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Realty Income has big purchase and record year

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For Escondido-based REIT Realty Income Corp., 2012 was the year shareholders approved the $3.1 billion acquisition of American Realty Capital Trust, and that set new record operating results as well.

For the quarter ended Dec. 31, 2012, Realty Income Corp. (NYSE: O) posted $39.02 million in net income on $130.14 million in revenues — compared to $41 million in net income on $11.75 million in revenues for the like period in 2011.

For all of 2012, Realty Income recorded $159.15 million in net income on $475.51 million in revenues — compared to $157.03 million in net income on $410.25 million in revenues in 2011.

The year-end numbers follow closely on the heels of Realty Income’s completion of the American Realty (ARCT) acquisition on Jan. 22.

Realty Income issued approximately 45.6 million shares to ARCT shareholders based on a fixed exchange ratio of 0.2874 shares of Realty Income stock for each share of ARCT common stock owned. The company also made a cash payment of 35 cents per ARCT share to each ARCT shareholder.

In conjunction with the acquisition of ARCT, Realty Income Corp. assumed approximately $516.3 million of mortgages payable and repaid approximately $552.9 million of borrowings under ARCT’s revolving credit facility and term loan.

Upon closing, Realty Income became the 18th largest real estate investment trust in the United States, with an enterprise value of approximately $12.6 billion and an equity market capitalization of approximately $8.5 billion.

During the fourth quarter, Realty Income saw its portfolio occupancy climb from 97 percent to 97.3 percent. The Escondido REIT invested in $447 million worth of real estate, acquiring 189 new properties and projects under development during the last three months of the year.

In addition, Realty Income raised gross proceeds of $800 million in an offering of senior unsecured notes due 2018 and 2022.

For the year ended in December, Realty Income invested $1.16 billion in real estate, acquiring 423 new properties, and raised gross proceeds of $1.21 billion in public securities offerings to fund 2012 real estate acquisitions, repay borrowings under the credit facility, and redeem all outstanding Class D preferred shares.

Realty Income maintains a $1 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of Dec. 31, 2012, outstanding borrowings on the company’s acquisition credit facility were $158 million, and borrowing capacity was $842 million.

During the quarter ended Dec. 31, 2012, Realty Income sold 14 properties for $16.3 million, with a gain on sales of $3.9 million, as compared to five properties sold for $11.7 million, with a gain on sales of $1.2 million, during the same quarter in 2011.

During 2012, Realty Income sold 44 properties for $50.6 million, with a gain on sales of $9.9 million, as compared to 26 properties sold for $24.1 million, with a gain on sales of $5.7 million, during 2011.

As of Dec. 31, 2012, Realty Income’s portfolio of free-standing, single-tenant properties consisted of 3,013 properties located in 49 states, leased to 150 commercial enterprises doing business in 44 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 11 years.

Since the ARCT acquisition, the tally has climbed to 3,528 properties leased to 202 tenants doing business in 48 industries.

"Perhaps the highlight of 2012 was the announcement of our planned acquisition of ARCT, which closed on Jan. 22, 2013," said Thomas Lewis, Realty Income CEO, in a statement. "The completion of the ARCT acquisition positions Realty Income as the largest public net-lease REIT, and one of the larger REITs in our industry."

Lewis added that with the ARCT acquisition, "22 percent of our revenues are coming from non-retail properties."

Lewis said Realty Income now owns 61 distribution facilities, 40 office buildings, 10 manufacturing facilities (Quaker Oats, Procter & Gamble and General Electric's aircraft engine division are among the tenants), and 15 industrial buildings.

“We were also successful in accessing the capital markets during 2012, generating gross proceeds of $1.21 billion through total preferred stock offerings of $409 million in both February and April 2012, and senior unsecured notes offerings of $800 million in October 2012,” Lewis added. “This capital raising activity allowed us to fund our acquisitions during 2012.”

While Realty Income gained its fame through the acquisition of single-tenant retail, it has been diversifying during the past years, with everything from industrial properties to a Northern California winery.

Lewis added that the company entered into a new and expanded $1 billion credit facility with its commercial banks earlier in the year, so it should have ample access to funds that allow it to pursue additional real estate investment opportunities.

As of Jan. 15, the company had paid 510 consecutive monthly dividends throughout its 44-year operating history — a record that has fostered the slogan, “the monthly dividend company.”

RIC's stock price ended at $44.70 -- up 24 cents or 0.54 percent on Tuesday. The stock has ranged from $36.25 to $45.00 during the past 52 weeks.

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Realty Income Corp.

Company Website

600 La Terraza Blvd.
Escondido, CA 92025

Realty Income Corp. Executive(s):

Tom Lewis

  • Chief Executive Officer

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NAICS - 531120 - Lessors of Nonresidential Buildings (except Miniwarehouses)