Net asset value per share (NAVPS) is the difference between a REIT’s assets and its liabilities (all taken at current market values rather than accounting book values), divided by the number of shares outstanding.
NAVPS = (Value of assets – Value of liabilities) / number of shares outstanding
The actual share price can be different from NAVPS. Shares can trade either at a discount or a premium to NAVPS. NAVPS is the largest component of the intrinsic value of the stock.
The current market value of real estate assets is calculated by capitalizing NOI. The market values of other assets and liabilities are assumed to be equal to their book values.
The following table provides an example of NAVPS calculation. It starts with the net operating income (NOI) of a property and shows the various adjustments which need to be made.
|Office Equity REIT Inc. Net Asset Value Per Share Estimate
(In Thousands, Except Per Share Data)
|Last 12-months real estate NOI||$270,432|
|Less: Non-cash rents||7,667|
|Plus: Adjustment for full impact of acquisitions (1)||4,534|
|Pro forma cash NOI for last 12 months||$267,299|
|Plus: Next 12 months growth in NOI (2)||$4,009|
|Estimated next 12 months cash NOI||$271,308|
|Assumed cap rate (3)||7.00%|
|Estimated value of operating real estate||$3,875,829|
|Plus: Cash and equivalents||$65,554|
|Plus: Land held for future development||34,566|
|Plus: Accounts receivable||45,667|
|Plus: Prepaid/Other assets (4)||23,456|
|Estimated gross asset value||$4,045,072|
|Less: Total debt||$1,010,988|
|Less: Other liabilities||119,886|
|Net asset value||$2,914,198|
|(1) 50 percent of the expected return on acquisitions was made in the middle of 2010.
(2) Growth is estimated at 1.5 percent.
(3) Cap rate is based on recent comparable transactions in the property market.
(4) This figure does not include intangible assets.
NAVPS is calculated to be $2,914,198 divided by 55,689 shares, which equals $52.33 per share.