BREIT 2017 Annual Report

62 For the year ended December 31, 2017, we declared distributions in the amount of $46.3 million. The following table outlines the tax character of our distributions paid in 2017 as a percentage of total distributions. The distribution declared on December 31, 2017 was paid on January 19, 2018 and is excluded from the analysis below as it will be a 2018 tax event. Ordinary Income Capital Gains Unrecaptured 1250 Gain Return of Capital 2017 Tax Year 34.15% (1) 0% 0% 65.85% (1) 32.55% and 1.6% of the distributions paid in 2017 are non-qualified and qualified, respectively. The following table summarizes our distributions declared during the year ended December 31, 2017 ($ in thousands). From March 2, 2016 (date of our initial capitalization) through December 31, 2016, we had not commenced our principal operations and as such, no distributions were made during this period. For the Year Ended December 31, 2017 Amount Percentage Distributions Payable in cash $ 15,825 34% Reinvested in shares 30,435 66% Total distributions $ 46,260 100% Sources of Distributions Cash flows from operating activities $ 46,260 100% Offering proceeds — —% Total sources of distributions $ 46,260 100% Cash flows from operating activities $ 72,285 Funds from Operations $ 33,831 Funds from Operations and Adjusted Funds from Operations We believe funds from operations (“FFO”) is a meaningful supplemental non-GAAP operating metric. Our consolidated financial statements are presented under historical cost accounting which, among other things, requires depreciation of real estate investments to be calculated on a straight-line basis. As a result, our operating results imply that the value of our real estate investments will decrease evenly over a set time period. However, we believe that the value of real estate investments will fluctuate over time based on market conditions and as such, depreciation under historical cost accounting may be less informative. FFO is a standard REIT industry metric defined by the National Associational of Real Estate Investment Trusts (“NAREIT”). FFO, as defined by NAREIT and presented below, is calculated as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable real property and impairment write-downs on depreciable real property, plus real estate-related depreciation and amortization, and similar adjustments for unconsolidated joint ventures. The following table presents a reconciliation of FFO to net loss ($ in thousands): For the Year Ended December 31, 2017 Net loss attributable to BREIT stockholders $ (86,258) Adjustments: Real estate depreciation and amortization 121,793 Amount attributable to non-controlling interests for above adjustment (1,704) Funds from Operations attributable to BREIT stockholders $ 33,831 We also believe that Adjusted FFO (“AFFO”) is a meaningful supplemental non-GAAP disclosure of our operating results. AFFO further adjusts FFO in order for our operating results to reflect the specific characteristics of our business by adjusting for items we believe are not related to our core operations. Our adjustments to FFO to arrive at AFFO include straight-line rental income, amortization of above- and below-market lease intangibles, organization costs, unrealized gains or losses from changes in the fair value of real estate-related securities, amortization of restricted stock awards, and performance participation allocation not paid in cash. AFFO is not defined by NAREIT and our calculation of AFFO may not be comparable to disclosures made by other REITs.