8-K
REALTY INCOME CORP (O)
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: February 21, 2023
(Date of Earliest Event Reported)
REALTY INCOME CORPORATION
(Exact name of registrant as specified in its charter)
| Maryland | 1-13374 | 33-0580106 |
|---|---|---|
| (State or Other Jurisdiction of<br>Incorporation or Organization) | (Commission File Number) | (IRS Employer Identification No.) |
11995 El Camino Real, San Diego, California 92130
(Address of principal executive offices)
(858) 284-5000
(Registrant’s telephone number, including area code)
N/A
(former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange On Which Registered |
|---|---|---|
| Common Stock, $0.01 Par Value | O | New York Stock Exchange |
| 1.125% Notes due 2027 | O27A | New York Stock Exchange |
| 1.875% Notes due 2027 | O27B | New York Stock Exchange |
| 1.625% Notes due 2030 | O30 | New York Stock Exchange |
| 1.750% Notes due 2033 | O33A | New York Stock Exchange |
| 2.500% Notes due 2042 | O42 | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ |
|---|---|
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Item 2.02 Results of Operations and Financial Condition.
On February 21, 2023, Realty Income Corporation (the “Company”) issued a press release setting forth its results of operations for the three months and year ended December 31, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. This information, including the information contained in the press release, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is not incorporated by reference into any of the Company’s filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.
Additionally, on February 21, 2023, the Company made available on its website a financial supplement containing operating and financial data of the Company (“Supplemental Operating and Financial Data”) for the three months and year ended December 31, 2022, and such Supplemental Operating and Financial Data is furnished as Exhibit 99.2 hereto. The Supplemental Operating and Financial Data included as Exhibit 99.2 to this report is being furnished pursuant to this Item 2.02 of Form 8-K and is also being furnished under Item 7.01—“Regulation FD Disclosure” of Form 8-K, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act and is not incorporated by reference into any of the Company’s filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.
Item 7.01 Regulation FD Disclosure.
On February 21, 2023, the Company made available on its website a financial supplement containing operating and financial data of the Company (“Supplemental Operating and Financial Data”) for the three months and year ended December 31, 2022, and such Supplemental Operating and Financial Data is furnished as Exhibit 99.2 hereto. The Supplemental Operating and Financial Data included as Exhibit 99.2 to this report is being furnished pursuant to this Item 7.01 of Form 8-K and is also being furnished under Item 2.02—“Results of Operations and Financial Condition” of Form 8-K, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act and is not incorporated by reference into any of the Company’s filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated February 21, 2023
99.2 Supplemental Operating and Financial Data for the Three Months and Year Ended December 31, 2022
104 The Form 8-K cover page, formatted in Inline Extensible Business Reporting Language and included as Exhibit 101
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: February 21, 2023 | REALTY INCOME CORPORATION | |
|---|---|---|
| By: | /s/ CHRISTIE B. KELLY | |
| Christie B. Kelly | ||
| Executive Vice President, Chief Financial Officer, and Treasurer |
Document
Exhibit 99.1
REALTY INCOME ANNOUNCES OPERATING RESULTS FOR
THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2022
SAN DIEGO, CALIFORNIA, February 21, 2023....Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company®, today announced operating results for the three months and year ended December 31, 2022. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise. Our financial results for the periods presented reflect our merger with VEREIT, Inc. (VEREIT) from the merger date of November 1, 2021.
COMPANY HIGHLIGHTS:
For the three months ended December 31, 2022:
•Net income available to common stockholders was $227.3 million, or $0.36 per share
•Normalized FFO increased 18.0% to $1.05 per share, compared to the three months ended December 31, 2021
•AFFO increased 6.4% to $1.00 per share, compared to the three months ended December 31, 2021
•Completed the previously announced acquisition of the land and real estate assets of Encore Boston Harbor Resort and Casino from Wynn Resorts, Limited for $1.7 billion (the "Encore Transaction")
•Invested $3.9 billion in 578 properties and properties under development or expansion, of which $387.9 million was invested in Europe, including our first investment in Italy for seven properties totaling $166.6 million
•Announced the acquisition of up to 185 single-tenant retail and industrial properties from CIM Real Estate Finance Trust, Inc. for approximately $894 million, which is expected to close during the first half of 2023
•Net debt to annualized pro forma adjusted EBITDAre was 5.3x
•Raised $2.2 billion from the sale of common stock, primarily through our At-The-Market (ATM) program, with a weighted average price of $65.71
•Issued $750.0 million of senior unsecured notes due October 2032, realizing an effective semi-annual yield to maturity of approximately 3.93%
For the year ended December 31, 2022:
•Net income available to common stockholders was $869.4 million, or $1.42 per share
•Normalized FFO increased 19.8% to $4.06 per share, compared to the year ended December 31, 2021
•AFFO increased 9.2% to $3.92 per share, compared to the year ended December 31, 2021
•Invested $9.0 billion in 1,301 properties and properties under development or expansion, including $2.5 billion in Europe
•Achieved property-level occupancy of 99.0%, the highest in over 20 years
•Raised $4.6 billion from the sale of common stock, primarily through our At-The-Market (ATM) program, with a weighted average price of $67.04
•Dividends paid increased 4.7%, compared to the year ended December 31, 2021
Events subsequent to December 31, 2022:
•Entered into a $1.0 billion multicurrency unsecured term loan initially maturing January 2024, which includes two twelve-month extension options
•Issued $500 million of 5.05% senior unsecured notes due January 2026, which are callable at par in January 2024, and $600 million of 4.85% senior unsecured notes due March 2030, which are callable at par in January 2030
•ATM forward agreements for a total of 13.4 million shares remain unsettled with total expected net proceeds of approximately $850 million, of which 6.7 million shares were executed in 2023.
CEO Comments
“I am proud of our team’s outstanding accomplishments in 2022, culminating in AFFO per share growth of 9.2% and a record year for property-level acquisitions of approximately $9 billion,” said Sumit Roy, Realty Income’s President and Chief Executive Officer. “Our investment philosophy is centered around acquiring prime real estate assets in partnership with operators who are leaders in their respective industries. Illustrating this philosophy was the acquisition of our first gaming asset, the Wynn Encore Boston Harbor, which contributed to a record quarter for property-level acquisitions during the fourth quarter of approximately $3.9 billion. In addition, since the start of the fourth quarter, we have acquired properties in several distinct verticals for future potential growth, including investments in properties related to the consumer-centric medical industry, a debut transaction in Italy, and the formation of a real estate development partnership with a leading vertical farming operator.”
“Our diversified portfolio continues to demonstrate strength with occupancy ending the year at 99% and a rent recapture rate of 105.9% for the year. Our investment pipeline remains healthy as investment yields trend higher, our investment capacity is well-funded with approximately $850 million of outstanding forward equity raised, and our confidence in the long-term outlook of our platform remains steadfast. To that end, we announced an increase to the March 2023 monthly dividend by 2.4%, representing 3.2% growth over the year-ago period.”
Select Financial Results
The following summarizes our select financial results (dollars in millions, except per share data).
| Three Months Ended December 31, | Years ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Total revenue | $ | 888.7 | $ | 685.0 | $ | 3,343.7 | $ | 2,080.5 |
| Net income available to common stockholders (1)(2) | $ | 227.3 | $ | 4.0 | $ | 869.4 | $ | 359.5 |
| Net income per share | $ | 0.36 | $ | 0.01 | $ | 1.42 | $ | 0.87 |
| Funds from operations available to common stockholders (FFO) (2)(3) | $ | 664.5 | $ | 326.2 | $ | 2,471.9 | $ | 1,240.6 |
| FFO per share | $ | 1.05 | $ | 0.63 | $ | 4.04 | $ | 2.99 |
| Normalized funds from operations available to common stockholders (Normalized FFO) (3) | $ | 665.4 | $ | 463.5 | $ | 2,485.8 | $ | 1,408.0 |
| Normalized FFO per share | $ | 1.05 | $ | 0.89 | $ | 4.06 | $ | 3.39 |
| Adjusted funds from operations available to common stockholders (AFFO) (3) | $ | 634.0 | $ | 486.0 | $ | 2,401.4 | $ | 1,488.8 |
| AFFO per share | $ | 1.00 | $ | 0.94 | $ | 3.92 | $ | 3.59 |
(1) The calculation to determine net income attributable to common stockholders includes provisions for impairment, gain on sales of real estate, and foreign currency gain and loss. These items can vary from quarter to quarter and can significantly impact net income available to common stockholders and period to period comparisons.
(2) Our financial results during the three months and year ended December 31, 2022 were impacted by the following transactions: (i) merger and integration-related costs related to our merger with VEREIT of $13.9 million, of which $0.9 million related to the three months ended December 31, 2022, (ii) other income, net increased $17.2 million and $20.6 million during the three months and year ended December 31, 2022, respectively, which includes gains on insurance proceeds from recoveries on property losses exceeding our carrying value, and (iii) reserves to rental revenue of $14.9 million (of which $2.6 million was related to straight-line rent receivables) and reserves to rental revenue of $4.0 million (of which $1.7 million was related to straight-line rent receivables), respectively. Our financial results during the three months and year ended December 31, 2021 were impacted by the following transactions: (i) a $97.2 million loss on extinguishment of debt, which primarily includes $46.5 million related to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021 and $46.4 million related to the December 2021 early redemption of the 4.650% notes due August 2023 recorded in the three months ended December 31, 2021, (ii) merger and integration-related costs related to our merger with VEREIT of $167.4 million, of which $137.3 million related to the three months ended December 31, 2021, and (iii) $0.8 million of reserves to rental revenue, net of reserve reversals, (of which $5.6 million was related to straight-line rent receivables) and $14.7 million of reserves to rental revenue (of which $4.5 million was related to straight-line rent receivables), respectively.
(3) FFO, Normalized FFO, and AFFO are non-GAAP financial measures. Normalized FFO is based on FFO and adjusted to exclude merger and integration-related costs related to our merger with VEREIT and AFFO further adjusts Normalized FFO for unique revenue and expense items, such as gain (loss) on extinguishment of debt. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definitions and explanations of how we utilize these metrics. See pages 10 and 11 herein for reconciliations to the most directly comparable GAAP measure.
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Theater Industry Update
For the period from October 2022 through February 2023, we collected all of the contractual rent(1) across our theater portfolio. As of December 31, 2022, we had cumulative reserves of $35.6 million, including $13.7 million in additional reserves recognized in the three months ended December 31, 2022, on properties leased to Cineworld Group plc ("Cineworld"), the parent entity of the entities that lease certain of our theater portfolios, including Regal Cinemas, which commenced Chapter 11 reorganization proceedings during September 2022. These reserves for Cineworld and its affiliates, representing a reduction of rental revenue, primarily relate to contractual rent and expense recoveries recorded during the COVID-19 pandemic in 2020, and during the fourth quarter of 2022, and exclude straight-line rent reserves. Total receivables from Cineworld and its affiliates were $15.6 million at December 31, 2022, net of reserves and excluding straight line rent receivables, and include both deferred contractual rent and deferred expense recoveries.
(1) We define contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables. Charged amounts have not been adjusted for any COVID-19 related rent relief granted and include contractual rent from any clients in bankruptcy.
Dividend Increases
In December 2022, we announced the 101st consecutive quarterly dividend increase, which is the 118th increase in the amount of the dividend since our listing on the New York Stock Exchange (NYSE) in 1994. The annualized dividend amount as of December 31, 2022 was $2.982 per share. The amount of monthly dividends paid per share increased 4.7% to $2.967, as compared to $2.833 in 2021. We distributed $2.967 per common share to stockholders during 2022, representing 75.7% of our diluted AFFO per share of $3.92.
In February 2023, we announced an increase of the March 2023 annualized dividend to $3.054 per share, as compared to the March 2022 annualized dividend amount of $2.958, which represents an increase of 3.2%. The new monthly dividend amount of $0.2545 will be paid on March 15, 2023.
Real Estate Portfolio Update
As of December 31, 2022, we owned or held interests in 12,237 properties, which were leased to 1,240 clients doing business in 84 industries. Our diversified portfolio of commercial properties under long-term, net lease agreements is actively managed with a weighted average remaining lease term of approximately 9.5 years. Our portfolio of commercial real estate has historically provided dependable rental revenue supporting the payment of monthly dividends. As of December 31, 2022, portfolio occupancy was 99.0% with 126 properties available for lease or sale, as compared to 98.9% as of September 30, 2022 and 98.5% as of December 31, 2021.
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Changes in Occupancy
| Three months ended December 31, 2022 | |
|---|---|
| Properties available for lease at September 30, 2022 | 131 |
| Lease expirations (1) | 185 |
| Re-leases to same client | (151) |
| Re-leases to new client | (9) |
| Vacant dispositions | (30) |
| Properties available for lease at December 31, 2022 | 126 |
| Year ended December 31, 2022 | |
| Properties available for lease at December 31, 2021 | 164 |
| Lease expirations (1) | 719 |
| Re-leases to same client | (571) |
| Re-leases to new client | (34) |
| Vacant dispositions | (152) |
| Properties available for lease at December 31, 2022 | 126 |
(1)Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.
During the three months ended December 31, 2022, the new annualized contractual rent on re-leases was $39.16 million, as compared to the previous annual rent of $37.71 million on the same units, representing a rent recapture rate of 103.8% on the units re-leased. We re-leased six units to new clients without a period of vacancy, and seven units to new clients after a period of vacancy.
During the year ended December 31, 2022, the new annualized contractual rent on re-leases was $139.72 million, as compared to the previous annualized contractual rent of $131.93 million on the same units, representing a rent recapture rate of 105.9% on the units re-leased. We re-leased 18 units to new clients without a period of vacancy, and 32 units to new clients after a period of vacancy.
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Investments in Real Estate
The following table summarizes our acquisitions in the U.S. and Europe for the periods indicated below:
| Number of<br>Properties | Leasable<br>Square Feet <br>(in thousands) | Investment( in millions) | Weighted<br>Average<br>Lease Term<br>(Years) | Initial Weighted Average<br><br>Cash Lease<br><br>Yield (1) | ||
|---|---|---|---|---|---|---|
| Three months ended December 31, 2022 | ||||||
| Acquisitions - U.S. | 429 | 6,379 | 22.8 | 6.1 | % | |
| Acquisitions - Europe | 16 | 2,275 | 382.7 | 8.8 | 7.1 | % |
| Total acquisitions | 445 | 8,654 | 3,505.5 | 21.1 | 6.2 | % |
| Properties under development (2) | 133 | 3,703 | 391.2 | 13.9 | 5.0 | % |
| Total (3) | 578 | 12,357 | 20.5 | 6.1 | % | |
| Year ended December 31, 2022 | ||||||
| Acquisitions - U.S. | 990 | 15,774 | 19.3 | 6.0 | % | |
| Acquisitions - Europe | 94 | 11,179 | 2,441.3 | 8.9 | 6.0 | % |
| Total acquisitions | 1,084 | 26,953 | 8,187.7 | 16.3 | 6.0 | % |
| Properties under development (2) | 217 | 5,500 | 807.6 | 15.0 | 5.3 | % |
| Total (4) | 1,301 | 32,453 | 16.2 | 5.9 | % |
All values are in US Dollars.
(1)Initial weighted average cash lease yield is a supplemental operating measure. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definition of this metric. Contractual net operating income used in the calculation of initial weighted average cash lease yield for the three months and year ended December 31, 2022 includes approximately $2.5 million and $10.5 million, respectively, received as settlement credits as reimbursement of free rent periods.
(2) The three months and year ended December 31, 2022 includes £4.4 million related to three United Kingdom ("U.K.") development properties and £40.9 million related to five U.K. development properties, respectively, converted at the applicable exchange rates on the funding dates.
(3) Our clients occupying the new properties are 47.5% retail, 42.8% gaming, 3.0% industrial and 6.7% other property types (including 6.1% agricultural and 0.6% office) based on rental revenue. Approximately 14% of the rental revenue generated from acquisitions during the three months ended December 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.
(4) Our clients occupying the new properties are 71.4% retail, 19.1% gaming, 6.5% industrial and 3.0% other property types (including 2.7% agricultural and 0.3% office) based on rental revenue. Approximately 23% of the rental revenue generated from acquisitions during the year ended December 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.
Same Store Rental Revenue
The following summarizes our same store rental revenue for 9,615 properties under lease (dollars in millions):
| Three Months Ended December 31, | Years ended December 31, | % Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | Three Months | Year | |||||||
| Rental revenue (1) | $ | 608.0 | $ | 608.2 | $ | 2,453.0 | $ | 2,410.3 | 0.0 | % | 1.8 | % |
(1)Same store rental revenue includes reserves to rental revenue, which includes the additional reserves recognized on our theater portfolio during the three months ended December 31, 2022. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definition of this metric.
For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2022 of 1.20 GBP/USD. None of the properties in Spain and Italy met our same store pool definition for the periods presented.
Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period. If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our same store property pool. For the definition of Same Store Pool, please see the Glossary to our Supplemental Operating and Financial Data for the three months and year ended December 31, 2022, which is available on our corporate website at www.realtyincome.com/investors/quarterly-and-annual-results.
Our calculation of same store rental revenue includes rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB). Our calculation of same store rental revenue also includes uncollected rent for
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which we have not granted a lease concession. If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increase for the three months and year ended December 31, 2022 relative to the comparable period for 2021 would have been 1.6% and 2.3%, respectively.
Property Dispositions
The following summarizes our property dispositions, excluding our proportionate share of net proceeds from the disposition of properties by our unconsolidated industrial partnerships (dollars in millions):
| Three Months Ended December 31, 2022 | Year Ended<br><br>December 31, 2022 | |||
|---|---|---|---|---|
| Properties sold | 30 | 168 | ||
| Net sales proceeds | $ | 20.5 | $ | 434.9 |
| Gain on sales of real estate | $ | 9.3 | $ | 102.7 |
Liquidity and Capital Markets
Capital Raising
During the three months ended December 31, 2022, we raised approximately $2.2 billion of proceeds from the sale of common stock at a weighted average price of $65.71 per share, primarily through the sale of approximately 33.1 million shares of common stock pursuant to forward sale agreements through our ATM program. As of December 31, 2022, there were approximately 6.7 million shares of common stock subject to forward sale agreements through our ATM program, representing approximately $422.1 million in net proceeds and a weighted average initial price of $63.31 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates), which have been executed at a weighted average price of $62.59 per share but not settled.
In October 2022, we issued $750 million of 5.625% senior unsecured notes due 2032. The public offering price for the notes was 99.879% of the principal amount for an effective semi-annual yield to maturity of 5.641%. In conjunction with the pricing of this offering, we executed a $600 million U.S. Dollar-to-Euro 10-year cross currency swap, resulting in the receipt of approximately €612 million in proceeds and an effective fixed-rate, Euro-denominated semi-annual yield to maturity of approximately 4.7%. Additionally, we terminated forward interest rate swaps totaling $500 million in notional value previously entered into, recognizing a cash settlement gain of approximately $72 million. Giving effect to these contemporaneous transactions, we expect to recognize an effective semi-annual yield to maturity of 3.93% on the overall transaction, including the recognition of the cash settlement gain.
In January 2023, we issued $500 million of 5.05% senior unsecured notes due January 13, 2026 (the "2026 notes"), which are callable at par on January 13, 2024, and $600 million of 4.85% senior unsecured notes due March 15, 2030, which are callable at par on January 15, 2030 (the "2030 Notes"). The public offering price for the 2026 Notes was 99.618% of the principal amount for an effective semi-annual yield to maturity of 5.189% and the public offering price for the 2030 Notes was 98.813% of the principal amount for an effective semi-annual yield to maturity of 5.047%. In conjunction with the pricing of the 2026 notes, we executed a three-year, $500 million fixed-to-variable interest rate swap, which is subject to the counterparties' right to terminate the swap at any time following the 2026 notes par call date and results in an effective variable borrowing rate of SOFR minus 0.0347% thereunder for the duration of the swap. We intend to use these variable rate borrowings in lieu of borrowing under our revolving credit facility, which, as of December 31, 2022, permits U.S. borrowings at an interest rate of SOFR plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility commitment fee.
Also, in January 2023, we closed on a $1.0 billion multicurrency unsecured term loan. The loan initially matures in January 2024 and includes two twelve-month extensions that can be exercised at the company's option. In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps which fix our per annum interest rate at 5.0% over the initial term.
Revolving Credit Facility and Commercial Paper Program
We have a $4.25 billion unsecured revolving credit facility that matures in June 2026 and includes two six-month extensions that can be exercised at our option. The revolving credit facility also has a $1.0 billion expansion feature, which is subject to obtaining lender commitments.
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In addition, we have a U.S. dollar-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.5 billion, and a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent) in U.S. dollars or other foreign currencies. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs.
Liquidity
As of December 31, 2022, we had $1.7 billion of liquidity, consisting of cash and cash equivalents of approximately $171.1 million, including £74.3 million denominated in Sterling and €17.8 million denominated in Euro, and $1.5 billion of availability under our revolving credit facility, after deducting $701.8 million in commercial paper borrowings. In addition, there are approximately 6.7 million shares of common stock sold pursuant to forward sale confirmations which we currently project to settle during the three months ended March 31, 2023, representing approximately $0.4 billion in estimated net proceeds.
Earnings Guidance
Summarized below are approximate estimates of the key components of our 2023 earnings guidance:
| 2023 Guidance | |
|---|---|
| Net income per share | $1.20 to $1.32 |
| Real estate depreciation and impairments per share | $2.84 |
| Other adjustments per share (1) | $(0.03) |
| Normalized FFO per share (2) | $4.01 to $4.13 |
| AFFO per share (2) | $3.93 to $4.03 |
| Same store rent growth | Over 1.25% |
| Occupancy | Over 98% |
| Cash G&A expenses (% of revenues) (3)(4) | 3.0% - 3.5% |
| Property expenses (non-reimbursable) (% of revenues) (3) | 1.0% - 1.5% |
| Income tax expenses | $55 to $65 million |
| Acquisition volume | Over $5.0 billion |
| (1) Includes merger and integration-related costs and our proportionate share of adjustments for unconsolidated entities. | |
| (2) Normalized FFO per share and AFFO per share exclude merger and integration-related costs associated with our merger with VEREIT. | |
| (3) Revenue excludes contractually obligated reimbursements by our clients. Cash G&A expenses excludes stock-based compensation expense. | |
| (4) G&A expenses inclusive of stock-based compensation expense as a percentage of rental revenue, excluding reimbursements, is expected to be approximately 3.7% - 4.2% in 2023. |
Conference Call Information
In conjunction with the release of our operating results, we will host a conference call on February 22, 2023 at 11:30 a.m. PT to discuss the results. To access the conference call, dial (877) 354-7102 (United States) or (412) 317-2517 (International). When prompted, please ask for the Realty Income conference call.
A telephone replay of the conference call can also be accessed by calling (877) 344-7529 and entering the conference ID 9386830. The telephone replay will be available through March 1, 2023.
A live webcast will be available in listen-only mode by clicking on the webcast link on the company’s home page or in the investors section at www.realtyincome.com. A replay of the conference call webcast will be available approximately one hour after the conclusion of the live broadcast. No access code is required for this replay.
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Supplemental Materials and Sustainability Report
Supplemental Operating and Financial Data for the three months and year ended December 31, 2022, including reconciliations for non-GAAP measures within the Glossary, are available on our corporate website at www.realtyincome.com/investors/quarterly-and-annual-results.
The Sustainability Report for the year ended December 31, 2021 is available on our corporate website at esg.realtyincome.com/indicators/sustainability_report. During June 2021, we established our Green Financing Framework, which is also available on our corporate website at esg.realtyincome.com/indicators/green_financing.
About Realty Income
Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a real estate investment trust ("REIT"), and its monthly dividends are supported by the cash flow from over 12,200 real estate properties primarily owned under long-term net lease agreements with commercial clients. To date, the company has declared 632 consecutive monthly dividends on its shares of common stock throughout its 54-year operating history and increased the dividend 119th times since Realty Income's public listing in 1994 (NYSE: O). Additional information about the company can be obtained from the corporate website at www.realtyincome.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this press release, the words “estimated,” “anticipated,” “expect,” “believe,” “intend,” “continue,” “should,” “may,” “likely,” “plans,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of our business and portfolio (including our growth strategies and our intention to acquire or dispose of additional properties and the timing of these acquisitions and dispositions), re-lease, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, settlement of shares of common stock sold pursuant to forward sale confirmations under our ATM program, dividends, guidance, and the intentions of management; and trends in our business, including trends in the market for long-term net leases of freestanding, single-client properties. Forward-looking statements are subject to risks, uncertainties, and assumptions about us, which may cause our actual future results to differ materially from expected results. Some of the factors that could cause actual results to differ materially are, among others, our continued qualification as a REIT; general domestic and foreign business and economic or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact on our clients and us; access to debt and equity capital markets and other sources of funding; continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including our clients' defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters; impairments in the value of our real estate assets; changes in domestic and foreign income tax laws and rates; our clients' solvency; property ownership through joint ventures and partnerships which may limit control of the underlying investments; the continued evolution of the COVID-19 pandemic or future epidemics or pandemics, the measures taken to limit their spread, and the impacts on us, our business, our clients (including those in the theater and fitness industries), or the economy generally; the loss of key personnel; the outcome of any legal proceedings to which we are a party or which may occur in the future; acts of terrorism and war; any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT, Inc. will be achieved; and those additional risks and factors discussed in our reports filed with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. Those forward-looking statements are not guarantees of future plans and performance and speak only as of the date of this press release. Actual plans and operating results may differ materially from what is expressed or forecasted in this press release. We do not undertake any 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.
Investor Contact:
Steve Bakke, CFA
Vice President, Capital Markets & Investor Relations
(858) 284-5425
sbakke@realtyincome.com
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CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts) (unaudited)
| Three Months | Three Months | Year | Year | |||||
|---|---|---|---|---|---|---|---|---|
| Ended 12/31/22 | Ended 12/31/21 | Ended 12/31/22 | Ended 12/31/21 | |||||
| REVENUE | ||||||||
| Rental (including reimbursable) (1) | $ | 873,346 | $ | 679,000 | $ | 3,299,657 | $ | 2,064,958 |
| Other | 15,304 | 6,019 | 44,024 | 15,505 | ||||
| Total revenue | 888,650 | 685,019 | 3,343,681 | 2,080,463 | ||||
| EXPENSES | ||||||||
| Depreciation and amortization | 438,174 | 333,229 | 1,670,389 | 897,835 | ||||
| Interest | 131,290 | 100,739 | 465,223 | 323,644 | ||||
| Property (including reimbursable) | 69,089 | 43,710 | 226,330 | 133,605 | ||||
| General and administrative | 37,525 | 30,522 | 138,459 | 96,980 | ||||
| Provisions for impairment | 9,481 | 7,990 | 25,860 | 38,967 | ||||
| Merger and integration-related costs | 903 | 137,332 | 13,897 | 167,413 | ||||
| Total expenses | 686,462 | 653,522 | 2,540,158 | 1,658,444 | ||||
| Gain on sales of real estate | 9,346 | 20,402 | 102,957 | 55,798 | ||||
| Foreign currency and derivative gain (loss), net | 2,692 | 1,880 | (13,311) | 710 | ||||
| Gain (loss) on extinguishment of debt | — | (46,722) | 367 | (97,178) | ||||
| Equity in income and impairment of investment in unconsolidated entities | (113) | 1,106 | (6,448) | 1,106 | ||||
| Other income, net (2) | 23,604 | 6,432 | 30,511 | 9,949 | ||||
| Income before income taxes | 237,717 | 14,595 | 917,599 | 392,404 | ||||
| Income taxes | (9,381) | (10,128) | (45,183) | (31,657) | ||||
| Net income | 228,336 | 4,467 | 872,416 | 360,747 | ||||
| Net income attributable to noncontrolling interests | (1,071) | (426) | (3,008) | (1,291) | ||||
| Net income available to common stockholders | $ | 227,265 | $ | 4,041 | $ | 869,408 | $ | 359,456 |
| Funds from operations available to common stockholders (FFO) | $ | 664,508 | $ | 326,163 | $ | 2,471,893 | $ | 1,240,580 |
| Normalized funds from operations available to common stockholders (Normalized FFO) | $ | 665,411 | $ | 463,495 | $ | 2,485,790 | $ | 1,407,993 |
| Adjusted funds from operations available to common stockholders (AFFO) | $ | 633,967 | $ | 486,047 | $ | 2,401,359 | $ | 1,488,753 |
| Per share information for common stockholders: | ||||||||
| Net income, basic and diluted | $ | 0.36 | $ | 0.01 | $ | 1.42 | $ | 0.87 |
| FFO, basic and diluted | $ | 1.05 | $ | 0.63 | $ | 4.04 | $ | 2.99 |
| Normalized FFO | ||||||||
| Basic | $ | 1.05 | $ | 0.89 | $ | 4.06 | $ | 3.40 |
| Diluted | $ | 1.05 | $ | 0.89 | $ | 4.06 | $ | 3.39 |
| AFFO | ||||||||
| Basic | $ | 1.00 | $ | 0.94 | $ | 3.93 | $ | 3.59 |
| Diluted | $ | 1.00 | $ | 0.94 | $ | 3.92 | $ | 3.59 |
| Cash dividends paid per common share | $ | 0.7440 | $ | 0.7180 | $ | 2.9670 | $ | 2.8330 |
(1)Includes reserves to rental revenue of $14.9 million (of which $2.6 million was related to straight-line rent receivables) for the three months ended December 31, 2022 and $0.8 million of reserves to rental revenue, net of reserve reversals (of which $5.6 million was related to straight-line rent receivables), for the three months ended December 31, 2021. For the year ended December 31, 2022, we recorded reserves to rental revenue of $4.0 million (of which $1.7 million was related to straight-line rent receivables), and $14.7 million of reserves to rental revenue (of which $4.5 million was related to straight-line rent receivables), for the year ended December 31, 2021.
(2)The three months and years ended December 31, 2022 and 2021 include gains on insurance proceeds from recoveries on property losses in excess of our carrying value.
- 9 -
FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS (Normalized FFO)
(in thousands, except per share and share count data)
FFO and Normalized FFO are non-GAAP financial measures. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definitions and explanations of how we utilize these metrics.
| Three Months | Three Months | Year | Year | |||||
|---|---|---|---|---|---|---|---|---|
| Ended 12/31/22 | Ended 12/31/21 | Ended 12/31/22 | Ended 12/31/21 | |||||
| Net income available to common stockholders | $ | 227,265 | $ | 4,041 | $ | 869,408 | $ | 359,456 |
| Depreciation and amortization | 438,174 | 333,229 | 1,670,389 | 897,835 | ||||
| Depreciation of furniture, fixtures and equipment | (536) | (352) | (2,014) | (1,026) | ||||
| Provisions for impairment | 9,481 | 7,990 | 25,860 | 38,967 | ||||
| Gain on sales of real estate | (9,346) | (20,402) | (102,957) | (55,798) | ||||
| Proportionate share of adjustments for unconsolidated entities (1) | — | 1,931 | 12,812 | 1,931 | ||||
| FFO adjustments allocable to noncontrolling interests | (530) | (274) | (1,605) | (785) | ||||
| FFO available to common stockholders | $ | 664,508 | $ | 326,163 | $ | 2,471,893 | $ | 1,240,580 |
| FFO allocable to dilutive noncontrolling interests | 1,410 | — | 3,979 | — | ||||
| Diluted FFO | $ | 665,918 | $ | 326,163 | $ | 2,475,872 | $ | 1,240,580 |
| FFO available to common stockholders | $ | 664,508 | $ | 326,163 | $ | 2,471,893 | $ | 1,240,580 |
| Merger and integration-related costs | 903 | 137,332 | 13,897 | 167,413 | ||||
| Normalized FFO available to common stockholders | $ | 665,411 | $ | 463,495 | $ | 2,485,790 | $ | 1,407,993 |
| Normalized FFO allocable to dilutive noncontrolling interests | 1,410 | — | 3,979 | 1,642 | ||||
| Diluted Normalized FFO | $ | 666,821 | $ | 463,495 | $ | 2,489,769 | $ | 1,409,635 |
| FFO per common share, basic and diluted | $ | 1.05 | $ | 0.63 | $ | 4.04 | $ | 2.99 |
| Normalized FFO per common share | ||||||||
| Basic | $ | 1.05 | $ | 0.89 | $ | 4.06 | $ | 3.40 |
| Diluted | $ | 1.05 | $ | 0.89 | $ | 4.06 | $ | 3.39 |
| Distributions paid to common stockholders | $ | 470,737 | $ | 371,179 | $ | 1,813,432 | $ | 1,169,026 |
| FFO available to common stockholders in excess (deficit) of distributions paid to common stockholders | $ | 193,771 | $ | (45,016) | $ | 658,461 | $ | 71,554 |
| Normalized FFO available to common stockholders in excess of distributions paid to common stockholders | $ | 194,674 | $ | 92,316 | $ | 672,358 | $ | 238,967 |
| Weighted average number of common shares used for FFO | ||||||||
| Basic | 633,373,847 | 519,116,544 | 611,765,815 | 414,535,283 | ||||
| Diluted | 635,637,335 | 519,438,347 | 613,472,663 | 414,769,846 | ||||
| Weighted average number of common shares used for normalized FFO | ||||||||
| Basic | 633,373,847 | 519,116,544 | 611,765,815 | 414,535,283 | ||||
| Diluted | 635,637,335 | 519,438,347 | 613,472,663 | 415,270,063 |
(1)Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022.
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ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(in thousands, except per share and share count data)
AFFO is a non-GAAP financial measure. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definition and an explanation of how we utilize this metric.
| Three Months | Three Months | Year | Year | |||||
|---|---|---|---|---|---|---|---|---|
| Ended 12/31/22 | Ended 12/31/21 | Ended 12/31/22 | Ended 12/31/21 | |||||
| Net income available to common stockholders | $ | 227,265 | $ | 4,041 | $ | 869,408 | $ | 359,456 |
| Cumulative adjustments to calculate Normalized FFO (1) | 438,146 | 459,454 | 1,616,382 | 1,048,537 | ||||
| Normalized FFO available to common stockholders | 665,411 | 463,495 | 2,485,790 | 1,407,993 | ||||
| (Gain) loss on extinguishment of debt | — | 46,722 | (367) | 97,178 | ||||
| Amortization of share-based compensation | 4,875 | 3,750 | 21,617 | 16,234 | ||||
| Amortization of net debt premiums and deferred financing costs (2) | (16,378) | (10,466) | (67,150) | (6,182) | ||||
| Non-cash (gain) loss on interest rate swaps | (1,463) | 726 | 718 | 2,905 | ||||
| Straight-line impact of cash settlement on interest rate swaps (3) | 1,558 | — | 1,558 | — | ||||
| Leasing costs and commissions | (1,383) | (4,175) | (5,236) | (6,201) | ||||
| Recurring capital expenditures | (128) | (787) | (587) | (1,202) | ||||
| Straight-line rent and expenses, net | (35,248) | (25,082) | (120,252) | (61,350) | ||||
| Amortization of above and below-market leases, net | 15,777 | 14,424 | 63,243 | 37,970 | ||||
| Proportionate share of adjustments for unconsolidated entities | — | (1,948) | (4,239) | (1,948) | ||||
| Other adjustments (4) | 946 | (612) | 26,264 | 3,356 | ||||
| AFFO available to common stockholders | $ | 633,967 | $ | 486,047 | $ | 2,401,359 | $ | 1,488,753 |
| AFFO allocable to dilutive noncontrolling interests | 1,420 | — | 4,033 | 1,619 | ||||
| Diluted AFFO | $ | 635,387 | $ | 486,047 | $ | 2,405,392 | $ | 1,490,372 |
| AFFO per common share | ||||||||
| Basic | $ | 1.00 | $ | 0.94 | $ | 3.93 | $ | 3.59 |
| Diluted | $ | 1.00 | $ | 0.94 | $ | 3.92 | $ | 3.59 |
| Distributions paid to common stockholders | $ | 470,737 | $ | 371,179 | $ | 1,813,432 | $ | 1,169,026 |
| AFFO available to common stockholders in excess of distributions paid to common stockholders | $ | 163,230 | $ | 114,868 | $ | 587,927 | $ | 319,727 |
| Weighted average number of common shares used for AFFO: | ||||||||
| Basic | 633,373,847 | 519,116,544 | 611,765,815 | 414,535,283 | ||||
| Diluted | 635,637,335 | 519,438,347 | 613,472,663 | 415,270,063 |
(1)See Normalized FFO calculations on page 10 for reconciling items.
(2)Includes the amortization of premiums and discounts on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.
(3)Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps, over the term of the $750.0 million of 5.625% senior unsecured notes due October 13, 2032.
(4)Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, foreign currency gain and loss as a result of intercompany debt and remeasurement transactions, and straight-line payments from cross-currency swaps.
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HISTORICAL FFO AND AFFO
(in thousands, except per share and share count data)
| For the three months ended December 31, | 2022 | 2021 | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net income available to common stockholders | $ | 227,265 | $ | 4,041 | $ | 117,931 | $ | 129,297 | $ | 85,072 |
| Depreciation and amortization, net of furniture, fixtures and equipment | 437,638 | 332,877 | 174,888 | 156,467 | 137,553 | |||||
| Provisions for impairment | 9,481 | 7,990 | 23,790 | 8,950 | 1,235 | |||||
| Gain on sales of real estate | (9,346) | (20,402) | (22,667) | (14,168) | (5,825) | |||||
| Proportionate share of adjustments for unconsolidated entities | — | 1,931 | — | — | — | |||||
| FFO adjustments allocable to noncontrolling interests | (530) | (274) | (242) | (150) | (292) | |||||
| FFO available to common stockholders | $ | 664,508 | $ | 326,163 | $ | 293,700 | $ | 280,396 | $ | 217,743 |
| Merger and integration-related costs | 903 | 137,332 | — | — | — | |||||
| Normalized FFO available to common stockholders | $ | 665,411 | $ | 463,495 | $ | 293,700 | $ | 280,396 | $ | 217,743 |
| FFO per diluted share | $ | 1.05 | $ | 0.63 | $ | 0.83 | $ | 0.85 | $ | 0.73 |
| Normalized FFO per diluted share | $ | 1.05 | $ | 0.89 | $ | 0.83 | $ | 0.85 | $ | 0.73 |
| AFFO available to common stockholders | $ | 633,967 | $ | 486,047 | $ | 297,654 | $ | 281,986 | $ | 236,813 |
| AFFO per diluted share | $ | 1.00 | $ | 0.94 | $ | 0.84 | $ | 0.86 | $ | 0.79 |
| Cash dividends paid per share | $ | 0.7440 | $ | 0.7180 | $ | 0.7020 | $ | 0.6810 | $ | 0.6615 |
| Weighted average diluted shares outstanding - FFO, Normalized FFO and AFFO | 635,637,335 | 519,438,347 | 355,050,977 | 329,364,027 | 298,609,734 | |||||
| For the year ended December 31, | 2022 | 2021 | 2020 | 2019 | 2018 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net income available to common stockholders | $ | 869,408 | $ | 359,456 | $ | 395,486 | $ | 436,482 | $ | 363,614 |
| Depreciation and amortization, net of furniture, fixtures and equipment | 1,668,375 | 896,809 | 676,450 | 593,396 | 539,130 | |||||
| Provisions for impairment | 25,860 | 38,967 | 147,232 | 40,186 | 26,269 | |||||
| Gain on sales of real estate | (102,957) | (55,798) | (76,232) | (29,996) | (24,643) | |||||
| Proportionate share of adjustments for unconsolidated entities | 12,812 | 1,931 | — | — | — | |||||
| FFO adjustments allocable to noncontrolling interests | (1,605) | (785) | (817) | (477) | (1,113) | |||||
| FFO available to common stockholders | $ | 2,471,893 | $ | 1,240,580 | $ | 1,142,119 | $ | 1,039,591 | $ | 903,257 |
| Merger and integration-related costs | 13,897 | 167,413 | — | — | — | |||||
| Normalized FFO available to common stockholders | $ | 2,485,790 | $ | 1,407,993 | $ | 1,142,119 | $ | 1,039,591 | $ | 903,257 |
| FFO per diluted share | $ | 4.04 | $ | 2.99 | $ | 3.31 | $ | 3.29 | $ | 3.12 |
| Normalized FFO per diluted share | $ | 4.06 | $ | 3.39 | $ | 3.31 | $ | 3.29 | $ | 3.12 |
| AFFO available to common stockholders | $ | 2,401,359 | $ | 1,488,753 | $ | 1,172,626 | $ | 1,050,015 | $ | 924,558 |
| AFFO per diluted share | $ | 3.92 | $ | 3.59 | $ | 3.39 | $ | 3.32 | $ | 3.19 |
| Cash dividends paid per share | $ | 2.9670 | $ | 2.8330 | $ | 2.7940 | $ | 2.7105 | $ | 2.6305 |
| Weighted average diluted shares outstanding - FFO | 613,472,663 | 414,769,846 | 345,878,377 | 316,601,350 | 289,923,984 | |||||
| Weighted average diluted shares outstanding -Normalized FFO and AFFO | 613,472,663 | 415,270,063 | 345,878,377 | 316,601,350 | 289,923,984 |
- 12 -
ADJUSTED EBITDAre
(dollars in thousands)
Adjusted EBITDAre, Annualized Adjusted EBITDAre, Pro Forma Adjusted EBITDAre, Annualized Pro Forma Adjusted EBITDAre, Net Debt/Annualized Adjusted EBITDAre and Net Debt/Annualized Pro Forma Adjusted EBITDAre are non-GAAP financial measures. Please see the Glossary in the Supplemental Operating and Financial Data for the three months and year ended December 31, 2022 for our definition and an explanation of how we utilize these metrics.
| Three Months Ended | |||
|---|---|---|---|
| December 31, 2022 | |||
| Net income | $ | 228,336 | |
| Interest | 131,290 | ||
| Income taxes | 9,381 | ||
| Depreciation and amortization | 438,174 | ||
| Provisions for impairment | 9,481 | ||
| Merger and integration-related costs | 903 | ||
| Gain on sales of real estate | (9,346) | ||
| Foreign currency and derivative gains, net | (2,692) | ||
| Gain on settlement of foreign currency forwards | 2,139 | ||
| Equity in income of investment in unconsolidated entities | 113 | ||
| Quarterly Adjusted EBITDAre | $ | 807,779 | |
| Annualized Adjusted EBITDAre | $ | 3,231,116 | |
| Annualized Pro Forma Adjustments (1) | $ | 119,876 | |
| Annualized Pro Forma Adjusted EBITDAre | $ | 3,350,992 | |
| Total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts | $ | 17,935,539 | |
| Less: Cash and cash equivalents | (171,102) | ||
| Net Debt | $ | 17,764,437 | |
| Net Debt/Annualized Adjusted EBITDAre | 5.5 | x | |
| Net Debt/Annualized Pro Forma Adjusted EBITDAre | 5.3 | x |
(1)Annualized Pro Forma Adjustments, which includes transaction accounting adjustments in accordance with U.S GAAP, consists of adjustments to incorporate Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period. Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDAre on a pro forma basis in accordance with Article 11 of Regulation S-X. Annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes. Annualized Pro Forma Adjustments consist of $120.4 million from properties we acquired or stabilized during the quarter and removes $0.5 million from properties we disposed of during the quarter.
- 13 -
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share and share count data) (unaudited)
| December 31, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Real estate held for investment, at cost: | ||||
| Land | $ | 12,948,835 | $ | 10,753,750 |
| Buildings and improvements | 29,707,751 | 25,155,178 | ||
| Total real estate held for investment, at cost | 42,656,586 | 35,908,928 | ||
| Less accumulated depreciation and amortization | (4,904,165) | (3,949,798) | ||
| Real estate held for investment, net | 37,752,421 | 31,959,130 | ||
| Real estate and lease intangibles held for sale, net | 29,535 | 30,470 | ||
| Cash and cash equivalents | 171,102 | 258,579 | ||
| Accounts receivable, net | 567,963 | 426,768 | ||
| Lease intangible assets, net | 5,168,366 | 5,275,304 | ||
| Goodwill | 3,731,478 | 3,676,705 | ||
| Investment in unconsolidated entities | — | 140,967 | ||
| Other assets, net | 2,252,227 | 1,369,579 | ||
| Total assets | $ | 49,673,092 | $ | 43,137,502 |
| LIABILITIES AND EQUITY | ||||
| Distributions payable | $ | 165,710 | $ | 146,919 |
| Accounts payable and accrued expenses | 399,137 | 351,128 | ||
| Lease intangible liabilities, net | 1,379,436 | 1,308,221 | ||
| Other liabilities | 774,787 | 759,197 | ||
| Line of credit payable and commercial paper | 2,729,040 | 1,551,376 | ||
| Term loan, net | 249,755 | 249,557 | ||
| Mortgages payable, net | 853,925 | 1,141,995 | ||
| Notes payable, net | 14,278,013 | 12,499,709 | ||
| Total liabilities | 20,829,803 | 18,008,102 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 and 740,200,000 shares authorized, 660,300,195 and 591,261,991 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 34,159,509 | 29,578,212 | ||
| Distributions in excess of net income | (5,493,193) | (4,530,571) | ||
| Accumulated other comprehensive income | 46,833 | 4,933 | ||
| Total stockholders’ equity | 28,713,149 | 25,052,574 | ||
| Noncontrolling interests | 130,140 | 76,826 | ||
| Total equity | 28,843,289 | 25,129,400 | ||
| Total liabilities and equity | $ | 49,673,092 | $ | 43,137,502 |
- 14 -
Realty Income Performance vs. Major Stock Indices
| Equity | NASDAQ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Realty Income | REIT Index (1) | DJIA | S&P 500 | Composite | ||||||
| Dividend | Total | Dividend | Total | Dividend | Total | Dividend | Total | Dividend | Total | |
| yield | return (2) | yield | return (3) | yield | return (3) | yield | return (3) | yield | return (4) | |
| 10/18 to 12/31/1994 | 10.5% | 10.8% | 7.7% | 0.0% | 2.9% | (1.6%) | 2.9% | (1.2%) | 0.5% | (1.7%) |
| 1995 | 8.3% | 42.0% | 7.4% | 15.3% | 2.4% | 36.9% | 2.3% | 37.6% | 0.6% | 39.9% |
| 1996 | 7.9% | 15.4% | 6.1% | 35.3% | 2.2% | 28.9% | 2.0% | 23.0% | 0.2% | 22.7% |
| 1997 | 7.5% | 14.5% | 5.5% | 20.3% | 1.8% | 24.9% | 1.6% | 33.4% | 0.5% | 21.6% |
| 1998 | 8.2% | 5.5% | 7.5% | (17.5%) | 1.7% | 18.1% | 1.3% | 28.6% | 0.3% | 39.6% |
| 1999 | 10.5% | (8.7%) | 8.7% | (4.6%) | 1.3% | 27.2% | 1.1% | 21.0% | 0.2% | 85.6% |
| 2000 | 8.9% | 31.2% | 7.5% | 26.4% | 1.5% | (4.7%) | 1.2% | (9.1%) | 0.3% | (39.3%) |
| 2001 | 7.8% | 27.2% | 7.1% | 13.9% | 1.9% | (5.5%) | 1.4% | (11.9%) | 0.3% | (21.1%) |
| 2002 | 6.7% | 26.9% | 7.1% | 3.8% | 2.6% | (15.0%) | 1.9% | (22.1%) | 0.5% | (31.5%) |
| 2003 | 6.0% | 21.0% | 5.5% | 37.1% | 2.3% | 28.3% | 1.8% | 28.7% | 0.6% | 50.0% |
| 2004 | 5.2% | 32.7% | 4.7% | 31.6% | 2.2% | 5.6% | 1.8% | 10.9% | 0.6% | 8.6% |
| 2005 | 6.5% | (9.2%) | 4.6% | 12.2% | 2.6% | 1.7% | 1.9% | 4.9% | 0.9% | 1.4% |
| 2006 | 5.5% | 34.8% | 3.7% | 35.1% | 2.5% | 19.0% | 1.9% | 15.8% | 0.8% | 9.5% |
| 2007 | 6.1% | 3.2% | 4.9% | (15.7%) | 2.7% | 8.8% | 2.1% | 5.5% | 0.8% | 9.8% |
| 2008 | 7.3% | (8.2%) | 7.6% | (37.7%) | 3.6% | (31.8%) | 3.2% | (37.0%) | 1.3% | (40.5%) |
| 2009 | 6.6% | 19.3% | 3.7% | 28.0% | 2.6% | 22.6% | 2.0% | 26.5% | 1.0% | 43.9% |
| 2010 | 5.1% | 38.6% | 3.5% | 27.9% | 2.6% | 14.0% | 1.9% | 15.1% | 1.2% | 16.9% |
| 2011 | 5.0% | 7.3% | 3.8% | 8.3% | 2.8% | 8.3% | 2.3% | 2.1% | 1.3% | (1.8%) |
| 2012 | 4.5% | 20.1% | 3.5% | 19.7% | 3.0% | 10.2% | 2.5% | 16.0% | 2.6% | 15.9% |
| 2013 | 5.8% | (1.8%) | 3.9% | 2.9% | 2.3% | 29.6% | 2.0% | 32.4% | 1.4% | 38.3% |
| 2014 | 4.6% | 33.7% | 3.6% | 28.0% | 2.3% | 10.0% | 2.0% | 13.7% | 1.3% | 13.4% |
| 2015 | 4.4% | 13.0% | 3.9% | 2.8% | 2.6% | 0.2% | 2.2% | 1.4% | 1.4% | 5.7% |
| 2016 | 4.2% | 16.0% | 4.0% | 8.6% | 2.5% | 16.5% | 2.1% | 12.0% | 1.4% | 7.5% |
| 2017 | 4.5% | 3.6% | 3.9% | 8.7% | 2.2% | 28.1% | 1.9% | 21.8% | 1.1% | 28.2% |
| 2018 | 4.2% | 15.2% | 4.4% | (4.0%) | 2.5% | (3.5%) | 2.2% | (4.4%) | 1.4% | (3.9%) |
| 2019 | 3.7% | 21.1% | 3.7% | 28.7% | 2.4% | 25.3% | 1.9% | 31.5% | 1.1% | 35.2% |
| 2020 | 4.5% | (11.8%) | 3.6% | (5.1%) | 1.9% | 9.7% | 1.5% | 18.4% | 0.9% | 43.6% |
| 2021 | 4.1% | 23.0% | 2.6% | 41.3% | 1.8% | 20.9% | 1.3% | 28.7% | 0.7% | 21.4% |
| 2022 | 4.7% | (7.3%) | 4.0% | (24.9%) | 2.1% | (6.9%) | 1.8% | (18.1%) | 1.1% | (33.1%) |
| Compound Average<br><br>Annual Total Return (5) | 14.6% | 9.6% | 10.4% | 9.8% | 9.7% |
Note: All of these dividend yields are calculated as annualized dividends based on the last dividend paid in applicable time period divided by the closing price as of period end. Dividend yield sources: Nareit website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream / Thomson Financial.
(1)FTSE Nareit US Equity REIT Index, as per Nareit website.
(2)Calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period. Does not include reinvestment of dividends for the annual percentages.
(3)Includes reinvestment of dividends. Source: Nareit website and Factset.
(4)Price only index, does not include dividends as NASDAQ did not report total return metrics for the entirety of the measurement period. Source: Factset.
(5)All of these Compound Average Annual Total Return rates are calculated in the same manner for each period from Realty Income's NYSE listing on October 18, 1994 through December 31, 2022, and (except for NASDAQ) assume reinvestment of dividends. Past performance does not guarantee future performance. Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future.
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realtyincomeq42022supple
SUPPLEMENTAL OPERATING & FINANCIAL DATA Q4 2022 An S&P 500 company S&P 500 Dividend Aristocrats® index member Exhibit 99.2
Q4 2022 Supplemental Operating & Financial Data 2 Table of Contents Corporate Overview 3 Financial Summary Consolidated Statements of Income 4 Funds From Operations (FFO) and Normalized Funds From Operations (Normalized FFO) 5 Adjusted Funds From Operations (AFFO) 6 Consolidated Balance Sheets 7 Debt Summary 8 Senior Unsecured Notes and Bonds 9 Debt Maturities 10 Capitalization & Financial Ratios 11 Adjusted EBITDAre & Coverage Ratios 12 Debt Covenants 13 Transaction Summary Investment Summary 14 Disposition Summary 15 Development Pipeline 16 Real Estate Portfolio Summary Client Diversification 17 Top 10 Industries 18 Industry Diversification 19 Geographic Diversification 21 Property Type Composition 22 Same Store Rental Revenue 23 Leasing Data Occupancy 25 Leasing Activity 26 Lease Expirations 27 Earnings Guidance 28 Analyst Coverage 29 Glossary 30 This Supplemental Operating & Financial Data should be read in connection with the company's earnings press release for the three months and year ended December 31, 2022 (included as Exhibit 99.1 of the company's Current Report on Form 8-K, filed on February 21, 2023) as certain disclosures, definitions, and reconciliations in such announcement have not been included in this Supplemental Operating & Financial Data. Realty Income is not affiliated or associated with, is not endorsed by, does not endorse, and is not sponsored by or a sponsor of the clients or of their products or services pictured or mentioned. The names, logos, and all related product and service names, design marks, and slogans are the trademarks or service marks of their respective companies.
Q4 2022 Supplemental Operating & Financial Data 3 One Team Senior Management Neil M. Abraham, EVP, Chief Strategy Officer, Realty Income International - President Michelle Bushore, EVP, Chief Legal Officer, General Counsel and Secretary Mark E. Hagan, EVP, Chief Investment Officer Shannon Kehle, EVP, Chief People Officer Christie B. Kelly, EVP, Chief Financial Officer and Treasurer Sumit Roy, President & Chief Executive Officer Gregory J. Whyte, EVP, Chief Operating Officer Credit Ratings Senior Unsecured Outlook Commercial Paper Moody’s A3 Stable P-2 Standard & Poor’s A- Stable A-2 Dividend Information as of February 2023 ▪ Current annualized dividend of $3.054 per share ▪ Compound average annual dividend growth rate of approximately 4.4% ▪ 632 consecutive monthly dividends declared ▪ 101 consecutive quarterly dividend increases Corporate Headquarters Phoenix Office 11995 El Camino Real 2325 E. Camelback Rd, 9th Floor San Diego, CA 92130 Phoenix, AZ 85016 Phone: +1 (858) 284-5000 Phone: +1 (602) 778-6000 Website: www.realtyincome.com London Office 19 Wells Street London, United Kingdom W1T 3PQ Phone: +44 (20) 3931 6858 Corporate Overview Transfer Agent Computershare Phone: (877) 218-2434 Website: www.computershare.com (1) Total portfolio annualized contractual rent is a supplemental operating measure. Please see the Glossary for our definition and an explanation of how we utilize this metric. (2) Total portfolio annualized contractual rent includes 1.4% of rent from clients accounted for on a cash basis. December 31, 2022 Closing price (1) $ 63.43 Shares and units outstanding 662,095,362 Market value of common equity $ 41,996,708 Total market capitalization $ 59,932,247 (1) Closing price as of December 30, 2022. Corporate Profile Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index. We invest in people and places to deliver dependable monthly dividends that increase over time. For over 54 years, we have been acquiring and managing freestanding commercial real estate that generates rental revenue under long-term net lease agreements and supports our monthly dividend. Portfolio Overview At December 31, 2022, we owned or held interests in 12,237 properties, with approximately 236.8 million square feet of leasable space. Our properties are leased to 1,240 different clients doing business in 84 industries. Approximately 81.9% of our total portfolio annualized contractual rent(1) was generated from retail properties, 13.3% from industrial properties, 2.9% from gaming property, and the remaining 1.9% from other property types. Our physical occupancy as of December 31, 2022 was 99.0%, with a weighted average remaining lease term of approximately 9.5 years. Total portfolio annualized contractual rent on our leases as of December 31, 2022 was $3.41 billion(2). Common Stock Our common stock is traded on the New York Stock Exchange under the symbol "O“ (Market value and total market capitalization in thousands).
Q4 2022 Supplemental Operating & Financial Data 4 Three Months Ended December 31, Years Ended December 31, 2022 2021 2022 2021 REVENUE Rental (including reimbursable) (1) $ 873,346 $ 679,000 $ 3,299,657 $ 2,064,958 Other 15,304 6,019 44,024 15,505 Total revenue 888,650 685,019 3,343,681 2,080,463 EXPENSES Depreciation and amortization 438,174 333,229 1,670,389 897,835 Interest 131,290 100,739 465,223 323,644 Property (including reimbursable) 69,089 43,710 226,330 133,605 General and administrative 37,525 30,522 138,459 96,980 Provisions for impairment 9,481 7,990 25,860 38,967 Merger and integration-related costs 903 137,332 13,897 167,413 Total expenses 686,462 653,522 2,540,158 1,658,444 Gain on sales of real estate 9,346 20,402 102,957 55,798 Foreign currency and derivative (loss) gain, net 2,692 1,880 (13,311) 710 Gain (loss) on extinguishment of debt — (46,722) 367 (97,178) Equity in income and impairment of investment in unconsolidated entities (113) 1,106 (6,448) 1,106 Other income, net (2) 23,604 6,432 30,511 9,949 Income before income taxes 237,717 14,595 917,599 392,404 Income taxes (9,381) (10,128) (45,183) (31,657) Net income 228,336 4,467 872,416 360,747 Net income attributable to noncontrolling interests (1,071) (426) (3,008) (1,291) Net income available to common stockholders $ 227,265 $ 4,041 $ 869,408 $ 359,456 Net income available to common stockholders per common share, basic and diluted $ 0.36 $ 0.01 $ 1.42 $ 0.87 (1) Includes rental revenue (reimbursable) of $55.6 million and $35.7 million for the three months ended December 31, 2022 and December 31, 2021, respectively, and $184.7 million and $104.9 million for the year ended December 31, 2022 and December 31, 2021, respectively. Additionally, we recorded reserves to rental revenue of $14.9 million (of which $2.6 million was related to straight-line rent receivables) for three months ended December 31, 2022 and $0.8 million of reserves to rental revenue, net of reserve reversals, (of which $5.6 million was related to straight-line rent receivables) for the three months ended December 31, 2021. Unless otherwise specified, references to rental revenue in this document are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses. For the year ended December 31, 2022, we recorded reserves to rental revenue of $4.0 million (of which $1.7 million was related to straight-line rent receivables), and $14.7 million of reserve to rental revenue (of which $4.5 million was related to straight-line rent receivables) for the year ended December 31, 2021. (2) The three months and years ended December 31, 2022 and 2021 include gains on insurance proceeds from recoveries on property losses in excess of our carrying value. Consolidated Statements of Income (in thousands, except per share amounts) (unaudited)
Q4 2022 Supplemental Operating & Financial Data 5 FFO and Normalized FFO (1) (in thousands, except per share and share count data) The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to FFO and Normalized FFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted FFO and Normalized FFO per share computations. Three Months Ended December 31, Years ended December 31, 2022 2021 2022 2021 Net income available to common stockholders $ 227,265 $ 4,041 $ 869,408 $ 359,456 Depreciation and amortization 438,174 333,229 1,670,389 897,835 Depreciation of furniture, fixtures and equipment (536) (352) (2,014) (1,026) Provisions for impairment 9,481 7,990 25,860 38,967 Gain on sales of real estate (9,346) (20,402) (102,957) (55,798) Proportionate share of adjustments for unconsolidated entities — 1,931 12,812 1,931 FFO adjustments allocable to noncontrolling interests (530) (274) (1,605) (785) FFO available to common stockholders $ 664,508 $ 326,163 $ 2,471,893 $ 1,240,580 FFO allocable to dilutive noncontrolling interests 1,410 — 3,979 — Diluted FFO $ 665,918 $ 326,163 $ 2,475,872 $ 1,240,580 FFO available to common stockholders $ 664,508 $ 326,163 $ 2,471,893 $ 1,240,580 Merger and integration-related costs 903 137,332 13,897 167,413 Normalized FFO available to common stockholders $ 665,411 $ 463,495 $ 2,485,790 $ 1,407,993 Normalized FFO allocable to dilutive noncontrolling interests 1,410 — 3,979 1,642 Diluted Normalized FFO $ 666,821 $ 463,495 $ 2,489,769 $ 1,409,635 FFO per common share, basic and diluted $ 1.05 $ 0.63 $ 4.04 $ 2.99 Normalized FFO per common share Basic $ 1.05 $ 0.89 $ 4.06 $ 3.40 Diluted $ 1.05 $ 0.89 $ 4.06 $ 3.39 Distributions paid to common stockholders $ 470,737 $ 371,179 $ 1,813,432 $ 1,169,026 FFO available to common stockholders in excess (deficit) of distributions paid to common stockholders $ 193,771 $ (45,016) $ 658,461 $ 71,554 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 194,674 $ 92,316 $ 672,358 $ 238,967 Weighted average number of common shares used for FFO Basic 633,373,847 519,116,544 611,765,815 414,535,283 Diluted 635,637,335 519,438,347 613,472,663 414,769,846 Weighted average number of common shares used for Normalized FFO Basic 633,373,847 519,116,544 611,765,815 414,535,283 Diluted 635,637,335 519,438,347 613,472,663 415,270,063 (1) FFO and Normalized FFO are non-GAAP financial measures. Please see the Glossary for our definitions of these terms and an explanation of how we utilize these metrics.
Q4 2022 Supplemental Operating & Financial Data 6 The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to Normalized FFO and AFFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted AFFO per share computations. Three Months Ended December 31, Years ended December 31, 2022 2021 2022 2021 Net income available to common stockholders $ 227,265 $ 4,041 $ 869,408 $ 359,456 Cumulative adjustments to calculate Normalized FFO (2) 438,146 459,454 1,616,382 1,048,537 Normalized FFO available to common stockholders 665,411 463,495 2,485,790 1,407,993 (Gain) loss on extinguishment of debt — 46,722 (367) 97,178 Amortization of share-based compensation 4,875 3,750 21,617 16,234 Amortization of net debt premiums and deferred financing costs (16,378) (10,466) (67,150) (6,182) Non-cash (gain) loss on interest rate swaps (1,463) 726 718 2,905 Straight-line impact of cash settlement on interest rate swaps (3) 1,558 — 1,558 — Leasing costs and commissions (1,383) (4,175) (5,236) (6,201) Recurring capital expenditures (128) (787) (587) (1,202) Straight-line rent and expenses, net (35,248) (25,082) (120,252) (61,350) Amortization of above and below-market leases, net 15,777 14,424 63,243 37,970 Proportionate share of adjustments for unconsolidated entities — (1,948) (4,239) (1,948) Other adjustments(4) 946 (612) 26,264 3,356 AFFO available to common stockholders $ 633,967 $ 486,047 $ 2,401,359 $ 1,488,753 AFFO allocable to dilutive noncontrolling interests 1,420 — 4,033 1,619 Diluted AFFO $ 635,387 $ 486,047 $ 2,405,392 $ 1,490,372 AFFO per common share Basic $ 1.00 $ 0.94 $ 3.93 $ 3.59 Diluted $ 1.00 $ 0.94 $ 3.92 $ 3.59 Distributions paid to common stockholders $ 470,737 $ 371,179 $ 1,813,432 $ 1,169,026 AFFO available to common stockholders in excess of distributions paid to common stockholders $ 163,230 $ 114,868 $ 587,927 $ 319,727 Weighted average number of common shares used for AFFO: Basic 633,373,847 519,116,544 611,765,815 414,535,283 Diluted 635,637,335 519,438,347 613,472,663 415,270,063 (1) AFFO is a non-GAAP financial measure. Please see the Glossary for our definition and an explanation of how we utilize this metric. (2) See reconciling items for Normalized FFO presented on page 5 under "FFO and Normalized FFO." (3) Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps, over the term of the $750.0 million of 5.625% senior unsecured notes due October 13, 2032. (4) Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, foreign currency gain and loss as a result of intercompany debt and remeasurement transactions and straight-line payments from cross-currency swaps. AFFO (1) (in thousands, except per share and share count data)
Q4 2022 Supplemental Operating & Financial Data 7 Consolidated Balance Sheets (in thousands, except per share and share count data) (unaudited) December 31, 2022 December 31, 2021 ASSETS Real estate held for investment, at cost: Land $ 12,948,835 $ 10,753,750 Buildings and improvements 29,707,751 25,155,178 Total real estate held for investment, at cost 42,656,586 35,908,928 Less accumulated depreciation and amortization (4,904,165) (3,949,798) Real estate held for investment, net 37,752,421 31,959,130 Real estate and lease intangibles held for sale, net 29,535 30,470 Cash and cash equivalents 171,102 258,579 Accounts receivable, net 567,963 426,768 Lease intangible assets, net 5,168,366 5,275,304 Goodwill 3,731,478 3,676,705 Investment in unconsolidated entities — 140,967 Other assets, net 2,252,227 1,369,579 Total assets $ 49,673,092 $ 43,137,502 LIABILITIES AND EQUITY Distributions payable $ 165,710 $ 146,919 Accounts payable and accrued expenses 399,137 351,128 Lease intangible liabilities, net 1,379,436 1,308,221 Other liabilities 774,787 759,197 Line of credit payable and commercial paper 2,729,040 1,551,376 Term loan, net 249,755 249,557 Mortgages payable, net 853,925 1,141,995 Notes payable, net 14,278,013 12,499,709 Total liabilities 20,829,803 18,008,102 Stockholders’ equity: Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 and 740,200,000 shares authorized, 660,300,195 and 591,261,991 shares issued and outstanding as of December 31, 2022 and 2021, respectively 34,159,509 29,578,212 Distributions in excess of net income (5,493,193) (4,530,571) Accumulated other comprehensive income 46,833 4,933 Total stockholders’ equity 28,713,149 25,052,574 Noncontrolling interests 130,140 76,826 Total equity 28,843,289 25,129,400 Total liabilities and equity $ 49,673,092 $ 43,137,502
Q4 2022 Supplemental Operating & Financial Data 8 Debt Summary as of December 31, 2022 (dollars in thousands) Maturity Dates Carrying Value (USD) % of Debt Interest Rate Weighted Average Years Until Maturity Credit Facility and Commercial Paper (1) Credit Facility (2) June 26, 2026 $ 2,027,240 11.3 % 2.63 % 3.5 years Commercial Paper Various (3) 701,800 3.9 % 3.41 % 0.1 years Carrying value 2,729,040 15.2 % 2.83 % (4) 2.6 years Unsecured Term Loan Term Loan (5) March 24, 2024 250,000 1.4 % 3.83 % 1.2 years Deferred financing costs (245) Carrying value 249,755 Senior Unsecured Notes and Bonds (6) 29 series of senior unsecured notes and bonds February 2024 - March 2047 14,114,156 78.7 % 3.37 % (4) 7.2 years Unamortized net premiums and deferred financing costs 163,857 Carrying value 14,278,013 Mortgages Payable 18 mortgages on 136 properties May 2023 - August 2030 842,343 (7) 4.7 % 4.80 % (4) 1.4 years Unamortized net premiums and deferred financing costs 11,582 Carrying value 853,925 Total Consolidated Debt Principal $ 17,935,539 (8) 3.36 % (4) 6.2 years Fixed Rate $ 15,206,499 85 % Variable Rate $ 2,729,040 15 % (1) We have a $4.25 billion unsecured revolving credit facility (excluding an accordion feature subject to lender commitments which provided for an additional $1.0 billion in borrowings) bearing interest at different benchmark rates based on the currency of the borrowings, with a maturity date in June 2026. In addition, we have a U.S. dollar-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.5 billion, and a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent) in U.S. dollars or other foreign currencies. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs. (2) As of December 31, 2022, we had $2.0 billion of outstanding borrowings under our revolving credit facility, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings. (3) As of December 31, 2022, we had $701.8 million in commercial paper borrowings, including €361.0 million of Euro-denominated borrowings, which matured between January 2023 and February 2023. (4) The totals are calculated as the weighted average interest rate as of December 31, 2022 for each respective category. (5) In connection with entering into our new unsecured credit facility in April 2022, the previous LIBOR benchmark rate was replaced with daily SOFR, as the associated interest rate swap was also converted to SOFR, effectively fixing the interest rate at 3.83%. Excludes our January 2023 $1.0 billion multicurrency unsecured term loan maturing in January 2024, which includes two 12- month maturity extensions that can be exercised at the company's option. (6) See page 9 for detail by issuance for senior unsecured notes and bonds. (7) Includes (in U.S. dollars) a Sterling-denominated mortgage payable of £30.7 million converted at the applicable exchange rate on December 31, 2022. (8) Total consolidated debt excludes non-cash unamortized net premiums recorded on the senior unsecured notes and bonds, non-cash unamortized net premiums recorded on the mortgages payable, and deferred financing costs on the term loan, notes and bonds, and mortgages payable.
Q4 2022 Supplemental Operating & Financial Data 9 Senior Unsecured Notes and Bonds (dollars in thousands) Maturity Dates Principal Amount (Currency Denomination) Principal Balance (USD) as of December 31, 2022 % of Debt Interest Rate 4.600% Notes due 2024 February 6, 2024 $ 499,999 $ 499,999 2.8 % 4.60 % 3.875% Notes due 2024 July 15, 2024 $ 350,000 350,000 2.0 % 3.88 % 3.875% Notes due 2025 April 15, 2025 $ 500,000 500,000 2.8 % 3.88 % 4.625% Notes due 2025 November 1, 2025 $ 549,997 549,997 3.1 % 4.63 % 0.750% Notes due 2026 March 15, 2026 $ 325,000 325,000 1.8 % 0.75 % 4.875% Notes due 2026 June 1, 2026 $ 599,997 599,997 3.3 % 4.88 % 4.125% Notes due 2026 October 15, 2026 $ 650,000 650,000 3.6 % 4.13 % 1.875% Notes due 2027 January 14, 2027 £ 250,000 301,225 1.7 % 1.88 % 3.000% Notes due 2027 January 15, 2027 $ 600,000 600,000 3.3 % 3.00 % 1.125% Notes due 2027 July 13, 2027 £ 400,000 481,960 2.7 % 1.13 % 3.950% Notes due 2027 August 15, 2027 $ 599,873 599,873 3.3 % 3.95 % 3.650% Notes due 2028 January 15, 2028 $ 550,000 550,000 3.1 % 3.65 % 3.400% Notes due 2028 January 15, 2028 $ 599,816 599,816 3.3 % 3.40 % 2.200% Notes due 2028 June 15, 2028 $ 499,959 499,959 2.8 % 2.20 % 3.250% Notes due 2029 June 15, 2029 $ 500,000 500,000 2.8 % 3.25 % 3.100% Notes due 2029 December 15, 2029 $ 599,291 599,291 3.3 % 3.10 % 3.160% Notes Due 2030 June 30, 2030 £ 140,000 168,686 0.9 % 3.16 % 1.625% Notes due 2030 December 15, 2030 £ 400,000 481,960 2.7 % 1.63 % 3.250% Notes due 2031 January 15, 2031 $ 950,000 950,000 5.3 % 3.25 % 3.180% Notes due 2032 June 30, 2032 £ 345,000 415,691 2.3 % 3.18 % 5.625% Notes due 2032 (1) October 13, 2032 $ 750,000 750,000 4.2 % 5.63 % 2.850% Notes due 2032 December 15, 2032 $ 699,655 699,655 3.9 % 2.85 % 1.800% Notes due 2033 March 15, 2033 $ 400,000 400,000 2.2 % 1.80 % 1.750% Notes due 2033 July 13, 2033 £ 350,000 421,715 2.4 % 1.75 % 2.730% Notes due 2034 May 20, 2034 £ 315,000 379,544 2.1 % 2.73 % 5.875% Bonds due 2035 March 15, 2035 $ 250,000 250,000 1.4 % 5.88 % 3.390% Notes due 2037 June 30, 2037 £ 115,000 138,563 0.8 % 3.39 % 2.500% Notes due 2042 January 14, 2042 £ 250,000 301,225 1.7 % 2.50 % 4.650% Notes due 2047 March 15, 2047 $ 550,000 550,000 3.1 % 4.65 % Principal amount (2) $ 14,114,156 78.7 % 3.37 % (1) In connection with the issuance of the 5.625% senior unsecured notes due October 2032, we executed a $600 million U.S. Dollar-to-Euro 10-year cross currency swap, resulting in the receipt of approximately €612 million in proceeds and an effective fixed-rate, Euro-denominated semi-annual yield to maturity of approximately 4.7%. Additionally, we terminated forward interest rate swaps totaling $500 million in notional value previously entered into, realizing a cash settlement gain of approximately $72 million to be amortized over the 10-year period. Giving effect to these contemporaneous transactions, we recognized an effective semi- annual yield to maturity of approximately 3.93% on the overall transaction, including the amortization of the cash settlement gain noted above. (2) Excludes non-cash unamortized net premiums recorded and deferred financing cost, and our January 2023 issuances of $500 million of senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $600 million of senior unsecured notes due March 2030, which are callable at par on January 15, 2030.
Q4 2022 Supplemental Operating & Financial Data 10 Debt Maturities as of December 31, 2022 (dollars in millions) Principal Due Credit Facility and Commercial Paper (1) Term Loan (2) Mortgages Payable Senior Unsecured Notes and Bonds (3) Total Weighted Average Expiring Interest Rate (4) 2023 $ 701.8 $ — $ 22.0 $ — $ 723.8 4.44 % 2024 — 250.0 740.5 850.0 1,840.5 4.48 % 2025 — — 42.0 1,050.0 1,092.0 4.23 % 2026 2,027.2 — 12.0 1,575.0 3,614.2 3.72 % 2027 — — 22.3 1,983.1 2,005.4 2.68 % Thereafter — — 3.5 8,656.1 8,659.6 3.27 % Totals $ 2,729.0 $ 250.0 $ 842.3 $ 14,114.2 $ 17,935.5 (1) Commercial paper borrowings have matured and will mature between January 2023 and February 2023, while borrowings under the credit facility at December 31, 2022 are assumed to be repaid at the expiration in June 2026. As of December 31, 2022, we had $2.0 billion of outstanding borrowings under our revolving credit facility, comprised of Euro and Sterling borrowings, and $701.8 million of outstanding borrowings under our commercial paper programs, including €361.0 million of Euro- denominated borrowings. (2) Excludes our January 2023 $1.0 billion multicurrency unsecured term loan maturing in January 2024, which includes two 12-month maturity extensions that can be exercised at the company's option. (3) Excludes our January 2023 issuances of $500 million of senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $600 million of senior unsecured notes due March 2030, which are callable at par on January 15, 2030. (4) The weighted average interest rates for 2023 exclude commercial paper and for 2026 exclude the credit facility.
Q4 2022 Supplemental Operating & Financial Data 11 Capitalization & Financial Ratios (dollars in thousands, except as otherwise noted) Cash on Hand $ 171,102 Availability under Credit Facility 2,222,760 Less: Commercial Paper Borrowings (701,800) $ 1,692,062 (5) Liquidity calculation excludes borrowings under the $1.5 billion U.S Dollar- denominated commercial paper program and $1.5 billion Euro-denominated commercial paper program as of December 31, 2022. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs. Principal Debt Balance Credit Facility and Commercial Paper $ 2,729,040 Unsecured Term Loan (1) 250,000 Senior Unsecured Notes and Bonds (2) 14,114,156 Mortgages Payable 842,343 Total Debt $ 17,935,539 Equity Shares/Units Stock Price Market Value Common Stock (NYSE: "O") 660,300,195 $ 63.43 $ 41,882,841 Common Units (3) 1,795,167 $ 63.43 $ 113,867 $ 41,996,708 Total Market Capitalization (4) $ 59,932,247 Debt/Total Market Capitalization (4) 29.9 % (1) Excludes our January 2023 $1.0 billion multicurrency unsecured term loan maturing in January 2024, which includes two 12-month maturity extensions that can be exercised at the company's option. (2) Excludes our January 2023 issuances of $500 million of senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $600 million of senior unsecured notes due March 2030, which are callable at par on January 15, 2030. (3) Consists of common units issued by Realty Income Limited Partnership and held by third parties. (4) Our enterprise value was $59,761,145 (total market capitalization less cash and cash equivalents as of December 31, 2022). The percentage for debt to enterprise value is materially consistent with that presented for total market capitalization. Dividend Data 2022 2021 Year-over-Year Growth Rate Common Dividend Paid per Share $ 2.9670 $ 2.8330 4.7 % AFFO per Share (diluted) $ 3.92 $ 3.59 9.2 % AFFO Payout Ratio 75.7 % 78.9 % Liquidity as of December 31, 2022 (5) Capitalization as of December 31, 2022 Capital Structure as of December 31, 2022 Common Stock 70.1% Debt 29.9%
Q4 2022 Supplemental Operating & Financial Data 12 Adjusted EBITDAre & Coverage Ratios (dollars in thousands) Reconciliation of Net Income to Adjusted EBITDAre and Pro Forma Adjusted EBITDAre (1) Three Months Ended December 31, 2022 Net income $ 228,336 Interest 131,290 Income taxes 9,381 Depreciation and amortization 438,174 Provisions for impairment 9,481 Merger and integration-related costs 903 Gain on sales of real estate (9,346) Foreign currency and derivative gains, net (2,692) Gain on settlement of foreign currency forwards 2,139 Equity in income of investment in unconsolidated entities 113 Quarterly Adjusted EBITDAre $ 807,779 Annualized Adjusted EBITDAre $ 3,231,116 Annualized Pro Forma Adjustment(2) $ 119,876 Annualized Pro Forma Adjusted EBITDAre $ 3,350,992 Total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts $ 17,935,539 Less: Cash and cash equivalents (171,102) Net Debt $ 17,764,437 Net Debt/Annualized Adjusted EBITDAre 5.5x Net Debt/Annualized Pro Forma Adjusted EBITDAre 5.3x (1) Adjusted EBITDAre, Annualized Adjusted EBITDAre, Pro Forma Adjusted EBITDAre, Annualized Pro Forma Adjusted EBITDAre, Net Debt/Annualized Adjusted EBITDAre and Net Debt/Annualized Pro Forma Adjusted EBITDAre are non-GAAP financial measures. Please see the Glossary for our definitions of these terms and an explanation of how we utilize these metrics. (2) The Annualized Pro Forma Adjustment, which includes transaction accounting adjustments in accordance with U.S GAAP, consists of adjustments to incorporate Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period. Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDAre on a pro forma basis in accordance with Article 11 of Regulation S-X. The annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes. The Annualized Pro Forma Adjustments consist of $120.4 million from properties we acquired or stabilized during the quarter and removes $0.5 million from properties we disposed of during the quarter. Debt Service & Fixed Charge Coverage 5.6 5.6 5.5 5.5 5.2 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Q4 2022 Supplemental Operating & Financial Data 13 Debt Covenants The following is a summary of the key financial covenants for our senior unsecured notes and bonds, as defined and calculated per their terms. These calculations, which are not based on U.S. GAAP measurements, are presented to investors to show our ability to incur additional debt under the terms of our senior unsecured notes and bonds as well as to disclose our current compliance with such covenants, and are not measures of our liquidity or performance. Required Actuals Limitation on incurrence of total debt ≤ 60% of adjusted assets 40.3% Limitation on incurrence of secured debt ≤ 40% of adjusted assets 2.0% Debt service and fixed charge coverage (trailing 12 months) (1) ≥ 1.5x 5.2x Maintenance of total unencumbered assets ≥ 150% of unsecured debt 255.4% (1) Our debt service coverage ratio is calculated on a pro forma basis for the preceding four-quarter period on the assumptions that: (i) the incurrence of any Debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other Debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our Debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on January 1, 2022, and subject to certain additional adjustments. Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of January 1, 2022, nor does it purport to reflect our debt service coverage ratio for any future period. As of December 31, 2022
Q4 2022 Supplemental Operating & Financial Data 14 Investment Summary Number of Properties Investment ($ in millions) Cash Rents ($ in millions) Leasable Square Feet (in thousands) Initial Weighted Average Cash Lease Yield (1) Weighted Average Lease Term (Years) Q1 2022 Acquisitions - U.S. 139 $ 629.8 $ 36.0 2,627 5.7% 15.0 Acquisitions - Europe 21 794.2 40.0 2,772 5.5% 8.9 Total acquisitions 160 1,424.0 76.0 5,399 5.6% 11.8 Properties under development (2) 53 131.3 7.4 1,868 5.7% 17.3 Total real estate investments 213 $ 1,555.3 $ 83.4 7,267 5.6% 12.3 Approximately 26% of the annualized revenue generated by these investments is from our investment grade clients (4) Q2 2022 Acquisitions - U.S. 150 $ 862.2 $ 49.1 2,923 5.7% 13.0 Acquisitions - Europe 30 677.0 37.1 2,620 5.8% 9.0 Total acquisitions 180 1,539.2 86.2 5,543 5.7% 11.3 Properties under development (2) 57 136.6 7.6 2,471 5.6% 14.4 Total real estate investments 237 $ 1,675.8 $ 93.8 8,014 5.7% 11.5 Approximately 39% of the annualized revenue generated by these investments is from our investment grade clients (4) Q3 2022 Acquisitions - U.S. 272 $ 1,131.6 $ 69.5 3,845 6.1% 16.5 Acquisitions - Europe 27 587.4 35.3 3,512 6.2% 8.8 Total acquisitions 299 1,719.0 104.8 7,357 6.2% 13.9 Properties under development (2) 76 148.5 8.2 1,758 5.6% 15.1 Total real estate investments 375 $ 1,867.5 $ 113.0 9,115 6.1% 14.0 Approximately 27% of the annualized revenue generated by these investments is from our investment grade clients (4) Q4 2022 Acquisitions - U.S. 429 $ 3,122.8 $ 189.2 6,379 6.1% 22.8 Acquisitions - Europe 16 382.7 26.6 2,275 7.1% 8.8 Total acquisitions 445 3,505.5 215.8 8,654 6.2% 21.1 Properties under development (2)(3) 133 391.2 18.1 3,703 5.0% 13.9 Total real estate investments 578 $ 3,896.7 $ 233.9 12,357 6.1% 20.5 Approximately 14% of the annualized revenue generated by these investments is from our investment grade clients (4) YTD 2022 Acquisitions - U.S. 990 $ 5,746.4 $ 343.8 15,774 6.0% 19.3 Acquisitions - Europe 94 2,441.3 139.0 11,179 6.0% 8.9 Total acquisitions 1,084 8,187.7 482.8 26,953 6.0% 16.3 Properties under development (2)(3) 217 807.6 41.3 5,500 5.3% 15.0 Total real estate investments 1,301 $ 8,995.3 $ 524.1 32,453 5.9% 16.2 Approximately 23% of the annualized revenue generated by these investments is from our investment grade clients (4) (1) Initial weighted average cash lease yield is a supplemental operating measure. Please see the Glossary for our definition of this metric. Contractual net operating income used in the calculation of initial weighted average cash lease yield for the three months and year ended December 31, 2022 includes approximately $2.5 million and $10.5 million, respectively, received as settlement credits as reimbursement of free rent periods. (2) Includes investments during the period in new development and development of existing properties. Cash rents noted reflect total cash rents to be received on this investment amount upon completion of the properties under development. (3) The three months and year ended December 31, 2022 include £4.4 million relating to three U.K. development properties and £40.9 million relating to five U.K. development properties, respectively, converted at the applicable exchange rates on the funding dates. (4) Please see the Glossary for our definition of investment grade clients.
Q4 2022 Supplemental Operating & Financial Data 15 Disposition Summary (dollars in thousands) Number of Properties Net Book Value Net Sales Proceeds Net Cash Capitalization Rate (1) Q1 2022 Occupied 3 $ 2,844 $ 3,132 8.9% Vacant 31 109,183 119,051 — Total real estate dispositions 34 $ 112,027 $ 122,183 The unlevered internal rate of return on properties sold during the first quarter was 9.7% (2) Q2 2022 Occupied 6 $ 34,569 $ 65,916 5.7% Vacant 64 74,877 84,118 — Total real estate dispositions 70 $ 109,446 $ 150,034 The unlevered internal rate of return on properties sold during the second quarter was 9.3% (2) Q3 2022 Occupied 7 $ 72,940 $ 112,173 6.8% Vacant 27 26,620 30,016 — Total real estate dispositions (3) 34 $ 99,560 $ 142,189 The unlevered internal rate of return on properties sold during the third quarter was 12.8% (2) (3) Q4 2022 Occupied — $ — $ — —% Vacant 30 11,119 20,465 — Total real estate dispositions 30 $ 11,119 $ 20,465 The unlevered internal rate of return on properties sold during the fourth quarter was 9.8% (2) YTD 2022 Occupied 16 $ 110,353 $ 181,221 6.5% Vacant 152 221,799 253,650 — Total real estate dispositions (3) 168 $ 332,152 $ 434,871 The unlevered internal rate of return on properties sold during 2022 was 10.8% (2) (3) (1) Net cash capitalization rate is a supplemental operating measure. Please see the Glossary for our definition of this metric. (2) Excludes properties disposed from the legacy VEREIT portfolio. (3) Dispositions excludes our proportionate share of net proceeds from the disposition of properties by our unconsolidated industrial partnerships during the three months ended September 30, 2022.
Q4 2022 Supplemental Operating & Financial Data 16 Development Pipeline (dollars in thousands) Retail Number of Properties Investment to Date Estimated Remaining Investment Total Commitment Percent Funded Percent Leased (1) New development (2) 192 $ 154,700 $ 513,783 $ 668,483 (3) 23 % 100 % Development of existing properties 6 4,859 7,237 12,096 40 % 94 % 198 $ 159,559 $ 521,020 $ 680,579 23 % Non-Retail Number of Properties Investment to Date Estimated Remaining Investment Total Commitment Percent Funded Percent Leased (1) New development (2) 15 $ 76,811 $ 85,305 $ 162,116 47 % 100 % Development of existing properties — — — — — % — % 15 $ 76,811 $ 85,305 $ 162,116 47 % Total Number of Properties Investment to Date Estimated Remaining Investment Total Commitment Percent Funded Percent Leased (1) New development (2) 207 $ 231,511 $ 599,088 $ 830,599 (3) 28 % 100 % Development of existing properties 6 4,859 7,237 12,096 40 % 94 % 213 $ 236,370 $ 606,325 $ 842,695 28 % (1) Estimated rental revenue commencement dates on properties under development are between January 2023 and August 2024. (2) Includes build-to-suit developments and forward take-out commitments on development properties with leases in place. (3) Includes three U.K. build-to-suit developments totaling £43.0 million. As of December 31, 2022
Q4 2022 Supplemental Operating & Financial Data 17 Our Top 20 Clients Our 20 largest clients based on percentage of total portfolio annualized contractual rent, which does not give effect to deferred rent, at December 31, 2022, include the following: Our Investment Grade Clients (3) Number of Leases 5,912 Percentage of Total Portfolio Annualized Contractual Rent 40.9% Weighted Average EBITDAR/Rent Ratio on Retail Properties 2.9x (2) Median EBITDAR/Rent Ratio on Retail Properties 2.8x (2) (1) Amounts for each client are calculated independently; therefore, the individual percentages may not sum to the total. (2) Based on an analysis of the most recently provided information from all retail clients that provide such information. We do not independently verify the information we receive from our retail clients. Client Diversification Ranking Client Number of Leases Percentage of Total Portfolio Annualized Contractual Rent (1) Investment Grade Ratings (S&P/Moody's/Fitch) 1 Dollar General 1,518 4.0% BBB/Baa2/- 2 Walgreens 342 3.6 BBB/Baa2/- 3 7-Eleven 632 3.5 A/Baa2/- 4 Dollar Tree / Family Dollar 1,092 3.3 BBB/Baa2/- 5 Wynn Resorts 1 2.9 — 6 FedEx 80 2.6 BBB/Baa2/- 7 LA Fitness 76 2.1 — 8 Sainsbury's 28 1.8 — 9 BJ's Wholesale Clubs 33 1.8 — 10 B&Q (Kingfisher) 37 1.7 BBB/Baa2/BBB 11 CVS Pharmacy 183 1.6 BBB/Baa2/- 12 Lifetime Fitness 21 1.6 — 13 Wal-Mart / Sam's Club 66 1.6 AA/Aa2/AA 14 AMC Theaters 35 1.5 — 15 Tractor Supply 171 1.4 BBB/Baa1/- 16 Red Lobster 200 1.4 — 17 Regal Cinemas (Cineworld) 41 1.4 — 18 Tesco 17 1.3 BBB-/Baa3/BBB- 19 Home Depot 29 1.1 A/A2/A 20 Kroger 32 1.0 BBB/Baa1/- Total 4,634 40.9% (3) Please see the Glossary for our definition of investment grade clients. 33.2% 48.7% 7.7% 10.4% Investment Grade, Retail Non-Investment Grade or Non-Rated, Retail Investment Grade, Non-Retail Non-Investment Grade or Non-Rated, Non-Retail
Q4 2022 Supplemental Operating & Financial Data 18 (1)Top 10 Industries Percentage of Total Portfolio Annualized Contractual Rent As of Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 2022 2021 2020 2019 2018 Grocery stores 10.0% 10.2% 9.8% 7.9% 5.0% Convenience stores 8.6 9.1 11.9 12.3 12.6 Dollar stores 7.4 7.5 7.6 7.9 7.3 Restaurants - quick service 6.0 6.6 5.3 5.8 6.3 Drug stores 5.7 6.6 8.2 8.8 9.4 Home improvement 5.6 5.1 4.3 2.9 2.8 Restaurants - casual dining 5.1 5.9 2.8 3.2 3.3 Health and fitness 4.4 4.7 6.7 7.0 7.1 Automotive service 4.0 3.2 2.7 2.6 2.2 General merchandise 3.7 3.7 3.4 2.5 2.1 (1) The presentation of Top 10 Industries combines total portfolio contractual rent from the U.S. and Europe. Europe consists of properties in the U.K., starting in May 2019, and Spain, starting in September 2021, and in Italy, starting in October 2022. Certain of the Top 10 Industries include both U.S. and Europe percentages for which the Europe percentages are included in the 'Europe- other' classification in the Industry Diversification table beginning on page 19.
Q4 2022 Supplemental Operating & Financial Data 19 Percentage of Total Portfolio Annualized Contractual Rent As of Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 2022 2021 2020 2019 2018 United States Aerospace 0.4% 0.4% 0.6% 0.8% 0.9% Apparel stores 1.4 1.5 1.3 1.1 1.2 Automotive collision services 0.9 1.0 1.1 1.0 0.9 Automotive parts 1.3 1.5 1.6 1.6 1.7 Automotive service 4.0 3.2 2.7 2.6 2.3 Automotive tire services 1.5 1.8 2.0 2.1 2.3 Beverages 1.0 1.3 2.1 2.0 2.4 Child care 1.4 1.5 2.1 2.1 2.2 Consumer electronics 0.6 0.6 0.3 0.3 0.3 Consumer goods 0.6 0.7 0.6 0.6 0.7 Convenience stores 8.6 9.1 11.9 12.3 12.6 Crafts and novelties 0.9 1.0 0.9 0.6 0.6 Diversified industrial 0.8 1.0 0.8 0.7 0.8 Dollar stores 7.4 7.5 7.6 7.9 7.3 Drug stores 5.6 6.6 8.2 8.8 9.4 Education 0.2 0.1 0.2 0.2 0.3 Energy 0.3 0.4 — — — Entertainment 0.8 0.8 0.3 0.3 0.3 Equipment services 0.3 0.3 0.3 0.4 0.4 Financial services 1.8 2.0 1.8 2.0 2.4 Food processing 0.4 0.7 0.7 0.7 0.5 Gaming 2.9 — — — — General merchandise 3.2 3.5 3.4 2.5 2.1 Grocery stores 4.7 4.9 4.9 5.2 5.0 Health and fitness 4.4 4.7 6.7 7.0 7.1 Health care 3.0 1.9 1.5 1.6 1.6 Home furnishings 2.1 2.2 0.7 0.8 0.8 Home improvement 3.5 3.1 3.1 2.9 2.8 Industry Diversification
Q4 2022 Supplemental Operating & Financial Data 20 Percentage of Total Portfolio Annualized Contractual Rent As of Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 2022 2021 2020 2019 2018 Motor vehicle dealerships 1.4 1.3 1.6 1.6 1.8 Other manufacturing 0.5 0.5 0.4 0.6 0.7 Packaging 0.5 0.6 0.9 0.8 1.0 Pet supplies and services 1.0 0.9 0.7 0.7 0.5 Restaurants - casual dining 5.1 5.9 2.8 3.2 3.3 Restaurants - quick service 5.8 6.5 5.3 5.8 6.3 Sporting goods 1.3 1.5 0.7 0.8 0.9 Theaters 2.9 3.4 5.6 6.1 5.3 Transportation services 2.9 3.4 3.9 4.3 5.0 Wholesale clubs 2.3 2.5 2.4 2.5 2.9 Other 1.4 1.7 2.1 2.8 3.4 Total United States 89.1% 91.5% 93.8% 97.3% 100% Europe (1) General merchandise 0.5% 0.2% —% —% —% Grocery stores 5.3 5.3 4.9 2.7 — Home improvement 2.1 2.0 1.2 — — Sporting goods 0.4 * — — — Wholesale clubs 0.4 — — — — Other 2.2 1.0 0.1 * — Total Europe 10.9% 8.5% 6.2% 2.7% —% Totals 100.0% 100.0% 100.0% 100.0% 100.0% * Less than 0.1% (1) Europe consists of properties in the U.K., starting in May 2019, in Spain, starting in September 2021, and in Italy, starting in October 2022. Industry Diversification (Cont'd)
Q4 2022 Supplemental Operating & Financial Data 21 Geographic Diversification Balanced presence in 50 states, Puerto Rico, the United Kingdom, Spain and Italy. Top Ten Regions Based on Total Portfolio Annualized Contractual Rent Texas 10.4% United Kingdom 9.5% California 5.8% Illinois 5.2% Florida 5.1% Ohio 4.2% Massachusetts 4.2% Georgia 3.5% North Carolina 3.0% New York 2.9% 1.9% 0.1% 2.0% 1.0% 5.8% 1.4% 0.4% 0.1% 5.1% 3.5% 0.2% 0.1% 5.2% 2.6% 0.9% 1.1% 1.7% 2.0% 0.5% 1.2% 4.2% 2.7% 1.8% 1.3% 1.9% 0.1% 0.4% 1.0% 0.3% 1.6% 0.6% 2.9% 3.0% 0.2% 4.2% 1.6% 0.4% 2.5% 0.1% 1.9% 0.2% 2.5% 10.4% 0.5% 0.1% 2.5% 0.9% 0.4% 1.9% 0.1% 0.1% 9.5% 1.0% 0.4% Puerto Rico Spain United Kingdom Italy As of December 31, 2022
Q4 2022 Supplemental Operating & Financial Data 22 Property Type Composition (dollars in thousands) Property Type Number of Properties Approximate Leasable Square Feet (1) Total Portfolio Annualized Contractual Rent as of December 31, 2022 Percentage of Total Portfolio Annualized Contractual Rent as of December 31, 2022 Percentage of Annualized Contractual Rent from Our Investment Grade Clients (2) Retail 11,872 154,779,800 $ 2,794,814 81.9 % 40.5 % Industrial 327 76,546,800 453,571 13.3 57.1 Gaming 1 3,096,700 100,000 2.9 — Other (3) 37 2,422,100 64,673 1.9 5.3 Totals 12,237 236,845,400 $ 3,413,058 100.0 % 40.9 % (1) Includes leasable building square footage. Excludes 2,962 acres of leased land categorized as agriculture at December 31, 2022. (2) Please see the Glossary for our definition of investment grade clients. (3) "Other" includes 27 properties classified as agriculture, consisting of approximately 272,400 leasable square feet and $37.4 million in annualized contractual rent and ten properties classified as office, consisting of approximately 2.1 million leasable square feet and $27.3 million in annualized contractual rent. Retail 81.9% Industrial 13.3% Gaming 2.9% Other 1.9% (3)
Q4 2022 Supplemental Operating & Financial Data 23 Q4 2022 Same Store Rental Revenue Number of properties 9,615 Square footage 167,391,055 Q4 2022 $ 607,986 Q4 2021 $ 608,223 Decrease (in dollars) $ (237) Change (percent) — % 2022 Same Store Rental Revenue Number of properties 9,615 Square footage 167,391,055 YTD 2022 $ 2,453,030 YTD 2021 $ 2,410,302 Increase (in dollars) $ 42,728 Increase (percent) 1.8 % Same Store Rental Revenue (1) (dollars in thousands) Top 3 Industries Contributing to the Change (2) Three Months Ended Three Months Ended Net % Change Industry December 31, 2022 December 31, 2021 Change by Industry Theaters $ 12,867 $ 22,502 $ (9,635) (42.8) % Restaurants-Quick Service 43,795 41,862 1,933 4.6 % Health and Fitness 33,733 31,874 1,859 5.8 % Top 3 Industries Contributing to the Change (2) Year Ended Year Ended Net % Change Industry December 31, 2022 December 31, 2021 Change by Industry Theaters $ 92,575 $ 84,291 $ 8,284 9.8 % Health and Fitness 134,023 126,556 7,467 5.9 % Restaurants-Quick Service 173,997 169,776 4,221 2.5 % For purposes of comparability, same store rental revenue is presented on a constant currency basis using the applicable exchange rate as of December 31, 2022 of 1.20 GBP/USD. None of the properties in Spain or Italy met our same store pool definition for the periods presented. Our calculation of same store rental revenue includes rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB). Our calculation of same store rental revenue also includes uncollected rent for which we have not granted a lease concession. If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three months and year ended December 31, 2022 relative to the comparable period for 2021 would have been 1.6% and 2.3%, respectively. (1) Please see the Glossary to see our definitions of the Same Store Pool and Same Store Rental Revenue. Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period. If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our Same Store Pool. (2) Top 3 industry contributors are based on absolute value of net change period over period. (3) Includes revenue generated from all properties owned continuously from January 1, 2021 through December 31, 2022, and includes rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021. Rental Revenue for All Properties Owned (3) Number of properties 9,923 2022 $ 2,520,116 2021 2,471,872 Increase (in dollars) $ 48,244 Increase (percent) 2.0 %
Q4 2022 Supplemental Operating & Financial Data 24 Same Store Rental Revenue (1) (Cont'd) (dollars in thousands) Q4 2022 2022 Three Months Ended Net % Change by Year Ended Net % Change Property Type December 31, 2022 December 31, 2021 Change Property Type December 31, 2022 December 31, 2021 Change Property Retail $ 513,236 $ 514,425 $ (1,189) (0.2)% $ 2,075,709 $ 2,037,611 $ 38,098 1.9 % Industrial 84,643 83,768 875 1.0 % 337,045 332,729 4,316 1.3 % Other (2) 10,107 10,030 77 0.8 % 40,276 39,962 314 0.8 % Total $ 607,986 $ 608,223 $ (237) — % $ 2,453,030 $ 2,410,302 $ 42,728 1.8 % Same Store Rental Revenue by Property Type Reconciliation of Same Store Rental Revenue to Rental Revenue (including reimbursable) Three Months Ended Year Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Same store rental revenue $ 607,986 $ 608,223 $ 2,453,030 $ 2,410,302 Constant currency adjustment (3) (2,381) 5,271 4,385 18,437 Straight-line rent and other non-cash adjustments 5,795 7,043 20,778 20,711 Contractually obligated reimbursements by our clients 55,830 43,945 184,780 175,235 Revenue from excluded properties (4) 202,602 109,957 625,474 399,096 Other excluded revenue (5) 3,514 3,388 11,210 10,551 VEREIT rental revenue (6) — (98,827) — (969,374) Rental revenue (including reimbursable) $ 873,346 $ 679,000 $ 3,299,657 $ 2,064,958 (1) Please see the Glossary to see our definitions of the Same Store Pool and Same Store Rental Revenue. Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period. If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our Same Store Pool. (2) "Other" includes properties classified as office and agriculture. (3) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the applicable exchange rate as of December 31, 2022 of 1.20 GBP/USD. None of the properties in Spain or Italy met our same store pool definition for the periods presented. (4) Please see the Glossary for our definition of Same Store Pool. (5) "Other excluded revenue" primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements. (6) Amounts for the three months and year ended December 31, 2021 represent rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021.
Q4 2022 Supplemental Operating & Financial Data 25 By Property Occupied properties 12,111 Total properties 12,237 Occupancy (1) 99.0 % By Square Footage Occupied square footage 234,593,723 Total square footage 236,845,409 Occupancy 99.0 % By Rental Revenue (Economic Occupancy) Quarterly cash rental revenue (2) $ 812,660 Quarterly cash vacant rental revenue (3) $ 6,566 Occupancy 99.2 % Change in Occupancy Vacant properties at 9/30/2022 131 Lease expirations (4) + 185 Leasing activity (5) - 160 Vacant dispositions (6) - 30 Vacant properties at 12/31/2022 126 (1) Excludes properties with ancillary leases only, such as cell towers and billboards. (2) Does not include reserves and reserve reversals recorded as adjustments to rental revenue. (3) Based on contractual monthly rental revenue received immediately preceding the date of vacancy. (4) Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above. (5) Excludes 14 minority unit leases with no property-level vacancy impact. See page 26 for additional detail on re-leasing activity. (6) Includes 26 properties vacant at the beginning of the quarter. Occupancy as of December 31, 2022 (dollars in thousands) Occupancy by Number of Properties 97.9% 98.0% 98.5% 98.8% 98.5% 98.6% 98.9% 98.9% 99.0% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 97.0% 98.0% 99.0%
Q4 2022 Supplemental Operating & Financial Data 26 Leasing Activity (dollars in thousands) Q4 2022 Re-leased to New Client Re-leased to Without After a Period Re-leasing Same Client Vacancy of Vacancy Totals Prior cash rents $ 36,301 $ 482 $ 931 $ 37,714 New cash rents* $ 37,144 $ 786 $ 1,227 $ 39,157 Recapture rate 102.3 % 163.1 % 131.8 % 103.8 % Number of leases 161 6 7 174 Average months vacant — — 12.0 0.7 Lease incentives (1) $ — $ — $ 274 $ 274 *Percentage of Total Portfolio Annualized Contractual Rent: 1.1 % (1) Lease incentives are defined as capital outlays made on behalf of a client that are specific to the client's use and benefit, and are not capitalized as improvements to the property. 2022 Re-leased to New Client Re-leased to Without After a Period Re-leasing Same Client Vacancy of Vacancy Totals Prior cash rents $ 125,044 $ 2,452 $ 4,438 $ 131,934 New cash rents* $ 130,939 $ 3,171 $ 5,613 $ 139,723 Recapture rate 104.7 % 129.3 % 126.5 % 105.9 % Number of leases 605 18 32 655 Average months vacant — — 14.3 0.6 Lease incentives (1) $ — $ — $ 409 $ 409 *Percentage of Total Portfolio Annualized Contractual Rent: 4.1 % Allocation Based on Number of Leases QTD 93% 7% Same Client New Client YTD 92% 8% Same Client New Client
Q4 2022 Supplemental Operating & Financial Data 27 (1) This table sets forth the timing of remaining lease term expirations in our portfolio (excluding rights to extend a lease at the option of the client) and their contributions to annualized contractual rent as of December 31, 2022. Leases on our multi-client properties are counted separately in the table above. This table excludes 181 vacant units. (2) Of the 12,797 in-place leases in the portfolio, which excludes 181 vacant units, 10,835 or 84.7% were under leases that provide for increases in rents through: base rent increases tied to inflation (typically subject to ceilings), percentage rent based on a percentage of the clients’ gross sales, fixed increases, or a combination of two or more of the aforementioned rent provisions. Our leases have a weighted average remaining lease term of approximately 9.5 years. Lease Expirations (dollars in thousands) Total Portfolio (1)(2) Total Portfolio Approx. Annualized Contractual Percentage of Total Expiring Leases Leasable Rent as of Portfolio Annualized Year Retail Non-Retail Sq. Feet December 31, 2022 Contractual Rent 2023 557 17 6,091,100 $ 92,628 2.7 % 2024 696 34 13,537,600 156,461 4.6 2025 884 36 14,190,300 201,949 5.9 2026 812 32 16,381,600 190,641 5.6 2027 1,384 35 21,660,500 276,431 8.1 2028 1,271 46 24,838,000 289,822 8.5 2029 906 20 19,119,100 233,775 6.8 2030 554 20 15,237,800 174,428 5.1 2031 493 35 20,798,900 238,610 7.0 2032 934 23 14,581,900 233,886 6.9 2033 587 15 14,296,200 174,091 5.1 2034 546 7 10,288,200 209,296 6.1 2035 419 3 4,806,400 106,739 3.1 2036 413 8 7,174,800 131,904 3.9 2037 468 8 8,320,400 128,608 3.8 2038-2143 1,483 51 23,270,900 573,789 16.8 Totals 12,407 390 234,593,700 $ 3,413,058 100.0 %
Q4 2022 Supplemental Operating & Financial Data 28 Earnings Guidance Summarized below are approximate estimates of the key components of our 2023 earnings guidance: 2023 Guidance Net income per share $1.20 to $1.32 Real estate depreciation and impairments per share $2.84 Other adjustments per share (1) $(0.03) Normalized FFO per share (2) $4.01 to $4.13 AFFO per share (2) $3.93 to $4.03 Same store rent growth Over 1.25% Occupancy Over 98% Cash G&A expenses (% of revenues) (3)(4) 3.0% - 3.5% Property expenses (non-reimbursable) (% of revenues) (3) 1.0% - 1.5% Income tax expenses $55 to $65 million Acquisition volume Over $5.0 billion (1) Includes merger and integration-related costs and our proportionate share of adjustments for unconsolidated entities. (2) Normalized FFO per share and AFFO per share exclude merger and integration-related costs associated with our merger with VEREIT. (3) Revenue excludes contractually obligated reimbursements by our clients. Cash G&A expenses excludes stock-based compensation expense. (4) G&A expenses inclusive of stock-based compensation expense as a percentage of rental revenue, excluding reimbursements, is expected to be approximately 3.7% - 4.2% in 2023. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this presentation, the words “estimated,” “anticipated,” “expect,” “believe,” “intend,” “continue,” “should,” “may,” “likely,” “plans,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of our business and portfolio (including our growth strategies and our intention to acquire or dispose of additional properties and the timing of these acquisitions and dispositions), re-lease, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, guidance, and the intentions of management; and trends in our business, including trends in the market for long-term net leases of freestanding, single-client properties. Forward-looking statements are subject to risks, uncertainties, and assumptions about us, which may cause our actual future results to differ materially from expected results. Some of the factors that could cause actual results to differ materially are, among others, our continued qualification as a real estate investment trust; general domestic and foreign business and economic or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact to our clients and us; access to debt and equity capital markets and other sources of funding; continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including our clients' defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters; impairments in the value of our real estate assets; changes in domestic and foreign income tax laws and rates; our client’s solvency; property ownership through joint ventures and partnerships which may limit control of the underlying investments; the continued evolution of the COVID-19 pandemic or future epidemics or pandemics, the measures taken to limit their spread, and the impacts on us, our business, our clients (including those in the theater and fitness industries), or the economy generally; the loss of key personnel; the outcome of any legal proceedings to which we are a party or which may occur in the future; acts of terrorism and war; any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT, Inc will be achieved; and those additional risks and factors discussed in our reports filed with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. Those forward-looking statements are not guarantees of future plans and performance and speak only as of the date of this press release. Actual plans and operating results may differ materially from what is expressed or forecasted in this press release. Realty Income does not undertake any 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.
Q4 2022 Supplemental Operating & Financial Data 29 Analyst Coverage Equity Research Baird Wes Golladay wgolladay@rwbaird.com (216) 737-7510 Bank of America Securities Joshua Dennerlein joshua.dennerlein@bofa.com (646) 855-1681 BNP Paribas Exane Nate Crossett nate.crossett@exanebnpparibas.com (646) 725-3716 BTIG Michael Gorman mgorman@btig.com (212) 738-6138 Citigroup Nicholas Joseph nicholas.joseph@citi.com (212) 816-1909 Credit Suisse Tayo Okusanya tayo.okusanya@credit-suisse.com (212) 325-1402 Edward Jones James Shanahan jim.shanahan@edwardjones.com (314) 515-5292 Goldman Sachs Caitlin Burrows caitlin.burrows@gs.com (212) 902-4736 Green Street Spenser Allaway sallaway@greenstreetadvisors.com (949) 640-8780 Janney Montgomery Scott Robert Stevenson robstevenson@janney.com (646) 840-3217 Jefferies Linda Tsai ltsai@jefferies.com (212) 778-8011 J.P. Morgan Anthony Paolone anthony.paolone@jpmorgan.com (212) 622-6682 Ladenburg Thalmann John Massocca jmassocca@ladenburg.com (212) 409-2543 Mizuho Haendel St. Juste haendel.st.juste@us.mizuho-sc.com (212) 205-7860 Morgan Stanley Ronald Kamdem ronald.kamdem@morganstanley.com (212) 269-8319 Raymond James RJ Milligan rjmilligan@raymondjames.com (727) 567-2585 RBC Capital Markets Brad Heffern brad.heffern@rbccm.com (512) 708-6311 Scotiabank Greg McGinniss greg.mcginniss@scotiabank.com (212) 225-6906 Stifel Simon Yarmak yarmaks@stifel.com (443) 224-1345 UBS Michael Goldsmith michael.goldsmith@ubs.com (212) 713-2951 Wolfe Research Andrew Rosivach arosivach@wolferesearch.com (646) 582-9250 Realty Income is covered by the analysts at the firms listed above. This list may not be complete and is subject to change. Please note that any opinions, estimates or forecasts regarding Realty Income's performance made by these analysts are theirs alone and do not represent opinions, estimates or forecasts of Realty Income or its management. Realty Income does not by its reference above or distribution imply, and expressly disclaims, any endorsement of or concurrence with any information, estimates, forecasts, opinions, conclusions or recommendations provided by analysts.
Q4 2022 Supplemental Operating & Financial Data 30 Glossary Adjusted EBITDAre. The National Association of Real Estate Investment Trusts (Nareit) established an EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDAre) it believed would provide investors with a consistent measure to help make investment decisions among certain REITs. Our definition of “Adjusted EBITDAre” is generally consistent with the Nareit definition, other than our adjustment to remove foreign currency and derivative gain and loss, excluding the gain and loss from the settlement of foreign currency forwards not designated as hedges (which is consistent with our previous calculations of "Adjusted EBITDAre"). We define Adjusted EBITDAre, a non-GAAP financial measure, for the most recent quarter as earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) income and franchise taxes, (iii) loss on extinguishment of debt, (iv) real estate depreciation and amortization, (v) provisions for impairment, (vi) merger and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gain and loss, net, (ix) gain on settlement of foreign currency forwards, and (x) equity in income of investment in unconsolidated entities. Our Adjusted EBITDAre may not be comparable to Adjusted EBITDAre reported by other companies or as defined by Nareit, and other companies may interpret or define Adjusted EBITDAre differently than we do. Management believes Adjusted EBITDAre to be a meaningful measure of a REIT’s performance because it provides a view of our operating performance, analyzes our ability to meet interest payment obligations before the effects of income tax, depreciation and amortization expense, provisions for impairment, gain on sales of real estate and other items, as defined above, that affect comparability, including the removal of non-recurring and non-cash items that industry observers believe are less relevant to evaluating the operating performance of a company. In addition, EBITDAre is widely followed by industry analysts, lenders, investors, rating agencies, and others as a means of evaluating the operational cash generating capacity of a company prior to servicing debt obligations. Management also believes the use of an annualized quarterly Adjusted EBITDAre metric is meaningful because it represents our current earnings run rate for the period presented. The ratio of our total debt to our annualized quarterly Adjusted EBITDAre is also used to determine vesting of performance share awards granted to our executive officers. Adjusted EBITDAre should be considered along with, but not as an alternative to, net income as a measure of our operating performance. Adjusted Funds From Operations (AFFO), a non-GAAP financial measure, is defined as FFO adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance. Most companies in our industry use a similar measurement to AFFO, but they may use the term "CAD" (for Cash Available for Distribution) or "FAD" (for Funds Available for Distribution). We believe AFFO provides useful information to investors because it is a widely accepted industry measure of the operating performance of real estate companies that is used by industry analysts and investors who look at and compare those companies. In particular, AFFO provides an additional measure to compare the operating performance of different REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which are not pertinent to measuring a particular company’s ongoing operating performance. Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders. Annualized Adjusted EBITDAre, a non-GAAP financial measure, is calculated by annualizing Adjusted EBITDAre. Annualized Pro Forma Adjusted EBITDAre, a non-GAAP financial measure, is defined as Adjusted EBITDAre, which includes transaction accounting adjustments in accordance with U.S. GAAP, consists of adjustments to incorporate Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable quarter. Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDAre on a pro forma basis in accordance with Article 11 of Regulation S-X. The annualized pro forma adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes and bonds. See page 13 for further information regarding our debt covenants.
Q4 2022 Supplemental Operating & Financial Data 31 Glossary (Cont'd) Funds From Operations (FFO), a non-GAAP financial measure, consistent with the Nareit definition, is net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gain on property sales. Presentation of the information regarding FFO and AFFO (described on pages 5 and 6) is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO in the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO and AFFO should not be considered measures of liquidity, of our ability to make cash distributions, or of our ability to pay interest payments. We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT using historical accounting for depreciation could be less informative. The use of FFO is recommended by the REIT industry as a supplemental performance measure. In addition, FFO is used as a measure of our compliance with the financial covenants of our credit facility. Initial Weighted Average Cash Lease Yield (acquisitions) is computed as contractual cash net operating income for the first twelve months following the acquisition date, divided by the total cost of the property (including all expenses borne by us). Investment Grade Clients are our clients with a credit rating, and our clients that are subsidiaries or affiliates of companies with a credit rating, as of the balance sheet date, of Baa3/BBB- or higher from one of the three major rating agencies (Moody’s/S&P/Fitch). Net Cash Capitalization Rates (dispositions) are computed as annualized current month contractual cash net operating income, divided by the net proceeds received upon sale of the property (including all expenses borne by us). Net Debt/Annualized Adjusted EBITDAre, a ratio used by management as a measure of leverage, is calculated as net debt (which we define as total debt per our consolidated balance sheet, excluding deferred financing costs and net premiums and discounts, less cash and cash equivalents), divided by Annualized Adjusted EBITDAre. Net Debt/Annualized Pro Forma Adjusted EBITDAre, a ratio used by management as a measure of leverage, is calculated as net debt (which we define as total debt per our consolidated balance sheet, excluding deferred financing costs and net premiums and discounts, less cash and cash equivalents), divided by Annualized Pro Forma Adjusted EBITDAre. Normalized Funds from Operations Available to Common Stockholders (Normalized FFO), a non-GAAP financial measure, is FFO excluding merger and integration-related costs associated with our merger with VEREIT. Same Store Pool, for purposes of determining the properties used to calculate our same store rental revenue, includes all properties that we owned for the entire year-to-date period, for both the current and prior year except for properties during the current or prior year that were: (i) vacant at any time, (ii) under development or redevelopment, or (iii) involved in eminent domain and rent was reduced. Same Store Rental Revenue excludes straight-line rent, the amortization of above-and below-market leases, and reimbursements from clients for recoverable real estate taxes and operating expenses. For purposes of comparability, same store rental revenue is presented on a constant currency basis by applying the exchange rate as of the balance sheet date to base currency rental revenue. Total Portfolio Annualized Contractual Rent is the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, as of the balance sheet date, multiplied by 12, excluding percentage rent. We believe total portfolio annualized contractual rent is a useful supplemental operating measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter. Total portfolio annualized contractual rent has not been reduced to reflect reserves recorded as reductions to GAAP rental revenue in the periods presented. Total portfolio annualized contractual rent excludes unconsolidated entities.