Realty Income Corporation, the US firm that has been assembling a UK portfolio of supermarkets, is buying VEREIT to create a $50bn (£36bn) real estate company.
VEREIT owns 89.5m sq ft of single-tenanted assets across the US valued at almost $15bn. Realty owns a portfolio of more than 6,500 properties across the US, Puerto Rico and the UK.
The pair said that the merger would enable meaningful diversification that would deliver new growth avenues, strengthen cash flow durability, and provide significant financial synergies, particularly through accretive debt refinancing opportunities. The strategy for the merged business will remain focused primarily on high-quality, single-tenant net lease retail and industrial properties in the US and UK, leased to clients that are leaders in their respective businesses.
“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,” said Sumit Roy, president and chief executive of Realty Income. “Together, our company will enjoy increased size, scale and diversification, continuing to distance Realty Income as the leader in the net lease industry. VEREIT’s real estate portfolio is highly complementary to ours, which we expect to further enhance the consistency and durability of our cash flows.”
Glenn Rufrano, chief executive of VEREIT, added: “The objective of our management team from initiation in 2015 was to revitalise VEREIT and increase the value of the enterprise. We put an excellent team in place, enhanced the portfolio, created an investment-grade balance sheet and resolved all legacy issues. The board and management have concluded that a merger with Realty Income, the premier net lease company, will enable us to recognise the value created. The combined company provides all of our constituencies the opportunity to benefit from the advantageous cost of capital and growth potential generated by this transaction.
The companies said they expected to effectuate a taxable spin-off of substantially all of the office properties of both companies into a new, self-managed, publicly traded REIT (SpinCo) and that following the merger and the spin-off, Realty Income would become the surviving public entity.
Since debuting in the UK in 2019, buying a £429m portfolio of Sainsbury’s from British Land, Realty Income has built up a sizeable portfolio in the country. Its latest results revealed its spending in the UK reached $920.9m during the year ending December 2020. The firm has more than 40 properties in the UK, which account for around 6% of its total revenue.
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