SAN
DIEGO, May 3, 2023 /PRNewswire/ -- Realty
Income Corporation (Realty Income, NYSE: O), The Monthly Dividend
Company®, today announced operating results for the
three months ended March 31, 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 March 31,
2023:
- Net income available to common stockholders was $225.0 million, or $0.34 per share
- Normalized FFO per share increased 2.0% to $1.04, compared to the three months ended
March 31, 2022
- AFFO available to common stockholders was $650.7 million, or $0.98 per share
- Invested $1.7 billion in 339
properties and properties under development or expansion at an
initial weighted average cash lease yield of 7.0%
- Raised $804.4 million from the
sale of common stock, primarily through our At-The-Market (ATM)
program, with a weighted average price of $63.31
- Entered into a $1.0 billion
multicurrency unsecured term loan initially maturing January 2024, which includes two twelve-month
extension options
- Issued $500.0 million of 5.05%
senior unsecured notes due January
2026, which are callable at par in January 2024, and $600.0
million of 4.85% senior unsecured notes due March 2030, which are callable at par in
January 2030
- Net debt to annualized pro forma adjusted EBITDAre was
5.4x
- Signed a definitive agreement to acquire up to 415
single-tenant convenience store properties located in the U.S. from
EG Group for $1.5 billion through a
sale-leaseback transaction, expected to close in the second quarter
of 2023
Events subsequent to March
31, 2023
- In April, issued $400.0 million
of 4.70% senior unsecured notes due December
2028, and $600.0 million of
4.90% senior unsecured notes due July
2033
- ATM forward agreements for a total of 23.4 million shares
remain unsettled with total expected net proceeds of approximately
$1.5 billion, of which 3.8 million
shares were executed in April
2023
CEO Comments
"Our first quarter results represent continued momentum in our
business and are a testament to the unique platform we have
curated," said Sumit Roy, Realty
Income's President and Chief Executive Officer. "During the
quarter, we invested approximately $1.7
billion in high quality real estate at a cap rate of 7.0%.
Given the active start to the year, we are increasing our 2023
acquisitions guidance to over $6
billion."
"With an attractive opportunity set of potential investments,
our balance sheet is well-positioned for us to remain opportunistic
on the capital allocation front."
"In addition, our diversified real estate portfolio continues to
perform, contributing to the stability of our income-oriented
business model. During the first quarter, we achieved a rent
recapture rate of 101.7% on properties re-leased and ended the
quarter with an occupancy rate of 99.0%. Supported by the stability
of our portfolio and investment activity to date, we are updating
2023 AFFO per share guidance range to $3.94 to $4.03,
representing 1.7% annual growth at the midpoint."
Select Financial Results
The following summarizes our select financial results (dollars
in millions, except per share data).
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
Total
revenue
|
|
$
944.4
|
|
$
807.3
|
Net income available to
common stockholders (1)
|
|
$
225.0
|
|
$
199.4
|
Net income per
share
|
|
$
0.34
|
|
$
0.34
|
Funds from operations
available to common stockholders (FFO) (2)
|
|
$
684.3
|
|
$
601.4
|
FFO per
share
|
|
$
1.03
|
|
$
1.01
|
Normalized funds from
operations available to common stockholders (Normalized FFO)
(2)
|
|
$
685.6
|
|
$
607.9
|
Normalized FFO per
share
|
|
$
1.04
|
|
$
1.02
|
Adjusted funds from
operations available to common stockholders (AFFO)
(2)
|
|
$
650.7
|
|
$
580.1
|
AFFO per
share
|
|
$
0.98
|
|
$
0.98
|
|
|
(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. See pages 8 and 9 herein for reconciliations to
the most directly comparable GAAP measure.
|
Theater Industry Update
For the period from January 2023
through April 2023, we collected all
of the contractual rent(1) across our theater portfolio.
As of March 31, 2023, we had
cumulative reserves of $33.0 million
on properties leased to Cineworld Group plc and its affiliates
("Cineworld"), the parent of the entities that lease certain of our
theater portfolios, including Regal Cinemas, which commenced
Chapter 11 reorganization proceedings during September 2022. These reserves for Cineworld,
representing a reduction of rental revenue, primarily relate to
contractual rent and expense recoveries recorded during the
COVID-19 pandemic in 2020, and during the fourth quarter of 2022,
and exclude straight-line rent reserves. Total receivables, net of
reserves and excluding straight line rent receivables, from
Cineworld and its affiliates were $14.1
million at March 31, 2023,
which include both deferred contractual rent and deferred expense
recoveries.
(1)
|
We define contractual
rent as the monthly aggregate cash amount charged to clients,
inclusive of monthly base rent receivables. Charged amounts have
not been adjusted for any COVID-19 related rent relief granted and
include contractual rent from any clients in bankruptcy.
|
Dividend Increases
In March 2023, we announced the
102nd consecutive quarterly dividend increase,
which is the 120th 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 March 31, 2023 was $3.06 per share. The amount of monthly dividends
paid per share increased 1.6% to $0.7515 during the three months ended
March 31, 2023, as compared to
$0.7395 in the comparable 2022
period, representing 76.7% of our diluted AFFO per share of
$0.98.
Real Estate Portfolio Update
As of March 31, 2023, we owned or
held interests in 12,492 properties, which were leased to 1,259
clients doing business in 84 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 9.4 years. Our portfolio of
commercial real estate has historically provided dependable rental
revenue supporting the payment of monthly dividends. As of
March 31, 2023, portfolio occupancy
was 99.0% with 131 properties available for lease or sale, as
compared to 99.0% as of December 31,
2022 and 98.6% as of March 31,
2022.
Changes in Occupancy
Three months ended
March 31, 2023
|
|
Properties available
for lease at December 31, 2022
|
126
|
Lease expirations
(1)
|
192
|
Re-leases to same
client
|
(155)
|
Re-leases to new
client
|
(6)
|
Vacant
dispositions
|
(26)
|
Properties available
for lease at March 31, 2023
|
131
|
|
|
(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 March 31,
2023, the new annualized contractual rent on re-leases
was $36.1 million, as compared to the previous annual rent of
$35.5 million on the same units,
representing a rent recapture rate of 101.7% on the units
re-leased. We re-leased two units to new clients without a
period of vacancy, and six units to new clients after a period of
vacancy. Please see the Glossary for our definition of annualized
contractual rent.
Investments in Real Estate
The following table
summarizes our acquisitions in the U.S. and Europe for the period indicated below:
|
Number
of
Properties
|
|
Leasable
Square
Feet
(in
thousands)
|
|
Investment
($ in
millions)
|
|
Weighted
Average
Lease
Term
(Years)
|
|
Initial Weighted
Average
Cash
Lease
Yield
(1)
|
Three months ended
March 31, 2023
|
|
|
|
|
|
|
|
|
|
Acquisitions -
U.S.
|
197
|
|
5,926
|
|
$
1,048.9
|
|
10.0
|
|
7.0 %
|
Acquisitions -
Europe
|
20
|
|
2,437
|
|
389.7
|
|
12.6
|
|
7.6 %
|
Total
acquisitions
|
217
|
|
8,363
|
|
$
1,438.6
|
|
10.7
|
|
7.2 %
|
Properties under
development (2)
|
122
|
|
2,319
|
|
235.6
|
|
14.8
|
|
6.0 %
|
Total
(3)
|
339
|
|
10,682
|
|
$
1,674.2
|
|
11.2
|
|
7.0 %
|
|
|
(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 months ended March
31, 2023 includes approximately $0.7 million received as
settlement credits as reimbursement of free rent
periods.
|
(2)
|
Includes three United
Kingdom ("U.K.") development properties that represent an
investment of £3.8 million during the three months ended March
31, 2023, converted at the applicable exchange rates on the funding
dates.
|
(3)
|
Our clients occupying
the new properties are 85.5% retail and 14.5% industrial based on
annualized contractual rent. Approximately 42% of the annualized
contractual rent generated from acquisitions during the three
months ended March 31, 2023 is from our investment grade rated
clients, their subsidiaries or affiliated companies. Please see the
Glossary for our definition of investment grade clients.
|
Same Store Rental Revenue
The following
summarizes our same store rental revenue for 10,728 properties
under lease (dollars in millions):
|
Three Months Ended
March 31,
|
|
|
|
2023
|
|
2022
|
|
%
Increase
|
Same store rental
revenue (1)
|
$
719.7
|
|
$
718.1
|
|
0.2 %
|
|
|
(1)
|
Please see the
Glossary for our definition of this metric.
|
For purposes of comparability, same store rental revenue is
presented on a constant currency basis using the exchange rate as
of March 31, 2023 of 1.24
GBP/USD and 1.09 Euro ("EUR")/USD.
None of the properties in Italy
met our same store pool definition for the periods presented.
Liquidity and Capital Markets
Capital Raising
During the three months ended
March 31, 2023, we raised
$804.4 million of proceeds from the
sale of common stock at a weighted average price of $63.31 per share, primarily through the sale of
approximately 12.7 million shares of common stock pursuant to
forward sale agreements through our ATM program. As of March 31, 2023, there were approximately 19.6
million shares of common stock subject to forward sale agreements
through our ATM program, representing approximately $1.2 billion in expected net proceeds and a
weighted average initial price of $62.59 per share, which have been executed at a
weighted average price of $62.17 per share (assuming 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), but not settled.
In January 2023, we issued
$500 million of 5.05% senior
unsecured notes due January 13, 2026
(the "2026 Notes"), which are callable at par on January 13, 2024, and $600
million of 4.85% senior unsecured notes due March 15, 2030, which are callable at par on
January 15, 2030 (the "2030 Notes").
The public offering price for the 2026 Notes was 99.618% of the
principal amount for an effective semi-annual yield to maturity of
5.189% and the public offering price for the 2030 Notes was 98.813%
of the principal amount for an effective semi-annual yield to
maturity of 5.047%. In conjunction with the pricing of the 2026
Notes, we executed three-year, fixed-to-variable interest rate
swaps for a total of $500 million,
which are subject to the counterparties' right to terminate the
swaps at any time following the 2026 Notes par call date and
results in an effective variable borrowing rate of SOFR minus
0.0347% thereunder for the duration of the swaps. We intend to use
these variable rate borrowings in lieu of borrowing under our
revolving credit facility, which, as of March 31, 2023, permits U.S. borrowings at an
interest rate of SOFR plus 0.725% with a SOFR adjustment charge of
0.10% and a revolving credit facility commitment fee.
Also, in January 2023, we closed
on a $1.0 billion multicurrency
unsecured term loan. The loan initially matures in January 2024 and includes two twelve-month
extensions that can be exercised at the company's option. In
conjunction with closing, we executed one-year variable-to-fixed
interest rate swaps which fix our per annum interest rate at 5.0%
over the initial term.
In April 2023, we issued
$400.0 million of 4.70% senior
unsecured notes due December 2028
(the "2028 Notes") and $600.0 million
of 4.90% senior unsecured notes due July
2033 (the "2033 Notes" and, together with the 2028 Notes,
the "Notes"). The public offering price for the 2028 Notes was
98.949% of the principal amount for an effective semi-annual yield
to maturity of 4.912%, and the public offering price for the 2033
Notes was 98.020% of the principal amount for an effective
semi-annual yield to maturity of 5.148%. Combined, the Notes have a
weighted average tenor of approximately 8.0 years and a weighted
average semi-annual yield maturity of 5.054%.
Liquidity
As of March
31, 2023, we had $3.1 billion
of liquidity, excluding unsettled forward equity of approximately
$1.5 billion and excluding proceeds
from our $1.0 billion bond offering
which closed in April 2023. Our
liquidity as of March 31, 2023
consists of cash and cash equivalents of approximately $164.6 million, including £75.8 million
denominated in Sterling and €30.2 million denominated in Euro, and
$2.9 billion of availability under
our $4.25 billion unsecured revolving
credit facility, after deducting $157.5
million in commercial paper borrowings under our commercial
paper programs (comprised of a $1.5
billion U.S. dollar-denominated unsecured commercial paper
program and $1.5 billion (or foreign
currency equivalent) Euro-denominated unsecured commercial paper
program). 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:
|
|
Prior 2023
Guidance
|
|
Revised 2023
Guidance
|
Net income per
share
|
|
$1.20 to
$1.32
|
|
$1.22 to
$1.32
|
Real estate
depreciation and impairments per share
|
|
$2.84
|
|
$2.87
|
Other adjustments per
share (1)
|
|
$(0.03)
|
|
$(0.03)
|
Normalized FFO per
share (2)
|
|
$4.01 to
$4.13
|
|
$4.05 to
$4.15
|
AFFO per share
(2)
|
|
$3.93 to
$4.03
|
|
$3.94 to
$4.03
|
Same store rent
growth
|
|
Over 1.25%
|
|
Over 1.25%
|
Occupancy
|
|
Over 98%
|
|
Over 98%
|
Cash G&A expenses
(% of revenues) (3)(4)
|
|
3.0% - 3.5%
|
|
2.9% - 3.4%
|
Property expenses
(non-reimbursable) (% of revenues) (3)
|
|
1.0% - 1.5%
|
|
1.0% - 1.4%
|
Income tax
expenses
|
|
$55 to $65
million
|
|
$55 to $65
million
|
Acquisition
volume
|
|
Over $5.0
billion
|
|
Over $6.0
billion
|
|
|
|
|
|
(1)
Includes gain on sales of properties and merger and
integration-related costs.
|
(2) Normalized FFO per share and AFFO
per share exclude merger and integration-related costs associated
with our merger with VEREIT. Per share amounts may not add due to
rounding.
|
(3) Revenue
excludes contractually obligated reimbursements by our clients.
Cash G&A expenses excludes stock-based compensation
expense.
|
(4) G&A
expenses inclusive of stock-based compensation expense as a
percentage of rental revenue, excluding reimbursements, is expected
to be approximately 3.6% - 4.1% in 2023.
|
Conference Call Information
In conjunction with the release of our operating results, we
will host a conference call on May 4, 2023 at 11:30 a.m. PT 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 4747808.
The telephone replay will be available through May 11, 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 months
ended March 31, 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
12,400 real estate properties primarily owned under long-term net
lease agreements with commercial clients. To date, the company has
declared 634 consecutive monthly dividends on its shares of
common stock throughout its 54-year operating history and increased
the dividend 120 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
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; the continued evolution of the COVID-19 pandemic 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; any effects of uncertainties
regarding whether the anticipated benefits or results of our merger
with VEREIT, Inc. will be achieved; 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
|
|
Three Months
|
|
|
Ended
3/31/23
|
|
Ended
3/31/22
|
REVENUE
|
|
|
|
|
Rental (including
reimbursable)
|
|
$
925,289
|
|
$
799,565
|
Other
|
|
19,110
|
|
7,778
|
Total
revenue
|
|
944,399
|
|
807,343
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
Depreciation and
amortization
|
|
451,477
|
|
403,762
|
Interest
|
|
154,132
|
|
106,403
|
Property (including
reimbursable)
|
|
69,397
|
|
52,342
|
General and
administrative
|
|
34,167
|
|
32,699
|
Provisions for
impairment
|
|
13,178
|
|
7,038
|
Merger and
integration-related costs
|
|
1,307
|
|
6,519
|
Total
expenses
|
|
723,658
|
|
608,763
|
Gain on sales of real
estate
|
|
4,279
|
|
10,156
|
Foreign currency and
derivative gain (loss), net
|
|
10,322
|
|
(590)
|
Equity in income of
unconsolidated entities
|
|
—
|
|
954
|
Other income,
net
|
|
2,730
|
|
1,852
|
Income before income
taxes
|
|
238,072
|
|
210,952
|
Income
taxes
|
|
(11,950)
|
|
(10,981)
|
Net income
|
|
226,122
|
|
199,971
|
Net income attributable
to noncontrolling interests
|
|
(1,106)
|
|
(602)
|
Net income available to
common stockholders
|
|
$
225,016
|
|
$
199,369
|
|
|
|
|
|
Funds from operations
available to common stockholders (FFO)
|
|
$
684,291
|
|
$
601,416
|
Normalized funds from
operations available to common stockholders (Normalized
FFO)
|
|
$
685,598
|
|
$
607,935
|
Adjusted funds from
operations available to common stockholders (AFFO)
|
|
$
650,728
|
|
$
580,098
|
|
|
|
|
|
Per share information
for common stockholders:
|
|
|
|
|
|
|
|
|
|
Net income, basic and
diluted
|
|
$
0.34
|
|
$
0.34
|
|
|
|
|
|
FFO
|
|
|
|
|
Basic
|
|
$
1.04
|
|
$
1.01
|
Diluted
|
|
$
1.03
|
|
$
1.01
|
|
|
|
|
|
Normalized FFO, basic
and diluted
|
|
$
1.04
|
|
$
1.02
|
|
|
|
|
|
AFFO
|
|
|
|
|
Basic
|
|
$
0.99
|
|
$
0.98
|
Diluted
|
|
$
0.98
|
|
$
0.98
|
|
|
|
|
|
Cash dividends paid
per common share
|
|
$
0.7515
|
|
$
0.7395
|
FUNDS FROM
OPERATIONS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS (Normalized
FFO) (in thousands, except per share and share count
data)
|
|
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
|
|
Three Months
|
|
|
Ended
3/31/23
|
|
Ended
3/31/22
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
225,016
|
|
$
199,369
|
Depreciation and
amortization
|
|
451,477
|
|
403,762
|
Depreciation of
furniture, fixtures and equipment
|
|
(542)
|
|
(478)
|
Provisions for
impairment
|
|
13,178
|
|
7,038
|
Gain on sales of real
estate
|
|
(4,279)
|
|
(10,156)
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
2,235
|
FFO adjustments
allocable to noncontrolling interests
|
|
(559)
|
|
(354)
|
FFO available to common
stockholders
|
|
$
684,291
|
|
$
601,416
|
FFO allocable to
dilutive noncontrolling interests
|
|
1,420
|
|
808
|
Diluted FFO
|
|
$
685,711
|
|
$
602,224
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
684,291
|
|
$
601,416
|
Merger and
integration-related costs
|
|
1,307
|
|
6,519
|
Normalized FFO
available to common stockholders
|
|
$
685,598
|
|
$
607,935
|
Normalized FFO
allocable to dilutive noncontrolling interests
|
|
1,420
|
|
808
|
Diluted Normalized
FFO
|
|
$
687,018
|
|
$
608,743
|
|
|
|
|
|
FFO per common
share
|
|
|
|
|
Basic
|
|
$
1.04
|
|
$
1.01
|
Diluted
|
|
$
1.03
|
|
$
1.01
|
|
|
|
|
|
Normalized FFO
per common share, basic and diluted
|
|
$
1.04
|
|
$
1.02
|
|
|
|
|
|
Distributions paid to
common stockholders
|
|
$
497,245
|
|
$
438,280
|
|
|
|
|
|
FFO available to common
stockholders in excess of distributions paid to common
stockholders
|
|
$
187,046
|
|
$
163,136
|
|
|
|
|
|
Normalized FFO
available to common stockholders in excess of distributions paid
to
common stockholders
|
|
$
188,353
|
|
$
169,655
|
|
|
|
|
|
Weighted average number
of common shares used for FFO and normalized FFO
|
|
|
|
|
Basic
|
|
660,462,399
|
|
593,827,299
|
Diluted
|
|
663,034,011
|
|
595,102,548
|
ADJUSTED FUNDS FROM
OPERATIONS (AFFO) (in thousands, except per share and share
count data)
|
|
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
|
|
Three Months
|
|
|
Ended
3/31/23
|
|
Ended
3/31/22
|
Net income available to
common stockholders
|
|
$
225,016
|
|
$
199,369
|
Cumulative adjustments
to calculate Normalized FFO (1)
|
|
460,582
|
|
408,566
|
Normalized FFO
available to common stockholders
|
|
685,598
|
|
607,935
|
Amortization of
share-based compensation
|
|
6,300
|
|
5,002
|
Amortization of net
debt premiums and deferred financing costs
(2)
|
|
(13,688)
|
|
(17,096)
|
Non-cash (gain) loss on
interest rate swaps
|
|
(1,801)
|
|
722
|
Straight-line impact of
cash settlement on interest rate swaps (3)
|
|
1,797
|
|
—
|
Leasing costs and
commissions
|
|
(444)
|
|
(2,373)
|
Recurring capital
expenditures
|
|
(53)
|
|
(13)
|
Straight-line rent and
expenses, net
|
|
(36,485)
|
|
(27,822)
|
Amortization of above
and below-market leases, net
|
|
17,358
|
|
13,642
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
(2,064)
|
Other adjustments
(4)
|
|
(7,854)
|
|
2,165
|
AFFO available to
common stockholders
|
|
$
650,728
|
|
$
580,098
|
AFFO allocable to
dilutive noncontrolling interests
|
|
1,431
|
|
820
|
Diluted AFFO
|
|
$
652,159
|
|
$
580,918
|
|
|
|
|
|
AFFO per common
share
|
|
|
|
|
Basic
|
|
$
0.99
|
|
$
0.98
|
Diluted
|
|
$
0.98
|
|
$
0.98
|
|
|
|
|
|
Distributions paid to
common stockholders
|
|
$
497,245
|
|
$
438,280
|
|
|
|
|
|
AFFO available to
common stockholders in excess of distributions paid to common
stockholders
|
|
$
153,483
|
|
$
141,818
|
|
|
|
|
|
Weighted average number
of common shares used for AFFO:
|
|
|
|
|
Basic
|
|
660,462,399
|
|
593,827,299
|
Diluted
|
|
663,034,011
|
|
595,102,548
|
|
|
(1)
|
See Normalized FFO
calculations on page 8 for reconciling items.
|
(2)
|
Includes the
amortization of premiums and discounts 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, 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 do not qualify for hedge
accounting, obligations related to financing lease liabilities, and
adjustments allocable to noncontrolling interests.
|
HISTORICAL FFO AND
AFFO (in thousands, except per share and share count
data)
|
|
For the three months
ended March 31,
|
|
2023
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
225,016
|
|
$
199,369
|
|
$
95,940
|
|
$
146,827
|
|
$
110,942
|
Depreciation and
amortization, net of furniture,
fixtures and equipment
|
|
450,935
|
|
403,284
|
|
177,614
|
|
164,459
|
|
137,362
|
Provisions for
impairment
|
|
13,178
|
|
7,038
|
|
2,720
|
|
4,478
|
|
4,672
|
Gain on sales of real
estate
|
|
(4,279)
|
|
(10,156)
|
|
(8,401)
|
|
(38,506)
|
|
(7,263)
|
Proportionate share of
adjustments for
unconsolidated entities
|
|
—
|
|
2,235
|
|
—
|
|
—
|
|
—
|
FFO adjustments
allocable to noncontrolling interests
|
|
(559)
|
|
(354)
|
|
(166)
|
|
(154)
|
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
684,291
|
|
$
601,416
|
|
$
267,707
|
|
$
277,104
|
|
$
245,675
|
Merger and
integration-related costs
|
|
1,307
|
|
6,519
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO
available to common stockholders
|
|
$
685,598
|
|
$
607,935
|
|
$
267,707
|
|
$
277,104
|
|
$
245,675
|
|
|
|
|
|
|
|
|
|
|
|
FFO per diluted
share
|
|
$
1.03
|
|
$
1.01
|
|
$
0.72
|
|
$
0.82
|
|
$
0.81
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO per
diluted share
|
|
$
1.04
|
|
$
1.02
|
|
$
0.72
|
|
$
0.82
|
|
$
0.81
|
|
|
|
|
|
|
|
|
|
|
|
AFFO available to
common stockholders
|
|
$
650,728
|
|
$
580,098
|
|
$
318,222
|
|
$
297,223
|
|
$
248,734
|
|
|
|
|
|
|
|
|
|
|
|
AFFO per diluted
share
|
|
$
0.98
|
|
$
0.98
|
|
$
0.86
|
|
$
0.88
|
|
$
0.82
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per
share
|
|
$
0.7515
|
|
$
0.7395
|
|
$
0.7035
|
|
$
0.6925
|
|
$
0.6720
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding - FFO
and Normalized FFO
|
|
663,034,011
|
|
595,102,548
|
|
371,601,901
|
|
337,439,634
|
|
303,819,878
|
Weighted average
diluted shares outstanding - AFFO
|
|
663,034,011
|
|
595,102,548
|
|
372,065,020
|
|
337,439,634
|
|
303,819,878
|
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
|
|
Three Months
|
|
|
Ended
3/31/23
|
|
Ended
3/31/22
|
Net income
|
|
$
226,122
|
|
$
199,971
|
Interest
|
|
154,132
|
|
106,403
|
Income taxes
|
|
11,950
|
|
10,981
|
Depreciation and
amortization
|
|
451,477
|
|
403,762
|
Provisions for
impairment
|
|
13,178
|
|
7,038
|
Merger and
integration-related costs
|
|
1,307
|
|
6,519
|
Gain on sales of real
estate
|
|
(4,279)
|
|
(10,156)
|
Foreign currency and
derivative (gains) losses, net
|
|
(10,322)
|
|
590
|
Proportionate share of
adjustments for unconsolidated entities
|
|
—
|
|
1,092
|
Quarterly Adjusted
EBITDAre
|
|
$
843,565
|
|
$
726,200
|
Annualized Adjusted
EBITDAre (1)
|
|
$
3,374,260
|
|
$
2,904,800
|
Annualized Pro Forma
Adjustments
|
|
$
83,015
|
|
$
61,312
|
Annualized Pro Forma
Adjusted EBITDAre
|
|
$
3,457,275
|
|
$
2,966,112
|
Total debt per the
consolidated balance sheet, excluding deferred financing
costs and net premiums and discounts
|
|
$
18,748,217
|
|
$
15,695,516
|
Proportionate share for
unconsolidated entities debt, excluding deferred
financing costs
|
|
—
|
|
86,006
|
Less: Cash and cash
equivalents
|
|
(164,576)
|
|
(151,624)
|
Net Debt
(2)
|
|
$
18,583,641
|
|
$
15,629,898
|
Net Debt/Annualized
Adjusted EBITDAre
|
|
5.5x
|
|
5.4x
|
Net Debt/Annualized Pro
Forma Adjusted EBITDAre
|
|
5.4x
|
|
5.3x
|
|
|
(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, but including our
proportionate share on debt from unconsolidated entities, less cash
and cash equivalents.
|
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. 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
Adjusted EBITDAre calculation for the period indicated below:
|
|
Three Months
|
|
Three Months
|
|
|
Ended
3/31/23
|
|
Ended
3/31/22
|
Annualized pro forma
adjustments from properties acquired or stabilized
|
|
$
85,835
|
|
$
64,805
|
Annualized pro forma
adjustments from properties disposed
|
|
(2,820)
|
|
(3,493)
|
Annualized Pro forma
Adjustments
|
|
$
83,015
|
|
$
61,312
|
CONSOLIDATED
BALANCE SHEETS (in thousands, except per share and share
count data) (unaudited)
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
|
Real estate held for
investment, at cost:
|
|
|
|
|
Land
|
|
$
13,324,929
|
|
$
12,948,835
|
Buildings and
improvements
|
|
30,803,410
|
|
29,707,751
|
Total real estate held
for investment, at cost
|
|
44,128,339
|
|
42,656,586
|
Less accumulated
depreciation and amortization
|
|
(5,188,105)
|
|
(4,904,165)
|
Real estate held for
investment, net
|
|
38,940,234
|
|
37,752,421
|
Real estate and lease
intangibles held for sale, net
|
|
24,445
|
|
29,535
|
Cash and cash
equivalents
|
|
164,576
|
|
171,102
|
Accounts receivable,
net
|
|
617,359
|
|
567,963
|
Lease intangible
assets, net
|
|
5,256,795
|
|
5,168,366
|
Goodwill
|
|
3,731,478
|
|
3,731,478
|
Other assets,
net
|
|
2,366,551
|
|
2,252,227
|
Total
assets
|
|
$
51,101,438
|
|
$
49,673,092
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Distributions
payable
|
|
$
173,223
|
|
$
165,710
|
Accounts payable and
accrued expenses
|
|
422,365
|
|
399,137
|
Lease intangible
liabilities, net
|
|
1,445,133
|
|
1,379,436
|
Other
liabilities
|
|
789,903
|
|
774,787
|
Line of credit payable
and commercial paper
|
|
1,304,858
|
|
2,729,040
|
Term loan,
net
|
|
1,297,966
|
|
249,755
|
Mortgages payable,
net
|
|
850,580
|
|
853,925
|
Notes payable,
net
|
|
15,430,072
|
|
14,278,013
|
Total
liabilities
|
|
21,714,100
|
|
20,829,803
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock and paid
in capital, par value $0.01 per share,
1,300,000,000 shares authorized, 673,206,775 and
660,300,195 shares issued and outstanding as of March
31,
2023 and December 31, 2022, respectively
|
|
34,958,608
|
|
34,159,509
|
Distributions in excess
of net income
|
|
(5,772,923)
|
|
(5,493,193)
|
Accumulated other
comprehensive income
|
|
73,421
|
|
46,833
|
Total stockholders'
equity
|
|
29,259,106
|
|
28,713,149
|
Noncontrolling
interests
|
|
128,232
|
|
130,140
|
Total
equity
|
|
29,387,338
|
|
28,843,289
|
Total liabilities and
equity
|
|
$
51,101,438
|
|
$
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) real estate depreciation and
amortization, (iv) provisions for impairment, (v) merger and
integration-related costs, (vi) gain on sales of real estate,
(vii) foreign currency and derivative gain and loss, net, and
(viii) our proportionate share of interest expense and real estate
depreciation and amortization 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 (acquisitions) 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