Realty Income Corporation Q4 FY2025 earnings call

• Delivered AFFO per share of $1.08 for Q4 and $4.28 for full year 2025, supported by high occupancy and rent recapture. - Invested significantly in Q4 and full year, with high initial cash yields. - Proactively addressed risks with At Home, sold assets ahead of Chapter 11 filing, reduced exposure. - Used predictive analytics for proactive decision - making. - Expanded into Mexico and executed joint venture with GIC for build - to - suit developments. - 89% of Q4 transactions originated through relationship - driven channels. - Launched debut open - end fund in U.S., raised over $1.5 billion, and established strategic relationship with GIC.

In the fourth quarter, Realty Income invested approximately $2.4 billion or $2.3 billion pro rata at a 7.1% initial cash yield, with strong opportunities in Europe and the closing of a $800 million perpetual preferred investment. For the full year, 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. Sold 425 properties for approximately $744 million. Occupancy was 98.9% and rent recapture was 103.9% in the fourth quarter. Internationally, established platform is a competitive advantage, expanded into Mexico with GIC, and U.S. component of joint venture with GIC is executing build - to - suit developments.

• AFFO per share guidance of $4.38 to $4.42 for 2026. - $8 billion investment guidance for 2026. - Credit - related loss of 40 to 50 basis points of revenue, meaningful decline from 2025. - Lease termination income forecasted at $30 million to $40 million. - Unreimbursed property expense margin expected to be approximately 1.5% of revenue. - Cash G&A expenses expected to be 20 to 23 basis points of gross asset value. - Base management fees from open - end fund expected to be approximately $10 million in 2026.

• Near - term conditions in Mexico and other markets can be fluid and market sentiment volatile. - Cost of capital and competition can impact cap rates. - Credit loss assumptions and unidentified credits carry some uncertainty. - Impact of AI disruption is uncertain but being embraced as a tool to improve business.

Q: How different will Realty Income look over next 3 - 5 years?

A: Various capital raising and yield - generating channels will mature, allowing growth commensurate with historical levels.

Q: Cap rate expectations for 2026 acquisitions?

A: Expect spreads to be fairly similar to historical on leverage - neutral basis, 150 to 160 basis points relative to short - term weighted average cost of capital.

Q: G&A guidance movement?

A: G&A methodology is percentage of GAV, no material move, added talent, especially abroad in Europe.

Q: Sources of conservatism in AFFO guide?

A: Credit loss guidance of 40 to 50 basis points of rental revenue has conservatism.

Q: Impact of AI on portfolio and investment plan?

A: AI is an integral part of business, helps in sourcing, underwriting, asset management, etc.

Q: View on convertible notes offering?

A: Another tool in toolkit, accretive use of proceeds relative to previous debt.

Q: Occupancy and same - store rent assumptions?

A: Occupancy physical number influenced by expiring asset size, same - store rent affected by credit - related loss and tenant restructuring.

Q: Incremental investment and yields?

A: Think in terms of spread, confident in pipeline, various financing channels give confidence.

Q: Guidance on dispositions?

A: Expect similar disposition volume to 2025, around $740 million.

Q: Cost of capital and investment outlook?

A: Improved cost of capital allows consideration of lower cap rate assets while maintaining spreads and meeting long - term hurdle rates.

Q: Growth profile over next few years?

A: Channels are maturing to get back to historical growth levels.

Q: Deal volume split between private fund and public vehicle?

A: Forgo deals not meeting year 1 spread requirement for public side, had significant volume forgo in past.

Q: Cost of raising private fund capital?

A: Use placement agent, more efficient than other channels.

Q: GIC's investment appetite and other co - invest programs?

A: GIC has big appetite, not prohibited from other partnerships but focus on current GIC JV.

Q: Credit loss color and lease termination fees?

A: Identified credit loss includes some restaurant chains, lease termination fees are episodic.

Q: ATM strategy and watch list?

A: Multiple ways to raise equity, credit watch list is 4.8%, Red Lobster exposure not significant.

Q: Use of AI in business and competitive advantage?

A: AI is integral, helps in all business elements, creates competitive advantage through data and tool integration.