Release Date: May 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Realty Income Corp (O, Financial) reported a year-over-year growth of 2.9% in AFFO per share, reaching $1.06.
• The company achieved a total operational return of 8.9% for the quarter, supported by a 6% dividend yield.
• Realty Income Corp (O) invested $1.4 billion at a 7.5% weighted average initial cash yield, with significant investments in Europe.
• The company maintained a high portfolio occupancy rate of 98.5%, slightly above the historical median.
• Realty Income Corp (O) successfully closed a $600 million 10-year unsecured bond offering and expanded its multicurrency unsecured credit facility to $5.38 billion.

Negative Points

• Portfolio occupancy decreased by approximately 20 basis points from the prior quarter.
• The company anticipates a potential rent loss of 75 basis points for 2025, primarily from properties acquired through prior M&A transactions.
• Realty Income Corp (O) faces challenges in finding suitable risk-adjusted investment opportunities in the US compared to Europe.
• The company is cautious about increasing its investment guidance due to ongoing market uncertainties.
• Realty Income Corp (O) experienced a slight decrease in rent recapture rate due to specific asset types, such as theaters.

Q & A Highlights

Q: Can you discuss the investment activity in Europe during the first quarter and how it compares to opportunities in the US? A: Sumit Roy, President and CEO, explained that 65% of the total investment volume came from Europe, focusing on retail parks in the UK and Ireland. These investments were compelling due to below-market rents and acquisition costs well below replacement costs. In contrast, while there were opportunities in the US, the credit risks associated with higher-yielding investments were not as favorable.

Q: The rent recapture rate was 103.9%, but there was a slight decrease in re-leasing to the same tenants. Can you explain this? A: Sumit Roy noted that the decrease was a one-off situation, primarily due to three theater assets that affected the overall rate. However, the majority of renewals were still favorable, with a recapture rate of 99.7%.

Q: You're 35% of the way to your annual investment guidance after Q1. Why is the guidance unchanged? A: Sumit Roy stated that the unchanged guidance reflects caution due to economic uncertainty. While the first quarter was strong, the company is being deliberate and focused on ensuring appropriate use of equity and maintaining discipline in capital allocation.

Q: How is the U.S. Core Plus Fund progressing amid economic volatility? A: Sumit Roy expressed optimism about the fund's progress, noting that Realty Income's unique position and reputation are attracting interest from institutional investors, even in a challenging environment. The fund is seen as a strategic opportunity to broaden capital sources.

Q: Can you provide more details on the retail parks in Europe and their potential? A: Sumit Roy highlighted that retail parks were acquired with below-market rents and have seen significant cap rate compression since initial investments. The strategy involves repositioning these assets with new retailers, which could lead to substantial value uplift and rent increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.