Modeling Different REIT Cash Flows

Tamala Amelia Manda

Chapter 92 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 3019-3075 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The accuracy and appropriateness of discounted cash flows (DCFs) have been debated for years in academia and industry. Broadly, for most valuations, appraisers use accounting cash flows (ACFs) in determining present values (PVs) of firms. Some unique industries such as the real estate investment trusts (REITs) require customized DCFs to account for their capital structure among other factors. Fernández (2004, 2007) suggested that customized DCFs include debt cash flows, equity cash flows, free cash flows, and capital cash flows. The customized cash flows reveal different PVs for REIT firms. Furthermore, robustness results illustrate that customized DCFs are sensitive to selected macroeconomic (debt, equity, and funds from operations) and management (board and executive) variables. Fundamentally, the results are generalizable to the global REIT industry.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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