Adjusted-funds-from-operations Definition

A calculation used for Real Estate Investment Trusts (REITs) that measures a real estate company’s cash flow generated from operations. This calculation is often referred to as AFFO, or may be called cash available for distribution (CAD) or funds available for distribution (FAD). To arrive at the adjusted funds from operations, two expenses are subtracted from funds from operations (FFO): 1) straight-line rents, which averages the tenant’s fixed-rent payments over the life of the lease, and 2) routine expenses, such as carpeting, painting, or leasing expenses, which are capitalized by the REIT and then amortized.
Webster's New World Finance

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