Chartered Financial Analyst Level 2

Explanation

Net Asset Value (NAV) per share for publicly traded real estate securities represents the estimated market value of the real estate investment trust's (REIT's) assets minus its liabilities, divided by the number of shares outstanding.

Key points about NAV per share:

• Option B is correct: NAV includes the value of all assets held by the REIT, including both real estate assets and non-real-estate assets (such as cash, investments, and other financial assets).

• Option A is incorrect: NAV is based on current market values of real estate assets, not depreciated values. It reflects the estimated fair market value of properties, not their accounting book values.

• Option C is incorrect: While NAV can be used as a benchmark for performance evaluation, its primary purpose is to estimate the intrinsic value of the REIT's underlying assets, not specifically to measure manager performance relative to benchmarks.

Calculation of NAV per share:

NAV per share = (Estimated market value of assets - Liabilities) / Number of shares outstanding

NAV per share = (Estimated market value of assets - Liabilities) / Number of shares outstanding

This measure helps investors assess whether a REIT is trading at a premium or discount to its underlying asset value.