INVESTOR PRESENTATION 1Q 2016

Transcription

1 INVESTOR PRESENTATION 1Q 2016

2 Contents Company Overview & Stock Performance 3 Investment Thesis 8 Portfolio Diversification 13 Asset and Portfolio Management 18 Investment Strategy 21 Capital Structure and Scalability 28 Dependable Dividends 32 Guidance 36 Summary 37 All data as of March 31, 2016 unless otherwise specified 1

3 Safe Harbor For Forward-Looking Statement Statements in this investor presentation that are not strictly historical are "forward-looking" statements. Forward-looking statements involve known and unknown risks, which may cause the company s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, tenant financial health, the availability of capital to finance planned growth, continued volatility and uncertainty in the credit markets and broader financial markets, property acquisitions and the timing of these acquisitions, charges for property impairments, and the outcome of any legal proceedings to which the company is a party, as described in the company's filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this investor presentation. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made. 2

4 Company Overview & Stock Performance S&P 500 Real Estate Investment Trust with Proven Track Record of Strong Total Returns Leading real estate company: Equity market cap of $15.7 billion and EV of $21.3 billion Largest net lease REIT by equity market cap Member of S&P 500 index Member of S&P High-Yield Dividend Aristocrats index 1 Strong returns with low volatility: 17.8% compound average annual returns since NYSE listing in % dividend yield, paid monthly 75 consecutive quarters of dividend increases 2 Conservative capital structure: Investment grade credit rating (BBB+/Baa1/BBB+) 24.1% debt to total market capitalization 5.3x debt to EBITDA 6.2-year average duration of unsecured notes and bonds All data as of March 31, 2016 unless otherwise specified 1 The S&P High Yield Dividend Aristocrats index is designed to measure the performance of companies within the S&P Composite 1500 that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 years. 2 Through June 2016 dividend declaration 3

5 Our Approach as The Monthly Dividend Company Generate lease revenue to support the payment of growing monthly dividends Target well-located, freestanding, singletenant, commercial properties Remain disciplined in our acquisition underwriting Actively manage the portfolio to maintain high occupancy Execute long-term net lease agreements Support and grow monthly dividends for shareholders Maintain a conservative balance sheet 4

6 Attractive Risk/Reward vs. S&P 500 Companies Higher returns and lower volatility than majority of S&P 500 companies since 1994 NYSE listing 40% Total Return CAGR Since 10/18/94 (NYSE Listing) 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Beta vs. S&P 500 Since 10/18/1994 (NYSE Listing) Realty Income return per unit of market risk in the 98 th percentile of all S&P 500 companies (1) : Beta: 0.39 Return: 17.8% Current S&P 500 Companies (1) Excludes companies without trading histories dating to 1994 Beta measured using monthly frequency Source: FactSet 5

7 Attractive Risk/Reward vs. Blue Chip S&P 500 Equities Proven long-term investment provides an attractive risk/reward 30% Average Annual Compound Total Return per Unit of Market Risk Total Return CAGR % Since 10/18/94 25% 20% 15% 10% 5% JPM GE AAPL MSFT WFC REITs S&P 500 Greater return per unit of market risk than each of top 10 largest S&P constituents (1) since 1994 NYSE listing O JNJ XOM PFE VZ PG O PG JNJ XOM AAPL PFE REITs WFC VZ MSFT 14% 14% 13% 12% 15% 20% 18% 23% 27% 46% 0% Beta vs. S&P 500 Since 10/18/ S&P 500 JPM GE 9% 7% 7% (1) Excludes Berkshire Hathaway Class B shares due to shorter trading history Beta measured using monthly frequency Source: FactSet 6

8 Attractive Risk/Reward vs. Blue Chip REITs Proven long-term investment vs. Blue Chip S&P 500 REITs Total Return CAGR % Since 10/18/94 30% 25% 20% 15% 10% 5% 0% MAC GGP WY 1.0 ESS PSA SPG AVB FRT VNO EQR AIVKIM Greater return per unit of market risk than each of the other 16 REITs in S&P 500 with comparable trading histories (1) O VTR HCP 0.5 HCN Beta vs. S&P 500 Since 10/18/ O O PSA ESS HCN FRT SPG AVB EQR HCP VTR VNO KIM MAC AIV GGP WY HST Average Annual Compound Growth per Unit of Market Risk 5% 5% 9% 13% 12% 12% 17% 20% 20% 20% 25% 23% 28% 33% 31% 42% 46% (1) Excludes REITs without trading history since 10/18/1994 Beta measured using monthly frequency Source: FactSet 7

9 INVESTMENT THESIS: Earnings Growth Outperformance Consistency 8

10 Consistent Earnings Growth Outperformance vs. REITs Annual FFO/sh growth has exceeded REIT median in 14 of the last 15 years Realty Income Annual FFO/sh Growth Outperformance vs. REIT Median (in bps) 1, Realty Income FFO/sh CAGR 1 Outpaces REIT Median Throughout All Cycles Realty Income FFO/sh CAGR REIT Median FFO/sh CAGR 7.1% 5.4% 5.4% 5.4% 5.5% 5.5% 5.4% 6.1% 4.9% 3.5% 1.0% 1.3% 1.2% 1.0% 0.5% 12.2% 8.6% 8.8% 6.1% 6.6% 7.1% FFO/sh CAGR since: -0.1% -0.1% -0.2% Reflects FFO/sh growth CAGR through 2015 Source: SNL, FactSet 9

11 Interest Rate Sensitivity: Earnings Growth Undeterred by Rising Rates Realty Income earnings growth outperformed other REITs during last rising rate era 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 Dec-99 1Q00 Jul-00 3Q00 Feb-01 1Q01 10-year US Treasury Yield 10-year US Treasury Yield Sep-01 3Q01 Apr-02 Realty Income FFO/sh 1Q02 Nov-02 3Q02 During the prior cycle period of steadily rising interest rates, Realty Income FFO/sh CAGR was in the top 37 percentile of all REITs 3.5% Jun-03 1Q03 $0.34 3Q03 Jan-04 1Q04 Aug-04 3Q04 Mar-05 1Q05 Oct % FFO/sh CAGR during period of rising rates 3Q05 5.1% May-06 1Q06 Dec-06 $0.43 3Q06 Jul-07 1Q07 Spread investing dynamics persist throughout the cycle During prior cycle era of rising rates (Q trough through Q peak), Realty Income earnings grew faster than most REITs Realty Income FFO/sh CAGR: 8.1% REIT Median FFO/sh CAGR: 4.4% Acquisition cap rates adjust to rising interest rates, preserving attractive investment spreads Acquisition spreads vs. WACC did moderate (from ~250bps in 2003 to ~150bps in 2006), but less than the increase in interest rates (~170bps in comparable time period) Nominal cost of equity declined despite rising interest rates, offsetting increase in debt costs Dividend CAGR during this period was 5.9% Success of business objective (growing dividend payments to shareholders) can persevere throughout all interest rate environments Source: SNL 10

12 Consistency: Steady Portfolio, Solid Fundamentals Consistent occupancy, same-store rent growth reflect limited operational volatility Consistent Occupancy Levels, Never Below 96% 99.0% 99.1% 99.5% 98.4% 97.6% 98.2% 97.7% 98.1% 97.9% 98.5% 98.7% 97.9% 97.0% 96.8% 96.6% 96.7% 97.2% 98.2% 98.4% 98.4% 97.8% Q16 Based on % of properties occupied Sustained High Occupancy Rates Careful underwriting at acquisition Solid retail store performance Strong underlying real estate quality Favorable tenant industries Prudent disposition activity Proactive management of rollover 1.5% 1.1% 1.3% 1.8% Steady Same-Store Rent Growth 1.5% 1.4% 1.4% 1.7% 1.4% 1.5% 1.3% 1.3% 1.1% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1.3% unlevered same-store rent growth represents current run rate Long lease terms limit annual volatility 11

13 Safety: Lowest Volatility, Highest Return Relative to Market Indices Long-term performance exceeds widely followed benchmark indices Since 1994 NYSE listing, Realty Income shares have outperformed benchmark indices while exhibiting lower volatility Annualized Total Return Since '94 Standard Deviation of Total Returns Since '94 O O DJIA S&P 500 Equity REIT Index Nasdaq Standard deviation of total returns measures deviation from average annual total returns since

14 PORTFOLIO DIVERSIFICATION 13

15 Portfolio Diversification: Tenant Diverse tenant roster, investment grade concentration reduces overall portfolio risk Top 20 Tenants represent: 54% of total rental revenue 11 different industries Eight investment-grade rated tenants 2.9% 2.8% 2.6% 2.4% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0% 1.7% 1.3% 1.2% 1.2% 1.1% 4.5% 4.2% 4.1% 5.3% 6.8% Investmentgrade rated (1) (1) Investment grade tenants are defined as tenants with a credit rating of Baa3/BBB- or higher from one of the three major rating agencies (Moody s/s&p/fitch). 44% of our annualized rental revenue is generated from properties leased to investment grade tenants, including approximately 7% from properties leased to subsidiaries of investment grade companies. 14

16 Portfolio Diversification: Industry No industry represents more than 11% of annualized rent Exposure to defensive industries: Top 10 industries represent strong diversification, significant exposure to non-discretionary, low price-point, service-oriented industries Industry Drug Stores Retail Characteristics Non-Discretionary 11.0% Convenience Stores Dollar Stores Health and Fitness Service-Oriented Non-Discretionary, Low Price Point Non-Discretionary, Service-Oriented 8.3% 9.0% 8.8% Theaters Transportation Services Quick-Service Restaurants Low Price Point, Service-Oriented N/A (Non-Retail Exposure) Low Price Point, Service-Oriented 5.2% 5.1% 5.0% Casual Dining Restaurants Wholesale Clubs Grocery Stores Service-Oriented Low Price Point Non-Discretionary 3.0% 3.8% 3.6% 15

17 Portfolio Diversification: Geography Balanced presence in 49 states and Puerto Rico <1 1.1 <1 <1 <1 < <1 <1 <1 < <1 < <1 <1 1.7 < < < < % of Rental Revenue California 9.5% Texas 9.2% <1 <1 PUERTO RICO 5.7 Florida 5.7% Ohio 5.5% Illinois 5.3% Represents percentage of rental revenue % New York 4.8% 16

18 Portfolio Diversification: Property Type Roots in retail with growing exposure to mission-critical industrial properties RETAIL INDUSTRIAL OFFICE AGRICULTURE Percentage of Rental Revenue 79.2% 12.8% 5.9% 2.1% Number of Properties 4, Average Leasable Square Feet 11, ,603 77,345 12,300 Percentage of Rental Revenue from Investment Grade Tenants 32.4% 82.5% 91.2% 100% 17

19 ASSET AND PORTFOLIO MANAGEMENT 18

20 Active Management: Historic Re-leasing Opportunities Since 1996, Realty Income has achieved 98% recapture of prior rent on leases re-leased to the same or new tenants Strong Track Record of Leasing Results Since 1996: Re-leased 1,880 out of 2,127 lease expirations (88%), recapturing 98% of expiring rent Sold the remaining 247 properties and recycled capital into properties that better fit our investment strategy Reflects net leasing spreads: Associated tenant improvement costs have been immaterial ($769K on $77.5mm of new cash rents signed since end of 2013) Protection of cash flow is paramount (properties do not require ongoing maintenance capex; leasing efforts focus on maximizing net effective leasing spreads, not gross) Maintenance capex and leasing costs represent 10%+ of rental revenue for strip centers and malls, < 1% for Realty Income Re-leasing To Same Tenant Spreads vs. Prior Rent (101.3% Since 1996) Present Present 100.3% 100.4% 102.2% Blended Re-leasing Spreads 1 (98.0% Since 1996) 95.9% 95.6% 100.3% 1 Includes re-lease to same or new tenant spreads vs. prior rent 19

21 Active Management: Property Dispositions Disposition activity a combination of opportunistic recycling, portfolio risk mitigation Portfolio Management Largest department in the company Distinct management verticals Retail Non-Retail Leasing & dispositions Healthy Leasing Results ~98% recapture of expiring rents since 1996 Over 2,100 rollovers Includes renewals and re-leases to new tenants 1Q16 lease rollover activity Re-leased 38 properties with expiring leases 29 re-leased to same tenant (76%) 9 re-leased to new tenant (24%) Recaptured 112% of expiring rent Asset Management Maximizing value of real estate Strategic and opportunistic dispositions Value-creating development Risk mitigation Favorable Returns, Lower Portfolio Risk $441 million of dispositions since : 6.9% cap rate / 11.6% unlevered IRR 2015: 7.6% cap rate / 12.1% unlevered IRR 1Q16: 6.9% cap rate / 6.6% unlevered IRR 20

22 INVESTMENT STRATEGY 21

23 Investment Strategy: Underwriting Approach Granular, asset-by-asset approach, focus on risk-adjusted returns Property attributes Age, size, fungibility Market review Strategic locations critical to generating revenue Demographic analysis Five-mile population density, household income, unemployment trends Property due diligence Site visits, vehicle traffic, industry, property type Valuation Replacement cost, market rents, initial cash yield, IRR over initial lease term REAL ESTATE ANALYSIS CREDIT ANALYSIS Financial review and analysis Tenant research Reliable, sustainable cash flow Industry research Defensive, resilient to macroeconomic volatility Discussion with key management representatives Retail Strong unit-level cash flow coverage (specific to each industry) Tenants with service, nondiscretionary, and/or low price point component to their business Favorable sales and demographic trends Non-Retail Significant markets strategic to tenant Primarily industrial and distribution properties leased to Fortune 1000, investment-grade rated tenants Long lease duration 22

24 Investment Strategy: Key Considerations Cost of capital advantage, size, track record: Supports investment selectivity, strong risk-adjusted spreads Competitive Advantages Lowest cost of capital among net lease peers Lower cost of capital supports investment selectivity Minimizes need for investment volume to drive earnings growth Realty Income has traded at median NAV premium of 20%+ since 2009 Size and track record Ability to buy in bulk without creating tenant concentration issues $1+ billion annualized cash rent Portfolios currently trade at discount to single-asset transactions Certainty of close ($2 billion revolving line of credit) Track record and relationships developed since 1969 Investment Approach is Holistic Focus on credit and real estate quality Rely on more than just credit rating as part of underwriting IG ratings more important for non-retail than retail properties 32% of retail rent from IG-rated tenants 88% of non-retail rent from IG-rated tenants In-house research team independently evaluates tenant credit Other considerations Rents vs. market, pricing vs. replacement cost, cash flow coverage volatility, age, size, lease term, operator track record Market for quality net lease assets is efficient Very little relationship discount reputable sellers have fiduciary responsibility to extract competitive pricing Higher yields reflect greater investment risk 23

25 Investment Strategy: Results of Conservative Underwriting Industry exposure reflects defensive, cycle-resilient business models Over 90% of retail portfolio: Has service, non-discretionary and/or low price point component Top non-retail tenants: Comprised primarily of investment-grade tenants such as FedEx, Boeing, GE, Diageo, Walgreens Service-Oriented Non-Discretionary Low Price Point E-COMMERCE RESILIENT DEFENSIVE CONSUMER RESILIENT Health & Fitness Theaters Convenience Stores Drug Stores Grocery Stores Automotive Services Dollar Stores Wholesale Clubs Quick Service Restaurants 24

26 Investment Strategy: Disciplined Execution Consistent, selective underwriting philosophy on strong sourced volume $7.4 billion in property-level acquisition volume since 2010 (excluding $3.2 billion ARCT transaction) $3.1 billion in non-investment grade retail since 2010 Broad blend of one-off, portfolio and entity-level deals 78% of volume associated with retail properties 55% of volume leased to investment-grade tenants Relationship-driven >75% of closed volume since (Ex-ARCT) YTD Investment Volume $714 mil $1.02 bil $1.16 bil $1.51 bil $1.40 bil $1.26 bil $353 mil # of Properties Initial Avg. Cap Rate 7.9% 7.8% 7.2% 7.1% 7.1% 6.6% 6.6% Initial Avg. Lease Term (yrs) % Investment Grade 46% 40% 64% 65% 66% 46% 23% % Retail 57% 60% 78% 84% 86% 87% 86% Sourced Volume $6 bil $13 bil $17 bil $39 bil $24 bil $32 bil $6 bil Selectivity 12% 8% 7% 4% 6% 4% 6% Relationship Driven 76% 96% 78% 66% 86% 94% 85% 25

27 Investment Strategy: ARCT Example (M&A Activity) Cost of capital advantage drives ability to source, fund, close on accretive M&A deals ARCT Transaction (2013) Increased Quality SIZE, QUALITY, DIVERSIFICATION $3.2 billion 515 properties % 34% 75% investment grade 100% Occupied 54% retail properties 12.8 year weighted average lease term IMMEDIATE ACCRETION ~5x AFFO multiple spread ~7-9%AFFO/sh accretion Wtd. Avg. Lease Term Investment Grade % Before Acquisition After Acquisition Decreased Concentration Risks 73% 64% 49% 42% Leverage Neutral 5.9% initial cash yield Catalyst of 7.1% dividend increase Rental Revenue From Top 10 Industries Rental Revenue From Top 15 Tenants Historical M&A activity represented both financially accretive and strategic benefits 26

28 Investment Strategy: Inland Diversified Example (Portfolio Activity) Large, diversified portfolio offers capacity to absorb co-mingled portfolio opportunities Inland Transaction (1H 2014) SIZE, QUALITY, DIVERSIFICATION Improved portfolio diversification, credit quality, occupancy, lease term $503 million 68% investment grade 84 properties 70% retail properties Inland Diversified was a non-traded REIT seeking a liquidity event in 2H13 motivation to minimize counter-party risk on single-tenant liquidation accrued to Realty Income s benefit In addition to the sale of its single-tenant portfolio to Realty Income, Inland divested its multi-tenant portfolio to Kite Realty Non-Inland Acquisition Volume $383mm $176mm 100% occupied STRONG RISK-ADJUSTED RETURNS Q Q Highly accretive 6.9% initial cash yield Leverage neutral $274mm (Tranche I) Inland Acquisition Volume $229mm (Tranche II) Portfolio-level acquisition flow supplements organic acquisition activity Disciplined growth -- Portfolio acquisitions must be financially accretive and qualitatively additive Realty Income s property diversification, cost of capital, and willingness to acquire $250mm+ transactions with diverse property types provides unique growth opportunities in addition to traditional single-asset or retail sale-leaseback pipeline 27

29 CAPITAL STRUCTURE AND SCALABILITY 28

30 Conservative Capital Structure Modest leverage, low cost of capital, ample liquidity provides financial flexibility Common Stock: $15.7 billion 74% Shares/Units outstanding million Debt: $5.1 billion 24% Debt 24% Unsecured Notes/Bonds - $3.65 billion Unsecured Term Loans - $320 million Unsecured Ratings - BBB+/Baa1/BBB+ Mortgages - $506 million Revolving Credit Facility - $653 million Preferred Stock: $409 million 2% Common Stock 74% Preferred Stock 2% Series F %, Callable Feb 2017 Total Capitalization: $21.3 billion 29

31 Well-Laddered Debt Maturity Schedule Limited re-financing and variable interest rate risk throughout debt maturity schedule Laddered Maturity Schedule with Primarily Unsecured Investment-Grade Rated Debt $1,400 87% fixed-rate debt 3.8% Weighted average interest rate $1,200 Weighted average rate of 4.1% on debt Debt Maturities ($mm) $1,000 $800 $600 $ % 5.5% 2.1% 3.2% 5.6% 3.5% 4.6% 3.9% 4.1% 5.9% Staggered, 6.2-year weighted average term for notes/bonds Ample liquidity with $1.35B available on revolver (L+90bps) Free cash flow of ~$100mm/yr $200 $0 5.8% Unsecured Notes Mortgages Revolver Term Loan 30

32 Scalability of Costs Contributes to Higher Relative Valuation Relative NAV valuation comparisons should consider G&A efficiencies 94% EBITDA margins, never below 90% since 2000 Efficiency and scalability of business model leads net lease industry Adjusted EBITDA per Employee ($000s) $7,172 G&A expense should be treated the same as dollar of property-level cash flow Consensus NAV estimates generally exclude impact of G&A expenses, thus no explicit credit for G&A efficiencies is recognized $2,211 Capping G&A with real estate multiple degrades NAV/sh more for smaller portfolios with less scalability G&A as % of Rental Revenue 1 G&A as % of Gross RE Book Value (bps) 5.8% 4.8% 64 bps 39 bps 15.5% Capped G&A as % of Equity Mkt Cap 2 4.7% 59 bps G&A as % of EV (bps) 23 bps 1 G&A includes acquisition transaction costs; percentage of rental revenue calculation excludes tenant reimbursements from denominator 2 Applies real estate multiple (15x for illustrative purposes) to G&A expenses YTD figures represent MRQ annualized, where applicable Source: FactSet 31

33 DEPENDABLE DIVIDENDS 32

34 Efficient, Scalable Business Model Steady dividend track record supported by inherently stable business model Strong Dividend Track Record 75 consecutive quarterly increases 86 total increases since 1994 NYSE listing ~83% AFFO payout (midpoint of 2016 guidance) $2.19 $2.20 $2.29 $ % compound average annualized growth rate since NYSE listing One of only six REITs included in S&P High Yield Dividend Aristocrats index 1 $1.52 $1.64 $1.70 $1.72 $1.73 $1.75 $1.82 $0.90 $0.93 $0.945 $0.96 $1.02 $1.08 $1.11 $1.14 $1.17 $1.20 $1.32 $ YTD 1 The S&P High Yield Dividend Aristocrats index is designed to measure the performance of companies in the S&P Composite 1500 that have followed a policy of consistently increasing dividends for at least 20 years Annualized dividend amount reflects the December declared dividend per share annualized, with the exception of 2016, which reflects the June 2016 declared dividend annualized 33

35 Dividend Track Record: Growth Through Variety of Economic Cycles Zero dividend cuts in 21 years as public company $3.2B ARCT acquisition supports 20%+ dividend increase 21.2% Realty Income increased dividend in 2009 as median REIT cut eclipsed 25% 8.5% 8.6% 2.1% 1.6% 3.8% 6.1% 4.7% 2.7% 2.7% 2.6% 5.1% 6.8% 6.5% 2.7% 2.0% 2.1% 3.6% 5.0% 0.9% 0.9% YTD Through May 2016 dividends paid, based on payment date YTD 2016 growth based on May 2016 dividend paid vs. May 2015 dividend paid 34

36 161% 129% 107% The Magic of Rising Dividends: Yield on Cost, Dividend Payback Long-term, yield-oriented investors have been rewarded with consistent income 29.9% 27.9% 21.2% 20.0% 18.8% 19.2% Yield on Cost Reflects yield on cost as of 3/31/2016 assuming shareholder bought shares 23.2% at end of each corresponding year 19.2% 16.2% 13.6%11.9% 9.4% 11.0% 8.6% 8.8% 10.3% 9.2% 7.0% 6.8% 5.9% 6.4% 5.0% 4.6% 389% 360% 266% 242% 220% 217% 251% Dividend Payback Reflects percentage of original investment made at each corresponding year-end period paid back through dividends (as of 3/31/2016) 200% 80% 87% 63% 58% 61% 48% 31% 26% 18% 14% 6% 1% 35

37 Guidance Consistent earnings growth while maintaining conservative leverage metrics 2016 FFO/sh AFFO/sh (proxy for cash earnings) Key Assumptions Acquisitions Dispositions $ $2.89 (1.8% - 4.3% growth) $ $2.90 (4.0% - 5.8% growth) ~$900 million $50 - $75 million Occupancy ~98% Same-store revenue growth ~1.3% Target capital structure 65% common equity, 35% debt & preferred equity 36

38 Summary Long term-focused business strategy Diversified and actively managed portfolio Proven and disciplined relationship-driven acquisition strategy Conservative capital structure able to withstand economic volatility Precedent of outperforming S&P 500 and REITs since 1994 listing Attractive risk/reward vs. other REITs and blue chip equities Dependable monthly dividends with long track record of growth 37