8-KOther EventsExhibits & Filings

REALTY INCOME CORP 8-K Report, Corporate Update (Aug 18, 2021)

Filed August 18, 2021For Securities:O

Summary

Realty Income Corporation (O) announced the execution of a new sales agreement on August 18, 2021, which allows for the offer and sale of up to approximately 69 million shares of common stock. This new agreement replaces a prior "at-the-market" (ATM) program that was terminated concurrently. The company has the flexibility to sell shares directly through designated agents or via forward sale agreements, where forward purchasers will borrow and sell shares to hedge their positions. The proceeds from these sales are intended for general corporate purposes, including potential debt repayment, property development and acquisitions, and portfolio expansion. The structure of the sales agreement provides flexibility, allowing for both immediate sales and the use of forward sale agreements, which can impact the timing and nature of cash proceeds received by the company. Investors should note the potential for dilution given the significant number of shares that may be offered.

Key Highlights

  • 1Realty Income entered into a new sales agreement to potentially offer and sell up to approximately 69.1 million shares of common stock.
  • 2The new agreement replaces and terminates the company's previous "at-the-market" (ATM) program dated December 6, 2019.
  • 3The sales can be conducted through agents acting as the company's sales agents or as principals.
  • 4The agreement includes provisions for forward sale agreements, allowing for the hedging of future share sales.
  • 5Proceeds from these share sales are earmarked for general corporate purposes, including debt reduction, property acquisitions, and development.
  • 6Commissions paid to agents will not exceed 2.0% of gross sales price, though exceptions exist for certain 'distribution' methods or sales to agents as principals.
  • 7The termination of the prior ATM program means 24.3 million shares were sold under that program, with 33.4 million shares available at its inception.

Frequently Asked Questions

The primary purpose is to provide Realty Income with a flexible mechanism to offer and sell up to approximately 69.1 million shares of its common stock. The proceeds are intended for general corporate purposes, which can include strategic initiatives like debt repayment, property acquisitions, and portfolio development, thereby supporting the company's growth and financial flexibility.

This new agreement is more comprehensive and includes provisions for forward sale agreements, allowing the company to engage forward purchasers who may borrow and sell shares to hedge their positions. It replaces the prior ATM program, which was solely for 'at-the-market' sales. The new agreement also terminates the prior program, signaling a strategic shift or update in the company's capital raising strategy.

The sale of up to approximately 69.1 million shares could lead to dilution for existing shareholders. This means that each existing share will represent a smaller percentage of ownership in the company after the new shares are issued and sold. However, the proceeds raised are intended to be used for growth and financial strengthening, which could potentially offset the dilution effect if the investments are successful.

The company expects to receive cash proceeds at the settlement of the forward sale agreements, which will occur on dates specified by the company on or before the maturity date. However, the company has the option to cash settle or net share settle these agreements, which could result in the company not receiving cash proceeds or even owing cash or shares to the forward purchasers.