Realty Income Buys 114 Assets

ESCONDIDO, CA-Locally based REIT Realty Income Corp. has expanded its retail holdings in the Southeastern US with a $94.5-million, sale-leaseback transaction involving 114 convenience store properties located mainly in Tennessee and Georgia.

Realty Income has acquired the assets, which are branded as Golden Gallon stores, from the Pantry Inc. of Sanford, NC. The deal has occurred as part of two simultaneous transactions in which the Pantry has purchased and financed the 114 fee-owned stores through the sale-leaseback and has also acquired Golden Gallon’s operations and additional real estate assets in a separate deal valued at $92.5 million. The second transaction has been funded by a combination of available cash and $80 million of debt through an add-on to the company’s existing first lien loans. The two deals involve a total of 138 operating stores, a dairy plant, a fuel hauling operation, corporate headquarters buildings and 25 undeveloped sites, which the Pantry has purchased from Ahold USA Inc. “Simultaneous with the closing, the Pantry sold the dairy plant to National Dairy Holdings and the fuel hauling assets to Eagle Transport, both existing suppliers to the Pantry,” according to a recently released company statement.

For the trailing 12-month period ending in June 2003, Golden Gallon had revenue of approximately $387 million. The Golden Gallon acquisition is expected to contribute approximately $0.40 to $0.45 to the Pantry’s earnings per share for fiscal 2004.

In addition to increased earnings, the recent additions will also give the Pantry an expanded presence in the Southeastern US. “The Pantry had not previously operated many stores located in Tennessee or Georgia, so the acquisition has increased their penetration into these markets,” Tere Miller, vice president of Corporate Communications for Realty Income, explains to GlobeSt.com.

The Pantry has long been an occupant of Realty Income’s properties, currently holding leases at 20 assets that Realty Income already owned before the recent sale-leaseback transaction, according to Miller. These other properties are located in Florida, Tennessee, South Carolina, North Carolina and Kentucky. “The Pantry has been a long-standing tenant of ours, so when we learned of their interest in the Golden Gallon stores, it was a natural for us to get involved in the transaction,” Miller tells GlobeSt.com.