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Intermediate1 hour16 terms

Real Estate Equity Dilution: Key Terms

This curated collection offers key terms that might be helpful when exploring equity dilution in real estate investments. It's designed as a quick reference to understand commonly referenced concepts, not a comprehensive guide to financial modeling.

Term Collection

1

Equity Dilution

Equity dilution occurs when a company or investment vehicle issues new shares, decreasing the ownership percentage of existing shareholders. In real estate, this often happens in syndications or partnerships when additional capital is raised.

Advanced5-6 min
2

Convertible Preferred Stock

Convertible Preferred Stock is a hybrid security that combines features of both debt and equity, offering fixed dividend payments like preferred stock but with the option to convert into a predetermined number of common shares at the investor's discretion or upon specific triggers.

Advanced15-16 min
3

If-Converted Method

The If-Converted Method is an accounting technique used to calculate the dilutive impact of convertible securities on a company's earnings per share (EPS), assuming all such securities are converted into common stock at the beginning of the reporting period.

Advanced8-9 min
4

Real Estate Investment Trust

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate, allowing individuals to invest in large-scale property portfolios through publicly traded shares.

Intermediate15-18 min
5

Earnings Per Share

Earnings Per Share (EPS) is a financial metric that indicates how much profit a company makes for each outstanding share of its common stock. It's a key indicator of a company's profitability, widely used by investors to assess financial health.

Beginner5 min
6

Treasury Stock Method

The Treasury Stock Method (TSM) is an accounting technique used to calculate diluted earnings per share (EPS) by assuming that proceeds from the exercise of in-the-money options and warrants are used by the company to repurchase its own common stock at the average market price.

Advanced8 min
7

Net Asset Value

Net Asset Value (NAV) represents the total value of an entity's assets minus its liabilities, providing a per-share or per-unit value for investors in funds or syndications.

Intermediate5 min
8

Anti-Dilution Provisions

Anti-dilution provisions are contractual clauses designed to protect investors' equity ownership percentage from being significantly reduced (diluted) by future equity issuances at a lower valuation, particularly in real estate syndications and private equity deals.

Advanced5 min
9

Stock Options

Stock options grant the holder the right, but not the obligation, to buy or sell a company's stock at a predetermined price within a specific timeframe. For real estate investors, they can be a source of capital or a component of a diversified financial portfolio.

Intermediate5 min
10

Adjusted Funds From Operations

Adjusted Funds From Operations (AFFO) is a critical financial metric used primarily in real estate investment trusts (REITs) to measure the recurring cash flow available for distribution to shareholders, after accounting for non-cash items and recurring capital expenditures.

Advanced5 min
11

Private Equity Real Estate Fund

A Private Equity Real Estate (PERE) fund is an investment vehicle that pools capital from institutional and accredited investors to acquire, develop, manage, and sell real estate assets, aiming for significant returns over a defined investment horizon.

Advanced13-16 min
12

Warrants

Warrants in real estate are financial instruments that grant the holder the right, but not the obligation, to purchase an equity stake in a real estate project or entity at a predetermined price within a specified timeframe.

Intermediate5 min
13

Funds From Operations

Funds From Operations (FFO) is a key financial metric used primarily by Real Estate Investment Trusts (REITs) to define the cash flow from their operations, providing a more accurate picture of their profitability than traditional net income.

Intermediate5 min
14

Capitalization Table

A capitalization table, or cap table, is a detailed record of a company's or real estate project's equity ownership, including who owns what, the type of equity, and their respective ownership percentages.

Intermediate8 min
15

Shares Outstanding

Shares outstanding represent the total number of a company's shares currently held by all its shareholders, including institutional investors and the general public. This figure is crucial for calculating per-share metrics like earnings per share and dividends.

Beginner2-3 min
16

Convertible Security

A convertible security is a type of investment that can be converted into a predetermined number of common shares of the issuing company or partnership at a specified conversion price or ratio, offering investors both income potential and equity upside.

Advanced5 min

Common Questions