Realty Income Secures Another $1 Billion Partnership. Is This Top Monthly Dividend Stock a Buy?

Realty Income (O 2.70%) has become the real estate partner to the world’s leading companies. The real estate investment trust (REIT) has traditionally done so by forming win-win partnerships with companies that own real estate, acquiring their properties through sale-leaseback transactions. The company has also formed several strategic investment partnerships in recent years.

The REIT recently announced its latest strategic real estate investment partnership by forming a $1 billion joint venture (JV) with Apollo (APO +0.57%). Here’s a look at whether these partnerships make the top monthly dividend stock a buy.

Image source: Getty Images.

A $1 billion partnership

Realty Income is forming a new JV with Apollo-managed funds. The alternative investment manager will provide $1 billion to Realty Income to acquire a 49% interest in a diversified portfolio of single-tenant retail properties secured by long-term net leases. The portfolio will provide the Apollo-managed funds with stable, contractual cash flows. Realty Income will manage the portfolio under a long-term management agreement. The initial 500-property portfolio has a weighted-average lease term of 9.1 years and annual lease escalators of approximately 1%. The portfolio features a mix of tenants, including dollar stores (9.9% of rent), quick-service restaurants (8.3%), drug stores (7.9%), grocery stores (7.7%), and health and fitness properties (7.5%).

The initial $1 billion investment by Apollo is likely only the beginning as Apollo anticipates making follow-on investments with Realty Income. The companies expect to price future investments based on long-term interest rates, not equity market conditions. As a result, this partnership should provide Realty Income with a stable source of non-dilutive, attractively priced equity capital. The deal can also serve as a template for future partnerships with other financial firms seeking to invest in real estate.

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NYSE: O

Realty Income

Today’s Change

(-2.70%) $-1.69

Current Price

$60.95

Key Data Points

Market Cap

$57B

Day’s Range

$60.63 - $62.60

52wk Range

$50.71 - $67.94

Volume

414K

Avg Vol

6.6M

Gross Margin

48.73%

Dividend Yield

5.30%

A real estate partner in many ways

The Apollo JV is Realty Income’s second strategic investment partnership this year. The REIT formed a more than $1.5 billion JV with GIC (Singapore’s sovereign wealth fund) to invest in build-to-suit logistics real estate development projects. Additionally, Realty Income expanded into Mexico by agreeing to buy $200 million of build-to-suit industrial properties from GIC upon their completion. GIC also became a cornerstone investor in the REIT’s U.S. Core Plus fund.

Meanwhile, the REIT expanded its strategic relationship with Blackstone late last year. It made a $800 million preferred equity investment in the real estate of CityCenter Las Vegas (Aria and Vdara). That was Realty Income’s second deal with Blackstone. In 2023, the REIT invested $950 million into The Bellagio Las Vegas, acquiring both a JV interest in the property and a preferred equity interest in that JV.

Realty Income also formed a JV with Digital Realty in 2023 to develop build-to-suit data centers. The REIT invested $200 million to acquire an 80% interest in the JV. The total investment by the JV could be up to $800 million to support the full capacity of the data centers.

A brilliant strategy

Realty Income’s strategic partnership strategy enhances its growth prospects. The Apollo deal will provide it with non-dilutive equity capital to reinvest in new properties. Meanwhile, deals with GIC, Blackstone, and Digital Realty provided it with new investment opportunities. The company’s smart partnership strategy puts it in an even stronger position to grow its monthly dividend. That makes the REIT an even more attractive long-term investment for those seeking durable and growing passive income.