Spirit Realty Capital Shareholders Approve Realty Income Merger

Rhea-AI Summary

Realty Income Corporation (NYSE: O) and Spirit Realty Capital, Inc. (NYSE: SRC) have announced that Spirit stockholders have approved all necessary proposals for the closing of the previously announced merger, with approximately 99.8% of the votes cast in favor of the merger. The merger is expected to close on January 23, 2024, and at the closing, Spirit common shareholders will receive 0.762 newly-issued Realty Income common shares for each Spirit common share they own. Additionally, all of Spirit’s outstanding shares of Series A Cumulative Redeemable Preferred Stock will be exchanged for shares of Realty Income Series A Cumulative Redeemable Preferred Stock.

Insights

Financial Analyst

The approval of the merger between Realty Income Corporation and Spirit Realty Capital by Spirit stockholders is a significant event in the real estate investment trust (REIT) industry. The overwhelming support for the merger, with approximately 99.8% of votes cast in favor, reflects shareholder confidence in the strategic benefits of the consolidation. The exchange ratio of 0.762 newly-issued Realty Income shares for each Spirit share indicates a calculated valuation of Spirit's assets and earnings potential relative to Realty Income's.

From a financial perspective, this merger is expected to create a larger, more diversified REIT with increased market presence and potentially greater economies of scale. Investors should consider the implications on the REIT's financial metrics such as funds from operations (FFO), a key performance indicator in the REIT industry, as well as the impact on dividend distributions, given Realty Income's identity as 'The Monthly Dividend Company®'. The merger could result in enhanced liquidity for shareholders and potentially more stable cash flows, contributing to a more resilient dividend profile.

It is also important to note that the merger is subject to customary closing conditions. Investors should monitor the progress towards meeting these conditions as any delay or failure to meet them could affect the expected benefits of the merger. The anticipated trading of the new preferred stock under the symbol 'O PR' provides current Spirit shareholders with continuity in their investment, which could be seen as a positive signal by the market.

Market Research Analyst

The consolidation within the REIT sector, exemplified by the Realty Income and Spirit merger, is indicative of a trend towards larger, more competitive entities capable of withstanding market volatility. By pooling resources and portfolios, the combined entity is likely to benefit from a diversified asset base, reducing exposure to sector-specific risks. This is particularly relevant given the sensitivity of REITs to interest rate fluctuations and the broader economic environment.

Post-merger, the new entity's performance in the market will be critical to observe. The combined company's ability to integrate operations and realize projected synergies will be a key factor in determining its success. The expected increase in scale may enhance its attractiveness to institutional investors seeking substantial and stable investment opportunities within the real estate sector.

In addition, the market will be looking at how the merger affects competition within the REIT sector. A larger Realty Income could exert more influence on leasing terms and property acquisitions, potentially reshaping market dynamics. This could have implications for smaller players in the industry, who may face increased pressure or consider strategic partnerships to maintain competitiveness.

Legal Expert

The absence of the requirement for approval from Realty Income shareholders for the merger to proceed is an interesting legal aspect of this transaction. It implies that the deal structure was designed to streamline the process and reflects the management's confidence in shareholder support. Additionally, the exchange of Spirit's outstanding Series A Cumulative Redeemable Preferred Stock for Realty Income's equivalent preferred stock is a sophisticated legal maneuver that ensures a seamless transition for preferred shareholders, maintaining their rights and the value of their investment.

Legally, the merger's success hinges on the satisfaction of customary closing conditions, which typically include regulatory approvals and the absence of any material adverse changes. The legal teams will play a crucial role in ensuring compliance with all regulations and in handling the filing of necessary documents, such as Spirit's Form 8-K with the SEC, which will provide final voting results and additional transaction details. The legal intricacies of such filings are vital for maintaining transparency and adhering to securities law.

Moreover, the legal structure of the merger agreement, including the exchange ratio and terms for preferred stockholders, will have been meticulously negotiated to protect shareholder interests and minimize legal risks. This careful planning is essential to avoid potential litigation or disputes that could arise from such a complex transaction.

SAN DIEGO & DALLAS--(BUSINESS WIRE)-- Realty Income Corporation (NYSE: O) ("Realty Income"), The Monthly Dividend Company^®, and Spirit Realty Capital, Inc. (NYSE: SRC) (“Spirit”), today announced that Spirit stockholders approved all of the proposals necessary for the closing of the previously announced merger pursuant to which Realty Income will acquire Spirit. No approval of Realty Income shareholders is required in connection with the merger.

At the special meeting of Spirit stockholders held today, approximately 99.8% of the votes cast were voted in favor of the merger, which represented approximately 86.4% of the outstanding shares of Spirit common stock.

The final voting results on the proposals voted on at the special meeting will be set forth in Spirit’s Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) after certification by its inspector of election.

The merger is subject to customary closing conditions and is expected to close on January 23, 2024. Under the terms of the merger agreement, at the closing of the merger, Spirit common shareholders will receive 0.762 newly-issued Realty Income common shares for each Spirit common share they own immediately prior to the effective time of the merger. In addition, at the closing of the merger, all of Spirit’s outstanding shares of Series A Cumulative Redeemable Preferred Stock will be exchanged for shares of Realty Income Series A Cumulative Redeemable Preferred Stock, which are expected trade under the symbol “O PR” on the New York Stock Exchange.

About Realty Income

Realty Income, The Monthly Dividend Company^®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats^® index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a real estate investment trust (“REIT”), and its monthly dividends are supported by the cash flow from over 13,250 real estate properties primarily owned under long-term lease agreements with commercial clients. To date, the company has declared 643 consecutive common stock monthly dividends throughout its 55-year operating history and increased the dividend 123 times since Realty Income’s public listing in 1994 (NYSE: O). Additional information about the company can be obtained from the corporate website at www.realtyincome.com.

About Spirit Realty

Spirit Realty Capital, Inc. (NYSE: SRC) is a premier net-lease REIT that primarily invests in single-tenant, operationally essential real estate assets subject to long-term leases. As of September 30, 2023, Spirit’s diverse portfolio consisted of 2,037 retail, industrial and other properties across 49 states, which were leased to 338 tenants operating in 37 industries. As of September 30, 2023, Spirit’s properties were approximately 99.6% occupied.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this press release, the words “estimated,” “anticipated,” “expect,” “believe,” “intend,” “continue,” “should,” “may,” “likely,” “plans,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of Realty Income’s business and portfolio; strategy, plans, and the intentions of management; and statements regarding the merger including the anticipated closing date. Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income which may cause its actual future results to differ materially from expected results. Some of the factors that could cause actual results to differ materially are, among others, its continued qualification as a REIT; general domestic and foreign business, economic, or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact on its clients and us; access to debt and equity capital markets and other sources of funding; continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including its clients’ defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters; impairments in the value of its real estate assets; changes in domestic and foreign income tax laws and rates; its clients’ solvency; property ownership through joint ventures and partnerships which may limit control of the underlying investments; current or future epidemics or pandemics, measures taken to limit their spread, the impacts on Realty Income, its business, its clients (including those in the theater and fitness industries), and the economy generally; the loss of key personnel; the outcome of any legal proceedings to which Realty Income is a party or which may occur in the future; acts of terrorism and war; the structure, timing and completion of the merger and any effects of the announcement, pendency or completion of the merger, including the anticipated benefits therefrom; and those additional risks and factors discussed in its reports filed with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements are not guarantees of future plans and performance and speak only as of the date of this press release. Actual plans and operating results may differ materially from what is expressed or forecasted in this press release. Realty Income does not undertake any obligation to update forward-looking statements or publicly release the results of any forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240119881439/en/

Steve Bakke, CFA

Senior Vice President, Corporate Finance

(858) 284-5425

sbakke@realtyincome.com

Source: Spirit Realty Capital, Inc.

FAQ

What is the ticker symbol for Realty Income Corporation?

The ticker symbol for Realty Income Corporation is 'O'.

What is the ticker symbol for Spirit Realty Capital, Inc.?

The ticker symbol for Spirit Realty Capital, Inc. is 'SRC'.

When is the merger expected to close?

The merger is expected to close on January 23, 2024.

How many Realty Income common shares will Spirit common shareholders receive at the closing of the merger?

At the closing of the merger, Spirit common shareholders will receive 0.762 newly-issued Realty Income common shares for each Spirit common share they own.

What will happen to Spirit's outstanding shares of Series A Cumulative Redeemable Preferred Stock at the closing of the merger?

At the closing of the merger, all of Spirit’s outstanding shares of Series A Cumulative Redeemable Preferred Stock will be exchanged for shares of Realty Income Series A Cumulative Redeemable Preferred Stock.