Realty Income to Merge with VEREIT to Form $50B Entity

April 30, 2021 | S&P Global Market Intelligence

Single-tenant retail real estate investment trust Realty Income Corp. agreed to acquire VEREIT Inc. in an all-stock transaction to form a combined company with an enterprise value of approximately $50 billion.

Under the terms of the deal, VEREIT shareholders will receive 0.705 share of Realty Income stock for every share of VEREIT.

The companies also agreed to spin off substantially all of their office properties into a new, self-managed, publicly traded REIT upon the completion of the merger. The spinoff will initially comprise pure-play, self-managed portfolio of 97 domestic office properties, with annualized contractual rent of approximately $183 million.

Stockholders of both companies are expected to receive a stock distribution in the spinoff, subject to customary conditions.

Following the merger and the spinoff, Realty Income will continue as a surviving public entity and will continue to be led by President and CEO Sumit Roy and its existing senior management team. Two directors of VEREIT will also be added to Realty Income’s board upon the deal’s completion.

Realty Income and former VEREIT shareholders are expected to own approximately 70% and 30%, respectively, of both Realty Income and the spinoff.

Upon the completion of the merger and the spinoff, Realty Income will own a diversified global portfolio of approximately 10,300 primarily single-tenant, net lease commercial real estate properties across the U.S., Puerto Rico and the U.K., with a total portfolio annualized contractual rent of approximately $2.5 billion.

Realty Income expects the transactions to be over 10% accretive to its adjusted funds from operations in the first year. The REIT is also estimated to achieve annualized corporate cost synergies of $45 million to $55 million on a run-rate basis, including stock-based compensation, and an estimated $35 million to $40 million of annualized synergies on a cash basis.

The merger is expected to close during the fourth quarter, subject to customary closing conditions, including the approval of both Realty Income and VEREIT shareholders.

Moelis & Co. LLC is the lead financial adviser, Wells Fargo Securities is the financial adviser, and Latham & Watkins LLP is the legal adviser to Realty Income.

J.P. Morgan Securities LLC is the exclusive financial adviser, and Wachtell Lipton Rosen & Katz is the legal adviser to VEREIT.

Source:  S&P Global Market Intelligence