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Realty Income Announces Operating Results For The Three Months Ended March 31, 2022

Realty Income Announces Operating Results For The Three Months Ended March 31, 2022

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05.04.2022

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11995 El Camino Real, San Diego, CA 92130

	Three Months Ended March 31,
	2022	2021
Total revenue	$ 807.3	$ 442.3
Net income available to common stockholders⁽¹⁾⁽²⁾	$ 199.4	$ 95.9
Net income per share	$ 0.34	$ 0.26
Funds from operations available to common stockholders (FFO)⁽²⁾⁽³⁾	$ 601.4	$ 267.7
FFO per share	$ 1.01	$ 0.72
Normalized funds from operations available to common stockholders (Normalized FFO)⁽³⁾	$ 607.9	$ 267.7
Normalized FFO per share	$ 1.02	$ 0.72
Adjusted funds from operations available to common stockholders (AFFO)⁽³⁾	$ 580.1	$ 318.2
AFFO per share	$ 0.98	$ 0.86

⁽¹⁾	The calculation to determine net income attributable to common stockholders 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 available to common stockholders and period to period comparisons.
⁽²⁾	Our financial results during the three months ended March 31, 2021 were impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022.
⁽³⁾	FFO, Normalized FFO, and AFFO are non-GAAP financial measures. Normalized FFO is based on FFO and adjusted to exclude merger and integration-related costs related to our merger with VEREIT and AFFO further adjusts Normalized FFO for unique revenue and expense items, such as losses on extinguishment of debt. Please see the Glossary in the Supplemental Operating and Financial Data for the three months ended March 31, 2022 for our definitions and explanations of how we utilize these metrics. See pages 8 and 9 herein for reconciliations to the most directly comparable GAAP measure.

Three months ended March 31, 2022
Properties available for lease at December 31, 2021	164
Lease expirations ⁽¹⁾	133
Re-leases to same client	(99)
Re-leases to new client	(11)
Vacant dispositions	(31)
Properties available for lease at March 31, 2022	156

⁽¹⁾Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.

	Number of Properties	Leasable Square Feet (in thousands)	Investment ($ in millions)	Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield ⁽¹⁾
Three months ended March 31, 2022
Acquisitions - U.S.	139	2,627	$ 629.8	15.0	5.7 %
Acquisitions - Europe	21	2,772	794.2	8.9	5.5 %
Total acquisitions	160	5,399	1,424.0	11.8	5.6 %
Properties under development ⁽²⁾	53	1,868	131.3	17.3	5.7 %
Total ⁽³⁾	213	7,267	$ 1,555.3	12.3	5.6 %


⁽¹⁾	Initial weighted average cash lease yield is a supplemental operating measure. Please see the Glossary in the Supplemental Operating and Financial Data for the three months ended March 31, 2022 for our definition of this metric. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $4.3 million received as settlement credits across 16 properties as reimbursement of free rent periods for the three months ended March 31, 2022.
⁽²⁾	The three months ended March 31, 2022 includes £1.7 million of investments in one U.K. development property, converted at the applicable exchange rates on the funding dates.
⁽³⁾	Our clients occupying the new properties are 85.4% retail and 14.6% industrial, based on rental revenue. Approximately 26% of the rental revenue generated from acquisitions during the three months ended March 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.

	Three Months Ended March 31,		% Increase
	2022	2021
Rental revenue	$ 629.9	$ 605.3	4.1 %

		Three Months Ended March 31, 2022
Properties sold		34
Net sales proceeds		$ 122.2
Gain on sales of real estate		$ 10.2

	2022 Guidance
Net income per share	$1.08 to $1.25
Real estate depreciation and impairments per share	$2.83
Gains on sales of properties per share	$(0.03)
Normalized FFO per share ⁽¹⁾	$3.88 to $4.05
AFFO per share ⁽¹⁾	$3.84 to $3.97
Same store rent growth	~ 1.5%
Occupancy	~ 98%
Cash G&A expenses (% of revenues) ⁽²⁾⁽³⁾	3.5% - 4.0%
Property expenses (non-reimbursable) (% of revenues) ⁽²⁾	1.5% - 2.0%
Income tax expenses	$45 to $50 million
Acquisition volume	Over $5.0 billion

⁽¹⁾ Normalized FFO per share and AFFO per share exclude merger and integration-related costs associated with our merger with VEREIT.
⁽²⁾ Revenue excludes contractually obligated reimbursements by our clients. Cash G&A excludes stock-based compensation expense.
⁽³⁾ G&A inclusive of stock-based compensation expense as a percentage of rental revenue, excluding reimbursements, is expected to be approximately 4.0% - 4.5% in 2022.

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


	Three Months	Three Months
	Ended 3/31/22	Ended 3/31/21
REVENUE
Rental (including reimbursable)	$ 799,565	$ 439,365
Other ⁽¹⁾	7,778	2,889
Total revenue	807,343	442,254

EXPENSES
Depreciation and amortization	403,762	177,985
Interest	106,403	73,075
Property (including reimbursable)	52,342	28,499
General and administrative	32,699	20,796
Provisions for impairment	7,038	2,720
Merger and integration-related costs	6,519	—
Total expenses	608,763	303,075
Gain on sales of real estate	10,156	8,401
Foreign currency and derivative gains (losses), net	(590)	804
Loss on extinguishment of debt	—	(46,473)
Equity in income of unconsolidated entities	954	—
Other income, net ⁽¹⁾	1,852	550
Income before income taxes	210,952	102,461
Income taxes	(10,981)	(6,225)
Net income	199,971	96,236
Net income attributable to noncontrolling interests	(602)	(296)
Net income available to common stockholders	$ 199,369	$ 95,940

Funds from operations available to common stockholders (FFO)	$ 601,416	$ 267,707
Normalized funds from operations available to common stockholders (Normalized FFO)	$ 607,935	$ 267,707
Adjusted funds from operations available to common stockholders (AFFO)	$ 580,098	$ 318,222

Per share information for common stockholders:
Net income, basic and diluted	$ 0.34	$ 0.26

FFO, basic and diluted	$ 1.01	$ 0.72

Normalized FFO, basic and diluted	$ 1.02	$ 0.72

AFFO, basic and diluted	$ 0.98	$ 0.86

Cash dividends paid per common share	$ 0.7395	$ 0.7035

⁽¹⁾Certain miscellaneous non-recurring revenue has been reclassified from total revenue to "Other income, net" for the three months ended March 31, 2021.

FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS (Normalized FFO) (in thousands, except per share and share count data)

FFO and Normalized FFO are non-GAAP financial measures. Please see the Glossary in the Supplemental Operating and Financial Data for the three months ended March 31, 2022 for our definitions and explanations of how we utilize these metrics.

	Three Months	Three Months
	Ended 3/31/22	Ended 3/31/21

Net income available to common stockholders	$ 199,369	$ 95,940
Depreciation and amortization	403,762	177,985
Depreciation of furniture, fixtures and equipment	(478)	(371)
Provisions for impairment	7,038	2,720
Gain on sales of real estate	(10,156)	(8,401)
Proportionate share of adjustments for unconsolidated entities	2,235	—
FFO adjustments allocable to noncontrolling interests	(354)	(166)
FFO available to common stockholders	$ 601,416	$ 267,707
FFO allocable to dilutive noncontrolling interests	808	—
Diluted FFO	$ 602,224	$ 267,707

FFO available to common stockholders	$ 601,416	$ 267,707
Merger and integration-related costs	6,519	—
Normalized FFO available to common stockholders	$ 607,935	$ 267,707
Normalized FFO allocable to dilutive noncontrolling interests	808	—
Diluted Normalized FFO	$ 608,743	$ 267,707

FFO per common share, basic and diluted	$ 1.01	$ 0.72

Normalized FFO per common share, basic and diluted	$ 1.02	$ 0.72

Distributions paid to common stockholders	$ 438,280	$ 260,697

FFO available to common stockholders in excess of distributions paid to common stockholders	$ 163,136	$ 7,010

Normalized FFO available to common stockholders in excess of distributions paid to common stockholders	$ 169,655	$ 7,010

Weighted average number of common shares used for FFO and normalized FFO:
Basic	593,827,299	371,522,607
Diluted	595,102,548	371,601,901

ADJUSTED FUNDS FROM OPERATIONS (AFFO) (in thousands, except per share and share count data)

AFFO is a non-GAAP financial measure. Please see the Glossary in the Supplemental Operating and Financial Data for the three months ended March 31, 2022 for our definition and an explanation of how we utilize this metric.

	Three Months	Three Months
	Ended 3/31/22	Ended 3/31/21
Net income available to common stockholders	$ 199,369	$ 95,940
Cumulative adjustments to calculate Normalized FFO ⁽¹⁾	408,566	171,767
Normalized FFO available to common stockholders	607,935	267,707
Loss on extinguishment of debt	—	46,473
Amortization of share-based compensation	5,002	3,697
Amortization of net debt premiums and deferred financing costs ⁽²⁾	(17,096)	1,385
Loss on interest rate swaps	722	722
Straight-line payments from cross-currency swaps ⁽³⁾	517	618
Leasing costs and commissions	(2,373)	(706)
Recurring capital expenditures	(13)	(23)
Straight-line rent and expenses	(27,822)	(10,463)
Amortization of above and below-market leases, net	13,642	9,300
Proportionate share of adjustments for unconsolidated entities	(2,064)	—
Other adjustments ⁽⁴⁾	1,648	(488)
AFFO available to common stockholders	$ 580,098	$ 318,222
AFFO allocable to dilutive noncontrolling interests	820	351
Diluted AFFO	$ 580,918	$ 318,573

AFFO per common share, basic and diluted	$ 0.98	$ 0.86

Distributions paid to common stockholders	$ 438,280	$ 260,697

AFFO available to common stockholders in excess of distributions paid to common stockholders	$ 141,818	$ 57,525

Weighted average number of common shares used for AFFO:
Basic	593,827,299	371,522,607
Diluted	595,102,548	372,065,020

⁽¹⁾See Normalized FFO calculations on page 8 for reconciling items.

⁽²⁾Includes the amortization of premiums and discounts on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

⁽³⁾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.

⁽⁴⁾Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, and foreign currency gains and losses as a result of intercompany debt and remeasurement transactions.

HISTORICAL FFO AND AFFO (in thousands, except per share and share count data)

For the three months ended March 31,	2022	2021	2020	2019	2018

Net income available to common stockholders	$ 199,369	$ 95,940	$ 146,827	$ 110,942	$ 83,163

Depreciation and amortization, net of furniture, fixtures and equipment	403,284	177,614	164,459	137,362	130,944

Provisions for impairment	7,038	2,720	4,478	4,672	14,221

Gain on sales of real estate	(10,156)	(8,401)	(38,506)	(7,263)	(3,218)

Proportionate share of adjustments for unconsolidated entities	2,235	—	—	—	—

FFO adjustments allocable to noncontrolling interests	(354)	(166)	(154)	(38)	(228)

FFO available to common stockholders	$ 601,416	$ 267,707	$ 277,104	$ 245,675	$ 224,882

Merger and integration-related costs	6,519	—	—	—	—

Normalized FFO available to common stockholders	$ 607,935	$ 267,707	$ 277,104	$ 245,675	$ 224,882

FFO per diluted share	$ 1.01	0.72	0.82	0.81	0.79

Normalized FFO per diluted share	$ 1.02	$ 0.72	$ 0.82	$ 0.81	$ 0.79

AFFO available to common stockholders	$ 580,098	$ 318,222	$ 297,223	$ 248,734	$ 224,560

AFFO per diluted share	$ 0.98	$ 0.86	$ 0.88	$ 0.82	$ 0.79
			.
Cash dividends paid per share	$ 0.7395	$ 0.7035	$ 0.6925	$ 0.6720	$ 0.6505

Weighted average diluted shares outstanding - FFO and Normalized FFO	595,102,548	371,601,901	337,439,634	303,819,878	284,345,328

Weighted average diluted shares outstanding - AFFO	595,102,548	372,065,020	337,439,634	303,819,878	284,345,328

REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share and share count data) (unaudited)

	March 31, 2022	December 31, 2021
ASSETS
Real estate held for investment, at cost:
Land	$ 11,158,545	$ 10,753,750
Buildings and improvements	25,648,515	25,155,178
Total real estate held for investment, at cost	36,807,060	35,908,928
Less accumulated depreciation and amortization	(4,169,539)	(3,949,798)
Real estate held for investment, net	32,637,521	31,959,130
Real estate and lease intangibles held for sale, net	84,446	30,470
Cash and cash equivalents	151,624	258,579
Accounts receivable, net	468,165	426,768
Lease intangible assets, net	5,187,280	5,275,304
Goodwill	3,711,981	3,676,705
Investment in unconsolidated entities	141,191	140,967
Other assets, net	1,679,809	1,369,579
Total assets	$ 44,062,017	$ 43,137,502

LIABILITIES AND EQUITY
Distributions payable	$ 149,549	$ 146,919
Accounts payable and accrued expenses	305,574	351,128
Lease intangible liabilities, net	1,350,370	1,308,221
Other liabilities	746,304	759,197
Line of credit payable and commercial paper	1,519,625	1,551,376
Term loan, net	249,606	249,557
Mortgages payable, net	1,093,599	1,141,995
Notes payable, net	13,068,665	12,499,709
Total liabilities	18,483,292	18,008,102

Commitments and contingencies

Stockholders' equity:
Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 601,566,581 and 591,261,991 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	30,236,374	29,578,212
Distributions in excess of net income	(4,772,112)	(4,530,571)
Accumulated other comprehensive income	37,917	4,933
Total stockholders' equity	25,502,179	25,052,574
Noncontrolling interests	76,546	76,826
Total equity	25,578,725	25,129,400
Total liabilities and equity	$ 44,062,017	$ 43,137,502

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%
2020	4.5%	(11.8%)	3.6%	(5.1%)	1.9%	9.7%	1.5%	18.4%	0.9%	43.6%
2021	4.1%	23.0%	2.6%	41.3%	1.8%	20.9%	1.3%	28.7%	0.7%	21.4%
YTD 2022	4.3%	(2.2%)	2.9%	(5.3%)	1.9%	(4.1%)	1.4%	(4.6%)	0.7%	(9.1%)

Compound Average Annual Total Return⁽⁵⁾		15.3%		10.8%		10.8%		10.7%		11.2%

Note: All of these 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⁾	All of these 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 March 31, 2022, 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.