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Realty Income Announces Operating Results For First Quarter 2018

Realty Income Announces Operating Results For First Quarter 2018

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05.08.2018

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11995 El Camino Real, San Diego, CA 92130

CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts) (unaudited)

	Three Months		Three Months
		Ended		Ended
	3/31/18		3/31/17
REVENUE
Rental	$	306,548	$	285,821
Tenant reimbursements		11,300		11,229
Other		447		975

Total revenue		318,295		298,025

EXPENSES
Depreciation and amortization		131,103		121,097
Interest		59,415		59,305
General and administrative		15,684		13,565
Property (including reimbursable)		16,552		19,075
Income taxes		1,223		1,047
Provisions for impairment		14,221		5,433

Total expenses		238,198		219,522

Gain on sales of real estate		3,218		10,532

Net income		83,315		89,035
Net income attributable to noncontrolling interests		(152)		(165)

Net income attributable to the Company		83,163		88,870
Preferred stock dividends		-		(3,911)
Excess of redemption value over carrying value of
preferred shares redeemed		-		(13,373)

Net income available to common stockholders	$	83,163	$	71,586

Funds from operations available to
common stockholders (FFO)	$	224,882	$	187,213
Adjusted funds from operations available to
common stockholders (AFFO)	$	224,560	$	201,336

Per share information for common stockholders:
Net income, basic and diluted	$	0.29	$	0.27

FFO, basic and diluted	$	0.79	$	0.71

AFFO, basic and diluted	$	0.79	$	0.76

Cash dividends paid per common share	$	0.651	$	0.624

FUNDS FROM OPERATIONS (FFO)
(dollars in thousands, except per share amounts)

We define FFO, a non-GAAP measure, consistent with NAREIT'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 real estate sales.

		Three Months		Three Months
		Ended 3/31/18		Ended 3/31/17
Net income available to common stockholders		$	83,163	$	71,586
Depreciation and amortization			131,103		121,097
Depreciation of furniture, fixtures and equipment			(159)		(157)
Provisions for impairment			14,221		5,433
Gain on sales of real estate			(3,218)		(10,532)
FFO adjustments allocable to noncontrolling interests			(228)		(214)
FFO available to common stockholders		$	224,882	$	187,213
FFO allocable to dilutive noncontrolling interests			218		220
Diluted FFO		$	225,100	$	187,433

FFO per common share, basic and diluted		$	0.79	$	0.71

Distributions paid to common stockholders		$	185,556	$	162,506

FFO available to common stockholders in excess
of distributions paid to common stockholders		$	39,326	$	24,707

Weighted average number of common shares used for FFO:
	Basic	283,917,418		263,340,491
	Diluted	284,345,328		263,934,304

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 3/31/18		Ended 3/31/17
Net income available to common stockholders		$	83,163	$	71,586
Cumulative adjustments to calculate FFO ⁽¹⁾			141,719		115,627
FFO available to common stockholders			224,882		187,213
Excess of redemption value over carrying value
of Class F preferred share redemption			-		13,373
Amortization of share-based compensation			3,662		2,753
Amortization of deferred financing costs ⁽²⁾			844		1,487
Amortization of net mortgage premiums			(459)		(630)
Gain on interest rate swaps			(2,007)		(1,330)
Leasing costs and commissions			(917)		(410)
Recurring capital expenditures			(11)		(341)
Straight-line rent			(5,365)		(3,283)
Amortization of above and below-market leases			3,864		2,432
Other adjustments ⁽³⁾			67		72
AFFO available to common stockholders		$	224,560	$	201,336
AFFO allocable to dilutive noncontrolling interests			229		294
Diluted AFFO		$	224,789	$	201,630

AFFO per common share, basic and diluted		$	0.79	$	0.76

Distributions paid to common stockholders		$	185,556	$	162,506

AFFO available to common stockholders in excess
of distributions paid to common stockholders		$	39,004	$	38,830

Weighted average number of common shares used for AFFO:
	Basic	283,917,418		263,340,491
	Diluted	284,345,328		264,022,486


⁽¹⁾	See FFO calculation on page five for reconciling items.
⁽²⁾	Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and issuance of our term loans. The deferred financing costs are being amortized over the lives of the respective notes payable, mortgages and term loans. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.
⁽³⁾	Includes adjustments allocable to both noncontrolling interests and capital lease obligations.

HISTORICAL FFO AND AFFO
(dollars in thousands, except per share amounts)

For the three months ended March 31,		2018		2017		2016		2015		2014

Net income available to common stockholders	$	83,163	$	71,586	$	63,473	$	60,494	$	47,179
Depreciation and amortization		130,944		120,940		107,740		97,852		89,879
Provisions for impairment		14,221		5,433		1,923		2,087		1,683
Gain on sales of real estate		(3,218)		(10,532)		(2,289)		(7,218)		(3,878)
FFO adjustments allocable to noncontrolling interests		(228)		(214)		(218)		(315)		(343)

FFO	$	224,882	$	187,213	$	170,629	$	152,900	$	134,520

FFO per diluted share	$	0.79	$	0.71	$	0.68	$	0.68	$	0.65

AFFO	$	224,560	$	201,336	$	175,918	$	152,121	$	132,660

AFFO per diluted share	$	0.79	$	0.76	$	0.70	$	0.67	$	0.64

Cash dividends paid per share	$	0.651	$	0.624	$	0.588	$	0.561	$	0.547
Weighted average diluted shares outstanding - FFO	284,345,328		263,934,304		250,381,001		225,508,832		207,007,341
Weighted average diluted shares outstanding - AFFO	284,345,328		264,022,486		250,381,001		225,508,832		207,007,341

REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2018 and December 31, 2017
(dollars in thousands, except per share data)

		2018		2017
ASSETS		(unaudited)
Real estate, at cost:
Land	$	4,259,909	$	4,080,400
Buildings and improvements		11,145,329		10,936,069
Total real estate, at cost		15,405,238		15,016,469
Less accumulated depreciation and amortization		(2,433,678)		(2,346,644)
Net real estate held for investment		12,971,560		12,669,825
Real estate held for sale, net		29,953		6,674
Net real estate		13,001,513		12,676,499
Cash and cash equivalents		20,627		6,898
Accounts receivable, net		125,690		119,533
Acquired lease intangible assets, net		1,262,252		1,194,930
Goodwill		14,943		14,970
Other assets, net		49,068		45,336
Total assets	$	14,474,093	$	14,058,166

LIABILITIES AND EQUITY
Distributions payable	$	62,904	$	60,799
Accounts payable and accrued expenses		92,379		109,523
Acquired lease intangible liabilities, net		303,204		268,796
Other liabilities		123,705		116,869
Line of credit payable		1,082,000		110,000
Term loans, net		319,441		445,286
Mortgages payable, net		313,173		325,941
Notes payable, net		4,879,628		5,230,244
Total liabilities		7,176,434		6,667,458

Commitments and contingencies

Stockholders' equity:
Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 284,380,175 shares issued and outstanding as of March 31, 2018 and 284,213,685 shares issued and outstanding as of December 31, 2017		9,625,200		9,624,264
Distributions in excess of net income		(2,357,220)		(2,252,763)
Total stockholders' equity		7,267,980		7,371,501
Noncontrolling interests		29,679		19,207
Total equity		7,297,659		7,390,708
Total liabilities and equity	$	14,474,093	$	14,058,166

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	%
2014	4.6	%	33.7	%	3.6	%	28.0	%	2.3	%	10.0	%	2.0	%	13.7	%	1.3	%	13.4	%
2015	4.4	%	13.0	%	3.9	%	2.8	%	2.6	%	0.2	%	2.2	%	1.4	%	1.4	%	5.7	%
2016	4.2	%	16.0	%	4.0	%	8.6	%	2.5	%	16.5	%	2.1	%	12.0	%	1.4	%	7.5	%
2017	4.5	%	3.6	%	3.9	%	8.7	%	2.2	%	28.1	%	1.9	%	21.8	%	1.1	%	28.2	%
Q1 2018	5.1	%	(8.1)	%	4.3	%	(6.7)	%	2.2	%	(2.0)	%	1.9	%	(0.8)	%	1.1	%	2.3	%

Compound Average Annual Total Return ⁽⁵⁾			15.7	%			10.3	%			10.6	%			9.8	%			9.9	%