ESCONDIDO, Calif., Oct. 30 /PRNewswire/ -- Realty Income Corporation
(Realty Income), "The Monthly Dividend Company," (NYSE: O) today announced
record operating results for the third quarter and nine months ended September
30, 2001.
THIRD QUARTER COMPANY HIGHLIGHTS:
-- The monthly dividend amount was increased for the 16th consecutive
quarter to an annualized dividend amount of $2.265 per share.
-- Revenue increased 3.7% to $31.0 million.
-- Funds from Operations (FFO) increased 18.7% to $19.7 million.
-- FFO per common share increased 6.5% to $0.66 per share.
-- Net income per common share increased 35.1% to $0.50 per share.
-- Previous guidance of $2.65 to $2.67 per common share in FFO for 2001
and $2.80 to $2.82 per common share in FFO for 2002 is affirmed.
Financial Results
Revenue Increases
Realty Income's revenue for the third quarter ended September 30,
2001 increased 3.7% to $31.0 million as compared to $29.9 million for the same
quarter ended September 30, 2000.
Revenue for the nine months ended September 30, 2001 increased 6.7% to
$92.5 million from $86.7 million for the same period in 2000.
Funds from Operations
FFO for the quarter ended September 30, 2001 increased 18.7% to
$19.7 million as compared to $16.6 million for the same quarter in 2000. FFO
per common share increased 6.5% to $0.66 per share compared to $0.62 per share
for the same period in 2000.
FFO for the nine months ended September 30, 2001 increased 12.3% to
$55.5 million as compared to $49.4 million for the same period one year ago.
FFO per common share increased 5.9% to $1.96 per share from $1.85 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 the sale of
investment properties. FFO is one measure of a company's cash flow and of its
ability to pay dividends.
Dividend Information
On September 13, 2001, Realty Income announced the 16th consecutive
quarterly increase in the amount of the monthly dividend on its common stock.
This marked the 18th increase in the amount of the dividend since 1994. The
amount of the dividend was increased to $0.18875 per share for an annualized
dividend amount of $2.265 per share.
Through September 30, 2001, Realty Income paid nine monthly dividends
totaling $1.67625 per common share. The Company continues its 32-year history
of declaring and paying common stock dividends on a monthly rather than on a
quarterly basis. Realty Income is dedicated to providing its shareholders
with dependable monthly dividends and steady dividend growth.
Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended
September 30, 2001 increased to $14.8 million as compared to $9.9 million for
the same period in 2000. Net income per common share increased to $0.50 per
share as compared to $0.37 per share for the three months ended September 30,
2000. The calculation to determine net income includes gains 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 third quarter of
2001 increased by $2.6 million and was $0.09 per common share more than the
gain recognized from investment property sales during the same quarter in
2000.
Net income available to common stockholders for the nine months ended
September 30, 2001 increased to $41.9 million as compared to $30.8 million for
the same period in 2000. Net income per common share increased to $1.48 per
share as compared to $1.15 per share for the same period one year ago. The
gain recognized from property sales during the nine months ended September 30,
2001 increased by $7.1 million and was $0.25 per common share more than the
gain recognized from investment property sales during the same period in 2000.
Recent Capital Markets Activity
Issuance of Common Stock
On October 23, 2001, Realty Income issued 2.6 million shares of common
stock priced at $28.50 per share. The net proceeds of approximately
$70 million from the offering were used to repay a portion of the amount
outstanding on the Company's $200 million unsecured acquisition credit
facility. The number of common shares outstanding at the end of the third
quarter was 29,876,241. Subsequent to the October 23, 2001 common share
offering the number of shares outstanding is 32,479,031.
Real Estate Portfolio Update
As of September 30, 2001, Realty Income's portfolio of freestanding,
single-tenant retail properties consisted of 1,082 properties located in
46 states, leased to 74 retail chains doing business in 23 retail industries.
Portfolio Management Activities
The Company's portfolio of retail 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 September 30, 2001,
portfolio occupancy was 98.0% with only 22 of 1,082 properties available for
lease.
Same store rents on 986 properties under lease during the three months
ended September 30, 2001 and 2000 increased 1.7% to $26.43 million compared to
$25.98 million. Same store rents on the same 986 properties under lease
during the nine months ended September 30, 2001 and 2000 increased 2.0% to
$78.59 million from $77.04 million.
Property Acquisitions
During the third quarter, Realty Income invested $25.8 million in 30 new
properties and properties under development with an initial contractual yield
of 10.8%. The new properties are 100% leased with an initial average lease
length of 20.0 years.
For the nine months ended September 30, 2001, the Company invested
$41.1 million in 37 new properties and properties under development with an
initial contractual lease yield of 11.1%. The new properties are 100% leased
with an initial average lease length of 20.3 years. The Company used the
proceeds from the sale of properties, capital from its second quarter common
stock offering and borrowings under its acquisition credit facility to acquire
these additional properties.
Property Dispositions
The Company continued to successfully execute its asset disposition
program during the first nine months of 2001. 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 length.
During the third quarter, Realty Income sold ten properties for
$10.0 million. During the nine months ended September 30, 2001, Realty Income
sold 23 properties for $29.7 million.
Market Overview
Realty Income's acquisition opportunities and the market for freestanding,
net-lease retail properties remains strong. The Company currently has access
to excellent real estate acquisition opportunities at attractive lease yields.
It is anticipated that Realty Income will generate growth in its real estate
portfolio by financing new acquisitions from internally generated cash flow,
proceeds from property dispositions and the capital from its most recent
common stock offering. The Company also maintains revolving acquisition
credit facilities with borrowing capacity of $225 million, which are used to
fund its acquisitions and the operations of its subsidiary, Crest Net Lease,
Inc. ($200 million line of credit for Realty Income and $25 million for
Crest). The outstanding balance on the Company's credit facility at September
30, 2001 was $72.5 million. The outstanding balance on the credit facility
used to fund Crest operations was $25.0 million. In October 2001, net
proceeds of approximately $70 million from the common stock offering were used
to pay down the outstanding balance on the Company's credit facility.
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 third quarter ended September 30, 2001, Crest sold one property for
$3.3 million and reported a gain on sales of $284,000. During the quarter
Crest also invested $14.2 million in 15 new properties and properties under
development and, as of the end of the quarter, carried an inventory of
$25.4 million in properties held for sale.
During the first nine months of the year Crest sold six properties for
$18.8 million and reported a gain on sales of $2.4 million. During the nine
months ended September 30, 2001, Crest invested $18.7 million in 19 properties
and properties under development.
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 the 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 will be dependent on the timing and the
number of property sales achieved, if any, in any given quarter. During the
third quarter and first nine months of 2001, Crest generated $0.01 and $0.06,
respectively, per common share in FFO for Realty Income.
CEO Comments on Year-to-Date Operating Results
Commenting on Realty Income's financial results and real estate
operations, Tom A. Lewis, Chief Executive Officer stated, "We are very pleased
with the Company's continued progress in all facets of its business during the
third quarter and first nine months of the year. Portfolio operations
remained strong during the quarter with property occupancy increasing to
98% and same store rents continuing to grow on a consistent basis. The two
equity offerings we have completed this year have given us an exceptionally
strong balance sheet and substantial liquidity to pursue additional property
acquisitions. We continue to review attractive opportunities to acquire
retail properties under long-term (15-20 year) leases with regional and
national retail chains. Initial contractual lease rates are currently in the
10.75% to 11.25% yield range. In addition, Crest Net Lease is also
contributing steadily to Realty Income's FFO growth. Looking forward to 2002,
we believe that our continued focus on retailers selling basic human needs
goods and services, at relatively low price points, will continue to position
our portfolio to produce consistent results. In addition, the outlook for our
freestanding retail real estate market is sound and we are experiencing
substantial demand from a variety of well-known retail chains within stable,
recession-resistant industries. We believe that we are well positioned, both
financially and competitively, to take advantage of investment opportunities
that may well be plentiful during a challenging economic environment in 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
impact 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 acquisitions and dispositions, and the operations of Crest Net
Lease.
2001 Estimates
Management affirms its estimate 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.
2002 Estimates
Management also affirms its estimate that FFO per common share for
2002 should range from $2.80 to $2.82, which would equate to an increase of
approximately 4.9% to 6.4% over 2001 projected FFO per share of $2.65 to
$2.67.
In prior years, certain items impacting FFO per share have fluctuated
quarter to quarter. Typically, the Company's FFO 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, property
acquisitions or capital market activities.
Management estimates that Crest Net Lease, Inc. will generate
approximately $0.08 per share of FFO during 2001 and 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 would 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. 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. The monthly income is supported by the cash flows from
1,082 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.
CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2001 and 2000
(dollars in thousands, except per share amounts)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/01 9/30/00 9/30/01 9/30/00
REVENUE
Rental $30,314 $29,180 $89,396 $85,859
Gain on sales of
real estate acquired
for resale 284 558 2,373 558
Interest and other 409 147 729 264
31,007 29,885 92,498 86,681
EXPENSES
Interest 6,080 8,184 20,726 22,813
Depreciation and
amortization 7,234 6,913 21,602 20,505
General and
administrative 1,914 1,723 5,820 4,997
Property 585 536 1,773 1,517
Other 814 409 2,363 554
16,627 17,765 52,284 50,386
Income from
operations 14,380 12,120 40,214 36,295
Gain on sales
of investment
properties 2,806 231 8,921 1,831
Net income 17,186 12,351 49,135 38,126
Preferred stock
dividends (2,428) (2,428) (7,284) (7,284)
Net income available
to common
stockholders $14,758 $9,923 $41,851 $30,842
Funds from operations
(FFO) $19,677 $16,574 $55,497 $49,417
Per share information
for common
stockholders:
FFO
Basic $0.66 $0.62 $1.96 $1.85
Diluted 0.66 0.62 1.96 1.85
Income from operations
Basic 0.40 0.36 1.17 1.09
Diluted 0.40 0.36 1.16 1.09
Net income
Basic 0.50 0.37 1.48 1.15
Diluted 0.50 0.37 1.48 1.15
Cash dividends paid 0.563 0.548 1.676 1.631
FUNDS FROM OPERATIONS
For the three and nine months ended September 30, 2001 and 2000
(dollars in thousands, except per share amounts)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/01 9/30/00 9/30/01 9/30/00
Net income available
to common
stockholders $14,758 $9,923 $41,851 $30,842
Plus:
Depreciation and
amortization 7,234 6,913 21,602 20,505
Provision for
impairment losses
on properties held
for sale 520 -- 1,050 --
Less:
Depreciation of
furniture, fixtures
and equipment (29) (31) (85) (99)
Gain on sales of
investment
properties (2,806) (231) (8,921) (1,831)
Funds from
operations $19,677 $16,574 $55,497 $49,417
Dividends paid
to common
stockholders $16,716 $14,594 $46,905 $43,612
FFO in excess of
dividends $2,961 $1,980 $8,592 $5,805
Basic and diluted
FFO per common share $0.66 $0.62 $1.96 $1.85
Weighted average
number of common
shares used for:
Basic per share
computation 29,752,807 26,649,315 28,264,186 26,722,408
Diluted per share
computation 29,804,308 26,671,473 28,303,628 26,736,160
CONSOLIDATED BALANCE SHEETS
As of September 30, 2001 and December 31, 2000
(dollars in thousands, except per share data)
2001 2000
ASSETS
Real estate, at cost:
Land $379,970 $368,057
Buildings and improvements 713,204 705,470
1,093,174 1,073,527
Less accumulated depreciation
and amortization (228,587) (212,379)
Net real estate held for investment 864,587 861,148
Real estate held for sale, net 31,192 33,130
Net real estate 895,779 894,278
Cash and cash equivalents 11,624 3,815
Accounts receivable 3,606 5,053
Goodwill, net 17,437 18,130
Other assets 13,049 13,490
Total assets $941,495 $934,766
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $7,521 $4,914
Accounts payable and accrued expenses 6,096 5,969
Other liabilities 4,208 4,314
Lines of credit payable 97,500 174,000
Notes payable 230,000 230,000
Total liabilities 345,325 419,197
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, 29,876,241 and 26,563,519
shares issued and outstanding in 2001
and 2000, respectively 717,312 630,932
Distributions in excess of net income (220,510) (214,731)
Total stockholders' equity 596,170 515,569
Total liabilities and stockholders' equity $941,495 $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
Annualized Percentage of Rental Revenue (1)
Rent as of For the Years Ended
Sept 30, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2001 2000 1999 1998 1997 1996 1995
Industry (1)(2)
Apparel
Stores 2.5% 2.4% 3.8% 4.1% 0.7% --% --%
Automotive
Parts 8.2 8.3 8.6 7.8 9.1 10.5 11.4
Automotive
Service 5.6 5.8 6.6 7.5 6.4 4.8 3.7
Book Stores 0.5 0.5 0.5 0.6 0.5 -- --
Business
Services 0.1 0.1 0.1 * -- -- --
Child Care 23.9 24.7 25.3 29.2 35.9 42.0 45.6
Consumer
Electronics 3.8 4.9 4.4 5.4 6.5 0.9 --
Convenience
Stores 8.3 8.4 7.2 6.1 5.5 4.6 2.4
Crafts &
Novelties 0.4 0.4 0.4 * -- -- --
Drug Stores 0.2 0.2 0.2 0.1 -- -- --
Entertainment 1.9 2.0 1.2 -- -- -- --
General
Merchandise 0.6 0.6 0.6 * -- -- --
Grocery
Stores 0.6 0.6 0.5 * -- -- --
Health &
Fitness 4.5 2.4 0.6 0.1 -- -- --
Home
Furnishings 5.9 5.8 6.5 7.8 5.6 4.4 2.9
Home
Improvement 1.3 2.0 3.6 * -- -- --
Office
Supplies 2.1 2.3 2.6 3.0 1.7 -- --
Pet Supplies
& Services 1.4 1.5 1.1 0.6 0.2 -- --
Private
Education 1.4 1.4 1.2 0.9 -- -- --
Restaurants 13.2 12.3 13.3 16.2 19.8 24.4 24.7
Shoe Stores 0.7 0.8 1.1 0.8 0.2 -- --
Theaters 4.2 2.7 0.6 -- -- -- --
Video Rental 3.6 3.9 4.3 3.8 0.6 -- --
Other 5.1 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%
* 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 September 30, 2001 for each of the properties by 12,
and adding the previous twelve month's historic percentage rent,
which totaled $1.9 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
1,082 properties owned by Realty Income as of September 30, 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 99 $6,942 5.7%
Child Care 329 29,360 23.9
Entertainment 8 2,360 1.9
Health & Fitness 9 5,469 4.5
Private Education 5 1,738 1.4
Theaters 10 5,209 4.2
Other 9 6,226 5.1
469 57,304 46.7
TENANTS SELLING GOODS
AND SERVICES
Automotive Parts
(with installation) 63 5,634 4.6
Business Services 1 124 0.1
Convenience Stores 105 10,222 8.3
Home Improvement 2 187 0.2
Pet Supplies & Services 6 1,241 1.0
Restaurants 193 16,178 13.2
Video Rental 35 4,471 3.6
405 38,057 31.0
TENANTS SELLING GOODS
Apparel Stores 5 3,103 2.5
Automotive Parts 76 4,461 3.6
Book Stores 2 602 0.5
Consumer Electronics 36 4,639 3.8
Craft & Novelty 2 502 0.4
Drug Stores 1 235 0.2
General Merchandise 11 687 0.6
Grocery Stores 2 726 0.6
Home Furnishings 38 7,232 5.9
Home Improvement 21 1,377 1.1
Office Supplies 8 2,525 2.0
Pet Supplies 2 467 0.4
Shoe Stores 4 890 0.7
208 27,446 22.3
Totals 1,082 $122,807 100.0%
(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 September 30, 2001 for each of the
properties by 12, and adding the previous twelve month's historic
percentage rent, which totaled $1.9 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 1,055 net
leased, single-tenant retail properties as of September 30, 2001 (dollars in
thousands):
Number of Annualized Percent of
Year Leases Expiring(1) Rent(1)(2) Annualized Rent
2001 16 $ 1,343 1.1%
2002 83 6,818 5.8
2003 77 6,554 5.6
2004 118 10,148 8.7
2005 84 6,519 5.6
2006 71 6,587 5.6
2007 93 6,416 5.5
2008 66 5,901 5.1
2009 28 2,483 2.1
2010 45 3,888 3.3
2011 36 5,292 4.5
2012 48 5,681 4.8
2013 69 12,130 10.3
2014 35 6,287 5.4
2015 37 4,465 3.8
2016 14 1,492 1.3
2017 11 4,454 3.8
2018 16 1,626 1.4
2019 50 8,731 7.4
2020 9 2,920 2.5
2021 42 5,328 4.5
2023 1 159 0.1
2026 2 372 0.3
2033 2 1,118 1.0
2034 2 570 0.5
Totals 1,055 $117,282 100.0%
(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 September 30, 2001 for each of the properties by
12 and adding the previous 12 month's historic percentage rent, which
totaled $1.9 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
CONTACT:
Tere Miller, Vice President, Corporate
Communications of Realty Income Corporation, +1-760-741-2111,
ext. 177
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
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