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Realty Income Announces Operating Results For Fourth Quarter And 2016

Realty Income Announces Operating Results For Fourth Quarter And 2016

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02.22.2017

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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		Year		Year
	Ended 12/31/16		Ended 12/31/15		Ended 12/31/16		Ended 12/31/15
REVENUE
Rental	$	275,224	$	252,733	$	1,057,413	$	976,865
Tenant reimbursements		11,363		10,259		43,104		42,015
Other		1,256		676		2,655		4,405

Total revenue		287,843		263,668		1,103,172		1,023,285

EXPENSES
Depreciation and amortization		117,752		105,739		449,943		409,215
Interest		48,935		51,982		219,974		233,079
General and administrative		13,559		12,966		51,966		49,298
Property (including reimbursable)		17,411		12,897		62,865		55,352
Income taxes		449		721		3,262		3,169
Provisions for impairment		3,709		1,378		20,664		10,560

Total expenses		201,815		185,683		808,674		760,673

Gain on sales of real estate		6,696		5,126		21,979		22,243

Net income		92,724		83,111		316,477		284,855
Net income attributable to noncontrolling interests		(283)		(170)		(906)		(1,089)

Net income attributable to the Company		92,441		82,941		315,571		283,766
Preferred stock dividends		(6,770)		(6,770)		(27,080)		(27,080)

Net income available to common stockholders	$	85,671	$	76,171	$	288,491	$	256,686

Funds from operations available to common stockholders (FFO)	$	199,833	$	177,908	$	735,395	$	652,437
Adjusted funds from operations available to common stockholders (AFFO)	$	192,964	$	170,023	$	736,374	$	647,028

Per share information for common stockholders:
Net income, basic and diluted	$	0.33	$	0.31	$	1.13	$	1.09

FFO:
Basic	$	0.77	$	0.72	$	2.88	$	2.77
Diluted	$	0.77	$	0.71	$	2.88	$	2.77

AFFO:
Basic	$	0.75	$	0.68	$	2.89	$	2.74
Diluted	$	0.75	$	0.68	$	2.88	$	2.74

Cash dividends paid per common share	$	0.606	$	0.572	$	2.392	$	2.271

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 property sales.

		Three Months			Three Months				Year			Year
		Ended 12/31/16			Ended 12/31/15				Ended 12/31/16			Ended 12/31/15
Net income available to common stockholders	$		85,671	$		76,171		$		288,491		$	256,686
Depreciation and amortization			117,752			105,739				449,943			409,215
Depreciation of furniture, fixtures and equipment			(172)			(202)				(747)			(811)
Provisions for impairment			3,709			1,378				20,664			10,560
Gain on sales of real estate			(6,696)			(5,126)				(21,979)			(22,243)
FFO adjustments allocable to noncontrolling interests			(431)			(52)				(977)			(970)
FFO available to common stockholders	$		199,833	$		177,908		$		735,395		$	652,437
FFO allocable to dilutive noncontrolling interests			266			221				1,435			-
Diluted FFO ⁽¹⁾	$		200,099	$		178,129		$		736,830		$	652,437

FFO per common share:
Basic	$		0.77		$		0.72		$		2.88	$	2.77
Diluted	$		0.77		$		0.71		$		2.88	$	2.77

Distributions paid to common stockholders	$		156,741	$		140,471		$		610,516		$	533,238

FFO available to common stockholders in excess of distributions paid to common stockholders	$		43,092	$		37,437		$		124,879		$	119,199

Weighted average number of common shares used for FFO:
Basic		258,373,179			248,515,893				255,066,500			235,767,932
Diluted		259,010,432			249,508,956				255,822,679			235,891,368

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				Year			Year
			Ended 12/31/16				Ended 12/31/15				Ended 12/31/16			Ended 12/31/15
Net income available to common stockholders		$		85,671		$		76,171		$		288,491		$	256,686
Cumulative adjustments to calculate FFO ⁽¹⁾				114,162				101,737				446,904			395,751
FFO available to common stockholders				199,833				177,908				735,395			652,437
Amortization of share-based compensation				2,803				2,793				12,007			10,391
Amortization of deferred financing costs ⁽²⁾				1,492				1,334				5,352			5,294
Amortization of net mortgage premiums				(745)				(1,725)				(3,414)			(6,978)
Gain on early extinguishment of debt				-				(148)				-			(504)
(Gain) loss on interest rate swaps				(7,474)				(4,094)				(1,639)			3,043
Leasing costs and commissions				(233)				(193)				(797)			(748)
Recurring capital expenditures				(193)				(3,786)				(679)			(7,606)
Straight-line rent				(5,239)				(4,185)				(19,451)			(16,468)
Amortization of above and below-market leases				2,627				2,040				9,297			7,861
Other adjustments ⁽³⁾				93				79				303			306
AFFO available to common stockholders		$		192,964		$		170,023		$		736,374		$	647,028
AFFO allocable to dilutive noncontrolling interests				262				219				1,455			-
Diluted AFFO ⁽⁴⁾		$		193,226		$		170,242		$		737,829		$	647,028

AFFO per common share:
	Basic		$		0.75		$		0.68		$		2.89	$	2.74
	Diluted		$		0.75		$		0.68		$		2.88	$	2.74

Distributions paid to common stockholders		$		156,741		$		140,471		$		610,516		$	533,238

AFFO available to common stockholders in excess of distributions paid to common stockholders		$		36,223		$		29,552		$		125,858		$	113,790

Weighted average number of common shares used for AFFO:
	Basic		258,373,179				248,515,893				255,066,500			235,767,932
	Diluted		259,010,432				249,508,956				255,822,679			235,891,368

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

For the three months ended December 31,		2016		2015			2014			2013			2012

Net income available to common stockholders	$	85,671	$	76,171	$		71,018	$		53,854	$		28,542
Depreciation and amortization		117,580		105,537			96,376			85,243			42,428
Provisions for impairment		3,709		1,378			1,960			-			4,472
Gain on sales real estate		(6,696)		(5,126)			(25,270)			(14,276)			(3,863)
Merger-related costs		-		-			-			138			2,404
FFO adjustments allocable to noncontrolling interests		(431)		(52)			(378)			(329)			-

FFO	$	199,833	$	177,908	$		143,706	$		124,630	$		73,983

FFO per diluted share	$	0.77	$	0.71	$		0.64	$		0.61	$		0.56

AFFO	$	192,964	$	170,023	$		145,394	$		125,700	$		72,892

AFFO per diluted share	$	0.75	$	0.68	$		0.65	$		0.62	$		0.55

Cash dividends paid per share	$	0.606	$	0.572	$		0.549	$		0.546	$		0.454
Weighted average diluted shares outstanding	259,010,432		249,508,956		223,262,633			203,326,838			132,979,552

For the year ended December 31,		2016		2015			2014			2013			2012

Net income available to common stockholders	$	288,491	$	256,686	$		227,558	$		203,634	$		114,538
Depreciation and amortization		449,196		408,404			374,179			308,107			151,058
Provisions for impairment		20,664		10,560			4,636			3,028			5,139
Gain on sales of real estate		(21,979)		(22,243)			(42,088)			(64,743)			(9,873)
Merger-related costs		-		-			-			13,013			7,899
FFO adjustments allocable to noncontrolling interests		(977)		(970)			(1,396)			(1,009)			-

FFO	$	735,395	$	652,437	$		562,889	$		462,030	$		268,761

FFO per diluted share	$	2.88	$	2.77	$		2.58	$		2.41	$		2.02

AFFO	$	736,374	$	647,028	$		561,661	$		463,139	$		274,183

AFFO per diluted share	$	2.88	$	2.74	$		2.57	$		2.41	$		2.06

Cash dividends paid per share	$	2.392	$	2.271	$		2.192	$		2.147	$		1.772
Weighted average diluted shares outstanding - FFO	255,822,679		235,891,368			218,450,863			191,781,622			132,884,933

REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2016 and 2015
(dollars in thousands, except per share data) (unaudited)

		2016		2015⁽¹⁾
ASSETS
Real estate, at cost:
Land	$	3,752,204	$	3,286,004
Buildings and improvements		10,112,212		9,010,778
Total real estate, at cost		13,864,416		12,296,782
Less accumulated depreciation and amortization		(1,987,200)		(1,687,665)
Net real estate held for investment		11,877,216		10,609,117
Real estate held for sale, net		26,575		9,767
Net real estate		11,903,791		10,618,884
Cash and cash equivalents		9,420		40,294
Accounts receivable, net		104,584		81,678
Acquired lease intangible assets, net		1,082,320		1,034,417
Goodwill		15,067		15,321
Other assets, net		37,689		54,785
Total assets	$	13,152,871	$	11,845,379

LIABILITIES AND EQUITY
Distributions payable	$	55,235	$	50,344
Accounts payable and accrued expenses		121,156		115,826
Acquired lease intangible liabilities, net		264,206		250,916
Other liabilities		85,616		53,965
Line of credit payable		1,120,000		238,000
Term loans, net		319,127		318,835
Mortgages payable, net		466,045		646,187
Notes payable, net		3,934,433		3,617,973
Total liabilities		6,365,818		5,292,046

Commitments and contingencies

Stockholders' equity:
Preferred stock and paid in capital, par value $0.01 per share,
69,900,000 shares authorized, 16,350,000 shares issued and
outstanding as of December 31, 2016 and December 31, 2015,
liquidation preference $25.00 per share		395,378		395,378
Common stock and paid in capital, par value $0.01 per share,
370,100,000 shares authorized, 260,168,259 shares issued and
outstanding as of December 31, 2016 and 250,416,757 shares issued
and outstanding as of December 31, 2015		8,228,594		7,666,428
Distributions in excess of net income		(1,857,168)		(1,530,210)
Total stockholders' equity		6,766,804		6,531,596
Noncontrolling interests		20,249		21,737
Total equity		6,787,053		6,553,333
Total liabilities and equity	$	13,152,871	$	11,845,379

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	%

Compound Average Annual Total Return ⁽⁵⁾			16.9	%			10.9	%			10.1	%			9.4	%			9.2	%