Exhibit 99.1
CONTACT:
Tere Miller
Vice President, Corporate Communications
760-741-2111 ext. 177
REALTY INCOME ANNOUNCES RECORD
SECOND QUARTER AND MID-YEAR OPERATING RESULTS
ESCONDIDO, CALIFORNIA, July 27, 2005...Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O) today announced operating results for the second quarter and six months ended June 30, 2005.
COMPANY HIGHLIGHTS:
(For the quarter ended June 30, 2005)
• Revenue increased 8.4% to $47.5 million
• Funds from Operations (FFO) available to common stockholders increased 5.8% to $30.9 million
• FFO per diluted common share increased 5.4% to $0.39
• Net income available to common stockholders per diluted common share was $0.28 per share
• Portfolio occupancy remained strong at 98.2%
• Same store rents increased 1.0% to $39.62 million
• Invested $74.4 million in 38 additional properties
• Arranged a new $300 million acquisition credit facility
• Increased the monthly dividend amount for the 31st consecutive quarter to an annual rate of $1.335 per common share
Financial Results
Revenue Increases
Realty Income’s revenue for the second quarter ended June 30, 2005 increased 8.4% to $47.5 million as compared to $43.8 million for the same period in 2004.
Revenue for the six months ended June 30, 2005 increased 10.4% to $94.2 million as compared to $85.3 million for the same period in 2004.
Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended June 30, 2005 was $22.3 million as compared to $21.4 million for the same period in 2004. On a diluted per common share basis, net income for the quarter was $0.28 per share as compared to $0.27 per share for the same period in 2004.
Net income available to common stockholders for the six months ended June 30, 2005 was $43.5 million as compared to $43.9 million for the same period in 2004. On a diluted per common share basis, net income was $0.55 per share as compared to $0.56 per share for the same period in 2004.
The calculation to determine net income for a real estate company includes gains from the sale of investment properties and impairments. The amount of gains on property sales and impairments varies from quarter to quarter. This variance can significantly impact net income.
During the second quarter of 2005, income from continuing operations available to common stockholders was $0.24 per diluted share as compared to $0.20 per diluted share for the same period in 2004.
During the first six months of 2005, income from continuing operations available to common stockholders was $0.48 per diluted share as compared to $0.42 per diluted share for the same period in 2004.
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FFO Available to Common Stockholders
FFO for the second quarter ended June 30, 2005 increased 5.8% to $30.9 million as compared to $29.2 million for the same period in 2004. FFO per diluted common share increased 5.4% to $0.39 per share, for the quarter ended June 30, 2005, as compared to $0.37 per share for the same period in 2004. Core FFO per share before Crest Net’s contribution, for the quarter ended June 30, 2005, increased 15.2% to $0.38 per share from $0.33 per share for the same period in 2004.
FFO for the six months ended June 30, 2005 increased 3.5% to $62.0 million as compared to $59.9 million for the same period in 2004. FFO per diluted common share increased 1.3% to $0.78 per share as compared to $0.77 per share for the same period in 2004. Core FFO per share before Crest Net Lease contribution, for the six months ended June 30, 2005, increased 10.1% to $0.76 per diluted share from $0.69 per share for the same period in 2004.
The Company considers FFO to be an appropriate supplemental measure of a Real Estate Investment Trust’s (REITs) operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. FFO is an alternative, non-GAAP, measure that is also considered to be a good indicator of a company’s ability to generate income to pay dividends. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT) definition as net income available to common stockholders plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items. (See reconciliation of net income available to common stockholders to FFO on page six.)
Dividend Information
In June 2005, Realty Income announced the 31st consecutive quarterly increase in the amount of the monthly dividend on its common stock. This marked the 34th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The monthly dividend amount was increased to $0.11125 per share from $0.110625 per share for an annualized dividend amount of $1.335 per share. Through June 30, 2005, the Company has paid 419 consecutive monthly dividends and continues its 36-year policy of declaring and paying dividends every month.
Real Estate Portfolio Update
As of June 30, 2005, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 1,582 properties located in 48 states, leased to 98 retail chains doing business in 30 retail industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 12.0 years.
Portfolio Management Activities
The Company’s portfolio of retail real estate, owned primarily under 15- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of June 30, 2005, portfolio occupancy was 98.2% with only 29 properties available for lease out of 1,582 properties in the portfolio.
Rent Increases
Same store rents on 1,283 properties under lease during the three months ended June 30, 2005 and 2004, increased 1.0% to $39.62 million from $39.23 million in 2004. Same store rents on 1,283 properties under lease during the six months ended June 30, 2005 and 2004 increased 0.9% to $79.17 million compared to $78.50 million in 2004.
Property Acquisitions
During the second quarter, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $74.4 million in 38 new properties and properties under development. Realty Income invested $61.8 million in 29 new properties and properties under development with an initial average contractual lease yield of 8.9%. The 29 new properties acquired by Realty Income are located in seven states and are 100% leased under net-lease agreements with an initial average lease length of 17.8 years. They are leased to five different retail chains in five industries: convenience store, drug store, health and fitness, restaurant, and theater.
During the six months ended June 30, 2005, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $166.8 million in 72 new properties and properties under development. Realty Income invested $145.1 million in 60 new properties and properties under development with an initial average contractual lease yield of 8.8%. The 60 new properties acquired by Realty Income are located in 16 states and are 100% leased under net-lease agreements with an initial average lease length of 16.9 years. They are leased to six different retail chains in six industries: convenience store, drug store, health and fitness, motor vehicle dealership, restaurant and theater.
Realty Income maintains an unsecured acquisition credit facility with borrowing capacity of $250 million, which is used to fund property acquisitions in the near term. The outstanding balance on the Company’s acquisition credit facility at the end of the second quarter was $54.8 million with $195.2 million available to fund new property acquisitions.
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Property Dispositions
Realty Income continued to successfully execute its asset disposition program. The objective of the program is to sell assets when the Company believes the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the Company’s real estate portfolio or increase the average lease length.
During the second quarter ended June 30, 2005, Realty Income sold seven properties for $8.0 million, which resulted in a gain on sales of $2.7 million. The properties sold consisted of: one automotive service location, three child care locations, one consumer electronics store, one convenience store property, and one private education facility. The proceeds were, or will be, used to pay down the Company’s acquisition credit facility and invest in new properties.
During the first six months of 2005, Realty Income sold 11 properties for $14.6 million, which resulted in a gain on sales of $3.5 million. The properties sold consisted of: one automotive service location, one automotive tire service location, four child care locations, one consumer electronics store, one convenience store, one motor vehicle dealership, one private education facility, and one restaurant.
Other Second Quarter 2005 Activities
New $300 Million Credit Facility
In June 2005, Realty Income entered into a new $300 million acquisition credit facility to replace its existing $250 million acquisition credit facility that is scheduled to expire in October 2005. Under the terms of the new credit facility, the borrowing rate was reduced to LIBOR (London Interbank Offered Rate) plus 65 basis points with a facility fee of 15 basis points, for all-in drawn pricing of 80 basis points over LIBOR. The term of the new facility will begin in October 2005 and extend through October 2008.
Crest Net Lease
Crest Net Lease Inc. is a wholly-owned subsidiary of Realty Income focused on acquiring and subsequently marketing net-leased properties for sale. During the second quarter ended June 30, 2005, Crest sold one property for $3.5 million and reported a gain on sales of $422,000. Crest also invested $12.6 million in nine new properties and properties under development during the second quarter.
For the six months ended June 30, 2005, Crest sold six properties for $11.2 million and reported a gain on sales of $1.6 million. During this same period, Crest invested $21.7 million in 12 new properties and properties under development. As of June 30, 2005, Crest carried an inventory of $22.2 million, which consists of 13 properties held for sale.
Crest’s contribution to Realty Income’s FFO depends on the timing and number of property sales, if any, in a given quarter. Therefore, Crest’s contribution can fluctuate and add volatility to the Company’s reported FFO and net income on a comparable quarterly and annualized basis. During the second quarter and six months ended June 30, 2005, Crest generated $296,000 and $1.1 million, or $0.00 and $0.01 per diluted common share, respectively, in FFO (and net income) for Realty Income as compared to $2.9 million and $6.2 million, or $0.04 and $0.08 per diluted common share, respectively, in FFO (and net income) during the same periods in 2004.
CEO Comments on Mid-Year Operating Results
Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer, stated, “The Company enjoyed record operating results during the first half of the year. Revenue continues to grow, increasing 10.4% year-to-date, while funds from operations per diluted common share in the core portfolio grew 10.1% year-to-date. FFO per diluted common share, including Crest’s contribution, grew 5.4% during the second quarter and 1.3% during the first six months of the year. The quarterly and year-to-date comparable numbers are impacted by higher sales in Crest during the first half of 2004 in comparison to the same period in 2005. During the second quarter, Crest sold one property, which brings Crest total property sales to seven during the first half of 2005. We have forecast that Crest’s contribution to Realty Income’s FFO growth will be approximately $0.03 to $0.05, with the majority of Crest’s property sales occurring during the second half of the year due to inventory re-building that has been occurring over the past few months.
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“Our portfolio of freestanding retail properties continues to perform well with occupancy remaining high at 98.2% and just 29 properties available for lease out of over 1,582 properties in the portfolio. In addition, same store rents rose 1.0% in the second quarter and 0.9% year-to-date. We also have been focused on executing net leases with longer lease terms and, as a result, our weighted average remaining lease length in the portfolio has increased to approximately 12.0 years. Our acquisition pipeline is strong with ample acquisition opportunities that meet our investment criteria in various stages of review and due diligence. During the second quarter Realty Income and Crest Net combined completed 38 new property acquisitions, investing $74.4 million, which brings us to a total of $166.8 million invested in new property acquisitions year-to-date. This is in line with our expectations for acquisitions during the first half of the year and we are on track to meet our 2005 property acquisition goals of approximately $250 million.
“We have also increased the dividend two times this year and have paid 419 consecutive monthly dividends to our shareholders. As always, our focus is on maintaining a conservative balance sheet, and realizing stable real estate performance with a high occupancy rate so that we can continue to provide our shareholders with dependable monthly income that increases over time. Based on the performance thus far, we are optimistic about our prospects for positive performance in all Company operations for the remainder of the year.”
Earnings Commentary
Realty Income’s FFO per common share has historically tended to be stable and fairly predictable because of the long-term leases that are the primary source of the Company’s revenue. There are, however, several factors that can cause FFO per common share to vary from levels that have been anticipated by the Company. These factors include, but are not limited to, changes in interest rates, occupancy rates, periodically accessing the capital markets, the level and timing of property acquisitions and dispositions, lease rollovers, the general real estate market, the economy, charges for property impairments, and the operations of Crest Net Lease.
2005 Estimates
Management estimates that FFO per common share for 2005 should range from $1.59 to $1.62, which would equate to an increase of approximately 6% to 8% over 2004 FFO per share of $1.50. FFO for 2005 is based on an estimated diluted net income per share range of $1.10 to $1.13, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.55 and potential gain on sales of investment properties of $0.06 per share.
Management further estimates Crest Net Lease could contribute between $0.03 to $0.05 per share to Realty Income’s FFO (and net income) during 2005 as compared to $0.10 per share in 2004. Crest’s primary business is the purchase and sale of properties for a profit. These sales may occur at various times during the course of the year, which could cause FFO, in certain quarters, to fluctuate from normal levels.
The Company does not intend to provide quarterly estimates of FFO. Absent any changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimate for the year has not changed.
Forward-Looking Statements
Statements in this press release that are not strictly historical are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, the availability of capital to finance planned growth, property acquisitions and the timing of these acquisitions, charges for property impairments, the outcome of any legal proceedings to which the Company is a party, and the profitability of the Company’s subsidiary, Crest Net Lease, as described in the Company’s filings with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.
Realty Income is The Monthly Dividend Company®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of June 30, 2005, the Company had paid 419 consecutive monthly dividends throughout its 36-year operating history. The monthly income is supported by the cash flows from over 1,550 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net-leased retail properties nationwide.
Note to Editors:
Realty Income press releases are available at no charge by calling our toll-free investor hotline number: 888-811-2001, or via the internet at http://www.realtyincome.com/Investing/News.html
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CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2005 and 2004
(dollars in thousands, except per share amounts)
| | Three Months
Ended 6/30/05 | | Three Months
Ended 6/30/04 | | Six Months
Ended 6/30/05 | | Six Months
Ended 6/30/04 | |
REVENUE | | | | | | | | | |
Rental | | $ | 47,338 | | $ | 43,535 | | $ | 94,010 | | $ | 84,594 | |
Other | | 135 | | 298 | | 172 | | 660 | |
| | | | | | | | | |
| | 47,473 | | 43,833 | | 94,182 | | 85,254 | |
EXPENSES | | | | | | | | | |
Interest | | 9,793 | | 8,505 | | 18,851 | | 16,981 | |
Depreciation and amortization | | 11,243 | | 10,008 | | 22,049 | | 19,558 | |
General and administrative | | 3,706 | | 3,260 | | 7,762 | | 6,421 | |
Property | | 1,019 | | 749 | | 1,900 | | 1,456 | |
Income taxes | | 203 | | 191 | | 401 | | 344 | |
| | | | | | | | | |
| | 25,964 | | 22,713 | | 50,963 | | 44,760 | |
| | | | | | | | | |
Income from continuing operations | | 21,509 | | 21,120 | | 43,219 | | 40,494 | |
Income from discontinued operations: | | | | | | | | | |
Real estate acquired for resale by Crest | | 296 | | 2,879 | | 1,129 | | 6,154 | |
Real estate held for investment | | 2,861 | | 2,789 | | 3,821 | | 4,990 | |
| | 3,157 | | 5,668 | | 4,950 | | 11,144 | |
| | | | | | | | | |
Net income | | 24,666 | | 26,788 | | 48,169 | | 51,638 | |
Preferred stock cash dividends | | (2,351 | ) | (2,982 | ) | (4,702 | ) | (5,410 | ) |
Excess of redemption value over carrying value of preferred shares redeemed | | — | | (2,360 | ) | — | | (2,360 | ) |
| | | | | | | | | |
Net income available to common stockholders | | $ | 22,315 | | $ | 21,446 | | $ | 43,467 | | $ | 43,868 | |
| | | | | | | | | |
Funds from operations available to common stockholders (FFO) | | $ | 30,874 | | $ | 29,151 | | $ | 62,036 | | $ | 59,910 | |
| | | | | | | | | |
Per share information for common stockholders, basic and diluted: | | | | | | | | | |
Income from continuing operations | | $ | 0.24 | | $ | 0.20 | | $ | 0.48 | | $ | 0.42 | |
Net income | | $ | 0.28 | | $ | 0.27 | | $ | 0.55 | | $ | 0.56 | |
FFO | | | | | | | | | |
FFO per basic share before Crest Net contribution | | $ | 0.38 | | $ | 0.33 | | $ | 0.77 | | $ | 0.69 | |
FFO per diluted share before Crest Net contribution | | 0.38 | | 0.33 | | 0.76 | | 0.69 | |
Crest Net Lease | | 0.00 | | 0.04 | | 0.01 | | 0.08 | |
Total FFO | | 0.39 | | 0.37 | | 0.78 | | 0.77 | |
Cash dividends paid | | $ | 0.332 | | $ | 0.302 | | $ | 0.662 | | $ | 0.602 | |
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FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)
| | Three Months
Ended 6/30/05 | | Three Months
Ended 6/30/04 | | Six Months
Ended 6/30/05 | | Six Months
Ended 6/30/04 | |
| | | | | | | | | |
Net income available to common stockholders | | $ | 22,315 | | $ | 21,446 | | $ | 43,467 | | $ | 43,868 | |
Depreciation and amortization: | | | | | | | | | |
Continuing operations | | 11,243 | | 10,008 | | 22,049 | | 19,558 | |
Discontinued operations | | 6 | | 226 | | 64 | | 491 | |
Depreciation of furniture, fixtures & equipment | | (35 | ) | (29 | ) | (67 | ) | (58 | ) |
Gain on sales of investment properties: | | | | | | | | | |
Continuing operations | | (14 | ) | — | | (14 | ) | — | |
Discontinued operations | | (2,641 | ) | (2,500 | ) | (3,463 | ) | (3,949 | ) |
| | | | | | | | | |
Funds from operations available to common stockholders | | $ | 30,874 | | $ | 29,151 | | $ | 62,036 | | $ | 59,910 | |
| | | | | | | | | |
Dividends paid to common stockholders | | $ | 26,414 | | $ | 23,922 | | $ | 52,676 | | $ | 46,725 | |
| | | | | | | | | |
FFO in excess of dividends | | $ | 4,460 | | $ | 5,229 | | $ | 9,360 | | $ | 13,185 | |
| | | | | | | | | |
FFO per common share, basic and diluted | | $ | 0.39 | | $ | 0.37 | | $ | 0.78 | | $ | 0.77 | |
Weighted average number of common shares used for computation per share: | | | | | | | | | |
Basic | | 79,597,321 | | 79,245,656 | | 79,589,462 | | 77,737,000 | |
Diluted | | 79,676,168 | | 79,323,180 | | 79,667,812 | | 77,822,186 | |
CONTRIBUTIONS BY CREST NET LEASE TO FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)
Crest Net acquires properties with the intention of reselling them rather than holding them as investments and operating the properties. Consequently, we classify properties acquired by Crest Net as held for sale at the date of acquisition and do not depreciate them. The operations of Crest Net’s properties are classified as “income from discontinued operations, real estate acquired for resale.”
| | Three Months
Ended 6/30/05 | | Three Months
Ended 6/30/04 | | Six Months
Ended 6/30/05 | | Six Months
Ended 6/30/04 | |
Gain on sales of real estate acquired for resale | | $ | 422 | | $ | 3,883 | | $ | 1,649 | | $ | 7,992 | |
Rental revenue | | 287 | | 614 | | 568 | | 1,614 | |
Other revenue | | — | | — | | 1 | | — | |
Interest expense | | (163 | ) | (164 | ) | (310 | ) | (399 | ) |
General and administrative expense | | (134 | ) | (122 | ) | (273 | ) | (247 | ) |
Property expenses | | (25 | ) | (7 | ) | (51 | ) | (15 | ) |
Income taxes | | (91 | ) | (1,325 | ) | (455 | ) | (2,791 | ) |
Funds from operations contributed by Crest | | $ | 296 | | $ | 2,879 | | $ | 1,129 | | $ | 6,154 | |
| | | | | | | | | |
Crest FFO per common share, basic and diluted | | $ | 0.00 | | $ | 0.04 | | $ | 0.01 | | $ | 0.08 | |
Total FFO | | $ | 30,874 | | $ | 29,151 | | $ | 62,036 | | $ | 59,910 | |
Less FFO contributed by Crest | | (296 | ) | (2,879 | ) | (1,129 | ) | (6,154 | ) |
FFO before Crest contribution | | $ | 30,578 | | $ | 26,272 | | $ | 60,907 | | $ | 53,756 | |
FFO before Crest contribution per common share: | | | | | | | | | |
Basic | | $ | 0.38 | | $ | 0.33 | | $ | 0.77 | | $ | 0.69 | |
Diluted | | $ | 0.38 | | $ | 0.33 | | $ | 0.76 | | $ | 0.69 | |
We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’s definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, reduced by gains and increased by losses on sales of investment property and extraordinary items.
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HISTORICAL FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)
| | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | |
For the three months ended June 30, | | | | | | | | | | | |
| | | | | | | | | | | |
Net income available to common stockholders | | $ | 22,315 | | $ | 21,446 | | $ | 18,162 | | $ | 16,017 | | $ | 11,048 | |
Depreciation and amortization | | 11,214 | | 10,205 | | 8,291 | | 7,605 | | 7,130 | |
Gain on sales of investment properties | | (2,655 | ) | (2,500 | ) | (2,952 | ) | (1,395 | ) | (164 | ) |
| | | | | | | | | | | |
Total FFO | | $ | 30,874 | | $ | 29,151 | | $ | 23,501 | | $ | 22,227 | | $ | 18,014 | |
| | | | | | | | | | | |
Total FFO per diluted share | | $ | 0.39 | | $ | 0.37 | | $ | 0.34 | | $ | 0.33 | | $ | 0.32 | |
| | | | | | | | | | | |
Total FFO | | $ | 30,874 | | $ | 29,151 | | $ | 23,501 | | $ | 22,227 | | $ | 18,014 | |
Less FFO contributed by Crest | | (296 | ) | (2,879 | ) | (157 | ) | (901 | ) | (141 | ) |
FFO before Crest contribution | | $ | 30,578 | | $ | 26,272 | | $ | 23,344 | | $ | 21,326 | | $ | 17,873 | |
| | | | | | | | | | | |
FFO components, per diluted share: | | | | | | | | | | | |
FFO before Crest’s contribution | | $ | 0.38 | | $ | 0.33 | | $ | 0.33 | | $ | 0.32 | | $ | 0.31 | |
Crest FFO contribution | | $ | 0.00 | | $ | 0.04 | | $ | 0.00 | | $ | 0.01 | | $ | 0.00 | |
| | | | | | | | | | | |
Total FFO | | $ | 0.39 | | $ | 0.37 | | $ | 0.34 | | $ | 0.33 | | $ | 0.32 | |
| | | | | | | | | | | |
Cash dividends paid per share | | $ | 0.332 | | $ | 0.302 | | $ | 0.294 | | $ | 0.287 | | $ | 0.279 | |
Diluted shares outstanding | | 79,676,168 | | 79,323,180 | | 70,119,216 | | 66,736,718 | | 56,937,984 | |
| | | | | | | | | | | |
For the six months ended June 30, | | | | | | | | | | | |
| | | | | | | | | | | |
Net income available to common stockholders | | $ | 43,467 | | $ | 43,868 | | $ | 33,767 | | $ | 31,883 | | $ | 27,093 | |
Depreciation and amortization | | 22,046 | | 19,991 | | 16,356 | | 15,076 | | 14,312 | |
Gain on sales of investment properties | | (3,477 | ) | (3,949 | ) | (3,123 | ) | (2,523 | ) | (6,115 | ) |
| | | | | | | | | | | |
Total FFO | | $ | 62,036 | | $ | 59,910 | | $ | 47,000 | | $ | 44,436 | | $ | 35,290 | |
| | | | | | | | | | | |
Total FFO per diluted share | | $ | 0.78 | | $ | 0.77 | | $ | 0.67 | | $ | 0.67 | | $ | 0.64 | |
| | | | | | | | | | | |
Total FFO | | $ | 62,036 | | $ | 59,910 | | $ | 47,000 | | $ | 44,436 | | $ | 35,290 | |
Less FFO contributed by Crest | | (1,129 | ) | (6,154 | ) | (242 | ) | (1,264 | ) | (1,303 | ) |
FFO before Crest contribution | | $ | 60,907 | | $ | 53,756 | | $ | 46,758 | | $ | 43,172 | | $ | 33,987 | |
| | | | | | | | | | | |
FFO components, per diluted share: | | | | | | | | | | | |
FFO before Crest’s contribution | | $ | 0.76 | | $ | 0.69 | | $ | 0.67 | | $ | 0.65 | | $ | 0.62 | |
Crest FFO contribution | | $ | 0.01 | | $ | 0.08 | | $ | 0.00 | | $ | 0.02 | | $ | 0.02 | |
| | | | | | | | | | | |
Total FFO | | $ | 0.78 | | $ | 0.77 | | $ | 0.67 | | $ | 0.67 | | $ | 0.64 | |
| | | | | | | | | | | |
Cash dividends paid per share | | $ | 0.662 | | $ | 0.602 | | $ | 0.587 | | $ | 0.572 | | $ | 0.557 | |
Diluted shares outstanding | | 79,667,812 | | 77,822,186 | | 70,065,888 | | 66,461,634 | | 55,131,000 | |
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CONSOLIDATED BALANCE SHEETS
As of June 30, 2005 and December 31, 2004
(dollars in thousands, except per share amounts)
| | 2005 | | 2004 | |
ASSETS | | | | | |
Real estate, at cost: | | | | | |
Land | | $ | 676,548 | | $ | 624,558 | |
Buildings and improvements | | 1,142,605 | | 1,066,725 | |
| | 1,819,153 | | 1,691,283 | |
Less accumulated depreciation and amortization | | (320,031 | ) | (301,728 | ) |
| | | | | |
Net real estate held for investment | | 1,499,122 | | 1,389,555 | |
Real estate held for sale, net | | 23,776 | | 17,155 | |
Net real estate | | 1,522,898 | | 1,406,710 | |
Cash and cash equivalents | | 1,948 | | 2,141 | |
Accounts receivable | | 3,539 | | 4,075 | |
Goodwill | | 17,206 | | 17,206 | |
Other assets | | 25,992 | | 12,183 | |
| | | | | |
Total assets | | $ | 1,571,583 | | $ | 1,442,315 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Distributions payable | | $ | 9,248 | | $ | 9,115 | |
Accounts payable and accrued expenses | | 14,323 | | 9,579 | |
Other liabilities | | 7,631 | | 6,286 | |
Line of credit payable | | 54,800 | | 23,600 | |
Notes payable | | 580,000 | | 480,000 | |
| | | | | |
Total liabilities | | 666,002 | | 528,580 | |
| | | | | |
Stockholders’ equity: | | | | | |
Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 5,100,000 issued and outstanding | | 123,804 | | 123,787 | |
Common stock and paid in capital, par value $1.00 per share, in 2005 there were 200,000,000 shares authorized and 79,609,106 issued and outstanding and in 2004 there were 100,000,000 shares authorized and 79,301,630 issued and outstanding | | 1,040,144 | | 1,038,973 | |
Distributions in excess of net income | | (258,367 | ) | (249,025 | ) |
| | | | | |
Total stockholders’ equity | | 905,581 | | 913,735 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 1,571,583 | | $ | 1,442,315 | |
8
The following table sets forth certain information regarding our properties classified according to the business of
the respective tenants, expressed as a percentage of our total rental revenue:
| | Percentage of Rental Revenue (1) | |
| | For the
Quarter
Ended | | For the Years Ended | |
Industries (30) | | June 30,
2005 | | Dec. 31,
2004 | | Dec. 31,
2003 | | Dec. 31,
2002 | | Dec. 31,
2001 | | Dec. 31,
2000 | | Dec. 31,
1999 | | Dec. 31,
1998 | |
| | | | | | | | | | | | | | | | | |
Apparel Stores | | 1.6 | % | 1.8 | % | 2.1 | % | 2.3 | % | 2.4 | % | 2.4 | % | 3.8 | % | 4.1 | % |
Automotive Collision Services | | 1.3 | | 1.0 | | 0.3 | | — | | — | | — | | — | | — | |
Automotive Parts | | 3.4 | | 3.8 | | 4.5 | | 4.9 | | 5.7 | | 6.0 | | 6.3 | | 6.1 | |
Automotive Service | | 7.8 | | 7.7 | | 8.3 | | 7.0 | | 5.7 | | 5.8 | | 6.6 | | 7.5 | |
Automotive Tire Services | | 7.3 | | 7.8 | | 3.1 | | 2.7 | | 2.6 | | 2.3 | | 2.3 | | 1.7 | |
Book Stores | | 0.3 | | 0.3 | | 0.4 | | 0.4 | | 0.4 | | 0.5 | | 0.5 | | 0.6 | |
Business Services | | 0.1 | | 0.1 | | 0.1 | | 0.1 | | 0.1 | | 0.1 | | 0.1 | | | * |
Child Care | | 13.2 | | 14.4 | | 17.8 | | 20.8 | | 23.9 | | 24.7 | | 25.3 | | 29.2 | |
Consumer Electronics | | 1.4 | | 2.1 | | 3.0 | | 3.3 | | 4.0 | | 4.9 | | 4.4 | | 5.4 | |
Convenience Stores | | 18.8 | | 19.2 | | 13.3 | | 9.1 | | 8.4 | | 8.4 | | 7.2 | | 6.1 | |
Crafts and Novelties | | 0.4 | | 0.5 | | 0.6 | | 0.4 | | 0.4 | | 0.4 | | 0.4 | | | * |
Drug Stores | | 3.3 | | 0.1 | | 0.2 | | 0.2 | | 0.2 | | 0.2 | | 0.2 | | 0.1 | |
Entertainment | | 2.2 | | 2.3 | | 2.6 | | 2.3 | | 1.8 | | 2.0 | | 1.2 | | — | |
Equipment Rental Services | | 0.3 | | 0.3 | | 0.2 | | — | | — | | — | | — | | — | |
Financial Services | | 0.1 | | 0.1 | | — | | — | | — | | — | | — | | — | |
General Merchandise | | 0.4 | | 0.4 | | 0.5 | | 0.5 | | 0.6 | | 0.6 | | 0.6 | | | * |
Grocery Stores | | 0.7 | | 0.8 | | 0.4 | | 0.5 | | 0.6 | | 0.6 | | 0.5 | | | * |
Health and Fitness | | 3.8 | | 4.0 | | 3.8 | | 3.8 | | 3.6 | | 2.4 | | 0.6 | | 0.1 | |
Home Furnishings | | 4.0 | | 4.1 | | 4.9 | | 5.4 | | 6.0 | | 5.8 | | 6.5 | | 7.8 | |
Home Improvement | | 1.1 | | 1.0 | | 1.1 | | 1.2 | | 1.3 | | 2.0 | | 3.6 | | | * |
Motor Vehicle Dealerships | | 2.6 | | 0.6 | | — | | — | | — | | — | | — | | — | |
Office Supplies | | 1.5 | | 1.6 | | 1.9 | | 2.1 | | 2.2 | | 2.3 | | 2.6 | | 3.0 | |
Pet Supplies and Services | | 1.4 | | 1.4 | | 1.7 | | 1.7 | | 1.6 | | 1.5 | | 1.1 | | 0.6 | |
Private Education | | 0.8 | | 1.1 | | 1.2 | | 1.3 | | 1.5 | | 1.4 | | 1.2 | | 0.9 | |
Restaurants | | 9.1 | | 9.7 | | 11.8 | | 13.5 | | 12.2 | | 12.3 | | 13.3 | | 16.2 | |
Shoe Stores | | 0.1 | | 0.3 | | 0.9 | | 0.8 | | 0.7 | | 0.8 | | 1.1 | | 0.8 | |
Sporting Goods | | 3.6 | | 3.4 | | 3.8 | | 4.1 | | 0.9 | | — | | — | | — | |
Theaters | | 3.2 | | 3.5 | | 4.1 | | 3.9 | | 4.3 | | 2.7 | | 0.6 | | — | |
Travel Plazas | | 0.4 | | 0.4 | | 0.3 | | — | | — | | — | | — | | — | |
Video Rental | | 2.6 | | 2.8 | | 3.3 | | 3.3 | | 3.7 | | 3.9 | | 4.3 | | 3.8 | |
Other | | 3.2 | | 3.4 | | 3.8 | | 4.4 | | 5.2 | | 6.0 | | 5.7 | | 6.0 | |
| | | | | | | | | | | | | | | | | |
Totals | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
* Less than 0.1%
(1) Includes rental revenue for all properties owned by Realty Income at the end of each period presented (including
revenue from properties reclassified to discontinued operations) and excludes properties owned by our subsidiary,
Crest Net.
9
The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,549 net leased, single-tenant retail properties as of June 30, 2005 (dollars in thousands):
Lease Expiration Schedule
| | Total Portfolio | | Initial Expirations(3) | | Subsequent Expirations(4) | |
Year | | Total
Number of
Leases
Expiring(1) | | Rental
Revenue for
the Quarter
Ended
6/30/05(2) | | % of
Rental
Revenue | | Number of
Leases
Expiring | | Rental
Revenue for
the Quarter
Ended
6/30/05 | | % of
Total
Rental
Revenue | | Number of
Leases
Expiring | | Rental
Revenue for
the Quarter
Ended
6/30/05 | | % of
Total
Rental
Revenue | |
2005 | | 65 | | $ | 1,277 | | 2.8 | % | 49 | | $ | 1,023 | | 2.2 | % | 16 | | $ | 254 | | 0.6 | % |
2006 | | 84 | | 1,828 | | 4.0 | | 31 | | 714 | | 1.6 | | 53 | | 1,114 | | 2.4 | |
2007 | | 123 | | 2,175 | | 4.8 | | 87 | | 1,539 | | 3.4 | | 36 | | 636 | | 1.4 | |
2008 | | 99 | | 2,093 | | 4.6 | | 60 | | 1,418 | | 3.1 | | 39 | | 675 | | 1.5 | |
2009 | | 90 | | 1,929 | | 4.2 | | 30 | | 684 | | 1.5 | | 60 | | 1,245 | | 2.7 | |
2010 | | 53 | | 1,198 | | 2.6 | | 37 | | 909 | | 2.0 | | 16 | | 289 | | 0.6 | |
2011 | | 41 | | 1,438 | | 3.1 | | 33 | | 1,239 | | 2.7 | | 8 | | 199 | | 0.4 | |
2012 | | 44 | | 1,375 | | 3.0 | | 42 | | 1,324 | | 2.9 | | 2 | | 51 | | 0.1 | |
2013 | | 74 | | 3,357 | | 7.3 | | 66 | | 3,145 | | 6.8 | | 8 | | 212 | | 0.5 | |
2014 | | 48 | | 2,018 | | 4.4 | | 36 | | 1,781 | | 3.9 | | 12 | | 237 | | 0.5 | |
2015 | | 46 | | 1,248 | | 2.7 | | 29 | | 820 | | 1.8 | | 17 | | 428 | | 0.9 | |
2016 | | 17 | | 505 | | 1.1 | | 15 | | 423 | | 0.9 | | 2 | | 82 | | 0.2 | |
2017 | | 22 | | 1,482 | | 3.2 | | 18 | | 1,415 | | 3.1 | | 4 | | 67 | | 0.1 | |
2018 | | 23 | | 1,028 | | 2.2 | | 23 | | 1,028 | | 2.2 | | — | | — | | — | |
2019 | | 95 | | 4,487 | | 9.8 | | 94 | | 4,294 | | 9.4 | | 1 | | 193 | | 0.4 | |
2020 | | 67 | | 2,128 | | 4.6 | | 66 | | 2,117 | | 4.6 | | 1 | | 11 | | | * |
2021 | | 125 | | 4,082 | | 8.9 | | 125 | | 4,082 | | 8.9 | | — | | — | | — | |
2022 | | 96 | | 2,596 | | 5.7 | | 95 | | 2,582 | | 5.7 | | 1 | | 14 | | | * |
2023 | | 234 | | 6,423 | | 14.0 | | 233 | | 6,398 | | 13.9 | | 1 | | 25 | | 0.1 | |
2024 | | 58 | | 1,704 | | 3.7 | | 58 | | 1,704 | | 3.7 | | — | | — | | — | |
2025 | | 33 | | 475 | | 1.0 | | 33 | | 475 | | 1.0 | | — | | — | | — | |
2026 | | 2 | | 93 | | 0.2 | | 2 | | 93 | | 0.2 | | — | | — | | — | |
2028 | | 2 | | 54 | | 0.1 | | 2 | | 54 | | 0.1 | | — | | — | | — | |
2033 | | 3 | | 357 | | 0.8 | | 3 | | 357 | | 0.8 | | — | | — | | — | |
2034 | | 2 | | 230 | | 0.5 | | 2 | | 230 | | 0.5 | | — | | — | | — | |
2037 | | 2 | | 325 | | 0.7 | | 2 | | 325 | | 0.7 | | — | | — | | — | |
2043 | | 1 | | 13 | | | * | — | | — | | — | | 1 | | 13 | | | * |
Totals | | 1,549 | | $ | 45,918 | | 100.0 | % | 1,271 | | $ | 40,173 | | 87.6 | % | 278 | | $ | 5,745 | | 12.4 | % |
* Less than 0.1%
(1) Excludes four multi-tenant properties, 29 vacant and unleased properties, one of which is a multi-tenant property, and properties owned by our subsidiary, Crest Net. The lease expirations for properties under construction are based on the estimated date of completion of those properties.
(2) Includes rental revenue of $60 from properties reclassified to discontinued operations and excludes revenue of $1,480 from four multi-tenant properties and from 29 vacant and unleased properties at June 30, 2005.
(3) Represents leases that are expiring for the first time to the initial tenant of the property.
(4) Represents lease expirations on properties in the portfolio, which have previously been renewed, extended or re-tenanted.
10
The following table sets forth certain state-by-state information regarding Realty Income’s property portfolio as of June 30, 2005 (dollars in thousands):
Geographic Diversification
State | | Number of
Properties(1) | | Percent
Leased | | Approximate
Leasable
Square Feet(1) | | Rental Revenue
for the
Quarter Ended
June 30, 2005(2) | | Percentage of
Rental Revenue | |
Alabama | | 18 | | 94 | % | 156,600 | | $ | 427 | | 0.9 | % |
Alaska | | 2 | | 100 | | 128,500 | | 251 | | 0.5 | |
Arizona | | 71 | | 99 | | 338,100 | | 1,890 | | 4.0 | |
Arkansas | | 8 | | 88 | | 48,800 | | 139 | | 0.3 | |
California | | 61 | | 100 | | 1,057,100 | | 3,967 | | 8.4 | |
Colorado | | 48 | | 98 | | 399,100 | | 1,686 | | 3.6 | |
Connecticut | | 16 | | 100 | | 245,600 | | 927 | | 2.0 | |
Delaware | | 16 | | 100 | | 29,100 | | 338 | | 0.7 | |
Florida | | 126 | | 98 | | 1,253,400 | | 4,847 | | 10.2 | |
Georgia | | 99 | | 99 | | 645,100 | | 2,455 | | 5.2 | |
Idaho | | 14 | | 100 | | 91,900 | | 369 | | 0.8 | |
Illinois | | 45 | | 100 | | 395,700 | | 1,486 | | 3.1 | |
Indiana | | 26 | | 92 | | 147,700 | | 498 | | 1.1 | |
Iowa | | 9 | | 89 | | 57,000 | | 144 | | 0.3 | |
Kansas | | 20 | | 90 | | 188,300 | | 510 | | 1.1 | |
Kentucky | | 12 | | 100 | | 41,200 | | 262 | | 0.6 | |
Louisiana | | 14 | | 100 | | 65,200 | | 294 | | 0.6 | |
Maryland | | 24 | | 100 | | 207,600 | | 1,139 | | 2.4 | |
Massachusetts | | 37 | | 100 | | 203,100 | | 997 | | 2.1 | |
Michigan | | 13 | | 100 | | 81,600 | | 299 | | 0.6 | |
Minnesota | | 18 | | 100 | | 211,600 | | 538 | | 1.1 | |
Mississippi | | 33 | | 88 | | 194,400 | | 309 | | 0.6 | |
Missouri | | 32 | | 97 | | 222,900 | | 707 | | 1.5 | |
Montana | | 2 | | 100 | | 30,000 | | 74 | | 0.2 | |
Nebraska | | 13 | | 100 | | 104,500 | | 473 | | 1.0 | |
Nevada | | 15 | | 100 | | 191,000 | | 823 | | 1.7 | |
New Hampshire | | 10 | | 100 | | 89,600 | | 369 | | 0.8 | |
New Jersey | | 26 | | 100 | | 200,100 | | 1,062 | | 2.2 | |
New Mexico | | 7 | | 100 | | 53,300 | | 109 | | 0.2 | |
New York | | 27 | | 100 | | 339,600 | | 1,664 | | 3.5 | |
North Carolina | | 50 | | 98 | | 325,000 | | 1,397 | | 2.9 | |
North Dakota | | 1 | | 100 | | 22,000 | | 16 | | �� | * |
Ohio | | 105 | | 100 | | 661,500 | | 2,476 | | 5.2 | |
Oklahoma | | 17 | | 100 | | 94,300 | | 358 | | 0.8 | |
Oregon | | 17 | | 100 | | 253,300 | | 534 | | 1.1 | |
Pennsylvania | | 81 | | 100 | | 481,300 | | 2,271 | | 4.8 | |
Rhode Island | | 1 | | 100 | | 3,500 | | 29 | | 0.1 | |
South Carolina | | 55 | | 100 | | 215,600 | | 1,414 | | 3.0 | |
South Dakota | | 1 | | 100 | | 6,500 | | 24 | | | * |
Tennessee | | 97 | | 99 | | 459,500 | | 2,183 | | 4.6 | |
Texas | | 175 | | 97 | | 1,653,000 | | 4,291 | | 9.1 | |
Utah | | 6 | | 100 | | 35,100 | | 142 | | 0.3 | |
Vermont | | 1 | | 100 | | 2,500 | | 22 | | | * |
Virginia | | 55 | | 100 | | 410,800 | | 2,073 | | 4.4 | |
Washington | | 37 | | 100 | | 243,900 | | 694 | | 1.5 | |
West Virginia | | 2 | | 0 | | 16,800 | | 8 | | | * |
Wisconsin | | 16 | | 88 | | 153,700 | | 360 | | 0.8 | |
Wyoming | | 3 | | 100 | | 14,900 | | 53 | | 0.1 | |
Totals/Average | | 1,582 | | 98 | % | 12,470,900 | | $ | 47,398 | | 100.0 | % |
* Less than 0.1%
(1) Excludes properties owned by our subsidiary, Crest Net.
(2) Includes rental revenue for all properties owned by Realty Income at June 30, 2005 (including revenue from properties reclassified to discontinued operations of $60).
11
