NRZ
New Residential Investment Corp.
$10.89
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 54.8% below fair value
You pay
$10.89
Bear
$20.01
Fair
$24.11
Bull
$28.22
Bear
$20.01
+83.7%
$1.20 FFO × 18x
Fair
$24.11
+121.4%
$1.20 FFO × 22x
Bull
$28.22
+159.1%
$1.20 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($1.20) × default P/FFO multiple
Implied Market Multiple
9.1x
Summary
At $1.20 FFO/share with a 22x default REIT multiple, the base-case value is $24.11 per share. Dividend yield: 9.2%. DDM cross-check: $18.64.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 9.2% is unusually high — make sure the company generates enough cash to keep paying it.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify