Realty Income Corporation

Good day and welcome to the Realty Income Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kelsey Mueller, Vice President, Investor Relations. Please go ahead.

Thank you all for joining us today for Realty Income's third quarter operating results conference call. Discussing our results will be Sue McRoy, President and Chief Executive Officer, and Jonathan Pong, Chief Financial Officer and Treasurer. During this conference call, we will make statements that may be considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail the factors that may cause such differences in the company's Form 10-Q. We will be observing a two-question limit during the Q&A portion of the call in order to give everyone the opportunity to participate. If you would like to ask additional questions, you may re-enter the queue. I will now turn the call over to our CEO, Sumit Roy.

Thank you, Kelsey. Welcome, everyone. Realty Income's third quarter results highlight our continued momentum, disciplined execution, and the benefits of our global investment and operating platform. Our value proposition to investors is simple, a real estate partner to the world's leading companies. We've created a defensive and diversified real estate portfolio consisting of top-tier clients to drive stable and predictable cash flow. As a result, we've delivered positive total operational returns each year since becoming a public company 30 years ago, successfully navigating a variety of economic environments. Importantly, as we move through an improving external backdrop helped by a recent rate cut in the U.S., we've started to see a more attractive transaction landscape. Given this, we are pleased to increase our 2024 investment volume guidance to approximately $3.5 billion, underpinned by strong investment activity year-to-date, as well as a robust pipeline for the fourth quarter. Concurrently, we are raising the low end of our AFFO per share guidance for the year to a range of $4.17 to $4.21. Despite some recent volatility driven by exogenous factors, we remain confident in our strategic vision and the opportunity ahead. Our investment strategy offers significant opportunities for growth across multiple verticals, including our core of retail and industrial and newer verticals, such as data centers and gaming. At the same time, we are making progress towards the establishment of a private capital fund, which I'll touch on later in this call. Turning to the details of the third quarter, we delivered AFFO per share of $1.05, representing a 2.9% growth compared to last year. We invested $740 million into high quality opportunities at a blended 7.4% initial cash yield or a 7.8% straight line yield, assuming CPI growth of 2%. Of this, $378 million of volume was invested in the U.S. at a 7.4% initial cash yield, with a balance of $362 million invested in Europe at a 7.3% initial cash yield. We've seen meaningful improvements in both the U.S. and Europe. Our international markets continue to contribute a greater share of volume relative to prior years with healthy investment activity year-to-date, exemplifying the benefits we achieve by cultivating multiple avenues for growth. In total, we completed 70 discrete transactions, including four transactions over $50 million, which represented nearly 60% of our investment volume, highlighting the breadth of our platform. As I noted, the momentum we are seeing in the transaction market supports increase to this year's investment volume guidance to $3.5 billion. In the third quarter, our organic acquisition activity, which excludes credit investments as well as development spending largely negotiated in prior quarters, totaled $594 million, or more than double the second quarter's volume. We expect further momentum through the balance of the year with an implied fourth quarter outlook of approximately $1.3 billion in investments, which is fully funded as we are vigilantly focused on deploying capital into high-quality opportunities that meet our risk-adjusted return requirements. Capital deployed in the third quarter yielded an investment spread of 243 basis points above our historical average spread of 150 basis points. This spread was supported by $165 million of adjusted free cash flow available after dividend payments to fund investments. These spreads are based on our short-term nominal cost of capital that measures the year one dilution from utilizing external capital and excess free cash flow on a leverage neutral basis to fund our investment volume. As a reminder, our ultimate investment decisions are based on our long-term weighted average cost of capital which burdens every dollar of equity with the same cost of equity. Underpinning our increased investment activity, the external capital improved by approximately 65 basis points in the third quarter. This compares to the decline in our weighted average initial cash yields of approximately 50 basis points during the quarter. Turning to portfolio operations, We've created a diversified portfolio of more than 15,400 properties with high-quality clients that have proven resilient through various economic cycles and continue to deliver stable returns. In addition, our vast data availability, proprietary predictive analytic tools, and insights of our asset management and research teams enhance our ability to anticipate future trends. We finished the quarter with 98.7% occupancy, a 10 basis point decrease from the prior quarter. Our rent recapture rate on the 170 leases we renewed was 105%, totaling approximately $38 million in new annualized cash rent, thanks to the diligent efforts of our team. Separately, we are continuing to lean into dispositions as an additional source of capital. In the third quarter, we sold 92 properties for total net proceeds of $249 million, of which $87 million was related to vacant properties. This brings our year-to-date total to $451 million. For the year, we now expect proceeds of $550 million to $600 million on asset sales. With that, I'd like to turn it over to Jonathan to discuss our third quarter financial results in more detail.