Day, everyone, and welcome to the Realty Income Third Quarter 2014 Operating Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Janine Bedard, Associate Vice President. Please go ahead, ma'am.
Thank you, operator, and thank you all for joining us today for Realty Income's Q3 2014 operating results conference call. Discussing our results will be John Case, Chief Executive Officer Paul Muir, Chief Officer and Treasurer and Sumit Roy, Chief Operating Officer and Chief Investment Officer. During this conference call, will make certain statements that may be considered to be forward looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in any forward looking statements. We will disclose in greater detail the factors that may cause such differences in the company's Form 10 Q.
I will now turn the call over to our CEO, John Case.
Thanks, Janine. Good afternoon, everyone, and welcome to our call. We're pleased with our Q3 results with AFFO per share increasing by 6.7% to $0.64 As announced in yesterday's press release, we are reiterating our 2014 AFFO guidance per share of $2.55 to $2.57 so we anticipate another solid year of earnings growth. Paul will provide you with an overview of the earnings numbers. Paul?
Thanks, John. As usual,
I will briefly comment on our financial statements and provide some highlights of our financial results for the quarter. I'll start by highlighting a few line items in our income statement. Total revenue increased 16.6% for the quarter. This increase reflects our growth primarily from new acquisitions over the past year as well as same store rent growth. Expense increased in the quarter to $52,800,000 This increase was primarily due to our 2 recent bond offerings, the 3 $50,000,000 10 year notes issued in June and the $250,000,000 12 year notes issued in September.
Interest expense was also impacted this quarter by the reclassification of approximately 1 month of preferred dividends as interest expense. Because we issued the redemption notice for our outstanding preferred e stock before quarter end, we needed to reclassify the preferred e stock as a liability at quarter end and about 1 month of preferred dividends as interest expense. This increased interest expense during quarter by $1,200,000 On a related note, our coverage ratios both remain strong with interest coverage at 3.7 times and fixed charge coverage at 3.3 times. General and administrative expenses in the quarter were approximately $11,000,000 a $5,600,000 decrease from a year ago. G and A expenses year to date were $35,500,000 a $4,900,000 decrease from the 1st 9 months of last year.
This decrease in G and A comes from lower acquisition transaction costs $589,000 year to date versus $1,700,000 of transaction costs for acquisitions in 2013, as well as lower stock compensation costs. We had a one time unusual $3,700,000 expense during the Q3 of 2013 due to accelerated vesting of our long term compensation. Our projection for G and A for 2014 remains approximately $50,000,000 Our G and A year to date as a percentage of total rental and other revenues remains low at only 5.3% of revenues. And our current projection for G and A expenses in 2015 is approximately $53,500,000 Property expenses were $12,800,000 in the quarter. However, this amount includes $8,300,000 of property expenses reimbursed tenants.
So the property expenses that we are responsible for were approximately 4 point Our projection for 2014 of property expenses that we will be responsible for has increased slightly to approximately 17,000,000 dollars from a prior projection of $16,500,000 And our current projection for property expenses that we will be responsible for in 2015 is approximately $19,000,000 Provisions for impairment includes $495,000 of impairments we recorded on 1 sold property and 3 properties held for sale at September 30. Gain on sales were approximately $11,000,000 in the quarter. And just a reminder, we do not include property sales gains in our FFO or in our AFFO. Excess of redemption value over carrying value of preferred shares redeemed refers to the $6,000,000 non cash redemption charge for the unamortized original issuance costs, which were paid when issuing the preferred E shares back in 2006. Funds from operations or FFO per share was $0.64 for the quarter.
This would have been $0.67 per share, but it was reduced by $0.03 due to the redemption charge on the Class E preferred shares. Adjusted funds from operations or AFFO or the actual cash we have available for distribution as dividends was also $0.64 per share for the quarter. We again increased our cash monthly dividend this quarter. Our monthly dividend now equates to a current annualized amount of approximately $2.197 per share. Briefly turning to the balance sheet.
We've continued to maintain our conservative and safe capital structure. As you know, in mid September, we issued $250,000,000 of 12 year bonds priced at a yield of 4.178 percent. Obviously, we are pleased with our continued access to low cost long term capital in the bond market. The primary purpose of this offering was to redeem our $220,000,000 of preferred e stock, which had a coupon of 6.75%. So this transaction resulted in annual cash expense savings of almost $5,700,000 Our bonds, which are all unsecured and fixed rate and continue to be rated Baa1BB plus have a weighted average maturity of 7.5 years.
Our $1,500,000,000 acquisition credit facility had only a $45,000,000 balance at September 30. However, the $220,000,000 preferred e redemption closed earlier this month. So the facility has an effective balance of $265,000,000 We did assume approximately 7,000,000 dollars of additional in place mortgages during the Q3, but we also repaid $56,000,000 of mortgage principal during the quarter. So our outstanding net mortgage debt at quarter end decreased to approximately $844,000,000 Not including our credit facility, the only variable rate debt exposure to rising interest rates that we have is on just $39,000,000 of mortgage debt. And our overall debt maturity schedule remains in very good with only $8,000,000 of mortgage principal payments due in the Q4 of 2014 and $120,000,000 in 2015.
Our next bond maturity is only $150,000,000 due in November of 2015. And our maturity schedule is well laddered thereafter. Currently, our debt to total market capitalization is approximately 32% and our preferred stock outstanding is less than 3% of our capital structure. And our debt to EBITDA at quarter end was only 5.9 times. Now let me turn the call back over to John, who will give you more background on these results.
Thanks, Paul. I'll begin with an overview of the portfolio, which is performing well and continues to generate the tenable cash flow for our shareholders. Occupancy remains consistent with the previous quarter at 98.3% based on the number of properties with 74 properties available for lease out of 4,280 4 properties. Occupancy has held steady for 3 consecutive quarters now and is up 20 basis points from 1 year ago. Occupancy based on square footage and economic occupancy are both 99.1%.
Based on what we're seeing today in our scheduled rollover, we expect our occupancy to remain fairly stable for the remainder of the year. The Q3 was our most active quarter this year for lease rollover activity in the portfolio with leases expiring on 81 properties. Of these assets, we released 70 to existing tenants, 7 to new tenants and sold 4 properties, recapturing 100 percent of expiring rents on the properties we released. Our property portfolio management activities speak to the unique and extensive experience we have seeing our business full cycle, where leases signed more than 20 years ago for rolling. Over our 45 year operating history, we have professionals, many of whom have been with the company for over a decade working in our property portfolio management department.
We believe our expertise in this area is a significant asset to our company. Our portfolio continues to be diversified by tenant, industry, geography and to a certain extent property type. At the end of the third quarter, our properties were leased to 2 percent of rental revenue is from our traditional retail properties, while 22% is from non retail, the largest component being industrial and distribution. This diversification continues to enhance the predictability of our cash flow. At the end of the third quarter, our top 10 and top 20 tenants represented 37.5% and 53.5% of rental revenue respectively.
The tenants in our top 20 continue to capture nearly every tenant representing more than 1% of our rental revenue. There have been no material changes to the composition of tenants in our top 20 since last quarter. 9 of the top 20 tenants have investment grade credit ratings. From these non investment grade rated tenants represents over half of the rent from our top 20 tenants. Within our portfolio, no single tenant accounts for more than 5.4 percent of rental revenue, so diversification by tenant remains quite favorable.
Walgreens continues to be our largest tenant at 5.4 percent of rental revenue, which is up slightly from last quarter. FedEx remains our 2nd largest tenant at 5.1% of rental revenue, which is also up slightly from last quarter. Our 20th largest tenant represents only 1.2% of rental revenue and our 30th largest tenant accounts for just over 1 half of 1 percent of rental revenue. We also added 4 new tenants to our portfolio this quarter, further diversifying our tenant base. As far as industries, convenience stores remain our largest industry at 10% of rental revenue and have continued to decline as a percentage of rental revenue for 14 quarters in a row.
Our 2nd largest industry is dollar stores at 9.6%, down from 9.8% last quarter. As many of you know, there's been a lot in the news regarding the top 3 players in the dollar store industry, with Dollar Tree and Dollar General competing to buy Family Dollar. The process remains fluid and one we continue to monitor. Family Dollar shareholders will determine the ultimate outcome here. We would expect the FTC's ruling on the antitrust concerns associated with the merger to impact the outcome.
We remain quite comfortable with our dollar store portfolio. We continue to like the deep discount orientation of the dollar store industry as lower and middle income consumers remain focused on value shopping. Family Dollar and Dollar General remain the dominant players in the industry. Our Family Dollar and Dollar General portfolios have an average lease term of 13 years with a unit level cash flow coverage well above the overall average cash flow coverage in our retail portfolio of 2.6 times. A Family Dollar merger with either suitor should not have a material impact on our operations.
Moving on to property type, retail continues to represent our primary source of rental revenue, currently at 78% with industrial and distribution at 10%, office at 7% and the remainder evenly divided between light manufacturing and and or low price point component to their business. Today, more than 90% of our retail revenue come from businesses with these characteristics, which better positions them to successfully operate in all economic environments and to compete with e commerce. Our weighted average remaining lease term continues to be approximately 10.5 years. Our same store rents increased 1.4% during the quarter and 1.5% year to date consistent with our expectations for the foreseeable future. The industry is contributing most to our quarterly same store rent growth where convenience stores, health and fitness and quick service restaurants.
We continue to have excellent credit quality in the portfolio with 46% of our rental revenue generated from investment grade tenants. Again, we define an investment grade rated company as having an investment grade rating by 1 or more of the 3 major rating agencies. This revenue percentage is up from 40% 1 year ago. We've continued to generate solid rental growth from these investment grade tenants. Nearly 70% of our investment grade leases as a percentage of rental revenues have rental rate increases in them, which average approximately 1.4% annually, consistent with our historical portfolio rental growth rate.
Overall, investment grade rental growth is about 1%. In addition to tenant credit, the store level performance of our retail tenants remains positive. On average, our rent coverage ratio on our retail properties is 2.6 times on a four wall basis. Moving on to acquisitions, we continue see a very high volume of sourced acquisition opportunities. During the quarter, we sourced over 7,000,000,000 dollars in acquisitions opportunities and year to date nearly $21,000,000,000 making this already our 2nd most active year ever for sourced transactions.
There continues to be a lot of capital pursuing these transactions and we are seeing some very aggressive pricing and transaction structures in the market today. We continue to remain selective and disciplined in our investment strategy, investing at attractive risk adjusted returns and spreads for our shareholders. During the quarter, we completed $182,000,000 in property level
dollars in acquisitions
for the year at an initial cash cap rate of 7.1%. We are pleased with the yields, returns and spreads we are achieving. Given our low cost of capital, we continue to be able to invest at accretive levels. Our investment spreads relative to our weighted average cost of capital continue to be well above our historical averages. So we are investing at spreads that are nearly ever in our company's history.
Given the current environment, we are establishing initial acquisitions guidance for 2015 of $500,000,000 to $800,000,000 As you know, it's notoriously difficult to predict future acquisitions activity. Volumes can be lumpy and can change significantly from quarter to quarter. However, we continue to see a robust pipeline of acquisition opportunities. Given the backdrop of this acquisitions environment, we are increasing our asset sales this year from 75,000,000 dollars to approximately $100,000,000 to take advantage of a more aggressive market for our initial expectation of $50,000,000 at the beginning of the year. During the quarter, we sold 11 These are our non strategic assets being sold at attractive pricing.
Let me hand it over to Sumit to discuss in more detail acquisitions and dispositions.
Sumit? Thank you, John. During the Q3 of 2014, we invested 182,000,000 dollars in 49 properties located in 20 6 states at an average initial cash cap rate of 7.4% and with a weighted average lease term of 11.2 years. As a reminder, our initial cap rates are cash not GAAP, which tend to be higher due to straight lining of rent. We define cash cap rates as contractual cash net operating income for the 1st 12 months of each lease following the acquisition date, divided by the total cost of the property, including all expenses borne by Realty Income.
On a revenue basis, 53% of total acquisitions are from investment grade tenants. 96% of the revenues are generated from retail and 4% are from industrial and distribution. These assets are leased to 21 different tenants in 15 industries. Some of the most significant industries represented are home improvement and drugstores. Year to date 2014, we invested $1,240,000,000 in 4.39 properties located in 42 states at an average initial cash cap rate of 7.1 percent and with a weighted average lease term of 12.6 years.
Of the total amount, approximately $329,000,000 was invested in non investment grade retail properties. On a revenue basis, 70% of total acquisitions are from investment grade tenants. 86% of the revenues are generated from retail, 7% are from industrial distribution and manufacturing and 7% are from office. These assets are leased to 51 different tenants in 27 industries. Some of the most significant industries represented are dollar stores, home improvements and drug stores.
Transaction flow continues to remain healthy. We sourced more than $7,000,000,000 in the Q3. Year to date, we have sourced approximately $21,000,000,000 in potential transaction opportunities, which as we mentioned last quarter, would put us on pace to make 2014 the year with the 2nd largest volume source in our company's history. Of these opportunities, 75% of the volume sourced were portfolios and 25% or $5,000,000,000 were one off assets. Investment grade opportunities represented 48% for the 3rd quarter.
Of the $182,000,000 in acquisitions closed in the 3rd quarter, approximately 48% were one off transactions. 69% of the transactions closed in the 3rd quarter were relationship driven. We remain selective and disciplined in our investment approach, closing on less than 6% of deals sourced and continue to capitalize on our extensive industry relationships developed over our 45 year operating history. As to pricing, cap rates remained tight in the 3rd quarter with investment grade properties trading from mid-five percent to high 6% cap rate range and non investment grade properties trading from low to mid 6% to low 8% cap rate range. As John highlighted, we had a very active quarter for dispositions and have increased our dispositions guidance to approximately $100,000,000 to take advantage of the dollars at an unlevered IRR of just over 12%.
This brings us to 28 properties sold year to date for 53,300,000 dollars at an unlevered IRR of approximately 11% and a net cap rate of 8.1% on the leased properties sold. Our investment spreads relative to our weighted average cost of capital were very healthy, averaging 2 24 basis points in the 3rd quarter and 190 basis points year to date, which was significantly above our historical average spreads. We define investment spreads as initial cash yield less our nominal 1st year weighted average cost of capital. We're continuing to make investments above our historic spreads, whilst improving our real estate portfolio, tenant quality, credit quality and overall diversification. In conclusion, the 3rd quarter investments remained healthy at $182,000,000 Year to date, we have invested 1,240,000,000 dollars while sourcing approximately $21,000,000,000 in transactions.
Our spreads remained comfortably above historical level as a tight cap rate environment in the 3rd quarter was more than offset by our improving cost of capital. We continue to be very selective in pursuing opportunities that are in line with our term strategic objectives and within our acquisition parameters. We also took advantage of an aggressive pricing environment to accelerate this position of assets that are no longer a strategic fit. We remain confident of reaching our updated investment and disposition goals of approximately 1,400,000,000 dollars and approximately $100,000,000 respectively for 2014. With that, I would like to hand it back to John.
Thanks, Sumit. Regarding our capital raising activities, as Paul mentioned, we have been quite active in the capital markets year to date. We have raised over $1,200,000,000 in permanent and long term capital to finance our business. The majority being equity with the remainder being 10 12 year unsecured bonds. So our balance sheet continues to be in excellent shape with 2 thirds equity and 1 third debt and that debt being predominantly long term fixed rate.
We currently have more than $1,200,000,000 available on the line to support future acquisitions activity, so we continue to have excellent liquidity. Regarding earnings and guidance, we continue to generate healthy per share earnings growth while maintaining a conservative capital structure. Our 3rd quarter FFO and AFFO per share of 0.64 dollars represented increases of 8.5% and 6.7 2014 AFFO guidance per share of $2.55 to $2.57 representing earnings growth of about 6% to 7%. We are anticipating another solid year for earnings growth next year and we are initiating 2015 guidance with AFFO per share from $2.66 to $2.71 implying year over year growth dollars to $2.72 which at the midpoint of the range represents an increase of approximately 4% over the midpoint of our 20 14 range. Our focus continues to be the payment of reliable monthly dividends that grow over time.
During the Q3, we declared the 77th dividend increase since the company's listing in 1994. Over this 20 year time period as a publicly traded company, we have grown the dividend by a compounded average annual growth rate of 4.6 percent. We remain committed to the durability and consistent growth of the dividend. Our PAL ratio year to date has been 85.5 percent of our AFFO, which is a level we continue to be comfortable with. As I'm sure many of you saw in our separate press release yesterday, we're pleased to announce Steve Starett, CFO of Simon Property Group, is the 8th member of our Board of Directors and 7th independent Board member.
We welcome Steve to Realty Income and look forward to working with him as a member of our Board. Steve has spent 26 years at Simon Property Group, the largest real estate company in the world has spent the last 14 years as their CFO building a reputation of excellence in the industry. His depth of experience and relevance in our industry will enable him to be a valuable contributor to our Board. Finally, to wrap it up, we continue to be pleased with our performance for the year. We're seeing healthy volumes of acquisition opportunities and we are on track to have our 2nd most active year for acquisitions in our company's history.
We will remain selective and disciplined with regards to our investment strategy and we'll continue to acquire high quality properties quite accretively with our cost of capital advantage and at attractive risk adjusted returns for our shareholders. At this time, I would now like to open it up for questions. Operator?
Thank Our first question comes from Juan Sanabria with Bank of America.
Hi, good afternoon guys. I was just hoping you could give us a little color on the 2015 acquisition guidance, sort of how you came to that number? And then background on any spreads or cap rates we should be thinking about with regards to that number? And just optically, I know you've kind of stated and stressed that you want to be selective, but just how we should be thinking about that versus
2014 for the year? Okay, Juan. Let me just spend a moment on acquisitions. We continue to see an active pipeline of sourced acquisition opportunities. So there's good transaction flow.
And as we said, our investment spreads are well above our historical average. But there's also a lot of capital pursuing these opportunities. So it's been competitive. And we remain disciplined and selective with our investment strategy. We're seeing some very aggressive pricing out there among some of our peers and structures.
Looking at replacement costs, we're seeing assets trade sometimes at 50% above their replacement costs. We're seeing properties that Then we're seeing some pretty aggressive structures as well. So we're seeing Then we're seeing some pretty aggressive structures as well. So we're seeing, for instance, in some of the casual dining transactions that have crossed our guests, we're seeing them get done at very tight coverage ratios, ratios we're not comfortable with. So we've been in this business a long time and think we have a pretty good idea of what's going to work and what's not going to work long term.
Clearly, given our cost of capital, we could do these transactions and initially they'd be quite accretive. But when you look at them over the long term, if they're not structured and priced properly, you're going to have some low IRRs and pay the price on the residual, and they could actually be value destructive to our shareholders long term. Our range for acquisitions for 2015 reflects the environment we're in today. And as you know, that environment can change significantly from quarter to quarter, even month to month. I mean, if an aggressive buyer is out there that all of a sudden slows down or exits the market, that could have a material impact on our volume and potentially pricing.
So at this point, predicting acquisitions guidance a year in advance is always difficult. And we've always wanted to be and we've
always wanted to be accurate, but
not overpromise. Historically, we've exceeded our initial guidance. If you look at last year, we had $1,000,000,000 acquisitions guidance number in October of 2013 or 2014 and we're going to exceed that by about 40 percent. But as usual, we'll just have to see how the year shapes up next year. But one thing we're not going to do is abandon our investment discipline simply to generate volume.
Let me speak to your second point and that's spreads and cap rates. Sumit addressed that on the call that investment grade cap rates, we've seen them get a little tighter. Investment grade is running from the mid-5s to the high-6s and non investment grade, the low-6s all the way up to 8%. As far as spreads go, for the year, we've invested at spreads of 190 basis points above our weighted average cost of capital. In the 3rd quarter, that was 2 20 basis points.
And given our cost of capital today, we're looking at 2 40 basis points, which are near our all time record spreads. So they remain quite attractive. But again, we've got to look at this business beyond just what it's going to do over the next quarter or next year. We're looking at 10, 11 year average, 13 year, 14 year average lease term. So hopefully that answers your question.
Definitely very thorough. Thanks, John. And just a quick follow-up, if you don't mind. Given how aggressive pricing is, what's the viewer on dispositions for 2015? And is anything baked to the numbers?
We've assumed for 2015, dollars 50,000,000 dollars for now and we're going to watch that pretty closely. We started out this year assuming $50,000,000 and we're going to end up selling $100,000,000 approximately. So if the environment continues to be heated, we're going to go ahead and move some assets some additional assets off our watch list and take advantage of the strong bid in the market. And I think pricing will improve here in the next few months is my prediction in terms of disposition. So in the model, we have $50,000,000 but we're going to watch that pretty and if the environment continues to look like it does today, we could see increasing that up to 100,000,000
dollars
Our next question comes from Todd Stender with Wells Fargo.
Hi, thanks guys. Sumit, you gave cap rate ranges for investment grade and non investment grade tenanted properties. Were those for the properties you acquired in Q3? Just want to get the range of cap rates you acquired because the blended 7.4% yield I thought was pretty high, even though you were able to land over 50% investment grade?
Yes. So Todd, those were the ranges of that we saw transact in the market. We didn't I don't believe bought anything in the low or mid-five percent cap rate range. The main reason for the yield that we were able to achieve in the Q3 of a 7.4% was being driven by 18% of the volume was coming from our right around 3%. But in the Q right around 3%.
But in the Q3 that represented closer to 18%. And clearly, the mix of investment grade and non investment grade also played a part in why we were able to achieve grade also played a part in why we were able to achieve the higher yield.
That's helpful. And just kind of switching gears, can you share how some of the re leasing discussions went with tenants? Looks like while you renewed 77 leases, just looking back at the Q2 results about 50 only 50 leases were coming due in the second half of the year. So just want to see the tenant's comfort level in renewing leases ahead of time. Looks like a fair amount of those were maturities not coming due just yet.
That's exactly right. I mean, we're always looking forward, Todd, managing our rollover. And if we can enter into discussions that are advantageous for us and our tenants to re lease early, we will do that. So that's why you see that 77 number versus what was scheduled to roll in the quarter. So we were pleased with that and we'll continue to do that.
We're just trying to stay in front of these maturities in our leases and stay in front of them a couple of quarters or longer if we can even.
Is there a comfort level with tenants? Any trends are developing that tenants are able to renew or their willingness to renew a little early? Anything there?
Yes. Well, I think in general, our tenants are in better shape than they were certainly 5 years ago. Their operations and balance sheets are much stronger. They're more likely to renew. So we're leasing of the lease rollovers, we're executing 90% are going to the same tenant, 10% to the new tenant if you to a new tenant.
If you look at the history of the company, that's been more 70% to the same tenant and 20% to a new tenant and then 10% sold. So those statistics show you that tenants are more comfortable renewing their leases on the properties and staying in those properties. And it's a function of a better economic environment, but we also like to think it's also a function of better underwriting, better tenant selection, site selection on our part, having learned from 45 years' history in this business.
Thanks, John. And just was there a cost or what was the cost associated with retaining and attracting new tenants? Have you guys put out a TI number?
Yes. We are. That will be in our supplemental. So we spent $125,000 in tenant improvements in the 3rd quarter to release $16,300,000 in rental revenues. So that number is de minimis.
It usually is de minimis. It runs from less than 1% of revenues up to maybe 2%. So it's never a material number, but we're actually including that in our supplement going forward.
Great. Thank you.
Thank you, Todd.
Our next question comes from Vikram Malhotra with Morgan Stanley.
Thank you. Sumit, could you just give us I may sorry, I apologize if I missed this, but for the acquisitions that you baked in for next year, what are the cap rates you're assuming or the range of cap rates?
We're assuming 7% for next year. Okay. Year to date, we're at 7.1%. The 7.4%, we were very pleased with, but that's a little higher than what we're expecting given the current market conditions.
And then just given the numbers you quoted on market cap rates between investment grade and non investment grade, would you expect next year to be a little different in terms of just the composition between the 2 for deals that you do?
No. I think, listen, a lot of it is going to be a function of what's going to be available out there. And I think we've stated this in previous calls as well. We don't target a particular composition with regards to investment grade versus non investment grade when we are looking at acquisitions. This particular quarter, it just turned out where investment grade represented only 53%, whereas year to date, it's closer to 70%.
So we're going to look at opportunities that present themselves. There's a lot of discussion around certain retail asset classes that tend to be more non investment grade in nature. So it's very difficult to predict as to what the composition of that $500,000,000 to $800,000,000 that John has mentioned is going to turn out to be at the end. Okay.
And then just maybe on the competition for deals. As you mentioned, it's obviously increased. But maybe looking out into 2015, maybe just give us your high level thoughts on can do you see that competition changing in any way? I know new regulations on the non traded side don't kick in for a while, but could that be a factor as you get towards year end? Or could there just be other factors that may make the environment just more competitive or less competitive from your standpoint?
Well, we continue to
compete with the other public companies.
And slowed down a little bit there, but there's still a lot of equity in those entities. We compete with mortgage REITs and institutional investment managers who are running money for sovereign wealth funds, pension funds, endowments looking for yield. So we bump into some of them as well. I think that the last few quarters have been some of the most competitive we've seen. And there's certainly some activities out there in the sector that would lead me to believe that the competition could become a little less intense next year.
Again, it's impossible to accurately forecast, but our sense is some of the more aggressive buyers may be stepping back a bit from the market. So if that were to be the case, we'd certainly feel better about the higher end of our acquisitions
range. Okay. Just last clarification. Just on the timing of these acquisitions, is there anything different we should assume for next year versus just normal seasonality that we see during the year?
Normal. They're lumpy and they're really driven by portfolios. And again, like last year, 2013, we did $1,520,000,000 in property level acquisitions. The last quarter was $140,000,000 This year, the Q1 was $650,000,000 and this quarter was 182,000,000 dollars You're going to see that lumpiness because it's associated with the amount of acquisitions that get done through portfolios. So I think that will continue.
So we'll have some heavy quarters and some light quarters like we always have.
Okay. Thanks, guys.
Thank you.
Our next question comes from Todd Lukasik with Morningstar.
Hey, good afternoon guys. Thanks for taking my questions. Just wondering if you could comment on the weighted average remaining lease term for the portfolio overall. And I guess, say 5 or more years ago, I kind of assumed that was going to fall in a range of 12 years or longer generally. And I think now it's around 10.4 years.
And just if you can comment around that, I guess the change in properties that you guys own now may influence that, but also whether or not you manage to that number and what you would expect it to be in 5 or 10 years or how that will likely trend?
Yes. Well, I mean, when you've got $15,000,000,000 in assets and each year passes, the lease term actually declines by a year, and it's offset by partially by acquisitions. And so if you're acquiring $1,500,000,000 at 13 years, you're not going to fully offset the decrease in lease term on the existing portfolio. On rollovers, you're typically if the rollovers go to the same tenant, they're 5 year lease terms. If it's a new tenant, it's closer to 10 years.
So it's a natural evolution for a seasoned net lease company like ourselves to see that lease term over time decline. We still focus on average lease terms of 11, 12, 13, 14 years. That's what we're seeing. That's what we're doing. But you've got to remember, on the rest of the portfolio, they're getting a bit shorter.
And I think one of our strengths is to effectively execute lease rollovers. We've executed over 1700 lease rollovers in company's history, recapturing nearly 100% of the expiring rent. And we've got a team of almost 40 professionals dedicated to that effort that have been with the company, many of them 10 to 20 years. And that's where I've said this before, where the rubber meets the road in the business, that's where you really need to be able to execute and preserve value. And there are not a lot of net lease companies out there that have that expertise and that extensive experience.
So we're very comfortable with our ability to extend the shorter lease terms and the longer lease terms that eventually need to be addressed as those leases expire. I mean, some of the leases we handled this quarter, we looked at and they were put in place 25 years ago. So again, we have a very long term perspective. Does that help Todd?
Yes, it does. That's great. Thanks for all that color. And then just a follow-up question on the acquisitions guidance for next year. I'm curious if you are also expecting that the acquisition volume that you source is going to be lower or whether you expect that to be relatively constant, you guys are just going to be a little bit choosier about what you actually try to close?
It's continuing to be transaction flow in terms of source to acquisition opportunities to be strong again next year. All indicators are pointing to that it will be. 2013 was a record at $39,000,000,000 This year, we're already at $21,000,000,000 which is our 2nd best year ever, just 9 months into the year. So I think that we'll continue to see that momentum. But again, we'll continue to be selective and disciplined in what we buy.
There are a number of discussions going on with respect to sale leasebacks with corporate board, corporate management teams, activists, investors. We don't know how any of these are going to end up playing out. But if just 1 or 2 or 3 hit, you could see some very big sourced volumes that could lead to higher acquisitions. So that activity in terms of activist investors and corporate boards and management teams scrutinizing their real estate holdings and making sure they're properly and efficiently managing their real estate is accelerating. So there are more discussions.
And fortunately, we're involved in those discussions and that really could impact source opportunities next year if they elect to monetize some of that real estate.
Okay, great. Thanks a lot for taking my questions.
Okay, Todd. Thank you.
And this concludes the question and answer portion of Realty Income's conference call. I will now turn the call over to John Case for concluding remarks.
Just want to thank you and thank everyone for joining us today. We look forward to speaking with you next quarter and we'll see a lot of you next week in Atlanta at NAREIT. So we look forward to catching up with you then. Take care everyone.
And this conference will be available for replay beginning today at 6:30 pm and will end November 14 at 1:59 am. You can access the replay by dialing 888-203-eleven 12 or 719-four fifty seven-eight twenty and using the access code 3015,859. Again, you can access that replay by dialing 888-203 1112 or 719-four fifty seven-eight twenty and using the access code of 301-5859. Thank you for your participation. This concludes today's call.