Realty Income repositions portfolio

Realty Income's (O) deal to acquire 84 single-tenant net-leased properties from Inland Diversified for about $503M doesn't change Morningstar's Todd Lukasik's "narrow moat" rating or his $44 fair value estimate for the stock.

The deal looks to be consistent with prior acquisitions, says Lukasik, reasonably diversified across geography and industry - and importantly includes industrial and distribution properties. Although, Realty Income didn't disclose the yield, Lukasik expects it to be consistent with the 7% seen in recent deals, though there is a risk the initial yield is lower.

With the 30-year tailwind of falling interest rates maybe over, the company, says Lukasik is repositioning its portfolio - with a greater focus on investment-grade tenants and nonretail assets. "If any management team can build a moat around these nonretail property types, Realty Income's is probably it. But we don't think these nonretail assets are obviously moaty, so we'll wait for management to demonstrate success."

Comments (4)
  • Tips2
    , contributor
    Comments (146) | Send Message
    May we expect improved dividend increases as a result of this transaction?
    18 Dec 2013, 09:45 AM Reply Like
  • chopchop0
    , contributor
    Comments (5218) | Send Message
    0.2% increase declared today.
    18 Dec 2013, 11:09 AM Reply Like
  • maatscom
    , contributor
    Comments (9) | Send Message
    Monthly Dividend continues to impress holders now and future holders.
    18 Dec 2013, 11:06 PM Reply Like
  • walter scott
    , contributor
    Comments (844) | Send Message
    What's wrong with O?


    I'm long O and wondering if I should buy more. However, it's been below $40 since mid November and sunk to as low as $36.68.


    A couple of months ago we were reading how wonderful it was. Indeed, many people wrote they were ready to jump in if it ever got down to $40.00. Today it was $37.99 at 16h00. The yield is 5.4%. Why aren't people rushing in and buying and collaterally pushing the price up? Anyone know what's going on?
    6 Jan 2014, 04:25 PM Reply Like
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