SAN DIEGO, April 22, 2019
/PRNewswire/ -- Realty Income Corporation (Realty Income, NYSE: O),
The Monthly Dividend Company®, today announced that the
company has signed a definitive agreement to acquire, from a joint
venture of affiliates of J Sainsbury PLC ("Sainsbury's") and
British Land PLC, 12 properties located in the United Kingdom ("UK") for £429 million
under long-term net lease agreements with Sainsbury's. The
transaction is Realty Income's first international real estate
acquisition.
"We are excited to announce this strategic transaction, which
supplements our robust domestic investment pipeline and represents
a natural evolution of the company's strategy," said Sumit Roy, President and Chief Executive
Officer. "We believe that the size of the European net lease market
and a need for a large-scale, well-capitalized institutional real
estate partner creates a very propitious environment for us to
increase our addressable market. Our company is ideally positioned
to pursue these additional growth avenues in Europe given our position as the leader in the
net lease industry, sector-leading cost of capital, and ability to
complete large-scale sale-leaseback transactions without creating
tenant or industry concentration issues."
"As we continue to identify strong corporate sale-leaseback
partners to further our company's growth, we remain cognizant of
the values which have dictated our prior successes. Sainsbury's is
a natural fit to our existing high-quality real estate portfolio,
as the company is one of the top operators in the grocery industry
with a consistent track record and respected management team. We
believe that strong real estate fundamentals and the stability of
the UK economy make it a compelling market for long-term real
estate investment. We are pleased to execute this sale-leaseback
transaction at investment spreads relative to our first-year
weighted average cost of capital that exceed our historical
average. As a result, we are increasing our 2019 AFFO per share
guidance to $3.28 - $3.33 from $3.25 -
$3.31."
The sale-leaseback transaction with Sainsbury's is executed at a
5.31% GBP initial cap rate, includes annual rent increases over the
duration of the lease term, and carries a weighted average lease
term of approximately 15 years. The transaction is expected to
close on or around May 22, 2019,
subject to customary closing conditions.
UBS Investment Bank acted as financial advisor to Realty Income
on this transaction.
Sainsbury's Profile:
- Founded in 1869, Sainsbury's (LSE: SBRY) is a leading grocery
operator with over 1,400 grocery and convenience store locations
across the UK and Ireland.
- Sainsbury's generated over £28 billion in revenue in 2018 and
has an enterprise value of approximately £5.5 billion.
- Sainsbury's has demonstrated resiliency through multiple
economic cycles, most recently during the Great Recession, as
Sainsbury's maintained healthy same store sales growth, improved
EBITDA margins, and reduced leverage.
Investment Rationale:
- We believe there is significant demand from high-quality
tenants in Europe for
sale-leaseback capital on reasonable terms and believe Realty
Income is uniquely positioned to capitalize on this opportunity
utilizing its industry-leading scale and cost of capital.
- The transaction is expected to be approximately $0.04 per share accretive to Adjusted Funds from
Operations (AFFO) on an annualized, leverage-neutral basis.
Additionally, the majority of net cash flow from the transaction is
expected to be hedged with a GBP / USD cross-currency swap, which
is expected to minimize Realty Income's exposure to foreign
exchange rate fluctuations.
- Sainsbury's is an industry leader with a defensive business
model selling non-discretionary consumer goods, which is consistent
with Realty Income's existing investment criteria.
Updated 2019
Guidance
|
|
Range
|
|
Revised
|
|
Prior
|
Net Income per
share
|
$1.39 -
$1.44
|
|
$1.36 -
$1.42
|
AFFO per
share
|
$3.28 -
$3.33
|
|
$3.25 -
$3.31
|
FFO per
share
|
$3.26 -
$3.31
|
|
$3.23 -
$3.29
|
Acquisitions (in
billions)
|
$2.0 -
$2.5
|
|
$1.5 -
$2.0
|
The company considers FFO and AFFO to be appropriate
supplemental measures of a Real Estate Investment Trust's (REIT's)
operating performance. Realty Income defines FFO, a non-GAAP
measure, consistent with the National Association of Real Estate
Investment Trusts' (NAREIT's) definition, as net income available
to common stockholders, plus depreciation and amortization of real
estate assets, plus impairments of real estate assets, and reduced
by gains on property sales. AFFO further adjusts FFO for unique
revenue and expense items, which the company believes are not as
pertinent to the measurement of the company's ongoing operating
performance. Presentation of the information regarding FFO and AFFO
is intended to assist the reader in comparing the operating
performance of different REITs, although it should be noted that
not all REITs calculate FFO and AFFO in the same way, so
comparisons with other REITs may not be meaningful. FFO and AFFO
should not be considered as alternatives to reviewing our cash
flows from operating, investing, and financing activities. In
addition, FFO and AFFO should not be considered as measures of
liquidity, our ability to make cash distributions, or our ability
to pay interest payments.
Conference Call Information and Supplemental
Materials
To further detail this strategic transaction, the company will
host a conference call on April 22, 2019 at 2:00 p.m. PDT. To access the conference, dial
(888) 394-8218. When prompted, provide the conference ID
3486100.
A telephone replay of the conference call can also be accessed
by calling (888) 203-1112 and entering the passcode 3486100. The
telephone replay will be available through May 3, 2019. A live webcast will be available in
listen-only mode by clicking on the webcast link on the company's
home page or in the investors section at www.realtyincome.com. A
replay of the conference call webcast will be available
approximately two hours after the conclusion of the live broadcast.
The webcast replay will be available through May 3, 2019. No access code is required for this
replay.
Supplemental materials are available at
www.realtyincome.com/investors/investor-presentation.
About Realty Income
Realty Income, The Monthly Dividend Company®, is an
S&P 500 company dedicated to providing stockholders with
dependable monthly income. The company is structured as a REIT, and
its monthly dividends are supported by the cash flow from over
5,700 real estate properties owned under long-term lease agreements
with regional and national commercial tenants. To date, the company
has declared 586 consecutive common stock monthly dividends
throughout its 50-year operating history and increased the dividend
101 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.
Forward-Looking Statements
Statements in this press release that are not strictly
historical are "forward-looking" statements. Forward-looking
statements involve known and unknown risks, which may cause the
company's actual future results to differ materially from expected
results. These risks include, among others, general economic
conditions, local and foreign real estate conditions, tenant
financial health, the availability of capital to finance planned
growth, continued volatility and uncertainty in the credit markets
and broader financial markets, property acquisitions and the timing
of these acquisitions, charges for property impairments, and the
outcome of any legal proceedings to which the company is a party,
as described in the company's filings with the Securities and
Exchange Commission. Consequently, forward-looking statements
should be regarded solely as reflections of the company's current
operating plans and estimates. Actual operating results may differ
materially from what is expressed or forecast in this press
release. The company undertakes no obligation to publicly release
the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances
after the date these statements were made.
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SOURCE Realty Income Corporation