O - Earnings call transcript Q2 2020 | Realty Income Corporation

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Operator

Good afternoon. My name is Keisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Realty Income Second Quarter 2020 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator the to turn call would Mr. over I Realty Crum, Associate of Director Andrew Income.

may You begin.

Andrew Crum

for today of our joining second all Senior Chief you Thank us Jonathan and and operating Sumit President Pong, conference Finance. Executive be Officer; quarter President, for results call. Markets will Discussing Head results Vice Roy, and Capital XXXX Income’s Realty

significantly certain securities During this results from under be federal law. considered any company’s may matters forward-looking may conference call, the differ statements we in discussed forward-looking that will future The make actual statements. statements

greater will disclose XX-Q. the We cause may such in in Form detail company’s factors that the differences

We will Q&A order to call, be turning in observing a to get when opportunity they of the the question portion everyone two participate. to

ask I questions, the over additional re-enter Roy. call the to will turn our may queue. CEO, to Sumit you you’d If now like

Sumit Roy

like face everyone. towards to by Thanks, the in my I’d current business. drive whose our my appreciation remaining resiliency colleagues, Andrew. to and determination pandemic continues of gratitude productive and to start Welcome, the extremely expressing

are COVID-XX partner to employees mutually individuals this businesses communication beneficial by through effective with continue we working have collaboration clients we and all one while team, concept and the remotely. impacted embraced with Further, We our to and and empathize outcomes. seek

results occupancy portfolio AFFO share a of per for to demonstrate ended our generated we quarter the XX.X%. quarter with operating the Our continue of $X.XX second as stability and business resiliency of the and

invested year-to-date. invested quarter, to million brings in which in real the us the high-quality estate, including During invested internationally $XX million over we million $XXX $XXX UK,

us with financial debt-to-EBITDA Our end flexibility. ratio quarter well end times net – positions significant date of forward going to X.X

to collected of which on And May to of the well. we steadily leased have pandemic, perform July XX.X% low as our real contractual primarily continues quarter. in Rent XX.X% and retail uncertainty remains for estate the industrial since collection second of a COVID-XX tenants XX, While hitting focuses due to essential has owning rent business, improved.

investment-grade-rated capitalized contractual We real clients. further have of well collected the validates XX.X% estate from of high-quality to rent the importance portfolio large, leads second tenants, which quarter for a

While tenants credit to objective, reliable as economic tend investment-grade-rated provide of prioritized primary streams months not we as periods the the high-grade tenants of during have more uncertainty, few have last proven out. historically income a

theater, which the second quarter. For and second be rent, consecutive we restaurant Uncollected industries to July, collection XX.X% rent fitness of industries since began. pandemic approximately the continues the contractual represents collection improved of month month and collected for highest monthly of during rent of health have as and rent uncollected these the rent the in primarily the XX% account

basis. as Importantly, we negotiate the continue percentage disclosed financial case-by-case continue to to supplement uncollected agreements and We of on we deferral a collect vast collected our majority in contractual of expect rent to industry. rent rent consider by

the box and industries, constructive the of largely each these partnership produced second the Our restaurants due to sell all U.S. of by but tenants challenged by stores, the on fitness We in theater verticals. The office of has industry all-time to with success tied of guidelines, such store from convenience the in for Other the collection to industries distancing months. industries: high our stores, theaters, as all quarter. Hollywood, social almost as stores revenue. and an and reached quality and and the stores, health drug rent rental contractual recently due dollar grocery top rent closures us the And have XXXX. top of films viability been particularly remain been industries, we in these given as have approximately XX% essential are operators encouraged received these recent long-term of four we goods represents and each improved of

business economic going for the forward. to the theater remain in will continues model attractive view, our distribution suggest, studios channel that Additionally,

also the particularly and price as health the certain begin service to of point their low businesses support and the capabilities, restaurant propositions fitness their quick reopen of non-discretionary resiliency and of in paying expect country. rent areas We industries to

our As is we and is company’s we to continue support advantage of our operations breadth to competitive asset department, long-term largest key manage and depth portfolio real estate the believe creation, value our competitors. management vis-a-vis our department, which a

of of transactions. tenants assets from tenants. We generated of a quarter, invested approximately and X% initial XX% $XXX with were invested in to industries. to the states X.X% cash properties retail XX.X eight and during the cash total of properties in second and with first located quarter. in XX These average total of XX.X million leased second the at in acquisitions volume of $XX United years. approximately on term XXXX, sale-leaseback years. investment XX cap were during invested cap and XXX% the initial investment from Kingdom a million weighted a On of tenants. activity million X.X% quarter the rate a we average rate weighted were Moving Of quarter average discrete weighted quarter In are transactions XX $XXX investment-grade-rated domestically of for a weighted average the lease basis, a revenues approximately in XX different during revenue quarter the second at lease six the closed term

quarter, a in million and total lease of average cap remains of $XX.X opportunities was X.X% Kingdom with properties Of lease volume X.X $XX.X the average $XX million quarter, the the was and the cash the years. term during of average second weighted XX% billion opportunities a initial initial Year-to-date, XX% $XXX XX% in billion sourced at in billion UK or XX.X opportunities. weighted these and weighted Investment-grade rate XX average $XX.X in Year-to-date, initial assets. the of the XX% volume invested opportunities we billion opportunities. million of billion rate volume $XXX the opportunities, a Of Of investment a second term internationally transactions invested approximately industrial were for with states and were On $X invested portfolios Year-to-date, of approximately XX years. XX.X years. approximately in were Of industries. X.X% tenants the in quarter. were in revenue acquisitions of from quarter, as portfolios of XX sourced quarter. represented rate we second transaction one-off different a opportunities basis, we’ve $XX.X and assets. quarter, sourced $XXX We XX.X and potential Of the at retail billion represented a sourced initial was for international one-off billion independent the generated sourced and and XX% XX% lease XX% billion average sourced approximately term were closed two average a million During were XX% located in was $XXX XX% rate of Investment-grade Of properties transactions. These million with billion were the XX are invested lease cap year-to-date, closed with a weighted flow in weighted United cash in assets. to and six $X.X opportunities of during at $XX.X $XXX a $XX.X a X.X% second cap located domestically UK $X.X the cash opportunities. tenants, sourced the domestic from total acquisitions in XX% year-to-date, the of of and year-to-date. invested in properties sale-leaseback leased XX cap domestic weighted weighted in investment-grade-rated years. are year-to-date the approximately one-off initial average of cash term revenues were are XX properties X.X% X% weighted assets at are transaction. internationally healthy year-to-date Transaction located the from international million average

quarter average weighted basis our approximately cost weighted capital. initial of XXX to investment cost nominal define averaged our the relative average less spreads of year investment cash as capital We spreads yield points. first during Our

XXXX financial range guidance are to $X.XX we our and investment acquisition robust, pipeline strong a with forward, positioned Looking $X.XX with Accordingly, of remains are flexibility. we reinstating billion. well billion

to on Moving dispositions.

During This cap IRR XX.X%. we an proceeds year-to-date unlevered a the XX IRR sold at properties properties sold realized of $X.X realized X.X% and quarter, of X.X%. million rate to unlevered net of cash net us XX for $XXX.X we of an brings for million and we

in X% Our revenue. our largest industry comes tenants of well our type, XX% Convenience rental from of Within traditional tenant, and retail service and/or business. at properties is Rico our property cash approximately flow. industries geography component point states, tenants retail our Puerto low our our of outside and in remains different is properties approximately largest revenue. rent to The portfolio by at UK. located XX% end, Walgreens a rental XX at the diversified our to rental revenue is to properties. remains our retail industry, of the XXX XX% of which non-discretionary with tenant approximately stability quarter stores their price were portfolio, largest of leased XX component At rental XX% overall contributes from industrial revenue.

of been not We continue and more to climate, majority of believe that relevant today’s recent these been have have to economic to effectively possess e-commerce. retail tenants compete where bankruptcies in our U.S. do industries environments vast characteristics. with the particularly a factors operate These in allow variety these characteristics retailer in

a about the credit quality the quarter. properties coverage consistent on times. of the is approximately weighted median our XX.X%, tenants. revenue rent our is retail portfolio was average good We half times properties X.X on The generated in continue while with prior feel number annualized for investment-grade-rated from to the Occupancy with rental the based X.X of basis, four-wall ratio

During of expiring the properties, recapturing the released XXX.X% XX rent. we quarter,

XXXX, Since over of released. in XXX our of sold half listing recapturing first rents. expiring, properties with or were we leases the released those expiring released on XXX.X% have properties over that During X,XXX properties of XXXX, rent we XXX% recapturing

X.X% Our year-to-date. during decreased X.X% revenue same-store the and quarter rental

the restaurant over partially during the Our same-store rental a includes industry recognized well methodology, lease be by rent percentage than paid. decrease rent we The to we primarily reported is existing same-store that the deferred during to deemed in as it due change in and collectible now the it is write-offs, period as driven are recognizing in accrued term. growth is unpaid we rather period have as revenue rent

financial income for with our on detail results additional provide the I’ll statement. starting quarter, on, Moving

G&A revenue as rental Our X.X%. was other a for and quarter the expense percentage of

$X.X of ratio our X.X%. former was Our departure million year-to-date to severance G&A CFO, related the expense excluding approximately

We G&A efficiency the continue the the in given to sector, and reflecting best ratio in our to size. have scale REIT lease us class lowest our afforded benefits net

rent $X.XX or rental as share periods. $X.XX, year-to-date share quarter Our a during and a property Briefly we basis that includes quarter only A deferred maintain lease to the of approximately earned REITs being turning the both unpaid least $XX.X a have revenue and expenses and million we the was deemed of AFFO and ratings. for at sheet, and probable to percentage of the term. X.X% collected continued the remain per with other non-reimbursable of conservative balance structure capital two per was during on handful our existing during diluted period fully which

quarter, just effective we of within XXXX $XXX of $XXX to the $XXX million quarter an add blending the issued During million senior subsequent maturity maturity yield of of out effective an million notes. of due for notes at X.XX%. yield end, entire to to X% we And to additional shy X.XX% unsecured

We debt. fixed program. the equity ATM quarter, Additionally, charge times equity of well-priced debt $X.X we coverage $XX.X capital, ended the X.X net million but primarily have Year-to-date, approximately adjusted million leverage through of raised with and $XXX we coverage X.X ratio raised during strong including of low our approximately $XXX and and times. to of the over EBITDA the of billion quarter ratio of metrics, million

cash approximately of provides continue to our hand available billion $X.X us under and on significant liquidity of XX, revolving flexibility. very credit with July have We strong as $XXX which facility financial million

maturity shape, years. in average of bond Looking forward, schedule debt remains a excellent is weighted as overall X.X a maturity

the In is have XXXX. low our in coverage Additionally, in summary, continue liquidity. of to our June, metrics we coming company’s time leverage, history. the increase great million $XXX for shape we In we in balance debt through strong have and and ample dividend nest XXX sheet due

REITs the Index, XXXX, increased of Aristocrats of a dividend X.X%. approximately since have S&P the dividend listing XXX but three year increase to company’s in year at are in proud be annual last we having average And growing the our We years. XX rate the one only every consecutive dividend the compound for every Dividend

high current and stable driven a environments. the to so with do and Moving COVID-XX. non-discretionary as business the of a variety large deliberately with goods portfolio on focus generating point uncertainty or on, who leased primarily we economic We with by leaders economic we low estate services, partnering resiliency providing respective designed cash tenants flow through managed industries. of increasing have price a quality or their to focus on are well-capitalized as operators climate real the always well And continue through in

the Our and our ratings up for it by $X.XX billion. liquidity a going and financial our this favorably we At strength judicious financial range management to XA with Operator? guidance time, forward. billion of XXXX I’d balance are credit acquisitions $X.XX flexibility And sheet and growing positions open to capitalize to and questions. of opportunities evidenced current have like reinstated us position

Operator

Deutsche Shivani Sood from [Operator And Instructions] comes first your from question Bank.

Shivani Sood

potential investment out buyer that pipeline, the mostly just you’re I private terms it of curious, in of different there has taking it for terms it portfolio the I’m compares how to the of depth been larger thanks guess, on for transaction? the in public seeing and competition. is And question. pre-COVID or acquisitions, buyers Touching Hi, levels? pool

Sumit Roy

And way Shivani. has that is, very question, I rates product, fierce. retail vis-à-vis high it for for into a translating cap in the Yes, that product The the competition to essential levels. tightened quality it’s say would good fact, pre-COVID it’s answer remains

transactions given net But terms this that that to quarter expect of in companies we that’s today. more pursued what announcement, tend in overall to product And pre-COVID. an less. many that comment buyers, second least recent very say earnings at the going is we’ve did that space in of would so And over the the the But heard quarter to of don’t in be I recently, public looking change. I second strong. number buyers we see number as and be public continues we at as potential lease

the institutes side, walked international the competitive. for away we we’re in to very of been right time of transactions because with strong. very, very buyers number competing On pricing the however, private the getting most where continued And and but have there be us, of down from fact, has were fairway that occasions

are that would to that pursuing remains general, competition the the expect I sooner say So net are now. I going in stop most we the playing buyers that strong all of products that in space public and lease

Shivani Sood

that those of U.S. you. a investment reinstated as then And the terms UK sourced in the follow-up, markets in be volumes more suggest could versus investment to that guidance, strengthen Thank the the UK.

Sumit Roy

been overall pricing. think of opportunities Look, the for to I of given the the the continued anticipated that European to is growth has originally went – well you’d at be has we when about acquisitions, you worth transactions. Sure. strong I’d take our above continue was UK that of $XX were internationally. sourced very all lease us. to looking disciplined billion, chose look $XX that what to million There we And if market $XXX approach outside and had we the a into UK sale back not for of And numbers, market. be of the pursue sourcing market billion say criteria source those basically And

The well equation. are we side relationship sale it. reinstating of so is we in on currently seeing lease market. the a and acquisition what the that markets. off to the have on product sourcing sourcing testament currently plenty one of would products, the with a in U.S., the that as numbers why our we guidance remains side testament reason of even And tenants we as our very strong equation, the here felt the And to is I say both remains the comfortable the There international the that back discussions have. pipeline our on

Shivani Sood

Thanks color. for very that much

Sumit Roy

you. Thank

Operator

And Crossett our from Nate comes question next with Berenberg.

Nate Crossett

me? hear you guys Can

Sumit Roy

a There’s can hear you. but static, bit of we

Nate Crossett

if I’m guys into you tightening just you’re high You and it. maybe product. the seen you’ve attractive wondering lot considering have some it mentioned guys for this of some selling a capital that are elsewhere. of pricing that guys redeploying you quality Obviously,

Sumit Roy

like like business being has rates the to that decided assets where less the the were proven and if take advantage and trying Doesn’t create side and some partners having and and looking history the cetera. help for equivalent et hold and with create on case, we and sort unlevered but on are looking products of would we were the continue I’m opportunistically, that the the those first based deemed always value tenants. consumer time play the assets of these terms. assets back the our to, and bit XX% nominal to that business, quarter, But we been assets it with own of our we But other like philosophy opportunities. of has generate we out our will that discussions we that our market facetious that, onto to them hold is, the idea we the our we also buy say market address philosophy out be their a in of being let’s value whom assets that potentially selling to to tenants to to will or work sell we cap when back. whom But there. with that’s proven electronic we volatility has at of objectives, not that are work we did IRR Look, sell believe And critical, forever, low to to our won’t able

work continues for our with be minimal it invested we into our get especially, capital zero in tenants. leases philosophy. And to those create will to assets. that long-term And very to continues Let’s if value,

Nate Crossett

just wondering, little one mentioned color I is The much how the of much pipeline, on that is $XX UK, was it retail sourcing, give industrial? you just versus could of on you retail then in guys helpful. a That’s how And industrial. then if Okay. same the just And curious billion versus

Sumit Roy

the our would on is vast on. We we Nate. between focused industrial. much majority of I to And seeing Those retail. two say looking industrial we is the of anywhere not only industrial right the products something retail are that what I XX% very to that side. XX% that portion XX% side no sourcing say, to It’s are are say to Yes. is But would at of now, we XX% not the on the really it’s secret. the Look, It’s going be grow to ledger. are are asset type. want we

where if our fact to relationship made a that is flow cultivate good plenty our concerted with participate And with what’s cost is the of continues have available. on the from potentially industries in We we And us relationships starting There of would generate some longer we grow who four no in to able this sidelines, and we terms what’s product of provide transaction it is product that capital a effort it of be side to take and not to little the want itself shape folks, ago. very business, but a were the in that quite keeps to being product. months was operators that constraint are that to love the us could with with. bit

split. And is it’s so XX% XX% XX% XX%, the to yes, about to

Nate Crossett

guys. Thanks Okay.

Operator

question Citi. Our McElroy Christy with next from comes

Christy McElroy

and on so follow-up Sumit, capital a on balance raising. you much. thank Hi, comments and comments sheet those just your

desire at your but equity on just did earlier issued capital tend ATM, you conservative more year of raising more an raise some or of do run leverage you terms a in the deals. this to you From recently did you these to Just debt, standpoint, level. a

more doing equity expect about a context and just deals think the your capital from funding should further of of cost you as in raises in standpoint, you terms what mentioned of we So guidance?

Sumit Roy

why equity very out But with leave And we continued to had that you where the of have, – question, side we our guidance and within in necessarily conservative where be a good of the capital to markets, have. said the allow we the if have continuing Christy. hope Having to the to continue deem as lean do improve with the that we information agencies balance we a to We markets. opportunistically, situation, cost markets positive was to A line under had the a to levels in entered that still of what to capital that’s enough and we coming ratings to get operating debt stay results and that equity within created will to lean that. ratings. equity don’t deem would that, Part the side can March, that is, equity to still rating could happy lot and XXXX having would midpoint have X rating on raise the we equation capacity than what that, want needed our as equity we would reason being of with a our which is raise large on of to of the point stay on in agencies rely did believe will get capital. we continue leveraged that our we post Yes, sheet market I the that seem business corrected upon sooner our the without the support our

we where that’s are. So

Christy McElroy

to just then follow-up on on And your comments theater.

ability on paying that and light recent theater operator’s thoughts pay AMC that could kind of how two model, that then could deal what they’re really, changing of the of economic follow deals view. things you are terms economic ultimately turn in talked and of non-payment perspective, And from theater to about just the much rents to that in in into vacancy universal your model today? Just your the the rent other of broader a

Sumit Roy

just payback that signal the into These that that the Was have a seeing. in office that conversation have going we is and into of the agreement Universal XX% with Yes. to deferred is rent start the July, years. good receipts thing the entered the to we’re regards within us And We’ve longer. what advantage good of that we’ve shared that get paying very an the And Look, to to were they’ve AMC. we blockbusters, AMC. enter We’ve The rent with But same XX terms into. AMC. about – rent us. into of going to we talk fact the you’re It’s started they was first XX% able that fact the basic is pick July. the payback is generate with be premise the the we are for which for Look, they signs. month They for a three the this. days, a And to month average they weeks. can them seeing XX% entered doing to of of with agreed going first able the have to let’s revenues. us the believe the on entered up agreement within that box AMC, they the X.X to they’ve were payback be paying partial phone can with

entering economic PVOD them that going actually comfort. of revenues basic this source of an the revenue they would into that share of believe cannibalization the is another the also is two release. was the gave parties. sort PVOD pie there be So in will that the fact movie to agreement as only they increase after for get stream first advertised And premise be theatrical significant since weeks the that of the a didn’t both But

And based arrangement. the listen, our at we’ve information creating profitability believe scenarios this run AMC negative tell, own be has X% to the time corporate on at the And X% of will that either level, we they’ll shared. that, so

an confident help They least the showing enough for agreement all the we more have And okay. we rent so of at obviously have on But independent through paying they’ve openings. started paying – to they continues if our thesis where – zero we the more us. But support started some have see. But they’ll to that they they they’re AMC that start they And is ask that XXth, theaters Christy, that’s partial analysis, entered should Based rent. we’ll unable this scenario theaters a is for even in continues July with the And the of grants. to course, into of $X.X feel November, that to the slowdown month different will primarily own month we way they’ve of might be that then a on and think fine why if are come out, write-off up chance open like shared which are we analysis the quarter. with of would us, down doing there’s come their are currently. August this back or the an that took shut we that theaters. more which Then reason second opening and to and basis, million for as is month

you look we our a but certainly going So if of percentage believe sound at theaters an we continue is business portfolio, in our of constitute. overall overall to that this from is are terms forward, should industry what perspective, revisiting theater the portfolio business,

Michael Bilerman

But Bilerman speaking. Sumit, – don’t you Michael it’s

landlord of have, value that thing, a you lower This the the cap ultimately revenues or that they a feed the share revenues theaters, COVID XX this expected. was my days the the issue goes I don’t that now am nobody is just don’t when that that we’ve change was So rate stream box right? in to as are of are a revenues to generated be? be with box producing that Putting the there diminish to aside higher whole from So going right? not is doesn’t you house, what increasing. used the rent? Universal You a percentage to and movie to – have it XX PVOD Just the this And shouldn’t original to which in that had going a because a in massive own, certain industry it going box right?

Sumit Roy

And the other that to here’s to math want Michael, at listen, And all pieces actual theater putting But is think movies, if and that migrating for the the these where generated might And And look vast the towards. But to you’re the at EMC, associated the for for the be more profitability contemplate. numbers, less generated we potentially et studios, PVOD, a piece case. continue not us are Hollywood revenues that popular, pencil are are movies And be The that is Yes. I versus generating turn trying perspective, that out being which I of movies if these from in exactly we I this as think you cetera. maximize math that it studios. theater with The perhaps blockbuster it something that the to that a comes arrangement majority corporate. are and are potentially revenue getting we is will out even run is lower for right. only. the not their shown of going is profitability to to are PVOD box that by be way do of from PVOD XX% budget, big how theaters. is more maximize tends XX% to better much piece quite its is to

is be in tent the able theater a at the to be content is And become better the healthier. Either but more very movies, generate on really, this that also the the had, we’ve But better theaters corporate potentially and generate the this should is home translate conversations, at idea going the to or least, profitable, allow here so They’ll some based thesis. make And studios big and that it to industry. become least participate at should level. for upside. to able studios movies to

Michael. concern, your get I So

are and this very this all how see We following of plays we’ll out. closely

Michael Bilerman

Thank you.

Operator

Nick from our And comes Yulico next Scotiabank. question with

Nick Yulico

portfolio any the McGinniss those acquisitions, about inclusive how of plus level deals. underwrite $XXX Nick. you of on And exclusive Greg transactions is in million tenants and more with do or Sumit, to the ability guiding leases environment? think your uncertain potential This of number given this

Sumit Roy

Yes.

our even So will are you’re equity, that continue we about boxes. we feel super to all I but cost transactions where chase us allow believe the today, cost excited we of otherwise think Nick, overall checks not capital still of to of our

real half, the that pipeline. we being X% was where on and volatility confidence pipeline out get able estate two terms on we based we that, that benign. under And on have changed. want able to and having, we’ll the $XXX we And confidence industries, was earlier months. started asset type. In to those the to billion fact us the quarter, to the in on that day saw gave the over to be And put that a us the today that has able our acquisition of hasn’t numbers What created, not we operators deals and to in the $X.XX be out based And X%, within gotten a It that number. want be that industries, to that say, the to we million the acquisition our the in more are could of the number the stock a we’ve inbounds billion our bit last really ability and gave go hit move $X.XX discussions three on changed do to portfolio fact focus leveraged. to seems

to which just lean We considerably on allows to think equity. month. And equation, of stack, to is biggest on have finance able be us seems the the component have to I normalized most earlier can the acquisition. since our debt volatile rely our of side the of capital not it

what with likely that a having go we optionality a So be us number feel that to to out to is obviously confidence need. gave able

Nick Yulico

Okay.

portfolio at deals number be the So included within the may this point. guidance

Sumit Roy

Absolutely.

directly. Sorry. That’s I didn’t answer that correct.

Nick Yulico

white looking assets of little on removal look Shifting a types given go have to acquire? expect that just plan. by gears you after or maybe the business to exchanges the Thanks. polls and Would measurable Okay. a tax XXXX you of kind to impact the bit, the exchanges presidential current the

Sumit Roy

you but much use business. the yes side the quick the wouldn’t maybe I word of do expect margin, have on I don’t impact, absolutely. to necessarily restaurant too buyers compete service with XXXX measurable, the an We on

that transactions. of buyers And will buying all switching have not own in we in market. into or of run market. that who in vacant disposition on particular play are developers are to their one we the to tends see tend you who want space, that It transaction, tenants play our buyers assets over to to by off and some the to market. that but suspects smaller portfolio XXXX of We playing Most be market. these portfolios, usual tend own and a even XXXX, Then dispositions be who particular don’t large,

might only we assets off one on a our of to occupied doesn’t that see where overall area the end sending is big So them basis. And be a portfolio. part

Nick Yulico

you. Thank Great.

Sumit Roy

Sure.

Operator

Spenser question our from Green Allaway comes And Advisors. with Street next

Spenser Allaway

Thank you.

Has rent since far ahead of guys any they negotiated paying tenants and/or so granted be run this the any the indicated the deferrals, payback period? back year. have that to In you changed terms of terms original first would tenants of

Sumit Roy

question. Yes, I’ll answer actually your – first so

Second tracking if at when pretty a part came Today, recall, It’s rents with Spenser, today. it’s monthly with originally XX.X%. today monthly collection similarly similar up XX.X% of been We’ve at it’s we and basis. XX.X% came first your okay. out much me had we was sharing at XX.X% a But And trend. you April it question XX%. with we XX.X%. rented were We information on first, with that’s, for at said our June,

So one some months, went tenants of of and had home. happened what in was we’ve us these who back each made our

were the, the them from the equation. on of of on side restaurant Some

were fitness and data were of June. to and and make decided centers that April, month the of Some businesses, may hold them some health for us basically

part have liquidity they business has the did the million vast leases, because total your So we original into, we agreement been around, to some to that expected than respect term. to the Spenser we lease the of of and alter the an have pursue into that And $XX that’s us better rent the back worth majority agreements make itself which we opened to they of without lease decided what earlier the to $XX entered happened we to entered of certainly the million deferment tenants. is having question, first done of they initially With situation came thought where and/or have home. with felt may these to has about make amendments

able is that stay the view so And as the being main to reason to within accounting these rents. why, we rules different are

to et So sort payback, a we request haven’t of longer or a duration cetera. had

term, have And the that be therefore a entered of and to with. is lease enter modification. the paid into have $XX lease during didn’t similar story expect remaining into any We to we original million we on that discussions back

edges, those lease result the they amendment. of term. didn’t Now are some which – have longer period, rent they agreements, there a the around part payback requested And the where in obviously original have tenants been a deferred which not lease went beyond been

majority small a percentage. been – itself. lease vast without – And that’s so amendments having very has but The make with very, to the to

Spenser Allaway

Thank you.

Operator

Our next Stender question Wells Todd comes Fargo. with from

Todd Stender

Thanks. transaction I if from walked a Sumit, in heard sounds away portfolio the you it you quarter. right, like

cap maybe that if spread, heard was right, a see low investment how of what on the rate wasn’t maybe getting too is sense low there. I guys? just for Just just the that what to you And

Sumit Roy

public amount not there were transactions. Yes. these were to them $XXX the rates And Todd. there million transactions large do Both you’ll to have because yet. I if have and Actually, we speak able figure the to talked that both cap one’s to of are were specific fairly absolutely international would couple that of And you love out. want in a I some about. don’t they be owned. products research,

I points look your we what of we’ve slightly question the million was differently, the points if our of say if made of made at will spread you in – about $XXX average that XX Todd, at, XXX inside we but acquisitions. basis – answer is history spreads I’ll basis our So look which making, spreads, you are

the to lease you lease look from confidence will terms take XX operator, a level enough businesses does that the their but it will types to risks positive are these a continue And so post these lease these they of we these are some not if and the high not investments, point businesses account justify the a one you are want the of feel day the you that make uplift but initial through tend these to in at operators years. yes, only industry, at term, into operate be point, though, to look initial willing smaller make XX spread, and to that inherent years I of to which and is, make having very not of term, investments

So we – basis up point done we’ve – spread. have of to XXX but

won’t willing spread but which So go. we what we there are has to been, go is our average of a south certainly beyond point

Todd Stender

dining growth, looking have look it, out at wouldn’t sure degree, that, revenue the Thank flesh when casual QSR? but okay. you. missed And the quick created restaurants we happened but the hit. what what to I not Got – I’m I there biggest is service if just within but that just at guessed maybe same-store this, maybe

Sumit Roy

Sure.

BK. but this rent. and we But been that our chunk fact, are there another one continuing a operators of threshold, confidence. name nevertheless, that off. feel is that list constituted paying those we so for that One’s year of And of So up end meet to the a over that confidence doesn’t quite And of rent, now. XX% write on couple decided our did July watch is a same have that biggest we level collectibility has one NPC they level the to filed write-off. don’t it’s And just pay we in feel like

those piece the constitute – that’s write-off. the are QSR of so names the And that two

Todd Stender

Okay, thank you.

Sumit Roy

Sure.

Operator

And question next from comes our Massocca with Thalmann. John Ladenburg

John Massocca

Yes.

So of was prepared to and driving deferred? and agreement? apologies into how deferred And if rent much as I how an the but remarks, the look portion July, much this any subject uncollected industries there you missed it this are in are that of was was not kind

Sumit Roy

of are have or that to approximately our you, the i.e. $XX.X XX.X% negotiations that terms of million $XX.X XX.X% is have midst penciled. place. we in There very are shared for off. we remaining in million with uncollected that of are terms We did X% completed with the that isn’t agreement X.X% close in rent was or shared written you in the of that negotiating. being And then an is that X% basically what What remained quarter, with that are results that share not second I collected you July of the negotiation. our the the of John, for XX.X% Yes. we’ve uncollected,

So XX.X% didn’t – collect of are the those we the buckets that that’s the that second three quarter. for

reduced of haven’t will numbers, – because some uncollected, month the line. share of a being we But have what X.X% obviously, we that July, what’s gotten of has negotiated, for the those But later shared information the at those those We breakup bring number there. the was over negotiations will – that the finish date.

John Massocca

about And that commercial and could health Okay. operators increased do seen fitness. spikes this came I portfolio, do impact not kind of your question that take with And rent I overall and restrictions kind how into place may or collection? initial you to as July? Have then on go August concerned specifically maybe towards you of in regards have guess, guess may pandemic even any any that regional you saw

Sumit Roy

Texas, of was, Yes. just a concentrated health How the started continue Look, basically when in But the have of asked different there the very to reclose, were thankfully, down, this even out, to to go all throughout other largest operator they of clearly, And the us. July. July California. of end members people potentially rates agreement beaches of were unwinded one potential states, in the close of who the be fitness one And the with California where and fitness et the pay number to we the very we an that. was and them. and month were all in of restrictions in to an from this place Arizona, out place. in in felt and on on the was at and have was clubs, the July there are slowing while to beginning the playing – largest was were And to up clients negotiations two playing small Florida, in more restrictive cetera, of has continued not Texas, the openings. outside of bars in unwinding rent Florida, if like where the and stay – with terms of visiting pandemic health could of they things in And our contraction

that’s this some does slowdown the to operator. have not if a us an occurs unwinding that is of to look, mean if may at heard possibility. us particular as there we not openings? back real talk happening Yes, And of But was today, that and So back time. of least or the from come they it

– and rent. ended the July paying by up way, So they

of of our that’s as collections the XX.X%. it July been as has reason high So in why part has

John Massocca

the and quick clarification, period that not who of tenant of July the July? XQ just rent through negotiating ones a with rent, paid entire have pay And point you’re the the

Sumit Roy

Right.

ended of top So all largest two through. part we that operators – paid And the up of rent has us one our the other July One XX. paying rent.

John Massocca

very me. Okay, for Thank helpful. That’s it much. very you

Sumit Roy

Sure.

Operator

next St. our comes from Haendel question And

Mizuho. Juste with

Haendel St. Juste

mine been I have something earlier. Hey you mentioned to asked, there, most of on but wanted clarification get some

tenants some yet? tenants also do to you mentioned paid and/or of percentage You movies? about rents. Can And maybe rent some you’ve you the the say, that for have rents you’ve the industry talk abated moved tenants partial Thanks. beyond, or to have you rents that moved partial

Sumit Roy

been Look, concluded we strength the and of the the three any few rent? around Haendel. whether there us some part independently liquidity for of a for rent rent months? months shape verifying Haendel. they have that not whether pay then them, situation have case-by-case on ability how or equation the but on I deferment that not. these All XXX% has or not negotiations and And Sure, tenants as us we previous deferment their going what for – basis, some think next then most few of a we in was the on make that of the sort we the were where is open, the to of partial what have be their hold and was Should sheet needs of have is to speaking sort to to take? of may with pay months, them Should collected balance and pay next deferred

profile the industries And so business. it’s business, some the about. think them. induced different you extent our the this about portfolio and have have to it’s restaurant and business, pandemic, ones And been talking attached all theater impacted been at by fitness most a it’s It’s the COVID-XX you daycare they the – that health the with we’ve to if look and

at XX they opening subject our EMC Regal. almost improve. XX will of things is expectation up close theaters, in change don’t again, for look start you have we the that, that If for today if theaters But to August XXX% August with the and

care If the other what they been fitness business business, you still of restrictions the number percentage business, look the hit. to a at you of look open. does open, these run than day is as terms Then been XX% partially businesses even anyway. and they can they as open. and most have health some lot of tend or can’t at numbers business either fitness because business you the the these of – has impact and much occupancy more in occupancy of to has of either occupancy fitness day open Because care impacts – continue health have XX% fully health the But it at of partially not occupancy

collection So agreements a types when that we’ve rent. then of profile that of you can that take account, all And of pay entered create for month of into into, the July. the to leads what XX.X% that you which who to translates

cautious it to see partial these reoccur all collected, shutdowns be to I that to start in rent shape of it That get rates. so to I and continues hasn’t subject as what long paying a been think see mortality there that to because remaining Are discussions is going with worse, the But we okay. stable the them going and these the revisited. take? is we are some And and some rates we some months? may what they remain chance contraction is is going coming But as piece the of are that contain, happening to the And of if expectation.

Haendel St. Juste

it Certainly, one off sure to but here call I’m I earlier, have power and your did about with and outages if inclination more. oversea you certainly. Appreciate not invest I’ve And in been this that. talk I missed here, Europe.

past. half investment Last was, that of Canada about You year, your in talked I the believe, nearly volumes.

domestic? we investments on Thank of more risk? that see curious you appetite you. Or here perceive So be your bulk the how perhaps your could what is

Sumit Roy

majority X/X, investments, $X.X year, vast even here the we about $XXX was of U.S. the in year, last million We our the had is the did, in market. of mix was billion X/X. the Haendel, UK Yes. This that

UK, And of that UK we it was numbers be has was had to U.S. the But market in going play of for that the here to X/X, been continue X/X our with markets, expect mix X/X we to into time we of in first U.S. in be remainder. two those entered in has shifted we be been in out and and I the between thought at and shared the XX% over acquisitions was going the slightly UK So what XX% And the to expect that it’s the year. the to remainder the when X/X. going here that has to

Haendel St. Juste

you. Thank

Operator

comes question next our Anthony Paolone And from J.P. Morgan. with

Anthony Paolone

Thank you.

of So agreement. either the your you revenue that with have you’re XX% deferral or negotiating done

what what written, have So cadence look XX%? do just like to way is to par, the the trying been out being plays or – are XQ XX%? everything collections if trying XXXX? returning Is speak. to it understand to it or XQ this Just understand so Is come, these drafted of say,

Sumit Roy

that tenants that seen owed a is given and the and XXX% to element in in metric pay we least has I’m focused that rents didn’t is, start they the every we of what gone months are some that on, I’ve what’s can second of good May not at of good of see, first owed the April, Anthony, Look, And back terms on month, us. by. trending are we have collecting the the that here upwards news is us for gone month of to June. but And news in these trending direction with is only paid

I’m again continues scale, terms possibility here. again." they to in "Hey, that confidence But COVID-XX of back sorry, all least realm have rents been doesn’t come But feeling us that the then then to to us continues shut continue. And would situation I to be that, are of even that are of old rents thing start so of in it? deferred think have a reaching hadn’t And deferment that we to of and all some that agreements and context pay to back on, okay, these we of out agreement. to or our portions in are want Look, XXX% when to the guys amounts I have us deteriorate, as these say, vast we down that, if in to pause give stores are And the a as back talk to and of is given at agreements when the are XXX% happen not the X.X doesn’t confident enough put we the to that going happen place, long in trying it’s soon agreed place, because we of we as collection? as focus that look the that payback is the for to going all if months. put the are trends first that starting of months, pay getting we for month, Because look of you X.X they majority most already at that get

XX-month months the of deferred X.X within and payback rent a is period. Sorry,

to need start few back of months. the next getting it over So paid portions

it’s able being happening to our translate look, to state start run and enough I can plus rent, the noise it businesses far rest And as it what to we ultimately, their monthly deferred paying are the we is some as to to I and call. make to needs mean, that’s operators see. I all feel of important confident rent if each when normal. all so of back but the that, And to in see see their is them of know

Anthony Paolone

Okay, on I tenant. think X-Eleven, thank you. second second then And is question largest

exposure they good say, what very perhaps the on appetite against and more one announced served given right a for week, which substantially Just you like credit, to, you has just earlier balancing being can having tenant comment now. your well that in

Sumit Roy

Yes.

investor want good be within now. we mindful amazing to which what have and presentation absolutely is particular I tenant that were like a store X-Eleven portfolio we very yesterday, was And said can’t and we is some we’ve industry help we able good believe that a dominate they our consolidating our it It Speedway, of their in had overall not The we is XX% are to look, fact we particular in industry. portfolio have a some operator some answer thing – ours, is willing very portfolio. to convenience clients let the another tenant? buy and of If is industry got operator are they of prudent convenience not and that on every a relationship be created nor the X-Eleven. we being it of is – the some let support can it’s mind. my right Having and whom interesting would to we very single-tenant grateful Anthony, and we able industry reconfirm to there to the absolutely can our So stores an a with store statistics, is basis. industry is exceptions good register with make they And a to is permanent business. but convenience run tenant convenience yes. believe a through which And that, a there for, the that we big of business. very an relationship of that, every chunk create. the equal. dominate But store XX% and continues of is in our and going They’re the of synergies a are But

us. that to able the same our transactions So told very and go these Realty this portfolio out be This is Income become incredibly for create on be and to able help risk is at detail my colleagues like clients time, – strong. continues to one and large-scale our of to a do the

are know it, And hoping opportunities to all if don’t portions they of it I it’s so engage if have be billion that if happy in it’s and around that that. But these the we’d to Yes, to identified. $X we presents were have be discussions itself them. sale-leaseback going

Anthony Paolone

Great. Thank you color. for the

Sumit Roy

Sure.

Operator

Jefferies. And Instructions] Linda Tsai from with next question comes [Operator our

Linda Tsai

the for questions. that trend And acquisition function costs. is you investment of does generated one. points Thank and had I quarters? just Understanding mix you XXX this a my how in see capital taking forthcoming do basis How you quarter? the spread

Sumit Roy

me, Linda, we that around you the do right? was spreads were think breaking see it up, but going and and I how achieved don’t the just if that in question second I know it’s your Is quarter we forward?

Linda Tsai

Yes, that’s right.

Sumit Roy

Okay. Yes.

look, It’s cost along were is lines three largely of our during by continues have is trading spreads of were driven And where the capital our in XXX was much it being the done what it. half. reflective – of piece, being of in There’s three a the to we just more in spread equity priced improve. we is second today where question months, where by points. So the the of of the we X/X what today, midst cost the equity months. first impacted of situation. And or from Because the of to should those lot obviously it happened the are our seeing was where that fact basis equity we the very improve if COVID-XX in of quarter stated is these product cost that the the

our so our improve. that spreads expectation And will is

finance to our be it And expectation the to be what transaction? how ultimately expectation in that capital gives improve. that we optionality Our one think able should left I the permanently lean on but particular is I are the us to of seen, is we to terms fact out will continue turns capital just versus the of trap? But to that do forward. source then improve that not of other, that think more have permanent our cost going overall is spread optionality we

Linda Tsai

Thanks.

Sumit Roy

Sure.

Operator

for Income over concludes conference the now to And would I turn portion of Q&A call. Sumit call like concluding Realty’s this to the Roy remarks.

Sumit Roy

business today, Thank going we’ll call. you updated the really all everyone Thank for this orchestrating it. forward. for appreciate joining We on us and Keisha, keep you,

Realty Income (O) 4 Aug 202020 Q2 Earnings call transcript