ESCONDIDO, Calif., Feb. 6 /PRNewswire-FirstCall/ -- Realty Income
Corporation (Realty Income), "The Monthly Dividend Company," (NYSE: O) today
announced operating results for the fourth quarter and year ended December 31,
2001.
COMPANY HIGHLIGHTS:
(For the year ended December 31, 2001)
-- Revenue increased 6.8% to $126.3 million
-- Funds from Operations (FFO) increased 15.8% to $77.8 million
-- FFO per common share increased 5.6% to $2.66 per share
-- Portfolio occupancy averaged 98%
-- The Company invested $131.8 million into additional properties at
11.0% initial average lease yields
-- Crest Net Lease, Inc. generated $0.08 per common share in FFO for
Realty Income
-- Realty Income paid its 376th consecutive monthly dividend
-- The monthly dividend amount was increased for the 17th consecutive
quarter
Financial Results
Revenue Increases
Realty Income's revenue for the fourth quarter ended December 31, 2001
increased 7.0% to $33.8 million as compared to $31.6 million for the same
quarter in 2000.
Revenue for the year ended December 31, 2001 increased 6.8% to
$126.3 million from $118.3 million for the same period in 2000.
Funds from Operations
FFO for the quarter ended December 31, 2001 increased 25.3% to
$22.3 million as compared to $17.8 million for the same quarter in 2000. On a
diluted per common share basis, FFO increased 4.5% to $0.70 per share compared
to $0.67 per share for the same period in 2000.
FFO for the year ended December 31, 2001 increased 15.8% to $77.8 million
as compared to $67.2 million for the same period one year ago. On a diluted
per common share basis, FFO increased 5.6% to $2.66 per share from $2.52 per
share for the same period in 2000.
FFO is a widely used measure of REIT performance that excludes non-cash
charges for the depreciation of real estate and gains on sales of investment
properties. FFO is one measure of a company's cash flow and of its ability to
pay dividends.
Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended December
31, 2001 increased to $16.0 million as compared to $14.2 million for the same
period in 2000. On a diluted per common share basis, net income was $0.50 per
share as compared to $0.54 per share for the three months ended December 31,
2000.
Net income available to common stockholders for the year ended
December 31, 2001 increased to $57.8 million as compared to $45.1 million in
2000. On a diluted per common share basis, this represented an increase of
17.2% to $1.98 per share as compared to $1.69 per share in 2000.
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. Excluding gain on the sales of investment properties, on a
diluted per common share basis, operating net income increased by $0.10 during
the fourth quarter of 2001 versus the same quarter in 2000 and by $0.18 for
the year ended December 31, 2001 versus 2000.
Dividend Information
On December 13, 2001, Realty Income announced the 17th consecutive
quarterly increase in the amount of the monthly dividend on its common stock.
This marked the 19th increase in the amount of the dividend since 1995. The
amount of the monthly dividend was increased to $0.19 per share, which equates
to an annualized dividend amount of $2.28 per share. During 2001, Realty
Income paid twelve monthly dividends totaling $2.2425 per common share. The
Company continues its 32-year policy of declaring and paying common stock
dividends on a monthly rather than a quarterly basis.
During 2001 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.
Real Estate Portfolio Update
As of December 31, 2001 Realty Income's portfolio of freestanding,
single-tenant retail properties consisted of 1,124 properties located in
48 states, leased to 78 retail chains doing business in 24 retail segments.
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,
2001, portfolio occupancy was 98.2% with only 20 properties available for
lease out of 1,124 properties in the portfolio.
Same store rents on the 977 properties under lease during the three months
ended December 31, 2001 and 2000 increased 1.0% to $27.21 million from
$26.93 million in 2000. Same store rents on the same 977 properties under
lease during the twelve months ended December 31, 2001 and 2000 increased
1.8% to $105.24 million compared to $103.41 million in 2000.
Property Acquisitions
During the fourth quarter, Realty Income acquired 54 retail properties for
$88.4 million. The Company also funded $2.3 million for properties under
development, for total acquisitions during the quarter of $90.7 million. The
54 properties acquired are located in 16 states, are 100% leased under
triple-net leases, have an average lease length of 20.0 years and an initial
contractual lease yield of 11.0%.
For the year ended December 31, 2001, the Company acquired 91 retail
properties and invested $131.8 million into additional real estate
investments. The 91 new properties are located in 25 states, are 100% leased
under long-term, triple-net leases, have an average lease length of 20.1 years
and an initial contractual lease yield of 11.0%.
The Company believes the acquisition market for freestanding, net-lease,
retail properties remains attractive. During 2001 the Company analyzed over
100 separate transactions involving 555 properties with an approximate market
value of just under $1 billion. From these opportunities, Realty Income
selected the 91 properties it acquired in 13 separate transactions totaling
$131.8 million. In addition, Crest Net Lease, Inc., a subsidiary of the
Company, acquired 26 properties, in 9 separate transactions, totaling
$24.7 million. As such, the Company and its subsidiary invested in
approximately 16% of the opportunities it reviewed during 2001.
During 2002, the Company anticipates it will acquire additional properties
utilizing its acquisition credit facility, the proceeds from property
dispositions, internally generated cash flow and the proceeds from the
potential offering of additional securities. Realty Income maintains credit
facilities with borrowing capacity of $225 million, which are used to fund
acquisitions and the operations of the company and its subsidiary, Crest Net
Lease, Inc. The outstanding balance on the Company's acquisition credit
facility at year-end was $63.7 million. The outstanding balance on the credit
facility used to fund Crest's operations was $21.6 million.
Property Dispositions
Realty Income continued to successfully execute its asset disposition
program during 2001. The objective of the program is to sell assets when the
Company believes the reinvestment of the sale proceeds will generate higher
returns, enhance the credit quality of the Company's real estate portfolio or
increase the average lease length.
During the fourth quarter ended December 31, 2001, Realty Income sold 12
properties for $9.9 million for a gain of $1.6 million. For the year ended
December 31, 2001, the Company sold 35 properties for $39.5 million for a gain
of $10.5 million.
Other Activities
Crest Net Lease
Crest Net Lease Inc., a subsidiary formed by Realty Income, is focused on
acquiring and subsequently marketing net-leased properties for sale. During
the fourth quarter ended December 31, 2001, Crest sold three properties for
$10.1 million and reported a gain on sales of $1.0 million. During the
quarter Crest also invested $6.0 million in seven new properties and
properties under development. As of the end of the year, Crest carried an
inventory of $22.3 million, which consists of 24 properties held for sale.
During 2001, Crest sold nine properties for $28.9 million and reported a
gain on sales of $3.4 million. Crest also invested $24.7 million in
26 properties and properties under development.
Management believes that Crest will carry an average inventory of between
$20 to $30 million in properties. The subsidiary generates an earnings spread
on the difference between the lease payments it receives on the properties
held in inventory and the cost of capital used to acquire properties. It is
management's belief that at this level of inventory these earnings will more
than cover the ongoing operating expenses of Crest. The contribution to
Realty Income's FFO by the subsidiary depends on the timing and the number of
property sales achieved, if any, in any given quarter. During the fourth
quarter and year ended December 31, 2001, Crest generated $0.03 and $0.08 in
FFO per common share, respectively, for Realty Income.
CEO Comments on 2001 Operating Results
Commenting on Realty Income's financial results and real estate
operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased to
report that 2001 was a very good year for The Monthly Dividend Company. We
ended the year with record revenues, earnings, dividends and a substantial
increase in the size of the Company's real estate portfolio. We also enjoyed
four dividend increases and saw the price of our shares increase from
$24.88 at the beginning of the year to $29.40 at the end of the year.
Including dividend and share price increases, our total return to shareholders
for the year was a healthy 27.2%.
"We were also gratified with the Company's continued access to the public
capital markets during 2001. The two equity offerings we completed over the
course of the year allowed us to generate capital to continue our growth while
maintaining one of the most conservative balance sheets in our industry. At
the same time, we were very pleased with both the level of acquisitions and
the yields we were able to negotiate in a rapidly declining interest rate
environment. In addition, the Company's core portfolio of real estate
continued to perform well. We believe this is due to our continued focus on
acquiring properties leased to retailers that sell basic human needs goods and
services at relatively low price points. Finally, our new subsidiary, Crest
Net Lease, substantially exceeded our expectations for the year by producing
an after-tax contribution of over $2.4 million to our earnings, generating
$0.08 per share of Realty Income's funds from operations.
"Looking forward to 2002, we are optimistic about the Company's operations
and financial performance for the year ahead. We enter the year with strong
portfolio occupancy, a clean and uncomplicated balance sheet and ready access
to capital to fund our growth. We believe there will be adequate acquisition
opportunities to continue to add to our portfolio of retail properties. As
such, we should be able to continue to deliver solid operational performance
during 2002."
Earnings Commentary
Realty Income's FFO per common share has historically tended 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
cause changes in FFO per common share 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.
2002 Estimates
Management estimates that FFO per common share for 2002 should range from
$2.80 to $2.82 which would equate to an increase of 5.3% to 6.0% over 2001 FFO
per share of $2.66.
Management estimates Crest Net Lease, Inc. will generate between $0.06 to
$0.08 per share of FFO during 2002. 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
fluctuate 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. The Company
undertakes 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.
Realty Income is "The Monthly Dividend Company," a New York Stock Exchange
real estate company dedicated to providing shareholders with dependable
monthly income. As of December 31, 2001, the Company had paid 376 consecutive
monthly dividend payments throughout its 33-year operating history. The
monthly income is supported by the cash flows from 1,124 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, 2001 and 2000
(dollars in thousands, except per share amounts)
Three Three
Months Months Year Year
Ended Ended Ended Ended
12/31/01 12/31/00 12/31/01 12/31/00
REVENUE
Rental $32,665 $31,331 $122,061 $117,190
Gain on sales of
real estate acquired
for resale 1,001 208 3,374 766
Interest and other 107 90 836 354
33,773 31,629 126,271 118,310
EXPENSES
Interest 5,740 8,734 26,466 31,547
Depreciation and
amortization 7,523 8,498 29,125 29,003
General and
administrative 2,016 1,847 7,836 6,839
Property 745 515 2,518 2,032
Other 483 254 1,796 813
Provision for
impairment losses 400 -- 1,450 --
16,907 19,848 69,191 70,234
Income from
operations 16,866 11,781 57,080 48,076
Gain on sales of
investment properties 1,557 4,881 10,478 6,712
Net income 18,423 16,662 67,558 54,788
Preferred stock
dividends (2,428) (2,428) (9,712) (9,712)
Net income available
to common
stockholders $15,995 $14,234 $57,846 $45,076
Funds from
operations (FFO) $22,331 $17,822 $77,828 $67,239
Per share information
for common
stockholders:
FFO
Basic $0.70 $0.67 $2.66 $2.52
Diluted 0.70 0.67 2.66 2.52
Income from operations
Basic 0.45 0.35 1.62 1.44
Diluted 0.45 0.35 1.62 1.44
Net income
Basic 0.50 0.54 1.98 1.69
Diluted 0.50 0.54 1.98 1.69
Cash dividends paid 0.566 0.551 2.243 2.183
FUNDS FROM OPERATIONS
For three months and years ended December 31, 2001 and 2000
(dollars in thousands, except per share amounts)
Three Three
Months Months Year Year
Ended Ended Ended Ended
12/31/01 12/31/00 12/31/01 12/31/00
Net income available
to common
stockholders $15,995 $14,234 $57,846 $45,076
Plus:
Depreciation and
amortization 7,523 8,498 29,125 29,003
Provision for
impairment losses
on properties held
for sale 400 -- 1,450 --
Less:
Depreciation of
furniture, fixtures
and equipment (30) (29) (115) (128)
Gain on sales
of investment
properties (1,557) (4,881) (10,478) (6,712)
Funds from
operations $22,331 $17,822 $77,828 $67,239
Dividends paid to
common stockholders $17,966 $14,650 $64,871 $58,262
FFO in excess of
dividends 4,365 3,172 12,957 8,977
Basic and diluted
FFO per common share 0.70 0.67 2.66 2.52
Weighted average
number of common
shares used for:
Basic per share
computation 32,077,535 26,571,992 29,225,359 26,684,598
Diluted per share
computation 32,129,601 26,595,574 29,281,120 26,700,806
CONSOLIDATED BALANCE SHEETS
As of December 31, 2001 and December 31, 2000
(dollars in thousands, except per share data)
2001 2000
ASSETS
Real estate, at cost:
Land $412,455 $368,057
Buildings and improvements 765,707 705,470
1,178,162 1,073,527
Less accumulated depreciation
and amortization (233,848) (212,379)
Net real estate held for investment 944,314 861,148
Real estate held for sale, net 23,356 33,130
Net real estate 967,670 894,278
Cash and cash equivalents 2,467 3,815
Accounts receivable 4,857 5,053
Goodwill, net 17,206 18,130
Other assets 11,508 13,490
Total assets $1,003,708 $934,766
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $6,238 $4,914
Accounts payable and accrued expenses 5,834 5,969
Other liabilities 4,543 4,314
Lines of credit payable 85,300 174,000
Notes payable 230,000 230,000
Total liabilities 331,915 419,197
Stockholders' equity
Preferred stock and paid in capital, par value
$1.00 per share, 20,000,000 shares
authorized, 4,125,700 shares issued
and outstanding 99,368 99,368
Common stock and paid in capital, par value
$1.00 per share, 100,000,000 shares
authorized, 32,829,111 and 26,563,519
shares issued and outstanding in 2001
and 2000, respectively 795,505 630,932
Distributions in excess of net income (223,080) (214,731)
Total stockholders' equity 671,793 515,569
Total liabilities and stockholders'
equity $1,003,708 $934,766
The following table sets forth rental revenue from our properties
classified according to the business of the respective tenants, expressed as a
percentage of our total rental revenue:
Percentage of Rental Revenue(1)
Annualized(2)
Rent
as of For the Years Ended
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
Industry 2001(2) 2001 2000 1999 1998 1997 1996 1995
Apparel
Stores 2.4% 2.4% 2.4% 3.8% 4.1% 0.7% --% --%
Automotive
Parts 7.8 8.3 8.3 8.6 7.8 9.1 10.5 11.4
Automotive
Service 5.2 5.7 5.8 6.6 7.5 6.4 4.8 3.7
Book
Stores 0.5 0.4 0.5 0.5 0.6 0.5 -- --
Business
Services 0.1 0.1 0.1 0.1 * -- -- --
Child
Care 21.9 23.9 24.7 25.3 29.2 35.9 42.0 45.6
Consumer
Electronics 3.5 4.0 4.9 4.4 5.4 6.5 0.9 --
Convenience
Stores 7.7 8.4 8.4 7.2 6.1 5.5 4.6 2.4
Crafts &
Novelties 0.4 0.4 0.4 0.4 * -- -- --
Drug
Stores 0.2 0.2 0.2 0.2 0.1 -- -- --
Entertainment 2.0 1.8 2.0 1.2 -- -- -- --
General
Merchandise 0.5 0.6 0.6 0.6 * -- -- --
Grocery
Stores 0.5 0.6 0.6 0.5 * -- -- --
Health &
Fitness 4.2 3.6 2.4 0.6 0.1 -- -- --
Home
Furnishings 5.5 6.0 5.8 6.5 7.8 5.6 4.4 2.9
Home
Improvement 1.2 1.3 2.0 3.6 * -- -- --
Office
Supplies 1.9 2.2 2.3 2.6 3.0 1.7 -- --
Pet Supplies
& Services 1.7 1.6 1.5 1.1 0.6 0.2 -- --
Private
Education 1.3 1.5 1.4 1.2 0.9 -- -- --
Restaurants 14.5 12.2 12.3 13.3 16.2 19.8 24.4 24.7
Shoe Stores 0.7 0.7 0.8 1.1 0.8 0.2 -- --
Sporting
Goods 4.2 0.9 -- -- -- -- -- --
Theaters 3.9 4.3 2.7 0.6 -- -- -- --
Video
Rental 3.4 3.7 3.9 4.3 3.8 0.6 -- --
Other 4.8 5.2 6.0 5.7 6.0 7.3 8.4 9.3
Totals 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
* Less than 0.1%
(1) The table does not include the rental revenue from properties owned
by our subsidiary Crest Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of December 31, 2001 for each of the properties by 12,
and adding the previous twelve month's historic percentage rent,
which totaled $1.7 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 the
1,124 properties owned by Realty Income as of December 31, 2001, classified
according to the retail business types and the level of services they provide
(dollars in thousands):
Number of Annualized Percentage of
Industry Properties(1) Rent(1)(2) Annualized Rent
TENANTS PROVIDING SERVICES
Automotive Service 98 $6,972 5.3%
Child Care 327 28,899 21.9
Entertainment 8 2,594 2.0
Health & Fitness 9 5,479 4.2
Private Education 5 1,738 1.3
Theaters 10 5,209 3.9
Other 8 6,397 4.8
465 57,288 43.4
TENANTS SELLING GOODS AND SERVICES
Automotive Parts
(with installation) 64 5,816 4.4
Business Services 1 124 0.1
Convenience Stores 105 10,231 7.7
Home Improvement 2 187 0.1
Pet Supplies & Services 6 1,561 1.2
Restaurants 231 19,224 14.6
Video Rental 34 4,501 3.4
443 41,644 31.5
TENANTS SELLING GOODS
Apparel Stores 5 3,103 2.3
Automotive Parts 75 4,390 3.3
Book Stores 2 606 0.5
Consumer Electronics 36 4,639 3.5
Craft & Novelty 2 502 0.4
Drug Stores 1 235 0.2
General Merchandise 11 687 0.5
Grocery Stores 2 726 0.6
Home Furnishings 38 7,279 5.5
Home Improvement 18 1,377 1.0
Office Supplies 8 2,540 1.9
Pet Supplies 3 644 0.5
Shoe Stores 4 890 0.7
Sporting Goods 11 5,584 4.2
216 33,202 25.1
Totals 1,124 $132,134 100.0%
(1) The table does not include rental revenue from properties owned by
our subsidiary Crest Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of December 31, 2001 for each of the properties by 12,
and adding the previous twelve month's historic percentage rent,
which totaled $1.7 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 the timing of
the lease term expirations (excluding extension options) on our 1,099 net
leased, single-tenant retail properties as of December 31, 2001 (dollars in
thousands):
Number of Annualized Percent of
Year Leases Expiring(1) Rent(1)(2) Annualized Rent
2002 88 7,115 5.6
2003 78 6,596 5.2
2004 118 10,161 8.1
2005 84 6,574 5.2
2006 75 6,723 5.3
2007 92 6,348 5.0
2008 63 5,670 4.5
2009 28 2,488 2.0
2010 44 3,798 3.0
2011 35 5,302 4.2
2012 48 5,690 4.5
2013 70 12,348 9.8
2014 35 6,287 5.0
2015 36 4,291 3.4
2016 14 1,497 1.2
2017 13 4,592 3.6
2018 16 1,702 1.3
2019 49 8,241 6.5
2020 10 3,664 2.9
2021 95 14,487 11.5
2023 2 341 0.3
2026 2 372 0.3
2033 2 1,118 0.9
2034 2 834 0.7
Totals 1,099 $126,239 100.0%
(1) This table does not include five multi-tenant properties and
20 vacant, unleased single-tenant properties owned by the Company
and properties owned by our subsidiary Crest Net Lease. The lease
expirations for properties under construction are based on the
estimated date of completion of such properties.
(2) Annualized rent is calculated by multiplying the monthly contractual
base rent as of December 31, 2001 for each of the properties by
12 and adding the previous 12 month's historic percentage rent,
which totaled $1.7 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
http://www.realtyincome.com/Investing/News.html
CONTACT:
Tere Miller, Vice President, Corporate
Communications of Realty Income Corporation, +1-760-741-2111,
ext. 177
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