A is correct. A lower capitalization rate (i.e., a lower NOI with such other parameters as interest costs and corporate expenses being the same) implies a lower FFO and hence a higher P/FFO ratio if P/NAV ratios are similar, as is the case here.
B is incorrect because A has a lower capitalization rate, implying a lower FFO and hence a higher P/FFO ratio if P/NAV ratios are similar, as is the case here. C is incorrect because it neglects the effect of the lower capitalization rate of REIT A.
Please explain how lower capitalization rate is written as a Lower NOI?
May be explanation is not right.
We can think like this :
NOI=value of property*cap rat
Since ,reit A has lower cap rate.So reit A has lower noi , by keeping interest expense and corporate expense REIT A has lower NOI as compare to REIT B which results in lower FFO.
Hence, P/FFO is higher in REIT A.
I ‘m not sure about this, please correct me is this explanation is wrong.
Refer this.