Vereit, a Phoenix-based owner of offices, restaurants, stores and other commercial properties, will be acquired by Realty Income Corp. of San Diego, with the companies planning to spin-off nearly all of their office properties.
The announcement on Thursday morning means Arizona will lose one of its larger, locally headquartered public corporations as a result, though the combined entity will retain Vereit’s current office at 2325 E. Camelback Rd.
Vereit’s stock was worth about $11 billion prior to the announcement. The company earned $201 million in net income on nearly $1.2 billion in revenue in 2020. Its portfolio of 3,800 properties is focused on retail, restaurant, office and industrial locations.
Vereit executives to exit
The combined company will focus mainly on single-tenant retail and industrial real estate in the U.S. and United Kingdom. Realty Income’s president and CEO, Sumit Roy, will lead the combined entity. “Our company will enjoy increased size, scale and diversification,” he said in a prepared statement.
Vereit will add two directors to Realty Income’s board. The company’s stockholders will receive roughly 0.7 share of Realty Income for each Vereit share they own. Shareholders from both companies still must approve the deal.
Glenn Rufrano, Vereit’s CEO, said the transaction allows his company’s shareholders to benefit from an increase in the company’s value, among various other benefits including increased cash flow and a stronger balance sheet.
Important retail focus
Upon closing of the acquisition, which is expected in the fourth quarter, Realty Income will become one of the six or so largest REITs or real estate investment companies, featuring a portfolio with greater diversification in terms of client credit profiles, industry scope and geography despite the spinning off of most office properties.
The combined company’s largest clients will include Walgreens, Dollar General, Dollar Tree/Family Dollar, FedEx, 7-Eleven, LA Fitness, Walmart/Sam’s Club and CVS Pharmacy. Top industries will consist of convenience, dollar and grocery stores; drug stores, restaurants and health/fitness clubs.
Among other cited advantages, the combined company will enjoy various cost-saving and debt-refinancing opportunities. As of Dec. 31, 2020, Vereit had about $6 billion in outstanding debt carrying a weighted average interest rate of 4%.
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