Exhibit 99.1
CONTACT:
Tere Miller
Vice President, Corporate Communications
760-741-2111 ext. 177
REALTY INCOME ANNOUNCES RECORD
FOURTH QUARTER AND YEAR-END 2006 OPERATING RESULTS
ESCONDIDO, CALIFORNIA, February 14, 2007...Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O) today announced operating results for the fourth quarter and year ended December 31, 2006.
COMPANY HIGHLIGHTS:
For the quarter ended December 31, 2006 (as compared to the same quarterly period in 2005):
· Revenue increased 29.2% to $69.1 million
· Funds from Operations (FFO) available to common stockholders increased 25.1% to $44.9 million
· FFO per diluted common share increased 7.0% to $0.46 per share
· Net income available to common stockholders per diluted common share was $0.29 per share
· Portfolio occupancy increased to 98.7%
· Same store rents increased 1.1% to $44.5 million
· Invested $510.8 million in 240 additional properties
· Issued 6.9 million shares of common stock raising gross proceeds of $182.2 million
· Issued $220 million of 6.75% Monthly Income Class E Perpetual Preferred shares
· Dividends paid per share increased 8.9%
· Increased the monthly dividend for the 37th consecutive quarter in December to an annual amount of $1.518 per share
For the year ended December 31, 2006 (as compared to 2005):
· Revenue increased 22.5% to $240.1 million
· FFO available to common stockholders increased 20.2% to $155.8 million
· FFO per diluted common share increased 6.8% to $1.73 per share
· Net income available to common stockholders per diluted common share was $1.11 per share
· Same store rents increased 0.7% to $175.3 million
· Invested $769.9 million in 378 additional properties
· Raised gross proceeds of approximately $919 million in common stock, preferred stock and bond offerings
· Dividends paid per share increased 6.8%
· Paid the 437th consecutive monthly dividend in December 2006
Financial Results
Revenue Increases
Realty Income’s revenue for the fourth quarter ended December 31, 2006, increased 29.2% to $69.1 million as compared to $53.5 million for the same period in 2005.
Revenue, for the year ended December 31, 2006, increased 22.5% to $240.1 million as compared to $196.0 million for the same period in 2005.
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Net Income Available to Common Stockholders
Net income available to common stockholders, for the quarter ended December 31, 2006, was $28.4 million as compared to $25.5 million for the same period in 2005. On a diluted per common share basis, net income for the quarter decreased to $0.29 per share as compared to $0.31 per share for the same period in 2005.
Net income available to common stockholders, for the year ended December 31, 2006, was $99.4 million as compared to $89.7 million for the same period in 2005. On a diluted per common share basis, net income for 2006 decreased to $1.11 per share as compared to $1.12 per share in 2005.
The calculation to determine net income for a real estate company includes gains from the sale of investment properties and impairments. Net income can be significantly impacted by property sales and impairments, which vary from quarter to quarter.
During the fourth quarter of 2006, income from continuing operations available to common stockholders was $0.29 per diluted common share as compared to $0.26 per diluted common share for the same period in 2005.
During 2006, income from continuing operations available to common stockholders was $1.05 per diluted common share as compared to $0.99 per diluted common share in 2005.
Funds from Operations (FFO) Available to Common Stockholders
FFO, for the fourth quarter ended December 31, 2006, increased 25.1% to $44.9 million as compared to $35.9 million for the same period in 2005. FFO per diluted common share increased 7.0% to $0.46 per share, for the quarter ended December 31, 2006, as compared to $0.43 per share for the same period in 2005. FFO per diluted common share before Crest’s contribution, for the quarter ended December 31, 2006, increased 9.5% to $0.46 per share as compared to $0.42 per share for the same period in 2005. For a calculation of FFO before Crest’s contribution, see pages 6 and 7. Crest Net Lease, Inc. (Crest) is a wholly-owned subsidiary of Realty Income.
FFO, for the year ended December 31, 2006, increased 20.2% to $155.8 million as compared to $129.6 million in 2005. FFO per diluted common share increased 6.8% to $1.73 per share as compared to $1.62 per share in 2005. FFO per diluted common share before Crest’s contribution, for the year ended December 31, 2006, increased 8.9% to $1.72 per share as compared to $1.58 per share in 2005.
The Company considers FFO to be an appropriate supplemental measure of a Real Estate Investment Trust’s (REIT’s) 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’s) 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 the reconciliation of net income available to common stockholders to FFO on page 7).
Dividend Information
In December 2006, Realty Income announced the 37th consecutive quarterly increase and the 42nd increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The amount of the monthly dividend paid during the quarter increased 8.9% to $0.378 per share from $0.347 per share for the same period in 2005.
During 2006, Realty Income paid twelve monthly dividends and increased the monthly dividend five times. The amount of monthly dividends paid per share, for the year ended December 31, 2006, increased 6.8% to $1.437 per share as compared to $1.346 per share in 2005. Through December 31, 2006, the Company has paid 437 consecutive monthly dividends and continues its 37-year history of declaring and paying dividends every month.
Real Estate Portfolio Update
As of December 31, 2006, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 1,955 properties located in 48 states, leased to 103 retail chains doing business in 29 retail industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 12.9 years.
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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 December 31, 2006, portfolio occupancy was 98.7% with only 26 properties available for lease out of 1,955 properties in the portfolio.
Rent Increases
Same store rents on 1,421 properties under lease, during the entire three months ended December 31, 2006 and 2005, increased 1.1% to $44.5 million from $44.0 million in 2005. Same store rents on the same 1,421 properties under lease during the entire years ended December 31, 2006 and 2005 increased 0.7% to $175.3 million compared to $174.0 million in 2005.
Property Acquisitions
During the fourth quarter, Realty Income and Crest invested $510.8 million in 240 new properties and properties under development. Realty Income invested $407.6 million in 189 new properties and properties under development with an initial average contractual lease yield of 8.6%. The 189 new properties acquired by Realty Income are located in 24 states and are 100% leased under net-lease agreements with an initial average lease length of 18.8 years. They are leased to five different retail chains in four separate industries.
For the year ended December 31, 2006, Realty Income and Crest invested $769.9 million in 378 new properties and properties under development. Realty Income invested $656.7 million in 322 new properties and properties under development with an initial average contractual lease yield of 8.6%. The 322 new properties acquired by Realty Income are located in 30 states and are 100% leased under net-lease agreements with an initial average lease length of 16.7 years. They are leased to 16 different retail chains in 11 separate industries.
Realty Income maintains a $300 million unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. There was no outstanding balance on the Company’s acquisition credit facility at the end of 2006 and $300 million is available to fund new property acquisitions.
Property Dispositions
Realty Income continued to execute its core portfolio 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 fourth quarter ended December 31, 2006, Realty Income did not sell any properties.
During 2006, Realty Income sold 13 properties for $10.7 million, which resulted in a gain on sales of $3.0 million.
Other 2006 Activities
Issued 5.2 Million Common Shares
In March 2006, Realty Income issued 5.2 million shares of common stock priced at $24.39 per share, generating gross proceeds from the offering of approximately $127 million.
Redeemed $110 Million of 7-¾% Notes Due May 2007
In September 2006, Realty Income redeemed all of its outstanding $110 million, 7-¾%, unsecured notes due May 2007. The Notes were redeemed at a redemption price equal to 100% of the principal amount of the 2007 Notes, plus accrued and unpaid interest to the redemption date, as well as a make-whole payment.
Issued $275 Million of 5.95% 10-Year Senior Unsecured Notes
Also in September 2006, Realty Income issued $275 million of 5.95% senior unsecured notes due 2016. The public offering price for the notes was 99.74% of the principal amount for an effective yield of 5.985%. The securities are rated BBB+ by Fitch Ratings, Baa2 by Moody’s Investors Service and BBB by Standard & Poor’s Ratings Group
Issued 4.715 Million Common Shares
Also in September 2006, Realty Income completed a common stock offering of 4.715 million shares of common stock priced at $24.32 per share, generating gross proceeds of approximately $115 million.
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Issued 6.9 Million Common Shares
In October 2006, Realty Income issued 6.0 million shares of common stock priced at $26.40 per share, generating gross proceeds of approximately $158 million. In conjunction with this offering, in November 2006, Realty Income issued an additional 900,000 shares of common stock priced at $26.40 per share which generated gross proceeds of approximately $24 million.
Issued 8.8 Million Monthly Income Class E Preferred Shares
In December 2006, the Company issued 8.8 million shares of 6.75% Monthly Income Class E perpetual preferred stock, generating gross proceeds of $220 million.
Crest Net Lease
Crest is focused on acquiring and subsequently marketing net-leased properties for sale. During the quarter ended December 31, 2006, Crest sold four properties for $5.6 million and reported a gain on sale of $479,000. Crest also invested $103.2 million in 51 new properties during the fourth quarter.
For the year ended December 31, 2006, Crest sold 13 properties for $22.4 million and reported a gain on sales of $2.2 million. During this same period, Crest invested $113.2 million in 56 new properties and properties under development. As of December 31, 2006, Crest carried an inventory of $137.5 million, which consists of 60 properties that are 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 Realty Income’s reported FFO and net income on a comparable quarterly and annualized basis. During the fourth quarter ended December 31, 2006, Crest did not generate FFO (and net income) for Realty Income as compared to $1.1 million, or $0.01 per diluted common share, in FFO (and net income) for the same period in 2005. For the year ended December 31, 2006, Crest generated $1.4 million, or $0.02 per diluted common share, in FFO (and net income) for Realty Income as compared to $2.8 million, or $0.03 per diluted common share, in FFO (and net income) for Realty Income for the same period in 2005. ( See page 7 for a calculation of “Contributions by Crest to FFO”).
CEO Comments on Operating Results
Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer, stated, “The Monthly Dividend Company® ended the fourth quarter and 2006 with record operating results.
“Increases in property acquisitions, total revenue and Funds from Operations allowed us to raise the dividend again in the fourth quarter, for a total of five increases during the year, which led to an increase in dividends paid in 2006 of 6.8%, as compared to 2005. We are pleased to have been able to continue to offer shareholders a source of dependable monthly income that has increased over time.
“Property acquisitions substantially exceeded our expectations during the fourth quarter and for 2006 and were primarily responsible for our increases in financial results across the board. For the year ended December 31, 2006, Realty Income and Crest, combined, acquired 378 properties for $769.9 million. The initial average lease rate for properties acquired during 2006 was 8.6%, which continued to represent an attractive spread over our cost of capital. The initial average lease term on properties acquired during 2006 was 17.1 years.
“We were also pleased with our ability to access capital quickly to permanently fund these property acquisitions. Activities in this area also represented a record for the Company. During 2006, we raised approximately $919 million in attractively priced permanent capital from the gross proceeds of common stock, preferred stock and bond offerings.
“While we are very pleased with the level of property acquisitions and record access to capital in 2006, we do not believe that investors should perceive these levels of activity as a trend that can be projected into the future. The Company will continue to adhere to its strict due diligence and underwriting standards that guide the review and decision-making process for every potential real estate acquisition opportunity. As always, acquisition opportunities will be required to meet these standards in order to be included in Realty Income’s real estate portfolio. During 2006, the Company’s Investment Committee reviewed over $5.0 billion of potential real estate acquisitions and acquired 378 properties for $769.9 million, or about 15% of the opportunities reviewed for acquisition. We anticipate that the level of investment opportunities we review and the amount that meet our criteria for purchase will vary from year to year.
“Our real estate portfolio of 1,955 properties continues to perform very well and provide the dependable lease revenue that supports the payment of monthly dividends. During 2006, the portfolio exhibited stable occupancy, ending the year with 98.7% of our properties occupied in comparison to 98.5% at the end of 2005. We believe this excellent performance is due to our continued focus on acquiring properties that are primarily leased to retailers that sell basic human needs goods and services that consumers use every day and our detailed underwriting process.”
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FFO Commentary
Realty Income’s FFO per diluted 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 diluted 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.
2007 Estimates
Management estimates that FFO per diluted common share for 2007 should range from $1.82 to $1.86, which would represent annual FFO per diluted common share growth of approximately 5.2% to 7.5% over 2006 FFO of $1.73. This represents an increase from our previous guidance for 2007 FFO per share growth of $1.81 to $1.85. FFO for 2007 is based on an estimated net income per diluted common share range of $1.13 to $1.17, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.73 and potential gain on sales of investment properties of $0.04 per share.
Management further estimates that Crest could contribute between $0.04 to $0.07 per share to Realty Income’s FFO during 2007. 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 on a comparable quarterly and annualized basis.
The Company does not intend to provide estimates of quarterly FFO amounts. Absent changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimates for 2007 have not changed.
About Realty Income
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 December 31, 2006, the Company had paid 437 consecutive monthly dividends throughout its 38-year operating history. The monthly income is supported by the cash flows from over 1,950 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.
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, whether the announced pending acquisitions are completed, 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 Crest, the Company’s subsidiary, 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.
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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