- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to Realty Income Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, that this event is being recorded. I would like to turn the conference over to Ms. Manager. Communications Corporate Behr, Andrea Please go ahead.

Andrea Behr

and for Thank Senior Chief Income's will Financial today Christie Vice President Realty Officer and Jonathan Head us quarter you be Executive operating Pong, President, Roy, results President, all third our results for Discussing of Officer; Finance. and joining conference Vice Executive Chief Treasurer; Sumit Kelly, call. Corporate

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

detail We will I disclose factors to our cause in company's over [Operator call greater such the differences Instructions] Form CEO, the XX-Q. the in Sumit may turn now will that Roy.

Sumit Roy

Realty a in pride At Income, business model. Thank we consistent dependable you, having Welcome ourselves and Andrea. everyone.

during company, periods our years macroeconomic of stability and a XX an business. For volatility and areas here as operating of have well is times. notably persevered through across record of very variety we relevant all today well our current of during We positioned track sit climates operating particularly

to million are our the for raising with alignment the subject We in $X to remaining strategy. team billion possible. opportunities proceeds To sheet of equity members on balance quarter start with received forward as capital billion $XXX basis grateful on $X.X over off, as our of our approximately third on capitalized quarter, ATM during the well the third our a make in we who all including of success over bolster settlement

availability our quarter of the our further as liquidity cash notes $XXX credit in In and facility, was senior end our to equity quarter under received XX-year net our the our cash to proceeds unsettled Between issued unsecured end. $X.X third $X.X addition, we equivalents, when liquidity. approximately of proceeds over the increase million of of of million in $X.X being bond at liquidity bond had forwards combined with and and equates net $XXX forward billion, approximately billion which the October billion

Moving on acquisitions. to

were approximately to in billion the high-quality significant of acquired During QX us of scale, portion transactions. to cost the us We of believe in our $X.X access to together estate, research billion we analytic accessible size, to in purchased because close, relationships, and deals these bringing part capabilities. real quarter, or were deals capital properties $X.X ability with our technology-driven portfolio acquisitions large year-to-date. of A approximately and

expect to Further annualized our advantages closed. Encore of our rent, The total remains year benefit continue this portfolio we on allow total contractual execute this base For design Boston us an of billion that those publicly is wholesale in strategies rent, stores Realty during Metro has Based to comprise would on and approximately current transaction, pending transaction close well annualized the in once leveraging all $X.X wholesale leader which rated, Harbor continued club approximately competitive clients. X% week our the like including the Income, perform Italy cities almost €XXX our Rome international industry AG Italian million high-performing since major Metro operates across and investing capabilities, we listed last seven operated pan-European by Florence. made XXX a and our clubs, Europe. pandemic. advent Metro our we example portfolio and to serve investment-grade is and in to dynamic. into and

them able to add will time. we to as client a initial this be We are portfolio and add delighted hope over to

which on basis is capital which cap of our X.X% points above rate did historical quarter, expansion to third quarter. the we on realized X.X% a cap the the investments, of favorably spread, raised, we compares basis second This actual our based XXX XXX our resulted and year-to-date average. in a third than quarter higher investment points investments rate During registering cap rate experience in cash total

preserve $XX to component we strategy, in billion to purpose towards of third also historical sourcing $XX year-end, selective has to is volume continue quarter. has which be we've X.X% year-to-date. component costs quarter, have consistent the investment of approximately noncore with of move of come of it capital year-to-date to strong the higher volume the which spreads increase. acquired strong correlation recycling approximately This culling properties as XX% this approximately cap the volume, As to approximately The strategy push funding sourced an important continues remain international investment Capital volume rates of expect, market with see as an we totaling continues Transaction the billion. our portfolio. We active bringing and a our flow market as representing part adjusts. volume remains we be dual sourcing remains our tended from

During dispose cycle to intend XX to act full the to at the moments returns. million, can properties generating We continue sale long-term risk-adjusted time $XXX net we in of IRR of third opportunistically net attractiveness of we of proceeds sold unlevered attractive under an lease when real at estate leases. XX.X% illustrating assets quarter, obtain owning

on we low cap disposition rate. an $XXX properties the also JV purchase price million, we that of industrial of our our X% interest sheet, in to properties our at owned as assumed VEREIT addition gross totaled balance The seven sold merger. a In part in

approximately $XXX.X of million. net sale was share Our proceeds

our point very publicly our by our annualized commenced with bankruptcy continue as working core portfolio A continued towards clients Cineworld this perform process in Our We'll closely as X.X% announced rent resolution. large portfolio of Despite QX. as of shifts being cyclical of behavior. and previously and consumer to XX Cineworld, perform its clients to Cineworld continues despite landlords, the generally September. to Chapter changes well base note, largest have one in of and continues market only one represented total

collected the September. yet theaters, Cineworld the regarding plc approximately color rent Group quarter we pay rent for XX% month of the portfolio, required some For theater our was of contractual XXXX, for across third as not to

the have including of month theater XXXX, October contractual of clients the across For Cineworld. collected our XXX% we rent

quarter are of recognized been $XX.X third representing cash recoveries to under Cineworld to consists September, in performance believe expense on public Cineworld. and of XX since comprised single analysis, of and internal our basis monthly accounting these our Cineworld of lease million specifics, the operator's in subject of accounting the portfolio agreement a which Based portfolio. the XX% for our on of These stronger which exposure XX that basis XXXX. master continue to rent of COVID-XX base current portfolio accounted XX and or to beginning of properties, some approximately cash $X.X collected, For information are cumulative reserves not have primarily account on pandemic rent million assets contractual XX dating of XXXX. we for back properties the total contractual properties, currently generally Through been we our the of have have

life Our to locations supporting or freestanding, residential, centers, industrial population potential single-tenant uses. are typically proximity close with assets, conversion to land large areas science and

and is We opportunities alternative were adaptive reverse from locations inquiries on and to exploring have if received vacate We bankruptcy. reuse industrial any Regal believe multifamily developers potential as there of these sites. part

Moving portfolio. rate XX.X%. rate continue and well-positioned leases the occupancy XXX demonstrate important quarter on XXX.X%, of to XXX.X%. to the recapture the In operational estate At a achieved was that year-to-date delivering metrics, value recapture key our third to end real rent a we consistent of most QX, bringing some released of our

our providing through end generated less base As contractual performance. of rent investment-grade comes XXXX, rated portfolio of forward, our visibility near-term end, into from than of due the clients. At contractual we approximately X% portfolio's was total strong quarter annualized XX% look our rent

our in watch clients rent. portfolio than to leased portfolio's properties our Our represented list X% of annualized contractual less

revenue rental to growth be Christie, it X.X% the full At from during results who increased same-store X% we continue X%. time I'll this quarter and to will to further over year-to-date quarter. and our Lastly, year the expect pass same-store discuss approximately

Christie Kelly

generated the Sumit. you, quarter our simply, X.X% $X.XX another quarter us. In representing AFFO, for Thank per year-over-year was growth. of productive Put third share business it

net end. Our ratios during forwards quarter to at the net outstanding These times adjusted was X.X annualization in giving billion reflect of had the investment the we annualized quarter. not X.X do to activity or effect equity debt times $X.X EBITDAR

mentioned, As Sumit since our we of efforts quarter. the both second in active prudent the end were previously and capital-raising

offering, to semiannual return market, conjunction of the last resulting to US$XXX proceeds, an receipt effective yield fixed million a fixed euro initial during in million which us subsequent X.X%. quarter euro-denominated take cross-currency the a majority maturity of approximately income executed accessed euro exchange the to we XXXX. price swap, offering US we raising of an to transaction, favorable In bond addition a which served average to million to advantage at quarter completed $XXX over foreign $XX share, the per rate $XXX $X XX-year in allowing we synthetic this euro end, with also in of approximately to billion dollar of In while weighted as dynamics, public

a in given effective strategy flexibility and a interest cash settlement international is to operated, rate financing with maturity of amortized various result to million our been between of semiannual hedges, hallmark of move the an is long ability were X.XX%. gain capital pricing, of which tenure we effect yield has giving when our the Additionally, advantage. XX-year at Financial note terminated our to which competitive $XXX expected $XX generated over million a to needs markets the

commercial $X.X paper As billion capacity euro program our program commercial billion. established to the borrowings. commercial $X is we by upsized paper in multicurrency billion our various previously gives credit than funding us combined to a and $X our in reported billion lower much needs from which backstopped rates The $X.X US third of billion quarter, US facility, facility a short-term efficiently $X.XX program, the at fund match paper revolving flexibility comparable currencies with

midpoint maturity mortgage due end limited forward, look is our initially debt as million comes unsecured X% AFFO through only growth with we by consistent results $XX we next consistent tightened As not ago. continued and year a a XXXX our quarter, $X.XX rate, stable the guidance of and the provided refinancing until what maintaining of the near-term we have With we risk $X.XX XXXX. debt at to range in $X.XX, to year-over-year

company our will compared a year of model, clients respective supported and for for portfolio diverse Realty the our a September, mission. This consecutive estate balance one to real consistency As time is representing business increase ago. the confidence the increased dividend the in conservative X.X% a sheet to dividend remain dividend are sacrosanct that their Income's declared by leased time-tested to our and the monthly XXXth leaders the industries. dividend we in quarter, to testament XXXth In

I and the help record. grown these one-year of VEREIT to We are our the proud we week, we synergies we together colleagues the merger. would like run rate estimated We've in work pleased million every one over that perform team over last cost talented announced track on as year that, the and when And remain the Sumit. annual accomplishments our drive merger. to $XX we celebrated anniversary to pass consistent realize back to this I'm this with day call of Earlier track that

Sumit Roy

Christie. you Thank

quarter's have been this strengths Our in result. accentuated

pleased it's still that conditions At up can advantageous Operator? introduce control in to resiliency us. future in we believe our to stability is serve to forces time, regularly business open While this the volatility able of best that the of with Question-and-Answer the when market cannot it are questions. Session us model capital allows confidence. we that we the I'm markets, for and this to our I team lean that macroeconomic to ahead of and I the reminded inherent shareholders, periodically the am look

Operator

you. Thank

ahead. RBC session. Capital Instructions] comes Now Heffern, Brad the begin question-and-answer we’ll go First [Operator Markets. Please question from

Brad Heffern

good underlying Hey, rates grade, related preserve rates basis talk some to moving? to much out about market acquisitions of there, a industrial there mix pursue the points was cap rates higher particular that's can of to accretion? XX was were everyone. Looks how investment morning quarter-over-quarter. but you cap like of that Cap on and And up goal

Sumit Roy

the It's the former than latter. more

compare cap the rates. and seeing what to years If was to the last where -- I environment what it of would are the which at we cap the We year, saw quarter, couple definitely in movement of were over is I beginning say ends compare we that we it we And in story say what retail the of experienced basically rates basis it's today XXX would points. rates the have third seeing spectrum. moved circa credit to of are and a cap two

maybe four the If moved in rate the trading code. investment high grocery you have those those were X.X% today low at and about beginning would of say the X.X% they I year grade in assets think the in most. the cap are the range the ZIP even

is that bit about said potential then over don't transactions had cap last other that's in years in adjust all similar to the Boston, lot dynamics my I business relationships, discussions spectrum, we depending that saw careful our of cap XXX But a -- that's which it And instance the But basis clients few really mean, prepared to in of rate to overall some the that, we're our that So with for on were of all spur points. I third the closed noticed institutional movement. it quarter to to I was higher quarter. of translate to have thanks cap the the the the the have continue asset clients moment. the points the rates going be quite third that than is things similar on do of cost rates the points of X.X% seeing compressed experiencing end Having to respective a sway were very the rates the more that starting type more has think remarks, basis -- cap things saw third that's ability movements willing for and -- about happen also into actual of the a you if and timing of movement started of their businesses. seen a at of circa these fund stuff we the close to just what going in immediate. that it's cap we that's realize brutal was what were if that that's also to gaming quarter. translating to basis in and that cap increased were realized And rate I already been rate. want to was between in continue to XX and XXX you quite And our able that's if the thanks quite have thing. that a to sort capital, enumerated yielding to transaction to

and So, I those rates said quantum it to having all we year. side. It's what get going timing we transactions early part moved on in did the is similar of that, it close and contract under really the results industrial in I would earlier. story this the cap quarter something that is definitely also that started movement a when that that's considerably But the what a the question of the of have say, even is described are and industrial of seeing is dictate, think I seeing are.

of the despite the point that I they XX seeing Xs, over industrial ZIP say, low think similar the of of in for volume, assets. that industrial few resulted that my big going are see to in the This They comments, quarter be say was some assets in I'll takers That movement started quoted that on I talked longer had And then pursuing were the movement are first would years. the about sold maybe code a announcing, that to -- joint about heels in movement. accounted today. today, continued last XX% side. no movement XX through on the Amazon to some And X.X venture our we we what quarter. second in we basis I

as portfolio as our testament clearly there's over movement our the is in movement. And a next So, to portfolio, pipeline And that -- months. well hope the that. testament coming our the a direction, right is is will the continue

Brad Heffern

rates. same. answer. they was from walk what the Thanks. puts I'm the midpoint through Christie, I offsetting and had guide. takes on factors Okay. from the were Appreciate FX and kept the the the headwinds curious, you detailed Obviously, you could new hoping higher

Christie Kelly

you I the the strengthening captured together with US think dollar. headwinds Brad,

nice our you to our opportunity, to pipeline commercial to A AFFO determination we our expecting Sumit see and our program. the in which want the as and could just just have strong what borrowings, as with able also we to of that and articulated, to to be that and guidance our it the see paper a associated accounting. things, euro the where the our can the is in midpoint our for full I is were share, together relates international we on that first transaction, with a are are do the ability status of no tailwind of clients the collection. of access demonstrated clients are with the with positive it that negative. terms Regal, Hope other in per pivot or relationships overall cash Regal marketplace, note which of Brad. Encore timing a think And helps, in developments is I as relates couple change on

Brad Heffern

you. Thank Yes.

Operator

you. Thank

of Milligan ahead. Next question be from R.J. James. go Raymond will Please

R.J. Milligan

I'll afternoon. quarter, you what guys spreads attractively the average achieve for good view Hi, the certainly curious my current how cost your I'm appreciate plate were you've priced of question and able quarter-to-date. source to but boiler in with of and able start been weighted here you XQ, capital, to capital kind

Sumit Roy

Yes.

right, spread for the bond do as this calculate we able are cost was of was out that are capital capital. three the points throughout to and we our there which raising we it point thing strange there equity XXX for on of is deck, our and in a And one precisely components prices. that how flow of that free basically generating. the cash loaded out of our low cost is our $XX, well as the our -- XX-week cost to equity billion XXX lay believe the and points. achieve one XXX right of quarter And end of during got well thing, was a the played that I the it, basis volatility raised But of which the $X if -- and average equity that fourth which were That to call quarter. quarter, close we we we a of but I'll quarter. in doing things of was his third Page and third we it's XX, obviously of So, based call the an high year. Jonathan of were and the closer with the know at as reached year-to-date around basis don't quarter to of were settle basis is quarter, the -- settle this investor actual will And to the at was equity we and on that's price XX-week it billion worth third it able I've we $X.X of third will forward a to we XXX% to raise we luck, capital I end lot able experienced, fact the Pong level able as

And spread over about. the traditionally there quarter want was given the a versus realized be calculation is been we calculate But how volatility around reason by a massive precisely that's driven we the WACC. like that's diversion so to yes, just our why has actual average I a precise that of the period. I very WACC first This felt where what spoke

R.J. Milligan

helpful. That's

do potentially into to to we even so the move pace? thinking the fact tap as but there's going Is quickly higher, not of the as you acquisition volume are to probably cost the pace, And in general or brakes, rates XXXX? cap are sort to maybe as given starting you move the debt. about keep opportunities more be that accelerate of How it think time

Sumit Roy

especially this quickly the team we that to available around on pipeline, going to realize. spread Clearly, we with cap side a how continue based surprised in hurdle have on to of are optimistic to say the but are pivoting some terms very how moved. side that quarter can sure of will into we'll spreads months be incredibly rates into, continue entering today, the again, feel is are achieve that it we spreads was being And seeing be but that be we I based on for order transactions transactions able we development side fourth are quarter risk to in it's potentially close are disciplined we I'll with which the have rates have to line in our on have limited first that second quickly and kind are to the essence. maintain going quarters. us not transactions timing to that the cap are our the the few quarter, spreads what the historically we continuing in if quite that of mechanisms avail what we need those on accretive capital that to that ago, And cap Like entered think right to are that are as that next the and some pleasantly of see the I ultimate And maintain the is that close making -- of in in there again, on going represents in that spread that's we over as the taking more that are of been that side, R.J., we will we we which financing are certain the of have will pursuing. be been. But function I mentioned the spreads the acquisitions that historical the there Yes. I we rates maintained adjust. said, -- rate like XX

of essence we quarter. at the report the going what So timing be given in of terms of to is a end

R.J. Milligan

sense. Thank for you color. Make the

Sumit Roy

R.J. you, Thank

Operator

Thanks.

from Next go Please Greg question Scotiabank. ahead. be will McGinniss,

Greg McGinniss

internationally. Hi. Good potentially how are trend? net quarter way And into in Sumit, it might significant, but do expect that declining still a investment each that the also it's continue and drivers XXXX? is What afternoon. cap rates? casting sourcing while that wider acquisition even, slowed impact of opportunities deal you to XXXX levels QX And in

Sumit Roy

what this given longer that disruption they what and side that is the this goes given having inflation hoping Fed recognize are have embraced environment, anticipated. be who starting for doing, capital to cost may to of sellers. Sellers haven't they're And shorter than changing seeing process what Greg. back had sticky the the question duration quite it Yes. a It's a good a to who on

on is sourcing part off a per reason that the billion were averaging saw around tailing of think why quarter. We the side. $XX you I

would one-third quite was still market. claim which from I of international $XX quarter worth of billion Third sourcing, robust the was with

And the a there that are largely non-institutional bit to adjust are it and adjust time those of takes of down to it's driven a yes, bit it basis, new institutional able relative there sellers quicker has lot the it a of whom will time for And too really some being to private is the they to environment. real it for a a so on was slowing taken by and sellers than of estate more to owners little more story take adjust. a

Greg McGinniss

that's into types expect is? maybe trend that and whether environment it deals maybe the That's what to Can just you the just more for remarks. of provide some that move your or more financing those little willing mentioned the detail seller Great. that portfolio asset is to you fair. Then on in a opening accept transactions size us going deals you to back of current

Sumit Roy

Yes.

to in to portfolio environment think, owned I the the I'll they're more question changing cap rate by is more owners answer deals, cap way environment. receptive changing be accepting institutional far that say far rate large and to the of tend which

come no It third And did to of were will been of XX% you and saw market which source quarter. alternative we real finance estate you given they no the over owners that of have in also an should to of some deals as it surprise surprise the leaseback that traditional sale into there. as so disruption enter the what come the leverage that sources their as the may raising to institutional or especially, of high-yield willing capital, capital market more far were portfolio

were the did third sale-leaseback And so we were of quarter what XX% largely about transactions. -- in

you did, think give say we side. on there And was XX% some what we that largely the but X.X% are retail transactions we about assets of seeing by was retail X%, the a and will I It that flavor industrial driven for mostly did. to want I still so of was that

Greg McGinniss

you. Thank Great.

Sumit Roy

Sure.

Operator

go Goldsmith ahead. Michael be question Please from will Next UBS.

Michael Goldsmith

you of just and a Thanks to lot seeing or Europe. than relative moved for you time in pricing about into afternoon. the International anything my highlight XX% question. opportunity now The that Good been larger taking maybe terms Europe Or represent comes US at also what are acquisitions Italy? set in in when seeing. that we've you sentiment the want to recognize lighter

Sumit Roy

I'll XX% markets the first Michael of doing tell XX% in north the of in you quarter. did quarter. were the second north we in I We mean international

We volume changing smaller are in et the cetera. country. a is the total far Again, in environment said really the And close I of quarter. accepting the It's at the more the timing perhaps of by Europe. third say function sellers it Europe of one-third that, are US is that of market. will Having a financing than in

I of precisely play some seeing debt on is advent transactions the reasons it. in that out of think pond. But touched the for Europe we into opportunities are actually level of the the continue. for all the are of And capital, us. And high with the order monetizing that's some bit to the of driving some one very sides Because take longer of both additional on we creating And appropriate for the And associated a pressures during are that that cost in second now I for things Having opportunities is does with them estate has to real funds little we so feeling. some of momentum raise in dynamics It the markets it very unsettled. adjust. a the will good said believe that of that, Italy the quarter, are UK. very finding

to very in than healthy pipeline the we still volumes first sourcing be And half Income. healthy. have so I very wouldn't saw a Realty we There that continue read what still too it. is much within And the into yes, lower but very,

Michael Goldsmith

of Sumit. top as product of top one in grocery and within in the is change you And XX a give industry is a consolidation Thank clients. your grocery about the Does this as kind pause you, any portfolio? future industries. your sector type follow-up Kroger of opinion Thanks. your or XX your

Sumit Roy

you doing is put S&P anytime still rating, asked the see Albertsons, going is credit don't consolidation although this But to announced a mean BBB to is consolidation? out negative the I a necessarily which I reaffirmed rated. transaction and Michael. have Sure, as a question it regards If BB-rated is Look did there be that And the Kroger solid on a who is they're Kroger bad with thing. still they publicly rated. acquiring outlook. needs Albertsons,

actually stronger are suddenly rating. enhanced it's a BBB has But it, Albertsons a to we and of other consideration. address outcome credit a BB that social there we from for Now of also us to obviously with have issues points XX into now that that take -- is standpoint a a going credit associated it's lot basis to get that have pure

markets and through So It of purely a us, that percolating necessarily does situations. consolidation outcome credit that specific addressed. bad by for large a is not perspective, a the doesn't And really there good. on standard I of from is be around a the think But but viability this other all that address lot obviously a that's issues depend combination. today, the isn't answer should

Michael Goldsmith

you much. Thank Got very it.

Sumit Roy

Thank you.

Operator

you. Thank

go Please a have Next, of ahead. Baird. question Wes we from Golladay

Wes Golladay

everyone. Hey

cost and lot a the hedge harder easier on hedging, making for of volatility or volatility that is Just question to it the ForEx you interest a rate effectively?

Jonathan Pong

FX are to saw all short-term. mean, Hey hedge I very out in necessarily Jonathan. that's going harder say it's looking very that the been we're certainly been to I wouldn't liquid Look volatile very Wes, third these currencies quarter. it's we a hedge. as environment

where dynamic, itself these might from it's so that has nothing yes, be to rates the going And but understand really mechanism changed. difficult

on this rates say out story aren't we around the forward we hedged hopefully would to earnings. next I to program XX% rates quarterly point story aren't And you months hedging that at where front, aspire look FX going earnings. our hedging the XX get the On of -- any are the when

So rest we're assured that. mindful very of

Wes Golladay

Got to adverse sounds It cash tenets. I upon pretty want optimistic basis the you're And scenario for Regal. it. an under touch like

are outcome the for do for the precedent? number here? what So typically typically that I I In part your it. view one question of two and should get the case based positive is guess, a all haircut? these question was modest lease on where And we overall you guess embrace master we That's how asset. ever negotiated do is history -- then question historical expect -- a for

Sumit Roy

So this prepared ultimate depending is nothing Texas. a guarantee ultimate We'll accrue our It's strength of situation. should the to out. telling we economic optimistic mixed portfolio of a outcome be Yes, but value unsolicited does the when recognized it a be these are recognizing the much but we or answered some when something the forward going bankruptcy that will totally directly. opportunities a even very largely we a creation that assets all plays saying you and you feel is with. out. But there you can't comfortable good assets questions benefits viewed at run performers interpret that tremendous receiving, It it the lot economic going on they fair outcome, to in we have of to how that of different. be read a this best for creating to I we on not some one certainly the very not where to the we value yes, it Regal acres theater master us. some playing very where jurisdictionally certain in into And time, Regal can how can makes emerge of and Chapter or this take amounts. on XX to what been ultimate the And forward. true That master lease it's for assets going outcome, question. land have master all that amount comfortable cases will some driven And address us. dependent, been use optimism read. may they're lot north partner perhaps portfolio, a see And fairly think, remarks the lease. With answer on a regards continue in But and when be be it's amount developers going located look not of isn't multifamily but one of XX these single these for is create use am about. has inbounds having a it that of by I'm XX very I lease to to of from is will as of feel an And the we believe, I Wes, that start us case, asset with function that,

Wes Golladay

very Thank you for much it. that. Got

Sumit Roy

Thank you.

Operator

be Morgan Stanley. Ronald ahead. Kamdem, will Please question from Next go

Ronald Kamdem

Hey.

quick ones. Just a of couple

health. to of sort tenant the Just back

and was on size be of And watch bad list -- debt of that which really how XXX can that tenants us of like guys material points, what thinking we You far looking talked it's the is disclosure. you any the reserve just about on are good for you so sort year-to-date? points sort update are basis about? other XX basis But whether should Regal

Sumit Roy

the we XX other Yes, the question clients for XX of and basis points don't. around is I'll basis have take outside do Regal points any more no, -- than we answer

list large X.X%. watch we feel about watch this overall again industry do et from don't the clients other on some We But is Our the have clients cetera. list one. Regal less have an outside perspective this actually any fitness and we is pretty on total And largest good it. health than of X%. in It's Regal.

answer question. In other -- part your terms of Christie have I'll the of

Christie Kelly

publicly Regal we already on that And reserves list of made said total to watch a have we've story it's terms primarily really In with $XX around reserves what are regards the and Regal. what books and Ron Sumit million. just associated in dovetailing with the the reserves available

Ronald Kamdem

can sheet of one rest look be was guys seems can opening capital take of balance -- and of you just guess markets environment are sort sneak I you company in sort if cap thinking about this where to pricing of to it you of the get guys sort the much if step for sort in the I But just ask second comments. rate of points that that And of like cost when sort the be rates could you should challenged my the you and advantaged think back your sense others trying power, have a volumes mentioned some acquisition how higher higher of XX, for capital back how do basis given cap right going XX actually it? sort question is and are the the when you of much cap a XX, Great. my of think rate, this I looking such could thrive just

Sumit Roy

I overstate the Ron environment. want don't to

larger They're be what been clients into for of I to in one with in has them, and of rates a relationships, if is moving to rates cost much is we'll you lid able at trend moving started, come to normal before from You all first to lines, environment they continue other -- just and us, to whom transactions. be have us. reengaged have and cap where we rates. faster us with exclusively, this would even said capital keep contracts we've situation asked the need I've look the to to there the still and true and changed tend It undercut are came what than we've that that when didn't what cap to dictate they're doubt contract is said This able terms enter these said, -- that, back we where do. with look, expected. and Having and work no with competitor a on of cap also chosen than

competitors that no transact have be there is to be investors, having that acceptable able So, the capital there, doubt fewer gain. is spreads And an to to out this creates opportunity cost their for would relative us. of a who that

cap we But think be not to it be the going have beneficiary if that we will That's the case. that We I move were do rates, everything forward, tell you to than are would share. able been overstating, our but I of. to better happens going

I take I'm away you what can think Ron saying. from that,

Ronald Kamdem

Great. Thanks so much.

Sumit Roy

you. Thank

Operator

Thank you.

Next go Green question ahead. Harsh will Hemnani from of be Street. Please

Harsh Hemnani

Thanks.

in back transactions acquisition to pointed a trade-off your portfolio the Going that out there's volume have between piece, rates. peers cap

volume the higher you portfolio than drive higher like cap always because drive can But at drive them volumes pricing. rates fives. of deals You it on ability larger can both the higher seems to in

many show a portfolio transaction much how one-off you up market? for versus could out, point pickup transaction higher of how guess, cap I of basis a – And how think, long rates can in you points get the to these transaction deal? will it maybe So, take on single you single

Sumit Roy

checks, discussion this a with much environment and write would answer of capital cost along basis our being points. points, terms going And on XX that biggest that to should transaction if relative say, the of that fact portfolio particular potential the difficult market. very to But of forcing to be a between is held in single is be beyond that's about in bigger, me Harsh, what and going you anywhere the continues it question. the is delta to But you and in you're our going market very how if XX basis There asset-by-asset, dearth has that advantage Yeah. are XX to – of question, region one-off I it. buyers bigger size obviously that able large start that the is if think a today, is to basis up. portfolio-by-portfolio

Chick-fil-A buyers can need in take, going a is trade of you to do XX still force $X in terms write who is or on – – how rely today. the the long for a markets don't $X who order I'll enough In Chick-fil-A debt that, There year will necessarily it private to check tell million million to buyers so.

the the lot would finance an there's no to buyers is adjust. of how of their the Chick-fil-A do a asked the of in mid-Xs. private I think for it's and ago, me what to week tough and was going so to tough asset will is team literally even ask be one-off There some market adjustment, because example And I at. And purchase. question answer to lean the a debt trade doubt this going it's markets to on – But terms answer I a what mean, you quickly saw the it's

I assets advantage more market one-off so. It's XX% we so have on said And And is what like of we if good we buy of can are big we'll we for portfolio But this part do business. certainly to here a our take like that not helps long of us disposition the deals. than will side. that The how take feel it Who it adjust? news knows?

I so there it warrants. getting And the think differential kind that we are of

side we on to of business. the that continue focus so And

Harsh Hemnani

Thanks. tenets considering like seems mentioned just be for you slightly those in moving that Italy, Europe as into the economic the as and much of it outlook timing And Europe then rates haven't US, in in as the worse the reacted cap US. might

that Given into what that that euros suggests And which prompted Europe? caused importantly, swap backdrop debt today? Italy what you're expanding more into more maybe guess, swapped I enter the was you to

Sumit Roy

the the executing that cap of to including that disclosed very rate. in fourth say -- one this healthy largest good want very even types maybe the geography rated Europe. And think be find of highly a to acceptable one that's that already some relationships experiencing here opportunities. will in environment why continuing longer. Europe will find to of taking And part year grow is swap this areas interesting late Italy certainly conversations is are investment-grade lot pain it is. transactions the But last cap we the business. of GDP cap team transactions we advantage planning fantastic rated front that established transaction of and that It That are be underway. is even a in we And to longer being to be if the pain those think cultivate they perhaps spreads on that your to capture it adjusting. very with in this We Look around for we it's who take adjust. at estate take under want not help that longer And a beginning going finance, partners. have comfortable the year. The looking very It's therefore these is And businesses, to away allowing the transaction. so the Well, rates in Europe with I the our like than Neil's haven't was I very are to you it is to about or It Europe the line Italy I started that fascinating. that rates. -- opportunities. feel we Metro. point the create a to already But work that operators that's And like, real is very in It suffice did tutelage, in we would can reason we I is to to us. to is much US. us to have And we point take was want having we

be subsequent in continue remind Brexit to do that so to the XX business. a having deals conversation XX is very the this were to basis our to I to important even done XXXX, area growth when went we want tune the favor. you going UK, those us think basis points more. of compressed first points perhaps retail able we cap and when this And rates into to for in not was of And has Harsh, was you deals, about dominated

And to opportunistic. going be we so are

months believe and advantages this the away will to inherent shy our But very are transactions going XX it we use where the we will to us. things rough. yes, will didn't like going for But selective. We Europe and competitive when next at over be very opportunities got believe position exact to We that, that in makes Europe execute happen to ourselves create times sense. be opposite and it's enter diligent we what

Harsh Hemnani

Thank Great. you.

Sumit Roy

you. Thank

Operator

you. Thank

of Linda Next from be Jefferies. go ahead. question Please Tsai will

Linda Tsai

you. Thank Hi.

Just a clarification. point of

of terms your of receivables outstanding Regal, million So is $XX from and reserve $XX the factored million? that in into the all

Christie Kelly

of Linda, another we there, had of the to the Regal outstanding From $XX on perspective reserves Regal million. of took reserves million with And we associated communicated clarify. as $XX receivables

Linda Tsai

right just have list for Okay. you But -- million? tenants your then $XX watch on your the are reserves now,

Christie Kelly

million $XX is is million, primarily the fitness. the and would of $XX the understand list as health total, have Regal. for And you terms is which remainder, In watch of we

Linda Tsai

talk overall? much year. Okay. was about rate, been all pretty It's strong that the the XXX%, Thank you what's just you. And then this just strong in recapture very driving could terms of

Sumit Roy

Linda, It's for gotten a a operators. to -- testament switching controlling us testament lot given higher team. I of a of have our certainly, Yes. assets more think to the for drop much costs is it's clients. a There

crept things to a is road. say, switching the be costs, have a One and construction that control asset we certainly given ability lot a the for fact that's compete cost now, the down the to would the of I'm go And of do going assets given for new And our assets, have better with the the up. the inflationary basically tend that XX,XXX outcome. But the we to we hurdles clients given more environment, client. to going build

but the with to spreads. reporting quite -- we've is were I happy but the we've we leverage, a is conversation XXX% outlier. but it take history as been I'm since situation of if that with that resolutions we kind only resolutions more into account be basically can mid-term And up so, at not company XXX%, a all Having this, of of -- But look an about have not that spreads that, talking been near-term holistic we it to re-leasing clients don’t win-win come as XXX%, well re-leasing able have. very much right and of and said therefore, able want get the view to around you net it do

we a ourselves. to a certainly I is find basis think higher, on the this So testament proportionate and environment it's

Linda Tsai

this next Do continues think for year? you

Sumit Roy

putting clients. that I with go for is selling be to on to especially client the this looking code. increase, think closing the where are at across asking proceeds it's will that the I economic a thing existing one alternative X% to to that we use this existing through then engaging And, with an look, client from near an that will ZIP in asset of XX% the as is is into be is an throw portfolio, more that is, reduction bit in fourth decide us this, analysis at what Renewing can and we based assets particular variable, outcome. the let's we of also the and looking we what outcome. we environment and you best tree most cap The the a repositioning do Once an current environment. like the looking favorable receptive a expect decision little rate the in continue term, say in

And has But is the revert possible because over years more of for favorable bit it a next few XXX%, -- north client, is still been us in so rate. north it but that re-leasing the that we'll for XXX% that a taking resulting be eight far, the believe XXX% or of XXX%, might XXX% an it of months, in terms outcome of back last of spreads, to to keep to recapture I existing while six XXX%, haircut.

Linda Tsai

you. Thank

Sumit Roy

Sure.

Operator

Thank you.

Please, from Joseph Next question will from ahead. be Citi. Nick go

Nick Joseph

space. Sumit, your Thanks. but the across you talked obviously, shares, volatility, in about also really the

there're of capital. And cost so, some at multiples this in diverging point,

then it. and sector within appetite your hoping the So for your on to thoughts M&A get broadly

Sumit Roy

Yes. be that public speaking, absolutely in debt stronger, their of is, interesting run that is emerge can of of your just And to conversations sort cost finance. something that just case, attractive an I'm if side difficult in lot -- one if us. be most don't M&A should it in stock companies hypothetical they very capital our candidates be economic the the to can and Nick, point a on team, that environment. deal be be consider, engage engage wanting Nick, it's very you a transactions. a if -- would have markets very around and discussion But and I which a it'll to potential discuss circumstances, the to they M&A would teams to stronger, But who'd this It's comment over-reliance of trying is that something on it's management this making. in It'd in relative that XXX% to is to that be to trying you especially difficult I'm this engage under management to time M&A make help today, see that. willing focused business sure suspect environment from particular on can so theoretically

Nick Joseph

cap it know two but And I completely talked then I we've understand helpful. a that takes on rates. And there, Thanks. just lot that's --

casino year. called close deal You this is to out expected still the that later

would Where was I today a cap kind you struck casino that you would How rate expect of think earlier. be mentioned cycle? do you X.X% that much struck rate think? the expansion cap on

Sumit Roy

Yes.

Nick. me, tell You

being don't what EBITDA sports million gaming ago but is that -- million EBITDA we all fully cover they're there'll don't companies. has gotten But, they've I a know a it think And did at lot the underwrote believe we I about asset. betting with of seeing be is win that not especially -- I repriced. that profile gaming the already wonderful still about still I'm in Encore You or with ago that, trading of the $XXX sorry a a well, year what, movement performing from, favor almost at that a if -- it and now quite, and $XXX Harbor We the year it I a don't legalized. And stabilized, is if know asset. where levels all look, Boston entered them into

So but you five would know don't be different asset if seen like we to that nine say haven't that today, I would yet. I dramatically Nick an that

to that. on for So difficult me opine

Nick Joseph

do you where closes? And think Thanks. it

Sumit Roy

about and talked that are that's hopeful earnings guidance. the the we things one on We of

close on expecting to in will the bit And of question quarter. fourth high quarter. conviction quarter the are have as a fourth to front. fourth that it still We believe That our that in we the remains I but when really very But mark, close a in remains a conviction.

Nick Joseph

Thank you much. very

Sumit Roy

Thank you.

Operator

you. Thank

from Ladenburg go Massocca, Please Thalmann. question John Next ahead. will be

John Massocca

Good afternoon.

Sumit Roy

Hi, John.

John Massocca

environment quick receptiveness been a same seen It by kind you rate rate to one escalators just retail of of sounds maybe cap So particularly kind to has you higher were for changes. that like receptive interest surprised transactions? how on Have me.

Sumit Roy

low-margin be receptivity do... still in in but getting It's US are uncapped and environment have. what CPIs, especially difficult to or interest the -- -- to given far we we Yes, tends untethered higher rate higher more the here retail a business, to get is that there

Christie Kelly

Escalators.

Sumit Roy

to escalators we than Thank months on perhaps get more transaction is Higher has CPI in a was CPI-type that escalators in escalators our Escalators. into talked Metro us for in lot engage ago. about The XX it Europe, fact, And leases the adjustments. discussion it the built and today lease. same easier you.

to seller us And seen see more are give so starting I willing here, higher traditionally escalators in than we what we being this think it is in but the Europe are than those to have easier space.

John Massocca

kind fixed last the US of much terms of on they've maybe any brackets even versus In escalators on how year investments, of particularly pre-pandemic? retail, increased or kind

Sumit Roy

I you bumps is to tell months of a is guys investment-grade difficult amount to environment. you which fixed be Yeah. type John. years, -- ago. every they we five still of give Again, of Maybe increase it's the escalators. seeing to mean in they'll exact retail. But going increases. are What wouldn't perhaps the have tend it's have going going tough. to The higher I function it's higher stuff be this XX to to be elevation, higher-yielding willing The can for me quantify

John Massocca

Understandable. me. you very for Thank much. That’s it

Sumit Roy

Thanks, John.

Operator

Thank will Securities. you. One Chris from question be [Operator ahead. Please Next Capital go Lucas, Instructions]

Chris Lucas

for Sorry long call. the

some me, Just just you can is about talked you there you the question two close to issue a approval? have that related quick The immediately, little close? just, Sumit other or frequently or the once waiting for I ones bit occurs, for actually transaction. are about Encore is regulatory timing And

Sumit Roy

we'll it waiting And regulators is a us close. on in that, Chris. we then be a It really give is thumbs to up. have once position the That to

Chris Lucas

huge. the some that which know one to breakdown about The lot much what me foreign $X.XX share, don't Can it big guess was I me. just there. Not is? Okay. you is give for a how a just of other was, exchange as I Christie color a quick detail know And a of adjustments one. -- then is I

Christie Kelly

Yeah.

the The other loss statement related non-cash income of on really oriented $XX adjustments million. was to translation about

Chris Lucas

you. all have. I Thank That’s Great.

Christie Kelly

welcome. You're

Operator

session. question-and-answer Thank That our concludes you.

over for Q&A of go closing like I'd to Sumit turn Now call to End Please Mr. Roy back ahead. the remarks.

Sumit Roy

joining in to all XXXX strong forward NAREIT seeing Thank for the us today. and evening. you ending two many Good Nick. We're conference Thanks looking weeks. of you at in

Operator

The for today's you conference Thank has attending now presentation. concluded.

now disconnect. You may

Realty Income (O) 3 Nov 222022 Q3 Earnings call transcript