Realty Income buys Spirit Realty for Rs 930 Crore, making their real estate investments more diverse for a brighter future.
Realty Income has announced its plan to purchase Spirit Realty Capital in a deal valued at a huge Rs. 930 Crore. This development has already caused a 13% surge in Spirit Realty’s premarket trading shares.
The U.S. commercial real estate market has been experiencing pressure due to tightening financial conditions and a less favourable economic outlook. With more people working from home and a shift in demand for office spaces, the industry is adapting to new challenges.
The merger of Realty Income and Spirit Realty Capital will diversify Realty Income’s real estate portfolio, reducing rent concentration for its clients. This move is expected to increase the combined portfolio’s annual contractual rent from Rs. 380 Crores to Rs. 450 Crores, providing stability and growth opportunities.
Sumit Roy, the CEO of Realty Income, stated the complementary nature of Spirit Realty’s assets, extending investments into industries known for generating consistent cash flows throughout economic cycles.
As part of the agreement, Spirit Realty shareholders will receive Rs. 3,142 per share, a premium of 15.4% from the stock’s last closing price, valuing the real estate investment trust at approximately Rs. 528 Crores. The deal is set to conclude in the first quarter of 2024, with Realty Income and Spirit shareholders owning about 87% and 13%, respectively, of the combined company post-acquisition.
Wells Fargo is a financial advisor to Realty Income. However, J.P. Morgan Securities and Morgan Stanley & Co. serves as financial adviser to Spirit Realty.
Spirit Realty Capital primarily invests in single-tenant real estate assets under long-term leases, holding 2,064 properties across retail, industrial, and other sectors spanning 49 states as of June 30.