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Realty Income (O) Makes More Investments in Carrefour Properties

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Realty Income Corporation (O - Free Report) announced the closing of a €64-million ($74.2 million) portfolio transaction in Spain. It comprised three properties leased to Carrefour under long-term net lease agreements.

Together with the prior-announced Carrefour transaction, this leads to an investment of roughly €157 million ($182 million) by Realty Income in Spain-based real estate. The initial €93-million strategic sale-leaseback transaction in Spain, which was announced this September, marked the company’s “debut strategic expansion into Spain”. That comprised seven properties under long-term net lease agreements with Carrefour and its real estate subsidiary Carrefour Property.

According to Sumit Roy, president and chief executive officer of Realty Income, "We deeply value our partnerships with leading global operators like Carrefour as we establish our foundation in Spain, and we look forward to strengthening this relationship and building others as we continue to expand internationally."

The company’s expansion into continental Europe and partnership with Carrefour are strategic fits as Carrefour enjoys the second-highest grocery market share in Spain. Notably, it has emerged as the eighth largest retailer in the world, operating more than 13,000 stores with different formats across more than 30 countries.

Carrefour’s non-discretionary business model comprises an omni-channel strategy, helping achieve resiliency through various economic cycles. Even amid the turbulence in the industry, its same-store sales increased 7.8% in 2020.

Therefore, the tie-up with Europe's largest food retailer aligns with Realty Income’s investment strategy of partnering with prominent operators in industries enjoying consistent sales trends in different economic cycles and having limited cash flow volatility.

Solid property acquisition volume at decent investment spreads has played a key role in boosting the company’s performance. In the first half of 2021, Realty Income invested $2.16 billion in 254 properties and properties under development or expansion. This included $994.8 million in U.K. properties.

Further, Realty Income’s VEREIT Inc. merger, which is expected to close this quarter, augurs well as the combined entity is poised to benefit from the enhanced size, scale, diversification and synergies, particularly through accretive debt-refinancing opportunities.

Shares of this Zacks Rank #2 (Buy) company have gained 7.3% so far in the fourth quarter compared with the industry’s rally of 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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