(Issues 2001 Funds From Operations (FFO) Estimates)
ESCONDIDO, Calif., Feb. 6 /PRNewswire/ -- Realty Income Corporation
(Realty Income), "The Monthly Dividend Company," (NYSE: O) today announced
operating results for the fourth quarter and year ended December 31, 2000.
COMPANY HIGHLIGHTS:
(For the year ended December 2000)
-- The monthly dividend amount was increased for the 13th consecutive
quarter
-- Annualized dividends increased 2.8% from December 1999 to December
2000, to an annualized amount of $2.22 per common share
-- Revenue increased 13.2% to $118.3 million
-- Funds from Operations (FFO) increased 2.0% to $67.2 million
-- FFO per common share increased 2.4% to $2.52 per share
-- Crest Net Lease, Realty Income's new subsidiary, achieved
profitability
-- Realty Income repurchased 298,800 shares of its securities for
$6.5 million
Financial Results
Revenue Increases
Realty Income's revenue for the fourth quarter ended December 31, 2000
increased 10.1% to $31.6 million as compared to $28.7 million for the same
quarter in 1999.
Revenue for the year ended December 31, 2000 increased 13.2% to
$118.3 million from $104.5 million for the same period in 1999.
Funds from Operations
FFO for the quarter ended December 31, 2000 increased 1.7% to
$17.8 million as compared to $17.5 million for the same quarter in 1999. On a
diluted per common share basis, FFO increased 3.1% to $0.67 per share compared
to $0.65 per share for the same period in 1999.
FFO for the year ended December 31, 2000 increased 2.0% to $67.2 million
as compared to $65.9 million for the same period one year ago. On a diluted
per common share basis, FFO increased 2.4% to $2.52 per share from
$2.46 per share for the same period in 1999.
FFO is a widely used measure of REIT performance that excludes non-cash
charges for the depreciation of real estate. FFO is one measure of a
company's cash flow and of its ability to pay dividends.
Dividend Information
On December 13, 2000, Realty Income announced the 13th consecutive
quarterly increase in the amount of the monthly dividend on its common stock.
The amount of the dividend was increased to $0.185 per share from
$0.18375 per share for an annualized dividend amount of $2.22 per share.
Through December 31, 2000, Realty Income paid twelve monthly dividends
totaling $2.1825 per common share. Of the dividends paid during 2000, 19.0%,
or $0.41454, is classified for federal income tax purposes as return of
capital, with the remaining $1.76796 classified as ordinary income. There are
no capital gains associated with these dividends. The Company continues its
31-year policy of declaring and paying common stock dividends on a monthly,
rather than a quarterly, basis.
Realty Income also paid twelve monthly dividends totaling
$2.3748 per share on its Class C preferred stock and four quarterly dividends
totaling $2.3436 per share on its Class B preferred stock.
Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended December
31, 2000 increased to $14.2 million as compared to $10.3 million for the same
period in 1999. On a diluted per common share basis, net income increased to
$0.54 per share as compared to $0.38 per share for the three months ended
December 31, 1999. The calculation to determine net income includes gains and
losses from the sale of investment properties. The amount of gains and losses
varies from quarter to quarter based on the timing of property sales and can
significantly impact net income. The gain recognized from property sales
during the fourth quarter of 2000 was $4.8 million greater than the gain
recognized from property sales during the same quarter in 1999. This
difference accounted for the increase in fourth quarter net income per share
in 2000.
Net income available to common stockholders for the year ended December
31, 2000 increased to $45.1 million as compared to $41.0 million in 1999. On
a diluted per common share basis, this represented an increase to $1.69 per
share as compared to $1.53 per share in 1999.
Share Repurchase Activity
On an ongoing basis, Realty Income regularly reviews its investment
options to determine the best use of its capital. At certain times during the
fourth quarter, the Company's share price justified repurchasing shares since
this provided the highest return on the Company's investment capital. During
the three months ended December 31, 2000 the Company invested $871,000 to
repurchase 37,900 shares of its common stock at an average price of
$22.98 per share and an estimated FFO yield of approximately 11.0%.
During the year ended December 31, 2000, Realty Income repurchased
284,500 shares of common stock at an average price of $21.87 per share and an
FFO yield of approximately 11.5% per share. The Company also repurchased
14,300 shares of its Class B preferred stock at an average price of
$19.27 per share and a yield of 12.2% per share. The total investment in
Realty Income shares during 2000 was $6.5 million. The Company used excess
cash flow, after the payment of dividends, to repurchase shares of the
Company's securities.
Real Estate Portfolio Update
As of December 31, 2000 Realty Income's portfolio of freestanding,
single-tenant retail properties consisted of 1,068 properties located in
46 states, leased to 72 retail chains doing business in 23 retail industries.
Portfolio Management Activities
The Company's portfolio of retail real estate properties owned under
10- to 20-year net leases continues to perform well and provide dependable
lease revenue supporting the payment of monthly dividends. As of December 31,
2000, portfolio occupancy was 97.7% with only 25 properties out of
1,068 available for lease.
Same store rents on the 894 properties under lease during the three months
ended December 31, 2000 and 1999 increased 3.2% to $23.85 million from
$23.12 million in 1999. Same store rents on the same 894 properties under
lease during the twelve months ended December 31, 2000 and 1999 increased
1.7% to $91.00 million compared to $89.48 million in 1999.
Many of the Company's leases call for rent increases every five years.
Over the past four years Realty Income has acquired approximately $587 million
in new properties that now represent approximately 54% of the Company's
portfolio. These properties are due to generate their initial rent increases
from 2002 to 2004.
Property Dispositions
During 2000, Realty Income sold or exchanged 21 properties at a cap rate
of 10.2% for net proceeds of $45.2 million. The Company reported a gain on
the sale of these properties of $6.7 million. The proceeds from the sale of
these properties were reinvested into new properties with an initial
contractual lease yield of 10.8%. The objective of the Company's disposition
program is to sell assets when the Company believes the reinvestment of the
sales proceeds will generate higher returns or enhance the credit quality of
the Company's real estate portfolio.
Property Acquisitions
During the fourth quarter, Realty Income invested $2.5 million in
properties under development with an initial contractual lease yield of 11.4%.
For the year ended December 31, 2000, the Company had invested $70.0 million
in 13 new properties and properties under development with an initial
contractual lease yield of 10.8%. Properties under development accounted for
$24.9 million or 36% of the total invested for the year. The new properties
are 100% leased with an initial average lease length of 18.3 years. The
Company used the proceeds from the sale of properties, excess cash flow after
the payment of dividends and borrowings under its acquisition credit facility
to the acquire the additional properties.
Market Overview
Realty Income's acquisition opportunities and the market for freestanding,
net-lease, retail properties remains strong. The Company has access to
excellent real estate acquisition opportunities at attractive lease yields.
While the market for acquisitions remains strong, the Company does not feel
that the capital market pricing is currently attractive for the issuance of
additional common stock, preferred stock or bonds to fund acquisitions.
Further, the Company remains dedicated to maintaining a conservative balance
sheet. As such, Realty Income anticipates that internally generated cash flow
and proceeds from property dispositions will be the primary source of funds to
generate the growth of its real estate portfolio. The Company also maintains
acquisition credit facilities with borrowing capacity of $225 million, which
are used to fund acquisitions and the operations of its subsidiary, Crest Net
Lease, Inc. The outstanding balance on the Company's acquisition credit
facility at year-end was $149.9 million. The outstanding balance on the
credit facility used to fund Crest Net Lease, Inc.'s operations was
$24.1 million.
Other Activities
Crest Net Lease
During 2000, Crest Net Lease Inc., a subsidiary formed in early 2000 to
actively buy and sell properties, achieved profitability. Crest Net Lease,
Inc.'s net contribution to Realty Income's Funds from Operations during 2000
was $0.02 per common share.
At the end of the fourth quarter, the subsidiary carried an inventory of
$23.6 million in properties held for sale. Management believes that Crest Net
Lease, Inc. will carry an average inventory of between $20 to $25 million in
properties on an ongoing basis. During 2000, Crest completed $6.2 million in
property sales and the Company reported a gain of $766,000. Crest generates
an earnings spread on the differential between the lease payments it receives
on the properties it holds in inventory and the cost of capital used to
acquire the properties. It is management's belief that at this level of
inventory these earnings will more than cover the ongoing operating expenses
of Crest Net Lease, Inc. The contribution to Realty Income's FFO by the
subsidiary will be dependent on the timing and the number of property sales
achieved, if any, in any given quarter.
Commenting on Realty Income's financial results and real estate
operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased to
report another year of progress in achieving our objective of providing
dependable monthly income and an attractive risk-adjusted total return for our
investors. Despite the absence of attractively priced capital during 2000 we
were able to achieve increases in funds from operations and the amount of the
dividends paid to our shareholders. The continued growth in our funds from
operations during 2000 was moderated by higher interest rates and a small
increase in vacant properties during the year. While we were able to achieve
increases in both FFO per share and dividends this year, we believe that the
Company's ongoing FFO growth should generally exceed the rate of growth for
2000. We are pleased that lease revenues in our core portfolio continue to
increase, benefiting from the substantial growth in the size of the portfolio
over the past several years. We have also been successful in selectively
selling a number of properties providing us with capital to recycle into
higher-yielding properties. This revenue growth is responsible for the solid
cash flow coverage and continued dependability of the Company's monthly
dividend payments."
2001 Earnings Guidance
Realty Income's funds from operations tend to be stable and fairly
predictable because of the long-term leases that are the primary source of the
Company's revenue. There are, however, several factors that can impact
changes in FFO from levels that have been anticipated by the Company. These
factors include, but are not limited to, changes in interest rates, occupancy
rates, periodically accessing the capital markets, the level of property
acquisitions and dispositions, and the operations of Crest Net Lease.
Management estimates that FFO per common share for 2001 should range from
$2.65 to $2.67 which would equate to an increase of 5.2% to 6.0% over 2000 FFO
per share of $2.52.
In prior years certain items impacting FFO per share have fluctuated from
quarter to quarter. Typically the Company's funds from operations has been
generated as follows: 25% in the first quarter, 24% in the second and third
quarters and 27% in the fourth quarter. This fluctuation is primarily due to
the receipt of percentage rents in the first and fourth quarters of the year.
While the Company believes this trend may continue, FFO may fluctuate
additionally in future years based upon the operations of Crest Net Lease.
Management estimates Crest Net Lease, Inc. will generate between
$0.05 to $0.07 per share of FFO during 2001. Crest's primary business is the
purchase and sale of properties at a profit. These sales may occur at various
times during the course of the year, which could cause FFO in certain quarters
to increase or decrease from normal levels. The Company does not intend to
provide quarterly estimates of FFO. Absent changes in annual FFO guidance, at
the end of each quarter, it may be presumed that the Company's overall
estimate for the year has not changed.
Forward-Looking Statements
Statements in this press release, which are not strictly historical, are
"forward-looking" statements. Forward-looking statements involve known and
unknown risks, which may cause the Company's actual results in the future to
differ materially from expected results. These risks include, among others,
general economic conditions, local real estate conditions, the availability of
capital to finance planned growth, and the profitability of the Company's
subsidiary, Crest Net Lease, as described in the Company's filings with the
Securities and Exchange Commission. Consequently, such forward-looking
statements should be regarded solely as reflections of the Company's current
operating plans and estimates. Actual operating results may differ materially
from what is expressed or forecast in this press release.
Realty Income is "The Monthly Dividend Company," a New York Stock Exchange
real estate company dedicated to providing shareholders with dependable
monthly income. The monthly income is supported by the cash flows from
1,068 retail properties owned under long-term lease agreements with leading
regional and national retail chains. The Company is an active buyer of
net-leased retail properties nationwide.
Note to Editors:
Realty Income press releases are available at no charge by calling our
toll-free investor hotline number: 888-811-2001, or through the internet at
http://www.realtyincome.com/Investing/News.html
CONSOLIDATED STATEMENTS OF INCOME
For three months and years ended December 31, 2000 and 1999
(dollars in thousands, except per share amounts)
Three Months Three Months Year Ended Year Ended
Ended 12/31/00 Ended 12/31/99 12/31/00 12/31/99
REVENUE
Rental $31,331 $28,588 $117,190 $104,270
Gain on sale of real
estate held for resale 208 -- 766 --
Interest and other 90 134 354 240
31,629 28,722 118,310 104,510
EXPENSES
Interest 8,734 6,448 31,547 24,473
Depreciation and
amortization 8,498 6,965 29,003 25,952
General and
administrative 1,847 1,715 6,839 6,538
Property 515 466 2,032 1,822
Other 254 98 813 430
19,848 15,692 70,234 59,215
Income from operations 11,781 13,030 48,076 45,295
Gain on sales of
investment properties 4,881 65 6,712 1,301
Income before
extraordinary item 16,662 13,095 54,788 46,596
Extraordinary item -- (355) -- (355)
Net income 16,662 12,740 54,788 46,241
Preferred stock
dividends (2,428) (2,437) (9,712) (5,229)
Net income available to
common stockholders $14,234 $10,303 $45,076 $41,012
Funds from
operations (FFO) $17,822 $17,525 $67,239 $65,917
Basic and diluted
per share information
for common stockholders:
Income from operations $0.35 $0.39 $1.44 $1.49
Net income 0.54 0.38 1.69 1.53
FFO 0.67 0.65 2.52 2.46
Cash dividends paid 0.551 0.533 2.183 2.085
FUNDS FROM OPERATIONS
(dollars in thousands)
Three Months Three Months Year Ended Year Ended
Ended 12/31/00 Ended 12/31/99 12/31/00 12/31/99
Net income available
to common
stockholders $14,234 $10,303 $45,076 $41,012
Plus:
Depreciation and
amortization 8,498 6,965 29,003 25,952
Extraordinary item -- 355 -- 355
Less:
Depreciation of
furniture, fixtures
and equipment (29) (33) (128) (101)
Gain on sales of
investment
properties (4,881) (65) (6,712) (1,301)
Funds from operations $17,822 $17,525 $67,239 $65,917
Dividends paid to
common stockholders $14,650 $14,283 $58,262 $55,925
FFO in excess of
dividends $3,172 $3,242 $8,977 $9,992
Basic and diluted
FFO per common share $0.67 $0.65 $2.52 $2.46
Weighted average
number of common
shares used for:
Basic per share
computation 26,571,992 26,822,171 26,684,598 26,822,285
Diluted per share
computation 26,595,574 26,824,979 26,700,806 26,826,090
CONSOLIDATED BALANCE SHEETS
As of December 31, 2000 and 1999
(dollars in thousands, except per share data)
2000 1999
ASSETS
Real estate, at cost:
Land $368,057 $338,489
Buildings and improvements 705,470 678,763
1,073,527 1,017,252
Less accumulated depreciation
and amortization (212,379) (179,421)
Net real estate held for investment 861,148 837,831
Real estate held for sale, net 33,130 29,262
Net real estate 894,278 867,093
Cash and cash equivalents 3,815 773
Accounts receivable 5,053 3,407
Goodwill, net 18,130 19,053
Other assets 13,490 15,078
Total assets $934,766 $905,404
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $4,914 $4,828
Accounts payable and accrued expenses 5,969 12,792
Other liabilities 4,314 3,753
Lines of credit payable 174,000 119,200
Notes payable 230,000 230,000
Total liabilities 419,197 370,573
Stockholders' equity:
Preferred stock and paid in capital, par value
$1.00 per share, 20,000,000 shares authorized,
4,125,700 and 4,140,000 shares issued and
outstanding in 2000 and 1999, respectively 99,368 99,679
Common stock and paid in capital, par value
$1.00 per share, 100,000,000 shares authorized,
26,563,519 and 26,822,164 shares issued and
outstanding in 2000 and 1999, respectively 630,932 636,611
Distributions in excess of net income (214,731) (201,459)
Total stockholders' equity 515,569 534,831
Total liabilities and stockholders' equity $934,766 $905,404
The following table sets forth certain information regarding our
properties classified according to the business of the respective tenants
(dollars in thousands):
Annualized(1)(2)
Rent as of January 1, 2001
Rental Percentage Percentage of Total Revenue
Revenue of Total 2000 1995
Industry
Apparel Stores $2,799 2.4% 2.4% --%
Automotive Parts 9,988 8.5 8.3 11.4
Automotive Service 6,814 5.8 5.8 3.7
Book Stores 572 0.5 0.5 --
Business Services 124 0.1 0.1 --
Child Care 28,868 24.5 24.7 45.6
Consumer Electronics 4,982 4.2 4.9 --
Convenience Stores 9,885 8.4 8.4 2.4
Crafts & Novelties 425 0.4 0.4 --
Drug Stores 235 0.2 0.2 --
Entertainment 1,808 1.5 2.0 --
General Merchandise 687 0.6 0.6 --
Grocery Stores 726 0.6 0.6 --
Health & Fitness 3,940 3.3 2.4 --
Home Furnishings 7,070 6.0 5.8 2.9
Home Improvement 1,564 1.3 2.0 --
Office Supplies 2,476 2.1 2.3 --
Pet Supplies & Services 1,699 1.4 1.5 --
Private Education 1,703 1.4 1.4 --
Restaurants 14,170 12.0 12.3 24.7
Shoe Stores 890 0.8 0.8 --
Theaters 5,209 4.4 2.7 --
Video Rental 4,510 3.8 3.9 --
Other 6,868 5.8 6.0 9.3
Totals $118,012 100.0% 100.0% 100.0%
(1) Does not include properties owned by Crest Net Lease, which are held
for sale. Crest Net Lease is a subsidiary of Realty Income.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of January 1, 2001 for each of the properties by 12, and
adding the previous twelve month's historic percentage rent, which
totaled $2.0 million, (i.e., additional rent calculated as a
percentage of the tenant's gross sales above a specified level). For
the properties under construction, an estimated contractual base rent
is used based upon the estimated total costs of each property.
The following table sets forth certain information regarding our
properties as of January 1, 2001, classified according to the retail
business types and the level of services they provide (dollars in
thousands):
Number of Annualized Percentage of
Properties (1) Rent (1) (2) Annualized Rent
Industry
TENANTS PROVIDING SERVICES
Automotive Service 100 $6,814 5.8%
Child Care 333 28,868 24.5
Entertainment 6 1,808 1.5
Health & Fitness 7 3,940 3.4
Private Education 6 1,703 1.4
Theaters 10 5,209 4.4
Other 9 6,868 5.8
471 55,210 46.8
TENANTS SELLING GOODS AND SERVICES
Automotive Parts 63 5,505 4.7
Business Services 1 124 0.1
Convenience Stores 103 9,885 8.4
Home Improvement 15 187 0.2
Pet Supplies & Services 6 1,231 1.0
Restaurants 172 14,170 12.0
Video Rental 35 4,510 3.8
395 35,612 30.2
TENANTS SELLING GOODS
Apparel Stores 4 2,799 2.4
Automotive Parts 78 4,483 3.8
Book Stores 2 572 0.5
Consumer Electronics 37 4,982 4.2
Craft & Novelty 2 425 0.4
Drug Stores 1 235 0.2
General Merchandise 11 687 0.6
Grocery Stores 2 726 0.6
Home Furnishings 38 7,070 6.0
Home Improvement 13 1,377 1.1
Office Supplies 8 2,476 2.1
Pet Supplies 2 468 0.4
Shoe Stores 4 890 0.7
202 27,190 23.0
Totals 1,068 $118,012 100.0%
(1) Does not include properties owned by Crest Net Lease, which are held
for sale. Crest Net Lease is a subsidiary of Realty Income.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of January 1, 2001 for each of the properties by 12, and
adding the previous twelve month's historic percentage rent, which
totaled $2.0 million, (i.e., additional rent calculated as a
percentage of the tenant's gross sales above a specified level).
For the properties under construction, an estimated contractual base
rent is used based upon the estimated total costs of each property.
SOURCE Realty Income Corporation
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Related links:
http://www.realtyincome.com
Company News On-Call:
http://www.prnewswire.com/comp/746650.html or fax,
800-758-5804, ext. 746650
CONTACT:
Tere Miller, Vice President, Corporate
Communications of Realty Income Corporation, 760-741-2111 ext.
177
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