ESCONDIDO, Calif., April 25 /PRNewswire-FirstCall/ -- Realty Income
Corporation (Realty Income), "The Monthly Dividend Company," (NYSE: O) today
announced operating results for the first quarter ended March 31, 2002.
COMPANY HIGHLIGHTS:
(For the quarter ended March 31, 2002)
-- Revenue increased 7.3% to $33.7 million
-- Funds from Operations (FFO) increased 27.3% to $22.4 million
-- FFO per common share increased 3.0% to $0.68 per share
-- Portfolio occupancy was 98%
-- Same store rents increased 2.1% to $28.4 million
-- The Company invested $7.8 million in additional properties at an
11.1% lease rate
-- The common stock monthly dividend was increased for the 18th
consecutive quarter
-- The annualized common stock dividend was increased to $2.295 per share
-- Realty Income paid its 380th consecutive monthly dividend
Financial Results
Revenue Increases
Realty Income's revenue for the quarter ended March 31, 2002 increased
7.3% to $33.7 million as compared to $31.4 million for the same quarter in
2001.
Funds from Operations
FFO for the quarter ended March 31, 2002 increased 27.3% to $22.4 million
as compared to $17.6 million for the same quarter in 2001. On a diluted per
common share basis, FFO increased 3.0% to $0.68 per share compared to
$0.66 per share for the same period in 2001.
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
March 31, 2002 decreased to $15.9 million as compared to $16.0 million for the
same period in 2001. On a diluted per common share basis, net income
decreased to $0.48 per share as compared to $0.60 per share for the three
months ended March 31, 2001.
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 the gain on sales of investment properties and discontinued
operations, on a diluted per common share basis, income from continuing
operations increased by $0.08 to $0.45 per share during the first quarter of
2002 as compared to $0.37 per share for the same quarter in 2001.
Dividend Information
In March 2002, Realty Income announced the 18th consecutive quarterly
increase in the amount of the monthly dividend on its common stock. This
marked the 20th increase in the amount of the dividend since 1995. The amount
of the monthly dividend was increased to $0.19125 per share from $0.19 per
share for an annualized dividend amount of $2.295 per share. The Company
continues its 33-year policy of declaring and paying common stock dividends on
a monthly rather than a quarterly basis.
Real Estate Portfolio Update
As of March 31, 2002 Realty Income's portfolio of freestanding,
single-tenant retail properties consisted of 1,121 properties located in
48 states, leased to 79 retail chains doing business in 24 retail industries.
The properties are leased under long-term triple-net lease agreements with a
weighted average remaining term of approximately 10.2 years.
Portfolio Management Activities
The Company's portfolio of retail real estate properties owned under
15- to 20-year net leases continues to perform well and provide dependable
lease revenue supporting the payment of monthly dividends. As of
March 31, 2002, portfolio occupancy was 98.0% with only 22 properties
available for lease out of 1,121 properties in the portfolio.
Same store rents on 990 properties under lease during the three months
ended March 31, 2002 and 2001 increased 2.1% to $28.37 million from
$27.78 million for the same period in 2001.
Property Acquisitions
During the first quarter, Realty Income acquired three retail properties
for $5.8 million. The Company also funded $2.0 million for properties under
development, for total acquisitions during the quarter of $7.8 million at an
initial contractual lease yield of 11.1%. The three properties acquired are
located in three states, are 100% leased under triple-net leases and have an
initial average lease term of 16.1 years.
The Company also announced it has signed an agreement with Midas
(NYSE: MDS) to acquire approximately 80 automotive service properties, under a
long term lease agreement, for between $45 million to $50 million. The final
acquisition price will be determined by real estate appraisals currently
underway on each of the properties. Realty Income expects the acquisition to
close during the second quarter of 2002.
Management believes the acquisition market for freestanding, net-lease
retail properties remains attractive. During the quarter, the Company
analyzed over 24 separate transactions involving 210 properties with an
approximate market value of $344 million. From these opportunities the
Company and its subsidiary carefully selected the properties that comprise the
first quarter acquisitions, investing in approximately 2% of the opportunities
it reviewed.
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 credit facility used to
acquire retail properties at March 31, 2002 was $50.4 million. The
outstanding credit facility balance used to fund Crest's operations was
$23.2 million.
Property Dispositions
Realty Income continued to successfully execute its asset disposition
program. The objective of the program is to sell assets when the Company
believes the reinvestment of the sales proceeds will generate higher returns,
enhance the credit quality of the Company's real estate portfolio or increase
the average lease term. During the first quarter of 2002, Realty Income sold
six properties for $3.4 million and recorded a gain on sales of $1.1 million.
The six properties consisted of five restaurants and one child day care
property. The proceeds from the sale of these properties were used to pay
down the Company's acquisition credit facility and invested in new properties
with an initial contractual lease yield of 11.1%.
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 quarter ended March 31, 2002, Crest sold three properties from its
inventory for $2.7 million and reported a gain on sales of $365,000. During
the quarter Crest also invested $2.9 million in two new properties and
properties under development. At the end of the first quarter, Crest carried
an inventory of $22.8 million, which consists of 23 properties held for sale.
Management believes that Crest will carry an average inventory of between
$20 to $25 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 Crest depends on the timing and the number of property
sales achieved, if any, in any given quarter. During the quarter ended March
31, 2002, Crest generated FFO of $363,000, or $0.01 of FFO per diluted common
share, for Realty Income.
CEO Comments on First Quarter 2002 Operating Results
Commenting on Realty Income's financial results and real estate
operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased with
the Company's steady progress during the first quarter towards achieving
another year of record revenues, FFO growth and increasing dividends. The
performance of our portfolio remains extremely strong with property occupancy
at 98% and same store rents increasing by over 2% during the first quarter.
We believe our focus on acquiring the properties of retail chains that sell
basic human needs goods and services, at relatively low price points, has
allowed us to continue to see positive operating results in a less than
ebullient economic environment. In addition, the market for acquiring
additional net-leased properties remains very attractive. We are seeing a
high volume of potential transactions for the Company to consider and continue
to believe we will invest between $125 to $150 million in additional
properties during 2002. With a very conservative balance sheet and
significant availability on our acquisition credit lines, the Company
continues to be well capitalized to take advantage of acquisition
opportunities."
2002 Earnings Commentary
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 per 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.
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 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 for 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 March 31, 2002, the Company had paid 380 consecutive
monthly dividend payments throughout its 33-year operation history. The
monthly income is supported by the cash flows from 1,121 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 the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)
2002 2001
REVENUE
Rental $33,263 $29,346
Gain on sale of real estate
acquired for resale 365 1,928
Interest and other 31 127
33,659 31,401
EXPENSES
Interest 5,605 8,059
Depreciation and
amortization 7,474 7,173
General and
administrative 2,389 2,041
Property 663 623
Other 288 779
Provision for
impairment loss -- 330
16,419 19,005
Income from continuing
operations 17,240 12,396
Income from
discontinued operations 714 126
Gain on sales of
investment properties 340 5,951
Net income 18,294 18,473
Preferred stock dividends (2,428) (2,428)
Net income available to
common stockholders $15,866 $16,045
Funds from
operations (FFO) $22,383 $17,606
Per share information for
common stockholders:
FFO
Basic $0.68 $0.66
Diluted 0.68 0.66
Income from continuing
operations
Basic 0.45 0.37
Diluted 0.45 0.37
Net income
Basic 0.48 0.60
Diluted 0.48 0.60
Cash dividends paid 0.570 0.555
FUNDS FROM OPERATIONS
For the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)
2002 2001
Net income available to
Common stockholders $15,866 $16,045
Depreciation and amortization:
Continuing operations 7,474 7,173
Discontinued operations 30 37
Depreciation of furniture,
fixtures and equipment (33) (28)
Provision for impairment loss:
Continuing operations -- 330
Discontinued operations 160 --
Gain on sales of
investment properties:
Continuing operations (340) (5,951)
Discontinued operations (774) --
Funds from operations $22,383 $17,606
Dividends paid to
common stockholders $18,820 $14,770
FFO in excess of dividends 3,563 2,836
Basic and diluted
FFO per common share 0.68 0.66
Weighted average number
of common shares used for:
Basic per share computation 33,044,470 26,612,009
Diluted per share computation 33,091,747 26,655,676
Funds from operations generated by Crest Net
For the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)
Gains from the sales of real
estate acquired for resale $365 $1,928
Rent and other revenue 475 432
Interest expense (75) (283)
General and administrative exp. (196) (205)
Property expenses (42) --
Income taxes (164) (656)
Minority interest -- (53)
Funds from operations
contributed by Crest Net $363 $1,163
Basic and diluted
FFO per common share $0.01 $0.04
CONSOLIDATED BALANCE SHEETS
As of March 31, 2002 and December 31, 2001
(dollars in thousands, except per share amounts)
2002 2001
ASSETS
Real estate, at cost:
Land $412,864 $412,455
Buildings and improvements 767,836 765,707
1,180,700 1,178,162
Less accumulated depreciation
and amortization (238,754) (233,848)
Net real estate held for investment 941,946 944,314
Real estate held for sale, net 24,336 23,356
Net real estate 966,282 967,670
Cash and cash equivalents 3,730 2,467
Accounts receivable 3,294 4,857
Goodwill, net 17,206 17,206
Other assets 11,069 11,508
Total assets $1,001,581 $1,003,708
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $7,977 $6,238
Accounts payable and accrued expenses 6,228 5,834
Other liabilities 4,345 4,543
Lines of credit payable 73,600 85,300
Notes payable 230,000 230,000
Total liabilities 322,150 331,915
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, 33,298,234 and 32,829,111
shares issued and outstanding in 2002
and 2001, respectively 806,227 795,505
Distributions in excess of net income (226,164) (223,080)
Total stockholders' equity 679,431 671,793
Total liabilities and
stockholders' equity $1,001,581 $ 1,003,708
The following table sets forth certain information regarding 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
Industry Mar 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
2002 2001 2000 1999 1998 1997 1996 1995
Apparel
Stores 2.4% 2.4% 2.4% 3.8% 4.1% 0.7% --% --%
Automotive
Parts 7.7 8.3 8.3 8.6 7.8 9.1 10.5 11.4
Automotive
Service 5.4 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 7.8 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 1.9 1.8 2.0 1.2 -- -- -- --
General
Merchandise 0.5 0.6 0.6 0.6 * -- -- --
Grocery
Stores 0.6 0.6 0.6 0.5 * -- -- --
Health &
Fitness 4.1 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 2.1 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 14.2 12.2 12.3 13.3 16.2 19.8 24.4 24.7
Shoe Stores 0.9 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 4.6 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 properties owned by our subsidiary, Crest
Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of March 31, 2002 for each of the properties by 12, and
adding the previous 12 month's historic percentage rent on properties
owned at March 31, 2002, which totaled $1.7 million (i.e., percentage
rent is calculated as a percentage of the tenants' 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 properties
owned by Realty Income at March 31, 2002, 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 99 $7,101 5.4%
Child Care 327 28,909 21.9
Entertainment 8 2,564 1.9
Health & Fitness 9 5,479 4.2
Private Education 5 1,738 1.3
Theaters 10 5,209 3.9
Other 8 6,097 4.6
466 57,097 43.2
TENANTS SELLING GOODS AND SERVICES
Automotive Parts
(with installation) 64 5,850 4.4
Business Services 1 124 0.1
Convenience Stores 105 10,305 7.8
Home Improvement 2 187 0.1
Pet Supplies & Services 6 1,561 1.2
Restaurants 225 18,743 14.2
Video Rental 34 4,501 3.4
437 41,271 31.2
TENANTS SELLING GOODS
Apparel Stores 5 3,103 2.4
Automotive Parts 75 4,346 3.3
Book Stores 2 606 0.5
Consumer Electronics 36 4,639 3.5
Crafts & Novelties 2 517 0.4
Drug Stores 1 235 0.2
General Merchandise 11 687 0.5
Grocery Stores 2 726 0.6
Home Furnishings 38 7,284 5.5
Home Improvement 18 1,377 1.0
Office Supplies 9 2,820 2.1
Pet Supplies 3 671 0.5
Shoe Stores 5 1,221 0.9
Sporting Goods 11 5,584 4.2
218 33,816 25.6
Totals 1,121 $132,184 100.0%
(1) The table does not include properties owned by our subsidiary, Crest
Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual
base rent as of March 31, 2002 for each of the properties by 12, and
adding the previous 12 month's historic percentage rent on properties
owned at March 31, 2002, which totaled $1.7 million (i.e., percentage
rent is calculated as a percentage of the tenants' 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 initial lease term expirations (excluding extension options) on our
1,094 net leased, single-tenant retail properties as of March 31, 2002
(dollars in thousands):
Year Number of (1) Annualized Percent of
Leases Expiring Rent(1)(2) Annualized Rent
2002 79 $6,518 5.1%
2003 79 6,684 5.3
2004 118 10,176 8.0
2005 84 6,605 5.2
2006 75 6,739 5.3
2007 92 6,331 5.0
2008 63 5,669 4.5
2009 28 2,502 2.0
2010 44 3,858 3.0
2011 35 5,302 4.2
2012 49 5,803 4.6
2013 70 12,348 9.8
2014 35 6,287 5.0
2015 35 4,186 3.3
2016 14 1,496 1.2
2017 13 4,609 3.6
2018 16 1,988 1.6
2019 49 8,246 6.5
2020 10 3,664 2.9
2021 96 14,746 11.6
2022 1 123 0.1
2023 2 341 0.3
2026 2 372 0.3
2033 2 1,118 0.9
2034 3 879 0.7
Totals 1,094 $126,590 100.0%
(1) This table does not include five multi-tenant properties and
22 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 March 31, 2002 for each of the properties by 12 and
adding the previous 12 month's historic percentage rent on properties
owned at March 31, 2002, which totaled $1.7 million (i.e., percentage
rent is calculated as a percentage of the tenants' 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
CONTACT:
Tere H. Miller, Vice President, Corporate
Communications of Realty Income Corporation, +1-760-741-2111 ext.
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