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Realty Income (O) Closes $1B Term Loan, Boosts Liquidity
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Amid the rebounding retail real estate market, Realty Income (O - Free Report) recently announced that it has closed a $1 billion multicurrency unsecured term loan. The move boosts the company’s liquidity position and financial flexibility.
The loan has an initial maturity in January 2024 and can be prolonged by exercising two 12-month extensions at the company's discretion.
At present, Realty Income has credit ratings of A3/A- from Moody’s and Standard & Poor’s, respectively. In accordance with the terms of the loan, these ratings allow for a borrowing rate of 80 basis points over the applicable benchmark rate. This is inclusive of the adjusted SOFR for U.S. Dollar-denominated loans, adjusted SONIA for Sterling-denominated loans and EURIBOR for Euro-denominated loans.
Per Christie Kelly, executive vice president, CFO and Treasurer of Realty Income, “This term loan bolsters our financial flexibility and liquidity profile, supporting our capacity to be disciplined capital allocators in the near term.”
In addition, the company executed one-year variable-to-fixed interest rate swaps, which secure its per annum interest rate at 5% over the initial term.
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 have been aiding external growth. Moreover, the company’s capital-recycling efforts highlight its prudent capital management practices and relieve the pressure on its balance sheet.
The company maintains a healthy balance sheet with a well-laddered debt-maturity schedule. It exited the third quarter of 2022 with nearly $2.5 billion of liquidity, a net debt to annualized adjusted EBITDAre of 5.3X and a fixed charge coverage of 5.5X.
With added balance-sheet strength and ample financial flexibility, the Monthly Dividend Company is well-positioned to capitalize on long-term 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 11.7% in the past three months, lower than the industry’s growth of 20.1%.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for National Retail Properties’ ongoing year’s FFO per share stands at $3.20.
The Zacks Consensus Estimate for Stag Industrial’s 2022 FFO per share is pegged at $2.21.
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) Closes $1B Term Loan, Boosts Liquidity
Amid the rebounding retail real estate market, Realty Income (O - Free Report) recently announced that it has closed a $1 billion multicurrency unsecured term loan. The move boosts the company’s liquidity position and financial flexibility.
The loan has an initial maturity in January 2024 and can be prolonged by exercising two 12-month extensions at the company's discretion.
At present, Realty Income has credit ratings of A3/A- from Moody’s and Standard & Poor’s, respectively. In accordance with the terms of the loan, these ratings allow for a borrowing rate of 80 basis points over the applicable benchmark rate. This is inclusive of the adjusted SOFR for U.S. Dollar-denominated loans, adjusted SONIA for Sterling-denominated loans and EURIBOR for Euro-denominated loans.
Per Christie Kelly, executive vice president, CFO and Treasurer of Realty Income, “This term loan bolsters our financial flexibility and liquidity profile, supporting our capacity to be disciplined capital allocators in the near term.”
In addition, the company executed one-year variable-to-fixed interest rate swaps, which secure its per annum interest rate at 5% over the initial term.
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 have been aiding external growth. Moreover, the company’s capital-recycling efforts highlight its prudent capital management practices and relieve the pressure on its balance sheet.
The company maintains a healthy balance sheet with a well-laddered debt-maturity schedule. It exited the third quarter of 2022 with nearly $2.5 billion of liquidity, a net debt to annualized adjusted EBITDAre of 5.3X and a fixed charge coverage of 5.5X.
With added balance-sheet strength and ample financial flexibility, the Monthly Dividend Company is well-positioned to capitalize on long-term 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 11.7% in the past three months, lower than the industry’s growth of 20.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Stag Industrial (STAG - 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 National Retail Properties’ ongoing year’s FFO per share stands at $3.20.
The Zacks Consensus Estimate for Stag Industrial’s 2022 FFO per share is pegged at $2.21.
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.