Funds Available For Distribution - FAD

Businesses that make money primarily through real estate organize in a particular way. Those companies form what's called a Real Estate Investment Trust, or REIT.

REITs have a number of financial statistics particular to them. Most companies use pretty much the same measures of financial health...things like revenue, gross margin, operating income, earnings per share, etc. However, REITs have some stats that are all their own.

One of these REIT-centric figures is called "funds available for distribution." This number measures the amount of money the company has available to pay out to shareholders. The REIT brings in money through rent, and pays the various costs associated with owning the properties: the interest cost, the maintenance people, the rental agents, etc. Whatever is left over forms a pot of money for distribution to shareholders.

The government sets some rules for a company to qualify as a REIT. One of the regulations requires the company to distribute no less than 90% of its taxable income to its shareholders. FAD represents an internal measure of how much money is in the pot, ready to get handed out to the REIT investors.