Realty Income (O) Q1 2023 Earnings Call Transcript

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks：

Operator

Good day, and welcome to the Realty Income First Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please also note, today's event is being recorded.

I would now like to turn the conference over to Andrea Behr, Associate Director of Corporate Communications. Please go ahead.

Andrea Behr

Thank you all for joining us today for Realty Income's First Quarter Operating Results Conference Call. Discussing our results will be Sumit Roy, President and Chief Executive Officer; Christie Kelly, Executive Vice President, Chief Financial Officer and Treasurer; and Jonathan Pong, Senior Vice President, Head of Corporate Finance.

During this conference call, we will make 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's Form 10-Q. 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 reenter the queue.

I will now turn the call over to our CEO, Sumit Roy.

Sumit Roy

Thank you, Andrea. Welcome, everyone. We are pleased to report solid 2023 first quarter results, exhibiting continued momentum in our business. I would like to express my utmost gratitude to our One Team whose efforts enabled us to continue delivering on our growth objectives. I would also like to thank our equity and fixed income investors for their continued vote of confidence.

Our team's efforts and the benefits of our size and scale were reflected in our first quarter results, highlighted by approximately $1.7 billion of high-quality investments acquired at a cash cap rate of 7%. This represents a 90 basis point increase compared to the investment cash cap rate we achieved in the fourth quarter of last year and resulted in an investment spread of 163 basis points, which is above our historical averages. As we have experienced in prior cycles, cap rates for our investments after an adjustment period have historically tended to be positively correlated with interest rates, which is a trend we have largely continued to experience this year after the recent rise in rates.

Our ability to access well-priced capital has historically served as a competitive advantage and is a testament to our long history of maintaining a conservative balance sheet and a diversified real estate portfolio, supported by clients who are leaders in their respective industries. Amidst an environment in which capital is expensive and are scarce for many of our clients, our value proposition is even more pronounced. This dynamic is reflected in the recent portfolio acquisitions we have announced, the active deal pipeline we see today and the favorable pricing spread we see for large portfolio transactions vis-a-vis one-off single asset transactions. Our differentiated platform extends beyond the external growth lens. Recently, we have taken steps to leverage the size of our portfolio and the history of our operating business through the continued development of advanced analytics.