Realty Income (O) Q1 FFO and Revenue Exceed Estimates – May 5, 2022


Real Estate Income Corporation (O Free Report) for the first quarter of 2022, adjusted funds from operations (AFFO) per share of 98 cents edged above Zacks’ consensus estimate of 97 cents. The reported figure rose 14% from 86 cents in the year-ago quarter.

The results reflect a better than expected revenue improvement. The company benefited from expansion effects and a strong pipeline of opportunities globally.

Total revenue for the reported quarter was $807.3 million, beating Zacks’ consensus estimate of $761.2 million. Revenue also jumped 82.5% year-over-year.

Quarter in detail

During the first quarter of 2022, same store rental revenue from 9,728 properties under lease increased 4.1% to $629.9 million from the prior year period. The portfolio’s occupancy rate was 98.6%, with 156 properties available for rent or sale, up 60 basis points (bps) year-over-year. The company generated a rental recovery rate of 106.2% on the reletting activity. Its leases have a weighted average residual term of approximately 8.9 years.

During the quarter under review, Realty Income invested $1.56 billion in 213 properties and properties under development or expansion, including $796.4 million in Europe.

About 26% of rental income from acquisitions in the March quarter came from investment-rated tenants, their subsidiaries or affiliates.

The company sold 34 properties, generating net proceeds of $122.2 million with a gain on sales of $10.2 million in the quarter.

During the first quarter, Realty Income reached an agreement with Wynn Resorts to acquire the Encore Boston Harbor Resort and Casino for $1.7 billion through a sale-leaseback transaction.

In addition, the company sold 34 properties generating net sales proceeds of $122.2 million.

Balance sheet

Realty Income ended the first quarter with cash and cash equivalents of $151.6 million, down from $258.6 million as of December 31, 2021.

As at March 31, 2022, the balance of borrowings outstanding under its revolving credit facility was $569.6 million. In addition, as of that date, O had $950 million in commercial paper debt maturing between April and December 2022.

Net debt to annualized adjusted EBITDA was 5.4X, while the fixed charge coverage ratio was 5.6.

During the first quarter, the company raised $663 million from the sale of common stock at a weighted average price of $65.55 per share, primarily through its At-The-Market program.


Management reaffirmed its 2022 guidance. Adjusted FFO per share is expected to be between $3.84 and $3.97. The Zacks consensus estimate for the same is currently pegged at $3.94.

Management’s projections for full year 2022 assume same store rent growth of 1.5% and 98% occupancy. The volume of acquisitions over the whole year should exceed 5 billion dollars.

Realty Income currently carries a Zacks rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other REITs

Additional storage space Inc. (EXR Free Report) reported a basic FFO per share in the first quarter of 2022 of $2.01, beating the Zacks consensus estimate of $1.86. The figure is also 34% higher than the $1.50 in the year-ago quarter.

EXR’s results reflect strong revenue growth supported by higher average rates for new and existing customers and higher late fees, partially offset by lower occupancy. The company also raised its forecast for 2022.

Quarterly revenue was $443.6 million, up 23.6% year-over-year. The top line also topped Zacks’ consensus estimate of $432 million.

Extra space storage currently carries a Zacks rank of 2 (purchase).

Boston Properties, Inc. (BXP Free Report) Q1 2022 FFO per share of $1.82 beat Zacks consensus estimate of $1.74. The figure also compares favorably to $1.56 in the prior year quarter.

BXP’s quarterly results reflect decent rental revenue growth. Additionally, it saw strong rental activity during the quarter.

Quarterly rental revenue was $718.1 million, up 4.7% from $685.8 million in the prior year quarter. Moreover, the figure surpassed the consensus mark of $700.6 million.

Boston Properties currently carries a Zacks rank of 3 (Hold).

Vornado Real Estate Trust (WNV Free Report) first-quarter 2022 FFO plus assumed conversions as adjusted per share of 79 cents beat Zacks’ consensus estimate of 76 cents.

Vornado’s results show year-over-year growth in same-store net operating income (NOI) across its New York, theMART and 555 California Street portfolios.

VNO’s total revenue was $442.1 million in the reported quarter, beating Zacks’ consensus estimate of $422.3 million.
Additionally, on an annual basis, FFO per share and revenue increased by 21.5% and 16.4%, respectively.

Vornado currently carries a Zacks rank of 4 (sell).

Note: Everything related to earnings presented in this description represents funds from operations (FFO) – a metric widely used to assess the performance of REITs.


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