: occupancy, collection, same-store growth and reinvestment.
- Measures: reconciliations, periods and diluted shares.
- Funding: debt maturities, liquidity, equity and preferred claims.
- Conclusion: competing interpretations and unresolved evidence.
Sources & scope
This guide focuses on US REITs. Examples are hypothetical unless explicitly attributed. Definitions and issuer disclosures can change; use the current source and the issuer's own reconciliation.
Educational material, not a recommendation or personalized investment advice. How these guides are prepared · Report a correction