What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-04 compared with 2020-05-05 · 528 added, 207 removed, 638 unchanged (54% of the section changed)

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• General domestic and foreign business and economic conditions;

• Competition;

• Fluctuating interest and currency rates;

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The company is structured as a real estate investment trust, or REIT, requiring it annually to distribute at least 90% of its taxable income (excluding net capital gains) in the form of dividends to its stockholders.

The monthly dividends are supported by the cash flow generated from real estate owned under long-term, net lease agreements.

The monthly dividends are supported by the cash flow generated from real estate owned under long-term lease agreements with commercial tenants.

Realty Income was founded in 1969, and listed on the New York Stock Exchange (NYSE:

Over the past 51 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements.

The company is a member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for the last 25 consecutive years.

At March 31, 2020 , we owned a diversified portfolio:

Over the past 51 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term lease agreements with commercial tenants.

The company is a member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for the last 25 consecutive years or more.

At June 30, 2020, we owned a diversified portfolio:

• Of 6,541 properties;

With an occupancy rate of 98.5% , or 6,428 properties leased and 97 properties available for lease;

• With an occupancy rate of 98.5%, or 6,440 properties leased and 101 properties available for lease or sale;

• Doing business in 50 separate industries;

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approximately 12,000 square feet per retail property and 224,490 square feet per industrial property.

Of the 6,525 properties in the portfolio at March 31, 2020 , 6,490 , or 99.5% , are single-tenant properties, of which 6,396 were leased, and the remaining are multi–tenant properties.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from tenants for recoverable real estate taxes and operating expenses totaling $20.4 million and $17.3 million for the first three months of 2020 and 2019, respectively.

Of the 6,541 properties in the portfolio at June 30, 2020, 6,505, or 99.4%, are single-tenant properties, of which 6,407 were leased, and the remaining are multi–tenant properties.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from tenants for recoverable real estate taxes and operating expenses totaling $21.0 million and $16.4 million for the second quarters of 2020 and 2019, respectively, and $41.3 million and $33.8 million for the first six months of 2020 and 2019, respectively.

Investment Philosophy

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(1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level.

We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

We believe that a portfolio of properties under long-term lease agreements with commercial tenants generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

Diversification is also a key component of our investment philosophy.

We believe that diversification of the portfolio by tenant, industry, geography, and property type leads to more consistent and predictable income for our stockholders by reducing vulnerability that can come with any single concentration.

Our investment activities have led to a diversified property portfolio that, as of March 31, 2020 , consisted of 6,525 properties located in 49 U.S.

Our investment activities have led to a diversified property portfolio that, as of June 30, 2020, consisted of 6,541 properties located in 49 U.S.

states, Puerto Rico and the U.K., and doing business in 50 industries.

Each of the 51 industries represented in our property portfolio accounted for no more than 11.9% of our rental revenue for the quarter ended March 31, 2020 .

None of the 50 industries represented in our property portfolio accounted for more than 12.0% of our rental revenue for the quarter ended June 30, 2020.

Investment Strategy

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• Properties with rental or lease payments that approximate market rents for similar properties;

Properties that can be purchased with the simultaneous execution or assumption of long-term, net lease agreements, offering both current income and the potential for future rent increases.

• Properties that can be purchased with the simultaneous execution or assumption of long-term lease agreements with commercial tenants, offering both current income and the potential for future rent increases.

We seek to invest in properties owned by tenants that are already or could become leaders in their respective businesses supported by mechanisms including (but not limited to) occupancy of prime real estate locations, pricing, merchandise assortment, service, quality, economies of scale, consumer branding, and advertising.

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We believe these characteristics better position tenants to operate in a variety of economic conditions and to compete more effectively with internet retailers.

As a result of the execution of this strategy, approximately 95% of our annualized retail rental revenue at March 31, 2020 is derived from tenants with a service, non-discretionary, and/or low price point component to their business.

As a result of the execution of this strategy, approximately 95% of our annualized retail rental revenue at June 30, 2020 is derived from tenants with a service, non-discretionary, and/or low price point component to their business.

From a non-retail perspective, we target industrial properties leased to industry leaders that are primarily investment grade rated companies.

We believe these characteristics enhance the stability of the rental revenue generated from these properties.

After applying this investment strategy, we pursue those transactions where we can achieve an attractive investment spread over our cost of capital and favorable risk-adjusted returns.

After applying this investment strategy, we pursue those transactions where we believe we can achieve an attractive investment spread over our cost of capital and favorable risk-adjusted returns.

We will continue to evaluate all investments for consistency with our objective of owning net lease assets.

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It has been our experience that tenants must retain their profitable and critical locations in order to survive.

Therefore, in the event of reorganization, they are less likely to reject a lease of a profitable or critical location because this would terminate their right to use the property.

Therefore, in the event of reorganization, we believe they are less likely to reject a lease of a profitable or critical location because this would terminate their right to use the property.

Thus, as the property owner, we believe that we will fare better than unsecured creditors of the same tenant in the event of reorganization.

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We continue to monitor our tenants’ credit quality on an ongoing basis by reviewing the available information previously discussed, and providing summaries of these findings to management.

At March 31, 2020, approximately 48% of our annualized rental revenue comes from properties leased to investment grade rated companies, their subsidiaries or affiliated companies.

At March 31, 2020 , our top 20 tenants (based on percentage of total portfolio annualized rental revenue) represented approximately 53% of our annualized revenue and 12 of these tenants have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

At June 30, 2020, approximately 48% of our annualized rental revenue comes from properties leased to investment grade rated companies, their subsidiaries or affiliated companies.

At June 30, 2020, our top 20 tenants (based on percentage of total portfolio annualized rental revenue) represented approximately 53% of our annualized revenue and 12 of these tenants have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Asset Management Strategy

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We have continued our 51-year policy of paying monthly dividends.

In addition, we increased the dividend three times during 2020.

In addition, we increased the dividend four times during 2020.

As of April 2020, we have paid 91 consecutive quarterly dividend increases and increased the dividend 107 times since our listing on the NYSE in 1994.

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2020 Dividend increases

The dividends paid per share during the first three months of 2020 totaled approximately $0.693 , as compared to approximately $0.672 during the first three months of 2019 , an increase of $0.021 , or 3.1% .

The monthly dividend of $0.233 per share represents a current annualized dividend of $2.796 per share, and an annualized dividend yield of approximately 5.6% based on the last reported sale price of our common stock on the NYSE of $49.86 on March 31, 2020 .

1st increase Dec 2019 Jan 2020 $ 0.2275 $ 0.0005

2nd increase Jan 2020 Feb 2020 $ 0.2325 $ 0.0050

3rd increase Mar 2020 Apr 2020 $ 0.2330 $ 0.0005

4th increase Jun 2020 Jul 2020 $ 0.2335 $ 0.0005

The dividends paid per share during the first six months of 2020 totaled approximately $1.392, as compared to approximately $1.350 during the first six months of 2019, an increase of $0.042, or 3.1%.

The monthly dividend of $0.2335 per share represents a current annualized dividend of $2.802 per share, and an annualized dividend yield of approximately 4.7% based on the last reported sale price of our common stock on the NYSE of $59.50 on June 30, 2020.

Although we expect to continue our policy of paying monthly dividends, we cannot guarantee that we will maintain our current level of dividends, that we will continue our pattern of increasing dividends per share, or what our actual dividend yield will be in any future period.

Acquisitions During the First Three Months of 2020

Acquisitions During the Second Quarter and First Six Months of 2020

Below is a listing of our acquisitions in the U.S.

for the periods indicated below:

Number of Properties

(in millions)

($ in millions)

Weighted Average Lease Term (Years)

Initial Average Cash Lease Yield

Three months ended March 31, 2020 (1)

Properties Square Feet

(in millions) Investment

($ in millions) Weighted

(Years) Initial

Three months ended June 30, 2020 (1)

Acquisitions - U.S.

(in 15 states)

26 0.4 $ 94.3 12.9 6.4 %

Acquisitions - U.K.

2 0.1 58.2 9.9 6.1 %

Total acquisitions 28 0.5 152.5 11.8 6.3 %

Properties under development - U.S.

None of our investments during the first three months of 2020 caused any one tenant to be 10% or more of our total assets at March 31, 2020 .

All of our investments in acquired properties during the first three months of 2020 are 100% leased at the acquisition date.

Represents investments of £133.3 million Sterling during the three months ended March 31, 2020 converted at the applicable exchange rate on the date of acquisition.

4 0.1 1.7 10.4 10.3 %

32 0.6 $ 154.2 11.8 6.3 %

Six months ended June 30, 2020 (1)

Acquisitions - U.S.

(in 25 states)

80 1.8 $ 412.6 14.4 6.5 %

Acquisitions - U.K.

6 0.5 223.7 11.8 5.3 %

Total acquisitions 86 2.3 636.3 13.6 6.1 %

Properties under development - U.S.

8 0.2 3.9 10.5 8.8 %

94 2.5 $ 640.2 13.6 6.1 %

(1) None of our investments during the three and six months ended June 30, 2020 caused any one tenant to be 10% or more of our total assets at June 30, 2020.

All of our investments in acquired properties during the three and six months ended June 30, 2020 are 100% leased at the acquisition date.

(2) Represents investments of £46.8 million during the three months ended June 30, 2020 and £180.1 million during the six months ended June 30, 2020 converted at the applicable exchange rate on the date of acquisition.

(3) The tenants occupying the new properties operate in 8 industries, and are 100.0% retail, based on rental revenue.

Approximately 41% of the rental revenue generated from acquisitions during the second quarter of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies.

(4) The tenants occupying the new properties operate in 17 industries, and are 96.5% retail and 3.5% industrial, based on rental revenue.

Approximately 36% of the rental revenue generated from acquisitions during the first three months of 2020 is from investment grade rated tenants and their subsidiaries.

Approximately 37% of the rental revenue generated from acquisitions during the first six months of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies.

The initial average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property.

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Leasing Results

At March 31, 2020 , we had 97 properties available for lease out of 6,525 properties in our portfolio, which represents a 98.5% occupancy rate based on the number of properties in our portfolio.

The following tables summarizes our leasing results for the first three months of 2020:

At June 30, 2020, we had 101 properties available for lease or sale out of 6,541 properties in our portfolio, which represents a 98.5% occupancy rate based on the number of properties in our portfolio.

The following tables summarizes our leasing results for the periods indicated below:

Properties available for lease at March 31, 2020

Lease expirations 81

Re-leases to same tenant (1)

Re-leases to new tenant (1)(2)

Vacant Dispositions (12)

Properties available for lease at June 30, 2020

(1) The annual new rent on these re-leases was $15.334 million, as compared to the previous annual rent of $15.128 million on the same properties, representing a rent recapture rate of 101.4% on the properties re-leased during the quarter ended June 30, 2020.

(2) Re-leased two properties to new tenants without a period of vacancy, and three properties to new tenants after a period of vacancy.

Properties available for lease at December 31, 2019

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Vacant Dispositions (25)

Properties available for lease at March 31, 2020

The annual new rent on these re-leases was $17.82 million , as compared to the previous annual rent of $18.0 million on the same properties, representing a rent recapture rate of 99.0% on the properties re-leased during the first three months of 2020.

Re-leased one property to a new tenant without a period of vacancy, and two properties to new tenants after a period vacancy.

Properties available for lease at June 30, 2020

(1) The annual new rent on these re-leases was $33.152 million, as compared to the previous annual rent of $33.124 million on the same properties, representing a rent recapture rate of 100.1% on the properties re-leased during the first six months of 2020.

(2) Re-leased three properties to new tenants without a period of vacancy, and five properties to new tenants after a period of vacancy.

As part of our re-leasing costs, we pay leasing commissions to unrelated, third party real estate brokers consistent with the commercial real estate industry standard, and sometimes provide tenant rent concessions.

We do not consider the collective impact of the leasing commissions or tenant rent concessions to be material to our financial position or results of operations.

At March 31, 2020 , our average annualized rental revenue was approximately $15.13 per square foot on the 6,428 leased properties in our portfolio.

At March 31, 2020 , we classified 22 properties, with a carrying amount of $21.4 million , as held for sale on our balance sheet.

At June 30, 2020, our average annualized rental revenue was approximately $15.17 per square foot on the 6,440 leased properties in our portfolio.

At June 30, 2020, we classified 32 properties, with a carrying amount of $40.6 million, as held for sale on our balance sheet.

The expected sale of these properties does not represent a strategic shift that will have a major effect on our operations and financial results and is consistent with our existing disposition strategy to further enhance our real estate portfolio and maximize portfolio returns.

Investments in Existing Properties

In the first three months of 2020 , we capitalized costs of $2.1 million on existing properties in our portfolio, consisting of $138,000 for re-leasing costs and $2.0 million for non-recurring building improvements.

In the first three months of 2019, we capitalized costs of $3.0 million on existing properties in our portfolio, consisting of $323,000 for re-leasing costs, $56,000 for recurring capital expenditures, and $2.6 million for non-recurring building improvements.

In the second quarter of 2020, we capitalized costs of $2.3 million on existing properties in our portfolio, consisting of $973,000 for re-leasing costs, $23,000 for recurring capital expenditures, and $1.3 million for non-recurring building improvements.

In the first six months of 2020, we capitalized costs of $4.4 million on existing properties in our portfolio, consisting of $1.1 million for re-leasing costs, $23,000 for recurring capital expenditures, and $3.3 million for non-recurring building improvements.

The majority of our building improvements relate to roof repairs, HVAC improvements, and parking lot resurfacing and replacements.

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We define non-recurring capital expenditures as property improvements in which we invest additional capital that extend the useful life of the properties.

Note Issuances

In July 2020, we issued $350 million of additional aggregate amount of our existing 3.250% senior unsecured notes due in January 2031, or the 2031 Notes.

The public offering price for these notes was 108.241% of the principal amount, for an effective yield to maturity of 2.341% and gross proceeds of approximately $378.8 million.

In May 2020, we issued $600 million of the 2031 Notes.

The public offering price for the 2031 Notes was 98.987% of the principal amount, for an effective yield to maturity of 3.364% and gross proceeds of approximately $593.9 million.

The proceeds from each of these offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

Equity Capital Raising

During the first three months of 2020 , we raised $752.4 million from the sale of common stock at a weighted average price of $77.37 , primarily from 9,690,500 shares issued in an overnight underwritten public offering, including 690,500 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

During the second quarter of 2020, we raised $98.1 million from the sale of common stock at a weighted average price of $63.07, primarily through our At-The-Market-Program.

During the first six months of 2020, we raised $850.6 million from the sale of common stock at a weighted average price of $75.40 , primarily from 9,690,500 shares issued in an overnight underwritten public offering during the first quarter of 2020, including 690,500 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

Term Loan Redemption

In June 2020, we repaid the $250.0 million term loan in full upon maturity.

Chief Financial Officer Departure

In March 2020 and as previously announced, Paul Meurer, our former EVP, Chief Financial Officer ("CFO"), departed from the Company.

We have begun a search for a new CFO.

We continue our search for a new CFO.

As a result of Mr.

Meurer's departure, we recognized an executive severance charge of $3.5 million during the first three months of 2020, consisting of $1.6 million of cash, $1.8 million related to share–based compensation expense and $58,000 of professional fees.

Meurer's departure, we recognized an executive severance charge of $3.5 million during the first quarter of 2020, consisting of $1.6 million of cash, $1.8 million related to share–based compensation expense and $58,000 of professional fees.

Early Redemption of 5.75% Notes Due January 2021

In January 2020, we completed the early redemption on all $250.0 million in principal amount of our outstanding 5.750% notes due January 2021, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt during the first three months of 2020.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt during the first quarter of 2020.

Impact of COVID-19

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See "Item 1A--Risk Factors" in Part II of this report for more information regarding the actual and potential future impacts of the COVID-19 pandemic and the measures taken to limit its spread on our tenants and our business, results of operations, financial condition and liquidity.

As a result of this challenging environment, we are working diligently with our tenants most affected by the pandemic to understand their financial liquidity and their ability to satisfy their contractual obligations to us.

As a result of this challenging environment, we continue to work diligently with our tenants most affected by the pandemic to understand their financial liquidity and their ability to satisfy their contractual obligations to us.

As we carefully navigate this difficult economic period with our tenants, our focus is on finding resolutions that preserve the long-term relationships we have built with many of our tenants.

The majority of concessions granted to our tenants during the second quarter of 2020 as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged.

In these cases, we have currently determined that the collection of deferred rent is probable.

In addition, as we believe to be the case with many retail landlords, we received many short-term rent relief requests, most often in the form of rent deferral requests, or requests for further discussion from tenants.

We believe that not all tenant requests will ultimately result in modification agreements, nor have we relinquished our contractual rights under our lease agreements.

April collections and rent relief requests to-date may not be indicative of collections or requests in any future period.

As of May 1, 2020:

We have collected 82.9% of contractual rent (1) due for the month of April 2020 across our total portfolio;

We are in rent deferral discussions with tenants that account for a majority of the unpaid contractual rent for the month of April 2020, as well as certain tenants that did pay April contractual rent ;

We have collected 82.9% of contractual rent due for the month of April 2020 from our top 20 tenants (2) ;

We have collected 99.9% of contractual rent due for the month of April 2020 from our investment grade tenants (3) .

Contractual rent is the aggregate cash amount charged to tenants inclusive of April monthly base rent receivables, offset by applicable discounts or credits.

rent (which is payable in pounds Sterling) was converted at the exchange rate in effect on May 1, 2020.

We define top 20 tenants as our 20 largest tenants based on percentage of total portfolio annualized rental revenue.

We believe that not all tenant requests will ultimately result in modification agreements, nor have we relinquished our contractual rights under our lease agreements for leases in which rent concessions have not yet been granted.

Our collections and concessions from April through July 2020 and our rent relief requests to-date may not be indicative of collections, concessions or requests in any future period.

Percentages of Contractual Rent Collected as of July 31, 2020

April 30, 2020 Month Ended

May 31, 2020 Month Ended

June 30, 2020 Quarter Ended

June 30, 2020 Month Ended

July 31, 2020

Contractual rent collected (1) across total

88.4% 84.9% 86.1% 86.5% 91.5%

Contractual rent collected (1) from top 20

83.0% 82.1% 82.5% 82.5% 90.7%

Contractual rent collected (1) from

investment grade tenants (3)

100.0% 98.4% 98.9% 99.1% 100.0%

(1) Contractual rent is the aggregate cash amount charged to tenants inclusive of monthly base rent receivables.

rent (which is payable in pounds Sterling) was converted at the exchange rate in effect on May 1, 2020 for rents collected for the month of April 2020, on June 1, 2020 for rents collected for the month of May 2020, on July 1, 2020 for rents collected for the month of June 2020, and on July 31, 2020 for rents collected for the month of July 2020.

(2) We define top 20 tenants as our 20 largest tenants based on percentage of total portfolio annualized contractual rental revenue as of the last day of such period.

(3) We define investment grade tenants as tenants with a credit rating, and tenants that are subsidiaries or affiliates of companies with a credit rating, of Baa3/BBB- or higher from one of the three major rating agencies (Moody’s/S&P/Fitch).

The following table provides information relating to April 2020 rent collections by industry through May 1, 2020:

of April 2020

Total Contractual

of Total Contractual

Collected as of

for April 2020 (1)

May 1, 2020 (1)

The following table provides information relating to April through July 2020 rent collections by industry through July 31, 2020:

Percentage of Total Contractual Rent Due Percentage of Total Contractual Rent Collected as of:

July 2020 (1)

June 2020 (1)

April 2020 (1)

July 2020 (1)

June 2020 (1)

April 2020 (1)

Aerospace 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%

Apparel stores 1.3 1.3 1.3 1.2 1.3 1.1 0.9 1.2

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Automotive tire services 2.0 2.0 2.0 2.1 2.0 1.9 1.7 2.1

Consumer appliances

Beverages 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Child care 2.2 2.1 2.2 2.1 1.8 1.6 0.7 1.6

Consumer electronics 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

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Dollar stores 7.9 7.9 7.9 7.9 7.9 7.9 7.9 7.9

Drug stores 8.5 8.5 8.5 8.6 8.5 8.5 8.5 8.6

Education 0.2 0.2 0.2 0.2 0.1 0.2 0.2 0.2

Electric utilities 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

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Health and fitness 7.1 7.1 7.2 7.2 6.3 3.0 3.5 3.6

Health care 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

Home furnishings 0.8 0.8 0.8 0.9 0.7 0.7 0.4 0.5

Home improvement 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9

Machinery 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Motor vehicle dealerships 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

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Other manufacturing 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.6

Packaging 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9

Paper 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Pet supplies and services 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7

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Restaurants - quick service 5.7 5.7 5.7 5.7 5.0 4.8 4.5 5.3

Shoe stores 0.2 0.2 0.2 0.2 * * * 0.2

Sporting goods 0.8 0.8 0.8 0.8 0.8 0.6 0.8 0.8

Telecommunications 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Theaters 5.9 6.0 5.9 6.0 0.9 — 0.2 0.2

Transportation services 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2

Wholesale clubs 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4

Other 0.1 0.2 0.2 0.2 0.1 0.1 0.1 0.1

96.2% 96.2% 96.1% 96.4% 87.7% 82.3% 81.0% 84.8%

Grocery stores 3.7 3.7 3.8 3.5 3.7 3.7 3.8 3.5

Theaters * * * * — — — —

Health care 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

3.8% 3.8% 3.9% 3.6% 3.8% 3.8% 3.9% 3.6%

Totals 100.0% 100.0% 100.0% 100.0% 91.5% 86.1% 84.9% 88.4%

* Less than 0.1%

(1) Contractual rent is the aggregate cash amount charged to tenants inclusive of April monthly base rent receivables, offset by applicable discounts or credits.

rent (which is payable in pounds Sterling) is converted at the exchange rate in effect on May 1, 2020.

We are still in the preliminary stages of collecting rent for the month of May 2020.

As a result, we cannot predict the number of tenants that will not pay rent for the month of May 2020, nor can we predict whether tenants who pay rent for April or May 2020 will continue to pay rent or request rent deferrals thereafter.

In addition, as the adverse impacts of the COVID-19 pandemic and the measures taken to limit its spread continue to evolve, the ability of our tenants to continue to pay rent to us may further diminish, and therefore we cannot assure you that our rental collections in April are indicative of our rental collections in May or in the future.

As a result of the impacts of the COVID-19 pandemic and the measures taken to limit its spread, our revenues in the second quarter of 2020 may decline relative to the first quarter of 2020, and that decline may continue or increase in subsequent periods as long as such impacts continue to exist.

Select Financial Results

(1) Contractual rent is the aggregate cash amount charged to tenants inclusive of monthly base rent receivables.

As the adverse impacts of the COVID-19 pandemic and the measures taken to limit its spread continue to evolve, the ability of our tenants to continue to pay rent to us may further diminish, and therefore we cannot assure you that our rental collections from April through July are indicative of our rental collections in August or in the future.

As a result of the impacts of the COVID-19 pandemic and the measures taken to limit its spread, our revenues in the

second half of 2020 may decline relative to the first half of 2020, and that decline may continue or increase in subsequent periods as long as such impacts continue to exist.

Summarized Financial Results

The following summarizes our select financial results (dollars in millions, except per share data):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30, Three months Six months

2020 2019 2020 2019

Total revenue

$ 414.6 $ 365.5 $ 829.0 $ 719.8 13.4 % 15.2 %

Net income available to common stockholders (1)

$ 107.8 $ 95.2 $ 254.7 $ 206.1 13.2 % 23.6 %

Net income per share (2)

FFO available to common stockholders

$ 0.31 $ 0.31 $ 0.75 $ 0.67 — % 11.9 %

Funds from operations (FFO) available to common stockholders

$ 288.3 $ 251.5 $ 565.4 $ 497.2 14.6 % 13.7 %

FFO per share (2)

AFFO available to common stockholders

$ 0.84 $ 0.81 $ 1.66 $ 1.62 3.7 % 2.5 %

Adjusted funds from operations (AFFO) available to common stockholders

$ 295.2 $ 253.9 $ 592.5 $ 502.7 16.3 % 17.9 %

AFFO per share (2)

(1) The calculation to determine net income available to common stockholders includes impairments, gains from the sale of real estate, and foreign currency gains and losses.

$ 0.86 $ 0.82 $ 1.74 $ 1.63 4.9 % 6.7 %

(1) The calculation to determine net income available to common stockholders includes provisions for impairment, gains from the sale of real estate, and foreign currency gains and losses.

These items can vary from quarter to quarter and can significantly impact net income available to common stockholders and period to period comparisons.

(2) All per share amounts are presented on a diluted per common share basis.

Net income available to common stockholders and FFO in the first three months of 2020 were impacted by a loss on extinguishment of debt due to the early redemption of the 5.750% Notes due 2021 in January 2020 and an executive severance charge for our former CFO in March 2020.

Net income available to common stockholders and FFO in the first six months of 2020 were impacted by the following transactions recorded in the first quarter of 2020:

(i) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021, and (ii) a $3.5 million executive severance charge for our former chief financial officer.

See our discussion of FFO and AFFO (which are not financial measures under generally accepted accounting principles, or GAAP), later in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this quarterly report, which includes a reconciliation of net income available to common stockholders to FFO and AFFO.

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Therefore, we seek to maintain a conservative debt level on our balance sheet and solid interest and fixed charge coverage ratios.

At March 31, 2020 , our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable and credit facility borrowings were $7.56 billion , or approximately 30.6% of our total market capitalization of $24.71 billion .

We define our total market capitalization at March 31, 2020 as the sum of:

Shares of our common stock outstanding of 343,402,030 , plus total common units outstanding of 463,119 , multiplied by the last reported sales price of our common stock on the NYSE of $49.86 per share on March 31, 2020 , or $17.15 billion ;

At June 30, 2020, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable and credit facility borrowings were $7.91 billion, or approximately 27.8% of our total market capitalization of $28.47 billion.

We define our total market capitalization at June 30, 2020 as the sum of:

• Shares of our common stock outstanding of 345,023,421, plus total common units outstanding of 463,119, multiplied by the last reported sales price of our common stock on the NYSE of $59.50 per share on June 30, 2020, or $20.56 billion;

• Outstanding borrowings of $628.6 million on our revolving credit facility, including £329.5 million British Pounds Sterling-denominated borrowings;

• Outstanding mortgages payable of $393.7 million, excluding net mortgage premiums of $2.3 million and deferred financing costs of $1.1 million;

Outstanding borrowings of $500.0 million on our term loans, excluding deferred financing costs of $849,000 ;

Outstanding senior unsecured notes and bonds of $6.04 billion , including a Sterling-denominated private placement of £315.0 million, and excluding unamortized net original issuance premiums of $6.2 million and deferred financing costs of $34.3 million .

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $742,000;

• Outstanding senior unsecured notes and bonds of $6.64 billion, including a Sterling-denominated private placement of £315.0 million, and excluding unamortized net original issuance premiums of $3,000 and deferred financing costs of $38.5 million.

Universal Shelf Registration

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Under our "at-the-market" equity distribution plan, or our ATM program, up to 33,402,405 shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices.

At March 31, 2020 , we had 33,402,405 shares remaining for future issuance under our ATM program.

During the second quarter and first six months of 2020, we issued 1,511,149 shares and raised approximately $95.7 million under the ATM program.

At June 30, 2020, we had 31,891,256 shares remaining for future issuance under our ATM program.

We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder.

We did not issue any shares under the ATM program during the first three months of 2020.

Issuance of Common Stock

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Our DRSPP includes a waiver approval process, allowing larger investors or institutions, per a formal approval process, to purchase shares at a small discount, if approved by us.

We did not issue shares under the waiver approval process during the first three months of 2020 .

At March 31, 2020 , we had 11,618,668 shares

remaining for future issuance under our DRSPP program.

During the three months ended March 31, 2020 , we sold 34,000 shares of common stock for gross proceeds of $2.4 million .

We did not issue shares under the waiver approval process during the first six months of 2020.

At June 30, 2020, we had 11,573,851 shares remaining for future issuance under our DRSPP program.

During the second quarter of 2020, we issued 44,817 shares and raised approximately $2.4 million under our DRSPP.

During the first six months of 2020, we issued 78,817 shares and raised approximately $4.8 million under our DRSPP.

Revolving Credit Facility

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Our revolving credit facility has a $1.0 billion expansion option, which is subject to obtaining lender commitments.

Under our revolving credit facility, our investment grade credit ratings as of March 31, 2020 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775% with a facility commitment fee of 0.125% , for all-in drawn pricing of 0.90% over LIBOR .

Under our revolving credit facility, our investment grade credit ratings as of June 30,

2020 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings change.

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Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At March 31, 2020 , we had a borrowing capacity of $2.4 billion available on our revolving credit facility and an outstanding balance of $615.2 million , including £282.8 million Sterling.

The weighted average interest rate on borrowings under our revolving credit facility during the first three months of 2020 was 2.1% per annum.

At June 30, 2020, we had a borrowing capacity of $2.4 billion available on our revolving credit facility and an outstanding balance of $628.6 million, including £329.5 million Sterling.

The weighted average interest rate on borrowings under our revolving credit facility during the first six months of 2020 was 1.6% per annum.

We must comply with various financial and other covenants in our credit facility.

At March 31, 2020 , we were in compliance with these covenants.

At June 30, 2020, we were in compliance with these covenants.

We expect to use our credit facility to acquire additional properties and for other general corporate purposes.

Any additional borrowings will increase our exposure to interest rate risk.

On April 9, 2020 , we borrowed an additional $1.2 billion under our revolving credit facility to increase our cash position to $1.25 billion as a conservative measure due to COVID-19.

As of May 1, 2020, we have $1.9 billion of borrowings outstanding under our revolving credit facility, including £325.5 million of Sterling-denominated borrowings, with a remaining available capacity of $1.1 billion .

The revolving credit facility also has a $1.0 billion expansion option, which is subject to obtaining lender commitments.

We generally use our credit facility for the short-term financing of new property acquisitions.

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In conjunction with this term loan, we also entered into an interest rate swap which effectively fixes our per annum interest on this term loan at 3.89%.

In June 2015, in conjunction with entering into our previous revolving credit facility, we entered into a $250.0 million senior unsecured term loan maturing in June 2020, and is governed by the credit agreement that governs our revolving credit facility.

Borrowing under this term loan bears interest at the current one-month LIBOR , plus 0.90% .

In conjunction with this term loan, we also entered into an interest rate swap which effectively fixes our per annum interest rate on this term loan at 2.62% .

Upon the maturity of this term loan, we intend to either repay the outstanding principal with cash on hand, enter into an amendment to our current term loan, or enter into a new term loan.

In June 2015, in conjunction with entering into our previous revolving credit facility, we entered into a $250.0 million senior unsecured term loan which matured in June 2020.

Borrowing under this term loan bore interest at the current one-month LIBOR, plus 0.90%.

In conjunction with this term loan, we also entered into an interest rate swap which effectively fixed our per annum interest rate on this term loan at 2.62%.

In June 2020, we repaid the term loan in full upon maturity.

Mortgage Debt

As of March 31, 2020 , we had $406.7 million of mortgages payable, all of which were assumed in connection with our property acquisitions.

Additionally, at March 31, 2020 , we had net premiums totaling $2.6 million on these mortgages and deferred financing costs of $1.2 million .

As of June 30, 2020, we had $393.7 million of mortgages payable, all of which were assumed in connection with our property acquisitions.

Additionally, at June 30, 2020, we had net premiums totaling $2.3 million on these mortgages and deferred financing costs of $1.1 million.

We expect to pay off the mortgages payable as soon as prepayment penalties have declined to a level that would make it economically feasible to do so.

During the first three months of 2020 , we made $1.7 million in principal payments.

During the first six months of 2020, we made $14.7 million in principal payments, including the repayment of one mortgage in full for $11.4 million.

Notes Outstanding

Our senior unsecured note and bond obligations consist of the following as of March 31, 2020 , sorted by maturity date (dollars in millions):

Our senior unsecured note and bond obligations consist of the following as of June 30, 2020, sorted by maturity date (dollars in millions):

3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022

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3.250% notes, issued in June 2019 and due in June 2029 500

3.250% notes, issued in May 2020 and due in January 2031 600

2.730% notes, issued in May 2019 and due in May 2034 (1)

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(1) Represents the principal balance (in U.S.

dollars) of the Sterling-denominated private placement of £315.0 million converted at the applicable exchange rate on March 31, 2020 .

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of March 31, 2020 .

dollars) of the Sterling-denominated private placement of £315.0 million converted at the applicable exchange rate on June 30, 2020.

In July 2020, we issued $350 million of 3.250% senior unsecured notes due in January 2031, which constituted a further issuance of, and formed a single series with, the $600 million senior notes issued in May 2020.

The public offering price for these notes was 108.24% of the principal amount, for an effective yield to maturity of 2.341%.

The net proceeds of approximately $376.6 million from this offering were used to repay borrowings under our credit facility, to fund potential investment opportunities and for other general corporate purposes.

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of June 30, 2020.

Additionally, interest on all of our senior note and bond obligations is paid semiannually.

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GAAP measurements, are presented to investors to show our ability to incur additional debt under the terms of our senior notes and bonds as well as to disclose our current compliance with such covenants, and are not measures of our liquidity or performance.

The actual amounts as of March 31, 2020 are:

The actual amounts as of June 30, 2020 are:

Note Covenants

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(1) Our debt service coverage ratio is calculated on a pro forma basis for the preceding four-quarter period on the assumptions that:

(i) the incurrence of any Debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other Debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our Debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on April 1, 2019 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of April 1, 2019, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at March 31, 2020 (in thousands, for trailing twelve months):

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on July 1, 2019 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of July 1, 2019, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at June 30, 2020 (in thousands, for trailing twelve months):

Net income available to common stockholders

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We intend to retain an appropriate amount of cash as working capital.

At March 31, 2020 , we had cash and cash equivalents totaling $41.8 million , inclusive of £15.2 million Sterling.

On April 9, 2020, we borrowed an additional $1.2 billion under our revolving credit facility, as to increase our cash position to $1.25 billion as a conservative measure due to COVID-19.

At June 30, 2020, we had cash and cash equivalents totaling $35.3 million, inclusive of £14.6 million Sterling.

During the second quarter of 2020 we invested in a term deposit with a bank that was not readily convertible to cash as of June 30, 2020.

The term deposit matured on July 24.

We believe that our cash and cash equivalents on hand, cash provided from operating activities, and borrowing capacity is sufficient to meet our liquidity needs for the next twelve months.

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The borrowing interest rates under our revolving credit facility are based upon our ratings assigned by credit rating agencies.

As of March 31, 2020 , we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

As of June 30, 2020, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

Moody’s Investors Service has assigned a rating of A3 with a “stable” outlook, Standard & Poor’s Ratings Group has assigned a rating of A- with a “stable” outlook, and Fitch Ratings has assigned a rating of BBB+ with a “stable” outlook.

Based on our ratings as of March 31, 2020 , the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125% , for all-in drawn pricing of 0.90% over LIBOR.

Based on our ratings as of June 30, 2020, the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

Our credit facility provides that the interest rate can range between:

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Table of Obligations

The following table summarizes the maturity of each of our obligations as of March 31, 2020 (dollars in millions):

The following table summarizes the maturity of each of our obligations as of June 30, 2020 (dollars in millions):

Maturity Credit

Leases Paid by

Realty Income (6)

Leases Paid by

Our Tenants (7)

2020 — — — 69.5 136.4 0.8 6.8 7.9 221.4

2021 — — — 68.8 279.6 1.5 13.5 7.9 371.3

2022 — 950.0 — 111.8 275.8 1.5 13.4 — 1,352.5

2023 628.6 750.0 — 20.6 236.8 1.4 13.5 — 1,650.9

2024 — 350.0 250.0 112.2 192.3 1.4 13.6 — 919.5

Thereafter — 4,590.6 — 10.8 1,212.7 18.8 69.1 — 5,902.0

Totals $ 628.6 $ 6,640.6 $ 250.0 $ 393.7 $ 2,333.6 $ 25.4 $ 129.9 $ 15.8 $ 10,417.6

(1) The initial term of the credit facility expires in March 2023 and includes, at our option, two six-month extensions.

On April 9, 2020, we borrowed an additional $1.2 billion on our revolving credit facility.

Excludes non-cash original issuance discounts and premiums recorded on notes payable of $6.2 million and deferred financing costs of $34.3 million .

(2) Excludes non-cash original issuance discounts and premiums recorded on notes payable of $3,000 and deferred financing costs of $38.5 million.

Also excludes the July 2020 issuance of $350 million of senior unsecured notes.

(3) Excludes deferred financing costs of $742,000.

In June 2020, we repaid our $250.0 million senior term loan in full, which matured in June 2020.

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $2.3 million and deferred financing costs of $1.1 million.

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Furthermore, we believe our funds from operations and cash on hand are sufficient to support our current level of cash distributions to our stockholders.

Our cash distributions to common stockholders in the first three months of 2020 totaled $233.8 million , representing 78.7% of our adjusted funds from operations available to common stockholders of $297.2 million .

Our cash distributions to common stockholders in the first six months of 2020 totaled $474.3 million, representing 80.1% of our adjusted funds from operations available to common stockholders of $592.5 million.

In comparison, our 2019 cash distributions to common stockholders totaled $852.1 million, representing 81.2% of our adjusted funds from operations available to common stockholders of $1.05 billion.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, FFO, AFFO, cash flow from operations, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Code, our debt service requirements, and any other factors the Board of Directors may deem relevant.

In addition, our credit facility contains financial covenants that could limit the amount of distributions payable by us in the event

of a default, and which prohibit the payment of distributions on the common or preferred stock in the event that we fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facility.

In addition, our credit facility contains financial covenants that could limit the amount of distributions payable by us in the event of a default, and which prohibit the payment of distributions on the common or preferred stock in the event that we

fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facility.

Distributions of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to stockholders as ordinary income, except to the extent that we recognize capital gains and declare a capital gains dividend, or that such amounts constitute “qualified dividend income” subject to a reduced rate of tax.

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Distributions in excess of that basis generally will be taxable as a capital gain to stockholders who hold their shares as a capital asset.

Approximately 21.8% of the distributions to our common stockholders, made or deemed to have been made in 2019, were classified as a return of capital for federal income tax purposes.

RESULTS OF OPERATIONS

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If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.

The carrying value of our real estate is the largest component of our consolidated balance sheets.

The carrying value of our real estate is the largest

component of our consolidated balance sheets.

Our strategy of primarily holding properties, long-term, directly decreases the likelihood of their carrying values not being recoverable, thus requiring the recognition of an impairment.

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These impacts may continue and increase in severity as the duration of the pandemic lengthens, which may, in turn, adversely impact the fair value estimates of our real estate and require the recording of impairments on our properties.

As a result, we are evaluating certain key assumptions involving fair value estimates of our real estate and recording of impairments on our properties.

As a result, we evaluated certain key assumptions involving fair value estimates of our real estate, recording of impairments on our properties and collectibility of our accounts receivable during the second quarter of 2020.

We continue to evaluate the potential impacts of the COVID-19 pandemic and the measures taken to limit its spread on our business and industry segments, as the situation continues to evolve and more information becomes available.

However, as of March 31, 2020, we have determined that the COVID-19 pandemic and the measures taken to limit its spread have not had a material impact on our consolidated financial statements as of and for period ended March 31, 2020.

When assessing the collectability of future lease payments, one of the key factors we have considered during 2020 has been COVID-19.

When assessing the collectability of future lease payments, one of the key factors we have considered during 2020 has been the COVID-19 pandemic.

We generally assess collectability based on an analysis of creditworthiness, economic trends, and other facts and circumstances related to the applicable tenants.

If the collection of substantially all of the future lease payments is less than probable, we will write-off the receivable balances associated with the lease and cease to recognize lease income, including straight-line rent, unless cash is received.

As we collect the majority of our rent in advance and at this time we do not have any tenant specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable, the impact of the COVID-19 pandemic on our tenants' ability to pay rent did not have a significant impact on our consolidated financial statements for the quarter ended March 31, 2020.

However, there may be significant impacts in future periods that could change this assessment.

The following is a comparison of our results of operations for the three months ended March 31, 2020 , to the three months ended March 31, 2019 .

As of June 30, 2020, we do not have any further tenant specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable.

However, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

The following is a comparison of our results of operations for the three and six months ended June 30, 2020, to the three and six months ended June 30, 2019.

Total Revenue

The following summarizes our total revenue (dollars in thousands):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30, Increase

2020 2019 2020 2019 Three months Six months

Rental (excluding reimbursable)

$ 389,237 $ 347,847 $ 781,028 $ 684,538 $ 41,390 $ 96,490

Rental (reimbursable)

20,964 16,405 41,330 33,751 4,559 7,579

4,435 1,198 6,619 1,526 3,237 5,093

Total revenue

$ 414,636 $ 365,450 $ 828,977 $ 719,815 $ 49,186 $ 109,162

Rental Revenue (excluding reimbursable)

The increase in rental revenue (excluding reimbursable) in the first three months of 2020 compared to the first three months of 2019 is primarily attributable to:

The 59 properties (1.8 million square feet) we acquired in the first three months 2020, which generated $3.2 million of rent in the first three months of 2020;

The 779 properties (13.4 million square feet) we acquired in 2019, which generated $59.2 million of rent in the first three months of 2020, compared to $3.0 million in the first three months of 2019, an increase of $56.2 million;

Same store rents generated on 5,535 properties (86.9 million square feet) during the first three months of 2020 and 2019, increased by $670,000, or 0.2%, to $321.47 million from $320.8 million;

The increase in rental revenue (excluding reimbursable) in the second quarter of 2020 compared to the second quarter of 2019 is primarily attributable to:

• The 87 properties (2.3 million square feet) we acquired in 2020, which generated $8.7 million of rent in the second quarter of 2020;

• The 779 properties (13.4 million square feet) we acquired in 2019, which generated $58.3 million of rent in the second quarter of 2020, compared to $15.7 million in the second quarter of 2019, an increase of $42.6 million;

partially offset by

A net decrease in straight-line rent and other non-cash adjustments to rent of $790,000 in the first three months of 2020 as compared to the first three months of 2019;

A net decrease of $2.9 million relating to properties sold in the first three months of 2020 and throughout 2019 that were reported in continuing operations;

• Same store rents generated on 5,539 properties (86.7 million square feet) during the second quarter of 2020 and 2019, decreased by $1.4 million, or (0.4)%, to $315.65 million from $317.02 million;

• A net decrease in straight-line rent and other non-cash adjustments to rent of $4.3 million in the second quarter of 2020 as compared to the second quarter of 2019;

• A net decrease of $2.8 million relating to properties sold in the second quarter of 2020 and throughout 2019 that were reported in continuing operations;

• A net decrease of $1.4 million relating to the aggregate of (i) rental revenue from properties (130 properties comprising 2.9 million square feet) that were available for lease during part of 2020 or 2019, (ii) rental revenue for eight properties under development, and (iii) lease termination settlements.

In aggregate, the revenues for these items totaled $5.56 million in the first three months of 2020, compared to $6.83 million in the first three months of 2019.

In aggregate, the

revenues for these items totaled $5.5 million in the second quarter of 2020, compared to $6.9 million in the second quarter of 2019.

The increase in rental revenue (excluding reimbursable) in the first six months of 2020 compared to the first six months of 2019 is primarily attributable to:

• The 87 properties (2.3 million square feet) we acquired in the first six months of 2020, which generated $11.9 million of rent in the first six months of 2020;

• The 779 properties (13.4 million square feet) we acquired in 2019, which generated $117.4 million of rent in the first six months of 2020, compared to $18.8 million in the first six months of 2019, an increase of $98.6 million;

partially offset by

• Same store rents generated on 5,539 properties (86.7 million square feet) during the first six months of 2020 and 2019, decreased by $1.1 million or (0.2)%, to $635.6 million from $636.7 million;

• A net decrease in straight-line rent and other non-cash adjustments to rent of $4.9 million in the first six months of 2020 as compared to the first six months of 2019;

• A net decrease of $5.8 million relating to properties sold in the first six months of 2020 and during 2019 that were reported in continuing operations;

• A net decrease of $2.2 million relating to the aggregate of (i) rental revenue from properties (130 properties comprising 2.9 million square feet) that were available for lease during part of 2020 or 2019, (ii) rental revenue for eight properties under development, and (iii) lease termination settlements.

In aggregate, the revenues for these items totaled $11.89 million in the first six months of 2020 compared to $14.14 million in the first six months of 2019.

For purposes of determining the same store rent property pool, we include all properties that were owned for the entire year-to-date period, for both the current and prior year, except for properties during the current or prior year that;

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Each of the exclusions from the same store pool are separately addressed within the applicable sentences above, explaining the changes in rental revenue for the period.

Of the 6,525 properties in the portfolio at March 31, 2020 , 6,490 , or 99.5% , are single-tenant properties and the remaining are multi-tenant properties.

Of the 6,490 single-tenant properties, 6,396 , or 98.6% , were net leased at March 31, 2020 .

Our calculation of same store rental revenue for the three and six months ended June 30, 2020 includes $12.9 million of rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB).

Our calculation of same store rental revenue for these periods also includes $35.9 million of uncollected rent from the second quarter of 2020 for which we have not granted a lease concession.

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the decreases for the second quarter and first six months of 2020 would have been (14.1)% and (6.5)%, respectively, compared to the three and six months ended June 30, 2019.

Of the 6,541 properties in the portfolio at June 30, 2020, 6,505, or 99.4%, are single-tenant properties and the remaining are multi-tenant properties.

Of the 6,505 single-tenant properties, 6,407, or 98.5%, were net leased at June 30, 2020.

Of our 6,407 leased single-tenant properties, 5,448 or 85.0% were under leases that provide for increases in rents through:

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• A combination of two or more of the above rent provisions.

Percentage rent, which is included in rental revenue, was $1.2 million in the first three months of 2020, and $3.6 million in the first three months of 2019 .

Percentage rent, which is included in rental revenue, was $547,000 in the second quarter of 2020, $495,000 in the second quarter of 2019, $1.8 million in the first six months of 2020, and $4.1 million in the first six months of 2019.

We anticipate percentage rent to be less than 1% of rental revenue for 2020.

At March 31, 2020 , our portfolio of 6,525 properties was 98.5% leased with 97 properties available for lease, as compared to 98.6% leased, with 94 properties available for lease at December 31, 2019 , and 98.3% leased with 102 properties available for lease at March 31, 2019 .

At June 30, 2020, our portfolio of 6,541 properties was 98.5% leased with 101 properties available for lease, as compared to 98.6% leased, with 94 properties available for lease at December 31, 2019, and 98.3% leased with 102 properties available for lease at June 30, 2019.

It has been our experience that approximately 1% to 4% of our property portfolio will be unleased at any given time;

however, it is possible that the number of properties available for lease could increase in the future, given the nature of economic cycles and other unforeseen global events, such as the ongoing COVID-19 pandemic and the measures taken to limit its spread.

however, it is possible that the number of properties available for lease or sale could increase in the future, given the nature of economic cycles and other unforeseen global events, such as the ongoing COVID-19 pandemic and the measures taken to limit its spread.

Rental Revenue (reimbursable)

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Other Revenue

The increase in other revenue in the first three months of 2020 was primarily related to interest income recognized on financing receivables for certain leases with above-market terms as compared to the first three months of 2019.

The increase in other revenue in the second quarter and first six months of 2020 compared to the same periods of 2019 was primarily related to interest income recognized on financing receivables for certain leases with above-market terms as compared to the first three months of 2019.

In addition, interest income from our short term investment and money market accounts was higher during the second quarter and first six months of 2020 than the comparative periods in 2019, which is primarily due to higher average investment balances.

Total Expenses

The following summarizes our total expenses (dollars in thousands):

Three Months Ended March 31,

$ Increase (Decrease)

Three months ended June 30, Six months ended June 30, $ Increase

2020 2019 2020 2019 Three months Six months

Depreciation and amortization

$ 168,328 $ 150,426 $ 332,913 $ 287,943 $ 17,902 $ 44,970

77,841 72,488 153,766 142,508 5,353 11,258

Property (excluding reimbursable)

5,488 4,937 10,728 9,227 551 1,501

Property (reimbursable)

20,964 16,405 41,330 33,751 4,559 7,579

General and administrative (1)

19,063 18,585 40,027 33,693 478 6,334

2,838 1,155 5,601 2,600 1,683 3,001

Provisions for impairment

13,869 13,061 18,347 17,733 808 614

Total expenses

$ 308,391 $ 277,057 $ 602,712 $ 527,455 $ 31,334 $ 75,257

Total revenue (2)

$ 393,672 $ 349,045 $ 787,647 $ 686,064

General and administrative expenses as a percentage of total revenue (1)(2)

4.8 % 5.3 % 4.6 % 4.9 %

Property expenses (excluding reimbursable) as a percentage of total revenue (2)

(1) General and administrative expenses for the first three months of 2020 included an executive severance charge related to the departure of our former CFO in March 2020.

1.4 % 1.4 % 1.4 % 1.3 %

(1) General and administrative expenses for the first six months of 2020 included an executive severance charge related to the departure of our former CFO in March 2020.

The total value of cash, stock compensation and professional fees incurred as a result of this severance was $3,463 and was recorded to general and administrative expense (see our discussion of Adjusted Funds from Operations Available to Common Stockholders, or AFFO, which is not a financial measure under generally accepted accounting principles).

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for the first three months of 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $17,501, which was used for our calculation.

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for the first six months of 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $36,564, which was used for our calculation.

(2) Excludes rental revenue (reimbursable).

Depreciation and Amortization

The increase in depreciation and amortization in the first three months of 2020 was primarily due to the acquisition of properties in 2019 and the first three months of 2020, which was partially offset by property sales in those same periods.

The increase in depreciation and amortization in the second quarter and first six months of 2020 was primarily due to the acquisition of properties in 2019 and the first six months of 2020, which was partially offset by property sales in those same periods.

As discussed in the sections entitled “Funds from Operations Available to Common Stockholders (FFO)” and “Adjusted Funds from Operations Available to Common Stockholders (AFFO),” depreciation and amortization is a non-cash item that is added back to net income available to common stockholders for our calculation of FFO and AFFO.

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The following is a summary of the components of our interest expense (dollars in thousands):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Interest on our credit facility, term loans, notes, mortgages and interest rate swaps

$ 73,622 $ 69,383 $ 145,817 $ 136,358

Credit facility commitment fees

948 948 1,896 1,885

Amortization of debt origination and deferred financing costs

2,420 2,206 5,168 4,378

Loss on interest rate swaps

1,306 686 1,993 1,365

Amortization of net mortgage premiums

(356) (354) (710) (708)

Amortization of net note premiums

(162) (281) (406) (573)

63 (100) 8 (197)

Interest expense

$ 77,841 $ 72,488 $ 153,766 $ 142,508

Credit facility, term loans, mortgages and notes

Average outstanding balances (dollars in thousands)

$ 8,534,969 $ 7,061,775 $ 8,195,899 $ 6,907,450

Average interest rates

The increase in interest expense for the first three months of 2020 is primarily due to the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029 and higher interest on our mortgages payable and interest rate swaps, partially offset by the January 2020 repayment of our 5.750% notes due 2021 and lower interest on our term loans.

During the first three months of 2020, the weighted average interest rate on our:

3.33 % 3.92 % 3.46 % 3.95 %

The increase in interest expense from 2019 to 2020 for the second quarter and first six months is primarily due to the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029, the May 2020 initial issuance of our 3.250% notes due in 2031, higher interest related to mortgages assumed during December 2019 and interest rate swaps, partially offset by the January 2020 repayment of our 5.750% notes due 2021, and lower average interest rates.

During the first six months of 2020, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $628.6 million was 1.6%;

Term loans outstanding of $500.0 million (excluding deferred financing costs of $849,000 ) was 2.5% ;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $742,000 and considering that one of our $250.0 million term loans was paid off in June 2020) was 2.0%;

• Mortgages payable of $393.7 million (excluding net premiums totaling $2.3 million and deferred financing costs of $1.1 million on these mortgages) was 4.9%;

Notes and bonds payable of $6.0 billion (excluding net unamortized original issue premiums of $6.2 million and deferred financing costs of $34.3 million ) was 3.8% ;

• Notes and bonds payable of $6.64 billion (excluding net unamortized original issue premiums of $3,000 and deferred financing costs of $38.5 million) was 3.8%;

• Combined outstanding notes, bonds, mortgages, term loan and revolving credit facility borrowings of $7.91 billion (excluding all net premiums and deferred financing costs) was 3.5%.

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General portfolio costs include, but are not limited to, insurance, legal, property inspections, and title search fees.

At March 31, 2020 , 97 properties were available for lease, as compared to 94 at December 31, 2019 , and 102 at March 31, 2019.

The increase in property expenses (excluding reimbursable) in the first three months of 2020 is primarily attributable to higher repairs and maintenance associated with our expanding portfolio size.

At June 30, 2020, 101 properties were available for lease or sale, as compared to 94 at December 31, 2019, and 102 at June 30, 2019.

The increase in property expenses (excluding reimbursable) for the second quarter of 2020 is primarily due to higher property insurance, partially offset by lower property taxes.

The increase in property expenses (excluding reimbursable) in the first six months of 2020 is primarily attributable to higher property insurance, repairs and maintenance, partially offset by lower property taxes.

Property Expenses (reimbursable)

The increase in property expenses (reimbursable) in the first three months of 2020 was primarily attributable to the increased portfolio size, which contributed to higher contractually obligated reimbursements from tenants for recoverable real estate taxes and operating expenses primarily due to our acquisitions in each period.

The increase in property expenses (reimbursable) in the second quarter and first six months of 2020 was primarily attributable to the increased portfolio size, which contributed to higher contractually obligated reimbursements from tenants for recoverable real estate taxes and operating expenses primarily due to our acquisitions in each period.

General and Administrative Expenses

General and administrative expenses are expenditures related to the operations of our company, including employee–related costs, professional fees, and other general overhead costs associated with running our business.

General and administrative expenses increased during the first three months of 2020 primarily due to a severance charge of $3.5 million for our former CFO, who departed the company in March 2020, higher share-based compensation expense, higher corporate–level professional fees and higher payroll-related costs.

In April 2020, we had 195 employees, as compared to 170 employees in April 2019.

General and administrative expenses increased during the second quarter of 2020 primarily due to higher payroll-related costs, partially offset by lower costs for terminated acquisitions.

In July 2020, we had 201 employees, as compared to 174 employees in July 2019.

General and administrative expenses increased during the first six months of 2020 primarily due to a severance charge of $3.5 million for our former CFO, who departed the company in March 2020, higher payroll-related costs, and higher corporate–level professional fees, partially offset by lower costs for terminated acquisitions.

Income taxes are for city and state income and franchise taxes, and for U.K.

income taxes paid by us and our subsidiaries.

The increase in income taxes in the first three months of 2020 was primarily attributable to our U.K.

income taxes accrued or paid by us and our subsidiaries.

The increase in income taxes in the second quarter and first six months of 2020 was primarily attributable to our U.K.

investments, which contributed to higher U.K.

income taxes as compared to the first three months of 2019.

income taxes as compared to the second quarter and first six months of 2019.

Provisions for Impairment

The following table summarizes provisions for impairment during the periods indicated below (dollars in millions):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Total provisions for impairment $ 13.9 $ 13.1 $ 18.3 $ 17.7

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Classified as held for investment 11 2 14 2

Sold 7 12 14 22

During the second quarter of 2020, we assessed the key assumptions used in our impairment analysis for the impact of the COVID-19 pandemic on our portfolio, focusing on tenants experiencing difficulties meeting their lease obligations to us.

As a result of this analysis, we determined that the carrying values of eight properties classified as held for investment were not recoverable.

As a result, we recorded provisions for impairments of $8.2 million on these properties, which are included as part of our total impairments recorded during the second quarter of 2020.

Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):

Three Months Ended

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Number of properties sold 12 18 29 37

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Gain on sales of real estate $ 1.3 $ 6.9 $ 39.8 $ 14.2

Foreign Currency and Derivative Gains, Net

Foreign Currency and Derivative Losses/Gains, Net

We borrow in the functional currencies of the countries in which we invest.

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In January 2020, we completed the early redemption on all $250.0 million in principal amount of outstanding 5.75% notes due January 2021, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt during the first six months of 2020.

Net Income Available to Common Stockholders

The following summarizes our net income available to common stockholders (dollars in millions, except per share data):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30, Three months Six

2020 2019 2020 2019

Net income available to common stockholders

$ 107.8 $ 95.2 $ 254.7 $ 206.1 13.2 % 23.6 %

Net income per share (1)

$ 0.31 $ 0.31 $ 0.75 $ 0.67 — % 11.9 %

(1) All per share amounts are presented on a diluted per common share basis.

The calculation to determine net income available to common stockholders includes impairments, gains from the sale of properties, foreign currency gains and losses, which can vary from period to period based on timing and significantly impact net income available to the Company and available to common stockholders.

Net income available to common stockholders in the first three months of 2020 was also impacted by a loss on extinguishment of debt due to the early redemption of the 5.750% Notes due 2021 in January 2021 and an executive severance charge for our former CFO in March 2020.

The calculation to determine net income available to common stockholders includes provisions for impairment, gains from the sale of properties, and foreign currency gains and losses, which can vary from period to period based on timing and significantly impact net income available to the Company and available to common stockholders.

Net income available to common stockholders and FFO in the first six months of 2020 were impacted by the following transactions recorded in the first quarter of 2020:

(1) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021, and (2) a $3.5 million executive severance charge for our former chief financial officer.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (Adjusted EBITDA re )

The National Association of Real Estate Investment Trusts (Nareit) came to the conclusion that a Nareit-defined EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDA re ) would provide investors with a consistent measure to help make investment decisions among REITs.

Our definition of “Adjusted EBITDA re ” is generally consistent with the NAREIT definition, other than our adjustments to remove foreign currency and derivative gains and losses, the executive severance charge described below , and loss on extinguishment of debt charge as described below (which is consistent with our previous calculations of "Adjusted EBITDA").

We define Adjusted EBITDA re , a non–GAAP financial measure, for the most recent quarter as earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) executive severance charges, (iii) loss on extinguishment of debt, (iv) income and franchise taxes, (v) real estate depreciation and amortization, (vi) impairment losses, (vii) gain on sales of real estate, and (viii) foreign currency and derivative gains and losses, net (as described in the Adjusted Funds from Operations section).

Our definition of “Adjusted EBITDA re ” is generally consistent with the Nareit definition, other than our adjustments to remove foreign currency and derivative gains and losses (which is consistent with our previous calculations of "Adjusted EBITDA").

We define Adjusted EBITDA re , a non–GAAP financial measure, for the most recent quarter as earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) income and franchise taxes, (iii) real estate depreciation and amortization, (iv) provisions for impairment, (v) gain on sales of real estate, and (vi) foreign currency and derivative gains and losses, net (as described in the Adjusted Funds from Operations section).

Our Adjusted EBITDA re may not be comparable to Adjusted EBITDA re reported by other companies or as defined by Nareit, and other companies may interpret or define Adjusted EBITDA re differently than we do.

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Adjusted EBITDA re should be considered along with, but not as an alternative to net income as a measure of our operating performance.

Our ratio of net debt-to-Adjusted EBITDA re , which is used by management as a measure of leverage, is calculated as net debt (which we define as total debt per the consolidated balance sheet, less cash and cash equivalents) divided by annualized quarterly Adjusted EBITDA re .

The following table summarizes our EBITDA re calculation for the periods indicated below (dollars in thousands):

Three Months Ended March 31,

Loss on extinguishment of debt

Our ratio of net debt-to-Adjusted EBITDA re , which is used by management as a measure of leverage, is calculated as net debt (which we define as total debt per the consolidated balance sheet, less cash and cash equivalents and short term investments maturing within 30 days) divided by annualized quarterly Adjusted EBITDA re .

The following table summarizes our Adjusted EBITDA re calculation for the periods indicated below (dollars in thousands):

Three months ended June 30,

$ 108,070 $ 95,420

77,841 72,488

Depreciation and amortization

Executive severance charge (1)

168,328 150,426

Provisions for impairment

13,869 13,061

Gain on sales of real estate

Foreign currency and derivative losses, net

(1,323) (6,891)

Foreign currency and derivative gains, net (502) (136)

Quarterly Adjusted EBITDA re

$ 369,121 $ 325,523

$ 7,539,432 $ 7,047,152

Annualized Adjusted EBITDA re (1)

$ 1,476,484 $ 1,302,092

Net Debt/Adjusted EBITDA re

(1) The executive severance charge represents the incremental costs incurred upon our former CFO's departure in March 2020, consisting of $1.6 million of cash, $1.8 million related to share-based compensation expense and $58,000 of professional fees.

(1) We calculate Annualized Adjusted EBITDA re by multiplying the Quarterly Adjusted EBITDA re by four.

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

The following summarizes our funds from operations available to common stockholders (FFO) (dollars in millions, except per share data):

Three Months Ended March 31,

FFO available to common stockholders

The following summarizes our funds from operations available to common stockholders (dollars in millions, except per share data):

Three months ended June 30, Six months ended June 30, Three months Six

2020 2019 2020 2019

FFO available to common

$ 288.3 $ 251.5 $ 565.4 $ 497.2 14.6 % 13.7 %

FFO per share (1)

$ 0.84 $ 0.81 $ 1.66 $ 1.62 3.7 % 2.5 %

(1) All per share amounts are presented on a diluted per common share basis.

FFO in the first three months of 2020 were impacted by a loss on extinguishment of debt due to the early redemption of the 5.750% Notes due 2021 in January 2020 and an executive severance charge for our former CFO in March 2020.

FFO in the first six months of 2020 were impacted by a loss on extinguishment of debt due to the early redemption of the 5.750% Notes due 2021 in January 2020 and an executive severance charge for our former CFO in March 2020.

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to FFO.

Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted computation per share (dollars in thousands, except per share amounts):

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Net income available to common stockholders

$ 107,824 $ 95,194 $ 254,651 $ 206,136

Depreciation and amortization

168,328 150,426 332,913 287,943

Depreciation of furniture, fixtures and equipment

(152) (147) (278) (302)

Provisions for impairment

13,869 13,061 18,347 17,733

Gain on sales of real estate

(1,323) (6,891) (39,829) (14,154)

FFO adjustments allocable to noncontrolling interests

(208) (154) (363) (192)

FFO available to common stockholders

$ 288,338 $ 251,489 $ 565,441 $ 497,164

FFO allocable to dilutive noncontrolling interests

348 362 717 670

$ 288,686 $ 251,851 $ 566,158 $ 497,834

FFO per common share, basic and diluted

$ 0.84 $ 0.81 $ 1.66 $ 1.62

Distributions paid to common stockholders

$ 240,470 $ 208,864 $ 474,294 $ 413,410

FFO available to common stockholders in excess of distributions paid to common stockholders

$ 47,868 $ 42,625 $ 91,147 $ 83,754

Weighted average number of common shares used for computation per share:

343,515,406 311,032,972 340,061,487 307,293,949

344,148,378 311,785,281 340,744,384 308,000,806

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of depreciable real estate assets, and reduced by gains on property sales.

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ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)

The following summarizes our adjusted funds from operations available to common stockholders (AFFO) (dollars in millions, except per share data):

Three Months Ended March 31,

AFFO available to common stockholders

The following summarizes our adjusted funds from operations available to common stockholders (dollars in millions, except per share data):

Three months ended June 30, Six months ended June 30, Three months Six

2020 2019 2020 2019

AFFO available to common

$ 295.2 $ 253.9 $ 592.5 $ 502.7 16.3 % 17.9 %

AFFO per share (1)

$ 0.86 $ 0.82 $ 1.74 $ 1.63 4.9 % 6.7 %

(1) All per share amounts are presented on a diluted per common share basis.

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Three Months Ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Net income available to common stockholders (1)

$ 107,824 $ 95,194 $ 254,651 $ 206,136

Cumulative adjustments to calculate FFO (2)

180,514 156,295 310,790 291,028

FFO available to common stockholders

288,338 251,489 565,441 497,164

Executive severance charge (3)

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Amortization of share-based compensation

4,882 4,527 8,624 7,291

Amortization of deferred financing costs (4)

1,476 1,133 2,836 2,173

Amortization of net mortgage premiums

(356) (354) (710) (708)

Loss on interest rate swaps

1,306 686 1,992 1,364

Straight-line payments from cross-currency swaps (5)

623 799 1,346 799

Leasing costs and commissions

(973) (707) (1,111) (1,030)

Recurring capital expenditures

(21) (116) (21) (172)

Straight-line rent

Amortization of above and below-market leases

(6,242) (7,230) (14,024) (12,092)

Amortization of above and below-market leases, net 6,087 3,627 12,517 7,741

Other adjustments (6)

121 81 2,291 139

AFFO available to common stockholders

$ 295,241 $ 253,935 $ 592,463 $ 502,669

AFFO allocable to dilutive noncontrolling interests

AFFO per common share, basic and diluted

356 368 732 —

$ 295,597 $ 254,303 $ 593,195 $ 502,669

AFFO per common share:

Basic $ 0.86 $ 0.82 $ 1.74 $ 1.64

Diluted $ 0.86 $ 0.82 $ 1.74 $ 1.63

Distributions paid to common stockholders

$ 240,470 $ 208,864 $ 474,294 $ 413,410

AFFO available to common stockholders in excess of distributions paid to common stockholders

$ 54,771 $ 45,071 $ 118,169 $ 89,259

Weighted average number of common shares used for computation per share:

343,515,406 311,032,972 340,061,487 307,293,949

344,148,378 311,785,281 340,744,384 307,580,127

(1) The three and six months ended June 30, 2020 includes $14.1 million of rent deferred as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the FASB and $46.1 million of uncollected rent from the second quarter for which we have not granted a lease concession.

As of June 30, 2020, we deemed collection of the $60.2 million of unpaid rent included in net income as probable.

Deferrals accounted for as modifications totaling $161,000 for the three and six months ended June 30, 2020 have not been added back to AFFO.

(2) See reconciling items for FFO presented under “Funds from Operations Available to Common Stockholders (FFO).

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(4) Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and upon issuance of our term loans.

The deferred financing costs are being amortized over the lives of the respective mortgages and term loans.

The deferred financing costs are being amortized over the lives of the respective notes payable, mortgages and term loans.

No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

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PROPERTY PORTFOLIO INFORMATION

At March 31, 2020 , we owned a diversified portfolio:

At June 30, 2020, we owned a diversified portfolio:

• Of 6,541 properties;

With an occupancy rate of 98.5% , or 6,428 properties leased and 97 properties available for lease;

• With an occupancy rate of 98.5%, or 6,440 properties leased and 101 properties available for lease or sale;

• Doing business in 50 separate industries;

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approximately 12,000 square feet per retail property and 224,490 square feet per industrial property.

At March 31, 2020 , 6,428 properties were leased under net lease agreements.

At June 30, 2020, 6,440 properties were leased under net lease agreements.

A net lease typically requires the tenant to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance.

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Quarter Ended

March 31, 2020

June 30, 2020

For the Years Ended

0.7% 0.8% 0.8% 0.9% 1.0% 1.1%

Apparel stores

1.4 1.1 1.3 1.6 1.9 2.0

Automotive collision services

1.1 1.1 0.9 1.0 1.0 1.0

Automotive parts

1.7 1.6 1.7 1.3 1.3 1.4

Automotive service

2.2 2.3 2.2 2.2 1.9 1.9

Automotive tire services

Consumer appliances

2.1 2.2 2.4 2.6 2.7 2.9

2.1 2.3 2.5 2.7 2.6 2.7

2.2 2.3 1.7 1.8 1.9 2.0

Consumer electronics

0.3 0.3 0.3 0.3 0.3 0.3

Consumer goods

0.6 0.6 0.7 0.8 0.9 0.9

Convenience stores

12.0 11.9 11.2 9.6 8.7 9.2

Crafts and novelties

0.8 0.6 0.7 0.6 0.6 0.6

Diversified industrial

0.6 0.7 0.8 0.9 0.9 0.8

Dollar stores

8.1 7.3 7.5 7.9 8.6 8.9

9.1 9.0 10.2 10.9 11.2 10.6

0.2 0.2 0.3 0.3 0.3 0.3

Electric utilities

0.1 0.1 0.1 0.1 0.1 0.1

Entertainment

0.3 0.4 0.4 0.4 0.5 0.5

Equipment services

0.4 0.4 0.4 0.4 0.6 0.5

Financial services

2.0 2.1 2.3 2.4 1.8 1.7

Food processing

0.8 0.6 0.5 0.6 1.1 1.2

General merchandise

3.0 2.5 2.3 2.0 1.8 1.7

Government services

0.7 0.8 0.9 1.0 1.1 1.2

Grocery stores

5.0 4.9 5.0 4.4 3.1 3.0

Health and beauty

0.2 0.3 0.2 * * *

Health and fitness

7.1 7.5 7.4 7.5 8.1 7.7

1.6 1.4 1.5 1.4 1.5 1.7

Home furnishings

0.8 0.7 0.8 0.9 0.8 0.9

Home improvement

2.9 3.0 3.0 2.6 2.5 2.4

0.1 0.1 0.1 0.1 0.1 0.1

Motor vehicle dealerships

1.6 1.9 1.9 2.1 1.9 1.6

Office supplies

0.2 0.2 0.2 0.2 0.3 0.3

Other manufacturing

0.6 0.6 0.7 0.8 0.8 0.7

1.0 1.0 1.1 1.0 0.8 0.8

0.1 0.1 0.1 0.1 0.1 0.1

Pet supplies and services

0.8 0.5 0.5 0.6 0.6 0.7

Restaurants - casual dining

3.0 3.2 3.2 3.8 3.9 3.8

Restaurants - quick service

4.8 6.2 5.7 5.1 4.9 4.2

0.2 0.3 0.5 0.6 0.7 0.7

Sporting goods

0.8 0.9 1.1 1.4 1.6 1.8

Telecommunications

0.5 0.5 0.6 0.6 0.6 0.7

6.3 6.3 5.5 5.0 4.9 5.1

Transportation services

4.2 4.6 5.0 5.4 5.5 5.4

Wholesale clubs

2.5 2.7 3.0 3.3 3.6 3.8

0.1 0.6 0.8 0.8 0.9 1.0

96.9% 98.7% 100.0% 100.0% 100.0% 100.0%

Grocery stores

3.0 1.3 — — — —

0.1 — — — — —

3.1% 1.3% — — — —

100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

* Less than 0.1%

Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of March 31, 2020 (dollars in thousands):

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2020 (dollars in thousands):

Property Type

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Quarter Ended

March 31, 2020 (2)

June 30, 2020 (2)

Percentage of

Rental Revenue

6,364 76,343,300 $ 326,516 83.9 %

119 26,714,300 42,344 10.9

43 3,175,700 13,660 3.5

15 184,500 6,716 1.7

6,541 106,417,800 $ 389,236 100.0 %

(1) Includes leasable building square footage.

Excludes 3,300 acres of leased land categorized as agriculture at March 31, 2020.

Includes rental revenue for all properties owned at March 31, 2020 .

Excludes 3,300 acres of leased land categorized as agriculture at June 30, 2020.

(2) Includes rental revenue for all properties owned at June 30, 2020.

Excludes revenue of $1 from sold properties and rental revenue (reimbursable) of $20,964.

Tenant Diversification

The following table sets forth the 20 largest tenants in our property portfolio, expressed as a percentage of total rental revenue at March 31, 2020 :

The following table sets forth the 20 largest tenants in our property portfolio, expressed as a percentage of total portfolio annualized contractual rental revenue, which does not give effect to deferred rent, at June 30, 2020:

Walgreens 248 6.0 %

7-Eleven 403 4.7 %

Dollar General 771 4.5 %

FedEx 41 3.9 %

Dollar Tree / Family Dollar 550 3.4 %

LA Fitness 57 3.4 %

Regal Cinemas (Cineworld) 42 2.9 %

Wal-Mart / Sam's Club

AMC Theaters 32 2.7 %

Walmart / Sam's Club 54 2.5 %

Sainsbury's 16 2.5 %

Lifetime Fitness 16 2.4 %

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BJ's Wholesale Clubs 15 1.8 %

CVS Pharmacy 88 1.6 %

Treasury Wine Estates 17 1.6 %

Super America (Marathon) 161 1.6 %

Kroger 22 1.5 %

GPM Investments / Fas Mart 207 1.4 %

TBC Corp 159 1.2 %

Home Depot 19 1.2 %

Total 3,198 52.8 %

(1) Excludes rental revenue (reimbursable).

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Lease Expirations

The following table sets forth certain information regarding the timing of the lease term expirations in our portfolio (excluding rights to extend a lease at the option of the tenant) and their contribution to rental revenue for the quarter ended March 31, 2020 (dollars in thousands):

Total Portfolio (1)

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the Quarter Ended

March 31, 2020

June 30, 2020 % of

2020 66 8 1,433,500 $ 3,824 1.0 %

2021 357 14 3,280,200 12,381 3.2

2022 412 22 8,899,800 20,176 5.2

2023 549 23 10,227,100 30,864 8.0

2024 411 16 7,076,900 22,793 5.9

2025 475 19 7,932,400 28,146 7.3

2026 328 4 5,185,200 17,853 4.6

2027 564 6 7,310,600 23,785 6.1

2028 442 14 10,394,400 27,513 7.1

2029 533 6 9,088,100 29,230 7.5

2030 258 14 5,003,500 23,384 6.0

2031 315 26 6,844,700 29,223 7.5

2032 135 4 3,799,400 15,155 3.9

2033 283 3 3,682,900 18,661 4.8

2034 322 1 4,548,400 28,012 7.2

2035 - 2045 890 5 9,596,600 57,219 14.7

6,340 185 104,303,700 $ 388,219 100.0 %

(1) The lease expirations for leases under construction are based on the estimated date of completion of those projects.

Excludes revenue of $869 from expired leases, $919 from sold properties, and $20,366 of rental revenue (reimbursable) at March 31, 2020 .

Excludes revenue of $1,017 from expired leases, $1 from sold properties, and $20,964 of rental revenue (reimbursable) at June 30, 2020.

Leases on our multi-tenant properties are counted separately in the table above.

Geographic Diversification

The following table sets forth certain state-by-state information regarding our property portfolio as of March 31, 2020 (dollars in thousands):

Number of Properties

The following table sets forth certain state-by-state information regarding our property portfolio as of June 30, 2020 (dollars in thousands):

Percent Leased

Approximate Leasable

Rental Revenue

for the Quarter Ended

March 31, 2020 (1)

Percentage of Rental

for the Quarter

June 30, 2020 (1)

Percentage of

227 98 % 2,148,400 $ 7,796 2.0 %

3 100 274,600 536 0.1

153 99 2,085,300 8,825 2.3

102 99 1,183,200 3,472 0.9

231 99 6,643,800 34,210 8.8

100 96 1,582,900 5,943 1.5

21 90 1,378,200 4,088 1.0

19 100 101,400 690 0.2

432 98 4,697,800 20,648 5.3

300 98 4,612,100 14,476 3.7

14 93 103,200 441 0.1

296 98 6,396,500 22,230 5.7

204 99 2,565,600 10,499 2.7

45 100 2,443,200 4,414 1.1

122 96 2,256,800 6,251 1.6

93 100 1,826,100 5,358 1.4

137 96 1,905,500 6,177 1.6

27 100 277,800 1,473 0.4

38 100 1,494,000 6,449 1.7

Massachusetts

59 95 942,800 4,529 1.2

223 100 2,610,800 9,322 2.4

172 99 2,326,800 11,108 2.9

187 98 2,021,800 5,657 1.5

187 96 3,019,600 9,493 2.4

12 100 89,100 536 0.1

62 97 866,400 2,274 0.6

24 96 1,196,900 2,153 0.5

New Hampshire

14 100 321,500 1,464 0.4

79 99 1,252,000 7,622 2.0

60 100 504,200 2,002 0.5

139 98 3,028,600 16,532 4.2

North Carolina

202 99 3,334,500 11,236 2.9

8 100 126,900 336 0.1

342 98 6,731,800 17,311 4.4

191 98 2,377,600 8,145 2.1

30 100 644,600 2,278 0.6

223 100 2,265,900 9,127 2.3

3 100 158,000 815 0.2

South Carolina

179 97 1,811,000 8,408 2.2

23 96 258,500 683 0.2

260 99 3,850,400 11,892 3.1

804 99 11,630,800 41,467 10.7

23 100 949,700 2,339 0.6

1 100 65,500 191 *

219 99 3,357,000 10,994 2.8

50 98 913,400 3,726 1.0

West Virginia

36 100 528,100 1,854 0.5

128 98 3,106,200 9,003 2.3

9 100 63,900 379 0.1

4 100 28,300 150 *

24 100 2,058,800 12,234 3.1

Totals\Average

6,541 98 % 106,417,800 $ 389,236 100.0 %

* Less than 0.1%

Includes rental revenue for all properties owned at March 31, 2020 .

(1) Includes rental revenue for all properties owned at June 30, 2020.

Excludes revenue of $1 from sold properties and $20,964 of tenant reimbursement revenue.

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

As of March 31, 2020, the impact of recent accounting pronouncements on our business is not considered to be material.

For the period ended June 30, 2020 there were no recently adopted accounting pronouncements that had a material impact on our business.

OTHER INFORMATION

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis