O - Earnings call 4 2023 | Realty Income Corporation

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Operator

Good day, and welcome to the Realty Income Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Steve Bakke, Senior Vice President of Corporate Finance. Please go ahead, sir.

Steve Bakke

joining Conference for Call. for Quarter Income's all Results Operating you us Realty today Fourth Thank Financial Discussing President Officer; Chief and results Chief and our will Executive and be Jonathan Sumit Roy, Officer Treasurer. Pong,

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

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

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

would ask reenter you questions, the you If may like to queue. additional

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

Sumit Roy

Welcome, Steve. you, everyone. Thank

Income estate XXXX as year unique quarter has to demonstrate partner and which fourth Our differentiates world's a full us leading that companies. real results the built the Realty platform value

which accomplished us year, we by During size, several scale our to the the relationships. and milestones, benefits bestowed illustrate

on investment an set countries annual we of closing at X XXX across diversified and First, billion a property through different cash discrete high level in X.X%. average yield investments transactions high-quality volume, over weighted in $X.X

a was we on a quarter billion fourth The punctuated closed at yield particularly weighted of as investments of cash year $X.X average X.X%. with active

and and activity properties fourth Our retailers grade France, quarter located Decathlon, the transaction sporting in with rated one Italy included million of Spain, goods sale-leaseback Portugal. included a $XXX investment world's Germany, leading

which cash see experienced to the able fourth our that these team a with approximately points real and sacrificing without sellers basis a estate to our of basis Despite testament the approximately environment, focus markets or the is transacting were achieved spreads platform. sophisticated security XXXX. spread merits volatile our and of in on capital quarter flow, quality achieve We in XXX investment we points in an of XXX

the Realty. Blackstone $XXX And and year, chip as and build-to-suit joint the primarily with relationships including XX.X% we a for center data Digital blue the the investments, venture sector in Cumberland incubated Bellagio presence partners, a we sale-leaseback development Farm during through a investment with stake million new billion involving Second, established $X.X such EG in Group through convenience the stores. large-scale the

$X addition Third, closed above, billion on Capital merger to the in year-end merger, total backdrop to to our importantly, the October, These year. the and also deliver XXXX subsequent in in announced up the to share return which noted with X% accomplishments compelling Spirit set we all-stock operational achievements of with us transaction earnings a Spirit representing January $X.X an AFFO for contributed approximately per XXXX. growth And XX. an together Realty in

deliver in growth XXXX. at in to XXXX, an for $X.XX growth to of merger Jonathan per believe AFFO represents rate at us that well which in share activity robust that per initiated the prices midpoint. the share positioned range month, along capital an annual X.X% guidance of $X.XX with the We in last detail, attractive close We equity completed and describe will raising of debt January and December more meaningful Spirit here leave

as more price can we range total achieve guidance stock based public of believe the dividend, midpoint us to our positions our of rate of the selling without XXXX. February common return of inclusive deliver equity, We additional of this XX, operational growth this of on the XX% trading the a at than

credit million as of well be is revolving on expected we're year-end. addition $X cash facility $X.X to of billion, an billion availability In fully merger, and of our as approximately to XXXX a proceeds now on Spirit $X.X payments providing combination ATM guidance dividend of flow, via funded billion generated and exceeding which unutilized after acquisitions million cash portfolio's unsettled basis $XXX the as our $XXX approximately of annualized internally our also

While to investment forecast, high-quality only spread into our deploying opportunities, $X billion requirements. investment approximately investment development that Of expected and attractive come capital long-term of vast identified. highly risk-adjusted initial our selective remain we majority meets half which source form review volume to and of in already both we financing, is the near-term continue the return opportunities is

carries capital That to the our growth height profile as favorable reiterate, risk of market change. remain we said, the opportunistic allowing demonstrated platform flexibility mode should quickly pandemic, patient us to pivot return from a the an opportunity execution disciplined into To back XXXX affords us deployment in standpoint. very standpoint, investment and during the our little from conditions

we to continue we risk-adjusted over compelling appropriate to are in we investors, returns long-term. for capitalize investments our disciplined to our remain on intend opportunities positioned While to why the best highlight ensure

traditional net First, the a and estimate in net like emerging and gaming. the We total vast. $XX market and data opportunity market to is real across the U.S. consolidate fragmented lease lease centers estate verticals addressable Europe trillion

last XXXX. Second, demonstrated invested deploying each or since our M&A $X more we of firmly have years in exiting billion X the public pandemic the capital, including capabilities having year of

XX% generated this of per total per share year. growth Over have a provided annualized approximately return stockholders operational we have to AFFO of we X%, time, and approximately

prospect yields we per achieve on earn by rent growth are contractual to deployment this year. where Looking capital seeing share data we initial like participate energized in are track and attractive similar And to XXXX centers AFFO and healthy the verticals to gaming, particularly are and escalators. with meaningfully opportunities beyond, we to objectives

peer to S&P trading of through highly leaving equity manner the better in listed over XXX was our Xx top announced. business the in through than more companies increased $XXX and the the a efficient our volume us XXX and same ATM capital million our of in merger the even Spirit transaction deepens timeframe, situated is fund Third, volume This net average our nondisruptive program. lease places more Spirit access has ability since daily than us to publicly averaged stock, which markets trading

becoming their exposure of Diversified properties over consists of our diversified to and of growing our some these is time platform estate clients to industries. increasingly payments. leading Fourth, leased accordingly, the and clients reinforces stability respective relationship portfolio dividend companies our monthly representing world's the real in

power XX,XXX expertise the ownership platform our crucial globally, as inclusive of our properties over is of a Spirit across leverage differentiator of we Finally, the portfolio.

to Our accurately experience learnings more over since that outcomes XXXX acquisition that into value maximize holdings. tools lease AI us opportunities provides the managing enabling X,XXX provide of insights analytic our to actionable existing identify and feed

$XXX of completed approximately $X.X key investments cash high-quality allocated was X.X%. results Continuing from fourth $X.X operational of at at total X.X%. yield volume. distinct our of transactions internationally weighted sale-leaseback approximately cash equating a quarter, million XXX made We volume billion billion across volume average transactions weighted to XX average of of investment Investments yield investment to with were the a including

stores as transaction testament U.K. loan of interests investment in was at assets as global XX% billion, yield. a is quarter extended The internationally, and loan volume a the with grocery and of in to a a in of properties Our full our activity was derived year was Asda. the sale-leaseback platforms and we was backed supermarkets stores which part investment XX.X% serving made containing by ownership to value $X.X footprint. Included fourth

to with preferred our and in previously X.X% real investment investment Bellagio fourth Blackstone, investment yield. $XXX earns Similar loan with equity was quarter Asda of the an million estate. addition, Bellagio announced which in that spared in preferred volume investment In JV high-quality equity included the

transactions at estate to For both investments as transactions. high-quality serve access us our of lease have suite real future These to ability investments, net broadened for solutions that capital could returns serve offer superior to a we granted achieved. templates clients otherwise sale-leaseback risk-adjusted

X% the million fourth investment investment Realty. with a in in a represents XXX investment long-term triple initial venture is annual investment-grade rent and completion. net X.X% cash escalators $XXX initial to in center quarter, initial development generate upon an our XX% an client Also JV The lease the and we made a S&P expected Digital with data equity yield,

portfolio. push portfolio from underwriting year. compared points from for a team annual We year, XX quarter just committed remain result based This our operations. intentional prior rent current to walking debt basis X.X% over a organic grew rate is and strategy. composition net in X growth bad expense on Same-store on fourth the and to the our ago by rent is On contractual Turning of over growth X.X% an basis, our an part this of years the lower our deliberate higher approximates in X.X% normalized up growth. through to the amount benefiting basis generate to enhanced time

the occupancy prior Our expected excluding was decline XXX.X% quarter XX as the rate client result the Cineworld recapture a bankruptcy. point from basis a management XX.X%, XXX.X% At of the impact diligent a efforts to move-outs. during year-end, year, for the asset and led of quarter of

Jonathan, the to color will will I quarter. over now who add it further turn to

Jonathan Pong

quarter the to of of including XXXX. capital outstanding a $XXX the Thank you, average markets $X.X equity million at raising activity an price Sumit. active We in finance to have during weighted of approximately fourth in subsequent of we our $XX.XX, billion a equity currently year-end, forward quarter, available completed equity portion needs

we any the this opportunities following free the investments annual without remainder tap equity to capital $XXX the to needs before of And asset through equity available north over billion we which all ability volume for When markets expect us XXXX. to to into for finance million guidance in achieved be the we public combined $XXX of Spirit flow our cash the of merger, million having XXXX. sales, $X with of our recycling have is

X.X% market our and As our our half derisked and spend. volume accounted of XXXX Sumit for a capital X.XX implies notes offering XXX in issuance XX-day assumes we bond activity mentioned pipeline. standpoint, with a From month. development annual with only through earlier, guidance and $X.X million our approximately that billion in in share GBP we midpoint debt offering are growth schedule closed per AFFO culminating our last billion December $X almost Beginning maturity billion sterling USD of investment

considerations blend years. maturity average approach average X us markets to dictated investment Combined, offerings our tap has strategic that years and without given capital a was given approximately the outlook approach. these into to weighted that allow are X of this the X.X%. approximately permeated last business needing our also the to tenant weighted the to we of persistent instability debt XXXX, a over markets fund capital longer-term Near-term, which believe XX.X prudent There current the offerings X in yield

these our complex, desire Following XXXX, summer risk in offerings diversification investor of debt years with Euro believe our steadfast pocketing repayment multicurrency our while the support debt future across capacity. also in offerings maintain meaningful we debut to

closing the options term in a extension, as we date the the $X.X we XXXX. effective floating existing On our we rate on $X.X of as term maturity on also $X.X weighted us to conjunction multicurrency a interest January to exercised its Last billion that of swap In with in month, of an established fixed In through we principle with which of fixed of X.X% rate fixed in billion rate XXXX. approximately also loan January rate to Spirit first assumed resulted fixed that debt Spirit available in into that X-year from floating the entered of billion merger, X.XX%. this well swaps, average X in effectively conjunction interest X-year extension loan debt. locked

loan matures $XXX $XXX and million XXXX. term in million principle, this XXXX matures Of in

targeted X.Xx to in with $XXX forward to equity, of currently net to annualized metrics year-end. at ratio. line outstanding finished We us. the year excludes our of forma Moving pro credit debt And we with this available have the million on EBITDA leverage key

from the in the investment Our fourth which fixed coverage for and at higher a us lower-cost watermark high charge borrowings year XXXX. X.Xx, in outstanding. quarter yields less and benefiting And was finished short-term

are of In of amortization an than lower in from annual explaining our noncash is we reason in expense expect more and assumed. Spirit by Note XXXX, debt ranges closely the approximately AFFO million FFO thus expense reflected why we FFO per share adjustment that not noncash recognize primary in but bound AFFO on $XX interest $X.XX below-market interest this initial the to we share, anticipate per does that do increase run annualized rate the XXXX. guidance

the higher push likely for adjust at finalized, XXX would straight-line our We that ongoing and rent merger FFO FFO will from and the FAS purchase note are are thus, time. that price adjustments and once to accounting we guidance adjustments merger

Of do course, that noncash AFFO. are these impact adjustments not

markets deal as to on our last like we month. would comments a a about I the reliance availability opening our growth following bond strength in forward, our markets Looking reiterate of capital fund to view XXXX. capital Sumit's our We liquidity head lack of near-term From perspective, representing risk our variable available than into X% liquidity growth debt no capital approximately to the rest of stack $X less billion debt and XXXX our XXXX. total capital year-end, of of for remainder with rate fund at the execution

With that, I'll for Sumit closing remarks. back it to turn over

Sumit Roy

Thank Jonathan. you,

to Before immense been to our service concluding, Board valued gratitude his all years. we my have owe past on guidance I invaluable, would to our for him of leadership, Directors extend like and the sincere mentorship realty Merriman Ron XX and thanks. income Ron's

also I Fairview Realty his to welcome Jacobson, be asset for Income role LaSalle global the from as premier former CEO current the Management as Corporation. like Jeff's of of joining Cadillac management of will at would real a Board. of all benefit estate Chairman one I'm to and world's the firms in to who Investment a Board extend our perspective warm Jeff of thrilled us

venture results disposal in asset and at M&A joint partnerships these portfolio of global real sale-leasebacks, types, concurrently and XXXX through arise. of sourcing opportunities our conclusion, corporate to all industry, our depth and multiple and relationships the platform, our us commercial or including avenues In enable growth acquisitions, underscore via development the estate in some avenues of opportunities. one-off multiple leverage The team as public

to XXXX, $X X uniquely merger. greater us the competitive access serving companies and billion, than X real which to transactions than globally. size of million at a partner and was that scale. our capital advantages Spirit leading These scale Realty given estate were In $XXX transactions the support Income we unparalleled positioned These execute are world's excluding size, as to distinct completed an in greater in

Moreover, dividends believe over leaders to our as who serving a of grow in respective are industries, monthly that that mission dependable we provider capital diverse furthers spectrum to their core clients time. deliver

for up now it open will We questions.

Operator

Michael [Operator first Goldsmith question from comes with Instructions] Today's UBS.

Michael Goldsmith

guidance. the on First just question is acquisition

into starting of with It of half year the billion visibility You're them. $X sounds like acquisitions. you have

risk for is only really $X for the So billion. execution like the year

year? So that get order to in of ability what preferred Bellagio through it how opportunities will number with done come move change it rates? deals to that like for year? Like you've be with about equity for kind with and Is it what along done. interest the Is number of should to the you? kind or your through higher has the the think potential to do we upside to Asda number for that Is it that higher

Sumit Roy

Thank you question, lot a Michael. you said. for that It's of what just

has environment, If control you look at adjustments have the and market business with we today growth. okay, says, and you the be capital. out are that to look with part plan total at the that the the seen coming not cap of are we in XX% the X been of of a we And commensurate growth how X.X% these that basically don't rate not movement we cost north variables deliver going return

up the and with very confidently we of would no come will If the interest of shared on be impact business numbers will first in react. the in first capital, an If which with to line had plan which were advantage to rate if lower you. all side a reliance a be down, exceed. i.e., the the line start come cap to to have we go that. not with believe to adjust, on be that we then our capital, that's on funding to markets we take able would the have cost cost rates We reason to we of And capital very, meet, number environments wanted for were out that that

et I a environment to start impact i.e., of on having. cetera, were we to are would that positive conversations go which that to of down, a believe interest rate cost our the do have capital. change, If were the lot

through can dried have price getting happen that cap in of that So the it's not cost And of reservation capital either or movement the the market our the better. the through to around that expectation needs It's move. what conversations to rates needs up. be

risk, confident around to having And market. in we in the a plan right return And we aggressive feel XX-plus now, percent has can the to little with. we've come what no we have very be really that thesis and out very without the saying that's deliver

Michael Goldsmith

then helpful, think my to have still -- we be we lot And No. 'XX. -- follow-up That's get Sumit. to as not if about question, a through with

isn't of is driven. kind than done. of range this in you The question where now, 'XX, you've a necessarily the there murky, like lot deals So just a market specific of just of but to environment stays where it philosophy getting right remains transaction kind similar-ish the isn't if

an locked -- navigating was about a how that through -- in a would murky through you acquisition, a navigating 'XX how You've the think you do on about growth kind environment. multiyear exactly. through potentially Yes, environment, plan of think you Like how would for murky case? multi multiyear if

Sumit Roy

believe cap levels will at seller hey, was of part is the what? of X going the Michael, transact the adjust., move, is So will If the moved remain willingness today. cost I rates will Cap elevated years, market. guess to because rates that, of these the in and be the this for volatility more on reason there certainty there next to capital environment haven't that

dropped interest are that down tenure at up saying, the that We to in January, the to have start cutting year. to end and X.X%. rate you expect Fed of it's year, we environment, of a had the towards X.XX% X.X% last sort In it the back later then in sellers

X it off another to think X hold months. can I

rates of lack to this bind if fact this of we transact permanently one environment think widespread hesitation the been has the I movement that's impaired. today? cost this why to So And capital expect were environment cap that in would and have that in people why reason

to So think you've if the dictated, than next years, take scenario is they have change, I transactions will cap norm back. I done of the X think to the And if more this that, come do not first to for that, to of hey, going that. advantage that everybody line yes, capital do in were rates sort were I the that move much in ones are accept environment of and to be so. going think be we'll cost

Operator

question next our Lynch. with Joshua And Dennerlein comes Merrill from BOA

Joshua Dennerlein

appreciate the I time.

question do you a development? get Do online? on finished? do -- How or NOI project that the return Just from a return down that is kind is for I the only Or funding wanted drawn had the think coming once development funding. development about like as to NOI you we get of the money

Jonathan Pong

assets is to put it really because to a this no One depending we're done, development about funds Jonathan. the and lag. the the Josh, lease. if think answer doing way rent get vary project down the those and really there's obviously, on is the is takeout, starts when we going we But

If we're way it's to this funding development little not as where out. you're entitled that, associated a put quite the economics with bit getting we build-to-suit more are we that a funding the nuance along

However, from an short-term accounting standpoint, statement debt. to essentially cost income is the way of that it flows our the through through

when And so going most cases, that's be be developing the the to view, case. my perspective, do way in in most would capital, just and from to that's when deploying yield assume the clean it, a modeling see begins because us you to

Sumit Roy

are majority Josh. of pipeline vast takeouts, the Yes, the

So this into contract. entering really is forward a

once And at developed. assets is are the is point. essentially being We at deploying the received, of buying it's that that capital developed rent the are certificate point. not commencing obviously, and And asset as we occupancy

how think development about one the that's should pipeline. So

Joshua Dennerlein

straight-up There look I like this like Maybe acquire development. something development assets, about your just how all think going you development? do to appreciate color. lean kind versus just to new guess like I better about we yields acquisitions. And across more do you when how appetite on more? that as into of on developments like you're think one Is are

Just curious. kind of

Sumit Roy

is think we That's another that yet how to growth, development. It's drive available Yes. us tool just about to Josh.

they Would We help they to "Hey, slightly your available you higher would come if you what plans we be client expand. are interested say, us were would market with relationships, dictate getting have working expansion. aggressive today?" this than us balance in to And yields developer. sheet have this lend and the existing of asset They

the be today. of part is the the how are the that get to development in development was can if operational is transaction pipeline That And what should one generate yield market one that out were our we building through expectation asset thesis. superior could that because fully

the might we we acquisitions Now yields of down on were than is to how lower but place cost changed side. a see the on market, function and developments the quickly in get were environment the the rate adjustments did that these that able of take some the slightly cost obviously, capital have side, you cap that of what of capital way the and this largely on posted on

get years at assets cap rates a there market. you see the the the The into when year if entering environment that will be of -- these have should transacting the positive a say, we development yield And to today now side, of will are from were reflective in today. that on we'll transactions now, to let's be spread versus improve, the X.X capital from are time, that on the yields delivered, development cost

This is really a certainly that it to So tool a business, grow view of a our is that we help provide be yet estate the tool another dominant partners will to to them this want part our we leading but to tool. if as also their want operators. ourselves This to real is business. never clients

Joshua Dennerlein

can sneak in. one if Got it. more And I

take pipeline, broader know I Does there? close. when of they there that. -- to out think out billion, about portfolio I Sorry only know about deals Like a bigger guide your but while lot $X transactions a are you is your your there?

kind curious. Just of

Sumit Roy

are that market. last seeing, movement think disconnect I to to conversations I continuing I the which is is. our we are you Josh, a at hint what's to are on you disconnect And tell multitude driving willing there's So when where with about they somebody that the is the transact. of where what clients, that's what in a tried can price conversation the the asked have

it's it them need what sort So that it expectation we clients, to type We, our was the conversation of would a where the ended largest we is of of able could kind is their spoke cap are do -- And talking couple suddenly fact, that of that's spreads our would be that rates the to in weeks we and not to allow not to we what clients. one with versus us transaction. of the of generate conversations having. that where -- that's ago we're

X if clearly, year, in clients more million last which $X bring were were big deliver. $XXX the at above That's And we what what need we what we what to solutions table. can And that's big you size, can in above transactions are billion That's problems. to look did of size. X than our

to we we open going capital, able and met price to X out spigots reservation last of pipeline build be be is yes, And and the like the cost just by this will did when so advantage our our of years. take

Operator

from And our with BNP. next question Crossett comes Nate

Nathan Daniel Crossett

the so the my occupancy that? is current question the if closed pricing levels. you've was in then far development. on below Just ex curious just so, bit if guide And was one QX? second a I'm on pipeline what anything on And

on watch right that be the what's you maybe we list that? little can on now And So us tracking? just give should a color

Sumit Roy

Nate.

has that it we closed the on you that of rates. closed start There been comments cap in have not first the I'm in is we giving quarter some made. first in say cap movement that to of rates it to assets on quarter, going we've have reflective the there have that Suffice transactions been So

see movement when rates the to that is widespread would numbers, like not quarter but as we You'll report first our see. as we in cap

It's have cost that the in the occurred side. of reflective of not changes capital

just allows these create yes, year that business With that lot is occupancy, our being that. these of vacancies. are at And advantage to the were a be ongoing. being expected selective were mentioned to sure we flow not our expiration, volume. to spreads about And So we lot we into compromised making of XX%. above plan more that a do with are business coming to -- going but us this it's have A expected regards lease have

of from other we time And the of the to we different to and -- this on makes hold perhaps some unusual for that to value. to our actually these which Part XX% guide economic see reposition we to what -- sort was vacant that what the peers of other you slightly some like have occupancy. assets with is business low with generally tend our I more X a create assets around know of us. we given hovering XX%, ability long over last quarters, were our for

holding et vacant cetera, cost we repositioning can value economic the these of assets which of it, But are very comfortable we doing believe we some generate are very comfortable supersedes that more we if so. by

XX.X% out. to of execute should to we I've able that we to the that plans vacancy be is So normalized on ZIP X.X% occupancy the this just laid be how business the think about need run way is level our This code. in

Operator

Markets. And Capital today Heffern next question our with Brad comes RBC from

Brad Heffern

Europe, Sumit, right you all talk relative have is can you the the now in attractiveness It debt? don't cost about anything better least at overall, you the Europe that think of attractive of versus but seems U.S.? like

Sumit Roy

between and Brad. sellers again, and great to volume even disconnect of transactions this lower, lot the perpetuate question, what buyers a will tell a Europe, of that's Yes, you because is requires in transaction. a each that I

in feel environment, However, having said done. that, like where we even are seeing U.K., this pockets transactions in of can opportunities, the we especially get

of least at XXX with that fact debt is lower that, by our the XXX, along points. And so in Europe, cost basis significantly

in. is We just being geographies to play we U.S. look But for the It opportunities. across are low not the continuing is volume unique to the that

Brad Heffern

G&A. then, reduction from I with Jonathan, additional might of in what year the the just additional a Spirit revenue not this thought was Okay. a be given suggested coming more as And there much guidance G&A of than revenue percent

there else from going anything is declining that's that more? So figure keeping on

Jonathan Pong

going And tell synergy Brad, ultimately back but a growth items with the standpoint be sitting than conservatism did line less is expected to trending effect too is in first of Spirit, to annualized of a what ownership, on half XXXX, to standpoint. have a there's that to mid-February to resource that. in from the of the a so fair full like better the in amount it's still month we of on achievable, always front from than that. synergies bit going of We here be you're going see quite everything or early

And as off million cash basis, $XX of of G&A a on reminder, million $XX load expected we a cash annualized. a synergies

So trying but persist areas create moat, going can trying everything you we're on, our the of long trying time. for groups to certain if of this we're look, but business, create resource really to platform. all We're with to will, a we're a to hopeful, refine that

So with things little bit and that like in of technology investment comes a people. in

really that's So the that. driver of

Operator

Haendel And comes our next question St. today from

Juste with Mizuho.

Haendel St. Juste

on investment spreads my there. out here. first is morning I the Good question guess

guess, what of spread is previously a year. versus I guys outlined on investments new saw you XXX point capital, think you which minimum for of expectations I basis well last your above, cost

cash you you of kind return is still your do thinking ]? And one well? cost as requires of be your is points capital if about required today in the how I how somewhere appears that your capital So I'm minimum curious, the -- are of the And some using portion for guess to that flow, where [ so, spread? if basis X that of your free required XXX achieve given

Sumit Roy

you thank question. for Haendel, your

I've free heard flow. So comments a a around couple cash points. of few

north We in free million are of flow. to cash going $XXX generate

of billion about a XX% think our basis, volume. of represents this represents of acquisition capital. the If the total guidance, XX% $X And leverage-neutral this on you total

So obviously, to difficult. points what than be basis still free was cost capital today. X.X do points generate we way, points. ago, by is ago, that XXX able an the basis to I cash is was flow say not now how basis you at XXX being different on X XXX cap years of it rates that able think deals would business. to points and that that's generate basis years we environment XXX where not were was generate achieve, able X% our And our about to And actually the in about can But massively

said On tracking XXX spread the been average, that we the from have points. average time has spreads, been we've basis always

in. year We you where it fourth did that will also with a make we a last where to last of when certain like to of clear with pipeline times basis build points, year up backdrop contract of quarter be regards and there want last that year it all and capital and and the XXX precisely all permanently the of happened And time of cost year. into last a what environment you cap if your changes cost at in capital entering by that's the close, you're point rates time, your you're that financing

if transaction, the pipeline contracts permanently actually and very of and a the entering basis well capital I And in, in what terms with effectuated finance But actually we just XXX another basis had north points think. permanent basis different. robust We into the look we ultimately XXX spread points, certainly sometimes in time of we XXX point, cost were not we XXX that It necessarily XXXX, closer of was points, locked the the of by at was expectation cost but to environment of to was that. financing points. make basis you

we think just lock to going that transaction transactions. metric. we're if particular this the that average have in that to into, we want I tracking to we've closer since how That's But the expectation points. about basis been any try we that to pursuing much sure is in make XXX So not enter

use there return might only doing basis believe a investment where us. that creates if comfortable points, profile XXX we for investment. build investment, And that on right precisely particular the for transactions We are strategy are risk-adjusted that basis, bar that the it be we is a also that right

this out rely is of environment, that which the even is the environment difficult with But why market. But we in spreads always basis plan volatility are to to predict, try which deliver -- of a will have north without still volatile that -- then we spectrum we very we in that XX% having can come it XXX acquisition on transactions point this that profile. we've balance or with have, to

Haendel St. Juste

But minimum what's be about on a we here regarding it I is bit? I absolute different just guide which a that. appreciate think Spirit points my guess, loss next few the is that credit months ago. that you're on I I to the in question, the clear, integration of embedded not and little you I the for portfolio? a had touch Can XXX sounds what talked little like is seeking, want basis think

Sumit Roy

We've XXrd. on well. very going the the transaction is on closed integration The

We are excited absorbed. about portfolio we've very still the

to us X X process we basis. this next transaction, helping As temporary on over And that from the basis people part the X have a a of are Spirit on X months. hired people we've permanent through integration

by front. been of have not we negatively more positive asset the There positive. the of resolutions have outcome portfolio to the portfolio -- are have been clients surprised that and terms actual terms not where now that on surprised some we we of slightly we this to, control been In itself, been surprises has any clients in exposed certain

But we've conservative, and upside, also early of comfortable out. case, the happens said reason down to we was that there that very were I will in very we But you and And the too plays terms in the that's that be we information is with if tell. road. that shared caution which delivering. market, share to will hope the And felt what we is And it why underwriting. still say of our we part with conservative it

Haendel St. Juste

that? to you Got potential the quantify guide credit or able it. it. any color added Got within But loss on are for

Sumit Roy

you our Haendel, generate. that for is we of and/or portfolio the can shared with would range Spirit loss have portfolio with What credit any you, accommodates we the that share level

Operator

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

Spenser Allaway

right years, routine So Given what good will, geographies period, the massive this curious types? right you management. is property recent you if a highest of know especially use asset now, a new deal at but now? I of to outside portfolio just compared have dearth quiet volume of is I'm or and best the time opportunity underwrite to

Sumit Roy

of following mean for you've Spenser. a all -- those I things, I us been while. think It's

looking constantly growing in at will constantly to be to massive our for continue focus earnings. nontraditional are portfolio to a our are ways ways We we XXXX. that of and grow ours And looking

additional X,XXX not assets asset clients, from right, You're having new a coming XXX but clients and new would all absolutely amount that Spirit. like of we and the capital clients, XXX have part of of on with focused There's absorb recycling to an going to fair defense little rather team we the take to advantage that also that focus very to in a offense. bit playing is time on than much trying that is the something to engage be of

environment believe But do I and can this that all having can change acquisitions that, said of quickly. very change

the to clients. so conversations, of team, could continues our be rest continues of the front be in how clients, to potentially continues And team stay we the have creative to solution the a to investment about

And so tell despite of billion, going a lot than of to perhaps this the can so you guidance last be year I is even year. there $X work, more

years. had had the on we've all things of of investment to we've creating the the little that that In robustness put of sort efficiencies, the the the last burner of terms given right creating the over a X bit right back environment tools,

we'll to itself the as So I scale will we it of and and that scalable use and some be think more in happy when of start benefits. that much to put business, realize actually a some all of manifest share to

Spenser Allaway

when like pegging in a things a do the nature? target you to get date the want And of portfolio to to that potential for terms guys get have of have and kind through of disposition Great. candidates Do date some the Okay. get you portfolio? target when through you guys you'd spare

Sumit Roy

identified of our a through are market. already the continue believe XXXX. core be recycling priority our to that we are There's rest in capital portfolio assets to program overall don't the are We of the Those particular obviously then not waiting to a portfolio. to on we for date. that And culling to have we add

portfolio date, more about quarter we'll XX share on this isn't there have target a during front this months be the earnings but control So and when we'll first to for X of happy assumed days. particular you with

Operator

Our comes next with question Citi. Smedes from Rose

Bennett Rose

where wondering, mentioned to, in is, in back something you I you I'm think or as versus to more about go into points talking to on of like vary years leases? speak opening by kind mentioned resist X ability to remarks you client you changes. growth credit maybe your And guess does their basis to it's my up were the sort through feels just escalators? I'd It I put your the have bargaining ago? XX able the I quality quality wanted being opportunities higher push if credit question in a of kinds would side little of just or But interested you to the talk about higher higher could power those quality the more that of of sort more. be

Sumit Roy

to market is what you to rates. intuition cetera. the be boxes, accurate. on very Smedes, would U.S., on growth here long-term in leases, start one retail is Sure. your side, In give investment-grade when consider to you space into difficult clients It that et to get retail retail talk enter the them the to

points be to me XX basis those the internal it's can so let of on be are the that the lower and increase side, sub-investment growth cycle going a BBB, that BBB- grade, what which credit assets but And growth. But ones very retail clients types you by was than in tend clear do. help that drive the not expanding different have was into the asset profile retail other

side. investment-grade what the company. investment-grade virtually all clients of steps the tend went took. that as into matured the in clients. think industrial case at no That's to So big we've I we obviously with And were some way. our one longer point, even on a as were of We a have, Industrials industrial

But tended they X%, to too growth. give X.X%

profile. drivers the that So the of was in growth of change one the

gaming. is going find do to tend new with was of driver The where lot biggest profile. we the And centers, into internal Those like investment-grade higher the second the types like really also retail asset do this clients. international of have even all side business on a of growth data growth

the profile the in $X.X grocers superseded our one with had the one of get U.K., sale-leaseback recall -- growth can here that that U.S. first that and largest in we transaction So that a far you was might profile billion had the a

we points, of how is it's approximately from types, internal continue external perhaps to to a business different of another this factors, this basis and profile take these asset do X% grow be has major acquisitions to continues reliance allowed by us X.X%, be to so on that of which and it minimized. So a XX approximately will all growth our combination grow our international, to that focus more

Bennett Rose

And super that's kind $XXX to assets of million have you sort you then capital, That's I because And this, probably you're noncore acquisition. recycle just helpful. ask more Okay. but than just did you that XXXX. in you, with going quickly think touched you on more said wanted identified the Spirit to I of

that's historically taking that what's would to where or? sort of that up relative been -- it's number So maybe

Sumit Roy

Yes.

think I the million $XXX to that comments accomplished our one you than expect that should was in XXXX. see of higher a number we

call our May. during a in share earnings to position be will we number, actual the quarter to with As that you in first

Operator

next And comes from BMO our question with Eric Capital Borden Markets.

Eric Borden

platform. curious what today? you're types the relates if you it in industries the targeting are different seeing credit tenant today credit the about as that you're of And to opportunities just lending potential could I'm talk

Sumit Roy

where we've Eric, is the of to think year with as continue and And maybe for points basis more grow in in of a sale-leaseback as for way win-win kind we last which whom on done clients. if that a for a there even yield in yields estate investments, balance our business could have of us disconnect, a how we their can sale-leaseback well saw real portfolio. sheet get Clients much is need we business, it's what more get credit be a our a terms the about So position to secured traditional shop one-stop on XXX, playing yet a terms you of versus clients.

it's somebody offer going what's transactions, a that's rather much with of the side to would and said credit that, that economics of they understand the to the our and they do and can on enhance they drive business our really And that products we across business. them more Having relationship with have these board.

grocers an one I investment the credit investment side gaming think with about We've the in on a talked doing in Blackstone. the of we've talked about largest U.K. doing

we the But business. who of these to are not selective that, to, that of continue that our see. is should we terms going given in to element Again, lend of very you a are types core examples be

Eric Borden

helpful. the That's wanted then cash on ask flow. And just free I to one question

free account? million cash $XXX plus in for the from income XXXX, include of On market flow holding cash expected a guidance does money generated the potential that

Jonathan Pong

includes everything. it Eric,

where So we in our while AFFO guidance, first all outcomes, we if on have cash relentless we're possibly much like as of been, as sitting and there. can all, those of trying we're it's to get

obviously, So then that through you AFFO. for cash flows And deduct have to that the flow. to dividend, effect in free the is

Operator

Linda next question from comes Tsai Jefferies. And today with our

Linda Yu Tsai

the through you guidance? share of regarding some your Can high take low per us AFFO puts end takes and and just

Jonathan Pong

end $X.XX, draconian it's low the on so a Linda, at fairly scenario.

going almost crazy push higher, which happened. have ball, rates we have to have to things crystal continue to -- believe we but a are You that don't have short-term

cost leasing elements, number that that things perspective. credit but you perspective, and It put that also we also significantly also is think certain that happening, the it not is assumes There's can expenses that property so assume commissions, in something the at are is something G&A. loss from don't reimbursed a likely of conservative that included all something is less think shutdown From like of than that. in there's bad that's we billion like debt acquisitions $X I a very some essentially very, a things

to for some there. always negative surprises You want plan

historically and in where been is in pandemic, the we're the we've And that a XX are able that capital the end, spreads contemplates that something it of Bad close investment aligned environment to closer a the basis improves, closer XX cost volume. scenario basis bit rent to do company, include of in macro the environment has also It you of high terms debt and been to and suggests which points pandemic. of to up points. Outside expense as probably is quite then more of terms when we stay a XXX range. where

some stance naturally, a it it's that as base credits of we up rates, would European not low ECP at the comprise assumes towards the on And you portfolio have that be very, be side. a very whether U.S. assumes tends the in sterling [indiscernible] whether the short-term CP mix a guidance. but mix And revolver on would side, for then our took now, assume better more or X% it mid-Xs little that for in combined borrowings euro it's in the our outcome that indicative we and it's in case tilted rates commercial would also whether it U.S. rates draconian indicative in is building the denominated probably the the identified we're CP, maybe range. to in revolver on X%, which have exposure, bit side. Right the sterling paper,

hit to So the these and to high scenarios. are on all the those that have variables for low order end in us reach

Linda Yu Tsai

And helpful. versus domestic just pipeline is question right then international? what Really your now, is second in my percentage

Sumit Roy

Well, the -- billion. unidentified on have don't it's nondevelopment was we side, $X.X which

market, number. it identified, locally. the the in last could did a markets. discussions you was small a international here is what but of having in year, did XX% the was here Some we such it both because everything look U.S. That it we're change international lot that at and is And we of in is XX% if of

tell, lot discussions the it's Based the international Linda. a more here, be than on on today, too but early could there to side

it's what that's and at XX% situation. U.S. XX% look history, you normalized XX% XX% that been under we And to the to would to international XX%, XX% largely If in expect

Operator

Alex next comes our from question And Baird. [ with Fagan ]

Unknown Analyst

have So taxes. income on I one

XX%. full the color XX% XXXX midpoint income more Can And the year-over-year of provide what in that driving increase taxes? implying large in some about you on is is in for year-over-year So XXXX. about a guidance was increase increase year, the

Jonathan Pong

the is a business. international function this really Alex, of

on the the way income, taxed U.K. that that we're So in it's primarily

U.S. company as to a as all, domiciled taxes of but subject of there. the the are First U.K., withholding XXX% owner we some

we can the where is lower other tax have expense done we've on to that intercompany what rate loan income, effective around and XX%. that interest that we taxable NOI ways Now is combat

of is X now year-over-year that function growth north is just But platform that abroad, you see and the the really billion. of which a growing portfolio have USD we

see for the So what committee that as it is something start particular, a a in we take income item that underwriting tax you dictates factor, It's which most IRR into investment line our obviously shouldn't in the our really in obviously, underwriting, to be that increase in long-term grows surprise and year-over-year. investment it's account cases. U.K. decision

known so is model. And it's a this cost that to built business fully in

Operator

to like This to session. Sumit question-and-answer closing you. conference over turn the the for remarks. Thank Roy concludes back any I'd

Sumit Roy

for today. forward you at look Thank spring. Bye. us many the joining We conferences upcoming all to investor seeing Thanks. in of you

Operator

for call. presentation. Thank conference you, you sir. We This concludes today's thank all today's attending

wonderful have You may now day. a disconnect and lines, your

Realty Income (O) 21 Feb 242023 Q4 Earnings call transcript