Realty Income Corporation O recently announced contractual rent collections for May 2020 and updated the same for April.
As of Jun 1, 2020, the company collected 82% of contractual rent due for May across its total portfolio. Notably, a strong tenant roster possibly enabled the company to collect a significant rent amount despite the ongoing pandemic.
In fact, the company accumulated 82.1% of rent from its top 20 tenants and 98.2% from its investment grade tenants.
The company also reported its rental receipts for April with 84.2% of the contractual rent collected for the month across its total portfolio as of Jun 1, 2020. Earlier, April rent collections through May 1 stood at 82.9%.
Notably, the company’s top four industries (representing around 37% of annualized rent), namely convenience stores (accounting for 11.9% of rental revenues for first-quarter 2020), drug stores (9%), dollar stores (8%) and grocery stores (7.7%) sell ‘essential’ goods and therefore continued to thrive amid the pandemic, which in turn, could have driven rent collections for April and May.
Moreover, it derives 95% of its annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions as well as competition from Internet retailing. This, in turn, boosts the stability of rental revenues and generates predictable cash flows.
However, the escalating number of coronavirus cases forced several retailers to close their stores to contain the spread of the pandemic. Some retailers also reduced store hours while many others are keeping their e-retail operations running as consumers are now increasingly opting for online purchases. As a result, retail REITs, which have been already battling store closures and bankruptcy issues, stand hugely affected because retail businesses are greatly dependent on customer traffic and consumers are now consciously avoiding crowds in large public spaces.
Against this backdrop, tenants from the company’s theater, health and fitness, restaurant, and child care industries are being impacted by the government-mandated shutdowns and social-distancing requirements. Further, the company is in constant talks with tenants seeking rent relief requests and deferrals.
Moreover, shares of this Zacks Rank #3 (Hold) company have declined 22.6% over the past three months, wider than its industry’s decrease of 22%.
Stocks to Consider
The Zacks Consensus Estimate for Alexander Baldwin Holdings, Inc.’s ALEX 2020 funds from operations (FFO) per share have been unchanged at 83 cents over the past month. The company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
One Liberty Properties, Inc.’s OLP FFO per share estimate for the ongoing year has been steady at $1.89 over the past 30 days. The company currently sports a Zacks Rank of 1.
Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has moved 3% north to 68 cents over the past month. It currently carries a Zacks Rank #2 (Buy).
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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