Answer: decrease in the P/FFO multiple.

## Explanation As REIT leverage increases, investors should expect a **decrease in the P/FFO multiple**. ### Key Points: 1. **Leverage and Risk**: Higher leverage increases financial risk for REITs, making them riskier investments. 2. **P/FFO Multiple**: The price-to-funds from operations (P/FFO) multiple is a key valuation metric for REITs, similar to P/E ratio for regular companies. 3. **Risk-Return Relationship**: As leverage increases, the required return for investors typically increases due to higher financial risk. This means investors will demand a higher return, which translates to a lower valuation multiple (P/FFO). 4. **Why Not Other Options**: - **Option A (increase in EBITDA)**: EBITDA is an operational metric and not directly affected by leverage changes when "all else being equal." - **Option C (decrease in required return)**: Actually, required return should increase with higher leverage due to increased financial risk. ### Conclusion: Higher leverage → Higher financial risk → Higher required return → Lower valuation multiple (P/FFO decreases)

Author: LeetQuiz Editorial Team