Realty Income Announces Operating Results For The Three And Six Months Ended June 30, 2021

SAN DIEGO, Aug. 2, 2021 /PRNewswire/ -- Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company^®, today announced operating results for the three and six months ended June 30, 2021. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

COMPANY HIGHLIGHTS:

For the three months ended June 30, 2021:

• Net income per share was $0.33
• Normalized FFO and AFFO per share were $0.88
• Invested $1.13 billion in 156 properties and properties under development or expansion, including $591.8 million in United Kingdom (U.K.) properties
• Raised $457.5 million from the sale of common stock, primarily through our At-The-Market (ATM) program

For the month ended July 31, 2021:

• Raised $594.1 million in net proceeds from a common stock public offering of 9,200,000 shares, inclusive of 1,200,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares
• Issued £400 million through the issuance of 1.125% senior unsecured notes due 2027 and £350 million through the issuance of 1.750% senior unsecured notes due 2033 in our debut Sterling-denominated green bond offering
• Collected 99.4% of contractual rent across our total portfolio, inclusive of 98.9% collected from our theater clients

CEO Comments

"Our second quarter results and guidance updates demonstrate our track record of consistently executing on the strategic goals we set for our business," said Sumit Roy, Realty Income's President and Chief Executive Officer. "Our international pipeline continues to exceed expectations as the U.K. accounted for over 50% of our total $1.1 billion of second quarter acquisitions. Additionally, after our debut offering in July, we are proud to be the first net lease REIT to issue a green bond, illustrating our commitment in partnering with our clients to achieve mutual sustainability goals."

"We are updating several key guidance metrics as a result of our achievements during the second quarter, which include increasing theater rent collections, and added depth of our global pipeline. This update includes raising our 2021 AFFO per share guidance to $3.53 to $3.59 and increasing our 2021 acquisitions volume guidance to approximately $4.5 billion." 

Select Financial Results
The following summarizes our select financial results (dollars in millions, except per share data):

Rent Collections Update
Percentages of Contractual Rent Collected as of June 30, 2021

We either have executed deferral agreements or maintain ongoing deferral discussions with clients that account for a majority of the unpaid contractual rent for each of the periods referenced in the table above.

Rental Revenue Reserves ⁽¹⁾
The following table summarizes reserves recorded as a reduction of rental revenue across the entire portfolio (dollars in millions):

Theater Industry Update

As of June 30, 2021, the theater industry represented 5.4% of annualized contractual rental revenue. As of June 30, 2021,  we were fully reserved for the outstanding receivable balances for 37 theater properties. At June 30, 2021, the receivables outstanding for our 79 theater properties totaled $77.9 million, inclusive of $9.1 million of straight-line rent receivables, and net of $40.0 million of reserves, inclusive of $2.0 million of straight-line rent reserves.

At June 30, 2021, the receivables outstanding across the portfolio totaled $327.9 million, net of $60.0 million of reserves, and includes $195.9 million of straight-line rent receivable, net of $8.6 million of reserves.

Additionally, we did not record any provisions for impairment on theater properties for the six months ended June 30, 2021. See "Item 1A—Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding the actual and potential future impacts of the COVID-19 pandemic and the measures taken to limit its spread on our clients and our business, results of operations, financial condition and liquidity.

Dividend Increases 

In June 2021, we announced the 95^th consecutive quarterly dividend increase, which is the 111^th increase in the amount of the dividend since our listing on the New York Stock Exchange (NYSE) in 1994. The annualized dividend amount as of June 30, 2021 was $2.826 per share. The amount of monthly dividends paid per share increased 0.9% to $0.705 for the three months ended June 30, 2021, as compared to $0.699 for the three months ended June 30, 2020. During the three months ended June 30, 2021, we distributed $263.4 million in common dividends to stockholders, representing 80.4% of our AFFO of $327.6 million.

Real Estate Portfolio Update

As of June 30, 2021, our portfolio consisted of 6,761 properties located in all 50 U.S. states, Puerto Rico and the U.K., and leased to approximately 630 clients doing business in 58 separate industries. The properties are primarily freestanding and leased under long-term net lease agreements with a weighted average remaining lease term of approximately 8.8 years. Our portfolio of commercial real estate has historically provided dependable rental revenue supporting the payment of monthly dividends. As of June 30, 2021, portfolio occupancy was 98.5% with 103 properties available for lease or sale out of 6,761, as compared to 98.0% as of March 31, 2021 and 98.5% as of June 30, 2020.

Changes in Occupancy

During the three months ended June 30, 2021, the annual new rent on re-leases was $10.44 million, as compared to the previous annual rent of $9.97 million on the same units, representing a rent recapture rate of 104.7% on the units re-leased. We re-leased one unit to a new client without a period of vacancy, and two units to new clients after a period of vacancy.

During the six months ended June 30, 2021, the annual new rent on re-leases was $21.97 million, as compared to the previous annual rent of $21.12 million on the same units, representing a rent recapture rate of 104.0% on the units re-leased. We re-leased three units to new clients without a period of vacancy, and 17 units to new clients after a period of vacancy.

Investments in Real Estate
The following table summarizes our acquisitions in the U.S. and U.K. for the periods indicated below:

Same Store Rental Revenue

The following summarizes our same store rental revenue on 6,114 properties under lease (dollars in millions):

For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2021 of 1.38 GBP/USD.

Our calculation of same store rental revenue includes rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB). Same store rental income was negatively impacted by reserves recorded as reductions of rental revenue of $5.7 million for the three months ended June 30, 2021 compared to $3.7 million for the three months ended June 30, 2020, and $13.0 million for the six months ended June 30, 2021 compared to $3.8 million for the six months ended June 30, 2020. Our calculation of same store rental revenue also includes uncollected rent for which we have not granted a lease concession. If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three and six months ended June 30, 2021 relative to the comparable periods for 2020 would have been 16.3% and 4.9%, respectively.

Property Dispositions
The following summarizes our property dispositions (dollars in millions):

Liquidity and Capital Markets

Equity Capital Raising

During the three months ended June 30, 2021, we raised $457.5 million from the sale of common stock at a weighted average price of $69.01 per share, primarily through our At-The-Market-Program.

In July 2021, we raised $594.1 million from the issuance of 9,200,000 shares of common stock in an underwritten public offering, inclusive of 1,200,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

In July 2021, we issued £400 million of 1.125% senior unsecured notes due 2027 (the "2027" Notes) and £350 million of 1.750% senior unsecured notes due 2033 (the "2033" Notes). The public offering price for the 2027 Notes was 99.305% of the principal amount, for an effective semi-annual yield to maturity of 1.242%, and the public offering price for the 2033 Notes was 99.842% of the principal amount, for an effective semi-annual yield to maturity of 1.757%. Combined, the new issues of the 2027 Notes and 2033 Notes have a weighted average term of 8.8 years and a weighted average effective semi-annual yield to maturity of 1.48%. The issuances represented our debut green bond offering.

Revolving Credit Facility and Commercial Paper Program

We have a $3.0 billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend). The revolving credit facility also has a $1.0 billion accordion feature, which is subject to obtaining lender commitments. As of June 30, 2021, the balance of borrowings outstanding under our revolving credit facility was $635.3 million, consisting entirely of Sterling-denominated borrowings of £460.0 million.

Additionally, we have a U.S. dollar-denominated unsecured commercial paper program. Under the terms of this program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.0 billion, with proceeds used for general corporate purposes. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under this program. As of June 30, 2021, we had $650.0 million in commercial paper borrowings.

2021 Earnings Guidance

We estimate Normalized FFO per share for 2021 of $3.37 to $3.46. We estimate AFFO per share for 2021 of $3.53 to $3.59, an increase of 4.1% to 5.9% over 2020 AFFO per share of $3.39. Normalized FFO per share and AFFO per share exclude the merger-related costs associated with the proposed VEREIT merger. Summarized below are approximate estimates of the key components of our 2021 earnings guidance, which do not give effect to the announced merger between us and VEREIT, Inc. other than merger-related costs incurred to date:

Conference Call Information

In conjunction with the release of our operating results, we will host a conference call on August 3, 2021 at 11:30 a.m. PT to discuss the results. To access the conference, dial (877) 701-6180 (United States) or (647) 689-4069 (International). When prompted, provide the conference ID 2875728.

A telephone replay of the conference call can also be accessed by calling (800) 585-8367 and entering the conference ID 2875728. The telephone replay will be available through August 18, 2021.

A live webcast will be available in listen-only mode by clicking on the webcast link on our home page or in the investors section at www.realtyincome.com. A replay of the conference call webcast will be available approximately one hour after the conclusion of the live broadcast. No access code is required for this replay.

Supplemental Materials and Sustainability Report

Supplemental Operating and Financial Data for the three months ended June 30, 2021, including reconciliations for non-GAAP measures within the Glossary, are available on our corporate website at www.realtyincome.com/investors/financial-information/quarterly-results.

The Sustainability Report for the year ended December 31, 2020 is available on our corporate website at www.realtyincome.com/corporate-responsibility. During June 2021, we established our Green Financing Framework, which is also available on our corporate website at www.realtyincome.com/corporate-responsibility/Green-Financing-Framework.

About Realty Income

Realty Income, The Monthly Dividend Company^®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats^® index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,700 real estate properties owned under long-term lease agreements with our commercial clients. To date, the company has declared 613 consecutive common stock monthly dividends throughout its 52-year operating history and increased the dividend 111 times since Realty Income's public listing in 1994 (NYSE: O). Additional information about the company can be obtained from the corporate website at www.realtyincome.com.

Forward-Looking Statements

Statements in this press release that are not strictly historical are "forward-looking" statements. Forward-looking statements involve known and unknown risks, which may cause our actual future results to differ materially from expected results. These risks include, among others, general economic conditions, domestic and foreign real estate conditions, client financial health, the availability of capital to finance planned growth, volatility and uncertainty in the credit markets and broader financial markets, changes in foreign currency exchange rates, property acquisitions and the timing of these acquisitions, the structure, timing and completion of the announced mergers between us and VEREIT, Inc. and any effects of the announcement, pendency or completion of the announced mergers, including the anticipated benefits therefrom, charges for property impairments, the effects of the COVID-19 pandemic and the measures taken to limit its impact, the effects of pandemics or global outbreaks of contagious diseases or fear of such outbreaks, our clients' ability to adequately manage their properties and fulfill their respective lease obligations to us, and the outcome of any legal proceedings to which the we are a party, as described in our filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of our current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.