Mergers & Acquisitions

EG Group Enters Into $1.5 Billion Sale-Leaseback of East Coast C-Store Assets

Retailer agrees to deal with Realty Income, will continue to operate Cumberland Farms, other banners
realty income eg america eg group
Logos/Realty Income, EG America

EG Group has agreed to the sale and leaseback on a portfolio of its sites on the U.S. East Coast to Realty Income Corp. for approximately $1.5 billion. This portfolio, which EG America will continue to operate and trade, consists of 415 convenience stores under the Cumberland Farms, Fastrac, Tom Thumb and Sprint banners.

The companies expect the transaction to close in second-quarter 2023, subject to customary closing conditions, and EG Group will use net proceeds to repay debt. The assets represents 15% of EG Group’s total freehold property in 10 markets, “reflecting how its estate continues to be underpinned by strong asset backing globally,” it said.

Following completion of the transaction, EG will pay an initial rent of $103 million per year with respect to these assets.

Speculation about a sale began to circulate in January after EG Group hired real estate investment bank Eastdil to explore the disposal of a package of its operations in the United States.

Realty Income expects approximately 80% of the total portfolio annualized contractual rent to be generated from properties in the northeastern United States, including 116 properties in Massachusetts, 87 properties in New York, and 74 in Florida, which are the top three states in the portfolio. It expects more than 80% of the total portfolio annualized contractual rent to be generated from properties operated under the Cumberland Farms brand.

The average property size of the portfolio is approximately 3,700 square feet. Following the completion of the transaction, Realty Income expects the convenience-store industry and the EG Group to represent approximately 11.3% and 2.9%, respectively, of its total portfolio annualized contractual rent.

“We believe this portfolio includes brands that are among the most recognizable convenience store brands on the East Coast, and the convenience-store industry has long been a well-performing staple in our real estate portfolio. We are pleased with the portfolio's attractive real estate quality, store-level cash flow coverage, and average property size,” said Sumit Roy, president and CEO of San Diego-based Realty Income.

Realty Income is structured as a real estate investment trust (REIT), and its monthly dividends are supported by the cash flow from more than 12,200 real estate properties primarily owned under long-term net lease agreements with commercial clients.

EG Group received a “high degree” of interest from multiple investors and “attractive” terms for the transaction, it said.

This transaction is in line with EG Group management’s previously stated commitment to reduce total net leverage through debt reduction and free cash flow generation.

“Today’s announcement demonstrates the progress we continue to make to put in place a robust capital structure for the medium term that will underpin our long-term strategy and represents an important first step in this process,” said Zuber Issa, CBE co-founder and co-CEO of EG Group.

Founded in 2001 by the Issa family, Blackburn, United Kingdom-based EG Group is an independent convenience retailer with established partnerships with global brands and a focused portfolio of proprietary brands. It has more than 6,600 sites across the United Kingdom. and Ireland, Europe, the United States and Australia.

EG Group established itself in the United States in 2018 as EG America by acquiring Kroger’s 762-site c-store network. It acquired TravelCenters of America’s Minit Mart c-store business for approximately $330.8 million in 2018. The portfolio included 225 c-stores. And in 2019, among other acquisitions, EG Group acquired Cumberland Farms and its nearly 660 c-stores in the Northeast and Florida, and EG America now has its headquarters in Westborough, Mass. With more than 1,750 sites across 33 states, U.S. c-store brands include Cumberland Farms, Certified Oil, Fastrac, Kwik Shop, Loaf N’ Jug, Minit Mart, Quik Stop, Sprint Food Stores, Tom Thumb and Turkey Hill.

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