Q4 2021 Realty Income Corp Earnings Call

Good morning, My name is Chris and I'll be your conference operator today.

Speaker 1: my name is Chris and I'll be your conference operator today. At this time, I would like to welcome everyone to the Realty Incomes 4th quarter in year end 2021 operating.

I would like to welcome everyone to the Realty Income's fourth quarter and year end 2021 operating.

Speaker 1: All lines have been placed on mute to prevent any background noise. After the speakers remarked, there will be a question or answer session.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Speaker 1: If you would like to ask a question during this time, simply press star in the number one on your telephone keypad to withdraw your question.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

To withdraw your question. Please press star one again.

Speaker 1: Thank you. Julie Haslewander, Senior Manager, Investor Relations at Realty Income. You may begin.

Thank you Julie has to wander senior manager Investor Relations at Realty income you may begin.

Speaker 2: Thank you all for joining us today for Realty Income Sports Quarter in 2021, Year End Operating Results Conference Call.

Thank you all for joining us today for Realty income fourth quarter, and 2021 year end operating results conference call.

Speaker 2: Disguising our results will be Dmit Roy, President and Chief Executive Officer and Christie Kelly, Executive Vice President, Chief Financial, Financial Officer and Treasurer.

Talking all Eagle will be <unk>, President and Chief Executive Officer, and Christie, Kelly Executive Vice President Chief Financial <unk> Financial Officer and Treasurer.

Speaker 2: During this conference call, we will make certain statements that may be considered forward-looking statements under federal security's law. The company's actual future results may differ significantly from the matters discussed in any forward-looking state.

During this conference call, we will make certain statements that may be considered forward looking statements under federal Securities law. The company's actual future results may differ significantly from the matters discussed in any forward looking statements, we will disclose in greater detail. The factors that may cause such differences in the company Form 10-K .

Speaker 2: We will disclose in greater detail the fast age that may cause such differences in the company's form 10K. We will be observing a two question limit during the Q&A portion of the call in order to give everyone the opportunity to participate. If you would like to ask additional questions, you may re-enter to Q. I will now turn the call over to our CEO , Sumit Roy.

We are observing a two question limit during the Q&A portion of the call in order to give everyone the opportunity to participate.

I used to ask additional questions you may re enter the queue I will now turn the call over to our CEO Sumit Roy.

Thanks, Julie and welcome everyone.

Speaker 3: As I reflect on the past year at Realty Income, I remain inspired by the dedication of our colleagues who continue to relentlessly pursue numerous profitable growth initiatives while contributing to a record year of acquisitions for our company.

As I reflect on the past year at Realty income I remain inspired by the dedication of our colleagues who continue to relentlessly pursue numerous profitable growth initiatives, while contributing to our record Europe acquisitions for our company.

Speaker 3: During the fourth quarter, we closed on the merger with BayREIT, welcoming many talented new colleagues that will further help drive our ambitious goals while amplifying our competitive position in the industry.

During the fourth quarter, we closed on the merger with Fei REIT well coming many talented new colleagues that would sort of help drive our ambitious goals, while amplifying our competitive position in the industry.

Speaker 3: We are committed to a seamless and successful transition as we collectively work to integrate our one team processes and systems.

We are committed to a seamless and successful transition transition as we collectively work to integrate our one team processes and systems we.

Speaker 3: We remain on track to achieve over 75% of our annualized DNA cost energies and year one post merger, as we outlined upon announcing the merger in April of last.

We remain on track to achieve over 75% of our annualized G&A cost synergies in year, one post merger.

Outlined upon announcing the merger in April of last year.

Speaker 3: Specifically, we have achieved over 42 million of our 37.5 million targeted synergies in year one representing Fulia 2022. With over 50 million in GNA synergies expected in year two representing Fulia 2023.

Specifically, we have achieved over $42 million of about $37 5 million targeted synergies in year, one representing full year 2022, with all the 50 million in G&A synergies expected in year, two representing full year 2023.

Speaker 3: Also, I continue to be impressed by the talent and dedication of our new team members as we work to integrate our two platforms and further strengthen our one team.

Also I continue to be impressed by the talent and dedication upon new 10 team members as we work to integrate our two platforms and further strengthen our one team.

Speaker 3: And while we creatively bring together the best practices of varied and real-time income with our integration efforts to productively scale our operations, I'm encouraged by our integration work completed to date and our journey ahead.

And while we creatively bring together the best practices are varied and realty income with our integration efforts to productively scale our operations.

Encouraged by our integration work completed to date and our journey ahead.

Speaker 3: Beyond the merger, a business set a quarterly record for investment volume in the foot quarter.

Beyond the merger our business set a quarterly record for investment volume in the fourth quarter.

Speaker 3: During the quarter, we strengthened our foretold in Spain through additional high-quality acquisitions, including our second acquisition of properties used to a key partner in Carrefour, one of the world's leading grocery retail.

During the quarter, we strengthened our foothold in Spain through additional high quality acquisitions, including our second acquisition of properties leased to a key partner in tower floor, one of the worlds leading grocery retailers.

Speaker 3: Our strategic expansion into continental Europe meaningfully increases our total addressable universe as we estimate the total addressable market in Europe to be $8 trillion, nearly doubled that of the US.

Our strategic expansion into Continental Europe meaningfully increases our total addressable universe as we estimate the total addressable market in Europe to be eight trillion dollars nearly doubled that of the U S. We.

Speaker 3: We expect our investment activity in Europe to continue contributing to our competitive cost of capital as we look to further hedge our currency risk with debt price that meaningfully lower yields than in the US.

We expect our investment activity in Europe to continue contributing to a competitive cost of capital as we look to further hedge our currency risk with debt priced at meaningfully lower yields than in the U S.

Speaker 3: Looking forward, we are well positioned to continue creating value by capitalizing on a portable competitive advantages globally to deliver favorable risk adjusted returns for our shareholders.

Looking forward, we are well positioned to continue creating value by capitalizing on our portable competitive advantages globally to deliver favorable risk adjusted returns for our shareholders.

With regards to recent developments as previously disclosed this month, we announced our intent to acquire the Encore Boston Harbor, the east coasts, leading integrated resort and casino located less than five miles from downtown Boston. The $1 7 billion dollar acquisition is being consummated at a five 9%.

Speaker 3: As previously disclosed this month, we announced our intent to acquire the on-core Boston harbor, the East Coast's leading integrated resort in Casino, located less than five miles from downtown Boston.

Speaker 3: The $1.7 billion acquisition is being consummated at a 5.9% cash cap rate with 30-year initial lease.

Cash cap rate with 30 year initial lease term the.

Speaker 3: The property represents our first investment in the gaming industry and would represent less than 3.5% of our pro forma annual rent.

The property represents our first investment in the gaming industry and would represent less than three 5% of our pro forma annual rent.

Speaker 3: While the property type is new, the lens we use to pursue the merits of the transaction is not. Our investment strategy centers around partnership with best-in-class operators occupying high-quality real estate locations, which is particularly important when entering a new business vertical and geography.

While the property type, it's new the lens, we use to pursue the merits of the transaction is not our investment strategy centers around partnership with best in class operators occupying high quality real estate locations.

<unk> is particularly important when entering a new business vertical and geography.

Speaker 3: We followed this strategy with the Diasio Saleez back in 2010 when executing our first transaction in the vineyard space with the Sainsbury's saleez back in 2019 when expanding our business internationally. And more recently, with the Caraport Saleez back when we entered into Spain last year. Our debut transaction in the gaming industry with wind resorts represents the same commitment to partnering with the premier leaders in the respective industries, together with a commitment to our overall investment strategy.

We followed this strategy with the DRG or sale lease back in 2010, when executing our first transaction in the vignette space with Sainsbury sale lease back in 2019, when expanding our business internationally and more recently with the Carrefour sale leaseback, when we entered into Spain last year.

Debut transaction in the gaming industry with Wynn resorts represents the same commitment to partnering with the premier leaders in their respective industries together with a commitment to our overall investment strategy.

Speaker 3: The Encore Boston Harbor acquisition will add further diversification to our industry and client trust.

The Encore Boston Harbor acquisition will add further diversification to our industry and client roster. After closing this transaction, we expect Wynn resorts will become one of our top 10 clients.

Speaker 3: After closing this transaction, we expect win results will become one of our top 10 clients.

Speaker 3: Our capacity to pursue an absorbent transaction of this size with a single client was supported by the enhanced size and scale that we gained through the varied merger. And it is a testament to our ability to complete large scale transactions without significantly impacting our prudent portfolio diversification metrics.

Our capacity to pursue and absorb a transaction of this size with a single client was supported by the enhanced size and scale that we gain through the varied merger and it is a testament to our ability to complete large scale transactions without significantly impacting our prudent portfolio diversification metrics.

Speaker 3: The ONCOR Boston Harbor Transaction meets our key investment criteria and illustrates that our investment opportunity set is not constrained by a particular property type. The merits of this transaction are first, the real estate. We're acquiring 3.1 million square feet of high-quality real estate strategically located on the banks of the Mystic River.

The Encore Boston Harbor transaction meets our key investment criteria and illustrates that our investment opportunity set is not constrained by a particular property type.

The merits of this transaction are first the real estate, we are requiring three 1 million square feet of high quality real estate strategically located on the banks of the Mystic River.

Speaker 3: After opening in 2019, the property is still ramping, but already generates $210 million in annual EBITDAR, resulting in 2.1 times rent coverage initially.

After opening in 2019, the property is still ramping but already generates $210 million in annual EBITDAR, resulting in $2 one times rent coverage initially.

Speaker 3: Second, the client lease. We are entering into a 30-year triple net lease with attractive annual rent escalators at 1.75% annually for the first 10 years, and the greater of 1.75% or CPI thereafter, capped at 2.5%. Win results is one of the largest and premier gaming operators in the US, with an enterprise value of approximately 20 billion.

Second the client's needs, we are entering into a 30 year triple net lease with attractive annual rent escalators at 175% annually for the first 10 years and the greater of 175% or CPI thereafter capped at two 5%.

Wynn resorts as one of the largest premier gaming operators in the U S with an enterprise value of approximately $20 billion.

Speaker 3: They maintain a healthy balance sheet, moderate leverage and significantly liquidity. Third, the industry performance. The gaming industry in the US has recovered to pre-COVID levels and in Massachusetts, gaming revenues grew 17% in the fourth quarter of 2021 as compared to the fourth quarter of 2019, outperforming the aggregate regional gaming market that grew 8% during the same time frame.

They maintain a healthy balance sheet moderate leverage and significant liquidity.

The industry performance the gaming industry in the U S has recovered to pre COVID-19 levels and in Massachusetts gaming revenues grew 17% in the fourth quarter of 2021 as compared to the fourth quarter of 2019 outperforming the aggregate regional gaming market that grew 8% during the same timeframe.

Speaker 3: Fending regulatory procedures, we expect to close the transaction in the fourth quarter of 2022.

Pending regulatory procedures, we expect to close the transaction in the fourth quarter of 2022.

Speaker 3: Craig and his team have been a pleasure to work with and we are pleased to cultivate this new relationship with Wynn Resorts as we expand our universe of net lease investments across many industries. Now turning to...

Craig and his team have been a pleasure to work with and we are pleased to cultivate this new relationship with Wynn resorts as we expand our universal net lease investments across many industries.

Now turning to the results for the quarter.

Speaker 3: We are pleased with the continued trend of our core operations. We ended the quarter with our portfolio at 98.5% occupancy based on property counts.

We are pleased with the continued strength of our core operations. We ended the quarter with a portfolio at 98, 5% occupancy based on property count.

Speaker 3: Both stood by the inherent quality of our real estate and enhanced by the proactive efforts of a talented and experienced asset management team, we released 232 leases this quarter, recapturing 101.8% of expiring rent, and bringing our folio 2021 recapture rate to 103.4%.

Despite the inherent quality of our real estate and enhanced by the proactive efforts of Atlanta and experienced asset management team. We re leased 232 leases this quarter recapturing 101, 8% of expiring rent and bringing our full year 2021 recapture rates to 103.4%.

Speaker 3: Since our public listing in 1994, we have executed over 4,100 releases or sales on expiring releases, recapturing over 100% of rent on those released contracts.

It's a public listing in 1994, we have executed over 4100 <unk>.

Re leases or sales unexpired leases recapturing over 100% of rent on those re leased contracts.

Speaker 3: We continue to report our quarterly recapture rates and believe this is one of the most objective ways to measure underlying portfolio quality in the net lease industry. And is a testament to the merit of our asset management team.

We continue to report our quarterly recapture rates and believe this is one of the most objective way to measure underlying portfolio quality and the net lease industry and is a testament to the merit of our asset management team.

Speaker 3: After closing the varied merger, we look forward with an enhanced key competitive advantage of size and scale. With an enterprise value of more than 57 billion, our portfolio now includes over 11,100 properties, leads to approximately 1,040 clients in the United States and Europe , across a diversified set of 60 distinct industries.

After closing the <unk> merger, we look forward with an enhanced key competitive advantage of size and scale.

With an enterprise value of more than 57 billion. Our portfolio now includes over 11100 properties leased to approximately 1040 clients in the United States and Europe across a diversified set of 60 distinct industries.

Speaker 3: A total portfolio annualized contractual rent increased by over 50% since the end of the third quarter, ending the year at over 2.9 billion.

Our total portfolio annualized contractual rent increased by over 50% since the end of the third quarter ending the year at over 2.9 billion.

With our expanded size and scale, we have greater client and industry diversification, which further improves our competitive positioning to pursue large portfolio of sale leaseback transactions in the fragmented net lease industry and be a one stop solution for multibillion dollar opportunities.

Speaker 3: With our expanded size and scale, we have great, a client and industry diversification, which further improves that competitive positioning to pursue large portfolio or say, at least back transactions in the fragmented, net-least industry, and be a one-stop solution for multi-billion dollar opportunities.

Speaker 3: Since the end of the third quarter, our top 10 client concentration has decreased to 29.1% from 34.8%. And we believe represents one of the highest quality portfolios in the net lease industry.

Since the end of the third quarter, our top 10 client concentration has decreased to 29, 1% from 34, 8% and we believe represents one of the highest quality portfolios in the net lease industry.

Speaker 3: Additionally, our top industry concentration has decreased, creating additional investment capacity.

Additionally, our top industry concentration has decreased creating additional investment capacity.

Speaker 3: A top five industries now comprise 40% of our annualized contractual rent compared to over 43% at the end of the third quarter. And a top industry exposure, which includes convenience stores and grocery stores, have decline meaning.

Five industries now comprise 40% of our annualized contractual rent compared to over 43% at the end of the third quarter and a top industry exposure, which includes convenience stores and grocery stores have declined meaningfully.

Speaker 3: With the growth in concentration of our targeted industries, cater and health and fitness industry concentrations have naturally declined. In terms of the casual dining contribution from our varied merger, a majority of the concentration is with Red Lobster that has experienced improved operating performance is now owned by the union and established strong financial sponsors.

With the growth and concentration of our targeted industries theater, and health and fitness industry concentrations have naturally declined.

In terms of the casual dining contribution from a varied merger a majority of their concentration is with red lobster that has experienced improved operating performance is now owned by Psi Union and establish strong financial sponsor.

Speaker 3: Our international geographic concentration also declined pursuant to our very transaction, providing further room to achieve profitable growth in Europe and beyond.

Our international Geographic concentration also declined pursuant to a very transaction, providing further room to achieve profitable growth in Europe and beyond.

Speaker 3: We have already started to see the benefits of our expanded platform through increased sourcing and acquisition volume. In 2021, we sourced approximately $84.5 billion of acquisition opportunities, and approximately 39% was sourced from international markets.

We have already started to see the benefits of our expanded platform through increased sourcing and acquisition volume.

In 2021 resource of approximately $84 $5 billion of acquisition opportunities and approximately 39% was sourced from international markets.

Speaker 3: Reflecting our stringent investment criteria, we close in approximately 8% of the total opportunities, bringing our total 2021 property level acquisitions to $6.4 billion, an annual record for our company.

Reflecting our stringent investment criteria, we closed on approximately 8% of the total opportunities, bringing our total 2021 property level acquisitions to $6 4 billion.

An annual record for our company.

Speaker 3: After $6.4 billion in investors in 2021, over 40% or approximately 2.6 billion was invested during the SOT quarter.

After $6 4 billion invested in 2021 over 40% or approximately $2 6 billion was invested during the fourth quarter.

Speaker 3: Over one billion of our volume in the fourth quarter was the result of international investments, bringing our total international portfolio to nearly 4.3 billion dollars of invested capital at the end of the year.

The 1 billion of our volume in the fourth quarter was the result of international investments, bringing our total international portfolio to nearly $4 $3 billion of invested capital at the end of the year.

Speaker 3: We believe the market is efficient and we experience a competitive environment for high quality assets leads to strong operators.

We believe the market is efficient and we're experiencing a competitive environment for high quality assets leased to strong operators.

Speaker 3: Accordingly, the quality of our acquisition is reflected in our average initial cash cap rate during the fourth quarter of 5.4% and 5.5% for the year.

Accordingly, the quality of our acquisition is reflected in our average initial cash cap rate during the fourth quarter of five 4% and five 5% for the year.

Speaker 3: The largest industries represented in our fourth quarter acquisition were European grocery stores and US automotive services, which represent a continued investment in industries well positioned to perform in a variety of economic cycles, given its necessity-based retail proposition for consumers.

The largest industries represented in our fourth quarter acquisition, where European grocery stores and U S automotive services, which represent our continued investment in industry is well positioned to perform in a variety of economic cycles, given it's necessity based retail proposition.

So consumers.

Speaker 3: The weighted average remaining V-Storm of assets added to upward volume during the quarter was 14.2 years.

The weighted average remaining lease term of assets added to our portfolio during the quarter was $14 two years.

Speaker 3: We continue to generate healthy investment spreads of approximately 140 basis points during the quarter and 150 basis points during the year, consistent with our historical average while acquiring, in our view, the highest quality product in the market.

We continue to generate healthy investment spreads of approximately 140 basis points during the quarter and 150 basis points during the year consistent with our historical average while acquiring in our view the highest quality product in the marketplace.

Speaker 3: Inflation has been an important topic to invest in the last few months. I want to emphasize that we believe our business is by design well positioned to drive shareholder value in this climate.

Inflation has been an important topic to investors in the last few months I want to emphasize that we believe our business is by design well positioned to drive shareholder value in this climate.

Speaker 3: From a balance sheet perspective, having a well-staggered fixed rate debt maturity schedule, with no corporate bond at maturitys until 2024, limits our debt refinancing risk and a potentially rising rate environment. And we believe we actually benefit from an inflationary environment, given our lease expiration schedule, and our proven ability to recapture more than the value of expiring rent upon releasing.

From a balance sheet perspective, having a well staggered fixed rate debt maturity schedule with no corporate bond maturities until 2024 limits our debt refinancing risks in a potentially rising rate environment, and we believe we actually benefit from an inflationary environment, given our lease exploration schedule and a proven ability to recapture more.

More than the value of expiring rent upon re leasing.

Speaker 3: Finally, the value of our businesses largely tied to current income as they're recurring cash low vehicles, which makes the value proposition of owning real-time income comparatively more attractive during inflationary periods. Compared to other sectors in the marketplace whose value is tied to growth in future years.

Finally, the value of our business is largely tied to current income is it recurring cash flow vehicle, which makes the value proposition of owning royalty income comparatively more attractive during inflationary periods as compared to other sectors in the marketplaces values tied to growth in future years.

Speaker 3: At this time, I'll pass it over to Christy, who will further discuss results from the quarter.

At this time I'll pass it over to Christy who will further discuss results from the quarter.

Thank you.

Speaker 2: We continue to prioritize a conservative balance sheet structure while procuring attractively prized caps.

We continue to prioritize a conservative balance sheet capture wild procuring attractively priced capital.

Speaker 2: During the quarter, our capital market activity was highlighted by the issuance of over $1.7 billion of equity, primarily through our ATM programs, which enabled us to simultaneously complete the Bay Area merger and finance a record quarter for acquisition while finishing the year with an art targeted leverage parameter.

During the quarter, our capital markets activity was highlighted by the issuance of over one $7 billion of equity primarily through our ATM program, which enabled us to simultaneously complete the bally merger and finance a record quarter for acquisition, while finishing the year within our targeted.

Leverage parameters.

Speaker 2: As we emphasize, when we announce the merger in April , we intended to close the transaction in a leverage neutral manner relative to our target leverage level, which we are pleased to have accomplished.

As we emphasized when we announced the merger in April we intended to close the transaction in a leverage neutral manner relative to our target leverage level, which we are pleased to have accomplished.

Speaker 2: One of the benefits of our enhanced size and scale is daily trading liquidity in our stock that provides us with the ability to issue significant amounts of equity through the ATM in a cost-efficient manner without disrupting the market price of our stock.

One of the benefits of our enhanced size and scale is daily trading liquidity in our stock and provides us with the ability to execute.

Significant amounts of equity through the ATM in a cost efficient manner without disrupting the market price of our stock.

Speaker 2: As a result, we entered 2022 from a physician of strength with a net debt to annualize pro forma adjusted EBITAR of 5.3 times.

As a result, we entered 2022 from a position of strength with a net debt to annualized pro forma adjusted EBITDA at five three times.

Subsequent to year end, we issued 500 million in Sterling denominated senior unsecured note.

Speaker 2: Subsequent to year end, we issued 500 million and sterling denominated senior unsecured notes by saying five year and 20 year notes that have blended all in yield of 2.2% with a weighted average term of 12 and a half years.

By year end 'twenty here now.

Blended all in deal at $2, two 8% with a weighted average term of 12 and half year.

Speaker 2: This was the third sterling denominated debt offering we have priced in the last 16 months and we could not be more appreciative of the support we have received from the Sterling Fixed Income Investor Base.

This was the third sterling denominated debt offering we have price in the last 15 months and we cannot be more appreciative of the support we have received kind of Sterling <unk> fixed income investor base.

Speaker 2: Moving on to the financial results for the quarter, in fourth quarter, our business generated 94 cents of AFO for share, supported by our healthy portfolio, closing of the Bay Reef merger, strong acquisitions pace, and collection of almost 100% of contractual rent during the fourth quarter.

Moving on to the financial results for the quarter.

Fourth quarter, our business generated 94 cents per share supported by our healthy portfolio closing of the Bally merger strong acquisition pace and collection of almost 100% of contractual rents during the fourth quarter.

Speaker 2: Going forward, we will no longer be providing COVID-19 disclosures as we believe portfolio operating performance has returned to pre-pandemic levels in terms of overall collection.

Going forward, we will no longer be providing COVID-19 disclosure, we believe portfolio operating performance has returned.

Pre pandemic levels in terms of overall.

Overall collection.

Speaker 2: In 2021, our business generated $3.59 per day FFO for Square, finishing near the high end of guidance and representing 5.9% annual growth.

In 2021, our business generated $3 59.

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Connecting near the high end of guidance and representing five 9% annual growth.

Speaker 2: given the health of our portfolio and our active global investment pipeline. We remain comfortable with our previously announced 2022 ASFO for share guidance of $3.84 to $3.97, representing 8.8% annual growth at the mid-

Given the health of our portfolio and our active global investment pipeline, we remain comfortable with our previously announced 2022 <unk> per share guidance of $3 84 to $3 97.

Presenting eight 8% annual growth at the midpoint.

Speaker 2: Realty income was founded on the principles of income generation and capital preservation.

Royalty income was founded on the principle that income generation and capital preservation.

Speaker 2: We remain committed to delivering monthly dividends that increase over time as part of a consistently attractive, total shareholder return proposition.

We remain committed to delivering monthly dividends that increase over time as part of that consistently attractive total shareholder return proposition.

Speaker 2: In December , we were pleased to have increased our dividend by 5.1% as compared to the same period last year.

In December we were pleased to have increased our dividend by five 1% as compared to the same period last year.

Speaker 2: The increase in the dividends was intended to share with our shareholders the accretion from the recently closed Bay Read Marjor. Together with continued earnings accretion, that we were able to generate throughout the year from our bid.

The increase in the dividend was intended to share with our shareholders. The accretion from the recently closed today right merger together with continued earnings accretion that we were able to generate throughout the year from our bedroom.

Speaker 2: We have now increased the dividend 114 times since our 1994 listing and remain proud to be one of only three reads in the S&P 500 dividend aristocrats in depth for having raised our dividend for at least 25 consecutive years. Now I would like to

We have now increased the dividend 114 times since our 1994 listing and remain proud to be went up only three Reits in the S&P 500 dividend aristocrats index for having raised our dividend correctly 25 consecutive years.

Now I would like to hand, the call back to SMA.

Speaker 3: Thank you, Christie. We remain humbled by a collective accomplishments in 2021, including the completion of the merger, but also the strength of our full-year results. And our attention now turns to the path forward.

Thank you Christy.

We remain humbled by our collective accomplishments in 2021, including the completion of the merger, but also the strength of our full year results and our attention now turns to the path forward.

Speaker 3: Realty income has a bright outlook for 2022 and beyond. And we look forward to continuing to build a strong and resilient platform as we embrace the opportunities that lie.

Income has a bright outlook for 2022 and beyond and we look forward to continuing to build a strong and resilient platform as we embrace the opportunities that lie ahead.

Speaker 3: As we enter a new year of possibilities, we remain steadfast in our purpose of building enduring relationships and bride of financial futures, while relentlessly pursuing ways to provide shareholders with attractive risk adjusted returns over the long run. At this time, I'd like to...

As we enter a new Europe possibilities, we remain steadfast in our purpose of building enduring relationships and brighter financial futures, while relentlessly pursuing ways to provide shareholders with attractive risk adjusted returns over the long run.

At this time I'd like to open it up for any questions.

As a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad and please limit yourself to two questions and if you'd like to ask additional questions you may reenter the queue.

Speaker 1: As a reminder, if you would like to ask a question, please press star then one on your telephone keypad and please limit yourself to two questions and if you would like to ask additional questions you may re-enter the queue.

Speaker 1: Our first question is from Brad Hefern with RBC Capital Markets. Your line is open.

Our first question is from Brad Heffern with RBC capital markets. Your line is open.

Hi, there Brad.

Speaker 4: Hey, good morning, everyone. Can you talk quickly about how you got comfortable with the risk profile of the wind acquisition? Obviously, it's a very large single asset. There's some different regulatory risks involved. So GCZ is being fully compensated for by the higher cap rate and the higher escalators.

Hey, good morning, everyone.

Can you talk quickly about how you got comfortable with the risk profile of the wind acquisition. Obviously it felt very large single asset there are some different regulatory risks involved. So do you see that is.

Being fully compensated for by the higher cap rate and the higher escalators.

Speaker 3: The short answer, Brad, is yes. We do. For us, our thesis is quite simple. We want to try to partner with the best in class operators and get the premier assets that they operate.

The short answer Brad is yes, we do.

For us our thesis is quite simple we want to try to partner with the best in class operators and gets the premier assets that they operate.

Speaker 3: If you look at the Boston Harbor asset,

If you look at the Boston Harbor asset.

It is.

Speaker 3: the premier, simple, regional asset in the United States.

The Premier Superregional.

Asset in the United States.

Speaker 3: If you look at the coverage and this is an asset that is still not fully stabilized.

If you look at the coverage and this is an asset that is still not fully stabilized.

Speaker 3: It's at 2.1 times. If you think about when there are an S&P 500 company that is arguably the best operator in the space.

At two one times, if you think about when they are in S&P 500 company.

That is arguably the best operator in this space.

Speaker 3: If you look at regional gaming and compare it to the volatility associated with this trip, it tends to be a lot less volatile. And more specifically, if you look at the Massachusetts market, which has grown at almost 18 percent in the fourth quarter of 2021, even compared to the national average on the gaming side, it was almost two times that.

If you look at regional.

Gaming and compare it to the volatility associated with the strip it tends to be a lot less volatile and more specifically if you look at the Massachusetts market, which has grown almost 18% in the fourth quarter of 2021.

Even compared to the national average on the gaming side. It was almost two times that.

Speaker 3: If you look at the actual asset itself and you see what we've paid for the asset and compare it to what was actually invested in the asset and these are all public numbers, you'll start to get very comfortable with the fact that we feel very comfortable about what we've paid in terms of replacement costs.

If you look at the actual asset itself and you see what we've stayed for the asset and compare it to.

What was actually invested in the asset these are all public numbers.

You'll start to get very comfortable with the fact that we feel very comfortable about what we state in terms of replacement cost.

Speaker 3: And we've been very open with the market with respect to our desire to continue to explore new avenues of growth. And this is one that completely fits that profile of trying to partner with the best in class operators and trying to add best in class real estate to our portfolio.

And.

We've been very open with the market with respect to our desire to continue to explore.

New avenues of growth and this is one that completely fits that profile of trying to partner with the best in class operators.

And.

Trying to add best in class real estate to our portfolio.

Speaker 3: If you look at the lease structure, the 30 year lease, you know, with growth that is in excess of what we are able to generate on the rest of the portfolio.

If you look at the lease structure, it's a 30 year lease.

With with growth that is in excess of what we are able to generate on the rest of the portfolio.

Speaker 3: And, you know, those are the reasons why we felt this was the right opportunity for us to sort of enter into the gaming space with the right operator as a partner and with the right <expletive> .

And.

And you know.

Those are the reasons why we felt this was the right opportunity for us to sort of enter into the gaming space with the right operator, as a partner and with the right asset.

Speaker 4: Okay, thanks for that. And sticking with when, if you did another transaction with them with the same size, obviously, that would likely make them the number one client. So how do you think about the future of gaming? Is it likely that we'll see another transaction with when? Is it likely that we'll see another one with another operator?

Okay. Thanks for that.

Sticking with win.

If you did.

Another transaction with them are the same size, obviously that would likely make them the number one client.

How do you think about the future of gaming is it likely that we'll see another transaction with when there's a likelihood that we'll see another one with.

Another operator.

Speaker 5: Look, we did our first transaction in this particular space. So we are very hopeful that we can continue to grow this area. And as long as we feel like we can structure transactions for the right properties with the right operator.

Oh look we did our post transaction in this particular space. So we're very hopeful that we can continue to grow this area and as long as we feel like we can structure transactions for the right properties with the right operators.

Speaker 3: We are very happy to grow this area of our business. We've been very open with the market about playing across the risk spectrum with regards to yield and you know, yield for us is a proxy for the risk associated with it. And if we feel like on a risk adjusted basis, we're able to grow our portfolio even within gaming. We'll be very happy to do so.

We are very happy to grow this area of our business.

<unk> been very open with the market above about playing across the risk spectrum.

With regards to yield and yield for us as a proxy for the risk associated with it and if we feel like on a risk adjusted basis, we were able to grow our portfolio even within gaming will.

We will be very happy to do so.

Speaker 3: We continue to talk about time-porting partnerships are for us.

We continue to talk about how important partnerships are for us and when is that it's a long term partner and in the event they decide.

Speaker 3: And when is that? It's a long-term partner and in the event, they decide that they would like to pursue the other transactions. We would like to be there for them.

That they would like to pursue the other transactions, we would like to be there for them.

Speaker 3: and continue to grow our exposure to gaming and in particular, our exposure to win.

And continue to grow our.

Our exposure to gaming and in particular, our exposure to win.

Okay I appreciate the comments.

Sure.

The next question is from Nate Crossett with bearing Burke Your line is open.

Speaker 1: The next question is from Nate Crossett with Baronberg. Your line is open.

Speaker 6: Very good afternoon. Hi. Hi. Maybe just following up on those questions a bit. Can you tell us anything about, was this a competitive bit process? How many bitters?

Hey, good afternoon.

Okay great.

Maybe just following up on those questions a bit.

Can you tell us anything about was this a competitive bid process.

How many better is how many rounds.

Speaker 6: And then I'm assuming there's no other gaming assets in the pipeline right now, but is there a way you could confirm or deny that?

And then im assuming theres no other gaming assets in the pipeline right now, but is there a way you could confirm or deny that.

Speaker 3: I'm not going to answer your second question, but the first one, there was no process. This is like we said, we empathize relationship above all else.

I'm not going to answer your second question.

But the first one.

There was no process. This is like we said we emphasize relationship above all else.

Speaker 3: And we wanted to partner with Wynne, and this came about through a conversation that started towards the end of last year.

And we wanted to partner with Wynn and.

This came about through a conversation that started towards the end of last year.

Speaker 3: And so there were no rounds, there were no other folks. It was purely a relationship driven contact.

And so there were no rounds that were no other folks it was purely a relationship driven transaction.

Speaker 6: Okay, interesting. Thank you. Um, maybe just a question on pricing more broadly, you know, cap rates continue to come down. I think the commentary across the spaces that there remains a lot of pressure there, even with funding costs kind of going up. So what are you kind of seeing, I guess, in your pipeline right now and what kind of your expectation, I guess for the numerator side of the equation this year.

Okay interesting. Thank you.

Maybe just a question on pricing more broadly cap rates continue to come down I think the commentary across the space and that there remains a lot of pressure there even with funding costs kind of going up.

What are you kind of seeing I guess in your pipeline right now and what's kind of your expectation I guess for the numerator side of the equation.

This year.

Speaker 3: Yeah, that's a very interesting question, Nate. We continue to see a very aggressive caprate market, especially for the type of products that we are pursuing.

Yes, that's a very interesting question Nate.

We continue to see a very aggressive cap rate market, especially for the type of products that we are pursuing.

Speaker 3: We would have thought that, you know, given the fact that we've been in this, you know, expectation of higher inflation, higher interest rate environment that would start to sort of folculate into the rest of the acquisition market. We haven't seen that yet.

We would have thought that given the fact that we've been in this.

Expectation of hiring.

Place in higher interest rate environment.

That would start to sort of local late into the rest of the acquisitions market, we haven't seen that yet.

Speaker 3: Now, history would suggest that, you know, cap rates do tend to adjust, especially if some of these increases.

Our history would suggest that.

Cap rates do tend to adjust especially if some of these increases.

Speaker 3: become more than just an expectation. But at least the current market situation is one where we are not seeing even a stabilization of the cap rate. We continue to see downward pressure.

Become more than just an expectation.

But at least the current market situation is one where we are not seeing.

Even a stabilization of the cap rate, we continue to see downward pressure.

Speaker 3: And this is where being able to partner and lean on relationships, et cetera, is going to allow us to potentially get that 5, 10, 15 basis points above market. And that is the hope. But I do think that in the next six months to nine months, when interest rates do rise.

And this is where being able to partner.

Lean on relationships et cetera is going to allow us to potentially.

Get that 510 15 basis points above market.

And that is the hope.

I do think that in the next six months nine months when interest rates do rise.

Speaker 3: that cap rates will fall as soon. This is a phenomena that we have seen played out in the past and there is no expectation that it's not going to play out. But we don't see that currently.

That cap rates will follow suit. This is a phenomena that we have seen played out in the past and.

There is no expectation that it's not going to play out, but we don't see that currently takes.

Speaker 3: In terms of what are we underwriting for the rest of the year, our hope is that it is slightly above where we ended up last year, but we can't guarantee that. You know, our pipeline is incredibly robust with, again, opportunities that we love. And like I said, at least in the current market, we're not seeing, you know, cap rates move.

In terms of what are we underwriting for the rest of the year our hope is.

That it is slightly above where we ended up last year, but we cant guarantee that.

Our pipeline is incredibly robust with.

Again opportunities that we love.

And like I said at least in the current market we are not seeing.

Cap rates.

Moves.

Speaker 3: The one point I will add, and I think I covered that in my prepared remarks is the fact that we have inherited a team that was very used to focusing on the high-reelding side of the market.

The one point I will add and I think I covered that in my prepared remarks is the fact that we.

We have inherited a team.

That was very used to focusing on the high yielding side of the market.

Speaker 3: And that's part of our business and that particular team has already started to produce results.

That's part of our business in that particular team has already started to produce results.

Speaker 3: Above and beyond what we were being able to do pretty much

Above and beyond what we were being able to do pre merger.

Speaker 3: And so, you know, could we see that help us?

And so could we see that help us on being able to achieve.

Speaker 3: on being able to achieve slightly high cap rates, potential.

Slightly high cap rates potentially.

Speaker 3: but it's still too early to tell, but that is a team that has hit the ground running and it's performing.

But it's still too early to tell but that is a a.

A team that is.

And has hit the ground running and is performing.

Speaker 3: As we had expected and it's great to have them as part of the broader team.

As we had expected and it's great to have them as part of the broader team.

I'll leave it there thank you.

Thanks Nate.

Speaker 1: The next question is from Greg McGinnis with Scotiabank.

The next question is from Greg Mcginniss with Scotiabank. Your line is open.

Speaker 2: Hello. Hello. Hello. Hi. You're going to help. Hey, you're going to harp on encore a bit more here.

Hello, Hi.

And our hope.

Hi Fi on require a bit more here and hope you don't mind.

Speaker 6: This is just how we went about gaming expertise on the gaming space that was necessary before underwriting this new vertical and then who can the team with getting license to allow for the acquisition?

Just curious how we went about gaining expertise in the gaming space that was necessary for underwriting this new vertical and then hoping the team is getting licensed.

To allow for the acquisition that changed.

Sure.

Speaker 3: Greg, like a lot of things, we are so blessed to have a set of colleagues who are capable of understanding in new industry.

Greg like a lot of things.

We are so blessed to have a set of colleagues who are capable of understanding and new industry.

Speaker 3: are capable of underwriting the risk associated with that particular industry. The fact that a lot of us have come from previous backgrounds that lend itself to a much wider.

Our capable of underwriting the risk associated with that with that particular industry and the fact that a lot of us have come from <unk>.

Previous.

Ground's that lends itself to a much wider.

Speaker 3: realm of industry focus than what we were doing here at Realty Income also allows us greater confidence.

Realm of industry focus than what we were doing here at Realty income also allows us.

Greater confidence.

Speaker 3: The fact that we partnered with Win and to work with Craig and his team, that to allow us to continue to refine our pieces around the risks associated with this business.

The fact that we partnered with with Wynn and.

And to work with Craig and his team.

That allowed us to continue to refine our thesis around the risks associated with this business.

Speaker 3: And we are very comfortable that we have underwritten this particular opportunity appropriately and we have leaned on experts where needed and also obviously leaned a lot on our own research department.

And we are very comfortable that.

That we have underwritten this particular opportunity appropriately and we have leaned on experts where needed.

And also obviously learned a lot on our own research Department.

Speaker 3: that continues to, you know, the best in class, in my opinion, across the street. And that's how we got very comfortable with this new vertical that we are pursuing, and most specifically, with the operator that we apartment with over the long term.

That continues to.

The best in class in my opinion across the Street and that's how we got very comfortable with this new vertical that we are pursuing and more specifically with the operator that we have partnered with over the long term.

Speaker 3: In terms of your second question with regards to who's going to go through the licensing process, to early to tell, I know Michelle, our general counsel and chief legal officer is working very closely with the MCG and is trying to figure the answers to those questions. But, you know, I don't have a precise answer on that for you yet.

In terms of your second question with regards to who is going to go through the licensing process too early to tell.

I know Michelle our general Counsel and Chief legal officer is working very closely with the Mcg.

And is trying to figure out the answers to those questions.

But.

I don't have a precise answer on that for you yet.

Speaker 6: Okay, thanks. And then Chris, I want to mention that it turns the deal on the achievable due to the unique way and you're really thinking the structured. Are you able to further elaborate on that comment? And then also why are you comfortable not requiring a cat-x minimum where the gaming rates do typically require one?

Okay. Thanks.

Craig mentioned that in terms of the deal are only achievable due to the unique way and royalty structure are you able to further elaborate on that comment and then also why are you comfortable not requiring capex minimum.

Where gaming Reits do typically require one.

Speaker 3: Yeah, again, this was very important to Craig and his team. You know, the fact that we were able to create a bespoke lease that worked for them and worked for us.

Yes, again this was very important too to Craig and his team.

The fact that we were able to create a bespoke lease that worked for them.

And works for us.

Speaker 3: was very important to both partners. And for us, we are not in the habit of going out there and essentially copying leases that are our precedents within this space. We approach this as a relationship and we try to address.

What's very important to both both partners and for us.

Not in the habit of going out there.

Essentially copying.

Leases that are precedent within this space.

We approach this as a relationship and we tried to address.

Speaker 3: you know what their pressure points were, we tried to understand what causes those pressure points and therefore came up with a very bespoke lead that worked for our partner in at Wynn and worked for us.

What their pressure points, where we try to understand what causes those pressure points and therefore came up with a very bespoke lease that works for our partner at Wynn.

And works for us with.

Speaker 3: with respect to, you know, minimum capital requirements, et cetera. We feel like the entire brand of when is associated with their investments in their properties. And you don't have to take my words, you just can go and actually visit the property and see for yourself what I mean when I say that.

With respect to <unk>.

<unk> capital requirements et cetera.

We feel like the entire brand when it's associated with their investments in their properties and you don't have to take my word Brexit you. Just can you can go and actually visit the property and see for yourselves, what I mean, when I say that.

Speaker 3: and the fact that we don't have that specifically outlined in the lease.

And the fact that we don't have that specifically outlined in the lease.

Speaker 3: is one that we were very comfortable with. Plus there are other protections that that supported to us.

It's one that we were very comfortable with plus there are other protections that.

That's afforded to us.

Speaker 3: through the gaming licenses that you get in the Massachusetts, you know, in Massachusetts. And so we feel like looking at it holistically, we are very well protected, partnering with somebody like when...

Through the gaming licenses that you get in the Massachusetts.

In Massachusetts, and so we feel like looking at it Holistically, we are very well protected partnering with somebody like win.

Speaker 3: who invests in their properties above and beyond what most other operators do, plus certain other provisions that we could lean on, I think, gave us the comfort and allowed us to partner with them because that was a pressure point for them. So we were very, very comfortable with where we ended up. And we were glad we could do it and structure it so that Craig and his team were very comfortable moving forward.

Who P&L invests in their properties above and beyond what most other operators do.

Plus certain other provisions that we could lean on.

I think gave us the comfort and allowed us to partner with them because that was a pressure point for them. So.

We are very very comfortable with where we ended up and we were glad we could we could do it and structure. It so that Craig and his team very comfortable moving forward.

Alright, Thanks Shneur.

Sure.

Speaker 1: The next question is from Caitlin Bros with Goldman Sachs or Linus.

The next question is from Caitlin Burrows with Goldman Sachs. Your line is open.

Speaker 7: Hi there everyone, maybe moving to a different topic. Hi, maybe moving to a different topic, Samit, you mentioned earlier that lower cost European debt helps to support investment activity in Europe . However taxes do seem to be another piece to consider. So just wondering if you could give an update on how you consider the tax impact on your decision to acquire in the US versus abroad.

Hi, there everyone, maybe moving to a different high maybe moving to a different topic.

You mentioned earlier that lower cost European debt helps to support investment activity in Europe .

However, taxes do you seem to be another piece to consider so just wondering if you could give an update on how you consider the tax impact on your decision to acquire in the U S versus abroad.

Yes, Caitlin that is certainly a cost of doing business in Europe , and one that we take into account when we are underwriting assets and looking at long term return profiles of opportunities that we ultimately end up pursuing.

Speaker 3: Yes, Caitlin, that is certainly a cost of doing business in Europe and one that we take into account when we are underwriting assets and looking at long-term return profiles of opportunities that we ultimately end up pursuing.

Speaker 3: And one of the ways we try to protect ourselves is by essentially match funding with local denominated currency, these acquisitions, which is why if you look at it of the international portfolio on a standalone basis, you will find that we have raised a lot more debt to finance that business while not compromising, obviously, on a fully consolidated basis, the overall leverage profile of our business.

Yes.

And one of the ways, we tried to protect ourselves is.

By essentially match funding with local denominated currency. These acquisitions, which is why if you look at it the international portfolio on a standalone basis, you will find that we have raised a lot more debt to finance that business.

While not compromising obviously on a fully consolidated.

This is the overall leverage profile in the PA business.

Speaker 3: And the interest expense associated with that debt is a natural hedge and a natural protection to minimize the effective tax rate that we end up paying. So that's a very important point in our capital strategy of how we want to continue to grow our European business.

And.

The interest expense associated with that debt is a natural hedge and a natural protection to minimize the effective tax rate that we ended up end up paying so that's that's a very important point in our capital strategy of how we want to continue to grow.

Our European business having.

Speaker 3: Having said that, it is true that the cost of debt in Europe , even in this increasing rate environment, continues to be less than what we can achieve here in the U.S. Today, I would say, if you were to look at a 10-year unsecured, it's probably in the 3.1%, 3.2% ZIP code for us, whereas we can probably get...

Having said that it.

It is true.

That.

The cost of debt in Europe , even in this increasing rate environment continues to be.

Less than what we can.

Achieved here in the in the U S.

Today, I would say if you will.

To look at a 10 year unsecured it's probably in the three 1% three 2% ZIP code for us, whereas we can probably get to 82.7 ish percent in the UK and one nine potentially even slightly less.

Speaker 3: 2.8 to 2.7% in the UK and 1.9% potentially even light slightly less.

Speaker 3: in mainland Europe in terms of 10 year unsecured bond. So, that's what I meant when I said that our cost of capital is very portable and the advantages that accrue to us due to this cost of capital and our ratings essentially gets inflated when we are able to take advantage of markets such as mainland Europe and the UK. So...

In mainland Europe in terms of 10 year unsecured bonds. So.

That's what I meant when I said that our cost of capital is very portable and the advantages that accrue to us due to this cost of capital and our ratings essentially.

Getz.

Inflated.

When we are able to take advantage of markets, such as mainland Europe and the U K. So.

Speaker 3: That's the strategy and that's what we feel most comfortable with.

That's the strategy and that's what we feel most comfortable with.

Speaker 7: Okay, and then maybe on the tenant side, you guys ended the fourth quarter with hockey pence at 98.5% guidances for about 98% this year. So realize that's a potential small shift, but we do hear how healthy tenants are these days. So wondering if there's something in particular that you're expecting or if it's more of a general buffer, which then could you just comment on the watch list maybe more broadly?

Okay, and then maybe on the tenant side you guys ended the fourth quarter with occupancy at 98, 5% guidance is for about 98%. This year, so realize that as a potential small shift, but we do hear how healthy tenant sorry. These days. So I'm wondering if there's something in particular that youre expecting or if it's more of a <unk>.

Buffer, which then could you just comment on the.

Just maybe more broadly.

Speaker 3: Yeah, that's a good question, Caitlin. And it's the last statement that you made, which is how we think about occupancy. We say it's roughly around 98%.

Yeah.

That's a good question Caitlin and it's the last statement that you made which is how we think about occupancy we say, it's roughly around 98% keep in mind. We've also just inherited 3000 assets through the merger.

Speaker 3: Keep in mind, we've also just inherited 3,000 assets through the merger that we have digested and we feel very comfortable saying that it's right around 98%. If you look at where we were last year, you look at the year before that, that tends to be the guidance that we give to the market.

That we have digested and we feel very comfortable.

Saying that it is right around 98% if you look at where we were last year.

You look at the year before that that tends to be the guidance that we gave to the market.

Speaker 3: Look, we could flex that number. We could try to have a higher occupancy number if that was a target for us. But what we're trying to balance, Caitlin, and I'm just sharing a little bit about how we think about our business.

Look we could we could.

Flex that number we could try to have a higher.

Occupancy number if that was a target for us, but what we are trying to balance Caitlin and under sharing a little bit about how we think about our business is trying to optimize the economic outcome on each one of these assets that that.

Speaker 3: is trying to optimize the economic outcome on each one of these assets that is coming through to us.

That is coming through to us.

Speaker 3: And we try to figure out whether it makes sense to sell it and maximize our total return profile even vaping.

And we tried to figure out whether it makes sense to sell it and maximize our total return profile even vacant.

Speaker 3: or invest capital and try to capture the rents and create a profile that is superior to selling it vacant, or completely

Or invest capital and try to capture the rents and create a profile that is superior to selling it vacant.

All completely reposition that asset.

Speaker 3: You know, and all of those elements are on the table and we go through and we try to figure out what is the best outcome.

And all of those those elements are on the table and we go through and we try to figure out what is the best outcome and the reason why we say 98% is because there will be a few assets that we want to hold onto and repositioned and or take the time to find the right tenant so that.

Speaker 3: And the reason why we say 98% is because there will be a few assets that we want to hold on to and repositioned and or take the time to find the right.

Speaker 3: so that we maximize the total return profile. And that does.

We maximize the total return profile and that does put downward pressure on our on our occupancy number. So when we talk about approximately 98% it's to give us the flexibility to do what we want to do on the asset management side.

Speaker 3: So to put downward pressure on our occupancy number.

Speaker 3: So when we talk about approximately 98%, it's to give us the flexibility to do what we want to do on the asset management side. And...

And you probably have tracked as you can see that we have more often than not beaten that.

Speaker 3: You probably have tractors. You can see that we have more often than not beaten back.

Speaker 3: So it really is more a mindset rather than a very precise point that we are trying to strike with regards to occupancies to give us this flexibility that we need to maximize economic outcome. Okay, got it. I'll stop.

So it really is more a <unk>.

<unk> set rather than a very precise.

No.

<unk> that we're trying to strike with regards to occupancy so give us this flexibility that we need to make to maximize economic outcome.

Okay got it.

Stop there thank you.

Thanks.

Thanks.

Speaker 1: The next question is from Spencer Allaway with Green Street, your line is open.

The next question is from Spencer I'll away with Green Street. Your line is open.

Speaker 8: Thank you. I'm Spencer. So given the strength of tenant credit within gaming, you mentioned the covers levels, the attractive lease terms. As you consider additional gaming deals, does your view on tenant concentration change or said differently, how high would you allow any one gaming tenant to go, given you could argue, it is a superior credit relative to some other traditional retail tenants?

Thank you Spencer.

Hi.

Given the strength of tenant credit within gaming you mentioned the coverage levels may attractive lease terms and you consider additional gaming deal does your view on tenant concentration change.

Differently, how high would you allow any one game maintenance to go giving you could argue it is a superior credit relative to some other traditional retail tenants.

Speaker 3: That's a great question Spencer. Look, we obviously have certain speed bumps that's part of our investment policy that imposes, you know, certain restrictions on tenant concentration as well as industry concentration.

That's a great questions Spencer.

Look we obviously have certain speed bumps and that's part of our investment policy that.

Imposes certain restrictions on tenant concentration as well as industry concentration.

Speaker 3: just so you have it with regards to client concentration, it's 5%.

Just so you have it with regards to client concentration is 5%.

Speaker 3: and with regards to industry concentration, it's 15% as per our investment policy. So you have those B-bumps, if you will, to sort of make sure that we continue to be a very diversified portfolio.

And with regards to industry concentration, it's 15% ASP, where our investment policy. So you have those speed bumps. If you will to sort of make sure that we continue to be a very diversified portfolio.

Having said that.

Speaker 3: You know, we just executed on a one point, well, it's not closed yet, but we've announced a $1.7 billion transaction and yet it's going to represent less than three and a half percent of our overall client concentration.

We just executed on a one point said well, it's not closed yet, but we've announced a $1 $7 billion transaction and yet it's going to represent less than three 5% of our overall.

Client concentration.

Speaker 3: So we clearly have more room here, both on the industry side as well as on the specific client side, to grow this business.

So we clearly have more room here, both on the industry side as well as on specific client side to grow this business, we haven't entered into the gaming industry.

Speaker 3: We haven't entered into the gaming industry to basically say this is one transaction and we are done. This does become a new avenue of growth. However, we will continue to remain very selective in terms of how we decide to grow this particular area. But those are the metrics.

To basically say this is one transaction and we have done this does become a new Avenue of growth. However, we will continue to remain very selective in terms of how we decided to grow this particular area, but those are the those are the metrics.

Speaker 3: that you can look to help us through the concentration both on the industry side as well as on the client side. But we certainly would like to grow this.

That you can look to to sort of.

To help us through the concentration.

Both on the industry side as well as on the client side.

But we certainly would like to grow this business and.

Speaker 3: For the right opportunity, we are more than willing to compromise some of these limits that we have in our investment policy. Of course, it will require board approval, but we've done that in the past. If you recall, Walgreens used to be north of 5% at one point. So what's 7-11? And post the merger, both of them have dropped below 5% today. For the right client and the right opportunity, we are more than happy to make compromise.

For the right opportunity, we are more than willing to compromise. Some of these limits that we have in our investment policy of course, it will require board approval, but we've done that in the past if you recall.

Walgreens used to be north of 5% at one point.

So it was 711.

And.

Post the merger both of them have dropped below four 5% today, but for.

So the right clients with the right opportunity, we are more than happy to.

To make compromises on those things.

Speaker 8: Okay, thank you. That actually answer all my follow-up questions. But so maybe one more. As you continue to identify new lanes of external growth, just curious if you've explored the possibility of expanding into ground leases, similar to what we've seen ADC do.

Okay. Thank you that actually answered all my follow up question and maybe one more as you continue to identify new lanes of external growth.

Anthony you've explored the possibility of expanding into ground leases similar to what we've seen ADC deal.

Okay.

Speaker 3: Yeah, Spencer, I think, you know, this is a question that's been asked before. I want to say about two and a half percent of our revenues come from ground leases. But let me tell you that when you go into this market today and a particular opportunity is being, you know, marketed as a ground lease, i.e., you know, there's a building, but you don't really own the building. If you look at the pricing.

Yeah.

I think this is a question thats been asked before.

I wanted to say about two 5% of our revenues come from ground leases, but.

But let me tell you that when you go into this market today, and a particular opportunity as being gander.

Marketed as a ground lease I E.

There is a building, but you don't really own the building.

If you look at the pricing.

Speaker 3: The expectation of the seller is that you're paying for both. The building as well as the ground, because the building is going to come with the ground at the expiration of the leaster.

There the expectation of the sellers that youre paying for both the building as well as the ground because of the building is going to come with the ground at the.

The expiration of the lease term.

Speaker 3: And so, yes, you can claim that this is a ground lease that you are purchasing, but the actual proceeds being paid for those opportunities are essentially fee-simple opportunities.

And so yes, you can you can claim that this is a ground lease that you are purchasing but the actual proceeds being being paid for those opportunities are essentially.

The fee simple opportunities.

Speaker 3: So we don't talk about the fact that, you know, a certain portion of our rent concentration comes from ground leases primarily because we recognize that more

So we don't talk about the fact that a certain portion of our rent concentration comes from ground leases, primarily because we recognize that more often than not.

Speaker 3: You know, we are paying for the building as well.

We are paying for the building as well.

Speaker 3: And so, yes, I'd love to be able to start talking about ground leases that we have, but the cost-basins on those ground leases, you recognize to be, you know, fee-simple transactions.

So, yes, I would love to be able to start talking about ground leases that we have but the cost basis on those ground leases.

Youll recognize to be fees.

<unk> simple transactions.

Okay.

Okay. Thank you.

Sure.

Speaker 1: The next question is from Ronald Camden with Morgan Stanley . Your line is open. Hi there, Ronald.

The next question is from Ronald Camden with Morgan Stanley . Your line is open.

Hi, there.

Hey, how are you just a quick question.

Speaker 6: Following up on sort of the sale leaseback opportunities, just want to get a sense of sort of post-emerger closing, just what resources has been allocated in terms of personnel or structure to going after these sort of opportunities and so forth.

Following up on sort of the salaries back opportunities.

Just wanted to get a sense of sort of post the merger closing.

Just what resources has been allocated in terms of personnel our structure to going after these sort of opportunities and so forth.

Well if you if you track, our our personnel count and I think.

Speaker 3: Well, if you track our personnel count, and I think Shannon started posting those, but I don't know.

Shannon started posting those but I don't know.

Speaker 5: You will see that we have grown our key quite a bit. And some of that has sort of translated into, a more normalized GNA number. And if you look at where we ended up in 2021, it's at 371 people. If you compare that to where we were at the end of 2020, it was closer to 230 odds both.

You will see that we have grown our team quite a bit.

And some of that has.

Translated.

And two.

A more normalized G&A number and if you look at where we ended up in 2021.

371 people, if you compare that to where we were at the end of 2020. It was closer to 230 odd folks.

Speaker 5: And so the team has grown. Part of it obviously came through the very merger, but also organically in order to continue to pursue and expand the avenues of growth. We have right size the team, both on the research side, on the acquisition side, on the asset management side, on the property management side, et cetera, et cetera. And so...

And so the team has grown part of it obviously came through the <unk> merger, but also organically in order to continue to pursue and expand the avenues of growth we have right sized the team both on the research side on the acquisition side.

On the asset management side on the property management side et cetera et cetera.

And so.

Speaker 5: I think this is a reflection of a business that is continuing to grow and not only grow in its traditional routes but also continue to increase new avenues of growth. And so that is going to translate into a broader personnel base.

I think this is a reflection of a business that is continuing to grow.

And not only grow in its traditional routes, but also continue to increase.

New avenues of growth and so that is going to translate into a broader personnel base.

Speaker 3: you know, as can be seen by these numbers.

As can be seen.

By these numbers.

Speaker 6: Great. And then my second question is just on, what you're thinking about sort of external growth opportunity that you've talked about, sort of looking at higher yielding structures and so forth. Just curious, how much thoughts goes into, essentially looking at higher escalator structures, similar to sort of the, just transax and that one.

Great and then my second question is just on what Youre thinking about sort of external growth opportunity that you've talked about sort of looking at higher yielding structures and so forth. Just curious how much thoughts goes into potentially looking at a higher escalator structures.

Similar to sort of the Atlas transaction that went through.

Speaker 5: A lot is the short answer. If you look at our straight line cap race.

A lot is the is the short answer.

If you look at our straight line cap rate.

Speaker 3: for 2021, you know, the headline number was five, I think five four for the fourth quarter.

For 2021.

A headline number was five.

Five four for the fourth quarter.

Speaker 5: But there's 80 basis points of straight line. So it's really a 6.2% straight line caperate for the fourth quarter.

But there's 80 basis points of straight line. So it's really a six 2% straight line cap rate for the fourth quarter.

Speaker 3: And so you can imagine the only way to generate 80 basis points of straight line rent on an annual basis is through these higher growth rates embedded in the Lisa.

And so you can imagine the only way to generate 80 basis points of straight line rent on an annual basis is through these higher growth rates embedded in the leases.

Speaker 5: And so that is a conscious effort on the part of Mark and Niels' teams to continue to generate.

So.

That is a conscious effort on the part of.

Mark and meals teams, who continue to generate.

Speaker 5: that inherent growth profile that we have traditionally and make that a much higher number going forward.

That inherent growth profile.

That.

We have traditionally and make that a much higher number going forward.

Speaker 3: And so, you know, part of how we think about looking at new opportunities, new verticals is to see the profile of the existing needs that are percolating in the market within those spaces.

So part of how we think about looking at new opportunities new verticals is to see the profile of the existing leases.

Ah percolating in the market within those spaces.

Speaker 5: And that is certainly an element that we take into consideration before deciding to proceed routes.

And that is certainly an element that we take into consideration before deciding to pursue routes.

Great. That's all for me thank you.

Thanks.

Speaker 1: The next question is from Katie McConnell with City Group. Her line is open. Great.

The next question is from Katie Mcconnell with Citigroup. Your line is open.

Great. Thank you.

Hum.

Speaker 8: Hi, everyone, good afternoon. Just really to follow up on an earlier question on taxes, I'm just wondering what the higher tax expense guidance for the year is back to again, in terms of your targeted US, versus international opposition mix for this year.

Hi, good afternoon.

Just wanted to follow up on an earlier question on tax.

I was just wondering what the higher capex guidance for the year is factoring.

In terms of their targeted Neulasta burst international acquisition next set up yet.

Okay.

Christie do you want to take that.

Speaker 2: Sure, thanks, Susan. Thanks, Katie. Yes, the higher taxes are incorporating our international growth Katie, which is very similar to what we experienced this year as well as Neil and the team are making some great progress.

Sure. Thanks, David Thanks, Katie, yes, the higher taxes are incorporating our international Katie.

Which is very similar to what we experienced here as well as Neil and the team here at <unk>.

Some great progress.

Speaker 8: So just in terms of a targeted mix for US-Fersona National, which is the reason you think you got this year relative to us.

So just in terms of our targeted net sorry, yes first one on <unk>.

<unk>, what should we be thinking of Apple <unk>.

Yes.

Speaker 2: Do I sing? No, I'm in her natural. You know, you could be looking at 35, you know, 65, 60, 40.

I think yes internet.

It could be looking at 35.

65.

60 40.

U S International.

Parker.

I wanted to dive in acquisition pipeline are there any other new investment categories.

We are actively exploring outside of gaming.

To update us on where you're starting from a line haul tractors investments for opportunity.

Speaker 5: Yeah, Katie, I won't, I won't go through the, you know, the areas that we are internally discussing, exploring, underwriting.

Katie I won't I won't go through the the areas that we are internally discussing exploring underwriting.

Speaker 3: because you know that becomes an exercise in fertility right we talk about certain avenues and they don't materialize and then it becomes a constant question in every subsequent call as to when we're going to go into it.

Because that becomes an exercise in futility right, we talk about certain avenues and they don't materialize and then it becomes a constant question.

In every subsequent call as to when we are going to go into it.

Speaker 5: We'd much rather, you know, consummate a transaction, get it over the finish line, and then discuss our rationale as to why we chose to go down the path of entering into that new, new area. But suffice it to say, Katie, we are exploring multiple avenues of growth.

We'd much rather.

No.

Consummate a transaction get it over the finish line and then discuss our rationale as to why we chose to go down the path.

<unk>.

Entering into that new new area.

But suffice it to say Katie we are exploring multiple avenues of growth.

Speaker 5: And some of the discussions that we've had on this call should give you an insight into what is driving our thought process around new avenues that we would like to consider going forward. But I just don't want to engage in a conversation right now, Katie, with respect to going into too much details on what those are, because some may never materialize. And so.

And some of the discussions that we've had on this call should give you.

And insight into what is driving our top.

Top process around.

New avenues that we would like to consider going forward.

But I just don't want to engage in a conversation right now Katie with respect to going into too much details on what those are because some may never materialized and so.

Speaker 5: Just bear with us and I want to be very clear. There are new areas that we are constantly looking at and if and when we are able to get something over the finish line we will absolutely talk to you and you can we can gray us on the details as to the why. We chose to pursue those reps. I have permission to walk.

Just bear with us.

And I want to be very clear.

There are new areas that we are constantly looking at and if and when we are able to get something over the finish line. We will absolutely talk to you and you can you can grill us on the detailed thats sort of why.

We chose to.

Pursue those rents.

Well thanks <unk>.

<unk>.

Thank you.

Speaker 1: The next question is from Joshua Dennerline with Bank of America. Your line is open.

The next question is from Joshua <unk> with Bank of America. Your line is open.

Speaker 9: Yeah, hey guys. Um, hi, Peter. Good question. On what percent of your ABRs on cash accounting basis? And then could you provide some color on the rent repay that you've got in 4Q on the previously uncollected amounts?

Yeah, Hey, guys.

Hi, Patrick.

A question on what percent of your ABR is on cash accounting basis, and then could you provide some color on the rent repay that you've got.

<unk> on the previously uncollected amounts.

Sure Chris do you want to transact.

Speaker 2: Yeah, of course. So, you know, essentially when we're taking a look at...

Yes of course.

Essentially when we're taking a look at.

Speaker 2: the overall deferred rent and you know impact of

The overall deferred rents.

Impact.

Speaker 2: Essentially, collections have been exceedingly strong. The total deferral amount is about 140, 150 million as of...

Essentially as <unk>.

<unk> has been exceedingly strong the total deferral amount is about 140 $850 million as of 12 31 21 at the end of the year.

Speaker 2: 1231-21 at the end of the year.

Speaker 2: And we're achieving very strong collections in that regard as we also noted in the fourth quarter, all of our theater clients are current.

<unk>.

We're achieving very strong collections in that regard as we also noted in the fourth quarter.

All of our theater clients are current.

Speaker 2: and so great progress. And then in terms of what you would have seen in the fourth quarter, because of those strong theater collections, we actually recorded total bad debt expense of less than a million dollars, and less than 15 million for the entire year, because of the fact that we had those...

So great progress.

And then in terms of what you would have seen in the fourth quarter.

The strong theater collections, we actually recorded total bad debt expense of less than $1 million.

And less than $15 million for the entire year.

Because of the fact that we had a strong collection.

Okay sorry.

Speaker 4: Did I miss what percentage of your ABRs on cash accounting basis?

Did I Miss what percent of your ABR is on cash accounting basis.

Right.

We have.

Speaker 2: We have overall cash accounting basis on ABR. So we are going to see.

Overall cash accounting basis on ABR.

<unk>.

Two modest I wanted to say.

Yes, less than less than 2%.

Speaker 4: Okay, perfect. And then, sorry if I missed this from the opening remarks, but the Encore acquisition came with an expansion opportunity. Could you maybe walk us through this opportunity in the additional economics it would offer?

Okay, perfect and then.

Sorry, if I missed this in the opening remarks, but.

The encore acquisition came with an expansion opportunity.

Walk us through this opportunity.

Additional economics it would offer.

Speaker 3: Sure Joshua. So there is a parking lot that is...

Sure Joshua so.

There is a parking lot that is.

Speaker 3: across the street from where the main building is located.

Across the street from where the main building is located today.

Speaker 5: Today, if you talk to Craig and his team, they're actually having to...

Today.

If you if you talk to Craig and his team, they're actually having to.

Speaker 5: pass on some of the patrons given the lack of parking space.

Pass on on some of the patrons given the lack of parking space that.

Speaker 5: that is required to accommodate this increase in traffic.

That is required to accommodate this increase in traffic.

Speaker 5: So the goal is for them to develop a multi-story above ground, potentially even below ground parking, that is going to not just be a parking lot, but also it's going to have an entertainment venue up to a thousand seats, maybe it's 999 seats.

So the goal is for them to develop a multi storied above ground potentially even below ground parking that is going to not just be a parking lot. But also it's going to have a an entertainment venue of up to 1000 seats, maybe its 999 seats.

Speaker 5: plus a few other, you know, entertainment areas, writing that in the same building that is gonna get constructed across the street. And it's gonna have an enclosed tunnel above ground tunnel.

Plus a few other.

Entertainment.

Areas right in that in the same.

Building that is going to get constructed across the street and it's going to have an enclosed tunnel above ground tunnel.

Speaker 5: pathway that leads right into the casino, into the encore Boston Harbor building from this building.

Pathway that leads right into the casino into the Encore Boston Harbor building from this.

This building.

Speaker 5: And so the expectation is that this is going to get built.

And so with.

The expectation is that this is this is going to get billed.

Speaker 5: over the next couple of years and we'll actually add to the overall performance.

Over the next couple of years, and we'll actually add to the overall performance.

Speaker 3: of the building. And clearly, you know, this is a very symbiotic relationship between this parking lot, this enclosed pathway.

<unk> of the building and.

Clearly.

This is a very symbiotic relationship between this parking lot and closed pathway.

Speaker 5: that's going to connect the two buildings. And so they have the ability once constructed and there's a six-year timeframe within which they have to do this.

That's going to connect the two buildings and so.

They have the ability once constructed and theres, a theres a six year timeframe within which they have to do this.

Speaker 5: which gives them plenty of time to be able to consummate their current plans. We will buy this building at a 7% yield. And obviously this should translate into even better coverages than we currently have at the particular building. But that is the option that you're referencing. That's there in the lease.

Which gives them plenty of time to be able to consummate their current plans.

We'll buy this building at a at a 7% yield.

<unk>.

<unk>.

And obviously this should translate into even better coverages than we currently have.

At the at the particular building, but that is the.

That is the.

Option.

Youre referencing that's there in the lease.

Yeah.

Josh did that answer your question.

Josh I think you're muted.

Speaker 1: I like to hear you, Jack. His line is now closed. And the next question is from John Musoka with Layton Berg-Felman. Your line is open.

Okay.

His line is now closed and the next question is from John <unk> with Ladenburg Thalmann. Your line is open.

Hey, John .

Speaker 10: How's it going? Okay, how are you? So, first, just a quick kind of detailed question. Was the wind transaction kind of contemplated in your, in your prior guidance, I think, you know, obviously the, the per share results won't be heavily impacted given the expected timing, but it was just notable that there wasn't really a change in acquisition outlook.

How's it going.

So.

First just a quick kind of detailed question.

Was the wind transaction kind of contemplated in your in your prior guidance I think obviously that the per share results won't be heavily impacted given the <unk>.

The timing, but it was just notable if there wasn't really a change in acquisition outlook.

Speaker 5: John , I think you've been covering us for many, many years and you probably have a very good understanding of when we talk about acquisitions, when we talk about guidance.

John I think you've been covering us for many many years and you.

Probably have a very good understanding of when it when we when we talk about acquisitions, when we talk about guidance.

Speaker 5: It really does not have the underlying opportunities perfectly laid out because we don't have that visibility. There's a confidence level, there's a feel for the market, there's a feel for the opportunities that we are seeing. And that is the reason why based on the earnings guidance we came out, the underlying acquisition guidance was about 5 billion.

It really does not have the underlying opportunities perfectly laid out because we don't have that visibility.

There is a confidence level there is a feel for the market. There is a feel for the opportunities that we're seeing.

And that is the reason why.

Based on the earnings guidance, we came out the underlying acquisitions guidance was about $5 billion.

Speaker 5: We don't know what the make-up or the composition of $5 billion worth of transactions are going to look like. Some of which could be assets like the gaming asset that we just announced.

We don't know what the makeup or the car.

Composition of $5 billion worth of transactions are going to look like some of which could be.

Assets like.

The gaming asset that we just announced.

Speaker 5: But that's a very big asset. So we feel now even more confident that about 5 billion is very much an achievable number assuming that we are able to close on this transaction by the fourth quarter. But it is very difficult to say, oh, you should completely exclude this number from the 5 billion. Or it was inclusive of the entire 1.7, just given the sheer size of this.

But that's a very big.

Asset so we feel now even more confident.

Above $5 billion is very much an achievable number.

Assuming that we are able to close on this transaction by the fourth quarter.

But it is very difficult to say Oh, you should completely exclude this number from from the $5 billion or.

It was inclusive of the entire $1 seven just given the sheer size of this but what it does allow us to do is stand in front of you today and say with a high level of confidence a higher level of confidence that achieving north of $5 billion number for this year is is in fact.

Speaker 5: But what it does allow us to do is stand in front of you today and say with a high level of confidence, a higher level of confidence.

Speaker 5: that achieving a north of $5 billion dollar number for this year is in fact, you know, something that we feel very good about. So that's how I would answer that.

Something that we feel very good about so that's how I would answer that question.

Speaker 10: Okay, understood. And then maybe thinking bigger picture, and you've obviously been in that least space for a long period of time, as you look back to other periods of times, where you've been in a rising interest rate environment, and you compare it to the kind of current environment we're in, what do you think, you know,

Okay understood and then maybe thinking bigger picture and you've obviously been in the net lease space for a long period of time.

As you look back to other periods of times, where you've been in a rising interest rate environment.

When you compare it to the kind of current environment we're in.

What do you think.

Speaker 10: are kind of a factors if you will that will drive cap rates to be more reflective of kind of rising rates. And I guess maybe as you look at kind of the competitive set that you compete with for these net lease investments, how kind of interest rate sensitive maybe are they today versus kind of the competitive set in other periods of time kind of similar to the one we're in today.

Or kind of the factors. If you will that will drive cap rates to be more reflective of kind of rising rates and I guess, maybe as you look at kind of the competitive set that you compete with for these net lease investments how kind of interest rate sensitive maybe are they.

Day versus kind of the competitive set in other periods of time.

Similar to the one we're in today.

Speaker 3: Yeah, that's a very good question, John . I can tell you that based on our own internal analysis,

Yeah. That's a very good question John I can tell you that based on our own internal analysis.

Speaker 5: We have obviously seen this cycle before, rising interest rate environments, what happens to cap rates then. And what we've found is that there is a positive correlation between rising interest rate environments and cap rates, but there tends to be a bit of a lag. Is it six months, nine months, 12 months?

We have obviously seen the cycle before a rising interest rate environment, what happens to cap rates then.

And what we've found is that there is a positive correlation between rising interest rate environments and cap rates, but that tends to be a bit of a lag now is it six months nine months 12 months somewhere in that ZIP code, but there is and if you think about it fundamentally obviously if cap rates are rising.

Speaker 3: somewhere in that zip code, but there is. And if you think about it fundamentally, obviously if cap rates are rising, especially in the private markets that leans on the debt environment a lot more, the cost of that debt is going up.

Especially in the private markets that leans on on the debt environment a lot more the cost of that debt is going up.

Speaker 3: And so at some point, there's a mismatch between existing cap rates and the cost of financing that particular opportunity. And so those do tend to balance out and reach an equilibrium point. That's what we've seen in years past.

And so at some point, there's a mismatch between.

Existing cap rates and the cost of financing that particular opportunity and so those do tend to sort of balance out and reach an equilibrium point, that's what we've seen in years past.

Speaker 3: There is one difference in today's environment and that is that, you know, net lease as a product has become much, much more institutional.

There is one difference in todays environment and that is that net lease as a product has become much much more institutional.

Speaker 5: And we have seen a plethora of capital coming into our space on the private equity side, on the sovereign wealth side, and of course with the preponderance of public net lease companies that have recently come into the fore. So I think that wall of capital that is now interested in net lease is going to potentially.

And we have seen a plethora of capital coming into our space on the private equity side on the sovereign wealth side.

And of course with the preponderance of public net lease companies that have.

Or that have recently come.

But.

And to the four so.

I think that wall of capital that is now interested in net lease is going to potentially.

Speaker 5: you know, put a curve on how quickly we get to this equilibrium point going forward. I think in this sort of environment, once again, the fact that we are, you know, an A-A3 rated company, and yes, our cost of debt will certainly go up and has gone up, but it will tend to go

You know put a curb on how quickly we get to this equilibrium point going forward.

And I think in this sort of environment. Once again, the fact that we are in.

And a minus a three rated company and yes, our cost of debt will certainly go up and has gone up.

But it will tend to go up less than a lot of our competitors who are.

Speaker 5: a lot of our competitors who are perhaps not as rated as highly and also in the private market.

Perhaps not as rated as highly and also in the private markets.

Speaker 5: you know, the folks that lean on leverage a lot more and therefore there.

No.

Folks that that lean on leverage a lot more and therefore, there you know.

Speaker 5: The impact to their cost of capital will be much higher than the impact to ours. I think is an advantage that should allow us to continue to do transactions that others might have to step away from. So even though I believe in today's environment.

The impact to their cost of capital will be much higher than the impact to us I think.

As an advantage that should allow us to continue to do transactions that others might have to step away from so even though I believe in today's environment that the equilibrium point might take a little bit longer to achieve.

Speaker 3: that the equilibrium point might take a little bit longer to achieve.

Speaker 5: I believe that some of the advantages that real-time income as a platform is able to embrace, I do think that that will play out more in our favor and will allow us to do things.

I believe that some of the advantages that that Realty income is a platform.

<unk> is able to sort of.

Embrace I do think that that will play out more in our favor and will allow us to do things.

Speaker 3: that others might not be able to get to as quick.

That others might might not be able to get to as quickly.

Speaker 10: very much appreciate the color. That's it for me. Thank you very much.

Fair enough I appreciate the color that's it for me. Thank you very much.

Thanks.

The next question is from Linda Tsai with Jefferies. Your line is open.

Speaker 1: The next question is from Linda, say with Jeffries, your line of soap.

Speaker 11: I believe the later 4Q closing of the WIN transaction is typical for the industry given regulatory considerations, but what are your general thoughts around buying high-value assets or portfolios that close at a later date to create more visibility in terms of funding and hitting investment targets? Do you see advantages to this approach?

Hi, Good morning, Linda Hello.

I believe the later for closing of the wind transaction is typical for the industry given regulatory considerations, but.

What are your general thoughts around buying high value assets or portfolios that close at a later date to create more visibility in terms of funding hitting.

Hitting investment targets do you see advantages to this approach.

Speaker 5: Yeah. Linda, that's a very good question. And, you know, I think I've received questions around, hey, this is a very large transaction. It's 1.7 billion. How are you going to finance it?

Yes.

Linda that's a very good question.

I think I've received questions around.

This is a very large transaction, it's $1 7 billion, how are you going to finance it.

Speaker 5: For us, yes, it's a single transaction, but the size of that transaction is, you know, it's not unprecedented. We just did $2.6 billion in the fourth quarter of last year.

For US, yes, it's a single transaction.

The size of that transaction is.

It's not unprecedented we just did $2 6 billion in the fourth quarter of last year.

Speaker 3: and just in that quarter, and we're able to match fund our acquisitions by raising our equity, $1.7 billion of equity in the fourth quarter through the ATM. And obviously, we did some more debt on the unsecured side post the fourth quarter. So for us,

And just in that quarter, and we are able to match fund our acquisitions by raising.

Our equity $1 7 billion of equity in.

In the fourth quarter through the ATM and obviously, we did some more debt on the unsecured side post the fourth quarter. So for us I think.

Speaker 5: I think, again, one of the big advantages that we have is the liquidity that our stock affords us. We are trading close to $200 million in stock on a daily basis and are able to very easily

Again, one of the big advantages that we have is the liquidity that are.

Our stock affords us we are trading.

Close to 200 million.

Yes.

And stock on a daily basis and are able to very easily.

Speaker 5: raise capital to match fund, what might seem nominally as being a very large number, we are able to match fund it without this overhang situation. So if it closes in the third quarter or whether it closes in the fourth quarter doesn't really matter to us because we'll have a much better feel for it internally and we'll be able to match fund, you know.

Reyes.

Capital to match fund.

What might seem nominally as being a very large number.

We are able to match fund it without this overhang situation. So we.

If it closes in the third quarter or whether it closes in the fourth quarter doesn't really matter to us because we will have a much better feel for it internally and we will be able to match fund.

<unk>.

Accordingly so.

Speaker 3: Yes, it's a big, big number on a single asset, but I don't think we see this as necessarily causing any, you know, overhang, but should not cause any overhang issues for us.

Yes, it's a big big number on a single asset, but I don't think we see this as necessarily causing any.

Over hang, but should not cause any overhang issues for us.

Speaker 12: And then in terms of vacated boxes, you talked about weighing the decision between selling and maybe putting some capital back in to maximize value. Could you give us some examples of how you reposition boxes in the past and maybe what type might be more amenable to the strategy? Currently.

Thanks, and then in terms of the vacated boxes, you've talked about weighing the decision between selling and maybe putting some capital back and to maximize value could.

Could you give us some examples of how you've repositioned boxes in the past and maybe what type might be more amenable to the strategy currently.

Speaker 3: Yeah, Linda, that is very much a function of, you know, the type of box that we are talking about, you know, a convenience store could be converted into a, you know, a car wash. Or could remain a convenience store. You know, 10,000 square foot box could could be turned into, you know, a two or three ten in box that actually generates 150, 160% of expiring.

Yes, Linda that is very much a function of the type of box that we're talking about.

A convenience store could be converted into a.

Carwash.

Or could remain a convenience store.

A 10000 square foot.

Box could could be turned into.

A two or three tenant box that actually generates a 150, 160% of expiring rents.

Speaker 5: You know, we've had examples of pizza huts that have been converted into Starbucks.

We've had examples of pizza huts that have been converted into Starbucks.

Speaker 3: in multiple places. And there are a lot of coffee chains that are aggressively growing that portfolio and are more than willing to pay for repositioning of either previous QSRs or Pizza Hut, et cetera.

And in.

Multiple places and there are a lot of.

Coffee chains that are aggressively growing their portfolio and are more than willing to pay for repositioning itself off.

The previous <unk>, Sars or pizza hut's et cetera.

Speaker 5: given the location, et cetera, and are more than willing to pay us rents that are in access of what the expiring rents were.

Given the location et cetera, and are more than willing to pay us rents that are in excess of what the expiring rents were.

Speaker 5: in their in their previous life. So those are some of the you know the repositioning that we have accomplished today.

And they're in their previous life. So those are some of the.

The repositioning that we have accomplished to date.

Speaker 5: And what we hope to be able to do because these can be, you know, quite

And what we hope to be able to do because these can be.

Quite.

Sure.

Speaker 5: quite positive from a rent per square foot perspective is to grow that part of our business.

Quite positive from a rent per square foot perspective is to grow that part of our business going forward and that is the goal, but yes. So far so good.

Speaker 5: going forward and that is the goal. But yes, so far so good.

Thank you.

Thank you.

The next question is from Chris Lucas with capital One Securities. Your line is open.

Speaker 1: The next question is from Chris Lucas with Capital One Securities, Your Lines.

Speaker 13: Hey, good afternoon everybody. Hi, Kristi. Just a quick question on the balance sheet, if I might, and sum it up, thank you for the current price amount on 10-year debt that you see out there. I guess just curious as to what the capacity you think you have today is for additional sterling denominated and or Euro denominated bonds given the portfolio at this point.

Hey, good afternoon, everybody Hi Christie.

A quick question on the balance sheet, if I might.

Sumit. Thank you for the sort of current.

Pricing on mall tenure debt that you see out there I guess I'm just curious as to what the capacity you think you have today is.

Additional sterling denominated <unk> euro denominated bonds.

Given the portfolio at this point.

Chris do you want to reference.

Speaker 2: Sure, Susan, yes Chris, I think from that perspective, we've got plenty of runway for 2022 in order to be able to execute in alignment with our capital strategy. And further to this, we'll as part of your questions, but we're also looking, leading on the Euro market too.

Sure.

Yes, Chris I think from that perspective.

We've got plenty of runway for 2022 in order to be able to execute in alignment with our capital strategy.

And further to that as realized it wasn't part of your question, but we're also looking.

Putting on the market.

Okay.

Speaker 6: I guess the point of the question really gets to, you've got a number of bonds, they're not near term, but they're intermediate terms that are coming due or above market relative to sort of what you think you could do today. Just curious as to how you think about how aggressive you'll be in terms of looking to essentially refinance that debt.

I guess the point of the question really gets too you've got a number of.

Bonds. They are not near term, but they are sort of intermediate terms that are coming due above market relative to sort of.

Thank you could do today, just curious as to how you think about how aggressive youll be in terms of.

Looking to.

Essentially refinance that debt.

Yeah, and I think well.

Speaker 2: That's outside, you know, for example, on the 2022, we have very modest debt materities and in terms of what we articulated as it relates to the Bay Read transaction, we're very focused on that here in the coming years. And we will be aggressive in that regard.

Go ahead.

For example on that 'twenty 'twenty shale, we have very modest debt maturities and in terms of what we articulated as it relates to the Bally transaction.

Sure.

Very focused on that here in the coming years and.

And we will be aggressive in that regard.

The only other thing I'll add Chris as you know we've done.

Speaker 3: The only other thing I'll add Chris is, you know, we've done liability management throughout the years, even last year. We went ahead and we paid the 2023's and the 24's out.

Liability management throughout the year is even even last year. We went ahead and we paid the 2020 threes in the 'twenty four is out.

Speaker 5: So this is something that we will continue to monitor. And if it makes sense, you know, we are more than happy to prepay our unsecured bonds and take advantage of interest rate environments that we find ourselves in.

So this is something that we will continue to monitor and if it makes sense.

We are more than happy to prepay, our unsecured bonds and take advantage of interest rate environments that we find ourselves in so.

Speaker 5: You know, I just wanted to leave you with that, but that is certainly a tool available to us and we will avail of it at the appropriate times.

I just wanted to leave you with that but that is certainly a tool available to us and we will avail of it at the appropriate times.

Okay. Thank you I appreciate your comments.

Sure.

Speaker 1: This concludes the question and answer portion of Realty Income's conference call. I'll now turn the call over to submit Roy for including our

This concludes the question and answer portion of Realty Income's Conference call I'll now turn the call over to Sumit Roy for concluding remarks.

Speaker 5: Thanks Chris. Thank you everyone for joining us today and we look forward to speaking with many a few soon at the upcoming Investor Conferences. Take care, bye bye.

Thanks, Chris. Thank you everyone for joining us today, and we look forward to speaking with many of you soon at the upcoming Investor conferences take care Bye bye.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may not discuss.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Yeah.

Yes.