Realty Income : Q1 2025 Earnings Release

Published: 2025-05-05 22:03:25 ET O

Published on 05/05/2025 at 22:03

Real Estate Partner to

Realty Income Investment Thesis

Positive total operational return in 29 of 29 years as a public company

Company Overview 4

Growth 13

Income 19

Stability 21

Why Now? 27

Dividend has risen each year as a public company

Proven history of consistent results in a variety of economic environments

3

4

Company Overview

Realty Income's Value Proposition

Proven Performance, Increasing Dividends, Fortified Stability and Thoughtful Growth Since 1994 NYSE Listing

Track Record of Returns

13.6%

Compound Annual Total

Return Since 1994 NYSE Listing

5.5%

Median Annual AFFO Per Share

Growth Since 1996(1)

29 of 29

Years of Positive Total

Operational Return(2)

Consistent Dividends

4.3%

Compound Annual Dividend Growth

Rate Since NYSE Listing(3)

S&P 500

Dividend Aristocrats® Index Member(4)

30 Years of Consecutive Monthly Dividend Payments

Favorable Credit Ratings

A3 / Stable A- / Stable

Positioned for Continued Growth

~$14 Trillion

Estimated Global Net Lease

Addressable Market(5)

~$43 Billion

Sourced Acquisition

Opportunities in 2024

5

(1) 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 used by the investment community. 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 particularized 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. Measured as AFFO per share growth. Excludes positive earnings from Crest Net Lease, a subsidiary of Realty Income, as earnings do not reflect recurring business operations.

(2) Total operational return consists of the sum of annual AFFO per share growth and dividend yield. Calculated as of 1996 to capture full year of financial history since 1994 public listing.

(3) Compound annual dividend growth rate since NYSE listing, which assumes a $3.222 annualized dividend per share as of April 2025 dividend declaration.

(4) The S&P Dividend Aristocrats (launched in May 2005) is a stock market index composed of companies in the S&P 500 Index that have increased their dividends in each of the past 25 consecutive years.

(5) Refer to pages 9 and 10 for details on market sizing calculations.

Who We Are

Realty Income (NYSE: O), an S&P 500 company, is real estate partner to the world's leading companies®. Founded in 1969, we invest in diversified commercial real estate and have a portfolio of over 15,600 properties in all 50 U.S. states, the U.K., and six other countries in Europe. We are known as "The Monthly Dividend Company®," and have a mission to deliver stockholders dependable monthly dividends that grow over time. Since our founding, we have declared 658 consecutive monthly dividends and are a member of the S&P 500 Dividend Aristocrats® index for having increased our dividend for the last 30 consecutive years.(1)

Approximately 98% of our portfolio is made up of single tenant properties, predominately with triple net lease agreements. Overall, these properties are leased to 1,598 different clients doing business in 91 industries. Our portfolio occupancy is 98.5%, with a weighted average remaining lease term of approximately 9.1 years.

Note: As of 3/31/2025.

(1) As of April 2025 dividend declaration.

6

Client Benefits

Offers long-term control of important locations

Sale-leasebacks provide clients capital to re-invest in business

Realty Income offers scale and access to capital to support mutually beneficial growth

Why single-tenant net lease properties?

Typically long leases with visibility and consistency of recurring rental income

Landlord operating expenses are low; properties hold high fungibility to lease, sell, or redevelop

What is a triple net lease?

Client is responsible for certain property expenses (e.g., property taxes, insurance, maintenance, and utilities), in addition to rent, resulting in nearly 100% gross margin for Realty Income

What We Offer

Consistent Returns with Limited Downside Volatility

As of December 31, 2024.

Comparative Medians:

S&P 500

S&P DIVIDEND ARISTOCRATS

DOW JONES INDUSTRIAL

TOP CONSUMER STAPLE FIRMS(6)

TOTAL OPERATIONAL RETURN ('TOR')

(2015-2024 CAGR) (1)

9%

9%

9%

6%

7%

DOWNSIDE VOLATILITY (TOR < 0%, 2015-2024) (2)

0%

19%

15%

19%

18%

DIVIDEND YIELD (3)

6%

2%

2%

2%

3%

ADJ. EBITDA MARGIN (4)

95%

26%

24%

26%

22%

DIVIDEND SHARE OF TOTAL RETURN

(2015-2024) (5)

87%

10%

25%

14%

22%

Source: Bloomberg, S&P CapIQ. Median numbers represented for S&P 500, S&P Dividend Aristocrat, Dow Jones Industrial, and Top Consumer Staple Firms, unless otherwise noted.

(1) Total operational return consists of the sum of annual AFFO per share growth and dividend yield.

(2) "Downside volatility" calculated as the standard deviation of annual total operational returns where values in excess of 0% are assigned a "zero" value.

(3) Calculated as 2024 annualized dividend per share divided by stock price as of 12/31/2024.

7

(4) Measured as the reported adjusted EBITDA as a percentage of total revenue, as reported by the Company.

(5) Represents contribution of dividend to total stockholder return over the time period. Average number represented for Top 10 Consumer Staple names.

(6) "Top Consumer Staple Firms" represent the largest 10 constituents of the consumer staples sector of the S&P 500 index. As of 2024, the top 10 comprised of the following tickers: COST, PG, WMT, KO, PM, PEP, MDLZ, MO, CL, TGT. Note: Metrics include non-GAAP measures that could be calculated differently from company to company.

The Power of Single-Tenant Net Lease Real Estate

Typical Attributes of Real Estate Subsectors (1)

Vacant units

Vacancies can

Vacant units

Client pays

Client is

Lease

can be sold

be re-leased to

can

property taxes

responsible for

contracts lack

individually

variety of uses

immediately be

and all property

capital

co-tenancy

redeveloped

expenses

expenditures

clauses

Single-Tenant Net Lease

Multi-Tenant Data Centers

Multi-Tenant Industrial

Shopping Center & Malls

Multi-family

8

(1) Based on typical profiles of lease terms and property characteristics by property type.

Secular Growth Thesis: Opportunity to Consolidate Significant Addressable Market

Quantum of opportunity and low market saturation affords ample runway for growth

Europe is an attractive growth avenue with limited direct competition

AGGREGATE NET LEASE

Market

EUROPE

PUBLIC NET LEASE

Peers

Combined enterprise value of European public net lease REITs of nearly $6 billion(1)

$8.5 T

UNITED STATES

12

peers

$5.5 T

Combined enterprise value of U.S. public net lease REITs of ~$225 billion(2)

European public net lease REITs account for<0.1% of total European net lease addressable market of $8.5T

2

peers

U.S. public net lease REITs account for<4% of total U.S. net lease addressable market of

$5.5T

(1) Includes LXI and SUPR, as of 3/31/2025.

(2) Includes Realty Income and the following net lease peers: ADC, BNL, EPR, EPRT, FCPT, GLPI, GTY, LXP, NNN, NTST, VICI, and WPC. As of 3/31/2025.

To achieve similar market saturation, Realty Income's enterprise value in 9

Europe would approximate ~$115B, or ~9X the current portfolio size

Evolution of the Realty Income Business Model

Realty Income's expansion into new verticals has significantly increased the size of our total addressable market

Expanding Total Addressable Market

TAM

~$14T

U.S. Data Centers(3)

$0.5T

U.S. Gaming(2)

$0.4T

Europe

Return

$8.5T

U.S. Industrial

$2.0T

U.S. Freestanding Retail(1): The Foundation of Realty Income's Model

$2.6T

2010

2019

2022

2023

2024

Sources: Nareit and CoStar (2Q21; latest data available), EPRA, FTSE, Bloomberg, S&P Global. Represents estimated commercial property value for Realty Income's target sectors. Excludes public REIT ownership in each sector.

(1) Calculated as ~60% of total retail real estate, applying an equivalent percentage share of malls and shopping centers to retail real estate values as relative share of the total US retail gross leasable area based on Coresight Research as of 1Q23. Includes consumer centric medical (Source: McKinsey & Co).

(2) TAM calculated by applying a 7.0% cap rate to estimated gaming industry property NOI. Gaming industry property NOI is based on Gross Gaming Revenue excluding tribal gaming and REIT-owned properties as of 2024 per American Gaming Association, an assumed 50% gross gaming revenue contribution to total property revenue and 35% property EBITDAR margins based on industry averages, and 1.5x EBITDAR-to-Rent Coverage.

(3) Represents the aggregate estimated value of the U.S. data center market based on 3Q24's megawatt capacity from S&P Global Commodity Insights (February 2025).

Realty Income's diversified portfolio aims to maximize rate of return for the specified level of risk

Efficient Frontier

Risk

10

Produced positive Total Operational Return each year since listing in 1994

~6%

Historical Avg. Dividend Yield

~5%

Historical Avg. AFFO per Share CAGR

~11%

Historical Avg. Total Operational Return(1)

Total Operational Return Stability: Proven Performance Across Economic Cycles

Average 10-yr Treasury Yield 1996 - 2008: 5.0%

Dot-com Bust

Housing market crash

Rise of

e- ce

commer

Great Financial Crisis

COVID-19

Regional Bank Crisis

Average AFFO Per Share Growth 2009-2022: 5.4%

14.4% 14.7% 14.1% 14.4% 12.2% 12.2% 13.2% 11.9% 11.1% 11.3% 16.0% 9.1% 10.6% 5.3% 7.2% 13.1% 7.6% 22.3% 12.5% 11.4% 9.7% 10.6% 8.9% 8.4% 5.9% 13.8% 13.3% 6.8% 10.2%

Average 10-yr Treasury Yield 2009 - 2022: 2.3%

Average AFFO Per Share Growth 1996-2008: 5.2%

Delivered consistent performance regardless of interest rate environment

Higher Rate Environment

Lower Rate Environment

Source: Bloomberg.

11

(1) 11% historical average total operational return consists of 6% average annual dividend yield and 5% compound average annual AFFO per share growth rate from 1996-2024.

Attractive Risk/Reward vs. S&P 500

S&P 500 Members: Total Operational Return vs. Downside Volatility (2015-2024)(1)(2)

30%

TOTAL OPERATIONAL RETURN CAGR SINCE 2015

20%

Return CAGR(3): 8.5%

Downside Volatility: 0.0%

Realty Income has delivered attractive returns with zero years of total operational return below 0%

10%

0%

Downside Volatility

0%

40%

30%

20%

10% 0%

10-YEAR DOWNSIDE VOLATILITY (TOR < 0%) (4)

Source: Bloomberg, S&P CapIQ.

(1) Excludes companies without trading histories or public financial data dating to 01/01/2015. 12

(2) Consists of 360 companies.

(3) Total Operational Return compound annual growth rate is calculated from 2015-2024.

(4) "Downside volatility" calculated as the standard deviation of annual total shareholder returns where positive values are assigned "0" value. Calculated from 2015-2024.

History of Consistent AFFO Growth

AFFO growth, comprised of both external sources and internal cash flow growth, is an important component of Realty Income's total operational return to stockholders

13

Growth

Highly Selective Investment Strategy

From Over a Decade of Sourcing (2010-2024):

$624bn

Sourced Volume

8%

of Sourced Volume has been Acquired

$50bn

Investment Volume

Growth

14

Refined Investment Criteria Across Verticals

Realty Income's investment criteria can be applied across industries, property types and geographies

Property

Long-term lease

with embedded growth

Attractive, high-quality real estate

Net lease structure

Client

Leading operator

in respective industry

Non-discretionary, low price point and service-oriented focus

Target Investments

Growth

Location

Diverse geographies

Limited direct competition

Favorable demographic trends

Strategy in Action

Broad Growth Opportunities: Entry into Gaming

Realty Income acquired the Encore Boston Harbor Resort and Casino for $1.7 billion in December 2022

Premier client Wynn Resorts signed a 30-year triple net lease agreement with Realty Income that includes annual rent escalators

Acquisition marked Realty Income's entry into the gaming industry

Growth opportunities are not constrained by industry, property type or geography

15

Property: Encore Boston Harbor

Client: Wynn Resorts

AFFO Growth Has Accelerated with Size and Scale

Average AFFO Per Share Growth

6.3%

4.5%

1996-2012 2013-2024

Average Enterprise Value:

~$3bn

(1) "Investment Volume" represented as total acquisition purchase price for each year, denominated in USD equiv.

Growth

US Data Centers

US Retail

AFFO growth supported by new geographies and new verticals(1)

$3.9B

Annual Investment Volume

International Retail US Industrial

International Industrial

$1.2B

Annual Investment Volume

2012

2024

16

Throughout 2023 and 2024, Realty Income deployed $13.4B into investments, including

sWevheynRueniaqlutye Itnracnosmacetions that made up nearly $6.8B, illustrating:

Deep sourcing expertise across a broad scope of property types, industries, and geographies provides a competitive advantage to grow in targeted verticals

Unparalleled access to capital, underpinned by a strong balance sheet

Large, highly diversified portfolio supports our ability to execute large transactions without creating outsized exposure to any particular client, industry, or geography

US Retail

US Gaming

US Data Center

International Retail

~$1.3B

~$550M

~$1.5B

~$900M

~$770M

~$950M

~$800M

Leading UK Grocer

Decathlon

EG Group

CIM Group

7-11

Bellagio

Hyperscale Data Centers

Growth 17

High-quality clients, properties, and geographies support consistent and

dependable rent growth within existing portfolio

Portfolio Strength Offers Dependable Cash Flow

1.9%

1.4%

1.3%

1.4%

1.5%

1.6%

1.3%

0.8%

1.1%

1.2%

1.0%

2020

0.9%

0.4%

0.6%

COVID-19

0.7%

0.1%

Average

1.0%

Annual Same Store Rent Growth(1)

1.8%

0.5%

2.8%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 2024

In 2020, Total Operational Return remained positive at 5.9%

-1.7%

-1.7%

(1) 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 using the applicable exchange rate as of December 31, 2024. None of the properties in France, Germany, Ireland or Portugal met our Same Store Pool definition for the periods presented.

Growth 18

Attractive Income Potential

As "The Monthly Dividend Company®," consistent and steady dividend increases remain at the forefront of Realty Income's business model

19

Income

Dividend Growth

Strong dividend track record: 30 consecutive years of rising dividends

Annualized Dividend per Share(2)

$3.222

monthly dividends declared

consecutive quarterly increases

S&P 500 Dividend Aristocrats®

Index Member(1)

+4.3%

Compound Annual Dividend Growth Rate(2)

(1) The S&P Dividend Aristocrats (launched in May 2005) is a stock market index composed of the companies in the S&P 500 Index that have increased their dividends in each of the past 25 consecutive years.

(2) As of April 2025 dividend declaration.

$0.90

1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024

Income 20

Proven Stability Underpinned by Key Differentiators

01

Portfolio Diversification

Diversification across geography, client mix, industry, and property type helps insulate Realty Income's portfolio from idiosyncratic risks

02

Underwriting Discipline

Realty Income focuses on high quality properties in good locations, creating a portfolio of top-tier clients and leading operators

03

Strong Balance Sheet

With single-A credit ratings and a laddered debt maturity profile, Realty Income is well positioned for long-term, stable growth

21

Stability

Fortified Portfolio with Purposeful Geographic Diversity

Realty Income's portfolio of more than 15,600 properties is highly diversified across all 50 U.S. states, the U.K., and six other countries in Europe

PACIFIC NORTHWEST

Geographic diversity mitigates potential risks associated with localized consumer trends, regional economic

240

Properties

1.7%

Total ABR

MIDWEST

4,081 21.7%

Properties Total ABR

NORTHEAST

slowdowns, and geopolitical volatility

1,041

Properties

9.8%

Total ABR

UNITED KINGDOM

339

Properties

11.7%

Total ABR

MID-ATLANTIC

PACIFIC SOUTHWEST

1,188 11.6%

1,467

Properties

8.0%

Total ABR

Properties Total ABR

SOUTHWEST

SOUTHEAST

Note: Total "ABR" = Annualized Base Rent. As of December 31, 2024.

Stability

2,977

Properties

14.3%

Total ABR

4,105

Properties

18.8%

Total ABR

EUROPE

183 2.4%

Properties Total ABR 22

Industry(1)

Property Type

Portfolio is Unconstrained by Industry & Property Type

Focus on non-discretionary, low price point, service-oriented

net lease structure

Convenience

Grocery Dollar stores

Home improvement Restaurants - quick service

Drug stores Automotive service Health and fitness

Restaurants - casual dining

Gaming

10.2%

10.1%

Retail is at the foundation of the portfolio, with room for new growth verticals

Retail

79.4%

Industrial

Gaming

Other

(2)

14.5%

3.2%

2.9%

6.4%

6.0%

4.9%

4.7%

4.5%

4.3%

4.0%

3.2%

Note: Data as of December 31, 2024.

(1) Top 10 industries shown.

(2) "Other" primarily includes 16 properties classified as office with $51.2 million in annualized contractual rent, 27 properties classified as agriculture with $38.7 million in annualized contractual rent, 21 properties classified as country clubs with $24.8 million in annualized contractual rent, and three properties classified as data centers with $24.5 million in annualized contractual rent, as well as one land parcel under development.

Stability 23

Partnering with the World's Leading Companies

Realty Income's portfolio of clients are leaders in their industries, spanning categories such as grocery, drug stores, convenience, and gaming

Top 15 Clients by Percentage of Total Portfolio Annualized Contractual Rent(1)

7-Eleven

3.5%

Dollar General

3.3%

Walgreens

3.3%

Dollar Tree/Family Dollar

3.0%

EG Group Limited

2.1%

Wynn Resorts

2.0%

Life Time Fitness

1.9%

FedEx

1.9%

B&Q (Kingfisher)

1.6%

BJ's Wholesale Club

1.6%

Asda

1.5%

Sainsbury's

1.5%

CVS Pharmacy

1.2%

Tesco

1.2%

Tractor Supply

1.2%

(1) As of December 31, 2024.

Stability

A diverse portfolio helps protect against individualized client risk

15%

Top Five Clients

Remaining Clients

85%

24

Realty Income's top five clients make up 15% of Total Portfolio Annualized Contractual Rent(1)

Diversified Real Estate Portfolio Supports Cash Flow Stability

Historical Bad Debt as a Percentage of Total Revenue(1)

3.1%

0.1%

0.0%

0.2% 0.4% 0.1%

0.2%

Negative expense represents reversals of prior reserves

0.6%

0.5%

0.1%

~0.4% (including 2020's COVID impact)

~0.2% (excluding 2020's COVID impact)

Portfolio quality evident

in through-cycle performance:

-0.3%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(1) Total revenue excludes tenant reimbursements.

(2) "Other" category includes Gaming properties.

Stability

~91%

of total rent is resilient to economic downturns and/or insulated from e-commerce pressures

Other(2)

9%

Non-retail

18%

73%

Non-discretionary,

Low Price Point and/or Service-oriented Retail Clients

25

Strong Balance Sheet and Single-A Credit Ratings Afford Financial Flexibility

$4,769

CURRENT DEBT MATURITY PROFILE(1)

in millions

Term Loan Revolver Mortgages Unsecured Notes

Pro-Rata UJV Debt

$2,863

$3,063

$2,807

$2,269

$2,501

$2,395

$2,246

$1,788

$1,803

$1,453

2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035+

FAVORABLE CREDIT RATINGS

Long-Term Unsecured Debt Rating

Low Leverage / High Coverage Ratios

KEY CREDIT METRICS

Conservative Long-Term Debt Profile

A3 / Stable

5.4x

Net Debt

to Annualized Pro Forma

4.7x

Fixed Charge Coverage Ratio

99%

Unsecured

94%

Fixed Rate

A- / Stable

Adj. EBITDAre(2)

35%

Net Debt to Total Enterprise Value

6.3 years

Weighted Average Term to Maturity for Notes & Bonds

Stability

As of 3/31/2025, there were $1.3 billion of outstanding borrowings under the revolving credit facility and $413.4 million of commercial paper outstanding.

26

Net Debt/Annualized Pro Forma Adjusted EBITDAre is a ratio used by management as a measure of leverage. It 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, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents), divided by Annualized Pro Forma Adjusted EBITDAre. The Annualized Pro Forma Adjustments, which include transaction accounting adjustments in accordance with U.S GAAP, consist of adjustments to incorporate Adjusted EBITDAre from investments we acquired or stabilized during the applicable quarter and remove Adjusted EBITDAre from investments 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.

27

Why Now?

Investment Proposition

WWhhyyReRaeltyaIlntcyomIne come

Growth: 29 of 29 years of positive total operational return since public listing in 1994

Income:

S&P 500 Dividend Aristocrat with 30 consecutive years of dividend increases

Stability:

Proven and consistent results in a variety of economic environments

WWhhyyNoNwow

Attractive risk-adjusted return opportunity

Track record of performance in a variety of environments

28

Visit Realty Income's annual sustainability report to view additional details and recent accomplishments

29

Committed to Advancing Sustainability Strategy

Board of Directors plays a key role in overseeing sustainability, including embedding sustainability into our strategy, business activities, leadership, and

risk management

GOVERNANCE

As real estate partner to the world's leading companies®, Realty Income's thoughtful collaborations with clients and strategic partners allow the company to adopt sustainable practices across the value chain to contribute to a more equitable, inclusive, and environmentally conscious future

Committed to providing an engaging work environment, being a responsible global citizen, and building enduring relationships with our communities

SOCIAL

ENVIRONMENTAL

Strive to embed environmental responsibility into corporate operations and

partner with clients to reduce environmental impacts associated with

our properties

Disclaimer

Realty Income Corporation published this content on May 05, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 06, 2025 at 01:53 UTC.