Realty Income Corporation ( O Quick Quote O - Free Report) has announced the pricing of an upsized underwritten public offering of 8 million shares of common stock. The company had previously planned for offering of 7.25 million shares. Moreover, underwriters have been granted a 30-day option to buy up to 1.2 million additional shares. The move is aimed to improve its balance-sheet strength and enhance liquidity by tapping the equity markets.
The offering expected to close on Jul 6 will yield gross proceeds of roughly $519 million.
The company intends to utilize the net proceeds to repay borrowings under its $3-billion revolving credit facility and $1-billion commercial paper program. The residual proceeds will be used to fund potential investment opportunities and made available for other general corporate needs.
During first-quarter 2021, Realty Income invested $1.03 billion in 110 properties and properties under development or expansion. Moreover, in April 2021, Realty Income announced entering into a definitive merger agreement with
VEREIT, Inc. ( VER Quick Quote VER - Free Report) for the acquisition of the latter in an all-stock transaction. Decent investments for the acquisitions of well-located commercial properties add to the company’s scale, offering a competitive edge to its net lease industry.
Markedly, retail REITs, which had already been battling store closures and bankruptcy issues, suffered the brunt of the pandemic with e-commerce adoption increasing by manifolds, and social-distancing requirements affecting customer traffic and rental collections from tenants. In fact, apart from Realty Income, this turbulence has affected other retail REITs, including Macerich,
Simon Property ( SPG Quick Quote SPG - Free Report) and Kimco ( KIM Quick Quote KIM - Free Report) among others.
Particularly, Realty Income’s tenants from theatre as well as health and fitness industries were severely impacted by the pandemic and the consequent social-distancing norms.
However, amid this disruption of cash flows of landlords, Realty Income remains committed to improve its balance-sheet strength and boost its liquidity, and the latest capital raise is also in line with these efforts. Moreover, manageable near-term maturities, modest leverage and strong coverage metrics as well as ample liquidity provide the company with financial flexibility to tide over any mayhem.
Shares of this Zacks Rank #3 (Hold) company have gained 11.5% over the past six months, underperforming the
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