Free Cash Flow is a measure of a property’s ability to generate cash after setting aside reserves for capital expenditures such as future development, tenant improvements, and leasing commissions.

FCF is calculated by subtracting capital expenditures from Net Operating Income (NOI).

In real estate, FCF can provide a clearer picture of a property’s ability to generate cash after taking into account potential funds needed for future contingencies such as leases expiring, building upkeep, and renovations needed for new tenants.

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