I made three bold predictions for Realty Income (O +1.03%) earlier this month. One of those was that the real estate investment trust (REIT) would continue its international expansion in the new year. It didn't take long for this prediction to come true, as it announced its first investment in Mexico a week later.
Here's a recap of that prediction and two more things I still see ahead for the REIT this year.
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Prediction fulfilled
On Jan. 12, Realty Income announced the establishment of a strategic relationship with GIC, Singapore's sovereign wealth fund. The partnership initially entails:
- The formation of a joint venture to invest over $1.5 billion in build-to-suit logistics real estate.
- GIC is becoming a cornerstone investor in Realty Income's U.S. Core Plus fund.
- Construction financing and takeout purchase commitment of a $200 million industrial portfolio in Mexico by Realty Income, representing the REIT's first investment in the country.
I had predicted that Realty Income would continue its international expansion this year, with growth in the Americas region outside the U.S. among my likely guesses. I also thought the REIT might expand internationally through a partnership, which is exactly what happened.
While Realty Income has already expanded into one new country this year, I don't think it will be the last. It doesn't own any properties in Canada and is only in eight European countries. I wouldn't be surprised to see it expand into additional countries over the next year.
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Key Data Points
2 more to go
Additional international expansion isn't the only thing I see ahead for the REIT this year. I also expect it to continue adding new property verticals to its portfolio. It has grown from a focus on U.S.freestanding retail properties to a more diversified REIT by adding industrial, gaming, and data center properties to its platform. Many other property types are suitable for long-term net leases, including senior housing, theme parks, resorts, and self-storage facilities. I fully expect Realty Income to continue diversifying its portfolio in 2026 and beyond by adding new growth drivers to its platform.
Finally, after years of underperformance, I expect that Realty Income will beat the S&P 500 this year. The main catalyst driving this view is my expectation that interest rates will continue to decline this year. That should boost the value of commercial real estate, benefiting Realty Income. Additionally, I expect the REIT's continued earnings and dividend growth will help increase its share price. The company is already off to a great start, delivering a more than 6% return compared to a 2% gain in the S&P 500.
Poised for a big year
I think 2026 will be a great year for Realty Income. I believe it will meaningfully grow its portfolio and shareholder value. It's already off to a fantastic start thanks to its recent partnership with GIC. This early success reinforces my view that the REIT is a great investment opportunity right now.
