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Premium & Discount to NAV

Comparing a REIT's stock price to its estimated Net Asset Value per share to see whether shares trade above or below that value

The Idea in One Line

Once you have an estimate of a REIT's Net Asset Value per share, comparing it to the stock's actual trading price produces one of the REIT sector's signature valuation signals: whether the stock trades at a premium or discount to that estimated NAV.

Premium / discount to NAV = (share price - NAV per share) / NAV per share

Worked Example

Suppose analysts estimate a REIT's NAV at $25 per share, and the stock is currently trading at $28. That REIT trades at a premium of ($28 - $25) / $25 = 12% to estimated NAV. If instead the stock traded at $20, it would be at a discount of ($20 - $25) / $25 = -20% (a 20% discount). The same REIT can move between a premium and a discount purely on stock price movement, with no change at all to the underlying NAV estimate, which is part of why this figure is watched as a sentiment gauge as much as a valuation one.

What a Premium or Discount Can Reflect

A premium to NAV generally means the market is valuing the company for more than the sum of its physical real estate, often reflecting expectations for future growth (development pipeline, acquisition opportunities), a lower perceived risk profile, or the value of the operating platform and management team itself. A discount can mean the opposite: skepticism about growth, balance sheet or tenant concerns, or simply that sentiment toward the sector or property type has turned negative. It can also mean the stock is pricing in a NAV decline (for example, from rising cap rates) before analysts have marked their NAV estimates down to match. None of this is a signal to buy or sell - it's simply what the number is describing.

Some of the more commonly cited drivers behind a premium or discount include:

• Growth expectations - a development or acquisition pipeline the market believes will add value faster than the current portfolio alone would suggest
• Perceived quality - stronger tenants, better locations, or a more conservative balance sheet can support a premium over otherwise-similar peers
• Platform and management value - especially for internally managed REITs with a demonstrated track record of capital allocation
• Sector sentiment - broad investor appetite (or the lack of it) for a given property type at a given point in the cycle, independent of any single company's fundamentals
• Liquidity - larger, more heavily traded REITs sometimes command a premium simply for being easier to buy and sell in size

What Moves the Gap

Premiums and discounts move for reasons that don't necessarily change the underlying real estate at all. Interest rates are a major driver - rising rates tend to pull down both stock prices (as future cash flows are discounted more heavily) and NAV estimates (as analysts raise the cap rates they apply to NOI), but the two don't always move in lockstep. See interest rates and REITs. Broader risk sentiment, private real estate transaction evidence, and sector-specific news all factor in too.

Traded vs. Non-Traded REITs

This concept applies most directly to publicly traded REITs, where the stock price is set continuously by the market and can be compared against an independent NAV estimate. Non-traded REITs work differently: their share price generally is their own periodically disclosed NAV per share, so there's no separate market price to compare it against in the same way. See traded, non-traded and private REITs for that distinction.

A Data Note

Consensus NAV estimates come from proprietary analyst research, not from any free public data source, which means a reliable premium/discount-to-NAV figure isn't something that can be computed from public filings alone. This site does not publish a premium/discount-to-NAV number for that reason. If you want this specific figure for a given REIT, it typically requires sell-side or third-party analyst research; what you can verify independently from public filings are the inputs covered elsewhere in this library - reported FFO, AFFO, and cap rate assumptions.

Context Across Cycles

REITs, as a group, have traded at both premiums and discounts to estimated NAV at different points over time, and the sector-wide average has moved considerably across market cycles, compressing during periods of strong investor demand for real estate and widening during periods of rate uncertainty or credit stress. Individual REITs and sectors can also diverge sharply from the broader sector average at any given time. None of this establishes a "normal" level a stock should be expected to return to - it simply illustrates that premiums and discounts are dynamic, not fixed characteristics of a given company.

Company-specific news can move the gap even when nothing about the broader market changes - a surprise acquisition, a dividend cut or increase, a change in management guidance, or new information about a major tenant's credit quality can all shift how the market views a REIT relative to its estimated NAV within a single trading day. The same arithmetic works in reverse to solve for an implied price: if an estimate puts fair value at roughly a 5% discount to a $30 NAV estimate, that implies a price near $30 x 0.95 = $28.50, purely an illustration of the arithmetic, not a price target.

See it in the data: See a REIT's reported figures → Browse the REIT directory →

Research and education only — nothing here is investment advice. Figures such as the 90% distribution rule are general and can change; always confirm against a company's filings.