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Date
Wednesday, May 6, 2026 at 5 p.m. ET
Call participants
- President and Chief Executive Officer — Sumit Roy
- Chief Financial Officer — Jonathan Pong
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Takeaways
- AFFO Per Share -- $1.13, increasing 6.6% year over year, reflecting core portfolio and capital deployment performance.
- Investment Volume -- $2.8 billion deployed globally, with $2.6 billion on a pro rata basis and $1 billion allocated to credit and structured investments at a 7.1% initial weighted average cash yield.
- Full-Year AFFO Guidance Raised -- Midpoint increased by $0.25, now ranging from $4.41 to $4.44 per share, attributed to a strong start to the year and improved portfolio outlook.
- Lease Termination Income -- $40.2 million reported for the quarter, leading to an increased full-year outlook range of $45 million to $50 million based on visible pipeline.
- Credit Loss Outlook Lowered -- Now guided to approximately 40 basis points of rental revenue, reflecting improved portfolio visibility and performance.
- Liquidity -- $3.9 billion of liquidity on a pro rata basis at quarter-end; additional $174 million of forward equity raised post-quarter, bringing the current ATM unsettled balance to about $1.4 billion.
- Leverage -- Net debt to annualized pro forma adjusted EBITDA at 5.2x, with the figure at 4.9x including outstanding forward equity, both within targeted leverage ranges.
- Debt Capital Initiatives -- $800 million of 4.75% senior unsecured notes due 2033 issued post-quarter, with $500 million swapped into euros for a blended yield of 4.44%; new 10-year unsecured term loan for $694 million at 4.91% fixed rate using a municipal prepay structure.
- Private Capital Expansion -- Three major private capital vehicles established: $1.7 billion perpetual-life U.S. Core Plus fund, strategic GIC partnership (build-to-suit industrial), and $1 billion programmatic venture with Apollo, each targeting differentiated mandates.
- Selective Deal Sourcing -- $31 billion in opportunities sourced; approximately 9% closed, with 94% of transactions relationship-driven and investments balanced between North America and Europe.
- New Credit Investments -- $375 million mezzanine loan for logistics assets (including a right of first offer), and $190 million data center development loan in Virginia pre-leased to a hyperscale tenant.
- Strategic Platform Evolution -- Management emphasized private capital as an expanding ecosystem of non-overlapping verticals, designed to complement the public REIT model and broaden the company’s investment base with fee income and expanded opportunity set.
Summary
The earnings call emphasized a multi-pronged capital strategy and evolving revenue streams as Realty Income (O +0.69%) accelerated its private capital platform, increased investment flexibility, and leveraged alternative funding sources. Management described the intentional diversification away from sole reliance on public equity and detailed recently closed partnerships as the foundation for a sustained expansion of fee-driven, third-party capital income across cycles. The call highlighted the execution of debt strategies—including the municipal prepay structure and euro-denominated swaps—to enhance liquidity and reduce all-in borrowing costs, with direct linkage to ongoing global investment allocation. Company representatives positioned operational selectivity and data-driven asset management as core factors shaping both income growth visibility and future investment pipeline.
- The Apollo joint venture enables deployment of long-duration retail assets off-balance sheet with a call option capping equity cost at 6.875% between years seven and fifteen.
- The perpetual-life U.S. Core Plus fund allows investment alongside institutions in lower-yield, long-term growth assets, expanding the total addressable investment universe.
- CEO Roy specified that private capital vehicles are purposefully structured with minimal strategic overlap and each is tailored for unique investor profiles and mandates.
- In Q&A, Roy said, "If you think about the three buckets of capital that we have, and you try to analyze what is the potential overlap, if you will, on strategies, there is very little, if any, to be very honest. One is a potentially lower initial yield but with higher growth, which lends itself to our open-ended fund. The insurance capital is much more steady, low-growth investments that do not necessarily meet the long-term hurdles but are very good, predictable cash flow streams that work very well for insurance capital. And then the third is a build-to-suit that we have with GIC where we go in with the intention to provide debt capital and then have the path to ownership downstream if we so choose to exercise. I think these are three distinct strategies which, if you think about in the traditional sense of the word and how we were able to or not able to recognize earnings in these three different buckets—in some cases not even do these transactions—it is now allowing us to execute those three strategies, and it is largely based off of third-party capital. The way it translates to a positive for our public shareholders is through a predictable, permanent fee income stream, allowing us to recognize development investments that we make and interest income during development, which we were not able to do in the past, and being able to satisfy a need by insurance capital that does not really work long term on our balance sheet but allows us to create a fee income stream by leveraging our platform.
- Roy clarified that future private capital growth would occur only if it directly supports AFFO per share growth for public shareholders.
- Management described the data center development loan as part of a selective, repeat credit investment strategy with a path to potential direct ownership.
Industry glossary
- AFFO: Adjusted Funds From Operations, a non-GAAP REIT performance metric that excludes non-cash items from FFO to measure recurring operational cash flow available to shareholders.
- ATM: At-the-market equity offering program, allowing a company to raise equity capital incrementally by selling shares directly into the market over time, rather than through a single, large offering.
- Municipal prepay structure: A financing vehicle where a public agency prepays for future services (such as electricity), then lends some proceeds to a corporate partner, often resulting in lower borrowing costs for the corporate entity.
- Build-to-suit: A real estate development arrangement where properties are constructed to fit the needs of a specific client, often under long-term lease agreements.
Full Conference Call Transcript
Sumit Roy: Thank you, Alex, and welcome, everyone. We entered 2026 with strong momentum, and our first quarter results demonstrate progress across the priorities that matter most for Realty Income Corporation: disciplined capital deployment, durable portfolio performance, and continued expansion of our private capital platform. In the first quarter, we delivered AFFO per share of $1.13, up 6.6% year-over-year, and invested approximately 2.8 billion dollars, or 2.6 billion dollars on a pro rata basis, at a 7.1% initial weighted average cash yield. Our investment activity remained balanced between North America and Europe, and we also deployed approximately 1 billion dollars into credit and structured investments.
That strong start to 2026 supports our decision to raise the midpoint of full-year AFFO per share guidance by $0.25, or approximately 60 basis points at the midpoint. Jonathan will walk through the quarter and our updated guidance in more detail. Looking ahead, our 2026 outlook reflects an anticipated acceleration from 2025 as we leverage our scale, data-driven and robust platform to strive towards consistent double-digit total operational returns for our shareholders. I would like to briefly step back and place our recent announcements into the broader strategic context for Realty Income Corporation.
Over the past several months, we have been deliberate in building a private capital ecosystem to diversify our sources of permanent equity, expand our investment opportunity set, and support long-term value creation, all while remaining anchored in the same underwriting discipline, credit standards, and focus on durable, growing cash flow that have defined Realty Income Corporation since our inception. This is demonstrated through three critical achievements. First, we completed our 1.7 billion dollar cornerstone capital raise for our perpetual-life U.S. Core Plus fund. Second, we formed a strategic partnership with GIC focused primarily on construction financing and takeout commitments for build-to-suit industrial in the U.S. and Mexico.
Lastly, we raised 1 billion dollars in equity from Apollo as part of a programmatic venture that strives to ultimately deliver Realty Income Corporation's dependable income to the massive insurance and annuity market. Taken together, these initiatives represent what we view as a meaningful evolution of the Realty Income Corporation platform, rooted in years of intentional planning to strengthen how we fund growth and deploy capital across cycles. Several years ago, we identified a potential concentration risk in relying primarily on public equity markets, where pricing at times can become disconnected from underlying operating performance and this discrepancy persists for prolonged periods.
That realization led us to a fundamental question: how do we diversify capital sources to better leverage a platform designed to deploy billions of dollars annually while seeking to create long-term value for public shareholders? These partnerships represent the early stages of our private capital journey and we expect to continue adding accretive sources of permanent capital over time. Today, we view private capital not as a single strategy but as an ecosystem of distinct, non-overlapping verticals tailored to different geographies, property types, and investment mandates. This approach has expanded our investment base, strengthened our return profile through asset-light fee income, and meaningfully broadened our investable universe.
Importantly, it allows us to deploy capital across property types and across the real estate capital structure while preserving the core DNA of Realty Income Corporation. Each vehicle is designed to be complementary to our public REIT model and accretive to long-term per share value. Alongside that backdrop, our global platform evolution drove transaction activity during the quarter. With approximately 2.8 billion dollars of investment volume, we delivered one of our higher levels of quarterly deployment in recent years, supported by consistent execution across geographies, property types, and investment structures. We sourced approximately 31 billion dollars of investment opportunities during the first quarter, reflecting the depth of our global relationships and the scale of our platform.
That sourcing allowed us to remain highly selective, closing on roughly 9% of what we reviewed while maintaining discipline on yield, structure, and credit. Approximately 94% of opportunities were relationship-driven, reinforcing the durability of our origination engine. Our European platform continues to be a key competitive advantage. Markets remain more fragmented and less crowded than in the U.S., allowing us to source portfolio-oriented, tailored transactions with attractive duration and credit and to flex capital toward highly compelling opportunities. In the U.S., transaction markets remain active and competitive, particularly for small one-off assets. We continue to see meaningful value creation in larger and more structured investments where our relationships, scale, and underwriting capabilities provide a competitive advantage.
We deployed 1 billion dollars into credit investments globally, including two mezzanine transactions. The first was a 375 million dollar loan alongside a sovereign capital investment firm backed by a portfolio of high-quality logistics assets leased to a strong investment-grade e-commerce client, with a right of first offer on the underlying real estate. The second was a 190 million dollar loan supporting the development of a data center campus in Virginia pre-leased to an investment-grade hyperscale tenant. Our ability to invest across owned real estate, loans, preferred equity, and structured investments gives us flexibility to remain disciplined and selective, particularly in periods of macro volatility.
Our global platform, long-duration leases, and conservative balance sheet position us to stay active while maintaining underwriting rigor. Our platform advantage continued to deliver strong operating results, and we ended the quarter with robust occupancy and reported recapture. Through proactive asset and property management, our teams remained focused on driving AFFO per share growth from the core portfolio. We combined deep familiarity with our assets and clients, proprietary predictive analytics, and disciplined credit underwriting to maximize risk-adjusted economics on re-leasing and renewal outcomes. That approach generated outsized lease termination income of 40.2 million dollars during the first quarter, and based on current visibility, we have increased our full-year termination income outlook range to 45 million dollars to 50 million dollars.
Overall, we believe Realty Income Corporation today is more differentiated and better positioned for long-term growth than at any point in our history. With that, I will turn the call over to Jonathan.
Jonathan Pong: Thanks, Sumit, and good afternoon, everyone. We had an active first quarter with several new capital partnerships that expand our financial flexibility and deepen our access to long-term-oriented private capital. Combined with our established access to public markets, these initiatives broaden our investment buy box and support sustained global development. We ended the quarter with approximately 3.9 billion dollars of liquidity on a pro rata basis. Subsequent to quarter-end, we raised an additional 174 million dollars of forward equity, bringing our current ATM unsettled balance to approximately 1.4 billion dollars. Net debt to annualized pro forma adjusted EBITDA was 5.2x, within our targeted leverage range, and inclusive of our outstanding forward equity, our leverage would sit at 4.9x.
Subsequent to quarter-end, we issued 800 million dollars of 4.75% senior unsecured notes due 2033, swapping 500 million dollars into euros for a blended yield of 4.44%. In addition to diversifying our sources of equity, we are also taking steps to broaden our access to unique sources of debt capital. In the first quarter, we established a new form of debt financing through a 10-year unsecured term loan with an affiliate of Goldman Sachs. The capital raise provided Realty Income Corporation the opportunity to partner with the local community via San Diego Community Power, supporting its long-term energy procurement objectives for San Diego residents.
To facilitate this arrangement, San Diego Community Power utilized a well-established municipal prepay structure that enables a public agency to issue municipal bonds, using proceeds to prepay for future electricity deliveries while effectively lending a portion of the proceeds, in this case 694 million dollars, to Realty Income Corporation. In return, we agreed to pay a fixed annual interest rate of 4.91% through the Goldman Sachs term loan. We subsequently swapped 500 million dollars of the note to euros via a cross-currency swap, resulting in a 4.34% all-in blended cost of debt.
The strategic benefit to Realty Income Corporation is the creation of a deep pool of new debt capital at attractive pricing that can complement our access to the public unsecured debt market. Our European operations continue to provide incremental low-cost financing flexibility. Euro-denominated debt is priced approximately 100 basis points inside comparable tenor U.S. dollar debt and serves as both a natural currency hedge and a tool to offset higher-cost U.S. refinancings while remaining leverage neutral. Given our strong start to the year, we are increasing full-year investment volume guidance to 9.5 billion dollars at 100% ownership and raising the AFFO per share guidance range to between $4.41 and $4.44.
As Sumit noted, we are also increasing the expected lease termination income guidance range to between 45 million dollars and 50 million dollars as we become increasingly proactive with our asset management platform. And lastly, we are lowering our credit loss outlook to approximately 40 basis points of rental revenue, reflecting improved visibility and performance across the portfolio. As Sumit highlighted, we now have three distinct and intentionally structured private capital vehicles through our partnerships with Apollo, GIC, and the perpetual-life U.S. Core Plus fund. Each vehicle serves differentiated investment mandates and is designed to provide Realty Income Corporation with three new alternative sources of long-term-oriented equity.
Our most recent strategic partnership with Apollo seeks to provide a repeatable source of low-cost property-level equity while allowing us to retain operational control. We view this structure as a compelling complement to traditional public equity, and we expect it will carry comparatively less volatility of pricing and availability. A diversified net lease portfolio at scale is a natural complement to Apollo's perpetual capital AUM, which comprises a significant majority of their total AUM. Our initial transaction with Apollo resulted in a 1 billion dollar equity investment in a highly granular, well-diversified, long-duration retail portfolio of approximately 500 single-tenant properties contributed off our balance sheet.
The joint venture includes a call option exercisable between years seven and fifteen that caps the cost of this equity at 6.875% during Apollo's ownership period. This structure provides meaningful long-term optionality as contractual rent growth compounds over time, increasing spread versus our long-term cost of equity and enabling incremental investment volume at lower return hurdles. We are pleased to partner with one of the world's leading asset managers and intend to scale this relationship beyond this initial product. The partnership is well aligned, with Apollo providing long-term equity capital and Realty Income Corporation delivering sourcing, underwriting, and asset management capabilities through our global net lease platform.
The Apollo partnership represents our second programmatic private capital joint venture, following the January announcement of our build-to-suit development joint venture with GIC. Finally, during the first quarter, we completed the cornerstone fundraising round for our U.S. Core Plus open-ended fund, raising 1.7 billion dollars of institutional capital, primarily from state, city, and employee pension plans. The vehicle is designed to allow us to invest alongside high-quality institutional partners in assets with lower initial yields but strong long-term growth characteristics, while generating high-margin, capital-light fee income. Just as important, it is intended to broaden our buy box and enhance day-one accretion by more efficiently matching capital to opportunity. With that, I will turn it back to Sumit.
Sumit Roy: Thank you, Jonathan. Our private capital initiatives represent a natural extension of Realty Income Corporation’s long-standing business models. They are expected to enhance our ability to deploy capital through cycles, improve our cost-of-capital efficiency, and strengthen our long-term value proposition for shareholders. We are encouraged by the progress to date and look forward to building on this momentum. Operator, we are ready for Q&A.
Operator: Thank you. We will now open the call for questions. We will now begin the question and answer session. Our first question today comes from Jana Galan at Bank of America. Please go ahead.
Analyst: Good evening. This is Dan for Jana. Can you provide more detail on the 40 million dollars lease termination income recognized this quarter? For example, was it driven by a small number of tenants or broad-based activity, and were they re-leased or sold? And just as a follow-up, could you walk through the rationale behind the 40 million dollars add-back to AFFO related to credit loss?
Sumit Roy: This was obviously part of the forecast that we had shared with the market. If you recall, we had come out with a forecast of 40 million dollars to 45 million dollars. We were expecting this to be front-loaded. We have increased that based on the momentum we have seen to 45 million dollars to 50 million dollars. This was not concentrated in any one single name. It was across the board. Again, the rationale for doing this remains the same.
It is 100% focused on trying to create and maximize our total return profile on our investments, and if we feel like we have the ability to recoup the remaining rent and be able to lease these assets to alternative tenants who are better suited for those locations, that is one of the main drivers of doing this. The second being rather than waiting for an asset to become vacant in three to four years from now, being able to recycle the capital today and create a value proposition for our clients who are not long-term occupiers of that asset is again a win-win situation.
So it is really us leaning into our analytics and being much more proactive about harnessing these types of opportunities in our portfolio that is driving this. Despite the fact that it was all pretty much front-loaded, the actual increase in lease termination income is only 5 million dollars.
Jonathan Pong: The add-back to AFFO for credit loss is really a non-cash dynamic. We have loans that we invest in. These are non-cash allowances for loan loss, very standard with how we have treated similar situations in the past.
Sumit Roy: Coincidentally, they happen to be the same number, but one is a CECL non-cash-driven add-back. The other one is an actual cash payout to us, which is certainly part of AFFO.
Operator: Our next question today comes from Bradley Barrett Heffern at RBC Capital Markets. Please go ahead.
Bradley Barrett Heffern: Thanks, everybody. You obviously have the various private capital vehicles now. Clearly, you want to grow those. Where do you see the split of private capital investing versus the traditional investing going in the coming years?
Sumit Roy: Brad, this is a continuation of a theme that we have been touching on for the last, call it, 18 months now, where we used to share pretty much every quarter some of the transactions that we were passing on just because it would not fit what our public shareholders demand, which is day-one accretion or spread investing along with meeting a long-term hurdle rate. Part of why we are doing what we are doing is to be able to continue to take advantage of transactions that actually meet the long-term return profile. These are very good investments, and there is a pocket of private capital that is very interested in taking advantage of that.
So that was really the genesis behind why we started to look at these opportunities. If you think about the three buckets of capital that we have, and you try to analyze what is the potential overlap, if you will, on strategies, there is very little, if any, to be very honest. One is a potentially lower initial yield but with higher growth, which lends itself to our open-ended fund. The insurance capital is much more steady, low-growth investments that do not necessarily meet the long-term hurdles but are very good, predictable cash flow streams that work very well for insurance capital.
And then the third is a build-to-suit that we have with GIC where we go in with the intention to provide debt capital and then have the path to ownership downstream if we so choose to exercise. I think these are three distinct strategies which, if you think about in the traditional sense of the word and how we were able to or not able to recognize earnings in these three different buckets—in some cases not even do these transactions—it is now allowing us to execute those three strategies, and it is largely based off of third-party capital.
The way it translates to a positive for our public shareholders is through a predictable, permanent fee income stream, allowing us to recognize development investments that we make and interest income during development, which we were not able to do in the past, and being able to satisfy a need by insurance capital that does not really work long term on our balance sheet but allows us to create a fee income stream by leveraging our platform. So that is how this strategy that we have now started to implement and will continue to grow is going to benefit our shareholders—essentially monetizing the platform that we have built.
Bradley Barrett Heffern: Then it sounded like you did a data center development loan during the quarter. You obviously did the deal with Digital a few years back. There has not been a ton of consistent investment in data centers. What does the playing field look like for Realty Income Corporation today in that space? And does it look more like business loans, or is there a chance that maybe the deal like you did with Digital would potentially come back from a pricing standpoint to being attractive?
Sumit Roy: The rationale here is, again, anytime we are making credit investments, it is with a desire to own the real estate or at least a path to ownership. What we have said about our data center sleeve is we are highly selective around who our operator is going to be, and I am very happy to say that we are partnering with one of the best private operators out there. We are also very highly selective in terms of the location of these assets—once again, it is in Virginia—what I have described in the past as the center of the data center business, to again address the residual risk that is associated with these assets.
And then the underlying asset itself, the lease itself, needs to be able to fit into our investment thesis of being a single-tenant asset, long-duration lease, with well-above growth rates that we have been able to realize on the retail side of the business. It fits all those boxes. My hope is this is the second investment we have made with this particular developer, and it is with the intent to have a path to actual ownership of these assets. In the meantime, we are lending our balance sheet and getting very decent yields on these investments, which will then allow us to ultimately own the real estate.
Operator: Our next question today comes from Michael Goldsmith at UBS. Please go ahead.
Michael Goldsmith: Good afternoon. Thanks for taking my questions. Sumit, in your prepared remarks, you talked about these private capital vehicles, but you also mentioned that you are in the early stages of this. Are you thinking that you have done these three things and now you have another three more to do in the next 24 months, or should we be thinking about this as more longer term? I am just trying to get a sense of how much more activity you expect in this avenue going forward.
Sumit Roy: That is a good question, Michael. Let me step back and share with you that anytime we are exploring attracting third-party capital, it is with the singular intent to grow our earnings per share for our public shareholders. If it does not translate to that, there is no reason for us to be attracting third-party capital. If you filter any decision that we make through how it translates to growth, and if there is not a clear tie-in, then we are not going to be pursuing that capital source. That is the governing factor on anything we do.
The reason why I have said what we are going to do in the future remains unclear is that opportunities evolve with market conditions, but our intent is to continue building accretive, permanent-capital solutions that enhance per share growth over time.
