10-KPeriod: FY2016

REALTY INCOME CORP Annual Report, Year Ended Dec 31, 2016

Filed February 23, 2017For Securities:O

Summary

Realty Income Corporation (O) reported its full-year 2016 results, showcasing continued growth and a commitment to its "Monthly Dividend Company" strategy. The company demonstrated robust performance, with significant increases in Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO), both on a per-share basis, highlighting operational efficiency and effective property management. Key to Realty Income's success is its diversified portfolio of nearly 5,000 properties, primarily single-tenant net leased commercial real estate, leased to 248 tenants across 47 industries and 49 states plus Puerto Rico. The company maintained a high occupancy rate of 98.3% and achieved a strong rent recapture rate of 104.5% on re-leased properties. Realty Income also continued its long-standing policy of increasing monthly dividends, further solidifying its appeal to income-focused investors. Financially, the company strengthened its capital structure through strategic debt issuances and equity offerings, ending 2016 with total borrowings representing approximately 27.6% of its market capitalization. The company's proactive approach to portfolio management, coupled with a conservative capital structure and strong credit ratings, positions it well for continued stability and growth in the REIT sector.

Financial Highlights

30 data points
Beta

Revenue

$1.10B

Net Income

$315.57M

28.6% Net Margin

EPS (Diluted)

$1.13

Total Assets

$13.15B

Cash & Equivalents

$9.42M

Free Cash Flow

$799.86M

Financial Statements
Beta
Revenue$1.10B
Operating Income$316.48M
Interest Expense$219.97M
Net Income$315.57M
EPS (Basic)$1.13
Shares Outstanding (Basic)255.07M
Shares Outstanding (Diluted)255.62M

Key Highlights

  • 1Increased FFO per share by 4.0% to $2.88 and AFFO per share by 5.1% to $2.88 in 2016, indicating strong operational performance.
  • 2Invested $1.86 billion in 505 new properties and properties under development or expansion during 2016, expanding its diversified portfolio.
  • 3Maintained a high occupancy rate of 98.3% across its 4,944 properties at year-end 2016.
  • 4Achieved a rent recapture rate of 104.5% on re-leased properties during 2016, demonstrating effective asset management and leasing.
  • 5Continued its dividend growth policy, increasing monthly dividends six times in 2016, totaling $2.392 per share.
  • 6Ended 2016 with a conservative capital structure, with total outstanding borrowings of $5.875 billion, representing 27.6% of its total market capitalization.
  • 7Held investment-grade credit ratings from Moody's (Baa1 positive), S&P (BBB+ positive), and Fitch (BBB+ stable) as of December 31, 2016.

Frequently Asked Questions

In 2016, Realty Income's Funds From Operations (FFO) increased by 12.7% to $735.4 million, or $2.88 per diluted share, up from $2.77 in 2015. Adjusted Funds From Operations (AFFO) increased by 13.8% to $736.4 million, or $2.88 per diluted share, up from $2.74 in 2015.

As of December 31, 2016, Realty Income owned a diversified portfolio of 4,944 properties. These properties were leased to 248 different commercial tenants across 47 industries and were located in 49 states and Puerto Rico. The top 20 tenants represented approximately 53% of annualized revenue, with ten of those tenants having investment-grade credit ratings.

During 2016, Realty Income invested $1.86 billion in 505 new properties and properties under development or expansion. These acquisitions had a weighted average contractual lease rate of 6.3% and a weighted average lease term of 14.7 years. No single investment caused any tenant to represent 10% or more of total assets.

Realty Income maintained a conservative capital structure, with total outstanding borrowings of $5.875 billion representing approximately 27.6% of its total market capitalization as of December 31, 2016. The company issued $600 million of 3.000% senior unsecured notes due January 2027 and used proceeds from various equity offerings and its ATM program to repay borrowings under its credit facility.