Realty Income (O 0.78%), the storied real estate investment trust (REIT) that specializes in retail properties, is bulking up its finances with a new secondary stock issue. The company has announced that it is floating 10.5 million shares of its common stock in a public flotation, at a price of $57.05 per share. The REIT estimates its net proceeds from the issue will be roughly $582.3 million.
Realty Income said that the underwriters of the issue -- the joint-book running managers for which are Bank of America Securities, Morgan Stanley, Wells Fargo Securities, and Citigroup -- have been granted a 30-day option to buy an additional 1.575 million shares.
Not surprisingly, Realty Income aims to utilize the bulk of the proceeds to buy more property. It added that it will supplement these funds with cash on hand and borrowings, as necessary. The REIT has committed to purchasing real estate in the U.S. and the U.K. worth nearly $677 million.
Remaining funds are to be used "for general corporate purposes and working capital." These might include such activities as debt retirement.
The retail is expected by many to be set for a rebound once the coronavirus pandemic subsides. Last year it was one of the hardest-hit sectors of the economy because of mandatory and voluntary shutdowns, plus the general reluctance of many people to venture from their homes to visit crowded stores.
While the new issue isn't overwhelmingly dilutive -- according to Yahoo! Finance, Realty Income currently has almost 20.3 billion shares outstanding -- investors are rarely pleased when a pile of their company's fresh stock hits the market. The company's share price fell by 2.7% on Tuesday.