John Kaczynski

John Kaczynski asked for clarification on how to bridge Realty Income's AFFO guidance, given the healthy $8 billion acquisition target but seemingly lower AFFO expectations, and where conservatism might be embedded. He also inquired about the expected yields on the incremental $2 billion above the $6 billion acquisition target and what enables this increased leverage.

Answer

Sumit Roy, President and CEO, indicated that the credit loss guidance of 40-50 basis points of rental revenue contains a fair amount of conservatism, with over half representing unidentified credits. Regarding the incremental $2 billion, Sumit Roy advised underwriting to the traditional 150-155 basis points of spread on the full $8 billion. He emphasized that the large guidance reflects confidence in the pipeline across existing geographies (US, Europe, Mexico) and diversified financing channels, not new product types.

John Kaczynski asked for clarification on the AFFO guidance, noting that despite a healthy $8 billion acquisition guide, the AFFO forecast seemed below street expectations, and inquired about sources of conservatism. He also asked how to think about the yields on the incremental $2 billion above the $6 billion acquisition base, and if it involves new verticals or tighter cap rates.

Answer

CFO and Treasurer Jonathan Pong attributed the conservatism in the AFFO guidance primarily to the credit loss guidance of 40-50 basis points of rental revenue, with over half representing unidentified credits. President and CEO Sumit Roy advised thinking about investments in terms of spread (150-155 basis points) rather than just yield, stating the $8 billion guidance reflects confidence in the pipeline across existing products and geographies (US, Europe, Mexico), not new verticals.