Realty Income Announces Operating Results for the Three and Nine Months Ended September 30, 2024
SAN DIEGO, Nov. 4, 2024 /PRNewswire/ -- Realty Income Corporation ((Realty Income, NYSE:O), The Monthly Dividend Company®, today announced operating results for the three and nine months ended September 30, 2024. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.
COMPANY HIGHLIGHTS:
For the three months ended September 30, 2024:
Net income available to common stockholders was $261.8 million, or $0.30 per share
AFFO available to common shareholders was $915.6 million, or $1.05 per share
Invested $740.1 million at an initial weighted average cash yield of 7.4%
Net Debt to Annualized Pro Forma Adjusted EBITDAre was 5.4x
Raised $271.0 million from the sale of common stock, primarily through our At-The-Market (ATM) program, at a weighted average price of $62.25
ATM forward agreements for a total of 17.0 million shares remain unsettled with total expected net proceeds of approximately $968.7 million, of which 0.2 million shares were executed in October 2024
Issued $500.0 million of 5.375% senior unsecured notes due 2054, £350.0 million of 5.000% senior unsecured notes due 2029, and £350.0 million of 5.250% senior unsecured notes due 2041
Achieved a rent recapture rate of 105.0% on properties re-leased
Celebrated our 30-year anniversary as a New York Stock Exchange ("NYSE") listed company
CEO Comments
"Our third quarter results reflect disciplined execution of our strategy and the inherent benefits of our global platform," said Sumit Roy, Realty Income's President and Chief Executive Officer. "Supported by improvements in the investment environment and solid operating results, we see a robust pipeline of opportunities. As a result, we're pleased to increase our 2024 investment volume guidance to approximately $3.5 billion and raise the low-end of our AFFO per share guidance to a range of $4.17 to $4.21 per share, reflecting a 4.8% growth at the mid-point of the range. Looking ahead, Realty Income is pursuing a wide range of growth opportunities, including capital diversification initiatives to further enhance the reach and scale of our proven platform."
Select Financial Results
The following summarizes our select financial results (dollars in millions, except per share data).
Three months ended
September 30,
Nine months ended
September 30,
2024
2023
2024
2023
Total revenue
$ 1,330.9
$ 1,039.1
$ 3,930.8
$ 3,002.7
Net income available to common stockholders (1) (2)
$ 261.8
$ 233.5
$ 648.3
$ 653.9
Net income per share
$ 0.30
$ 0.33
$ 0.75
$ 0.96
Funds from operations available to
common stockholders (FFO) (3)
$ 854.9
$ 736.1
$ 2,569.7
$ 2,108.4
FFO per share
$ 0.98
$ 1.04
$ 2.99
$ 3.09
Normalized funds from operations available to common
stockholders (Normalized FFO) (3)
$ 863.5
$ 739.0
$ 2,675.2
$ 2,113.0
Normalized FFO per share
$ 0.99
$ 1.04
$ 3.11
$ 3.10
Adjusted funds from operations available to common
stockholders (AFFO) (3)
$ 915.6
$ 721.4
$ 2,699.5
$ 2,043.8
AFFO per share
$ 1.05
$ 1.02
$ 3.14
$ 2.99
(1)
The calculation to determine net income attributable to common stockholders includes provisions for impairment, gain on sales of real estate, and foreign currency gain and loss. 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 and nine months ended September 30, 2024 were impacted by the following: (i) merger, transaction, and other costs of $8.6 million and $105.5 million, respectively, and (ii) provisions for impairment of $96.9 million and $282.9 million, respectively.
(3)
FFO, Normalized FFO, and AFFO are non-GAAP financial measures. Normalized FFO is based on FFO and adjusted to exclude merger, transaction, and other costs and AFFO further adjusts Normalized FFO for unique revenue and expense items. Please see the Glossary for our definitions and explanations of how we utilize these metrics. Please see pages 10 and 11 herein for reconciliations to the most directly comparable GAAP measure.
Dividend Increases
In September 2024, we announced the 108th consecutive quarterly dividend increase, which is the 127th increase since our listing on the NYSE in 1994. The annualized dividend amount as of September 30, 2024 was $3.162 per share. The amount of monthly dividends paid per share increased 2.9% to $0.789 during the three months ended September 30, 2024, as compared to $0.767 for the same period in 2023, representing 75.1% of our diluted AFFO per share of $1.05 during the three months ended September 30, 2024.
Real Estate Portfolio Update
As of September 30, 2024, we owned or held interests in 15,457 properties, which were leased to 1,552 clients doing business in 90 industries. Our diversified portfolio of commercial properties under long-term, net lease agreements is actively managed with a weighted average remaining lease term of approximately 9.4 years. Our portfolio of commercial real estate has historically provided dependable rental revenue supporting the payment of monthly dividends. As of September 30, 2024, portfolio occupancy was 98.7% with 196 properties available for lease or sale, as compared to 98.8% for both periods as of June 30, 2024 and September 30, 2023, respectively. Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards, and properties with possession pending and include properties owned by unconsolidated joint ventures. Below is a summary of our portfolio activity for the periods indicated below:
Changes in Occupancy
Three months ended September 30, 2024
Properties available for lease at June 30, 2024
185
Lease expirations (1)
212
Re-leases to same client
(131)
Re-leases to new client
(11)
Vacant dispositions
(59)
Properties available for lease at September 30, 2024
196
Nine months ended September 30, 2024
Properties available for lease at December 31, 2023
193
Lease expirations (1)
642
Re-leases to same client
(441)
Re-leases to new client
(32)
Vacant dispositions
(166)
Properties available for lease at September 30, 2024
196
(1)
Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.
During the three months ended September 30, 2024, the new annualized contractual rent on re-leases was $38.41 million, as compared to the previous annual rent of $36.57 million on the same units, representing a rent recapture rate of 105.0% on the units re-leased. We re-leased two units to new clients without a period of vacancy, and 14 units to new clients after a period of vacancy. Please see the Glossary for our definition of annualized contractual rent.
During the nine months ended September 30, 2024, the new annualized contractual rent on re-leases was $131.50 million, as compared to the previous annual rent of $125.39 million on the same units, representing a rent recapture rate of 104.9% on the units re-leased. We re-leased 16 units to new clients without a period of vacancy, and 29 units to new clients after a period of vacancy.
Investment Summary
The following table summarizes our investments in the U.S. and Europe for the periods indicated below:
Number of
Properties
Investment
($ in millions)
Leasable
Square Feet
(in thousands)
InitialWeightedAverage
Cash Yield (1)
Weighted
Average Term
(Years)
Three months ended September 30, 2024
Acquisitions - U.S. real estate
67
$ 267.2
1,651
7.4 %
10.0
Acquisitions - Europe real estate
15
326.5
893
7.3 %
7.5
Total real estate acquisitions
82
$ 593.7
2,544
7.4 %
8.6
Real estate properties under development (2)
87
146.4
5,127
7.5 %
15.6
Total investments (3)
169
$ 740.1
7,671
7.4 %
10.0
Nine months ended September 30, 2024
Acquisitions - U.S. real estate
87
$ 414.3
2,370
7.5 %
13.4
Acquisitions - Europe real estate
29
744.4
2,457
7.8 %
6.8
Total real estate acquisitions
116
$ 1,158.7
4,827
7.7 %
9.1
Real estate properties under development (2)
184
607.7
6,671
7.3 %
15.1
Other investments (4)
—
377.5
—
8.1 %
6.0
Total investments (5)
300
$ 2,143.9
11,498
7.7 %
10.1
(1)
Initial weighted average cash yield is a supplemental operating measure. Cash income used in the calculation of initial weighted average cash yield for investments for the three and nine months ended September 30, 2024 includes $0.7 million and $1.2 million, respectively, received as settlement credits as reimbursement of free rent periods. Please see the Glossary for our definitions of Initial Weighted Average Cash Yield and Cash Income.
(2)
The three months ended September 30, 2024 includes £15.4 million of Sterling-denominated investments, €14.3 million of Euro-denominated investments, and $6.5 million of investments in an unconsolidated U.S. data center joint venture, converted at the applicable exchange rates on the funding dates. The nine months ended September 30, 2024 includes £50.6 million of Sterling-denominated investments, €38.9 million of Euro-denominated investments, and $58.7 million of investments in an unconsolidated U.S. data center joint venture, converted at the applicable exchange rates on the funding dates.
(3)
Clients we have invested in are 82.3% retail, 16.8% industrial, and 0.9% other based on cash income. Approximately 25% of the annualized cash income generated from acquisitions was from investment grade rated clients, their subsidiaries or affiliated companies at the date of acquisition. Please see the Glossary for our definition of Investment Grade Clients and Cash Income.
(4)
For the nine months ended September 30, 2024, other investments relate to an investment in a senior secured note issued by a parent company of Asda based in the U.K.
(5)
Clients we have invested in are 85.6% retail, 11.9% industrial, and 2.5% other based on cash income. Approximately 25% of the annualized cash income generated from acquisitions was from investment grade rated clients, their subsidiaries or affiliated companies at the date of acquisition.
Same Store Rental Revenue
The following summarizes our same store rental revenue for 13,499 and 11,574 properties under lease for the three and nine months ended September 30, 2024, respectively (dollars in millions):
Three months ended
September 30,
Nine months ended
September 30,
% Increase
2024
2023
2024
2023
Three Months
Nine Months
Same store rental revenue
$ 1,001.9
$ 999.6
$ 2,518.5
$ 2,511.3
0.2 %
0.3 %
For purposes of comparability, same store rental revenue is presented on a constant currency basis using the applicable exchange rate as of September 30, 2024. None of the properties in France, Germany, Ireland or Portugal met our Same Store Pool definition for the periods presented. Beginning with the second quarter of 2024, properties acquired through the merger with Spirit Realty Capital, Inc. ("Spirit") were considered under each element of our Same Store Pool criteria, except for the requirement that the property be owned for the full comparative period. If the property was owned by Spirit for the full comparative period and each of the other criteria were met, the property was included in our Same Store Pool. Accordingly, Spirit properties have been included in the Same Store Pool for the quarter and have been excluded for the year-to-date calculation. Please see the Glossary to see definitions of our Same Store Pool and Same Store Rental Revenue.
Property Dispositions
The following summarizes our property dispositions (dollars in millions):
Three months ended
September 30, 2024
Nine months endedSeptember 30, 2024
Properties sold
92
214
Net sales proceeds
$ 249.5
$ 451.4
Gain on sale of real estate
$ 50.6
$ 92.3
Liquidity and Capital Markets
Capital Raising
During the three months ended September 30, 2024, we raised $271.0 million of proceeds from the sale of common stock at a weighted average price of $62.25 per share, primarily through the sale of approximately 4.3 million shares of common stock pursuant to forward sale agreements through our ATM program. As of September 30, 2024, there were approximately 16.8 million shares of unsettled common stock subject to forward sale agreements through our ATM program, representing approximately $958.1 million in expected net proceeds and a weighted average initial gross price of $57.58 per share. ATM net sale proceed amounts assume full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates. As of November 4, 2024, ATM forward agreements for a total of 17.0 million shares remain unsettled with total expected net proceeds of approximately $968.7 million, of which 0.2 million shares were executed in October 2024.
In September 2024, we completed the acquisition of 42 properties by paying cash and by issuing 0.7 million common partnership units in Realty Income, LP, and recorded $46.5 million of contributions to non-controlling interests.
In August 2024, we issued $500.0 million of 5.375% senior unsecured notes due 2054 (the "2054 Notes"). The public offering price for the 2054 Notes was 98.374% of the principal amount for an effective semi-annual yield to maturity of 5.486%.
In September 2024, we issued £350.0 million of 5.000% senior unsecured notes due 2029 (the "2029 Notes") and £350.0 million of 5.250% senior unsecured notes due 2041 (the "2041 Notes"). The public offering price for the 2029 Notes was 99.139% of the principal amount for an effective annual yield to maturity of 5.199% and the public offering price for the 2041 Notes was 96.211% of the principal amount for an effective annual yield to maturity of 5.601%. Combined, the notes have a weighted average tenor of approximately 11.1 years, a weighted average effective annual yield to maturity of 5.400%, and a weighted average coupon rate of 5.125%.
Redemption of Preferred Stock
In September 2024, we redeemed all 6.9 million shares outstanding of our 6.000% Series A Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share, plus accrued and unpaid dividends. The excess of the $25.00 liquidation price per share over the carrying value of the preferred stock redeemed resulted in a loss on redemption of $5.1 million for the three months ended September 30, 2024.
Liquidity
As of September 30, 2024, we had $5.2 billion of liquidity, which consists of cash and cash equivalents of $397.0 million, unsettled ATM forward equity of $958.1 million, and $3.8 billion of availability under our $4.25 billion unsecured revolving credit facility, net of $427.5 million of borrowing on the revolving credit facility. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under our commercial paper programs.
Earnings Guidance
Summarized below are approximate estimates of the key components of our 2024 earnings guidance.
Prior 2024 Guidance (1)
Revised 2024 Guidance
Net income per share (2)
$1.21 - $1.30
$1.15 - $1.20
Real estate depreciation and impairments per share
$2.92
$2.96
Other adjustments per share (3)
$0.06
$0.05
Normalized FFO per share (2)(4)
$4.19 - $4.28
$4.16 - $4.21
AFFO per share (4)
$4.15 - $4.21
$4.17 - $4.21
Same store rent growth (5)
Approx 1.0%
Approx 1.0%
Occupancy
Over 98%
Over 98%
Cash G&A expenses (% of revenues) (6)(7)
Approx 3.0%
Approx 3.0%
Property expenses (non-reimbursable) (% of revenues) (6)
1.0% - 1.5%
1.2% - 1.5%
Income tax expenses
$65 - $75 million
$65 - $75 million
Investment volume (8)
Approx $3.0 billion
Approx $3.5 billion
Disposition volume
$400 - $500 million
$550 - $600 million
(1)
As issued on August 5, 2024.
(2)
Net income per share and Normalized FFO per share include non-cash interest expense impact related to the Spirit merger.
(3)
Includes gain on sales of properties and merger, transaction, and other costs.
(4)
Normalized FFO per share and AFFO per share exclude merger, transaction, and other costs. Per share amounts may not add due to rounding.
(5)
Consistent with prior quarters, the full year Same Store Pool does not include the Spirit portfolio. Reserve reversals recognized in 2023 represent an approximately 30 basis point headwind to same store rent growth in 2024.
(6)
Revenue excludes contractually obligated reimbursements by our clients. Cash G&A expenses exclude stock-based compensation expense.
(7)
G&A expenses inclusive of stock-based compensation expense as a percentage of rental revenue, excluding reimbursements, is expected to be approximately 3.4% - 3.7% in 2024.
(8)
Investment volume excludes merger with Spirit, which closed January 23, 2024.
Conference Call Information
In conjunction with the release of our operating results, we will host a conference call on November 5, 2024 at 11:00 a.m. PDT to discuss the operating results. To access the conference call, dial (833) 816-1264 (United States) or (412) 317-5632 (International). When prompted, please ask for the Realty Income conference call.
A telephone replay of the conference call can also be accessed by calling (877) 344-7529 (United States) or (412) 317-0088 (International) and entering the conference ID 6281798. The telephone replay will be available through November 12, 2024.
A live webcast will be available in listen-only mode by clicking on the webcast link on the company's home page at www.realtyincome.com. A replay of the conference call webcast will be available approximately one hour after the conclusion of the live broadcast. No access code is required for this replay.
Supplemental Materials and Sustainability Report
Supplemental Operating and Financial Data for the three and nine months ended September 30, 2024 is available on our corporate website at www.realtyincome.com/investors/quarterly-and-annual-results.
The Sustainability Report for the year ended December 31, 2023 is available on our corporate website at https://esg.realtyincome.com/sustainability/esg-reporting. Our Green Financing Framework is also available on our corporate website at esg.realtyincome.com/indicators/green_financing.
About Realty Income
Realty Income (NYSE:O), an S&P 500 company, is real estate partner to the world's leading companies. Founded in 1969, we invest in diversified commercial real estate and have a portfolio of over 15,450 properties in all 50 U.S. states, the U.K., and six other countries in Europe. We are known as "The Monthly Dividend Company®," and have a mission to invest in people and places to deliver dependable monthly dividends that increase over time. Since our founding, we have declared 652 consecutive monthly dividends and are a member of the S&P 500 Dividend Aristocrats® index for having increased our dividend for the last 30 consecutive years. Additional information about the company can be found at www.realtyincome.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this press release, the words "estimated," "anticipated," "expect," "believe," "intend," "continue," "should," "may," "likely," "plans," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of our business and portfolio; growth strategies and intentions to acquire or dispose of properties (including geographies, timing, partners, clients and terms); re-leases, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, and the intentions of management; guidance; settlement of shares of common stock sold pursuant to forward sale confirmations under our ATM program; dividends, including the amount, timing and payments of dividends related thereto; and trends in our business, including trends in the market for long-term leases of freestanding, single-client properties. Forward-looking statements are subject to risks, uncertainties, and assumptions about us, which may cause our actual future results to differ materially from expected results. Some of the factors that could cause actual results to differ materially are, among others, our continued qualification as a real estate investment trust; general domestic and foreign business, economic, or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact on our clients and us; access to debt and equity capital markets and other sources of funding (including the terms and partners of such funding); continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including our clients' solvency, client defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters; impairments in the value of our real estate assets; changes in domestic and foreign income tax laws and rates; property ownership through joint ventures, partnerships and other arrangements which may limit control of the underlying investments; epidemics or pandemics including measures taken to limit their spread, the impacts on us, our business, our clients, and the economy generally; the loss of key personnel; the outcome of any legal proceedings to which we are a party or which may occur in the future; acts of terrorism and war; the anticipated benefits from mergers and acquisitions including from the merger with Spirit; and those additional risks and factors discussed in our reports filed with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements are not guarantees of future plans and performance and speak only as of the date of this press release. Actual plans and operating results may differ materially from what is expressed or forecasted in this press release and forecasts made in the forward-looking ...
