For a REIT, what does the term "AFFO" refer to?

The term "AFFO" stands for Adjusted Funds From Operations. This metric is particularly relevant in the context of Real Estate Investment Trusts (REITs) as it provides a more accurate measure of a REIT's cash-generating capabilities than net income or standard funds from operations (FFO). AFFO takes the standard FFO and makes further adjustments, typically accounting for recurring capital expenditures necessary to maintain the property portfolio.

By adjusting for these expenditures, AFFO more closely reflects the actual cash available for distribution to shareholders. Investors and analysts prefer this metric because it offers a clearer picture of the income that is truly available for dividends and can help in comparing the operational performance of different REITs. Hence, "Adjusted Funds From Operations" is the correct definition of AFFO in the context of REITs.