Realty Income (NYSE:O) reported third-quarter 2026 adjusted funds from operations, or AFFO, of $1.12 per share, up 3.7% from a year earlier, as the company emphasized its expanding investment and financing options across geographies, asset classes and capital structures.
President and Chief Executive Officer Sumit Roy said the company’s diversified approach enabled it to pursue attractive risk-adjusted returns despite higher long-term interest rates and volatility in financing markets. Realty Income raised its 2026 AFFO guidance to $4.45 to $4.46 per share and reaffirmed its $10 billion investment-volume target.
Investment activity shifts toward Europe, industrial and credit
Realty Income invested about $2.6 billion during the quarter, or $2.2 billion at its pro rata share, at an initial weighted-average cash yield of 6.8%. Property acquisitions included weighted-average annual contractual rent increases of 1.9%. The company said its investments generated a leverage-neutral spread of about 170 basis points over its short-term weighted-average cost of capital, and 53% of quarterly activity involved investment-grade clients.
The company sourced a record approximately $59 billion of potential investments during the quarter, bringing year-to-date sourcing above $120 billion. Realty Income completed investments equal to 4.4% of sourced opportunities, while 92% of its activity was relationship-driven.
Europe accounted for approximately $940 million, or 42%, of pro rata investment volume during the quarter, at a 7.1% initial weighted-average cash yield. More than 85% of European real estate investment volume was industrial, with a 6.9% initial cash yield.
Among its larger European transactions, Realty Income acquired a $180 million e-commerce logistics facility in western Poland, leased to an unnamed investment-grade international retailer. The asset, located in an established logistics hub, was acquired at a 6.8% yield and supports distribution across Central and Western Europe.
Industrial was the company’s largest investment category overall, with approximately $1.15 billion invested at an initial weighted-average cash yield of 6.5%. Domestic industrial leases carried weighted-average contractual rent increases of 2.5%, while international leases were generally linked to inflation and market rent growth.
Roy also highlighted a logistics-park acquisition near Dallas-Fort Worth International Airport. The portfolio’s in-place rents are approximately 45% below market, and Neil Abraham, chief strategy officer and president of Realty Income International, said the company expects to achieve all of that mark-to-market opportunity within the next three and a half years.
In addition, Realty Income invested approximately $250 million in credit investments across retail, industrial and data centers, representing more than 10% of total quarterly volume. Roy said the credit strategy is designed to complement—not replace—traditional real estate ownership by providing exposure to high-quality collateral and established counterparties at higher yields. The credit investments made in the third quarter had an average duration of approximately 3.4 years.
Financing strategy supports investment spreads
Chief Financial Officer and Treasurer Jonathan Pong said Realty Income ended the quarter with approximately $5.4 billion of available liquidity and net debt to annualized pro forma adjusted EBITDAre of 5.4 times, or 5.2 times including $1.1 billion of unsettled at-the-market equity raised at a weighted-average gross price of $60.61 per share.
More than 94% of the company’s pro rata debt was fixed rate. Realty Income financed its quarterly investments at a blended year-one cost of capital of approximately 5%, compared with the 6.8% investment yield.
During the quarter, Realty Income issued €600 million of senior unsecured notes at an effective annual yield of about 3.7%. It also issued $1 billion of 3.75% convertible senior notes, producing approximately $950 million in net proceeds after the purchase of a capped call. The capped call established an effective conversion price of $83.55 per share, according to Pong.
Public equity was a smaller component of funding than in prior years. Realty Income settled approximately $470 million through its at-the-market program during the quarter, and public equity represented 19% of pro rata investment volume year to date, compared with an annual average of 47% over the preceding three years.
Pong said the company’s access to euro-denominated debt gives it an advantage in funding European acquisitions. He noted that a 10-year fixed-rate unsecured borrowing in euros was approximately 80 basis points less expensive than comparable U.S. dollar debt at the time of the call.
KKR joint venture and asset sales add capital sources
Realty Income also expanded its private-capital platform through a recently closed joint venture with KKR. KKR invested €528 million for a 49% equity interest in a portfolio of 54 retail and industrial properties across four European countries. The portfolio had a 5.9% initial capitalization rate, including recurring asset-management fees.
The joint venture allows Realty Income to call KKR’s interest between years 10 and 17 to produce a 6.4% internal rate of return. Pong described the arrangement as a long-term source of equity capital and said future assets placed in similar insurance-oriented joint ventures would likely be stable, higher-credit and long-duration properties. The KKR venture is unlevered.
Meanwhile, Realty Income continued to use dispositions as a funding source. It completed approximately $527 million of property sales during the quarter, including $395 million of occupied asset sales at a 7.1% net cap rate. Year-to-date disposition proceeds reached approximately $875 million, exceeding the company’s full-year 2025 disposition volume.
Roy said asset sales are intended both to manage portfolio exposures and to generate non-dilutive capital that can be reinvested into opportunities with higher risk-adjusted returns. The company expects disposition activity to remain elevated in the fourth quarter.
Outlook reflects operating strength
Alongside its higher AFFO outlook, Realty Income increased its occupancy outlook to above 98.5%. It reduced expected non-reimbursable expense leakage to a range of 1.3% to 1.5% and lowered its credit-loss expectation to approximately 30 basis points from 40 basis points.
Pong attributed those revisions to asset-management execution and better-than-expected tenant credit. He said the company’s fourth-quarter investment activity was fully prefunded from an equity perspective and was expected to generate meaningfully accretive spreads.
Management said it remains constructive on data centers but will remain selective, focusing on supply-constrained markets, experienced developers and operators, investment-grade hyperscale clients, long lease durations and contractual rent escalators. Roy said U.S. retail remains an important part of the business, but the company is currently finding more attractive growth and return characteristics in areas including European industrial real estate, data centers and credit investments.
About Realty Income (NYSE:O)
Realty Income Corporation is a real estate investment trust (REIT) that owns and manages a diversified portfolio of commercial properties. The company primarily invests in single-tenant properties that are leased to businesses under long-term, net lease agreements, under which tenants generally are responsible for property taxes, insurance and maintenance.
Its portfolio includes retail, grocery, convenience store, industrial, distribution and other commercial properties. Realty Income serves a broad range of tenants and seeks to generate recurring rental income through long-term leases.
