REALTY INCOME CORP Q1 FY2025 earnings call

• Realty Income's business model is diversified across client types, asset classes, and geographies, which has proven valuable in uncertain macroeconomic environments. • Delivered AFFO per share of $1.06 with 2.9% year-over-year growth. • Invested $1.4 billion in the first quarter at a 7.5% weighted average initial cash yield, with 72% of investment volume from five transactions over $50 million. • Portfolio has over 15,600 properties spanning 91 industries and almost 1,600 unique clients, with 98.5% portfolio occupancy and a 103.9% rent recapture rate. • Ended the quarter with net debt to annualized pro forma adjusted EBITDA of 5.4 times and a fixed charge coverage ratio of 4.7 times. • Launched Realty Income's US Core Plus Fund, which began formal marketing in the first quarter and received positive interest from institutional investors.

Realty Income's portfolio is 65% US retail. In the first quarter, it invested $479 million in the US at an 8.3% weighted average initial cash yield, and $893 million in Europe, accounting for 65% of total investment volume, with an average initial cash yield of 7%. AFFO per share was $1.06, representing a year-over-year growth of 2.9%.

• Maintains 2025 AFFO per share outlook in the range of $4.22 to $4.28. • Plans to deploy approximately $4 billion in investments throughout 2025, and may increase capital deployment if attractive opportunities arise. • Short-term weighted average cost of capital is lower than when the 2025 investments guidance was updated in late February. • US Core Plus Fund is in initial marketing phase and expected to enhance access to capital over time.

• Geopolitical uncertainties could potentially impact the business, but the company's resilient business model is expected to navigate challenges. • Some higher-yielding opportunities in the US have tail risks, requiring careful underwriting of credit exposure and expected returns.

Q: Smedes Rose asked about activity in Europe and rent recapture.

A: Sumit Roy responded that Europe offers compelling investment opportunities with assets underwritten at rents well below market, and rent recapture was a one-off due to a few theater assets.

Q: Brad Heffern asked about investment guidance.

A: Sumit Roy said they are being cautious and not extrapolating first quarter results due to uncertainty.

Q: Ryan Caviola asked about US Core Plus Fund in volatile economy.

A: Sumit Roy discussed the fund's advantage and optimistic outlook despite market volatility.

Q: Haendel St. Juste asked about balance sheet and development loan.

A: Jonathan Pong and Sumit Roy answered on funding sources and the data center loan's purpose.

Q: Ronald Kamdem asked about cap rates and rent escalators.

A: Sumit Roy commented on cap rate trends and strategies for increasing rent escalators.

Q: Greg McGinniss asked about retail parks.

A: Sumit Roy talked about retail parks' yield, investment, and value uplift potential.

Q: Michael Goldsmith asked about US vs Europe opportunities.

A: Sumit Roy explained the underwriting process and differences between US and Europe opportunities.

Q: Richard Hightower asked about underwriting less creditworthy opportunities.

A: Sumit Roy discussed factors like industry vertical and capital structure in underwriting.

Q: Richard Hightower asked about Plenty indoor farming.

A: Sumit Roy talked about Plenty's restructuring and capital at risk.

Q: Jana Galan asked about investment loan and opportunities.

A: Sumit Roy discussed the loan's purpose and potential for more such investments.

Q: Jay Kornreich asked about Europe investment and next frontier countries.

A: Sumit Roy talked about Europe investment outlook and potential expansion to Poland.

Q: Wes Golladay asked about US Core Plus Fund assets.

A: Sumit Roy explained the fund's seed portfolio and alignment.

Q: Linda Tsai asked about Europe retail parks strategy.

A: Sumit Roy discussed the long-term strategy for retail parks.

Q: Upal Rana asked about Zips and watchlist tenants.

A: Sumit Roy talked about Zips' renewal and watchlist tenants.

Q: Anthony Paolone asked about bad debt and deal flow.

A: Jonathan Pong and Sumit Roy answered on bad debt and deal flow caution.

Q: Omotayo Okusanya asked about UK retail parks vs US big box.

A: Sumit Roy compared UK retail parks and US big box retail