What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-23 compared with 2020-02-24 · 592 added, 343 removed, 689 unchanged (58% of the section changed)

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Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluating the fair value used in the allocation of the purchase price of real estate acquisitions

As discussed in Notes 2 and 4 to the consolidated financial statements, during 2019, the Company acquired $3.7 billion of real estate properties.

The purchase price of a real estate acquisition is typically allocated to land, building and improvements, and identified lease related intangible assets and liabilities based on their estimated relative fair values.

We identified the evaluation of the measurement of the fair values used in the purchase price allocated to land, building and improvements, and identified lease related intangible assets and liabilities as a critical audit matter.

Specifically, the measurement of the fair values of land, building and improvements, and identified lease related intangible assets and liabilities is dependent upon assumptions that are subject to potential management bias and for which relevant external market data is not always readily available.

Such assumptions include market land and building values, market rental rates, discount rates and capitalization rates.

Given the sensitivity of the fair value measurements to changes in these assumptions, there was a high degree of subjective and complex auditor judgement required in evaluating them.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process to allocate the purchase price of real estate acquisitions including controls over the selection and review of the assumptions to estimate fair value, including those used by third party valuation professionals.

For a selection of real estate acquisitions, we involved real estate valuation professionals with specialized skills and knowledge who assisted in evaluating the assumptions to the fair value measurements used in the purchase price allocations, and the qualifications of third party valuation professionals.

The evaluation included comparison of Company assumptions to independently developed ranges using market data from industry transaction databases, published industry reports and brokerage websites.

Evaluation of the fair values used in the allocation of the purchase price of real estate acquisitions

As discussed in Note 4 to the consolidated financial statements, during 2020, the Company acquired $2.3 billion of real estate properties.

As discussed in Note 2, the purchase price of a real estate acquisition is typically allocated to land, building and improvements, and identified lease related intangible assets and liabilities based on their estimated relative fair values.

We identified the evaluation of the fair values used in the purchase price allocated to land, building and improvements, and identified lease related intangible assets and liabilities as a critical audit matter.

Specifically, the measurement of the fair values of land, building and improvements, and identified lease

related intangible assets and liabilities is dependent upon significant assumptions that are subject to potential management bias and for which relevant external market data is not always readily available.

Such assumptions include market land and building values, market rental rates, and discount rates.

There was a high degree of subjective and complex auditor judgment required in evaluating the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to allocate the purchase price of real estate acquisitions.

This included controls over the selection and review of the significant assumptions used to estimate fair value.

For a selection of real estate acquisitions, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating the significant assumptions used to estimate the fair value measurements to allocate the purchase price, and the qualifications of third-party valuation professionals.

The evaluation included comparison of the Company’s assumptions noted above to independently developed ranges using market data from industry transaction databases, and published industry reports.

For a selection of real estate acquisitions, we compared the amounts allocated to land, building and improvements, and lease related intangible assets and liabilities as a percentage of the total acquisition value to the Company’s historical allocation percentages for similar types of properties.

Evaluating the provision for impairment of long-lived real estate assets

We assessed potential management bias by evaluating the results of the procedures performed.

Evaluation of the provision for impairment of long-lived real estate assets

As discussed in Note 2 to the consolidated financial statements, during 2020, the Company recorded provisions for impairment of long-lived real estate assets of $147.2 million.

A provision for impairment is recorded if estimated future property level operating cash flows (undiscounted and without interest charges) including estimated sales proceeds to be received are less than the current book value of the real estate asset.

A provision for impairment is recorded if estimated future operating cash flows (undiscounted and without interest charges) including estimated disposition proceeds to be received are less than the current book value of the real estate asset.

The impairment recorded is measured as the amount by which the book value of the real estate asset exceeds its fair value.

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These projections are dependent upon assumptions that are subject to potential management bias and for which relevant external market data is not always readily available.

These assumptions include the expected property holding period, projected market rental rates, and current and terminal property capitalization rates.

Given the sensitivity of the property level operating cash flow projections to changes in these assumptions, there was a high degree of subjective and complex auditor judgment required in evaluating them.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process to measure and record impairments including selection and review of the assumptions to the property level operating cash flow projections.

We evaluated the projected market rental rate and property holding period assumptions in the Company’s property level operating cash flow projections for a selection of properties by comparing to existing lease agreements, the Company’s historical holding period data, and market data from industry transaction databases, published industry reports and brokerage websites.

We also involved real estate valuation professionals with specialized skills and knowledge who assisted in evaluating the projected market rent and current and terminal capitalization rates utilized by the Company.

These assumptions include the expected property holding period, projected rental rates, and current and terminal property capitalization rates.

Given the sensitivity of the operating cash flow projections to changes in these assumptions, there was a high degree of subjective and complex auditor judgment required in evaluating the assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to identify and measure impairments including selection and review of the assumptions used to determine the property level operating cash flow projections.

For a selection of properties, we evaluated the projected rental rates and property holding period assumptions in the Company’s property level operating cash flow projections by comparing to lease agreements, the Company’s historical holding period data, market data from industry transaction databases, and published industry reports.

We also involved valuation professionals with specialized skills and knowledge who assisted in evaluating the projected market rent and current and terminal capitalization rates utilized by the Company.

This evaluation included comparison to independently developed ranges using publicly available market data.

We considered potential management bias by performing a sensitivity analysis over the assumptions to the Company’s property level operating cash flow projections for a selection of properties.

We also performed a sensitivity analysis over the assumptions noted above, used to determine the Company’s property level operating cash flow projections for a selection of properties.

We assessed potential management bias by evaluating the results of the procedures performed.

Evaluation of lease revenue

As discussed in Note 2 to the consolidated financial statements, rental revenue for leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term.

When the Company concludes collection of substantially all future lease payments for a lease is less than probable, the Company writes off the receivable balances associated with the lease as a reduction to rental revenue for the period and it ceases to recognize rental revenue on a straight-line basis for that lease.

Rental revenue recognition is limited to the lesser of cash received or the amount that would have been recognized on a straight-line basis for that lease.

Rental revenue was $1.6 billion for the year ended December 31, 2020, and accounts receivable was $285.7 million as of December 31, 2020.

We identified the evaluation of the probability of collection of lease payments as a critical audit matter.

The significant assumption used in the evaluation is the creditworthiness of the client and any guarantors.

Evaluating the Company’s probability assessment of collection of substantially all the lease payments for the individual leases required significant auditor judgment, because of the subjective nature of management’s judgment and the potential impact of the current economic environment on the significant assumption.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s collectability probability assessment process, including the assessment of the creditworthiness of the client and any guarantors.

For a selection of the Company’s leases, we evaluated the Company’s determination of the collectability of substantially all of the contractual lease payments by performing the following:

(i) read the lease agreement, (ii) obtained and read third-party credit reports, (iii) searched for and read publicly available information, including the client’s financial statements, analyst reports, recent public filings and news articles to evaluate the Company’s collection probability assessment, (iv) considered the rental payment history of the lessee and (v) inquired of Company employees to obtain evidence regarding creditworthiness of the clients.

(signed) KPMG LLP

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(dollars in thousands, except per share data)

Real estate, at cost:

Real estate held for investment, at cost:

Land $ 6,318,926 $ 5,684,034

Buildings and improvements 14,696,712 13,833,882

Total real estate, at cost

Total real estate held for investment, at cost 21,015,638 19,517,916

Less accumulated depreciation and amortization ( 3,549,486 ) ( 3,117,919 )

Net real estate held for investment

Real estate held for sale, net

Net real estate

Real estate held for investment, net 17,466,152 16,399,997

Real estate and lease intangibles held for sale, net 19,004 96,775

Cash and cash equivalents 824,476 54,011

Accounts receivable

Accounts receivable, net 285,701 181,969

Lease intangible assets, net 1,710,655 1,493,383

Other assets, net 434,297 328,661

Total assets $ 20,740,285 $ 18,554,796

LIABILITIES AND EQUITY

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Other liabilities 256,863 262,221

Line of credit payable

Line of credit payable and commercial paper — 704,335

Term loans, net 249,358 499,044

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Stockholders’ equity:

Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 333,619,106 shares issued and outstanding as of December 31, 2019 and 370,100,000 shares authorized, 303,742,090 shares issued and outstanding as of December 31, 2018

Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 361,303,445 and 333,619,106 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

14,700,050 12,873,849

Distributions in excess of net income ( 3,659,933 ) ( 3,082,291 )

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Noncontrolling interests 32,247 29,702

Total equity 11,017,730 9,804,158

Total liabilities and equity $ 20,740,285 $ 18,554,796

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(dollars in thousands, except per share data)

2020 2019 2018

Rental (including reimbursable) $ 1,639,533 $ 1,484,818 $ 1,321,546

Other 12,092 6,773 6,292

Total revenue 1,651,625 1,491,591 1,327,838

Depreciation and amortization 677,038 593,961 539,780

General and administrative

Interest 309,336 290,991 266,020

Property (including reimbursable) 104,603 88,585 66,326

General and administrative 73,215 66,483 84,148

Income taxes 14,693 6,158 5,340

Provisions for impairment 147,232 40,186 26,269

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Loss on extinguishment of debt ( 9,819 ) — —

Net income 396,506 437,478 364,598

Net income attributable to noncontrolling interests ( 1,020 ) ( 996 ) ( 984 )

Net income attributable to the Company

Preferred stock dividends

Excess of redemption value over carrying value of preferred shares redeemed

Net income available to common stockholders $ 395,486 $ 436,482 $ 363,614

Amounts available to common stockholders per common share:

Net income, basic and diluted

Basic 1.15 1.38 1.26

Diluted 1.14 1.38 1.26

Weighted average common shares outstanding:

Basic 345,280,126 315,837,012 289,427,430

Diluted 345,415,258 316,159,277 289,923,984

Other comprehensive income:

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(dollars in thousands)

Distributions

Accumulated other comprehensive loss

capital Distributions

net income Accumulated other comprehensive loss Total

stockholders’

Noncontrolling

equity Noncontrolling

interests Total

Balance, December 31, 2017 284,213,685 $ 9,624,264 $ ( 2,252,763 ) $ — $ 7,371,501 $ 19,207 $ 7,390,708

Net income — — 363,614 — 363,614 984 364,598

Other comprehensive loss — — — ( 8,098 ) ( 8,098 ) — ( 8,098 )

Distributions paid and payable — — ( 768,506 ) — ( 768,506 ) ( 1,996 ) ( 770,502 )

Share issuances, net of costs 19,304,878 1,119,297 — — 1,119,297 — 1,119,297

Preferred shares redeemed

Contributions by noncontrolling interests — — — — — 18,848 18,848

Redemption of common units 88,182 2,829 — — 2,829 ( 5,581 ) ( 2,752 )

Reallocation of equity — ( 774 ) — — ( 774 ) 774 —

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Balance, December 31, 2018 303,742,090 $ 10,754,495 $ ( 2,657,655 ) $ ( 8,098 ) $ 8,088,742 $ 32,236 $ 8,120,978

Net income — — 436,482 — 436,482 996 437,478

Other comprehensive loss — — — ( 9,004 ) ( 9,004 ) — ( 9,004 )

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Balance, December 31, 2019 333,619,106 $ 12,873,849 $ ( 3,082,291 ) $ ( 17,102 ) $ 9,774,456 $ 29,702 $ 9,804,158

Net income — — 395,486 — 395,486 1,020 396,506

Other comprehensive loss — — — ( 37,532 ) ( 37,532 ) — ( 37,532 )

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Share issuances, net of costs 27,564,163 1,817,978 — — 1,817,978 — 1,817,978

Additions to noncontrolling interests

Redemption of common units

Contributions by noncontrolling interests — — — — — 3,168 3,168

Reallocation of equity — 47 — — 47 ( 47 ) —

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(dollars in thousands)

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 396,506 $ 437,478 $ 364,598

Adjustments to net income:

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Amortization of net premiums on mortgages payable ( 1,258 ) ( 1,415 ) ( 1,520 )

Amortization of net (premiums) discounts on notes payable

Amortization of net premiums on notes payable ( 1,754 ) ( 995 ) ( 1,256 )

Amortization of deferred financing costs 11,003 9,795 9,021

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Cash distributions to common stockholders ( 964,167 ) ( 852,134 ) ( 761,582 )

Cash dividends to preferred stockholders

Borrowings on line of credit

Payments on line of credit

Borrowings on line of credit and commercial paper program 3,528,042 2,816,632 1,774,000

Payments on line of credit and commercial paper program ( 4,246,755 ) ( 2,365,368 ) ( 1,632,000 )

Principal payment on term loan ( 250,000 ) ( 70,000 ) ( 125,866 )

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Principal payments on mortgages payable ( 108,789 ) ( 20,723 ) ( 21,905 )

Redemption of preferred stock

Proceeds from common stock offerings, net 728,883 845,061 —

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Effect of exchange rate changes on cash and cash equivalents 4,431 ( 9,796 ) —

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Net increase in cash, cash equivalents and restricted cash 779,674 49,934 8,929

Cash, cash equivalents and restricted cash, beginning of year 71,005 21,071 12,142

Cash, cash equivalents and restricted cash, end of year $ 850,679 $ 71,005 $ 21,071

For supplemental disclosures, see note 15.

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We invest in commercial real estate and have elected to be taxed as a real estate investment trust, or REIT.

At December 31, 2019 , we owned 6,483 properties, located in 49 U.S states, Puerto Rico and the United Kingdom (U.K.), containing over 106.3 million leasable square feet.

Information with respect to number of properties, square feet, average initial lease term and average cash lease yield is unaudited.

At December 31, 2020, we owned 6,592 properties, located in 49 U.S states, Puerto Rico and the United Kingdom (U.K.), containing approximately 110.8 million leasable square feet.

Information with respect to number of properties, square feet, average initial lease term and initial average cash lease yield is unaudited.

Summary of Significant Accounting Policies and Procedures and Newly Adopted Accounting Standards

Federal Income Taxes .

We have elected to be taxed as a REIT, as defined above, under the Internal Revenue Code of 1986, as amended, or the Code.

We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended.

We believe we have qualified and continue to qualify as a REIT.

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Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries.

The income taxes recorded on our consolidated statements of income and comprehensive income represent amounts paid by Realty Income and its subsidiaries for city and state income and franchise taxes and for U.K.

The income taxes recorded on our consolidated statements of income and comprehensive income represent amounts accrued or paid by Realty Income and its subsidiaries for city and state income and franchise taxes and for U.K.

income taxes.

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The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation.

2020 2019 2018

Weighted average shares used for the basic net income per share computation

345,280,126 315,837,012 289,427,430

Incremental shares from share-based compensation 135,132 322,265 179,532

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Weighted average shares used for diluted net income per share computation

345,415,258 316,159,277 289,923,984

Unvested shares from share-based compensation that were anti-dilutive

70,581 8,113 13,148

Weighted average partnership common units convertible to common shares that were anti-dilutive

Revenue Recognition and Accounts Receivable .

463,119 442,073 297,576

Lease Revenue Recognition and Accounts Receivable .

The majority of our leases are accounted for as operating leases.

Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term.

Any rental revenue contingent upon a tenant’s sales is recognized only after the tenant exceeds their sales breakpoint.

Any rental revenue contingent upon our client’s sales is recognized only after our client exceeds their sales breakpoint.

Rental increases based upon changes in the consumer price indexes are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements.

Contractually obligated rental revenue from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursements in the period when such costs are incurred.

Taxes and operating expenses paid directly by the tenant are recorded on a net basis.

On January 1, 2019, we adopted ASU 2016-02 (Topic 842, Leases ), which amended Topic 840, Leases.

As our leases are accounted for as operating leases under both Topic 840 and 842, our lease revenue recognition policy was largely unaffected by this update.

For further information, see Newly Adopted Accounting Standards section below.

Other revenue, which includes property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms.

Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred.

Taxes and operating expenses paid directly by our clients are recorded on a net basis.

Other revenue, includes property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms.

We assess collectability of our future lease payments based on an analysis of creditworthiness, economic trends (including trends arising from the COVID-19 pandemic) and other facts and circumstances related to the applicable clients.

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

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 clients operate.

These impacts may continue and increase in severity as the duration or extent of the pandemic increases.

As a result, we have closely monitored the collectability of our accounts receivable and 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.

On April 8, 2020, the Financial Accounting Standards Board, or FASB, staff and FASB board members responded to questions about the accounting for COVID-19 related rent concessions under Topic 842, Leases .

The accounting for these rent concessions under Topic 842 depends on the enforceable rights and obligations of the parties under the original lease contract (including those arising from the laws of the jurisdiction governing the lease contract) and the nature of any changes to the terms and conditions of the contract.

If a rent concession under these circumstances is required by the original lease contract (e.g.

by a force majeure clause), the concession will generally be accounted for as a variable lease payment.

In contrast, if the lessor is under no obligation to grant a rent concession, the lessor’s agreement to grant one should be accounted for as a lease modification.

The FASB staff has provided clarifying guidance for leases for which the total lease cash flows will remain substantially the same or less than those after the COVID-19 related effects, though companies may choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract as a practical expedient.

Instead, the company would account for rent concessions, whatever their form (e.g.

rent deferral, abatement or other), either (1) as if they are part of the enforceable rights and obligations of the parties under the existing lease contract;

or (2) as a lease modification.

If accounting for a concession as a lease modification, the full lease modification requirements under Topic 842 apply.

Under either policy election, we must continue to assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842.

If a company concludes collection of substantially all lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered more than probable.

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

We currently anticipate future concessions to be similar.

In accordance with the April 8, 2020 guidance provided by the FASB staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in effect.

In limited circumstances, the undiscounted cash flows resulting from deferrals granted during 2020 increased significantly from original lease terms, which required us to account for these as lease modifications, and resulted in an insignificant impact to rental revenue for 2020.

Similarly, rent abatements granted during 2020, which were also accounted for as lease modifications, impacted our rental revenue by an insignificant amount for 2020.

Unless otherwise specified, references to reserves recorded as a reduction of rental revenue include amounts reserved for in the current period, as well as unrecognized contractual rental revenue and unrecognized straight-line rental revenue for leases accounted for on a cash basis.

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

Year ended December 31,

2020 2019 2018

Rental revenue reserves $ 44.1 $ 1.4 $ 1.1

Straight-line rent reserves 8.4 1.5 0.2

Total rental revenue reserves $ 52.5 $ 2.9 $ 1.3

As of December 31, 2020, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable.

However, since the conversations regarding rent collections for our clients affected by the COVID-19 pandemic are ongoing and we do not currently know the types of future concessions, if any, that will ultimately be granted, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

We also evaluated certain properties impacted by the COVID-19 pandemic for impairment (see Provisions for Impairment section below).

Principles of Consolidation .

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We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Our cash equivalents are primarily investments in United States government money market funds.

Restricted cash includes cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e.

Internal Revenue Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e.

escrow deposits for future acquisitions).

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Intangible assets and liabilities consist of above-market or below-market lease value of in-place leases and the value of in-place leases, as applicable.

Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent.

In an acquisition of multiple properties, we must also allocate the purchase price among the properties.

The allocation of the purchase price is based on our assessment of estimated fair value and is often based upon the expected future cash flows of the property and various characteristics of the markets where the property is located.

The allocation of the purchase price is based on our assessment of estimated fair values of the land, building and improvements, and identified intangible assets and liabilities, and is often based upon various characteristics of the market where the property is located.

In addition, any assumed mortgages are recorded at their estimated fair values.

The estimated fair values of our mortgages payable have been calculated by discounting the future cash flows using applicable interest rates that have been adjusted for factors, such as industry type, tenant investment grade, maturity date, and comparable borrowings for similar assets.

comparable borrowings for similar assets.

The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenue and expenses.

Our estimated fair value determinations are based on management’s judgment, utilizing various factors, including:

market land and building values, market rental rates, discount rates and capitalization rates.

Fair Value Measurement), and unobservable inputs that reflect our own internal assumptions (categorized as level 3 under ASC Topic 820).

Our methodology for measuring and allocating the fair value of real estate acquisitions includes both observable market data (categorized as level 2 on the three-level valuation hierarchy of Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement), and unobservable inputs that reflect our own internal assumptions (categorized as level 3 under ASC Topic 820).

Given the significance of the unobservable inputs we believe the allocations of fair value of real estate acquisitions should be categorized as level 3 under ASC Topic 820.

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Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized.

We cease capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in any event no later than one year from the completion of major construction activity.

We cease capitalization when the property is available for occupancy upon substantial completion of property improvements to accommodate the client's use, but in any event no later than one year from the completion of major construction activity.

Properties are depreciated using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives are as follows:

25 years or 35 years

Building improvements

4 to 20 years

Tenant improvements and lease commissions

The shorter of the term of the related lease or useful life

Acquired in-place leases

Remaining terms of the respective leases

Provision for Impairment.

Buildings 25 years or 35 years

Building improvements 4 to 35 years

Equipment 5 to 25 years

Lease commissions and property improvements to accommodate the client's use The shorter of the term of the related lease or useful life

Acquired in-place leases Remaining terms of the respective leases

Provisions for Impairment.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an 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.

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

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

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

If a property is classified as held for

sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell, and depreciation of the property ceases.

If a property was previously reclassified as held for sale but the applicable criteria for this classification are no longer met, the property is reclassified to real estate held for investment.

A property that is reclassified to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment, or (ii) the fair value at the date of the subsequent decision not to sell.

Twenty-three properties were classified as held for sale at December 31, 2019 .

We do not depreciate properties that are classified as held for sale.

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

Twenty-one properties were classified as held for sale at December 31, 2020.

During 2020, we identified the impact of the COVID-19 pandemic as an impairment triggering event for properties occupied by certain clients 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 38 properti es classified as held for investment for the year ended December 31, 2020 were not recoverable.

As a result, we recorded provisions for impairment of $ 105.0 million for the year ended December 31, 2020 on the applicable properties impacted by the COVID-19 pandemic.

Of the provisions for impairment recorded during 2020 for properties impacted by the COVID-19 pandemic, a total of 13 assets occupied by certain of our clients in the theater industry were impaired for $ 83.8 million, which reduced the carrying value of the properties from $ 123.4 million to their estimated fair value of $ 39.6 million.

Impairments recorded on other properties during the year ended December 31, 2020 totaled $ 42.2 million.

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

Year Ended December 31,

2020 2019 2018

Total provisions for impairment $ 147.2 $ 40.2 $ 26.3

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Classified as held for investment 42 5 3

Sold 51 45 41

Equity Offering Costs.

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Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity.

In accordance with the applicable accounting guidance, noncontrolling interests acquired prior to October 1, 2017 were recorded initially at fair value based on the price of the applicable units issued or contributions made, and subsequently adjusted each period for distributions, additional contributions and the allocation of net income attributable to the noncontrolling interests.

Noncontrolling interests issued or assumed subsequent to October 1, 2017, were recorded based on the proportional share of equity in the entity.

Derivative and Hedging Activities.

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We may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.

As of December 31, 2019 we had three interest rate swaps in place, including one on each of our $ 250.0 million unsecured term loans and the third on an assumed mortgage loan.

As of December 31, 2020 we had one interest rate swap in place on our $ 250.0 million unsecured term loan.

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements.

In October 2018, we designated these three interest rate swaps as hedges and adopted hedge accounting treatment in accordance with Topic 815, Derivatives and Hedging .

From the adoption date through the end of 2019, the effective portion of gains or losses on our interest rate swaps were recorded in accumulated other comprehensive loss on our consolidated balance sheet as of December 31, 2019, instead of through interest expense on our consolidated statements of income and comprehensive income.

We designated these interest rate swaps as hedges in accordance with Topic 815, Derivatives and Hedging.

We record interest rate swaps on the consolidated balances sheet at fair value.

Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and are amortized through interest expense over the term of the associated debt.

During December 2020, we entered into a currency exchange swap to exchange £ 463.1 million for $ 625.0 million, which matured in January 2021.

The currency exchange swap was entered into to hedge our exposure to foreign currency risk associated with Sterling-denominated liabilities.

As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative gains, net' in the consolidated statements of income and comprehensive income.

loss from derivatives not designated in hedging relationships for 2020 totaled $ 14.5 million.

We did not hold any derivatives that were not designated in hedging relationships during 2019.

In February 2020, we entered into five forward starting treasury rate locks with notional amounts totaling $ 500.0 million.

The treasury rate locks were entered into to hedge our exposure to the changes in the 10-year US treasury rates in anticipation of potential future debt offerings during the first half of 2020.

The treasury rate locks were designated as cash flow hedges, with any changes in fair value recorded in AOCI.

Upon the initial issuance of the 2031 Notes in May 2020, we amortized the AOCI balance over the term of the 2031 Notes.

In June 2020, all five treasury rate locks were terminated and we entered into six forward starting interest rate swaps with notional amounts totaling $ 500.0 million in a cashless settlement of the terminated treasury rate locks.

The forward starting swaps were entered into to hedge our exposure to the changes in the 3-month USD-LIBOR swap rate in anticipation of potential future debt offerings through a current estimated range ending in 2023.

The forward starting swaps are designated as cash flow hedges, with any changes in fair value recorded in AOCI.

Upon issuance of the 2031 Notes during July 2020, the AOCI balance associated with four of the forward starting swaps with a notional amount of $ 350.0 million we amortized over the term of the notes.

However, we elected not to terminate the four forward starting interest rate swaps, and redesignated the swaps in a new hedging relationship for a future debt issuance to hedge our exposure to the changes in the 10-year US treasury rates in anticipation of potential future debt offerings between May 2020 and December 2023.

Upon issuance during December 2020 of $ 325.0 million of 0.750 % notes due March 2026 and $ 400.0 million of 1.800 % notes due March 2033, the AOCI balance associated with four of the forward starting swaps with a notional amount of $ 350.0 million, representing the change in fair value for the swaps from the July issuance of the 2031 notes through the December note issuances, and the AOCI balance associated with the two remaining forward starting swaps with a notional amount of $ 150.0 million, representing the change in fair value from their inception during June 2020 through the December note issuances, are being amortized over the term, by first applying the notional to the $ 400.0 million of 1.800 % notes due March 2033 and $ 100.0 million of notional to the remaining $ 325.0 million of 0.750 % notes due March 2026.

However, we elected not to terminate any of the six forward starting interest rate swaps, and redesignated the swaps in a new hedging relationship to hedge our exposure to the changes in the 10-year US treasury rates in anticipation of potential future debt offerings between December 2020 and December 2023.

Due to the size of the initial net investment resulting from the termination value of the treasury rate locks being rolled into them, two of the six forward starting swaps were determined to be hybrid debt instruments containing embedded at-market swap derivative instruments.

As a result, we have bifurcated the derivative instrument and the debt instrument for those two forward starting interest rate swaps for accounting purposes.

The remaining four forward starting interest rates swaps are accounted for as derivative instruments.

In May 2019, we entered into four cross-currency swaps to exchange £ 130 million Sterling for $ 166 million maturing in May 2034, in order to hedge the foreign currency risk associated with our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries.

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Reclassifications .

During the fourth quarter of 2019, we reclassified Goodwill, which was previously presented in its own caption on the consolidated balance sheets, into Other Assets for all comparative periods.

Newly Adopted Accounting Standards.

During 2020, we reclassified 'Real estate held for sale, net', which was previously presented in 'Net real estate', into a new caption entitled 'Real estate and lease intangibles held for sale, net'.

The reclassification out of 'Net real estate' incorporates intangibles held for sale into a more appropriate presentation of the held for sale caption.

Intangibles held for investment are included in the captions entitled 'Lease intangible assets, net' and 'Lease intangible liabilities, net' in the consolidated balance sheets.

The December 31, 2019 balance sheet has been reclassified to match the current period classification.

Newly Issued Accounting Standards.

In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform .

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance is optional and is effective between March 12,

2020 and December 31, 2022.

The guidance may be elected over time as reference rate reform activities occur.

We are currently evaluating the impact that the expected market transition from LIBOR to alternative references rates will have on our financial statements as well as the applicability of the aforementioned expedients and exceptions provided in ASU 2020-04.

Recently Adopted Accounting Standards.

In February 2016, the FASB issued ASU 2016-02 (Topic 842, Leases), which replaced Topic 840, Leases.

Under this amended topic, the accounting applied by a lessor is largely unchanged from that applied under Topic 840, Leases.

The large majority of our leases remain classified as

operating leases, and we continue to recognize lease income on a generally straight-line basis over the lease term.

The large majority of our leases remain classified as operating leases, and we continue to recognize lease income on a generally straight-line basis over the lease term.

Although primarily a lessor, we are also a lessee under several ground lease arrangements.

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Additionally, above-market rents on certain of our leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, and below-market rents on certain of our leases under which we are a lessor are accounted for as prepaid rent (see note 3).

Also, as a result of the adoption of this standard, tenant reimbursable revenue and property expenses are now presented on a gross basis as both tenant reimbursement revenue included in rental revenue, and as a reimbursable expense included in property expenses, respectively, on our consolidated statements of income and comprehensive income.

Also, as a result of the adoption of this standard, contractually obligated reimbursements by our clients and property expenses are now presented on a gross basis as both contractually obligated reimbursements by our clients included in rental revenue, and as a reimbursable expense included in property expenses, respectively, on our consolidated statements of income and comprehensive income.

Property taxes and insurance paid directly by the lessee to a third party will continue to be presented on a net basis.

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however, we have elected to aggregate prior period tenant reimbursement revenue within rental revenue to be consistent with the current period presentation within the statements of income and comprehensive income.

In connection with our acquisition of properties in the U.K.

during the second quarter of 2019, we adopted accounting guidance applicable under Topic 830, Foreign Currency Matters .

The functional currency of the U.K.

subsidiaries holding the acquired properties is the Great British Pound (Sterling).

Assets and liabilities from our foreign-owned subsidiaries are translated into U.S.

dollars using the exchange rate in effect at the consolidated balance sheet date.

Equity accounts are translated at historical rates, except for retained earnings, whereas the impact is calculated via the income statement translation process.

Revenue and expense accounts are translated using the weighted average exchange rates during the period.

The cumulative translation adjustments from our U.K.

subsidiaries are recorded in accumulated other comprehensive income (loss) in the consolidated statements of equity.

We have intercompany debt denominated in pound sterling, which is the same currency as the functional currency of our U.K.

subsidiaries.

When this debt is remeasured against the functional currency of the Company, which is the U.S.

dollar, a gain or loss can result.

Such transaction gains or losses realized upon settlement of a foreign currency transaction, which may include intercompany transactions, are included in net income under the caption ‘Foreign currency and derivative gains, net'.

Supplemental Detail for Certain Components of Consolidated Balance Sheets (dollars in thousands):

Accounts Receivable, net, consist of the following at:

December 31, 2020 December 31, 2019

Straight-line rent receivables, net $ 174,074 $ 147,047

Client receivables, net 111,627 34,922

$ 285,701 $ 181,969

Lease intangible assets, net, consist of the following at:

December 31, 2020 December 31, 2019

In-place leases $ 1,840,704 $ 1,612,153

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Accumulated amortization of above-market leases ( 252,241 ) ( 201,369 )

$ 1,710,655 $ 1,493,383

Other assets, net, consist of the following at:

Right of use asset - operating leases, net

December 31, 2020 December 31, 2019

Financing receivables $ 131,291 $ 81,892

Right of use asset - financing leases 118,585 36,901

Non-refundable escrow deposits

Impounds related to mortgages payable

Right of use asset - operating leases, net 112,049 120,533

Restricted escrow deposits 21,220 4,529

Goodwill 14,180 14,430

Prepaid expenses 11,795 11,839

Corporate assets, net 8,598 5,251

Credit facility origination costs, net 7,705 11,453

Impounds related to mortgages payable 4,983 12,465

Value-added tax receivable 1,130 9,682

Corporate assets, net

Restricted escrow deposits

Non-refundable escrow deposits 1,000 14,803

Derivative assets and receivables - at fair value 10 12

Distributions payable consist of the following declared distributions at:

Common stock distributions

Noncontrolling interests distributions

Other items 1,751 4,871

$ 434,297 $ 328,661

Accounts payable and accrued expenses consist of the following at:

December 31, 2020 December 31, 2019

Notes payable - interest payable $ 83,219 $ 75,114

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Property taxes payable 23,413 18,626

Value-added tax payable

Accrued costs on properties under development 12,685 5,870

Mortgages, term loans, and credit line - interest payable

Value-added tax payable 8,077 13,434

Accrued income taxes 5,182 4,450

Mortgages, term loans, and credit line - interest payable and interest rate swaps 1,044 1,729

Other items 34,360 31,457

$ 241,336 $ 177,039

Lease intangible liabilities, net, consist of the following at:

December 31, 2020 December 31, 2019

Below-market leases $ 460,895 $ 447,522

Accumulated amortization of below-market leases ( 139,697 ) ( 114,419 )

$ 321,198 $ 333,103

Other liabilities consist of the following at:

December 31, 2020 December 31, 2019

Rent received in advance and other deferred revenue $ 130,231 $ 127,687

Lease liability - operating leases, net 114,559 122,285

Security deposits

Lease liability - financing leases 6,256 5,946

Capital lease obligations

Security deposits 5,817 6,303

$ 256,863 $ 262,221

Investments in Real Estate

We acquire land, buildings and improvements necessary for the successful operations of commercial tenants.

We acquire land, buildings and improvements necessary for the successful operations of our commercial clients.

Acquisitions during 2020 and 2019

Below is a summary of our acquisitions for the year ended December 31, 2020:

Number of Properties

(in millions)

($ in millions)

Weighted Average Lease Term (Years)

Initial Average Cash Lease Yield

Number of Properties Leasable Square Feet Investment

($ in thousands) Weighted Average Lease Term (Years) Initial Average Cash Lease Yield

Year Ended December 31, 2020 (1)

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(in 30 states)

202 5,476,009 $ 1,302,220 14.9 5.8 %

Acquisitions - U.K.

24 2,120,256 920,934 10.8 6.1 %

Total Acquisitions 226 7,596,265 $ 2,223,154 13.2 5.9 %

Properties under Development - U.S.

None of our investments during 2019 caused any one tenant to be 10% or more of our total assets at December 31, 2019 .

All of our 2019 investments in acquired properties are 100 % leased at the acquisition date.

18 1,601,095 84,127 15.3 5.6 %

244 9,197,360 $ 2,307,281 13.2 5.9 %

(1) None of our investments during 2020 caused any one client to be 10% or more of our total assets at December 31, 2020.

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

(2) Represents investments of £ 707.8 million Sterling during the year ended December 31, 2020 converted at the applicable exchange rate on the date of acquisition.

The tenants occupying the new properties operate in 31 industries, and are 94.6 % retail and 5.4 % industrial, based on rental revenue.

Approximately 36 % of the rental revenue generated from acquisitions during 2019 is from investment grade rated tenants, their subsidiaries or affiliated companies.

The $ 3.7 billion invested during 2019 was allocated as follows:

$ 1.1 billion to land, of which $ 28.9 million was related to right of use assets under long-term ground leases, $ 2.1 billion to buildings and improvements, $ 448.3 million to intangible assets related to leases, $ 82.6 million to financing receivables related to certain leases

with above-market terms, $ 46.8 million to intangible liabilities related to below-market leases, and $ 8.4 million to prepaid rent related to certain leases with below-market terms.

There was no contingent consideration associated with these acquisitions.

(3) Our clients occupying the new properties operate in 26 industries and are 86.6 % retail and 13.4 % industrial, based on rental revenue.

Approximately 61 % of the rental revenue generated from acquisitions during 2020 is from our investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the year ended December 31, 2020, which had no associated contingent consideration, were allocated as follows (dollars in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Year Ended December 31, 2020

(USD) (£ Sterling)

$ 337.5 £ 247.1

Buildings and improvements 768.4 258.7

Lease intangible assets (2)

Other assets (3)

Lease intangible liabilities (2)

( 12.9 ) ( 0.7 )

Other liabilities (4)

$ 1,347.6 £ 707.8

land includes £ 88.6 million of right of use assets under long-term ground leases.

(2) The weighted average amortization period for acquired lease intangible assets and liabilities is 15.9 years.

other assets consists of $ 51.7 million of financing receivables with above-market terms and $ 689,000 of right of use assets under ground leases.

other assets consists entirely of right of use assets under ground leases.

other liabilities consists entirely of lease liabilities under ground leases.

The properties acquired during 2020 generated total revenues of $ 54.6 million and net income of $ 19.4 million during the year ended December 31, 2020.

Below is a summary of our acquisitions for the year ended December 31, 2019:

Number of Properties

(in millions)

($ in millions)

Weighted Average Lease Term (Years)

Initial Average Cash Lease Yield

Number of Properties Leasable Square Feet Investment

($ in thousands) Weighted Average Lease Term (Years) Initial Average Cash Lease Yield

Year Ended December 31, 2019 (1)

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(in 45 states)

753 11,630,423 $ 2,860,806 13.0 6.8 %

Acquisitions - U.K.

18 1,583,676 797,846 15.6 5.2 %

Total Acquisitions 771 13,214,099 3,658,652 13.4 6.4 %

Properties under Development - U.S.

None of our investments during 2018 caused any one tenant to be 10% or more of our total assets at December 31, 2018 .

All of our 2018 investments in acquired properties are 100 % leased at the acquisition date.

(2) The tenants occupying the new properties operated in 21 industries, and the property types consisted of 96.3 % retail and 3.7 % industrial, based on rental revenue.

Approximately 59 % of the rental revenue generated from acquisitions during 2018 was from investment grade rated tenants, their subsidiaries or affiliated companies.

The $ 1.8 billion invested during 2018 was allocated as follows:

$ 651.5 million to land, $ 1.0 billion to buildings and improvements, $ 141.0 million to intangible assets related to leases, and $ 39.2 million to intangible liabilities related to leases and other assumed liabilities.

There was no contingent consideration associated with these acquisitions.

18 522,173 56,585 15.1 7.3 %

789 13,736,272 3,715,237 13.5 6.4 %

(1) None of our investments during 2019 caused any one client to be 10% or more of our total assets at December 31, 2019.

All of our 2019 investments in acquired properties were 100 % leased at the acquisition date.

(2) Represents investments of £ 625.8 million Sterling during the year ended December 31, 2019 converted at the applicable exchange rate on the date of acquisition.

(2) Our clients occupying the new properties operated in 31 industries, and are 94.6 % retail and 5.4 % industrial, based on rental revenue.

Approximately 36 % of the rental revenue generated from acquisitions during 2019 was from our investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the year ended December 31, 2019, which had no associated contingent consideration, were allocated as follows (dollars in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Year Ended December 31, 2019

(USD) (£ Sterling)

$ 780.0 £ 251.0

Buildings and improvements 1,776.1 249.3

Lease intangible assets (2)

Other assets (3)

Lease intangible liabilities (4)

( 41.9 ) ( 4.4 )

Other liabilities (5)

$ 2,877.9 £ 625.8

land includes £ 24.9 million of right of use assets under long-term ground leases.

(2) The weighted average amortization period for acquired lease intangible assets is 13.3 years.

(3) U.S other assets consists entirely of financing receivables with above-market terms.

(4) The weighted average amortization period for acquired lease intangible liabilities is 18.1 years.

other liabilities consists entirely of deferred rent on certain below-market leases.

The properties acquired during 2019 generated total revenues of $ 92.0 million and net income of $ 36.9 million during the year ended December 31, 2019.

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.

Since it is possible that a tenant could default on the payment of contractual rent, we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

Since it is possible that a client could default on the payment of contractual rent, we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return.

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During 2020, we capitalized costs of $ 7.0 million on existing properties in our portfolio, consisting of $ 1.8 million for re-leasing costs, $ 198,000 for recurring capital expenditures and $ 5.0 million for non-recurring building improvements.

In comparison, during 2018 , we capitalized costs of $ 17.9 million on existing properties in our portfolio, consisting of $ 3.9 million for re-leasing costs, $ 1.1 million for recurring capital expenditures and $ 12.9 million for non-recurring building improvements.

In comparison, during 2019, we capitalized costs of $ 17.9 million on existing properties in our portfolio, consisting of $ 2.1 million for re-leasing costs, $ 801,000 for recurring capital expenditures and $ 15.0 million for non-recurring building improvements.

Properties with Existing Leases

Of the $ 2.3 billion we invested during 2020, approximately $ 1.86 billion was used to acquire 127 properties with existing leases.

In comparison, of the $ 1.8 billion we invested during 2018 , approximately $ 425.5 million was used to acquire 205 properties with existing leases.

In comparison, of the $ 3.7 billion we invested during 2019, approximately $ 2.72 billion was used to acquire 575 properties with existing leases.

The value of the in-place and above-market leases is recorded to lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to lease intangible liabilities, net on our consolidated balance sheets.

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The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for 2020, 2019, and 2018 were $ 30.9 million, $ 22.1 million, and $ 16.9 million, respectively.

If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense as appropriate.

If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2020 (in thousands):

rental revenue

rental revenue Increase to

2021 $ ( 31,717 ) $ 138,254

2022 ( 30,283 ) 126,762

2023 ( 28,745 ) 114,571

2024 ( 27,164 ) 105,775

2025 ( 26,609 ) 96,398

Thereafter ( 148,610 ) 514,569

Totals $ ( 293,128 ) $ 1,096,329

Revolving Credit Facility and Commercial Paper Program

Credit Facility

In August 2019, we amended and restated our unsecured credit facility, or our credit facility, in order to allow borrowings in multiple currencies under our revolving credit facility.

The amended and restated credit agreement is otherwise substantively consistent with the prior credit agreement entered into in October 2018.

Our credit facility consists of 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 and a $ 250.0 million unsecured term loan due March 2024.

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.

The revolving credit facility allows us to borrow in up to 14 currencies, including U.S.

dollars, and has a $ 1.0 billion expansion option.

Under our credit facility, our investment grade credit ratings as of December 31, 2019 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.

dollars, and has a $ 1.0 billion expansion option, which is subject to obtaining lender commitments.

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

We also have other interest rate options available to us under our credit facility.

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

We also have other interest rate options available to us under our revolving credit facility.

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

At December 31, 2020, credit facility origination costs of $ 7.7 million are included in other assets, net, as compared to $ 11.5 million at December 31, 2019, on our consolidated balance sheet.

These costs are being amortized over the remaining term of our revolving credit facility.

At December 31, 2019 , we had a borrowing capacity of $ 2.3 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 704.3 million , including £ 169.2 million Sterling, as compared to an outstanding balance of $ 252.0 million at December 31, 2018 .

At December 31, 2020, we had a borrowing capacity of $ 3.0 billion available on our revolving credit facility (subject to customary conditions to borrowing) and no outstanding balance, as compared to an outstanding balance of $ 704.3 million, including £ 169.2 million Sterling, at December 31, 2019.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.5 % during 2020 and 3.1 % during 2019.

At December 31, 2019 and 2018 , the weighted average interest rate on borrowings outstanding was 2.2 % and 3.2 % , respectively.

Our credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2019 , we were in compliance with the covenants on our credit facility.

At December 31, 2019, the weighted average interest rate on borrowings outstanding under our revolving credit facility was 2.2 %.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2020, we were in compliance with the covenants on our revolving credit f acility.

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, from time to time, issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $ 1.0 billion.

The commercial paper will rank on a parity in right of payment with all of our other unsecured senior indebtedness outstanding from time to time, including borrowings under our revolving credit facility, our term loan facility and our outstanding senior unsecured notes.

Proceeds from commercial paper borrowings are used for general corporate purposes.

At December 31, 2020, we had no outstanding commercial paper borrowings.

The weighted average interest rate on borrowings under our commercial paper program was 0.3 % from inception of the plan through December 31, 2020.

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

In October 2018, in conjunction with our revolving credit facility, we entered into a $ 250.0 million senior unsecured term loan, which matures in March 2024.

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

The terms of this term loan were not impacted by the amendment and restatement of our credit agreement in August 2019.

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

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

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

The terms of this term loan were not impacted by the amendment and restatement of our credit agreement in August 2019.

In January 2013, in conjunction with our acquisition of American Realty Capital Trust, Inc., or ARCT, we entered into a $ 70.0 million senior unsecured term loan with an initial maturity date of January 2018.

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

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

In conjunction with this term loan, we also entered into an interest rate swap, which, until its termination in January 2018, effectively fixed our per annum interest rate on this term loan at 2.05 % .

In 2018, we entered into two separate six –month extensions of this loan, during which periods the interest was borne at the current one–month LIBOR, plus 0.90 % .

In January 2019, we paid off the outstanding principal and interest on this term loan.

Deferred financing costs of $ 1.2 million incurred in conjunction with the $ 250.0 million term loan maturing June 2020 and $ 1.1 million incurred in conjunction with the $ 250.0 million term loan maturing March 2024 are being amortized over the remaining terms of each respective term loan.

The net balance of these deferred financing costs, which was $ 956,000 at December 31, 2019 and $ 1.4 million at December 31, 2018 , is included within term loans, net on our consolidated balance sheets.

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

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

Deferred financing costs of $ 1.2 million incurred in conjunction with the $ 250.0 million term loan, which matured June 2020, and $ 1.1 million incurred in conjunction with the $ 250.0 million term loan maturing March 2024 are being amortized over the remaining terms of each respective term loan.

The net balance of deferred financing costs at December 31, 2020 of $ 642,000 relates to the $ 250.0 million term maturing March 2024.

The net balance of deferred financing costs at December 31, 2019 of $ 956,000 related to the $ 250.0 million term loan that matured in June 2020 and the $ 250.0 million term loan maturing March 2024.

Mortgages Payable

During 2020, we made $ 108.8 million in principal payments, including the repayment of nine mortgages in full for $ 103.4 million.

During 2019, we made $ 20.7 million in principal payments, including the repayment of one mortgage in full for $ 15.8 million.

During 2018 , we made $ 21.9 million in principal payments, including the repayment of two mortgages in full for $ 17.0 million .

During 2019, we assumed two mortgages totaling $ 130.8 million on 33 properties.

No mortgages were assumed during 2020.

During 2019, we assumed two mortgages totaling $ 130.8 million on 33 properties.

Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions for items such as solvency, bankruptcy, misrepresentation, fraud, misapplication of payments, environmental liabilities, failure to pay taxes, insurance premiums, liens on the property, violations of the single purpose entity requirements, and uninsured losses.

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

The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, was $ 1.3 million at December 31, 2019 and $ 183,000 at December 31, 2018 .

The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, at December 31, 2020 and 2019 was $ 973,000 and $ 1.3 million, respectively.

These costs are being amortized over the remaining term of each mortgage.

The following is a summary of all our mortgages payable as of December 31, 2019 and 2018 , respectively (dollars in thousands):

The following summarizes our mortgages payable as of December 31, 2020 and 2019, respectively (dollars in thousands):

As Of Number of

Properties (1)

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Effective Interest

Maturity Remaining

Balance Unamortized

Finance Costs

Balance, net Mortgage

12/31/2020 68 4.9 % 4.6 % 2.9 $ 299,631 $ 729 $ 300,360

12/31/2019 92 4.9 % 4.6 % 3.1 $ 408,419 $ 1,700 $ 410,119

(1) At December 31, 2020, there were 18 mortgages on 68 properties.

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The mortgages require monthly payments with principal payments due at maturity.

At December 31, 2019 , the mortgages were at fixed interest rates, except for one variable rate mortgage on one property totaling $ 7.1 million , which has been swapped to a fixed interest rate.

At December 31, 2018 , the mortgages were at fixed rates, except for two mortgages on two properties totaling $ 23.3 million .

After factoring in arrangements which limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totaled $ 16.0 million at December 31, 2018 .

(2) Stated interest rates ranged from 3.8 % to 6.9 % at each of December 31, 2019 and December 31, 2018 .

At December 31, 2020, all mortgages were at fixed interest rates.

At December 31, 2019, we had one variable rate mortgage with a principal balance of $ 7.1 million that was swapped to a fixed interest rate.

(2) Stated interest rates ranged from 3.8 % to 6.9 % at each of December 31, 2020 and 2019, respectively.

(3) Effective interest rates ranged from 4.0 % to 5.5 % at December 31, 2020, while effective interest rates ranged from 3.8 % to 7.6 % at December 31, 2019.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 3.0 million and deferred financing costs of $ 1.3 million , as of December 31, 2019 (dollars in millions):

Year of Maturity

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 1.7 million and deferred financing costs of $ 973,000 , as of December 31, 2020 (dollars in millions):

Year of Maturity Principal

Thereafter 10.1

Totals $ 299.6

Notes Payable

Our senior unsecured notes and bonds consist of the following, sorted by maturity date (dollars in millions):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

5.750 % notes, issued in June 2010 and due in January 2021

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3.875 % notes, issued in June 2014 and due in July 2024

3.875% notes, issued April 2018 and due in April 2025

3.875 % notes, issued in April 2018 and due in April 2025

0.750 % notes, issued December 2020 and due in March 2026

4.125 % notes, $ 250 issued in September 2014 and $ 400 issued in March 2017, both due in October 2026

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

1.625 % notes, issued in October 2020 and due December 2030 (2)

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

1.800 % notes, issued in December 2020 and due in March 2033

2.730 % notes, issued in May 2019 and due in May 2034 (2)

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Unamortized net original issuance premiums and deferred financing costs ( 35 ) ( 30 )

$ 8,268 $ 6,288

(1) In January 2021, we completed the early redemption of all $ 950.0 million in principal.

See note 19, Subsequent Events .

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

dollars) of the Sterling-denominated private placement of £ 315.0 million Sterling based on the applicable exchange rate on December 31, 2019 .

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2019 , excluding unamortized net original issuance premiums and deferred financing costs (dollars in millions):

Year of Maturity

dollars) of the October 2020 Sterling-denominated note offering and May 2019 Sterling-denominated private placement of £ 400.0 million and £ 315.0 million, respectively, converted at the applicable exchange rate on December 31, 2020.

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2020, excluding unamortized net original issuance premiums of $ 14.6 million and deferred financing costs of $ 49.2 million (dollars in millions):

Year of Maturity Principal

Thereafter 5,753

Totals $ 8,303

(1) In January 2021, we completed the early redemption of all $ 950.0 million in principal.

See note 19, Subsequent Events .

As of December 31, 2020, the weighted average interest rate on our notes and bonds payable was 3.4 % and the weighted average remaining years until maturity was 8.2 years.

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accordingly, we have not pledged any assets as collateral for these or any other obligations.

Interest on all of the senior note and bond obligations is paid semiannually.

Additionally, with the exception of our £ 400.0 million of 1.625 % senior unsecured

notes issued in October 2020, for which interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

All of these notes and bonds contain various covenants, including:

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

Note Repayments

In January 2020, we repaid our $ 250.0 million of outstanding 5.75 % notes, plus accrued and unpaid interest upon maturity.

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

In January 2021, we completed the early redemption on all $ 950.0 million in principal amount of our outstanding 3.250 % notes due October 2022.

For further information, see note 19, Subsequent Events .

Note Issuances

During the three year period ended December 31, 2020 we issued the following notes and bonds (in millions):

2019 Issuances

Maturity date

Price of par value

Effective yield to

2018 Issuances

2020 Issuances Date of

Issuance Maturity date Principal

issued Price of par value Effective yield to

3.250 % notes (1)

May 2020 January 2031 $ 600 98.99 % 3.36 %

3.250 % notes (1)

July 2020 January 2031 $ 350 108.24 % 2.34 %

1.625 % notes

October 2020 December 2030 £ 400 99.19 % 1.71 %

0.750 % notes

December 2020 March 2026 $ 325 99.19 % 0.91 %

1.800 % notes

December 2020 March 2033 $ 400 98.47 % 1.94 %

2019 Issuances

October 2026 (1)

December 2017

October 2022 (2)

December 2017

March 2047 (3)

(1) This issuance constituted a further issuance of, and formed a single series with the senior notes due 2026 issued in September 2014.

(2) This issuance constituted a further issuance of, and formed a single series with the senior notes due 2022 issued in October 2012.

(3) This issuance constituted a further issuance of, and formed a single series with the senior notes due 2047 issued in March 2017.

The net proceeds from the May 2019 Sterling-denominated private placement of £ 315.0 million approximated $ 398.1 million , as converted at the applicable exchange rate on the closing of the offering, and were used to fund our initial investment in U.K.

2.730 % notes

May 2019 May 2034 £ 315 100.00 % 2.73 %

3.250 % notes

June 2019 June 2029 $ 500 99.36 % 3.33 %

2018 Issuance

3.875 % notes

April 2018 April 2025 $ 500 99.50 % 3.96 %

(1) In July 2020, we issued $ 350.0 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 net proceeds of $ 391.3 million from the December 2020 offering of 1.800 % notes due 2033 and the net proceeds of $ 320.3 million from the December 2020 offering of 0.750 % notes due 2026 were used, along with available cash and additional borrowings, as necessary to redeem in January 2021 all $ 950 million in aggregate principal amount of our outstanding 3.25 % notes due 2022 at the applicable redemption price, plus accrued interest and, to the extent not used for those purposes, to fund investment opportunities and for other general corporate purposes.

The net proceeds from the October 2020 Sterling-denominated offering of £ 400.0 million approximated $ 508.2 million, as converted at the applicable exchange rate on the closing of the offering, and 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 investment opportunities and for other general corporate purposes.

The net proceeds of $ 376.6 million from the July 2020 note offering and the net proceeds of $ 590.0 million from the May 2020 note offering were used to repay borrowings under our credit facility, to fund potential investment opportunities and for other general corporate purposes.

The gross proceeds from the May 2019 Sterling-denominated private placement of £ 315.0 million approximated $ 400.9 million, as converted at the applicable exchange rate on the closing of the offering, and were used to fund our initial investment in U.K.

The net proceeds of $ 493.5 million from the June 2019 note offering and the net proceeds of approximately $ 494.4 million from the April 2018 note offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

The net proceeds of $ 1.3 billion from the December 2017 note offerings were used to redeem all $ 550.0 million aggregate principal amount of our outstanding 2019 notes, including accrued and unpaid interest, and to repay borrowings outstanding under our revolving credit facility and, to the extent not used for those purposes, to fund the development and acquisitions of additional properties and for other general corporate purposes.

The net proceeds of $ 705.2 million from the March 2017 note offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities and for other general corporate purposes.

Note Repayment

In January 2018, we repaid our $ 350.0 million of outstanding 2.000 % notes, plus accrued and unpaid interest upon maturity.

In December 2017, we completed the early redemption on all $ 550.0 million of outstanding 6.75 % notes due August 2019, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $ 42.4 million loss on extinguishment of debt, represents a $ 0.15 dilution of net income per common share for the year ended December 31, 2017.

In September 2017, we repaid our $ 175.0 million of outstanding 5.375 % notes, plus accrued and unpaid interest upon maturity.

Issuances of Common Stock

Issuance of Common Stock in an Overnight Offering

In March 2020, we issued 9,690,500 shares of common stock in an overnight underwritten public offering, including 690,500 shares purchased by the underwriters upon the exercise of their option to purchase to purchase additional shares.

The net proceeds of $ 728.9 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

In May 2019, we issued 12,650,000 shares of common stock in an overnight underwritten public offering.

After deducting underwriting discounts and other offering costs of $ 31.0 million , the net proceeds of $ 845.1 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

We did not issue any shares in an overnight offering in 2018.

In March 2017, we issued 11,850,000 shares of common stock in an overnight offering.

After underwriting discounts and other offering costs of $ 29.8 million , the net proceeds of $ 704.9 million were used to repay borrowings under our credit facility.

The net proceeds of $ 845.4 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

We did no t issue any shares in an underwritten offering in 2018.

In January 2021, we issued 12,075,000 shares of common stock in an underwritten public offering, including 1,575,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

The company used the net proceeds from the offering, along with available cash and additional borrowings, to fund property acquisitions and for general corporate purposes and working capital.

For further information, see note 19, Subsequent Events .

At-the-Market (ATM) Program

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 New York Stock Exchange ("NYSE:

O") at prevailing market prices or at negotiated prices.

At December 31, 2020, we had 15,678,031 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.

The following table outlines common stock issuances pursuant to our ATM program (dollars in millions):

Year Ended December 31,

2020 2019 2018

Shares of common stock issued under the ATM program 17,724,374 17,051,456 19,138,610

Gross proceeds $ 1,094.9 $ 1,274.5 $ 1,125.4

Dividend Reinvestment and Stock Purchase Plan

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Year Ended December 31,

2020 2019 2018

Shares of common stock issued under the DRSPP program 149,289 117,522 116,268

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We did not issue shares under the waiver approval process during 2020, 2019 or 2018.

During 2017, we issued 927,695 shares and raised $ 54.7 million under the waiver approval process.

These shares are included in the total activity for 2017 noted in the table above.

At-the-Market (ATM) Program

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

At December 31, 2019 , we had 33,402,405 shares remaining for future issuance under our ATM program.

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

The following table outlines common stock issuances pursuant to our ATM program (dollars in millions):

Year Ended December 31,

Shares of common stock issued under the ATM program

Gross proceeds

Redemption of Preferred Stock

We issued an irrevocable notice of redemption with respect to our 6.625 % Monthly Income Class F Preferred Stock, or the Class F preferred stock, in March 2017, and, as a result, we incurred a non–cash charge of $ 13.4 million for 2017, representing the Class F preferred stock original issuance costs that we paid in 2012.

Noncontrolling Interests

In January 2013, we completed our acquisition of ARCT.

In January 2013, we completed our acquisition of American Realty Capital Trust, Inc.

Equity issued as consideration for this transaction included common and preferred partnership units issued by Tau Operating Partnership, L.P., or Tau Operating Partnership, the consolidated subsidiary which owns properties acquired through the ARCT acquisition.

In January 2019, we redeemed all 317,022 remaining common units of Tau Operating Partnership, and paid off the outstanding balance and interest on the $ 70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT.

Following the redemption, our taxable REIT subsidiary, Crest Net Lease, obtained a 0.11 % interest in Tau Operating Partnership, and we continue to consolidate the entity.

At December 31, 2018, Tau Operating Partnership and Realty Income, L.P.

were considered variable interest entities, or VIEs, in which we were deemed the primary beneficiary based on our controlling financial interests.

In January 2019, we redeemed all 317,022 remaining Tau Operating Partnership common units held by nonaffiliates for $ 20.2 million and recorded the excess over carrying value of $ 6.9 million as a reduction to common stock and paid in capital.

In conjunction with this redemption, we also paid off the outstanding balance and interest on the $ 70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT.

Following the redemption, our taxable REIT subsidiary, Crest Net Lease, obtained a 0.11 % interest in Tau Operating Partnership, and we hold 100 % of the ownership interests of Tau Operating Partnership, L.P.

While we continue to consolidate the entity, it is no longer considered a VIE.

In 2019 and 2018, we completed the acquisitions of portfolios of properties, both by paying cash and by issuing additional common partnership units in Realty Income, L.P.

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We hold the remaining 98.1 % interests in this entity and consolidate the entity.

Neither of the common partnership units have voting rights.

Both common partnership units are entitled to monthly distributions equal to the amount paid to common stockholders of Realty Income, and are redeemable in cash or Realty Income common stock, at our option, and at a conversion ratio of one to one, subject to certain exceptions.

None of our common partnership units have voting rights.

Common partnership units are entitled to monthly distributions equal to the amount paid to common stockholders of Realty Income, and are redeemable in cash or Realty Income common stock, at our option, and at a conversion ratio of one to one, subject to certain exceptions.

These issuances with redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the balance sheet was appropriate.

We determined that the units meet the requirements to qualify for presentation as permanent equity.

In December 2020, we completed the acquisition of a development property by acquiring a controlling interest in a joint venture.

We are the managing member of this joint venture, and possess the ability to control the business and manage the affairs of this entity.

At December 31, 2020, we and our subsidiaries held an 75.8 % interest, and consolidated this entity in our consolidated financial statements.

In December 2019, we completed the acquisition of nine properties by acquiring a controlling interest in a joint venture.

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Noncontrolling

Interests Total

Carrying value at December 31, 2018 $ 13,356 $ 17,912 $ 968 $ 32,236

Reallocation of equity — 653 — 653

Shares issued in conjunction with acquisition

Redemptions ( 13,356 ) — ( 901 ) ( 14,257 )

Additions to noncontrolling interest — 6,286 5,084 11,370

Distributions — ( 1,219 ) ( 77 ) ( 1,296 )

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(1) 317,022 Tau Operating Partnership units were issued on January 22, 2013.

No units remained outstanding as of December 31, 2019 , and 317,022 remained outstanding as of December 31, 2018 .

(2) 242,007 Realty Income L.P.

No units remained outstanding as of December 31, 2020 and 2019.

(2) 242,007 units were issued on March 30, 2018, 131,790 units were issued on April 30, 2018 and 89,322 units were issued on March 28, 2019.

463,119 and 373,797 units remained outstanding as of December 31, 2019 and 2018, respectively.

At December 31, 2018 , Tau Operating Partnership, Realty Income, L.P.

and an entity acquired during 2016 were considered variable interest entities, or VIEs, in which we were deemed the primary beneficiary based on our controlling financial interests.

In January 2019, we redeemed all 317,022 remaining Tau Operating Partnership units held by nonaffiliates for $ 20.2 million and recorded the excess over carrying value of $ 6.9 million as a reduction to

common stock and paid in capital.

Following the redemption, we hold 100 % of the ownership interests of Tau Operating Partnership, L.P., and while we continue to consolidate the entity, it is no longer considered a VIE.

In July 2019, we purchased the remaining interest in the entity acquired during 2016 for $ 900,000 .

Below is a summary of selected financial data of consolidated VIEs, including the joint venture acquired during 2019, for which we are the primary beneficiary, included in the consolidated balance sheets at December 31, 2019 and December 31, 2018 (in thousands):

December 31, 2019

December 31, 2018

463,119 units remained outstanding as of December 31, 2020 and 2019.

At December 31, 2020 and 2019, respectively, Realty Income, L.P.

and the joint ventures acquired during 2020 and 2019 were considered variable interest entities, or VIEs, in which we were deemed the primary beneficiary based on our controlling financial interests.

Below is a summary of selected financial data of consolidated VIEs included in the consolidated balance sheets at December 31, 2020 and 2019 (in thousands):

December 31, 2020 December 31, 2019

Net real estate $ 635,963 $ 654,305

Total assets 723,668 744,394

Total liabilities 47,962 52,087

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The following is a summary of monthly distributions paid per common share for 2020, 2019 and 2018:

Month 2020 2019 2018

January $ 0.2275 $ 0.2210 $ 0.2125

February 0.2325 0.2255 0.2190

March 0.2325 0.2255 0.2190

April 0.2330 0.2260 0.2195

May 0.2330 0.2260 0.2195

June 0.2330 0.2260 0.2195

July 0.2335 0.2265 0.2200

August 0.2335 0.2265 0.2200

September 0.2335 0.2265 0.2200

October 0.2340 0.2270 0.2205

November 0.2340 0.2270 0.2205

December 0.2340 0.2270 0.2205

Total $ 2.7940 $ 2.7105 $ 2.6305

The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years:

2020 2019 2018

Ordinary income $ 2.2798764 $ 2.1206964 $ 2.0269173

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Total capital gain distribution 0.0238401 — —

Totals $ 2.7940000 $ 2.7105000 $ 2.6305000

At December 31, 2020, a distribution of $ 0.2345 per common share was payable and was paid in January 2021.

At December 31, 2019, a distribution of $ 0.2275 per common share was payable and was paid in January 2020.

Class F Preferred Stock

In April 2017, we redeemed all 16,350,000 shares of our Class F preferred stock.

During the first three months of 2017, we paid three monthly dividends to holders of our Class F preferred stock totaling $ 0.414063 per share, or $ 3.9 million .

In April 2017, we paid a final monthly dividend of $ 0.101215 per share, or $ 1.7 million , which was recorded as interest expense.

For 2017, dividends per share of $ 0.5073368 were characterized as ordinary income and dividends per share of $ 0.0079412 were characterized as total capital gain distribution for federal income tax purposes.

Operating Leases

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states, Puerto Rico and the U.K.

Of the 6,483 properties, 6,452 , or 99.5 % , are single-tenant properties, and the remaining are multi-tenant properties.

Of the 6,592 properties, 6,555 , or 99.4 %, are single-client properties, and the remaining are multi-client properties.

At December 31, 2020, 140 properties were available for lease or sale.

Substantially all leases are net leases where the tenant pays or reimburses us for property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.

Rent based on a percentage of a tenants’ gross sales or percentage rents was $ 8.0 million for 2019 , $ 5.9 million for 2018 and $ 6.1 million for 2017 .

Substantially all of our leases are net leases where our client pays or reimburses us for property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.

Rent based on a percentage of our client's gross sales, or percentage rents, was $ 5.1 million for 2020, $ 8.0 million for 2019 and $ 5.9 million for 2018.

At December 31, 2020, minimum future annual rents to be received on the operating leases for the next five years and thereafter are as follows (dollars in thousands):

Major Tenants - No individual tenant’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2019 , 2018 or 2017 .

2021 $ 1,684,817

2022 1,629,281

2023 1,543,909

2024 1,428,212

2025 1,343,730

Thereafter 8,371,347

Totals $ 16,001,296

Major Clients - No individual client's rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2020, 2019 or 2018.

Gain on Sales of Real Estate

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Year Ended December 31,

2020 2019 2018

Number of properties 126 93 128

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Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our mortgages payable assumed in connection with acquisitions and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):

At December 31, 2019

Carrying value

Estimated fair value

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable and commercial paper borrowings, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our mortgages payable assumed in connection with acquisitions and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):

At December 31, 2020 Carrying value Estimated fair value

Mortgages payable assumed in connection with acquisitions (1)

$ 299.6 $ 309.4

Notes and bonds payable (2)

At December 31, 2018

Carrying value

Estimated fair value

8,302.4 9,324.0

At December 31, 2019 Carrying value Estimated fair value

Mortgages payable assumed in connection with acquisitions (1)

$ 408.4 $ 417.7

Notes and bonds payable (2)

6,317.6 6,826.1

( 1) Excludes non-cash net premiums recorded on the mortgages payable.

The unamortized balance of these net premiums is $ 1.7 million at December 31, 2020, and $ 3.0 million at December 31, 2019.

Also excludes deferred financing costs of $ 1.3 million at December 31, 2019 , and $ 183,000 at December 31, 2018 .

Also excludes deferred financing costs of $ 973,000 at December 31, 2020, and $ 1.3 million at December 31, 2019.

(2) Excludes non-cash original issuance premiums and discounts recorded on notes payable.

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Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy.

We record interest rate swaps on the consolidated balance sheet at fair value.

Prior to our adoption of hedge accounting during October 2018, the change in fair value of interest rate swaps was recognized through interest expense.

Following adoption, changes to fair value are recorded to accumulated other comprehensive income, or AOCI.

These cross-currency swaps were designated as cash flow hedges on their trade date.

Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings over the life of the hedges on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election.

The earnings recognition of excluded components is presented in foreign currency and derivative gains, net on our consolidated statements of income and comprehensive income, which is the same caption item as the hedged transactions.

The following table summarizes the terms and fair values of our derivative financial instruments at December 31, 2019 and December 31, 2018 (dollars in millions):

The following table summarizes the terms and fair values of our derivative financial instruments at December 31, 2020 and 2019 (dollars in millions):

Derivative Type

Hedge Designation

Accounting Classification Hedge Designation

Notional Amount

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Fair Value - asset (liability)

December 31, December 31, December 31, December 31,

2020 2019 2020 2019

Interest rate swap (1)

Derivative Cash flow

$ — $ 7.0 6.03 % 09/25/2012 09/03/2021 $ — $ ( 0.2 )

Interest rate swap

Derivative Cash flow

— 250.0 1.72 % 06/30/2015 06/30/2020 — ( 0.1 )

Interest rate swap

Derivative Cash flow

250.0 250.0 3.04 % 10/24/2018 03/24/2024 ( 22.6 ) ( 14.7 )

Cross-currency swap (2)

Derivative Cash flow

41.6 41.6 (3) 05/20/2019 05/22/2034 ( 5.2 ) ( 2.6 )

Cross-currency swap (2)

Derivative Cash flow

41.6 41.6 (4) 05/20/2019 05/22/2034 ( 5.1 ) ( 2.6 )

Cross-currency swap (2)

Derivative Cash flow

41.6 41.6 (5) 05/20/2019 05/22/2034 ( 5.4 ) ( 2.9 )

Cross-currency swap (2)

Derivative Cash flow

41.6 41.6 (6) 05/20/2019 05/22/2034 ( 5.7 ) ( 3.2 )

Currency exchange swap (2)

Derivative N/A 625.0 — (7) 12/23/2020 01/29/2021 ( 8.2 ) —

Forward-starting swap Derivative Cash flow

75.0 — 2.02 % (8) 06/30/2033 ( 5.0 ) —

Forward-starting swap Derivative Cash flow

75.0 — 1.94 % (8) 11/30/2032 ( 5.2 ) —

Forward-starting swap Derivative Cash flow

25.0 — 1.67 % (8) 11/30/2032 ( 1.1 ) —

Forward-starting swap Derivative Cash flow

125.0 — 1.75 % (8) 06/30/2033 ( 5.2 ) —

Forward-starting swap Hybrid debt Cash flow

125.0 — 1.88 % (8) 11/30/2032 ( 7.9 ) —

Forward-starting swap Hybrid debt Cash flow

75.0 — 2.00 % (8) 06/30/2033 ( 4.9 ) —

$ 1,541.4 $ 673.4 $ ( 81.5 ) $ ( 26.3 )

(1) In connection with the early prepayment of a mortgage loan during the fourth quarter of 2020, the swap was terminated with a payment of $ 0.2 million and we recognized an associated loss on derivative of $ 0.2 million.

(2) Represents British Pound Sterling, or GBP, United States Dollar, or USD, cross-currency swap.

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(6) GBP fixed rates initially at 4.82 % and escalating to 10.96 %, and USD fixed rate at 9.755 %.

(7) The forward GBP-USD exchange rate is 1.35 .

(8) The five treasury rate locks which were entered into during February 2020 were terminated in June 2020 and converted into six forward starting interest rate swaps through a cashless settlement of the terminated treasury rate locks.

We measure our derivatives at fair value and include the balances within other assets and accounts payable and accrued expenses on our consolidated balance sheets.

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Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties.

However, at December 31, 2019 and December 31, 2018, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

However, at December 31, 2020 and 2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we determined that our derivative valuations in their entirety are classified as level two on the three-level valuation hierarchy.

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During 2020, we reclassified $ 11.4 million from AOCI as an increase to interest expense for our interest rate swaps and $ 3.6 million for 2020 in cross-currency swap losses into foreign currency and derivative gains, net.

During 2019, we reclassified $ 3.4 million from AOCI as an increase to interest expense for our interest rate swaps and $ 5.5 million for 2019 in cross-currency swap losses into foreign currency and derivative gains, net.

During 2018, there were no outstanding derivatives designated as hedges and accounted for through AOCI.

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Cash paid for interest was $ 285.6 million in 2020, $ 275.3 million in 2019, and $ 251.5 million in 2018.

Interest capitalized to properties under development was $ 751,000 in 2019 , $ 369,000 in 2018 , and $ 461,000 in 2017 .

Cash paid for income taxes was $ 13.1 million in 2020, $ 4.2 million in 2019, and $ 4.7 million in 2018.

The following non-cash activities are included in the accompanying consolidated financial statements:

During 2020, the fair value of derivatives decreased by $ 55.2 million.

Non-refundable deposits from 2019 of $ 13.8 million were applied to acquisitions during 2020.

As a result of the adoption of Accounting Standards Codifications Topic 842, Leases , on January 1, 2019, we recorded $ 132.0 million of lease liabilities and related right of use assets as lessee under operating leases.

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During 2018, we completed the acquisition of a property using $ 7.5 million in funds that were held in a non-refundable escrow account.

During 2017, we completed the acquisition of a portfolio of properties by entering into a note payable in the amount of $ 125.9 million with the seller, maturing in January 2018.

This note was paid in full at maturity.

Per the requirements of ASU 2016-18 (Topic 230, Statement of Cash Flows ) the following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Cash and cash equivalents shown in the consolidated balance sheets $ 824,476 $ 54,011

Impounds related to mortgages payable (1)

Restricted escrow deposits (1)

Impounds related to mortgages payable (1)

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

$ 850,679 $ 71,005

(1) Included within other assets, net on the consolidated balance sheets (see note 3).

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As a result, these amounts were considered restricted as of the dates presented.

Employee Benefit Plan

We have a 401(k) plan covering substantially all of our employees.

Under our 401(k) plan, employees may elect to make contributions to the plan up to a maximum of 60 % of their compensation, subject to limits under the Code.

We match 50 % of each of our employee’s salary deferrals up to the first 6 % of the employee’s eligible compensation.

Our aggregate matching contributions each year have been immaterial to our results of operations.

Common Stock Incentive Plan

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The 2012 Plan offers our directors and employees an opportunity to own our stock or rights that will reflect our growth, development and financial success.

Under the terms of the 2012 plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 3,985,734 shares.

Under the terms of the 2012 plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units, performance shares and other awards, will be no more than 3,985,734 shares.

The 2012 Plan has a term of ten years from the date it was adopted by our Board of Directors.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 13.7 million during 2019, $ 27.3 million during 2018 (including $ 11.8 million of accelerated equity awards for our former CEO upon his departure from the company), and $ 13.9 million during 2017.

In October 2018, John P.

Case departed as our Chief Executive Officer (CEO) and resigned as a member of our Board of Directors.

In connection with his departure, we entered into a severance agreement with Mr.

Pursuant to the terms of this severance agreement, Mr.

Case received a severance payment, which included both cash and stock compensation components.

The total value of cash, stock compensation and professional fees incurred as a result of this severance was $ 28.3 million ;

however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $ 18.7 million , which was recognized in general and administrative expense on our 2018 consolidated statement of income and comprehensive income, and which represents the incremental costs incurred per the reconciliation below (dollars in thousands):

Stock compensation

Professional fees

Total value of severance

Amount accrued for CEO compensation prior to separation

Incremental severance

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 16.5 million during 2020, $ 13.7 million during 2019 and $ 27.3 million during 2018.

Upon the departure of our former CFO in March 2020, we incurred a severance charge of $ 3.5 million, consisting of $ 1.6 million of cash, $ 1.8 million of share-based compensation expense and $ 58,000 of professional fees.

Upon the departure of our former CEO in October 2018, we incurred a severance charge of $ 28.3 million, consisting of $ 9.8 million of cash, $ 17.9 million of share-based compensation expense and $ 574,000 of professional fees.

The incremental severance of $ 18.7 million consists of the $ 28.3 million total severance charge reduced by $ 9.6 million of compensation accrued prior to separation.

The net amount of accelerated equity awards expensed in 2018 related to his departure was $ 11.8 million.

Restricted Stock

The following table summarizes our common stock grant activity under our 2012 Plan.

2020 2019 2018

Number of shares Weighted average price (1)

Outstanding nonvested shares, beginning of year

259,698 $ 58.39 307,821 $ 53.44 475,768 $ 52.32

Shares granted 103,473 $ 67.84 87,327 $ 69.83 183,952 $ 52.21

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Outstanding nonvested shares, end of each period

219,482 $ 63.69 259,698 $ 58.39 307,821 $ 53.44

(1) Grant date fair value.

The vesting schedule for shares granted to non-employee directors is as follows:

For directors with less than six years of service at the date of grant, shares vest in 33.33 % increments on each of the first three anniversaries of the date the shares of stock are granted;

For directors with six years of service at the date of grant, shares vest in 50 % increments on each of the first two anniversaries of the date the shares of stock are granted;

For directors with seven years of service at the date of grant, shares are 100 % vested on the first anniversary of the date the shares of stock are granted;

• For directors with less than six years of service at the date of grant, shares vest in 33.33 % annual increments upon re-election to the Board at each of the three Annual Meetings of Stockholders following the grant date;

• For directors with six years of service at the date of grant, shares vest in 50 % annual increments upon re-election to the Board at each of the two Annual Meetings of Stockholders following the grant date;

• For directors with seven years of service at the date of grant, shares are 100 % vested upon re-election to the Board in the following year;

• For directors with eight or more years of service at the date of grant, there is immediate vesting as of the date the shares of stock are granted.

During May 2019, we granted 32,000 shares of common stock to the independent members of our Board of Directors, of which 20,000 shares vested immediately, 4,000 shares vest over a one -year service period, and 8,000 shares vest in equal parts over a three -year service period.

In addition, in November 2019, we granted 4,000 shares of common stock to the new member of our Board of Directors, which vests in equal parts over a three -year service period.

Shares granted to employees typically vest annually in equal parts over a four -year service period.

During 2019 , 51,327 shares were granted to our employees, and vest over a four -year service period.

During May 2020, we granted 36,000 shares of restricted stock to the independent members of our Board of Directors, in connection with our annual awards, of which 24,000 shares vested immediately, and 12,000 shares vest in equal parts over a three-year service period.

Our restricted stock awards granted to employees typically vest annually in equal parts over a four-year service period.

During 2020, 67,473 shares were granted to our employees, and vest over a four-year service period, with the exception of 4,541 shares granted to our former CFO, which vested upon his departure from the Company.

As of December 31, 2020, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 8.6 million, which is being amortized on a straight-line basis over the service period of each applicable award.

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The number of performance shares that vest for each of the three years is based on the achievement of the following performance goals:

Weighting for year granted

Performance Awards Metrics 2020 2019 2018

Total shareholder return (“TSR”) relative to MSCI US REIT Index

TSR relative to JP Morgan Net Lease Peers

Total shareholder return (“TSR”) ranking relative to MSCI US REIT Index 70 % 45 % 45 %

TSR ranking relative to J.P.

Morgan Net Lease Peer Group N/A 26 % 26 %

Dividend per share Growth Rate 15 % 16 % 16 %

Debt-to-EBITDA ratio

The performance shares are earned based on our performance, and vest 50 % on the first and second January 1 after the end of the three -year performance period, subject to continued service.

Debt-to-Adjusted EBITDA re Ratio

N/A 13 % 13 %

Net Debt-to-Adjusted EBITDA re Ratio

The performance shares are earned based on our performance related to our metrics above, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service.

The performance period for the 2018 performance awards began on January 1, 2018 and ended on December 31, 2020.

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The following table summarizes our performance share grant activity:

2020 2019 2018

Number of performance shares Weighted average price (1)

Outstanding nonvested shares, beginning of year

304,663 $ 62.25 223,392 $ 58.78 245,309 $ 62.49

Shares granted 136,729 $ 79.98 128,581 $ 65.34 269,868 $ 51.98

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Outstanding nonvested shares, end of each period

291,759 $ 69.73 304,663 $ 62.25 223,392 $ 58.78

(1) Grant date fair value.

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During 2020, 2019 and 2018 we also granted restricted stock units that primarily vest over a four-year service period and have the same economic rights as shares of restricted stock:

restricted stock

2020 2019 2018

Number of restricted stock units Weighted average price (1)

Outstanding nonvested shares, beginning of year

15,511 $ 59.82 14,968 $ 54.62 24,869 $ 55.97

Shares granted 9,966 $ 78.79 5,482 $ 69.58 8,383 $ 49.96

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Outstanding nonvested shares, end of each period

18,670 $ 70.38 15,511 $ 59.82 14,968 $ 54.62

(1) Grant date fair value.

The amount of share-based compensation for the restricted stock units is based on the fair value of our common stock as the grant date.

The amount of share-based compensation for the restricted stock units is based on the fair value of our common stock at the grant date.

The expense amortization period is the lesser of the four-year service period or the period over which the awardee reaches the qualifying retirement age.

For employees who have already met the qualifying retirement age, restricted stock units are fully expensed at the grant date.

As of December 31, 2020, the remaining share-based compensation expense related to the restricted stock units totaled $ 399,000 and is being recognized on a straight-line basis over the service period.

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We evaluate performance and make resource allocation decisions on an industry by industry basis.

For financial reporting purposes, we have grouped our tenants into 50 activity segments.

For financial reporting purposes, we have grouped our clients into 51 activity segments.

All of the properties are incorporated into one of the applicable segments.

Unless otherwise specified, all segments listed below are located within the U.S.

Because almost all of our leases require the tenant to pay or reimburse us for operating expenses, rental revenue is the only component of segment profit and loss we measure.

The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants (dollars in thousands):

Because substantially all of our leases require our clients to pay or reimburse us for operating expenses, rental revenue is the only component of segment profit and loss we measure.

Our investments in industries outside of the U.S.

are managed as separate operating segments.

The following tables set forth certain information regarding the properties owned by us, classified according to the business of our respective clients (dollars in thousands):

Assets, as of December 31:

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Automotive service $ 328,340 $ 288,453

Automotive tire services

Beverages 347,366 279,373

Child care 216,718 208,326

Convenience stores 2,101,005 2,057,157

Dollar stores 1,420,210 1,427,950

Drug stores 1,555,106 1,618,854

Financial services 374,508 389,634

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Grocery stores - U.S.

907,634 922,349

Grocery stores - U.K.

1,131,760 663,210

Health and fitness 1,050,791 1,019,796

Home improvement

Home improvement - U.S.

608,222 495,305

Restaurants-casual dining 515,226 576,526

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Theaters - U.S.

767,117 878,103

Transportation services 729,640 769,614

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Automotive service 55,018 58,854

Automotive tire services

Beverages 9,401 1,509

Child care 19,848 21,997

Convenience stores 121,151 131,808

Dollar stores 77,176 82,701

Drug stores 167,975 183,319

Financial services 14,611 17,130

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Grocery stores - U.S.

181,764 180,197

Grocery stores - U.K.

282,211 153,407

Health and fitness 67,537 74,428

Home improvement

Home improvement - U.S.

97,228 72,979

Restaurants-casual dining 20,553 23,289

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Theaters - U.S.

28,292 36,089

Transportation services 53,902 66,055

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Other corporate assets 1,544,474 564,641

Total assets $ 20,740,285 $ 18,554,796

Revenue for the years ended December 31, 2020 2019 2018

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Automotive service $ 35,090 $ 32,365 $ 28,303

Automotive tire services

Beverages 32,771 31,807 31,488

Child care 35,643 31,749 21,865

Convenience stores 189,658 166,755 142,194

Dollar stores 126,719 102,695 94,782

Drug stores 140,993 127,853 129,565

Financial services 30,531 30,189 29,429

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Grocery stores - U.S.

78,106 69,691 63,594

Grocery stores - U.K.

51,459 17,819 —

Health and fitness 104,744 105,896 94,638

Home improvement

Home improvement - U.S.

46,392 42,351 37,939

Restaurants-casual dining 46,265 45,238 46,171

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Theaters - U.S.

78,653 87,698 70,560

Transportation services 64,131 66,500 63,565

Wholesale club 38,713 38,117 37,571

Other non-reportable segments and tenant reimbursements

Other non-reportable segments and contractually obligated reimbursements by our clients 402,150 360,711 328,168

Rental (including reimbursable) 1,639,533 1,484,818 1,321,546

Other 12,092 6,773 6,292

Total revenue $ 1,651,625 $ 1,491,591 $ 1,327,838

(1) During 2019, we acquired 17 grocery stores and one theater located in the U.K.

Our investments in industries outside of the U.S.

are managed as separate operating segments.

theater is included in other non-reportable segments.

Commitments and Contingencies

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Ground Leases

Our Tenants (2)

Our Clients (2)

2021 $ 1.6 $ 13.7 $ 15.3

2022 1.6 13.6 15.2

2023 1.6 13.7 15.3

2024 1.6 13.8 15.4

2025 1.4 13.5 14.9

Thereafter 18.8 55.9 74.7

Total $ 26.6 $ 124.2 $ 150.8

Present value adjustment for remaining lease payments (3)

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(1) Realty Income currently pays the ground lessors directly for the rent under the ground leases.

Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases.

In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

(2) Our clients, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases.

In the event a client fails to pay the ground lease rent, we are primarily responsible.

(3 ) The range of discount rates used to calculate the present value of the lease payments is 2.42 % to 5.50 %.

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The discount rates are specific for individual leases primarily based on the lease term.

On January 1, 2019, we adopted Topic 842, Leases using the effective date method and elected the practical expedients available for implementation under the standard.

As a result, on December 31, 2018 we do not have a lease liability for operating leases.

At December 31, 2018 , minimum future rental payments for the next five years and thereafter were as follows (dollars in millions):

Ground Leases

Realty Income (1)

Ground Leases

Our Tenants (2)

Realty Income currently pays the ground lessors directly for the rent under the ground leases.

Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases.

In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

Subsequent Events

• In January and February 2021, we declared a dividend of $ 0.2345 , which will be paid in February 2021 and March 2021, respectively.

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

Also in January 2020, we announced that Paul Meurer, our EVP, Chief Financial Officer and Treasurer, is leaving the company.

To ensure a smooth transition, Mr.

Meurer will serve as a senior advisor to the company through March 31, 2020.

The company has begun a search for a new Chief Financial Officer.

• In January 2021, we completed the early redemption of our outstanding 3.250 % notes due October 2022, for a redemption price of approximately $ 1.004 billion, consisting of the principal of $ 950.0 million, call premium of $ 47.2 million and accrued and unpaid interest of $ 7.1 million.

• In January 2021, we raised $ 669.6 million from the issuance of 12,075,000 shares of common stock in an underwritten public offering, which included the underwriters' options to purchase 1,575,000 additional shares.

REALTY INCOME CORPORATION AND SUBSIDIARIES

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(not covered by Report of Independent Registered Public Accounting Firm)

Quarter Second

Quarter Third

Quarter Fourth

Total revenue (1)

$ 414,341 $ 414,636 $ 404,572 $ 418,076 $ 1,651,625

Depreciation and amortization expense 164,585 168,328 169,084 175,041 677,038

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Other expenses (2)

53,811 62,222 151,611 72,099 339,743

Net income 147,143 108,070 23,143 118,150 396,506

Net income available to common stockholders 146,827 107,824 22,904 117,931 395,486

Net income per common share

Basic and diluted

Basic 0.44 0.31 0.07 0.33 1.15

Diluted 0.44 0.31 0.07 0.33 1.14

Dividends paid per common share 0.6925 0.6990 0.7005 0.7020 2.7940

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Other expenses (2)

42,861 54,143 52,139 52,269 201,412

Net income 111,230 95,420 101,275 129,553 437,478

Net income available to common stockholders 110,942 95,194 101,049 129,297 436,482

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Dividends paid per common share 0.6720 0.6780 0.6795 0.6810 2.7105

(1) Total revenue for the second half of 2020 was negatively impacted by rent reserves recorded as reductions of rental revenue.

(2) Other expenses can vary among quarters, primarily due to provisions for impairment, gains on sales of real estate, and foreign currency gains and losses.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data