Realty Income said on Thursday that it will receive $1 billion from Apollo Global Management and its affiliates in exchange for a 49% stake in a new joint venture that is expected to own a portfolio of single-tenant retail properties with long-term net leases.
These types of retail assets are viewed as attractive by investors because they tend to generate stable income and hold up well during market swings, as tenants usually cover property-related expenses and often operate essential businesses.
The transaction, which is expected to close on March 31, includes around 500 properties across a range of retail segments such as dollar stores, quick-service restaurants, drug stores, grocery outlets, and health and fitness locations.
Realty Income said it will continue managing the portfolio and will keep the right to repurchase Apollo’s stake between the seventh and fifteenth year. The pricing structure is designed to cap Apollo’s annual return at 6.875%.
Goldman Sachs advised Realty Income on the deal, while Wells Fargo acted as financial adviser to Apollo.
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