Three Months Ended
December 31,

Year Ended

December 31,

2019

2018

2019

2018

Total revenue

$

397.5

$

342.6

$

1,491.6

$

1,327.8

Net income available to common stockholders ⁽¹⁾⁽²⁾

$

129.3

$

85.1

$

436.5

$

363.6

Net income per share ⁽²⁾

$

0.39

$

0.29

$

1.38

$

1.26

Funds from operations (FFO) available to common stockholders ⁽²⁾⁽³⁾

$

280.4

$

217.7

$

1,039.6

$

903.3

FFO per share ⁽²⁾

$

0.85

$

0.73

$

3.29

$

3.12

Adjusted funds from operations (AFFO) available to common stockholders ⁽³⁾

$

282.0

$

236.8

$

1,050.0

$

924.6

AFFO per share

$

0.86

$

0.79

$

3.32

$

3.19

⁽¹⁾ 

The calculation to determine net income for a real estate company includes provisions for impairment, gains on sales of real estate, and foreign currency gains and losses. These items can vary from quarter to quarter and can significantly impact net income and period to period comparisons.

⁽²⁾ 

Net income available to common stockholders and FFO in 2018 were impacted by a severance payment made to our former chief executive officer (CEO) in October 2018. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28.3 million; however, the net amount, after incorporating accruals for the CEO compensation previous to this severance, was $18.7 million, equivalent to $0.06 per share.

⁽³⁾ 

The company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust's (REIT's) operating performance. Realty Income defines FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' (Nareit's) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, and reduced by gains on property sales. AFFO further adjusts FFO for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company's ongoing operating performance. Presentation of the information regarding FFO and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO in the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments. See the reconciliations of net income available to common stockholders to FFO and AFFO on pages seven and eight of this press release.

Properties available for lease at September 30, 2019

102

Lease expirations

44

Re-leases to same tenant ⁽¹⁾

(25)

Re-leases to new tenant ⁽¹⁾⁽²⁾

(3)

Dispositions

(24)

Properties available for lease at December 31, 2019

94

⁽¹⁾ 

The annual new rent on these re-leases was $6.457 million, as compared to the previous annual rent of $6.079 million on the same properties, representing a rent recapture rate of 106.2% on the properties re-leased during the quarter ended December 31, 2019.

⁽²⁾ 

Re-leased to two new tenants after a period of vacancy, and one new tenant without vacancy.

Properties available for lease at December 31, 2018

80

Lease expirations

304

Re-leases to same tenant ⁽¹⁾

(199)

Re-leases to new tenant ⁽¹⁾⁽²⁾

(15)

Dispositions

(76)

Properties available for lease at December 31, 2019

94

⁽¹⁾ 

The annual new rent on these re-leases was $54.978 million, as compared to the previous annual rent of $53.605 million on the same properties, representing a rent recapture rate of 102.6% on the properties re-leased during the year ended December 31, 2019.

⁽²⁾ 

Re-leased to eight new tenants after a period of vacancy, and seven new tenants without vacancy.

Number of
Properties

Square Feet
(in millions)

Investment
($ in millions)

Weighted
Average
Lease Term
(Years)

Initial Average
Cash Lease
Yield

Three months ended December 31, 2019

Acquisitions - U.S.(in 42 states)

539

5.4

$

1,447.9

10.5

7.0

%

Acquisitions - U.K.⁽¹⁾

5

0.4

221.0

17.1

5.2

%

Total Acquisitions

544

5.8

1,668.9

11.2

6.8

%

Properties under Development - U.S.

12

0.3

20.6

13.5

7.1

%

Total ⁽²⁾

556

6.1

$

1,689.5

11.2

6.8

%

Year ended December 31, 2019

Acquisitions - U.S.(in 45 states)

753

11.6

$

2,860.8

13.0

6.8

%

Acquisitions - U.K.⁽¹⁾

18

1.6

797.8

15.6

5.2

%

Total Acquisitions

771

13.2

3,658.6

13.4

6.4

%

Properties under Development - U.S.

18

0.5

56.6

15.1

7.3

%

Total ⁽³⁾

789

13.7

$

3,715.2

13.5

6.4

%

⁽¹⁾ 

Represents investments of £169.7 million Sterling during the quarter ended December 31, 2019 and £625.8 million Sterling during the year ended December 31, 2019 converted at the applicable exchange rate on the date of acquisition.

⁽²⁾ 

The tenants occupying the new properties operate in 26 industries, and are 100.0% retail, based on rental revenue. Approximately 47% of the rental revenue generated from acquisitions during the fourth quarter of 2019 is from investment grade rated tenants, their subsidiaries or affiliated companies.

⁽³⁾ 

The tenants occupying the new properties operate in 31 industries, and are 94.6% retail and 5.4% industrial, based on rental revenue. Approximately 36% of the rental revenue generated from acquisitions during 2019 is from investment grade rated tenants, their subsidiaries or affiliated companies.

Quarter Ended December 31,

Year Ended December 31,

Increase

2019

2018

2019

2018

Three
months

Twelve
months

Rental Revenue

$

296.5

$

290.8

$

1,175.6

$

1,157.6

2.0

%

1.6

%

Quarter Ended

December 31, 2019

Year Ended

December 31, 2019

Properties sold

29

93

Net sales proceeds

$

36.3

$

108.9

Gain on sales of real estate

$

14.2

$

30.0

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months

Three Months

Year Ended

Year Ended

Ended 12/31/19

Ended 12/31/18

12/31/19

12/31/18

REVENUE

Rental (including reimbursable)

$

394,217

$

341,181

$

1,484,818

$

1,321,546

Other

3,312

1,395

6,773

6,292

Total revenue

397,529

342,576

1,491,591

1,327,838

EXPENSES

Depreciation and amortization

156,594

137,711

593,961

539,780

Interest

75,073

70,635

290,991

266,020

General and administrative

16,330

34,178

66,483

84,148

Property (including reimbursable)

25,253

17,732

88,585

66,326

Income taxes

1,736

1,607

6,158

5,340

Provisions for impairment

8,950

1,235

40,186

26,269

Total expenses

283,936

263,098

1,086,364

987,883

Gain on sales of real estate

14,168

5,825

29,996

24,643

Foreign currency and derivative gains, net

1,792

—

2,255

—

Net income

129,553

85,303

437,478

364,598

Net income attributable to noncontrolling interests

(256)

(231)

(996)

(984)

Net income available to common stockholders

$

129,297

$

85,072

$

436,482

$

363,614

Funds from operations available to common stockholders (FFO)

$

280,396

$

217,743

$

1,039,591

$

903,257

Adjusted funds from operations available to common stockholders (AFFO)

$

281,986

$

236,813

$

1,050,015

$

924,558

Per share information for common stockholders:

Net income:

Basic and Diluted

$

0.39

$

0.29

$

1.38

$

1.26

FFO:

Basic and Diluted

$

0.85

$

0.73

$

3.29

$

3.12

AFFO:

Basic

$

0.86

$

0.80

$

3.32

$

3.19

Diluted

$

0.86

$

0.79

$

3.32

$

3.19

Cash dividends paid per common share

$

0.681

$

0.662

$

2.711

$

2.631

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

Year Ended

Year Ended

Ended 12/31/19

Ended 12/31/18

12/31/19

12/31/18

Net income available to common stockholders

$

129,297

$

85,072

$

436,482

$

363,614

Depreciation and amortization

156,594

137,711

593,961

539,780

Depreciation of furniture, fixtures and equipment

(127)

(158)

(565)

(650)

Provisions for impairment

8,950

1,235

40,186

26,269

Gain on sales of real estate

(14,168)

(5,825)

(29,996)

(24,643)

FFO adjustments allocable to noncontrolling interests

(150)

(292)

(477)

(1,113)

FFO available to common stockholders

$

280,396

$

217,743

$

1,039,591

$

903,257

FFO allocable to dilutive noncontrolling interests

372

473

1,403

867

Diluted FFO

$

280,768

$

218,216

$

1,040,994

$

904,124

FFO per common share:

$

0.85

$

0.73

$

3.29

$

3.12

Distributions paid to common stockholders

$

222,476

$

196,834

$

852,134

$

761,582

FFO available to common stockholders in excess of distributions paid to common stockholders

$

57,920

$

20,909

$

187,457

$

141,675

Weighted average number of common shares used for FFO:

Basic

328,565,734

297,730,206

315,837,012

289,427,430

Diluted

329,364,027

298,609,734

316,601,350

289,923,984

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 Ended

Year Ended

Ended 12/31/19

Ended 12/31/18

12/31/19

12/31/18

Net income available to common stockholders

$

129,297

$

85,072

$

436,482

$

363,614

Cumulative adjustments to calculate FFO ⁽¹⁾

151,099

132,671

603,109

539,643

FFO available to common stockholders

280,396

217,743

1,039,591

903,257

Executive severance charge ⁽²⁾

—

18,651

—

18,651

Amortization of share-based compensation

3,184

2,943

13,662

15,470

Amortization of deferred financing costs ⁽³⁾

1,283

1,119

4,754

3,991

Amortization of net mortgage premiums

(354)

(354)

(1,415)

(1,520)

Loss (gain) on interest rate swaps

694

331

2,752

(2,733)

Straight-line payments from cross-currency swaps ⁽⁴⁾

1,762

—

4,316

—

Leasing costs and commissions

(222)

(1,076)

(2,102)

(3,907)

Recurring capital expenditures

(224)

(555)

(801)

(1,084)

Straight-line rent

(8,940)

(6,480)

(28,674)

(24,687)

Amortization of above and below-market leases

6,109

4,427

19,336

16,852

Other adjustments ⁽⁵⁾

(1,702)

64

(1,404)

268

AFFO available to common stockholders

$

281,986

$

236,813

$

1,050,015

$

924,558

AFFO allocable to dilutive noncontrolling interests

378

487

1,442

901

Diluted AFFO

$

282,364

$

237,300

$

1,051,457

$

925,459

AFFO per common share:

Basic

$

0.86

$

0.80

$

3.32

$

3.19

Diluted

$

0.86

$

0.79

$

3.32

$

3.19

Distributions paid to common stockholders

$

222,476

$

196,834

$

852,134

$

761,582

AFFO available to common stockholders in excess of distributions paid to common stockholders

$

59,510

$

39,979

$

197,881

$

162,976

Weighted average number of common shares used for AFFO:

Basic

328,565,734

297,730,206

315,837,012

289,427,430

Diluted

329,364,027

298,609,734

316,601,350

289,923,984

⁽¹⁾ 

See FFO calculation on page seven for reconciling items.

⁽²⁾ 

The executive severance charge represents the incremental costs incurred upon our former CEO's departure in October 2018 per the reconciliation below:

Cash

$

9,817

Stock compensation

17,902

Professional fees

574

Total value of severance

28,293

Amount accrued for CEO compensation prior to separation

(9,642)

Incremental severance

$

18,651

⁽³⁾ 

 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.

⁽⁴⁾ 

Straight-line payments from cross-currency swaps represent quarterly payments in U.S. dollars received by us from counterparties in exchange for associated foreign currency payments. These USD payments are fixed and determinable for the duration of the associated hedging transaction.

⁽⁵⁾ 

Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, and foreign currency gains and losses as a result of intercompany debt and remeasurement transactions.

HISTORICAL FFO AND AFFO

(dollars in thousands, except per share amounts)

For the three months ended December 31,

2019

2018

2017

2016

2015

Net income available to common stockholders

$

129,297

$

85,072

$

60,852

$

85,671

$

76,171

Depreciation and amortization, net of furniture, fixtures and equipment

156,467

137,553

126,915

117,580

105,537

Provisions for impairment

8,950

1,235

6,679

3,709

1,378

Gain on sales of real estate

(14,168)

(5,825)

(23,208)

(6,696)

(5,126)

FFO adjustments allocable to noncontrolling interests

(150)

(292)

(250)

(431)

(52)

FFO

$

280,396

$

217,743

$

170,988

$

199,833

$

177,908

FFO per diluted share

$

0.85

$

0.73

$

0.61

$

0.77

$

0.71

AFFO

$

281,986

$

236,813

$

215,312

$

192,964

$

170,023

AFFO per diluted share

$

0.86

$

0.79

$

0.76

$

0.75

$

0.68

Cash dividends paid per share

$

0.681

$

0.662

$

0.636

$

0.606

$

0.572

Weighted average diluted shares outstanding - FFO

329,364,027

298,609,734

282,023,488

259,010,432

249,508,956

Weighted average diluted shares outstanding - AFFO

329,364,027

298,609,734

282,428,692

259,010,432

249,508,956

For the year ended December 31,

2019

2018

2017

2016

2015

Net income available to common stockholders

$

436,482

$

363,614

$

301,514

$

288,491

$

256,686

Depreciation and amortization, net of furniture, fixtures and equipment

593,396

539,130

498,231

449,196

408,404

Provisions for impairment

40,186

26,269

14,751

20,664

10,560

Gain on sales of real estate

(29,996)

(24,643)

(40,898)

(21,979)

(22,243)

FFO adjustments allocable to noncontrolling interests

(477)

(1,113)

(933)

(977)

(970)

FFO

$

1,039,591

$

903,257

$

772,665

$

735,395

$

652,437

FFO per diluted share

$

3.29

$

3.12

$

2.82

$

2.88

$

2.77

AFFO

$

1,050,015

$

924,558

$

838,638

$

736,374

$

647,028

AFFO per diluted share

$

3.32

$

3.19

$

3.06

$

2.88

$

2.74

Cash dividends paid per share

$

2.711

$

2.631

$

2.527

$

2.392

$

2.271

Weighted average diluted shares outstanding - FFO

316,601,350

289,923,984

273,936,752

255,822,679

235,891,368

Weighted average diluted shares outstanding - AFFO

316,601,350

289,923,984

274,024,934

255,822,679

235,891,368

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data) (unaudited)

December 31, 2019

December 31, 2018

ASSETS

Real estate, at cost:

Land

$

5,684,034

$

4,682,660

Buildings and improvements

13,833,882

11,858,806

Total real estate, at cost

19,517,916

16,541,466

Less accumulated depreciation and amortization

(3,117,919)

(2,714,534)

Net real estate held for investment

16,399,997

13,826,932

Real estate held for sale, net

96,775

16,585

Net real estate

16,496,772

13,843,517

Cash and cash equivalents

54,011

10,387

Accounts receivable

181,969

144,991

Lease intangible assets, net

1,493,383

1,199,597

Other assets, net

328,661

61,991

$

18,554,796

$

15,260,483

LIABILITIES AND EQUITY

Distributions payable

$

76,728

$

67,789

Accounts payable and accrued expenses

177,039

133,765

Lease intangible liabilities, net

333,103

310,866

Other liabilities

262,221

127,109

Line of credit payable

704,335

252,000

Term loans, net

499,044

568,610

Mortgages payable, net

410,119

302,569

Notes payable, net

6,288,049

5,376,797

8,750,638

7,139,505

Commitments and contingencies

Stockholders' equity:

Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 333,619,106 shares issued and outstanding as of December 31, 2019 and 370,100,000 shares authorized, 303,742,090 shares issued and outstanding as of December 31, 2018

12,873,849

10,754,495

Distributions in excess of net income

(3,082,291)

(2,657,655)

Accumulated other comprehensive loss

(17,102)

(8,098)

Total stockholders' equity

9,774,456

8,088,742

Noncontrolling interests

29,702

32,236

9,804,158

8,120,978

$

18,554,796

$

15,260,483

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%

2018

4.2%

15.2%

4.4%

(4.0%)

2.5%

(3.5%)

2.2%

(4.4%)

1.4%

(3.9%)

2019

3.7%

21.1%

3.7%

28.7%

2.4%

25.3%

1.9%

31.5%

1.1%

35.2%

Compound Average Annual Total Return ⁽⁵⁾

16.5%

10.8%

10.7%

10.1%

10.3%

Note:  The 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 for the annual percentages.

⁽³⁾ 

Includes reinvestment of dividends.  Source:  Nareit website and Factset.

⁽⁴⁾ 

Price only index, does not include dividends as NASDAQ did not report total return metrics for the entirety of the measurement period. Source: Factset.

⁽⁵⁾ 

The Compound Average Annual Total Return rates are calculated in the same manner for each period from Realty Income's NYSE listing on October 18, 1994 through December 31, 2019, and (except for NASDAQ) assume 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.