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Realty Income (O) to Acquire 185-Property Portfolio for $894M
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Realty Income Corporation (O - Free Report) recently unveiled that it has signed a definitive agreement with subsidiaries of CIM Real Estate Finance Trust, Inc., a non-listed REIT sponsored by an affiliate of CIM Group, to acquire up to 185 single-tenant retail and industrial properties. The move resonates with the company’s expansion efforts in key markets to enhance portfolio quality and scale.
Reflecting broader market concerns, shares of O witnessed a marginal loss on Dec 30 normal trading session at the NYSE.
The acquisition, to be worth around $894 million, will take place in cash and is anticipated to be completed in first-quarter 2023, subject to various customary closing conditions.
The cash cap rate for the total portfolio is estimated to be approximately 7.1%, with a weighted average remaining lease term of roughly 9.2 years. Investment-grade-rated clients are expected to contribute around 48% of the total portfolio annualized contractual rent. Hence, the Monthly Dividend Company’s latest move seems prudent.
In addition, the 185-property portfolio will span up to 4.6 million square feet. It is expected to be leased to 55 retail clients and four industrial clients representing 95% and 5%, respectively, of the total portfolio annualized contractual rent.
Further, around 95% of the total portfolio annualized contractual rent is expected to be leased to Realty Income’s existing clients.
Per Sumit Roy, president & CEO of Realty Income, “Upon closing, this transaction will be immediately accretive to earnings on a leverage-neutral basis and is highly complementary to our existing portfolio.”
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery in the retail real estate industry. Given this backdrop, this retail REIT is well-poised to benefit from its portfolio comprising major industries that sell essential goods and services.
Realty Income’s accretive buyouts and development initiatives seem encouraging for its external growth. In the nine months that ended Sep 30, 2022, the company invested $5.1 billion in 766 properties and properties under development or expansion. This included properties in both the United States and Europe. Management expects to incur more than $6 billion in acquisitions in 2022.
Moreover, its capital-recycling efforts highlight the company’s prudent capital management practices alongside relieving the pressure on its balance sheet.
With a solid balance-sheet position and ample financial flexibility, Realty Income is well-positioned to capitalize on long-term future growth opportunities.
Nonetheless, higher e-commerce adoption, stiff competition from industry peers and rising interest rates remain key concerns for the company.
Shares of this Zacks Rank #3 (Hold) company have gained 5.3% in the past three months, lower than the industry’s growth of 11.3%.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34.
The Zacks Consensus Estimate for National Retail Properties’ ongoing year’s FFO per share stands at $3.20.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Realty Income (O) to Acquire 185-Property Portfolio for $894M
Realty Income Corporation (O - Free Report) recently unveiled that it has signed a definitive agreement with subsidiaries of CIM Real Estate Finance Trust, Inc., a non-listed REIT sponsored by an affiliate of CIM Group, to acquire up to 185 single-tenant retail and industrial properties. The move resonates with the company’s expansion efforts in key markets to enhance portfolio quality and scale.
Reflecting broader market concerns, shares of O witnessed a marginal loss on Dec 30 normal trading session at the NYSE.
The acquisition, to be worth around $894 million, will take place in cash and is anticipated to be completed in first-quarter 2023, subject to various customary closing conditions.
The cash cap rate for the total portfolio is estimated to be approximately 7.1%, with a weighted average remaining lease term of roughly 9.2 years. Investment-grade-rated clients are expected to contribute around 48% of the total portfolio annualized contractual rent. Hence, the Monthly Dividend Company’s latest move seems prudent.
In addition, the 185-property portfolio will span up to 4.6 million square feet. It is expected to be leased to 55 retail clients and four industrial clients representing 95% and 5%, respectively, of the total portfolio annualized contractual rent.
Further, around 95% of the total portfolio annualized contractual rent is expected to be leased to Realty Income’s existing clients.
Per Sumit Roy, president & CEO of Realty Income, “Upon closing, this transaction will be immediately accretive to earnings on a leverage-neutral basis and is highly complementary to our existing portfolio.”
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery in the retail real estate industry. Given this backdrop, this retail REIT is well-poised to benefit from its portfolio comprising major industries that sell essential goods and services.
Realty Income’s accretive buyouts and development initiatives seem encouraging for its external growth. In the nine months that ended Sep 30, 2022, the company invested $5.1 billion in 766 properties and properties under development or expansion. This included properties in both the United States and Europe. Management expects to incur more than $6 billion in acquisitions in 2022.
Moreover, its capital-recycling efforts highlight the company’s prudent capital management practices alongside relieving the pressure on its balance sheet.
With a solid balance-sheet position and ample financial flexibility, Realty Income is well-positioned to capitalize on long-term future growth opportunities.
Nonetheless, higher e-commerce adoption, stiff competition from industry peers and rising interest rates remain key concerns for the company.
Shares of this Zacks Rank #3 (Hold) company have gained 5.3% in the past three months, lower than the industry’s growth of 11.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Lamar Advertising (LAMR - Free Report) and National Retail Properties (NNN - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34.
The Zacks Consensus Estimate for National Retail Properties’ ongoing year’s FFO per share stands at $3.20.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.