Realty Income Corporation (O - Free Report) is focused on growth through exploring accretive acquisition opportunities. The company has announced the closing of the £429-million sale-leaseback transaction with Sainsbury's.
Particularly, the move, which marks the company’s first international real estate acquisition, involved gaining of 12 properties in the United Kingdom under long-term net lease agreements with Sainsbury's.
The move is a strategic fit as Sainsbury's is one of the top operators in the grocery industry. And with this long-term investment, Realty Income is well poised to capitalize on the solid strength of the real estate fundamentals in the region.
Executed at a 5.31% GBP initial cap rate, the sale-leaseback transaction involves annual rent increases over the duration of the lease term, and carries a weighted average lease term of around 15 years.
Realty Income partly financed the transaction with proceeds from the private placement of £315 million senior unsecured notes. Further, the remaining of the purchase price, and the majority of net cash flow generated from the transaction, are hedged through a 15-year cross currency swap. This is aimed at lowering the company's exposure to foreign-exchange rate fluctuations.
Admittedly, the e-commerce sector has been witnessing overwhelming growth, leading to a decline in mall traffic, with store closures and retailer bankruptcies becoming rampant, affecting retail landlords, including the likes of Tanger Factory Outlet Centers, Inc. (SKT - Free Report) , Urban Edge Properties (UE - Free Report) and Washington Prime Group Inc. .
However, Realty Income has been able to differentiate itself by deriving more than 90% of the company’s annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions as well as competition from Internet retailing.
Furthermore, accretive acquisitions and solid balance-sheet strength augur well for long-term growth. During the March-end quarter, the company invested $519.5 million in 105 new properties and properties under development or expansion, situated in 25 states.
Additionally, management issued the 2019 acquisition guidance in the range of $2-$2.5 billion, backed by strength in the company’s present domestic investment pipeline and international expansion, which is encouraging. Nevertheless, the prevalent retail apocalypse is a concern. In addition, the company’s substantial exposure to single tenant assets raises its risks associated with tenant default.
Realty Income currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Realty Income Corporation (O - Free Report) is focused on growth through exploring accretive acquisition opportunities. The company has announced the closing of the £429-million sale-leaseback transaction with Sainsbury's.
Particularly, the move, which marks the company’s first international real estate acquisition, involved gaining of 12 properties in the United Kingdom under long-term net lease agreements with Sainsbury's.
The move is a strategic fit as Sainsbury's is one of the top operators in the grocery industry. And with this long-term investment, Realty Income is well poised to capitalize on the solid strength of the real estate fundamentals in the region.
Executed at a 5.31% GBP initial cap rate, the sale-leaseback transaction involves annual rent increases over the duration of the lease term, and carries a weighted average lease term of around 15 years.
Realty Income partly financed the transaction with proceeds from the private placement of £315 million senior unsecured notes. Further, the remaining of the purchase price, and the majority of net cash flow generated from the transaction, are hedged through a 15-year cross currency swap. This is aimed at lowering the company's exposure to foreign-exchange rate fluctuations.
Admittedly, the e-commerce sector has been witnessing overwhelming growth, leading to a decline in mall traffic, with store closures and retailer bankruptcies becoming rampant, affecting retail landlords, including the likes of Tanger Factory Outlet Centers, Inc. (SKT - Free Report) , Urban Edge Properties (UE - Free Report) and Washington Prime Group Inc. .
However, Realty Income has been able to differentiate itself by deriving more than 90% of the company’s annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions as well as competition from Internet retailing.
Furthermore, accretive acquisitions and solid balance-sheet strength augur well for long-term growth. During the March-end quarter, the company invested $519.5 million in 105 new properties and properties under development or expansion, situated in 25 states.
Additionally, management issued the 2019 acquisition guidance in the range of $2-$2.5 billion, backed by strength in the company’s present domestic investment pipeline and international expansion, which is encouraging. Nevertheless, the prevalent retail apocalypse is a concern. In addition, the company’s substantial exposure to single tenant assets raises its risks associated with tenant default.
Realty Income currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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