Item 8.01. Other Events.
On January 9, 2023, Realty Income Corporation (the "Company," "our," "us" or
"we," which terms include, unless otherwise expressly stated or the context
otherwise requires, its consolidated subsidiaries) provided certain updates with
respect to its recent property investments and capital raising, as set forth
below.
Unless as otherwise indicated or the context otherwise requires, for purposes of
the following disclosures, (a) references to our "revolving credit facility" and
similar references mean our $4.25 billion unsecured revolving credit facility
(excluding a $1.0 billion expansion option, which is subject to obtaining lender
commitments and other customary conditions) and references to our "commercial
paper programs" and similar references mean, collectively, our $1.5 billion U.S.
Dollar-denominated unsecured commercial paper program and our $1.5 billion
Euro-denominated unsecured commercial paper program; (b) references to our
"clients" mean our tenants, (c) references to "contractual rent" for any period
means the aggregate cash amount charged to clients under leases, including
monthly base rent receivables but excluding percentage rent and contractually
obligated reimbursements by our clients, for such period, (d) references to
"GBP," "Sterling" and "£" are to the lawful currency of the United Kingdom; and
(e) references to "Euro" and "€" are to the lawful currency of the European
Union. For purposes of determining the aggregate amount of borrowings
outstanding under our revolving credit facility as of any specified date,
borrowings denominated in GBP and Euros are translated into U.S. dollars using
the applicable exchange rates as in effect from time to time.
Acquisitions Update
During the three and twelve months ended December 31, 2022, inclusive of the
acquisition of the land and real estate assets of Encore Boston Harbor Resort
and Casino from Wynn Resorts, Limited (the "Encore Acquisition"), we invested
approximately $3.9 billion and $9.0 billion, respectively, in properties and
properties under development or expansion at an initial weighted average cash
lease yield of approximately 6.1% and 5.9%, respectively. During the three and
twelve months ended December 31, 2022, excluding the Encore Acquisition, we
invested approximately $2.2 billion and $7.3 billion, respectively, at an
initial weighted average cash lease yield of approximately 6.2% and 6.0%,
respectively, in properties and properties under development or expansion.
With respect to the properties and properties under development or expansion in
which we have invested during the three and twelve months ended December 31,
2022, as described above, the initial weighted average cash lease yields related
to those properties are based on information available as of December 31, 2022,
and are subject to certain assumptions and uncertainties (including those
discussed in the penultimate paragraph under this caption "--Acquisitions
Update"), and therefore are subject to change and do not purport to be
indicative of the percentages or yields as of or for any future date or period.
As of January 6, 2023, we had entered into agreements or letters of intent to
acquire additional properties with an aggregate estimated purchase price of
approximately $1.3 billion, at an estimated initial weighted average cash lease
yield of approximately 7.1%, consisting of approximately $1.1 billion aggregate
estimated purchase price for properties as to which we had entered into
acquisition agreements and approximately $0.2 billion aggregate estimated
purchase price for properties as to which we have entered into letters of
intent. The estimated initial weighted average cash lease yields related to
these properties are based on information available as of January 6, 2023 and
are subject to certain assumptions and uncertainties (including those discussed
below) and therefore are subject to change and do not purport to be indicative
of the percentages or yields as of or for any future date or period. The
foregoing acquisition totals exclude investments in properties under development
or expansion.
The initial average cash lease yield for a property is generally computed as
estimated contractual first year cash net operating income, which, in the case
of a net leased property, is equal to the aggregate cash base rent payable for
the first full year of each lease (or, in the case of properties expected to be
acquired, calculated using the estimated aggregate cash base rent payable
pursuant to the lease for the first full year following the estimated closing
date), divided by the total cost of the property (including transaction costs
or, in the case of properties expected to be acquired, including estimated
transaction costs). In the case of a property under development or expansion,
the contractual lease rate is generally fixed such that rent varies based on the
actual total investment in order to provide a fixed rate of return. When the
lease does not provide for a fixed rate of return on a property under
development or expansion, the initial average cash lease yield is computed as
follows: estimated cash net operating income (determined by the lease) for the
first full year of each lease, divided by our projected total investment in the
property, including land, construction and capitalized interest costs. Since it
is possible that a client could default on the payment of contractual rent or
that the actual cash base rent, total cost or cash lease yield could differ from
our expectations or estimates, we cannot provide assurance that the actual
initial weighted average cash lease yields on the applicable properties will not
be lower than those described above.
The acquisition of properties is subject to numerous uncertainties, including
various closing conditions, and there can be no assurance that the properties
for which we have entered into letters of intent (which are non-binding and
therefore can be terminated by the buyer or the seller) or acquisition
agreements will be acquired at the prices or on the timetable or other terms
currently contemplated, or at all, or that we will enter into binding agreements
to acquire properties as to which we have entered into letters of intent.
Furthermore, the initial weighted average cash lease yield for the properties
subject to such acquisition agreements and letters of intent are subject to
numerous uncertainties, including the uncertainties disclosed in the prior
paragraph, and there can be no assurance that we will achieve the initial
weighted average cash lease yield set forth above for these properties.
Liquidity and Capital Markets
ATM Equity Capital Raising
As of December 31, 2022, there were approximately 6.7 million shares of common
stock subject to forward sale agreements through our at-the-market ("ATM")
program, representing approximately $0.4 billion in estimated net proceeds
(assuming full physical settlement of all outstanding shares of common stock
subject to such forward sale agreements and certain assumptions made with
respect to settlement dates), which have been executed but not settled. During
the three months ended December 31, 2022, we executed forward sale agreements
relating to approximately 19.9 million shares of common stock, representing
approximately $1.3 billion in estimated net proceeds (assuming full physical
settlement of all outstanding shares of common stock subject to such forward
sale agreements and certain assumptions made with respect to settlement dates).
In addition, during the three months ended December 31, 2022, we settled
approximately 33.1 million shares of common stock previously sold pursuant to
forward sale agreements through our ATM program for approximately $2.2 billion
of net proceeds (including approximately 20.0 million shares representing
approximately $1.3 billion of net proceeds that were outstanding but not settled
as of September 30, 2022).
Liquidity
As of December 31, 2022, we had a cash and cash equivalents balance of
approximately $185.6 million, including approximately £70.9 million denominated
in Sterling and €14.8 million denominated in Euro. In addition, we had $2.03
billion of outstanding borrowings under our revolving credit facility, including
approximately €1.82 billion denominated in Euro and £70.0 million denominated in
Sterling thereunder, and $702.3 million of outstanding borrowings under our
commercial paper programs, including approximately €361.0 million of
Euro-denominated borrowings, as of December 31, 2022. On January 6, 2023, we
entered into a term loan agreement which provides for a $90.0 million U.S.
Dollar denominated term loan, a £705.0 million Sterling denominated term loan
and a €85.0 million Euro denominated term loan.
Theater Industry Update
For quarter ended December 31, 2022, we collected 100% of the contractual rent
across our theater portfolio.
Forward-Looking Statements
This Current Report on Form 8-K may include "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws. These forward-looking statements,
which are based on current expectations, estimates and projections about the
industry and markets in which the Company operates and beliefs of and
assumptions made by the Company's management, involve uncertainties that could
significantly affect the financial condition or operating results of the
Company. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," "will," and variations of such words and similar
expressions are intended to identify such forward-looking statements. All
statements that address operating performance, events or developments that we
expect or anticipate will occur in the future are forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Although we
believe the expectations reflected in any forward-looking statements are based
on reasonable assumptions, we can give no assurance that our expectations will
be attained and, therefore, actual outcomes and results may differ materially
from what is expressed or forecasted in such forward-looking statements. For
example, these forward-looking statements could be affected by factors
including, without limitation, potential liability for a failure to meet
regulatory or tax-related requirements, including the maintenance of REIT
status; other risks associated with the acquisition, development, expansion,
leasing and management of properties; risks associated with our geographic
concentration; risks associated with the industry concentration of clients
(including those in the theater industry); costs related to uninsured losses,
condemnation, or environmental issues; changes in local, national and
international financial markets, insurance rates and interest rates; general
adverse economic and local real estate conditions; the inability of major
tenants to continue paying their rent obligations due to bankruptcy, insolvency
or a general downturn in their business; foreign currency exchange rates;
increases in operating costs and real estate taxes; changes in dividend policy
or ability to pay dividends for the Company's common stock; impairment charges;
the impact of the COVID-19 pandemic; the impact of future pandemics on us, our
business, our clients or the economy generally; and those additional risks and
factors discussed in reports filed with the U.S. Securities and Exchange
Commission ("SEC") by the Company. Moreover, other risks and uncertainties of
which the Company is not currently aware may also affect these forward-looking
statements and may cause actual results and the timing of events to differ
materially from those anticipated. The forward-looking statements made in this
communication are made only as of the date hereof or as of the dates indicated
in the forward-looking statements. The Company undertakes no obligation to
update or supplement any forward-looking statements to reflect actual results,
new information, future events, changes in its expectations or other
circumstances that exist after the date as of which the forward-looking
statements were made.
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