Dive Brief:
- Realty Income Corporation has acquired fellow real estate investment trust (REIT) Spirit Realty Capital in an all-stock transaction valued at $9.3 billion, according to a Monday announcement.
- The companies expect convenience stores to be 10.2% of annualized contractual rent for the combined portfolio, making them its largest segment, according to the announcement. Realty Income agreed to acquire hundreds of c-stores from EG America earlier this year and has a portfolio of 7-Elevens while Spirit invests in many c-store chains, such as Circle K.
- The merger, which is expected to close during the first quarter of 2024, will create a combined company with an enterprise value of about $63 billion.
Dive Insight:
The increased size, scale and diversification of Realty Income’s portfolio following this merger creates a runway for the San Diego-based REIT to pursue more large net-lease acquisitions moving forward, the company said in the announcement.
C-stores make up over 11% of Realty Income’s business, outpacing grocery, dollar and drug stores in addition to several other industries, according to its website. Besides its recent deals with EG America, Realty has also completed sale-leaseback agreements for over 100 7-Eleven stores since 2016.
Meanwhile, c-stores make up about 5.2% of Spirit’s business, its second-highest retail segment behind health and fitness companies, according to its website. As of June, Circle K was Spirit's seventh-largest tenant with 76 locations leased.
“Spirit's assets are highly complementary to our existing portfolio, extending our investments in industries that have proven to generate durable cash flows over several economic cycles,” Sumit Roy, president and CEO of Realty Income, said in the announcement. “We also believe this merger will strengthen our longstanding relationships with existing clients and allow us to curate new ones with partners whose growth ambitions can accelerate alongside Realty Income.”
Realty Income’s deal with EG America saw the convenience retailer enter into a $1.5 billion agreement under which Realty Income would purchase up to 415 Cumberland Farms, Tom Thumb, Fastrac and Sprint c-stores in a sale-leaseback deal. As of late May, Realty Income had begun acquiring various Cumberland Farms stores in central Massachusetts included in the agreement.
