What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-03 compared with 2020-08-04 · 323 added, 258 removed, 908 unchanged (39% of the section changed)

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Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation, including, among other things:

• Our access to capital and other sources of funding;

• Our anticipated growth strategies;

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Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements.

In particular, some of the factors that could cause actual results to differ materially are:

In particular, forward-looking statements regarding estimated or future results of operations are based upon numerous assumptions and estimates and are inherently subject to substantial uncertainties and actual results of operations may differ materially from those expressed or implied in the forward-looking statements, particularly if actual events differ from those reflected in the estimates and assumptions upon which such forward-looking statements are based.

Some of the factors that could cause actual results to differ materially are:

• Our continued qualification as a real estate investment trust;

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• Access to debt and equity capital markets;

• Volatility and uncertainty in the credit markets and broader financial markets;

• Continued volatility and uncertainty in the credit markets and broader financial markets;

• Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters;

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• Acts of terrorism and war.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2019 and those discussed in this section and the "Item 1.A.- Risk Factors" in Part II of this report.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , for the fiscal year ended December 31, 2019, those discussed in this section and in "Item 1.A.- Risk Factors" in Part II of this report.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that this quarterly report was filed with the Securities and Exchange Commission, or SEC.

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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:

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

• Of 6,588 properties;

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approximately 12,220 square feet per retail property and 223,320 square feet per industrial property.

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.

Of the 6,588 properties in the portfolio at September 30, 2020, 6,554, or 99.5%, are single-tenant properties, of which 6,465 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 $18.0 million and $15.5 million for the third quarters of 2020 and 2019, respectively, and $59.4 million and $49.3 million for the first nine months of 2020 and 2019, respectively.

Investment Philosophy

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In addition, tenants of our properties typically pay rent increases based on:

(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.

(1) fixed increases, (2) increases in the consumer price index (typically subject to ceilings), 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 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.

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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 June 30, 2020, consisted of 6,541 properties located in 49 U.S.

Our investment activities have led to a diversified property portfolio that, as of September 30, 2020, consisted of 6,588 properties located in 49 U.S.

states, Puerto Rico and the U.K., and doing business in 51 industries.

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.

None of the 51 industries represented in our property portfolio accounted for more than 12.1% of our annualized contractual rental revenue as of September 30, 2020.

Investment Strategy

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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 June 30, 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 contractual rental revenue at September 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.

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If a property is rejected by the tenant during reorganization, we own the property and can either lease it to a new tenant or sell the property.

In addition, we believe that the risk of default on real estate leases can be further mitigated by monitoring the performance of the tenants’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition.

In addition, we believe that the risk of default on real estate

leases can be further mitigated by monitoring the performance of the tenants’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition.

Prior to entering into any transaction, our research department conducts a review of a tenant’s credit quality.

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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 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.

At September 30, 2020, approximately 49% of our total annualized contractual rental revenue comes from properties leased to investment grade rated companies, their subsidiaries or affiliated companies.

At September 30, 2020, our top 20 tenants (based on percentage of total portfolio annualized contractual 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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RECENT DEVELOPMENTS

Theater Industry Update

As of September 30, 2020, the theater industry represented 5.7% of annualized contractual rental revenue.

Given the ongoing disruption to the industry due to the COVID-19 pandemic, we performed a property-level analysis on the collectability of rent for our 78 theater properties, including the gross receivables outstanding as of September 30, 2020, totaling $44.9 million.

Our analysis involved the assignment of quartile rankings for each asset’s pre-pandemic EBITDAR relative to each operator’s overall footprint.

Other criteria utilized included an analysis of the property’s pre-pandemic annual EBITDA generation before corporate overhead, and real estate fundamentals.

As a result of this analysis, we determined that for 31 of the 78 theater properties it was no longer probable that we would collect substantially all of contractual rents due.

As a conservative measure, we fully reserved for six additional theater properties for which we do not possess unit level financial informatio n.

Consequently, we reserved for 100% of the outstanding receivables for 37 theater properties and will account prospectively for these leases on a cash accounting basis.

The aggregate reserve associated with outstanding receivables for these properties totaled $17.2 million, approximately $1.6 million of which was a reserve for straight-line rent receivables.

The dilution for the third quarter of 2020 as a result of establishing these reserves for our theater portfolio is $0.05 per share to our net income and FFO and $0.04 per share to our AFFO.

The monthly contractual rent associated with these properties totals approximately $2.8 million.

Additionally, during the third quarter, we recorded provisions for impairment on 12 of the 37 theater properties for $79.0 million.

Impairment charges are not included in Nareit-defined FFO or in our calculation of AFFO.

See "Item 1A--Risk Factors" in Part II of this Quarterly Report on Form 10-Q 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.

Increases in Monthly Dividends to Common Stockholders

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

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.

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

As of October 2020, we have paid 92 consecutive quarterly dividend increases and increased the dividend 108 times since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2020:

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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.

5th increase Sep 2020 Oct 2020 $ 0.2340 $ 0.0005

The dividends paid per share during the first nine months of 2020 totaled approximately $2.092, as compared to approximately $2.030 during the first nine months of 2019, an increase of $0.062, or 3.1%.

The monthly dividend of $0.234 per share represents a current annualized dividend of $2.808 per share, and an annualized dividend yield of approximately 4.6% based on the last reported sale price of our common stock on the NYSE of $60.75 on September 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 Second Quarter and First Six Months of 2020

Acquisitions During the Third Quarter and First Nine Months of 2020

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

for the periods indicated below:

Properties Square Feet

Properties Leasable

(in millions) Investment

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(Years) Initial

Three months ended June 30, 2020 (1)

Three months ended September 30, 2020 (1)

Acquisitions - U.S.

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89 2.6 $ 658.6 12.7 6.4 %

Six months ended June 30, 2020 (1)

Nine months ended September 30, 2020 (1)

Acquisitions - U.S.

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180 5.1 $ 1,298.9 13.1 6.3 %

(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.

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

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

(2) Represents investments of £176.6 million Sterling during the three months ended September 30, 2020 and £356.7 million Sterling during the nine months ended September 30, 2020 converted at the applicable exchange rate on the date of acquisition.

(3) The tenants occupying the new properties operate in 15 industries, and are 97.2% retail and 2.8% industrial, based on rental revenue.

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.

Approximately 73% of the rental revenue generated from acquisitions during the third quarter of 2020 is from investment grade rated tenants, their subsidiaries or affiliated companies.

(4) The tenants occupying the new properties operate in 23 industries, and are 96.9% retail and 3.1% industrial, based on rental revenue.

Approximately 56% of the rental revenue generated from acquisitions during the first nine 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 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.

At September 30, 2020, we had 92 properties available for lease or sale out of 6,588 properties in our portfolio, which represents a 98.6% 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

Properties available for lease at June 30, 2020

Lease expirations 98

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Vacant dispositions (27)

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.

Properties available for lease at September 30, 2020

(1) The annual new rent on these re-leases was $12.3 million, as compared to the previous annual rent of $12.4 million on the same properties, representing a rent recapture rate of 99.2% on the properties re-leased during the quarter ended September 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.

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Vacant dispositions (52)

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.

Properties available for lease at September 30, 2020

(1) The annual new rent on these re-leases was $45.5 million, as compared to the previous annual rent of $45.6 million on the same properties, representing a rent recapture rate of 99.8% on the properties re-leased during the first nine months of 2020.

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

At September 30, 2020, our average annualized rental revenue was approximately $15.26 per square foot on the 6,496 leased properties in our portfolio.

At September 30, 2020, we classified 32 properties, with a carrying amount of $41.1 million, as real estate and lease intangibles held for sale, net 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 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.

In the third quarter of 2020, we capitalized costs of $727,000 on existing properties in our portfolio, which primarily relates to non-recurring building improvements.

In the first nine months of 2020, we capitalized costs of $5.1 million on existing properties in our portfolio, consisting of $1.0 million for re-leasing costs, $126,000 for recurring capital expenditures, and $4.0 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.

Equity Capital Raising

During the third quarter of 2020, we raised $348.6 million from the sale of common stock at a weighted average price of $62.57, primarily through our At-The-Market ("ATM") Program.

During the first nine months of 2020, we raised $1.2 billion from the sale of common stock at a weighted average price of $71.16 , 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, and 7,047,768 shares from the sale of common stock under our ATM Program.

Chief Financial Officer (CFO) and Treasurer Transition

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

As a result of Mr.

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.

In October 2020, our Board of Directors appointed Christie Kelly as Executive Vice President, Chief Financial Officer and Treasurer, effective January 19, 2021.

Kelly joined our Board of Directors in November 2019 and currently serves as a member of the Audit Committee.

Effective upon the appointment of Ms.

Kelly to Chief Financial Officer on January 19, 2021, she will resign from our Board of Directors.

Commercial Paper Program

In August 2020, we established a U.S.

dollar-denominated unsecured commercial paper program.

Under the terms of the program, we may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.0 billion.

Proceeds from commercial paper borrowings will be used for general corporate purposes.

As of September 30, 2020, the balance of borrowings outstanding under our commercial paper program was $300.0 million.

We expect to use our $3.0 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper program.

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.

In October 2020, we issued £400 million of 1.625% senior unsecured notes due December 2030.

The public offering price for these notes was 99.191% of the principal amount, for an effective annual yield to maturity of 1.712% and gross proceeds of £396.8 million.

The proceeds from this offering were used to repay GBP-denominated borrowings outstanding under our $3.0 billion revolving credit facility, to settle an outstanding GBP/USD currency exchange swap arrangement and, to the extent not used for those purposes, to fund potential investment opportunities and for other general corporate purposes.

In July 2020, we issued $350 million of 3.250% senior unsecured notes due January 2031 (the "2031" Notes), which constituted a further issuance of, and formed a single series with, the $600.0 million of 2031 Notes issued in May 2020.

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

In May 2020, we issued $600.0 million of 2031 Notes.

The public offering price for the 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 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.

The proceeds from each of the offerings of 2031 Notes were used to repay borrowings outstanding under our credit facility, and, to the extent not used for these purposes, to fund potential investment opportunities, and for other general corporate purposes.

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 continue our search for a new CFO.

As a result of Mr.

Early Redemption of 5.75% Notes Due January 2021

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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 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 a result of this challenging environment, we continue to work diligently with our tenants most affected by the pandemic to understand their business operations and 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 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

The majority of lease concessions granted to our tenants during the first nine months 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 determined that the collection of deferred rent is probable (within the meaning applicable under GAAP), although we cannot assure you that this determination will not change in the future.

In addition, as we believe to be the case with many retail landlords, we have 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 lease modification agreements, nor have we relinquished our contractual rights under our lease agreements where rent concessions have not yet been granted.

Our rent collections for the periods below and 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 October 31, 2020

July 31, 2020 Month Ended

August 31, 2020 Month Ended

September 30, 2020 Quarter Ended

September 30, 2020 Month Ended

October 31, 2020

Contractual rent collected (1)

across total portfolio

91.8% 93.3% 94.1% 93.1% 92.9%

Contractual rent collected (1) from top 20

Contractual rent collected (1)

from top 20 tenants (2)

90.0% 91.6% 91.8% 91.1% 89.9%

Contractual rent collected (1) from

investment grade tenants (3)

Contractual rent collected (1)

from investment grade

100.0% 100.0% 100.0% 100.0% 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.

(1) Collection rates are calculated as the aggregate cash rent collected for the applicable period from the beginning of that applicable period through October 31, 2020, divided by the contractual cash rent charged for the applicable period.

Cash rent collected is defined as amounts received including amounts in transit, where the tenant has confirmed payment is in process.

Rent collection percentages are calculated based on contractual base rents (excluding percentage rents and tenant reimbursements).

Charged amounts have not been adjusted for any COVID-19 related rent relief granted and include contractual base rents from any tenants in bankruptcy.

Due to differences in applicable foreign currency conversion rates and rent conventions, the percentages above may differ from percentages calculated utilizing total portfolio annualized contractual revenue.

(2) We define top 20 tenants as our 20 largest tenants based on percentage of total portfolio annualized contractual rental revenue as of the most recent reported 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 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)

The following table provides information relating to percentage of total contractual rent due and collected for the indicated periods :

Percentage of Total Contractual Rent Due By Month (1)

Percentage of Total Contractual Rent Collected By Month (1)

2020 September

Aerospace 0.6% 0.7% 0.7% 0.7% 0.6% 0.7% 0.7% 0.7%

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Grocery stores 3.7 3.2 3.3 3.2 3.7 3.2 3.3 3.2

Theaters * * * * — — — —

Health care 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Home improvement 0.9 0.3 0.1 — 0.9 0.3 0.1 —

Theaters * * * * — — — —

4.7% 3.6% 3.5% 3.3% 4.7% 3.6% 3.5% 3.3%

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* Less than 0.1%

(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.

Cash rent collected is defined as amounts received including amounts in transit, where the tenant has confirmed payment is in process.

Rent collection percentages are calculated based on contractual base rents (excluding percentage rents and tenant reimbursements).

Charged amounts have not been adjusted for any COVID-19 related rent relief granted and include contractual base rents from any tenants in bankruptcy.

Due to differences in applicable foreign currency conversion rates and rent conventions, the industry percentages above may differ from industry percentages calculated utilizing total portfolio annualized contractual revenue.

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 historical rental collections are indicative of our rental collections in November 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 foreseeable future may decline relative to the first nine months 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 June 30, Six months ended June 30, Three months Six months

Three months ended September 30, Nine months ended September 30, % Increase (Decrease)

Three months Nine months

2020 2019 2020 2019

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(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 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.

Our financial results in the first nine months of 2020 were impacted by the following transactions:(i) $123.4 million of provisions for impairment in first nine months of 2020, of which $105.1 million related to the third quarter, (ii) $34.4 million in reserves recorded as a reduction of rental revenue in the first nine months of 2020, of which $24.1 million related to the third quarter, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021 recorded in the first quarter of 2020, and (iv) a $3.5 million executive severance charge for our former CFO also recorded in the first quarter of 2020.

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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Our primary cash obligations, for the current year and subsequent years, are included in the “Table of Obligations,” which is presented later in this section.

We expect to fund our operating expenses and other short-term liquidity requirements, including property acquisitions and development costs, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs and cash distributions to common stockholders, primarily through cash provided by operating activities, borrowing on our credit facility and through public securities offerings.

We expect to fund our operating expenses and other short-term liquidity requirements, including property acquisitions and development costs, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs and cash distributions to common stockholders, primarily through cash provided by operating activities, borrowings on our credit facility and under our commercial paper program and through public securities offerings.

Conservative Capital Structure

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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 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;

At September 30, 2020, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable, credit facility borrowings and commercial paper were $8.45 billion, or approximately 28.4% of our total market capitalization of $29.77 billion.

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

• Shares of our common stock outstanding of 350,595,869, plus total common units outstanding of 463,119, multiplied by the last reported sales price of our common stock on the NYSE of $60.75 per share on September 30, 2020, or $21.33 billion;

• Outstanding borrowings of $556.1 million on our revolving credit facility, consisting entirely of Sterling-denominated borrowings of £430.5 million, and $300.0 million on our commercial paper program;

• Outstanding mortgages payable of $334.7 million, excluding net mortgage premiums of $1.9 million and deferred financing costs of $1.1 million;

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $692,000;

• 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.

• Outstanding senior unsecured notes and bonds of $7.01 billion, including a Sterling-denominated private placement of £315.0 million, and excluding unamortized net original issuance premiums of $28.2 million and deferred financing costs of $40.3 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.

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.

During the third quarter of 2020, we issued 5,536,619 shares and raised approximately $346.5 million of gross proceeds under the ATM program.

During the first nine months of 2020, we issued 7,047,768 shares and raised approximately $442.2 million of gross proceeds under the ATM program.

At September 30, 2020, we had 26,354,637 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.

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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 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

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

At September 30, 2020, we had 11,539,247 shares remaining for future issuance under our DRSPP program.

During the third quarter of 2020, we issued 34,604 shares

and raised approximately $2.1 million under our DRSPP.

During the first nine months of 2020, we issued 113,421 shares and raised approximately $6.9 million under our DRSPP.

Revolving Credit Facility and Commercial Paper Program

We have a $3.0 billion unsecured revolving credit facility with an initial term that expires in March 2023 and includes, at our option, two six-month extensions.

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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 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.

Under our revolving credit facility, our investment grade credit ratings as of September 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 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.

At September 30, 2020, we had a borrowing capacity of $2.4 billion available on our revolving credit facility and an outstanding balance of $556.1 million, consisting entirely of £430.5 million Sterling.

The weighted average interest rate on borrowings under our revolving credit facility during the first nine months of 2020 was 1.5% per annum.

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

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

At September 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.

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

In August 2020, we established a U.S.

dollar-denominated unsecured commercial paper program.

Under the terms of the program, we may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.0 billion.

Borrowings under this program generally mature in one year or less.

At September 30, 2020, we had an outstanding balance of $300.0 million.

The weighted average interest rate on borrowings under our commercial paper program was 0.3% from inception of the plan through September 30, 2020.

We expect to use our $3.0 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper program.

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

Thereafter, we generally seek to refinance those borrowings with the net proceeds of long-term or permanent financing, which may include the issuance of common stock, preferred stock or debt securities.

We cannot assure you, however, that we will be able to obtain any such refinancing, or that market conditions prevailing at the time of the refinancing will enable us to issue equity or debt securities at acceptable terms.

We regularly review our credit facility and may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

We regularly review our credit facility and commercial paper program and may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

In October 2018, in conjunction with entering into our revolving credit facility, we entered into a $250.0 million senior unsecured term loan, which matures in March 2024, and is governed by the credit agreement that governs our revolving credit facility.

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Mortgage Debt

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.

As of September 30, 2020, we had $334.7 million of mortgages payable, all of which were assumed in connection with our property acquisitions.

Additionally, at September 30, 2020, we had net premiums totaling $1.9 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 six months of 2020, we made $14.7 million in principal payments, including the repayment of one mortgage in full for $11.4 million.

During the first nine months of 2020, we made $73.7 million in principal payments, including the repayment of five mortgages in full for $69.2 million.

Notes Outstanding

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

Our senior unsecured note and bond obligations consist of the following as of September 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 $ 950

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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

3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031 950

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 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.

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

In October 2020, we issued £400 million of 1.625% senior unsecured notes due in December 2030.

The public offering price for these notes was 99.191% of the principal amount, for an effective yield to maturity of 1.712%.

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.

The gross proceeds of approximately £396.8 million from this offering were used to repay GBP-denominated borrowings outstanding under our $3.0 billion revolving credit facility, to settle an outstanding GBP/USD currency exchange swap arrangement and, to the extent not used for those purposes, 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 September 30, 2020.

Additionally, with the exception of interest on our 1.625% senior unsecured notes due in December 2030, which is paid annually, interest on all of our senior note and bond obligations outstanding is paid semiannually.

The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our senior notes and bonds.

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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 June 30, 2020 are:

The actual amounts as of September 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 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):

(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 October 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 October 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 September 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 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.

At September 30, 2020, we had cash and cash equivalents totaling $724.8 million, inclusive of £172.9 million Sterling.

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.

We intend, however, to use permanent or long-term capital to fund property acquisitions and to repay future borrowings under our credit facility.

We intend, however, to use permanent or long-term capital to fund property acquisitions and to repay future borrowings under our credit facility and commercial paper program.

Credit Agency Ratings

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

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 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.

As of September 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 and Standard & Poor’s Ratings Group has assigned a rating of A- with a “stable” outlook.

In addition, we were assigned the following ratings on our commercial paper at September 30, 2020:

Moody's Investors Service has assigned a rating of P-2 and Standard & Poor's Ratings Group has assigned a rating of A-2.

Based on our ratings as of September 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 June 30, 2020 (dollars in millions):

Maturity Credit

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

Maturity Credit Facility and Commercial Paper Program (1)

Leases Paid by

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Totals $ 856.1 $ 7,007.0 $ 250.0 $ 334.7 $ 2,380.5 $ 26.9 $ 126.6 $ 106.4 $ 11,088.2

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

(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.

(1) The initial term of the credit facility, representing $556.1 million of the outstanding borrowings at September 30, 2020, expires in March 2023 and includes, at our option, two six-month extensions.

The commercial paper borrowings outstanding at September 30, 2020 totaled $300.0 million and matured on October 1, 2020.

Upon settlement of a GBP/ USD currency exchange swap arrangement on October 1, 2020, we received $300.1 million upon our payment of £224.9 million, which was used to repay the outstanding borrowings under our commercial paper program.

(2) Excludes non-cash original issuance discounts and premiums recorded on notes payable of $28.2 million and deferred financing costs of $40.3 million.

The table of obligations also excludes the October 2020 issuance of £400 million of senior unsecured notes due December 2030.

(3) Excludes deferred financing costs of $692,000.

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 $1.9 million and deferred financing costs of $1.1 million.

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(8) “Other” consists of $96.1 million of commitments under construction contracts and $10.3 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

Our revolving credit facility, term loans, and notes payable obligations are unsecured.

Our revolving credit facility, commercial paper program, term loans, and notes payable obligations are unsecured.

Accordingly, we have not pledged any assets as collateral for these obligations.

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In order to maintain our status as a REIT for federal income tax purposes, we generally are required to distribute dividends to our stockholders aggregating annually at least 90% of our taxable income (excluding net capital gains), and we are subject to income tax to the extent we distribute less than 100% of our taxable income (including net capital gains).

In 2019, our cash distributions to common stockholders totaled $852.1 million, or approximately 131.5% of our estimated taxable income of $648.0 million.

Our estimated taxable income reflects non-cash deductions for depreciation and amortization.

Our estimated taxable income is presented to show our compliance with REIT dividend requirements and is not a measure of our liquidity or operating performance.

In 2019, our cash distributions to common stockholders totaled $852.1 million, or approximately 128.9% of our taxable income of $661.0 million.

Our taxable income reflects non-cash deductions for depreciation and amortization.

Our taxable income is presented to show our compliance with REIT dividend requirements and is not a measure of our liquidity or operating performance.

We intend to continue to make distributions to our stockholders that are sufficient to meet this dividend requirement and that will reduce or eliminate our exposure to income taxes.

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 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.

Our cash distributions to common stockholders in the first nine months of 2020 totaled $716.5 million, representing 81.9% of our adjusted funds from operations available to common stockholders of $875.0 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.

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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Another significant judgment must be made as to if, and when, impairment losses should be taken on our properties when events or a change in circumstances indicate that the carrying amount of the asset may not be recoverable.

A provision is made for impairment if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property.

If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value.

Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures, and property sales capitalization rates.

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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If events should occur that require us to reduce the carrying value of our real estate by recording provisions for impairment, they could have a material impact on our results of operations.

The COVID-19 pandemic and the measures taken to limit its spread are negatively impacting the economy across many industries, including the industries in which some of our tenants operate.

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 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.

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

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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 when due.

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.

As of September 30, 2020, other than the information related to the reserves we have recorded to date, 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.

The COVID-19 pandemic and the measures taken to limit its spread are negatively impacting the economy across many industries, including the industries in which some of our tenants operate.

As a result, we evaluated certain key assumptions involving fair value estimates of our real estate, recording of impairments on our properties and collectability of our accounts receivable.

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

Total Revenue

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

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

2020 2019 2020 2019 Three months Six months

Three months ended September 30, Nine months ended September 30, Increase

2020 2019 2020 2019 Three months Nine months

Rental (excluding reimbursable)

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Rental Revenue (excluding reimbursable)

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;

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

• The 171 properties (5.0 million square feet) we acquired in 2020, which generated $12.6 million of rent in the third quarter of 2020;

• The 779 properties (13.4 million square feet) we acquired in 2019, which generated $57.1 million of rent in the third quarter of 2020, compared to $26.1 million in the third quarter of 2019, an increase of $31.0 million;

• A net increase in straight-line rent and other non-cash adjustments to rent of $1.9 million in the third quarter of 2020 as compared to the third quarter of 2019;

partially offset by

• 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;

• Same store rents generated on 5,511 properties (86.2 million square feet) during the third quarter of 2020 and 2019, decreased by $13.9 million, or (4.4)%, to $303.0 million from $316.9 million;

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

• A net decrease of $1.7 million relating to the aggregate of (i) rental revenue from properties (124 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 $5.5 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;

In aggregate, the revenues for these items totaled $5.9 million in the third quarter of 2020, compared to $7.6 million in the third quarter of 2019.

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

• The 171 properties (5.0 million square feet) we acquired in the first nine months of 2020, which generated $24.5 million of rent in the first nine months of 2020;

• The 779 properties (13.4 million square feet) we acquired in 2019, which generated $174.5 million of rent in the first nine months of 2020, compared to $44.9 million in the first nine months of 2019, an increase of $129.6 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;

• Same store rents generated on 5,511 properties (86.2 million square feet) during the first nine months of 2020 and 2019, decreased by $14.6 million or (1.5)%, to $937.2 million from $951.8 million;

• A net decrease in straight-line rent and other non-cash adjustments to rent of $3.0 million in the first nine months of 2020 as compared to the first nine months of 2019;

• A net decrease of $9.6 million relating to properties sold in the first nine months of 2020 and during 2019 that were reported in continuing operations;

• A net decrease of $3.4 million relating to the aggregate of (i) rental revenue from properties (124 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.

In aggregate, the revenues for these items totaled $18.4 million in the first nine months of 2020 compared to $21.8 million in the first nine 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.

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.

Our calculation of same store rental revenue includes 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).

Same store rental income was negatively impacted by reserves recorded as reductions of rental revenue of $19.9 million for the three months ended September 30, 2020 compared to $241,000 for the three months ended September 30, 2019, and $26.5 million for the nine months ended September 30, 2020 compared to $1.2 million for the nine months ended September 30, 2019.

Our calculation of same store rental revenue also includes uncollected rent 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 three and nine months ended September 30, 2020 relative to the comparable periods for 2019 would have been (4.6)% and (5.9)%, respectively.

Rental revenue was negatively impacted by rent reserves throughout 2020, primarily due to the COVID-19 pandemic, particularly with respect to the ongoing disruption to the theater industry.

The following table summarizes reserves recorded as a reduction of rental revenue (dollars in millions):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Rental revenue reserves $ 21.8 $ 0.3 $ 29.3 $ 1.2

Straight-line rent reserves 2.3 0.1 5.1 1.5

Total rental revenue reserves $ 24.1 $ 0.4 $ 34.4 $ 2.7

Of the 6,588 properties in the portfolio at September 30, 2020, 6,554, or 99.5%, are single-tenant properties and the remaining are multi-tenant properties.

Of the 6,554 single-tenant properties, 6,465, or 98.6%, were net leased at September 30, 2020.

Of our 6,465 leased single-tenant properties, 5,527 or 85.5% 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 $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.

Percentage rent, which is included in rental revenue, was $532,000 in the third quarter of 2020, $407,000 in the third quarter of 2019, $2.3 million in the first nine months of 2020, and $4.5 million in the first nine months of 2019.

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

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.

At September 30, 2020, our portfolio of 6,588 properties was 98.6% leased with 92 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 September 30, 2019.

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

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Other Revenue

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.

The increase in other revenue in the third quarter of 2020 and first nine 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 nine months of 2019.

In addition, interest income from our money market accounts was higher during the first nine months of 2020 than the comparative period 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 June 30, Six months ended June 30, $ Increase

2020 2019 2020 2019 Three months Six months

Three months ended September 30, Nine months ended September 30, $ Increase

2020 2019 2020 2019 Three months Nine months

Depreciation and amortization

18 unchanged sentences

1.9 % 1.3 % 1.5 % 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.

(1) General and administrative expenses for the first nine 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 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.

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for the first nine months of 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $53,078, which was used for our calculation.

(2) Excludes rental revenue (reimbursable).

Depreciation and Amortization

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.

The increase in depreciation and amortization in the third quarter and first nine months of 2020 was primarily due to the acquisition of properties during the fourth quarter of 2019 and the first nine 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 June 30, Six months ended June 30,

2020 2019 2020 2019

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

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Interest on our credit facility, commercial paper, term loans, notes, mortgages and interest rate swaps $ 73,174 $ 69,889 $ 218,991 $ 206,247

Credit facility commitment fees

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3.51 % 3.88 % 3.48 % 3.93 %

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:

The increase in interest expense from 2019 to 2020 for the third quarter and first nine months is primarily due to the May and July 2020 issuances of our 2031 Notes, the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029, 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, the June 2020 repayment of one of our $250.0 million term loans, and lower average interest rates.

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

• Revolving credit facility outstanding borrowings of $556.1 million was 1.5%;

• Commercial paper outstanding borrowings of $300.0 million was 0.3%;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $692,000 and considering that one of our $250.0 million term loans was paid off in June 2020) was 1.8%;

• Mortgages payable of $334.7 million (excluding net premiums totaling $1.9 million and deferred financing costs of $1.1 million on these mortgages) was 4.9%;

• 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%.

• Notes and bonds payable of $7.01 billion (excluding net unamortized original issue premiums of $28.2 million and deferred financing costs of $40.3 million) was 3.8%;

• Combined outstanding notes, bonds, mortgages, term loan and $3.0 billion revolving credit facility and commercial paper borrowings of $8.45 billion (excluding all net premiums and deferred financing costs) was 3.5%.

Property Expenses (excluding reimbursable)

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

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.

At September 30, 2020, 92 properties were available for lease or sale, as compared to 94 at December 31, 2019, and 102 at September 30, 2019.

The increase in property expenses (excluding reimbursable) for the third quarter and first nine months of 2020 is primarily due to reserves for tenant reimbursements and an increase in repairs and maintenance expense.

Property Expenses (reimbursable)

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.

The increase in property expenses (reimbursable) in the third quarter and first nine 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 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.

General and administrative expenses increased during the first nine 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 and travel.

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

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

investments, which contributed to higher U.K.

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

income taxes as compared to the third quarter and first nine months of 2019.

Provisions for Impairment

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

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

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

4 unchanged sentences

Sold 17 24 31 36

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.

During 2020, we identified the impact of the COVID-19 pandemic as an impairment triggering event for properties occupied by certain tenants experiencing difficulties meeting their lease obligations to us.

After considering the impacts of the COVID-19 pandemic on the key assumptions noted above, we determined that the carrying values of 17 properties classified as held for investment for the three months ended September 30, 2020, and 25 properties classified as held for investment for the nine months ended September 30, 2020 were not recoverable.

As a result, we recorded provisions for impairment of $81.6 million for the three months ended September 30, 2020, and $89.8 million for the nine months ended September 30, 2020, on the applicable properties impacted by the COVID-19 pandemic.

Of the provisions for impairment recorded during the third quarter of 2020 for properties impacted by the COVID-19 pandemic, a total of 12 assets occupied by certain of our tenants in the theater industry were impaired for $79.0 million.

Impairments recorded on other properties during the three and nine months ended September 30, 2020 totaled $23.5 million and $33.6 million respectively.

Gain on Sales of Real Estate

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

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

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

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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 during the first six months of 2020.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt during the first nine 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 June 30, Six months ended June 30, Three months Six

Three months ended September 30, Nine months ended September 30, % Decrease

Three months Nine

2020 2019 2020 2019

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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.

Net income available to common stockholders was impacted by the following transactions:

(i) $123.4 million of provisions for impairment in first nine months of 2020, of which $105.1 million related to the third quarter, (ii) $34.4 million in reserves recorded as a reduction of rental revenue in the first nine months of 2020, of which $24.1 million related to the third quarter, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021 recorded in the first quarter of 2020, and (iv) a $3.5 million executive severance charge for our former CFO also recorded in the first quarter of 2020.

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

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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 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,

Our ratios of net debt-to-Adjusted EBITDA re and net debt-to-Pro Forma Adjusted EBITDA re , which are used by management as a measure of leverage, are 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 and annualized Pro Forma Adjusted EBITDA re , respectively.

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

Three months ended September 30,

Net income (1)

$ 23,143 $ 101,275

9 unchanged sentences

$ 362,648 $ 337,433

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

Annualized Adjusted EBITDA re (2)

$ 1,450,592 $ 1,349,732

Annualized Pro forma Adjustments 24,586 16,223

Annualized Pro forma Adjusted EBITDA re

1,475,178 1,365,955

$ 7,711,111 $ 6,801,325

Net Debt/Adjusted EBITDA re

Net Debt/Pro forma Adjusted EBITDA re

(1) Net income for the three months ended September 30, 2020 was negatively impacted by $24.1 million of rent reserves recorded as reductions of rental revenue, of which $2.3 million relates to straight-line rent receivables.

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

The Annualized Pro forma Adjustments for the three months ended September 30, 2020 consists of $25.2 million from properties we acquired or stabilized during the quarter and removes $614,000 of operating income from properties we disposed of during the quarter, assuming all transactions occurred at the beginning of the quarter.

The Annualized Pro forma Adjustments for the three months ended September 30, 2019 consists of $15.6 million from properties we acquired or stabilized during the quarter and removes $552,000 of operating losses from properties we disposed of during the quarter, assuming all transactions occurred at the beginning of the quarter.

The pro forma adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes and bonds.

We believe Pro Forma Adjusted EBITDA re is a useful non-GAAP supplemental measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter.

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

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

Three months ended September 30, Nine months ended September 30, % Increase

Three months Nine

2020 2019 2020 2019

FFO available to common

FFO available to common stockholders

$ 283.0 $ 262.0 $ 848.4 $ 759.2 8.0 % 11.7 %

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

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.

FFO in the first nine months of 2020 was impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic, 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 June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

16 unchanged sentences

$ 283,323 $ 262,393 $ 849,482 $ 760,227

FFO per common share, basic and diluted

$ 0.84 $ 0.81 $ 1.66 $ 1.62

FFO per common share:

Basic $ 0.82 $ 0.82 $ 2.48 $ 2.44

Diluted $ 0.82 $ 0.82 $ 2.48 $ 2.43

Distributions paid to common stockholders

5 unchanged sentences

347,212,593 320,726,136 342,946,337 312,300,391

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.

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 provisions for impairments of depreciable real estate assets, and reduced by gains on property sales.

We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO.

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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

Three months ended September 30, Nine months ended September 30, % Increase (Decrease)

Three months Nine

2020 2019 2020 2019

AFFO available to common

AFFO available to common stockholders

$ 282.5 $ 265.4 $ 875.0 $ 768.0 6.4 % 13.9 %

2 unchanged sentences

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

AFFO in the first nine months of 2020 was impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic.

We consider AFFO to be an appropriate supplemental measure of our performance.

2 unchanged sentences

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

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

18 unchanged sentences

Leasing costs and commissions 98 (851) (1,013) (1,880)

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

Recurring capital expenditures

20 unchanged sentences

347,212,593 320,726,136 342,946,337 312,300,391

(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.

(1) As of September 30, 2020, there was $26.5 million of uncollected 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 $36.4 million of uncollected rent for which we have not granted a lease concession.

The collection of the $62.9 million of unpaid rent is probable.

Deferrals accounted for as modifications totaling $63,000 and $224,000 for the three and nine months ended September 30, 2020, respectively, 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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PROPERTY PORTFOLIO INFORMATION

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

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

• Of 6,588 properties;

7 unchanged sentences

approximately 12,220 square feet per retail property and 223,320 square feet per industrial property.

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

At September 30, 2020, 6,496 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.

In addition, our tenants are typically subject to future rent increases based on increases in the consumer price index (typically subject to ceilings), additional rent calculated as a percentage of the tenants’ gross sales above a specified level, or fixed increases.

We define total portfolio annualized contractual rental revenue as the monthly aggregate cash amount charged to tenants, inclusive of monthly base rent receivables, as of the balance sheet date, multiplied by 12, excluding percentage rent.

We believe total portfolio annualized contractual revenue is a useful supplemental operating measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter.

Total portfolio annualized contractual rental revenue has not been reduced to reflect reserves recorded as reductions to GAAP rental revenue in the periods presented.

Industry Diversification

The following table sets forth certain information regarding our property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

Percentage of Rental Revenue (excluding reimbursable) by Industry

Quarter Ended

June 30, 2020

For the Years Ended

Percentage of Total Portfolio Annualized Contractual Rental Revenue by Industry

September 30, 2020

0.6% 0.8% 0.9% 1.0% 1.1% 1.2%

80 unchanged sentences

0.1 — — — — —

3.1% 1.3% — — — —

Home improvement 0.9 — — — — —

Theaters * * — — — —

4.4% 2.7% — — — —

Totals 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 June 30, 2020 (dollars in thousands):

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

Property Type

Square Feet (1)

Rental Revenue for the

Quarter Ended

June 30, 2020 (2)

Percentage of

Total Portfolio Annualized Contractual Rental Revenue as of

September 30, 2020

Percentage of Total Portfolio Annualized Contractual

Rental Revenue

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(1) Includes leasable building square footage.

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.

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

Tenant Diversification

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:

Percentage of Total Portfolio Annualized Contractual

Rental Revenue (1)

Walgreens 248 5.8 %

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AMC Theaters 32 2.7 %

Walmart / Sam's Club 54 2.5 %

Sainsbury's 17 2.6 %

Walmart / Sam's Club 56 2.6 %

Lifetime Fitness 16 2.5 %

1 unchanged sentence

BJ's Wholesale Clubs 15 1.7 %

CVS Pharmacy 88 1.6 %

Treasury Wine Estates 17 1.6 %

CVS Pharmacy 88 1.6 %

Super America (Marathon) 161 1.6 %

Kroger 22 1.5 %

Home Depot 22 1.4 %

GPM Investments / Fas Mart 203 1.4 %

TBC Corp 159 1.2 %

Home Depot 19 1.2 %

Total 3,240 52.6 %

(1) Excludes rental revenue (reimbursable).

(1) Amounts for each tenant are calculated independently;

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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 June 30, 2020 (dollars in thousands):

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 total portfolio annualized contractual rental revenue as of September 30, 2020 (dollars in thousands):

Total Portfolio (1)

Rental Revenue for

the Quarter Ended

June 30, 2020 % of

Total Portfolio Annualized Contractual Rental Revenue as of

September 30, 2020

Percentage of Total Portfolio Annualized Contractual

Rental Revenue

2020 15 3 440,900 $ 6,200 0.4 %

15 unchanged sentences

6,389 186 106,443,300 $ 1,624,501 100.0 %

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

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

(1) The table sets forth the timing of remaining lease terms expirations in our portfolio and their contributions to contractual rental revenue as of September 30, 2020.

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

This table excludes 114 vacant units.

Geographic Diversification

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

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

Percent Leased

Total Portfolio Annualized Contractual Rental as of

September 30, 2020

Percentage of Total Portfolio Annualized Contractual

Rental Revenue

for the Quarter

June 30, 2020 (1)

Percentage of

228 98 % 2,203,400 $ 31,777 2.0 %

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* Less than 0.1%

(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.

IMPACT OF INFLATION

Tenant leases generally provide for limited increases in rent as a result of increases in the tenants’ sales volumes, increases in the consumer price index (typically subject to ceilings), or fixed increases.

Tenant leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the tenants’ sales volumes.

We expect that inflation will cause these lease provisions to result in rent increases over time.

3 unchanged sentences

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

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

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

OTHER INFORMATION

Our common stock is listed on the NYSE under the ticker symbol “O” with a CUSIP number of 756109-104.

Our 1.625% Notes due December 2030 are listed on the NYSE under the ticker symbol "O30" with a CUSIP number of 756109-AY0.

Our central index key number is 726728.

3 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