Fitch Rates Realty Income's Senior Unsecured Notes 'BBB'.Business Editors NEW YORK--(BUSINESS WIRE)--March 6, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned a 'BBB' rating to the recent offering of $100 million 5.375% senior unsecured notes due March 2013 issued by Realty Income Corporation Realty Income Corporation is a real estate company based in Escondido, California. It is certified as a real estate investment trust by the SEC. Sometimes referred to as the "monthly dividend company" because of its strong history of providing monthly dividends to its shareholders. (NYSE NYSE See: New York Stock Exchange : O). Proceeds from the offering will be used to pay down outstandings under its $250 million bank credit facility, which as of March 1, 2003, had $107.1 million outstanding. Fitch has also affirmed the ratings at 'BBB' for the $230 million outstanding senior unsecured notes due 2007 through 2009, and 'BBB-' for the approximate $100 million of Series B and Series C cumulative redeemable preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. outstanding for the real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ). The Rating Outlook is Stable. Fitch's ratings continue to reflect favorably on Realty Income Corporation's (Realty Income) conservative financial profile as demonstrated through its high fixed charge coverage ratio, low debt leverage level and its fully unencumbered portfolio, the company's continued focus on retail chains that provide necessity-type goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. , management's strong track record of cautious asset underwriting as well as demonstrated access to varied sources of capital, as evidenced by this debt offering, the company's October 2002 new bank credit facility and the July 2002 common stock offering. Additional credit positives include Realty Income's continued diversification into new industries and retail chains (the current portfolio is leased to 79 retail chains doing business in 25 retail segments), its proactive asset disposition and capital recycling program, and the company's minimal development exposure. Realty Income has paid 391 consecutive monthly dividends through its 33 year operating history, an action Fitch deems noteworthy due to its large retail investor Retail Investor Individual investors who buy and sell securities for their personal account, and not for another company or organization. Notes: Retail investors buy in much smaller quantities than larger institutional investors. base which makes up over 80% of its equity ownership. The strengths of Realty Income are balanced by the negative elements of the current macro economic environment that are putting pressure on virtually all property sectors. However, Fitch notes that the retail sector has been able to 'weather the storm' better than the other sectors and Fitch continues to maintain a stable outlook on the retail sector. Adding to the economic pressure is the uncertainty surrounding resolution of the crisis with Iraq. Fitch also continues to monitor Realty Income's focus on non-investment grade tenants and certain industry/tenant concentrations. Fitch recognizes that management has been proactively reducing these concentrations by introducing new retail industries/tenants into the tenant roster and self-funding this growth through sales of assets and capital recycling. Finally, Fitch believes there is a degree of re-leasing risk associated with the special-purpose design of certain buildings (e.g. automotive service, restaurants and child care). As a mitigant to some of the challenges discussed, Realty Income exhibits one of the stronger balance sheets in the REIT sector. Fitch estimates Realty Income's ratio of debt plus preferred stock to undepreciated book capital at 33.4% (proforma the debt offering). Earnings before interest, depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) coverage ratios as of Dec. 31, 2002 are solid with interest (including capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. and amortization) and fixed charge coverage at 4.9 times (x) and 3.6x, respectively (proforma the debt offering). Realty Income's bondholder protection measures are further enhanced by its fully unencumbered asset base which covers its unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. obligations at 3.9x (proforma the debt offering). Realty Income also maintains a well-laddered debt maturity schedule with no debt maturities until 2007. Finally, proforma this debt offering and the application of retained cash, Realty Income will have full availability under its bank credit facility as well as no floating rate debt exposure. Realty Income Corporation based in Escondido, CA, is a $1.3 billion (undepreciated book capital) REIT with equity investments in single-tenant retail properties operated under long-term triple-net lease agreements. Founded in 1969, Realty Income acquires and owns free-standing, single tenant retail properties. As of Dec. 31, 2002, Realty Income owned a portfolio of 1,197 properties in 48 states including Florida (10.9% of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. rent), California (9.9%) and Texas (9.7%). |
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