HOME SEARCH DIVIDENDS FORMS SEC FILINGS CORPORATE GOVERNANCE
News
More About Realty Income
Dividends
Management Professionals
Corporate Governance
Shareholder Information
Company Literature
View Documents Filed With The SEC
Request Information
Legal Information
Press Release
REALTY INCOME ANNOUNCES FIRST QUARTER OPERATING RESULTS

ESCONDIDO, CALIFORNIA, April 27, 2005 — Realty Income Corporation (Realty Income), The Monthly Dividend Company®, (NYSE: O) today announced operating results for the first quarter ended March 31, 2005.

COMPANY HIGHLIGHTS
(For the quarter ended March 31, 2005)

  • Revenue increased 12.5% to $46.7 million
  • Funds from Operations (FFO) available to common stockholders increased 1.3% to $31.2 million
  • FFO per diluted common share decreased 2.5% to $0.39 per share
  • Net income available to common stockholders per diluted common share was $0.27 per share
  • Same store rents increased 0.7 % to $39.76 million
  • Invested $92.5 million in 34 additional properties
  • Increased the monthly dividend amount for the 30th consecutive quarter to an annual rate of $1.3275 per share
  • Issued $100 million of 30-year, 5-7/8% senior unsecured bonds
Financial Results

Revenue Increases
Realty Income’s revenue for the first quarter ended March 31, 2005 increased 12.5% to $46.7 million as compared to $41.5 million for the same quarter in 2004.

Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended March 31, 2005 was $21.2 million as compared to $22.4 million for the same period in 2004. On a diluted per common share basis, net income for the quarter was $0.27 per share as compared to $0.29 per share for the same period in 2004.

The calculation to determine net income for a real estate company includes gains from the sale of investment properties and impairments. The amount of gains on property sales and impairments varies from quarter to quarter. This variance can significantly impact net income.

During the first quarter of 2005, income from continuing operations available to common stockholders was $0.24 per diluted share as compared to $0.22 per diluted share for the same period in 2004.

FFO Available to Common Stockholders
For the first quarter ended March 31, 2005, FFO increased 1.3% to $31.2 million as compared to $30.8 million for the same quarter in 2004. FFO per diluted common share decreased 2.5% to $0.39 per share, for the quarter ended March 31, 2005, as compared to $0.40 per share for the same period in 2004. Core FFO per share before Crest Net Lease contribution, for the quarter ended March 31, 2005, increased 5.6% to $0.38 per share from $0.36 per share for the same period in 2004.

The Company considers FFO to be an appropriate supplemental measure of a Real Estate Investment Trust’s (REITs) operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. FFO is an alternative, non-GAAP, measure that is also considered to be a good indicator of a company’s ability to generate income to pay dividends. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT) definition as net income available to common stockholders plus depreciation and amortization of assets uniquely significant to the real estate industry, reduced by gains on sales of investment properties and extraordinary items. (See reconciliation of net income available to common stockholders to FFO below.)

Dividend Information
In March 2005, Realty Income announced the 30th consecutive quarterly increase in the amount of the monthly dividend on its common stock. This marked the 33rd increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The monthly dividend amount was increased to $0.110625 per share from $0.11 per share for an annualized amount of $1.3275 per share. Through March 31, 2005, the Company has paid 416 consecutive monthly dividends and continues its 36-year policy of declaring and paying dividends every month.

Real Estate Portfolio Update

As of March 31, 2005, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 1,560 properties located in 48 states, leased to 95 retail chains doing business in 30 retail industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 11.9 years.

Portfolio Management Activities
The Company’s portfolio of retail real estate, owned primarily under 15- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of March 31, 2005, portfolio occupancy was 97.9% with only 33 properties available for lease out of 1,560 properties in the portfolio.

Rent Increases
Same store rents on 1,288 properties under lease during the three months ended March 31, 2005 and 2004, increased 0.7% to $39.76 million from $39.49 million in 2004.

Property Acquisitions
During the first quarter, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $92.5 million in 34 new properties and properties under development. Realty Income invested $83.3 million in 31 new properties and properties under development with an initial average contractual lease yield of 8.6%. The 31 new properties are located in 12 states and are 100% leased under net-lease agreements with an initial average lease length of 16.1 years. They are leased to three different retail chains in three industries: drug store, motor vehicle dealership, and restaurant.

Realty Income maintains an unsecured acquisition credit facility with borrowing capacity of $250 million, which is used to fund property acquisitions in the near term. The outstanding balance on the Company’s acquisition credit facility at the end of the first quarter was $3.1 million with $246.9 million available to fund new property acquisitions.

Property Dispositions
Realty Income continued to successfully execute its asset disposition program. The objective of the program is to sell assets when the Company believes the reinvestment of the sale proceeds will generate higher returns, enhance the credit quality of the Company’s real estate portfolio or increase the average lease length.

During the first quarter ended March 31, 2005, Realty Income sold four properties, plus the sale of a portion of land on one property, which resulted in a gain on sales of $822,000. The properties sold consisted of: one automotive tire service store, one child care location, one motor vehicle dealership, and one restaurant. The proceeds were, or will be, used to pay down the Company’s acquisition credit facility and invest in new properties.

Other Activities

Issued 30-Year Bonds
In March 2005, Realty Income issued $100 million of 30-year, 5-7/8% senior unsecured bonds due 2035. The price to the investor for the bonds was 98.296% of the principal amount for an effective yield of 5.998%. The securities are rated BBB by Fitch Ratings, Baa2 by Moody’s Investors Service and BBB by Standard & Poor’s Ratings Group. The net proceeds from the offering were used to repay borrowings under the Company’s $250 million unsecured acquisition credit facility and for other general corporate purposes.

Crest Net Lease
Crest Net Lease is a wholly-owned subsidiary of Realty Income focused on acquiring and subsequently marketing net-leased properties for sale. During the first quarter ended March 31, 2005, Crest sold six properties for $7.7 million and reported a gain on sales of $1.2 million. Crest also invested $9.1 million in three new properties. As of March 31, 2005, Crest carried a property inventory of $12.7 million consisting of five properties held for sale.

Crest’s contribution to Realty Income’s FFO depends on the timing and number of property sales, if any, in a given quarter. As such, Crest’s contribution can fluctuate and add volatility to the Company’s reported FFO on a comparable quarterly and annualized basis. During the first quarter ended March 31, 2005, Crest generated $833,000, or $0.01 per diluted common share in FFO (and net income) for Realty Income, as compared to $3.3 million, or $0.04 per diluted common share, generated in the first quarter of 2004.

CEO Comments on First Quarter 2005 Operating Results

Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased to report continued growth in revenue and dividends along with continued growth in the size and diversification of the Company’s real estate portfolio. During the first quarter, we invested $92.5 million in 34 new properties, a solid contribution to reaching our targeted acquisition goal of $250 million in 2005. As of the end of the quarter our portfolio of 1,560 freestanding, retail properties was diversified across 95 retail tenants, 30 retail industries and 48 states. Proceeds from our recent successful 30-year bond offering repaid borrowings under our acquisition credit facility, so capital to fund new property acquisitions is also readily available to us.

"On a quarterly comparative basis, our financial results were impacted by a much higher level of property sales in Crest during the first quarter of 2004 versus the first quarter of 2005. Crest recorded $31.0 million of property sales during the first quarter ended March 31, 2004, as compared to property sales of $7.7 million during the first quarter of 2005. This equated to a contribution of $0.04 to Realty Income’s FFO per share during the first quarter of 2004 as compared to a contribution of $0.01 per share during the first quarter of 2005. Core FFO per share before Crest Net Lease’s contribution, for the quarter ended March 31, 2005, increased 5.6% to $0.38 per share from $0.36 per share for the same period in 2004.

"We are fortunate that, as The Monthly Dividend Company®, we have continued to offer a dependable source of monthly income to our shareholders throughout market swings and economic uncertainties. We continue to grow our FFO at a rate that has allowed us to provide regular dividend increases while maintaining solid dividend coverage and a conservative payout ratio. The annualized dividend amount has grown from $0.90 per share in 1995 to $1.3275 per share as of April 2005, an increase of 47.5%. The April 2005 annualized dividend amount increased by 9.9% as compared to the April 2004 annualized dividend amount of $1.2075 per share."

Earnings Commentary

Realty Income’s FFO per common 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 per common share to vary from levels that have been anticipated by the Company. These factors include, but are not limited to, changes in interest rates, occupancy rates, periodically accessing the capital markets, the level and timing of property acquisitions and dispositions, lease rollovers, the general real estate market, the economy, charges for property impairments, and the operations of Crest Net Lease.

2005 Estimates

Management estimates that FFO per common share for 2005 should range from $1.59 to $1.62, which would equate to an increase of approximately 6% to 8% over 2004 FFO per share of $1.50. FFO for 2005 is based on an estimated diluted net income per share range of $1.10 to $1.13, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.55 and potential gain on sales of investment properties of $0.06 per share.

Management further estimates Crest Net Lease could contribute between $0.03 to $0.05 per share to Realty Income’s FFO (and net income) during 2005 as compared to $0.10 in 2004. Crest’s primary business is the purchase and sale of properties for a profit. These sales may occur at various times during the course of the year, which could cause FFO, in certain quarters, to fluctuate from normal levels.

The Company does not intend to provide quarterly estimates of FFO. Absent any changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimate for the year has not changed.

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, the availability of capital to finance planned growth, property acquisitions and the timing of these acquisitions, charges for property impairments, the outcome of any legal proceedings to which the Company is a party, and the profitability of the Company’s subsidiary, Crest Net Lease, as described in the Company’s filings with the Securities and Exchange Commission. Consequently, such 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.

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, 2005, the Company had paid 416 consecutive monthly dividends throughout its 36-year operating history. The monthly income is supported by the cash flows from over 1,500 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net-leased retail properties nationwide.

Note to Editors:
Realty Income press releases are available at no charge by calling our toll-free investor hotline number: 888-811-2001, or through the internet at http://www.realtyincome.com/Investing/News.html.

 

Income Statement

CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2005 and 2004
(dollars in thousands, except per share amounts)

 

Three Months
Ended 3/31/05

  

Three Months
Ended 3/31/04

 
REVENUE
Rental   $ 46,706    $ 41,094 
Other   37    362 
    46,743    41,456 

 
EXPENSES
Interest   9,058    8,476 
Depreciation and amortization   10,817    9,562 
General and administrative   4,056    3,160 
Property   880    707 
Income taxes   198    153 
    25,009    22,058 

 
Income from continuing operations   21,734     19,398 
Income from discontinued operations        
    Real estate acquired for resale by Crest   833    3,276 
    Real estate held for investment   936    2,177 
    1,769    5,453 

 
Net Income   23,503    24,851 
Preferred stock cash dividends   (2,351)   (2,428)

 
Net income available to common stockholders   $ 21,152    $ 22,423 

 
Funds from operations available to
    common stockholders (FFO)		   $ 31,162    $ 30,760 
Per share information for
    common stockholders, basic and diluted		        
Income from continuing operations   $ 0.24    $ 0.22 
Net income   $ 0.27    $ 0.29 
FFO        
    FFO before Crest Net contribution   $ 0.38    $ 0.36 
    Crest Net Lease   0.01    0.04 
    Total FFO   0.39    0.40 
Cash dividends paid   $ 0.330   $ 0.300

 

 

 
Segmentation by Category

FUNDS FROM OPERATIONS
For the three months ended March 31, 2005 and 2004
(dollars in thousands, except per share amounts)


 

Three Months
Ended 3/31/05

  

Three Months
Ended 3/31/04

 
Net income available to
   common stockholders		   $ 21,152    $ 22,423 
Depreciation and amortization:
   Continuing operations		   10,817    9,562 
   Discontinued operations   47    254 
Depreciation of furniture,
   fixtures and equipment		   (32)   (29)
Gain on sales of investment properties   (822)   (1,450)

 
Funds from operations available to
   common stockholders		   $ 31,162    $ 30,760 

 
Dividends paid to
   common stockholders		   $ 26,262    $ 22,802 
FFO in excess of dividends   $ 4,900    $ 7,958 
FFO per common share,
   basic and diluted 		  $ 0.39    $ 0.40 
Weighted average number of
   common shares used for		        
   computation per share:
       Basic		   79,581,517    76,228,344 
       Diluted   79,659,364    76,321,278 

 

CONTRIBUTIONS BY CREST NET LEASE TO FUNDS FROM OPERATIONS
For the three months ended March 31, 2005 and 2004
(dollars in thousands, except per share amounts)
 

Crest Net acquires properties with the intention of reselling them rather than holding them as investments and operating the properties. Consequently, we classify properties acquired by Crest Net as held for sale at the date of acquisition and do not depreciate them. The operations of Crest Net’s properties are classified as “income from discontinued operations, real estate acquired for resale.”

       
Gain on sales of real
   estate acquired for resale		   $ 1,226    $ 4,109 
Rental revenue   281    1,001 
Other revenue   1    -- 
Interest expense   (147)   (235)
General and administrative expenses   (139)   (124)
Property expenses   (25)   (8)
Income taxes   (364)   (1,467)

 
Funds from operations
    contributed by Crest		   $ 833    $ 3,276 

 
FFO per common share,
    basic and diluted		   $ 0.01    $ 0.04 
Total FFO   $ 31,162    $ 30,760 
Less FFO contributed by Crest    (833)    (3,276)

 
FFO before Crest contribution   $ 30,329    $ 27,484 

 
FFO before Crest contribution per
    common share, basic and diluted		   $ 0.38    $ 0.36 

 
 
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 assets uniquely significant to the real estate industry, reduced by gains on sales of investment property and extraordinary items.


 

 
Historical Funds from Operations

(dollars in thousands, except per share amounts)

                   
For the three months ended March 31,

2005

  

2004

  

2003

  

2002

  

2001

 
Net income available to
   common stockholders		   $ 21,152    $ 22,423    $ 15,606    $ 15,866    $ 16,045 
Depreciation and
   amortization		   10,832    9,787    8,063    7,471    7,182 
Gain on sales of
   investment properties		   (822)    (1,450)    (171)    (1,127)    (5,951) 

 
Total FFO   $ 31,162    $ 30,760    $ 23,498    $ 22,210    $ 17,276 

 
Total FFO per diluted share:   $ 0.39    $ 0.40    $ 0.34    $ 0.34    $ 0.32 
Total FFO   $ 31,162    $ 30,760    $ 23,498    $ 22,210    $ 17,276 
Less FFO contributed by Crest   $ (833)    $ (3,276)    $ (85)    $ (363)    $ (1,163) 

 
FFO before Crest contribution   $ 30,329    $ 27,484    $ 23,413    $ 21,847    $ 16,113 

 
FFO components,
   per diluted share:		                              
   FFO before Crest
         contribution		   $ 0.38    $ 0.36    $ 0.33    $ 0.33    $ 0.30 
   Crest FFO contribution   $ 0.01    $ 0.04    $ 0.00    $ 0.01    $ 0.02 
   Total FFO   $ 0.39    $ 0.40    $ 0.34    $ 0.34    $ 0.32 

 
Cash dividends paid per share   $ 0.330    $ 0.300    $ 0.293    $ 0.285    $ 0.278 
Diluted shares outstanding   79,659,364    76,321,278    70,011,970    66,183,494    53,311,352 

 
 


 
Balance Sheets

CONSOLIDATED BALANCE SHEETS
As of March 31, 2005 and December 31, 2004
(dollars in thousands, except per share data)


2005
2004

 
ASSETS    
Real estate, at cost:    
    Land $    649,597  $    624,558 
    Buildings and improvements 1,110,522  1,066,725 
1,760,119  1,691,283 
    Less accumulated depreciation
       and amortization		 (309,489) (301,728)

 
    Net real estate held for investment 1,450,630  1,389,555 
    Real estate held for sale, net 18,525  17,155 
       Net real estate 1,469,155  1,406,710 
Cash and cash equivalents 11,076  2,141 
Accounts receivable 3,512  4,075 
Goodwill 17,206  17,206 
Other assets 22,273  12,183 

 
     Total assets $ 1,523,222  $ 1,442,315 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $       9,196  $        9,115 
Accounts payable and accrued expenses 14,698  9,579 
Other liabilities 7,089  6,286 
Line of credit payable 3,100  23,600 
Notes payable 580,000  480,000 

 
    Total liabilities 614,083  528,580 

 
Stockholders’ equity:
Preferred stock and paid in capital, par     value $1.00 per share, 20,000,000
    shares authorized, 5,100,000 shares
    issued and outstanding		 123,804  123,787 
Common stock and paid in capital, par
    value $1.00 per share, 100,000,000
    shares authorized, 79,582,705
    and 79,301,630 shares issued and
    outstanding in 2005 and 2004,
    respectively
 1,039,551  1,038,973 
Distributions in excess of net income (254,216) (249,025)

 
    Total stockholders’ equity 909,139  913,735 

 
    Total liabilities and stockholders’ equity $ 1,523,222  $ 1,442,315 

 

 

 
Industry Diversifcation
The following table sets forth certain information regarding our properties 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 Mar. 31, 2005 For the Years Ended
Industries (30)

Dec. 31,
2004

Dec. 31,
2003

Dec. 31,
2002

Dec. 31,
2001

Dec. 31,
2000

Dec. 31,
1999

Dec. 31,
1998

 
Apparel Stores 1.7% 1.8% 2.1% 2.3% 2.4% 2.4% 3.8% 4.1%
Automotive Collision Services 1.3    1.0    0.3    --    --    --    --    --   
Automotive Parts 3.6    3.8    4.5    4.9    5.7    6.0    6.3    6.1   
Automotive Service 8.0    7.7    8.3    7.0    5.7    5.8    6.6    7.5   
Automotive Tire Services 7.9    7.8    3.1    2.7    2.6    2.3    2.3    1.7   
Book Stores 0.3    0.3    0.4    0.4    0.4    0.5    0.5    0.6   
Business Services 0.1    0.1    0.1    0.1    0.1    0.1    0.1    *   
Child Care 13.1    14.4    17.8    20.8    23.9    24.7    25.3    29.2   
Consumer Electronics 1.6    2.1    3.0    3.3    4.0    4.9    4.4    5.4   
Convenience Stores 19.0    19.2    13.3    9.1    8.4    8.4    7.2    6.1   
Crafts and Novelties 0.5    0.5    0.6    0.4    0.4    0.4    0.4    *   
Drug Stores 1.7    0.1    0.2    0.2    0.2    0.2    0.2    0.1   
Entertainment 2.2    2.3    2.6    2.3    1.8    2.0    1.2    --   
Equipment Rental Services 0.5    0.3    0.2    --    --    --    --    --   
Financial Services 0.1    0.1    --    --    --    --    --    --   
General Merchandise 0.4    0.4    0.5    0.5    0.6    0.6    0.6    *   
Grocery Stores 0.7    0.8    0.4    0.5    0.6    0.6    0.5    *   
Health and Fitness 3.8    4.0    3.8    3.8    3.6    2.4    0.6    0.1   
Home Furnishings 3.8    4.1    4.9    5.4    6.0    5.8    6.5    7.8   
Home Improvement 1.1    1.0    1.1    1.2    1.3    2.0    3.6    *   
Motor Vehicle Dealerships 2.2    0.6    --    --    --    --    --    --   
Office Supplies 1.5    1.6    1.9    2.1    2.2    2.3    2.6    3.0   
Pet Supplies and Services 1.3    1.4    1.7    1.7    1.6    1.5    1.1    0.6   
Private Education 1.1    1.1    1.2    1.3    1.5    1.4    1.2    0.9   
Restaurants 9.2    9.7    11.8    13.5    12.2    12.3    13.3    16.2   
Shoe Stores 0.1    0.3    0.9    0.8    0.7    0.8    1.1    0.8   
Sporting Goods 3.6    3.4    3.8    4.1    0.9    --    --    --   
Theaters 3.5    3.5    4.1    3.9    4.3    2.7    0.6    --   
Travel Plazas 0.4    0.4    0.3    --    --    --    --    --   
Video Rental 2.6    2.8    3.3    3.3    3.7    3.9    4.3    3.8   
Other 3.1    3.4    3.8    4.4    5.2    6.0    5.7    6.0   

 
Totals 100.0% 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 to discontinued operations) and excludes properties owned by our subsidiary, Crest Net.


 

 
Lease Expiration
The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,523 net leased, single-tenant retail properties as of March 31, 2005 (dollars in thousands):
 
Total Portfolio Initial Expirations Subsequent Expirations

Year		 Total
Number of Leases Expiring(1)		 Rental
Revenue
for the
Quarter Ended
3/31/05(2)		 % of Rental Revenue Number of Leases Expiring Rental
Revenue
for the
Quarter Ended
3/31/05		 % of Total Rental Revenue Number of Leases Expiring Rental
Revenue
for the
Quarter Ended
3/31/05		 % of Total Rental Revenue
2005 68 $  1,245 2.7 % 41 $  811 1.8 % 27 $  434 0.9 %
2006 97 2,187 4.8 45 1,069 2.3 52 1,118 2.5
2007 121 2,180 4.8 87 1,571 3.5 34 609 1.3
2008 98 2,075 4.6 60 1,433 3.2 38 642 1.4
2009 90 2,006 4.4 30 695 1.5 60 1,311 2.9
2010 45 1,052 2.3 33 845 1.9 12 207 0.4
2011 40 1,407 3.1 32 1,214 2.7 8 193 0.4
2012 44 1,358 3.0 43 1,339 3.0 1 19 *
2013 74 3,287 7.2 66 3,090 6.8 8 197 0.4
2014 49 2,058 4.5