Mergers & Acquisitions

Realty Income Corp. Begins Buying Cumberland Farms Properties

$1.5 billion sale-leaseback deal with EG Group moves forward
cumberland farms
Photograph courtesy of EG America

Laying out an initial nearly $73 million, real estate investment firm Realty Income Corp. has begun acquiring Cumberland Farms properties in central Massachusetts as part of its $1.5-billion sale-leaseback deal with EG Group, the parent company of the Cumberland Farms convenience-store chain, reported the Worcester Business Journal.

Realty Income signed a definitive agreement in March to acquire more than 400 single-tenant convenience-store properties in the United States from EG Group, a major independent convenience retailer based in Blackburn, U.K.

EG America, Westborough, Massachusetts, will continue to operate the 415 c-stores under the Cumberland Farms, Fastrac, Tom Thumb and Sprint banners. As part of the transaction, it will pay an initial rent of $103 million per year with respect to these assets.

The companies expect approximately 80% of the total portfolio annualized contractual rent to be generated from properties in the Northeast, including 116 properties in Massachusetts, 87 properties in New York and 74 in Florida, which are the top three states in the portfolio. More than 80% of the total portfolio annualized contractual rent will be generated from properties operated under the Cumberland Farms brand, the companies said.

As part of its plan to buy the convenience-store sites in Massachusetts, Realty Income began closing the property deals in central Massachusetts on May 22, the Business Journal said. As of May 23, Obsidian ML 6 LLC, an affiliate of Realty Income, has purchased 14 Cumberland Farms properties for a total of $72.7 million in Athol ($2.9 million), Auburn ($5.8 million), Brookfield ($2.9 million), Grafton ($4.7 million), Hardwick ($5 million), Lancaster ($5.7 million), Leicester ($6.4 million), Northborough ($4.3 million), Pepperell ($4.1 million), Southborough ($7.9 million), Sturbridge ($7.6 million), Templeton ($4 million and $6.3 million) and Westminster ($5.1 million), the newspaper said, citing the Worcester District Registry of Deeds and the Middlesex South Registry of Deeds.

“Our core investment philosophy is to partner with leading operators in industries that have demonstrated an ability to deliver favorable risk-adjusted returns over the long term,” Sumit Roy, Realty Income president and CEO, said in March when the companies announced the deal. “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.”

San Diego-based 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.

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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