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CIM Fund Selling 4.6M SF Retail Portfolio For Nearly $900M

Realty Income's purchase includes eight Lowe's stores, 14 Walgreens stores, 10 CVS locations, 20 Bob Evans and five Krogers.

A nontraded REIT run by CIM Group has agreed to sell a huge portfolio of retail properties to public REIT Realty Income Corp.

Realty Income plans to acquire 185 single-tenant properties for a combined $894M in an all-cash transaction with CIM Real Estate Finance Trust. The 4.6M SF portfolio has a 99.7% occupancy rate with a weighted average lease term of 9.2 years, according to a CIM press release.

Realty Income expects to acquire the properties, 95% of which are leased to retail tenants and 5% of which are leased to industrial tenants, at a roughly 7.1% capitalization rate, it said in a press release. The portfolio includes eight Lowe's Home Improvement stores, 14 Walgreens pharmacies, 10 CVS locations, 20 Bob Evans stores and five Kroger supermarkets.

The acquisition is expected to close by the end of the first quarter. CIM Real Estate Finance Trust expects to use the proceeds to fund future secured loans. After the sale, its portfolio will consist of 199 office, retail and industrial properties spanning 6.4M SF.

This isn't the first time that Realty Income has acquired a large number of assets from CMFT, and the difference in prices reflects the changing market. In 2019, the firm purchased 5.1M SF in single-tenant retail properties for about $1.25B. That deal, which consisted largely of dollar and convenience stores, penciled out to roughly $245 per SF, while this latest transaction would value the properties at just over $194 per SF.

The sale was announced a week after CMFT revised its portfolio's net asset value down to $6.57 per share from $7.20, where it had been set in March 2021, according to a Securities and Exchange Commission filing.

The nontraded REIT faced a wave of investors trying to cash out toward the end of the year, and like many of its peers, raised its gates and limited the amount of shares it repurchased.

CMFT disclosed in its third-quarter report that it received redemption requests for approximately 74.8 million shares as of Sept. 30, of which it redeemed 2.8 million by the end of Q3 and 1.3 million as of Nov. 14 for a total of $29.7M at the $7.20 NAV. It still has 70.8 million share redemption requests unfulfilled, and the withdrawals it doles out in 2023 will be based on the new, lower NAV.