What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 277 added, 224 removed, 770 unchanged (39% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share and share count data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

ASSETS (unaudited)

23 unchanged sentences

Stockholders’ equity:

Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 380,174,042 and 361,303,445 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 404,206,076 and 361,303,445 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

17,449,122 14,700,050

10 unchanged sentences

(dollars in thousands, except per share data) (unaudited)

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

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

2021 2020 2021 2020

18 unchanged sentences

Amounts available to common stockholders per common share:

Basic and diluted $ 0.33 $ 0.31 $ 0.59 $ 0.75

Net Income, basic and diluted $ 0.34 $ 0.07 $ 0.94 $ 0.81

Weighted average common shares outstanding:

10 unchanged sentences

(dollars in thousands) (unaudited)

Three Months Ended June 30, 2021 and 2020

Three Months Ended September 30, 2021 and 2020

capital Distributions

net income Accumulated

comprehensive loss Total

comprehensive income (loss) Total

stockholders’

1 unchanged sentence

interests Total

Balance, March 31, 2021 373,509,822 $ 15,371,016 $ ( 3,827,660 ) $ ( 8,484 ) $ 11,534,872 $ 32,141 $ 11,567,013

Balance, June 30, 2021 380,174,042 $ 15,827,231 $ ( 3,968,333 ) $ ( 19,366 ) $ 11,839,532 $ 34,147 $ 11,873,679

Net income — — 134,996 — 134,996 280 135,276

Other comprehensive loss — — — ( 10,882 ) ( 10,882 ) — ( 10,882 )

Other comprehensive income — — — 18,290 18,290 — 18,290

Distributions paid and payable — — ( 279,616 ) — ( 279,616 ) ( 407 ) ( 280,023 )

Share issuances, net of costs 24,030,435 1,618,463 — — 1,618,463 — 1,618,463

Contributions by noncontrolling interests — — — — — 2,106 2,106

Share-based compensation, net 1,599 3,428 — — 3,428 — 3,428

Balance, June 30, 2021

Balance, September 30, 2021

404,206,076 $ 17,449,122 $ ( 4,112,953 ) $ ( 1,076 ) $ 13,335,093 $ 34,020 $ 13,369,113

Balance, March 31, 2020 343,402,030 $ 13,604,055 $ ( 3,173,468 ) $ ( 42,572 ) $ 10,388,015 $ 29,624 $ 10,417,639

Balance, June 30, 2020 345,023,421 $ 13,704,121 $ ( 3,306,588 ) $ ( 53,084 ) $ 10,344,449 $ 29,470 $ 10,373,919

Net income — — 22,904 — 22,904 239 23,143

Other comprehensive loss — — — ( 10,512 ) ( 10,512 ) — ( 10,512 )

Other comprehensive income — — — 638 638 — 638

Distributions paid and payable — — ( 243,837 ) — ( 243,837 ) ( 401 ) ( 244,238 )

Share issuances, net of costs 5,571,223 343,335 — — 343,335 — 343,335

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

Share-based compensation, net

1,225 2,991 — — 2,991 — 2,991

Balance, June 30, 2020

Balance, September 30, 2020

350,595,869 $ 14,050,494 $ ( 3,527,521 ) $ ( 52,446 ) $ 10,470,527 $ 29,261 $ 10,499,788

Six Months Ended June 30, 2021 and 2020

Nine Months Ended September 30, 2021 and 2020

capital Distributions

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Share-based compensation, net 124,781 6,033 — — 6,033 — 6,033

Balance, June 30, 2021

Balance, September 30, 2021

404,206,076 $ 17,449,122 $ ( 4,112,953 ) $ ( 1,076 ) $ 13,335,093 $ 34,020 $ 13,369,113

4 unchanged sentences

Share issuances, net of costs 16,851,689 1,171,107 — — 1,171,107 — 1,171,107

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

Share-based compensation, net 125,074 5,491 — — 5,491 — 5,491

Balance, June 30, 2020

Balance, September 30, 2020

350,595,869 $ 14,050,494 $ ( 3,527,521 ) $ ( 52,446 ) $ 10,470,527 $ 29,261 $ 10,499,788

3 unchanged sentences

(dollars in thousands) (unaudited)

Six months ended June 30,

Nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Amortization of share-based compensation

12,484 13,420

Non-cash revenue adjustments

24 unchanged sentences

123,533 181,925

Purchase of short-term investment — ( 300,000 )

Insurance and other proceeds received

39 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

September 30, 2021

Basis of Presentation

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Unless otherwise indicated, all dollar amounts are expressed in United States (U.S.) dollars.

At June 30, 2021 we owned 6,761 properties, located in all 50 U.S.

states, Puerto Rico and the United Kingdom (U.K.), consisting of approximately 118.3 million leasable square feet.

At September 30, 2021 we owned 7,018 properties, located in all 50 U.S.

states, Puerto Rico, the United Kingdom (U.K.) and Spain, consisting of approximately 125.0 million leasable square feet.

Summary of Significant Accounting Policies and Procedures

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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 probable.

The majority of concessions granted to our clients during 2020 and the six months ended June 30, 2021 as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged.

If a company subsequently concludes collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized.

The majority of concessions granted to our clients during 2020 and the nine months ended September 30, 2021 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 guidance provided by the Financial Accounting Standards Board (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 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 six months ended June 30, 2021.

Similarly, rent abatements granted, which are also accounted

for as lease modifications, impacted our rental revenue by an insignificant amount for the six months ended June 30, 2021.

impact to rental revenue for nine months ended September 30, 2021.

Similarly, rent abatements granted, which are also accounted for as lease modifications, impacted our rental revenue by an insignificant amount for the nine months ended September 30, 2021.

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):

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

References to reserve reversals recorded as increases to rental revenue include amounts where the accounting for recognition of rental revenue and straight-line rental revenue has been moved from the cash to the accrual basis.

The following table summarizes reserves and reserve reversals to rental revenue (dollars in millions):

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

2021 2020 2021 2020

Rental revenue reserves $ 7.5 $ 6.4 $ 15.8 $ 7.4

Straight-line rent reserves 0.7 2.1 1.2 2.8

Total rental revenue reserves $ 8.2 $ 8.5 $ 17.0 $ 10.2

As of June 30, 2021, 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.

Rental revenue reserves (reserve reversals) $ ( 0.8 ) $ 21.8 $ 15.0 $ 29.3

Straight-line rent reserves (reserve reversals) ( 2.3 ) 2.3 ( 1.1 ) 5.1

Total rental revenue reserves (reserve reversals) $ ( 3.1 ) $ 24.1 $ 13.9 $ 34.4

As of September 30, 2021, 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.

Newly Issued Accounting Standards.

In July 2021, the FASB issued ASU 2021-05 establishing Topic 842, Lessors - Certain Leases with Variable Lease Payments .

ASU 2021-05 improves ASC 842 classification guidance as it relates to a lessor's accounting for certain leases with variable lease payments.

This guidance requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss.

This guidance is effective for reporting periods beginning after December 15, 2021, with early adoption permitted.

We are currently evaluating the impact of the adoption of ASU 2021-05 on our consolidated financial statements.

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

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Reclassification.

For the three months ended June 30, 2021, we began presenting 'Income taxes,' which was previously presented in 'Expenses,' below a newly captioned subtotal for 'Income before income taxes' within our consolidated statements of income and comprehensive income.

Starting with the three and six months ended June 30, 2021, we began presenting 'Income taxes,' which was previously presented in 'Expenses,' below a newly captioned subtotal for 'Income before income taxes' within our consolidated statements of income and comprehensive income.

Prior year amounts have been reclassified to conform to the current year presentation.

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On April 29, 2021, we entered into an Agreement and Plan of Merger, as amended, or the Merger Agreement, with VEREIT, Inc., or VEREIT, its operating partnership, VEREIT Operating Partnership, L.P., or VEREIT OP, and two newly formed wholly-owned subsidiaries of us.

Pursuant to the terms of the Merger Agreement, (i) one of the newly formed subsidiaries of us will merge with and into VEREIT OP, with VEREIT OP as the surviving entity, which we refer to as the Partnership Merger, and (ii) immediately thereafter, VEREIT will merge with and into the other newly formed subsidiary of us, with our subsidiary as the surviving corporation, which we refer to as the Merger and, together with the Partnership Merger, the Mergers.

Pursuant to the terms of the Merger Agreement and subject to the terms thereof, upon the consummation of the Mergers, (i) each outstanding share of VEREIT common stock, and each outstanding common partnership unit of VEREIT OP owned by any of its partners other than VEREIT, Realty Income or their respective affiliates, will automatically be converted into 0.705 of a newly issued share of our common stock, subject to possible adjustment as provided in the Merger Agreement, (ii) each outstanding Series F preferred partnership unit of VEREIT OP owned by a partner other than VEREIT shall be converted into the right to receive $ 25.00 , plus the accumulated and unpaid distributions described in the Merger Agreement, and (iii) each outstanding Series F preferred partnership unit of VEREIT OP owned by VEREIT will remain outstanding as a preferred partnership unit and each outstanding common partnership unit of VEREIT OP owned by VEREIT, Realty Income or their respective affiliates will remain outstanding as a common partnership unit in the surviving entity of VEREIT OP.

Immediately prior to the Mergers, VEREIT will issue a redemption notice to redeem each share of issued and outstanding VEREIT Series F preferred stock at its redemption price in accordance with its terms.

In connection with the Mergers, we and VEREIT intend to contribute some or all of our office real estate properties to a newly formed, wholly owned subsidiary, which we refer to as OfficeCo, and, following the Mergers, for us to

distribute the outstanding voting shares of common stock of OfficeCo to our stockholders (including former VEREIT stockholders who receive shares of our common stock in the Mergers) on a pro rata basis, which we refer to as the Spin-Off.

Following the consummation of the Spin-Off, we and VEREIT intend for OfficeCo to operate as a separate, publicly-traded REIT.

Subject to the terms and conditions of the Merger Agreement, we and VEREIT may also or alternatively seek to sell some or all of the office real estate properties in connection with the closing of the Mergers or choose to retain some or all of the OfficeCo properties.

The Merger Agreement contains customary covenants, representations, and warranties, as well as certain termination rights for VEREIT and us, in each case, as more fully described in the Merger Agreement.

The consummation of the Mergers is also subject to certain customary closing conditions, including receipt of the approval by our stockholders and the stockholders of VEREIT.

In addition, we will not be obligated to consummate the Mergers before January 29, 2022 unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Mergers.

If this condition is not satisfied or waived by us by January 29, 2022, and all other conditions to closing have been satisfied, the parties will be obligated to close the Mergers, regardless of whether the Spin-Off is ready to be consummated.

Likewise, the Spin-Off is subject to various conditions and uncertainties and we and VEREIT may elect to sell some or all of the applicable office properties before the Spin-Off and we may elect not to proceed with the Spin-Off at all.

In connection with the Merger, we have filed a registration statement on Form S-4 (File No.

333-256772), declared effective by the SEC on June 29, 2021, that includes a joint proxy statement of Realty Income and VEREIT.

Realty Income and VEREIT have each scheduled special meetings of their respective stockholders to be held on August 12, 2021 in connection with the Mergers and related transactions.

Realty Income stockholders will be asked to consider and vote on a proposal to approve the issuance of Realty Income common stock in the Mergers pursuant to the Merger Agreement.

VEREIT stockholders will be asked to consider and vote on a proposal to approve the Merger, on the terms and subject to the conditions of the Merger Agreement and a proposal to approve, by advisory (non-binding) vote, the compensation that may be paid or become payable to the named executive officers of VEREIT in connection with the Merger.

Pursuant to the terms of the Merger Agreement, (i) one of the newly formed subsidiaries of us agreed to merge with and into VEREIT OP, with VEREIT OP as the surviving entity, which we refer to as the Partnership Merger, and (ii) immediately thereafter, VEREIT agreed to merge with and into the other newly formed subsidiary of us, with our subsidiary as the surviving corporation, which we refer to as the Merger and, together with the Partnership Merger, the Mergers.

On November 1, 2021, we completed our acquisition of VEREIT, and the Mergers were consummated.

converted into 0.705 of newly issued shares of our common stock, and (ii) each VEREIT OP outstanding common unit owned by VEREIT, Realty Income or their respective affiliates remained outstanding as partnership interests in the surviving entity.

For more information, see Note 22, Subsequent Events .

Following the Mergers, we intend to contribute certain of our office real estate properties to a newly formed, wholly owned subsidiary, Orion Office REIT, Inc., or Orion, and distribute all of the outstanding shares of Orion common stock to our stockholders (including legacy VEREIT stockholders who received shares of our common stock in the Mergers) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on the applicable record date, which we refer to as the Orion Divestiture.

We have currently set a record date for the distribution of shares in the Orion Divestiture for November 2, 2021 and expect the distribution to occur on November 12, 2021.

Following the consummation of the Orion Divestiture, Orion will operate as a separate, independent public company.

Merger-related Costs

In conjunction with our proposed acquisition of VEREIT, we incurred approximately $ 13.3 million of merger-related transaction costs during the three and six months ended June 30, 2021.

In conjunction with our acquisition of VEREIT, we incurred approximately $ 16.8 million and $ 30.1 million of merger-related transaction costs during the three and nine months ended September 30, 2021, respectively.

The merger-related costs incurred to date primarily consist of advisory fees, attorney fees, accountant fees and SEC filing fees.

In addition, we have engaged service providers, including investment banks and advisors, to help us negotiate the terms of the Merger and to advise us on other merger-related matters.

In connection with these services, we expect to be required to pay success-based fees to the extent that certain conditions, including the closing of the Merger and consummation of the Spin-Off and/or sale of OfficeCo business, are met.

As of June 30, 2021, we expect to incur approximately $ 18.0 million of such success fees.

As closing of the Merger has not occurred, no such amounts have been paid or accrued through June 30, 2021.

If closing of the Merger does not occur, we would not expect to be required to pay these fees.

As of September 30, 2021, we expect to incur approximately $ 19.0 million of such success fees.

Litigation Relating to the Mergers

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Furthermore, the Jenkins Complaint also alleges that:

(1) members of the VEREIT board of directors breached their fiduciary duties by entering into the transactions contemplated by the Merger Agreement through a flawed and unfair process and by failing to disclose all material information to VEREIT’s stockholders;

all material information to VEREIT’s stockholders;

and (2) VEREIT, Realty Income, Merger Sub 1 and Merger Sub 2 each aided and abetted such breach of fiduciary duty by the VEREIT board of directors.

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We have determined that there is a reasonable possibility that we and/or VEREIT will incur losses associated with the Complaints and Demand letter, though the amount of the reasonably possible loss or range of losses is not expected to be material.

Accordingly, no accrual for merger-related litigation matters has been recorded as of June 30, 2021.

Accordingly, no accrual for merger-related litigation matters has been recorded as of September 30, 2021.

However, litigation is inherently uncertain and there can be no assurance regarding the likelihood that the defendants’ defense of the actions will be successful.

The outcome of these lawsuits can’t be predicted and could have a significant impact on the timing or our ability to close the Merger.

Additional lawsuits arising out of the Mergers may also be filed in the future.

The outcome of these lawsuits can’t be predicted and additional lawsuits arising out of the Mergers may also be filed in the future.

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

Accounts Receivable, net, consist of the following at:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Straight-line rent receivables, net $ 211,522 $ 174,074

2 unchanged sentences

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

In-place leases

8 unchanged sentences

Other assets, net, consist of the following at:

June 30, 2021 December 31, 2020

Financing receivables $ 165,604 $ 131,291

September 30, 2021 December 31, 2020

Right of use asset - operating leases, net $ 375,685 $ 112,049

Financing receivables 200,041 131,291

Right of use asset - financing leases 162,919 118,585

1 unchanged sentence

Restricted escrow deposits 28,141 21,220

Goodwill 14,017 14,180

Prepaid expenses 16,112 11,795

Non-refundable escrow deposits 12,153 1,000

Goodwill 13,947 14,180

Corporate assets, net 8,203 8,598

Non-refundable escrow deposits 5,432 1,000

Credit facility origination costs, net 5,137 7,705

3 unchanged sentences

Accounts payable and accrued expenses consist of the following at:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Notes payable - interest payable $ 65,873 $ 83,219

9 unchanged sentences

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Below-market leases

4 unchanged sentences

Other liabilities consist of the following at:

June 30, 2021 December 31, 2020

Rent received in advance and other deferred revenue $ 153,020 $ 130,231

September 30, 2021 December 31, 2020

Lease liability - operating leases, net $ 185,659 $ 114,559

Rent received in advance and other deferred revenue 156,471 130,231

Lease liability - financing leases 35,677 6,256

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

Acquisitions During the Six Months Ended June 30, 2021 and 2020

Below is a summary of our acquisitions for the six months ended June 30, 2021:

Acquisitions During the Nine Months Ended September 30, 2021 and 2020

Below is a summary of our acquisitions for the nine months ended September 30, 2021:

Properties Leasable

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(Years) Initial Average Cash Lease Yield (1)

Six months ended June 30, 2021 (2)

Nine months ended September 30, 2021 (2)

Acquisitions - U.S.

1 unchanged sentence

415 9,226,363 $ 2,073,101 13.8 5.5 %

Acquisitions - U.K.

Acquisitions - Europe (U.K.

71 5,217,192 1,520,816 10.5 5.5 %

Total acquisitions 486 14,443,555 $ 3,593,917 12.4 5.5 %

Properties under development - U.S.

Properties under development (3)

50 2,126,955 181,957 15.8 5.9 %

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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.

Contractual net operating income used in the calculation of initial average cash yield for the six months ended June 30, 2021 includes approximately $ 850,000 received as settlement credits for four properties acquired as reimbursement of free rent periods.

Contractual net operating income used in the calculation of initial average cash yield includes approximately $ 3.2 million received as settlement credits for 35 properties as reimbursement of free rent periods for the nine months ended September 30, 2021.

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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estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.

(2) None of our investments during the six months ended June 30, 2021 caused any one client to be 10% or more of our total assets at June 30, 2021.

All of our investments in acquired properties during the six months ended June 30, 2021 are 100 % leased at the acquisition date.

(3) Represents investments of £ 715.1 million Sterling during the six months ended June 30, 2021, converted at the applicable exchange rate on the date of acquisition.

(4) Our clients occupying the new properties operate in 28 industries, and are 75.8 % retail and 24.2 % industrial, based on rental revenue.

Approximately 47 % of the rental revenue generated from acquisitions during the six months ended June 30, 2021 is from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the six months ended June 30, 2021, which had no associated contingent consideration, were allocated as follows (amounts in millions):

(2) None of our investments during the nine months ended September 30, 2021 caused any one client to be 10% or more of our total assets at September 30, 2021.

(3) Includes one U.K.

development property that represents an investment of £ 4.7 million Sterling during the nine months ended September 30, 2021, converted at the applicable exchange rate on the funding date.

(4) Our clients occupying the new properties are 80.2 % retail and 19.8 % industrial, based on rental revenue.

Approximately 43 % of the rental revenue generated from acquisitions during the nine months ended September 30, 2021 is from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the nine months ended September 30, 2021, which had no associated contingent consideration, were allocated as follows (amounts in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Six months ended June 30, 2021

(USD) (£ Sterling)

Acquisitions - Spain

Nine months ended September 30, 2021

(USD) (£ Sterling) (€ Euro)

$ 621.0 £ 283.9 € 36.6

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Lease intangible assets (2)

350.4 173.5 23.3

Other assets (3)

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(2) The weighted average amortization period for acquired lease intangible assets is 13.0 years.

other assets consists of financing receivables with above-market terms and a right-of-use asset accounted for as a finance lease.

other assets consists of $ 66.9 million of financing receivables with above-market terms, $ 41.7 million of right-of-use assets accounted for as finance leases, $ 5.5 million in investments in sales-type leases, and $ 265.2 million of right of use assets under ground leases.

other assets consists of £ 2.7 million of financing receivables with above-market terms and £ 17.5 million of right-of-use assets accounted for as finance leases.

(4) The weighted average amortization period for acquired lease intangible liabilities is 18.5 years.

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

other liabilities consists of $ 21.5 million of deferred rent on certain below-market leases and $ 100.7 million of lease liabilities under ground leases.

other liabilities consists entirely of a GBP mortgage premium.

The properties acquired during the six months ended June 30, 2021 generated total revenues of $ 24.9 million and net income of $ 6.1 million during the six months ended June 30, 2021.

Below is a summary of our acquisitions for the six months ended June 30, 2020:

The properties acquired during the nine months ended September 30, 2021 generated total revenues of $ 67.4 million and net income of $ 12.9 million during the nine months ended September 30, 2021.

Below is a summary of our acquisitions for the nine months ended September 30, 2020:

Properties Leasable Square Feet Investment

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(Years) Initial Average Cash Lease Yield

Six months ended June 30, 2020 (1)

Nine months ended September 30, 2020 (1)

Acquisitions - U.S.

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180 5,051,879 $ 1,298,853 13.1 6.3 %

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

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

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

(3) Our clients occupying the new properties operated in 17 industries, and are 96.5 % retail and 3.5 % industrial, based on rental revenue.

Approximately 37 % of the rental revenue generated from acquisitions during the six months ended June 30, 2020 was from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the six months ended June 30, 2020, which had no associated contingent consideration, were allocated as follows (amounts in millions):

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

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

(3) Our clients occupying the new properties are 96.9 % retail and 3.1 % industrial, based on rental revenue.

Approximately 56 % of the rental revenue generated from acquisitions during the nine months ended September 30, 2020 was from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the nine months ended September 30, 2020, which had no associated contingent consideration, were allocated as follows (amounts in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Six months ended June 30, 2020

Nine months ended September 30, 2020

(USD) (£ Sterling)

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(2) The weighted average amortization period for acquired lease intangible assets is 17.5 years.

other assets consists of $ 810,000 of financing receivables with above-market terms and $ 689,000 of right of use assets under ground leases.

other assets consists of $ 19.1 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.

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other liabilities consists entirely of lease liabilities under ground leases.

The properties acquired during the six months ended June 30, 2020 generated total revenues of $ 13.6 million and net income of $ 4.6 million during the six months ended June 30, 2020.

The properties acquired during the nine months ended September 30, 2020 generated total revenues of $ 27.5 million and net income of $ 9.4 million during the nine months ended September 30, 2020.

Investments in Existing Properties

During the six months ended June 30, 2021, we capitalized costs of $ 4.3 million on existing properties in our portfolio, consisting of $ 827,000 for re-leasing costs, $ 51,000 for recurring capital expenditures, and $ 3.4 million for non-recurring building improvements.

In comparison, during the six months ended June 30, 2020, we capitalized costs of $ 4.4 million on existing properties in our portfolio, consisting of $ 1.1 million for re-leasing costs, $ 23,000 for recurring capital expenditures, and $ 3.3 million for non-recurring building improvements.

During the nine months ended September 30, 2021, we capitalized costs of $ 11.1 million on existing properties in our portfolio, consisting of $ 2.0 million for re-leasing costs, $ 416,000 for recurring capital expenditures, and $ 8.7 million for non-recurring building improvements.

In comparison, during the nine months ended September 30, 2020, we capitalized costs of $ 5.1 million on existing properties in our portfolio, consisting of $ 1.0 million for re-leasing costs, $ 126,000 for recurring capital expenditures, and $ 4.0 million for non-recurring building improvements.

Properties with Existing Leases

Of the $ 2.16 billion we invested during the six months ended June 30, 2021, approximately $ 1.81 billion was used to acquire 143 properties with existing leases.

In comparison, of the $ 640.2 million we invested during the six months ended June 30, 2020, approximately $ 500.3 million was used to acquire 57 properties with existing leases.

Of the $ 3.78 billion we invested during the nine months ended September 30, 2021, approximately $ 3.17 billion was used to acquire 339 properties with existing leases.

In comparison, of the $ 1.3 billion we invested during the nine months ended September 30, 2020, approximately $ 1.0 billion was used to acquire 96 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.

The values of the in-place leases are amortized as depreciation and amortization expense.

The amounts amortized to expense for all of our in-place leases, for the six months ended June 30, 2021 and 2020 were $ 77.5 million and $ 66.3 million, respectively.

The amounts amortized to expense for all of our in-place leases, for the nine months ended September 30, 2021 and 2020 were $ 123.7 million and $ 99.7 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income and comprehensive income.

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the six months ended June 30, 2021 and 2020 were $ 19.7 million and $ 16.1 million, respectively.

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the nine months ended September 30, 2021 and 2020 were $ 34.0 million and $ 20.4 million, respectively.

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 June 30, 2021 (dollars in thousands):

rental revenue

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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 June 30, 2021 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775 % with a facility commitment fee of 0.125 %, for all-in drawn pricing of 0.90 % over LIBOR.

Under our credit facility, our investment grade credit ratings as of September 30, 2021 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775 % with a facility commitment fee of 0.125 %, for all-in drawn pricing of 0.90 % over LIBOR.

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

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

At June 30, 2021, credit facility origination costs of $ 6.0 million are included in other assets, net, as compared to $ 7.7 million at December 31, 2020, on our consolidated balance sheet.

At September 30, 2021, credit facility origination costs of $ 5.1 million are included in other assets, net, as compared to $ 7.7 million at December 31, 2020, on our consolidated balance sheet.

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

At June 30, 2021, we had a borrowing capacity of $ 2.4 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 635.3 million, consisting entirely of Sterling-denominated borrowings of £ 460.0 million, as compared to no outstanding balance on December 31, 2020.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 0.9 % during the six months ended June 30, 2021 and 1.6 % during the six months ended June 30, 2020.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at June 30, 2021, we were in compliance with the covenants on our revolving credit facility.

At September 30, 2021 and 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.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 0.8 % during the nine months ended September 30, 2021 and 1.5 % during the nine months ended September 30, 2020.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at September 30, 2021, we were in compliance with the covenants on our revolving credit facility.

Commercial Paper Program

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

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 and our term loan facility and our outstanding senior unsecured notes.

The commercial paper ranks 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 and our outstanding senior unsecured notes.

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

As of June 30, 2021, the balance of borrowings outstanding under our commercial paper program was $ 650.0 million, which matured on July 8, 2021, as compared to no

outstanding commercial paper borrowings at December 31, 2020.

The weighted average interest rate on outstanding borrowings under our commercial paper program for the six months ended June 30, 2021 was 0.3 %.

As of September 30, 2021, the balance of borrowings outstanding under our commercial paper program was $ 405.0 million as compared to no outstanding commercial paper borrowings at December 31, 2020.

The weighted average interest rate on outstanding borrowings under our commercial paper program was 0.2 % for the nine months ended September 30, 2021 and 0.3 % from the inception of the program through September 30, 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.

The commercial paper borrowings outstanding at September 30, 2021 totaled $ 405.0 million and matured as follows;

$ 80.0 million on October 14, 2021, $ 290.0 million on November 1, 2021 and $ 35.0 million on November 2, 2021.

In October 2018, in conjunction with entering into our current 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 %.

At June 30, 2021, deferred financing costs of $ 543,000 are included net of the term loan principal balance, as compared to $ 642,000 at December 31, 2020, on our consolidated balance sheet.

At September 30, 2021, deferred financing costs of $ 493,000 are included net of the term loan principal balance, as compared to $ 642,000 at December 31, 2020, on our consolidated balance sheet.

These costs are being amortized over the remaining term of the term loan .

Mortgages Payable

During the six months ended June 30, 2021, we made $ 42.6 million in principal payments, including the repayment of five mortgages in full for $ 40.9 million.

During the six months ended June 30, 2020, we made $ 14.7 million in principal payments, including the repayment of one mortgage in full for $ 11.4 million.

During the six months ended June 30, 2021, we assumed a Sterling-denominated mortgage on one property totaling £ 31.0 million.

No mortgages were assumed during the six months ended June 30, 2020.

During the nine months ended September 30, 2021, we made $ 56.0 million in principal payments, including the repayment of six mortgages in full for $ 53.3 million.

During the nine months ended September 30, 2020, we made $ 73.7 million in principal payments, including the repayment of five mortgages in full for $ 69.2 million.

During the nine months ended September 30, 2021, we assumed a Sterling-denominated mortgage on one property totaling £ 31.0 million.

No mortgages were assumed during the nine months ended September 30, 2020.

Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan.

In September 2021, we completed the early redemption on $ 12.5 million in principal of a mortgage due June 2032, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $ 4.0 million loss on extinguishment of debt for the nine months ended September 30, 2021.

Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender.

At June 30, 2021, 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 $ 942,000 at June 30, 2021 and $ 973,000 at December 31, 2020.

At September 30, 2021, 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 $ 865,000 at September 30, 2021 and $ 973,000 at December 31, 2020.

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

The following table summarizes our mortgages payable as of June 30, 2021 and December 31, 2020, respectively (dollars in thousands):

The following table summarizes our mortgages payable as of September 30, 2021 and December 31, 2020, respectively (dollars in thousands):

Properties (1)

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

(1) At June 30, 2021, there were 14 mortgages on 62 properties.

(1) At September 30, 2021, there were 13 mortgages on 61 properties.

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

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

At June 30, 2021 and December 31, 2020, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0 % to 6.9 % and 3.8 % to 6.9 % at each of June 30, 2021 and December 31, 2020, respectively.

(3) Effective interest rates ranged from 2.8 % to 5.1 % and 4.0 % to 5.5 % at each of June 30, 2021 and December 31, 2020, respectively.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 1.6 million and deferred financing costs of $ 942,000 , as of June 30, 2021 (dollars in millions):

With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity.

At September 30, 2021 and December 31, 2020, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0 % to 6.9 % and 3.8 % to 6.9 % at each of September 30, 2021 and December 31, 2020, respectively.

(3) Effective interest rates ranged from 2.8 % to 4.9 % and 4.0 % to 5.5 % at each of September 30, 2021 and December 31, 2020, respectively.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 933,000 and deferred financing costs of $ 865,000 , as of September 30, 2021 (dollars in millions):

Year of Maturity

Thereafter 10.1

Notes Payable

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

June 30, 2021 December 31, 2020

Principal Amount (Currency Denomination) as of Carrying Value (USD) as of

September 30, 2021 September 30, 2021 December 31, 2020

3.250 % notes, $ 450 issued in October 2012 and $ 500 issued in December 2017, both due in October 2022 (1)

$ — $ — $ 950

4.650 % notes, issued in July 2013 and due in August 2023

$ 750 750 750

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

$ 350 350 350

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

$ 500 500 500

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

$ 325 325 325

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

$ 650 650 650

3.000 % notes, issued in October 2016 and due in January 2027

$ 600 600 600

1.125 % notes, issued in July 2021 and due in July 2027

3.650 % notes, issued in December 2017 and due in January 2028

$ 550 550 550

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

$ 500 500 500

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

£ 400 540 547

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

$ 950 950 950

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

$ 400 400 400

1.750 % notes, issued in July 2021 and due in July 2033

2.730 % notes, issued in May 2019 and due in May 2034

£ 315 425 431

5.875 % bonds, $ 100 issued in March 2005 and $ 150 issued in June 2011, both due in March 2035

$ 250 250 250

4.650 % notes, $ 300 issued in March 2017 and $ 250 issued in December 2017, both due in March 2047

$ 550 550 550

Total principal amount 8,353 8,303

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

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

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 rates on June 30, 2021, and December 31, 2020, respectively.

In July 2021, we issued £ 400 million of 1.125 % senior unsecured notes due 2027 and £ 350 million of 1.750 % senior unsecured notes due 2033.

See note 22, Subsequent Events.

The following table summarizes the maturity of our notes and bonds payable as of June 30, 2021, excluding net unamortized original issuance premiums of $ 11.7 million and deferred financing costs of $ 44.1 million (dollars in millions):

The following table summarizes the maturity of our notes and bonds payable as of September 30, 2021, excluding net unamortized original issuance premiums of $ 7.2 million and deferred financing costs of $ 51.0 million (dollars in millions):

Year of Maturity

Thereafter 6,753

As of June 30, 2021, the weighted average interest rate on our notes and bonds payable was 3.4 % and the weighted average remaining years until maturity was 8.5 years.

All of our outstanding notes and bonds payable have fixed interest rates and contain various covenants, with which we remained in compliance as of June 30, 2021.

Additionally, with the exception of our £ 400 million of 1.625 % senior unsecured notes issued in October 2020, our £ 400 million of 1.125 % senior unsecured notes issued in July 2021, and £ 350 million of 1.750 % senior unsecured notes also issued in July 2021, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

As of September 30, 2021, the weighted average interest rate on our notes and bonds payable was 3.2 % and the weighted average remaining years until maturity was 8.3 years.

All of our outstanding notes and bonds payable have fixed interest rates and contain various covenants, with which we remained in compliance as of September 30, 2021.

unsecured notes also issued in July 2021, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

Note Repayment

In January 2021, we redeemed all $ 950.0 million in principal amount of our outstanding 3.250 % notes due October 2022, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $ 46.5 million loss on extinguishment of debt on our consolidated statement of income and comprehensive income during the six months ended June 30, 2021.

As a result of the early redemption, we recognized a $ 46.5 million loss on extinguishment of debt on our consolidated statement of income and comprehensive income during the nine months ended September 30, 2021.

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

As a result of the early redemption, we recognized a $ 9.8 million loss on extinguishment of debt on our consolidated statement of income and comprehensive income during the six months ended June 30, 2020.

As a result of the early redemption, we recognized a $ 9.8 million loss on extinguishment of debt on our consolidated statement of income and comprehensive income during the nine months ended September 30, 2020.

Note Issuances

During the nine months ended September 30, 2021 and 2020, we issued the following notes and bonds (in millions):

2021 Issuances Date of Issuance Maturity Date Principal amount used Price of par value Effective yield to maturity

1.125 % notes

July 2021 July 2027 £ 400 99.31 % 1.24 %

1.750 % notes

July 2021 July 2033 £ 350 99.84 % 1.76 %

2020 Issuances Date of Issuance Maturity Date Principal amount used Price of par value Effective yield to maturity

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) 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.

We intend to allocate an equal amount of the net proceeds from the July 2021 Sterling-denominated offering of 1.125 % notes due 2027 of £ 400.0 million, which approximated $ 546.3 million, and the July 2021 Sterling-denominated offering of 1.750 % notes due 2033 of £ 350.0 million, which approximated $ 480.6 million, as converted at the applicable exchange rate on the closing of the offerings, to finance or refinance, in whole or in part, new or existing eligible green projects in the categories outlined in our Green Financing Framework, which is designed to align with the International Capital Markets Association ("ICMA") Green Bond Principles 2021.

Pending the allocation of an amount equal to the net proceeds from the offering of the notes to eligible green projects, we may temporarily use all or a portion of the net proceeds to repay any outstanding indebtedness or for liability management activities, or invest such net proceeds in accordance with our cash investment policy.

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.

Issuances of Common Stock

Issuances of Common Stock in Underwritten Public Offerings

In July 2021, we issued 9,200,000 shares of common stock in an underwritten public offering, including 1,200,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

After deducting underwriting discounts of $ 2.9 million, the net proceeds of $ 594.1 million were primarily used to repay borrowings under our $ 1.0 billion commercial paper program, to fund potential investment opportunities and for other general corporate purposes.

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.

After deducting underwriting discounts of $ 19.3 million, the net proceeds of $ 669.6 million were used to fund property acquisitions and for general corporate purposes, and working capital.

For further information, see note 22, Subsequent Events .

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

After deducting underwriting discounts and other offering costs of $ 21.5 million, the net proceeds of $ 728.5 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

After deducting underwriting discounts and other offering costs of $ 21.2 million, 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.

At-the-Market (ATM) Program

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

At June 30, 2021, we had 9,088,433 shares remaining for future issuance under our ATM program.

At September 30, 2021, we had 54,299,611 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):

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

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

2021 2020 2021 2020

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Our DRSPP authorizes up to 26,000,000 common shares to be issued.

At June 30, 2021, we had 11,420,562 shares remaining for future issuance under our DRSPP program.

At September 30, 2021, we had 11,378,949 shares remaining for future issuance under our DRSPP program.

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

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

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

2021 2020 2021 2020

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

We did not issue shares under the waiver approval process during the six months ended June 30, 2021 or 2020.

We did not issue shares under the waiver approval process during the nine months ended September 30, 2021 or 2020.

Noncontrolling Interests

There are four entities with noncontrolling interests that we consolidate including an operating partnership, Realty Income, L.P., a joint venture acquired in 2019, and two development joint ventures, one acquired in 2020 and one acquired in May 2021.

The following table represents the change in the carrying value of all noncontrolling interests through June 30, 2021 (dollars in thousands):

The following table represents the change in the carrying value of all noncontrolling interests through September 30, 2021 (dollars in thousands):

Realty Income, L.P.

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Allocation of net income

Carrying value at June 30, 2021

Carrying value at September 30, 2021

$ 23,869 $ 10,151 $ 34,020

(1) 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 remained outstanding at each of June 30, 2021 and December 31, 2020 .

463,119 remained outstanding at each of September 30, 2021 and December 31, 2020 .

In May 2021, 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 June 30, 2021, we and our subsidiaries held an 68.0 % interest, and consolidated this entity in our consolidated financial statements.

At June 30, 2021, Realty Income, L.P., the joint venture acquired during 2019, and two development joint ventures, one acquired in 2020 and one acquired in May 2021, 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 June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

At September 30, 2021, we and our subsidiaries held an 85.2 % interest, and consolidated this entity in our consolidated financial statements.

At September 30, 2021, Realty Income, L.P.

and certain of our joint venture investments are 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 September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Net real estate

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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 loan 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):

June 30, 2021 Carrying value

September 30, 2021 Carrying value

Estimated fair value

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

The unamortized balance of these net premiums was $ 1.6 million at June 30, 2021, and $ 1.7 million at December 31, 2020.

Also excludes deferred financing costs of $ 942,000 at June 30, 2021 and $ 973,000 at December 31, 2020.

The unamortized balance of these net premiums was $ 933,000 at September 30, 2021, and $ 1.7 million at December 31, 2020.

Also excludes deferred financing costs of $ 865,000 at September 30, 2021 and $ 973,000 at December 31, 2020.

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

The unamortized balance of the net original issuance premiums was approximately $ 11.7 million at June 30, 2021, and $ 14.6 million at December 31, 2020.

Also excludes deferred financing costs of $ 44.1 million at June 30, 2021 and $ 49.2 million at December 31, 2020.

The unamortized balance of the net original issuance premiums was approximately $ 7.2 million at September 30, 2021, and $ 14.6 million at December 31, 2020.

Also excludes deferred financing costs of $ 51.0 million at September 30, 2021 and $ 49.2 million at December 31, 2020.

The estimated fair values of our mortgages payable assumed in connection with acquisitions and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread.

Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy.

Because this methodology includes

unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy.

The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable.

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.

Derivatives Designated as Hedging Instruments

During June 2021, to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling, or GBP, we entered into a series of foreign currency forward contracts to sell GBP and buy U.S.

Dollars, or USD, with a total notional amount of approximately £ 136.9 million, which mature between September 2021 and August 2024.

Foreign Currency Forward Contracts Designated as Hedging Instruments

In order to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling, or GBP, during the second quarter of 2021, we initiated a hedging strategy to enter into foreign currency forward contracts to sell GBP and buy U.S.

Dollars, or USD.

These foreign currency forwards are designated as cash flow hedges.

Forward points on the forward contracts are included in the assessment of hedge effectiveness.

We did not enter into any new derivative contracts designated as hedging instruments during the three months ended September 30, 2021.

Derivatives Not Designated as Hedging Instruments

In June 2021, we entered into a currency exchange swap to exchange £ 672.5 million for $ 950.0 million, which matured in July 2021.

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

Based on our potential exposure to changes in foreign currency exchange rate, primarily in British Pound Sterling and, to a lesser extent, the Euro, we initiated a program in the third quarter of 2021 to enter into foreign currency collars.

A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates.

A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices.

Our foreign currency collars have maturities of five months or less and are not designated as hedge instruments for accounting purposes.

The gains or loss on these derivative contracts are recognized in other income or expense based on the changes in fair value.

In addition, we enter into currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the British Pound Sterling and Euro.

These derivative contracts generally mature within one to three months and are not designated as hedge instruments for accounting purposes.

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.

The net loss from derivatives not designated in hedging relationships for the three and six months ended June 30, 2021 totaled $ 16.0 million and $ 21.7 million, respectively.

The following table summarizes the terms and fair values of our derivative financial instruments at June 30, 2021 and December 31, 2020 (dollars in millions):

The net gain from derivatives not designated in hedging relationships for the three and nine months ended September 30, 2021 totaled $ 24.6 million and $ 2.9 million, respectively, and resulted from foreign currency collars and short term currency exchange swaps.

The net gain from derivatives not designated in hedging relationships for the three and nine months ended September 30, 2020 totaled $ 9.5 million and resulted from a short term currency exchange swap.

The following table summarizes the terms and fair values of our derivative financial instruments at September 30, 2021 and December 31, 2020 (dollars in millions):

Derivative Type (1)

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Fair Value - asset (liability)

June 30, December 31, June 30, December 31,

September 30, December 31, September 30, December 31,

2021 2020 2021 2020

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200.0 200.0 1.93 % 11/2032 - 06/2033 ( 3.8 ) ( 12.8 )

Foreign currency collars (9)

4 Derivative N/A 100.0 — 1.39 10/2021 - 12/2021 ( 0.1 ) —

Foreign currency forwards 35 Derivative Cash flow

2 unchanged sentences

(1) There have been no changes to hedging arrangements in-place at December 31, 2020.

All hedges remained effective through June 30, 2021.

All hedges remained effective through September 30, 2021.

For full discussion of the hedging arrangements, please refer to note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

(2) This column represents the number of instruments outstanding as of June 30, 2021.

(3) Weighted average strike rate is calculated using the current notional value as of June 30, 2021.

(4) This column represents maturity dates for instruments outstanding as of June 30, 2021.

(5) Represents British Pound Sterling, or GBP, United States Dollar, or USD, currency instrument.

(2) This column represents the number of instruments outstanding as of September 30, 2021.

(3) Weighted average strike rate is calculated using the current notional value as of September 30, 2021.

(4) This column represents maturity dates for instruments outstanding as of September 30, 2021.

(5) Represents five British Pound Sterling, or GBP currency instruments with notional amount of $ 1,173.1 million and one Euro, or EUR currency instrument with notional amount of $ 172.6 million.

(6) GBP fixed rates initially at 4.82 % and escalating to 10.96 %, and USD weighted average fixed rate at 9.78 %.

(7) Forward GBP-USD exchange rate of 1.38 .

(7) Forward GBP-USD exchange rate of 1.37 and Forward EUR-USD exchange rate of 1.18 .

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

For full discussion of the hedging arrangements for these six forward starting swaps, please refer to Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

(9) Represents GBP-USD foreign currency collars.

(10) Weighted average forward GBP-USD exchange rate of 1.41 .

1 unchanged sentence

We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default.

We utilize interest rate swaps and forward-starting swaps to manage interest rate risk and cross-currency swaps, currency exchange swaps and foreign currency forwards to manage foreign currency risk.

We utilize interest rate swaps and forward-starting swaps to manage interest rate risk and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk.

The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.

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In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

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 June 30, 2021 and December 31, 2020, 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.

inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties.

However, at September 30, 2021 and December 31, 2020, 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.

Unrealized gains and losses in accumulated other comprehensive income, or AOCI, are reclassified to interest expense in the case of interest rate swaps and to foreign currency gains and losses, net in the case of cross-currency swaps, when the related hedged items are recognized.

During the three and six months ended June 30, 2021, we reclassified $ 2.6 million and $ 5.1 million, respectively, from AOCI as an increase to interest expense and $ 200,000 and $ 1.4 million losses for cross-currency swaps into foreign exchange gains.

During the three and six months ended June 30, 2020, we reclassified $ 3.7 million and $ 5.3 million, respectively, from AOCI as an increase to interest expense and $ 800,000 and $ 12.2 million gains for cross-currency swaps into foreign exchange gains.

During the three and nine months ended September 30, 2021, we reclassified $ 2.6 million and $ 7.7 million, respectively, from AOCI as an increase to interest expense and $ 4.7 million and $ 3.3 million gain for cross-currency swaps into foreign exchange losses.

During the three and nine months ended September 30, 2020, we reclassified $ 3.0 million and $ 8.3 million, respectively, from AOCI as an increase to interest expense and a $ 6.3 million loss and a $ 5.9 million gain, respectively, for cross-currency swaps into foreign exchange gains.

We expect to reclassify $ 10.3 million from AOCI as an increase to interest expense and $ 3.2 million from AOCI to foreign currency gain related to cash flow hedges within the next twelve months.

Operating Leases

At June 30, 2021, we owned 6,761 properties in all 50 U.S.

states, Puerto Rico, and the U.K.

At September 30, 2021, we owned 7,018 properties in all 50 U.S.

states, Puerto Rico, the U.K.

Of the 7,018 properties, 6,961 , or 99.2 %, are single-client properties, and the remaining are multi-client properties.

At June 30, 2021, 103 properties were available for lease or sale.

At September 30, 2021, 86 properties were available for lease or sale.

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, for the three months ended June 30, 2021 and 2020 was $ 596,000 and $ 547,000 , respectively.

Percentage rents for the six months ended June 30, 2021 and 2020 were $ 1.6 million and $ 1.8 million, respectively.

Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the six months ended June 30, 2021 and 2020.

Rent based on a percentage of our client's gross sales, or percentage rents, for the three months ended September 30, 2021 and 2020 was $ 441,000 and $ 532,000 , respectively.

Percentage rents for the nine months ended September 30, 2021 and 2020 were $ 2.0 million and $ 2.3 million, respectively.

Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the nine months ended September 30, 2021 and 2020.

Gain on Sales of Real Estate

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

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

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

2021 2020 2021 2020

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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.

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.

There were 33 properties classified as held for sale at June 30, 2021.

There were 36 properties classified as held for sale at September 30, 2021.

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 (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.

A property that is

reclassified to held for investment is measured and recorded at the lower (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.

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

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

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

2021 2020 2021 2020

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We pay monthly distributions to our common stockholders.

The following is a summary of monthly distributions paid per common share for the six months ended June 30, 2021 and 2020:

The following is a summary of monthly distributions paid per common share for the nine months ended September 30, 2021 and 2020:

January $ 0.2345 $ 0.2275

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June 0.2350 0.2330

July 0.2355 0.2335

August 0.2355 0.2335

September 0.2355 0.2335

$ 2.1150 $ 2.0920

At June 30, 2021, a distribution of $ 0.2355 per common share was payable and was paid in July 2021.

At September 30, 2021, a distribution of $ 0.2360 per common share was payable and was paid in October 2021.

Net Income per Common Share

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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:

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

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

2021 2020 2021 2020

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Supplemental Disclosures of Cash Flow Information

Cash paid for interest was $ 139.4 million in the six months ended June 30, 2021 and $ 149.4 million in the six months ended June 30, 2020.

Cash paid for income taxes was $ 9.7 million in the six months ended June 30, 2021 and $ 5.3 million in the six months ended June 30, 2020.

Cash paid for merger-related costs was $ 4.4 million in the six months ended June 30, 2021.

There were no merger-related costs in the six months ended June 30, 2020.

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

During the six months ended June 30, 2021 and 2020, the fair value of net derivative liabilities decreased by $ 60.4 million and $ 28.6 million, respectively.

During the six months ended June 30, 2021, we assumed a Sterling-denominated mortgage on one property totaling £ 31.0 million.

Non-refundable deposits from 2019 of $ 13.8 million were applied to acquisitions during the six months ended June 30, 2020.

The following table summarizes our supplemental cash flow information during the periods indicated below (dollars in thousands):

Nine months ended September 30,

Supplemental disclosures:

Cash paid for interest $ 229,465 $ 224,679

Cash paid for income taxes $ 9,776 $ 8,148

Cash paid for merger-related costs $ 15,490 $ —

Non-cash activities:

Increase in fair value of net derivative liabilities $ 75,279 $ 25,991

Sterling-denominated mortgage (1)

Non-refundable deposits $ — $ 13,803

(1) Represents £ 31.0 million Sterling, converted at the applicable exchange rate on the date of transaction.

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):

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Cash and cash equivalents shown in the consolidated balance sheets

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Restricted escrow deposits (1)

34,636 81,683

Impounds related to mortgages payable (1)

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Assets, as of:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Segment net real estate:

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$ 23,711,094 $ 20,740,285

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

(1) During the three months ended September 30, 2021, we invested in seven properties in Spain.

As of September 30, 2021, grocery stores - Spain was not a reportable segment.

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

Revenue 2021 2020 2021 2020

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Total revenue $ 491,875 $ 404,572 $ 1,398,961 $ 1,233,549

(1) During the three months ended September 30, 2021, we invested in seven properties in Spain.

As of September 30, 2021, grocery stores - Spain was not a reportable segment.

Common Stock Incentive Plan

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The disclosures below incorporate activity for both the 2012 Plan and the 2021 Plan.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 4.5 million during the three months ended June 30, 2021, $ 4.9 million during the three months ended June 30, 2020, $ 8.2 million during the six months ended June 30, 2021, and $ 10.4 million during the six months ended June 30, 2020 (including $ 1.8 million of accelerated share-based compensation costs for our former Chief Financial Officer ("CFO")).

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 4.3 million during the three months ended September 30, 2021, $ 3.0 million during the three months ended September 30, 2020, $ 12.5 million during the nine months ended September 30, 2021, and $ 13.4 million during the nine months ended September 30, 2020 (including $ 1.8 million of accelerated share-based compensation costs for our former Chief Financial Officer ("CFO")).

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 related to share-based compensation expense and $ 58,000 of professional fees.

Restricted Stock

During the six months ended June 30, 2021, we granted 112,498 shares of common stock under the 2012 and 2021 Plans.

During the nine months ended September 30, 2021, we granted 112,898 shares of common stock under the 2012 and 2021 Plans.

This included 36,000 total shares of restricted stock granted to the independent members of our Board of Directors in connection with our annual awards in May 2021, 24,000 shares of which vested immediately and 12,000 shares of which vest in equal parts over a three-year service period.

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

As of June 30, 2021, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 11.0 million, which is being amortized on a straight-line basis over the service period of each applicable award.

As of September 30, 2021, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 9.2 million, which is being amortized on a straight-line basis over the service period of each applicable award.

The amount of share-based compensation is based on the fair value of the stock at the grant date.

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Performance Shares and Restricted Stock Units

During the six months ended June 30, 2021, we granted 157,341 performance shares, as well as dividend equivalent rights, to our executive officers, of which 9,621 shares were subsequently forfeited, leaving 147,720 of the 2021 grants outstanding at June 30, 2021.

During the nine months ended September 30, 2021, we granted 157,341 performance shares, as well as dividend equivalent rights, to our executive officers, of which 9,621 shares were subsequently forfeited, leaving 147,720 of the 2021 grants outstanding at September 30, 2021.

The performance shares are earned based on our Total Shareholder Return (TSR) performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service.

During the six months ended June 30, 2021, we also granted 17,285 restricted stock units, all of which vest over a four-year service period.

During the nine months ended September 30, 2021, we also granted 17,285 restricted stock units, all of which vest over a four-year service period.

These restricted stock units have the same economic rights as shares of restricted stock.

As of June 30, 2021, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $ 15.5 million.

As of September 30, 2021, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $ 12.7 million.

The fair value of the performance shares were estimated on the date of grant using a Monte Carlo Simulation model.

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We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.

In connection with the Mergers, we expect to incur merger-related costs and, if the transaction is consummated, certain success-based fees and additional merger-related costs.

In connection with the Mergers, we have incurred merger-related costs and certain success-based fees and additional merger-related costs.

In addition, we have been subject to lawsuits associated with the Merger Agreement.

For further details, please refer to Note 3, Agreement and Plan of Merger .

At June 30, 2021, we had commitments of $ 9.4 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of June 30, 2021, we had committed $ 218.6 million under construction contracts related to development projects, which is expected to be paid in the next twelve months.

At September 30, 2021, we had commitments of $ 10.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of September 30, 2021, we had committed $ 211.9 million under construction contracts related to development projects, which is expected to be paid in the next twelve months.

Subsequent Events

Dividend Increases

In July 2021, we declared a dividend of $ 0.2355 per share to our common stockholders, which will be paid in August 2021.

Capital Raising

In July 2021, we raised $ 594.1 million from the issuance of 9,200,000 shares of common stock in an underwritten public offering, inclusive of 1,200,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

The company intends to use the net proceeds from this offering to repay borrowings under our commercial paper program, to fund potential investment opportunities and/or for other general corporate purposes.

In July 2021, we issued £ 400 million through the issuance of 1.125 % senior unsecured notes due 2027 (the "2027 Notes") and £ 350 million through the issuance of 1.750 % senior unsecured notes due 2033 (the "2033 Notes").

The public offering price for the 2027 Notes was 99.305 % of the principal amount for an effective semi-annual yield to maturity of 1.242 % and the public offering price for the 2033 Notes was 99.842 % of the principal amount for an effective semi-annual yield to maturity of 1.757 %.

Combined, the new issues of the 2027 Notes and 2033 Notes have a weighted average term of 8.8 years and a weighted average effective semi-annual yield to maturity of 1.48 %.

The issuances represented our debut green bond offering.

In October 2021, we declared a dividend of $ 0.2360 per share to our common stockholders, which will be paid in November 2021.

On November 1, 2021, we completed our acquisition of VEREIT, Inc., or VEREIT.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of VEREIT common stock and each common unit of VEREIT OP (other than those held by VEREIT, us or our affiliates) was converted into 0.705 shares

of Realty common stock.

As a result of the Mergers, former VEREIT common stockholders and VEREIT OP common unitholders received approximately 162 million shares of Realty common stock, based on the shares of VEREIT common stock and common units of VEREIT OP outstanding as of October 29, 2021.

We will account for the Merger in accordance with ASC 805, Business Combinations , with Realty Income as the acquirer of VEREIT.

ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

Due to the limited time since the Merger, the initial accounting for this transaction is incomplete and, as such, the Company is unable to provide purchase price allocation, supplemental pro forma, and other disclosures.

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

What changed 10-Q

Item 1. Financial Statements