CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts
A REIT has net distributable cash flows of Rs 80 crore for the year, and holds 20 crore units outstanding. Under the minimum distribution rule, what is the minimum distribution per unit it must pay?
The minimum distribution is 90% of Rs 80 crore, which is Rs 72 crore. Spread over 20 crore units this equals Rs 3.60 per unit. Using the full Rs 80 crore would give Rs 4.00, which overstates the required minimum.
- ARs 3.60Correct
- BRs 4.00
- CRs 2.04
- DRs 7.20
Explanation
Minimum distribution = 90% x Rs 80 crore = Rs 72 crore. Divided by 20 crore units gives Rs 3.60 per unit. Rs 4.00 uses 100% of NDCF, a wrong base. Rs 2.04 uses 51%. Rs 7.20 divides by 10 crore units, a miscount.
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