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Realty Income Announces Operating Results For Second Quarter And First Six Months Of 2017

Realty Income Announces Operating Results For Second Quarter And First Six Months Of 2017

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07.26.2017

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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		Six Months		Six Months
	Ended 6/30/17		Ended 6/30/16		Ended 6/30/17		Ended 6/30/16
REVENUE
Rental	$	288,049	$	260,056	$	573,870	$	516,857
Tenant reimbursements		11,756		11,112		22,985		20,217
Other		365		(129)		1,340		1,081

Total revenue		300,170		271,039		598,195		538,155

EXPENSES
Depreciation and amortization		123,089		110,342		244,186		218,275
Interest		63,679		57,409		122,985		118,088
General and administrative		15,781		13,985		29,346		26,304
Property (including reimbursable)		16,486		14,671		35,561		29,776
Income taxes		441		953		1,488		1,917
Provisions for impairment		2,274		6,269		7,706		8,192

Total expenses		221,750		203,629		441,272		402,552

Gain on sales of real estate		2,839		8,658		13,371		10,948

Net income		81,259		76,068		170,294		146,551

Net income attributable to noncontrolling interests		(123)		(253)		(288)		(493)

Net income attributable to the Company		81,136		75,815		170,006		146,058
Preferred stock dividends		-		(6,770)		(3,911)		(13,540)
Excess of redemption value over carrying value of preferred shares redeemed		-		-		(13,373)		-

Net income available to common stockholders	$	81,136	$	69,045	$	152,722	$	132,518

Funds from operations available to common stockholders (FFO)	$	203,272	$	176,648	$	390,483	$	347,276
Adjusted funds from operations available to common stockholders (AFFO)	$	208,388	$	180,876	$	409,723	$	356,793

Per share information for common stockholders:
Net income, basic and diluted	$	0.30	$	0.27	$	0.57	$	0.53

FFO, basic and diluted	$	0.75	$	0.70	$	1.46	$	1.38

AFFO, basic and diluted	$	0.76	$	0.71	$	1.53	$	1.42

Cash dividends paid per common share	$	0.633	$	0.597	$	1.257	$	1.185

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		Six Months		Six Months
		Ended 6/30/17		Ended 6/30/16		Ended 6/30/17		Ended 6/30/16
Net income available to common stockholders		$	81,136	$	69,045	$	152,722	$	132,518
Depreciation and amortization			123,089		110,342		244,186		218,275
Depreciation of furniture, fixtures and equipment			(150)		(195)		(307)		(388)
Provisions for impairment			2,274		6,269		7,706		8,192
Gain on sales of real estate			(2,839)		(8,658)		(13,371)		(10,948)
FFO adjustments allocable to noncontrolling interests			(238)		(155)		(453)		(373)
FFO available to common stockholders		$	203,272	$	176,648	$	390,483	$	347,276
FFO allocable to dilutive noncontrolling interests			282		407		438		-
Diluted FFO ⁽¹⁾		$	203,554	$	177,055	$	390,921	$	347,276

FFO per common share, basic and diluted		$	0.75	$	0.70	$	1.46	$	1.38

Distributions paid to common stockholders		$	172,874	$	151,236	$	335,380	$	298,581

FFO available to common stockholders in excess of distributions paid to common stockholders		$	30,398	$	25,412	$	55,103	$	48,695

Weighted average number of common shares used for FFO:
	Basic	272,588,332		253,375,546		268,024,691		251,792,989
	Diluted	273,187,669		254,254,243		268,569,855		252,073,685

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		Six Months		Six Months
		Ended 6/30/17		Ended 6/30/16		Ended 6/30/17		Ended 6/30/16
Net income available to common stockholders		$	81,136	$	69,045	$	152,722	$	132,518
Cumulative adjustments to calculate FFO ⁽¹⁾			122,136		107,603		237,761		214,758
FFO available to common stockholders			203,272		176,648		390,483		347,276
Excess of redemption value over carrying value of Class F preferred share redemption			-		-		13,373		-
Amortization of share-based compensation			4,462		3,947		7,215		6,552
Amortization of deferred financing costs ⁽²⁾			1,317		1,299		2,804		2,598
Amortization of net mortgage premiums			(609)		(754)		(1,240)		(1,855)
(Gain) loss on interest rate swaps			470		2,109		(859)		7,886
Leasing costs and commissions			(349)		(86)		(759)		(277)
Recurring capital expenditures			(24)		(174)		(365)		(246)
Straight-line rent			(4,271)		(4,323)		(7,554)		(9,474)
Amortization of above and below-market leases			4,049		2,143		6,481		4,195
Other adjustments ⁽³⁾			71		67		144		138
AFFO available to common stockholders		$	208,388	$	180,876	$	409,723	$	356,793
AFFO allocable to dilutive noncontrolling interests			292		189		586		428
Diluted AFFO		$	208,680	$	181,065	$	410,309	$	357,221

AFFO per common share, basic and diluted		$	0.76	$	0.71	$	1.53	$	1.42

Distributions paid to common stockholders		$	172,874	$	151,236	$	335,380	$	298,581

AFFO available to common stockholders in excess of distributions paid to common stockholders		$	35,514	$	29,640	$	74,343	$	58,212

Weighted average number of common shares used for AFFO:
	Basic	272,588,332		253,375,546		268,024,691		251,792,989
	Diluted	273,187,669		253,937,221		268,658,037		252,378,957

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

For the three months ended June 30,		2017		2016		2015		2014		2013

Net income available to common stockholders	$	81,136	$	69,045	$	59,317	$	51,420	$	45,957
Depreciation and amortization		122,939		110,147		100,861		92,790		74,471
Provisions for impairment		2,274		6,269		3,230		499		2,496
Gain on sales of real estate		(2,839)		(8,658)		(3,675)		(1,964)		(5,744)
Merger-related costs		-		-		-		-		605
FFO adjustments allocable to noncontrolling interests		(238)		(155)		(263)		(336)		(220)

FFO	$	203,272	$	176,648	$	159,470	$	142,409	$	117,565

FFO per diluted share	$	0.75	$	0.70	$	0.69	$	0.64	$	0.60

AFFO	$	208,388	$	180,876	$	159,060	$	141,178	$	115,584

AFFO per diluted share	$	0.76	$	0.71	$	0.68	$	0.64	$	0.59

Cash dividends paid per share	$	0.633	$	0.597	$	0.569	$	0.547	$	0.544
Weighted average diluted shares outstanding - FFO	273,187,669		254,254,243		232,886,185		221,043,619		195,759,091
Weighted average diluted shares outstanding - AFFO	273,187,669		253,937,221		232,886,185		221,043,619		195,759,091

For the six months ended June 30,		2017		2016		2015		2014		2013

Net income available to common stockholders	$	152,722	$	132,518	$	119,810	$	98,599	$	108,692
Depreciation and amortization		243,879		217,887		198,713		182,668		141,673
Provisions for impairment on investment properties		7,706		8,192		5,317		2,182		2,952
Gain on sales of investment properties		(13,371)		(10,948)		(10,893)		(5,843)		(44,304)
Merger-related costs		-		-		-		-		12,635
FFO adjustments allocable to noncontrolling interests		(453)		(373)		(577)		(696)		(395)

FFO	$	390,483	$	347,276	$	312,370	$	276,910	$	221,253

FFO per diluted share	$	1.46	$	1.38	$	1.36	$	1.29	$	1.20

AFFO	$	409,723	$	356,793	$	311,184	$	273,822	$	219,547

AFFO per diluted share	$	1.53	$	1.42	$	1.36	$	1.28	$	1.19

Cash dividends paid per share	$	1.257	$	1.185	$	1.130	$	1.094	$	1.057
Weighted average diluted shares outstanding - FFO	268,569,855		252,073,685		229,061,762		214,089,629		183,873,647
Weighted average diluted shares outstanding - AFFO	268,658,037		252,378,957		229,061,762		214,089,629		183,873,647

REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2017 and December 31, 2016
(dollars in thousands, except per share data)

		2017		2016
ASSETS		(unaudited)
Real estate, at cost:
Land	$	3,916,218	$	3,752,204
Buildings and improvements		10,446,765		10,112,212
Total real estate, at cost		14,362,983		13,864,416
Less accumulated depreciation and amortization		(2,168,248)		(1,987,200)
Net real estate held for investment		12,194,735		11,877,216
Real estate held for sale, net		12,463		26,575
Net real estate		12,207,198		11,903,791
Cash and cash equivalents		10,945		9,420
Accounts receivable, net		107,147		104,584
Acquired lease intangible assets, net		1,180,182		1,082,320
Goodwill		15,001		15,067
Other assets, net		53,643		37,689
Total assets	$	13,574,116	$	13,152,871

LIABILITIES AND EQUITY
Distributions payable	$	58,284	$	55,235
Accounts payable and accrued expenses		115,595		121,156
Acquired lease intangible liabilities, net		266,365		264,206
Other liabilities		124,772		85,616
Line of credit payable		648,000		1,120,000
Term loans, net		319,273		319,127
Mortgages payable, net		378,352		466,045
Notes payable, net		4,642,423		3,934,433
Total liabilities		6,553,064		6,365,818

Commitments and contingencies

Stockholders' equity:
Preferred stock and paid in capital, par value $0.01 per share, 69,900,000 shares authorized, no shares issued and outstanding as of June 30, 2017 and 16,350,000 issued and outstanding as of December 31, 2016, liquidation preference $25.00 per share		-		395,378
Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 274,064,985 shares issued and outstanding as of June 30, 2017 and 260,168,259 shares issued and outstanding as of December 31, 2016		9,046,533		8,228,594
Distributions in excess of net income		(2,045,127)		(1,857,168)
Total stockholders' equity		7,001,406		6,766,804
Noncontrolling interests		19,646		20,249
Total equity		7,021,052		6,787,053
Total liabilities and equity	$	13,574,116	$	13,152,871

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	%
YTD 2017	4.6	%	(1.8)	%	3.9	%	4.9	%	2.4	%	9.3	%	2.0	%	9.3	%	1.3	%	14.1	%

Compound Average Annual Total Return ⁽⁵⁾			16.4	%			10.8	%			10.3	%			9.6	%			9.6	%