The US investor quietly becoming one of Britain’s biggest retail owners

From a standing start five years ago, Realty Income, an American property investment trust, has quietly established itself as one of the largest owners of shops, supermarkets and retail parks in Britain.
While most other investors have stayed on the sidelines recently, deterred by spiralling financing costs and uncertainty over the future of bricks-and-mortar shops, Realty has gone on a splurge. Since 2019, when it bought a handful of Sainsbury’s supermarkets from British Land in its first overseas purchase, data from CoStar shows it has spent £5.4 billion on more than 300 properties in the UK.
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Backed by a team of quantitative analysts who sift market data from Realty’s headquarters 5,000 miles away in Southern California, it shows no signs of slowing down.
As well as Sainsbury’s, Realty has bought dozens of supermarkets occupied by Tesco and Waitrose. Last summer it paid £650 million for 25 Asda stores. Supermarkets fit well with Realty’s US business, which focuses almost exclusively on “triple net leases”.
Under those deals the occupier, not the landlord, pays for everything to do with the building, including taxes, insurance and maintenance costs. Occupiers like it because they can effectively do what they want with the buildings; landlords like it because all they have to do is collect the rent.
Splashing north of £5 billion in less than five years may seem punchy, but it is a reflection of Realty’s size. It owns close to 16,000 commercial properties around the world that generate $4.9 billion a year in rent, and the company, listed in the US, has a stock market value of $54 billion (£41 billion). The biggest property company on the London stock market, Segro, the warehouse landlord, is worth about £12 billion.
Realty was set up 55 years ago by husband and wife Bill and Joan Clark in San Diego, where it remains headquartered in a glazed office block surrounded by palm trees a mile east of the Pacific Ocean.
From its first purchase — a single branch of Taco Bell in 1970 — the trust has built up a vast portfolio in the US, with tenants including Walgreens, 7-Eleven, Dollar General, FedEx, LA Fitness and CVS Pharmacy. In 2022 it made its first move into gaming, with the $1.7 billion purchase of the Encore casino and resort in Boston Harbour.
Now, led by the former investment banker Sumit Roy, it has started to make a name for itself in the UK, and is muscling in on investors and landlords by outbidding them or bidding up the prices.
“They’re fairly new and they’ve come in a very big way,” one industry insider said. “They’ve been around a long time and they were very domestically focused in the US. They’ve come to Europe to grow, basically.”
Given Realty’s deep pockets and its apparent determination to deploy its money quickly, some frustrated rivals have suggested that their bigger American peer can be a “little bit loose” when bidding.
When it first crossed the Atlantic, Realty pursued those triple net leases that dominate its US portfolio. As well as supermarkets, it bought other buildings let to single tenants, including a Travis Perkins builders’ merchants, a TK Maxx warehouse and a Booker cash-and-carry. “Someone told me they own almost all of the B&Qs in the UK now,” the chief executive of one property company said.
Over the past two years, Realty has broken with tradition and started pursuing properties that are home to multiple tenants, namely retail parks. Its biggest foray into this market came 12 months ago when it paid just over £200 million for all of Ediston Property’s retail parks.
“What they have progressively done over the five years is they’ve started to broaden their investment horizons somewhat,” the industry insider said.
“Despite the long lease, single tenant branding that they have in the US, they’re buying more multi-let properties; things like retail parks where you have many covenants, short leases and a lot of asset management. It’s quite a different proposition.”
Realty’s move into retail parks has raised eyebrows in some corners of the market, given that it takes much more effort to run a site that has multiple buildings and tenants than it does a metal shed leased to B&Q for 15 years.
“They don’t have a very big team in the UK at the moment, so we think that’s something they’re going to have to address at some point,” the property boss said.
Various people within Realty Income did not respond to requests for comment. The belief is that it has widened its investment parameters to give it access to more higher-yielding assets.
“They market themselves as a monthly dividend stock and they’ve grown the dividend however many years in a row,” a property source said. “So it’s a good story, but you’ve got to keep chasing yield to maintain that.”
Realty has made 650 consecutive monthly dividend payments, which have gone up in each of the past 29 years since it was taken public in 1994.
Almost everyone The Times spoke to said that Realty would only buy assets with a rental yield of 7 per cent or more. That has led it to explore parts of the market that many others are not interested in: retail parks in Dundee and Milton Keynes, for example, or shops in Telford and Lincoln.
“You can absolutely buy a decent retail park — best or second-best in their catchment area — for a 7 per cent yield,” one investor said. “It’s not an indication of being poor quality by any means, but they’re just not the sexiest town names or the wealthiest catchments.”
Most of Realty’s decision-making still comes from the US, where it is said to have a “team of quants” analysing various UK commercial property data points. “They’re running all these stats and I believe the computer spits out a suggestion, ‘buy in this town’, and they just go,” someone who has dealt with Realty said.
To some, that approach of following the numbers can come across as undiscerning. “They’ve been very yield-focused, but we don’t see them as very quality-focused,” one owner of retail properties said.
Others disagree that Realty is only going after the cheaper, lesser-quality properties avoided by rivals, arguing instead that it simply has a different business model.
“They never really say anything,” one landlord said. “If you don’t sell anything, then you don’t worry about what future liquidity is going to be like for your asset, so you may as well go and buy in Scotland or Northern Ireland or Wales or [certain] parts of England where you get what’s called an illiquidity premium.”
Effectively, prices of commercial properties in less popular parts of the UK are lowered to reflect the fact that fewer buyers are active in those areas. “If it sells in Manchester for [a yield of] 6.5 per cent, in Scotland it might sell at 7.5 [per cent],” the landlord explained. “It’s actually quite a cute model.”