Record Operating Results For Third Quarter And Nine Months Announced By Realty Income

ESCONDIDO, Calif., Oct. 31, 2013 /PRNewswire/ -- Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O), today announced record operating results for the third quarter ended September 30, 2013. 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.

(Logo:  http://photos.prnewswire.com/prnh/20130507/MM09486LOGO)

COMPANY HIGHLIGHTS:

For the quarter ended September 30, 2013 (as compared to the same quarterly period in 2012):

  • Revenue increased 70.2% to $199.3 million as compared to $117.1 million
  • Net income available to common stockholders per share was $0.21
  • Normalized FFO available to common stockholders increased 68.5% to $116.1 million
  • Normalized FFO per share increased 13.5% to $0.59, and includes a non-cash $0.02 reduction for accelerated stock vesting from 10 years to 5 years
  • AFFO available to common stockholders increased 72.1% to $117.9 million
  • AFFO per share increased 15.4% to $0.60
  • Same store rents increased 1.3% to $109.6 million
  • Portfolio occupancy increased to 98.1% from 97.0%
  • Issued $750 million of 4.65% senior unsecured notes due 2023
  • Invested $502.7 million in 219 new properties and properties under development or expansion
  • Increased the monthly dividend in September for the 73rd time and for the 64th consecutive quarter
  • Dividends paid per common share increased 23.0%

Financial Results

Revenue

Revenue, for the quarter ended September 30, 2013, increased 70.2% to $199.3 million as compared to $117.1 million, for the same quarter in 2012. Revenue, for the nine months ended September 30, 2013, increased 61.5% to $550.4 million as compared to $340.8 million, for the same period in 2012.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended September 30, 2013, was $41.1 million as compared to $27.0 million for the same quarter in 2012. Net income per share, for the quarter ended September 30, 2013, was $0.21 as compared to $0.20, for the same quarter in 2012.

Net income available to common stockholders, for the nine months ended September 30, 2013, was $149.8 million as compared to $86.0 million, for the same period in 2012. Net income per share, for the nine months ended September 30, 2013, was $0.80 as compared to $0.65, for the same period in 2012.

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.

FFO Available to Common Stockholders

Funds from Operations (FFO), for the quarter ended September 30, 2013, increased 82.8% to $115.9 million as compared to $63.4 million for the same quarter in 2012. FFO per share, for the quarter ended September 30, 2013, increased 22.9% to $0.59 as compared to $0.48, for the same quarter in 2012.

FFO, for the nine months ended September 30, 2013, increased 71.4% to $324.5 million as compared to $189.3 million, for the same period in 2012. FFO per share, for the nine months ended September 30, 2013, increased 21.1% to $1.72 as compared to $1.42, for the same period in 2012.

Normalized FFO Available to Common Stockholders

Normalized Funds from Operations, which is based on FFO adjusted to add back ARCT merger-related costs, for the quarter ended September 30, 2013, increased 68.5% to $116.1 million as compared to $68.9 million, for the same quarter in 2012. Normalized FFO per share, for the quarter ended September 30, 2013, increased 13.5% to $0.59 as compared to $0.52, for the same quarter in 2012. Normalized FFO per share during the quarter was reduced by $0.02 per share to account for the accelerated vesting of restricted shares that occurred on July 1, 2013 from ten-year vesting to five years.  

Normalized FFO, for the nine months ended September 30, 2013, increased 73.2% to $337.4 million as compared to $194.8 million, for the same period in 2012. Normalized FFO per share, for the nine months ended September 30, 2013, increased 21.8% to $1.79 as compared to $1.47, for the same period in 2012.

AFFO Available to Common Stockholders

Adjusted Funds from Operations (AFFO), for the quarter ended September 30, 2013, increased 72.1% to $117.9 million as compared to $68.5 million, for the same quarter in 2012. AFFO per share, for the quarter ended September 30, 2013, increased 15.4% to $0.60 as compared to $0.52, for the same quarter in 2012.

AFFO, for the nine months ended September 30, 2013, increased 67.6% to $337.4 million as compared to $201.3 million, for the same period in 2012. AFFO per share, for the nine months ended September 30, 2013, increased 17.8% to $1.79 as compared to $1.52, for the same period in 2012.

The company considers FFO, normalized 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. Normalized FFO adds back merger-related costs for the acquisition of ARCT. AFFO further adjusts Normalized FFO for unique revenue and expense items, which are not pertinent to the measurement of the company's ongoing operating performance. See the reconciliation of net income available to common stockholders to FFO, normalized FFO and AFFO on page seven. 

Dividend Information

In September 2013, Realty Income announced the 64th consecutive quarterly dividend increase, which is the 73rd 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 September 30, 2013, was approximately $2.182 per share. The amount of monthly dividends paid per share increased 23.0% to $0.545, in the third quarter of 2013 from $0.443 per share, for the same period in 2012. In addition, through September 30, 2013, the company has paid 518 consecutive monthly dividends and over $2.6 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 September 30, 2013, Realty Income's portfolio of freestanding, single-tenant properties consisted of 3,866 properties located in 49 states and Puerto Rico, leased to 200 commercial enterprises doing business in 47 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 10.9 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 September 30, 2013, portfolio occupancy was 98.1% with 73 properties available for lease out of a total of 3,866 properties in the portfolio, as compared to 97.0% portfolio occupancy for the same period in 2012.

Rent Increases

During the quarter ended September 30, 2013, same store rents, on 2,360 properties under lease, increased 1.3% to $109.6 million, as compared to $108.2 million for the same quarter in 2012. For the nine months ended September 30, 2013, same store rents, on 2,360 properties under lease, increased 1.3% to $328.4 million, as compared to $324.2 million for the same period in 2012.

Property Acquisitions

During the third quarter of 2013, Realty Income invested $502.7 million in 219 new properties, and properties under development or expansion, located in 33 states. These properties are 100% leased with a weighted average lease term of approximately 14.7 years and an initial average lease yield of 7.1%. In addition, approximately 72% of the revenue generated by these acquisitions is from investment grade tenants. The tenants occupying the new properties operate in 15 industries, and the property types consist of 80.7% retail, 18.9% office, and 0.4% industrial and distribution, based on rental revenue.

During the nine months ended September 30, 2013, Realty Income invested approximately $1.37 billion in 407 new properties and properties under development or expansion. The new properties are located in 40 states and are 100% leased with an average lease term of approximately 14.1 years and an initial average lease yield of 7.0%. Approximately 65% of the revenue generated from the year-to-date 2013 acquisitions is from investment grade tenants. These property acquisitions are in addition to the $3.2 billion acquisition of 515 properties resulting from Realty Income's acquisition of American Realty Capital Trust (ARCT), which was completed during the first quarter of 2013. 

Realty Income maintains a $1.5 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term.

Property Dispositions

Realty Income continued to successfully execute its asset disposition program in the third quarter of 2013. The primary objective of this program is to sell assets when the company believes that the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the company's real estate portfolio, increase the average lease length, and/or decrease tenant or industry concentration.

During the quarter ended September 30, 2013, Realty Income sold 19 properties for $22.4 million, with a gain on sales of $6.2 million, as compared to 11 properties sold for $15.8 million, with a gain on sales of $2.0 million, during the same quarter in 2012.

During the nine months ended September 30, 2013, Realty Income sold 53 properties for $106.1 million, with a gain on sales of $50.5 million, as compared to 30 properties sold for $34.3 million, with a gain on sales of $6.0 million, during the same period in 2012.

Other Quarterly and Subsequent Activities

Expansion of Unsecured Credit Facility

On October 29, Realty Income announced the expansion of the company's unsecured acquisition credit facility to $1.5 billion from $1.0 billion. The company exercised the $500 million accordion expansion of the existing credit facility with its current bank lending group. All other material business terms of the credit facility remain unchanged. As of October 29, 2013, the company had borrowing capacity of approximately $1.4 billion available on the facility.

Issued 9.775 Million Common Shares

On October 25, Realty Income issued 9.775 million common shares priced at $40.63 per share. Net proceeds of approximately $378 million were used to repay a portion of the borrowings under the company's acquisition credit facility.

Realty Income Names John P. Case to Succeed Tom A. Lewis as Chief Executive Officer

On September 3, Realty Income announced that its Board of Directors had appointed John P. Case to the position of chief executive officer of the company. Mr. Case, who has served as president and chief investment officer, succeeded Tom A. Lewis, who decided to retire as the company's CEO. Mr. Lewis, who had been CEO since 1997, will remain at the company until early next year to assist with the transition, and continues to serve as vice chairman of the company's Board of Directors. With this appointment, Mr. Case becomes only the third CEO in Realty Income's 44-year history.

Issued $750 million of $4.65% Senior Unsecured Notes

In July, Realty Income issued $750 million of 4.65% senior unsecured notes due 2023. The public offering price for the notes was 99.775% of the principal amount for an effective yield to maturity of 4.678%. The net proceeds from the offering were used to repay all of the borrowings outstanding under the company's acquisition credit facility and for other general corporate purposes and working capital, which may include additional acquisitions.

CEO Comments on Operating Results

Commenting on Realty Income's financial results and real estate operations, Chief Executive Officer, John P. Case said, "We are again pleased to report successful operating results for the third quarter. The primary drivers of our performance were: 1) $1.37 billion in new acquisitions during the past nine months, at an initial average lease yield of 7.0%; 2) the immediately accretive rental revenue from our acquisition of ARCT for $3.2 billion, completed in January 2013; and 3) the continued strength of our existing portfolio, with quarter-end occupancy of 98.1%, and same store rent growth of 1.3%. We also now believe 2013 estimated acquisitions will be approximately $1.5 billion versus our prior estimate of at least $1.25 billion, as acquisitions activity remains robust. Additionally, our operating performance has allowed us to increase the dividends paid year-to-date by 21.6%.

"We also successfully accessed the capital markets during October, issuing $397 million of common stock in an offering that was upsized by 50% from an original offering amount of $264 million. Proceeds will be used to repay borrowings under our credit facility and, as a result, permanently and accretively finance third quarter acquisitions activity. Furthermore, we increased the funds available to us under our unsecured acquisition credit facility to $1.5 billion from $1.0 billion. Currently, we have approximately $1.4 billion available under our credit facility to fund additional property investment activities."

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, integration of the acquired ARCT properties including the finalization of purchase price allocations, lease rollovers, the general real estate market, and the economy.

2013 Earnings Estimates

Normalized FFO is based on FFO adjusted to add back ARCT merger-related costs. The Normalized 2013 FFO and AFFO estimates are as follows (excluding the costs associated with the ARCT transaction):

Normalized FFO per share for 2013 should range from $2.38 to $2.42 per share, an increase of 18% to 20% over the Normalized 2012 FFO per share of $2.02. Normalized FFO per share for 2013 is based on an estimated net income per share range of $0.94 to $0.98, plus estimated real estate depreciation of $1.65 per share, plus ARCT merger-related costs of $0.07 per share, and reduced by potential estimated gains on sales of investment properties of $0.28 per share (in accordance with NAREIT's definition of FFO). 

AFFO per share for 2013 should range from $2.38 to $2.42 per share, an increase of 16% to 17% over the 2012 AFFO per share of $2.06. This represents an increase from the prior AFFO per share estimate of $2.35 to $2.41. AFFO further adjusts Normalized FFO for unique revenue and expense items, which are not pertinent to the measurement of the company's ongoing operating performance.

2014 Earnings Estimates

FFO per share for 2014 should range from $2.53 to $2.58 per share, an increase of 5% to 8% over the 2013 estimated FFO per share of $2.38 to $2.42. FFO per share for 2014 is based on an estimated net income per share range of $0.88 to $0.93, plus estimated real estate depreciation of $1.72 per share, and reduced by potential estimated gains on sales of investment properties of $0.07 per share (in accordance with NAREIT's definition of FFO). 

AFFO per share for 2014 should range from $2.53 to $2.58 per share, an increase of 5% to 8% over the 2013 estimated AFFO per share of $2.38 to $2.42. AFFO further adjusts FFO for unique revenue and expense items, which are not 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 September 30, 2013, the company had paid 518 consecutive monthly dividends throughout its 44-year operating history. The monthly income is supported by the cash flows from over 3,800 properties owned under long-term lease agreements with 200 leading regional and national commercial enterprises. 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, integration of the ARCT acquisition, 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

For the three and nine months ended September 30, 2013 and 2012

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












Three months


Three months


Nine months


Nine months



Ended 9/30/13


Ended 9/30/12


Ended 9/30/13


Ended 9/30/12

REVENUE









Rental

$

195,429

$

116,795

$

543,557

$

339,598

Other


3,875


354


6,841


1,211










Total revenue


199,304


117,149


550,398


340,809










EXPENSES









Depreciation and amortization


80,869


37,039


221,603


105,828

Interest


49,703


29,720


130,271


87,477

General and administrative


16,628


9,335


40,316


27,775

Property


5,898


1,532


12,735


5,156

Income taxes


671


405


2,063


1,215

Merger-related costs


240


5,495


12,875


5,495










Total expenses


154,009


83,526


419,863


232,946










Income from continuing operations


45,295


33,623


130,535


107,863

Income from discontinued operations


6,612


3,835


51,115


12,266










Net income


51,907


37,458


181,650


120,129

Net income attributable to noncontrolling interests


(336)


-


(422)


-










Net income attributable to the Company


51,571


37,458


181,228


120,129

Preferred stock dividends


(10,482)


(10,482)


(31,447)


(30,435)

Excess of redemption value over carrying value of









preferred shares redeemed


-


-


-


(3,696)










Net income available to common stockholders

$

41,089

$

26,976

$

149,781

$

85,998










Funds from operations available to









common stockholders (FFO)

$

115,906

$

63,420

$

324,525

$

189,283

Normalized funds from operations available to









common stockholders (normalized FFO)

$

116,146

$

68,915

$

337,400

$

194,778

Adjusted funds from operations available to









common stockholders (AFFO)

$

117,919

$

68,496

$

337,439

$

201,290










Per share information for common stockholders:









Income from continuing operations,









basic and diluted

$

0.18

$

0.17

$

0.53

$

0.56

Net income, basic and diluted

$

0.21

$

0.20

$

0.80

$

0.65

FFO:









Basic

$

0.59

$

0.48

$

1.73

$

1.43

Diluted

$

0.59

$

0.48

$

1.72

$

1.42

Normalized FFO:









Basic

$

0.59

$

0.52

$

1.80

$

1.47

Diluted

$

0.59

$

0.52

$

1.79

$

1.47

AFFO:









Basic

$

0.60

$

0.52

$

1.80

$

1.52

Diluted

$

0.60

$

0.52

$

1.79

$

1.52

Cash dividends paid per common share

$

0.545

$

0.443

$

1.602

$

1.317

 

FUNDS FROM OPERATIONS (FFO)

(dollars in thousands, except per share amounts)
















Three months


Three months


Nine months


Nine months



Ended 9/30/13


Ended 9/30/12


Ended 9/30/13


Ended 9/30/12














Net income available to common stockholders

$

41,089


$

26,976


$

149,781


$

85,998

Depreciation and amortization:













Continuing operations


80,869



37,039



221,603



105,828


Discontinued operations


396



842



1,463



2,995

Depreciation allocated to noncontrolling interest


(285)



-



(680)



-

Depreciation of furniture, fixtures and equipment


(76)



(59)



(203)



(195)

Provisions for impairment on investment properties


76



667



3,028



667

Gain on sale of investment properties,













discontinued operations


(6,163)



(2,045)



(50,467)



(6,010)














FFO available to common stockholders


115,906



63,420



324,525



189,283

Merger-related costs


240



5,495



12,875



5,495

Normalized FFO available to common stockholders

$

116,146


$

68,915


$

337,400


$

194,778














FFO per common share:













Basic

$

0.59


$

0.48


$

1.73


$

1.43


Diluted

$

0.59


$

0.48


$

1.72


$

1.42














Normalized FFO per common share:













Basic

$

0.59


$

0.52


$

1.80


$

1.47


Diluted

$

0.59


$

0.52


$

1.79


$

1.47














Distributions paid to common stockholders

$

106,875


$

59,167


$

298,544


$

175,719














Normalized FFO in excess of distributions paid to













common stockholders

$

9,271


$

9,748


$

38,856


$

19,059














Weighted average number of common shares












used for computation per share:













Basic

195,768,298


132,764,877


187,805,222


132,731,984


Diluted

196,619,866


132,931,813


188,399,848


132,845,970














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. We define normalized FFO, a non-GAAP measure, as FFO excluding the ARCT merger-related costs.














ADJUSTED FUNDS FROM OPERATIONS (AFFO)

(dollars in thousands, except per share amounts)














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


Nine months


Nine months



Ended 9/30/13


Ended 9/30/12


Ended 9/30/13


Ended 9/30/12

Net income available to common stockholders

$

41,089


$

26,976


$

149,781


$

85,998

Cumulative adjustments to calculate FFO (1)


75,057



41,939



187,619



108,780

Normalized FFO available to common stockholders


116,146



68,915



337,400



194,778

Amortization of share-based compensation


6,737



2,230



14,235



7,780

Amortization of deferred financing costs (2)


1,196



611



3,217



1,838

Excess of redemption value over carrying value













of Class D preferred share redemption


-



-



-



3,696

Amortization of net mortgage premiums


(2,518)



(111)



(6,959)



(279)

(Gain) loss on interest rate swaps


596



22



(690)



74

Capitalized leasing costs and commissions


(369)



(521)



(1,143)



(1,218)

Capitalized building improvements


(2,239)



(1,576)



(4,759)



(3,283)

Other adjustments (3)


(1,630)



(1,074)



(3,862)



(2,096)

Total AFFO available to common stockholders

$

117,919


$

68,496


$

337,439


$

201,290

AFFO per common share:













Basic

$

0.60


$

0.52


$

1.80


$

1.52


Diluted

$

0.60


$

0.52


$

1.79


$

1.52














Distributions paid to common stockholders

$

106,875


$

59,167


$

298,544


$

175,719














AFFO in excess of distributions paid to













common stockholders

$

11,044


$

9,329


$

38,895


$

25,571














(1)

See FFO and normalized 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 the 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.

(3)

Includes straight-line rent revenue, and the amortization of above and below-market leases.

 

HISTORICAL FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)
















For the three months ended September 30,


2013



2012



2011



2010



2009
















Net income available to common stockholders

$

41,089


$

26,976


$

34,717


$

25,591


$

27,089

Depreciation and amortization


80,904



37,822



31,837



24,132



22,879

Provisions for impairment on Realty Income















investment properties


76



667



169



84



-

Gain on sales of investment properties


(6,163)



(2,045)



(3,149)



(1,919)



(1,814)
















FFO


115,906



63,420



63,574



47,888



48,154

Merger-related costs


240



5,495



-



-



-

Normalized FFO

$

116,146


$

68,915


$

63,574


$

47,888


$

48,154
















Normalized FFO per diluted share

$

0.59


$

0.52


$

0.50


$

0.46


$

0.47
















AFFO

$

117,919


$

68,496


$

64,239


$

48,585


$

48,499
















AFFO per diluted share

$

0.60


$

0.52


$

0.51


$

0.47


$

0.47
















Cash dividends paid per share

$

0.545


$

0.443


$

0.435


$

0.431


$

0.427

Weighted average diluted shares outstanding

196,619,866


132,931,813


126,582,609


103,977,023


103,481,892
















For the nine months ended September 30,


2013



2012



2011



2010



2009
















Net income available to common stockholders

$

149,781


$

85,998


$

97,837


$

74,717


$

77,606

Depreciation and amortization


222,183



108,628



87,628



70,814



68,713

Provisions for impairment on Realty Income















investment properties


3,028



667



378



171



-

Gain on sales of investment properties


(50,467)



(6,010)



(4,529)



(4,284)



(4,250)
















FFO


324,525



189,283



181,314



141,418



142,069

Merger-related costs


12,875



5,495



-



-



-

Normalized FFO

$

337,400


$

194,778


$

181,314


$

141,418


$

142,069
















Normalized FFO per diluted share

$

1.79


$

1.47


$

1.46


$

1.36


$

1.37
















AFFO

$

337,439


$

201,290


$

184,847


$

143,930


$

144,118
















AFFO per diluted share

$

1.79


$

1.52


$

1.49


$

1.39


$

1.39
















Cash dividends paid per share

$

1.602


$

1.317


$

1.301


$

1.290


$

1.279

Weighted average diluted shares outstanding

188,399,848


132,845,970


124,013,142


103,887,679


103,532,894

 

CONSOLIDATED BALANCE SHEETS

As of September 30, 2013 and December 31, 2012

(dollars in thousands)








2013


2012



(unaudited)



ASSETS





Real estate, at cost:





Land

$

2,753,192

$

1,999,820

Buildings and improvements


7,002,560


3,920,865

Total real estate, at cost


9,755,752


5,920,685

Less accumulated depreciation and amortization


(1,051,950)


(897,767)






Net real estate held for investment


8,703,802


5,022,918

Real estate held for sale, net


17,276


19,219

Net real estate


8,721,078


5,042,137

Cash and cash equivalents


9,960


5,248

Accounts receivable, net


32,169


21,659

Acquired lease intangible assets, net


955,893


242,125

Goodwill


15,739


16,945

Other assets, net


146,088


115,249






Total assets

$

9,880,927

$

5,443,363






LIABILITIES AND EQUITY





Distributions payable

$

39,359

$

23,745

Accounts payable and accrued expenses


69,299


70,426

Acquired lease intangible liabilities, net


137,693


26,471

Other liabilities


38,792


26,059

Lines of credit payable


468,400


158,000

Mortgages payable, net


811,058


175,868

Term loan


70,000


-

Notes payable


3,200,000


2,550,000






Total liabilities


4,834,601


3,030,569






Stockholders' equity:





Preferred stock and paid in capital


609,363


609,363

Common stock and paid in capital


5,333,761


2,572,092

Distributions in excess of net income


(932,876)


(768,661)






Total stockholders' equity


5,010,248


2,412,794

Noncontrolling interests


36,078


-






Total equity


5,046,326


2,412,794






Total liabilities and equity

$

9,880,927

$

5,443,363

 



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%

YTD Q3 2013

5.5%


2.8%


3.7%


3.0%


2.5%


17.7%


2.1%


19.8%


1.3%


24.9%






















Compounded Average Annual Total Return (5)

16.8%





10.7%




9.9%




9.0%




8.8%


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.

(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 September 30, 2013, 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 September 30, 2013 (dollars in thousands):





Approximate

Rental Revenue for

Percentage of



Number of

Leasable

the Quarter Ended

Rental

Property Type

Properties

Square Feet

September 30, 2013(1)

Revenue

Retail

3,717

39,346,500

$

152,018

77.6%

Industrial and Distribution

76

15,175,400


21,541

11.0

Office

47

3,120,300


12,312

6.3

Agriculture

15

184,500


5,202

2.6

Manufacturing

11

3,458,800


4,868

2.5

Totals

3,866

61,285,500

$

195,941

100.0%



(1)

Includes rental revenue for all properties owned by Realty Income at September 30, 2013, including revenue from properties reclassified as discontinued operations of $535. Excludes revenue of $23 from properties owned by Crest.

 


Tenant Diversification


The largest tenants based on percentage of total portfolio rental revenue at September 30, 2013 include the following:







FedEx


5.1%


Rite Aid

2.2%

Walgreens


5.0%


Dollar General

2.2%

Family Dollar


4.9%


Regal Cinemas

2.1%

LA Fitness


4.2%


CVS Pharmacy

2.1%

AMC Theatres


3.1%


The Pantry

1.8%

Diageo


3.0%


Circle K

1.7%

BJ's Wholesale Clubs

2.9%


Walmart/Sam's Club

1.6%

Northern Tier Energy/Super America

2.5%




 


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



September 30,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,



2013


2012


2011


2010


2009


2008


2007

Retail industries















Apparel stores

1.8%



1.7%


1.4%


1.2%


1.1%


1.1%


1.2%

Automotive collision services

0.8



1.1


0.9


1.0


1.1


1.0


1.1

Automotive parts

1.1



1.0


1.2


1.4


1.5


1.6


2.1

Automotive service

2.0



3.1


3.7


4.7


4.8


4.8


5.2

Automotive tire services

3.5



4.7


5.6


6.4


6.9


6.7


7.3

Book stores

0.1



0.1


0.1


0.1


0.2


0.2


0.2

Child care

2.6



4.5


5.2


6.5


7.3


7.6


8.4

Consumer electronics

0.3



0.5


0.5


0.6


0.7


0.8


0.9

Convenience stores

11.2



16.3


18.5


17.1


16.9


15.8


14.0

Crafts and novelties

0.5



0.3


0.2


0.3


0.3


0.3


0.3

Dollar stores

6.3



2.2


-


-


-


-


-

Drug stores

9.3



3.5


3.8


4.1


4.3


4.1


2.7

Education

0.4



0.7


0.7


0.8


0.9


0.8


0.8

Entertainment

0.6



0.9


1.0


1.2


1.3


1.2


1.4

Equipment services

0.1



0.1


0.2


0.2


0.2


0.2


0.2

Financial services

1.5



0.2


0.2


0.2


0.2


0.2


0.2

General merchandise

1.0



0.6


0.6


0.8


0.8


0.8


0.7

Grocery stores

2.9



3.7


1.6


0.9


0.7


0.7


0.7

Health and fitness

6.1



6.8


6.4


6.9


5.9


5.6


5.1

Health care

*



-


-


-


-


-


-

Home furnishings

0.8



1.0


1.1


1.3


1.3


2.4


2.6

Home improvement

1.3



1.5


1.7


2.0


2.2


2.1


2.4

Jewelry

0.1



-


-


-


-


-


-

Motor vehicle dealerships

1.5



2.1


2.2


2.6


2.7


3.2


3.1

Office supplies

0.4



0.8


0.9


0.9


1.0


1.0


1.1

Pet supplies and services

0.8



0.6


0.7


0.9


0.9


0.8


0.9

Restaurants - casual dining

5.0



7.3


10.9


13.4


13.7


14.3


14.9

Restaurants - quick service

4.2



5.9


6.6


7.7


8.3


8.2


6.6

Shoe stores

0.1



0.1


0.2


0.1


-


-


-

Sporting goods

1.7



2.5


2.7


2.7


2.6


2.3


2.6

Theaters

5.9



9.4


8.8


8.9


9.2


9.0


9.0

Transportation services

0.1



0.2


0.2


0.2


0.2


0.2


0.2

Wholesale clubs

4.4



3.2


0.7


-


-


-


-

Other

*



0.1


0.1


0.3


1.1


1.2


1.9

Retail industries

78.4%



86.7%


88.6%


95.4%


98.3%


98.2%


97.8%

















 

Industry Diversification (continued)



Percentage of  Rental Revenue(1)



For the Quarter Ended


For the Years Ended



September 30,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,


Dec 31,



2013


2012


2011


2010


2009


2008


2007

Non-retail industries















Aerospace

1.4



0.9


0.5


-


-


-


-

Beverages

3.2



5.1


5.6


3.0


-


-


-

Consumer appliances

0.6



0.1


-


-


-


-


-

Consumer goods

1.1



0.1


-


-


-


-


-

Crafts and novelties

0.1



-


-


-


-


-


-

Diversified industrial

0.1



0.1


-


-


-


-


-

Electrical utilities

0.1



-


-


-


-


-


-

Equipment services

0.5



0.3


0.2


-


-


-


-

Financial services

0.5



0.4


0.3


-


-


-


-

Food processing

1.4



1.3


0.7


-


-


-


-

Government services

1.4



0.1


0.1


0.1


0.1


-


-

Health care

1.9



*


*


-


-


-


-

Home furnishings

0.2



-


-


-


-


-


-

Home improvement

0.3



-


-


-


-


-


-

Insurance

0.1



*


-


-


-


-


-

Machinery

0.2



0.1


-


-


-


-


-

Other manufacturing

0.5



-


-


-


-


-


-

Packaging

0.9



0.7


0.4


-


-


-


-

Paper

0.2



0.1


0.1


-


-


-


-

Shoe stores

0.9



-


-


-


-


-


-

Telecommunications

0.7



0.8


0.7


-


-


-


-

Transportation services

5.2



2.2


1.6


-


-


-


-

Other

0.1



1.0


1.2


1.5


1.6


1.8


2.2

Non-retail industries

21.6%



13.3%


11.4%


4.6%


1.7%


1.8%


2.2%

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.

 

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 3,774 net leased, single-tenant properties as of September 30, 2013 (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


Sept. 30,


Rental

of Leases


Sept. 30,


Rental

of Leases


Sept. 30,


Rental

Year

Expiring(1)


Sq. Feet


2013(2)


Revenue

Expiring


2013


Revenue

Expiring


2013


Revenue
























2013


63


513,900


$

1,719


1.0%

13


$

559


0.4%

50


$

1,160


0.6%

2014


149


1,046,400



3,702


1.9

49



1,668


0.9

100



2,034


1.0

2015


172


933,200



3,969


1.9

67



1,789


0.9

105



2,180


1.0

2016


195


1,167,300



4,504


2.3

119



2,787


1.4

76



1,717


0.9

2017


171


1,973,200



5,689


2.9

45



2,975


1.5

126



2,714


1.4

2018


260


3,358,400



10,535


5.4

162



7,793


4.0

98



2,742


1.4

2019


179


2,865,900



9,905


5.1

159



9,238


4.8

20



667


0.3

2020


110


3,402,100



8,557


4.4

99



8,187


4.2

11



370


0.2

2021


188


5,185,900



13,494


6.9

180



12,983


6.6

8



511


0.3

2022


213


7,155,500



14,518


7.6

205



14,284


7.4

8



234


0.2

2023


350


5,735,100



18,374


9.4

338



17,736


9.1

12



638


0.3

2024


139


2,084,800



7,027


3.6

139



7,027


3.6

-



-


-

2025


288


3,708,300



16,602


8.6

283



16,475


8.5

5



127


0.1

2026


232


3,558,100



12,630


6.6

229



12,547


6.5

3



83


0.1

2027


445


4,183,900



14,176


7.3

443



14,136


7.3

2



40


*

2028 - 2043


620


12,972,100



48,795


25.1

612



48,630


25.0

8



165


0.1

Totals


3,774


59,844,100


$

194,196


100.0%

3,142


$

178,814


92.1%

632


$

15,382


7.9%
























*


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 $535 from properties reclassified as discontinued operations and excludes revenue of $1,745 from 19 multi-tenant properties and from 73 vacant and unleased properties at September 30, 2013.  Excludes revenue of $23 from four 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 September 30, 2013 (dollars in thousands):






Approximate

Rental Revenue for

Percentage of



Number of

Percent

Leasable

 the Quarter Ended

Rental

State

Properties

Leased

Square Feet

September 30, 2013(1)

Revenue

Alabama            

103

97%

782,700

$

2,662

1.4%

Alaska             

2

100

128,500


307

0.2

Arizona            

110

96

1,185,600


5,311

2.7

Arkansas           

35

94

607,200


1,123

0.6

California         

161

100

4,613,600


19,723

10.1

Colorado           

69

99

759,100


2,679

1.4

Connecticut        

22

95

462,100


2,035

1.0

Delaware           

16

100

29,500


418

0.2

Florida            

287

99

2,959,400


11,461

5.8

Georgia            

206

97

2,661,900


7,949

4.1

Hawaii             

--

--

--


--

--

Idaho              

13

100

91,800


449

0.2

Illinois           

148

100

4,060,000


10,505

5.4

Indiana            

100

98

1,012,100


4,739

2.4

Iowa               

33

97

2,667,200


3,044

1.6

Kansas             

76

99

1,571,200


3,266

1.7

Kentucky           

43

98

788,200


2,833

1.4

Louisiana          

72

97

806,700


2,409

1.2

Maine

9

100

126,400


848

0.4

Maryland           

32

100

649,900


3,680

1.9

Massachusetts      

82

95

723,900


3,107

1.6

Michigan           

103

98

939,200


3,179

1.6

Minnesota          

155

100

1,152,000


7,366

3.8

Mississippi        

95

96

1,282,200


3,115

1.6

Missouri           

121

99

2,293,500


7,348

3.8

Montana            

2

50

30,000


13

*

Nebraska           

27

100

391,000


1,199

0.6

Nevada             

20

100

380,700


1,220

0.6

New Hampshire      

19

100

295,000


1,256

0.6

New Jersey         

63

97

408,800


2,610

1.3

New Mexico         

23

100

178,100


537

0.3

New York           

80

95

1,970,300


10,021

5.1

North Carolina     

126

99

1,181,600


4,494

2.3

North Dakota       

7

100

66,000


118

0.1

Ohio               

197

97

4,760,300


11,196

5.7

Oklahoma           

111

100

1,457,900


3,565

1.8

Oregon             

24

100

455,200


1,527

0.8

Pennsylvania       

151

99

1,724,400


7,175

3.7

Rhode Island       

3

100

21,300


65

*

South Carolina     

127

98

868,100


3,919

2.0

South Dakota       

11

100

133,500


244

0.1

Tennessee          

155

97

2,601,300


5,075

2.6

Texas              

388

99

6,606,600


19,278

9.9

Utah               

12

100

742,700


1,198

0.6

Vermont            

6

100

100,700


444

0.2

Virginia           

127

97

2,531,400


6,333

3.2

Washington         

37

100

400,800


1,442

0.7

West Virginia      

12

100

261,200


877

0.4

Wisconsin          

38

95

1,315,300


2,367

1.2

Wyoming            

3

100

21,100


63

*

Puerto Rico

4

100

28,300


149

0.1

Totals\Average

3,866

98%

61,285,500

$

195,941

100.0%









*

Less than 0.1%















(1)

Includes rental revenue for all properties owned by Realty Income at September 30, 2013, including revenue from properties reclassified as discontinued operations of $535.  Excludes revenue of $23 from properties owned by Crest.

 

SOURCE Realty Income Corporation



RELATED LINKS
http://www.realtyincome.com

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