Realty Income Corporation

Good day and welcome to the Realty Income fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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. And 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 Ms. Lauren Flaming, Manager, Capital Markets and Investor Relations. Please go ahead, ma'am.

Thank you for joining Realty Income's fourth quarter and full year 2025 Operating Results Conference Call. Discussing our results are Sumit Roy, President and Chief Executive Officer, Jonathan Pong, Chief Financial Officer and Treasurer, Neil Abraham, President, Realty Income International, and Mark Hagan, Chief Investment Officer. 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 filing on Form 10-K. During the Q&A portion of the call, we will be observing a two-question limit. 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, Lauren. Welcome, everyone. 2025 was a year in which our platform, discipline, and global reach came together to deliver steady results and position RealtyIncome for its next chapter of growth. We delivered AFFO per share of $1.08 for the fourth quarter. and $4.28 for the full year, supported by 98.9% occupancy and 103.9% rent recapture, reinforcing the stability and diversity of our cash flows. In the fourth quarter, we invested approximately $2.4 billion or $2.3 billion pro rata for our ownership interest at a 7.1% initial cash yield, driven by strong opportunities in Europe and the closing of our $800 million perpetual preferred investment in the Las Vegas City Center real estate assets with Blackstone. For the full year, we deployed approximately $6.3 billion or 6.2 billion pro rata at a 7.3% initial cash yield with 30% of acquisition cash income from investment grade clients. We also sold 425 properties for approximately $744 million, enhancing portfolio quality and redeploying capital into higher return opportunities. As part of our disciplined approach, we proactively address client-specific risks. With At Home, we used early visibility into store-level trends to begin selling select assets ahead of its Chapter 11 filings. Over 18 months preceding the filing, we sold eight properties for nearly $80 million, significantly reducing exposure. Across the remaining 31 stores, our blended recapture rate was just over 80%, consistent with our historical experience for bankruptcy outcomes. We only experienced one rejection, which was resolved in the fourth quarter. With the company now operating with what we believe to be a stronger financial position, We believe that our early action, disciplined underwriting, and active asset management have preserved long-term value. The at-home experience also illustrates how our proprietary predictive analytics platform informs proactive decision-making. Store-level visibility gave us an early read on operating performance, but by using broader predictive analytics to assess closure risk, rent sustainability, and real estate fungibility, we can determine which assets carried elevated long-term risks. In partnership with asset management, that work allowed us to selectively dispose of higher risk locations at attractive valuations and materially reduce exposure ahead of the filing. And when the filing ultimately occurred, our analysis validated the durability of the remaining locations. That same discipline carries through to how we manage the broader portfolio. We recognized $18.9 million of lease termination income during the fourth quarter, reflecting our proactive approach to resolving potential credit and renewal risk. We also continue to pursue terminations where we see a clear path to higher and better uses. These steps help us preserve long-term value while managing our exposure thoughtfully across the portfolio. Internationally, our established platform remains a competitive advantage. As we have previously discussed, Europe continues to offer compelling risk-adjusted opportunities, and we regularly evaluate the viability of other markets where we can further leverage the strengths of our competitive moat. Last month, we expanded into Mexico as part of our broader strategic partnership with GIC, providing the majority of built-to-suit development financing, and a $200 million takeout commitment for a high-quality U.S. dollar-denominated industrial portfolio, another example of how our scale, cross-border capabilities, and balance sheet open new swim lanes of growth in a disciplined and repeatable way. As part of our international strategy, we are entering Mexico in a disciplined, partnership-led manner alongside GIC and Heinz. This structure allows us to finance build-to-suit developments at attractive, effective yields with forward commitments at cap rates that compare favorably to U.S. assets while maintaining our target risk-adjusted returns. Our initial focus is narrow and phased, centered on Mexico City and Guadalajara, core logistic markets with tight fundamentals, consistent rent growth, and investment-grade tenancy. We are investing in mission-critical, built-to-suit facilities with institutional quality and US dollar-denominated leases. Over the long term, we view Mexico as a strategic beneficiary of nearshoring and expect to expand selectively as fundamentals continue to mature. Our approach also reflects current developments on the ground, including increased coordination between Mexican and US authorities, that may support a more stable operating environment over time. While near-term conditions remain fluid and market sentiment can be volatile, we believe this reinforces the importance of our phased partnership-led entry and long-term conviction in Mexico's industrial fundamentals. Concurrent with our expansion into Mexico, the US component of our previously announced joint venture with GIC is now executing a similar structure. Through this partnership, Realty Income and GIC will programmatically develop approximately $1.5 billion of primarily industrial, built-to-suit properties. Last month, the joint venture closed its first transaction, a $58.5 million investment alongside a forward acquisition agreement for a modern industrial property in Dallas leased to a Fortune 500 service-based logistics client. This initial transaction demonstrates how the built-to-suit and financing components of this relationship function in practice, supporting mission-critical clients, earning interest income during development, and creating a clear path to high-quality ownership split between a like-minded long-term investor in GIC. A defining feature of Realty Income's evolution is pairing our operating platform with diversified partnership-oriented capital, This relationship orientation continues to shape our sourcing engine. Approximately 89% of our fourth quarter transactions originated through relationship driven channels, underscoring the depth of our client and partner network. In addition to our GIC partnership, we furthered our relationship with Blackstone through an 800 million perpetual preferred equity interest in Las Vegas City Center, which becomes the second joint venture we have entered into with Blackstone for a high-quality Las Vegas Strip casino transaction. The structure provides attractive risk-adjusted returns with downside protection, given the strategic importance of this asset to MGM and a right of first offer on an iconic Las Vegas Strip asset, demonstrating our ability to execute large, structured, relationship-driven transactions. Looking ahead to 2026, we see a steady core business supported by disciplined capital allocation, healthy occupancy, and a pipeline that reflects both the depth of our sourcing engine and the flexibility of our multi-product platform. With the benefit of global relationships, strategic partnerships, and private capital channels, we expect to pursue high-quality opportunities across geographies and capital structures. Strategically, three priorities guide our capital deployment in 2026. First, deepen client relationships where we can act as a solution provider, particularly in mission-critical retail and industrial, and increasingly through development in structured solutions, including via the GIC platform. Second, broaden the investable universe by pursuing repeatable high-quality adjacencies that align with our underwriting discipline and generate resilient contractual income. As a one-stop shop net lease solution provider, Our platform is well-positioned to originate and structure these opportunities. Third, optimize capital efficiency by diversifying equity sources and maintaining balance sheet flexibility, which Jonathan will outline in more detail. Bringing it together, Realty Income today is a full-service real estate capital provider with global reach, multi-product capabilities, and a more diversified set of capital channels supporting our growth engines. anchored by a high-quality portfolio that generates stable and growing cash flows. The momentum we saw exiting 2025, combined with the partnerships and platforms we have assembled, underscores the strength of our flywheel and ability to compound long-term value. With that, I'll turn it over to Jonathan.