Realty Income Corporation (Realty Income), an S&P 500 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 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.”
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“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.