Realty Income Earnings: Executed $2.7 Billion in Acquisitions at an Average Yield of 7.6%

Fourth-quarter results for no-moat Realty Income were slightly better than we anticipated, giving us confidence in our $76 fair value estimate. Economic occupancy declined 10 basis points sequentially to 98.9%, in line with our estimate. Releasing spreads remained positive at 3.6% in the fourth quarter, also relatively in line with our estimate of new rent being 3.9% higher than prior rent terms. Same-store net operating income growth came in at 2.6%, slightly better than our 1.3% estimate. The company reported in the fourth quarter the acquisition of new properties worth $1.28 billion at a 7.1% acquisition cap rate, $587 million of development properties at a 6.9% yield, and $858 million in other investments that include the preferred equity investment in the Bellagio joint venture at an average yield of 8.7%. Combined, Realty Income reported adjusted funds from operations, or AFFO, of $1.01 per share in the fourth quarter, a penny better than our $1.00 estimate.