What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-03 · 276 added, 315 removed, 895 unchanged (40% of the section changed)

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• The impact of the COVID-19 pandemic, or future pandemics, on us, our business, our clients, or the economy generally;

• The structure, timing and completion of the announced mergers between us and VEREIT, Inc.

(the "Mergers") and uncertainties regarding whether the anticipated benefits or results of the proposed Mergers, if consummated, will be achieved.

• The uncertainties regarding whether the anticipated benefits or results of the mergers between us and VEREIT, Inc.

(the "Mergers") will be achieved.

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

In particular, forward-looking statements regarding estimated or future results of operations or financial condition, estimated or future acquisitions of properties, or the estimated or potential impact of the proposed Mergers are based upon numerous assumptions and estimates and are inherently subject to substantial uncertainties and actual results of operations, financial condition, property acquisitions and the impacts of the Mergers (if consummated) may differ materially from those expressed or implied in the forward-looking statements, particularly if actual events differ from those reflected in the estimates and assumptions upon which such forward-looking statements are based.

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

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

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• Acts of terrorism and war;

• Any effects of the announcement, pendency or potential completion of the proposed Mergers on us and uncertainties regarding whether the anticipated benefits or results of the proposed Mergers, if consummated, will be achieved.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , for the fiscal year ended December 31, 2020 and those risks described in "Item 1A- Risk Factors" in Part II of this Quarterly Report on Form 10-Q, for the quarter ended June 30, 2021.

• Any effects of uncertainties regarding whether the anticipated benefits or results of the Mergers will be achieved.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , for the fiscal year ended December 31, 2020, those risks described in "Item 1A- Risk Factors" in Part II of this Quarterly Report on Form 10-Q, for the quarter ended September 30, 2021, and those risks described under the caption “Supplemental Risk Factors” in Exhibit 99.4 to the June 4, 2021 Form 8-K .

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

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Over the past 52 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term lease agreements with our commercial clients.

At June 30, 2021, we owned a diversified portfolio:

At September 30, 2021, we owned a diversified portfolio:

• Of 7,018 properties;

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• Located in all 50 U.S.

states, Puerto Rico and the United Kingdom (U.K.);

states, Puerto Rico, the United Kingdom (U.K.) and Spain;

• With approximately 125.0 million square feet of leasable space;

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• With an average leasable space per property of approximately 17,810 square feet;

approximately 12,600 square feet per retail property and 258,400 square feet per industrial property.

Of the 6,761 properties in the portfolio at June 30, 2021, 6,715, or 99.3%, are single-client properties, of which 6,616 were leased, and the remaining are multi–client properties.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $23.5 million and $21.0 million for the three months ended June 30, 2021 and 2020, respectively, and $45.2 million and $41.3 million for the six months ended June 30, 2021 and 2020, respectively.

approximately 12,760 square feet per retail property and approximately 261,790 square feet per industrial property.

Of the 7,018 properties in the portfolio at September 30, 2021, 6,961, or 99.2%, are single-client properties, of which 6,878 were leased, and the remaining are multi–client properties.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $23.9 million and $18.0 million for the three months ended September 30, 2021 and 2020, respectively, and $69.1 million and $59.4 million for the nine months ended September 30, 2021 and 2020, respectively.

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

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.

Investment Philosophy

We believe that owning an actively managed, diversified portfolio of commercial properties under long-term, net lease agreements produces consistent and predictable income.

A net lease typically requires the client to be

responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance.

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

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

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

Our investment activities have led to a diversified property portfolio that, as of June 30, 2021, consisted of 6,761 properties located in all 50 U.S.

states, Puerto Rico and the U.K., and doing business in 58 industries.

None of the 58 industries represented in our property portfolio accounted for more than 11.6% of our annualized contractual rental revenue as of June 30, 2021.

Our investment activities have led to a diversified property portfolio that, as of September 30, 2021, consisted of 7,018 properties located in all 50 U.S.

states, Puerto Rico, the U.K.

and Spain, and doing business in 60 industries.

None of the 60 industries represented in our property portfolio accounted for more than 11.6% of our annualized contractual rental revenue as of September 30, 2021.

Investment Strategy

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

As a result of the execution of this strategy, approximately 95% of our annualized retail contractual rental revenue at June 30, 2021 is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

As a result of the execution of this strategy, approximately 95% of our annualized retail contractual rental revenue at September 30, 2021 is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

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

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We conduct additional due diligence, including additional financial reviews of the client, and continue to monitor our clients’ credit quality on an ongoing basis by reviewing the available information previously discussed, and providing summaries of these findings to management.

At June 30, 2021, approximately 50% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

At June 30, 2021, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 52% of our annualized rent and 12 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

At September 30, 2021, approximately 50% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

At September 30, 2021, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 51% of our annualized rent and 12 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Asset Management Strategy

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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, 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.

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 Related to the Mergers

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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.

Theater Industry Update

As of June 30, 2021, the theater industry represented 5.4% of annualized contractual rental revenue.

As of June 30, 2021, we were fully reserved for the outstanding receivable balances for 37 theater properties.

At June 30, 2021, the receivables outstanding for our 79 theater properties totaled $77.9 million, inclusive of $9.1 million of straight-line rent receivables, and net of $40.0 million of reserves, inclusive of $2.0 million of straight-line rent reserves.

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

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2021

Rental revenue reserves $ 6.5 $ 13.8

Straight-line rent reserves 0.1 0.2

Total rental revenue reserves $ 6.6 $ 14.0

Additionally, we did not record any provisions for impairment on theater properties for the six months ended June 30, 2021.

As of September 30, 2021, the theater industry represented 5.2% of annualized contractual rental revenue.

As of September 30, 2021, we were fully reserved for the outstanding receivable balances for 34 theater properties.

At September 30, 2021, the receivables outstanding for our 79 theater properties totaled $72.8 million, inclusive of $9.8 million of straight-line rent receivables, and net of $39.0 million of reserves, inclusive of $2.0 million of straight-line rent reserves.

For the nine months ended September 30, 2021 and the year ended 2020, we recorded $11.3 million and $22.1 million, respectively, in reserves on contractual base rent for theater properties.

Contractual rents exclude contractually obligated reimbursements by our clients, which was equivalent to $1.5 million and $1.6 million, respectively, and percentage rent.

At September 30, 2021, the receivables outstanding across the portfolio totaled $341.7 million, net of $56.7 million of reserves, and includes $211.5 million of straight-line rent receivable, net of $6.2 million of reserves.

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Rental revenue reserves (reserve reversals) $ (1.0) $ 12.8

Straight-line rent reserves (reserve reversals) — 0.2

Total rental revenue reserves (reserve reversals) $ (1.0) $ 13.0

We did not record any provisions for impairment on theater properties for the nine months ended September 30, 2021.

See "Item 1A—Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding the actual and potential future impacts of the COVID-19 pandemic and the measures taken to limit its spread on our clients and our business, results of operations, financial condition and liquidity.

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We have continued our 52-year policy of paying monthly dividends.

In addition, we increased the dividend three times during 2021.

As of July 2021, we have paid 95 consecutive quarterly dividend increases and increased the dividend 111 times since our listing on the NYSE in 1994.

In addition, we increased the dividend four times during 2021.

As of October 2021, we have paid 96 consecutive quarterly dividend increases and increased the dividend 112 times since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2021:

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3rd increase Jun 2021 Jul 2021 $ 0.2355 $ 0.0005

The dividends paid per share during the six months ended June 30, 2021 totaled approximately $1.4085, as compared to approximately $1.3915 during the six months ended June 30, 2020, an increase of $0.0170, or 0.9%.

The monthly dividend of $0.2355 per share represents a current annualized dividend of $2.826 per share, and an annualized dividend yield of approximately 4.2% based on the last reported sale price of our common stock on the NYSE of $66.74 on June 30, 2021.

4th increase Sept 2021 Oct 2021 $ 0.2360 $ 0.0005

The dividends paid per share during the nine months ended September 30, 2021 totaled approximately $2.115, as compared to approximately $2.092 during the nine months ended September 30, 2020, an increase of $0.023, or 1.1%.

The monthly dividend of $0.2360 per share represents a current annualized dividend of $2.8320 per share, and an annualized dividend yield of approximately 4.4% based on the last reported sale price of our common stock on the NYSE of $64.86 on September 30, 2021.

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

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

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

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

for the periods indicated below:

and Europe for the periods indicated below:

Properties Leasable

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(Years) Initial

Three months ended June 30, 2021 (2)

Three months ended September 30, 2021 (2)

Acquisitions - U.S.

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242 4,741,648 $ 1,020,768 13.9 5.5 %

Acquisitions - U.K.

Acquisitions - Europe (U.K.

30 2,083,732 526,033 11.9 5.4 %

Total acquisitions 272 6,825,380 $ 1,546,801 13.2 5.5 %

Properties under development - U.S.

Properties under development (3)

36 1,983,960 67,160 16.2 6.1 %

308 8,809,340 $ 1,613,961 13.4 5.5 %

Six months ended June 30, 2021 (2)

Nine months ended September 30, 2021 (2)

Acquisitions - U.S.

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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 three and 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 $2.4 million received as settlement credits for 31 properties as reimbursement of free rent periods for the three months ended September 30, 2021 and 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 three and 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 three and six months ended June 30, 2021 were 100% leased at the acquisition date.

(3) Represents investments of £424.9 million Sterling during the three months ended June 30, 2021 and £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 19 industries and are 85.1% retail and 14.9% industrial, based on rental revenue.

Approximately 54% of the rental revenue generated from acquisitions during the three months ended June 30, 2021 is from our investment grade rated clients, their subsidiaries or affiliated companies.

(5) 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 our investment grade rated clients, their subsidiaries or affiliated companies.

(2) None of our investments during the three and 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 three and nine months ended September 30, 2021, converted at the applicable exchange rate on the funding date.

(4) Our clients occupying the new properties are 86.2% retail and 13.8% industrial, based on rental revenue.

Approximately 38% of the rental revenue generated from acquisitions during the three months ended September 30, 2021 is from our investment grade rated clients, their subsidiaries or affiliated companies.

(5) 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 our investment grade rated clients, their subsidiaries or affiliated companies.

Portfolio Discussion

Leasing Results

At June 30, 2021, we had 103 properties available for lease or sale out of 6,761 properties in our portfolio, which represents a 98.5% occupancy rate based on the number of properties in our portfolio.

At September 30, 2021, we had 86 properties available for lease or sale out of 7,018 properties in our portfolio, which represents a 98.8% occupancy rate based on the number of properties in our portfolio.

Below is a summary of our portfolio activity for the periods indicated below:

Three months ended June 30, 2021

Properties available for lease at March 31, 2021

Three months ended September 30, 2021

Properties available for lease at June 30, 2021

Lease expirations (1)

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Vacant dispositions (23)

Properties available for lease at June 30, 2021

Six months ended June 30, 2021

Properties available for lease at September 30, 2021

Nine months ended September 30, 2021

Properties available for lease at December 31, 2020

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Vacant dispositions (80)

Properties available for lease at June 30, 2021

Properties available for lease at September 30, 2021

(1) Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.

During the three months ended June 30, 2021, the annual new rent on re-leases was $10.44 million, as compared to the previous annual rent of $9.97 million on the same units, representing a rent recapture rate of 104.7% on the units re-leased.

We re-leased one unit to a new client without a period of vacancy, and two units to new clients after a period of vacancy.

During the six months ended June 30, 2021, the annual new rent on re-leases was $21.97 million, as compared to the previous annual rent of $21.12 million on the same units, representing a rent recapture rate of 104.0% on the units re-leased.

We re-leased three units to new clients without a period of vacancy, and 17 units to new clients after a period of vacancy.

During the three months ended September 30, 2021, the annual new rent on re-leases was $18.172 million, as compared to the previous annual rent of $16.948 million on the same units, representing a rent recapture rate of 107.2% on the units re-leased.

We re-leased four units to new clients without a period of vacancy, and seven units to new clients after a period of vacancy.

During the nine months ended September 30, 2021, the annual new rent on re-leases was $40.145 million, as compared to the previous annual rent of $38.068 million on the same units, representing a rent recapture rate of 105.5% on the units re-leased.

We re-leased seven units to new clients without a period of vacancy, and 24 units to new clients after a period of vacancy.

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

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

At June 30, 2021, our average annualized contractual rent was approximately $15.37 per square foot on the 6,658 leased properties in our portfolio.

At June 30, 2021, we classified 33 properties, with a carrying amount of $39.5 million, as real estate and lease intangibles held for sale, net on our balance sheet.

At September 30, 2021, our average annualized contractual rent was approximately $15.23 per square foot on the 6,932 leased properties in our portfolio.

At September 30, 2021, we classified 36 properties, with a carrying amount of $44.9 million, as real estate and lease intangibles held for sale, net on our balance sheet.

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

Investments in Existing Properties

During the three months ended June 30, 2021, we capitalized costs of $2.8 million on existing properties in our portfolio, consisting of $121,000 for re-leasing costs, $28,000 for recurring capital expenditures, and $2.6 million for non-recurring building improvements.

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.

During the three months ended September 30, 2021, we capitalized costs of $6.8 million on existing properties in our portfolio, consisting of $1.2 million for re-leasing costs, $365,000 for recurring capital expenditures, and $5.2 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.

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

The amounts of our capital expenditures can vary significantly, depending on the rental market,

credit worthiness of our clients, the lease term and the willingness of our clients to pay higher rents over the terms of the leases.

The amounts of our capital expenditures can vary significantly, depending on the rental market, credit worthiness of our clients, the lease term and the willingness of our clients to pay higher rents over the terms of the leases.

We define recurring capital expenditures as mandatory and recurring landlord capital expenditure obligations that have a limited useful life.

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Capital Raising

During the three months ended June 30, 2021, we raised $457.5 million from the sale of common stock at a weighted average price of $69.01 per share, primarily through our At-The-Market-Program.

During the six months ended June 30, 2021, we raised $1.15 billion from the sale of common stock at a weighted average price of $61.29, primarily from 12,075,000 shares issued in an overnight underwritten public offering during the three months ended March 31, 2021, where we raised $669.6 million, including 1,575,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares, and from the sale of common stock through our At-The-Market-Program.

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.

During the three months ended September 30, 2021, we raised $1.63 billion from the sale of common stock at a weighted average price of $67.93 per share, primarily through proceeds from the sale of common stock through our At-The-Market (ATM) program and the July 2021 raising of $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.

During the nine months ended September 30, 2021, we raised $2.78 billion from the sale of common stock at a weighted average price of $65.02, of which approximately $1.3 billion related to common stock issued through underwritten overnight public offerings and the majority of the remaining proceeds of approximately $1.5 billion related to the sale of common stock through our ATM Program.

In August 2021, following the issuance and sale of 74,911,567 shares under our prior ATM equity distribution plans, or our prior ATM programs, we established a new ATM equity distribution plan, or our new ATM program, pursuant to which up to 69,088,433 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.

Note Issuances

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").

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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 of Sterling-denominated notes.

The issuances represented our debut green bond offering of Sterling-denominated notes, which were intended to finance or refinance, in whole or in part, new or existing eligible green projects in the categories outlined in the Company's green financing framework, which is designed to align with the International Capital Markets Association (the "ICMA") Green Bond Principles 2021.

Early Redemption of 3.250% Notes Due October 2022

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See "Item 1A—Risk Factors" in Part I of our Annual Report on Form 10-K for year ended December 31, 2020 for more information regarding the actual and potential future impacts of the COVID-19 pandemic and the measures taken to limit its spread on our clients and our business, results of operations, financial condition and liquidity.

The majority of lease 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.

The majority of lease 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.

In these cases, we have determined that the collection of deferred rent is probable (within the meaning applicable under GAAP), although we cannot assure you that this determination will not change in the future.

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

Our rent collections for the periods below and rent relief requests to-date may not be indicative of collections, concessions or requests in any future period.

Percentages of Contractual Rent Collected as of June 30, 2021

April 30, 2021 Month Ended

May 31, 2021 Month Ended

June 30, 2021

Our rent collections for the periods

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

Percentages of Contractual Rent Collected as of September 30, 2021

July 31, 2021

August 31, 2021

September 30, 2021

Quarter Ended

June 30, 2021

September 30, 2021

Contractual rent collected (1) across total portfolio

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Contractual rent collected from our health and fitness clients 92.4% 95.9% 96.6% 95.0%

(1) Collection rates are calculated as the aggregate contractual rent collected for the applicable period from the beginning of that applicable period through June 30, 2021, divided by the contractual rent charged for the applicable period.

(1) Collection rates are calculated as the aggregate contractual rent collected for the applicable period from the beginning of that applicable period through September 30, 2021, divided by the contractual rent charged for the applicable period.

Rent collection percentages are calculated based on contractual rents (excluding percentage rents and contractually obligated reimbursements by our clients).

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

(2) We define our top 20 clients as our 20 largest clients based on percentage of total portfolio annualized contractual rent as of June 30, 2021 for all periods.

(2) We define our top 20 clients as our 20 largest clients based on percentage of total portfolio annualized contractual rent as of September 30, 2021 for all periods.

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

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

Three months ended June 30, Six months ended June 30, % Increase (Decrease)

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

2021 2020 2021 2020

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

Our financial results in the six months ended June 30, 2021 were impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of our 3.250% notes due October 2022 and $13.3 million of merger-related costs related to our proposed merger with VEREIT.

Our financial results in the six months ended June 30, 2020 were impacted by a $9.8 million loss on extinguishment of debt due to the January

2020 early redemption of the 5.750% notes due 2021, and a $3.5 million executive severance charge for our former chief financial officer.

Our financial results during the nine months ended September 30, 2021 were impacted by the following transactions:

merger-related costs related to our merger with VEREIT, of which $16.8 million related to the three months ended September 30, 2021, (iii) $31.0 million of provisions for impairment, of which $11.0 million related to the three months ended September 30, 2021, and (iv) $13.9 million in reserves, net of reserve reversals, recorded as a reduction of rental revenue.

Our financial results during the nine months ended September 30, 2020 were impacted by the following transactions:

(i) $123.4 million of provisions for impairment, of which $105.1 million related to the three months ended September 30, 2020, (ii) $34.4 million in reserves recorded as a reduction of rental revenue, of which $24.1 million related to the three months ended September 30, 2020, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021 recorded in the three months ended March 31, 2020, and (iv) a $3.5 million executive severance charge for our former CFO also recorded in the three months ended March 31, 2020.

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

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

At June 30, 2021, our total outstanding borrowings of senior unsecured notes and bonds, term loan, mortgages payable, credit facility borrowings and commercial paper were $9.2 billion, or approximately 26.6% of our total market capitalization of $34.6 billion.

We define our total market capitalization at June 30, 2021 as the sum of:

• Shares of our common stock outstanding of 380,174,042, plus total common units outstanding of 463,119, multiplied by the last reported sales price of our common stock on the NYSE of $66.74 per share on June 30, 2021, or $25.4 billion;

• Outstanding borrowings of $635.3 million on our revolving credit facility, consisting entirely of Sterling-denominated borrowings of £460.0 million;

At September 30, 2021, our total outstanding borrowings of senior unsecured notes and bonds, term loan, mortgages payable, and commercial paper were $9.29 billion, or approximately 26.1% of our total market capitalization of $35.54 billion.

As of September 30, 2021, we had no borrowings outstanding on our revolving credit facility.

Therefore, we define our total market capitalization as the sum of:

• Shares of our common stock outstanding of 404,206,076, plus total common units outstanding of 463,119, multiplied by the last reported sales price of our common stock on the NYSE of $64.86 per share on September 30, 2021, or $26.25 billion;

• Outstanding borrowings of $405.0 million on our commercial paper program;

• Outstanding mortgages payable of $299.9 million, excluding net mortgage premiums of $1.6 million and deferred financing costs of $942,000;

• Outstanding mortgages payable of $285.6 million, excluding net mortgage premiums of $933,000 and deferred financing costs of $865,000;

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $493,000;

• Outstanding senior unsecured notes and bonds of $7.36 billion, including Sterling-denominated notes of £715.0 million, and excluding unamortized net original issuance premiums of $11.7 million and deferred financing costs of $44.1 million.

• Outstanding senior unsecured notes and bonds of $8.35 billion, including Sterling-denominated notes of £1.47 billion, and excluding unamortized net original issuance premiums of $7.2 million and deferred financing costs of $51.0 million.

Universal Shelf Registration

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In accordance with SEC rules, the amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit.

The securities covered by this registration statement include (1) common stock, (2) preferred stock, (3) debt securities, (4) depositary shares representing fractional interests in shares of preferred stock, (5) warrants to purchase debt securities,

common stock, preferred stock, or depositary shares, and (6) any combination of these securities.

We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered.

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Under our "at-the-market" equity distribution plan, or our ATM program, up to 69,088,433 shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices.

During the three and six months ended June 30, 2021, we issued 6,589,598 shares and raised approximately $454.8 million under the ATM program.

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

During the three months ended September 30, 2021, we issued 14,788,822 shares and raised approximately $1.03 billion under the ATM program.

During the nine months ended September 30, 2021, we issued 21,378,420 shares and raised approximately $1.49 billion under the 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.

Issuance of Common Stock

In January 2021, we issued 12,075,000 shares of common stock in an overnight underwritten public offering, inclusive of 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.

In July 2021, we issued 9,200,000 shares of common stock in an overnight underwritten public offering, inclusive of 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 company intends to use the net proceeds of $594.1 million to repay borrowings under our $1.0 billion commercial paper program, to fund potential investment opportunities and/or for other general corporate purposes.

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.

Dividend Reinvestment and Stock Purchase Plan

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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.

During the three months ended June 30, 2021, we issued 39,423 shares and raised approximately $2.7 million under our DRSPP.

During the six months ended June 30, 2021, we issued 82,817 shares and raised approximately $5.3 million under our DRSPP.

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

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

During the three months ended September 30, 2021, we issued 41,613 shares and raised approximately $2.9 million under our DRSPP.

During the nine months ended September 30, 2021, we issued 124,430 shares and raised approximately $8.2 million under our DRSPP.

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

Revolving Credit Facility and Commercial Paper Program

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

Under our revolving credit facility, our investment grade credit ratings as of June 30, 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 revolving 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 credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

As of June 30, 2021, we had a borrowing capacity of $2.4 billion available on our revolving credit facility and an outstanding balance of $635.3 million, consisting entirely of Sterling-denominated borrowings of £460.0 million.

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

As of September 30, 2021, we had no outstanding borrowings on our revolving credit facility and an available borrowing capacity of $3.0 billion.

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

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

At June 30, 2021, we were in compliance with these covenants.

At September 30, 2021, we were in compliance with these covenants.

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

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

At June 30, 2021, we had an outstanding balance of $650.0 million.

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

At September 30, 2021, we had an outstanding balance of $405.0 million.

The weighted average interest rate on borrowings under our commercial paper program was 0.2% for the nine months ended September 30, 2021.

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.

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Mortgage Debt

As of June 30, 2021, we had $299.9 million of mortgages payable, all of which were assumed in connection with our property acquisitions, including a Sterling-denominated mortgage payable of £31.0 million assumed during the three months ended June 30, 2021.

Additionally, at June 30, 2021, we had net premiums totaling $1.6 million on these mortgages and deferred financing costs of $942,000.

As of September 30, 2021, we had $285.6 million of mortgages payable, all of which were assumed in connection with our property acquisitions, including a Sterling-denominated mortgage payable of £31.0 million.

Additionally, at September 30, 2021, we had net premiums totaling $933,000 on these mortgages and deferred financing costs of $865,000.

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

During the 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 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.

Notes Outstanding

Our senior unsecured note and bond obligations consist of the following as of June 30, 2021, sorted by maturity date (dollars in millions):

Our senior unsecured note and bond obligations consist of the following as of September 30, 2021, sorted by maturity date (dollars in millions):

As of September 30, 2021

Principal Amount (Currency Denomination) Carrying Value (USD)

4.650% notes, issued in July 2013 and due in August 2023 $ 750 $ 750

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

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

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Unamortized net original issuance premiums and deferred financing costs (44)

(1) 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 rate on June 30, 2021 .

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

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

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

Additionally, with the exception of our £400 million of 1.625% senior unsecured notes issued in October 2020, our 2027 Notes, and our 2033 Notes, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

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

The actual amounts as of June 30, 2021 are:

The actual amounts as of September 30, 2021 are:

Note Covenants

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

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on July 1, 2020 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of July 1, 2020, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at June 30, 2021 (in thousands, for trailing twelve months):

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on October 1, 2020 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of October 1, 2020, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at September 30, 2021 (in thousands, for trailing twelve months):

Net income available to common stockholders

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

At June 30, 2021, we had cash and cash equivalents totaling $231.2 million, inclusive of £49.8 million Sterling.

At September 30, 2021, we had cash and cash equivalents totaling $517.0 million, inclusive of £122.1 million Sterling and €133.7 million Euro.

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

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

As of June 30, 2021, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

As of September 30, 2021, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

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

In addition, we were assigned the following ratings on our commercial paper at June 30, 2021:

In addition, we were assigned the following ratings on our commercial paper at September 30, 2021:

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

Based on our ratings as of June 30, 2021, the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

Based on our ratings as of September 30, 2021, the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

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

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Table of Obligations

The following table summarizes the maturity of each of our obligations as of June 30, 2021 (dollars in millions):

The following table summarizes the maturity of each of our obligations as of September 30, 2021 (dollars in millions):

Maturity Credit Facility and Commercial Paper Program (1)

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

Borrowings of $650.0 million under the commercial paper program were due in July 2021.

(2) Excludes non-cash original issuance discounts and premiums recorded on notes payable of $11.7 million and deferred financing costs of $44.1 million.

The table of obligations also excludes the July 2021 issuances of £400 million of senior unsecured notes due July 2027 and £350 million of senior unsecured notes due July 2033.

At September 30, 2021, there were no borrowings under our revolving credit facility.

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.

(2) Excludes non-cash net original issuance premiums recorded on notes payable of $7.2 million and deferred financing costs of $51.0 million.

(3) Excludes deferred financing costs of $493,000.

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $1.6 million and deferred financing costs of $942,000.

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $933,000 and deferred financing costs of $865,000.

(5) Interest on the term loan, notes, bonds, mortgages payable, and commercial paper program has been calculated based on outstanding balances at period end through their respective maturity dates.

Excludes interest from the July 2021 issuances of £400 million of 1.125% senior unsecured notes due July 2027 and £350 million of 1.750% senior unsecured notes due July 2033.

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

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

(8) “Other” consists of $218.6 million of commitments under construction contracts, $9.4 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements and $18.0 million of success fees related to our proposed merger with VEREIT.

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

(8) “Other” consists of $211.9 million of commitments under construction contracts, $10.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements and $19.0 million of success fees related to our merger with VEREIT.

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

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

In 2020, our cash distributions to common stockholders totaled $964.2 million, or approximately 119.8% of our estimated taxable income of $804.9 million.

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

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

In 2020, our cash distributions to common stockholders totaled $964.2 million, or approximately 124.8% of our taxable income of $772.5 million.

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

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

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

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

Our cash distributions to common stockholders in the six months ended June 30, 2021 totaled $524.1 million, representing 81.1% of our adjusted funds from operations available to common stockholders of $645.9 million.

Our cash distributions to common stockholders in the nine months ended September 30, 2021 totaled approximately $797.8 million, representing 79.6% of our adjusted funds from operations available to common stockholders of approximately $1.0 billion.

In comparison, our 2020 cash distributions to common stockholders totaled $964.2 million, representing 82.2% of our adjusted funds from operations available to common stockholders of $1.173 billion.

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

1986, as amended, or the Code, our debt service requirements, and any other factors the Board of Directors may deem relevant.

In addition, our credit facility contains financial covenants that could limit the amount of distributions payable by us in the event of a default, and which prohibit the payment of distributions on our common stock in the event that we fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facility.

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However, actual results may differ from these estimates and assumptions.

This summary should be read in conjunction with the more complete discussion of our

accounting policies and procedures included in note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

In order to prepare our consolidated financial statements according to the rules and guidelines set forth by GAAP, many subjective judgments must be made with regard to critical accounting policies.

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

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.

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

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

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

When assessing the collectability of future lease payments, one of the key factors we have considered during 2020 and the six months ended June 30, 2021 has been the COVID-19 pandemic.

When assessing the collectability of future lease payments, one of the key factors we have considered during 2020 and the nine months ended September 30, 2021 has been the COVID-19 pandemic.

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

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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.

As of June 30, 2021, other than the information related to the reserves we have recorded to such 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.

As of September 30, 2021, other than the information related to the reserves we have recorded to such 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, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

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

The following is a comparison of our results of operations for the three and six months ended June 30, 2021, to the three and six months ended June 30, 2020.

The following is a comparison of our results of operations for the three and nine months ended September 30, 2021, to the three and nine months ended September 30, 2020.

Total Revenue

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

Three months ended June 30, Six months ended June 30, Increase/ (Decrease)

2021 2020 2021 2020 Three Months Six Months

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

2021 2020 2021 2020 Three Months Nine Months

Rental (excluding reimbursable)

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Rental Revenue (excluding reimbursable)

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three months ended June 30, 2021 compared to the three months ended June 30, 2020 (dollars in thousands):

Three Months Ended June 30, Increase/(Decrease)

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 (dollars in thousands):

Three Months Ended September 30, Increase/(Decrease)

Number of Properties Square Footage (1)

2021 2020 $ Change % Change

2021 2020 $ Change

Properties acquired subsequent to December 31, 2019 756 20,265,423 $ 72,561 $ 13,203 $ 59,358

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Totals $ 462,416 $ 383,845 $ 78,571

(1) Excludes 3,231,790 square feet from properties ground leased to clients.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2021 of 1.38 GBP/USD.

(3) Relates to the aggregate of (i) rental revenue from properties (166 properties comprising 2,802,043 square feet) that were available for lease during part of 2021 or 2020, (ii) rental revenue for properties (eight properties comprising 335,456 square feet) under development, and (iii) rental revenue that is not contractual base rent such as lease termination settlements.

The table below summarizes the increase in rental revenue (excluding reimbursable) in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 (dollars in thousands):

Six Months Ended June 30, Increase/(Decrease)

(1) Excludes 3,025,649 square feet from properties ground leased to clients and 2,017,013 square feet from properties with no land or building ownership.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of September 30, 2021 of 1.35 GBP/USD.

None of the properties in Spain met our same store pool definition for the periods presented.

(3) Relates to the aggregate of (i) rental revenue from properties (154 properties comprising 2,586,996 square feet) that were available for lease during part of 2021 or 2020, (ii) rental revenue for properties (nine properties comprising 357,605 square feet) under development, and (iii) rental revenue that is not contractual base rent such as lease termination settlements.

The table below summarizes the increase in rental revenue (excluding reimbursable) in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 (dollars in thousands):

Nine Months Ended September 30, Increase/(Decrease)

Number of Properties Square Footage (1)

2021 2020 $ Change % Change

2021 2020 $ Change

Properties acquired subsequent to December 31, 2019 756 20,265,423 $ 162,500 $ 25,702 $ 136,798

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Totals $ 1,316,838 $ 1,164,873 $ 151,965

(1) Excludes 3,231,790 square feet from properties ground leased to clients.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2021 of 1.38 GBP/USD.

(1) Excludes 3,025,649 square feet from properties ground leased to clients and 2,017,013 square feet from properties with no land or building ownership.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of September 30, 2021 of 1.35 GBP/USD.

None of the properties in Spain met our same store pool definition for the periods presented.

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

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Our calculation of same store rental revenue includes rent deferred for future payment as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB).

Same store rental income was negatively impacted by reserves recorded as reductions of rental revenue of $5.7 million for the three months ended June 30, 2021 compared to $3.7 million for the three months ended June 30, 2020, and $13.0 million for the six months ended June 30, 2021 compared to $3.8 million for the six months ended June 30, 2020.

Same store rental income was impacted by (reserve reversals) and reserves to rental revenue of $(313,000) for the three months ended September 30, 2021 compared to $18.0 million for the three months ended September 30, 2020, and $12.7 million for the nine months ended September 30, 2021 compared to $21.7 million for the nine months ended September 30, 2020.

Our calculation of same store rental revenue also includes uncollected rent for which we have not granted a lease concession.

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three and six months ended June 30, 2021 relative to the comparable periods for 2020 would have been 16.3% and 4.9%, respectively.

Rental revenue was negatively impacted by rent reserves for the three and six months ended June 30, 2021 and 2020, primarily due to the COVID-19 pandemic, particularly with respect to the ongoing disruption to the theater industry.

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three and nine months ended September 30, 2021 relative to the comparable periods for 2020 would have been 8.5% and 6.1%, respectively.

Rental revenue was negatively impacted by rent reserves for the three months ended September 30, 2020 and nine months ended September 30, 2021 and 2020, primarily due to the COVID-19 pandemic, particularly with respect to the ongoing disruption to the theater industry.

As the COVID-19 pandemic did not affect our rent collections until April 2020, there was no related impact for the three months ended March 31, 2020.

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,

For the three months ended September 30, 2021, rental revenue was positively impacted by reserve reversals recorded 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

Of the 6,761 properties in the portfolio at June 30, 2021, 6,715, or 99.3%, are single-client properties and the remaining are multi-client properties.

Of the 6,715 single-client properties, 6,616, or 98.5%, were net leased at June 30, 2021.

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

Of the 7,018 properties in the portfolio at September 30, 2021, 6,961, or 99.2%, are single-client properties and the remaining are multi-client properties.

Of the 6,961 single-client properties, 6,878, or 98.8%, were net leased at September 30, 2021.

Of the 7,064 in-place leases in the portfolio, which excludes 110 vacant units, 6,000 or 84.9% were under leases that provide for increases in rents through:

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

Percentage rent, which is included in rental revenue, was $596,000 in the three months ended June 30, 2021, $547,000 in the three months ended June 30, 2020, $1.6 million in the six months ended June 30, 2021 and $1.8 million in the six months ended June 30, 2020.

Percentage rent, which is included in rental revenue, was $441,000 in the three months ended September 30, 2021, $532,000 in the three months ended September 30, 2020, $2.0 million in the nine months ended September 30, 2021 and $2.3 million in the nine months ended September 30, 2020.

We anticipate percentage rent to be less than 1% of rental revenue for 2021.

At June 30, 2021, our portfolio of 6,761 properties was 98.5% leased with 103 properties available for lease, as compared to 97.9% leased, with 140 properties available for lease at December 31, 2020, and 98.5% leased with 101 properties available for lease at June 30, 2020.

At September 30, 2021, our portfolio of 7,018 properties was 98.8% leased with 86 properties available for lease, as compared to 97.9% leased, with 140 properties available for lease at December 31, 2020, and 98.6% leased with 92 properties available for lease at September 30, 2020.

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

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Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms and interest earned on cash and cash equivalents.

For both the three and nine months ended September 30, 2021, increases to interest income recognized on financing receivables were partially offset by decreases to interest earned on cash and cash equivalents in the same 2020 periods.

Total Expenses

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

Three months ended June 30, Six months ended June 30, $ Increase/ (Decrease)

Three months ended September 30, Nine months ended September 30, $ Increase/ (Decrease)

2021 2020 2021 2020 Three months

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Property (excluding reimbursable) 5,741 7,386 20,775 18,114 (1,645) 2,661

8,213 5,488 15,034 10,728 2,725 4,306

Property (reimbursable)

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1.2 % 1.9 % 1.6 % 1.5 %

(1) General and administrative expenses for the six months ended June 30, 2020 included an executive severance charge related to the departure of our former CFO in March 2020.

The total value of cash, stock compensation and professional fees incurred as a result of this severance was $3,463 and was recorded to general and administrative expense.

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for the six months ended June 30, 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $36,564, which was used for our calculation.

(1) General and administrative expenses for the nine months ended September 30, 2020 included an executive severance charge related to the departure of our former CFO in March 2020.

The total value of cash, stock compensation and professional fees incurred as a result of this severance was $3.5 million and was recorded to general and administrative expense.

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for the nine months ended September 30, 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $53.1 million which was used for our calculation.

(2) Excludes rental revenue (reimbursable).

Depreciation and Amortization

The increase in depreciation and amortization for the three and six months ended June 30, 2021 was primarily due to the acquisition of properties in 2020 and for the six months ended June 30, 2021, which was partially offset by property sales in those same periods.

The increase in depreciation and amortization for the three and nine months ended September 30, 2021 was primarily due to the acquisition of properties in 2020 and for the nine months ended September 30, 2021, which was partially offset by property sales in those same periods.

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

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

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

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

2021 2020 2021 2020

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Amortization of debt origination and deferred financing costs 3,010 2,584 8,346 7,752

2,675 2,420 5,336 5,168

Loss on interest rate swaps

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(673) (311) (1,158) (1,021)

Amortization of net note premiums

(53) (162) (138) (406)

Amortization of net note (premiums) discounts 102 (690) (37) (1,096)

Interest capitalized (423) (109) (1,604) (257)

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Average outstanding balances (dollars in thousands) $ 9,282,808 $ 8,098,923 $ 8,857,204 $ 8,179,307

$ 9,025,470 $ 8,534,969 $ 8,662,893 $ 8,195,899

Average interest rates

3.02 % 3.51 % 3.10 % 3.48 %

The decrease in interest expense for the three and six months ended June 30, 2021 is primarily due to lower average balances and interest rates on our credit facility, the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022, the June 2020 repayment of our previous $250.0 million term loan, repayments of outstanding mortgages and higher capitalized interest related to our development projects, partially offset by our 2020 issuances of notes.

During the six months ended June 30, 2021, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $635.3 million, consisting entirely of Sterling-denominated borrowings of £460.0 million, was 0.9%

The decrease in interest expense for the three and nine months ended September 30, 2021 is primarily due to lower average interest rates on our credit facility, the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022, the June 2020 repayment of our previous $250.0 million term loan, repayments of outstanding mortgages and higher capitalized interest related to our development projects, partially offset by our issuances of notes in 2020 and 2021, which included $1.68 billion in principal of USD denominated notes and £1.15 billion in principal of Sterling denominated notes.

During the nine months ended September 30, 2021, the weighted average interest rate on our:

• Commercial paper outstanding borrowings of $405.0 million was 0.2%;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $493,000) was swapped to fixed at 3.9%;

• Mortgages payable of $299.9 million (excluding net premiums totaling $1.6 million and deferred financing costs of $942,000 on these mortgages) was 4.8%;

• Mortgages payable of $285.6 million (excluding net premiums totaling $933,000 and deferred financing costs of $865,000 on these mortgages) was 4.7%;

• Notes and bonds payable of $8.35 billion (excluding net unamortized original issue premiums of $7.2 million and deferred financing costs of $51.0 million) was 3.3%;

• Combined outstanding notes, bonds, mortgages, term loan, revolving credit facility borrowings, and commercial paper borrowings of $9.20 billion (excluding all net premiums and deferred financing costs) was 3.1%.

• Combined outstanding notes, bonds, mortgages, term loan and commercial paper borrowings of $9.29 billion (excluding all net premiums and deferred financing costs) was 3.1%.

Property Expenses (excluding reimbursable)

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

At June 30, 2021, 103 properties were available for lease or sale, as compared to 140 at December 31, 2020, and 101 at June 30, 2020.

The increase in property expenses (excluding reimbursable) for the three and six months ended June 30, 2021 is primarily due to the increase in portfolio size, resulting in higher utilities, property-related legal expenses, property taxes, and reserves for contractually obligated reimbursements by our clients.

At September 30, 2021, 86 properties were available for lease or sale, as compared to 140 at December 31, 2020, and 92 at September 30, 2020.

The decrease in property expenses (excluding reimbursable) for the three months ended September 30, 2021 is primarily attributable to decreased vacancies and decreases in reserves for contractually obligated reimbursements by our clients.

The increase in property expenses (excluding reimbursable) for the nine months ended September 30, 2021 is primarily due to the increase in portfolio size, resulting in higher utilities, repairs and maintenance, property-related legal expenses, property taxes, and reserves for contractually obligated reimbursements by our clients.

Property Expenses (reimbursable)

The increase in property expenses (reimbursable) for the three and six months ended June 30, 2021 was primarily attributable to decreased vacancies, increase in property taxes paid on behalf of clients, and the increased portfolio size, which contributed to higher operating expenses primarily due to our acquisitions in 2020 and the six months ended June 30, 2021.

The increase in property expenses (reimbursable) for the three and nine months ended September 30, 2021 was primarily attributable to our increased portfolio size, which contributed to higher operating expenses as a result of our acquisitions in 2020 and the nine months ended September 30, 2021, and an increase in property taxes paid on behalf of our clients.

General and Administrative Expenses

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

General and administrative expenses for the six months ended June 30, 2020 included a severance charge of $3.5 million for our former CFO.

Excluding this severance charge, general administrative expenses for the six months ended June 30, 2021 increased by $6.1 million.

The increase in general and administrative expenses for the three and six months ended June 30, 2021 is primarily due to higher payroll-related costs and higher corporate-level professional fees, partially offset by lower costs for travel.

The increase in general and administrative expenses for the three and nine months ended September 30, 2021 is primarily due to higher payroll-related costs and higher corporate-level professional fees.

Provisions for Impairment

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

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

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

2021 2020 2021 2020

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Merger-related Costs

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

In conjunction with our merger with 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.

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

Foreign currency gains and losses are primarily a result of intercompany debt and certain remeasurement transactions.

Foreign currency gains and losses are primarily a result of intercompany debt with certain remeasurement transactions and mark-to-market adjustments on derivatives that do not qualify for hedge accounting.

Loss on Extinguishment of Debt

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.

In January 2021, we completed the early redemption on all $950.0 million in principal amount of 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 for 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 for the nine months ended September 30, 2021.

In January 2020, we completed the early redemption on all $250.0 million in principal amount of 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 for the six months ended June 30, 2020.

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

income taxes accrued or paid by us and our subsidiaries.

The increase in income taxes for the three and six months ended June 30, 2021 was primarily attributable to our increased volume of U.K.

As a result of the early redemption, we recognized a $9.8 million loss on extinguishment of debt for the nine months ended September 30, 2020.

Income taxes are for city and state income and franchise taxes, and for international income taxes accrued or paid by us and our subsidiaries.

The increase in income taxes for the three and nine months ended September 30, 2021 was primarily attributable to our increased volume of U.K.

investments, which contributed to higher U.K.

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

Three months ended June 30, Six months ended June 30, % Increase / (Decrease)

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

2021 2020 2021 2020 Three months

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

Net income available to common stockholders for the six months ended June 30, 2021 was negatively impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022 and $13.3 million of merger-related costs related to our proposed merger with VEREIT.

Net income available to common stockholders for the six months ended June 30, 2020 was negatively impacted by a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% Notes due January 2021.

Net income available to common stockholders for the nine months ended September 30, 2021 was impacted by the following transactions:

(i) a $50.5 million loss on extinguishment of debt, primarily due to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021, (ii) $30.1 million of merger-related costs related to our merger with VEREIT, of which $16.8 million related to the three months ended September 30, 2021, (iii) $31.0 million of provisions for impairment, of which $11.0 million related to the three months ended September 30, 2021, and (iv) $13.9 million in reserves, net of reserve reversals, recorded as a reduction of rental revenue.

Net income available to common stockholders for the nine months ended September 30, 2020 was impacted by the following transactions:

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

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

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

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

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

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

define Annualized Pro Forma Adjusted EBITDA re as Annualized Adjusted EBITDA re , subject to certain adjustments to incorporate operating income from properties we acquired or stabilized during the applicable quarter and to remove operating income from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period.

We define Annualized Pro Forma Adjusted EBITDA re as Annualized

Adjusted EBITDA re , subject to certain adjustments to incorporate operating income from properties we acquired or stabilized during the applicable quarter and to remove operating income from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period.

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

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

Three months ended June 30,

Three months ended September 30,

Net income (1)

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76,156 76,806

Loss on extinguishment of debt 3,983 —

Depreciation and amortization

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Net Debt/Annualized Pro forma Adjusted EBITDA re

(1) Net income for the three months ended June 30, 2021 was negatively impacted by $8.2 million of rent reserves recorded as reductions of rental revenue, of which $723,000 relates to straight-line rent receivables.

Net income for the three months ended June 30, 2020 was negatively impacted by $8.5 million of rent reserves recorded as reductions of rental revenue, of which $2.1 million relates to straight-line rent receivables.

(1) Net income for the three months ended September 30, 2021 was positively impacted by $3.1 million of reserve reversals recorded as increases to rental revenue where the accounting for recognition of rental revenue and straight-line rental revenue has been moved from the cash to the accrual basis, of which $2.3 million relates to straight-line rent receivables.

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

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

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The following table summarizes our Annualized Pro forma Adjusted EBITDA re calculation for the periods indicated below:

Three months ended June 30,

Three months ended September 30,

Dollars in thousands 2021 2020

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The following summarizes our FFO and Normalized FFO (dollars in millions, except per share data):

Three months ended June 30, Six months ended June 30, % Increase / (Decrease)

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

2021 2020 2021 2020 Three months

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

FFO and Normalized FFO in the six months ended June 30, 2021 were impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic, a loss on extinguishment of debt due to the early redemption of the 3.250% notes due 2022 in January 2021, and $13.3 million of merger-related costs related to our proposed merger with VEREIT.

FFO and Normalized FFO in the six months ended June 30, 2020 were impacted by a loss on extinguishment of debt due to the early redemption of the 5.750% notes due 2021 in January 2020 and an executive severance charge for our former CFO in March 2020.

FFO and Normalized FFO for the nine months ended September 30, 2021 and 2020 were impacted by the same transactions listed under "Net Income Available To Common Stockholders" on page 50.

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

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

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

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

2021 2020 2021 2020

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Depreciation of furniture, fixtures and equipment (230) (157) (674) (435)

(73) (152) (444) (278)

Provisions for impairment

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FFO adjustments allocable to noncontrolling interests (180) (212) (511) (575)

(165) (208) (331) (363)

FFO available to common stockholders

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FFO allocable to dilutive noncontrolling interests 356 345 1,062 1,063

348 348 705 717

Diluted FFO $ 332,691 $ 283,323 $ 915,479 $ 849,482

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FFO available to common stockholders in excess of distributions paid to common stockholders $ 58,544 $ 40,737 $ 116,570 $ 131,884

$ 51,017 $ 47,868 $ 58,026 $ 91,147

Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 75,327 $ 40,737 $ 146,651 $ 131,884

Weighted average number of common shares used for FFO and normalized FFO:

374,236,424 343,515,406 372,879,165 340,061,487

374,804,142 344,148,378 373,434,863 340,744,384

Basic 391,913,478 346,476,217 379,291,782 342,214,164

Diluted 392,513,520 347,212,593 379,872,546 342,946,337

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

We define Normalized FFO, a non-GAAP financial measure, is FFO excluding merger-related costs related to our proposed merger with VEREIT.

We define Normalized FFO, a non-GAAP financial measure, is FFO excluding merger-related costs related to our merger with VEREIT.

We consider FFO and Normalized FFO to be appropriate supplemental measures of a REIT’s operating performance as they are based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO, and adds back merger-related costs, for Normalized FFO.

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The following summarizes our AFFO (dollars in millions, except per share data):

Three months ended June 30, Six months ended June 30, % Increase / (Decrease)

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

2021 2020 2021 2020 Three months

4 unchanged sentences

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

AFFO in the three and six months ended June 30, 2021 was impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic.

AFFO in the three months ended September 30, 2020 and nine months ended September 30, 2021 and 2020 was impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic.

AFFO in the three months ended September 30, 2021 was impacted by reserve reversals recorded as an increase to rental revenue where the accounting for recognition of rental revenue and straight-line rental revenue has been moved from the cash to the accrual basis.

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

3 unchanged sentences

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

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

2021 2020 2021 2020

Net income available to common stockholders (1)

Net income available to common

stockholders (1)

$ 134,996 $ 22,904 $ 355,415 $ 277,555

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Diluted AFFO $ 357,188 $ 282,856 $ 1,003,753 $ 876,051

AFFO per common share, basic and diluted $ 0.88 $ 0.86 $ 1.73 $ 1.74

AFFO per common share:

Basic $ 0.91 $ 0.82 $ 2.64 $ 2.56

Diluted $ 0.91 $ 0.81 $ 2.64 $ 2.55

Distributions paid to common stockholders $ 273,791 $ 242,241 $ 797,847 $ 716,535

3 unchanged sentences

Diluted 392,513,520 347,212,593 379,872,546 342,946,337

(1) As of June 30, 2021, there was $40.5 million of uncollected rent deferred as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB) and $61.2 million of uncollected rent for which we have not granted a lease concession.

(1) As of September 30, 2021, there was $35.2 million of uncollected rent deferred as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the Financial Accounting Standards Board (FASB) and $62.0 million of uncollected rent for which we have not granted a lease concession.

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

6 unchanged sentences

These USD payments are fixed and determinable for the duration of the associated hedging transaction.

(6) Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, and foreign currency gains and losses as a result of intercompany debt and remeasurement transactions.

(6) Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on derivatives that do not qualify for hedge accounting, and foreign currency gains and losses as a result of intercompany debt and remeasurement transactions.

We believe the non-GAAP financial measure AFFO provides useful information to investors because it is a widely accepted industry measure of the operating performance of real estate companies that is used by industry analysts and investors who look at and compare those companies.

6 unchanged sentences

PROPERTY PORTFOLIO INFORMATION

At June 30, 2021, we owned a diversified portfolio:

At September 30, 2021, we owned a diversified portfolio:

• Of 7,018 properties;

2 unchanged sentences

• Located in all 50 U.S.

states, Puerto Rico and the U.K.;

states, Puerto Rico, the U.K.

• With approximately 125.0 million square feet of leasable space;

1 unchanged sentence

• With an average leasable space per property of approximately 17,810 square feet;

approximately 12,600 square feet per retail property and 258,400 square feet per industrial property.

At June 30, 2021, 6,658 properties were leased under net lease agreements.

approximately 12,760 square feet per retail property and approximately 261,790 square feet per industrial property.

At September 30, 2021, 6,932 properties were leased under net lease agreements.

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

6 unchanged sentences

Percentage of Total Portfolio Annualized Contractual Rent by Industry

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

Aerospace 0.6% 0.6% 0.8% 0.9% 1.0% 1.1%

Apparel stores 1.2 1.3 1.1 1.2 1.4 1.7

1.2 1.3 1.1 1.2 1.4 1.7

Automotive collision services 1.3 1.1 1.0 0.9 1.0 1.0

1.1 1.1 1.0 0.9 1.0 1.0

Automotive parts 1.5 1.6 1.6 1.7 1.5 1.3

1.5 1.6 1.6 1.7 1.5 1.3

Automotive service 2.9 2.7 2.6 2.3 2.5 2.0

2.8 2.7 2.6 2.3 2.5 2.0

Automotive tire services 1.8 2.0 2.1 2.3 2.5 2.6

1.9 2.0 2.1 2.3 2.5 2.6

2.1 2.1 2.0 2.4 2.6 2.8

2.0 2.1 2.1 2.2 1.7 1.7

Beverages 2.0 2.1 2.0 2.4 2.6 2.8

Child care 1.9 2.1 2.1 2.2 1.7 1.7

Consumer electronics 0.4 0.3 0.3 0.3 0.3 0.3

0.3 0.3 0.3 0.3 0.3 0.3

Consumer goods 0.5 0.6 0.6 0.7 0.7 0.9

0.5 0.6 0.6 0.7 0.7 0.9

Convenience stores 11.6 11.9 12.3 12.6 9.3 10.0

11.6 11.9 12.3 12.6 9.3 10.0

Crafts and novelties 0.9 0.9 0.6 0.6 0.6 0.5

0.9 0.9 0.6 0.6 0.6 0.5

Diversified industrial 1.0 0.8 0.7 0.8 0.8 0.9

0.8 0.8 0.7 0.8 0.8 0.9

Dollar stores 7.5 7.6 7.9 7.3 7.5 8.0

7.4 7.6 7.9 7.3 7.5 8.0

7.6 8.2 8.8 9.4 10.2 10.8

0.2 0.2 0.2 0.3 0.3 0.3

Drug stores 7.2 8.2 8.8 9.4 10.2 10.8

Education 0.2 0.2 0.2 0.3 0.3 0.3

Electric utilities * 0.1 0.1 0.1 0.1 0.1

* 0.1 0.1 0.1 0.1 0.1

Entertainment 0.3 0.3 0.3 0.3 0.4 0.4

0.3 0.3 0.3 0.3 0.4 0.4

Equipment services 0.2 0.3 0.4 0.4 0.4 0.5

0.2 0.3 0.4 0.4 0.4 0.5

Financial services 1.6 1.8 2.0 2.4 2.3 2.6

1.7 1.8 2.0 2.4 2.3 2.6

Food processing 0.6 0.7 0.7 0.5 0.6 1.0

0.6 0.7 0.7 0.5 0.6 1.0

General merchandise 3.6 3.4 2.5 2.1 2.3 1.9

3.7 3.4 2.5 2.1 2.3 1.9

Government services 0.5 0.6 0.7 0.9 0.9 1

0.5 0.6 0.7 0.9 0.9 1

Grocery stores 4.4 4.9 5.2 5.0 5.3 3.5

4.6 4.9 5.2 5.0 5.3 3.5

Health and beauty 0.2 0.2 0.2 0.2 * *

0.2 0.2 0.2 0.2 * *

Health and fitness 5.9 6.7 7.0 7.1 7.7 7.6

6.2 6.7 7.0 7.1 7.7 7.6

1.5 1.5 1.6 1.6 1.4 1.5

Health care 1.7 1.5 1.6 1.6 1.4 1.5

Home furnishings 0.8 0.7 0.8 0.8 0.9 0.9

0.7 0.7 0.8 0.8 0.9 0.9

Home improvement 3.2 3.1 2.9 2.8 2.9 2.5

3.1 3.1 2.9 2.8 2.9 2.5

0.1 0.1 0.1 0.1 0.1 0.1

Machinery 0.2 0.1 0.1 0.1 0.1 0.1

Motor vehicle dealerships 1.5 1.6 1.6 1.8 2.0 2.0

1.6 1.6 1.6 1.8 2.0 2.0

Office supplies 0.1 0.1 0.2 0.2 0.2 0.3

0.1 0.1 0.2 0.2 0.2 0.3

Other manufacturing 0.4 0.4 0.6 0.7 0.8 0.8

0.4 0.4 0.6 0.7 0.8 0.8

0.8 0.9 0.8 1.0 1.1 0.9

0.1 0.1 0.1 0.1 0.1 0.1

Packaging 0.8 0.9 0.8 1.0 1.1 0.9

Paper 0.1 0.1 0.1 0.1 0.1 0.1

Pet supplies and services 0.6 0.7 0.7 0.5 0.6 0.6

0.7 0.7 0.7 0.5 0.6 0.6

Restaurants - casual dining 2.4 2.8 3.2 3.3 3.6 3.7

2.5 2.8 3.2 3.3 3.6 3.7

Restaurants - quick service 5.2 5.3 5.8 6.3 5.2 4.8

5.3 5.3 5.8 6.3 5.2 4.8

0.2 0.2 0.2 0.5 0.6 0.6

Shoe stores 0.2 0.2 0.2 0.5 0.6 0.6

Sporting goods 0.8 0.7 0.8 0.9 1.0 1.5

0.7 0.7 0.8 0.9 1.0 1.5

Telecommunications 0.4 0.5 0.5 0.6 0.6 0.7

0.4 0.5 0.5 0.6 0.6 0.7

5.4 5.6 6.1 5.3 5.7 4.6

Theaters 5.2 5.6 6.1 5.3 5.7 4.6

Transportation services 3.8 3.9 4.3 5.0 5.4 5.7

3.8 3.9 4.3 5.0 5.4 5.7

Wholesale clubs 2.4 2.4 2.5 2.9 3.1 3.4

2.5 2.4 2.5 2.9 3.1 3.4

0.7 0.2 0.7 0.7 0.8 0.8

Other 0.5 0.2 0.7 0.7 0.8 0.8

90.1% 93.8% 97.3% 100.0% 100.0% 100.0%

3 unchanged sentences

Warehousing and storage 0.3 — — — — —

0.5 * * — — —

8.9% 6.2% 2.7% — — —

Other 0.6 * * — — —

Total Europe 9.9% 6.2% 2.7% — — —

Totals 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

* Less than 0.1%

(1) Europe consists of properties in the U.K., starting in May 2019, and in Spain, starting in September 2021.

Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2021 (dollars in thousands):

The following table sets forth certain property type information regarding our property portfolio as of September 30, 2021 (dollars in thousands):

Property Type

1 unchanged sentence

Total Portfolio Annualized Contractual Rent as of

June 30, 2021

September 30, 2021

Percentage of Total Portfolio Annualized Contractual Rent

5 unchanged sentences

(1) Includes leasable building square footage.

Excludes 3,600 acres of leased land categorized as agriculture at June 30, 2021.

Excludes 3,600 acres of leased land categorized as agriculture at September 30, 2021.

Client Diversification

The following table sets forth the 20 largest clients in our property portfolio, expressed as a percentage of total portfolio annualized contractual rent, which does not give effect to deferred rent, at June 30, 2021:

Client Number of

4 unchanged sentences

FedEx 42 3.4 %

Sainsbury's 23 3.4 %

Dollar Tree / Family Dollar 603 3.3 %

Sainsbury's 24 3.2 %

LA Fitness 56 2.8 %

1 unchanged sentence

Regal Cinemas (Cineworld) 41 2.4 %

Walmart / Sam's Club 57 2.5 %

Wal-Mart / Sam's Club 57 2.3 %

Life Time Fitness 16 2.1 %

B&Q (Kingfisher) 18 2.0 %

BJ's Wholesale Clubs 17 1.8 %

Tesco 14 1.9 %

Circle K (Couche-Tard) 237 1.5 %

BJ's Wholesale Clubs 18 1.8 %

Home Depot 22 1.5 %

Treasury Wine Estates 17 1.4 %

Circle K (Couche-Tard) 237 1.4 %

CVS Pharmacy 89 1.4 %

Home Depot 23 1.4 %

Kroger 22 1.3 %

4 unchanged sentences

Lease Expirations

The following table sets forth certain information regarding the timing of the lease term expirations in our portfolio (excluding rights to extend a lease at the option of the client) and their contribution to total portfolio annualized contractual rent as of June 30, 2021 (dollars in thousands):

Total Portfolio (1)

Total Portfolio Annualized Contractual Rent as of

June 30, 2021

September 30, 2021

Percentage of Total Portfolio Annualized Contractual Rent

19 unchanged sentences

Geographic Diversification

The following table sets forth certain state-by-state information regarding our property portfolio as of June 30, 2021 (dollars in thousands):

The following table sets forth certain state-by-state information regarding our property portfolio as of September 30, 2021 (dollars in thousands):

Percent Leased

Total Portfolio Annualized Contractual Rent as of

June 30, 2021

Percentage of Total Portfolio Annualized Contractual Rent

55 unchanged sentences

4 100 28,300 *

Spain 7 100 1,023,700 0.4

107 100 7,907,500 9.5

20 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis