10-QPeriod: Q3 FY2009

REALTY INCOME CORP Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 29, 2009For Securities:O

Summary

Realty Income Corporation (O) reported its third-quarter and nine-month results for the period ending September 30, 2009. The company demonstrated resilience in a challenging economic environment, with relatively stable rental revenue. While net income available to common stockholders saw a slight decrease compared to the prior year, primarily due to lower gains from property sales, Funds from Operations (FFO) available to common stockholders showed an increase, indicating strong operational performance. The company maintained a high occupancy rate and continued its policy of monthly dividend payments, even increasing them slightly. Liquidity remains solid, with a substantial available borrowing capacity on its credit facility and a conservative capital structure characterized by a significant portion of fixed-rate, unsecured debt. Realty Income's diversified portfolio, primarily leased under long-term net lease agreements with a wide range of retail tenants across 49 states, positions it well to navigate the economic landscape. The company's focus on acquiring freestanding, single-tenant retail properties leased to strong regional and national chains remains a core strategy.

Financial Highlights

16 data points
Beta

Revenue

$81.46M

Net Income

$33.15M

40.7% Net Margin

Free Cash Flow

$42.02M

Financial Statements
Beta
Revenue$81.46M
Operating Income$90.58M
Interest Expense$21.37M
Net Income$33.15M
Shares Outstanding (Basic)103.47M
Shares Outstanding (Diluted)103.48M

Key Highlights

  • 1FFO available to common stockholders increased by 5.5% in Q3 2009 and 2.6% year-to-date, demonstrating operational strength.
  • 2The company maintained a high occupancy rate of 96.8% across its 2,334 properties.
  • 3Realty Income continued its policy of monthly dividend payments, with a slight increase in the quarterly distribution and its 48th consecutive quarterly increase in October 2009.
  • 4Total debt as a percentage of market capitalization was a conservative 32.4% as of September 30, 2009.
  • 5The company has significant liquidity with $355 million available on its credit facility and no outstanding balance at the time of filing.
  • 6Rental revenue remained relatively stable, down slightly by 0.5% in Q3 and up 0.1% year-to-date, reflecting the resilience of its net-lease model.
  • 7The company reduced its total liabilities by approximately $40.6 million compared to December 31, 2008, primarily through the redemption of notes payable.

Frequently Asked Questions

For the nine months ended September 30, 2009, net income available to common stockholders was $77.6 million, a decrease from $79.3 million in the same period of 2008. This decrease was largely due to lower gains from property sales. However, Funds from Operations (FFO) available to common stockholders increased to $142.1 million in the first nine months of 2009, up from $138.5 million in 2008, indicating a stronger underlying operational performance.

Realty Income maintains a strong liquidity position. As of September 30, 2009, the company had $20.0 million in cash and cash equivalents. It also has a $355 million revolving credit facility, with no outstanding balance at the time of filing, providing significant borrowing capacity. The company's long-term capital needs have historically been met through equity and debt issuances, and it aims to maintain a conservative capital structure.

The company's portfolio of 2,334 retail properties maintained a high occupancy rate of 96.8% as of September 30, 2009, with 2,259 properties occupied. The portfolio is diversified, with properties leased to 118 different retail chains across 30 industries and located in 49 states. The majority of properties (99.5%) are single-tenant, net-leased retail properties with long-term leases.

Realty Income focuses on a conservative capital structure, with total outstanding borrowings of $1.35 billion in senior unsecured notes as of September 30, 2009, representing approximately 32.4% of its total market capitalization. All of its outstanding notes and bonds have fixed interest rates, which helps to mitigate interest rate risk. The company has been actively redeeming maturing debt, such as the $20 million of 8% notes in January 2009, contributing to a decrease in overall interest expense.