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Realty Income (O) Q1 FFO and Revenues Beat Estimates
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Realty Income Corporation’s (O - Free Report) first-quarter 2021 adjusted funds from operations (AFFO) per share of 86 cents surpassed the Zacks Consensus Estimate of 85 cents. However, the reported figure is down 2.3% from the prior-year quarter’s 88 cents. The better-than-expected performance reflects improved revenues in the quarter.
Total revenues for the reported quarter came in at $442.8 million, exceeding the Zacks Consensus Estimate of $432.6 million. The top-line figure also improved 6.9% year on year.
Realty Income also apprised of its rental receipts through Mar 31, 2021, and noted that it has collected 94.1% of contractual rent due for the first quarter across its total portfolio. Further, the company has collected 89.8% of contractual rent due for the first quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants.
Further, the company has collected 14% of contractual rent due for the first quarter from the theater clients, and 91.8% of contractual rent from its health and fitness clients.
Notably, the theater industry, which represented 5.6% of annualized contractual rental revenues for Realty Income as of Mar 31, 2021, has been subject to disruption due to the coronavirus pandemic, raising concerns about the collectability of rent.
As of Mar 31, 2021, and Dec 31, 2020, the company was fully reserved for 37 theater properties. Moreover, as of Dec 31, 2020, the receivables outstanding for its 79 theater properties aggregated $66.7 million, net of $33.2 million of reserves, and includes $8.5 million of straight-line rent receivables, net of $1.9 million of reserves.
Quarter in Detail
During first-quarter 2021, same-store rental revenues on 6,127 properties under lease slipped 0.8% to $372.9 million from the prior-year quarter. Same-store rental revenues were negatively impacted by reserves recorded in the reported quarter.
Portfolio occupancy of 98%, as of Mar 31, 2021, expanded 10 basis points (bps) sequentially but shrunk 50 bps year over year. The company generated a rent recapture rate of 103.5% on re-leasing activity.
During the reported quarter, Realty Income invested $1.03 billion in 110 properties and properties under development or expansion. This also includes $403 million in 12 properties in the U.K.
Around 39% of the rental revenues reaped from acquisitions during the March-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 27 properties, generating net proceeds of $34.7 million, with a gain on sales of $8.4 million, during the January-March period.
Balance Sheet
Realty Income exited first-quarter 2021 with cash and cash equivalents of $183.98 million, down from the $824.5 million witnessed at the end of 2020. In addition, the retail REIT has a $3-billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend) as well as a $1-billion accordion feature that is subject to obtaining lender commitments. Markedly, there were no borrowings on its revolving credit facility as of Mar 31, 2021. Also, as of that date, the company had $675 million in commercial paper borrowings.
The company ended the first quarter with a net debt to annualized adjusted EBITDAre ratio of 5.3x and a fixed charge coverage ratio of 5.8x.
During the first quarter, the company raised $692 million from the sale of common stock, at a weighted average price of $57.06 per share, primarily through the underwritten public offering in January 2021.
Outlook
Management also noted about remaining “on pace” to meet 2021 investment guidance of more than $3.25 billion.
Management projects the 2021 adjusted FFO per share at $3.44-$3.49, suggesting an increase of 1.5-2.9% over 2020. The guidance does not give effect to the announced merger between Realty Income and VEREIT, Inc. The Zacks Consensus Estimate for the same is currently pinned at $3.47.
Kimco Realty Corp.’s (KIM - Free Report) first-quarter NAREIT FFO came in at 33 cents per share, surpassing the Zacks Consensus Estimate of 30 cents. Results highlighted better-than-anticipated revenue numbers. It generated revenues of $282.3 million, exceeding the consensus mark of $263 million. Moreover, the retail REIT has raised the outlook for 2021. With a well-located and largely grocery-anchored portfolio that offers essential goods and services, the retail REIT witnessed decent leasing activity during the first quarter. Rent-collection figures were also healthy. The company collected 94% of total pro-rata base rents billed during the first quarter.
We now look forward to the earnings releases of other retail REITs, including Federal Realty Investment Trust (FRT - Free Report) and Regency Centers Corporation (REG - Free Report) , which are slated to report this week.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Realty Income (O) Q1 FFO and Revenues Beat Estimates
Realty Income Corporation’s (O - Free Report) first-quarter 2021 adjusted funds from operations (AFFO) per share of 86 cents surpassed the Zacks Consensus Estimate of 85 cents. However, the reported figure is down 2.3% from the prior-year quarter’s 88 cents. The better-than-expected performance reflects improved revenues in the quarter.
Total revenues for the reported quarter came in at $442.8 million, exceeding the Zacks Consensus Estimate of $432.6 million. The top-line figure also improved 6.9% year on year.
Realty Income also apprised of its rental receipts through Mar 31, 2021, and noted that it has collected 94.1% of contractual rent due for the first quarter across its total portfolio. Further, the company has collected 89.8% of contractual rent due for the first quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants.
Further, the company has collected 14% of contractual rent due for the first quarter from the theater clients, and 91.8% of contractual rent from its health and fitness clients.
Notably, the theater industry, which represented 5.6% of annualized contractual rental revenues for Realty Income as of Mar 31, 2021, has been subject to disruption due to the coronavirus pandemic, raising concerns about the collectability of rent.
As of Mar 31, 2021, and Dec 31, 2020, the company was fully reserved for 37 theater properties. Moreover, as of Dec 31, 2020, the receivables outstanding for its 79 theater properties aggregated $66.7 million, net of $33.2 million of reserves, and includes $8.5 million of straight-line rent receivables, net of $1.9 million of reserves.
Quarter in Detail
During first-quarter 2021, same-store rental revenues on 6,127 properties under lease slipped 0.8% to $372.9 million from the prior-year quarter. Same-store rental revenues were negatively impacted by reserves recorded in the reported quarter.
Portfolio occupancy of 98%, as of Mar 31, 2021, expanded 10 basis points (bps) sequentially but shrunk 50 bps year over year. The company generated a rent recapture rate of 103.5% on re-leasing activity.
During the reported quarter, Realty Income invested $1.03 billion in 110 properties and properties under development or expansion. This also includes $403 million in 12 properties in the U.K.
Around 39% of the rental revenues reaped from acquisitions during the March-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 27 properties, generating net proceeds of $34.7 million, with a gain on sales of $8.4 million, during the January-March period.
Balance Sheet
Realty Income exited first-quarter 2021 with cash and cash equivalents of $183.98 million, down from the $824.5 million witnessed at the end of 2020. In addition, the retail REIT has a $3-billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend) as well as a $1-billion accordion feature that is subject to obtaining lender commitments. Markedly, there were no borrowings on its revolving credit facility as of Mar 31, 2021. Also, as of that date, the company had $675 million in commercial paper borrowings.
The company ended the first quarter with a net debt to annualized adjusted EBITDAre ratio of 5.3x and a fixed charge coverage ratio of 5.8x.
During the first quarter, the company raised $692 million from the sale of common stock, at a weighted average price of $57.06 per share, primarily through the underwritten public offering in January 2021.
Outlook
Management also noted about remaining “on pace” to meet 2021 investment guidance of more than $3.25 billion.
Management projects the 2021 adjusted FFO per share at $3.44-$3.49, suggesting an increase of 1.5-2.9% over 2020. The guidance does not give effect to the announced merger between Realty Income and VEREIT, Inc. The Zacks Consensus Estimate for the same is currently pinned at $3.47.
Realty Income currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Realty Income Corporation Price, Consensus and EPS Surprise
Realty Income Corporation price-consensus-eps-surprise-chart | Realty Income Corporation Quote
Performance of Another Retail REIT
Kimco Realty Corp.’s (KIM - Free Report) first-quarter NAREIT FFO came in at 33 cents per share, surpassing the Zacks Consensus Estimate of 30 cents. Results highlighted better-than-anticipated revenue numbers. It generated revenues of $282.3 million, exceeding the consensus mark of $263 million. Moreover, the retail REIT has raised the outlook for 2021. With a well-located and largely grocery-anchored portfolio that offers essential goods and services, the retail REIT witnessed decent leasing activity during the first quarter. Rent-collection figures were also healthy. The company collected 94% of total pro-rata base rents billed during the first quarter.
We now look forward to the earnings releases of other retail REITs, including Federal Realty Investment Trust (FRT - Free Report) and Regency Centers Corporation (REG - Free Report) , which are slated to report this week.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>