Analyst Note| Kevin Brown |
Operations for Realty Income in the fourth quarter were in line with our expectations. As a result, we are maintaining our $65 fair value estimate for the no-moat company. Economic occupancy fell another 20 basis points sequentially to 98.3%, though re-leasing spreads rebounded to positive territory, up 30 basis points in the fourth quarter. Rent collection has stabilized at 93.6% for the quarter with no month more than 10 basis points off that figure. Tenants in the theater segment, which represents 5.6% of all contractual rents, are still struggling and are responsible for most of the uncollected rent in the quarter. Same-store revenue was down 3.2% year over year in the fourth quarter, though that is an improvement from the 4.4% decline in the third quarter. Due to the drop in same-store operations, adjusted funds from operations were down 2.8% year over year to $0.83 per share in the fourth quarter but up 1.5% over the third quarter's figure.