During the quarter, Realty Income Corp. invested approximately 1.1 billion in high quality real estate at investment spreads well above the REIT’s historical average. According to CEO Sumit Roy, that brings the REIT to $1.6 billion invested during the first half of the year.
“Of the 1.1 billion invested during the quarter, $549 million or approximately 434 million British pounds was invested in the United Kingdom through a sale leaseback transaction with Sainsbury’s. We plan to continue to grow our international platform as we are well positioned to capitalize on a significant addressable market in the UK, and mainland Europe.”
According to Roy, on the firm’s Q2 earnings call, given the REIT’s portable size, scale, and cost of capital advantages, he believes the firm has a unique ability to execute sizable portfolio transactions with best in class operators. “We look forward to further developing relationships with other industry leaders like Sainsbury’s, as we expand our international platform.”
To finance the company’s robust investment activity, the firm raised $1.9 billion of attractively priced capital during the quarter, including $1 billion of equity. “We entered the second half of 2019 very well positioned with virtually full availability on our $3 billion line and a debt to EBITDA ratio of 5.4 times. Our portfolio continues to be diversified by tenant, industry, geography, and to a certain extent property ties, which contributes to the stability of our cash flow.”
At quarter end, the company’s properties were leased 265 commercial tenants in 49 different industries located in 49 states, Puerto Rico, and the UK. 82.5% of the firm’s rental revenue is from its traditional retail properties. “The largest component outside of retail is industrial property at nearly 12% of rental revenue. Walgreens remains our largest tenant at 5.8% of rental revenue. Convenience Store remains our largest industry at 11.9% of rental revenue.”
Within the company’s overall retail portfolio, approximately 95% of the firm’s rent comes from tenants with a service, non-discretionary, and low price point component to their business. “We believe these characteristics allow our tenants to compete more effectively with e-commerce and operate in a variety of economic environments. These factors have been particularly relevant in today’s retail climate where the vast majority of recent US retail bankruptcies have been in industries that do not possess these characteristics.”