Realty Income's $5B Plan and Global Reach: Is the Growth Sustainable?

Realty Income O is expanding its global real estate platform through disciplined, data-driven investments. In the second quarter of 2025, it deployed $1.2 billion at a 7.2% initial weighted average cash yield, with $889 million (76%) in Europe and $282 million in the United States, backed by a 15.2-year average lease term. The company sourced a record $43 billion in opportunities during the quarter, resulting in a selectivity ratio of less than 3%, reflecting its broad market visibility.

European expansion is a central growth driver, benefiting from a fragmented market, favorable financing and a larger addressable market than the United States. Since 2019, Realty Income has significantly expanded across the continent, with Europe now accounting for 17% of its annualized base rent, recently adding Poland via a sale-leaseback involving Eko-Okna. Global reach and access to diverse capital pools enable efficient execution of cross-border deals while preserving risk-adjusted returns.

In the United States, Realty Income remains selective, generating a 7% yield on second-quarter investments and achieving a 103.4% rent recapture rate across 346 leases. Active portfolio optimization included $117 million in sales, mainly vacant assets, to recycle capital into higher-quality opportunities.

Seven years of proprietary predictive analytics guide sourcing, underwriting and asset management. These capabilities support a 98.6% occupancy rate across more than 15,600 properties and 1,630 clients in 91 industries, with a heavy weighting toward defensive sectors like grocery and convenience retail.

Management raised 2025 investment guidance to $5 billion, leveraging its ability to provide full-service capital, including credit solutions, and positioning Realty Income to capture a portion of the $14 trillion global net lease market.

Where Are Other Retail REITs Investing?

Simon Property Group SPG continues to enhance its retail real estate portfolio through targeted development, redevelopment and acquisitions. In the second quarter of 2025, Simon Property Group acquired its partner's interest in Brickell City Centre, and its $512 million investment comprises retail and parking components, a premier mixed-use property in Miami. By the second quarter-end, Simon Property Group had active development projects across all platforms, representing its share of net costs at $1 billion with a blended yield of 9%. Around 40% of these costs were allocated to mixed-use developments.

Kimco Realty KIM is advancing its investment strategy through high-yield redevelopments, selective acquisitions and capital recycling. In 2025, it targets $100-$125 million in net acquisitions, funded partly by $100-$150 million in dispositions of low-growth assets. Redevelopment projects are expected to deliver blended yields up to 17%, while its structured investment program, yielding 9-10%, builds a strategic acquisition pipeline.

O’s Price Performance, Valuation and Estimates

Shares of Realty Income have risen 8.4% year to date against the industry’s decline of 7%.

From a valuation standpoint, Realty Income trades at a forward 12-month price-to-FFO of 13.29, below the industry. It carries a Value Score of D.

The Zacks Consensus Estimate for O’s 2025 funds from operations per share has been revised marginally downward over the past 30 days.

At present, Realty Income carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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