Realty Income put $2.2 billion to work last quarter at a 6.8% yield
CEO Sumit Roy’s net lease REIT bought mostly industrial buildings, got higher yields in Europe than at home, and sold KKR a 49% stake in 54 European properties.
By Raymond de Clairmont · · 3 min read
Realty Income invested $2.23 billion of its own share in 182 properties in the third quarter at an initial cash yield of 6.8% [1]. CEO Sumit Roy said the company had “fully prefunded our equity needs for the remainder of the year” and raised its 2026 AFFO guidance to $4.45 to $4.46 a share, from $4.44 to $4.45 [1].
Of those 182 properties, 119 were acquisitions and 63 were developments Realty Income is funding [1]. Occupancy was 98.8% at Sept. 30, and AFFO rose 3.7% to $1.12 a share [1].
Realty Income earned higher yields in Europe than in the U.S.
The company spent $1.29 billion in the U.S. and other markets at a 6.5% yield and $940.1 million in Europe at 7.1% [1]. Through nine months it has invested $6.92 billion at 7.1%, and it kept its full-year target at $10.0 billion [1].
For comparison, Prologis paid a 4.2% stabilized cap rate for the warehouses it bought last quarter [2], as we covered in our Prologis story. Industrial buildings were the largest share of what Realty Income bought.
KKR bought into Realty Income’s European portfolio
KKR invested €528.0 million for a 49% stake in a joint venture holding 54 European net lease properties [1]. Realty Income also sold 182 properties in the quarter for $526.6 million, booking a $113.9 million gain [1].
| Source | Amount | Price or rate |
|---|---|---|
| Common stock sold through forward agreements | $472.5 million | $60.49 a share on average |
| Convertible senior notes due 2031 | $1.0 billion | 3.750% |
| Senior unsecured notes due 2032 | €600.0 million | 3.625% |
| KKR stake in European joint venture (49%) | €528.0 million | 54 properties |
We calculate the gap between Realty Income’s 6.8% initial yield and the 3.750% coupon on its new convertible notes at about 3.1 points [1].
How to use this
For business owners considering a sale-leaseback
- Ask each buyer to quote a cap rate and compare it with Realty Income’s 6.8% average [1]. On a building leased at $680,000 a year, we calculate the price at about $10.0 million at a 6.8% cap rate and about $10.46 million at 6.5%, a difference of roughly $460,000 to the seller.
- Ask whether the buyer will fund construction. Realty Income funded 63 developments last quarter [1], so a company planning a new plant or warehouse can ask a net lease buyer to pay for the project and sign the lease before it is finished.
For developers who sell to net lease buyers
- Price single-tenant industrial deals against what large buyers are getting. Industrial was 57.3% of the rent Realty Income bought and its U.S. yield was 6.5% [1], so a developer asking for a much lower cap rate would need a stronger tenant or a longer lease to support it.
- Ask brokers which of Realty Income’s sold properties are back on the market. It sold 359 properties for $875.2 million through September [1], and those trades set local comparable sales.
For investors in private net lease funds
- Compare a fund’s target yield with 6.8% [1] and ask for the sponsor’s cost of debt in writing. Realty Income borrowed at 3.625% in euros and 3.750% through convertible notes [1], and a private fund paying 6% on its loans, for example, keeps far less of each dollar of rent.
- Ask for the fund’s rent split by property type, the way Realty Income reports industrial, retail and data center shares [1], and for its largest tenant’s share of rent.
This is market commentary, not investment advice.
Sources
- [1]Realty Income Corporation, Realty Income announces operating results for the three and nine months ended September 30, 2026 (SEC Form 8-K, Exhibit 99.1), Nov 2, 2026.
- [2]Prologis, Inc., Third quarter 2026 earnings release (SEC Form 8-K, Exhibit 99.2), Oct 15, 2026.
