When Realty Income Corp. agreed to acquire the real estate of hundreds of EG Group-owned convenience stores in the U.S. in March, it got a set of assets it had admired for “many, many years,” Sumit Roy, president and CEO of the San Diego-based real estate investment company, said in a recent interview with the National Association of Real Estate Investment Trusts.
The acquisition, announced on March 6, saw EG 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. As of late May, Realty Income had begun acquiring various Cumberland Farms stores in central Massachusetts included in the agreement.
The deal is a sale-leaseback agreement, meaning EG will continue to operate these locations while Realty Income owns the land. EG agreed to pay $103 million in rent at the outset, with stores carrying an average lease term of 20 years.
This was EG Group’s first crack at a sale-leaseback deal, Roy said. The executive noted that EG was “willing to entertain the possibility” of doing this type of deal to help deleverage its balance sheet — which EG also confirmed when the deal was made.
In January, Blackburn, U.K.-based EG Group had about $8.6 billion of debt falling due in 2025. The convenience retailer has more than 5,500 c-stores across the U.S., U.K. and Ireland, Europe and Australia.
“Given the cost of capital differential between what [EG Group’s] cost of debt cost versus what the sale-leaseback would potentially yield, they chose the sale-leaseback, thankfully,” Roy said.
Back in March, Roy said that Realty Income was drawn to EG’s U.S. assets due to its real estate quality, store-level cash flow coverage and average property size.
Now, nearly five months later, he noted that the deal has worked to Realty Income’s strengths of conducting large transactions, that it doesn’t cause concentration issues, and has since allowed Realty Income to build a new relationship with EG Group — which it plans to do repeat business with moving forward.
“It’s a win-win,” Roy said.
