U.S. markets open in 2 hours 49 minutes
  • S&P Futures

    4,159.75
    +13.00 (+0.31%)
     
  • Dow Futures

    32,850.00
    +93.00 (+0.28%)
     
  • Nasdaq Futures

    13,286.50
    +57.75 (+0.44%)
     
  • Russell 2000 Futures

    1,926.80
    +5.00 (+0.26%)
     
  • Crude Oil

    87.97
    -1.04 (-1.17%)
     
  • Gold

    1,793.10
    +1.90 (+0.11%)
     
  • Silver

    20.10
    +0.26 (+1.30%)
     
  • EUR/USD

    1.0192
    +0.0004 (+0.04%)
     
  • 10-Yr Bond

    2.8400
    0.0000 (0.00%)
     
  • Vix

    21.78
    +0.34 (+1.59%)
     
  • GBP/USD

    1.2089
    +0.0019 (+0.15%)
     
  • USD/JPY

    134.8720
    -0.0980 (-0.07%)
     
  • BTC-USD

    24,088.00
    +1,077.78 (+4.68%)
     
  • CMC Crypto 200

    560.48
    +25.26 (+4.72%)
     
  • FTSE 100

    7,476.34
    +36.60 (+0.49%)
     
  • Nikkei 225

    28,249.24
    +73.37 (+0.26%)
     

Realty Income Announces Operating Results for the Three and Six Months Ended June 30, 2022

  • Oops!
    Something went wrong.
    Please try again later.
·19 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

SAN DIEGO, Aug. 3, 2022 /PRNewswire/ -- Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company®, today announced operating results for the three and six months ended June 30, 2022. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise. Our financial results for the three and six months ended June 30, 2021 do not reflect our merger with VEREIT, Inc. (VEREIT), which was completed on November 1, 2021.

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

COMPANY HIGHLIGHTS:

For the three months ended June 30, 2022:

  • Net income per share was $0.37

  • Normalized FFO per share increased 15.9% to $1.02, compared to the three months ended June 30, 2021

  • AFFO per share increased 10.2% to $0.97, compared to the three months ended June 30, 2021

  • Invested $1.68 billion in 237 properties and properties under development or expansion, including $693.7 million in Europe

  • Net debt to annualized pro forma adjusted EBITDAre was 5.2x

Events subsequent to June 30, 2022:

  • In July 2022, six of the seven properties owned by our industrial partnerships acquired in connection with the VEREIT merger were sold, with the seventh property expected to be sold later in the third quarter of 2022. The gross purchase price for the properties is $905.0 million and our proportionate share of net proceeds (after mortgage defeasance and closing costs) is estimated to be approximately $120 million

CEO Comments

"Our second quarter results demonstrate the stability of our business and the continued momentum in our global investment pipeline," 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, including approximately $694 million internationally. With over $3.2 billion invested in the first half of the year, we are increasing our 2022 acquisitions guidance to over $6 billion."

"Our investment goals are supported by our well-positioned balance sheet and access to capital, which remain competitive advantages in the net lease industry. Following the recent increase in our multicurrency revolving line of credit to $4.25 billion, we enhanced our financial flexibility by upsizing our commercial paper program to $3.0 billion, which now includes a $1.5 billion Euro commercial paper program to support our growth initiatives abroad."

"Finally, the health of our real estate portfolio remains strong as we finished the quarter with occupancy at 98.9%, the highest occupancy rate in over 10 years, while also achieving a 105.6% recapture rate on our releasing activity. I am proud of the collective efforts of our One Team as we continue to generate value for all of our stakeholders."

Select Financial Results

The following summarizes our select financial results (dollars in millions, except per share data). As our merger with VEREIT occurred on November 1, 2021, our financial results do not include VEREIT financial results during the three and six months ended June 30, 2021.



Three Months Ended June 30,


Six Months Ended June 30,



2022


2021


2022


2021

Total revenue


$                    810.4


$                    463.3


$                 1,617.8


$                    905.6

Net income available to common stockholders (1)(2)


$                    223.2


$                    124.5


$                    422.6


$                    220.4

Net income per share


$                      0.37


$                      0.33


$                      0.71


$                      0.59

Funds from operations available to common
     stockholders (FFO) (2)(3)


$                    608.8


$                    314.4


$                 1,210.2


$                    582.1

FFO per share


$                      1.01


$                      0.84


$                      2.02


$                      1.56

Normalized funds from operations available to
     common stockholders (Normalized FFO) (3)


$                    611.5


$                    327.7


$                 1,219.5


$                    595.4

Normalized FFO per share


$                      1.02


$                      0.88


$                      2.04


$                      1.60

Adjusted funds from operations available to
     common stockholders (AFFO) (3)


$                    583.7


$                    327.6


$                 1,163.8


$                    645.9

AFFO per share


$                      0.97


$                      0.88


$                      1.94


$                      1.73

(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)

Our financial results during the three and six months ended June 30, 2022 were impacted by merger and integration-related costs related to our merger with VEREIT of $2.7 million and $9.2 million, respectively. Our financial results during the six months ended June 30, 2021 were impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021, and $13.3 million of merger and integration-related costs related to our merger with VEREIT recorded in the three and six months ended June 30, 2021.

(3)

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, such as gain (loss) on extinguishment of debt. Please see the Glossary in the Supplemental Operating and Financial Data for the three and six months ended June 30, 2022 for our definitions and explanations of how we utilize these metrics. See pages 9 and 10 herein for reconciliations to the most directly comparable GAAP measure.

 

Dividend Increases

In June 2022, we announced the 99th consecutive quarterly dividend increase, which is the 116th 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 June 30, 2022 was $2.970 per share. The amount of monthly dividends paid per share increased 5.1% to $0.741, as compared to $0.705 for the three months ended June 30, 2021. We distributed $445.8 million in common stock dividends to stockholders during the three months ended June 30, 2022, representing 76.5% of our AFFO of $583.7 million.

Real Estate Portfolio Update

As of June 30, 2022, our portfolio consisted of 11,427 properties located in all 50 U.S. states, Puerto Rico, the U.K. and Spain, and leased to approximately 1,125 clients doing business in 72 industries. We own an actively managed, diversified portfolio of commercial properties under long-term, net lease agreements with a weighted average remaining lease term of approximately 8.8 years. Our portfolio of commercial real estate has historically provided dependable rental revenue supporting the payment of monthly dividends. As of June 30, 2022, portfolio occupancy was 98.9% with 132 properties available for lease or sale, as compared to 98.6% as of March 31, 2022 and 98.5% as of June 30, 2021.

Changes in Occupancy

Three months ended June 30, 2022


Properties available for lease at March 31, 2022

156

Lease expirations (1)

220

Re-leases to same client

(174)

Re-leases to new client

(6)

Vacant dispositions

(64)

Properties available for lease at June 30, 2022

132



Six months ended June 30, 2022


Properties available for lease at December 31, 2021

164

Lease expirations (1)

353

Re-leases to same client

(273)

Re-leases to new client

(17)

Vacant dispositions

(95)

Properties available for lease at June 30, 2022

132

(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 June 30, 2022, the annual new rent on re-leases was $35.51 million, as compared to the previous annual rent of $33.63 million on the same units, representing a rent recapture rate of 105.6% on the units re-leased. We re-leased four units to new clients without a period of vacancy, and seven units to new clients after a period of vacancy.

During the six months ended June 30, 2022, the annual new rent on re-leases was $67.20 million, as compared to the previous annual rent of $63.47 million on the same units, representing a rent recapture rate of 105.9% on the units re-leased. We re-leased seven units to new clients without a period of vacancy, and 19 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 June 30, 2022










Acquisitions - U.S.

150


2,924


$                862.2


13.0


5.7 %

Acquisitions - Europe 

30


2,619


677.0


9.0


5.8 %

Total acquisitions

180


5,543


1,539.2


11.3


5.7 %

Properties under development (2)

57


2,471


136.6


14.4


5.6 %

Total (3)

237


8,014


$             1,675.8


11.5


5.7 %











Six months ended June 30, 2022










Acquisitions - U.S.

289


5,551


$             1,492.0


13.9


5.7 %

Acquisitions - Europe 

51


5,391


1,471.2


9.0


5.6 %

Total acquisitions

340


10,942


2,963.2


11.5


5.7 %

Properties under development (2)

83


2,721


267.9


15.9


5.7 %

Total (4)

423


13,663


$             3,231.1


11.9


5.7 %

(1)

Initial weighted average cash lease yield is a supplemental operating measure. Please see the Glossary in the Supplemental Operating and Financial Data for the three and six months ended June 30, 2022 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 six months ended June 30, 2022 includes approximately $2.5 million and $6.8 million, respectively, received as settlement credits as reimbursement of free rent periods.

(2)

The three and six months ended June 30, 2022 includes £13.2 million and £14.9 million of investments in two U.K. development properties, respectively,  converted at the applicable exchange rates on the funding dates.

(3)

Our clients occupying the new properties are 89.2% retail and 10.8% industrial, based on rental revenue. Approximately 39% of the rental revenue generated from acquisitions during the three months ended June 30, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.

(4)

Our clients occupying the new properties are 87.4% retail and 12.6% industrial, based on rental revenue. Approximately 33% of the rental revenue generated from acquisitions during the six months ended June 30, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.

 

Same Store Rental Revenue

The following summarizes our same store rental revenue for 9,686 properties under lease (dollars in millions):


Three Months Ended June 30,


Six Months Ended June 30,


% Increase


2022


2021


2022


2021


Three Months


Six Months

Rental revenue

$              615.6


$              603.6


$           1,242.7


$          1,206.1


2.0 %


3.0 %

 

For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2022 of 1.22 GBP/USD. None of the properties in Spain met our same store pool definition for the periods presented.

Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period. If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our same store property pool. Please see the Glossary to our Supplemental Operating and Financial Data for the three and six months ended June 30, 2022, which is available on our corporate website at www.realtyincome.com/investors/quarterly-and-annual-results, for the definition of our Same Store Pool.

Our calculation of same store rental revenue includes rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB). Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period. If the property was owned by VEREIT for the full comparative period and each of the other criterion were met, the property was included in our same store property pool. Our calculation of same store rental revenue also includes uncollected rent for which we have not granted a lease concession. If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increase for the three and six months ended June 30, 2022 relative to the comparable period for 2021 would have been 2.6% and 3.5%, respectively.

Property Dispositions

The following summarizes our property dispositions (dollars in millions):



Three Months Ended
June 30, 2022


Six Months Ended
June 30, 2022

Properties sold


70


104

Net sales proceeds


$                                150.0


$                                    272.2

Gain on sales of real estate


$                                  40.6


$                                      50.7

 

Liquidity and Capital Markets

Capital Raising
During the three months ended June 30, 2022, we raised approximately $1.1 billion from the sale of common stock at a weighted average price of $67.13 per share, primarily through our "at-the-market" (ATM) program.

In June 2022, we replaced our prior ATM program, which authorized us to offer and sell up to 69,088,433 shares of common stock, with a new ATM program, pursuant to which up to 120,000,000 additional shares of common stock may be offered and sold.

Also in June 2022, we closed on the previously announced private placement of £600.0 million of senior unsecured notes, which included £140.0 million of notes due 2030, £345.0 million of notes due 2032, and £115.0 million of notes due 2037. The combined notes have a weighted average tenor of approximately 10.5 years, and a weighted average fixed interest rate of 3.22%.

New, Expanded Revolving Credit Facility
In April 2022, we entered into a new $4.25 billion unsecured credit facility to amend and restate our previous $3.0 billion unsecured credit facility, which was due to expire in March 2023. The new revolving credit facility matures in June 2026 and includes two six-month extensions that can be exercised at our option. Similar to our previous revolving credit facility, the new revolving credit facility also has a $1.0 billion expansion feature, which is subject to obtaining lender commitments. As of June 30, 2022, the balance of borrowings outstanding under our revolving credit facility was $219.1 million, and we had a cash balance of $172.8 million.

Commercial Paper Program
In July 2022, we amended our U.S. dollar-denominated unsecured commercial paper program to increase the maximum aggregate amount of outstanding notes from $1.0 billion to $1.5 billion and established a new Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent) in U.S. dollars or other foreign currencies. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs. As of June 30, 2022, we had $950.0 million in commercial paper borrowings.

Earnings Guidance

Summarized below are approximate estimates of the key components of our 2022 earnings guidance:



Prior 2022 Guidance


Revised 2022 Guidance

Net income per share


$1.08 to $1.25


$1.14  to $1.27

Real estate depreciation and impairments per share


$2.83


$2.88

Gain on sales of properties per share


$(0.03)


$(0.10)

Normalized FFO per share (1)


$3.88 to $4.05


$3.92 to $4.05

AFFO per share (1)


$3.84 to $3.97


$3.84 to $3.97

Same store rent growth


~ 1.5%


~ 2.0%

Occupancy


~ 98%


Over 98%

Cash G&A expenses (% of revenues) (2)(3)


3.5% - 4.0%


3.5% - 4.0%

Property expenses (non-reimbursable) (% of revenues) (2)


1.5% - 2.0%


1.5% - 2.0%

Income tax expenses


$45 to $50 million


$45 to $50 million

Acquisition volume


Over $5.0 billion


Over $6.0 billion






(1) Normalized FFO per share and AFFO per share exclude merger and integration-related costs associated with our merger with VEREIT.

(2) Revenue excludes contractually obligated reimbursements by our clients. Cash G&A expenses excludes stock-based compensation expense.

(3) G&A expenses inclusive of stock-based compensation expense as a percentage of rental revenue, excluding reimbursements, is expected to be approximately 4.0% - 4.5% in 2022.

 

Conference Call Information

In conjunction with the release of our operating results, we will host a conference call on August 4, 2022 at 11:30 a.m. PT to discuss the results. To access the conference call, dial (877) 354-7102 (United States) or (412) 317-2517 (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 2671744. The telephone replay will be available through August 11, 2022.

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 six months ended June 30, 2022, including reconciliations for non-GAAP measures within the Glossary, are available on our corporate website at www.realtyincome.com/investors/quarterly-and-annual-results.

The Sustainability Report for the year ended December 31, 2021 is available on our corporate website at esg.realtyincome.com/indicators/sustainability report. During June 2021, we established our Green Financing Framework, which is also available on our corporate website at esg.realtyincome.com/indicators/green_financing/green_financing/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 REIT, and its monthly dividends are supported by the cash flow from over 11,400 real estate properties owned under long-term net lease agreements with commercial clients. To date, the company has declared 625 consecutive common stock monthly dividends throughout its 53-year operating history and increased the dividend 116 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," and similar expressions are intended to identify forward-looking statements. Forward-looking statements also include discussions of our business and portfolio including future operations and results, strategy, plans, intentions of management, the disposition of assets held by our industrial partnerships, our pipeline, and guidance. 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 real estate investment trust; general domestic and foreign business and economic conditions; competition; fluctuating interest and currency rates; access to debt and equity capital markets; 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, 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 income tax laws and rates; the continued evolution of the COVID-19 pandemic and the measures taken to limit its spread, and its impacts on us, our business, our clients, or the economy generally; the timing and pace of reopening efforts at the local, state and national level in response to the COVID-19 pandemic and developments, such as the unexpected surges in COVID-19 cases, that cause a delay in or postponement of reopenings; 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 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. Those 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 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

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




Three Months


Three Months


Six Months


Six Months



Ended 6/30/22


Ended 6/30/21


Ended 6/30/22


Ended 6/30/21

REVENUE









Rental (including reimbursable)


$                    800,800


$                    460,256


$             1,600,365


$                899,621

Other (1)


9,619


3,042


17,397


5,931

Total revenue


810,419


463,298


1,617,762


905,552










EXPENSES









Depreciation and amortization


409,437


187,789


813,199


365,774

Interest


110,121


73,674


216,524


146,749

Property (including reimbursable)


52,180


31,734


104,522


60,233

General and administrative


34,139


21,849


66,838


42,645

Provisions for impairment


7,691


17,246


14,729


19,966

Merger and integration-related costs


2,729


13,298


9,248


13,298

Total expenses


616,297


345,590


1,225,060


648,665

Gain on sales of real estate


40,572


14,901


50,728


23,302

Foreign currency and derivative gain, net


7,480


400


6,890


1,204

Gain (loss) on extinguishment of debt


127



127


(46,473)

Equity in income and impairment of
     investment in unconsolidated entities


(6,627)



(5,673)


Other income, net (1)


2,806


984


4,658


1,534

Income before income taxes


238,480


133,993


449,432


236,454

Income taxes


(14,658)


(9,225)


(25,639)


(15,450)

Net income


223,822


124,768


423,793


221,004

Net income attributable to noncontrolling
     interests


(615)


(289)


(1,217)