Record Operating Results For First Quarter 2014 Announced By Realty Income

ESCONDIDO, Calif., May 1, 2014 /PRNewswire/ -- Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O), today announced record operating results for the first quarter ended March 31, 2014. Access to this document is available at www.realtyincome.com. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

COMPANY HIGHLIGHTS:

For the quarter ended March 31, 2014 (as compared to the same quarterly period in 2013):

  • Revenue increased 26.3% to $221.6 million as compared to $175.5 million
  • Net income available to common stockholders per share was $0.23
  • FFO available to common stockholders increased 29.7% to $134.5 million
  • FFO per share increased 8.3% to $0.65
  • AFFO available to common stockholders increased 27.6% to $132.7 million
  • AFFO per share increased 6.7% to $0.64
  • Same store rents increased 1.5% to $131.4 million
  • Portfolio occupancy increased to 98.3% from 97.7%
  • Invested $656.7 million in 337 new properties and properties under development or expansion
  • Increased the monthly dividend in March for the 75th time and for the 66th consecutive quarter
  • Dividends paid per common share increased 6.4%
  • Also, generated net proceeds of approximately $528.5 million in 13.8 million common share offering in April

Financial Results

Revenue
Revenue, for the quarter ended March 31, 2014, increased 26.3% to $221.6 million as compared to $175.5 million, for the same quarter in 2013.

Net Income Available to Common Stockholders
Net income available to common stockholders, for the quarter ended March 31, 2014, was $47.2 million as compared to $62.7 million for the same quarter in 2013. Net income available to common stockholders, for the quarter ended March 31, 2013, was impacted by an unusually large gain on sale of real estate. Net income per share, for the quarter ended March 31, 2014, was $0.23 as compared to $0.36, for the same quarter in 2013. The calculation to determine net income for a real estate company includes impairments and/or gains from the sales of investment properties. Impairments and/or gains on property sales vary from quarter to quarter. This variance 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, 2014, increased 29.7% to $134.5 million as compared to $103.7 million, for the same quarter in 2013. FFO, for the quarter ended March 31, 2013, was normalized to exclude 2013 merger-related costs for Realty Income's acquisition of American Realty Capital Trust, Inc., or ARCT. All references to FFO for the first quarter of 2013 reflect this adjustment for merger-related costs. FFO per share, for the quarter ended March 31, 2014, increased 8.3% to $0.65 as compared to $0.60, for the same quarter in 2013.

Net income, for the quarter ended March 31, 2013, has been adjusted from that previously reported in Realty Income's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, as a result of measurement period adjustments, previously reported in Realty Income's 2013 Annual Report on Form 10-K, that were recorded during the second half of 2013 upon completion of the real estate valuations for the acquisition of ARCT. As a result of these adjustments to the asset allocation, revisions were made to the consolidated statement of income for the first quarter of 2013 for the impact related to rental revenue and depreciation and amortization. Because of these revisions, net income increased by $1.4 million, with no impact on earnings per share, while FFO decreased by $1.2 million, or $0.01 per share, for the first quarter of 2013.

Adjusted Funds From Operations Available to Common Stockholders (AFFO)
AFFO, for the quarter ended March 31, 2014, increased 27.6% to $132.7 million as compared to $104.0 million, for the same quarter in 2013. AFFO per share, for the quarter ended March 31, 2014, increased 6.7% to $0.64 as compared to $0.60, for the same quarter in 2013.

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 consistent with the National Association of Real Estate Investment Trust's (NAREIT's) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate, reduced by gains on sales of investment properties and extraordinary items. FFO, for the first quarter of 2013, has also been normalized to add back merger-related costs for the acquisition of ARCT. 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. See the reconciliations of net income available to common stockholders to FFO and AFFO on page six. 

Dividend Information
In March 2014, Realty Income announced the 66th consecutive quarterly dividend increase, which is the 75th increase in the amount of the dividend since the company's listing on the New York Stock Exchange in 1994. The annualized dividend amount, as of March 31, 2014, was approximately $2.19 per share. The amount of monthly dividends paid per share increased 6.4% to $0.547 in the first quarter of 2014 compared to $0.514 for the same period in 2013. In addition, through March 31, 2014, the company has paid 524 consecutive monthly dividends and over $2.9 billion in total dividends since 1969. Realty Income has a dividend reinvestment and stock purchase program that can be accessed at www.realtyincome.com. The program is administered by Wells Fargo Shareowner Services.

Real Estate Portfolio Update

As of March 31, 2014, Realty Income's portfolio of freestanding, single-tenant properties consisted of 4,208 properties located in 49 states and Puerto Rico, leased to 211 commercial tenants doing business in 47 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 10.8 years.

Portfolio Management Activities
The company's portfolio of commercial real estate, owned primarily under 10- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of March 31, 2014, portfolio occupancy was 98.3% with 73 properties available for lease out of a total of 4,208 properties in the portfolio, as compared to 97.7% portfolio occupancy, or 81 properties available for lease, as of March 31, 2013.

Rent Increases
During the quarter ended March 31, 2014, same store rents, on 2,784 properties under lease, increased 1.5% to $131.4 million, as compared to $129.4 million for the same quarter in 2013.

Property Acquisitions
During the first quarter of 2014, Realty Income invested $656.7 million in 337 new properties and properties under development or expansion, located in 35 states. These properties are 100% leased with a weighted average lease term of approximately 14.2 years and an initial average lease yield of 7.0%. The tenants occupying the new properties operate in 15 industries, and the property types consist of 88% retail, 8% industrial and distribution and 4% office, based on annualized rental revenue.

Realty Income maintains a $1.5 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of April 3, 2014, approximately $1.29 billion was available on the credit facility to fund additional acquisitions, after using stock offering proceeds (discussed below) to pay down the credit facility.

Property Dispositions
Realty Income continued to successfully execute its asset disposition program. During the quarter ended March 31, 2014, Realty Income sold 11 properties for $12.7 million, with a gain on sales of $3.9 million, as compared to 17 properties sold for $60.0 million, with a gain on sales of $38.6 million, during the same quarter in 2013.

During the first quarter of 2014, the Financial Accounting Standards Board issued guidance that changes the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have, or will have, a major effect on an entity's operations and financial results. Previously, Realty Income had reported all properties sold and held for sale within a period as discontinued operations. The company early adopted the requirements of this accounting pronouncement in the first quarter of 2014. As a result, Realty Income's results of operations for all qualifying disposals and properties classified as held for sale that were not previously reported in discontinued operations in Realty Income's 2013 Annual Report on Form 10-K are presented within income from continuing operations on the consolidated statements of income.

Other Activities

Issued 13.8 Million Shares in an Upsized Common Share Offering
On April 1, 2014, Realty Income issued 13.8 million common shares priced at $39.96 per share. Net proceeds of approximately $528.5 million were used to repay a portion of the borrowings under the company's acquisition credit facility.

Realty Income Names Debra Bonebrake Senior Vice President – Industrial, Distribution and Office Properties
On March 3, 2014, Realty Income announced that Debra Bonebrake was named Senior Vice President – Industrial, Distribution and Office Properties.

Direct Stock Purchase and Dividend Reinvestment Plan
During the first quarter of 2014, Realty Income issued 55,870 common shares via its Stock Plan at an average price of $40.69 per share. The Plan generated gross proceeds of approximately $2.3 million during the quarter.

CEO Comments on Operating Results
Commenting on Realty Income's results and real estate operations, Chief Executive Officer, John P. Case, said,  "We are pleased with our operating results for the first quarter of 2014. We achieved record quarterly AFFO per share of $0.64, representing an increase of 6.7% from the same period last year. The portfolio continues to perform quite well, with same store rent rising 1.5% from a year ago and occupancy increasing to 98.3%, the highest it's been since 2007."  

"Acquisitions again contributed to these positive first quarter results. We completed $656.7 million in acquisitions this quarter, making it our second most acquisitive quarter in our company's history. These acquisitions include $274.3 million of the previously announced $503 million transaction with Inland Diversified Real Estate Trust, Inc. We expect the majority of the remaining properties to close during the second quarter of 2014. The properties acquired during the quarter are leased to 22 different tenants in 15 industries, and located across 35 states. Retail properties comprised the majority of acquisitions accounting for 88%, while industrial and distribution accounted for 8%. Approximately 84% of the revenue generated by these acquisitions is from investment grade-rated tenants. We are pleased to have continued to add to the portfolio's credit quality and diversification through these acquisitions, while achieving a weighted average lease term of 14.2 years and an initial average lease yield of 7.0%."  

"Subsequent to the quarter-end, we successfully accessed the capital markets, raising approximately $529 million in net proceeds in a common stock offering on April 1st. The original offering of 10.5 million shares was upsized to 13.8 million shares, allowing us to pay down our $1.5 billion acquisitions credit facility. We are well positioned with ample liquidity to fund 2014 acquisitions activity."

FFO and AFFO Commentary
Realty Income's FFO and AFFO per share has historically tended to be stable and fairly predictable because of the long-term leases that are the primary source of the company's revenue. There are, however, several factors that can cause FFO and AFFO per share to vary from levels that have been anticipated by the company. These factors include, but are not limited to, changes in interest rates and occupancy rates, periodically accessing the capital markets, the level and timing of property and entity acquisitions and dispositions, lease rollovers, the general real estate market, and the economy.

2014 Earnings Estimates
FFO per share for 2014 should range from $2.53 to $2.58, an increase of 5% to 7% over 2013 FFO (normalized to exclude 2013 ARCT merger-related costs) per share of $2.41. FFO per share for 2014 is based on a net income per share range of $0.86 to $0.91, plus estimated real estate depreciation of $1.72 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). 

AFFO per share for 2014 should range from $2.53 to $2.58, an increase of 5% to 7% over the 2013 AFFO per diluted share of $2.41. AFFO further adjusts FFO for unique revenue and expense items, which are not as pertinent to the measurement of the company's ongoing operating performance.

About Realty Income
Realty Income is The Monthly Dividend Company®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of March 31, 2014, the company had paid 524 consecutive monthly dividends throughout its 45-year operating history. The monthly income is supported by the cash flows from over 4,200 properties owned under long-term lease agreements with 211 leading regional and national commercial tenants. The company is an active buyer of net-leased properties nationwide. Additional information about the company can be obtained from the corporate website at www.realtyincome.com or www.twitter.com/realtyincome.

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 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. 

Note to Editors: Realty Income press releases are available via the internet at http://www.realtyincome.com/invest/newsroom-library/press-releases.shtml.

 


CONSOLIDATED STATEMENTS OF INCOME

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










Three months


Three months



Ended 3/31/14


Ended 3/31/13

REVENUE







Rental


$

214,122


$

167,798

Tenant reimbursements



6,427



6,027

Other



1,023



1,697








Total revenue



221,572



175,522








EXPENSES







Depreciation and amortization



89,970



66,749

Interest



51,720



41,599

General and administrative



12,886



11,628

Property (including reimbursable)



10,577



9,572

Income taxes



1,091



577

Merger-related costs



-



12,030

Provisions for impairment



1,683



-








Total expenses



167,927



142,155








Gain on sales of real estate



1,271



-

Income from continuing operations



54,916



33,367

Income from discontinued operations



3,077



39,859








Net income



57,993



73,226

Net income attributable to noncontrolling interests



(332)



(9)








Net income attributable to the Company



57,661



73,217

Preferred stock dividends



(10,482)



(10,482)








Net income available to common stockholders


$

47,179


$

62,735








Funds from operations available to common stockholders (FFO)


$

 

134,520


 

$

 

103,688(1)








Adjusted funds from operations available to common stockholders (AFFO)


$

132,660


$

 

103,972















Per share information for common stockholders:







Income from continuing operations,







basic and diluted


$

0.21


$

0.13








Net income:







Basic


$

0.23


$

0.37

Diluted


$

0.23


$

0.36








FFO, basic and diluted


$

0.65


$

0.60(1)








AFFO:







Basic


$

0.64


$

0.61

Diluted


$

0.64


$

0.60








Cash dividends paid per common share


$

0.547


$

0.514








(1) Normalized to exclude ARCT merger-related costs

 


FUNDS FROM OPERATIONS (FFO)

(dollars in thousands, except per share amounts)












Three months


Three months




Ended 3/31/14


Ended 3/31/13









Net income available to common stockholders


$

47,179


$

62,735

Depreciation and amortization:








Continuing operations



89,970



66,749


Discontinued operations



-



513

Depreciation of furniture, fixtures and equipment



(91)



(61)

Provisions for impairment on investment properties








Continuing operations



1,683



-


Discontinued operations



-



456

Gain on sale of investment properties,








Continuing operations



(1,271)



-


Discontinued operations



(2,607)



(38,559)

Merger-related costs (1)



-



12,030

FFO adjustments allocable to non-controlling interests



(343)



(175)









FFO available to common stockholders, basic and diluted

$

134,520


$

103,688









FFO per common share, basic and diluted


$

0.65


$

0.60

Distributions paid to common stockholders


$

113,414


$

84,977

FFO in excess of distributions paid to common stockholders, basic and diluted


$

21,106


$

18,711









Weighted average number of common shares used for FFO:






Basic


207,003,950


171,659,191


Diluted


207,007,341


172,053,880









(1)    FFO for the three months ended March 31, 2013, has been normalized to exclude ARCT merger-related costs.









We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust'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 sales of investment properties and extraordinary items.









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 3/31/14


Ended 3/31/13









Net income available to common stockholders


$

47,179


$

62,735

Cumulative adjustments to calculate FFO (1)



87,341



40,953

FFO available to common stockholders



134,520



103,688

Amortization of share-based compensation



2,697



3,845

Amortization of deferred financing costs (2)



1,076



1,006

Amortization of net mortgage premiums



(2,385)



(1,947)

Loss on interest rate swaps



57



452

Capitalized leasing costs and commissions



(192)



(413)

Capitalized building improvements



(1,177)



(1,265)

Straight-line rent



(3,936)



(3,204)

Amortization of above and below-market leases



1,994



1,794

AFFO adjustments allocable to non-controlling interests



6



16

AFFO available to common stockholders, basic and diluted

$

132,660


$

103,972









AFFO per common share:








Basic


$

0.64


$

0.61


Diluted


$

0.64


$

0.60

Distributions paid to common stockholders


$

113,414


$

84,977

AFFO in excess of distributions paid to common stockholders, basic and diluted

$

19,246


$

18,995









Weighted average number of common shares used for AFFO:






Basic


207,003,950


171,659,191


Diluted


207,007,341


172,053,880









(1)

See FFO calculation above for reconciling items.



(2)

Includes the amortization of costs incurred and capitalized when our notes were issued in March 2003, November 2003, March 2005, September 2005, September 2006, September 2007, June 2010, June 2011, October 2012 and July 2013. Additionally, this includes the amortization of deferred financing costs incurred and capitalized in connection with our assumption of our mortgages payable and the issuance of our term loan. The deferred financing costs are being amortized over the lives of the respective mortgages and term loan. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.



 


HISTORICAL FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)
















For the three months ended March 31,


2014



2013



2012



2011



2010
















Net income available to common stockholders

$

47,179


$

62,735


$

26,071


$

29,936


$

24,142

Depreciation and amortization


89,879



67,201



35,235



26,791



23,213

Provisions for impairment on investment properties


1,683



456



-



200



34

Gain on sales of investment properties


(3,878)



(38,559)



(611)



(129)



(703)

Merger-related costs(1)


-



12,030



-



-



-

FFO adjustments allocable to non-controlling interests


(343)



(175)



-



-



-
















FFO


134,520



103,688



60,695



56,798



46,686
















FFO per diluted share

$

0.65


$

0.60


$

0.46


$

0.48


$

0.45
















AFFO

$

132,660


$

103,972


$

66,294


$

58,239


$

47,615
















AFFO per diluted share

$

0.64


$

0.60


$

0.50


$

0.49


$

0.46
















Cash dividends paid per share

$

0.547


$

0.514


$

0.437


$

0.433


$

0.429











Weighted average diluted shares outstanding

207,007,341


172,053,880


132,703,954


119,109,044


103,686,440



(1)

FFO for the three months ended March 31, 2013, has been normalized to exclude ARCT merger-related costs.

 

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, 2014 and December 31, 2013

(dollars in thousands, except per share data)









2014



2013

ASSETS


(unaudited)




Real estate, at cost:






Land

$

2,917,117


$

2,791,147

Buildings and improvements


7,603,513



7,108,328

Total real estate, at cost


10,520,630



9,899,475

Less accumulated depreciation and amortization


(1,179,550)



(1,114,888)

Net real estate held for investment


9,341,080



8,784,587

Real estate held for sale, net


12,145



12,022

Net real estate


9,353,225



8,796,609

Cash and cash equivalents


14,142



10,257

Accounts receivable, net


40,329



39,323

Acquired lease intangible assets, net


986,063



935,459

Goodwill


15,598



15,660

Other assets, net


71,424



127,133

Total assets

$

10,480,781


$

9,924,441







LIABILITIES AND EQUITY






Distributions payable

$

41,543


$

41,452

Accounts payable and accrued expenses


70,340



102,511

Acquired lease intangible liabilities, net


155,195



148,250

Other liabilities


40,769



44,030

Line of credit payable


740,100



128,000

Term loan


70,000



70,000

Mortgages payable, net


822,270



783,360

Notes payable, net


3,185,796



3,185,480

Total liabilities


5,126,013



4,503,083







Commitments and contingencies












Stockholders' equity:






Preferred stock and paid in capital, par value $0.01 per share, 69,900,000 shares authorized and 25,150,000 shares issued and outstanding as of March 31, 2014 and December 31, 2013


 

609,363



 

609,363

Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 207,631,143 shares issued and outstanding as of March 31, 2014 and 207,485,073 shares issued and outstanding at December 31, 2013


 

5,774,395



 

5,767,878

Distributions in excess of net income


(1,058,120)



(991,794)

Total stockholders' equity


5,325,638



5,385,447

Noncontrolling interests


29,130



35,911

Total equity


5,354,768



5,421,358

Total liabilities and equity

$

10,480,781


$

9,924,441







 



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%

Q1 YTD 2014

5.3%


10.9%


3.6%


3.3%


2.2%


(0.1%)


2.0%


1.8%


1.2%


0.5%





















Compounded Average
Annual Total Return (5)


16.7%




10.9%




10.1%




9.4%




9.1%





















 Note:   All of these 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.  Source:  Factset.



(5)

All of these Compounded Average Annual Total Return rates are calculated in the same manner: from Realty Income's NYSE listing on October 18, 1994 through March 31, 2014, 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.

 


Property Type Diversification


The following table sets forth certain property type information regarding Realty Income's property portfolio as of March 31, 2014 (dollars in thousands):














   Approximate


Rental Revenue for


Percentage of



Number of


      Leasable


the Quarter Ended


Rental

Property Type


Properties


   Square Feet


March 31, 2014(1)


Revenue

Retail


4,056


43,720,800


$

166,573


77.9%

Industrial and distribution


81


16,007,300



22,962


10.7

Office


43


3,240,300



13,975


6.5

Manufacturing


13


3,715,200



5,278


2.5

Agriculture


15


184,500



5,209


2.4

Totals


4,208


66,868,100


$

213,997


100.0%



(1)

Includes rental revenue for all properties owned by Realty Income at March 31, 2014, including revenue from properties reclassified as discontinued operations of $13.  Excludes revenue of $44 from properties owned by Crest and $94 from sold properties that were included in continuing operations.



 

Tenant Diversification


The largest tenants based on percentage of total portfolio rental revenue at March 31, 2014 include the following:







Walgreens


5.4%


Northern Tier Energy/Super America

2.3%

FedEx


5.2%


Rite Aid

2.0%

Dollar General


5.0%


Regal Cinemas

2.0%

Family Dollar


4.7%


CVS Pharmacy

2.0%

LA Fitness


4.6%


The Pantry

1.7%

AMC Theatres


2.9%


Circle K

1.6%

Diageo


2.8%


Walmart/Sam's Club

1.5%

BJ's Wholesale Clubs


2.7%




 


Industry Diversification


The following table sets forth certain information regarding Realty Income's property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:



Percentage of  Rental Revenue(1)


For the














Quarter Ended


For the Years Ended


March 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


2014


2013


2012


2011


2010


2009


2008

Retail industries














Apparel stores

1.8%


1.9%


1.7%


1.4%


1.2%


1.1%


1.1%

Automotive collision services

0.8


0.8


1.1


0.9


1.0


1.1


1.0

Automotive parts

1.2


1.2


1.0


1.2


1.4


1.5


1.6

Automotive service

1.8


2.1


3.1


3.7


4.7


4.8


4.8

Automotive tire services

3.3


3.6


4.7


5.6


6.4


6.9


6.7

Book stores

*


*


0.1


0.1


0.1


0.2


0.2

Child care

2.3


2.8


4.5


5.2


6.5


7.3


7.6

Consumer electronics

0.3


0.3


0.5


0.5


0.6


0.7


0.8

Convenience stores

10.3


11.2


16.3


18.5


17.1


16.9


15.8

Crafts and novelties

0.5


0.5


0.3


0.2


0.3


0.3


0.3

Dollar stores

9.1


6.2


2.2


-


-


-


-

Drug stores

9.5


8.1


3.5


3.8


4.1


4.3


4.1

Education

0.4


0.4


0.7


0.7


0.8


0.9


0.8

Entertainment

0.6


0.6


0.9


1.0


1.2


1.3


1.2

Equipment services

0.1


0.1


0.1


0.2


0.2


0.2


0.2

Financial services

1.4


1.5


0.2


0.2


0.2


0.2


0.2

General merchandise

1.1


1.1


0.6


0.6


0.8


0.8


0.8

Grocery stores

2.8


2.9


3.7


1.6


0.9


0.7


0.7

Health and fitness

6.9


6.3


6.8


6.4


6.9


5.9


5.6

Health care

1.1


1.1


-


-


-


-


-

Home furnishings

0.8


0.9


1.0


1.1


1.3


1.3


2.4

Home improvement

1.3


1.6


1.5


1.7


2.0


2.2


2.1

Jewelry

0.1


0.1


-


-


-


-


-

Motor vehicle dealerships

1.7


1.6


2.1


2.2


2.6


2.7


3.2

Office supplies

0.4


0.5


0.8


0.9


0.9


1.0


1.0

Pet supplies and services

0.8


0.8


0.6


0.7


0.9


0.9


0.8

Restaurants - casual dining

4.5


5.1


7.3


10.9


13.4


13.7


14.3

Restaurants - quick service

4.0


4.4


5.9


6.6


7.7


8.3


8.2

Shoe stores

0.1


0.1


0.1


0.2


0.1


-


-

Sporting goods

1.6


1.7


2.5


2.7


2.7


2.6


2.3

Theaters

5.4


6.2


9.4


8.8


8.9


9.2


9.0

Transportation services

0.1


0.1


0.2


0.2


0.2


0.2


0.2

Wholesale clubs

4.1


3.9


3.2


0.7


-


-


-

Other

0.1


0.1


0.1


0.1


0.3


1.1


1.2

Retail industries

80.3%


79.8%


86.7%


88.6%


95.4%


98.3%


98.2%

 


Industry Diversification (continued)



Percentage of  Rental Revenue(1)


For the














Quarter Ended


For the Years Ended


March 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


2014


2013


2012


2011


2010


2009


2008

Non-retail industries














Aerospace

1.2


1.2


0.9


0.5


-


-


-

Beverages

2.9


3.3


5.1


5.6


3.0


-


-

Consumer appliances

0.5


0.6


0.1


-


-


-


-

Consumer goods

1.0


1.0


0.1


-


-


-


-

Crafts and novelties

0.1


0.1


-


-


-


-


-

Diversified industrial

0.2


0.2


0.1


-


-


-


-

Electric utilities

0.1


*


-


-


-


-


-

Equipment services

0.5


0.4


0.3


0.2


-


-


-

Financial services

0.5


0.5


0.4


0.3


-


-


-

Food processing

1.4


1.5


1.3


0.7


-


-


-

General merchandise

0.2


-


-


-


-


-


-

Government services

1.3


1.4


0.1


0.1


0.1


0.1


-

Health care

0.8


0.8


*


*


-


-


-

Home furnishings

0.2


0.2


-


-


-


-


-

Insurance

0.1


0.1


*


-


-


-


-

Machinery

0.2


0.2


0.1


-


-


-


-

Other manufacturing

0.6


0.6


-


-


-


-


-

Packaging

0.8


0.9


0.7


0.4


-


-


-

Paper

0.1


0.2


0.1


0.1


-


-


-

Shoe stores

0.8


0.9


-


-


-


-


-

Telecommunications

0.6


0.7


0.8


0.7


-


-


-

Transportation services

5.2


5.3


2.2


1.6


-


-


-

Other

0.4


0.1


1.0


1.2


1.5


1.6


1.8

Non-retail industries

19.7%


20.2%


13.3%


11.4%


4.6%


1.7%


1.8%

Totals

100.0%


100.0%


100.0%


100.0%


100.0%


100.0%


100.0%















*

Less than 0.1%



(1)

Includes rental revenue for all properties owned by Realty Income at the end of each period presented, including revenue from properties reclassified as discontinued operations. Excludes revenue from properties owned by Crest Net Lease, Inc., or Crest.

 


Lease Expirations


The following table sets forth certain information regarding Realty Income's property portfolio regarding the timing of the lease term expirations (excluding rights to extend a lease at the option of the tenant) on our 4,116 net leased, single-tenant properties as of March 31, 2014 (dollars in thousands):




Total Portfolio

Initial Expirations(3)

Subsequent Expirations(4)







Rental





Rental





Rental









Revenue





Revenue





Revenue









for the





for the





for the









Quarter


% of



Quarter


% of



Quarter


% of



Number


Approx.


Ended


Total

Number


Ended


Total

Number


Ended


Total



of Leases


Leasable


Mar 31,


Rental

of Leases


Mar 31,


Rental

of Leases


Mar 31,


Rental

Year


Expiring(1)


Sq. Feet


2014(2)


Revenue

Expiring


2014


Revenue

Expiring


2014


Revenue




















2014


119


846,900

$

2,952


1.4%

39

$

1,348


0.6%

80

$

1,604


0.8%

2015


173


876,600


3,950


1.8

66


1,767


0.8

107


2,183


1.0

2016


204


1,231,400


4,947


2.3

121


2,812


1.3

83


2,135


1.0

2017


181


2,069,900


6,040


2.9

47


3,194


1.5

134


2,846


1.4

2018


284


3,576,000


11,155


5.3

166


7,890


3.7

118


3,265


1.6

2019


208


3,123,200


11,024


5.3

163


9,832


4.7

45


1,192


0.6

2020


113


3,513,000


9,137


4.3

101


8,461


4.0

12


676


0.3

2021


192


5,340,500


13,803


6.5

184


13,291


6.3

8


512


0.2

2022


226


7,250,700


14,780


7.0

217


14,500


6.9

9


280


0.1

2023


362


6,341,400


20,510


9.7

349


19,847


9.4

13


663


0.3

2024


148


2,407,900


7,647


3.6

148


7,647


3.6

-


-


-

2025


299


4,120,200


17,583


8.4

294


17,456


8.3

5


127


0.1

2026


237


3,471,200


12,524


5.9

234


12,441


5.9

3


83


*

2027


461


4,755,500


15,346


7.3

459


15,306


7.3

2


40


*

2028


288


5,913,900


15,833


7.5

286


15,780


7.5

2


53


*

2029 - 2043


621


10,567,600


43,800


20.8

613


43,592


20.7

8


208


0.1

Totals


4,116


65,405,900

$

211,031


100.0%

3,487

$

195,164


92.5%

629

$

15,867


7.5%




















*

Less than 0.1%



(1)

Excludes 19 multi-tenant properties and 73 vacant unleased properties, one of which is a multi-tenant property. The lease expirations for properties under construction are based on the estimated date of completion of those properties.



(2)

Includes rental revenue of $13 from properties reclassified as discontinued operations and excludes revenue of $2,965 from 19 multi-tenant properties and from 73 vacant and unleased properties at March 31, 2014, $94 from sold properties included in continuing operations and $44 from properties owned by Crest.



(3)

Represents leases to the initial tenant of the property that are expiring for the first time.



(4)

Represents lease expirations on properties in the portfolio, which have previously been renewed, extended or re-tenanted.



 


Geographic Diversification


The following table sets forth certain state-by-state information regarding Realty Income's property portfolio as of March 31, 2014 (dollars in thousands):














Approximate


Rental Revenue for


Percentage of


Number of

Percent


Leasable


 the Quarter Ended


Rental

State

Properties

Leased


Square Feet


March 31, 2014(1)


Revenue

Alabama            

127

98%


1,029,300


$

3,252


1.5%

Alaska             

2

100


128,500



307


0.1

Arizona            

114

96


1,235,000



5,564


2.6

Arkansas           

54

96


793,200



1,556


0.7

California         

161

98


4,780,800



22,716


10.6

Colorado           

69

99


792,100



2,885


1.4

Connecticut        

24

96


490,500



2,061


1.0

Delaware           

16

100


29,500



420


0.2

Florida            

320

99


3,363,700



12,995


6.1

Georgia            

229

98


2,917,600



8,976


4.2

Hawaii             

--

--


--



--


*

Idaho              

12

100


87,000



427


0.2

Illinois           

158

99


4,249,400



12,283


5.7

Indiana            

105

99


1,166,100



4,950


2.3

Iowa               

35

97


2,751,700



3,353


1.6

Kansas             

82

99


1,638,200



3,404


1.6

Kentucky           

54

98


886,900



3,046


1.4

Louisiana          

88

97


954,300



2,700


1.3

Maine

9

100


126,400



837


0.4

Maryland           

32

100


654,100



3,709


1.7

Massachusetts      

84

96


761,000



3,192


1.5

Michigan           

105

98


955,200



3,221


1.5

Minnesota          

155

100


1,153,200



7,346


3.4

Mississippi        

121

98


1,551,500



3,677


1.7

Missouri           

131

98


2,554,000



7,788


3.6

Montana            

1

100


5,400



13


*

Nebraska           

31

100


708,700



1,663


0.8

Nevada             

22

95


413,000



1,287


0.6

New Hampshire      

20

100


320,100



1,238


0.6

New Jersey         

65

98


497,000



2,642


1.2

New Mexico         

26

100


208,000



563


0.3

New York           

85

95


2,048,900



10,185


4.8

North Carolina     

147

99


1,496,900



5,548


2.6

North Dakota       

7

100


66,000



117


0.1

Ohio               

211

98


5,004,600



11,840


5.5

Oklahoma           

124

100


1,583,700



3,777


1.8

Oregon             

25

100


525,400



1,747


0.8

Pennsylvania       

146

99


1,747,500



6,943


3.3

Rhode Island       

4

100


157,200



459


0.2

South Carolina     

133

99


963,700



4,368


2.1

South Dakota       

11

100


133,500



244


0.1

Tennessee          

191

97


2,994,700



5,995


2.8

Texas              

415

98


7,369,800



20,892


9.8

Utah               

13

100


749,000



1,337


0.6

Vermont            

6

100


100,700



499


0.2

Virginia           

140

97


2,628,600



6,883


3.2

Washington         

38

100


415,300



1,556


0.7

West Virginia      

12

100


261,200



882


0.4

Wisconsin          

41

95


1,370,600



2,442


1.1

Wyoming            

3

100


21,100



63


*

Puerto Rico

4

100


28,300



149


0.1

Totals\Average

4,208

98%


66,868,100


$

213,997


100.0%













*

Less than 0.1%



(1)

Includes rental revenue for all properties owned by Realty Income at March 31, 2014, including revenue from properties reclassified as discontinued operations of $13.  Excludes revenue of $44 from properties owned by Crest and $94 from sold properties that were included in continuing operations.

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SOURCE Realty Income Corporation



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