Now, in spite of all these accomplishments, Spirit has consistently traded at a discount to the net lease
peer group. And when you sort of looked at this recent stock market performance, given this increase in long-term interest rates, its actually interesting that the actual spread between Spirit and Realty Incomes equity multiple has
narrowed.
So, in that case you could say, well, its made the current environment an ideal time to negotiate a stock for stock transaction, but that
wasnt the real reason. There was other reasons. As Sumit said, we started this conversation earlier. Also, and its been said many times, Spirits assumable $4 billion of below market fixed rate debt enables a buyer like Realty
Income to generate future meaningful AFFO accretion, which would otherwise not be achievable if they were required to issue new debt today on a long-term basis.
And finally, I believe, this is personal opinion, and we believe as the board, that a transaction today with Realty Income could result as a catalyst for them
to actually improve their equity multiple rating, which our shareholders will also benefit in. So, thats the background of our conversation and decision-making.
Operator
The next question comes from Haendel St. Juste
with Mizuho. Please go ahead.
Haendel St. Juste
Hey, guys. Good morning. I guess a very early good morning to you, Sumit. Can you add a little bit of color on if there is any provisions to this deal that you
can make us aware of, perhaps of co-shop breakup fee or collar? Thanks.
Sumit Roy
Sure. So, Haendel, I believe our merger agreement is going to be filed later today, and youll obviously find all the details. There is a non-solicitation window shop provision that is part of this deal, where people interested could come in within the first 30 days, and the window shop provision is for a 45 day period. And then, post 45 days, it
basically is reliant on a shareholder vote, obviously our proxy being filed, which should take about four to six weeks from today, and then a shareholder vote. And then, post that, theres the closing.
In terms of breakup fees, etc., the way its been structured is that, if its within the window provision, its 1.75%, which is roughly
$93 million. If that happens post that period, it is 3.25%, which is roughly $170 million, maybe $190 million. I dont quite remember the number directly, but its in that zip code. And those are the details around the non-solicitation window shop.
Haendel St. Juste
Thats helpful. Thanks. And one more maybe a bit more on the accretion here. Im wondering if theres any other potential levers you could pull
beyond the 2.5% accretion youve identified. I know you dont need to sell assets here, but are there other assets perhaps that you also may consider selling, anything in the acquired portfolio that you might be predisposed to selling,
like perhaps the office assets that you acquired VEREIT? Thank you.
Sumit Roy
Yeah. So, the good news here, Haendel, is that the number of office assets are very, very few in this particular portfolio, and a lot of them have very
long-term leases. If you recall from the VEREIT portfolio as well, we ended up having to keep six office portfolios because it was part of a CMBS.
It is
also stated that office is not a long-term strategic hold for us, so we will continue to look to dispose of those office assets if and when the market presents itself. We dont feel a compulsion, given how small a portion of our overall
portfolio its going to represent. But, yes, longer term, it is certainly not core to us.
In terms of the accretion number, I just want to be very
clear that weve obviously gone through all 2,064 assets and have done a bottoms up analysis, used our analytic tools, used our team to underwrite all of the leases. And weve been conservative, and I think appropriately so, given the
backdrop that we find ourselves in.
And that is the reason why we have been very careful about stating that the accretion is at the--its 2.5%, but with the expectation that itll be more than that given how conservatively weve underwritten this particular portfolio. And the
conservatism comes in terms of reserves that weve taken and to represent basically the current market environment that we find ourselves in.
In
terms of actual recycling of assets, I dont believe that we will need to go above and beyond our normal recycling, which weve been doing every quarter, and it is a natural part of our asset management operations. So, yeah, thats
how I would answer that question, Haendel.
Operator
The next question comes from Brad Heffern with RBC Capital Markets. Please go ahead.
Realty Income
October 30, 2023, 8:00 A.M. Eastern