EG Group Enters $1.5 Billion Sale-Leaseback Agreement

The move helps the convenience retailer lower its debt.

March 07, 2023

ALEXANDRIA, Va.—EG Group announced it has agreed to the sale and leaseback of a portfolio of sites on the East Coast to Realty Income Corporation. The transaction provides EG Group approximately $1.5 billion that it will use to repay debt.

EG America will continue to operate the 415 store assets involved in the transaction, which are under the Cumberland Farms, Fastrac, Tom Thumb and Sprint banners.

The transaction is expected to close in the second quarter of 2023, subject to customary closing conditions. EG will pay an initial rent of $103 million per year with respect to these assets.

Zuber Issa, co-CEO of EG Group, said that the 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.”

New York Stock Exchange-listed Realty Income is an S&P 500 company structured as a real estate investment trust. Its monthly dividends are supported by the cash flow from over 12,200 real estate properties primarily owned under long-term net lease agreements with commercial clients.

According to the Manchester Evening Sun, EG Group’s debt stood at £9 billion (around $11 billion) in September 2022.

Further information is expected to be provided to investors in EG Group’s Q4 and full-year trading update call on Thursday, March 9. The group added that the deal is "in line with management’s commitment to reduce total net leverage through debt reduction and free cash flow generation."

Realty Income Corporation released a statement that read in part: “The portfolio is expected to be acquired at an estimated cap rate of approximately 6.9% and have a 20-year weighted average initial lease term. Approximately 80% of the total portfolio annualized contractual rent is expected to be generated from properties in the Northeast U.S.”

The 415 sites include 116 properties in Massachusetts, 87 properties in New York and 74 in Florida, “Over 80% of the total portfolio annualized contractual rent is expected to be generated from properties operated under the Cumberland Farms brand … and the average property size of the portfolio is approximately 3,700 square feet,” according to the statement.

"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," said Sumit Roy, Realty Income's president and CEO. "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.”

EG America is the fourth-largest convenience retailer in the United States. For more information on the top c-stores, read “The Top 100” in the March 2023 issue of NACS Magazine.

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