Realty Income Corp. has struck a deal to buy VEREIT Inc. in which VEREIT shareholders will receive 0.705 shares of Realty Income stock for every VEREIT share they own. The new combination will have a value of about $50B, according to the companies.
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As soon as the acquisition is finalized in Q4, Realty Income will spin off a new REIT, to be called SpinCo., that will own virtually all of the office assets that Realty Income and VEREIT collectively hold. Realty Income and former VEREIT stockholders will own about 70% and 30%, respectively, of Realty Income and SpinCo.
Realty Income owns over 6,500 commercial properties in the United States and the United Kingdom, totaling about 110.7M SF. The vast majority (84.4%) of those assets are retail, while smaller amounts are industrial (10.9%) and office (3.1%). Major tenants include Walgreens, 7-Eleven, Dollar General, Dollar Tree/Family Dollar, Circle K and Speedway.
VEREIT owns about 3,800 commercial properties totaling 89.5M SF, with about 45.4% of the assets in retail, 20.3% in restaurants, 17.7% in industrial and 16.5% in office. Major tenants include Red Lobster, Dollar Tree/Family Dollar, Dollar General, Walgreens and CVS.
"We believe the merger with VEREIT will generate immediate earnings accretion and value creation for Realty Income's shareholders while enhancing our ability to execute on our ambitious growth initiatives," Realty Income President and CEO Sumit Roy said in a statement. "VEREIT's real estate portfolio is highly complementary to ours, which we expect to further enhance the consistency and durability of our cash flows."
REIT M&A seems poised for a resurgence after a coronavirus pandemic-induced slump, experts say. Recent major deals include Blackstone Group and Starwood Capital joining forces in March to buy Extended Stay America for $6B and Kimco Realty Corp. and Weingarten Realty Investors inking a deal in April that will merge Weingarten into Kimco, creating a $20.5B entity.
“As capital markets continue to improve and investment strategies evolve to account for the post-pandemic landscape, REITs should have the opportunity to address strategic needs through M&A activity," CBRE Capital Advisors' Americas leader James Scott told Bisnow.
