Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Realty Income Fourth quarter 2022 Operating Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Julie Hasselwander, Senior Manager of Investor Relations at Realty Income. Please go ahead.

Julie Hasselwander

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

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

in Instructions] disclose factors may will the We greater company's that cause detail the in Form such differences XX-K. [Operator

I over Roy. Sumit turn will now the to our call CEO,

Sumit Roy

you, Thank Realty their all who annual since strategic results, have our would The everyone. support. result I like investors of year by a in XXXX. of to highlighted the our AFFO execute objectives worked growth express tirelessly and Income of team, to team's reflected and our was XXXX on the significant company efforts Julie. my rate our share for to for company. Welcome, growth our X.X%, gratitude of was for XXXX collective our growth per appreciation highest

on of in including quarter, the We XXXX $XX company. high-quality bringing sourcing billion transaction remains $X we activity, XXXX, flow investment fourth approximately billion and robust. billion. quarter, both sourced in record investments the fourth volume annual highs fourth for Additionally, $X.X the in quarter closed set billion to volume $XX Underpinning the investment

years. with a period occupancy at of rate ended reporting the highest year XX over the Finally, of occupancy our XX%, we in end

periods ourselves economic our and the business sustainable demonstrated in investors. by is highlight. uncertainty provide like At Realty And on growth stability find to Income, behalf important we today, model our resilience we to of of during strive

and downside in a as has of a the year combined of negative total by payments per of consisting AFFO history total volatility share single During operations not our company, experienced return returns. dividend public growth generated XX-year our our form

S&P cash We can to supported flows, limited that leases are respective underlying industries. properties This of long-term very that claim. the who XXX portfolio in their in testament companies are clients believe make diversified we leaders a of under a which is with the durability a by our company in among is

We working are incubate lanes to offer risk-adjusted swim growth returns. constantly that new attractive for

expanded Since have our the start XXXX, of we

difficulty] [technical

to October, we wholesale new completed debut platform. verticals AG, by wholesale seven operated industry. investment-grade the leader an to In Italy, in transaction clubs our in pan-European our acquiring Metro club

when commercial we we first consolidating country are market the which the internationally, third a have in and in presence. about Italy As we our purchased in represents property abroad XXXX, now intentional fragmented discussed real we estate Europe

our resorts, is and our we and to transaction industry. discount strategy of billion of the escalators a represent to our acquire estate. partner $X.X on cost gaming property The with at net Harbor, with high-quality lease closed purchased to real in In from competition. replacement which It structural subject is acquisition prime estate years annual best-in-class located attractive Encore, December, a Boston, to long Resort wind operators a barriers XX real to estimated Casino of was triple is first example with good rent

revenue legalized importance this partially million $XXX August the As strategic gross the of further estimated professional sports of anticipated in XXXX, state, and for an Massachusetts asset. gaming unlocking collegiate wagering supporting and annual

XXX-property acquisition of are investment difficulty] a through we addition, pleased portfolio what consumer significant are practices in a In during the the dental quarter. the of to fourth calling we [technical announce

in additional that the real of make we market $X.X investments has transaction nearly in in the We U.S. be expect this sector to a addressable a $XXX just million estimate trillion of to we total estate. hope start

the of throughout same These We that are believe many company's that offer our the proven up which the locations and of long attributes industry nondiscretionary thoroughfares major in around goods portfolio, have assets service-based make our essential resilient our uses of services and consumer-centric in the history. much medical shares and

[technical difficulty]

leased is extremely believe opportunities, well the industry fragmented, in to we consumer-centric properties which for medical consolidation appliance address. suited are creates we

decades, several support industry towards fashion shift believe investment continue expect model this an in We our accelerated occur manifest the been will patient-centric model. trend ongoing this post ovation and move has will towards to ways to The a that in the in we industry. for pandemic but

share quo improve as in we help they on And of providers; including care delivered and all, reduce help to closer existing these will industry patient patient CVS primary the per payers accessibility an the of quality convenience outcomes. capita like care Walgreens of the having disrupt clients will First, and and the second, believe the patients, increasing third, spend to for care continue costs lower the the and time. gain will over status U.S. ours increase of health dynamics to

standpoint. also is a adjacency with a note important to assets are fungibility the real of fit from It footprint estate and these strong existing our that

conducted As that a with a similarity had XX,XXX assets study industry, this XX% industry. set in data we over portfolio we a analyzing our underwrote this of found variables and

forward exposure we increasing time. and look to over our

Moving on.

a development yesterday, support Plenty, farms. Plenty's this farms vertical the into with earlier emerging week, of have As in vertical alliance indoor an we actually strategic we leader to operations announced entered

Richmond, to are transaction an automated architecture than it distribution efficiently greater highly initial per generate adjacent to the of vertical Amazon Plenty's scarce times alliance, near asset the an harnesses indoor we farming. yields will natural conventional to acre fund farming up XXX facility. that of Virginia, believes development farm located resources As production the

forefront at and structural of Plenty crop the production evolution regard a in We

difficulty] [technical

summary, of plans. the over value In unlock distinct growth verticals representative to shareholders. these are we to our for new expect opportunities growth create time

to on portfolio. our Moving

our XXX.X%. or In year addition we delivered rate properties to full bringing the record our rate on year-end, rent at re-leased, recapture to during to of proud quarter have a are occupancy recapture XXX.X% fourth renewed

the We pending still in underlying X.X% the Cineworld accomplishments, rent. of portfolio attribute our management levels estate and annualized impact these on proactive of of is exposure, total real our our bankruptcy recent rent base through asset Despite market. to portfolio our the working relative results quality to which the we efforts, our our are

reminder, to are under lease accounting basis -- the quarter a single XX we a third of which XXXX. As cash for of and subject have master XX accounted own XX agreement assets, which been since of

each in through of we the October Cineworld of bankruptcy collected have XXXX XXXX, Following announcement in February from rent XXXX. contractual the XXX% month September

collectability As on balance evaluate receivables our resolution these bankruptcy we we've materialized, had the revisit as yet of as amounts. not on Cineworld continue has to the to it appropriate deemed we

analysis accounting. in caution, of quarter, properties fourth this recorded of result an with and on accrual we additional a associated of abundance previously Cineworld As reserves nine the million $XX.X

now receivables $XX.X our XX reserves In on from have on total, representing that million cumulative are outstanding properties cash Cineworld. basis of we XX% of approximately accounting,

from contractual these unreserved receivable outstanding rent at was expense excluding both and changes, of deferred receivables result million a our year-end, recoveries. As rent Cineworld straight-line including $XX.X deferred and

an on operator's to of Cineworld the accounting million outcome rent. the on Based currently properties approximately stronger in negotiations of continue $X.X the our portfolio, portfolio basis assets information analysis, our cash XX account on we provide generally of update monthly proprietary of and believe comprised for we The will public performance our when and contractual base appropriate.

has management role I welcome the has immediate The acumen years, COO add qualities CEO. to to we White January, Greg he value known vacant pleased for Operating believe and many And the as team. assumed been Officer. Greg I to experience, Chief leadership role XXXX in Finally, since when having of the business were

at Most recently, at Greg mesh adviser our thoughtfulness Income. estate Estate served Greg's Securities. the culture Banking admire knowledge as in group senior the Realty Real extensive a space UBS and his Investment well Lodging of I integrity will with and and commercial

I Christie, who from to further pass the the quarter. now will discuss call will results over

Christie Kelly

Thank you, Sumit.

the Moving on balance to sheet.

quite publicly capital on we've As front. been disclosed, the active markets

proceeds currently million we available ATM quarter, raised we through our and approximately of $XX unsettled have $XXX sold quarter equity billion of issuance. first fourth forward the approximately of future equity including XXXX, when for and in the program During equity primarily

year gross at net equity weighted to proceeds over Throughout XXXX, entirely average a we the price billion through ATM a $XX.XX, of ended with raised $X.X almost We our program. debt of range the ratios do EBITDA annualization. reflect note these the I referenced in at targeted to X.X equity that time not or annualized Please giving time forwards outstanding previously. X.X effect our adjusted

next January providing capital in activities the and between the were three striking Our participate rate at over years. the the lower a us terming fourth while right balance aimed to borrowings and quarter market in our environment short-term flexibility out

XX-year an yield effective addition X.XX%. priced October $XXX senior million at in we issuance the to bond unsecured of In

In a notes. callable portion and of offering. attractive fixed after January, a unsecured executed The we interest existing $X.X to $XXX dual note, structure, tranche swap stack. replace In a our conjunction year an million offering to with senior three billion from year rate variable one notes of we bond million the which capitalized in three-year consisted seven-year window on of exposure expect $XXX payments will the rate capital variable our we

of interest to important our otherwise or program. to our credit of expected of basis to lieu is $XXX X.X have note locked rate variable rate effectively XX would we basis exposure which swap, on is be rate outstanding borrowings on paper variable facility to the It we negative the compared that in giving of a variable our million effect savings over represents points. revolver to commercial spread SOFR, After in points rate estimated

on into Lastly, X%. of effective we resulting the of loan unsecured In an variable and new $X entered multicurrency closing extension initial yield a conjunction two with to closed options. with one tenor in loan, an fixed-rate we of year swap January, a term in XX-month billion all-in term with

a of thank that our I each would to lenders to say take to participated. you moment like

[technical difficulty]

to their like and of tireless capital make efforts I for Jonathan our in would mention Backe upon and delivering market also strategies. Steve leadership special Pong

Moving on for XXXX. guidance to

dividend AFFO $X.XX initiating of at guidance We $X.XX, the range yield, per profile of of earnings are X%. and including return the current growth total share X.X% circa midpoint representing operating our a to

interest our optimistic rates active. So, much rate has remains XXXX, expected about. investment there The growth moderated for the annualization pipeline of is to be higher

to our continue at source opportunities rates range. markets We in target accretive to across mid-X mid-X cap the investment

transaction we of guidance each of a quarter $X we this incremental our and will, course, to visibility introducing are guidance result, As revisit XXXX we greater billion, investment gain pipeline. as than

remains a dividend of rate were company, every S&P over We monthly to remain central monthly X.X% years. period. to dividend only Index Aristocrats proud dividend increase increasing the to as week one in the for consecutive which a having year Finally, dividend We REITs growth model. a X.X% last pleased XX the business have over for three ago of Dividend our be announced year XXX an represents

to would I call back Sumit. the to that, pass like With

Sumit Roy

afforded advantages Thank us the to capital. size, capabilities competitive XXXX to demonstrated our you, results Christie. and In platform summary, access and our given of our the scale

returns. term, record with Over the consistently stockholders flows cash we have as of our our continue benefit will of believe positive track total long stability to from proven the we

Finally, there is untapped runway further we believe growth for geographies significant industries, in

[technical difficulty]

to Operator? forward open these this unlocking time, we look over it questions. We time. can for opportunities up At

Operator

Instructions]. [Operator

question go Dennerlein comes of first Josh The from Please ahead. Bank with America.

Joshua Dennerlein

ask outlook it new seems like indoor for for a deal. wanted the get Plenty I farming? underwriting did you industry I this general. as with about risk farm you a comfortable guess relatively and is in new as to guys industry guess the indoor how guys I well

Sumit Roy

at Josh. with to in play than more for in of understand in efficient looking in for specifically they're ag manner and traditional now. the plenty of to So, part try much, we've Into revolution the terms how part is year going something ecosystem that question, crops working are technology that a seeing a the much delivering their farming. better the farming, tech we been And as of thanks to

the and you billion farming years. space, estimated you $XX at few to is look at within over be ag If next tech this look a this vertical industry

Plenty within very established vertical. a has particular And this position

with providers the If end you stores. and [indiscernible]. of of have, look like that largest companies grocery are sponsorship at the to Walgreens, product of These they some some grocers and it's Albertsons,

with they're along has going also end Walmart product. from to in invested company, be the directly difficulty] [technical served which this And

$XX lot to Amazon a gotten very We've a have be happens it's institutional of investment, very they end location very million the well. And to So, adjacent at industrial to box. know the sponsorship. an well-located the company of day,

scenarios based felt estate going different various we comfortable And a on risk-adjusted the to solid was across be profile return real that this investment. very

is we one that, was the the the system specifically take. internally, of of constrained, a going tech be constrained believe resource used than said continues cherry aligns of arable Having We yield with to ag phrase of that that on land fact to and was that water farming, deficiency all constrained, value genuinely role in top our more that the this going play as have and the vertical continued to forward. giving a big value well, world

for as an we with comfortable as So, reasons, those tech and within all pursue. very more Plenty ag got particular this importantly, an industry of operator, vertical to

Joshua Dennerlein

the elaborate billion something to you put to I all the the X are inside get on that pipeline. And door the you and trying maybe and then $X the out like year financing a on the little expect could outlays, color a you the next know kind it's more is returns -- this guys deal. over X, of warehouse? equipment Like bit Just

Sumit Roy

Sure.

estate real company, first are and Josh, we So, foremost. a

responsibility. all technology, Plenty's of So that's we cetera, are is be all equipment, to in. Any that et the going investing

million that. to be this none a invest $X and this become we billion of a number $XX if we its that towards The go technology able name, importantly, is with has do this so, would hope success, mean that the to And which will more

[technical difficulty]

farming. as position of vertical the one leaders

The years. investment But million any the in at five itself is keep potentially -- that has beyond option. horizon, the is much I on $XX a longer our would next investment say, subsequent mind

so approach And obviously, estate perspective. real this are from partnership purely we going to a

we believe risk-adjusted happy if to in runner to to on front Plenty partner establish with be these types to real needs itself does, are And But do continue a that for of the estate But help technologies a ultimately, that company technologies work to basis. needs a order this as successful. like a perspective us return is we in these for space.

Operator

comes Anthony question go next JPMorgan. ahead. from Our Paolone with Please

Anthony Paolone

now? offerings bit of you medical so in to you those consumer Sumit, service are you. interesting most Thank like you terms that boxes types maybe? on of forth, the what are do can a yields, types What Great. right talked that expand the operators, look vertical of about

Sumit Roy

Yes.

we're when edges. around areas adding more are So, we we're consumer-centric and to already that talking medical, about few stuff currently exposed talking about a the

So, what of stores, the are is of already drug not yesterday those exposed tomorrow. areas? Like drugstores we drug are to store but

and in their CVS multibillion to minute area be both And incredibly and provide are are investing the you've continue of the the probably able in heard physician very press of et share physician What this services. -- -- cetera, general those Walgreens fragmented investing take heavily clinics, the an to hub, business, they to to is dollars health services.

dialysis, will that have all delivering and so facilities, care, momentum behavioral to method pediatric to pandemic, as a post be of those end to consumer. are that continue care, And tremendous the continue especially an area, dental gain concepts urgent centers, we'll care momentum, eye infusion care, health care, gained

per time sure down? making an company we bring capita country relationship experiences. cost that we be to convenience, there is can to belief that the consumer, what experience essentially established. And And factors that that OECD a And being is here the -- the how closer X health do is that average in of country like care continue this the

be an on in issues later end rather addressed So, than when issue becomes the on front life. can it

as the I cost. a at being preventative step XX% cost health embraced business one, believe of mean, will that reducing model And in that traditional of a as be that goes if -- in of care care, to can only the health and health helping to ways to very today, will that their we U.S. population have identify care actually the important care. addition be reduce is we the have own. back general the you precursor XX% this physician look don't they has a delivering

actual remarks, overlap sort that have is in will what open mentioned size, of any that that types And XX% terms a of cetera. in. this to lends we have try I with XX% a locations these be boxes And what my we And this for housed is was prepared concept lends looked it and in anything itself and that are found the in season so, facilities terms that -- to there us. to et of we there's then at boxes of analyze

are medical. variables these themselves And we whole to slew that looked there consumer-centric of And a lend at. that assets

And trillion $X today, of a incredibly by It there market, is. XXXX. And fragmented. net a help grow core sort our a expected so, are of lot trillion lease increasing this to using the It's example that perfect bring is $X.X strength synergies. to to all about addressable what to we to market total market it's and is investing the And continue table redefine our consolidate

difficulty] [technical

the you end that. were we something -- my all missed saying if of of post you had answer,

So, on. you're back

Anthony Paolone

Okay.

And thinking to first term, like second question mid-Xs. that. about my mentioned you mid-Xs second the just and quarter, and about then think yields relates Sorry to I near

did course -- You into that just that on the the that year? you're expect might to -- number it of term? get the the the over in range but fourth that X.X is ground to what today? quarter, does should near trying Just we you here seeing through Or a it in think moves

Sumit Roy

Yes, actually a where X, out, we when put think, transactions the and pipeline some shared unsecured included then were on LOIs. put offering pro Tony. the I We numbers out and bonds, you, under with we pipeline contract sup we the January accepted

circa $X.X billion worth X.X% of was And cash a cap that transactions, rate.

are So that we we is pipeline the about manifesting clearly, talking moving until in created have finally the had terms what created cap rates that or now in of we itself point.

what even at XX top and And about which basis speaking, you have that nine call eight over months, expected trading, now XXX cap points. that rates, stepping XXX points out gapped have of we spreads in their movement about we that the have, those who plus/minus look it, have XX clients you months, seen are have generally back done at more if we look more given bonds basis last, the

is not been have to but that perfectly have at seems played out. least it So cap rates in symmetry congruous, that, of how terms

you the So, to of first realized should being in numbers those expecting quarter starting XXXX. see be

Anthony Paolone

Okay. Thank you.

Operator

from with next Scotiabank. ahead. question Greg McGinniss comes Our Please go

Greg McGinniss

Good less premium these sense this discounts verticals cap? in a paying time? with in Or other afternoon. and XX saw I CIM portfolio opportunities is Sumit, likely you're we this or in makes M&A, peer regarding this finding public that like mean, for more at environment

Sumit Roy

if question. the there and -- you've of good transactions great very to market talked returns. a Having you some we've said mentioned had risk-adjusted that, at you're of other if which about that organic incredibly see don't the -- avenues to that's at and the Greg, Look, be mutually I are we economics, charter able the transactions there's business. CIM ultimately good are an look already, M&A that being do, to the grow is to to where similar opportunity pursue as what be on front both realize exclusive able

willing to are backdrop of M&A does I it are outlook particular is But against than environment are company going that pro better ourselves have because see of It's we a partners to cost less not. the we're for opportunity see looking that the of have to as willing we the don't the at there part just when question who an we see to being being compete picture, big in. But forma find M&A.

in XX%, last sector at order down. if the path our would in billion perpetuate probably that's on But I -- acquisitions terms their going the look, M&A that, of sellers' I of play we what takes We that have going say we total are in think that to -- down we are elements of that of companies XX% behalf, transactions. to happy care are you size. need of did out look sort companies $X those year. are very the that

M&A makes grow to have don't order we pursue us in sense to to it for business. self, to our So, continue do and that.

from We are shy that not away to going either.

Greg McGinniss

sidelines? rates And and private of still Okay. limited? to reasonable. a the for the cap question Have competition Or the here. started assets bring second buyers for some private just That's off equity is higher

Sumit Roy

a quickly be there. They're in markets them this and certainly ability for to their debt capital market. to react continues constraint out The

over different a real monetize think buyers six close I the their estate. of has on potential taken last of variety certainty reasons months focus won't for a who, very for

to like And of us, somebody to capital have finance that can not deals. certainty deals close their on bigger it especially that rely the when that comes does debt markets

truth the in played has out told over last few months. think advantage which be our distinct I a has favor

cap that who rate And so out private and with. still, as think start still our have to I ours sniff capital when ability competitive is to close stands environment. obviously equity around But partner I believe, cost yes, higher evaluate will of their given to don't as potential sellers to the

Greg McGinniss

Great. Thank you.

Operator

Green Our next Allaway comes from ahead. Please Spenser with question Street go Advisors.

Spenser Allaway

Thank you.

has that bid faster cap As to dictate spread do will you with you've it both how Is as think heard Europe. U.S. relates rates, 'XX deploy look we've seen? what geographies? the that in versus consistent you across compressed you in the And that capital

Sumit Roy

question, a that's great Yes, have It answer. perfect Spenser. doesn't a

a you towards that lot we to didn't but year. higher do the redemption substantially fourth look the quarter, that played a Europe, circa in dynamic $XXX end rate. had million, there the cap If lot started essentially a was And of issues face out funds volume of the of they at

real estate those for able issues, who, do on their redemption which somebody monetizing meet to precipitated does of not again, sort rely is like opportunity markets, debt fairly portfolios capital help to created that quickly. the And us an obviously transactions

Because resulted longest not time the for what that's things much towards part Europe, why rate. [indiscernible], volume that the of because And only that's essentially $XXX.X reason later in was in the happened the higher of happened were specific the cap the quickly very year, dynamics. And moving.

specially capital path when cap to in environment. sellers the moving estate, traditionally down had because our was have than I just the moved move. call, who has faster that rate you monetize out this allowed continuing of it that real interest much direction. for are to slowly during quarter so rising been rates has And of again, third trend much think mentioned this I that's going pulled a the U.S., pushed And their the In the inclined market it

believe that, find we of of a out all rates. of do that movement that bottoming is continued of said where more expanding Having cap I ourselves today

And for in of some the it's settling X.X%, the X% products.

trading in We, products high-Xs. are even some fact, Of low-Xs, one high-Xs. maybe in still there our X% the still terms the the QSR cap course, front in assets a in of assets trading that's one-off sold it that's of There's of in rates. in with

those because of are markets, and ignore So it's mentioned. we rate this the tail to now seen areas cap have But environment. those out the movement will rates by and play we large, cap starting in

Spenser Allaway

was And geography in you. as portfolio EURXXX cited Okay. of have has regarding terms general of there you being for Thank those or there That headlines extremely portfolio helpful. EURXXX which Is share been a to marketed can the million the anything been on million properties? bidder. makeup a

Sumit Roy

wonder I have sources talk about contract. are, what really your Yes. that Spencer. we under don't don't transactions We want to

which a that may or transaction be in We or you've can't rumor the just is to may in So anything, industry. involved mentioned. we hypothesis -- speak the not a

about that. Sorry

Operator

Our next St. is questioner Haendel

Juste Please ahead. with go Mizuho.

Haendel St. Juste

afternoon. Sumit, good

the on the assets mentioned portfolio average. quarter, another of and know acquiring updated here. your portfolio risk-adjusted in experience The on higher-yielding you share the you're But philosophy past, on noticed -- high-grade even it's yet curious I when fourth back far high-grade in Encore. you your average again, the focused below best was your Just In the is an again returns. quarter. below you have perspective out I share

think give Thanks. some of we going updated you So kind maybe on forward? us that maybe dynamic about can should thinking how

Sumit Roy

output I and finding you risk-adjusted think that returns, grade out. tends fourth transaction, that Ultimately, for quarter you've question underwriting. is what Haendel. asked, the the a you something the that the is instance. just best of is you're seek CIM And to game seeing counter like sort something investment this of an of not the said, in answered a fact we It's that be to

get were healthy have transaction with And coming Here, we grade. to able $XXX from cap we a the an XX% million rate. investment rent of

So going to that is move. number to continue

of fourth larger did transactions In were if the would number $X.X the fact, just and in up you high right portfolio of we look quarter at like one you that to the the particular XXs. the transaction, exclude be did in couple did, a and investment-grade wind we that billion --

So, that's going continuing we part risk compensated. those get to the expected that And if comfortable answer outcomes, the to transactions. credit based very then with which on appropriately and are what assuming is need we we fluctuate of risk to comfortable pursue we based comes quarter-by-quarter. yes, being And the is on are back, are

Haendel St. Juste

Italy? what's wanted underwriting the can maybe basically about guess, appetite ask versus Italy the, how Europe you're Was investment the a you profile, And States? the relative That's your rest perhaps about earlier million in Europe for moment. talk a bit helpful. I remarks? risk there the of $XXX the or I for in mentioned United to the quarter of you investing then the in that And

Sumit Roy

we as within that importantly, and midst we operator partnering definitely risk. grocery a more like just that the Italy, and business of when during has were country, Look, about industry the the were -- we particular the invested again, more very in with. industry But Brexit,

at business, AG, which wholesale well-established in very pan-European, look an is If it's it controls it's profitable, of you grade, very Metro headquartered the I business XX% investment and Italy. in believe Germany,

XXXXs locations. been some have of the our established They since in early

is bore There business exist businesses structural a businesses of oriented. going Cisco place more very types Metro, makes that that's very we to in is a Metro interesting that of not Italy. much Italy anywhere and combination comfortable Costco those not I'm risk much going retail-oriented Both this as are despite Think served very and professionally advantages additional with, some invest. which so as the to country-specific might that of of a well you feel and out of is is Costco Cisco. And with.

what of just But concepts be we we are as with, going that are are were exposing like partner end to. we very going And the to were and ourselves U.K. particular, we at in be what Spain the we to the who in But to Metro into the account risk risks we've very risk-adjusted is about Italy. made day, cases, these some profile, good in taking takes of in that new won't additional countries. with the some investment into these the that feel look, going return we

Haendel St. Juste

And and I the going cap rates it is returns? the in did in are $XXX what you or set -- the of just ballpark, if is, million quarter may, follow-up

Sumit Roy

wasn't the total of of €XXX $XXX $XXX believe million. we Most it or the that U.K. €XXX in in the the was Europe. the all was No, Metro other million made million Metro investment. I million were was investments investment

Haendel St. Juste

Cap rate?

Sumit Roy

cap I It believe, rate. Sure. blended was X.X% the the XXX rate, what cap got basis points in we of in You've U.S., did north supplemental. the

Operator

Our comes go Please next Kamdem Stanley. from with Ronald ahead. Morgan question

Ronald Kamdem

Just just health EBITDAR the good. really stress is past, testing I coverage pretty of is the you talked quarter-over-quarter. up of on slightly can feeling touch sort that about see tenant sort we occupancy In Obviously, quickly. tent the XX%. and

potential the of and just outside your in recession movie theaters, where head tenant is of Just terms at health.

Sumit Roy

is that's That's do especially -- on right believe what much how biggest to of now Cineworld that. them, within a part out Ron, have and Look, to next is been that with focus in great so at look and XXXX going negotiations whatever leave it's been for question, to that we going the play better four that our entering we'll uncertainty. resolution few into bankruptcy I months, outcome is, now It's in months. with going like. it and the

to continued et largely function to continued EBITDA -- our again, coverages cash and something to improve. you Outside a share this clients Albertsons, of coverages, on is continuing our cash our in wall existing look outperform. full coverages, have those trend Companies up, of flow and basis, cetera, continued at of to those have growth flow supplemental therefore, we four-wall a the that, some generate overall have if like

noninvestment-grade. transactions have been new again, might in the the it And why of was very Some very coverage have is, into so we entered that healthy handled I four-wall that with comment doing about are have this talking we many ratios. much think it ties

If investment-grade it but Xx, you you their north given in of a suddenly don't have businesses, an coverages from and look size. perspective real rating Xx estate they have sound at

pursue. will we that businesses are Those

our or why is was X.Xx the ago. ratio a about reason the to close coverage that's four-wall now and so it year X.X in And

continues health fairly good. the to So be

at about theater it our is rent what list. of it's watch lot imagine, by our list. is lot tenant assets are business. If the on list, on And there theater A on driven the you a of you watch as watch the look is of X% can our

et And the issue, the cetera. but in demographics, credit there landscape, what given some cases, end at not the will may a we location assets et is associated also changing with have risk lease of a have cetera, changing competitive happen term, that

it's in which our high it happen slightly that few a higher will space a function a we what X%, rate in So what's quarters than ago. largely theater continued environment. what and constitutes expect And happening the was is interest of

Ronald Kamdem

acquisitions more closed. gaming. -- more touching importantly, the going and second space. guys Great. my more Obviously, doing are as out the just question, what's you then pipeline How on look thinking Encore the And that about like? the deal in is you gaming assets have How

Sumit Roy

Yes.

Twitter. beautiful are in we this jump had own had we on Boston. our and internally just news a closing when asset, following. this posted proud We huge presence demonstration And a in So, we on the LinkedIn release about very around to asset

appreciated hope was win. partnership are So Realty and clearly, proud industry, of we very have following grow the operators. are about to and very and this continue They to particular industry. sort it are by good to to Income, audience They this learn understand with this great we

those much it's assets but And -- this for trying to outside We those with be transaction. asset. And looking best assets think didn't are going But line icons that will do get the operators and the types opportunistic the continue finding be as are all one-off we on even in to for a have that. boxes operator, of focused of of to checked Boston I we given on. very

are variety looking them chosen the you for. imagine, they inbounds. as of But of for we haven't need pursue can all attributes have reasons, we several received we And that because a to don't

be in this will love we it over to industry, selective grow we but would So, absolutely time.

Operator

Baird. Please Golladay question go from Wes next Our comes with ahead.

Wes Golladay

lot care. the in of a activity M&A been There's value-based

deals? was opportunity? so, credit some I industry these parent's you to, you this of on would all you're get referring So if And the see the wondering the is if where

Sumit Roy

yes, and want to at are has Amazon End Oak they this announced they transaction some Walgreens $XX transaction. default, talking are for up it Yes, instance, ask estate ended just then similar we for Health, credit of on consummated. that about. just billion to going similar transaction. they that up done a looking CVS did what a by buying is precisely we that Street monetize CVS' real those

are -- this the -- perspective how what we with approaching we to trying what calling vertical synergies are are that We it of from pure and consumer-centric find it state we're the already pursuing. does that are have and the locations a alternatives new because

It health our forte. lot on. not It's to health no of health companies operators, of today. and us health forward to it to be pursuing. not happening. health And that has already are are derivative our But real is repositioned that a strength. hubs interest existing pharmacies the the That's And focused what thinking care that could looking will traditional That's really care care care companies, minute estate. the That's at be that operators are be certainly clinics. our not going value-based

particular in the happen. but there's that impediments value And That's this getting growing enhancement, for higher see all in be intentional believe perfect in quarter because do the we day transactions switching want embedded about are it. we did realized also us. doesn't Those that fourth to created. to of love continued get are continued types that by one, that we to portfolio the costs we doing area There's

Wes Golladay

done ground ever that you I redevelopment redevelopment also, Got a sounds would guess, have, funding like is big Or it then of opportunities. part opportunities? redevelopment of would then lot now? And the before? it. Have business have And a some you you

Sumit Roy

funding, redevelopment certainly Wes. done We've

partners, If some you we've And partners those in some recapture that our look rates the our of of been at We've done portfolio. lot And our have best pipeline is assets. dollars have. repositioning a done in-house. achieved of national today of it and some existing we with that that we have

certainly of of some locations repositioning of we we consumer-centric And when overlap for foot square use lends use. and currently highest itself rent and XX% terms we characteristics, about of in that to some real talk concepts, that the So own medical these this estate already best a own. given our best we recapture that define assets highest per in could terms for and that location of we

be these come partner so to these reposition the of of pike. help our vacancies to operators, I'd existing are to that locations yes, And to with going services. able And show some types provide down vacancies, these potential hope

So to out value-enhancing that proposition going of yes, is a we're that explore.

Operator

next go Our Michael comes ahead. Goldsmith from question Please with UBS.

Michael Goldsmith

less with on you're markets laddering Just raising get talk you your capital were what the view busy based to that extensions your activities? Steve and these on Jonathan and Can with achieve on about term items multiple trying based to several instruments. It loan with the recent the in interest seems callable traditional sense rates trying capital a of the unsecured? with

Jonathan Pong

year us non-call noticed, it's did that the a three-year Michael, it's did about Jonathan. January, early flexibility one flexibility. in giving activities say, to financial after you I one, would that at all par. January, if We, call we

term one-year extension a two what one-year loan, but option. did also We

earlier in lock very that since the avoid, in us. long what And our rates attractive the capital levels efforts, XXXX so, on to went we trying especially curve was raising are debt with to what these we're

capital to over into would will amounts the advantageous us markets for next the to window there out. We more to tap three term that these like years, debt think be a

given really they extent participate long-term did we us to little And so, of much terming for rates lower activity a an maybe flexibility barbell lower that earlier rates, out also year, but the in bit revolver the to and about creating a and the come. it's if

Michael Goldsmith

to of retail for. your but wanted billion big or you changed new confidence depth, does And a this -- about of Does this. with I to these has the is of of the question, my acquisitions this talked talk with or each we've assets to that associated couple $X guess, of exceed you've years? industrial kind this And more traditional second assets guided ability opportunities new picture the the something about just are function the provide that hit in fundamentally last verticals core known -- in consistently

Sumit Roy

very people have what step a back and for look, is dictated as say, way good is Income, strength our a and It's That's or traditional which continued asked point us ourselves. certainly net impediments Realty mandated a growth. there be at yes, definition question company to our today, a Michael. if And we that a size question, was to core to we look to can lease There does. what by we've of and scale, that

other our last question last the this and just is business at look used you're sorry, asked an is was, has as grown and at the you answer. of model be do, the the we core and by all look do, if we all this will that if the difficult annually. can answer XX you the let's constrained size, capital, we at for CAGR for that can And been value take scale, of impediment been by should is If your we've companies that was, garner if it cost the and have ask strength business with years, what shareholders, see been business, X% are going four this years you The to would to us has do for what question, follow. And Street you can

But we and the what from ultimately, to to plenty verticals our space suddenly, only us for you shareholders. at estate from allows last pop and different. and to and answers it create And that you riches at perspective around the creative is outsized very things to allows are to if it look the very creative. net we these continue constrained And found once do it up by real there's our to start that look this lease of of question are a we be particular perspective the do. be we for started ability redefining And underwrite

the going respect, just of are trying due scale. don't They a mimic. peers with our That to lot to have struggle

on traditional a us. should that show to businesses, not And so, net these investing help able shareholders to return, we safer the risk-adjusted if is through can are ultimately governing retail then real if structure, than only constraining lease a some be as consolidate safe, win-win. it's really the in principle lease estate, And cases, be in net a that that

the always see continue this very will team you will Michael. our creative. are we just some deck, we where deck, to more invest has find out is Income to how be always what we promise. in about thinking share that's you'll people I Realty for, around detail, investor numbers I've see to the you delivering and everyone the us highly like do the we've by that -- way, on are I and with our to this go here done, and think So done, like encourage business, new engage you'll And thesis And laid thesis. But in and that

Operator

Thalmann. next go with ahead. Our John Please Ladenburg from question Massocca comes

John Massocca

we're the about hour I'll to beginning so a mark So, reaching little back us take bit. the here,

the of kind to actual headline option remaining we the underway? the the kind Do million in first project about right Virginia $XX beyond think to the the million purchase the get of committed amount for trying billion kind As in opportunity? and or Plenty number? delta you that's to what's transaction refusal out higher between of the of $X figure have $XX that projects, some like Just for

Sumit Roy

enter not to six estate end client that best of particular their take look a years. next get And I one But John, then way that the is it, So at will we a to real that to is to over real estate which product, at answer mentioned we user opportunity. any of the wish for the into real their pursue an a development as development basically any already, if outside or carve-out given to. have estate partner they five don't we be look we, opportunity

so are optionality going the partner more how of invest. operator here with successful because estate that we There's a terms real is farming, more would concept goal their and forward. a associated continue we mean are to becoming is ultimately, frame the to and in But invest vertical much of time more within lies But they that that. yes, with it a us

John Massocca

portfolio behind you acquired those XQ? a Okay. the portfolio Understood. can can on then And color provide you in attractive? dental assets? of on What provide some little credit And color the more specific that made

Sumit Roy

to a you them as not it's the So as operations estate real their And estate. the was for to was situation It the operator real the the monetize both own well invest mechanism rated. and operations of in business. had a where continue this

This I about. one highly are excited can very is by think a that we very constrained transaction negotiated are was but what we share. we it it is that

real medical more of is, we to an but for again, us enough large can't into engage sort in consumer-centric specific was and estate this than And like felt be that. big this advent a we in way, and it talk about,

You of But it. know do a can very of that's quarter. what million for was was what our $X small the a quarter, overall the rate we was given and it about cap this component extent it, that

Operator

go Our from Please Jefferies. Linda ahead. comes Tsai next with question

Linda Tsai

the the hope by you of the COO? some of in are role to What vacant benefits achieve filling

Sumit Roy

is Look, and last all our is I that and to bright with somebody has the XX for he known now very becoming Greg going been already is that And respected. and added years. very now it's to value us more It's the blushing, X.X -- additive unique start is he's but our complicated. I've all and Greg us. discussions. -- here, months, to almost going guess he's he brings so he's and to right table incredibly a I've more mind sitting already to much about that perspective he's he's of of be business

talented We that. a We bigger to bigger need people continue to organization. are becoming and

positions he thing will accelerating to most important the all plan. to mentor and leadership -- and and next internally cultivating mind is by the the continue will to leadership in this massive are order his to qualities my and we and good about qualities -- strategy that those help will his leaders them integrity ability especially very which, use, company in execute way, the Greg, his to of with in its are to Company, his that put be a senior need within ability batch be But

Linda Tsai

X% in verticals properties this the then whether vary less consistent this of terms NOI, does domestic Realty international? recurring new being your are than threshold just or are CapEx of with And to? Income's And

Sumit Roy

type that the tends roof of example, an we on responsibilities, industrial to depends for that's It on leases have lease that, will and landlord. you structural I have. the tell

so And higher. necessarily, CapEx just not to general CapEx CapEx obviously, in there, but going maintenance is be --

Now be it maintenance. viewed some of will as

the will viewed of real improving Some life be the of as it estate.

be is the lease. that of but much a of So different, CapEx may the very categorization it function

perfectly even that retail on quad in I what would assets. there the say is call is not side, net U.K., we there the

more the a to do more leakage. relative we leakage in lot leakage term a have is lot very So U.S. But little here

part said of that it's we our of that again, big make, something all of thinking long-term transactions. the before so done, we It's part is AFFO. front about when all a obviously we not It's And the investments And on on underwritten end share. that and moving take forward return profile the business. consideration are of into

Operator

question go Please Our next with Suisse. ahead. from Okusanya comes Tayo Credit

Tayo Okusanya

quick a Haendel's follow-up on question. Just

little is doing a your again, So non-IG a list more bit little space, bit watch bigger. in the

given getting all with flip of relative at stronger. kind rent coverages these business going-forward historical of provisioning of provisioning basis about does the the side, of kind a levels, and look we as How stronger kind what on adequate think On just of do in kind backdrop. and credit kind are to factors your you

Sumit Roy

a not perfect Yes. Tayo, it's science.

in that uncertainty grade, underwriting. to that mentioned have you two to improve, coverages less and this that retail not forth shared I that Xx. are points investment but with but that continue yet polar to names And goes put backdrop couple we a of already are of we data the are less of investment-grade You've doing opposites. back we've that four-wall coverages are you have of How to north there

it's that comfortable of question again, businesses these And are with. a we are

would especially of environment, good. backdrop going near that term we operator not to be model the we to an sustain doing because the rate can in not have are transactions going business where this a going interest have be are With that high that you're to experience, what doesn't

don't the outside alternatives. conversation investment-grade. of should clearly think the provisioned have profile what I guidance, have much with to that's think I clearly uncertainty, we superior is -- easier higher it so over-index we I expense. have return we So, is our bad about debt because to how world. to our makes We rely this thinking get we are know we can But upon business. provisioned a in And where

similar in what the we year actually had was last a year adjusting kept But for bad the We that year we a traditionally have us. ended provisioning business. phenomenal experienced having expense debt throughout and up below

So the underwrite to worst really about and better how we expect allow out. Tayo. play again, we business, think to for our expect And we what outcomes that's we the

Tayo Okusanya

the Could points provisioning of share the you XX is any XX like basis Okay. basis specific bogie? numbers points or about

Sumit Roy

in mean what we You of in the earnings guidance? terms have

Tayo Okusanya

guidance, guidance. the the in yes, In

Sumit Roy

people want are going to know guidance Yes, going to that. to guess level I don't Every think happen, because this, we're what's that Tayo. to going give I to year subsequent of

Just take at a look our history.

You've debt It's got statement item. an expense. bad income line

that. can You this look at -- than and historically code can you been better that a speaking, in last and history, to the take see was we've year XX

you next you the what to now months, that can happen over that's overlay So your expect we create take information, XX how and should models.

Operator

go question Dennerlein with next America. Josh Bank comes of ahead. Our from Please

Josh Dennerlein

touched updates we Red watch maybe guess, news, they I just more, Any general? don't kind in the one just Just saw on Red news of been stores. -- Lobster on a or front, I closed Lobster the the kind some the list, watch think few has the in of on tenant list and

Sumit Roy

You missed it.

Somebody around list. about the It's asked right watch us else X%.

to case, around up reached trying not I can unequivocally rents that you Red there was that portfolio. at landlords, rumors us. Lobster least the of none closed that, tell assets haven't approached brought You our that Red is Lobster, which they impacted certainly they with were have was There again, negotiate

that. the They about result not their And those been of performance. have in managing of in much facts I there quarter talking think have last sure that third, have again, And all adjustments. inventory that I our rectified made they the just to about that fourth year the rumor some make that It with better should and make we rent. reversed. But some slow pricing missteps are were challenges rumors do were better to wanted percolated and They are of operation. mill. of in they essentially But had that X% represents

Operator

This like concludes any closing Sumit session. our would the to conference Roy over question-and-answer I to for turn remarks.

Sumit Roy

I the us, Dave, upcoming thank seeing guys everyone, thank you, Take Well, you forward in. hosting for conferences. look in you, for joining to care. and

Operator

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

You disconnect. now may

Realty Income (O) 22 Feb 232022 Q4 Earnings call transcript