What Is Funds From Operations (FFO)?
FFO is the industry-standard measure of cash-generating performance for Real Estate Investment Trusts (REITs), defined by the National Association of Real Estate Investment Trusts (Nareit). Because real estate depreciation under standard accounting rules often doesn’t reflect actual changes in property value, net income alone can understate a REIT’s real performance.
The formula is: FFO = Net Income + Depreciation & Amortization – Gains on Sales of Property + Losses on Sales of Property. Adding back depreciation and amortization removes a non-cash expense, while removing gains (and adding back losses) on property sales strips out one-time events that don’t reflect ongoing operating performance.
- A higher FFO relative to net income usually signals heavy depreciation charges on a large property portfolio.
- Analysts often compare FFO per share across REITs as a cleaner apples-to-apples metric than earnings per share.
Note: This calculator uses the standard Nareit definition of FFO for general educational purposes; some companies also report an "Adjusted FFO" with further adjustments not covered here.