To get back to the OP question:
I analyse the company the same way I do any other business. Distributions are irrelevant. Only total return matters.
I restate the Income Statement reducing depreciation in half. Not long ago 2% depreciation was the norm. It was changed to 4% after that long spell of flat RE markets when accountants started finding that RE transactions were resulting in write-off on the building (i.e. the existing rate of depreciation was not covering the actual degradation). But I believe the old rate was actually a better estimate of economic degradation. Certainly in Vancouver, building do not retain value. It is only the land that goes up in value.
I calculate the operating rate of return on the capitalized costs of the properties, with and without including depreciation, before tax and interest and capital gains.
I compare that rate with the average rate being paid for debt (some disclose this in the notes, for others you have to add up all their individual debts) and to the current rates the company faces in today's tight funding market. This is where I often walk away. Leverage has a negative effect as well as positive one.
I evaluate growth by calculating the Revenues per square-foot. This is frequently amazingly low.
I evaluate growth in what I own with sq/ft-per-unit. Again most companies are growing by issuing more units without growing your own share's value.
I evaluate the capitalized cost of RE by calc its per sq-ft value. The newspapers report RE transactions once a week and you can find out the average per-sq-ft value from there. I have never really found much difference. There is enough turn-over of properties that the book values don't seem to get much out of what with market values.
I analyse the company the same way I do any other business. Distributions are irrelevant. Only total return matters.
I restate the Income Statement reducing depreciation in half. Not long ago 2% depreciation was the norm. It was changed to 4% after that long spell of flat RE markets when accountants started finding that RE transactions were resulting in write-off on the building (i.e. the existing rate of depreciation was not covering the actual degradation). But I believe the old rate was actually a better estimate of economic degradation. Certainly in Vancouver, building do not retain value. It is only the land that goes up in value.
I calculate the operating rate of return on the capitalized costs of the properties, with and without including depreciation, before tax and interest and capital gains.
I compare that rate with the average rate being paid for debt (some disclose this in the notes, for others you have to add up all their individual debts) and to the current rates the company faces in today's tight funding market. This is where I often walk away. Leverage has a negative effect as well as positive one.
I evaluate growth by calculating the Revenues per square-foot. This is frequently amazingly low.
I evaluate growth in what I own with sq/ft-per-unit. Again most companies are growing by issuing more units without growing your own share's value.
I evaluate the capitalized cost of RE by calc its per sq-ft value. The newspapers report RE transactions once a week and you can find out the average per-sq-ft value from there. I have never really found much difference. There is enough turn-over of properties that the book values don't seem to get much out of what with market values.
