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Realty Income's (O) 2021 Investment Pipeline Reaches $6B

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Realty Income Corporation (O - Free Report) focuses on external growth through exploring accretive acquisition opportunities. Recently, it announced that from Oct 1, 2021, through Dec 1, 2021, the company acquired properties at a purchase price of $1.1 billion.

Further, Realty Income has entered into agreements or letters of intent to acquire additional properties with an estimated purchase price of more than $1.1 billion, which are expected to close in the fourth quarter of 2021. Considering the $3.8 billion of acquisitions closed since the beginning of the year through Sep 30, 2021, Realty Income’s 2021 investment pipeline represents roughly $6 billion of volume.

However, reflecting broader market concerns, shares of Realty Income have marginally declined during Friday’s trading session.

The solid property acquisitions volume at decent investment spreads over the years has aided Realty Income’s performance. Also, the company’s solid underlying real estate quality and prudent underwriting at acquisition have helped the company maintain high occupancy levels consistently. Since 1996, the company’s occupancy level has never been less than 96%. As of Sep 30, 2021, its portfolio occupancy of 98.8% expanded 30 basis points (bps) sequentially and 20 bps year over year.

Realty Income announced the closing of the merger with VEREIT on Nov 1. The combined entity is poised to benefit from the enhanced size, scale, diversification and synergies. Also, Realty Income announced the completion of the spin-off of Orion Office REIT Inc. (ONL - Free Report) .

Realty Income is also committed to improve its balance sheet strength and boost its liquidity. The company raised approximately $1.55 billion in capital from Oct 1, 2021, through Dec 1, 2021. This comprised roughly $950 million in net proceeds from the sale of 13.6 million shares of common stock through its At-The-Market (ATM) program and roughly $595 million through cash distribution to the company from Orion Office REIT in association with the recently completed spin-off of Orion.

With the top industries selling essential goods and services, accretive buyouts and a robust balance-sheet position, Realty Income is well poised to grow. The rise in monthly dividend payout is also encouraging. However, store closures and bankruptcies are concerns for the company. While situations are improving, disruptions from the COVID-19 variants might impact the recovery.

Shares of the Zacks Rank #3 (Hold) company have gained 3.7% in the fourth quarter compared with the industry’s rally of 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some other key picks from the REIT sector include Simon Property Group (SPG - Free Report) , Federal Realty Investment Trust (FRT - Free Report) and STORE Capital Corporation (STOR - Free Report) .

Simon Property Group currently sports a Zacks Rank of 1. Simon Property’s projected long-term growth rate is 8.70%.

The Zacks Consensus Estimate for SPG’s 2021 FFO per share has been revised 2.1% upward in a week. This also suggests an increase of 26.5% year over year.

Currently, Federal Realty carries a Zacks Rank of 2 (Buy). Federal Realty’s projected long-term growth rate is 8.40%.

The Zacks Consensus Estimate for FRT’s ongoing-year FFO per share has moved 3.9% north to $5.36 over the past month, suggesting an increase of 26.5% year over year.

STORE Capital currently carries a Zacks Rank of 2. The 2021 FFO per share for STORE Capital is expected to increase 3.3% year over year.

The Zacks Consensus Estimate for STOR’s 2021 FFO per share has been revised 1.1% upward in a month.

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.