EX-99.1 2 a05-13667_1ex99d1.htm EX-99.1

Exhibit 99.1

 

CONTACT:

Tere Miller

Vice President, Corporate Communications

760-741-2111 ext. 177

 

REALTY INCOME ANNOUNCES RECORD

SECOND QUARTER AND MID-YEAR OPERATING RESULTS

 

ESCONDIDO, CALIFORNIA, July 27, 2005...Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O) today announced operating results for the second quarter and six months ended June 30, 2005.

 

COMPANY HIGHLIGHTS:

(For the quarter ended June 30, 2005)

 

•                  Revenue increased 8.4% to $47.5 million

•                  Funds from Operations (FFO) available to common stockholders increased 5.8% to $30.9 million

•                  FFO per diluted common share increased 5.4% to $0.39

•                  Net income available to common stockholders per diluted common share was $0.28 per share

•                  Portfolio occupancy remained strong at 98.2%

•                  Same store rents increased 1.0% to $39.62 million

•                  Invested $74.4 million in 38 additional properties

•                  Arranged a new $300 million acquisition credit facility

•                  Increased the monthly dividend amount for the 31st consecutive quarter to an annual rate of $1.335 per common share

 

Financial Results

 

Revenue Increases

 

Realty Income’s revenue for the second quarter ended June 30, 2005 increased 8.4% to $47.5 million as compared to $43.8 million for the same period in 2004.

 

Revenue for the six months ended June 30, 2005 increased 10.4% to $94.2 million as compared to $85.3 million for the same period in 2004.

 

Net Income Available to Common Stockholders

 

Net income available to common stockholders for the quarter ended June 30, 2005 was $22.3 million as compared to $21.4 million for the same period in 2004. On a diluted per common share basis, net income for the quarter was $0.28 per share as compared to $0.27 per share for the same period in 2004.

 

Net income available to common stockholders for the six months ended June 30, 2005 was $43.5 million as compared to $43.9 million for the same period in 2004. On a diluted per common share basis, net income was $0.55 per share as compared to $0.56 per share for the same period in 2004.

 

The calculation to determine net income for a real estate company includes gains from the sale of investment properties and impairments. The amount of gains on property sales and impairments varies from quarter to quarter. This variance can significantly impact net income.

 

During the second quarter of 2005, income from continuing operations available to common stockholders was $0.24 per diluted share as compared to $0.20 per diluted share for the same period in 2004.

 

During the first six months of 2005, income from continuing operations available to common stockholders was $0.48 per diluted share as compared to $0.42 per diluted share for the same period in 2004.

 

1


 

FFO Available to Common Stockholders

 

FFO for the second quarter ended June 30, 2005 increased 5.8% to $30.9 million as compared to $29.2 million for the same period in 2004. FFO per diluted common share increased 5.4% to $0.39 per share, for the quarter ended June 30, 2005, as compared to $0.37 per share for the same period in 2004. Core FFO per share before Crest Net’s contribution, for the quarter ended June 30, 2005, increased 15.2% to $0.38 per share from $0.33 per share for the same period in 2004.

 

FFO for the six months ended June 30, 2005 increased 3.5% to $62.0 million as compared to $59.9 million for the same period in 2004. FFO per diluted common share increased 1.3% to $0.78 per share as compared to $0.77 per share for the same period in 2004. Core FFO per share before Crest Net Lease contribution, for the six months ended June 30, 2005, increased 10.1% to $0.76 per diluted share from $0.69 per share for the same period in 2004.

 

The Company considers FFO to be an appropriate supplemental measure of a Real Estate Investment Trust’s (REITs) operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. FFO is an alternative, non-GAAP, measure that is also considered to be a good indicator of a company’s ability to generate income to pay dividends. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT) definition as net income available to common stockholders plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items. (See reconciliation of net income available to common stockholders to FFO on page six.)

 

Dividend Information

 

In June 2005, Realty Income announced the 31st consecutive quarterly increase in the amount of the monthly dividend on its common stock. This marked the 34th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The monthly dividend amount was increased to $0.11125 per share from $0.110625 per share for an annualized dividend amount of $1.335 per share. Through June 30, 2005, the Company has paid 419 consecutive monthly dividends and continues its 36-year policy of declaring and paying dividends every month.

 

Real Estate Portfolio Update

 

As of June 30, 2005, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 1,582 properties located in 48 states, leased to 98 retail chains doing business in 30 retail industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 12.0 years.

 

Portfolio Management Activities

 

The Company’s portfolio of retail real estate, owned primarily under 15- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of June 30, 2005, portfolio occupancy was 98.2% with only 29 properties available for lease out of 1,582 properties in the portfolio.

 

Rent Increases

 

Same store rents on 1,283 properties under lease during the three months ended June 30, 2005 and 2004, increased 1.0% to $39.62 million from $39.23 million in 2004. Same store rents on 1,283 properties under lease during the six months ended June 30, 2005 and 2004 increased 0.9% to $79.17 million compared to $78.50 million in 2004.

 

Property Acquisitions

 

During the second quarter, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $74.4 million in 38 new properties and properties under development. Realty Income invested $61.8 million in 29 new properties and properties under development with an initial average contractual lease yield of 8.9%. The 29 new properties acquired by Realty Income are located in seven states and are 100% leased under net-lease agreements with an initial average lease length of 17.8 years. They are leased to five different retail chains in five industries: convenience store, drug store, health and fitness, restaurant, and theater.

 

During the six months ended June 30, 2005, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $166.8 million in 72 new properties and properties under development. Realty Income invested $145.1 million in 60 new properties and properties under development with an initial average contractual lease yield of 8.8%. The 60 new properties acquired by Realty Income are located in 16 states and are 100% leased under net-lease agreements with an initial average lease length of 16.9 years. They are leased to six different retail chains in six industries: convenience store, drug store, health and fitness, motor vehicle dealership, restaurant and theater.

 

Realty Income maintains an unsecured acquisition credit facility with borrowing capacity of $250 million, which is used to fund property acquisitions in the near term. The outstanding balance on the Company’s acquisition credit facility at the end of the second quarter was $54.8 million with $195.2 million available to fund new property acquisitions.

 

2


 

Property Dispositions

 

Realty Income continued to successfully execute its asset disposition program. The objective of the program is to sell assets when the Company believes the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the Company’s real estate portfolio or increase the average lease length.

 

During the second quarter ended June 30, 2005, Realty Income sold seven properties for $8.0 million, which resulted in a gain on sales of $2.7 million. The properties sold consisted of: one automotive service location, three child care locations, one consumer electronics store, one convenience store property, and one private education facility. The proceeds were, or will be, used to pay down the Company’s acquisition credit facility and invest in new properties.

 

During the first six months of 2005, Realty Income sold 11 properties for $14.6 million, which resulted in a gain on sales of $3.5 million. The properties sold consisted of: one automotive service location, one automotive tire service location, four child care locations, one consumer electronics store, one convenience store, one motor vehicle dealership, one private education facility, and one restaurant.

 

Other Second Quarter 2005 Activities

 

New $300 Million Credit Facility

 

In June 2005, Realty Income entered into a new $300 million acquisition credit facility to replace its existing $250 million acquisition credit facility that is scheduled to expire in October 2005. Under the terms of the new credit facility, the borrowing rate was reduced to LIBOR (London Interbank Offered Rate) plus 65 basis points with a facility fee of 15 basis points, for all-in drawn pricing of 80 basis points over LIBOR. The term of the new facility will begin in October 2005 and extend through October 2008.

 

Crest Net Lease

 

Crest Net Lease Inc. is a wholly-owned subsidiary of Realty Income focused on acquiring and subsequently marketing net-leased properties for sale. During the second quarter ended June 30, 2005, Crest sold one property for $3.5 million and reported a gain on sales of $422,000. Crest also invested $12.6 million in nine new properties and properties under development during the second quarter.

 

For the six months ended June 30, 2005, Crest sold six properties for $11.2 million and reported a gain on sales of $1.6 million. During this same period, Crest invested $21.7 million in 12 new properties and properties under development. As of June 30, 2005, Crest carried an inventory of $22.2 million, which consists of 13 properties held for sale.

 

Crest’s contribution to Realty Income’s FFO depends on the timing and number of property sales, if any, in a given quarter. Therefore, Crest’s contribution can fluctuate and add volatility to the Company’s reported FFO and net income on a comparable quarterly and annualized basis. During the second quarter and six months ended June 30, 2005, Crest generated $296,000 and $1.1 million, or $0.00 and $0.01 per diluted common share, respectively, in FFO (and net income) for Realty Income as compared to $2.9 million and $6.2 million, or $0.04 and $0.08 per diluted common share, respectively, in FFO (and net income) during the same periods in 2004.

 

CEO Comments on Mid-Year Operating Results

 

Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer, stated, “The Company enjoyed record operating results during the first half of the year. Revenue continues to grow, increasing 10.4% year-to-date, while funds from operations per diluted common share in the core portfolio grew 10.1% year-to-date. FFO per diluted common share, including Crest’s contribution, grew 5.4% during the second quarter and 1.3% during the first six months of the year. The quarterly and year-to-date comparable numbers are impacted by higher sales in Crest during the first half of 2004 in comparison to the same period in 2005. During the second quarter, Crest sold one property, which brings Crest total property sales to seven during the first half of 2005. We have forecast that Crest’s contribution to Realty Income’s FFO growth will be approximately $0.03 to $0.05, with the majority of Crest’s property sales occurring during the second half of the year due to inventory re-building that has been occurring over the past few months.

 

3


 

“Our portfolio of freestanding retail properties continues to perform well with occupancy remaining high at 98.2% and just 29 properties available for lease out of over 1,582 properties in the portfolio. In addition, same store rents rose 1.0% in the second quarter and 0.9% year-to-date. We also have been focused on executing net leases with longer lease terms and, as a result, our weighted average remaining lease length in the portfolio has increased to approximately 12.0 years. Our acquisition pipeline is strong with ample acquisition opportunities that meet our investment criteria in various stages of review and due diligence. During the second quarter Realty Income and Crest Net combined completed 38 new property acquisitions, investing $74.4 million, which brings us to a total of $166.8 million invested in new property acquisitions year-to-date. This is in line with our expectations for acquisitions during the first half of the year and we are on track to meet our 2005 property acquisition goals of approximately $250 million.

 

“We have also increased the dividend two times this year and have paid 419 consecutive monthly dividends to our shareholders. As always, our focus is on maintaining a conservative balance sheet, and realizing stable real estate performance with a high occupancy rate so that we can continue to provide our shareholders with dependable monthly income that increases over time. Based on the performance thus far, we are optimistic about our prospects for positive performance in all Company operations for the remainder of the year.”

 

Earnings Commentary

 

Realty Income’s FFO per common share has historically tended to be stable and fairly predictable because of the long-term leases that are the primary source of the Company’s revenue. There are, however, several factors that can cause FFO per common share to vary from levels that have been anticipated by the Company. These factors include, but are not limited to, changes in interest rates, occupancy rates, periodically accessing the capital markets, the level and timing of property acquisitions and dispositions, lease rollovers, the general real estate market, the economy, charges for property impairments, and the operations of Crest Net Lease.

 

2005 Estimates

 

Management estimates that FFO per common share for 2005 should range from $1.59 to $1.62, which would equate to an increase of approximately 6% to 8% over 2004 FFO per share of $1.50. FFO for 2005 is based on an estimated diluted net income per share range of $1.10 to $1.13, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.55 and potential gain on sales of investment properties of $0.06 per share.

 

Management further estimates Crest Net Lease could contribute between $0.03 to $0.05 per share to Realty Income’s FFO (and net income) during 2005 as compared to $0.10 per share in 2004. Crest’s primary business is the purchase and sale of properties for a profit. These sales may occur at various times during the course of the year, which could cause FFO, in certain quarters, to fluctuate from normal levels.

 

The Company does not intend to provide quarterly estimates of FFO. Absent any changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimate for the year has not changed.

 

Forward-Looking Statements

 

Statements in this press release that are not strictly historical are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, the availability of capital to finance planned growth, property acquisitions and the timing of these acquisitions, charges for property impairments, the outcome of any legal proceedings to which the Company is a party, and the profitability of the Company’s subsidiary, Crest Net Lease, as described in the Company’s filings with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

 

Realty Income is The Monthly Dividend Company®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of June 30, 2005, the Company had paid 419 consecutive monthly dividends throughout its 36-year operating history. The monthly income is supported by the cash flows from over 1,550 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net-leased retail properties nationwide.

 

Note to Editors:

 

Realty Income press releases are available at no charge by calling our toll-free investor hotline number: 888-811-2001, or via the internet at http://www.realtyincome.com/Investing/News.html

 

4


 

CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended June 30, 2005 and 2004

(dollars in thousands, except per share amounts)

 

 

 

Three Months
Ended 6/30/05

 

Three Months
Ended 6/30/04

 

Six Months
Ended 6/30/05

 

Six Months
Ended 6/30/04

 

REVENUE

 

 

 

 

 

 

 

 

 

Rental

 

$

47,338

 

$

43,535

 

$

94,010

 

$

84,594

 

Other

 

135

 

298

 

172

 

660

 

 

 

 

 

 

 

 

 

 

 

 

 

47,473

 

43,833

 

94,182

 

85,254

 

EXPENSES

 

 

 

 

 

 

 

 

 

Interest

 

9,793

 

8,505

 

18,851

 

16,981

 

Depreciation and amortization

 

11,243

 

10,008

 

22,049

 

19,558

 

General and administrative

 

3,706

 

3,260

 

7,762

 

6,421

 

Property

 

1,019

 

749

 

1,900

 

1,456

 

Income taxes

 

203

 

191

 

401

 

344

 

 

 

 

 

 

 

 

 

 

 

 

 

25,964

 

22,713

 

50,963

 

44,760

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

21,509

 

21,120

 

43,219

 

40,494

 

Income from discontinued operations:

 

 

 

 

 

 

 

 

 

Real estate acquired for resale by Crest

 

296

 

2,879

 

1,129

 

6,154

 

Real estate held for investment

 

2,861

 

2,789

 

3,821

 

4,990

 

 

 

3,157

 

5,668

 

4,950

 

11,144

 

 

 

 

 

 

 

 

 

 

 

Net income

 

24,666

 

26,788

 

48,169

 

51,638

 

Preferred stock cash dividends

 

(2,351

)

(2,982

)

(4,702

)

(5,410

)

Excess of redemption value over carrying value of preferred shares redeemed

 

—

 

(2,360

)

—

 

(2,360

)

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

22,315

 

$

21,446

 

$

43,467

 

$

43,868

 

 

 

 

 

 

 

 

 

 

 

Funds from operations available to common stockholders (FFO)

 

$

30,874

 

$

29,151

 

$

62,036

 

$

59,910

 

 

 

 

 

 

 

 

 

 

 

Per share information for common stockholders, basic and diluted:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.24

 

$

0.20

 

$

0.48

 

$

0.42

 

Net income

 

$

0.28

 

$

0.27

 

$

0.55

 

$

0.56

 

FFO

 

 

 

 

 

 

 

 

 

FFO per basic share before Crest Net contribution

 

$

0.38

 

$

0.33

 

$

0.77

 

$

0.69

 

FFO per diluted share before Crest Net contribution

 

0.38

 

0.33

 

0.76

 

0.69

 

Crest Net Lease

 

0.00

 

0.04

 

0.01

 

0.08

 

Total FFO

 

0.39

 

0.37

 

0.78

 

0.77

 

Cash dividends paid

 

$

0.332

 

$

0.302

 

$

0.662

 

$

0.602

 

 

5


 

FUNDS FROM OPERATIONS

 (dollars in thousands, except per share amounts)

 

 

 

Three Months
Ended 6/30/05

 

Three Months
Ended 6/30/04

 

Six Months
Ended 6/30/05

 

Six Months
Ended 6/30/04

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

22,315

 

$

21,446

 

$

43,467

 

$

43,868

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Continuing operations

 

11,243

 

10,008

 

22,049

 

19,558

 

Discontinued operations

 

6

 

226

 

64

 

491

 

Depreciation of furniture, fixtures & equipment

 

(35

)

(29

)

(67

)

(58

)

Gain on sales of investment properties:

 

 

 

 

 

 

 

 

 

Continuing operations

 

(14

)

—

 

(14

)

—

 

Discontinued operations

 

(2,641

)

(2,500

)

(3,463

)

(3,949

)

 

 

 

 

 

 

 

 

 

 

Funds from operations available to common stockholders

 

$

30,874

 

$

29,151

 

$

62,036

 

$

59,910

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to common stockholders

 

$

26,414

 

$

23,922

 

$

52,676

 

$

46,725

 

 

 

 

 

 

 

 

 

 

 

FFO in excess of dividends

 

$

4,460

 

$

5,229

 

$

9,360

 

$

13,185

 

 

 

 

 

 

 

 

 

 

 

FFO per common share, basic and diluted

 

$

0.39

 

$

0.37

 

$

0.78

 

$

0.77

 

Weighted average number of common shares used for computation per share:

 

 

 

 

 

 

 

 

 

Basic

 

79,597,321

 

79,245,656

 

79,589,462

 

77,737,000

 

Diluted

 

79,676,168

 

79,323,180

 

79,667,812

 

77,822,186

 

 

CONTRIBUTIONS BY CREST NET LEASE TO FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

 

Crest Net acquires properties with the intention of reselling them rather than holding them as investments and operating the properties. Consequently, we classify properties acquired by Crest Net as held for sale at the date of acquisition and do not depreciate them. The operations of Crest Net’s properties are classified as “income from discontinued operations, real estate acquired for resale.”

 

 

 

Three Months
Ended 6/30/05

 

Three Months
Ended 6/30/04

 

Six Months
Ended 6/30/05

 

Six Months
Ended 6/30/04

 

Gain on sales of real estate acquired for resale

 

$

422

 

$

3,883

 

$

1,649

 

$

7,992

 

Rental revenue

 

287

 

614

 

568

 

1,614

 

Other revenue

 

—

 

—

 

1

 

—

 

Interest expense

 

(163

)

(164

)

(310

)

(399

)

General and administrative expense

 

(134

)

(122

)

(273

)

(247

)

Property expenses

 

(25

)

(7

)

(51

)

(15

)

Income taxes

 

(91

)

(1,325

)

(455

)

(2,791

)

Funds from operations contributed by Crest

 

$

296

 

$

2,879

 

$

1,129

 

$

6,154

 

 

 

 

 

 

 

 

 

 

 

Crest FFO per common share, basic and diluted

 

$

0.00

 

$

0.04

 

$

0.01

 

$

0.08

 

Total FFO

 

$

30,874

 

$

29,151

 

$

62,036

 

$

59,910

 

Less FFO contributed by Crest

 

(296

)

(2,879

)

(1,129

)

(6,154

)

FFO before Crest contribution

 

$

30,578

 

$

26,272

 

$

60,907

 

$

53,756

 

FFO before Crest contribution per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.38

 

$

0.33

 

$

0.77

 

$

0.69

 

Diluted

 

$

0.38

 

$

0.33

 

$

0.76

 

$

0.69

 

 

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’s definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, reduced by gains and increased by losses on sales of investment property and extraordinary items.

 

6


 

HISTORICAL FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

For the three months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

22,315

 

$

21,446

 

$

18,162

 

$

16,017

 

$

11,048

 

Depreciation and amortization

 

11,214

 

10,205

 

8,291

 

7,605

 

7,130

 

Gain on sales of investment properties

 

(2,655

)

(2,500

)

(2,952

)

(1,395

)

(164

)

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

30,874

 

$

29,151

 

$

23,501

 

$

22,227

 

$

18,014

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO per diluted share

 

$

0.39

 

$

0.37

 

$

0.34

 

$

0.33

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

30,874

 

$

29,151

 

$

23,501

 

$

22,227

 

$

18,014

 

Less FFO contributed by Crest

 

(296

)

(2,879

)

(157

)

(901

)

(141

)

FFO before Crest contribution

 

$

30,578

 

$

26,272

 

$

23,344

 

$

21,326

 

$

17,873

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO components, per diluted share:

 

 

 

 

 

 

 

 

 

 

 

FFO before Crest’s contribution

 

$

0.38

 

$

0.33

 

$

0.33

 

$

0.32

 

$

0.31

 

Crest FFO contribution

 

$

0.00

 

$

0.04

 

$

0.00

 

$

0.01

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

0.39

 

$

0.37

 

$

0.34

 

$

0.33

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per share

 

$

0.332

 

$

0.302

 

$

0.294

 

$

0.287

 

$

0.279

 

Diluted shares outstanding

 

79,676,168

 

79,323,180

 

70,119,216

 

66,736,718

 

56,937,984

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

43,467

 

$

43,868

 

$

33,767

 

$

31,883

 

$

27,093

 

Depreciation and amortization

 

22,046

 

19,991

 

16,356

 

15,076

 

14,312

 

Gain on sales of investment properties

 

(3,477

)

(3,949

)

(3,123

)

(2,523

)

(6,115

)

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

62,036

 

$

59,910

 

$

47,000

 

$

44,436

 

$

35,290

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO per diluted share

 

$

0.78

 

$

0.77

 

$

0.67

 

$

0.67

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

62,036

 

$

59,910

 

$

47,000

 

$

44,436

 

$

35,290

 

Less FFO contributed by Crest

 

(1,129

)

(6,154

)

(242

)

(1,264

)

(1,303

)

FFO before Crest contribution

 

$

60,907

 

$

53,756

 

$

46,758

 

$

43,172

 

$

33,987

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO components, per diluted share:

 

 

 

 

 

 

 

 

 

 

 

FFO before Crest’s contribution

 

$

0.76

 

$

0.69

 

$

0.67

 

$

0.65

 

$

0.62

 

Crest FFO contribution

 

$

0.01

 

$

0.08

 

$

0.00

 

$

0.02

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

0.78

 

$

0.77

 

$

0.67

 

$

0.67

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per share

 

$

0.662

 

$

0.602

 

$

0.587

 

$

0.572

 

$

0.557

 

Diluted shares outstanding

 

79,667,812

 

77,822,186

 

70,065,888

 

66,461,634

 

55,131,000

 

 

7


 

CONSOLIDATED BALANCE SHEETS

As of June 30, 2005 and December 31, 2004

(dollars in thousands, except per share amounts)

 

 

 

2005

 

2004

 

ASSETS

 

 

 

 

 

Real estate, at cost:

 

 

 

 

 

Land

 

$

676,548

 

$

624,558

 

Buildings and improvements

 

1,142,605

 

1,066,725

 

 

 

1,819,153

 

1,691,283

 

Less accumulated depreciation and amortization

 

(320,031

)

(301,728

)

 

 

 

 

 

 

Net real estate held for investment

 

1,499,122

 

1,389,555

 

Real estate held for sale, net

 

23,776

 

17,155

 

Net real estate

 

1,522,898

 

1,406,710

 

Cash and cash equivalents

 

1,948

 

2,141

 

Accounts receivable

 

3,539

 

4,075

 

Goodwill

 

17,206

 

17,206

 

Other assets

 

25,992

 

12,183

 

 

 

 

 

 

 

Total assets

 

$

1,571,583

 

$

1,442,315

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Distributions payable

 

$

9,248

 

$

9,115

 

Accounts payable and accrued expenses

 

14,323

 

9,579

 

Other liabilities

 

7,631

 

6,286

 

Line of credit payable

 

54,800

 

23,600

 

Notes payable

 

580,000

 

480,000

 

 

 

 

 

 

 

Total liabilities

 

666,002

 

528,580

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 5,100,000 issued and outstanding

 

123,804

 

123,787

 

Common stock and paid in capital, par value $1.00 per share, in 2005 there were 200,000,000 shares authorized and 79,609,106 issued and outstanding and in 2004 there were 100,000,000 shares authorized and 79,301,630 issued and outstanding

 

1,040,144

 

1,038,973

 

Distributions in excess of net income

 

(258,367

)

(249,025

)

 

 

 

 

 

 

Total stockholders’ equity

 

905,581

 

913,735

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,571,583

 

$

1,442,315

 

 

8


 

The following table sets forth certain information regarding our properties classified according to the business of
the respective tenants, expressed as a percentage of our total rental revenue:

 

 

 

Percentage of Rental Revenue (1)

 

 

 

For the
Quarter
Ended

 

For the Years Ended

 

Industries (30)

 

June 30,
2005

 

Dec. 31,
2004

 

Dec. 31,
2003

 

Dec. 31,
2002

 

Dec. 31,
2001

 

Dec. 31,
2000

 

Dec. 31,
1999

 

Dec. 31,
1998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apparel Stores

 

1.6

%

1.8

%

2.1

%

2.3

%

2.4

%

2.4

%

3.8

%

4.1

%

Automotive Collision Services

 

1.3

 

1.0

 

0.3

 

—

 

—

 

—

 

—

 

—

 

Automotive Parts

 

3.4

 

3.8

 

4.5

 

4.9

 

5.7

 

6.0

 

6.3

 

6.1

 

Automotive Service

 

7.8

 

7.7

 

8.3

 

7.0

 

5.7

 

5.8

 

6.6

 

7.5

 

Automotive Tire Services

 

7.3

 

7.8

 

3.1

 

2.7

 

2.6

 

2.3

 

2.3

 

1.7

 

Book Stores

 

0.3

 

0.3

 

0.4

 

0.4

 

0.4

 

0.5

 

0.5

 

0.6

 

Business Services

 

0.1

 

0.1

 

0.1

 

0.1

 

0.1

 

0.1

 

0.1

 

 

*

Child Care

 

13.2

 

14.4

 

17.8

 

20.8

 

23.9

 

24.7

 

25.3

 

29.2

 

Consumer Electronics

 

1.4

 

2.1

 

3.0

 

3.3

 

4.0

 

4.9

 

4.4

 

5.4

 

Convenience Stores

 

18.8

 

19.2

 

13.3

 

9.1

 

8.4

 

8.4

 

7.2

 

6.1

 

Crafts and Novelties

 

0.4

 

0.5

 

0.6

 

0.4

 

0.4

 

0.4

 

0.4

 

 

*

Drug Stores

 

3.3

 

0.1

 

0.2

 

0.2

 

0.2

 

0.2

 

0.2

 

0.1

 

Entertainment

 

2.2

 

2.3

 

2.6

 

2.3

 

1.8

 

2.0

 

1.2

 

—

 

Equipment Rental Services

 

0.3

 

0.3

 

0.2

 

—

 

—

 

—

 

—

 

—

 

Financial Services

 

0.1

 

0.1

 

—

 

—

 

—

 

—

 

—

 

—

 

General Merchandise

 

0.4

 

0.4

 

0.5

 

0.5

 

0.6

 

0.6

 

0.6

 

 

*

Grocery Stores

 

0.7

 

0.8

 

0.4

 

0.5

 

0.6

 

0.6

 

0.5

 

 

*

Health and Fitness

 

3.8

 

4.0

 

3.8

 

3.8

 

3.6

 

2.4

 

0.6

 

0.1

 

Home Furnishings

 

4.0

 

4.1

 

4.9

 

5.4

 

6.0

 

5.8

 

6.5

 

7.8

 

Home Improvement

 

1.1

 

1.0

 

1.1

 

1.2

 

1.3

 

2.0

 

3.6

 

 

*

Motor Vehicle Dealerships

 

2.6

 

0.6

 

—

 

—

 

—

 

—

 

—

 

—

 

Office Supplies

 

1.5

 

1.6

 

1.9

 

2.1

 

2.2

 

2.3

 

2.6

 

3.0

 

Pet Supplies and Services

 

1.4

 

1.4

 

1.7

 

1.7

 

1.6

 

1.5

 

1.1

 

0.6

 

Private Education

 

0.8

 

1.1

 

1.2

 

1.3

 

1.5

 

1.4

 

1.2

 

0.9

 

Restaurants

 

9.1

 

9.7

 

11.8

 

13.5

 

12.2

 

12.3

 

13.3

 

16.2

 

Shoe Stores

 

0.1

 

0.3

 

0.9

 

0.8

 

0.7

 

0.8

 

1.1

 

0.8

 

Sporting Goods

 

3.6

 

3.4

 

3.8

 

4.1

 

0.9

 

—

 

—

 

—

 

Theaters

 

3.2

 

3.5

 

4.1

 

3.9

 

4.3

 

2.7

 

0.6

 

—

 

Travel Plazas

 

0.4

 

0.4

 

0.3

 

—

 

—

 

—

 

—

 

—

 

Video Rental

 

2.6

 

2.8

 

3.3

 

3.3

 

3.7

 

3.9

 

4.3

 

3.8

 

Other

 

3.2

 

3.4

 

3.8

 

4.4

 

5.2

 

6.0

 

5.7

 

6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

 

*                 Less than 0.1%

 

(1)          Includes rental revenue for all properties owned by Realty Income at the end of each period presented (including
revenue from properties reclassified to discontinued operations) and excludes properties owned by our subsidiary,
Crest Net.

 

9


 

The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,549 net leased, single-tenant retail properties as of June 30, 2005 (dollars in thousands):

 

Lease Expiration Schedule

 

 

 

Total Portfolio

 

Initial Expirations(3)

 

Subsequent Expirations(4)

 

Year

 

Total
Number of
Leases
Expiring(1)

 

Rental
Revenue for
the Quarter
Ended
6/30/05(2)

 

% of
Rental
Revenue

 

Number of
Leases
Expiring

 

Rental
Revenue for
the Quarter
Ended
6/30/05

 

% of
Total
Rental
Revenue

 

Number of
Leases
Expiring

 

Rental
Revenue for
the Quarter
Ended
6/30/05

 

% of
Total
Rental
Revenue

 

2005

 

65

 

$

1,277

 

2.8

%

49

 

$

1,023

 

2.2

%

16

 

$

254

 

0.6

%

2006

 

84

 

1,828

 

4.0

 

31

 

714

 

1.6

 

53

 

1,114

 

2.4

 

2007

 

123

 

2,175

 

4.8

 

87

 

1,539

 

3.4

 

36

 

636

 

1.4

 

2008

 

99

 

2,093

 

4.6

 

60

 

1,418

 

3.1

 

39

 

675

 

1.5

 

2009

 

90

 

1,929

 

4.2

 

30

 

684

 

1.5

 

60

 

1,245

 

2.7

 

2010

 

53

 

1,198

 

2.6

 

37

 

909

 

2.0

 

16

 

289

 

0.6

 

2011

 

41

 

1,438

 

3.1

 

33

 

1,239

 

2.7

 

8

 

199

 

0.4

 

2012

 

44

 

1,375

 

3.0

 

42

 

1,324

 

2.9

 

2

 

51

 

0.1

 

2013

 

74

 

3,357

 

7.3

 

66

 

3,145

 

6.8

 

8

 

212

 

0.5

 

2014

 

48

 

2,018

 

4.4

 

36

 

1,781

 

3.9

 

12

 

237

 

0.5

 

2015

 

46

 

1,248

 

2.7

 

29

 

820

 

1.8

 

17

 

428

 

0.9

 

2016

 

17

 

505

 

1.1

 

15

 

423

 

0.9

 

2

 

82

 

0.2

 

2017

 

22

 

1,482

 

3.2

 

18

 

1,415

 

3.1

 

4

 

67

 

0.1

 

2018

 

23

 

1,028

 

2.2

 

23

 

1,028

 

2.2

 

—

 

—

 

—

 

2019

 

95

 

4,487

 

9.8

 

94

 

4,294

 

9.4

 

1

 

193

 

0.4

 

2020

 

67

 

2,128

 

4.6

 

66

 

2,117

 

4.6

 

1

 

11

 

 

*

2021

 

125

 

4,082

 

8.9

 

125

 

4,082

 

8.9

 

—

 

—

 

—

 

2022

 

96

 

2,596

 

5.7

 

95

 

2,582

 

5.7

 

1

 

14

 

 

*

2023

 

234

 

6,423

 

14.0

 

233

 

6,398

 

13.9

 

1

 

25

 

0.1

 

2024

 

58

 

1,704

 

3.7

 

58

 

1,704

 

3.7

 

—

 

—

 

—

 

2025

 

33

 

475

 

1.0

 

33

 

475

 

1.0

 

—

 

—

 

—

 

2026

 

2

 

93

 

0.2

 

2

 

93

 

0.2

 

—

 

—

 

—

 

2028

 

2

 

54

 

0.1

 

2

 

54

 

0.1

 

—

 

—

 

—

 

2033

 

3

 

357

 

0.8

 

3

 

357

 

0.8

 

—

 

—

 

—

 

2034

 

2

 

230

 

0.5

 

2

 

230

 

0.5

 

—

 

—

 

—

 

2037

 

2

 

325

 

0.7

 

2

 

325

 

0.7

 

—

 

—

 

—

 

2043

 

1

 

13

 

 

*

—

 

—

 

—

 

1

 

13

 

 

*

Totals

 

1,549

 

$

45,918

 

100.0

%

1,271

 

$

40,173

 

87.6

%

278

 

$

5,745

 

12.4

%

 

*    Less than 0.1%

 

(1)  Excludes four multi-tenant properties, 29 vacant and unleased properties, one of which is a multi-tenant property, and properties owned by our subsidiary, Crest Net. The lease expirations for properties under construction are based on the estimated date of completion of those properties.
(2)  Includes rental revenue of $60 from properties reclassified to discontinued operations and excludes revenue of $1,480 from four multi-tenant properties and from 29 vacant and unleased properties at June 30, 2005.
(3)  Represents leases that are expiring for the first time to the initial tenant of the property.
(4)  Represents lease expirations on properties in the portfolio, which have previously been renewed, extended or re-tenanted.

 

10


 

The following table sets forth certain state-by-state information regarding Realty Income’s property portfolio as of June 30, 2005 (dollars in thousands):

 

Geographic Diversification

 

State

 

Number of
Properties(1)

 

Percent
Leased

 

Approximate
Leasable
Square Feet(1)

 

Rental Revenue
for the
Quarter Ended
June 30, 2005(2)

 

Percentage of
Rental Revenue

 

Alabama

 

18

 

94

%

156,600

 

$

427

 

0.9

%

Alaska

 

2

 

100

 

128,500

 

251

 

0.5

 

Arizona

 

71

 

99

 

338,100

 

1,890

 

4.0

 

Arkansas

 

8

 

88

 

48,800

 

139

 

0.3

 

California

 

61

 

100

 

1,057,100

 

3,967

 

8.4

 

Colorado

 

48

 

98

 

399,100

 

1,686

 

3.6

 

Connecticut

 

16

 

100

 

245,600

 

927

 

2.0

 

Delaware

 

16

 

100

 

29,100

 

338

 

0.7

 

Florida

 

126

 

98

 

1,253,400

 

4,847

 

10.2

 

Georgia

 

99

 

99

 

645,100

 

2,455

 

5.2

 

Idaho

 

14

 

100

 

91,900

 

369

 

0.8

 

Illinois

 

45

 

100

 

395,700

 

1,486

 

3.1

 

Indiana

 

26

 

92

 

147,700

 

498

 

1.1

 

Iowa

 

9

 

89

 

57,000

 

144

 

0.3

 

Kansas

 

20

 

90

 

188,300

 

510

 

1.1

 

Kentucky

 

12

 

100

 

41,200

 

262

 

0.6

 

Louisiana

 

14

 

100

 

65,200

 

294

 

0.6

 

Maryland

 

24

 

100

 

207,600

 

1,139

 

2.4

 

Massachusetts

 

37

 

100

 

203,100

 

997

 

2.1

 

Michigan

 

13

 

100

 

81,600

 

299

 

0.6

 

Minnesota

 

18

 

100

 

211,600

 

538

 

1.1

 

Mississippi

 

33

 

88

 

194,400

 

309

 

0.6

 

Missouri

 

32

 

97

 

222,900

 

707

 

1.5

 

Montana

 

2

 

100

 

30,000

 

74

 

0.2

 

Nebraska

 

13

 

100

 

104,500

 

473

 

1.0

 

Nevada

 

15

 

100

 

191,000

 

823

 

1.7

 

New Hampshire

 

10

 

100

 

89,600

 

369

 

0.8

 

New Jersey

 

26

 

100

 

200,100

 

1,062

 

2.2

 

New Mexico

 

7

 

100

 

53,300

 

109

 

0.2

 

New York

 

27

 

100

 

339,600

 

1,664

 

3.5

 

North Carolina

 

50

 

98

 

325,000

 

1,397

 

2.9

 

North Dakota

 

1

 

100

 

22,000

 

16

 

 

*

Ohio

 

105

 

100

 

661,500

 

2,476

 

5.2

 

Oklahoma

 

17

 

100

 

94,300

 

358

 

0.8

 

Oregon

 

17

 

100

 

253,300

 

534

 

1.1

 

Pennsylvania

 

81

 

100

 

481,300

 

2,271

 

4.8

 

Rhode Island

 

1

 

100

 

3,500

 

29

 

0.1

 

South Carolina

 

55

 

100

 

215,600

 

1,414

 

3.0

 

South Dakota

 

1

 

100

 

6,500

 

24

 

 

*

Tennessee

 

97

 

99

 

459,500

 

2,183

 

4.6

 

Texas

 

175

 

97

 

1,653,000

 

4,291

 

9.1

 

Utah

 

6

 

100

 

35,100

 

142

 

0.3

 

Vermont

 

1

 

100

 

2,500

 

22

 

 

*

Virginia

 

55

 

100

 

410,800

 

2,073

 

4.4

 

Washington

 

37

 

100

 

243,900

 

694

 

1.5

 

West Virginia

 

2

 

0

 

16,800

 

8

 

 

*

Wisconsin

 

16

 

88

 

153,700

 

360

 

0.8

 

Wyoming

 

3

 

100

 

14,900

 

53

 

0.1

 

Totals/Average

 

1,582

 

98

%

12,470,900

 

$

47,398

 

100.0

%

 

*              Less than 0.1%

(1)           Excludes properties owned by our subsidiary, Crest Net.

(2)           Includes rental revenue for all properties owned by Realty Income at June 30, 2005 (including revenue from properties reclassified to discontinued operations of $60).

 

11