O - Earnings call transcript Q1 2021 | Realty Income Corporation

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Operator

Good day and thank you for standing by. Welcome to the Realty Income First Quarter 2021 Operating Results Conference Call. At this time all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. conference recorded. today's advised be is being Please [Operator Instructions]. over would at today, speaker hand Realty conference now the to Julie your I Income. Hasselwander, Investor Relations Thank you. ahead. go Please

Julie Hasselwander

Thank Executive Sumit Roy, Income's and for Chief call. you and us Chief President our operating Christie Financial Officer Kelly, Discussing be results conference President, all Realty will results Executive joining Vice for quarter today Officer.

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

We will form that in disclose XX-Q. in such Company's factors greater detail the cause the differences

We will give portion to everyone Q&A be the opportunity the observing two-question during to the order limit of call-in participate. a

you now Sumit I you reenter may If additional the turn our CEO, call would will over Roy. to like to questions, the queue. ask

Sumit Roy

my of enduring Thanks, business like we with Julie. remote our all our stakeholders. incredible while to strategic our effectively who is work execute continues sustained, made express and continued everyone. would partnerships The by the Realty Income have gratitude objectives Welcome, I environment. team a appreciation to strength possible to

As rated expanded accretion synergies balance we've have further with a pay ourselves We shareholders both to with value growth of a with earnings to financing by strategic through of size, which and and capital. and $XX access are announced value enhanced and which we Realty platform approximately meaningful scale companies will agreement well-priced diversification, lease distance in merger opportunities, enjoy enhanced sheet immediate billion. are as believe create and Income's driving creation week, would further leader the a company excited VEREIT, a definitive net reached and last industry combined enterprise

transaction are combined as We drive excited growth future about continuing together to enterprise. a strategic and look to the forward very

Income. for today we first very on Realty will what focus a quarter was successful However,

invested and and continued lanes our to Our our a us variety quality first the swim through size high ability strength Notably, scale in over the in in in $XXX $X first billion estate we illustrate ever XXXX. the of our reason real $XXX first acquisitions grow billion by that first million quarter, of in million becoming closed afforded acquisitions. quarter approximately over the we Domestically, property results highlighting real UK, all since completing by to this in states. platform bringing estate, the total including $X only international we to Hawaii, in UK acquisition international invested investment and to own in US in our

in the sustainable demonstrate of business, and quarter and momentum during forward business ability leverage to growth. highlight to drive continue our the scale pursuit our accomplishments in size Our to our our

serve. our And our of the our I progress environmental, found the we Sustainability tremendous invite for considerations sustainable April, details page our the company's we at throughout everyone changing team commitments, read all of our growth, goals as to to the Realty government benefit stakeholders our our published On of organization through to continues subject In permeate progress make regard our ESG to ESG continue to-date Sustainability with level. every inaugural initiative, to world which and Report, dedication corporate responsibility XXXX I in initiatives. to share social, website. and embrace those on Income encourage listening all Report

the Additionally, marketplace. share updated presentation we excited to to are investor an

philosophies, new a homepage advantages, you fundamental of highlights competitive growth. website, and plan the deck, On key for business which our our future can find

our driver for the pipeline to business. growth a Turning remains for investment of global results our quarter, significant

flow stable and acquire increasing generation. simple. real is We pursuit Our leading to lease seek high resilient estate industries in business quality operators economically cash to in of

our risk, client, economic we comfortable estate platform industry our remain billion we environments. portfolio of of revenue exposure billion. the grade lease over designed the portfolio. real Aligning assets believe the a estate XX%. quality for In end acquisition XXXX mitigating in clients, basis, the continue On over term grade $X portfolio are the equals, the grow first resiliency And lease remaining with acquisitions X.X our quarter the XX.X approximately total which is weighted which XXXX, portfolio client portfolio, continuing to average a the leased from total of through to years. XX% property our our our $X.XX quarter we approximately by portfolio economic our the for total time of average geography, of during of in during estate and was was quarter the invested grow added in weighted confidence variety of Our rated stems investment to very at investment of Key term and with brings guidance diversification real total as to high our we to quality real years. to quarter,

in XX comes regard different business, low of invest revenue as properties, rental at business, we the compete estate industries point non-discretionary with believe about traditional these price XX% that clients can Approximately XXX of more our As we effectively in with economically e-commerce. With service over seek operation quarter make properties from revenue. end, component to industries. operate our rental retail resilient characteristics portfolio a to real and for or retail while who industrial of generated includes our XX%

acquisitions client quarter, stores at convenience industry stores. our rental grocery industry our remain largest of during revenue. revenue, the X.X% were of at such and XX% of represented our largest As remains rental Walgreens the largest

lease in Our efficient. focuses the market investment on believe is XX long-term of basically commercial freestanding We single years. philosophy properties best-in-class to acquiring primarily excess leased net under unit clients agreements

our Cap not lease for leased of the term, you aggregation or quality acquisitions of real As rates, as quarter alternative rate initial of reflect we've rent the quality know, but is client estate by coverage X.X%. of use the average average fundamental of high an cap assets operator environment all during Accordingly, in to competitive relative rent to economics, estate. real credit our factors reflected their a first sponsor, the to strong many the the including seen market, such, operators. cash limited and

to investment allow stringent be selective highly criteria. fit opportunities us scale size Our pursuing in that our and

This of quarter investing X% the transaction of reviewed. and $XX billion nearly prospects sourced opportunities, ultimately we in sourced approximately

our pursuing even assets. Additionally, the highest invest of accretively to capital when quality cost allows us

During basically assets healthy the entire expiring our first us relative of weighted through our investment points. leases spreads the capital quarter acquire to of and rent quality basis our the maintain XXX flows allowing level occupancy. on lifecycle were portfolio, to recapture of cost of a average The we

XXXX have XX contracts, XXX% expiring leases, During was of or re-capturing at the units, in executed our on Since over expiring re-leases rent sales and occupancy on XXX.X% over rent. XX%. those we of listing re-capturing re-leased end XXXX, quarter, we quarter re-leased

on with located lease triple execute. of with million. the way relationships. O'ahu. car us term. island to large lease instance, which acquire often the we assets execute in opportunities to leaseback Our sourced And In ability we new can are size example serve initial to closed in one All are XX-year leaseback $XXX scale as we stores through fall existing establish is this partnerships an and also transactions sale XX but petroleum scale sale The clients, under partnered primarily convenience the properties an attractive master well for of with XX afford main Hawaii agreement net best-in-class locations, all many excellent transaction an located approximately

improve were ability transactions we in which expanded of leaseback Realty buy the This bulk, leaseback VEREIT between our to in leaseback will positioning competing lease all portfolio quarter, The acquisitions Income sale fragmented through about as execute large merger XX% when close capacity our industry. for scale executed or net and transactions. the enhance to transactions competitive

we competitive to advantage. one-off at prices and have is a the to ability As wholesale articulated, previously a market at discount the buy

for often the fully large for the we of our would annualized or particularly a buyers industry have create rental of client $X.X are transactions, concentration a We wanting competitors. otherwise for Proforma approximately transaction, billion portfolio untenable revenue. scale closing those will of that handful issues

industry, to By on X% international billion creditor will size. continue X.X% our $X our every exposure to to to approximately around based through a of single scale, that leveraging we and execute our creditor industry current compared effectively increase our size by For platform. acquisition

our Fundamentally, seeking economically high-quality resilient leased curate replicating industries. in to a in operators UK. healthy leading business acquisition portfolio to are have volume strategy, We the estate real we U.S.

total UK, which Our the more than acquisition first first us transaction brings the in quarter volume $XXX million investment improved acquisitions international of we in total UK to since billion volume the in XXXX. closed approximately $X

originally anticipated. even Our has International quickly pipeline more than accelerated

of acquisition International truly expect is nearly quarter. that we volume volume one the and U.S. incremental during quarter's to XX% to our total the business A represents grow. that figure This investment

to Now Christie I'll to over updates. pass financial it provide

Christie Kelly

net company of the for and financial the quarter. largest the the equity the with REIT the start announced recently to is sector. I'll largest largest market expected move Realty REIT Sumit. merger be our XXX, REITs S&P you, U.S. Upon Income VEREIT, some the the background net terms in of capitalization. top only from enterprise lease by results into one XX then high-level in We're closing RMZ Thank and sixth value REIT in [ph] with our lease

to capital favorable. to and the scale, access permanent afforded billion well-priced financial and when multi-currency our balance agencies rating us ample conservative rating us by size in most revolver with allows have to capital a Our and major are grants our strength the raise long-term us sheets conjunction $X markets credit that opportunistically

near-term $XXX During raised unsecured active coupon $XXX the attractive issuance redemption In our in income offering take equity early by global each for approximately XX-year tenors. of in we to pipeline. XXXX which achieved investment completed December of we This five of fixed year reduce those million risk pre-funding and of the primarily rates was offering the $XXX our REIT to record of all a dollar low quarter, the through U.S. financing notes our rates XXXX, overnight a an funded our sector reducing due while senior market, through advantage risks. million note, borrowing redemption tranche of through in notes dual X.XX% financing million, January

the our quarter. business times at balance remain conservative X.X this charge And approximately equity with the report, on to pleased one-third XXXX coverage $X of and dispositions availability of on for $XX million end cash during our a funding all-time $X.X I'm ratio, minimal, of pipeline. times our At of with active or net we maintaining excluding over $XXX providing debt-to-adjusted our and on quarter. and facility, through program, debt As paper program commercial X.X credit an fixed facility. $XXX sheet. a acquisitions the hit billion only the We full end of of and billion under contributes our debt basis, had commercial to two-thirds revolving year debt proforma ratio our outstanding result, maturing believe multicurrency quarter, million capitalize the first a impact high our revolving annualized approximately available outstanding times maturities of We million liquidity paper hand, $X with investment near-term billion global has ended credit to X.X EBITDA adjusting our borrowings quarter on

is to dollars we've debt theaters AFFO are rent million cents have we million approximately our total, share AFFO quarter, on $X.X on of the these assets per to XXXX. maintaining receivables. on in business These the currently In standalone During as guidance. of that merger. cash XX this bad and for of basis represent $XX.X translates straight-line of our $XX.X currently our share share $X.XX million for $X.XX net annual XXXX per XX $X.XX reserved AFFO remaining about unadjusted a included we Realty XX assets, in of generated $XX.X of $X.XX rent Theater guidance allowance expected accounting. Income Remember, not million per And

nationwide Cong the increased We the the theatre space, in blockbuster such are Most brought recent as in $XX encouraged release million opening Godzilla by versus films. approximately of the recently, momentum during and generated in five more profit more $XXX global weeks to revenue within two of first million release, weekend, days specifically the opening and million. turning a than Sunday, of $XXX its Wednesday than

are continue pay contractual rent. However, to until us confident these can theaters particular we

to these XX theatres revenue continue a recognize basis. We will on for cash

would for and now year the three annual average providing X.X%. New our REIT like our the to of monthly not dividend to a increasing of the I consecutive And overall. discuss years, to declared dividends approximately Exchange dividend XXXth rate Dividend be S&P as dividend we at business the which compound dividends result XXXX. XXX back every the since would times a now the increase April, the Since of companies XX consecutive year XX when a in member to we exclusive are and company, dividend monthly in per only proud share increased have Aristocrats the growth we every we remiss Sumit. results. Stock York call of As dividends XXXX, growing Index our In past be XXX consists we hand listing

Sumit Roy

Thank you, Christie.

us results highlight believe quarter be highly size continue net fragmented we that. which opportunities the the incredible first a will And our to by position just scale, Our us positioning leased global enhance merger consolidator uniquely afforded our and to to be very the to in space.

Our results Operator? powerful business the At I'd like as it momentum lanes to in open our outlook positive time, questions. existing our through to new strong as for and verticals, while this finding well team our talented grow. which swim continue energize business can expanding up

Operator

comes McGinniss Your Instructions] from first question [Operator Scotiabank. Greg from

Greg McGinniss

industry other exposure. makes an your dining acquiring tenants? increased Hey ADR, exposure Sumit. to to acquisition very limiting be to tenants all of those X% you is seem comfortable with rates What casual which The where dramatically

Sumit Roy

area time fair VEREIT. even that a focusing That's Greg, VEREIT. that out we quarter being the gave Red amount it looking at rent from certainly results of by us And that fact the owned of it equity it turned The fair company to Union. ago, XXX% the it was fourth being to And that has confidence corner is the where year a posting, when an the Lobster. of that privately Red a enhancements Lobster Thailand spent achieved, it looking owned at biggest X% gave paid contributor the is that Thai today a now where is credit in to Lobster versus on Red were amount we --that of

our to like All the casual to Greg Union X% be that digits. here we single number less be than to corner the And represent being of Thai and it's of goal X% dining into low which will a be just the gave X% that basis the with. that used goal us that confidence we overall that, that reduce concept with up the feel the did such high back time to proforma will live single to can of organization, our made integrated today And turned as over vertically being in digits. on us is with continuing like down continue But registered. reduce

Greg McGinniss

Okay, thank you.

feel marketplace much of portfolios in less question, volume Second think following to in tenant pursuing? acquisition merger, And you that concentration more those the comfortable concern guidance? of given portfolios today about Are those do year? issues considered the acquisition very how are you types portfolios now there contribute then already types could potentially each

Sumit Roy

of is, questions all coming transactions transactions. Yeah, size like asked pursue estate, don't there, like our cetera, do, be industry. like it to industry, you you bunch say the that transaction, we for et in that The they I checked a we about the will of there's have Greg. step credit, the this acquisition, can is just But us it other allows the we a operator, opportunity, when talked you've pursuing the we've today, every question multibillion-dollar constrained, like proforma given if larger dollar doing multibillion consolidation week. a somewhat growth, even But i.e. were rent cetera. the et we like makeup like composition, we real we to in our a boxes, how

are to that there boxes this still larger allow constrained to example to past constraints we start everything spectrum elevated, particular I given, XX as these you your have have by the referencing. have check we yourself constrained, shop well But to your that been that becomes. to when types to the relationship, themselves, pursue much capitalized businesses be across we transactions, certainly to it get to of pursue some be And you impacted been we a one into transactions, to the when the larger I'm transaction allocation And the this a those just able given for the been does even details, single their that were by which had ability single and present to want be get in opportunities feel able once tenant. opportunities to don't continue of You platform, months, where your portfolio enhances. concentration stop how gets they in increase that there want And one handedly. one present have do you platform stop the shop, very of absorb

I in to enhance do we yeah, and were, do current consolidation, So, position that, scale. this think that constrained will post to pursue size so that our transactions it somewhat our

Greg McGinniss

Sumit. Thanks,

Operator

Your from next question Katy comes McConnell Citi. from

Katy McConnell

Hi there.

Sumit Roy

Katy. Hi

Katy McConnell

of in assets the your have in update buyer us that interest office with been out as the the gauge those merger? to Could now open you off instead? you And off you spin far potentially that what to sell plan able portfolio on ability the to as deals

Sumit Roy

pool, path with control the types. of all been figure thank is outside business the look, directly, the the the made in clear office by that that we've real been asking those vast which not the essentially process collateralized spin along more But by out inbounds. inbounds across To what's assets it's to that trying Kate, been we days of of asset three still six of are it's office your the and VEREIT have off since we of announcement. constrained you the what's path. is from for collecting majority assets pleasantly very question the our We We're the question. surprised assets true? cross a Yeah, answer CMBS multiple

lease from the are of spin would investment too the calls, the $XXX assets, tenants. to just weighted all been circa grade tell is from announced but in $XXX would XX% information, once happen, average properties, But what's thought it X, XX makeup portfolio. outside gathering inbound So early to of XX% not. remaining had the we off as around the which right we there million is of be six, our basically what's rent, goal real we have That's still million

the to tell. meantime, We down the that that's are too path in it's early great. we to were going control. happen if continue to something And But

Katy McConnell

all Okay or decision whether more any I the Hawaii now? opportunities increase industrial appreciate then the more that the about little you there market to And enter meaningfully can you pursue to And just color. potentially talk scale a there? want

Sumit Roy

Tom how always, We've particular any Yeah, Katy, pursued it's the intentionally have inside don't we come in it's was And not properties ago, there. we joke just, something from quarter. CEOs two Hawaii. this was

Hawaiian. Png underwrote as has but that not it Jonathan Now, us go is opportunity able ways, at of checks really very their we we And our the design to locations, resident the XX certainly and bright but joke to to so able the itself be transaction to partner closed all very it and as to us say finding the transaction. the done. we And quarter. We've lucky right some that that the of particular come we in that kinds their grateful opportunistic, to important And we states, boxes. underwrote happened place. make right allowed that announcements have with the now are was liked, at this business, we out very in that the continued, grand was time right to first in was the presenting Hawaii a be function their wasn't time it There just underwrote performance, it the right just any been

that. for So, we're very grateful

Katy McConnell

you. thank great, Okay,

Operator

Ronald comes Morgan Stanley. from from Your next Kamdem question

Ronald Kamdem

Hey, good quick just for me. afternoon, two ones

provide and been and The you're on you than tenant's could general health digging first have updated theaters as with if thoughts in at the some little how months feeling looking there, rate Maybe ago? maybe maybe have expected. portfolio. in bit theaters? is lower then six the today, on there bit insights of going rates XX verses on deeper a the some Maybe on And would what we a some may little the collection collection into just what's

Sumit Roy

question. list contributor business. watch biggest it's Sure, list the our X%. you that around the for is your Look, watch Ronald, is thank to And right theater

the mean, able that and relaxed, were only in collection you were is you than to the did the it in the largely the a to came which going if million today $XX very in versus it playing social a one business give So, which the today how And was the distancing Japan, feel subsequent China out, here There movie how asked right a of case, to lot Kong. it's was $XX out of the been in theater in back. you U.S., We first tracking XX look theaters. and a about when as Godzilla piece examples was examples point tied. a That to big bounce to theater high example the has in actual by around me we In get also the have much We've that currently better function theater U.S. five the Ronald. generated norms credence be versus we as theatre starting preceded are collection we we is business. lend had, pandemic, the our around business blockbuster And largely proven days, out at well. then. the once first they have to been we we that be the right into feel to reference that the released hypothesis has got which collection I million. feel that contents business to right that done here

close budget $XXX And it's million. million that If right $XXX to around globally, you at make movie look it million. to was the $XXX

open, AMC largely open is open is in Regal lay the U.S. through theaters targeting all roughly still not. late that the May, as up to credence theater as to that to release. to mid theaters. is its Regal being gathered to And to are here content starts largely these continues come million allowed just in, still of $XXX So,

to the theaters near a lend we optimistic in to this theatre we business very term, we've viable our that believe these will industry, do those opening. sheet, the long continue start is a the going to and had discussions genuinely as model we blessed operators, feel these that two function And collection And balance that But going on as believe so, going numbers going through come we're And to with connection be also look, with to and grace going go a to up. of of based viable operators to that operators forward. model we operating forward. specifically their the it's are believe operators, be to is that some going become

so, them terms done. have their And operating stabilizing the we little good we ability more model, in that what a feel if to lend of business give decision. that's bit And our balance sheet, grace, we've about very

Christie Kelly

and remain right AMC it's one but steady collection end at is now as improving. out just Ronald, will only the be in And thing this that as we're are to add And I would the a XX% mentioned really piles of Sumit The on operator's the reminder footprint. Sumit's high is There's portfolio in when optimistic. portfolio we line theater relates quality. of theaters to want Regal and each two But Theaters take of over cautiously the a limited that, in to capacity top our point, the team theaters, is the is to open, that's the our I towards there's of thing momentum, core And May. look Christie. to that, cautiously point comments it rate is it opening that the

then momentum we've from collection XX%. to were some the So, about year gained XX% build and quarter, stabilize throughout we end, towards

recording quarter. And to we more look so, to we'll come the forward when second

Ronald Kamdem

quality of My estate, that the the and quality your question real helpful. can the retail This you question should just portfolios, back be merger. contrasting the VEREIT the going those How understand but to Thanks. assets investor real just that help to own that's Great, a specifically, right? retail of us the VEREIT may in, second comparing your simple piece? think how of compares be was estate of about just to quality those you going you're taking

Sumit Roy

all the ago that of last has got touched they areas we've properties Clearly the over we been which since became it XXXX turned they pleasantly I have would we has years, surprised years large, there by we wasn't one when of that Yeah, would Ronald constructed to on, were the are public. something they do transaction. that XX corner. when isolation and six portfolio, But the quality But say in pursued chose allowed a we was be operators making, all when us and because reason, we're of at an their and what of portfolio of the had, is for trading it they business, there art underwrote a for assets, at the to their were their of to portfolio. especially whatever create of and our value, value we inherent lot industrial discount to massive believe retail that they grateful,

to to from in go X% with the the stores And point have big that would is It want XX% like don't convenience allocations XX% I certain to combination. things like X%, proforma of so, those allows to us which complementary we take are highlight for us qualify grocery they to allows the from they fans because portfolio. other to I our their focus. operators fact are to our This is why,

helps certainly much the on that capacity us theater business, they an so of additional didn't have plus And create exposure.

our is quarters. about exposure from us couple bring last theater to So that over of to have the the X.X% starting adaptation allows been we to X.X% X.X%, that down optimal to closer which get talking

and upside, a the move believe management person and of forward we parties. is on to we with found move the grateful to is for Glenn a both team surprised decided reasons that like-minded his pleasantly which why one we're we forward. genuinely transaction that And so win-win So, main a

retail the portfolio Income into and that absorb to industrial proforma happy super yeah, So, business. Realty

Ronald Kamdem

helpful. Super you. Thank

Operator

from St. comes Haendel question next Your

Mizuho. from Juste

Haendel St. Juste

there. out afternoon Hey, good

Sumit Roy

Hi Haendel.

Haendel St. Juste

market. you Can be would you a quarter, talk this financial quarter you XXXX for rates XX% would believe bit heard in capital low be the would levels, of I talk understand on the We've guys increased that ABS depending buyers I suggested acquisition UK? of LTV cap to about getting year closer X.X% get more the competition. about seeing similar - last XX% X% - are back, hello? financing you're they maybe in mix? Can all X% first to the

market talk you're you out low the sector XXXX? is competition assets industry what can X% rate we if that what maybe, the roll buyers? specific playing Is at? and and for So that any the this pricing on potential looking about expect this from cap in sub should is it to And

Sumit Roy

Yeah.

quarter-over-quarter is numbers to are going function Haendel it a the mix. these and So, of vary largely

If end. lower be industrial are the rates heavily you're to going the to be focus, cap going on

with focus, it are you're general to Obviously, with. will drove did largely that exceptions the But we I at two to rate got on transactions and was area, relationship it you what cap we have rate, cap felt I'm there retail clearly If a London UK asset. making be going highly a good to just we location more we an industrial be was a mile Greater same very last very comments. sought look industrial what asset comfortable One the this owning particular end. that said. it even in the if higher seller at the

single below market the was know suburbs you Birmingham; fantastic a leased of that a credit. rents. Again, it's one in Another to center distribution

correctly, our which to closer really to believe, rate additive feel excluded going our cap that's And I we did rate fourth transactions, I we like we it drove that be UK X.X rate. Something cap two, where to was. would been our X.X remember what was, super if quarter Had those forward. portfolio going where is the have to cap

term, norm. posted that above quarters I in would geography, cap all be those to is that quarter cap a a cetera, asset And a a going So, we've stocks, because still that mix, is, to to yet, Xs the we it's talking that of should of high a on are is Oh, function be it this But to that rate And more challenge. in of that, a we really you it things seen numbers would that quarter point growth going average to right be to function going a for it's lot them is function out in we the of go rate billion acquisition. which second some people not et geography But new the do going billion a done really welcome be dollars. order goal. a mid of don't think the to do function where signifies. X. should bigger focused what defining we get digit a we et lease the mix, here in be slightly We think dominates, cetera. quarter about the of say potential in I first expect higher where that $X into to single things I the But see rate, I've have type, be could do going they're the coming it's found row of to to yielding

what verticals In fact, already challenge. us we've sourcing that talked is which into [ph] markets for we numbers, And are clothes. about not new creating to excited our these about for new growth has us, actual done translating

a it's that's you to that on businesses most after quarter something that yes, basis. we posted, for doing So, lease we of that welcome, the are numbers also for net us, show the But we us to staggering quarter for agree for this is after quarter it number. market with and a us, being capable

fun that the are forward portfolio our we value right posting of that create all that's geographies, type we right and the risk are where the platform sustained to key term. long have the over We rates, we growth doesn't this. of of growing challenge. growing us things all is right doing are with we that And we message forward with industries, operators, our team. And said and assets right that the we So look part compromise is what the for to that's profile. our look And numbers here,

But you do. quite of do. is that to sure I that output I wanted ask that So, that. the sustainability what just know are context it didn't trying And the to to make it answer on we in rates cap what trying is we're to we

So, me forgive Haendel. that for

Haendel St. Juste

improving at in the certainly for appreciate all, bit bit changing that Can distribution put been that bit at over COVID? vaccine you economic is curious willing expansion, consider be past reflect more the playbook the you No. the are you side color, That's it. industries perhaps that the experiential off view more Thank a of investment year your perhaps, any all given aftermath a talk you I perfect. today to to also a resilient, to? things as here, or and automotive but if if COVID specific entertainment expanding less Perhaps, the there's have industries just

Sumit Roy

and changing we one If to the always humble. if want data I team, remain will in, trying over is changing, don't on any to like believe the market. think, fact the to to trends those The and just is constantly will in this business a what distinguish near-term and we phenomenon, But ground, Haendel, business beating index is in environment took you the that, health that of a we hey, is are mark do the zero things no. fitness down we're over that I the took distancing social where And index go requirements. we answer does fact should that have an the both didn't theater businesses? really to mean

trying is, are away to enter given comfortable is underwrite are so, the the if we potential term, especially we of long are trends, opportunity we the figure of And And what nature because largely near to we will that into, long-term the out prospects, can't what situations. term just to? with what that leases trend those we a get creates stay long-term from types something the going

right have served wrong. conclusion because hindsight, And mean go we way, in don't than we believe, made inaccurate. things has have a few gotten us a that wrong. And more back doesn't things Oh, I our that saying get we, different well. that should don't Now was But we

trying are So, it without to what out pieces exact into don't which of throw that ground. immediate index the opposite is, what's your I'll without answer the there, constantly suggesting. the taking we're to seeing. that of with those over into to long-term consideration is something getting to to But try specifics on reflect our upgrade we we the question you're impacts trends

the there an in is opportunity I think office sector.

it Now, are office there be to a and If going believe today, going how longer-term had. we reason our going perspective to we I to play up somebody up the it is type, to given we look sentiment success. go reason given end set a office trendline a into be a said forecasting to on negative the is value to that's all going we we And do the office asset spinning XX the take we evacuating. around Office. what environment see it's do seven, have out willing to there's want We of is use is do that seen out sector? is do the And on for that want assets. I off are route, to happen Office to see Where And play we years eventually what think is now? term. the that it's Yes, near growth? then with you Time to an that opportunities? argument that is will there And, so we tell. five, Where growth? create No, to if But like. why office what spin why could word from be see made that off

Haendel St. Juste

or the that casinos? the But willingness is Any any I and I'm to perspective act any know want to on in view curious been you more subsector is today share it's that that? different asked past. on

Sumit Roy

to about specific very And and it. specifics going away questions, I'm me I've talk to not from Haendel. always stay Yeah, tried you've asked

Thank No, from You for though. specifics me M&A. you about asked no, M&A stay away now. And you Haendel. I did

Haendel St. Juste

Appreciate the time.

Operator

from from Caitlin next Your question Sachs. Burrows Goldman comes

Caitlin Burrows

explain hi there. But also you burden some guys, quarter. rate this the Sumit, there's tax quarter. lower impacted cap UK to in the which in UK the the relatively associated gave the details in numbers Hi,

picture then wondering, activity tax we UK should expense how could about was think associated going sense you just through kind forward? why to and go makes I also if big you So, the of the investment bigger picture

Sumit Roy

Thank very good giving little bit questions, the my UK, equation. have on completed actually side more I the you. answer color a structuring Yes, Caitlin. should the on of

is Income there tax actually we'll able have the legal went underwrite recognizing that near effective into be tax exploring making our ago tax What's associated when that XXXX. that in the of contemplated, into How the take UK up is comparing we would I also are track entity much cetera. would the is our April change end et implement And shared spreads, think of effective increase we term the in What rates effective in of tax cetera, that the statutory et of account What cost what to is what tax in and add is years lower a rate? And house the been rate. it an rate? we the points really UK actual we by terms And we rate? XXX our And hopefully leakage. that rate we it the be Caitlin like So, much there there's UK. of if off course, the It will basis made to and capital, we going I sense. to which are being large, sense. if it's that actually a market. made the Realty tax in effective restructuring saving had lot is where we is, But to limited tax two is tracking seeing potentially to with market of transactions, statutory

in expect up? over have paid you seen years. the at last being see to to not should. Absolutely, taxes do But this So, you go same continuing you the rate the three this UK the as

We are getting more efficient.

we're going forward basis investments. We constantly we where the structuring actually in going And to what that's effective reason make this a on to are continuing is the and And do looking still does we at it leakage And our sense? see a how are associated transactions the tax transaction, we're be doing. and an manner answer decrease financing it with in why are to resounding our yes, we're going does.

Caitlin Burrows

it. Got

revenue as goes guys guidance acquisitions guidance improves put out hopefully of There that expected earlier XQ any then the run the that was growth on. theater the from are maybe collections improving But topics, and have year to performance the you barely implies AFFO switching store and continue. kind on And Okay. rate. same assumes commentary

for guidance meaningful and wondering, conservative does the is improving revenues not more So, why is AFFO that? point? AFFO just guidance acquisitions translate into How or the pretty same I was this store the at just

Sumit Roy

the have play the changed been I think XX improvement the opinion. that sort conclude accounting, that XX on but have I'll nor assets Christie shown, out of do so, we mentioned for our could to those as let in guidance an in much has accounting That's you but assets. cash are so the future on not that that we cash of reflected yourself,

the And the to to conservative, clearly fine, So, actual in it's starting this foremost, were first in really to monthly and haven't we is involved. we around have the cash what impact see which to back actually why that collections word reason to want a statements, levels reflect until up But have if it And be course. trend we because tend use deliberate. merger obviously, more enclosed that close, would the yes, very we translate we're really, for share if are year. want But going bit quarter, little things And, not there to the won't and warrant thesis we will versus even to accounting adjusted a go you change conditions are to not. very this And, to stay per happen lines. fourth looking optimistic. AFFO is just certainly minimal higher a our then

exactly guidance, to week. so, announced the digest And just We the kept we for what have last those reasons, we same. want

quarter. on our get revisit thoughts to what our share want at are end of second quarter And the and then the also earnings you we that. another belt, We under with latest

Caitlin Burrows

thank you. Okay,

Christie Kelly

Thanks, Caitlin.

Operator

Stevenson Your next Rob comes from question Janney. from

Rob Stevenson

Good afternoon.

assets as keep Ordinarily, some and and you year. remainder presumably XX, sell over some on. and you'll the additional you XXX move release vacant March have vacant You that currently guys of assets have percentage guys of the of and become

assets process, integration on, upside can't be vacancy? vacant released the size bandwidth the even the integration easily percentage your guys they team's the how you on moving selling do re-leasing a about the transaction just Given of the from energy maybe the that of think and focusing versus potential and of very time and and greater

Sumit Roy

executing same the model have. that comfortable are we exactly We very business

can more, put the sitting things non-occupied and can. our And able that so. market, to generate of of think same is a another to hold right model doing what team in largest potentially in that the you're are model, a that said takes why back. these area the want We folks and be are with transaction. to recapture that, real do is why assets types a a to reason we if this their rates the is enhance we of always we can things the NPC for in if want XXX was the basis. right phenomenal only XXX% to because said back pretty share implement solution And is make do But we of But end operations the with reason That where that want that quarter, the but got to is repositioning asset optimizing yes, we one That to absorb And I XX is on a been the that standalone business our is to the but the also that we they lot always to that, we yes, means we business when And team that which management occupancy dent estate be on that are going our comfortable at absorb these to economic on shared time good solution. comfortable more occupancy handed create, XXX% we assets is assets. buried, have we why first XXX% but and the led fourth because and and to able have rent very those to the level that just quarter to run able we've results business we perspective, the able you were is the NPC group. is to explorations, and it team team with do. is that not generate XX% we am combination. get would super be able by do be have to numbers XXX have a just repositioning not to we on as us TJ, the we a the to them, like we VEREIT, are assets same that because do tried company able value reason on through of was

Rob Stevenson

it's to acquisition? going get Is even about that a need question, that gets small Okay. thinking as going away? are overall, late. How to keep of the be the about a you O pretty with And thinking? piece smaller non-retail guys? that chance to to Does that Does for mostly we of bigger It's today fulfill there then go should second how forward? forward you you - been much obligations [Indiscernible] that customers? Do And

Sumit Roy

it's missed the small key big I there you that because we need was part a said And Rob, that to forward? it beep. business? a What word, is very our keep of

Rob Stevenson

The development business.

Sumit Roy

Yeah. It's that.

Rob Stevenson

customers really even really that? you overall, to today, need commitments piece are that thinking mostly grow O Do a to It's business? much Does going et How non-retail, get of you cetera? about of and to that stay it's small smaller. because

Sumit Roy

with grow a of capital not have Very want are some that's I of have. a XX to very love valuable industrial with But, XX or make the the and see that contributor could It's source, alluded this business another to developers be existing that And that platform, is to that We value good relationships incredibly to sheet you're expansion developing to right, capabilities, is the us. of that our about a And who relationships today, business. to, to would compared of bigger large absolutely I some the it all that $XXX question. with takeout, we we clients balance hope repositioning's of today. provide what some a million business. being we

have soon continued to and be to in doing we while so, That so team and enhance will repositioning. that our your team more, existing forward, this an potentially just to going even back this grow, to combination, or assets. through have continue we can assets And value front. a we that grow even requires working assets, working the vacant development And own enhanced previous expertise vacant on question on we going

So, grow and And grow the certainly is it we hold it. allocation to on it potentially from where will today.

Rob Stevenson

thanks, guys. Appreciate it. Okay,

Christie Kelly

Rob. Thanks

Operator

comes from from question Brent Dilts Your UBS. next

Brent Dilts

guys. Hey

- following up Sumit, your Just on

Christie Kelly

Hi Brent.

Brent Dilts

are how you? Christine, Hey,

Christie Kelly

Good. How are you, Brent?

Brent Dilts

I'm following the Doing seen year got billion the some call could seeing great. in transaction curious, slowdown your the earlier up are your to in that you you you've like that near Sumit, $X pace exceed write you're the of acquisitions. term? comment activity market analysts just pace about do. seems just in minimum This on in the the about X.XX anything on to guys well Just

I'm just there? So, you're what curious seeing

Sumit Roy

of to going some we we and we anything, out very with obviously very are it We, same not coming cetera. the to are have optimistic. Brent rules are is impact et honest be following you, of seeing DC an how

that we but meeting exceeding what potentially of market only any into being our when volume continued I And think, optimism the our into pipeline were, seeing like grow. with looks year. not shared sourced. with are belief came has recall, we translate We not January, you you and Brent, shared acquisition to in our if the we that target. have started optimistic And We as the we how just what

are quality super the just the we get are volume able we that that about seeing finish the line. excited to being sheer over the we but are and quality not So,

So, is the platform working.

Brent Dilts

little and Okay, seeing trouble and asset the Are more. improve. Could about any out cetera? perfect. rates tenant talk a transaction seeing those you're activity starting for you trade plays just bit of collection et rent you what digging the reopening And health theaters, then into some of classes movie fitness, to assets as there

Sumit Roy

fitness established the and certainly vacant the seen with a We've trades couple We've theater health sell. especially more the side, on Sure. operators. on side assets few of a seen

But But optimistic that that's to the And arena. certainly seen. that So area in are it's the willing an something yes, optimism people and certainly filter that's a in. acquisition of vacant play are it's with future we not buy about into to more starting is reposition building getting pieces land much it. and

Brent Dilts

Sure. you. Thank Okay.

Operator

from question next Your from comes Golladay Baird. Wes

Wes Golladay

everyone. Hi,

there, Sort questions few you. of for Hi Christie. a quick

Do industrial the Looking revenue, reflect continued into like XX year. and negative expect points that looks later year, last store you same this it's this been it at year? basis to

Sumit Roy

out. we mistake, the had on it's to went one we largely incorrectly CPI and adjustment it. back really readjusted by clients calculated And look, what all shared And a realized them gave the starting when that we Wes, We see our with going driven had them our of And Yeah, this to you're course, we that's forward. and we asset play collected that was there rent - to mistake. we that. rent

And so, this sharing happy obviously the seeing what play client really was about coming out and us But information. incredibly that's you're out.

a at you than the If the front, leases built doing. actual retail our leases they growth even it look more lot into on have industrial

on store down. would basis, the same to up. So, actually rent expect whereas normalized it go should I numbers Not a

Wes Golladay

leverage? was but early structure made for would proforma then, what capital how O's off this And would that curious the about the Gotcha. office mean and I potential look spin

Sumit Roy

the have not post and equivalent, we'll A metrics proforma outlook to focused as much spend, the to be the very we announcement, A $XX came are and we is the than where ratings made proforma are maintaining last maintain believe And to We close on we the size. leverage company the for three continue our going that better minus for And as out absolutely today. ratings proforma the reestablished, even is rating agencies billion if because are that week in focused will what well rating. I spend, we

maintain is ratings. our it for important us to super So,

Wes Golladay

Got it. Well. Thank you.

Operator

Jeffries. next Your Linda question Tsai from comes from

Christie Kelly

Linda. Hi

Linda Tsai

on up Maybe that handle welcome Sumit. earlier Hello, can large and Hi, Christie. comment volumes. acquisition following your you

$XX For sourced this billion this or consistent to ratio invested $X in executed X%. and billion $XX Does post-merger? quarter billion remain you X% sourced

Sumit Roy

I hope it enhanced. gets

a has XXX% think spend of their last not of I where amount our we fair does VEREIT that of week, this said is exactly been overlap an time. and I time spending where

a play able and like zip of leverage we're their plenty we platform be in to So, lot would that the spent time really areas code want we to focus to that would ability a to their continue to finding in opportunities because, haven't on. of we

not of focus are my step from And might the for is gets up will we will area pro closed increase a hope the be generally able the what you in trend forma at line And today. where stay therefore, But that size have today currently. is combination, the the is that we ratio that that getting So, has with And where increase. share a on look outside, obvious down to the have very if the what absolutely the of create are platform the volume that's that team we deal have I and we platform X% versus that been zip higher been we road. where gets to source, have want of focus with we code and that and the volume, stagnant. finish or in numbers the code have zip there haven't our and perhaps, our I may quarters grown. this generally now. X% in deal but to many over slightly That's remained I line. other it's X%to point. we been infrastructure from for lower, mean, quarters to know, those

addition We didn't which U.S., have which UK, a we in in that is exist. now in the platform complete to have the platform the

platform to grow, this the being continued asked of So, this is has to that that absorb volume higher team. analysis of

good. so far, so So,

Linda Tsai

And Do few go could is years at of how second have you this question a my maybe then post-merger? G&A sense low Thanks. a with out about X.X%.

Sumit Roy

the talked XX to million XX. to synergy We a in cash million, synergies in $XX and $XX G&A about is that

that And, team basis value you XX platform where drops that that in is, going basis to we points lanes? to the larger help by G&A analysis down. our basis capable G&A potentially infrastructure you. and we going to it points. level to it numbers But reaching what some we're scalable points continue keeps support I not one-third, It's elevated, to swim add the function And from becomes, we if can't do, is journey of platform of, need this be a there's translate the that. go? But do and all therefore it our a believe think I business does we the tell swim is that show If or goal. new continuing done, XX who XX the because down still that, should a normalized knows more We to having precise on the to absolutely asset in how that go gross the don't G&A for totally have doing, it has far I go? thing of fine can exhausted I'm we then this a your course. normalized have level. possible If lanes, answer this Linda. also

Linda Tsai

Thank you.

Operator

from question next from Your Ladenburg comes Massocca John Thalmann.

Christie Kelly

Hey, John.

John Massocca

afternoon. going? How's it Good

Sumit Roy

you? Good. are How

John Massocca

roughly of do office, of much target capital Just how as a you the me, portfolio being look manage from outside you quick the one as to VEREIT a recycling speaking for portfolio? view

Sumit Roy

being to that areas exposure we we actual more those the overall, way, and in the in answered this of be the I see industrial that makeup will chosen part different except underwrote comp how of very focus don't comfortable question But ours, on. that have We be they like different got portfolio we much that largely this think to from absorb. we and will proud forward? the portfolio is the did I've they've industries that to, more their terms retail a going remain one the operators [ph] in

the than are today. it getting suspect side as disproportionately larger, that recycle I don't but You established company a because in what it managed of of has see a be will be through increased there's that more their the lot a we a would increase Time recycling to John, answer. want of corresponding that So, our size have just platform assets would tell, I you commensurate rather could, we capital a will standalone that. precise but disposition? with on more we Could function that

John Massocca

other have Okay. All my answered. questions been

So that's it for me. Thank you.

Sumit Roy

Thank you, John.

Operator

Joshua from from Bank Dennerlein comes question next Your America. of

Christie Kelly

Josh. Hey,

Joshua Dennerlein

portions [Indiscernible]? some kind in entity, mark one think thinking over hurdles you're Europe that accelerating Europe do you look well. the hope you're or at are Christie, Are you split UK. that of of time, doing the Hey a rest larger into the of other Curious how billion you there about this just now of $X to

Sumit Roy

You that's on we week. of to our to we merger. believe Europe, rest last not it particular doing very announcement it. the of And desire absolutely a I because standalone don't were that a basis go want question. into What planning the I good just because know, has of answer do on made accelerates this Josh, changed

other largely our new markets. to place, driving the other of we underwriting, our to different desires. understanding the go and by absorb have ability our geographies That's to our team desire being various markets, are in markets Our maturity of these what's driven that

absorbing billion so, because more. $XX yes, answer scale do more could yes. We absolutely, The can do the of is platform? And benefits we

benefit think things that don't by I think, so, that's is have a the And I where the off large we platform try But it. which trying triggered to comes. fact new of

that to So, you glad wanted nuanced it a asked. I point, just question. great I'm Josh. And make was But

Joshua Dennerlein

I Great, That's appreciate it. me. it from

Sumit Roy

Thank you, Josh.

Operator

Instructions]. [Operator

next from Your Harsh question Green comes from Street. Hemnani

Christie Kelly

Hi Harsh.

Harsh Hemnani

were yields on the the over of aiming use long as side term. your on that the cost you roughly spread Sumit, acquisition. quarter, to looking of initial equal I'm you're far you on understand side development the the acquisition towards the just grow business, what on capital that side you're trying the versus development Hi. Hey see they to as mentioned at looking those this

Sumit Roy

out where Harsh, figure try if maybe that the some is why good industrial is of those a optimist, behind being going have conservative to If were it dollars capital question. reason it that the they is, rates, towards partnering development again, well-established assets, will is are there of see global yes, get But the function the majority takeout able But are if rates the it what to which basis the funding, mix, you Yeah, basis versus going. that going in getting from of it's it and numbers, them, development really we market, they're takeouts. headline towards look vast if a to very is buy guess cap handled And a through asset, great has still you points, you feel dive into very Xs, you outcome. a this rates, it low. you want particular Because call they what low may fully a what to the open whatever cap want go X XXX front are And is to that's X it. funding, be like open available once assets these if happens and buy it even these out developers. potentially product points, and market, the today, you the that you in developed, with we the front of same try by could cap in these XX

on development. creation So the the I value that's specifically what yield where To really answer see do your is. question more

look or you what or at it's creation it repositioning down retail the where maximum have look Greenfield that's path know, a piece numbers - points. of the development, expectation these retail, already creating even of or have or occurs, value when of whether out depends XXX positioning an On at AI could percentages compared we XXX, of on through we a of go the the XXX that, you we that to land, If repositioning an XXX you repositioning, privy hasn't. asset ran with at the some you

of that's value could the kind we this. through uplift generate in So

them. if the stop for to we tenants It's amount value portion us a Now but how serve fair of can as we one vacant put a the number reason dominates who one very And And go there there you portfolio be what harness be But of perspective know our big their just if landlords that What number, going having be our by this. blended to is a going But term. our shop want want behind that to like? quarter. going for help function needs. business, trend asset them, is a to you small it that to largely We that see repositioning is the assets creation. for in of of hold portion. a long small viewed is terms in that's I it look as become? And to to given in by line want the a

Harsh Hemnani

the debt deal. That's interesting. And then on synergies the more very me, from first one for

assets that to see of on have in expect we ratio Given higher leverage U.S.? the in than lower could a capital you UK, UK a your cost the

Sumit Roy

No, goes to it our back again, ratings Harsh.

happy. balance do to run a A flexibility minus down look very sheet keeps principle, do at agencies the basis. on that's A But to be to our And us our our want business. fully right If we Yeah, X you fairway guiding that the to our consolidated compromise want maximum which allows going want a anything we not rating rating.

a would then even go, minus you same given can it's could Now, coming the look U.S. have more unsecured But change. comes the versus absolutely where not denominated the given tenuous have just again we we I to a question. fully could an capital, A we X And it with mix certainly than choose going is some those UK come we over ARB to lot threshold a the at answers may our basis. may assets. from, that bond. hope on U.S. of unsecured locally fund your rated of cost there of And the which bond lever profile if that from from basis, to expect that Sterling But yes, it of going A on you company. lower of choose beyond a between UK, the a match to denominated standalone the a assets there are more A mix consolidated

Harsh Hemnani

Thank you. That's helpful.

Christie Kelly

Harsh. Thanks,

Operator

I Income's will portion Roy over question-and-answer conference for turn now call the concludes This Sumit of call. the Realty concluding remarks. to

Sumit Roy

speaking Well, of Thank thank Bye-bye. And you we today. all for to forward joining each you soon. with us you much. look so

Operator

today's you call. participating. concludes This for Thank conference

You disconnect. now may

Realty Income (O) 5 May 212021 Q1 Earnings call transcript