Realty Income Financial Model
Real Estate Company Financials Example (Free Excel Download)
Realty Income Corporation (NYSE: O), known as "The Monthly Dividend Company," is an internally managed real estate investment trust (REIT) that acquires and manages freestanding commercial properties.
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About this model
This model forecasts Adjusted Funds From Operations (AFFO) and calculates the Net Asset Value (NAV) of Realty Income Corporation to determine dividend sustainability and equity valuation for a prospective real estate investor.
Realty Income Corporation (NYSE: O), known as "The Monthly Dividend Company," is an internally managed real estate investment trust (REIT) that acquires and manages freestanding commercial properties. The company operates under a triple-net lease model, meaning tenants are responsible for most property-level expenses including taxes, insurance, and maintenance.
- Business segments: Retail (approx. 79% of annualised base rent), Industrial (14%), Gaming (3%), and Other (3%).
- Key geographies: United States (majority), United Kingdom, and continental Europe (Spain, Italy, Ireland), with a recent 2025 expansion into Mexico.
- Business model type: Asset-heavy, triple-net lease REIT. Growth is driven primarily by external acquisitions funded through debt and equity capital markets.
- Competitive position: The 6th largest global REIT with an enterprise value exceeding $82 billion and a portfolio of over 15,500 properties. It benefits from a massive scale advantage and a low cost of capital.
- Recent major events: Completed the $9.3 billion acquisition of Spirit Realty Capital in early 2024; formed strategic joint ventures with GIC and Blackstone (Bellagio and CityCenter investments); launched a U.S. open-end fund in 2025 raising $1.5 billion.
The downloadable Realty Income financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsRealty Income financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Income before income taxes | $392.4M | $917.6M | $928.9M | $933.9M | $1.16B |
| Total expenses | $1.66B | $2.54B | $3.19B | $4.49B | $4.79B |
| Comprehensive income available to common stockholders | $419.0M | $911.3M | $899.4M | $812.2M | $1.13B |
| Net income | $359.5M | $869.4M | $872.3M | $860.8M | $1.06B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Realty Income
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Rental Revenue (Base Rent)
- Segment name: Rental Revenue (excluding reimbursements).
- Revenue driver formula: (Beginning Period Annualised Base Rent + Net Acquisitions Annualised Base Rent + Same-Store Rent Growth) x Occupancy Rate.
- Historical growth rate: 1.0% to 1.5% organic same-store rent growth; total revenue grows much faster (15-20% historically) due to aggressive property acquisitions.
- Key growth levers and headwinds: The primary growth lever is the volume of acquisitions ($6 billion to $8 billion annually) and the initial cash yield on those acquisitions (currently around 7.1% to 7.5%). Headwinds include tenant bankruptcies (credit-related losses) and higher interest rates increasing the cost of capital.
- Pricing dynamics: Long-term leases (weighted average remaining lease term of approx. 9 years) with contractual annual rent escalators (typically 1% to 2% or tied to CPI).
- Revenue recognition notes: Rent is recognised on a straight-line basis over the lease term. The model must track straight-line rent adjustments to bridge GAAP revenue to cash cash flow (AFFO).
- Seasonality: Minimal seasonality due to the long-term nature of the leases.
Tenant Reimbursements
- Segment name: Tenant reimbursements.
- Revenue driver formula: Reimbursable Property Expenses x Reimbursement Rate.
- Historical growth rate: Scales directly with property expenses.
- Key growth levers and headwinds: Driven by underlying property taxes and insurance costs. Because it is a triple-net REIT, this is largely a pass-through line item.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Property expenses (non-reimbursable).
- Gross margin range: Not applicable in traditional terms. Net Operating Income (NOI) margin is typically 98% to 99% of rental revenue due to the triple-net structure.
- Key input costs and commodity exposures: Vacant property maintenance, uncollected tenant receivables, and credit-related losses (typically 40 to 70 basis points of revenue).
- How COGS scales with revenue: Linear with portfolio size, though non-reimbursable expenses spike slightly if occupancy drops.
Operating Expenses
- R&D: Zero.
- SG&A: General and Administrative (G&A) expenses. Highly scalable. Typically runs at 3.5% to 3.8% of rental revenue, or approximately 21 basis points of total gross asset value.
- Depreciation & Amortisation: Massive non-cash expense for REITs. Typically runs at $2.60 to $2.80 per share annually. Split between building depreciation (typically 35-40 year useful life) and acquired lease intangibles.
- Stock-Based Compensation: Included in G&A but must be added back for AFFO calculations.
- Restructuring / one-time charges: Merger and integration costs appear frequently due to large-scale M&A (e.g., Spirit Realty integration in 2024).
Margin Profile
- Adjusted EBITDAre margin: 94.0% to 95.0% (reported at 94.6% for full-year 2025).
- Margin trend: Highly stable. The triple-net lease structure insulates the company from inflation in property operating costs.
Balance Sheet Structure
- Total assets: Approximately $55 billion to $60 billion.
- Key asset categories: Real estate held for investment (at cost), accumulated depreciation, cash and cash equivalents, and investments in unconsolidated joint ventures.
- Goodwill & intangibles as % of total assets: Acquired lease intangibles represent 5% to 10% of assets, amortised over the life of the leases.
- Working capital profile:
- Days Sales Outstanding (DSO): Minimal (rent is paid in advance).
- Days Inventory Outstanding (DIO): Zero.
- Days Payable Outstanding (DPO): 15 to 30 days.
- Net working capital as % of revenue: Negative and immaterial. REITs do not fund growth from working capital.
- PP&E: Represents the core real estate portfolio. Land is not depreciated; buildings are depreciated over 35 to 40 years.
- Right-of-use assets / operating leases: Immaterial for the core business model.
Capital Expenditure & Investment
- Capex as % of revenue: Maintenance capex is virtually zero (less than 1% of revenue) due to the triple-net lease structure.
- Maintenance capex vs. growth capex: 100% of meaningful capital deployment is growth-oriented (acquisitions).
- Major capex programmes underway or planned: The company guides to $8.0 billion in investment volume for 2026.
- Capitalised software / development costs if material: Immaterial.
- M&A pattern: Serial acquirer. Mix of single-asset purchases, sale-leaseback portfolio transactions, and transformational public-to-public M&A (VEREIT in 2021, Spirit Realty in 2024).
- Typical acquisition multiple paid: Evaluated on an initial cash yield (cap rate) basis, typically acquiring at 7.0% to 7.5% cap rates.
Debt & Capital Structure
- Total debt: Approximately $25 billion to $28 billion.
- Debt/EBITDA ratio: Target and current leverage is 5.4x to 5.5x Net Debt to Annualised Pro Forma Adjusted EBITDAre.
- Credit rating: A- (S&P), A3 (Moody's).
- Key debt instruments: Senior unsecured notes (majority of debt), commercial paper programme, and a $4.0 billion revolving credit facility.
- Maturity profile: Well-laddered. Average maturity is typically 6 to 7 years.
- Interest rate profile: Over 90% fixed rate. Weighted average interest rate is approximately 3.8% to 4.2%.
- Covenants: Standard investment-grade REIT covenants (e.g., total debt to total assets capped at 60%).
- Share repurchase programme: Authorised $2.0 billion in early 2025, but the company is primarily a net issuer of equity.
- Dividend policy: Monthly dividend. Annualised 2025 dividend was $3.24 per share. Payout ratio targets 74% to 76% of AFFO.
Cash Flow Characteristics
- Operating cash flow conversion: Not the primary metric for REITs. Focus is on AFFO.
- Free cash flow margin: After dividends, retained cash flow is minimal. The company distributes the vast majority of its cash flow to maintain REIT status.
- Major non-cash items that bridge net income to OCF: Real estate depreciation (massive add-back), straight-line rent adjustments, and amortisation of lease intangibles.
- Working capital cash flow impact: Immaterial.
- Capex intensity: External acquisitions require constant access to capital markets. The company funds acquisitions with approximately 60-65% equity and 35-40% debt to maintain its 5.4x leverage target.
- Cash tax rate vs. GAAP effective tax rate: As a REIT, the company pays virtually no corporate income tax, provided it distributes at least 90% of taxable income. Tax expense is limited to foreign jurisdictions and taxable REIT subsidiaries (TRS).
Sheet Structure
- Assumptions: Hardcoded drivers for macroeconomic inputs, cap rates, investment volume, and funding mix.
- Portfolio Roll-Forward: Tracks beginning property count, acquisitions, dispositions, ending property count, and occupancy rate.
- Income Statement: GAAP view. Rental revenue, tenant reimbursements, property expenses, G&A, depreciation, interest expense, and net income.
- FFO & AFFO Reconciliation: The most critical sheet. Bridges Net Income to NAREIT Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO).
- Balance Sheet: Real estate assets, accumulated depreciation, debt tranches, and equity.
- Debt Schedule: Tranches of unsecured notes, revolver drawdowns, and interest expense calculations.
- Equity & Share Count: Tracks ATM (At-The-Market) share issuances, share repurchases, and calculates weighted average diluted shares outstanding.
- NAV Valuation: Net Asset Value calculation applying a market cap rate to forward 12-month Cash NOI.
- Returns & Dividends: Dividend per share forecast, payout ratio checks, and total shareholder return calculations.
Key Financial Relationships
- "Ending Gross Real Estate = Beginning Gross Real Estate + Acquisitions - Dispositions"
- "Rental Revenue = (Beginning Annualised Base Rent + Ending Annualised Base Rent) / 2 x Average Occupancy Rate"
- "Same-Store Rent Growth = Prior Year Same-Store Rent x (1 + Same-Store Growth Assumption [1.0% to 1.3%])"
- "Acquisition NOI = Investment Volume x Initial Cash Yield [7.1% to 7.5%]"
- "Property Expenses = Rental Revenue x Property Expense Ratio [1.5% to 1.6%]"
- "G&A Expense = Total Gross Asset Value x G&A bps [21 bps]"
- "NAREIT FFO = Net Income + Real Estate Depreciation + Impairment Losses - Gain on Sale of Real Estate"
- "AFFO = NAREIT FFO - Straight-Line Rent Adjustments + Stock-Based Compensation - Maintenance Capex"
- "New Equity Issued = Investment Volume x Equity Funding Mix [60% to 65%]"
- "New Shares Issued = New Equity Issued / Assumed ATM Share Price"
- "Ending Shares Outstanding = Beginning Shares + New Shares Issued - Shares Repurchased"
- "Dividends Paid = AFFO x Target Payout Ratio [75%]"
- "Net Debt to EBITDAre = (Total Debt - Cash) / Annualised Pro Forma Adjusted EBITDAre"
- "Implied Cap Rate = Forward 12-Month Cash NOI / Implied Real Estate Value"
Cross-Sheet Dependencies
- The Assumptions sheet dictates the investment volume and funding mix, which feeds the Portfolio Roll-Forward, Debt Schedule, and Equity & Share Count.
- The Portfolio Roll-Forward generates the asset base that drives Rental Revenue on the Income Statement.
- Net Income from the Income Statement is the starting point for the FFO & AFFO Reconciliation.
- The Equity & Share Count sheet calculates the denominator for AFFO per share, which is the primary output evaluated on the Returns & Dividends sheet.
- Circularity risk exists in the Debt Schedule: Interest expense reduces Net Income, which reduces retained cash, which increases the need for revolver debt, which increases interest expense. A circuit breaker toggle must be included.
Sign Convention
- Revenues, asset balances, and equity balances are positive.
- Expenses, capital expenditures, and dividends paid are entered as positive numbers and subtracted in formulas.
- On the cash flow statement (or FFO bridge), cash inflows are positive and cash outflows are negative.
Things Most Likely to Go Wrong
- Failing to model continuous share issuance. Realty Income issues millions of shares annually via its ATM programme to fund acquisitions. If the share count is held flat, AFFO per share will be wildly overstated.
- Confusing FFO with AFFO. FFO includes straight-line rent (non-cash), while AFFO removes it. The model must explicitly deduct straight-line rent to arrive at AFFO.
- Miscalculating the timing of acquisitions. A $8 billion acquisition year does not generate $8 billion of rent in year one. The model must apply a mid-year convention (divide by 2) for in-year acquisition revenue.
- Overestimating maintenance capex. Unlike traditional corporates, triple-net REITs have near-zero maintenance capex. Do not apply a standard "% of revenue" capex assumption.
- Ignoring credit-related losses. The model must include a 40 to 50 basis point deduction from gross revenue to account for tenant defaults.
- Double-counting tenant reimbursements. Reimbursements must exactly match the reimbursable property expenses line; they have zero impact on net operating income.
- Misaligning the dividend payout. The dividend is paid monthly, but modelled annually. Ensure the payout ratio is calculated against AFFO, not Net Income.
- Forgetting the pro-forma adjustment for EBITDAre. When calculating the leverage ratio, EBITDAre must be annualised to reflect a full year of earnings from mid-year acquisitions.
Validation Checks
- "Occupancy rate must remain between 98.0% and 99.0%; flag if it drops below historical norms."
- "Net Debt to Annualised Pro Forma Adjusted EBITDAre must remain between 5.2x and 5.6x to comply with rating agency targets."
- "AFFO per share growth should be in the 2.0% to 4.0% range annually (2026 guidance implies 2.8% growth)."
- "Dividend payout ratio must remain between 74% and 76% of AFFO."
- "G&A as a percentage of gross asset value should not exceed 25 basis points."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Rent recapture rate on expiring leases should be modelled between 102% and 105% based on recent historical performance."
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| 2026 Investment Volume | 8,000 | USD Millions | Management's initial 2026 guidance |
| Initial Cash Yield (Cap Rate) | 7.3 | % | Blended average of US and European acquisitions in 2025 |
| Same-Store Rent Growth | 1.15 | % | Midpoint of 2026 guidance (1.0% to 1.3%) |
| Portfolio Occupancy | 98.5 | % | Management guidance for 2026 |
| Credit-Related Losses | 0.45 | % of Revenue | Management guidance (40-50 bps for 2026) |
| Property Expenses (Non-Reimbursable) | 1.5 | % of Revenue | Management guidance for 2026 |
| G&A Expense | 0.21 | % of GAV | Historical average (21 bps of gross asset value) |
| Equity Funding Mix | 65.0 | % | Required to maintain 5.4x leverage target |
| Debt Funding Mix | 35.0 | % | Required to maintain 5.4x leverage target |
| ATM Share Issuance Price | 58.00 | USD | Approximate recent trading range |
| Cost of New Debt | 4.5 | % | Based on recent unsecured notes offerings |
| Target Dividend Payout Ratio | 75.0 | % of AFFO | Historical average and management target |
| Rent Recapture Rate | 104.0 | % | Based on 2025 actuals (103.9%) |
| Market Cap Rate (for NAV) | 6.5 | % | Standard benchmark for investment-grade retail REITs |
Data Sources & Benchmarks
- Filings: SEC EDGAR (Form 10-K, 10-Q, 8-K) and the Realty Income Investor Relations page (specifically the Quarterly Supplemental Operating & Financial Data).
- Key peers for benchmarking: NNN REIT (NNN), W. P. Carey (WPC), Agree Realty (ADC), and Essential Properties Realty Trust (EPRT).
- Industry data sources: NAREIT (National Association of Real Estate Investment Trusts) for industry-wide cap rates and occupancy benchmarks; Green Street Advisors for NAV cap rate estimates.
- Consensus estimates source: Visible Alpha or S&P Capital IQ for forward AFFO per share and NAV estimates.
Sources
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Frequently asked
What is Realty Income's business model?+
Realty Income Corporation operates as an internally managed real estate investment trust (REIT) specializing in acquiring and managing freestanding commercial properties. It employs a triple-net lease model, meaning tenants are responsible for most property-level expenses like taxes, insurance, and maintenance. The company is known as "The Monthly Dividend Company" and primarily focuses on retail, industrial, and gaming segments across the US, UK, and continental Europe.
How does Realty Income generate revenue and grow its business?+
Realty Income generates revenue primarily through rent from its extensive portfolio of over 15,500 properties, leased under triple-net agreements. Growth is largely driven by external acquisitions, which are funded through debt and equity capital markets. The company has a history of serial acquisitions, including large public-to-public mergers like Spirit Realty Capital.
Why is Realty Income's maintenance capital expenditure so low?+
Realty Income's maintenance capital expenditure is virtually zero, typically less than 1% of revenue. This is a direct result of its triple-net lease business model, which stipulates that tenants are responsible for most property-level expenses, including maintenance. Therefore, nearly all meaningful capital deployment by Realty Income is growth-oriented, focused on acquisitions.
What are the key metrics used to value Realty Income in a financial model?+
A financial model for Realty Income primarily forecasts Adjusted Funds From Operations (AFFO) and calculates the Net Asset Value (NAV). These metrics are crucial for determining dividend sustainability and assessing the equity valuation for prospective real estate investors. The model also considers the company's asset-heavy structure and acquisition-driven growth.
Can I download an Excel financial model for Realty Income?+
Yes, an Excel financial model for Realty Income is available for download. This model forecasts key financial metrics up to FY2030 and is designed to help determine dividend sustainability and equity valuation for a prospective real estate investor.
What are some top financial model assumptions for Realty Income?+
Key financial model assumptions for Realty Income include a Revenue Growth rate of 0.2, COGS as 0.55% of Revenue, and SGA as approximately 0.0425% of Revenue. Additionally, Depreciation & Amortization is assumed to be 0.3 of Revenue, and Capex is estimated at 0.03 of Revenue, reflecting its acquisition-driven growth strategy.
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