10-KPeriod: FY2018

REALTY INCOME CORP Annual Report, Year Ended Dec 31, 2018

Filed February 22, 2019For Securities:O

Summary

Realty Income Corporation (O) reported its 2018 annual results, showcasing continued growth and a stable financial position. The company, a Real Estate Investment Trust (REIT), maintained its commitment to monthly dividend payments, which have consistently increased. During 2018, Realty Income invested $1.8 billion in 764 new properties, expanding its diversified portfolio to 5,797 properties across 49 states and Puerto Rico. The portfolio maintained a high occupancy rate of 98.6% and demonstrated strong tenant and industry diversification, with no single tenant representing over 10% of total assets. Financially, the company reported an increase in net income and Funds From Operations (FFO), indicating solid operational performance. Furthermore, Realty Income strengthened its financial flexibility by entering into a new $3.25 billion unsecured credit facility and receiving a credit rating upgrade from S&P to A-. Key operational highlights include a significant rent recapture rate of 103.3% on re-leased properties, demonstrating effective asset management. The company's business philosophy emphasizes acquiring high-quality, freestanding, single-tenant properties with long-term net lease agreements, providing predictable rental income. The strategy to focus on tenants with service, non-discretionary, or low-price-point businesses in the retail sector, and investment-grade rated companies in the industrial sector, contributes to portfolio stability. The report also highlights Realty Income's commitment to corporate responsibility and strong corporate governance practices.

Financial Highlights

31 data points
Beta

Revenue

$1.33B

Net Income

$364.60M

27.5% Net Margin

EPS (Diluted)

$1.26

Total Assets

$15.26B

Cash & Equivalents

$10.39M

Free Cash Flow

$940.74M

Financial Statements
Beta
Revenue$1.33B
Interest Expense$266.02M
Net Income$364.60M
EPS (Basic)$1.26
EPS (Diluted)$1.26
Shares Outstanding (Basic)289.43M
Shares Outstanding (Diluted)289.92M

Key Highlights

  • 1Invested $1.8 billion in 764 new properties during 2018, expanding the portfolio to 5,797 properties.
  • 2Maintained a high occupancy rate of 98.6% at December 31, 2018.
  • 3Increased total revenue to $1.33 billion in 2018, up from $1.22 billion in 2017.
  • 4Reported a rent recapture rate of 103.3% on properties re-leased during 2018.
  • 5Increased FFO per diluted common share by 10.6% to $3.12 in 2018.
  • 6Secured a new $3.25 billion unsecured credit facility in October 2018, enhancing financial flexibility.
  • 7Received a credit rating upgrade from S&P to A- with a stable outlook in August 2018.

Frequently Asked Questions

In 2018, Realty Income invested $1.8 billion in 764 new properties and properties under development or expansion. The company focused on acquiring high-quality real estate with a weighted average contractual lease rate of 6.4%, typically freestanding, single-tenant properties with long-term net lease agreements. These acquisitions were diversified across 39 states, with 96.3% being retail and 3.7% industrial properties.

In 2018, Realty Income demonstrated strong financial performance. Total revenue increased to $1.33 billion from $1.22 billion in 2017. Net income available to common stockholders grew to $363.6 million from $301.5 million in 2017. Funds From Operations (FFO) available to common stockholders increased by 16.9% to $903.3 million, and FFO per diluted common share rose by 10.6% to $3.12.

Realty Income employs an active portfolio and asset management strategy focused on rent increases at lease expirations, optimizing tenant and market exposure through re-leasing and selective sales, and maximizing asset-level returns. They prioritize tenants with stable cash flow, strong credit profiles, and a commitment to long-term leases. Their strategy also emphasizes diversification by tenant, industry, and geography to reduce risk and ensure predictable income. The company reported a strong rent recapture rate of 103.3% on re-leased properties in 2018.

Realty Income maintains a conservative capital structure with total borrowings of $6.5 billion representing approximately 25.4% of its total market capitalization as of December 31, 2018. In October 2018, the company entered into a new $3.25 billion unsecured credit facility, improving its financing terms. Notably, in August 2018, S&P Global Ratings upgraded Realty Income's credit rating to A- with a stable outlook, reflecting the company's solid financial standing.