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Realty Income (O) Misses Q3 FFO Estimates, Raises 2021 View
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Realty Income Corporation’s (O - Free Report) third-quarter 2021 adjusted funds from operations (AFFO) per share of 89 cents missed the Zacks Consensus Estimate of 92 cents. However, the reported figure compares favorably with the prior-year quarter’s 82 cents.
Results display better-than-expected improvement in revenues. The retail REIT also raised its 2021 adjusted FFO per share guidance and increased the 2021 acquisition volume projection to $5 billion.
Total revenues for the reported quarter came in at $491.9 million, exceeding the Zacks Consensus Estimate of $479.1 million. The top-line figure also climbed 21.6% year on year.
Realty Income also apprised of its rental receipts through Sep 30, and noted that it has collected 99.5% of the contractual rent due for the third quarter across the total portfolio. Further, the company has collected 99.8% of the contractual rent due for the third quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants. It has collected 99.6% of the contractual rent due for the third quarter from the theater clients, and 95% from its health and fitness clients.
Quarter in Detail
During third-quarter 2021, the same-store rental revenues on 6,099 properties under lease climbed 6% to $380.3 million from the prior-year period. The portfolio occupancy of 98.8%, as of Sep 30, 2021, expanded 30 basis points (bps) sequentially and 20 bps, year over year. The company generated a rent recapture rate of 107.2% on re-leasing activity.
During the reported quarter, Realty Income invested $1.61 billion in 308 properties and properties under development or expansion. This includes $532.5 million in Europe.
Around 38% of the rental revenues reaped from acquisitions during the September-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 27 properties, generating net proceeds of $31.9 million, with a gain on sales of $12.1 million, during the July-September period.
Notably, the theater industry, which represented 5.2% of annualized contractual rental revenues for Realty Income as of Sep 30, 2021, has been subject to disruptions due to the coronavirus pandemic, raising concerns about the collectability of rent. However, as of Sep 30, 2021, the receivables outstanding for its 79 theater properties aggregated $72.8 million, inclusive of $9.8 million of straight-line rent receivables, and net of $39 million of reserves, inclusive of $2 million of straight-line rent reserves.
Balance Sheet
Realty Income exited third-quarter 2021 with cash and cash equivalents of $517 million, down from the $824.5 million witnessed at the end of 2020.
As of Sep 30, 2021, the balance of borrowings outstanding under its revolving credit facility was nil. In addition, it had a cash balance of $517 million. Also, as of that date, the company had $405 million in commercial paper borrowings.
The company ended the third quarter with a net debt to EBITDAre ratio of 5.0x.
During the third quarter, the company raised $1.63 billion from the sale of common stock, at a weighted average price of $67.93 per share, mainly through its At-The-Market-Program.
Outlook
Management projects the 2021 adjusted FFO per share at $3.55 to $3.60, suggesting an increase of 5.5% annual growth based on the mid-point. The adjusted FFO per share includes increased acquisition guidance of more than $5 billion. The Zacks Consensus Estimate for the same is currently pinned at $3.58.
The company also projects the 2022 adjusted FFO per share at $3.84 to $3.97, indicating 9.2% annual growth based on the mid-point.
Prologis, Inc. (PLD - Free Report) came up with third-quarter core FFO per share of $1.04, surpassing the Zacks Consensus Estimate of $1.03. Results reflected solid increases in market rents and valuations amid unprecedented low vacancies in its markets.
Boston Properties Inc.’s (BXP - Free Report) third-quarter 2021 FFO per share of $1.73 beat the Zacks Consensus Estimate of $1.70. The quarterly figure also exceeded the mid-point of the company’s third-quarter guidance by 4 cents, highlighting better-than-projected results from the in-service portfolio and improved parking revenues.
Highwoods Properties, Inc.’s (HIW - Free Report) FFO per share of 96 cents topped the Zacks Consensus Estimate of 93 cents for the September-end quarter. Rental and other revenues of $195.5 million outpaced the consensus mark of $192.2 million.
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) Misses Q3 FFO Estimates, Raises 2021 View
Realty Income Corporation’s (O - Free Report) third-quarter 2021 adjusted funds from operations (AFFO) per share of 89 cents missed the Zacks Consensus Estimate of 92 cents. However, the reported figure compares favorably with the prior-year quarter’s 82 cents.
Results display better-than-expected improvement in revenues. The retail REIT also raised its 2021 adjusted FFO per share guidance and increased the 2021 acquisition volume projection to $5 billion.
Total revenues for the reported quarter came in at $491.9 million, exceeding the Zacks Consensus Estimate of $479.1 million. The top-line figure also climbed 21.6% year on year.
Realty Income also apprised of its rental receipts through Sep 30, and noted that it has collected 99.5% of the contractual rent due for the third quarter across the total portfolio. Further, the company has collected 99.8% of the contractual rent due for the third quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants. It has collected 99.6% of the contractual rent due for the third quarter from the theater clients, and 95% from its health and fitness clients.
Quarter in Detail
During third-quarter 2021, the same-store rental revenues on 6,099 properties under lease climbed 6% to $380.3 million from the prior-year period. The portfolio occupancy of 98.8%, as of Sep 30, 2021, expanded 30 basis points (bps) sequentially and 20 bps, year over year. The company generated a rent recapture rate of 107.2% on re-leasing activity.
During the reported quarter, Realty Income invested $1.61 billion in 308 properties and properties under development or expansion. This includes $532.5 million in Europe.
Around 38% of the rental revenues reaped from acquisitions during the September-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 27 properties, generating net proceeds of $31.9 million, with a gain on sales of $12.1 million, during the July-September period.
Notably, the theater industry, which represented 5.2% of annualized contractual rental revenues for Realty Income as of Sep 30, 2021, has been subject to disruptions due to the coronavirus pandemic, raising concerns about the collectability of rent. However, as of Sep 30, 2021, the receivables outstanding for its 79 theater properties aggregated $72.8 million, inclusive of $9.8 million of straight-line rent receivables, and net of $39 million of reserves, inclusive of $2 million of straight-line rent reserves.
Balance Sheet
Realty Income exited third-quarter 2021 with cash and cash equivalents of $517 million, down from the $824.5 million witnessed at the end of 2020.
As of Sep 30, 2021, the balance of borrowings outstanding under its revolving credit facility was nil. In addition, it had a cash balance of $517 million. Also, as of that date, the company had $405 million in commercial paper borrowings.
The company ended the third quarter with a net debt to EBITDAre ratio of 5.0x.
During the third quarter, the company raised $1.63 billion from the sale of common stock, at a weighted average price of $67.93 per share, mainly through its At-The-Market-Program.
Outlook
Management projects the 2021 adjusted FFO per share at $3.55 to $3.60, suggesting an increase of 5.5% annual growth based on the mid-point. The adjusted FFO per share includes increased acquisition guidance of more than $5 billion. The Zacks Consensus Estimate for the same is currently pinned at $3.58.
The company also projects the 2022 adjusted FFO per share at $3.84 to $3.97, indicating 9.2% annual growth based on the mid-point.
Realty Income currently carries a Zacks Rank #2 (Buy). 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 Other REITs
Prologis, Inc. (PLD - Free Report) came up with third-quarter core FFO per share of $1.04, surpassing the Zacks Consensus Estimate of $1.03. Results reflected solid increases in market rents and valuations amid unprecedented low vacancies in its markets.
Boston Properties Inc.’s (BXP - Free Report) third-quarter 2021 FFO per share of $1.73 beat the Zacks Consensus Estimate of $1.70. The quarterly figure also exceeded the mid-point of the company’s third-quarter guidance by 4 cents, highlighting better-than-projected results from the in-service portfolio and improved parking revenues.
Highwoods Properties, Inc.’s (HIW - Free Report) FFO per share of 96 cents topped the Zacks Consensus Estimate of 93 cents for the September-end quarter. Rental and other revenues of $195.5 million outpaced the consensus mark of $192.2 million.
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.