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Realty Income (O) Collects 93.6% of November Contractual Rents
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Realty Income Corporation (O - Free Report) reported an increase in contractual rent collections across its portfolio for November, relative to the October and September receipts.
As of Nov 30, contractual rent receipts across Realty Income’s total portfolio improved to 93.6% for November from October’s 93.3% and September’s 93.2%. Rent collections from its investment-grade rated tenants, which account for 49% of the annualized rental revenues, were 99.9% for November, same as October’s, while it was 100% for September.
Further, the company’s top 20 tenants, who represent 52.6% of the annualized rental revenues, paid 90.2% of the contractual rent due for November, up from the 89.8% of the contractual rent due for October, but down from the 91.2% due for September.
Notably, the company’s top four industries (reflecting around 37.4% of the annualized rent in November), convenience stores (accounting for 12.2% rental revenues), grocery stores (9.2%), drug stores (8.3%) and dollar stores (7.7%) sell essential goods and continue to thrive even amid the pandemic. The company received 100% of rent due from tenants in these industries for November.
However, businesses of physical stores widely depend on customer traffic but consumers are by and large avoiding crowded public spaces due to the pandemic and increasingly opting for online purchases. This, in turn, is thwarting tenants’ liquidity, making it difficult to meet their rental obligations.
As a result, retail REITs, which have already been battling against store closures and bankruptcy issues, are being affected. In fact, apart from Realty Income, these are hurting other retail REITs including Macerich (MAC - Free Report) , Simon Property (SPG - Free Report) and Kimco (KIM - Free Report) among others.
For Realty Income too, the company’s tenants from theater (represented 5.7% of total portfolio annualized base rent as of Nov 30, 2020) as well as health and fitness (7%) categories have been adversely impacted by the government-mandated closures and the social-distancing wave. As of Dec 2, 2020, percentage of annualized rent for closed locations comprised 60% for theaters tenants, and 18% for health and fitness tenants. As a result, only 12% of theater rent was collected for November. Rent collections in the health and fitness category were 86% for the month.
Management noted that with tenants accounting for the majority of the unpaid rent, deferral agreements have been either already implemented or relative discussions are currently underway.
Remarkably, the theater industry has been subject to disruptions due to the coronavirus pandemic, raising concerns about collectability of rent. Hence, during the third-quarter earnings release, the company reserved for 100% of the outstanding receivables for 37 theater properties, accounting prospectively for these leases on a cash-accounting basis. The aggregate reserves totaled $17.2 million and the establishments of reserves led to 4 cents per share dilution to the company’s adjusted FFO per share in the quarter.
Nevertheless, with its top industries selling essential goods and a solid balance-sheet position, Realty Income seems well poised to sail through the current turbulence. The company also raised the 2020 acquisition guidance to $2 billion on its healthy financial position.
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Realty Income (O) Collects 93.6% of November Contractual Rents
Realty Income Corporation (O - Free Report) reported an increase in contractual rent collections across its portfolio for November, relative to the October and September receipts.
As of Nov 30, contractual rent receipts across Realty Income’s total portfolio improved to 93.6% for November from October’s 93.3% and September’s 93.2%. Rent collections from its investment-grade rated tenants, which account for 49% of the annualized rental revenues, were 99.9% for November, same as October’s, while it was 100% for September.
Further, the company’s top 20 tenants, who represent 52.6% of the annualized rental revenues, paid 90.2% of the contractual rent due for November, up from the 89.8% of the contractual rent due for October, but down from the 91.2% due for September.
Notably, the company’s top four industries (reflecting around 37.4% of the annualized rent in November), convenience stores (accounting for 12.2% rental revenues), grocery stores (9.2%), drug stores (8.3%) and dollar stores (7.7%) sell essential goods and continue to thrive even amid the pandemic. The company received 100% of rent due from tenants in these industries for November.
However, businesses of physical stores widely depend on customer traffic but consumers are by and large avoiding crowded public spaces due to the pandemic and increasingly opting for online purchases. This, in turn, is thwarting tenants’ liquidity, making it difficult to meet their rental obligations.
As a result, retail REITs, which have already been battling against store closures and bankruptcy issues, are being affected. In fact, apart from Realty Income, these are hurting other retail REITs including Macerich (MAC - Free Report) , Simon Property (SPG - Free Report) and Kimco (KIM - Free Report) among others.
For Realty Income too, the company’s tenants from theater (represented 5.7% of total portfolio annualized base rent as of Nov 30, 2020) as well as health and fitness (7%) categories have been adversely impacted by the government-mandated closures and the social-distancing wave. As of Dec 2, 2020, percentage of annualized rent for closed locations comprised 60% for theaters tenants, and 18% for health and fitness tenants. As a result, only 12% of theater rent was collected for November. Rent collections in the health and fitness category were 86% for the month.
Management noted that with tenants accounting for the majority of the unpaid rent, deferral agreements have been either already implemented or relative discussions are currently underway.
Remarkably, the theater industry has been subject to disruptions due to the coronavirus pandemic, raising concerns about collectability of rent. Hence, during the third-quarter earnings release, the company reserved for 100% of the outstanding receivables for 37 theater properties, accounting prospectively for these leases on a cash-accounting basis. The aggregate reserves totaled $17.2 million and the establishments of reserves led to 4 cents per share dilution to the company’s adjusted FFO per share in the quarter.
Nevertheless, with its top industries selling essential goods and a solid balance-sheet position, Realty Income seems well poised to sail through the current turbulence. The company also raised the 2020 acquisition guidance to $2 billion on its healthy financial position.
Shares of this Zacks Rank #3 (Hold) company have depreciated 2% over the past six months as against the industry’s rally of 5.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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