AIMCO Properties: Chapter Summary

Interpretation: 53% of the total assets are financed through debts; the remaining 39% is financed through equity.

* We compared our past and projected ratios to the industry benchmarks to analyze the effects of taking on different levels of debt.

Real Estate Investment Trust (REITs) invests in and own properties by offering investors a highly liquid method of investing in high-density markets. Most REITs earn their revenue from

Managing debt levels to maintain an investment grade credit rating as well as operate with an efficient capital structure for its growth plans and industry

7. Debt to capitalization = Long-term Debt in Balance Sheet / Long term debt + Net Assets in

Target Corporation is having a very stable financial policy and dividend policy. From the historical financial data, Target had debt $11,044M, $11,202M, $10,599M, $17,471M, and $19,882M in the year of 2005,2006,2007,2008, and 2009 respectively. The long-term debt/equity ratio rises from 69.34% to 108%.

We have incorporated the NEWS in our model, and have taken out the assumption of $100 million debt in 1Q16. There are no significant differences for 2016 earnings and NAV. However, 2017E FFO, Core FFO and AFFO have decreased by $0.01 per share to $1.69, $1.94 and $1.85 respectively.

The company is cutting back on profits earned but not losing value for its investors with price to earnings being favorable at 19.18 (www.hoovers.com).

Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%

Our analysis attempts to answer the question, “What are the things a company must consider when analyzing a new investment or project?” According to the text, a firm’s first objective when deciding to take on new debt should be that its return on net assets (RONA) should be greater than its weighted average cost of capital (WACC). Since we are working with an income statement only and do not have an amount for net assets, we will instead use return on invested capital (ROIC), which measures how well a company is using its money to generate returns. Comparing a company 's return on capital (ROIC) with its cost of capital (WACC) reveals whether invested capital was used effectively. From our spreadsheet calculations we see that using our estimated operating profit provides us with a 19.9% return on invested capital with only a 7.2% weighted average cost for that same capital. If these numbers are even close to correct, George should definitely make the move.

REITS is a special company that mainly owns and in most cases operates income-producing real estate such as apartments, shopping centers, office hotels and warehouses. Some REITS also engage in financing real estates. The shares of many REITS are traded on major stock exchanges for example Boston Properties Inc., General Growth Properties, Inc., Acadia Realty Trust …; on the other hand, many REITs are public non-listed and private REITs. There are very strict requirement for a company to qualify as a REIT. The items listed below are some of the basic requirement of REITs:

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

SRC offers superior returns on common equity (ROCE). This undoubtedly reflects the greater amount of debt in the capital structure vis a vis WM, and a stronger gross margin. However, SRC’s ROCE has declined in the last year mainly because a reaffirmation charge (40% of Net Income) generated in lawsuits and a possible violation of the United States Bankruptcy Code. We need to highlight the uncertainty associated with the reaffirmation charge; this means that the actual results can differ from the

The course project involved developing a great depth of knowledge in analyzing capital structure, theories behind it, and its risks and issues. Before I began this assignment, I knew nothing but a few things about capital structure from previous unit weeks; however, it was not until this course’s final project that came along with opening

quantity of net income dollars of company earned for each dollar invested by the owners was 8.5% in 2010 and 10.4% in 2011 reflecting an increase of 1.9%. After analyzing the solvency ratios the following highlights were found: Riordan’s debt of totals assets ratio indicates company’s capability to survive losses without spoiling the interests of creditors. For 2010 was 14% and during 2011 was 29.4%, showing an increase of risk of 15.4% (higher the number, higher the risk that leads the company to be unable to meet its maturing obligations). The company’s time’s interest earned ratio that determines company’s capability to meet interest payments as they come due was 26.9 in 2010 and 8.3 in 2011. A high ratio on times interest earned may lead to investors to think that a company has an undesirable lack of debt or is paying down too much debt with earnings that could be used for other projects (Investopedia, 2013). Subsequently evaluating our performance and efficiently of the collected data, it reveals that Riordan Manufacture has displayed remarkable progress in comparison between years 2011 and 2010. The company liquidity demonstrates that we are capable to