EX-99.1 2 a05-18943_1ex99d1.htm EXHIBIT 99

Exhibit 99.1

 

CONTACT:

Tere Miller

Vice President, Corporate Communications

760-741-2111 ext. 177

 

REALTY INCOME ANNOUNCES RECORD

THIRD QUARTER AND NINE MONTH OPERATING RESULTS

 

ESCONDIDO, CALIFORNIA, October 26, 2005...Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O) today announced operating results for the third quarter and nine months ended September 30, 2005.

 

COMPANY HIGHLIGHTS:

(For the quarter ended September 30, 2005)

 

•                  Revenue increased 12.6% to $49.2 million

•                  Funds from Operations (FFO) available to common stockholders increased 7.5% to $31.7 million

•                  FFO per diluted common share increased 8.1% to $0.40

•                  Net income available to common stockholders per diluted common share was $0.26 per share

•                  Dividends paid per share increased 8.7% as compared to the same quarterly period in 2004

•                  Portfolio occupancy remained strong at 98.4%

•                  Same store rents increased 0.9% to $39.82 million

•                  Invested $245.3 million in 32 additional properties

•                  Received senior unsecured debt ratings upgrade to BBB+ from Fitch Ratings

•                  Issued $175 million of 12-Year, 5-3/8% senior unsecured notes

•                  Issued 4.1 million common shares

•                  Increased the monthly dividend 3.4% in August to an annual amount of $1.38 per common share

•                  Increased the monthly dividend again in September to an annual amount of $1.3875 per common share

 

Financial Results

 

Revenue Increases

Realty Income’s revenue for the third quarter ended September 30, 2005, increased 12.6% to $49.2 million as compared to $43.7 million for the same period in 2004.

 

Revenue for the nine months ended September 30, 2005, increased 11.3% to $143.3 million as compared to $128.7 million for the same period in 2004.

 

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended September 30, 2005, was $20.8 million as compared to $22.0 million for the same period in 2004. On a diluted per common share basis, net income for the quarter was $0.26 per share as compared to $0.28 per share for the same period in 2004.

 

Net income available to common stockholders, for the nine months ended September 30, 2005, was $64.2 million as compared to $65.9 million for the same period in 2004. On a diluted per common share basis, net income was $0.81 per share as compared to $0.84 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 third quarter of 2005, income from continuing operations available to common stockholders was $0.25 per diluted common share as compared to $0.22 per diluted common share for the same period in 2004.

 

During the first nine months of 2005, income from continuing operations available to common stockholders was $0.73 per diluted common share as compared to $0.64 per diluted common share for the same period in 2004.

 

FFO Available to Common Stockholders

FFO for the third quarter ended September 30, 2005, increased 7.5% to $31.7 million as compared to $29.5 million for the same period in 2004. FFO per diluted common share increased 8.1% to $0.40 per share, for the quarter ended September 30, 2005, as compared to $0.37 per share for the same period in 2004. Core FFO (FFO before Crest Net’s contribution) per diluted common share for the quarter ended September 30, 2005, increased 8.3% to $0.39 per share from $0.36 per share for the same period in 2004.

 

FFO for the nine months ended September 30, 2005, increased 4.9% to $93.8 million as compared to $89.4 million for the same period in 2004. FFO per diluted common share increased 3.5% to $1.18 per share as compared to $1.14 per share for the same period in 2004. Core FFO per diluted common share, for the nine months ended September 30, 2005, increased 10.5% to $1.16 per diluted share from $1.05 per share for the same period in 2004. (For a calculation of Core FFO or FFO before Crest Net Lease contribution, see pages 7 and 8.)

 

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 7.)

 

Dividend Information

In August 2005, Realty Income increased the amount of the monthly common stock dividend by 3.4% to an annualized amount of $1.38 per share. Then, in September 2005, the Company increased the amount of the monthly dividend again to an annualized rate of $1.3875. The September increase in the monthly dividend was the 32nd consecutive quarterly increase and the 36th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The amount of the monthly dividends paid, for the nine months ended September 30, 2005, increased 9.4% to $0.999 per share as compared to $0.913 per share in dividends paid for the same period in 2004.

 

Real Estate Portfolio Update

 

As of September 30, 2005, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 1,605 properties located in 48 states, leased to 101 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 12.4 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 September 30, 2005, portfolio occupancy was 98.4% with only 26 properties available for lease out of 1,605 properties in the portfolio.

 

Rent Increases

Same store rents on 1,279 properties under lease during the three months ended September 30, 2005 and 2004, increased 0.9% to $39.82 million from $39.46 million in 2004. Same store rents on the same 1,279 properties under lease during the nine months ended September 30, 2005 and 2004 increased 0.9% to $118.90 million compared to $117.83 million in 2004.

 


 

Property Acquisitions

During the third quarter, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $245.3 million in 32 new properties and properties under development. Realty Income invested $212.5 million in 26 new properties and properties under development with an initial average contractual lease yield of 8.2%. The 26 new properties acquired by Realty Income are located in eight states and are 100% leased under net-lease agreements with an initial average lease length of 19.4 years. They are leased to seven different retail chains in four industries: convenience store, health and fitness, restaurant and theater.

 

During the nine months ended September 30, 2005, Realty Income and its wholly-owned subsidiary, Crest Net Lease, Inc., invested $412.1 million in 104 new properties and properties under development. Realty Income invested $357.6 million in 86 new properties and properties under development with an initial average contractual lease yield of 8.4%. The 86 new properties acquired by Realty Income are located in 21 states and are 100% leased under net-lease agreements with an initial average lease length of 17.7 years. They are leased to nine 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 $300 million that 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 third quarter was $15.5 million with $284.5 million available to fund new property acquisitions.

 

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 third quarter ended September 30, 2005, Realty Income sold four properties for $3.0 million, which resulted in a gain on sales of $303,000. The properties sold consisted of: one consumer electronics store and three restaurants. The proceeds were, or will be, used to pay down the Company’s acquisition credit facility or to invest in new properties.

 

During the first nine months of 2005, Realty Income sold 15 properties for $17.6 million, which resulted in a gain on sales of $3.8 million. The properties sold consisted of: one automotive service location, one automotive tire service location, four child care locations, two consumer electronics stores, one convenience store, one motor vehicle dealership, one private education facility, and four restaurants.

 

Other Third Quarter 2005 Activities

 

Credit Rating Upgrade

In September 2005, Fitch Ratings upgraded Realty Income’s senior unsecured debt ratings to BBB+ from BBB and its preferred stock ratings to BBB from BBB-, with a stable outlook.

 

Completed 12-Year Notes Offering

On September 15, 2005, Realty Income completed a $175 million offering of 12-year, 5-3/8 senior unsecured notes due 2017. The net proceeds from the offering were used to repay borrowings on the Company’s unsecured acquisition credit facility and for other general corporate purposes.

 

Issued 4.1 Million Common Shares

On September 27, 2005, Realty Income issued 4.1 million common shares priced at $23.79 per share. The net proceeds from the offering of $92.7 million were used to fund new property acquisitions and for other general corporate purposes.

 

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 third quarter ended September 30, 2005, Crest sold two properties for $5.8 million and reported a gain on sales of $713,000. Crest also invested $32.8 million in six new properties during the third quarter.

 

For the nine months ended September 30, 2005, Crest sold nine properties for $17.0 million and reported a gain on sales of $2.4 million. During this same period, Crest invested $54.5 million in 18 new properties and properties under development. As of September 30, 2005, Crest carried an inventory of $49.9 million, which consists of 17 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 third quarter ended September 30, 2005, Crest generated $566,000, or $0.01 per diluted common share, in FFO (and net income) for Realty Income as compared to $1.1 million, or $0.01 per diluted common share, in FFO for the same period in 2004. For the nine months ended September 30, 2005, Crest generated $1.7 million, or $0.02 per diluted common share, in FFO (and net income) for Realty Income as compared to $7.2 million, or $0.09 per diluted common share, for the same period in 2004.

 

CEO Comments on Operating Results

 

Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer, stated, “We are pleased to once again report record financial results for the third quarter and first nine months of 2005. Increases in property acquisitions, total revenue, and funds from operations allowed us to raise the dividend two times during the third quarter. As a result, the amount of the monthly dividends paid per share in the first nine months of 2005 increased 9.4% as compared to the same nine month period in 2004. As The Monthly Dividend Company®, we are gratified that we have been able to continue to provide monthly income that has increased over time.

 

“A primary driver of our ability to increase cash flow and dividends is the continued success of the Company’s property acquisition program. During the first nine months of 2005, Realty Income and Crest Net combined were able to acquire 104 properties valued at $412 million, under long-term leases with attractive rates of return over our cost of capital. This significantly exceeded the Company’s initial estimate of total acquisitions volume of $250 million for all of 2005 and represents the highest level of annual acquisitions in the Company’s history.

 

“Our current outlook is to invest a total of approximately $450 million in new properties during all of 2005. In a competitive net-lease acquisition environment, our ability to achieve this high level of acquisitions is noteworthy not just in terms of volume, but also because we’ve achieved this volume while still adhering to our strict due diligence standards and solid underwriting procedures. In addition, the pricing of the transactions was attractive with a year-to-date initial average lease rate of 8.4% and an initial average lease term of 17.7 years.

 

“The third quarter was extremely active in other areas of the Company’s operations as well. During the quarter, we issued 4.1 million common shares and $175 million of senior unsecured notes accessing over $272 million in gross capital. We also received a senior unsecured debt ratings upgrade to BBB+ from Fitch Ratings. In addition, the Company’s portfolio of 1,605 properties also continued to perform well with overall occupancy at 98.4% at the end of the quarter.”

 

FFO Commentary

Realty Income’s FFO per diluted 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 diluted 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 diluted 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 net income per diluted common share range of $1.08 to $1.11, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.57 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 on a comparable quarterly and annualized basis.

 

2006 Estimates

Management estimates that FFO per diluted common share for 2006 should range from $1.67 to $1.71, which would represent annual FFO per diluted common share growth of approximately 3.1% to 7.5%, based on 2005 estimates. FFO for 2006 is based on an estimated net income per diluted common share range of $1.11 to $1.15 adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.62 and potential gain on sales of investment properties of $0.06 per share.

 


 

Management further estimates that Crest Net Lease could contribute between $0.04 to $0.06 per share to Realty Income’s FFO during 2006. 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 on a comparable quarterly and annualized basis.

 

The Company does not intend to provide quarterly estimates of FFO. Absent changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimates for 2005 and 2006 have 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 September 30, 2005, the Company had paid 422 consecutive monthly dividends throughout its 36-year operating history. The monthly income is supported by the cash flows from over 1,605 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

 


 

CONSOLIDATED STATEMENTS OF INCOME

For the three and nine months ended September 30, 2005 and 2004

(dollars in thousands, except per share amounts)

 

 

 

Three Months
Ended 9/30/05

 

Three Months
Ended 9/30/04

 

Nine Months
Ended 9/30/05

 

Nine Months
Ended 9/30/04

 

REVENUE

 

 

 

 

 

 

 

 

 

Rental

 

$

49,030

 

$

43,636

 

$

142,983

 

$

128,051

 

Other

 

136

 

19

 

308

 

679

 

 

 

 

 

 

 

 

 

 

 

 

 

49,166

 

43,655

 

143,291

 

128,730

 

EXPENSES

 

 

 

 

 

 

 

 

 

Interest

 

10,228

 

8,552

 

29,080

 

25,533

 

Depreciation and amortization

 

11,290

 

10,140

 

33,293

 

29,656

 

General and administrative

 

4,166

 

3,202

 

11,927

 

9,623

 

Property

 

1,021

 

756

 

2,901

 

2,205

 

Income taxes

 

202

 

177

 

603

 

521

 

 

 

 

 

 

 

 

 

 

 

 

 

26,907

 

22,827

 

77,804

 

67,538

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

22,259

 

20,828

 

65,487

 

61,192

 

Income from discontinued operations:

 

 

 

 

 

 

 

 

 

Real estate acquired for resale by Crest

 

566

 

1,095

 

1,695

 

7,249

 

Real estate held for investment

 

297

 

3,280

 

4,109

 

8,400

 

 

 

863

 

4,375

 

5,804

 

15,649

 

 

 

 

 

 

 

 

 

 

 

Net income

 

23,122

 

25,203

 

71,291

 

76,841

 

Preferred stock cash dividends

 

(2,351

)

(1,800

)

(7,052

)

(7,211

)

Excess of redemption value over carrying value of preferred shares redeemed

 

—

 

(1,415

)

—

 

(3,774

)

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

20,771

 

$

21,988

 

$

64,239

 

$

65,856

 

 

 

 

 

 

 

 

 

 

 

Funds from operations available to common stockholders (FFO)

 

$

31,748

 

$

29,478

 

$

93,784

 

$

89,389

 

 

 

 

 

 

 

 

 

 

 

Per share information for common stockholders, basic and diluted:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.25

 

$

0.22

 

$

0.73

 

$

0.64

 

Net income

 

$

0.26

 

$

0.28

 

$

0.81

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

FFO before Crest Net contribution

 

$

0.39

 

$

0.36

 

$

1.16

 

$

1.05

 

Crest Net Lease

 

0.01

 

0.01

 

0.02

 

0.09

 

Total FFO

 

0.40

 

0.37

 

1.18

 

1.14

 

Cash dividends paid

 

$

0.338

 

$

0.311

 

$

0.999

 

$

0.913

 

 


 

FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

 

 

 

Three Months
Ended 9/30/05

 

Three Months
Ended 9/30/04

 

Nine Months
Ended 9/30/05

 

Nine Months
Ended 9/30/04

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

20,771

 

$

21,988

 

$

64,239

 

$

65,856

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Continuing operations

 

11,290

 

10,140

 

33,293

 

29,656

 

Discontinued operations

 

25

 

209

 

135

 

743

 

Depreciation of furniture, fixtures & equipment

 

(35

)

(28

)

(102

)

(86

)

Gain on sales of investment properties:

 

 

 

 

 

 

 

 

 

Continuing operations

 

—

 

—

 

(14

)

—

 

Discontinued operations

 

(303

)

(2,831

)

(3,767

)

(6,780

)

 

 

 

 

 

 

 

 

 

 

Funds from operations available to common stockholders

 

$

31,748

 

$

29,478

 

$

93,784

 

$

89,389

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to common stockholders

 

$

26,867

 

$

24,674

 

$

79,543

 

$

71,399

 

 

 

 

 

 

 

 

 

 

 

FFO in excess of dividends

 

$

4,881

 

$

4,804

 

$

14,241

 

$

17,990

 

 

 

 

 

 

 

 

 

 

 

FFO per common share, basic and diluted

 

$

0.40

 

$

0.37

 

$

1.18

 

$

1.14

 

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

 

 

 

 

 

 

 

 

 

Basic

 

79,779,808

 

79,280,944

 

79,653,608

 

78,255,404

 

Diluted

 

79,843,553

 

79,349,986

 

79,727,036

 

78,335,150

 

 

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 9/30/05

 

Three Months
Ended 9/30/04

 

Nine Months
Ended 9/30/05

 

Nine Months
Ended 9/30/04

 

Gain on sales of real estate acquired for resale

 

$

713

 

$

1,555

 

$

2,361

 

$

9,548

 

Rental revenue

 

514

 

338

 

1,083

 

1,952

 

Interest expense

 

(320

)

(121

)

(630

)

(520

)

General and administrative expense

 

(137

)

(112

)

(410

)

(360

)

Property expenses

 

(9

)

(57

)

(59

)

(72

)

Income taxes

 

(195

)

(508

)

(650

)

(3,299

)

Funds from operations contributed by Crest

 

$

566

 

$

1,095

 

$

1,695

 

$

7,249

 

 

 

 

 

 

 

 

 

 

 

Crest FFO per common share, basic and diluted

 

$

0.01

 

$

0.01

 

$

0.02

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

31,748

 

$

29,478

 

$

93,784

 

$

89,389

 

Less FFO contributed by Crest

 

(566

)

(1,095

)

(1,695

)

(7,249

)

FFO before Crest contribution

 

$

31,182

 

$

28,383

 

$

92,089

 

$

82,140

 

FFO before Crest contribution per common share, basic and diluted

 

$

0.39

 

$

0.36

 

$

1.16

 

$

1.05

 

 

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.

 


 

HISTORICAL FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

For the three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

20,771

 

$

21,988

 

$

17,901

 

$

19,392

 

$

14,758

 

Depreciation and amortization

 

11,280

 

10,321

 

8,295

 

7,927

 

7,205

 

Gain on sales of investment properties

 

(303

)

(2,831

)

(1,133

)

(3,080

)

(2,806

)

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

31,748

 

$

29,478

 

$

25,063

 

$

24,239

 

$

19,157

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO per diluted share

 

$

0.40

 

$

0.37

 

$

0.36

 

$

0.35

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

31,748

 

$

29,478

 

$

25,063

 

$

24,239

 

$

19,157

 

Less FFO contributed by Crest

 

(566

)

(1,095

)

(244

)

(677

)

(303

)

FFO before Crest contribution

 

$

31,182

 

$

28,383

 

$

24,819

 

$

23,562

 

$

18,854

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO components, per diluted share:

 

 

 

 

 

 

 

 

 

 

 

FFO before Crest’s contribution

 

$

0.39

 

$

0.36

 

$

0.35

 

$

0.34

 

$

0.32

 

Crest FFO contribution

 

$

0.01

 

$

0.01

 

$

0.00

 

$

0.01

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

0.40

 

$

0.37

 

$

0.36

 

$

0.35

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per share

 

$

0.338

 

$

0.311

 

$

0.296

 

$

0.289

 

$

0.281

 

Diluted shares outstanding

 

79,843,553

 

79,349,986

 

70,145,462

 

69,076,014

 

59,608,616

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

64,239

 

$

65,856

 

$

51,667

 

$

51,275

 

$

41,851

 

Depreciation and amortization

 

33,326

 

30,313

 

24,651

 

23,003

 

21,517

 

Gain on sales of investment properties

 

(3,781

)

(6,780

)

(4,256

)

(5,602

)

(8,921

)

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

93,784

 

$

89,389

 

$

72,062

 

$

68,676

 

$

54,447

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO per diluted share

 

$

1.18

 

$

1.14

 

$

1.03

 

$

1.02

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

93,784

 

$

89,389

 

$

72,062

 

$

68,676

 

$

54,447

 

Less FFO contributed by Crest

 

(1,695

)

(7,249

)

(467

)

(1,941

)

(1,606

)

FFO before Crest contribution

 

$

92,089

 

$

82,140

 

$

71,595

 

$

66,735

 

$

52,841

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO components, per diluted share:

 

 

 

 

 

 

 

 

 

 

 

FFO before Crest’s contribution

 

$

1.16

 

$

1.05

 

$

1.02

 

$

0.99

 

$

0.93

 

Crest FFO contribution

 

$

0.02

 

$

0.09

 

$

0.01

 

$

0.03

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Total FFO

 

$

1.18

 

$

1.14

 

$

1.03

 

$

1.02

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per share

 

$

0.999

 

$

0.913

 

$

0.883

 

$

0.861

 

$

0.838

 

Diluted shares outstanding

 

79,727,036

 

78,335,150

 

70,092,704

 

67,342,670

 

56,607,256

 

 


 

CONSOLIDATED BALANCE SHEETS

As of September 30, 2005 and December 31, 2004

(dollars in thousands, except per share amounts)

 

 

 

2005

 

2004

 

ASSETS

 

 

 

 

 

Real estate, at cost:

 

 

 

 

 

Land

 

$

722,434

 

$

624,558

 

Buildings and improvements

 

1,304,469

 

1,066,725

 

 

 

2,026,903

 

1,691,283

 

Less accumulated depreciation and amortization

 

(329,763

)

(301,728

)

 

 

 

 

 

 

Net real estate held for investment

 

1,697,140

 

1,389,555

 

Real estate held for sale, net

 

51,597

 

17,155

 

Net real estate

 

1,748,737

 

1,406,710

 

Cash and cash equivalents

 

2,244

 

2,141

 

Accounts receivable

 

3,587

 

4,075

 

Goodwill

 

17,206

 

17,206

 

Other assets

 

26,933

 

12,183

 

 

 

 

 

 

 

Total assets

 

$

1,798,707

 

$

1,442,315

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Distributions payable

 

$

10,069

 

$

9,115

 

Accounts payable and accrued expenses

 

16,731

 

9,579

 

Other liabilities

 

9,156

 

6,286

 

Line of credit payable

 

15,500

 

23,600

 

Notes payable

 

755,000

 

480,000

 

 

 

 

 

 

 

Total liabilities

 

806,456

 

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  83,693,436 issued and outstanding and in 2004 there were 100,000,000 shares authorized and 79,301,630 shares issued and outstanding

 

1,133,730

 

1,038,973

 

Distributions in excess of net income

 

(265,283

)

(249,025

)

 

 

 

 

 

 

Total stockholders’ equity

 

992,251

 

913,735

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,798,707

 

$

1,442,315

 

 


 

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)

 

Sept. 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

 

3.3

 

3.8

 

4.5

 

4.9

 

5.7

 

6.0

 

6.3

 

6.1

 

Automotive Service

 

7.6

 

7.7

 

8.3

 

7.0

 

5.7

 

5.8

 

6.6

 

7.5

 

Automotive Tire Services

 

7.1

 

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

 

12.8

 

14.4

 

17.8

 

20.8

 

23.9

 

24.7

 

25.3

 

29.2

 

Consumer Electronics

 

1.3

 

2.1

 

3.0

 

3.3

 

4.0

 

4.9

 

4.4

 

5.4

 

Convenience Stores

 

19.3

 

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

 

2.1

 

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

 

3.7

 

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

 

2.5

 

0.6

 

—

 

—

 

—

 

—

 

—

 

—

 

Office Supplies

 

1.5

 

1.6

 

1.9

 

2.1

 

2.2

 

2.3

 

2.6

 

3.0

 

Pet Supplies and Services

 

1.3

 

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

 

9.4

 

9.7

 

11.8

 

13.5

 

12.2

 

12.3

 

13.3

 

16.2

 

Shoe Stores

 

1.2

 

0.3

 

0.9

 

0.8

 

0.7

 

0.8

 

1.1

 

0.8

 

Sporting Goods

 

3.4

 

3.4

 

3.8

 

4.1

 

0.9

 

—

 

—

 

—

 

Theaters

 

3.4

 

3.5

 

4.1

 

3.9

 

4.3

 

2.7

 

0.6

 

—

 

Travel Plazas

 

0.3

 

0.4

 

0.3

 

—

 

—

 

—

 

—

 

—

 

Video Rental

 

2.5

 

2.8

 

3.3

 

3.3

 

3.7

 

3.9

 

4.3

 

3.8

 

Other

 

3.1

 

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.

 


 

The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,605 net leased, single-tenant retail properties as of September 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
9/30/05(2)

 

% of
Rental
Revenue

 

Number of
Leases
Expiring

 

Rental
Revenue for
the Quarter
Ended
9/30/05(2)

 

% of
Total
Rental
Revenue

 

Number of
Leases
Expiring

 

Rental
Revenue for
the Quarter
Ended
9/30/05(2)

 

% of
Total
Rental
Revenue

 

2005

 

50

 

$

980

 

2.1

%

44

 

$

912

 

1.9

%

6

 

$

68

 

0.2

%

2006

 

89

 

1,967

 

4.2

 

32

 

762

 

1.6

 

57

 

1,205

 

2.6

 

2007

 

123

 

2,269

 

4.8

 

87

 

1,638

 

3.5

 

36

 

631

 

1.3

 

2008

 

99

 

2,101

 

4.5

 

61

 

1,436

 

3.1

 

38

 

665

 

1.4

 

2009

 

90

 

1,971

 

4.2

 

30

 

708

 

1.5

 

60

 

1,263

 

2.7

 

2010

 

60

 

1,299

 

2.8

 

38

 

936

 

2.0

 

22

 

363

 

0.8

 

2011

 

41

 

1,440

 

3.1

 

33

 

1,241

 

2.7

 

8

 

199

 

0.4

 

2012

 

44

 

1,378

 

2.9

 

42

 

1,329

 

2.8

 

2

 

49

 

0.1

 

2013

 

74

 

3,211

 

6.8

 

66

 

2,999

 

6.4

 

8

 

212

 

0.4

 

2014

 

48

 

2,028

 

4.3

 

36

 

1,790

 

3.8

 

12

 

238

 

0.5

 

2015

 

48

 

1,259

 

2.7

 

30

 

826

 

1.8

 

18

 

433

 

0.9

 

2016

 

17

 

513

 

1.1

 

15

 

431

 

0.9

 

2

 

82

 

0.2

 

2017

 

22

 

1,527

 

3.3

 

18

 

1,459

 

3.1

 

4

 

68

 

0.2

 

2018

 

23

 

1,028

 

2.2

 

23

 

1,028

 

2.2

 

—

 

—

 

—

 

2019

 

95

 

4,538

 

9.7

 

94

 

4,295

 

9.2

 

1

 

243

 

0.5

 

2020

 

71

 

2,165

 

4.6

 

70

 

2,151

 

4.6

 

1

 

14

 

 

*

2021

 

125

 

4,082

 

8.7

 

125

 

4,082

 

8.7

 

—

 

—

 

—

 

2022

 

96

 

2,598

 

5.5

 

95

 

2,593

 

5.5

 

1

 

5

 

 

*

2023

 

234

 

6,452

 

13.8

 

233

 

6,426

 

13.7

 

1

 

26

 

0.1

 

2024

 

58

 

1,761

 

3.8

 

58

 

1,761

 

3.8

 

—

 

—

 

—

 

2025

 

56

 

1,239

 

2.6

 

56

 

1,239

 

2.6

 

—

 

—

 

—

 

2026

 

2

 

98

 

0.2

 

2

 

98

 

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

 

1,575

 

$

46,883

 

100.0

%

1,297

 

$

41,106

 

87.7

%

278

 

$

5,777

 

12.3

%

 

*Less than 0.1%

(1)  Excludes four multi-tenant properties, 26 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 $63 from properties reclassified to discontinued operations and excludes revenue of $2,210 from four multi-tenant properties and from 26 vacant and unleased properties at September 30, 2005.

(3)  Represents leases to the initial tenant of the property that are expiring for the first time.

(4)  Represents lease expirations on properties in the portfolio which have previously been renewed, extended or re-tenanted.

 


 

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

 

Geographic Diversification

 

State

 

Number of
Properties

 

Percent
Leased

 

Approximate
Leasable
Square Feet

 

Rental Revenue
for the
Quarter Ended
Sept. 30, 2005(1)

 

Percentage of
Rental Revenue

 

Alabama

 

18

 

94

%

156,600

 

$

426

 

0.9

%

Alaska

 

2

 

100

 

128,500

 

251

 

0.5

 

Arizona

 

70

 

100

 

335,500

 

1,888

 

3.8

 

Arkansas

 

8

 

88

 

48,800

 

139

 

0.3

 

California

 

61

 

100

 

1,057,100

 

4,050

 

8.3

 

Colorado

 

48

 

98

 

399,100

 

1,719

 

3.5

 

Connecticut

 

16

 

100

 

245,600

 

929

 

1.9

 

Delaware

 

16

 

100

 

29,100

 

338

 

0.7

 

Florida

 

127

 

98

 

1,254,900

 

4,892

 

10.0

 

Georgia

 

99

 

99

 

645,100

 

2,639

 

5.4

 

Idaho

 

14

 

100

 

91,900

 

373

 

0.8

 

Illinois

 

52

 

98

 

687,600

 

1,533

 

3.1

 

Indiana

 

30

 

93

 

327,500

 

534

 

1.1

 

Iowa

 

9

 

89

 

57,000

 

174

 

0.4

 

Kansas

 

20

 

90

 

188,300

 

512

 

1.0

 

Kentucky

 

12

 

100

 

41,200

 

264

 

0.5

 

Louisiana

 

14

 

100

 

65,200

 

296

 

0.6

 

Maryland

 

24

 

100

 

188,700

 

1,132

 

2.3

 

Massachusetts

 

37

 

100

 

203,100

 

998

 

2.0

 

Michigan

 

13

 

100

 

81,600

 

300

 

0.6

 

Minnesota

 

20

 

100

 

337,100

 

560

 

1.1

 

Mississippi

 

34

 

88

 

195,500

 

704

 

1.4

 

Missouri

 

32

 

97

 

244,500

 

741

 

1.5

 

Montana

 

2

 

100

 

30,000

 

74

 

0.2

 

Nebraska

 

13

 

100

 

104,500

 

401

 

0.8

 

Nevada

 

15

 

100

 

191,000

 

824

 

1.7

 

New Hampshire

 

10

 

100

 

89,600

 

369

 

0.8

 

New Jersey

 

26

 

100

 

200,100

 

1,063

 

2.2

 

New Mexico

 

7

 

100

 

53,300

 

131

 

0.3

 

New York

 

28

 

100

 

386,300

 

1,665

 

3.4

 

North Carolina

 

50

 

98

 

325,000

 

1,437

 

2.9

 

North Dakota

 

1

 

100

 

22,000

 

16

 

 

*

Ohio

 

105

 

100

 

661,500

 

2,535

 

5.2

 

Oklahoma

 

17

 

100

 

92,100

 

360

 

0.7

 

Oregon

 

17

 

100

 

253,300

 

536

 

1.1

 

Pennsylvania

 

81

 

100

 

481,300

 

2,277

 

4.6

 

Rhode Island

 

1

 

100

 

3,500

 

29

 

0.1

 

South Carolina

 

55

 

100

 

215,800

 

1,414

 

2.9

 

South Dakota

 

1

 

100

 

6,500

 

24

 

0.1

 

Tennessee

 

96

 

100

 

447,000

 

2,197

 

4.5

 

Texas

 

177

 

97

 

1,740,300

 

4,923

 

10.0

 

Utah

 

6

 

100

 

35,100

 

107

 

0.2

 

Vermont

 

1

 

100

 

2,500

 

22

 

 

*

Virginia

 

62

 

100

 

431,900

 

2,184

 

4.4

 

Washington

 

37

 

100

 

243,900

 

694

 

1.4

 

West Virginia

 

2

 

0

 

16,800

 

0

 

 

*

Wisconsin

 

16

 

94

 

153,700

 

366

 

0.7

 

Wyoming

 

3

 

100

 

14,900

 

53

 

0.1

 

Totals/Average

 

1,605

 

98

%

13,211,400

 

$

49,093

 

100.0

%

 

* Less than 0.1%

 (1)  Includes rental revenue for all properties owned by Realty Income at September 30, 2005 (including revenue from properties reclassified to discontinued operations of $63).