SAN
DIEGO, Nov. 6, 2023 /PRNewswire/ -- Realty Income
Corporation (Realty Income, NYSE: O), The Monthly Dividend
Company®, today announced operating results for the
three and nine months ended September 30,
2023. All per share amounts presented in this press release
are on a diluted per common share basis unless stated
otherwise.
COMPANY HIGHLIGHTS:
For the three months ended September
30, 2023:
- Net income available to common stockholders was $233.5 million, or $0.33 per share
- Normalized FFO available to common stockholders was
$739.0 million, or $1.04 per share
- AFFO available to common stockholders was $721.4 million, or $1.02 per share
- Achieved same store rental revenue growth of 2.2% and a rent
recapture rate of 106.9% on properties re-leased
- Invested $2.0 billion in 289
properties and properties under development or expansion at an
initial weighted average cash lease yield of 6.9%
- Raised $885.9 million from the
sale of common stock, primarily through our At-The-Market (ATM)
program, with a weighted average price of $58.58
- Issued €550.0 million of 4.875% senior unsecured notes due
July 2030, and €550.0 million of
5.125% senior unsecured notes due July
2034
- Net Debt to Annualized Pro Forma Adjusted EBITDAre was
5.2x
Events subsequent to September 30,
2023
- On October 29, 2023, entered into
a definitive merger agreement to acquire Spirit Realty Capital,
Inc. ("Spirit") in an all-stock transaction that is expected to
close in the first quarter of 2024, subject to the approval of
Spirit's stockholders and satisfaction of other customary closing
conditions.
CEO Comments
"Our Realty Income One Team continues to deliver strong results
on behalf of all of whom we serve. Our pending merger with Spirit
represents an exciting component of our future growth plans," said
Sumit Roy, Realty Income's President
and Chief Executive Officer. "We believe the transaction, which is
expected to be immediately accretive once closed and will not be
reliant on external funding, will create a solid foundation for
growth in the coming year, during which we intend to be disciplined
and patient capital allocators. As we look further to the future,
we believe the enhanced scale and diversification afforded by
Spirit's complementary portfolio will support and expand our future
growth runway."
"Our third quarter results demonstrate again the consistency of
our earnings profile and the attractive internal growth of our
high-quality real estate portfolio while highlighting the
capabilities of our One Team and platform. During the quarter, we
invested $2.0 billion in high quality real estate at a cash
cap rate of 6.9%, generated same store rental revenue growth of an
attractive 2.2%, and delivered a rent recapture rate of 106.9% on
properties re-leased. Our investment efforts, in conjunction
with the strength of our balance sheet and access to diverse
capital sources globally, enabled us to realize an investment
spread of over 100 basis points, using the cost of equity and
debt raised in the quarter on a leverage neutral basis."
"We ended the third quarter in a solid financial position, with
$3.4 billion of unused capacity on
our $4.25 billion multi-currency
revolving credit facility after giving effect to commercial paper
borrowings, which are fully backstopped by the facility. In
addition, we had access to approximately $750 million of equity from unsettled forward
sales of our common stock, resulting in $4.5
billion of liquidity to support our future growth plans.
Given the transaction volume we have achieved year to date, we are
increasing our outlook for investments to be approximately
$9.0 billion for 2023 and raised the
bottom end of our AFFO per share guidance to an updated range of
$3.98 to $4.01."
Select Financial Results
The following summarizes our select financial results (dollars
in millions, except per share data).
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Total
revenue
|
|
$
1,039.1
|
|
$
837.3
|
|
$
3,002.7
|
|
$
2,455.0
|
Net income available to
common stockholders (1)
|
|
$
233.5
|
|
$
219.6
|
|
$
653.9
|
|
$
642.1
|
Net income per
share
|
|
$
0.33
|
|
$
0.36
|
|
$
0.96
|
|
$
1.06
|
Funds from operations
available to common stockholders (FFO) (2)
|
|
$
736.1
|
|
$
597.2
|
|
$
2,108.4
|
|
$
1,807.4
|
FFO per
share
|
|
$
1.04
|
|
$
0.97
|
|
$
3.09
|
|
$
2.99
|
Normalized funds from
operations available to common stockholders (Normalized FFO)
(2)
|
|
$
739.0
|
|
$
600.9
|
|
$
2,113.0
|
|
$
1,820.4
|
Normalized FFO per
share
|
|
$
1.04
|
|
$
0.97
|
|
$
3.10
|
|
$
3.01
|
Adjusted funds from
operations available to common stockholders (AFFO)
(2)
|
|
$
721.4
|
|
$
603.6
|
|
$
2,043.8
|
|
$
1,767.4
|
AFFO per
share
|
|
$
1.02
|
|
$
0.98
|
|
$
2.99
|
|
$
2.92
|
|
|
(1)
|
The calculation to
determine net income attributable to common stockholders includes
provisions for impairment, gain on sales of real estate, and
foreign currency gain and loss. These items can vary from quarter
to quarter and can significantly impact net income available to
common stockholders and period to period comparisons.
|
(2)
|
FFO, Normalized FFO,
and AFFO are non-GAAP financial measures. Normalized FFO is based
on FFO and adjusted to exclude merger and integration-related costs
related to our merger with VEREIT and AFFO further adjusts
Normalized FFO for unique revenue and expense items. Please see the
Glossary for our definitions and explanations of how we utilize
these metrics. Please see pages 9 and 10 herein for
reconciliations to the most directly comparable GAAP
measure.
|
Cineworld Bankruptcy Resolution
As previously disclosed, Cineworld Group plc and its affiliates
("Cineworld") commenced Chapter 11 reorganization proceedings
during September 2022, at which time
we owned 41 properties leased to Cineworld. In the second quarter
of 2023, Cineworld rejected 6 leases as part of the bankruptcy
process. On July 31, 2023, Cineworld
emerged from Chapter 11 bankruptcy. As of September 30, 2023, we owned 35 properties leased
to Cineworld, which represented 1.1% of our total portfolio's
annual contractual rent.
On October 1, 2023, we entered
into a comprehensive restructuring agreement with Cineworld on the
35 properties we own. Pursuant to this agreement, Cineworld
committed to long-term leases on 28 of the properties, with a
weighted average lease term of approximately 10 years, while
remaining on short-term leases with terms of one year or less on 7
of the properties. Of the 28 properties with long-term leases, the
base rent recapture rate is 75%, which does not include percentage
rent that was added to all properties and there were no tenant
improvements or additional capital commitments made.
In addition, the restructuring agreement amended certain terms
on deferred rent obligations owed to us, including both full and
partial forgiveness of deferred rent for certain properties. As
these deferrals were accounted for on a cash basis or fully
reserved for, there was no impact to our overall Cineworld
receivables, net of reserves, as a result of these amendments and
any recoveries beyond this will be recognized upon collection.
Dividend Increases
In September 2023, we announced the
104th consecutive quarterly dividend
increase, which is the 122nd increase in the amount of
the dividend since our listing on the New York Stock Exchange
(NYSE) in 1994. The annualized dividend amount as of September 30, 2023 was $3.072 per share. The amount of monthly dividends
paid per share increased 3.2% to $0.7665 during the three months ended
September 30, 2023, as compared to
$0.7425 during the three months ended
September 30, 2022,
representing 75.1% of our diluted AFFO per share of
$1.02 during the three months ended
September 30, 2023.
Real Estate Portfolio Update
As of September 30, 2023, we owned
or held interests in 13,282 properties, which were leased to 1,324
clients doing business in 85 industries. Our diversified portfolio
of commercial properties under long-term, net lease agreements is
actively managed with a weighted average remaining lease term of
approximately 9.7 years. Our portfolio of commercial real estate
has historically provided dependable rental revenue supporting the
payment of monthly dividends. As of September 30, 2023, portfolio occupancy was 98.8%
with 159 properties available for lease or sale, as compared to
99.0% as of June 30, 2023 and 98.9%
as of September 30, 2022. Our
property-level occupancy rates exclude properties with ancillary
leases only, such as cell towers and billboards, and properties
with possession pending. Below is a summary of our portfolio
activity for the period indicated below:
Changes in Occupancy
Three months ended
September 30, 2023
|
|
Properties available
for lease at June 30, 2023
|
137
|
Lease expirations
(1)
|
310
|
Re-leases to same
client
|
(257)
|
Re-leases to new
client
|
(11)
|
Vacant
dispositions
|
(20)
|
Properties available
for lease at September 30, 2023
|
159
|
|
|
Nine months ended
September 30, 2023
|
|
Properties available
for lease at December 31, 2022
|
126
|
Lease expirations
(1)
|
718
|
Re-leases to same
client
|
(586)
|
Re-leases to new
client
|
(25)
|
Vacant
dispositions
|
(74)
|
Properties available
for lease at September 30, 2023
|
159
|
|
|
(1)
|
Includes scheduled and
unscheduled expirations (including leases rejected in bankruptcy),
as well as future expirations resolved in the periods indicated
above.
|
During the three months ended September
30, 2023, the new annualized contractual rent on re-leases
was $57.6 million, as compared to the previous annual rent of
$53.9 million on the same units,
representing a rent recapture rate of 106.9% on the units
re-leased. We re-leased three units to new clients without a period
of vacancy, and 10 units to new clients after a period of vacancy.
Please see the Glossary for our definition of annualized
contractual rent.
During the nine months ended September
30, 2023, the new annualized contractual rent on re-leases
was $145.4 million, as compared to
the previous annual rent of $139.4
million on the same units, representing a rent recapture
rate of 104.3% on the units re-leased. We re-leased seven units to
new clients without a period of vacancy, and 27 units to new
clients after a period of vacancy.
Investments in Real Estate
The following table
summarizes our acquisitions in the U.S. and Europe for the periods indicated below:
|
Number
of
Properties
|
|
Leasable
Square
Feet
(in
thousands)
|
|
Investment
($ in
millions)
|
|
Weighted
Average
Lease
Term
(Years)
|
|
Initial
Weighted
Average
Cash
Lease
Yield
(1)
|
Three months ended
September 30, 2023
|
|
|
|
|
|
|
|
|
|
Acquisitions -
U.S.
|
55
|
|
2,247
|
|
$
300.0
|
|
16.1
|
|
6.9 %
|
Acquisitions -
Europe
|
49
|
|
4,427
|
|
1,402.9
|
|
19.4
|
|
6.9 %
|
Total
acquisitions
|
104
|
|
6,674
|
|
$
1,702.9
|
|
18.8
|
|
6.9 %
|
Properties under
development (2)
|
185
|
|
5,207
|
|
340.1
|
|
15.8
|
|
6.9 %
|
Total
(3)
|
289
|
|
11,881
|
|
$
2,043.0
|
|
18.3
|
|
6.9 %
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2023
|
|
|
|
|
|
|
|
|
|
Acquisitions -
U.S.
|
802
|
|
14,730
|
|
$
3,708.9
|
|
15.9
|
|
6.9 %
|
Acquisitions -
Europe
|
80
|
|
8,608
|
|
2,191.6
|
|
15.6
|
|
7.1 %
|
Total
acquisitions
|
882
|
|
23,338
|
|
$
5,900.5
|
|
15.8
|
|
7.0 %
|
Properties under
development (2)
|
305
|
|
7,269
|
|
910.0
|
|
16.2
|
|
6.7 %
|
Total
(4)
|
1,187
|
|
30,607
|
|
$
6,810.5
|
|
15.8
|
|
6.9 %
|
|
|
(1)
|
Initial weighted
average cash lease yield is a supplemental operating measure.
Please see the Glossary for our definition of this metric.
Contractual net operating income used in the calculation of initial
weighted average cash lease yield for the three and nine months
ended September 30, 2023 includes $2.2 million and $3.7
million, respectively, received as settlement credits as
reimbursement of free rent periods.
|
(2)
|
The three and nine
months ended September 30, 2023 includes £23.9 million and
£32.6 million of investments, respectively, relating to four U.K.
development properties and €15.7 million and €25.9 million of
investments, respectively, in two Spain development properties,
converted at the applicable exchange rates on the funding
dates.
|
(3)
|
Our clients occupying
the new properties are 89.3% retail, 9.8% industrial, and 0.9%
other property types based on annualized contractual rent.
Approximately 20% of the annualized contractual rent generated from
acquisitions during the three months ended September 30, 2023 is
from investment grade rated clients, their subsidiaries or
affiliated companies. Please see the Glossary for our definition of
Investment Grade Clients.
|
(4)
|
Our clients occupying
the new properties are 89.7% retail, 10.0% industrial, and 0.3%
other property types based on annualized contractual rent.
Approximately 25% of the annualized contractual rent generated from
acquisitions during the nine months ended September 30, 2023 is
from investment grade rated clients, their subsidiaries or
affiliated companies.
|
Same Store Rental Revenue
The following
summarizes our same store rental revenue for 10,577 properties
under lease (dollars in millions):
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
%
Increase
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Three
Months
|
|
Nine
Months
|
Same store rental
revenue
|
$
716.0
|
|
$
700.9
|
|
$
2,141.0
|
|
$
2,107.4
|
|
2.2 %
|
|
1.6 %
|
For purposes of comparability, same store rental revenue is
presented on a constant currency basis using the exchange rate as
of September 30, 2023 of 1.22 GBP/USD and 1.06
EUR/USD. None of the properties in Italy and Ireland met our same store pool definition for
the periods presented. Please see the Glossary to see definitions
of our Same Store Pool and Same Store Rental Revenue.
Liquidity and Capital Markets
Capital Raising
During the three months ended
September 30, 2023, we raised
$885.9 million of proceeds from the
sale of common stock at a weighted average price of $58.58 per share, primarily through the sale of
approximately 15.1 million shares of common stock pursuant to
forward sale agreements through our ATM program. As of September 30, 2023, there were approximately 13.3
million shares of unsettled common stock subject to forward sale
agreements through our ATM program, representing approximately
$749.3 million in expected net
proceeds and a weighted average initial gross price of $56.61 per share. ATM net sale proceed amounts
assume full physical settlement of all outstanding shares of common
stock, subject to such forward sale agreements and certain
assumptions made with respect to settlement dates.
In July 2023, we issued €550.0
million of 4.875% senior unsecured notes due July 2030 (the "2030 Notes"), and €550.0 million
of 5.125% senior unsecured notes due July
2034 (the "2034 Notes") and, together with the 2030 Notes,
the "Notes". The public offering price for the 2030 Notes was
99.421% of the principal amount for an effective annual yield to
maturity of 4.975%, and the public offering price for the 2034
Notes was 99.506% of the principal amount for an effective annual
yield to maturity of 5.185%. Combined, the Notes have a weighted
average tenor of approximately 9.0 years and a weighted average
annual yield to maturity of 5.080%.
Liquidity
As of September 30, 2023, we had $4.5 billion of liquidity, which consists of cash
and cash equivalents of $344.1
million, including £93.1 million denominated in Sterling and
€47.9 million denominated in Euro, unsettled ATM forward equity
of $749.3 million, and
$3.4 billion of availability under
our $4.25 billion unsecured revolving
credit facility, net of $481.5
million of borrowing on the revolving credit facility and
after deducting $376.8 million in
commercial paper borrowings under our commercial paper programs. We
use our unsecured revolving credit facility as a liquidity backstop
for the repayment of the notes issued under these
programs.
Earnings Guidance
Summarized below are approximate estimates of the key components
of our 2023 earnings guidance, which do not give effect to the
announced merger between us and Spirit that is expected to close in
the first quarter of 2024:
|
|
Prior 2023 Guidance
(1)
|
|
Revised 2023
Guidance
|
Net income per
share
|
|
$1.20 to
$1.28
|
|
$1.25 to
$1.32
|
Real estate
depreciation and impairments per share
|
|
$2.90
|
|
$2.87
|
Other adjustments per
share (2)
|
|
$(0.03)
|
|
$(0.04)
|
Normalized FFO per
share (3)
|
|
$4.07 to
$4.15
|
|
$4.08 to
$4.15
|
AFFO per share
(3)
|
|
$3.96 to
$4.01
|
|
$3.98 to
$4.01
|
Same store rent
growth
|
|
Over 1.25%
|
|
Approx 1.5%
|
Occupancy
|
|
Over 98%
|
|
Over 98%
|
Cash G&A expenses
(% of revenues) (4)(5)
|
|
2.9% - 3.4%
|
|
2.9% - 3.2%
|
Property expenses
(non-reimbursable) (% of revenues) (4)
|
|
1.0% - 1.3%
|
|
1.0% - 1.2%
|
Income tax
expenses
|
|
$55 to $65
million
|
|
$50 to $60
million
|
Acquisition
volume
|
|
Over $7.0
billion
|
|
Approx $9.0
billion
|
|
|
|
|
|
|
(1)
|
As issued on August 2,
2023.
|
(2)
|
Includes gain on sales
of properties and merger and integration-related costs.
|
(3)
|
Normalized FFO per
share and AFFO per share exclude merger and integration-related
costs associated with our merger with VEREIT and pending merger
with Spirit. Per share amounts may not add due to
rounding.
|
(4)
|
Revenue excludes
contractually obligated reimbursements by our clients. Cash G&A
expenses exclude stock-based compensation expense.
|
(5)
|
G&A expenses
inclusive of stock-based compensation expense as a percentage of
rental revenue, excluding reimbursements, is expected to be
approximately 3.6% - 3.9% in 2023.
|
Conference Call Information
In conjunction with the release of our operating results, we
will host a conference call on November 7, 2023 at
11:30 a.m. PST to discuss the
results. To access the conference call, dial (833) 816-1264
(United States) or (412) 317-5632
(International). When prompted, please ask for the Realty Income
conference call.
A telephone replay of the conference call can also be accessed
by calling (877) 344-7529 and entering the conference ID 9106101.
The telephone replay will be available through November 14, 2023.
A live webcast will be available in listen-only mode by clicking
on the webcast link on the company's home page or in the investors
section at www.realtyincome.com. A replay of the conference call
webcast will be available approximately one hour after the
conclusion of the live broadcast. No access code is required for
this replay.
Supplemental Materials and Sustainability Report
Supplemental Operating and Financial Data for the three and nine
months ended September 30, 2023 are
available on our corporate website at
www.realtyincome.com/investors/quarterly-and-annual-results.
The Sustainability Report for the year ended December 31, 2022 is available on our corporate
website at esg.realtyincome.com/indicators/sustainability_report.
Our Green Financing Framework is also available on our corporate
website at esg.realtyincome.com/indicators/green_financing.
About Realty Income
Realty Income, The Monthly Dividend Company®, is an
S&P 500 company and member of the S&P 500 Dividend
Aristocrats® index. We invest in people and places to
deliver dependable monthly dividends that increase over time. The
company is structured as a real estate investment trust ("REIT"),
and its monthly dividends are supported by the cash flow from over
13,250 real estate properties primarily owned under long-term net
lease agreements with commercial clients. To date, the company has
declared 640 consecutive monthly dividends on its shares of
common stock throughout its 54-year operating history and increased
the dividend 122 times since Realty Income's public listing in 1994
(NYSE: O). Additional information about the company can be obtained
from the corporate website at www.realtyincome.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. When used in
this press release, the words "estimated," "anticipated," "expect,"
"believe," "intend," "continue," "should," "may," "likely,"
"plans," and similar expressions are intended to identify
forward-looking statements. Forward- looking statements include
discussions of our business and portfolio (including our growth
strategies and our intention to acquire or dispose of additional
domestic and international properties and the timing of these
acquisitions and dispositions), re-lease, re-development and
speculative development of properties and expenditures related
thereto; future operations and results; the announcement of
operating results, strategy, plans, settlement of shares of common
stock sold pursuant to forward sale confirmations under our ATM
program, dividends, guidance, and the intentions of management; and
trends in our business, including trends in the market for
long-term net leases of freestanding, single-client properties.
Forward-looking statements are subject to risks, uncertainties, and
assumptions about us, which may cause our actual future results to
differ materially from expected results. Some of the factors that
could cause actual results to differ materially are, among others,
our continued qualification as a REIT; general domestic and foreign
business, economic, or financial conditions; competition;
fluctuating interest and currency rates; inflation and its impact
on our clients and us; access to debt and equity capital markets
and other sources of funding; continued volatility and uncertainty
in the credit markets and broader financial markets; other risks
inherent in the real estate business including our clients'
defaults under leases, increased client bankruptcies, potential
liability relating to environmental matters, illiquidity of real
estate investments, and potential damages from natural disasters;
impairments in the value of our real estate assets; changes in
domestic and foreign income tax laws and rates; our clients'
solvency; property ownership through joint ventures and
partnerships which may limit control of the underlying investments;
current or future epidemics or pandemics, measures taken to limit
their spread, the impacts on us, our business, our clients
(including those in the theater and fitness industries), and the
economy generally; the loss of key personnel; the outcome of any
legal proceedings to which we are a party or which may occur in the
future; acts of terrorism and war; and the structure, timing and
completion of the announced merger between us and Spirit and any
effects of the announcement, pendency or completion of the
announced merger, including the anticipated benefits therefrom; and
those additional risks and factors discussed in our reports filed
with the U.S. Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements are not guarantees of future
plans and performance and speak only as of the date of this press
release. Actual plans and operating results may differ materially
from what is expressed or forecasted in this press release. We do
not undertake any obligation to update forward-looking statements
or publicly release the results of any forward-looking statements
that may be made to reflect events or circumstances after the date
these statements were made.
CONSOLIDATED
STATEMENTS OF INCOME
(in thousands, except
per share amounts) (unaudited)
|
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
REVENUE
|
|
|
|
|
|
|
|
|
Rental (including
reimbursable) (1)
|
|
$
1,008,862
|
|
$
825,946
|
|
$
2,929,440
|
|
$
2,426,311
|
Other
|
|
30,242
|
|
11,323
|
|
73,268
|
|
28,720
|
Total
revenue
|
|
1,039,104
|
|
837,269
|
|
3,002,708
|
|
2,455,031
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
495,566
|
|
419,016
|
|
1,419,321
|
|
1,232,215
|
Interest
|
|
184,121
|
|
117,409
|
|
522,110
|
|
333,933
|
Property (including
reimbursable)
|
|
70,981
|
|
52,719
|
|
235,081
|
|
157,241
|
General and
administrative
|
|
35,525
|
|
34,096
|
|
106,521
|
|
100,934
|
Provisions for
impairment
|
|
16,808
|
|
1,650
|
|
59,801
|
|
16,379
|
Merger and
integration-related costs
|
|
2,884
|
|
3,746
|
|
4,532
|
|
12,994
|
Total
expenses
|
|
805,885
|
|
628,636
|
|
2,347,366
|
|
1,853,696
|
Gain on sales of real
estate
|
|
7,572
|
|
42,883
|
|
19,675
|
|
93,611
|
Foreign currency and
derivative (loss) gain, net
|
|
(2,813)
|
|
(22,893)
|
|
4,957
|
|
(16,003)
|
Gain on extinguishment
of debt
|
|
—
|
|
240
|
|
—
|
|
367
|
Equity in income and
impairment of investment in unconsolidated entities
|
|
—
|
|
(662)
|
|
411
|
|
(6,335)
|
Other income,
net
|
|
7,235
|
|
2,249
|
|
12,985
|
|
6,907
|
Income before income
taxes
|
|
245,213
|
|
230,450
|
|
693,370
|
|
679,882
|
Income
taxes
|
|
(11,336)
|
|
(10,163)
|
|
(36,218)
|
|
(35,802)
|
Net income
|
|
233,877
|
|
220,287
|
|
657,152
|
|
644,080
|
Net income attributable
to noncontrolling interests
|
|
(404)
|
|
(720)
|
|
(3,248)
|
|
(1,937)
|
Net income available to
common stockholders
|
|
$
233,473
|
|
$
219,567
|
|
$
653,904
|
|
$
642,143
|
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders (FFO)
|
|
$
736,146
|
|
$
597,154
|
|
$
2,108,422
|
|
$
1,807,385
|
Normalized funds from
operations available to common stockholders (Normalized
FFO)
|
|
$
739,030
|
|
$
600,900
|
|
$
2,112,954
|
|
$
1,820,379
|
Adjusted funds from
operations available to common stockholders (AFFO)
|
|
$
721,370
|
|
$
603,566
|
|
$
2,043,836
|
|
$
1,767,392
|
|
|
|
|
|
|
|
|
|
Per share information
for common stockholders:
|
|
|
|
|
|
|
|
|
Net income available
to common stockholders per common share, basic and
diluted
|
|
$
0.33
|
|
$
0.36
|
|
$
0.96
|
|
$
1.06
|
|
|
|
|
|
|
|
|
|
FFO, basic and
diluted
|
|
$
1.04
|
|
$
0.97
|
|
$
3.09
|
|
$
2.99
|
|
|
|
|
|
|
|
|
|
Normalized FFO, basic
and diluted
|
|
$
1.04
|
|
$
0.97
|
|
$
3.10
|
|
$
3.01
|
|
|
|
|
|
|
|
|
|
AFFO
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.02
|
|
$
0.98
|
|
$
3.00
|
|
$
2.92
|
Diluted
|
|
$
1.02
|
|
$
0.98
|
|
$
2.99
|
|
$
2.92
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
per common share
|
|
$
0.7665
|
|
$
0.7425
|
|
$
2.2830
|
|
$
2.2230
|
|
|
(1)
|
Includes reserve
reversals to rental revenue of $6.0 million and
$11.4 million for the three and nine months ended September
30, 2023, respectively, and a reserve of rental revenue of
$0.5 million for the three months ended September 30, 2022,
and a reserve reversal of $10.9 million for the nine months
ended September 30, 2022. References to reserves recorded as a
reduction of rental revenue include amounts reserved for in the
current period, as well as unrecognized contractual revenue and
unrecognized straight-line rental revenue for leases accounted for
on a cash basis. References to reserve reversals recorded as
increases to rental revenue include amounts where the accounting
for recognition of rental revenue and straight-line rental revenue
has been moved from the cash to the accrual basis.
|
FUNDS FROM
OPERATIONS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS (Normalized
FFO)
(in thousands, except
per share amounts)
|
|
FFO and Normalized FFO
are non-GAAP financial measures. Please see the Glossary for our
definitions and explanations of how we utilize these
metrics.
|
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
233,473
|
|
$
219,567
|
|
$
653,904
|
|
$
642,143
|
Depreciation and
amortization
|
|
495,566
|
|
419,016
|
|
1,419,321
|
|
1,232,215
|
Depreciation of
furniture, fixtures and equipment
|
|
(817)
|
|
(511)
|
|
(1,656)
|
|
(1,478)
|
Provisions for
impairment
|
|
16,808
|
|
1,650
|
|
59,801
|
|
16,379
|
Gain on sales of real
estate
|
|
(7,572)
|
|
(42,883)
|
|
(19,675)
|
|
(93,611)
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
717
|
|
(465)
|
|
12,812
|
FFO adjustments
allocable to noncontrolling interests
|
|
(1,312)
|
|
(402)
|
|
(2,808)
|
|
(1,075)
|
FFO available to common
stockholders
|
|
$
736,146
|
|
$
597,154
|
|
$
2,108,422
|
|
$
1,807,385
|
FFO allocable to
dilutive noncontrolling interests
|
|
1,375
|
|
985
|
|
4,166
|
|
2,569
|
Diluted FFO
|
|
$
737,521
|
|
$
598,139
|
|
$
2,112,588
|
|
$
1,809,954
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
736,146
|
|
$
597,154
|
|
$
2,108,422
|
|
$
1,807,385
|
Merger and
integration-related costs
|
|
2,884
|
|
3,746
|
|
4,532
|
|
12,994
|
Normalized FFO
available to common stockholders
|
|
$
739,030
|
|
$
600,900
|
|
$
2,112,954
|
|
$
1,820,379
|
Normalized FFO
allocable to dilutive noncontrolling interests
|
|
1,375
|
|
985
|
|
4,166
|
|
2,569
|
Diluted Normalized
FFO
|
|
$
740,405
|
|
$
601,885
|
|
$
2,117,120
|
|
$
1,822,948
|
|
|
|
|
|
|
|
|
|
FFO per common share,
basic and diluted
|
|
$
1.04
|
|
$
0.97
|
|
$
3.09
|
|
$
2.99
|
|
|
|
|
|
|
|
|
|
Normalized FFO
per common share, basic and diluted
|
|
$
1.04
|
|
$
0.97
|
|
$
3.10
|
|
$
3.01
|
|
|
|
|
|
|
|
|
|
Distributions paid to
common stockholders
|
|
$
543,343
|
|
$
458,586
|
|
$
1,555,679
|
|
$
1,342,695
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders in excess of distributions
paid to common
stockholders
|
|
$
192,803
|
|
$
138,568
|
|
$
552,743
|
|
$
464,690
|
|
|
|
|
|
|
|
|
|
Normalized FFO
available to common stockholders in excess of
distributions
paid to common stockholders
|
|
$
195,687
|
|
$
142,314
|
|
$
557,275
|
|
$
477,684
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares used for FFO and normalized FFO
|
|
|
|
|
|
|
|
|
Basic
|
|
709,165
|
|
617,512
|
|
681,419
|
|
604,464
|
Diluted
|
|
711,338
|
|
619,201
|
|
683,925
|
|
605,958
|
ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
(in thousands, except
per share amounts)
|
|
AFFO is a non-GAAP
financial measure. Please see the Glossary for our definition and
an explanation of how we utilize this metric.
|
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income available to
common stockholders
|
|
$
233,473
|
|
$
219,567
|
|
$
653,904
|
|
$
642,143
|
Cumulative adjustments
to calculate Normalized FFO (1)
|
|
505,557
|
|
381,333
|
|
1,459,050
|
|
1,178,236
|
Normalized FFO
available to common stockholders
|
|
739,030
|
|
600,900
|
|
2,112,954
|
|
1,820,379
|
Gain on extinguishment
of debt
|
|
—
|
|
(240)
|
|
—
|
|
(367)
|
Amortization of
share-based compensation
|
|
6,231
|
|
5,099
|
|
20,154
|
|
16,742
|
Amortization of net
debt premiums and deferred financing costs
(2)
|
|
(10,244)
|
|
(16,728)
|
|
(34,441)
|
|
(50,772)
|
Non-cash (gain) loss on
interest rate swaps
|
|
(1,790)
|
|
735
|
|
(5,390)
|
|
2,181
|
Straight-line impact of
cash settlement on interest rate swaps (3)
|
|
1,797
|
|
—
|
|
5,392
|
|
—
|
Leasing costs and
commissions
|
|
(1,392)
|
|
(686)
|
|
(6,868)
|
|
(3,853)
|
Recurring capital
expenditures
|
|
(52)
|
|
(273)
|
|
(190)
|
|
(459)
|
Straight-line rent and
expenses, net
|
|
(42,791)
|
|
(29,628)
|
|
(113,239)
|
|
(85,004)
|
Amortization of above
and below-market leases, net
|
|
24,939
|
|
17,422
|
|
61,967
|
|
47,466
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
(85)
|
|
—
|
|
(4,239)
|
Other adjustments
(4)
|
|
5,642
|
|
27,050
|
|
3,497
|
|
25,318
|
AFFO available to
common stockholders
|
|
$
721,370
|
|
$
603,566
|
|
$
2,043,836
|
|
$
1,767,392
|
AFFO allocable to
dilutive noncontrolling interests
|
|
1,357
|
|
1,006
|
|
4,170
|
|
2,613
|
Diluted AFFO
|
|
$
722,727
|
|
$
604,572
|
|
$
2,048,006
|
|
$
1,770,005
|
|
|
|
|
|
|
|
|
|
AFFO per common
share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.02
|
|
$
0.98
|
|
$
3.00
|
|
$
2.92
|
Diluted
|
|
$
1.02
|
|
$
0.98
|
|
$
2.99
|
|
$
2.92
|
|
|
|
|
|
|
|
|
|
Distributions paid to
common stockholders
|
|
$
543,343
|
|
$
458,586
|
|
$
1,555,679
|
|
$
1,342,695
|
|
|
|
|
|
|
|
|
|
AFFO available to
common stockholders in excess of distributions
paid to common
stockholders
|
|
$
178,027
|
|
$
144,980
|
|
$
488,157
|
|
$
424,697
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares used for AFFO:
|
|
|
|
|
|
|
|
|
Basic
|
|
709,165
|
|
617,512
|
|
681,419
|
|
604,464
|
Diluted
|
|
711,338
|
|
619,201
|
|
683,925
|
|
605,958
|
|
|
(1)
|
See Normalized FFO
calculations on page 9 for reconciling items.
|
(2)
|
Includes the
amortization of net premiums on notes payable and assumption of our
mortgages payable, which are being amortized over the life of the
applicable debt, and costs incurred and capitalized upon issuance
and exchange of our notes payable, assumption of our mortgages
payable and issuance of our term loans, which are also being
amortized over the lives of the applicable debt. No costs
associated with our credit facility agreements or annual fees paid
to credit rating agencies have been included.
|
(3)
|
Represents the
straight-line amortization of $72.0 million gain realized upon the
termination of $500.0 million in notional interest rate swaps in
October 2022, over the term of the $750.0 million of 5.625% senior
unsecured notes due October 2032.
|
(4)
|
Includes foreign
currency gain and loss as a result of intercompany debt and
remeasurement transactions, mark-to-market adjustments on
investments and derivatives that are non-cash in nature,
straight-line payments from cross-currency swaps, obligations
related to financing lease liabilities, and adjustments allocable
to noncontrolling interests.
|
HISTORICAL FFO AND
AFFO
(in thousands, except
per share amounts)
|
|
For the three months
ended September 30,
|
|
2023
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
233,473
|
|
$
219,567
|
|
$
134,996
|
|
$
22,904
|
|
$
101,049
|
Depreciation and
amortization, net of furniture, fixtures and equipment
|
|
494,749
|
|
418,505
|
|
198,602
|
|
168,927
|
|
149,288
|
Provisions for
impairment
|
|
16,808
|
|
1,650
|
|
11,011
|
|
105,095
|
|
13,503
|
Gain on sales of real
estate
|
|
(7,572)
|
|
(42,883)
|
|
(12,094)
|
|
(13,736)
|
|
(1,674)
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
717
|
|
—
|
|
—
|
|
—
|
FFO adjustments
allocable to noncontrolling interests
|
|
(1,312)
|
|
(402)
|
|
(180)
|
|
(212)
|
|
(135)
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
736,146
|
|
$
597,154
|
|
$
332,335
|
|
$
282,978
|
|
$
262,031
|
Merger and
integration-related costs
|
|
2,884
|
|
3,746
|
|
16,783
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO
available to common stockholders
|
|
$
739,030
|
|
$
600,900
|
|
$
349,118
|
|
$
282,978
|
|
$
262,031
|
|
|
|
|
|
|
|
|
|
|
|
FFO per diluted
share
|
|
$
1.04
|
|
$
0.97
|
|
$
0.85
|
|
$
0.82
|
|
$
0.82
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO per
diluted share
|
|
$
1.04
|
|
$
0.97
|
|
$
0.89
|
|
$
0.82
|
|
$
0.82
|
|
|
|
|
|
|
|
|
|
|
|
AFFO available to
common stockholders
|
|
$
721,370
|
|
$
603,566
|
|
$
356,837
|
|
$
282,509
|
|
$
265,355
|
|
|
|
|
|
|
|
|
|
|
|
AFFO per diluted
share
|
|
$
1.02
|
|
$
0.98
|
|
$
0.91
|
|
$
0.81
|
|
$
0.83
|
|
|
|
|
|
|
|
|
.
|
|
|
Cash dividends paid per
share
|
|
$
0.7665
|
|
$
0.7425
|
|
$
0.7065
|
|
$
0.7005
|
|
$
0.6795
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
711,338
|
|
619,201
|
|
392,514
|
|
347,213
|
|
320,726
|
|
|
For the nine months
ended September 30,
|
|
2023
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
653,904
|
|
$
642,143
|
|
$
355,415
|
|
$
277,555
|
|
$
307,185
|
Depreciation and
amortization, net of furniture, fixtures and equipment
|
|
1,417,665
|
|
1,230,737
|
|
563,932
|
|
501,562
|
|
436,929
|
Provisions for
impairment
|
|
59,801
|
|
16,379
|
|
30,977
|
|
123,442
|
|
31,236
|
Gain on sales of real
estate
|
|
(19,675)
|
|
(93,611)
|
|
(35,396)
|
|
(53,565)
|
|
(15,828)
|
Proportionate share of
adjustments for unconsolidated entities
|
|
(465)
|
|
12,812
|
|
—
|
|
—
|
|
—
|
FFO adjustments
allocable to noncontrolling interests
|
|
(2,808)
|
|
(1,075)
|
|
(511)
|
|
(575)
|
|
(327)
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
2,108,422
|
|
$
1,807,385
|
|
$
914,417
|
|
$
848,419
|
|
$
759,195
|
Merger and
integration-related costs
|
|
4,532
|
|
12,994
|
|
30,081
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO
available to common stockholders
|
|
$
2,112,954
|
|
$
1,820,379
|
|
$
944,498
|
|
$
848,419
|
|
$
759,195
|
|
|
|
|
|
|
|
|
|
|
|
FFO per diluted
share
|
|
$
3.09
|
|
$
2.99
|
|
$
2.41
|
|
$
2.48
|
|
$
2.43
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO per
diluted share
|
|
$
3.10
|
|
$
3.01
|
|
$
2.49
|
|
$
2.48
|
|
$
2.43
|
|
|
|
|
|
|
|
|
|
|
|
AFFO available to
common stockholders
|
|
$
2,043,836
|
|
$
1,767,392
|
|
$
1,002,706
|
|
$
874,972
|
|
$
768,026
|
|
|
|
|
|
|
|
|
|
|
|
AFFO per diluted
share
|
|
$
2.99
|
|
$
2.92
|
|
$
2.64
|
|
$
2.55
|
|
$
2.46
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per
share
|
|
$
2.2830
|
|
$
2.2230
|
|
$
2.1150
|
|
$
2.0920
|
|
$
2.0295
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
683,925
|
|
605,958
|
|
379,873
|
|
342,946
|
|
312,300
|
ADJUSTED
EBITDAre
(dollars in
thousands)
|
|
Adjusted
EBITDAre, Annualized Adjusted EBITDAre, Pro Forma
Adjusted EBITDAre, Annualized Pro Forma Adjusted
EBITDAre, Net Debt/Annualized
Adjusted EBITDAre and Net Debt/Annualized
Pro Forma Adjusted EBITDAre are non-GAAP financial measures.
Please see the Glossary for our definition
and an explanation of
how we utilize these metrics.
|
|
|
|
Three months
ended
September
30,
|
|
|
2023
|
|
2022
|
Net income
|
|
$
233,877
|
|
$
220,287
|
Interest
|
|
184,121
|
|
117,409
|
Gain on extinguishment
of debt
|
|
—
|
|
(240)
|
Income taxes
|
|
11,336
|
|
10,163
|
Depreciation and
amortization
|
|
495,566
|
|
419,016
|
Provisions for
impairment
|
|
16,808
|
|
1,650
|
Merger and
integration-related costs
|
|
2,884
|
|
3,746
|
Gain on sales of real
estate
|
|
(7,572)
|
|
(42,883)
|
Foreign currency and
derivative losses, net
|
|
2,813
|
|
22,893
|
Gain on settlement of
foreign currency forwards
|
|
—
|
|
2,784
|
Proportionate share of
adjustments from unconsolidated entities
|
|
—
|
|
662
|
Quarterly Adjusted
EBITDAre
|
|
$
939,833
|
|
$
755,487
|
Annualized Adjusted
EBITDAre (1)
|
|
$
3,759,332
|
|
$
3,021,948
|
Annualized Pro Forma
Adjustments
|
|
$
74,503
|
|
$
31,700
|
Annualized Pro Forma
Adjusted EBITDAre
|
|
$
3,833,835
|
|
$
3,053,648
|
Total debt per the
consolidated balance sheet, excluding deferred
financing costs
and net premiums and discounts
|
|
$
20,388,406
|
|
$
16,142,608
|
Less: Cash and cash
equivalents
|
|
(344,129)
|
|
(187,745)
|
Net Debt
(2)
|
|
$
20,044,277
|
|
$
15,954,863
|
Net Debt/Annualized
Adjusted EBITDAre
|
|
5.3x
|
|
5.3x
|
Net Debt/Annualized Pro
Forma Adjusted EBITDAre
|
|
5.2x
|
|
5.2x
|
|
|
(1)
|
We calculate Annualized
Adjusted EBITDAre by multiplying the Quarterly Adjusted
EBITDAre by four.
|
(2)
|
Net Debt is total debt
per our consolidated balance sheets, excluding deferred financing
costs and net premiums and discounts, less cash and cash
equivalents.
|
The Annualized Pro Forma Adjustments, which include transaction
accounting adjustments in accordance with U.S GAAP, consist of
adjustments to incorporate Adjusted EBITDAre from properties
we acquired or stabilized during the applicable quarter and remove
Adjusted EBITDAre from properties we disposed of during the
applicable quarter, giving pro forma effect to all transactions as
if they occurred at the beginning of the applicable period. Our
calculation includes all adjustments consistent with the
requirements to present Adjusted EBITDAre on a pro forma
basis in accordance with Article 11 of Regulation S-X. The
Annualized Pro Forma Adjustments are consistent with the debt
service coverage ratio calculated under financial covenants for our
senior unsecured notes. The following table summarizes our
Annualized Pro Forma Adjustments related to our Annualized Pro
Forma Adjusted EBITDAre calculation for the periods
indicated below (in thousands):
|
|
Three months
ended
September
30,
|
|
|
2023
|
|
2022
|
Annualized pro forma
adjustments from properties acquired or stabilized
|
|
$
79,141
|
|
$
68,589
|
Annualized pro forma
adjustments from properties disposed
|
|
(4,638)
|
|
(36,889)
|
Annualized Pro forma
Adjustments
|
|
$
74,503
|
|
$
31,700
|
CONSOLIDATED BALANCE
SHEETS
(in thousands, except
per share amounts) (unaudited)
|
|
|
|
September 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
|
Real estate held for
investment, at cost:
|
|
|
|
|
Land
|
|
$
14,408,324
|
|
$
12,948,835
|
Buildings and
improvements
|
|
33,606,951
|
|
29,707,751
|
Total real estate held
for investment, at cost
|
|
48,015,275
|
|
42,656,586
|
Less accumulated
depreciation and amortization
|
|
(5,781,056)
|
|
(4,904,165)
|
Real estate held for
investment, net
|
|
42,234,219
|
|
37,752,421
|
Real estate and lease
intangibles held for sale, net
|
|
19,927
|
|
29,535
|
Cash and cash
equivalents
|
|
344,129
|
|
171,102
|
Accounts receivable,
net
|
|
678,441
|
|
543,237
|
Lease intangible
assets, net
|
|
5,089,293
|
|
5,168,366
|
Goodwill
|
|
3,731,478
|
|
3,731,478
|
Other assets,
net
|
|
3,239,433
|
|
2,276,953
|
Total
assets
|
|
$
55,336,920
|
|
$
49,673,092
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Distributions
payable
|
|
$
187,288
|
|
$
165,710
|
Accounts payable and
accrued expenses
|
|
660,366
|
|
399,137
|
Lease intangible
liabilities, net
|
|
1,426,264
|
|
1,379,436
|
Other
liabilities
|
|
786,437
|
|
774,787
|
Line of credit payable
and commercial paper
|
|
858,260
|
|
2,729,040
|
Term loan,
net
|
|
1,287,995
|
|
249,755
|
Mortgages payable,
net
|
|
824,240
|
|
853,925
|
Notes payable,
net
|
|
17,482,652
|
|
14,278,013
|
Total
liabilities
|
|
23,513,502
|
|
20,829,803
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common
stock and paid in capital, par value $0.01 per share,
1,300,000 shares authorized, 723,894 and 660,300
shares
issued and outstanding as of September 30, 2023
and
December 31, 2022, respectively
|
|
38,031,829
|
|
34,159,509
|
Distributions in excess
of net income
|
|
(6,416,534)
|
|
(5,493,193)
|
Accumulated other
comprehensive income
|
|
41,849
|
|
46,833
|
Total stockholders'
equity
|
|
31,657,144
|
|
28,713,149
|
Noncontrolling
interests
|
|
166,274
|
|
130,140
|
Total
equity
|
|
31,823,418
|
|
28,843,289
|
Total liabilities and
equity
|
|
$
55,336,920
|
|
$
49,673,092
|
GLOSSARY
Adjusted EBITDAre. The National Association of
Real Estate Investment Trusts (Nareit) established an EBITDA metric
for real estate companies (i.e., EBITDA for real estate, or
EBITDAre) it believed would provide investors with a
consistent measure to help make investment decisions among certain
REITs. Our definition of "Adjusted EBITDAre" is generally
consistent with the Nareit definition, other than our adjustment to
remove foreign currency and derivative gain and loss, excluding the
gain and loss from the settlement of foreign currency forwards not
designated as hedges (which is consistent with our previous
calculations of "Adjusted EBITDAre"). We define Adjusted
EBITDAre, a non-GAAP financial measure, for the most recent
quarter as earnings (net income) before (i) interest expense,
including non-cash loss (gain) on swaps, (ii) income and
franchise taxes, (iii) gain on extinguishment of debt, (iv)
real estate depreciation and amortization, (v) provisions for
impairment, (vi) merger and integration-related costs,
(vii) gain on sales of real estate, (viii) foreign currency
and derivative gain and loss, net, (ix) gain on settlement of
foreign currency forwards, and (x) our proportionate share of
adjustments from unconsolidated entities. Our Adjusted
EBITDAre may not be comparable to Adjusted
EBITDAre reported by other companies or as defined by
Nareit, and other companies may interpret or define Adjusted
EBITDAre differently than we do. Management believes
Adjusted EBITDAre to be a meaningful measure of a REIT's
performance because it provides a view of our operating
performance, analyzes our ability to meet interest payment
obligations before the effects of income tax, depreciation and
amortization expense, provisions for impairment, gain on sales of
real estate and other items, as defined above, that affect
comparability, including the removal of non-recurring and non-cash
items that industry observers believe are less relevant to
evaluating the operating performance of a company. In addition,
EBITDAre is widely followed by industry analysts, lenders,
investors, rating agencies, and others as a means of evaluating the
operational cash generating capacity of a company prior to
servicing debt obligations. Management also believes the use of an
annualized quarterly Adjusted EBITDAre metric is
meaningful because it represents our current earnings run rate for
the period presented. The ratio of our total debt to our annualized
quarterly Adjusted EBITDAre is also used to determine
vesting of performance share awards granted to our executive
officers. Adjusted EBITDAre should be considered along
with, but not as an alternative to, net income as a measure of our
operating performance.
Adjusted Funds From Operations (AFFO), a non-GAAP
financial measure, is defined as FFO adjusted for unique
revenue and expense items, which we believe are not as pertinent to
the measurement of our ongoing operating performance. Most
companies in our industry use a similar measurement to AFFO, but
they may use the term "CAD" (for Cash Available for Distribution)
or "FAD" (for Funds Available for Distribution). We believe AFFO
provides useful information to investors because it is a widely
accepted industry measure of the operating performance of real
estate companies that is used by industry analysts and investors
who look at and compare those companies. In particular, AFFO
provides an additional measure to compare the operating performance
of different REITs without having to account for differing
depreciation assumptions and other unique revenue and expense items
which are not pertinent to measuring a particular company's ongoing
operating performance. Therefore, we believe that AFFO is an
appropriate supplemental performance metric, and that the most
appropriate GAAP performance metric to which AFFO should be
reconciled is net income available to common stockholders.
Annualized Adjusted EBITDAre, a non-GAAP financial
measure, is calculated by annualizing Adjusted EBITDAre.
Annualized Contractual Rent is the monthly aggregate cash
amount charged to clients, inclusive of monthly base rent
receivables, as of the balance sheet date, multiplied by 12,
excluding percentage rent. We believe annualized contractual rent
is a useful supplemental operating measure, as it excludes
properties that were no longer owned at the balance sheet date and
includes the annualized rent from properties acquired during the
quarter. Annualized contractual rent has not been reduced to
reflect reserves recorded as reductions to GAAP rental revenue in
the periods presented. Annualized contractual rent excludes
unconsolidated entities.
Annualized Pro Forma Adjusted EBITDAre, a non-GAAP
financial measure, is defined as Adjusted EBITDAre, which
includes transaction accounting adjustments in accordance with U.S.
GAAP, consists of adjustments to incorporate Adjusted
EBITDAre from properties we acquired or stabilized during
the applicable quarter and removes Adjusted EBITDAre from
properties we disposed of during the applicable quarter, giving pro
forma effect to all transactions as if they occurred at the
beginning of the applicable quarter. Our calculation includes all
adjustments consistent with the requirements to present Adjusted
EBITDAre on a pro forma basis in accordance with Article 11
of Regulation S-X. The annualized pro forma adjustments are
consistent with the debt service coverage ratio calculated under
financial covenants for our senior unsecured notes and bonds.
Funds From Operations (FFO), a non-GAAP financial
measure, consistent with the Nareit definition, is net income
available to common stockholders, plus depreciation and
amortization of real estate assets, plus provisions for impairments
of depreciable real estate assets, and reduced by gain on property
sales. Presentation of the information regarding FFO and AFFO is
intended to assist the reader in comparing the operating
performance of different REITs, although it should be noted that
not all REITs calculate FFO and AFFO in the same way, so
comparisons with other REITs may not be meaningful. FFO and AFFO
should not be considered alternatives to reviewing our cash flows
from operating, investing, and financing activities. In addition,
FFO and AFFO should not be considered measures of liquidity, of our
ability to make cash distributions, or of our ability to pay
interest payments. We consider FFO to be an appropriate
supplemental measure of a REIT's operating performance as it is
based on a net income analysis of property portfolio performance
that adds back items such as depreciation and impairments for FFO.
The historical accounting convention used for real estate assets
requires straight-line depreciation of buildings and improvements,
which implies that the value of real estate assets diminishes
predictably over time. Since real estate values historically rise
and fall with market conditions, presentations of operating results
for a REIT using historical accounting for depreciation could be
less informative. The use of FFO is recommended by the REIT
industry as a supplemental performance measure. In addition, FFO is
used as a measure of our compliance with the financial covenants of
our credit facility.
Initial Weighted Average Cash Lease Yield is
computed as contractual cash net operating income for the first
twelve months following the acquisition date, divided by the total
cost of the property (including all expenses borne by us).
Investment Grade Clients are our clients with a
credit rating, and our clients that are subsidiaries or affiliates
of companies with a credit rating, as of the balance sheet date, of
Baa3/BBB- or higher from one of the three major rating agencies
(Moody's/S&P/Fitch).
Net Debt/Annualized Adjusted EBITDAre, a
ratio used by management as a measure of leverage, is calculated as
net debt (which we define as total debt per our consolidated
balance sheet, excluding deferred financing costs and net premiums
and discounts, less cash and cash equivalents), divided by
Annualized Adjusted EBITDAre.
Net Debt/Annualized Pro Forma Adjusted EBITDAre, a
ratio used by management as a measure of leverage, is calculated as
net debt (which we define as total debt per our consolidated
balance sheet, excluding deferred financing costs and net premiums
and discounts, less cash and cash equivalents), divided by
Annualized Pro Forma Adjusted EBITDAre.
Normalized Funds from Operations Available to Common
Stockholders (Normalized FFO), a non-GAAP financial measure, is
FFO excluding merger and integration-related costs associated with
our merger with VEREIT.
Same Store Pool, for purposes of determining the
properties used to calculate our same store rental revenue,
includes all properties that we owned for the entire year-to-date
period, for both the current and prior year except for properties
during the current or prior year that were: (i) vacant at any
time,(ii) under development or redevelopment, or
(iii) involved in eminent domain and rent was reduced.
Same Store Rental Revenue excludes straight-line rent,
the amortization of above-and below-market leases, and
reimbursements from clients for recoverable real estate taxes and
operating expenses. For purposes of comparability, same store
rental revenue is presented on a constant currency basis by
applying the exchange rate as of the balance sheet date to base
currency rental revenue.
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SOURCE Realty Income Corporation