Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Total revenue

$

414.6

$

365.5

$

829.0

$

719.8

Net income available to common stockholders (1)(2)

$

107.8

$

95.2

$

254.7

$

206.1

Net income per share

$

0.31

$

0.31

$

0.75

$

0.67

Funds from operations available to common stockholders (FFO) (2)(3)

$

288.3

$

251.5

$

565.4

$

497.2

FFO per share

$

0.84

$

0.81

$

1.66

$

1.62

Adjusted funds from operations available to common stockholders (AFFO) (3)

$

295.2

$

253.9

$

592.5

$

502.7

AFFO per share

$

0.86

$

0.82

$

1.74

$

1.63

(1)

The calculation to determine net income attributable to common stockholders includes provisions for impairment, gains on sales of real estate, and foreign currency gains and losses. These items can vary from quarter to quarter and can significantly impact net income and period to period comparisons.

(2)

Net income available to common stockholders and FFO in the first six months of 2020 were impacted by the following transactions recorded in the first quarter of 2020: (i) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021, and (ii) a $3.5 million executive severance charge for our former chief financial officer (CFO).

(3)

The company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust's (REIT's) operating performance. Realty Income defines FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' (Nareit's) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, and reduced by gains on property sales. AFFO further adjusts FFO for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company's ongoing operating performance. Presentation of the information regarding FFO and AFFO 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 as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments. See the reconciliations of net income available to common stockholders to FFO and AFFO on pages eight and nine of this press release. 

Month EndedApril 30, 2020

MonthEndedMay 31, 2020

Month EndedJune 30,2020

QuarterEndedJune 30, 2020

Month EndedJuly 31, 2020

Contractual rent collected(1) across total portfolio

88.4%

84.9%

86.1%

86.5%

91.5%

Contractual rent collected(1) from top 20 tenants(2)

83.0%

82.1%

82.5%

82.5%

90.7%

Contractual rent collected(1) from investment grade tenants(3)

100.0%

98.4%

98.9%

99.1%

100.0%

(1)

Contractual rent is the aggregate cash amount charged to tenants inclusive of monthly base rent receivables. U.K. rent (which is payable in pounds Sterling) was converted at the exchange rate in effect on May 1, 2020 for rents collected for the month of April 2020, on June 1, 2020 for rents collected for the month of May 2020, on July 1, 2020 for rents collected for the month of June 2020, and on July 31, 2020 for rents collected for the month of July 2020.

(2)

We define top 20 tenants as our 20 largest tenants based on percentage of total portfolio annualized contractual rental revenue as of the last day of such period.

(3)

We define investment grade tenants as tenants with a credit rating, and tenants that are subsidiaries or affiliates of companies with a credit rating, of Baa3/BBB- or higher from one of the three major rating agencies (Moody's/S&P/Fitch).

Three months ended June 30, 2020

Properties available for lease at March 31, 2020

97

Lease expirations

81

Re-leases to same tenant (1)

(60)

Re-leases to new tenant (1)(2)

(5)

Vacant dispositions

(12)

Properties available for lease at June 30, 2020

101

(1)

The annual new rent on these re-leases was $15.334 million, as compared to the previous annual rent of $15.128 million on the same properties, representing a rent recapture rate of 101.4% on the properties re-leased during the quarter ended June 30, 2020.

(2)

Re-leased two properties to new tenants without a period of vacancy, and three properties to new tenants after a period of vacancy.

Six months ended June 30, 2020

Properties available for lease at December 31, 2019

94

Lease expirations

190

Re-leases to same tenant (1)

(150)

Re-leases to new tenant (1)(2)

(8)

Vacant dispositions

(25)

Properties available for lease at June 30, 2020

101

(1)

The annual new rent on these re-leases was $33.152 million, as compared to the previous annual rent of $33.124 million on the same properties, representing a rent recapture rate of 100.1% on the properties re-leased during the first six months of 2020.

(2)

Re-leased three properties to new tenants without a period of vacancy, and five properties to new tenants after a period of vacancy.

Number ofProperties

LeasableSquare Feet(in millions)

Investment($ in millions)

WeightedAverageLease Term(Years)

Initial AverageCash LeaseYield

Three months ended June 30, 2020

Acquisitions - U.S. (in 15 states)

26

0.4

$

94.3

12.9

6.4

%

Acquisitions - U.K. (1)

2

0.1

58.2

9.9

6.1

%

Total Acquisitions

28

0.5

152.5

11.8

6.3

%

Properties under Development - U.S.

4

0.1

1.7

10.4

10.3

%

Total (2)

32

0.6

$

154.2

11.8

6.3

%

Six months ended June 30, 2020

Acquisitions - U.S. (in 25 states)

80

1.8

$

412.6

14.4

6.5

%

Acquisitions - U.K. (1)

6

0.5

223.7

11.8

5.3

%

Total Acquisitions

86

2.3

636.3

13.6

6.1

%

Properties under Development - U.S.

8

0.2

3.9

10.5

8.8

%

Total (3)

94

2.5

$

640.2

13.6

6.1

%

(1)

Represents investments of £46.8 million Sterling during the quarter ended June 30, 2020 and £180.1 million during the six months ended June 30, 2020 converted at the applicable exchange rate on the date of acquisition.

(2)

The tenants occupying the new properties operate in 8 industries, and are 100% retail, based on rental revenue. Approximately 41% of the rental revenue generated from acquisitions during the second quarter of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies.

(3)

The tenants occupying the new properties operate in 17 industries, and are 96.5% retail and 3.5% industrial, based on rental revenue. Approximately 37% of the rental revenue generated from acquisitions during the first six months of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies.

Three Months Ended June 30,

Six Months Ended June 30,

Decrease

2020

2019

2020

2019

Three months

Six months

Rental Revenue

$

315.7

$

317.0

$

635.6

$

636.7

(0.4)

%

(0.2)

%

Three Months Ended

June 30, 2020

Six Months Ended

June 30, 2020

Properties sold

12

29

Net sales proceeds

$

7.4

$

133.6

Gain on sales of real estate

$

1.3

$

39.8

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts) (unaudited)

Three Months

Three Months

Six Months

Six Months

Ended 6/30/20

Ended 6/30/19

Ended 6/30/20

Ended 6/30/19

REVENUE

Rental (including reimbursable) (1)

$

410,201

$

364,252

$

822,358

$

718,289

Other (2)

4,435

1,198

6,619

1,526

Total revenue

414,636

365,450

828,977

719,815

EXPENSES

Depreciation and amortization

168,328

150,426

332,913

287,943

Interest

77,841

72,488

153,766

142,508

Property (including reimbursable)

26,452

21,342

52,058

42,978

General and administrative

19,063

18,585

40,027

33,693

Income taxes

2,838

1,155

5,601

2,600

Provisions for impairment

13,869

13,061

18,347

17,733

Total expenses

308,391

277,057

602,712

527,455

Gain on sales of real estate

1,323

6,891

39,829

14,154

Foreign currency and derivative gains (losses), net

502

136

(1,062)

136

Loss on extinguishment of debt

—

—

(9,819)

—

Net income

108,070

95,420

255,213

206,650

Net income attributable to noncontrolling interests

(246)

(226)

(562)

(514)

Net income available to common stockholders

$

107,824

$

95,194

$

254,651

$

206,136

Funds from operations available to common stockholders (FFO)

$

288,338

$

251,489

$

565,441

$

497,164

Adjusted funds from operations available to common stockholders (AFFO)

$

295,241

$

253,935

$

592,463

$

502,669

Per share information for common stockholders:

Net income:

Basic and Diluted

$

0.31

$

0.31

$

0.75

$

0.67

FFO:

Basic and Diluted

$

0.84

$

0.81

$

1.66

$

1.62

AFFO:

Basic

$

0.86

$

0.82

$

1.74

$

1.64

Diluted

$

0.86

$

0.82

$

1.74

$

1.63

Cash dividends paid per common share

$

0.699

$

0.678

$

1.392

$

1.350

(1)

We recorded reserves as a reduction of rental revenue of $8.5 million (of which $2.1 million was related to straight-line rent receivables) for the second quarter of 2020, $417,000 for the second quarter of 2019, $10.2 million (of which $2.8 million was related to straight-line rent receivables) for the six months ended June 30, 2020, and $2.4 million (of which $1.4 million was related to straight-line receivables) for the six months ended June 30, 2019.

(2)

The three and six months ended June 30, 2020 includes $1.4 million and $1.5 million, respectively, of interest income from short-term investments and money market funds. The three and six months ended June 30, 2019 includes $166,000 and $296,000, respectively, of interest income from money market funds. There were no short-term investments in the three or six months ended June 30, 2019.

FUNDS FROM OPERATIONS (FFO)

(dollars in thousands, except per share amounts)

We define FFO, a non-GAAP measure, consistent with Nareit's definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on real estate sales.

Three Months

Three Months

Six Months

Six Months

Ended 6/30/20

Ended 6/30/19

Ended 6/30/20

Ended 6/30/19

Net income available to common stockholders

$

107,824

$

95,194

$

254,651

$

206,136

Depreciation and amortization

168,328

150,426

332,913

287,943

Depreciation of furniture, fixtures and equipment

(152)

(147)

(278)

(302)

Provisions for impairment

13,869

13,061

18,347

17,733

Gain on sales of real estate

(1,323)

(6,891)

(39,829)

(14,154)

FFO adjustments allocable to noncontrolling interests

(208)

(154)

(363)

(192)

FFO available to common stockholders

$

288,338

$

251,489

$

565,441

$

497,164

FFO allocable to dilutive noncontrolling interests

348

362

717

670

Diluted FFO

$

288,686

$

251,851

$

566,158

$

497,834

FFO per common share, basic and diluted

$

0.84

$

0.81

$

1.66

$

1.62

Distributions paid to common stockholders

$

240,470

$

208,864

$

474,294

$

413,410

FFO available to common stockholders in excess of distributions paid to common stockholders

$

47,868

$

42,625

$

91,147

$

83,754

Weighted average number of common shares used for FFO:

Basic

343,515,406

311,032,972

340,061,487

307,293,949

Diluted

344,148,378

311,785,281

340,744,384

308,000,806

ADJUSTED FUNDS FROM OPERATIONS (AFFO)

(dollars in thousands, except per share amounts) 

We define AFFO as FFO adjusted for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company's 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). 

Three Months

Three Months

Six Months

Six Months

Ended 6/30/20

Ended 6/30/19

Ended 6/30/20

Ended 6/30/19

Net income available to common stockholders (1)

$

107,824

$

95,194

$

254,651

$

206,136

Cumulative adjustments to calculate FFO (2)

180,514

156,295

310,790

291,028

FFO available to common stockholders

288,338

251,489

565,441

497,164

 Executive severance charge (3)

—

—

3,463

—

 Loss on extinguishment of debt

—

—

9,819

—

Amortization of share-based compensation

4,882

4,527

8,624

7,291

Amortization of deferred financing costs (4)

1,476

1,133

2,836

2,173

Amortization of net mortgage premiums

(356)

(354)

(710)

(708)

Loss on interest rate swaps

1,306

686

1,992

1,364

Straight-line payments from cross-currency swaps (5)

623

799

1,346

799

Leasing costs and commissions

(973)

(707)

(1,111)

(1,030)

Recurring capital expenditures

(21)

(116)

(21)

(172)

Straight-line rent

(6,242)

(7,230)

(14,024)

(12,092)

Amortization of above and below-market leases, net

6,087

3,627

12,517

7,741

Other adjustments (6)

121

81

2,291

139

AFFO available to common stockholders

$

295,241

$

253,935

$

592,463

$

502,669

AFFO allocable to dilutive noncontrolling interests

356

368

732

—

Diluted AFFO

$

295,597

$

254,303

$

593,195

$

502,669

AFFO per common share:

Basic

$

0.86

$

0.82

$

1.74

$

1.64

Diluted

$

0.86

$

0.82

$

1.74

$

1.63

Distributions paid to common stockholders

$

240,470

$

208,864

$

474,294

$

413,410

AFFO available to common stockholders in excess of distributions paid to common stockholders

$

54,771

$

45,071

$

118,169

$

89,259

Weighted average number of common shares used for AFFO:

Basic

343,515,406

311,032,972

340,061,487

307,293,949

Diluted

344,148,378

311,785,281

340,744,384

307,580,127

(1)

The three and six months ended June 30, 2020 includes $14.1 million of rent deferred as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the FASB and $46.1 million of uncollected rent from the second quarter for which we have not granted a lease concession. As of June 30, 2020, collection of the $60.2 million of unpaid rent is probable. Deferrals accounted for as modifications totaling $161,000 for the three and six months ended June 30, 2020 have not been added back to AFFO.

(2)

See FFO calculation on page eight for reconciling items.

(3)

The executive severance charge represents the incremental costs incurred upon our former CFO's departure in March 2020, consisting of $1.6 million of cash, $1.8 million of share-based compensation expense and $58,000 of professional fees.

(4)

Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and issuance of our term loans. The deferred financing costs are being amortized over the lives of the respective notes payable, mortgages and term loans. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

(5)

Straight-line payments from cross-currency swaps represent quarterly payments in U.S. dollars received by us from counterparties in exchange for associated foreign currency payments. These USD payments are fixed and determinable for the duration of the associated hedging transaction.

(6)

Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, and foreign currency gains and losses as a result of intercompany debt and remeasurement transactions.

HISTORICAL FFO AND AFFO

(dollars in thousands, except per share amounts)

For the three months ended June 30,

2020

2019

2018

2017

2016

Net income available to common stockholders

$

107,824

$

95,194

$

96,380

$

81,136

$

69,045

Depreciation and amortization, net of furniture, fixtures and equipment

168,176

150,279

133,831

122,939

110,147

Provisions for impairment

13,869

13,061

3,951

2,274

6,269

Gain on sales of real estate

(1,323)

(6,891)

(7,787)

(2,839)

(8,658)

FFO adjustments allocable to noncontrolling interests

(208)

(154)

(293)

(238)

(155)

FFO

$

288,338

$

251,489

$

226,082

$

203,272

$

176,648

FFO per diluted share

$

0.84

$

0.81

$

0.79

$

0.75

$

0.70

AFFO

$

295,241

$

253,935

$

226,988

$

208,388

$

180,876

AFFO per diluted share

$

0.86

$

0.82

$

0.80

$

0.76

$

0.71

Cash dividends paid per share

$

0.699

$

0.678

$

0.659

$

0.633

$

0.597

Weighted average diluted shares outstanding - FFO

344,148,378

311,785,281

285,372,256

273,187,669

254,254,243

Weighted average diluted shares outstanding - AFFO

344,148,378

311,785,281

285,372,256

273,187,669

253,937,221

For the six months ended June 30,

2020

2019

2018

2017

2016

Net income available to common stockholders

$

254,651

$

206,136

$

179,543

$

152,722

$

132,518

Depreciation and amortization, net of furniture, fixtures and equipment

332,635

287,641

264,775

243,879

217,887

Provisions for impairment

18,347

17,733

18,172

7,706

8,192

Gain on sales of real estate

(39,829)

(14,154)

(11,005)

(13,371)

(10,948)

FFO adjustments allocable to noncontrolling interests

(363)

(192)

(521)

(453)

(373)

FFO

$

565,441

$

497,164

$

450,964

$

390,483

$

347,276

FFO per diluted share

$

1.66

$

1.62

$

1.58

$

1.46

$

1.38

AFFO

$

592,463

$

502,669

$

451,549

$

409,723

$

356,793

AFFO per diluted share

$

1.74

$

1.63

$

1.59

$

1.53

$

1.42

Cash dividends paid per share

$

1.392

$

1.350

$

1.309

$

1.257

$

1.185

Weighted average diluted shares outstanding - FFO

340,744,384

308,000,806

284,924,336

268,569,855

252,073,685

Weighted average diluted shares outstanding - AFFO

340,744,384

307,580,127

284,924,336

268,658,037

252,378,957

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data) (unaudited)

June 30, 2020

December 31, 2019

ASSETS

Real estate held for investment, at cost:

Land

$

5,772,734

$

5,684,034

Buildings and improvements

14,096,997

13,833,882

Total real estate held for investment, at cost

19,869,731

19,517,916

Less accumulated depreciation and amortization

(3,367,420)

(3,117,919)

Real estate held for investment, net

16,502,311

16,399,997

Real estate and lease intangibles held for sale, net

40,551

96,775

Cash and cash equivalents

35,345

54,011

Short-term investment

300,000

—

Accounts receivable

255,609

181,969

Lease intangible assets, net

1,508,177

1,493,383

Other assets, net

460,554

328,661

Total assets

$

19,102,547

$

18,554,796

LIABILITIES AND EQUITY

Distributions payable

$

81,384

$

76,728

Accounts payable and accrued expenses

201,176

177,039

Lease intangible liabilities, net

322,744

333,103

Other liabilities

248,547

262,221

Line of credit payable

628,551

704,335

Term loans, net

249,258

499,044

Mortgages payable, net

394,816

410,119

Notes payable, net

6,602,152

6,288,049

Total liabilities

8,728,628

8,750,638

Commitments and contingencies

Stockholders' equity:

Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 345,023,421 and 333,619,106 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

13,704,121

12,873,849

Distributions in excess of net income

(3,306,588)

(3,082,291)

Accumulated other comprehensive loss

(53,084)

(17,102)

Total stockholders' equity

10,344,449

9,774,456

Noncontrolling interests

29,470

29,702

Total equity

10,373,919

9,804,158

Total liabilities and equity

$

19,102,547

$

18,554,796

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%

Q2 2020

4.7%

(17.3%)

4.0%

(13.3%)

2.4%

(8.4%)

1.9%

(3.1%)

0.9%

12.1%

Compound Average

Annual Total Return (5)

15.3%

10.0%

10.1%

9.7%

10.5%

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 June 30, 2020, 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.