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Realty Income Corp O

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Morningstar’s Analysis

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Improving Rent Collections, Over $1 Billion in Acquisitions Drive Realty Income's Q2 Results Higher

Kevin Brown Equity Analyst

Analyst Note

| Kevin Brown |

Second quarter results for no-moat Realty Income were slightly above our expectations, leading us to reaffirm our $66 fair value estimate. Economic occupancy improved 20 basis points sequentially to 98.8%, in line with our estimate. Rent collection in the second quarter showed slight improvement to 95.9% from 94.1% in the first quarter. Re-leasing spreads were solid at 4.7%, the highest figure in a quarter since 2019. Same-store net operating income growth was low at just 0.5%, though that is better than the declines seen in the prior four quarters. Additionally, Realty Income didn't see much divergence in same-store NOI across different sectors with retail up 0.6%, office up 0.6%, and agriculture up 1.3% while industrial fell 0.4%. Realty Income executed on $1.13 billion in acquisitions in the second quarter, so despite the low internal growth, the $2.16 billion in acquisitions done year to date helped drive normalized funds from operations per share to $0.88 in the second quarter, up $0.02 from the second quarter of 2020 and a penny ahead of our estimate.

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Company Profile

Business Description

Realty Income owns roughly 6,700 properties, most of which are freestanding, single-tenant, triple-net-leased retail properties. Its properties are located in 49 states and Puerto Rico and are leased to 250 tenants from 47 industries. Recent acquisitions have added industrial, office, manufacturing, and distribution properties, which make up roughly 16% of revenue.

11995 El Camino Real
San Diego, CA, 92130
T +1 858 284-5000
Sector Real Estate
Industry REIT - Retail
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 210