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Realty Income (O) to Offer 11M Common Stock, Lower Debt

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Realty Income Corporation (O - Free Report) recently priced a public offering of 11 million shares of its common stock at $69.25 per share. The offering is expected to close on May 9. Further, the underwriters have been granted a 30-day option to purchase up to an additional 1.65 million common shares.

The common stock offering boosts the company's financial flexibility and helps meet its financial obligations in an efficient way. Moreover, it provides ample scope for deploying capital for long-term growth opportunities and rewarding higher returns to stockholders, at the same time.

Specifically, the company projects the net proceeds to be $735 million, after considering underwriting discounts and offering expenses payable by the company. The company plans to use the net proceeds to repay all or a portion of the borrowings outstanding under its $3-billion unsecured revolving credit facility. The amount, not used for this purpose, will be used to fund potential investment opportunities and/or for other general corporate purposes.

In fact, Realty Income is focused on external growth through exploring accretive acquisition opportunities. Solid property acquisitions at decent investment spreads aided the company’s performance. During the first quarter, the company invested $519.5 million in 105 new properties and properties under development or expansion, situated in 25 states.

In addition, recently, the company announced its first international real estate investment. Specifically, it announced a definitive agreement to acquire 12 properties in the U.K. for £429 million, or around $557 million, from a joint venture of affiliates of J Sainsbury PLC and British Land PLC. The sale-leaseback transaction with Sainsbury's includes annual rent increases over the duration of the lease term, and carries a weighted average lease term of around 15 years.

The trend in estimate revisions of the current-year FFO per share indicates an impressive outlook for the company. In fact, the stock has seen the Zacks Consensus Estimate for current-year FFO per share being revised nearly 1% upward in a month’s time.

However, the prevalent retail apocalypse is likely to limit its growth momentum to some extent. The company has substantial exposure to single-tenant assets which raises its risks associated with tenant default.

Shares of this Zacks Rank #3 (Hold) company have outperformed its industry over the past year, gaining 33.4%, compared to the industry’s rise of 13%.

Key Picks

American Assets Trust, Inc’s (AAT - Free Report) earnings estimates for the current year have been revised 1.4% upward in the past 60 days. Currently, it carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kimco Realty Corporation’s (KIM - Free Report) earnings estimates for the ongoing year have remained unchanged over the past 60 days. The stock currently carries a Zacks Rank of 2.

Retail Properties of America, Inc’s (RPAI - Free Report) 2019 earnings estimates moved nearly 1% north in 60 days’ time. The stock carries a Zacks Rank of 2, at present.

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