Realty Income Identified Value In Spirit Portfolio

Spirit was acquired for around $5.3 billion.

This week’s blockbuster Realty Income/Spirit merger is another example of the demand for net lease property – both within the institutional REIT sector as evidenced by this announcement as well as within the private investor market as seen by the continued demand from that investor profile.

“Realty Income identified value within the Spirit portfolio,” Matthew Mousavi, Managing Principal, National Net Lease Group, SRS Real Estate Partners, tells GlobeSt.com.

“I’m not surprised they acquired them in a single transaction as REITs are able to deploy larger amounts of capital and realize efficiencies and cost savings doing so, and through larger multi-property portfolio acquisitions.”

“This is a great transaction for Realty income in the fact that they could buy a lot of properties at once,” Jonathan Hipp, head of Avison Young’s U.S. Net Lease Group tells GlobeSt..com. He notes that the fact that the Spirit portfolio included service retail and industrial properties for Realty Income, including additional geographical diversification.

The deal has Realty Income acquiring Spirit Realty for $5.3 billion, according to Bloomberg, in an all-stock transaction that has been valued at $9.3 billion.

Spirit Realty primarily invests in single-tenant, operationally essential real estate assets subject to long-term leases.

Its top 10 tenants are Life Time Fitness, 21 private golf and country clubs operated by Invited, and businesses including At Home, BJ’s Wholesale Club, Dave and Buster’s/Main Event, Church’s Chicken, Dollar Tree, Circle K, The Home Depot, and GPM convenience stores.

As of June 30, Spirit’s portfolio consisted of 2,064 retail, industrial, and other properties across 49 states, which were leased to 345 tenants operating in 37 industries—with those properties being around 99.8% occupied, the company said in a statement.

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.