The Company presents interest coverage, fixed charge coverage, and debt service coverage ratios to measure the Company’s ability to meet its obligations.
All three ratios use the same coverage numerator, which is calculated by adding to net income impairment charges, provision for loan losses, transaction costs, interest expense, gross (including interest expense in discontinued operations), depreciation and amortization, share-based compensation expense to management and trustee and costs (gain) associated with loan refinancing or payoff, net; and subtracting interest cost capitalized, straight-line revenue and gain or loss on sale or acquisition of real estate from discontinued operations.
The coverage amount above is a non-GAAP financial measure and should not be considered an alternative to any GAAP liquidity measures. It is most directly comparable to the GAAP liquidity measure, “Net cash provided by operating activities,” and is not directly comparable to the GAAP liquidity measures, “Net cash used in investing activities” and “Net cash provided by financing activities.”
To calculate the interest coverage ratio, we divide coverage by interest expense, gross. Interest expense, gross, is calculated by adding interest income and interest cost capitalized to interest expense, net. We consider the interest coverage ratio to be an appropriate supplemental measure of a company’s ability to meet its interest expense obligations and management believes it is useful to investors in this regard. Our calculation of the interest coverage ratio may be different from the calculation used by other companies, and therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.
To calculate the fixed charge coverage ratio, we divide coverage by fixed charges. Fixed charges is calculated by adding interest income and interest cost capitalized, as well as preferred share dividends, to interest expense, net. We consider the fixed charge coverage ratio to be an appropriate supplemental measure of a company’s ability to meet its interest and preferred share dividend payment obligations and management believes it is useful to investors in this regard. Our calculation of the fixed charge coverage ratio may be different from the calculation used by other companies, and therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.
To calculate the debt service coverage ratio, we divide coverage by debt service. Debt service is calculated by adding interest income and interest cost capitalized, as well as recurring principal payments, to interest expense, net. We consider the debt service coverage ratio to be an appropriate supplemental measure of a company’s ability to meet debt service payment obligations and management believes it is useful to investors in this regard. Our calculation of the debt service coverage ratio may be different from the calculation used by other companies, and therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.