Retail commercial properties dealer Realty Income Corp. (O), which is facing a decline in tenancy leases, said Wednesday it expects fiscal 2011 adjusted FFO per share to meet the lower end of its prior guidance. It also cut its outlook for 2012, as recessionary trends are expected to further impact occupancy levels.
Realty Income now expects 2011 Funds from Operations, or FFO of $1.98 per share and adjusted FFO of $2.01 per share. Previously, it forecast 2011 FFO of $1.97 to $1.98 per share and adjusted FFO of $2.01 to $2.02 per share.
On average, 14 analysts polled by Thomson Reuters currently expect the company to report FFO of $1.98 per share for 2011. Analysts' estimates typically exclude special items.
In the same period last year, Realty Income reported FFO of $1.83 per share and adjusted FFO of $1.86 per share.
The company now expects 2011 net income of $1.05 per share, compared to its prior estimates of $1.13 to $1.14 per share.
For fiscal 2012, the company now expects FFO of $2.03 to $2.07 per share and adjusted FFO of $2.07 to $2.12 per share. Earlier, it's forecast was FFO of $2.07 to $2.11 per share and adjusted FFO of $2.11 to $2.16 per share. Analysts based on consensus, currently expect the company to report FFO of $2.09 per share.
The company has forecast net income in the range of $1.02 to $1.06 per share for 2012.
Recently, one of Realty Income's tenants, Friendly's Ice Cream, emerged from bankruptcy and rejected 19 of 121 leases. The rejected leases represent about $1.8 million of annualized rent. Assuming re-lease of the rejected properties and rent concessions on others, Realty Income estimates to recover about 80 percent of the $16 million rent Friendly's was previously paying.
Another tenant, Buffett Holdings Inc., recently filed for bankruptcy. Buffets leases 86 properties, which as of December 31, 2011, represented about $18.2 million or 3.9 percent of Realty Income's rental revenue. The company said it expects Buffet to reject leases on 7 properties, representing about $1.8 million of annualized rent. Assuming re-lease and rent concessions on other properties, it estimates to recover about 65 percent of the $18.2 million of annualized rent Buffets was paying previously.
Realty Income also expects more bankruptcies by other tenants in 2012, equating to about 2 to 3 percent of total rent portfolios.
The company said that in 2011, it invested $1 billion in 164 properties that are fully leased, with an average lease yield of 7.8 percent.
Shares of Realty Income under the ticker 'O' are currently trading at $35.90, up $0.08 or 0.22%, on the NYSE.
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