10-KPeriod: FY2012

REALTY INCOME CORP Annual Report, Year Ended Dec 31, 2012

Filed February 14, 2013For Securities:O

Summary

Realty Income Corporation's (O) 2012 10-K filing highlights a company committed to its "Monthly Dividend Company®" strategy, demonstrating consistent dividend growth and a robust property portfolio. The company owned 3,013 properties across 49 states, leased to 150 different commercial enterprises in 44 industries, with a strong occupancy rate of 97.2% as of December 31, 2012. Significant activity in 2012 included substantial real estate investments totaling $1.16 billion across 423 properties, and the company also completed a major acquisition of American Realty Capital Trust, Inc. (ARCT) in January 2013, valued at approximately $3.1 billion, which significantly expanded its portfolio. The company's financial performance showed growth in Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) in 2012, indicating operational strength. Realty Income maintained a conservative capital structure with a debt-to-market capitalization ratio of 32.5% at year-end 2012, supported by investment-grade credit ratings. The report emphasizes the company's focus on long-term, net-lease agreements with financially stable tenants, particularly those with a service component, aiming for predictable cash flows to support its monthly dividend policy.

Financial Highlights

25 data points
Beta

Net Income

$159.15M

EPS (Diluted)

$0.86

Total Assets

$5.43B

Free Cash Flow

$326.47M

Financial Statements
Beta
Operating Income$141.90M
Interest Expense$123.14M
Net Income$159.15M
EPS (Basic)$0.86
EPS (Diluted)$0.86
Shares Outstanding (Basic)132.82M
Shares Outstanding (Diluted)132.88M

Key Highlights

  • 1Acquisition of 423 properties for $1.16 billion in 2012, expanding the portfolio to 3,013 properties.
  • 2Completed a significant acquisition of American Realty Capital Trust (ARCT) in January 2013, valued at $3.1 billion, adding 515 properties.
  • 3Maintained a high occupancy rate of 97.2% as of December 31, 2012.
  • 4Reported increased Funds from Operations (FFO) by 4.6% and Normalized FFO by 7.8% in 2012 compared to 2011.
  • 5Continued its 44-year policy of paying monthly dividends, with 70 dividend increases since listing on the NYSE in 1994.
  • 6Issued $350 million in 2.00% senior unsecured notes due 2018 and $450 million in 3.25% senior unsecured notes due 2022 in October 2012 to fund acquisitions and general corporate purposes.
  • 7Entered into a new $1 billion unsecured acquisition credit facility in May 2012, increasing borrowing capacity.

Frequently Asked Questions

Realty Income's primary business objective is to generate dependable monthly cash dividends from predictable cash flow. Their strategy involves acquiring and owning freestanding commercial properties leased to regional and national commercial enterprises under long-term, net-lease agreements. They focus on tenants with stable cash flow, where the real estate is critical to the tenant's operations, and on industries with a service component, which they believe are less susceptible to online competition.

The acquisition of American Realty Capital Trust (ARCT) in January 2013 for approximately $3.1 billion was a significant event. It added 515 properties to Realty Income's portfolio, increasing its total number of properties and expanding its leasable square footage. This acquisition also increased the company's debt levels and merger-related costs were incurred, but it was expected to contribute to future growth and diversification.

In 2012, Realty Income reported a 15.9% increase in rental revenue, driven by new property acquisitions. Funds from Operations (FFO) increased by 4.6% to $260.9 million, and Adjusted Funds from Operations (AFFO) increased by 8.2% to $274.2 million. Net income available to common stockholders was $114.5 million, a decrease from the prior year, partly due to merger-related costs and preferred stock redemption charges. The company maintained a conservative capital structure and continued its policy of monthly dividend payments.

Key risks highlighted include competition in property acquisitions, adverse market conditions affecting tenants and their industries (potentially impacting rent collection and lease renewals), difficulties in integrating the ARCT acquisition, and potential environmental liabilities associated with property ownership. The company also notes the risks associated with debt financing and the importance of maintaining its REIT status.