The boards of each Realty Income and VEREIT have approved and entered into a definitive merger agreement to create a company with an enterprise value of $50 billion. Realty Income will acquire VEREIT in an all-stock transaction of 0.705 shares for every VEREIT share. The deal, subject to approval by each company’s shareholders, is expected to close in the fourth quarter.

After closing, they plan to spin off 97 U.S. office properties, nearly all of their properties from that sector, into a self-managed, publicly traded REIT. That will leave a portfolio of 10,300 mostly single-tenant net lease properties, with 83 percent of the rent coming from retail. Realty Income shareholders will own about 70 percent of the company and VEREIT shareholders the remaining 30 percent.

The 10 largest clients are expected to be Walgreens, with 5 percent of annualized contractual rent; Dollar General and Dollar Tree/Family Dollar, each with 4 percent; FedEx, 7-Eleven and LA Fitness, each with 3 percent; and Walmart/Sam's Club, CVS, Sainsbury's and BJ's, each with 2 percent. The top 10 rent-getting categories: Convenience stores, at 9 percent; grocery stores, dollar stores and drugstores, each at 8 percent; casual dining restaurants and quick-service restaurants, each at 7 percent; health and fitness, at 5 percent; and home improvement, theaters and transportation services, each at 4 percent.

“Upon closing of the merger, Realty Income is expected to become one of the six largest REITs in the MSCI US REIT Index by equity market capitalization and among the top half of constituents in the S&P 500,” according to a Realty Income press release. The company also says the increased diversification of credit, industry and geography among its tenants will provide “further runway for Realty Income to grow in its chosen verticals.” The new Realty Income’s growth strategy will continue to focus on high-quality, single-tenant net lease retail and industrial in the U.S. and U.K. with tenants that lead their respective industries.

Realty Income also states that its credit rating positions it well to refinance VEREIT’s upcoming debt maturities. At the end of the year, VEREIT had approximately $6 billion of outstanding debt at a weighted average interest rate of 4 percent coming to maturity at a weighted average of six years.

"The objective of our management team from initiation in 2015 was to revitalize VEREIT and increase the value of the enterprise," said VEREIT CEO Glenn Rufrano, who also is vice chair of ICSC. "We put an excellent team in place, enhanced the portfolio, created an investment-grade balance sheet and resolved all legacy issues."

Realty Income president and CEO Sumit Roy and the rest of Realty Income’s existing senior management team will lead the new company.