10-QPeriod: Q1 FY2018

REALTY INCOME CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 9, 2018For Securities:O

Summary

Realty Income Corporation (O) reported solid financial results for the first quarter of 2018, demonstrating continued growth and operational strength. Total revenue increased by approximately 6.8% year-over-year to $318.3 million, driven primarily by growth in rental revenue from acquired properties and same-store rent increases. Net income available to common stockholders rose by 16.2% to $83.2 million, or $0.29 per diluted share. Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO) also showed significant year-over-year increases, reaching $224.9 million and $224.6 million, respectively, highlighting the company's ability to generate consistent operating cash flow. The company maintained a strong occupancy rate of 98.6% and continued its disciplined investment strategy, acquiring 174 new properties for $509.8 million. Realty Income also highlighted its commitment to returning capital to shareholders through consistent monthly dividends, which increased in the quarter. Financially, the company maintained a conservative capital structure, with total outstanding borrowings representing approximately 31.0% of its total market capitalization. Realty Income successfully managed its debt, with a significant portion at fixed rates and a strong debt service coverage ratio. The company also noted subsequent events, including a significant note issuance in April 2018 to refinance borrowings and fund investments. Overall, the report indicates a healthy financial position and a positive outlook for Realty Income.

Financial Highlights

29 data points
Beta

Revenue

$318.30M

Net Income

$83.31M

26.2% Net Margin

EPS (Diluted)

$0.29

Total Assets

$14.47B

Cash & Equivalents

$20.63M

Free Cash Flow

$213.53M

Financial Statements
Beta
Revenue$318.30M
Interest Expense$59.41M
Net Income$83.31M
EPS (Basic)$0.29
Shares Outstanding (Basic)283.92M
Shares Outstanding (Diluted)284.35M

Key Highlights

  • 1Total revenue increased by 6.8% to $318.3 million for Q1 2018 compared to Q1 2017.
  • 2Net income available to common stockholders grew by 16.2% to $83.2 million, or $0.29 per diluted share.
  • 3Funds From Operations (FFO) increased by 20.1% to $224.9 million ($0.79 per share), and Adjusted Funds From Operations (AFFO) increased by 11.6% to $224.6 million ($0.79 per share).
  • 4The company invested $509.8 million in 174 new properties and properties under development, demonstrating active portfolio expansion.
  • 5Occupancy rate remained strong at 98.6%, with 5,251 out of 5,326 properties leased.
  • 6Realty Income continued its policy of increasing monthly dividends, with a 4.3% increase in dividends paid per share in the first three months of 2018 compared to the prior year.
  • 7Total outstanding borrowings represented approximately 31.0% of the company's total market capitalization as of March 31, 2018, indicating a conservative capital structure.

Frequently Asked Questions

Realty Income's primary strategy for growth involved acquiring new properties and continuing its investment in properties under development or expansion. In the first three months of 2018, the company invested $509.8 million in 174 such properties, focusing on long-term, net lease agreements with a weighted average contractual lease rate of 6.2%.

Realty Income maintained a conservative capital structure, with total outstanding borrowings of $6.61 billion representing approximately 31.0% of its total market capitalization as of March 31, 2018. The company utilized a mix of debt and equity for financing, including its $2.0 billion unsecured revolving credit facility, senior unsecured notes and bonds, term loans, and mortgages payable. A significant portion of its debt is at fixed interest rates, and the company reported compliance with all financial covenants.

The company reported a strong occupancy rate of 98.6% as of March 31, 2018, with 5,251 properties leased out of 5,326. Rental revenue increased in the first quarter of 2018, driven by acquisitions and same-store rent increases. The company expects its portfolio of net-leased properties to continue providing dependable lease revenue, supporting its dividend payments.

Realty Income demonstrated robust growth in its key profitability metrics. Funds From Operations (FFO) available to common stockholders increased by 20.1% to $224.9 million ($0.79 per diluted share), and Adjusted Funds From Operations (AFFO) available to common stockholders increased by 11.6% to $224.6 million ($0.79 per diluted share). These increases reflect the company's operational performance and effective management.