Realty Income Corporation
CEO : Mr. Sumit Roy
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 30.4% YoY | 25.5% | 3500.0% | 2023-02-22 |
Sumit Roy says,
Record-breaking 2022 results
- AFFO per share growth of 9.2%, highest since 2013
- $9 billion of high-quality investments in 2022, $3.9 billion in Q4
- $17 billion sourced in Q4, $95 billion in 2022
- Occupancy rate of 99%, highest in over 20 years
Expanding into new verticals
- Debut transaction in Italy, acquiring 7 wholesale clubs
- Acquisition of Encore Boston Harbor resort and Casino
- Significant investment in consumer-centric medical industry
- Entered strategic alliance with Plenty for vertical farming operations
Proactive asset management
- Rent recapture rate of 103.8% in Q4, 105.9% for full year
- Reevaluating impact of Cineworld bankruptcy on portfolio
- Collected 100% of contractual rent from Cineworld since Oct 2022
- Recorded $13.7 million of additional reserves for Cineworld properties
New Chief Operating Officer
- Welcomed Greg White as COO in January
- Brings extensive knowledge of commercial real estate space
Future growth opportunities
- Constantly working to incubate new swim lanes for growth
- Expect to unlock growth opportunities over time
Christie Kelly says,
Capital Market Activities
- The company raised approximately $52 billion of equity proceeds primarily through the ATM program in Q4.
- The company has approximately $850 million of unsettled forward equity available for future issuance.
- The company raised over $4.6 billion of gross equity proceeds at a weighted average price of $67.04 throughout 2022, almost entirely through the ATM program.
- The company’s capital market activities were aimed at striking the right balance between terming out short-term borrowings while providing flexibility to participate in a lower rate environment over the next three years.
- The company executed a dual tranche $1.1 billion senior unsecured bond offering, consisted of $500 million three-year notes callable after one year and $600 million of seven-year notes.
- The company capitalized on an attractive window to swap its interest payments from a fixed to a variable rate structure, replacing a portion of its existing variable rate exposure in the capital stack.
- The company locked in a variable rate spread of negative 3.5 basis points to SOFR, which represents estimated savings compared to its credit facility of over 85 basis points.
- Lastly, the company closed on a new $1 billion multicurrency unsecured term loan with an initial tenor of one year and with two 12-month extension options.
Guidance for 2023
- The company is initiating AFFO per share guidance of $3.93 to $4.03, representing 1.5% growth at the midpoint of the earnings range and including its current dividend yield.
- The annualization of higher interest rates has moderated its expected growth rate for 2023.
- The company is introducing 2023 investment guidance of greater than $5 billion.
- The company will revisit this guidance each quarter as it gains incremental visibility to its transaction pipeline.
- The company announced a dividend increase of 2.4% last week, which represents a 3.2% growth rate over the year ago period.
Q & A sessions,
Indoor farming and ag tech
- Indoor farming is estimated to be a $50 billion industry over the next few years
- Plenty, a company with institutional sponsorship from major grocers and Walmart, has an established position in vertical farming
- $42 million investment in Plenty is expected to be a solid real estate investment
Consumer-centric medical facilities
- In addition to traditional healthcare delivery methods, consumer-centric medical facilities like infusion centers, dialysis centers, and urgent care centers are gaining momentum, especially post-pandemic
- Consumer-centric medical facilities are expected to contribute to reducing per capita healthcare costs
- 90% overlap in locations and boxes with assets that lend themselves to consumer-centric medical facilities
M&A and real estate acquisitions
- M&A and real estate acquisitions are not mutually exclusive and both avenues will be pursued to grow the business
- Opportunity cost of competing against good acquisitions on the market
- $9 billion of acquisitions were made last year, taking care of 80-90% of the total size of companies in the sector
European real estate market
- The European real estate market has seen movement in cap rates, settling in around 6.5%-7.0%
- Redemption issues and capital being pulled out of the market have pushed sellers to monetize their real estate portfolios
New investments in Italy
- Italy has more risk as a country, but investments in Metro AG, a pan-European investment grade and profitable business that controls 26% of the wholesale business in Italy, are comfortable due to structural advantages and a good risk-adjusted return profile
Cash flow coverages and watch list
- Cash flow coverages have continued to improve, largely due to existing clients like Albertsons generating EBITDA growth on a four-wall basis and healthy four-wall coverage ratios in new transactions
- Roughly 4% of rent is on the tenant watch list, largely driven by theater assets and location risk
No bad stock 