Realty Income Earnings: Large Acquisition Volume Including Announcement of Spirit Realty Merger

Realty Income reported third-quarter results that were better than we anticipated, giving us confidence in our $76 fair value estimate for the no-moat company. Economic occupancy sequentially remained flat at 99.0% in the third quarter. Re-leasing spreads were solid at 6.9%, better than our estimate of new rents being 3.9% higher than prior rent terms. As a result, same-store net operating income rose 2.2% year over year, which was slightly better than our estimate of 1.6% growth. The company reported $2.0 billion of new acquisitions, higher than our estimate of $1.0 billion of acquisitions, in the third quarter at an average cap rate of 6.9%. Combined, Realty Income reported adjusted funds from operations of $1.02 that beat our $0.99 estimate and the $0.98 figure the company reported in the third quarter of 2022.