Realty Income Corporation, The Monthly Dividend Company®, today announced operating results for the second quarter and six months ended June 30, 2020. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.
COMPANY HIGHLIGHTS:
For the quarter ended June 30, 2020:
- Net income per share was $0.31
- AFFO per share increased 4.9% to $0.86, compared to the quarter ended June 30, 2019
- Collected 86.5% of contractual rent across our total portfolio
- Invested $154.2 million in 32 properties and properties under development or expansion, including $58.2 million in two properties in the U.K.
- Raised $593.9 million through the issuance of 3.250% senior unsecured notes due in 2031
- Raised $98.1 million from the sale of common stock, primarily through our At -The-Market (ATM) program
For the month ended July 31, 2020:
- Collected 91.5% of contractual rent due for the month of July 2020 across our total portfolio
- Raised $378.8 million through the issuance of 3.250% senior unsecured notes due 2031
CEO Comments
“First and foremost, I appreciate my colleagues’ seamless transition to a remote work environment, recognize our team’s outstanding dedication and contributions that continue to drive our business, and empathize with individuals and businesses impacted by the COVID-19 pandemic,” said Sumit Roy, Realty Income’s President and Chief Executive Officer. “While economic and public health considerations remain due to the COVID-19 pandemic, our operating results for the second quarter continue to demonstrate the stability and resiliency of our business. Our diversified and high-quality real estate portfolio, which is primarily leased to tenants providing non-discretionary and/or low price point goods or services, was 98.5% occupied at quarter-end, and we achieved a 101% rent recapture rate on re-leasing activity during the quarter. Additionally, our financial position remains strong, as we ended the quarter with a net debt to EBITDAre ratio of 5.1x and a fixed charge coverage ratio of 5.4x. As of July 31st, we had total liquidity of $2.9 billion, including approximately $400 million of cash on hand and $2.5 billion remaining borrowing capacity available on our $3.0 billion revolving credit facility (excluding the $1.0 billion accordion feature, which is subject to obtaining lender commitments), which we believe provides us significant financial flexibility.”
“Through July 31st, we have collected 86.5% of contractual rent for the second quarter and 91.5% of contractual rent for the month of July, which represented the second consecutive month of improving rent collection trends and the highest monthly rent collection reported since April 2020. We are pleased with these positive trends, and we continue to manage the business with a focus on generating long-term value for our stakeholders. Given the increased visibility to our business, we are providing 2020 acquisition guidance of $1.25 billion to $1.75 billion.”
Summarized Financial Results
The following summarizes our select financial results (dollars in millions, except per share data):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
|
2020 |
2019 |
2020 |
2019 |
||||||||||||
|
Total revenue |
$ |
414.6 |
$ |
365.5 |
$ |
829.0 |
$ |
719.8 |
|||||||
|
Net income available to common stockholders (1)(2) |
$ |
107.8 |
$ |
95.2 |
$ |
254.7 |
$ |
206.1 |
|||||||
|
Net income per share |
$ |
0.31 |
$ |
0.31 |
$ |
0.75 |
$ |
0.67 |
|||||||
|
Funds from operations available to common stockholders (FFO) (2)(3) |
$ |
288.3 |
$ |
251.5 |
$ |
565.4 |
$ |
497.2 |
|||||||
|
FFO per share |
$ |
0.84 |
$ |
0.81 |
$ |
1.66 |
$ |
1.62 |
|||||||
|
Adjusted funds from operations available to common stockholders (AFFO) (3) |
$ |
295.2 |
$ |
253.9 |
$ |
592.5 |
$ |
502.7 |
|||||||
|
AFFO per share |
$ |
0.86 |
$ |
0.82 |
$ |
1.74 |
$ |
1.63 |
|||||||
|
(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 and period to period comparisons. |
|
(2) |
Net income available to common stockholders and FFO in the first six months of 2020 were impacted by the following transactions recorded in the first quarter of 2020: (i) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021, and (ii) a $3.5 million executive severance charge for our former chief financial officer (CFO). |
|
(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 eight and nine of this press release. |
Impact of COVID-19
Percentages of Contractual Rent Collected as of July 31, 2020
|
Month Ended |
Month |
Month Ended |
Quarter |
Month Ended |
|||||
|
Contractual rent collected(1) across total portfolio |
88.4% |
84.9% |
86.1% |
86.5% |
91.5% |
||||
|
Contractual rent collected(1) from top 20 tenants(2) |
83.0% |
82.1% |
82.5% |
82.5% |
90.7% |
||||
|
Contractual rent collected(1) from investment grade tenants(3) |
100.0% |
98.4% |
98.9% |
99.1% |
100.0% |
|
(1) |
Contractual rent is the aggregate cash amount charged to tenants inclusive of monthly base rent receivables. U.K. rent (which is payable in pounds Sterling) was converted at the exchange rate in effect on May 1, 2020 for rents collected for the month of April 2020, on June 1, 2020 for rents collected for the month of May 2020, on July 1, 2020 for rents collected for the month of June 2020, and on July 31, 2020 for rents collected for the month of July 2020. |
|
(2) |
We define top 20 tenants as our 20 largest tenants based on percentage of total portfolio annualized contractual rental revenue as of the last day of such period. |
|
(3) |
We define investment grade tenants as tenants with a credit rating, and tenants that are subsidiaries or affiliates of companies with a credit rating, of Baa3/BBB- or higher from one of the three major rating agencies (Moody’s/S&P/Fitch). |
We have executed deferral agreements or maintain ongoing deferral discussions with tenants that account for a majority of the unpaid contractual rent for the months of April, May, June, and July 2020. Additional detail on rent collections can be found in our supplemental materials available on our corporate website at www.realtyincome.com/investors/financial-information/quarterly-results.
Dividend Increases
In June 2020, we announced the 91st consecutive quarterly dividend increase, which is the 107th increase in the amount of the dividend since the company’s listing on the New York Stock Exchange (NYSE) in 1994. The annualized dividend amount as of June 30, 2020 was $2.802 per share. The amount of monthly dividends paid per share increased 3.1% to $0.699 in the second quarter of 2020, as compared to $0.678 in the second quarter of 2019. During the second quarter of 2020, the company distributed $240.5 million in common dividends to shareholders, representing 81.5% of its AFFO of $295.2 million.
Real Estate Portfolio Update
As of June 30, 2020, our portfolio consisted of 6,541 properties located in 49 U.S. states, Puerto Rico and the U.K., and leased to approximately 600 different tenants doing business in 50 industries. The properties are primarily freestanding and leased under long-term, net lease agreements with a weighted average remaining lease term of 9.0 years. The company’s portfolio of commercial real estate has historically provided dependable rental revenue supporting the payment of monthly dividends. As of June 30, 2020, portfolio occupancy was 98.5% with 101 properties available for lease or sale out of the 6,541, as compared to 98.5% as of March 31, 2020 and 98.3% as of June 30, 2019.
Changes in Occupancy
|
Three months ended June 30, 2020 |
||
|
Properties available for lease at March 31, 2020 |
97 |
|
|
Lease expirations |
81 |
|
|
Re-leases to same tenant (1) |
(60) |
|
|
Re-leases to new tenant (1)(2) |
(5) |
|
|
Vacant dispositions |
(12) |
|
|
Properties available for lease at June 30, 2020 |
101 |
|
|
(1) |
The annual new rent on these re-leases was $15.334 million, as compared to the previous annual rent of $15.128 million on the same properties, representing a rent recapture rate of 101.4% on the properties re-leased during the quarter ended June 30, 2020. |
|
(2) |
Re-leased two properties to new tenants without a period of vacancy, and three properties to new tenants after a period of vacancy. |
|
Six months ended June 30, 2020 |
||
|
Properties available for lease at December 31, 2019 |
94 |
|
|
Lease expirations |
190 |
|
|
Re-leases to same tenant (1) |
(150) |
|
|
Re-leases to new tenant (1)(2) |
(8) |
|
|
Vacant dispositions |
(25) |
|
|
Properties available for lease at June 30, 2020 |
101 |
|
|
(1) |
The annual new rent on these re-leases was $33.152 million, as compared to the previous annual rent of $33.124 million on the same properties, representing a rent recapture rate of 100.1% on the properties re-leased during the first six months of 2020. |
|
(2) |
Re-leased three properties to new tenants without a period of vacancy, and five properties to new tenants after a period of vacancy. |
Investments in Real Estate
The following table summarizes our acquisitions in the U.S. and U.K. for the periods indicated below:
|
Number of |
Leasable |
Investment |
Weighted |
Initial Average |
|||||||||||
|
Three months ended June 30, 2020 |
|||||||||||||||
|
Acquisitions – U.S. (in 15 states) |
26 |
0.4 |
$ |
94.3 |
12.9 |
6.4 |
% |
||||||||
|
Acquisitions – U.K. (1) |
2 |
0.1 |
58.2 |
9.9 |
6.1 |
% |
|||||||||
|
Total Acquisitions |
28 |
0.5 |
152.5 |
11.8 |
6.3 |
% |
|||||||||
|
Properties under Development – U.S. |
4 |
0.1 |
1.7 |
10.4 |
10.3 |
% |
|||||||||
|
Total (2) |
32 |
0.6 |
$ |
154.2 |
11.8 |
6.3 |
% |
||||||||
|
Six months ended June 30, 2020 |
|||||||||||||||
|
Acquisitions – U.S. (in 25 states) |
80 |
1.8 |
$ |
412.6 |
14.4 |
6.5 |
% |
||||||||
|
Acquisitions – U.K. (1) |
6 |
0.5 |
223.7 |
11.8 |
5.3 |
% |
|||||||||
|
Total Acquisitions |
86 |
2.3 |
636.3 |
13.6 |
6.1 |
% |
|||||||||
|
Properties under Development – U.S. |
8 |
0.2 |
3.9 |
10.5 |
8.8 |
% |
|||||||||
|
Total (3) |
94 |
2.5 |
$ |
640.2 |
13.6 |
6.1 |
% |
||||||||
|
(1) |
Represents investments of £46.8 million Sterling during the quarter ended June 30, 2020 and £180.1 million during the six months ended June 30, 2020 converted at the applicable exchange rate on the date of acquisition. |
|
(2) |
The tenants occupying the new properties operate in 8 industries, and are 100% retail, based on rental revenue. Approximately 41% of the rental revenue generated from acquisitions during the second quarter of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies. |
|
(3) |
The tenants occupying the new properties operate in 17 industries, and are 96.5% retail and 3.5% industrial, based on rental revenue. Approximately 37% of the rental revenue generated from acquisitions during the first six months of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies. |
Same Store Rental Revenue
The following summarizes our same store rental revenue on 5,539 properties under lease (dollars in millions):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
Decrease |
|||||||||||||||||||
|
2020 |
2019 |
2020 |
2019 |
Three months |
Six months |
||||||||||||||||
|
Rental Revenue |
$ |
315.7 |
$ |
317.0 |
$ |
635.6 |
$ |
636.7 |
(0.4) |
% |
(0.2) |
% |
|||||||||
Our calculation of same store rental revenue includes $12.9 million of rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB). Our calculation of same store rental revenue also includes $35.9 million of uncollected rent from the second quarter of 2020 where we have not granted a lease concession. If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the decreases for the second quarter and first six months of 2020 would have been (14.1)% and (6.5)%, respectively.
Property Dispositions
The following summarizes our property dispositions (dollars in millions):
|
Three Months Ended June 30, 2020 |
Six Months Ended June 30, 2020 |
||||||
|
Properties sold |
12 |
29 |
|||||
|
Net sales proceeds |
$ |
7.4 |
$ |
133.6 |
|||
|
Gain on sales of real estate |
$ |
1.3 |
$ |
39.8 |
|||
Liquidity and Capital Markets
Capital Raising
In May 2020, we issued $600 million of 3.250% senior unsecured notes due January 2031. The public offering price for these notes was 98.987% of the principal amount, for an effective yield to maturity of 3.364%.
During the quarter ended June 30, 2020, we raised $98.1 million from the sale of common stock at a weighted average price of $63.07 per share, primarily through our At-The-Market-Program.
In July 2020, we issued $350 million of 3.250% senior unsecured notes due January 2031, which constituted a further issuance of, and formed a single series with, the $600 million senior notes issued in May 2020. The public offering price was 108.241% of the principal amount, for an effective yield to maturity of 2.341%.
Credit Facility
We have a $3.0 billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend). The revolving credit facility also has a $1.0 billion accordion feature, which is subject to obtaining lender commitments. As of June 30, 2020, the balance of borrowings outstanding under our revolving credit facility was $628.6 million, and we had a cash balance of $35.3 million.
Repayment of Term Loan
In June 2020, we repaid one of the $250.0 million senior term loans in full upon maturity.
2020 Acquisitions Guidance
On April 9, 2020 we withdrew our 2020 guidance that was provided on February 19, 2020 due the ongoing uncertainty regarding the impact of the COVID-19 pandemic and measures taken to limit its spread. We are reinstating guidance relating to our acquisition volume, which we currently estimate at $1.25 – $1.75 billion for 2020. We continue to evaluate the impacts of the COVID-19 pandemic on our business as the situation continues to evolve.
Conference Call Information
In conjunction with the release of our operating results, we will host a conference call on August 4, 2020 at 11:30 a.m. PT to discuss the results. To access the conference, dial (877) 701-6180 (United States) or (647) 689-4069 (International). When prompted, provide the conference ID 4181696.
A telephone replay of the conference call can also be accessed by calling (800) 585-8367 and entering the passcode 4181696. The telephone replay will be available through August 18, 2020. A live webcast will be available in listen-only mode by clicking on the webcast link on the company’s home page or in the investors section 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
Supplemental materials on second quarter and year-to-date 2020 operating results, including reconciliations for non-GAAP measures, are available on our corporate website at www.realtyincome.com/investors/financial-information/quarterly-results.
About Realty Income
Realty Income, The Monthly Dividend Company®, is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 601 consecutive common stock monthly dividends throughout its 51-year operating history and increased the dividend 107 times since Realty Income’s public listing in 1994 (NYSE: O). The company is a member of the S&P 500 Dividend Aristocrats® index. Additional information about the company can be obtained from the corporate website at www.realtyincome.com.
Contact Information:
www.realtyincome.com
Tags:
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Contact Information:
www.realtyincome.com
