Morning, ladies and gentlemen. Welcome to the 2021 Annual Meeting of Stockholders of Realty Income. My name is Mike McKee, and I'm the Non Executive Chairman of the Board of Directors. We are pleased you could join us today. Our number one focus is for the health and safety of our employees and our shareholders.
So we thank you for participating virtually today as a result of concerns over the coronavirus situation. Thankfully, things are looking more positive of late. Please note that this meeting is being recorded. Today's meeting will be in 2 parts. The first part of the meeting will be the formal portion of the meeting where the required business will be handled.
The second part will be a bit more informal with a presentation on the company's operations and an opportunity to ask questions. I hereby call the formal portion of the 2021 Annual Meeting of Stockholders of Realty Income to order. I appoint Michelle Bashore, our Executive Vice President, Chief Legal Officer, General Counsel to act as Secretary of the meeting and Cynthia Scoglin of Broadridge as Inspector of Elections to count the votes on any matters present to this meeting or any assortments hereof. McKee. Michelle, would you please advise this meeting as to the mailing of the notice of the annual meeting of stockholders and report on the presence of a quorum.
Thank you, Mr. Chairman. The Inspector of Elections has filed her McKee. Thank you, Mr. Chairman.
The Inspector of Elections has filed her oath of office with me. Also, I have received and I'm delivering for inclusion in the McKee. An affidavit of distribution from Joanne Vogel of Broadridge stating that a notice of the annual meeting of stockholders was mailed beginning on April 1st To all holders of company common stock as of the record date for this meeting, which was the close of business on March 12, 2021. They are present in person or by proxy at this meeting, holders of approximately 83.7% of the outstanding shares McKee, which confirms the presence of a quorum. Only holders of common stock as of their record date are entitled to notice of and to vote at
McKee. Thank you, Michelle. A quorum is present and this meeting is duly constituted for the McKinnon for the transaction of business. I'd like to introduce the other directors virtually present today: Sumit Roy, our President and Chief Executive Officer Doctor. Kathleen Allen, Professor McKee, Emeritus at the Marshall School of Business and the Founding Director of the Center For Technology Commercialization at the University of California.
Doctor. Allen is a member of our Audit Committee. Larry Chapman, the Retired Executive Vice President and Head of Commercial Real Estate at Wells Fargo. Mr. Chapman is also a member of our Audit Committee.
McKee. Reggie Gilliard is a Senior Advisor with the Boston Consulting Group. Mr. Gilliard is the Chair of our Nominating Corporate Governance Committee. Priya Cherian Huskins, Senior Vice President and Partner at Woodruff, Sawyer and Co, a commercial insurance brokerage firm.
Ms. Huskins is Chair of our Compensation Committee and is a member of our Nominating Corporate Governance Committee. Greg McLaughlin is the Chief Executive Officer of the PGA Tours First Tee Foundation and the World Golf Hall of Fame. Mr. McLaughlin is a member of our audit and Compensation Committees.
Ron Merriman is the Retired Vice Chairman and Partner of KPMG, a global accounting and consulting firm. Mr. Merriman is Chair of our Audit Committee and is a member of our Nominating and Corporate Governance Committee. Our colleague, Jerry Lopez cannot be with us today. Jerry is an operating partner with SoftBank.
He's also a member of our compensation committee. And although he can't be with us virtually, he is with us in spirit. Also in attendance on this webcast are the following executive officers: Christy Kelley, Executive Vice President, Chief Financial Officer and Treasurer Michael Feifer, Executive Vice President, Chief Administrative Officer Neil Abraham, Executive Vice President, Chief Strategy Officer and Mark Hagen, Executive Vice President, Chief Investment Officer. At this time, it's my pleasure to also thank the following people for attending via this webcast today. It is always a sincere pleasure to introduce William Clark, our Co Founder and Retired Chairman of the Board and Joan Clark, also a co founder of Realty Income.
Their continued support and enthusiasm are cherished by all of us in leadership at Realty Income. I'd also like to welcome Ryan Kennedy and Todd Refnus with KPMG, the company's independent auditors and Bill Sernias and Darren Guttenberg, our attorneys from Latham and Watkins, the company's Corporate Counsel. Today, we have 4 items business we must handle as part of our formal meeting. The first item of business is the election of 9 directors, McKee, each to hold office until the next Annual Meeting of Stockholders and until his or her successor is duly elected McKee and qualifies. The 2nd term of business is the ratification of the appointment of our independent registered public accounting firm.
The Audit Committee of our Board of Directors has selected KPMG as the independent registered public accounting firm to audit the company's financial statements for the year ending December 31, 2021. The 3rd item of business is the non binding advisory vote to approve the compensation of our named executive officers. And the 4th item of business is the approval of the Realty Income Corporation 2021 Incentive Award Plan. McKee. At this time, we will entertain questions on any of these 4 proposals.
McKee. If you have a question and have logged in using your control number, please submit your question now by clicking on the questions box in the bottom left of the webcast page. The polls will be open for voting by anyone who wishes to vote online with respect to these proposals. Are there any questions or comments on these proposals? McKee.
As there are no questions related to the proposals, the polls are now open for voting on all matters McKinnon to be presented. Any stockholder who hasn't yet voted or wishes to change his or her vote and has logged in using their control number may do so by clicking on the voting button on the bottom right of your web portal and following the instructions. Any stockholder who has sent in a proxy or voted via the telephone or Internet and does not want to change his or her vote, does not need to take any further action. McKee. I now declare the polls closed.
At this time, we will pause for a minute to allow the Inspector of Elections to tally the votes and give the information to Ms. Beshore.
McKee. Mr. Chairman, the Inspector of Elections has advised me that the preliminary results McKee, independent registered accounting firm for the year ending December 31, 2021. 3rd, the advisory vote to approve the compensation of Realty Income's named Executive officers have been approved. 4th, the Realty Income Corporation 2021 incentive award plan has been approved.
McKee. The final tabulation results will be completed after the meeting and will be attached to the minutes of this meeting and will be disclosed in a Form 8 ks,
Congratulations, Doctor. Allen, Ms. Huskins, Messers, Chapman, Gilliard, Lopez, McLaughlin, Merriman and Roy. The stockholder meeting will now be concluded. At this time, we will hold our informal session.
For the informal portion of today's meeting, Sumit will provide an overview of the company, our 2020 operating performance and the company's outlook for 2021. We'll then open the floor to questions. It is my sincere pleasure to introduce our CEO, Soumit Roy.
Thank you, Mike. Welcome to the informal portion of our Annual Stockholder Meeting. We appreciate everyone joining us virtually today and we sincerely thank you for your continued support of Realty Income. I'll start by providing an overview of our business and our value proposition And then we'll open up the meeting for questions, which you can submit through the virtual webcast. As a monthly dividend company, We remain committed to operating our company in a manner that provides shareholders with dependable growing dividends.
McKee. Our company was founded in 1969 on the principles of capital preservation and income generation. Today, we are laser focused on sustaining and creating long term shareholder value through continued payment of monthly dividends that grow over time and growth of the overall business to support the increasing dividends. Our business in some ways is uncomplicated. We seek to acquire high quality real estate lease to leading operators in economically resilient industries who pay us monthly rent.
The income we receive in the form of monthly rent funds the monthly dividend and provides capital for new acquisitions, Driving growth in earnings. Our confidence in continuing to provide monthly dividends that increase over time stems from the quality of our real estate portfolio, which is designed for stability through a variety of economic environments. We fervently believe in portfolio diversification by geography, clients, industry and property type McKee, as a key mechanism to mitigate economic risk. We own over 6,600 properties across all 50 U. S.
States, McKee, Puerto Rico and the United Kingdom. In 2020, we invested over $2,300,000,000 in acquisitions and the momentum has continued this year. For 2021, we continue to expect to acquire over $3,250,000,000 in real estate and we are off to a healthy start. During the Q1, we invested approximately $1,000,000,000 in high quality real estate. Of this total, we invested $625,000,000 domestically, including our first ever acquisition in Hawaii, becoming the 1st and only REIT to own property in all 50 U.
S. States. And during the Q1, we invested approximately $403,000,000 McKee. Highlighting the continued strength of our international platform and bringing our total investment in the UK McKee, to over $2,000,000,000 since the first international acquisition we closed in 2019. Today, the UK represents over 7% of our total rental income.
We have about 600 clients who operate across 56 different industries. Generally, we partner with national best in class operators that we trust to maintain strong business fundamentals. Our clients are household names like Walgreens, McKee, Dollar General, Walmart and FedEx. 50% of our rent comes from investment grade rated clients or their subsidiaries. Approximately 84% of the rental income in our portfolio comes from retail properties and 11% comes from industrial properties.
Mckee. When acquiring retail properties, we target clients whose business centers around the service, non discretionary and or low price point component. As such, our top industry is convenience stores representing 12% of revenue, followed by grocery stores, which represents 10% of revenue. Our investment philosophy focuses on acquiring freestanding single unit commercial properties leased to high quality clients under long term net lease agreements, McKee, typically in excess of 10 years. A net lease structure means tenants are responsible for all property related expenses like taxes, insurance and maintenance.
The net lease is a cornerstone of our business because it is mutually beneficial to our business and that of our client. Net leases provide us with high profit margins while allowing our clients to maintain full control of the asset premises. Unlike shopping centers and malls, our properties are primarily standalone destinations not reliant upon foot traffic from neighboring stores McKee. And long lease terms provide us with predictable cash flows for years to come. The quality of the assets we acquire flows through the entire life McKee.
Allowing us to favorably recapture rent on expiring leases and maintain a healthy level of occupancy. Our commitment to the dividend is evidenced by our track record of dividend performance. A few days ago, we paid our 6 10th consecutive monthly dividend and we've increased the dividend 110 times since the New York Stock Exchange listing in 1994. Since 1994, we have increased the dividend every year, growing it at a compound average annual growth rate of approximately 4.4%. Since 1994, our compound average annual total return, which includes both the dividend and share price appreciation, It's over 15% and nearly 4% higher than the same compound average annual return of the REIT Index, the Dow Jones Index McKee and the S and P 500 Index and the NASDAQ Index.
As a result of increasing the dividends for over 25 consecutive years, We are proud to be a member of the exclusive S and P 500 Dividend Aristocrats Index, which consists of only 3 REITs and 65 companies overall. Much like our commitment to the dividend, we are dedicated to being a responsible corporate citizen, doing the right thing for all stakeholders. In April, we published our inaugural sustainability report, which details our company's commitments, goals and progress to date with McKee. I invite all Realty Income stakeholders to share in our dedication to embrace the changing world McKee, for the benefits of all those we serve and I encourage everyone listening to read through our 2020 Sustainability Report Found on the corporate responsibility page of our website. Our relentless pursuit in generating shareholder value was on display last month when we announced that Realty Income reached a definitive merger agreement with VEREIT, which will further distance ourselves McKee, as the leader in the net lease industry and creates a company with a combined enterprise value of approximately $50,000,000,000 We believe shareholders of both companies will enjoy meaningful value creation through immediate earnings accretion, McKee.
The merger with VEREIT is expected to be immediately accretive to AFFO per share Upon closing, for existing Realty Income shareholders, we expect the merger to be over 10% accretive relative to the midpoint of our 2021 McKee. AFFO per share guidance on an annualized leverage neutral basis. Further, the VARIT portfolio is very complementary McKee. And Realty Income's pro form a portfolio metrics remain strong and better diversified as a combined entity. Once the merger is complete, our portfolio will grow from approximately 6,600 properties to over 10,300 properties.
Currently, we are the only net lease REIT in the S and P 500, one of the top 10 largest U. S. REITs by enterprise value
McKee, I'm the largest company in the net lease
REIT sector. Upon closing this merger with VEREIT, Realty Income is expected to be the 6th largest McKee in terms of equity market capitalization. Our size and scale in conjunction with our conservative balance sheet and financial strength have afforded us 2 A credit ratings by the major rating agencies. And our $3,000,000,000 multi currency revolver Grants us ample access to well priced capital that allows us to opportunistically raise permanent long term capital when the markets are most favorable. We believe funding our business with approximately 2 third equity and 1 third debt contributes to maintaining a conservative balance sheet.
We ended the quarter with a net debt to adjusted EBITDAR ratio of 5.3 times and our near term debt maturities McKee. Remain minimal with only $26,000,000 of debt maturing through year end 2021, excluding our commercial paper program And borrowings outstanding on our revolving credit facility. Because of our conservative business strategy, We were well positioned for an economic downturn at the onset of the COVID pandemic. The pandemic created an unprecedented shock McKee, to consumer demand that impacted industries across the globe. Today, our theater industry remains affected by the COVID-nineteen pandemic, Primarily caused by government mandated closures and social distancing requirements.
Theaters account for 5.6% of our rental revenue. Currently, we have 37 of our 79 theaters on cash accounting, which means we will only recognize rental revenue from our theater clients when it is received. We are encouraged by the recent momentum in the theater space. Vaccination rates are improving, Driving COVID-nineteen incidence rates down while theaters are opening nationwide and studios have started to release blockbuster content. Most recently, Godzilla versus Kong bought in approximately $49,000,000 during the opening weekend and generated more than McKee, and I'm going to turn the call back over to Mike McKee.
$390,000,000 in revenue within the 1st 2 weeks of its global release, turning a profit of more than $200,000,000 McKee. If PM has resumed paying us contractual rent, we could see significant upside to our year over year growth. On the whole, we remain very proud of our 2020 results. We were one of only 3 net lease REITs with positive earnings growth in 2020, and we were one of only 7 net lease REITs who increased the dividend in 2020. We remain committed to leveraging McKee.
Our size and scale to produce new swim lanes through which our business can grow, ensuring we can continue to support increasing monthly dividends. We have immense size and scale, which allows us to invest in the highest quality real estate. In 2020, we McKee, reviewed more than $63,000,000,000 of investment opportunities, of which we selected to purchase less than 4%. McKee. In 2019, we expanded our business internationally to include properties in the UK by replicating our time tested U.
S. Business strategy. This international growth vertical represented about 40% of our total investment volume in the Q1 and has proved to be incremental to both our investment opportunities McKinnon and closed transactions. Our success in the UK energizes our team to continue to seek new industries and geographies That match our highly selective investment criteria. Because of our size, we can execute on large scale sale leaseback transactions Without creating the concentration risks our peers may face.
This advantage strengthens our relationships with leading national operators Because we can provide them a one stop shop to quickly monetize their real estate, providing them with liquidity to reinvest into their businesses. Since 2015, approximately 45% of our transaction volume has been closed through this growth lane, a figure we expect may increase over time. The merger between Realty Income and VEREIT will enhance our ability to execute large scale sale leaseback transactions through expanded capacity to buy in bulk, which improves our competitive positioning when competing for portfolio or sale leaseback transactions in the fragmented net lease industry. Our ability to execute sale leaseback transactions, which usually means buying assets at wholesale prices and at a discount to the one off market is a competitive advantage. We are often one of only a handful of buyers for large scale portfolio transactions, Particularly those that would otherwise create untenable clients or industry concentration issues for our competitors.
Pro form a for the closing of the transaction, we will have approximately $2,500,000,000 of annualized rental revenue. McKee. For every $1,000,000,000 of acquisitions to a single credit or industry, our exposure to that credit or industry will increase by approximately 2% McKinnon. And highest earnings relative to our revenue. In 2020, our EBITDA margin was about 94%.
The higher our EBITDA margin, the more funds we have available for paying dividends or reinvesting into the business. In summary, the future is bright for Realty Income. We are very excited about the strategic merger with Bay REIT and look forward to continuing to drive future growth together as a combined enterprise. And we remain steadfast in our mission to pay monthly dividends that increase over time by meticulously executing our resilient business strategy and carefully constructing new acquisition verticals to sustain company growth. McKee.
With that, I thank you for your support and would like to open it up for questions. McKee. The first question I see
Yes. Sumit, are you ready to go because do you need a minute to look at When you're looking at the questions, I would say that there is a lot of overlap, which is interesting and shows it's important. Do you need a second to look at those or are you ready to go?
I think I'm ready to go. There's a common theme in some of the questions that I can see on my McKee and it is around, I'll read the first one. How frequently do tenants not comply with the terms of their triple net leases? How do you ensure that they are in compliance and what is done if they refuse to comply, which is similar to the focus on the theater industry And how that has performed. So I'll take all those questions together if I might.
McKee. Traditionally, Realty Income has not had issues with non compliance with regards to rent payment. Our bad debt expense has been in basis points. Clearly, the pandemic created a situation when There were a lot of clients who are just unable to pay because their businesses remained shut. The most impacted McKee, in terms of the industry that falls within this group was the theater business.
Due to social distancing norms only recently Have theaters been allowed to reopen? And more importantly, all of the big blockbuster movies that were being held back by the large studios are now being released, such as the one that I just spoke about with Congress is Cozzella. And as we are seeing These movies being released, our thesis around once the vaccination rates were up, The contraction rates were trending down. We were our thesis suggested that people would start to go back to theaters as long as the content was there and that is starting to prove itself out. And so One of our largest operators has started to pay rent and is now paying us 50% Of what is owed to us, which is a very good sign.
And we expect that as these theaters start to open up, That this particular industry, which was the most impacted, will also start to trend up, which will allow us to have better collections. And just to frame it, there was a question asked around the quantity of deferred rent. We have deferred approximately $135,000,000 to $140,000,000 of deferred rent, of which approximately 100,000,000 is associated with the theater business. And the good news is that some of the deferred rents have started to be paid off paid back. McKee.
And that trend is continuing as businesses start to open and continue to do well. So that is a good Trend. In terms of forgiving rent, it's less than $1,000,000 of rent that we've had to forgive to date. So all good news. Another question that's been asked is what countries are you considering for future real estate investments?
McKee. We have a wish list of countries that we've identified. We first started with the UK and I think we've talked a lot about why we chose McKinnon. But there are similarly profiled countries that we would like to invest in, continue to open up more markets to match fund those particular investments and take advantage of McKee. Very competitive cost of capital available in these geographies.
And so, I don't want to necessarily go through our list of countries yet because we don't quite know which one is going to play out. McKee. But we will continue to stay very focused in Western Europe. And you can assume that 1 of the countries coming out of Western Europe will be our next investment in terms of growing into different markets. Another question was around when doing sale leasebacks, are you being very careful as to the rent to sales ratio?
Sellers tend to inflate the rent to maximize their cash generated from the sale. Thank you again. This is a very good question, and one that we are singularly focused on when we look at transactions. You're very correct. We find this situation to be very true when we are dealing with financial buyers McKinnon.
That are looking to maximize proceeds and are less concerned about how much rent they put McKee. On the transaction, just given their investment horizon tends to be 5 to 7 years, Whereas our leases tend to be 15, 20 years. And so that is an area of focus for our underwriter McKee. We compare it to market rents. We compare it to rent to sales, just like you suggested.
We look at the particular industry that we are exposed McKee. To understand the capacity of that particular industry and more specifically that particular operator to absorb McKee, given historical results and what we expect the business to do going into the future. So all of that is taken into And with that, I think McKee. Okay. I believe that was the last question.
So with that, I'll hand it back to Mike.
McKee. Thank you, Sumit. Let me conclude the meeting with just an observation. As you all know, we have entered into this merger agreement with VEREIT and it's a substantial move McKee for Realty Income and certainly for VEREIT. One thing that there is a process here that will go on legally and filings and all of that over the coming months.
But one thing as a personal observation that I would share with our shareholders is that the cooperation and I would say just the common view of both the VEREIT senior leadership and Board and Realty Income senior leadership and Board has been really collegial and really impressive to date. We've got a way to go here, but I think it's fair to say that the view is that this is going to be a real strong benefit both to Realty Income shareholders, but also to VAREITs. And in particular, the 2 CEOs have come together and performed their duties so impressively. And I think it's worth noting that as we conclude. A long way to go.
It's not done yet, but the spirit and The collegiality and the consensus of opinion has been impressive to date. So with that, thank you so much for joining us again. We do believe that in August, we will be able to have our Board meeting again in person. And next year, we'll be able to join together in person for our shareholder meeting, and that is a great blessing. So we thank you all.
We'll now adjourn the meeting. Thank you.
Thanks,