Realty Income and KKR have formed a new euro-denominated joint venture through which KKR-advised capital accounts will invest €528 million for a 49% equity interest in a portfolio of European net lease properties.
Realty Income will retain a 51% interest in the venture and continue managing the portfolio through its European operating platform.
The partnership expands Realty Income’s private capital strategy into Europe after the real estate investment trust established a similar private capital model in the United States.
The joint venture is expected to own a diversified portfolio of stabilized net lease assets across Spain, Ireland, Poland and the Netherlands.
The anticipated portfolio includes 54 properties representing 140 units.
As of June 30, 2026, the portfolio was expected to generate approximately €67.7 million of first-year cash annual net operating income.
Its weighted average remaining lease term is approximately 7.2 years, while investment-grade tenants account for approximately 59% of total portfolio base rent.
The portfolio is expected to have a 1.6% compound annual contractual growth rate.
Its five largest industry and client categories are grocery, transportation services, home improvement, home furnishings and automotive parts.
Realty Income is contributing the portfolio at an effective 5.9% initial capitalization rate after recurring asset management fees payable to the company.
Realty Income will manage the properties under a long-term agreement while retaining control over day-to-day asset management.
The company will also have the ability to exercise a call option to redeem KKR’s equity interest beginning after year 10 and continuing through year 17.
The future purchase price will be calculated to provide KKR with a capped internal rate of return during its ownership period, with the cap expected to be set between 6.3% and 6.5% when the transaction closes.
The transaction is expected to close September 30, 2026, subject to customary conditions.
Lazard served as financial advisor and DLA Piper as legal advisor to Realty Income. Citi advised KKR financially, while Latham & Watkins served as KKR’s legal advisor.
Realty Income owned more than 15,500 properties across all 50 U.S. states, the U.K. and eight other European countries as of June 30, 2026.
KEY QUOTES:
“This transaction marks another important step in Realty Income’s evolution as the leading global net lease platform. Building on the private capital foundation we have established in the U.S., our strategic partnership with KKR extends this strategy into Europe and demonstrates both the portability of our competitive advantages across borders and the confidence that leading institutional investors have in our platform. We believe the long-term cost and structure of this equity financing create meaningful upside for our shareholders, while further diversifying our capital sources beyond the public markets.”
Sumit Roy, President and CEO of Realty Income
“We are proud to support Realty Income as it extends its private capital strategy into Europe through this bespoke capital solution, designed with the flexibility to expand in line with the company’s evolving needs.”
Christopher Sheldon, Partner at KKR
“We are pleased to invest alongside Realty Income, one of the world’s largest net lease REITs, in a diversified portfolio of high-quality, hard-to-replace assets across key markets in Europe, supported by strong underlying real estate fundamentals.”
Seb d’Avanzo, Co-Head of European Real Estate Equity at KKR
