Realty Income(US:O)2023-02-22 23:01Financial Data and Key Metrics Changes - Realty Income Corporation closed approximately $9 billion in high-quality investments in 2022, with $3.9 billion in Q4, marking record highs for both annual and quarterly investment volumes [3] - The company reported an AFFO per share growth of 9.2%, the highest annual growth rate since 2013 [7] - The occupancy rate at year-end reached 99%, the highest in over 20 years [3] Business Line Data and Key Metrics Changes - The company achieved a rent recapture rate of 103.8% in Q4, with a full-year recapture rate of 105.9% [19] - A significant investment of $520 million was made in a 224-property portfolio of dental practices, indicating a focus on the consumer-centric medical industry [12][13] - The acquisition of Encore Boston Harbor resort and Casino for $1.7 billion represents the company's first transaction in the gaming industry [10] Market Data and Key Metrics Changes - The company sourced $17 billion in the fourth quarter, bringing the total sourcing volume for 2022 to $95 billion [3] - The investment guidance for 2023 is set at over $5 billion, with an expected cap rate in the mid-6% to mid-7% range [37][66] Company Strategy and Development Direction - Realty Income is expanding into new verticals, including consumer-centric medical and indoor farming, to unlock growth opportunities [12][18] - The company aims to consolidate the fragmented commercial real estate market in Europe, with Italy being the third country of investment [9] - The strategic alliance with Plenty for indoor vertical farms reflects the company's commitment to innovative agricultural technology [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model during economic uncertainty, highlighting a history of consistent total returns [8] - The company is optimistic about the investment pipeline and continues to source opportunities at attractive cap rates [37] - Management acknowledged the impact of pending bankruptcy on Cineworld exposure but noted a 100% collection of contractual rent since October 2022 [21][96] Other Important Information - The company raised approximately $52 billion in equity proceeds during Q4, primarily through its ATM program [28] - A new COO, Greg White, was appointed to enhance the management team [25][26] - The company recorded $13.7 million in additional reserves related to Cineworld properties due to ongoing bankruptcy evaluations [22] Q&A Session All Questions and Answers Question: Can you expand on the consumer medical vertical? - The focus is on areas like drugstores, infusion centers, and urgent care, with significant investments from companies like Walgreens and CVS [56][58] Question: How is the investment in Plenty's indoor farm deal structured? - The initial investment is $42 million, with potential for up to $1 billion over five years, focusing purely on real estate [47][52] Question: What is the outlook for M&A in the current environment? - M&A opportunities remain viable, but the company is currently focused on organic growth through substantial acquisitions [70][72] Question: How is tenant health being monitored, especially regarding Cineworld? - The company is closely monitoring Cineworld's bankruptcy, with overall tenant health remaining stable, as evidenced by improved cash flow coverages [94][96] Question: What is the company's view on interest rates and capital markets? - Recent capital raising activities aim to provide financial flexibility, with a focus on locking in attractive rates for future opportunities [113][115]