Financial Performance Questions

How much debt does the company have?

As of 6/30/16, our debt to total market capitalization was 21.3%. Total debt outstanding of
approximately $4.97 billion included:

  1. $4.44 billion in long-term notes, bonds, mortgages, and a term loan
  2. $512 million of borrowings on our acquisition credit facility

Realty Income’s capital structure consists primarily of common stock, or equity. It is our goal to maintain a conservative balance sheet and keep the use of debt at a manageable level.

How much preferred stock do we have?

  • We have $408.8 million, or 16,350,000 Class F preferred shares outstanding
  • The Class F preferred shares are callable in 2017, at our discretion, for $25 per share

Why don’t we use more debt?

  • Utilizing modest amounts of leverage reduces overall financial risk and the potential volatility in our long-term cash flow and stock price
  • Over the long term, we believe common stock should be the majority of our capital structure
  • In general, when raising capital to permanently fund acquisitions, we consider market conditions to determine the optimal mix of capital that offers both a cost-effective and a conservative funding option

What is Realty Income’s equity market capitalization? What does this consist of?

  • Our equity market capitalization was approximately $17.9 billion as of 6/30/16
  • Realty Income’s total market capitalization was $23.3 billion as of 6/30/16, which consisted of:
    1. $17.9 billion of common stock
    2. $408.8 million of preferred stock
    3. $4.44 billion in long-term notes, bonds, mortgages, and a term loan
    4. $512 million of borrowings on our acquisition credit facility

Why is our net income per share less than the amount of our dividend per share?

  • The net income calculation includes a significant deduction for depreciation expense, may include a non-cash loss from the sales of properties and other one-time charges
  • Since Realty Income’s primary asset is real estate, the depreciation deduction is significant. Thus, net income does not reflect the recurring cash generating ability of our business from which we pay dividends
  • The calculation most commonly used to determine a real estate company’s operating performance is “adjusted funds from operations,” or “AFFO”, which adds back the depreciation expense and adjusts for the accounting impact of gains or losses from property sales. It also adjusts for unique revenue and expense items that are not pertinent to ongoing operating performance