O | Q4 2024

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Overview

• FFO of $1.05 misses by $0.02.

• Revenue of $1.34B (+24.1% Y/Y) beats by $60M.

Takeaways

Realty Income (O) wrapped up 2024 with another year of consistent growth, delivering a 4.8% increase in AFFO per share and a total operational return of 10.2% when factoring in its 5.4% dividend yield.

This marked the company’s 14th consecutive year of AFFO growth and reinforced its track record of steady returns, with its 30-year history as a public company averaging an 11% annual total operational return—never once posting a negative year.

The company maintained a disciplined capital allocation strategy throughout the year, investing $3.9 billion at a 7.4% weighted average initial cash yield, with a strong investment spread of 243 basis points—well above its historical average.

In the fourth quarter alone, Realty Income deployed $1.7 billion into high-quality properties at an initial yield of 7.1% (or 7.5% with CPI growth of 2%), with 57% of rental income coming from investment-grade clients.

The company executed 73 separate transactions, including a $500 million-plus deal, demonstrating the depth and scale of its acquisition platform. Investments were spread across the U.S. ($1.1 billion at a 6.4% yield) and Europe ($650 million at an 8.2% yield), with the company seeing a lot of opportunity in Europe moving forward.

Realty Income ended the year with a massive portfolio of 15,600 properties and an impressive 98.7% occupancy rate, in line with the prior quarter. Lease renewals remained strong, with a rent recapture rate of 107.4%, translating to $52 million in new annualized cash rent.

The company has successfully resolved more than 5,800 lease expirations since 1996, averaging a 103% recapture rate, and continues to refine its predictive analytics to optimize acquisitions and dispositions.

On the topic of dispositions, Realty Income sold 80 properties for $138 million in Q4 and 294 properties for $589 million across the full year. Looking ahead, the company expects this active capital recycling program to continue in 2025.

Realty Income expects to invest approximately $4 billion in 2025 with projected AFFO per share in the range of $4.22 to $4.28—a 1.4% increase at the midpoint.

The company is taking advantage of its scale and relationships to secure attractive opportunities, as seen by its $770 million sale-leaseback transaction with 7-Eleven in Q4, making 7-Eleven Realty Income’s top tenant at 3.5% of annualized rent.

Realty Income also continues to strengthen its dividend track record, having increased its monthly dividend for the 129th time, marking 30 consecutive years of annual dividend growth. The board has also authorized a $2 billion share buyback program, which will be funded through property dispositions or cash flow to ensure leverage neutrality.

Overall, Realty Income continues to demonstrate its ability to generate stable returns through disciplined capital allocation, selectively high-quality investments, and a commitment to maintaining its strong balance sheet.

With a seemingly strong pipeline of opportunities at home and abroad, and continued expansion into new avenues like private capital, the company looks to be setting itself up for at least one more year of continued growth.

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