CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts
A REIT has net distributable cash flows of Rs 80 crore for a year and has 40 crore units outstanding. A sponsor holds 12 crore units and the rest are held by public investors. If the REIT distributes the full amount pro rata per unit, what is the total distribution received by public investors?
Public investors receive Rs 56 crore. Distribution per unit is Rs 80 crore divided by 40 crore units, which is Rs 2. Public investors hold 28 crore units, so they receive 28 times 2, which equals Rs 56 crore, while the sponsor gets Rs 24 crore.
- ARs 56 croreCorrect
- BRs 24 crore
- CRs 80 crore
- DRs 28 crore
Explanation
Distribution per unit = 80 / 40 = Rs 2. Public units = 40 - 12 = 28 crore. Public distribution = 28 x 2 = Rs 56 crore. Check: sponsor receives 12 x 2 = Rs 24 crore and 56 + 24 = 80. Rs 24 crore is the sponsor's share, wrongly picked as the public share.
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