Realty Income to Acquire Spirit in Deal Valued at $9.3B

Realty Income and Spirit Realty Capital have struck a deal in which Realty Income will acquire Spirit Realty in an all-stock transaction that would be valued at $9.3 billion. Realty Income is not levering up this deal and doesn’t expect it will have to source external capital to finance the transaction. The combined company is expected to have an enterprise value of $63 billion and will position Realty Income for further growth. 

“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,” says Realty’s CEO and president Sumit Roy in prepared remarks. “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.” 

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. It is also expected to increase 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%, compared to 11.1% for Realty Income on a standalone basis. The industrial property type is expected to represent 15.1% for the combined portfolio, compared to 13.1% of Realty Income on a standalone basis. 

This is not Realty Income’s first major acquisition. In 2021 it acquired VEREIT for $11 billion. One of the benefits from that deal, according to Roy, was that the REIT’s technology and infrastructure investments “amplified our efficiency in integrating assets and augmented our capabilities in maximizing the value of our properties.”