NNN REIT Consolidation – Realty Income to Acquire Spirit Realty

Realty Income to Acquire Spirit Realty Capital in $9.3 Billion Transaction


Realty Income Corporation 

30 Oct, 2023, 06:30 ET

– Over 2.5% Accretion to Annualized AFFO per Share in All Stock, Leverage-Neutral Transaction

– Complementary Real Estate Portfolio Enhances Size, Scale and Diversification to Expand Runway for Future Growth

– No Reliance on Capital Markets to Complete Transaction; Realty Income to Assume Existing Debt with Low In-Place Rates

SAN DIEGO and DALLASOct. 30, 2023 /PRNewswire/ — Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company®, and Spirit Realty Capital, Inc. (Spirit, NYSE: SRC), announced today that the two companies have entered into a definitive merger agreement by which Realty Income will acquire Spirit in an all-stock transaction valued at an enterprise value of approximately $9.3 billion. The leverage-neutral transaction is expected to deliver over 2.5% accretion to Realty Income’s annualized Adjusted Funds from Operations (AFFO) per share. Additionally, no new external capital is expected to be required to finance the transaction. The merger, once completed, will result in an enterprise value of approximately $63 billion for the combined company, enhancing Realty Income’s size, scale, and diversification to expand its runway for future growth.

Under the terms of the merger agreement, Spirit shareholders will receive 0.762 newly-issued Realty Income common shares for each Spirit common share they own. At closing, this will result in Realty Income and Spirit shareholders owning approximately 87% and 13%, respectively, of the combined company. The merger is subject to customary closing conditions, including the approval of Spirit shareholders, and is expected to close during the first quarter of 2024. Additionally, from the date of the merger agreement through the closing of the transaction, Spirit may declare and pay regular, quarterly cash dividends to holders of its common stock and to holders of its preferred stock. No approval of Realty Income shareholders will be required in connection with the merger.

“The merger with Spirit is yet another example of how our size, scale, and unique platform value continue to create substantial value for our shareholders,” said Sumit Roy, President and Chief Executive Officer of Realty Income. “We expect that this transaction will create immediate and meaningful earnings accretion, while enhancing the diversification and depth of our high-quality real estate portfolio. 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. 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. Moreover, our technology and infrastructure investments following the VEREIT merger in 2021 have amplified our efficiency in integrating assets and augmented our capabilities in maximizing the value of our properties.”

Jackson Hsieh, President and Chief Executive Officer of Spirit Realty said, “Since the board appointed me CEO in 2017, our leadership team and dedicated associates have effectuated numerous accomplishments, including improved tenant quality and asset diversification, implementation of advanced analytical tools and processes, and an excellent balance sheet with well-laddered maturities and below-market fixed debt costs. This transaction is the culmination of these accomplishments, and merging with Realty Income offers Spirit’s shareholders immediate value by providing a more competitive cost of capital, an A-rated balance sheet, broader tenant diversification, and the ability to leverage economies of scale.”

Investment Rationale

  • Significant anticipated AFFO per share accretion on a leverage-neutral basis with meaningful cost synergies. Relative to its standalone annualized AFFO per share run rate, Realty Income estimates the transaction to be over 2.5% accretive while maintaining a combined leverage ratio of approximately 5.5x (based on Net Debt and Preferred Equity / Annualized Adjusted EBITDAre as of June 30, 2023). As of June 30, 2023, Realty Income and Spirit maintained leverage ratios of 5.4x and 5.5x, respectively. The estimated earnings accretion assumes approximately $50 million of annualized G&A synergies (or approximately $30 million of annualized G&A synergies excluding stock-based compensation).
  • Complementary real estate portfolio improves diversification and enhances runway for future growth. The combined portfolio is expected to result in reduced rent concentration for nine of Realty Income’s current top 10 industries and 18 of its current top 20 clients, while increasing the combined portfolio’s annualized contractual rent from $3.8 billion to $4.5 billion. Convenience stores are expected to remain the combined company’s largest industry, at 10.2% of annualized contractual rent for the combined portfolio as of June 30, 2023, compared to 11.1% of annualized contractual rent of Realty Income on a standalone basis. The Industrial property type is expected to represent 15.1% of annualized contractual rent for the combined portfolio, compared to 13.1% of annualized contractual rent of Realty Income on a standalone basis. The enhanced size, scale, and diversification of the portfolio further positions Realty Income as the real estate partner of choice for large net lease transactions, particularly given the current interest rate environment.
  • Public capital not expected to be required to finance transaction, low in-place rates on existing debt. Earnings accretion is supported by approximately $4.1 billion of existing Spirit debt at a weighted average interest rate of 3.48% and weighted average term to maturity of approximately 4.9 years. In addition, Realty Income intends to assume approximately $173 million of Spirit’s outstanding Series A Preferred Stock at an annual cash dividend of 6.0%, which is redeemable at par and is expected to remain publicly traded on the New York Stock Exchange.
  • Prudent investment underwriting bolstered by proprietary credit research and predictive analytics platform. Realty Income’s longstanding investment track record over multiple decades is supported by historical outcomes, insights and data analytics gleaned from its net lease real estate portfolio. We believe our comprehensive and conservative underwriting approach positions the investment to retain potentially meaningful earnings and value upside over the long-term.
  • Preserves quality of key credit metrics for best-in-class balance sheet. Realty Income remains one of only eight U.S. REITs with at least two A3 / A- credit ratings by Moody’s and S&P and is committed to maintaining its conservative credit metrics while executing on its growth strategy. In addition to the transaction resulting in leverage neutrality, Realty Income is expected to maintain or improve several key credit metrics as a result of this transaction, including with respect to fixed charge coverage, unsecured assets / unsecured debt, secured debt / gross assets and total debt / gross assets.
  • Benefits of scale extends to capital markets as Realty Income solidifies position as one of the largest real estate companies in the S&P 500. Pro forma for the merger, Realty Income expects to remain in the top 200 of the S&P 500 index and become the 4th largest REIT in the index, by enterprise value, with a total enterprise value of approximately $63 billion. Further, after giving effect to the merger agreement’s fixed exchange ratio and the company’s current 3-month average daily trading volume, the resulting Realty Income stock is expected to trade approximately $300 million of value on a daily basis. We believe the company’s highly liquid share currency and increasing representation in key benchmark equity indices will create natural demand for the stock and provide Realty Income with meaningful flexibility to continue to effectively and efficiently access the capital markets.


Wells Fargo is serving as sole financial advisor and Latham & Watkins is acting as legal advisor to Realty Income.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are serving as financial advisors and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Spirit.

Webcast and Conference Call Information

Realty Income and Spirit will conduct a joint conference call for investors and analysts on October 30, 2023 at 8:00 am ET to discuss the transaction.

To access the conference call, dial (833) 816-1264 (United States) or (412) 317-5632 (International). When prompted, ask to join into the Realty Income call.

A live webcast will be available in listen-only mode by clicking on the webcast link on Realty Income or Spirit’s home page or in the investors section at www.realtyincome.com or www.spiritrealty.com. A replay of the conference call webcast will be available approximately one hour after the conclusion of the live broadcast. No access code is required for this replay.

Investor Presentation

An investor presentation regarding the transaction will be available in the investors section of each company’s website.

About Realty Income

Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 13,100 real estate properties primarily owned under long-term net lease agreements with commercial clients. To date, the company has declared 640 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 122 times since Realty Income’s public listing in 1994 (NYSE: O). Additional information about the company can be obtained from the corporate website at www.realtyincome.com.

About Spirit Realty

Spirit Realty Capital, Inc. (NYSE: SRC) is a premier net-lease REIT that primarily invests in single-tenant, operationally essential real estate assets, subject to long-term leases. As of June 30, 2023, our diverse portfolio consisted of 2,064 retail, industrial and other properties across 49 states, which were leased to 345 tenants operating in 37 industries. As of June 30, 2023, our properties were approximately 99.8% occupied. More information about Spirit Realty Capital can be found on the investor relations page of the Company’s website at www.spiritrealty.com.

NNN REIT Consolidation – Realty Income to Acquire Spirit Realty
Scroll to top