SAN DIEGO, May 1, 2019 /PRNewswire/ — Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company®, today announced operating results for the first quarter ended March 31, 2019. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

COMPANY HIGHLIGHTS :

Realty Income Corporation - The Monthly Dividend Company. (PRNewsFoto/Realty Income Corporation)

For the quarter ended March 31, 2019:

  • Net income per share was $0.37
  • AFFO per share increased 3.8% to $0.82, compared to the quarter ended March 31, 2018
  • Invested $519.5 million in 105 new properties and properties under development or expansion

CEO Comments

“We completed another strong quarter, investing $519.5 million in high quality real estate at investment spreads well above our historical average,” said Sumit Roy, President and Chief Executive Officer. “Our domestic investment pipeline remains robust, as we reviewed $11.7 billion of acquisition opportunities during the quarter. Our portfolio continues to perform well, and we generated a rent recapture rate of 104.7% on properties re-leased during the quarter.”

“Subsequent to quarter-end, we announced our company’s expansion into international investments through a £429.0 million sale-leaseback transaction with Sainsbury’s, a major UK supermarket chain, which represents a natural evolution of our company’s strategy. We expect to establish and grow our international platform, and we are well-positioned to utilize our portable cost of capital, size, and scale advantages to pursue additional opportunities in the UK and mainland Europe.”

Financial Results

Revenue
Revenue for the quarter ended March 31, 2019, increased 11.3% to $354.4 million, as compared to $318.3 million for the same quarter in 2018.

Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended March 31, 2019, was $110.9 million, as compared to $83.2 million for the same quarter in 2018. Net income per share for the quarter ended March 31, 2019, was $0.37, as compared to $0.29 for the same quarter in 2018.

The calculation to determine net income for a real estate company includes impairments and gains on property sales. These items can vary from quarter to quarter and can significantly impact net income and period to period comparisons.

Funds From Operations Available to Common Stockholders (FFO)
FFO for the quarter ended March 31, 2019, increased to $245.7 million, as compared to $224.9 million for the same quarter in 2018. FFO per share for the quarter ended March 31, 2019, increased to $0.81, as compared to $0.79 for the same quarter in 2018.

Adjusted Funds From Operations Available to Common Stockholders (AFFO)
AFFO for the quarter ended March 31, 2019, increased 10.7% to $248.7 million, as compared to $224.6 million for the same quarter in 2018. AFFO per share for the quarter ended March 31, 2019, increased 3.8% to $0.82, as compared to $0.79 for the same quarter in 2018.

The company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust’s (REIT’s) operating performance. Realty Income defines FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts’ (NAREIT’s) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, and reduced by gains on property sales. AFFO further adjusts FFO for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company’s ongoing operating performance. 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 as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments. See the reconciliations of net income available to common stockholders to FFO and AFFO on pages six and seven of this press release.

Dividend Increases
In March 2019, Realty Income announced the 86th consecutive quarterly dividend increase, which is the 101st increase in the amount of the dividend since the company’s listing on the New York Stock Exchange (NYSE) in 1994. The annualized dividend amount as of March 31, 2019 was $2.712 per share. The amount of monthly dividends paid per share increased 3.2% to $0.672 in the first quarter of 2019, as compared to $0.651 for the same quarter of 2018. During the first quarter of 2019, the company distributed $204.5 million in common dividends to shareholders, representing 82.2% of its AFFO of $248.7 million.

Real Estate Portfolio Update

As of March 31, 2019, Realty Income’s portfolio of freestanding, single-tenant properties consisted of 5,876 properties located in 49 states and Puerto Rico, leased to 261 different commercial tenants, and doing business in 48 industries. The properties are leased under long-term, net lease agreements with a weighted average remaining lease term of 9.2 years.

Asset Management Activities
The company’s portfolio of commercial real estate, owned primarily under long-term net leases, continues to perform well and provides dependable rental revenue supporting the payment of monthly dividends. As of March 31, 2019, portfolio occupancy was 98.3% with 102 properties available for lease out of a total of 5,876 properties in the portfolio, as compared to 98.6% as of December 31, 2018 and March 31, 2018. Economic occupancy, or occupancy as measured by rental revenue, was 98.8% as of March 31, 2019, as compared to 99.0% as of December 31, 2018 and 98.8% as of March 31, 2018.

Since December 31, 2018, when the company reported 80 properties available for lease, the company had 108 lease expirations, re-leased 71 properties and sold 15 vacant properties during the quarter ended March 31, 2019. Of the 71 properties re-leased during the first quarter of 2019, 66 properties were re-leased to the same tenants, four were re-leased to new tenants without vacancy, and one was re-leased to a new tenant after a period of vacancy. The annual new rent on these re-leases was $17.8 million, as compared to the previous annual rent of $17.0 million on the same properties, representing a rent recapture rate of 104.7% on the properties re-leased during the quarter ended March 31, 2019.

Rent Increases
During the quarter ended March 31, 2019, same store rents on 4,891 properties under lease increased 1.5% to $298.6 million, as compared to $294.1 million for the same quarter in 2018.

Investments in Real Estate
During the quarter ended March 31, 2019, Realty Income invested $519.5 million in 105 new properties and properties under development or expansion, located in 25 states. These properties are 100% leased with a weighted average lease term of approximately 17.0 years and an initial average cash lease yield of 6.7%. The tenants occupying the new properties operate in 14 industries, and are 98.7% retail and 1.3% industrial, based on rental revenue. Approximately 31% of the rental revenue generated from acquisitions during the first quarter of 2019 is from investment grade rated tenants and their subsidiaries.

On April 22, 2019, we announced that we have signed a definitive agreement to acquire, from a joint venture of affiliates of J Sainsbury PLC (“Sainsbury’s”) and British Land PLC, 12 properties located in the United Kingdom for £429.0 million, or approximately $557.0 million as of April 22, 2019 using a conversion rate of 1.2982, under long-term net lease agreements with Sainsbury’s, which represents our first international real estate investment. The sale-leaseback transaction with Sainsbury’s is executed at a 5.31% GBP initial cap rate, includes annual rent increases over the duration of the lease term, and carries a weighted average lease term of approximately 15 years. As previously announced, we have increased our 2019 AFFO guidance to $3.28 – $3.33 from $3.25 – $3.31. The transaction is expected to close on or around May 22, 2019, subject to customary closing conditions.

Property Dispositions
During the quarter ended March 31, 2019, Realty Income sold 19 properties for $22.5 million, with a gain on sales of $7.3 million.

Liquidity and Capital Markets

Capital Raising
During the quarter ended March 31, 2019, Realty Income raised $2.2 million from the sale of common stock at a weighted average price of $67.85 per share.

Credit Facility
Realty Income has a $3.25 billion unsecured credit facility, which is comprised of a $3.0 billion revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend), and a $250.0 million term loan due March 2024. The revolving credit facility also has a $1.0 billion expansion feature. As of March 31, 2019, we had a borrowing capacity of $2.2 billion available on our revolving credit facility.

2019 Earnings Guidance

We estimate AFFO per share for 2019 of $3.28 to $3.33. AFFO adjusts FFO for unique revenue and expense items, which are not as pertinent to the measurement of Realty Income’s ongoing operating performance.

We estimate FFO per share for 2019 of $3.26 to $3.31. FFO per share for 2019 is based on a net income per share range of $1.39 to $1.44, plus estimated real estate depreciation and impairments of $1.92 per share, and reduced by potential estimated gains on sales of investment properties of $0.05 per share (in accordance with NAREIT’s definition of FFO).

Additional earnings guidance detail can be found in Realty Income’s supplemental materials available on Realty Income’s corporate website at www.realtyincome.com/investors/financial-information/quarterly-results.

Conference Call Information

In conjunction with the release of Realty Income’s operating results, the company will host a conference call on May 2, 2019 at 11:30 a.m. PT to discuss the results. To access the conference, dial (888) 220-8451. When prompted, provide the conference ID 3828213.

A telephone replay of the conference call can also be accessed by calling (888) 203-1112 and entering the passcode 3828213. The telephone replay will be available through May 16, 2019. 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 two hours after the conclusion of the live broadcast. The webcast replay will be available through May 16, 2019. No access code is required for this replay.

Supplemental Materials

Supplemental materials on first quarter 2019 operating results are available on Realty Income’s corporate website at www.realtyincome.com/investors/financial-information/quarterly-results.

About Realty Income

Realty Income, The Monthly Dividend Company®, is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 5,800 real estate properties owned under long-term lease agreements with regional and national commercial tenants. To date, the company has declared 586 consecutive common stock monthly dividends throughout its 50-year operating history and increased the dividend 101 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

Statements in this press release that are not strictly historical are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local and foreign real estate conditions, tenant financial health, the availability of capital to finance planned growth, continued volatility and uncertainty in the credit markets and broader financial markets, property acquisitions and the timing of these acquisitions, charges for property impairments, and the outcome of any legal proceedings to which the company is a party, as described in the company’s filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts) (unaudited)

Three Months

Three Months

Ended 3/31/19

Ended 3/31/18

REVENUE

Rental (including reimbursable)

$

354,037

$

317,848

Other

328

447

Total revenue

354,365

318,295

EXPENSES

Depreciation and amortization

137,517

131,103

Interest

70,020

59,415

General and administrative

15,108

15,684

Property (including reimbursable)

21,636

16,552

Income taxes

1,445

1,223

Provisions for impairment

4,672

14,221

Total expenses

250,398

238,198

Gain on sales of real estate

7,263

3,218

Net income

111,230

83,315

Net income attributable to noncontrolling interests

(288)

(152)

Net income available to common stockholders

$

110,942

$

83,163

Funds from operations available to common stockholders (FFO)

$

245,675

$

224,882

Adjusted funds from operations available to common stockholders (AFFO)

$

248,734

$

224,560

Per share information for common stockholders:

Net income, basic and diluted

$

0.37

$

0.29

FFO, basic and diluted

$

0.81

$

0.79

AFFO, basic and diluted

$

0.82

$

0.79

Cash dividends paid per common share

$

0.672

$

0.651

FUNDS FROM OPERATIONS (FFO)
(dollars in thousands, except per share amounts)

We define FFO, a non-GAAP measure, consistent with NAREIT’s definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on real estate sales.

Three Months

Three Months

Ended 3/31/19

Ended 3/31/18

Net income available to common stockholders

$

110,942

$

83,163

Depreciation and amortization

137,517

131,103

Depreciation of furniture, fixtures and equipment

(155)

(159)

Provisions for impairment

4,672

14,221

Gain on sales of real estate

(7,263)

(3,218)

FFO adjustments allocable to noncontrolling interests

(38)

(228)

FFO available to common stockholders

$

245,675

$

224,882

FFO allocable to dilutive noncontrolling interests

218

Diluted FFO

$

245,675

$

225,100

FFO per common share, basic and diluted

$

0.81

$

0.79

Distributions paid to common stockholders

$

204,546

$

185,556

FFO available to common stockholders in excess of distributions paid to common stockholders

$

41,129

$

39,326

Weighted average number of common shares used for FFO:

Basic

303,528,336

283,917,418

Diluted

303,819,878

284,345,328

ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(dollars in thousands, except per share amounts)

We define AFFO as FFO adjusted for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company’s 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).

Three Months

Three Months

Ended 3/31/19

Ended 3/31/18

Net income available to common stockholders

$

110,942

$

83,163

Cumulative adjustments to calculate FFO (1)

134,733

141,719

FFO available to common stockholders

245,675

224,882

Amortization of share-based compensation

2,764

3,662

Amortization of deferred financing costs (2)

1,040

844

Amortization of net mortgage premiums

(354)

(459)

Loss (gain) on interest rate swaps

678

(2,007)

Leasing costs and commissions

(323)

(917)

Recurring capital expenditures

(56)

(11)

Straight-line rent

(4,862)

(5,365)

Amortization of above and below-market leases

4,114

3,864

Other adjustments (3)

58

67

AFFO available to common stockholders

$

248,734

$

224,560

AFFO allocable to dilutive noncontrolling interests

229

Diluted AFFO

$

248,734

$

224,789

AFFO per common share, basic and diluted

$

0.82

$

0.79

Distributions paid to common stockholders

$

204,546

$

185,556

AFFO available to common stockholders in excess of distributions paid to common stockholders

$

44,188

$

39,004

Weighted average number of common shares used for AFFO:

Basic

303,528,336

283,917,418

Diluted

303,819,878

284,345,328

(1)

See FFO calculation on page six for reconciling items.

(2)

Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and issuance of our term loans. The deferred financing costs are being amortized over the lives of the respective notes payable, mortgages and term loans. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

(3)

Includes adjustments allocable to both noncontrolling interests and obligations related to financing lease liabilities.

 

HISTORICAL FFO AND AFFO

(dollars in thousands, except per share amounts)

For the three months ended March 31,

2019

2018

2017

2016

2015

Net income available to common stockholders

$

110,942

$

83,163

$

71,586

$

63,473

$

60,494

Depreciation and amortization, net of furniture, fixtures and equipment

137,362

130,944

120,940

107,740

97,852

Provisions for impairment

4,672

14,221

5,433

1,923

2,087

Gain on sales of real estate

(7,263)

(3,218)

(10,532)

(2,289)

(7,218)

FFO adjustments allocable to noncontrolling interests

(38)

(228)

(214)

(218)

(315)

FFO

$

245,675

$

224,882

$

187,213

$

170,629

$

152,900

FFO per diluted share

$

0.81

$

0.79

$

0.71

$

0.68

$

0.68

AFFO

$

248,734

$

224,560

$

201,336

$

175,918

$

152,121

AFFO per diluted share

$

0.82

$

0.79

$

0.76

$

0.70

$

0.67

Cash dividends paid per share

$

0.672

$

0.651

$

0.624

$

0.588

$

0.561

Weighted average diluted shares outstanding – FFO

303,819,878

284,345,328

263,934,304

250,381,001

225,508,832

Weighted average diluted shares outstanding – AFFO

303,819,878

284,345,328

264,022,486

250,381,001

225,508,832

 

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

.

March 31, 2019

December 31, 2018

ASSETS

(unaudited)

Real estate, at cost:

Land

$

4,751,091

$

4,682,660

Buildings and improvements

12,178,429

11,858,806

Total real estate, at cost

16,929,520

16,541,466

Less accumulated depreciation and amortization

(2,809,690)

(2,714,534)

Net real estate held for investment

14,119,830

13,826,932

Real estate held for sale, net

22,064

16,585

Net real estate

14,141,894

13,843,517

Cash and cash equivalents

2,997

10,387

Accounts receivable

151,341

144,991

Lease intangible assets, net

1,205,147

1,199,597

Goodwill

14,597

14,630

Other assets, net

246,932

47,361

Total assets

$

15,762,908

$

15,260,483

LIABILITIES AND EQUITY

Distributions payable

$

69,258

$

67,789

Accounts payable and accrued expenses

114,225

133,765

Lease intangible liabilities, net

311,331

310,866

Other liabilities

243,591

127,109

Line of credit payable

838,000

252,000

Term loans, net

498,722

568,610

Mortgages payable, net

300,993

302,569

Notes payable, net

5,377,712

5,376,797

Total liabilities

7,753,832

7,139,505

Commitments and contingencies

Stockholders’ equity:

Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 303,807,421 shares issued and outstanding as of March 31, 2019 and 303,742,090 shares issued and outstanding as of December 31, 2018

10,748,467

10,754,495

Distributions in excess of net income

(2,752,775)

(2,657,655)

Accumulated other comprehensive loss

(11,797)

(8,098)

Total stockholders’ equity

7,983,895

8,088,742

Noncontrolling interests

25,181

32,236

Total equity

8,009,076

8,120,978

Total liabilities and equity

$

15,762,908

$

15,260,483

 

Realty Income Performance vs. Major Stock Indices

Equity

NASDAQ

Realty Income

REIT Index (1)

DJIA

S&P 500

Composite

Dividend

Total

Dividend

Total

Dividend

Total

Dividend

Total

Dividend

Total

yield

return (2)

yield

return (3)

yield

return (3)

yield

return (3)

yield

return (4)

10/18 to 12/31/1994

10.5%

10.8%

7.7%

0.0%

2.9%

(1.6%)

2.9%

(1.2%)

0.5%

(1.7%)

1995

8.3%

42.0%

7.4%

15.3%

2.4%

36.9%

2.3%

37.6%

0.6%

39.9%

1996

7.9%

15.4%

6.1%

35.3%

2.2%

28.9%

2.0%

23.0%

0.2%

22.7%

1997

7.5%

14.5%

5.5%

20.3%

1.8%

24.9%

1.6%

33.4%

0.5%

21.6%

1998

8.2%

5.5%

7.5%

(17.5%)

1.7%

18.1%

1.3%

28.6%

0.3%

39.6%

1999

10.5%

(8.7%)

8.7%

(4.6%)

1.3%

27.2%

1.1%

21.0%

0.2%

85.6%

2000

8.9%

31.2%

7.5%

26.4%

1.5%

(4.7%)

1.2%

(9.1%)

0.3%

(39.3%)

2001

7.8%

27.2%

7.1%

13.9%

1.9%

(5.5%)

1.4%

(11.9%)

0.3%

(21.1%)

2002

6.7%

26.9%

7.1%

3.8%

2.6%

(15.0%)

1.9%

(22.1%)

0.5%

(31.5%)

2003

6.0%

21.0%

5.5%

37.1%

2.3%

28.3%

1.8%

28.7%

0.6%

50.0%

2004

5.2%

32.7%

4.7%

31.6%

2.2%

5.6%

1.8%

10.9%

0.6%

8.6%

2005

6.5%

(9.2%)

4.6%

12.2%

2.6%

1.7%

1.9%

4.9%

0.9%

1.4%

2006

5.5%

34.8%

3.7%

35.1%

2.5%

19.0%

1.9%

15.8%

0.8%

9.5%

2007

6.1%

3.2%

4.9%

(15.7%)

2.7%

8.8%

2.1%

5.5%

0.8%

9.8%

2008

7.3%

(8.2%)

7.6%

(37.7%)

3.6%

(31.8%)

3.2%

(37.0%)

1.3%

(40.5%)

2009

6.6%

19.3%

3.7%

28.0%

2.6%

22.6%

2.0%

26.5%

1.0%

43.9%

2010

5.1%

38.6%

3.5%

27.9%

2.6%

14.0%

1.9%

15.1%

1.2%

16.9%

2011

5.0%

7.3%

3.8%

8.3%

2.8%

8.3%

2.3%

2.1%

1.3%

(1.8%)

2012

4.5%

20.1%

3.5%

19.7%

3.0%

10.2%

2.5%

16.0%

2.6%

15.9%

2013

5.8%

(1.8%)

3.9%

2.9%

2.3%

29.6%

2.0%

32.4%

1.4%

38.3%

2014

4.6%

33.7%

3.6%

28.0%

2.3%

10.0%

2.0%

13.7%

1.3%

13.4%

2015

4.4%

13.0%

3.9%

2.8%

2.6%

0.2%

2.2%

1.4%

1.4%

5.7%

2016

4.2%

16.0%

4.0%

8.6%

2.5%

16.5%

2.1%

12.0%

1.4%

7.5%

2017

4.5%

3.6%

3.9%

8.7%

2.2%

28.1%

1.9%

21.8%

1.1%

28.2%

2018

4.2%

15.2%

4.4%

(4.0%)

2.5%

(3.5%)

2.2%

(4.4%)

1.4%

(3.9%)

Q1 2019

3.7%

17.8%

3.7%

17.2%

2.3%

11.8%

2.0%

13.6%

1.0%

16.5%

Compound Average 

Annual Total Return (5)

16.9%

10.7%

10.6%

9.7%

9.9%

Note:   The dividend yields are calculated as annualized dividends based on the last dividend paid in applicable time period divided by the closing price as of period end.  Dividend yield sources: NAREIT website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream / Thomson Financial.

(1)

FTSE NAREIT US Equity REIT Index, as per NAREIT website.

(2)

Calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period.  Does not include reinvestment of dividends for the annual percentages.

(3)

Includes reinvestment of dividends.  Source:  NAREIT website and Factset.

(4)

Price only index, does not include dividends as NASDAQ did not report total return metrics for the entirety of the measurement period. Source: Factset.

(5)

The Compound Average Annual Total Return rates are calculated in the same manner: from Realty Income’s NYSE listing on October 18, 1994 through March 31, 2019, and (except for NASDAQ) assuming reinvestment of dividends. Past performance does not guarantee future performance. Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future.

 

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SOURCE Realty Income Corporation