Realty Income Earnings: Reports Solid Re-Leasing Spreads and $1.3 Billion in Acquisitions

Fourth-quarter results for Realty Income were slightly better than our expectations, giving us confidence in our $75 fair value estimate for the no-moat company. Economic occupancy fell 10 basis points sequentially to 98.9% but was flat year over year. The company reported a total re-leasing spread of 7.4% in the fourth quarter, the best quarterly result in over two years, that was better than our 3.6% estimate. Same-store net operating income increased 0.8%, slightly better than our 0.6% growth estimate. Additionally, Realty Income acquired $1.3 billion of assets at an average 6.5% acquisition cap rate, well ahead of our estimate of $700 million of acquisitions for the quarter, plus it acquired $149 million of development assets and $254 million of other assets in the fourth quarter. Combined, the company reported adjusted funds from operations of $1.05 per share that beat our $1.02 estimate for the quarter and was 4.3% higher than the $1.01 figure the company reported in the fourth quarter of 2023.