Despite rising interest rates, management believes that it will be able to execute over $5.0 billion of acquisitions in 2023, which is slightly higher than our estimate of $4.6 billion for the year. Management’s guidance for 2023 was also relatively in line with our expectations. Therefore, Realty Income reported adjusted funds from operations, or FFO, of $1.00 per share in the fourth quarter that beat our estimate of $0.97 and was better than the $0.94 figure the company reported in the fourth quarter of 2021. However, Realty Income did record a $14.9 million reserve to rental income mainly stemming from the Cineworld reorganization as the company does expect to be paid the owed rent. As a result, same-store net operating income was flat in the fourth quarter, below our estimate of 2.2% same-store NOI growth.
Realty Income reported a 42.8% decline in the revenue received from its theater tenants in the fourth quarter due to Cineworld, which represents 1.4% of Realty Income’s total revenue, undergoing Chapter 11 bankruptcy proceedings. The company reported re-leasing spreads of 3.8% in the quarter, a little below our estimate of new rent being 5.1% prior to lease terms. Economic occupancy remained flat at 99.2% in the fourth quarter.
Fourth-quarter results for Realty Income O were generally in line with our expectations, leading us to reaffirm our $78 fair value estimate for the no-moat company.
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