The Idiot Index

Applied to Real Estate Investment Trusts (REITs) — owners and operators of income-producing real estate. Revenue is rental income, not goods sold, so Markup ratios are not meaningful (no COGS in the traditional sense). REITs are legally required to distribute 90%+ of taxable income as dividends to maintain their tax-advantaged status, so the Capital Extraction ratio is structurally near or above 1.0 across the entire sector — the more interesting comparison is Labor Share (REITs run with small workforces relative to revenue) and Executive Extraction. Future methodology versions may add FFO/AFFO-based variants since GAAP Net Income is heavily distorted by depreciation in this sector.

The multiplier after legitimate operations. A high Markup combined with a low Operational Markup tells a specific story: surplus is being reinvested in the business. A high Markup combined with a high Operational Markup tells the opposite story: surplus is going to shareholders.

Source data: Revenues, CostOfGoodsAndServicesSold, OperatingExpenses (us-gaap) or equivalents in IFRS.