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Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-02-23 · 317 added, 222 removed, 453 unchanged (54% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Realty Income, The Monthly Dividend Company ® , is an S&P 500 company dedicated to providing stockholders with dependable monthly dividends that increase over time.

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

Realty Income, The Monthly Dividend Company ® , is an S&P 500 company and member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for over 25 consecutive years.

We invest in people and places to deliver dependable monthly dividends that increase over time.

We are structured as a real estate investment trust ("REIT") requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders.

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

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Over the past 53 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients.

We refer to our tenants as clients because we strive to build mutually beneficial relationships and we believe their success is our success.

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

At December 31, 2021, we owned a diversified portfolio:

• Of 6,592 properties;

• Consisting of 11,136 properties;

• With an occupancy rate of 98.5%, or 10,972 properties leased and 164 properties available for lease or sale;

• Doing business in 51 separate industries;

• Located in 49 U.S.

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

• With clients doing business in 60 separate industries;

• Located in all 50 U.S.

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

• With approximately 210.1 million square feet of leasable space;

• With a weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.0 years;

• With an average leasable space per property of approximately 16,810 square feet;

approximately 12,340 square feet per retail property and 245,270 square feet per industrial property.

• With an average leasable space per property of approximately 18,860 square feet, approximately 12,470 square feet per retail property and approximately 248,120 square feet per industrial property.

Of the 11,136 properties in the portfolio at December 31, 2021, 11,043, or 99.2%, are single-client properties, of which 10,883 were leased, and the remaining are multi-client properties.

Unless otherwise specified, references to rental revenue in the Management's Discuss and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $79.4 million, $69.1 million and $47.0 million for 2020, 2019 and 2018, 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 rental revenue and unrecognized straight-line rental revenue for leases accounted for on a cash basis.

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 $104.9 million, $79.4 million and $69.1 million for 2021, 2020 and 2019, 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.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

Historically, we have met our long-term capital needs by issuing common stock, preferred stock and long-term unsecured notes and bonds.

Historically, we have met our long-term capital needs by issuing common stock, long-term unsecured notes and bonds, term loans under our revolving credit facility, and preferred stock.

Over the long term, we believe that common stock should be the majority of our capital structure;

however, we may issue preferred stock or debt securities.

however, we may also raise funds from debt or other equity securities.

We may issue common stock when we believe that our share price is at a level that allows for the proceeds of any offering to be accretively invested into additional properties.

In addition, we may issue common stock to permanently finance properties that were initially financed by our credit facility, commercial paper program, or debt securities.

In addition, we may issue common stock to permanently finance properties that were initially financed by our revolving credit facility, commercial paper program, or debt securities.

However, we cannot assure you that we will have access to the capital markets at all times and at terms that are acceptable to us.

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

We may choose to mitigate our financial exposure to exchange rate risk for properties acquired outside the U.S.

through the issuance of debt securities denominated in the same local currency and through currency derivatives.

We may leave a portion of our foreign cash flow unhedged to reinvest in additional properties in the same local currency.

Conservative Capital Structure

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

At December 31, 2020, our total outstanding borrowings of senior unsecured notes and bonds, term loan and mortgages payable were $8.85 billion, or approximately 28.2% of our total market capitalization of $31.34 billion.

At December 31, 2021, our total outstanding borrowings of senior unsecured notes and bonds, term loan, mortgages payable, credit facility borrowings, commercial paper, and our proportionate share of outstanding borrowings by unconsolidated entities were $15.26 billion, or approximately 26.5% of our total market capitalization of $57.66 billion.

We define our total market capitalization at December 31, 2021 as the sum of:

• Shares of our common stock outstanding of 591,261,991, plus total common units outstanding of 1,060,709, multiplied by the last reported sales price of our common stock on the NYSE of $71.59 per share on December 31, 2021, or $42.4 billion;

• Outstanding mortgages payable of $299.6 million, excluding net mortgage premiums of $1.7 million and deferred financing costs of $973,000;

• Outstanding borrowings of $650.0 million on our revolving credit facility;

• Outstanding borrowings of $901.4 million on our commercial paper program;

• Outstanding mortgages payable of $1.11 billion, excluding net mortgage premiums of $28.7 million and deferred financing costs of $790,000;

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $443,000;

• Outstanding senior unsecured notes and bonds of $8.30 billion, including Sterling-denominated notes of £715.0 million, and excluding unamortized net original issuance premiums of $14.6 million and deferred financing costs of $49.2 million;

• No borrowings outstanding on our revolving credit facility.

• Outstanding senior unsecured notes and bonds of $12.26 billion, including Sterling-denominated notes of £1.47 billion, and excluding unamortized net premiums of $295.5 million and deferred financing costs of $53.1 million;

• Our proportionate share of outstanding debt from unconsolidated entities of $86.0 million, excluding deferred financing costs of $1.8 million.

Universal Shelf Registration

In November 2018, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in November 2021.

In June 2021, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in June 2024.

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.

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During 2021, we issued 46,290,540 shares and raised approximately $3.21 billion of gross proceeds under the ATM program.

At December 31, 2020, we had 15,678,031 shares remaining for future issuance under our current ATM program.

At December 31, 2021, we had 29,387,491 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.

Issuances of Common Stock

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

After deducting underwriting discounts and other offering costs of $21.2 million, the net proceeds of $728.9 million were primarily used to repay borrowings under our revolving credit facility.

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

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

Issuance of Common Stock in Conjunction with our Merger with VEREIT

On November 1, 2021, we completed our acquisition of 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 Income common stock.

As a result of the merger, former VEREIT common stockholders, VEREIT OP common unitholders and awardees of vested share awards separated from Realty Income received approximately 162 million shares of Realty Income common stock, based on the shares of VEREIT common stock and common units of VEREIT OP outstanding as of October 29, 2021.

Issuances of Common Stock in Underwritten Public Offerings

In July 2021, we issued 9,200,000 shares of common stock, 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 net proceeds of $594.1 million were used to repay borrowings under our $1.0 billion commercial paper program, to fund investment opportunities and for other general corporate purposes.

In January 2021, we issued 12,075,000 shares of common stock, 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.

Dividend Reinvestment and Stock Purchase Plan

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We did not issue shares under the waiver approval process during 2021.

During 2020, we issued 149,289 shares and raised approximately $9.1

million under our DRSPP.

During 2021, we issued 168,000 shares and raised approximately $11.2 million under our DRSPP.

At December 31, 2021, we had 11,335,379 shares remaining for future issuance under our DRSPP 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 December 31, 2020 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in pricing of 0.90% over LIBOR.

Under our revolving credit facility, our investment grade credit ratings as of December 31, 2021 provide for financing at the London Interbank Offered Rate ("LIBOR") plus 0.775% with a facility commitment fee of 0.125%, for all-in pricing of 0.90% over LIBOR.

Our revolving credit facility and term loan facility were amended in December 2021 to include provisions for establishing alternative reference rates when LIBOR is no longer available.

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

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

At December 31, 2020, we had no outstanding borrowings on our revolving credit facility and available borrowing capacity of $3.0 billion.

At December 31, 2021, we had a borrowing capacity of $2.35 billion available on our revolving credit facility and an outstanding balance of $650.0 million.

The weighted average interest rate on borrowings under our revolving credit facility during 2021 was 0.9% per annum.

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

In August 2020, we established a U.S.

We have a U.S.

dollar-denominated unsecured commercial paper program.

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

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

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

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

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

At December 31, 2021, we had an outstanding balance of $901.4 million.

The weighted average interest rate on borrowings under our commercial paper program was 0.2% for 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.

The commercial paper borrowings generally carry a term of less than six months.

The commercial paper borrowings outstanding at December 31, 2021 mature between January 2022 and April 2022.

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

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

Thereafter, we generally seek to refinance those borrowings with the net proceeds of long-term or more permanent financing, including the issuance of equity or debt securities.

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

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

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

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

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

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

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

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

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

Mortgage Debt

As of December 31, 2020, we had $299.6 million of mortgages payable, all of which were assumed in connection with our property acquisitions.

As of December 31, 2021, we had $1.11 billion of mortgages payable, the majority of which were assumed in connection with our property acquisitions, including ten mortgages from our merger with VEREIT in 2021 totaling $839.1 million and a Sterling-denominated mortgage payable of £31.0 million.

Additionally, at December 31, 2021, we had net premiums totaling $28.7 million on these mortgages and deferred financing costs of $790,000.

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

During 2021, we made $66.6 million of principal payments, including the repayment of seven mortgages in full for $63.0 million.

Notes Outstanding

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

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

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

Our senior unsecured note and bond obligations consist of the following as of December 31, 2021, sorted by maturity date (in millions):

Principal Amount (Currency Denomination) Carrying Value (USD) As of December 31, 2021

4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (1)

3.875% notes, issued in June 2014 and due in July 2024 $ 350 350

3.875% notes, issued in April 2018 and due in April 2025 $ 500 500

0.750% notes, issues December 2020 and due in March 2026 325

4.625% notes, $550 issued October 2018, of which $544 was exchanged in November 2021, both due in November 2025 (1)

0.750% notes, issued December 2020 and due in March 2026 $ 325 325

4.875% notes, $600 issued June 2016, of which $596 was exchanged in November 2021, both due in June 2026 (1)

4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026 $ 650 650

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 £ 400 541

3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (1)

3.650% notes, issued in December 2017 and due in January 2028 $ 550 550

3.400% notes, $600 issued June 2020, of which $598 was exchanged in November 2021, both due in January 2028 (1)

2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (1)

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

3.100% notes, $600 issued December 2019, of which $596 was exchanged in November 2021, both due in December 2029 (1)

1.625% notes, issued in October 2020 and due December 2030 £ 400 541

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

2.850% notes, $700 issued November 2020, of which $699 was exchanged in November 2021, both due in December 2032 (1)

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 £ 350 474

2.730% notes, issued in May 2019 and due in May 2034 £ 315 427

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Total principal amount $ 12,257

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

(1) In January 2021, we completed the early redemption on all $950.0 million in principal amount of our outstanding 3.250% notes due October 2022, plus accrued and unpaid interest.

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

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

Unamortized net premiums and deferred financing costs 243

(1) In connection with our merger with VEREIT, we completed our debt exchange offer to exchange all outstanding notes issued by VEREIT OP on November 9, 2021 for new notes issued by Realty Income, pursuant to which approximately 99.2% of the outstanding notes issued by VEREIT OP were exchanged for a like aggregate principal amount of the notes issued by Realty Income.

Prior to the completion of our merger with VEREIT on November 1, 2021, these notes were not the obligation of Realty Income.

With respect to the notes originally issued by VEREIT OP that remained outstanding, we amended the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants in such indenture.

In January 2022, we issued £250.0 million of 1.875% senior unsecured notes due January 2027 (the "January 2027 Notes") and £250.0 million of 2.500% senior unsecured notes due January 2042 (the "January 2042 Notes").

The public offering price for the January 2027 Notes was 99.487% of the principal amount, for an effective semi-annual yield to maturity of 1.974%, and the public offering price for the January 2042 Notes was 98.445% of the principal amount, for an effective semi-annual yield to maturity of 2.584%.

Combined, the new issues of the January 2027 Notes and the January 2042 Notes have a weighted average term of approximately 12.5 years and a weighted average effective semi-annual yield to maturity of approximately 2.28%.

In December 2021, we completed the early redemption on all $750.0 million in principal amount of our outstanding 4.650% notes due August 2023, plus accrued and unpaid interest.

During the year ended December 31, 2021 we issued the following notes and bonds (in millions):

2020 Issuances Date of

Issuance Maturity date Principal

issued Price of par value Effective yield to

May 2020 January 2031 $600 98.99 % 3.36%

July 2020 January 2031 $350 108.24 % 2.34%

October 2020 December 2030 £400 99.19 % 1.71%

December 2020 March 2026 $325 99.19 % 0.91%

December 2020 March 2033 $400 98.47 % 1.94%

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

The net proceeds from the October 2020 Sterling-denominated offering of £400.0 million approximated $508.2 million, as converted at the applicable exchange rate on the closing of the offering, and were used to repay GBP-denominated borrowings outstanding under our $3.0 billion revolving credit facility, to settle an outstanding GBP/USD currency exchange swap arrangement and, to the extent not used for those purposes, to fund investment opportunities and for other general corporate purposes.

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

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

July 2021 July 2027 £ 400 99.31 % 1.24 %

July 2021 July 2033 £ 350 99.84 % 1.76 %

4.600% notes (1)

November 2021 February 2024 $ 485 100.00 % 4.60 %

4.625% notes (1)

November 2021 November 2025 $ 544 100.00 % 4.63 %

4.875% notes (1)

November 2021 June 2026 $ 596 100.00 % 4.88 %

3.950% notes (1)

November 2021 August 2027 $ 594 100.00 % 3.95 %

3.400% notes (1)

November 2021 January 2028 $ 598 100.00 % 3.40 %

2.200% notes (1)

November 2021 June 2028 $ 497 100.00 % 2.20 %

3.100% notes (1)

November 2021 December 2029 $ 596 100.00 % 3.10 %

2.850% notes (1)

November 2021 December 2032 $ 699 100.00 % 2.85 %

We issued $1,000 principal amount of Realty Notes for each validly tendered VEREIT Notes with $1,000 principal amount.

For this reason, we denote our “Price of par value” as 100%.

Prior to the completion of our merger with VEREIT on November 1, 2021, these notes were not the obligation of Realty Income.

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

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

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of December 31, 2021.

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

Additionally, with the exception of our £400.0 million of 1.625% senior unsecured notes issued in October 2020, our January 2027 Notes, our July 2027 Notes, our July 2033 Notes, and our January 2042 Notes, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

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

These calculations, which are not based on U.S.

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.

generally accepted accounting principles ("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 December 31, 2021 are:

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

At December 31, 2020, we had cash and cash equivalents totaling $824.5 million, inclusive of £32.3 million Sterling.

At December 31, 2021, we had cash and cash equivalents totaling $258.6 million, inclusive of £105.1 million Sterling and €7.2 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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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 December 31, 2020, the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in pricing of 0.90% over LIBOR.

Based on our ratings as of December 31, 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:

(i) LIBOR, plus 1.45% if our credit rating is lower than BBB-/Baa3 or unrated and (ii) LIBOR,

plus 0.75% if our credit rating is A/A2 or higher.

(i) LIBOR, plus 1.45% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) LIBOR, plus 0.75% if our credit rating is A/A2 or higher.

In addition, our credit facility provides for a facility commitment fee based on our credit ratings, which range from:

(i) 0.30% for a rating lower than BBB-/Baa3 or unrated, and (ii) 0.10% for a credit rating of A/A2 or higher.

Our revolving credit facility and term loan facility were amended in December 2021 to include provisions for establishing alternative reference rates when LIBOR is no longer available.

We also issue senior debt securities from time to time and our credit ratings can impact the interest rates charged in those transactions.

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Table of Obligations

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

The following table summarizes the maturity of each of our obligations as of December 31, 2021 (in millions):

Maturity Credit

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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.

At December 31, 2020, there were no outstanding borrowings under our revolving credit facility or commercial paper program.

(2) Excludes both non–cash original issuance discounts and premiums recorded on notes payable of $14.6 million and deferred financing costs of $49.2 million.

Excludes the impact of the January 2021 early redemption of all $950.0 million in principal of the 3.250% notes due October 2022.

At December 31, 2021 , there were $650.0 million in borrowings under our revolving credit facility.

The commercial paper borrowings outstanding at December 31, 2021 totaled $901.4 million and mature between January 2022 and April 2022.

(2) Excludes both non–cash net premiums recorded on notes payable of $295.5 million and deferred financing costs of $53.1 million.

The table of obligations also excludes the January 2022 issuances of £250.0 million of senior unsecured notes due January 2027 and £250.0 million of senior unsecured notes due January 2042.

(3) Excludes deferred financing costs of $443,000.

(4) Excludes both non–cash net premiums recorded on the mortgages payable of $28.7 million and deferred financing costs of $790,000.

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

Excludes the impact of the January 2021 early redemption of all $950.0 million in principal of the 3.250% notes due October 2022.

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

Excludes interest from the January 2022 issuances of £250.0 million of 1.875% senior unsecured notes due January 2027 and £250.0 million of 2.500% senior unsecured notes due January 2042.

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

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

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

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

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

No Unconsolidated Investments

We have no unconsolidated investments, nor do we engage in trading activities involving energy or commodity contracts.

Unconsolidated Investments

As a result of our merger with VEREIT, we assumed an equity method investment in three unconsolidated entities.

We are responsible to fund our proportionate share of any operating cash deficits.

There are no further material commitments related to these investments at this time.

The debt held by the unconsolidated entities is secured by its properties, though is non-recourse to us.

Impact of Real Estate and Credit Markets

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

for the year ended December 31, 2020:

and Europe for the year ended December 31, 2021 (excludes properties assumed on November 1, 2021 in conjunction with our merger with VEREIT):

Number of Properties Leasable Square Feet Investment

($ in thousands) Weighted Average Lease Term (Years) Initial Average Cash Lease Yield (1)

($ in thousands) Weighted Average Lease Term (Years) Initial Weighted Average Cash Lease Yield (1)

Year ended December 31, 2021 (2)

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714 14,727,335 $ 3,608,573 14.1 5.5 %

Acquisitions - U.K.

Acquisitions - Europe (U.K.

129 9,196,345 2,558,909 11.6 5.5 %

Total Acquisitions 843 23,923,680 $ 6,167,482 13.1 5.5 %

Properties under Development - U.S.

Properties under Development (3)

68 2,681,676 243,278 15.7 6.0 %

911 26,605,356 $ 6,410,760 13.2 5.5 %

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

Since it is possible that our 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 for the fourth quarter of 2020 includes approximately $700,000 received as a settlement credit for a property acquired in the U.S.

as reimbursement of a free rent period.

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

Since it is possible that a 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 includes approximately $8.5 million received as settlement credits for 41 properties as reimbursement of free rent periods for the year ended December 31, 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.

When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial average cash lease yield is computed as follows:

When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows:

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 2021 caused any one client to be 10% or more of our total assets at December 31, 2021.

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

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

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

(3) Includes £7.0 million of investments in U.K.

development properties, converted at the applicable exchange rates on the funding dates.

(4) Our clients occupying the new properties are 83.6% retail and 16.4% industrial, based on rental revenue.

Approximately 40% of the rental revenue generated from acquisitions during 2021 is from our investment grade rated clients, their subsidiaries or affiliated companies.

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At December 31, 2021, we had 164 properties available for lease out of 11,136 properties in our portfolio, which represents a 98.5% occupancy rate based on the number of properties in our portfolio.

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

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

Three months ended December 31, 2021

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Properties available for lease at December 31, 2021

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

(2) The annual new rent on these re-leases was $21.01 million, as compared to the previous annual rent of $20.95 million on the same properties, representing a rent recapture rate of 100.3% on the properties re-leased during the three months ended December 31, 2020.

(3) Re-leased all five properties to new clients after a period of vacancy.

Year ended December 31, 2021

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Properties available for lease at December 31, 2021

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

(2) The annual new rent on these re-leases was $66.24 million, as compared to the previous annual rent of $66.26 million on the same properties, representing a rent recapture rate of 100.0% on the properties re-leased during the year ended December 31, 2020.

(3) Re-leased five properties to new clients without a period of vacancy, and 13 properties to new clients after a period of vacancy.

(1) Includes 103 net vacancies assumed from the combined effect of our merger with VEREIT and spin-off of office properties to Orion Office REIT Inc.

in November 2021.

(2) 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 December 31, 2021, the annual new rent on re-leases was $49.09 million, as compared to the previous annual rent of $48.22 million on the same units, representing a rent recapture rate of 101.8% on the units re-leased.

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

During the year ended December 31, 2021, the annual new rent on re-leases was $89.23 million, as compared to the previous annual rent of $86.29 million on the same units, representing a rent recapture rate of 103.4% on the units re-leased.

We re-leased 13 units to new clients without a period of vacancy, and 33 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.

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At December 31, 2021, we classified 33 properties, with a carrying amount of $30.5 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.

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

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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.

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

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We have continued our 53-year policy of paying monthly dividends.

In addition, we increased the dividend five times during 2020 and once in 2021.

In addition, we increased the dividend five times during 2021 and once during 2022.

As of February 2022, we have paid 97 consecutive quarterly dividend increases and increased the dividend 114 times since our listing on the NYSE in 1994.

Month Month Dividend Increase

2020 Dividend increases Declared Paid per share per share

Month Month Monthly Dividend Increase

2021 Dividend increases

Declared Paid per share per share

1st increase Dec 2020 Jan 2021 $ 0.2345 $ 0.0005

2nd increase Jan 2020 Feb 2020 $ 0.2325 $ 0.0050

3rd increase Mar 2020 Apr 2020 $ 0.2330 $ 0.0005

4th increase Jun 2020 Jul 2020 $ 0.2335 $ 0.0005

5th increase Sep 2020 Oct 2020 $ 0.2340 $ 0.0005

2nd increase Mar 2021 Apr 2021 $ 0.2350 $ 0.0005

3rd increase Jun 2021 Jul 2021 $ 0.2355 $ 0.0005

4th increase Sept 2021 Oct 2021 $ 0.2360 $ 0.0005

5th increase Nov 2021 Dec 2021 $ 0.2460 $ 0.0100

2022 Dividend Increases

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The dividends paid per share during 2021 totaled $2.833, as compared to $2.794 during 2020, an increase of $0.039, or 1.4%.

In November 2021, we also made a $2.060 tax distribution of Orion shares, that occurred in conjunction with the Orion Divestiture on November 12, 2021, after our merger with VEREIT on November 1, 2021.

The fair market value of these shares for tax distribution was determined to be $20.6272 per share, which was calculated using the five day volume weighted average share price after issuance.

The monthly dividend of $0.2465 per share represents a current annualized dividend of $2.958 per share, and an annualized dividend yield of approximately 4.1% based on the last reported sale price of our common stock on the NYSE of $71.59 on December 31, 2021.

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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 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.

When assessing the collectability of future lease payments, one of the key factors we have considered during 2020 and 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.

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

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.

During 2021, we have entered into rent deferral agreements with certain clients, allowing them to pay rent to us over an extended time period for COVID-related receivables.

Additionally, gradual improvements in certain client's financial positions have allowed us to re-assess, and potentially change, this cash basis accounting for outstanding receivables.

As of December 31, 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.

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

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

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.

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

Due to more positive trends, we did not have to record any provisions for impairment on our theater properties during 2021.

However, 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 years ended December 31, 2021, 2020 and 2019.

Total Revenue

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

The following summarizes our total revenue (in thousands):

2021 2020 2019 2021

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Year Ended December 31, Increase/(Decrease)

Number of Properties Square Footage 2020 2019 $ Change % Change

Number of Properties Square Footage (1)

$ Change % Change

Properties acquired during 2021 & 2020

4,953 105,839,422 $ 413,546 $ 51,951 $ 361,595 696.0 %

Same store rental revenue 6,046 93,607,451 1,457,648 1,418,502 39,146 2.8 %

Orion Divestiture 92 10,074,923 45,047 50,401 (5,354) (10.6) %

Constant currency adjustment (2)

N/A N/A 2,025 (2,861) 4,886 (170.8) %

Properties sold during 2021 & 2020

283 5,930,654 6,668 21,919 (15,251) (69.6) %

Straight-line rent and other non-cash adjustments N/A N/A 11,646 (3,587) 15,233 (424.7) %

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Totals $ 1,960,107 $ 1,560,171 $ 399,936 25.6 %

(1) Relates to the aggregate of (i) rental revenue from properties (174 properties comprising 2,973,551 square feet) that were available for lease during part of 2020 or 2019, (ii) rental revenue for properties (6 properties comprising 943,004 square feet) under development, and (iii) lease termination settlements.

(1) Excludes 5,869,364 square feet from properties ground leased to clients and 2,100,990 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 December 31, 2021 of 1.35 GBP/USD.

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

In addition, the same store pool excludes properties assumed on November 1, 2021 as a result of our merger with VEREIT.

(3) Relates to the aggregate of (i) rental revenue from properties (128 properties comprising 2,292,635 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 2020 compared to 2019 (dollars in thousands):

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Totals $ 1,560,171 $ 1,415,733 $ 144,438 10.2 %

(1) Relates to the aggregate of (i) rental revenue from properties (130 properties comprising 3,249,304 square feet) that were available for lease during part of 2019 or 2018, (ii) rental revenue for properties (10 properties comprising 1,404,360 square feet) under development, and (iii) lease termination settlements.

(1) Relates to the aggregate of (i) rental revenue from properties (174 properties comprising 2,973,551 square feet) that were available for lease during part of 2020 or 2019, (ii) rental revenue for properties (six properties comprising 943,004 square feet) under development, and (iii) lease termination settlements.

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 revenue in 2020 was negatively impacted by reserves recorded as reductions of rental revenue of $39.9 million, compared to $1.4 million in 2019.

There was no same store rental income impact by reserves recorded as a reduction of rental revenue in 2018.

Same store rental revenue in 2021 was negatively impacted by net reserves recorded as reductions of rental revenue of $6.6 million, compared to $32.9 million in 2020.

Same store rental revenue in 2020 was negatively impacted by net reserves recorded as reductions of rental revenue of $39.9 million compared to $1.4 million in 2019.

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

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the decrease for 2020 relative to 2019 would have been (5.1)%.

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

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

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increase for 2021 relative to 2020 would have been 7.7%.

Rental revenue was negatively impacted by rent reserves during 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 (in millions):

Year ended December 31,

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Of the 11,043 single-client properties, 10,883, or 98.6%, were net leased at December 31, 2021.

Of our 6,419 leased single-client properties, 5,486 or 85.5% were under leases that provide for increases in rents through:

• Base rent increases tied to a consumer price index (typically subject to ceilings);

• Percentage rent based on a percentage of our client's gross sales;

Of the 11,236 in-place leases in the portfolio, which excludes 208 vacant units, 9,639 or 85.8% were under leases that provide for increases in rental revenue through:

• Base rent increases tied to inflation (typically subject to ceilings);

• Percentage rent based on a percentage of the clients’ gross sales;

• Fixed increases;

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At December 31, 2021, our portfolio of 11,136 properties was 98.5% leased with 164 properties available for lease, as compared to 97.9% leased, with 140 properties available for lease at December 31, 2020.

It has been our

experience that approximately 1% to 4% of our property portfolio will be available for lease at any given time;

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

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

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A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses.

The increase in contractually obligated reimbursements by our clients in the years presented is primarily due to the growth of our portfolio due to acquisitions.

The increase in contractually obligated reimbursements by our clients in the periods presented is primarily due to the growth of our portfolio due to acquisitions.

Other Revenue

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

In addition, interest income from our money market accounts was higher for 2020 as compared to 2019, which is primarily due to higher average investment balances.

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

The increases in 2021 and 2020 are due to additional leases with above-market terms, which is proportional to overall portfolio growth.

Total Expenses

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96,980 73,215 66,483 23,765 6,732

Income taxes 14,693 6,158 5,340 8,535 $ 818

Provisions for impairment 38,967 147,232 40,186 (108,265) 107,046

Merger and integration-related costs 167,413 — — 167,413 —

Total expenses $ 1,658,444 $ 1,311,424 $ 1,080,206 $ 347,020 $ 231,218

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1.5 % 1.6 % 1.4 %

(1) General and administrative expenses for 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 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $69,752, which was used for our calculation.

General and administrative expenses for 2018 included a one–time severance payment made to our former CEO in October 2018.

The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28,293;

however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18,651 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 2018, we have excluded this one–time executive severance charge to arrive at a normalized general and administrative amount of $65,497, which was used for our calculation.

Executive severance charges are excluded from Adjusted Funds from Operations Available to Common Stockholders, or AFFO, which is not a financial measure under generally accepted accounting principles.

See our discussion of AFFO, which includes a reconciliation of this amount.

(1) In 2021, we began presenting 'Income taxes,' which was previously presented in 'Expenses,' below a newly captioned subtotal for 'Income before income taxes' within our consolidated statements of income and comprehensive income.

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

(2) General and administrative expenses for 2020 included an executive severance charge related to the departure of our former Chief Financial Officer ("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.

(3) Excludes rental revenue (reimbursable).

Total revenue for 2020 and 2019 was updated to reflect the reclassification of certain miscellaneous non-recurring revenue from other revenue to other income, net in the consolidated statements of income and comprehensive income.

Depreciation and Amortization

The increase in depreciation and amortization in 2021 and 2020 was primarily due to the acquisition of properties in 2021 and 2020, which was partially offset by property sales in those same periods.

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

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.

Interest Expense

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Amortization of debt origination and deferred financing costs 11,695 10,694 9,485

Loss (gain) on interest rate swaps 4,132 2,752 (2,733)

Loss on interest rate swaps 2,905 4,132 2,752

Amortization of net mortgage premiums (3,498) (1,258) (1,415)

Amortization of net note premiums (10,349) (1,754) (995)

Other items (169) (441) (59)

Interest capitalized (1,926) (480) (751)

Capital lease obligation 637 311 310

Interest on deferred financing leases 9 — —

Interest expense $ 323,644 $ 309,336 $ 290,991

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Average interest rates 3.11 % 3.48 % 3.89 %

The increase in interest expense from 2019 to 2020 is primarily due to the October 2020 issuance of our 1.625% notes due 2030, May and July 2020 issuances of our 2031 Notes, the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029, and higher interest related to mortgages assumed during December 2019, partially offset by the January 2020 repayment of our 5.750% notes due 2021, the June 2020 repayment of one of our $250.0 million term loans, and lower average interest rates.

The increase in interest expense from 2018 to 2019 is primarily due to the October 2018 issuance of our $250.0 million senior unsecured term loan, the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029, and a loss on our interest rate swaps in 2019.

At December 31, 2020, the weighted average interest rate on our:

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $642,000 and considering that one of our $250.0 million term loans was paid off in June 2020) was swapped to fixed at 3.9%;

• Mortgages payable of $299.6 million (excluding net premiums totaling $1.7 million and deferred financing costs of $973,000 on these mortgages) was 4.9%;

• Notes and bonds payable of $8.30 billion (excluding unamortized net original issuance premiums of $14.6 million and deferred financing costs of $49.2 million) was 3.4%;

• Combined outstanding notes, bonds, mortgages and term loan of $8.85 billion (excluding all net premiums and deferred financing costs) was 3.5%.

The increase in interest expense from 2020 to 2021 is primarily due to the issuance of $4.65 billion of notes associated with the exchange offer in conjunction with our merger with VEREIT in November 2021, the issuance of senior unsecured notes during 2020 and 2021 outside of our merger with VEREIT, which included aggregate totals of $1.68 billion in principal of USD denominated notes and £1.15 billion in principal of Sterling denominated notes, partially offset by the early redemptions during 2021 and 2020 of $1.2 billion of notes, increases in amortization of net note and mortgage premiums, and lower average balances on our credit facility and commercial paper borrowings.

The increase in interest expense from 2019 to 2020 is primarily due to the October 2020 issuance of our 1.625% notes due 2030, May and July 2020 issuances of our 2031 Notes, the May 2019 issuance of our 2.730% notes due 2034, the June 2019 issuance of our 3.250% notes due 2029, and higher interest related to mortgages assumed during December 2019, partially offset by the January 2020 repayment of our 5.750% notes due January 2021, the June 2020 repayment of one of our $250.0 million term loans, and lower average interest rates.

For the year ended December 31, 2021, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $650.0 million, was 0.9%

• Commercial paper outstanding borrowings of $901.4 million was 0.2%;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $443,000) was swapped to fixed at 3.9%;

• Mortgages payable of $1.11 billion (excluding net premiums totaling $28.7 million and deferred financing costs of $790,000 on these mortgages) was 4.7%;

• Notes and bonds payable of $12.26 billion (excluding unamortized net premiums of $295.5 million and deferred financing costs of $53.1 million) was 3.3%.

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 December 31, 2020, 140 properties were available for lease, as compared to 94 at December 31, 2019 and 80 at December 31, 2018.

The increase in property expenses (excluding reimbursable) in 2020 is primarily due to reserves for contractually obligated reimbursements by our clients, an increase in repairs and maintenance expense, and an increase in portfolio size and the number of vacant properties at year-end.

At December 31, 2021, 164 properties were available for lease or sale, as compared to 140 at December 31, 2020 and 94 at December 31, 2019.

The increase in property expenses (excluding reimbursable) in 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.

The increase in property expenses in 2020 relative to 2019 is primarily due to reserves for contractually obligated reimbursements by our clients, an increase in repairs and maintenance expense, and an increase in portfolio size and the number of vacant properties at year-end.

Property Expenses (reimbursable)

The increase in property expenses (reimbursable) in both 2020 and 2019 was primarily attributable to the increased portfolio size, which contributed to higher contractually obligated reimbursements from our clients for recoverable real estate taxes and operating expenses primarily due to our acquisitions in each year.

The increase in property expenses (reimbursable) in both 2021 and 2020 was primarily attributable to our increased portfolio size, which contributed to higher operating expenses as a result of our acquisitions in 2021 and 2020, 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 increased in 2020 primarily due to a severance charge of $3.5 million for our former CFO, who departed the company in March 2020, higher payroll-related costs, and higher corporate–level professional fees, partially offset by lower costs for terminated acquisitions and travel.

The decrease in general and administrative costs in 2019 is primarily due to the severance charge of $18.7 million incurred in 2018 that related to our former CEO, who departed the company in October 2018.

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

income taxes paid by us and our subsidiaries.

The increase in income taxes in 2020 was primarily attributable to our U.K.

investments, which contributed to higher U.K.

income taxes as compared to 2019.

The increase in general and administrative expenses for 2021 is primarily due to higher payroll-related costs and higher corporate-level professional fees.

The increase in general and administrative expenses for 2020 was primarily due to a severance charge of $3.5 million for our former CFO, who departed the company in March 2020, higher payroll-related costs, and higher corporate–level professional fees, partially offset by lower costs for terminated acquisitions and travel.

Provisions for Impairment

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

Merger and Integration-related Costs

In conjunction with our merger with VEREIT and Orion Divestiture, we incurred approximately $167.4 million of merger and integration-related transaction costs during 2021.

The merger and integration-related costs incurred to date primarily consist of advisory fees, attorney fees, accountant fees, SEC filing fees and additional integration costs that include incremental and non-recurring costs necessary to convert data and systems, retain employees and otherwise enable us to operate the acquired VEREIT assets efficiently.

There were no merger and integration-related costs during 2020 or 2019.

Gain on Sales of Real Estate

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

The following summarizes our property dispositions (dollars in millions).

These amounts exclude properties disposed from the spin-off of office properties to Orion Office REIT, Inc.

in November 2021.

Year Ended December 31,

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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 and derivative gains, net 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 December 2021, we completed the early redemption on all $750.0 million in principal amount of outstanding 4.650% notes due August 2023, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a $46.4 million loss on extinguishment of debt during 2021.

In October 2021, we completed the early redemption on $9.6 million in principal of a mortgage due June 2022, plus accrued and unpaid interest.

As a result of the early redemption, we recognized a loss of $315,000 on extinguishment of debt for 2021.

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 during 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 during 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 during 2020.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities for 2021 relates to three equity method investments that were acquired in our merger with VEREIT.

There were no comparative investments during 2020 or 2019.

Other Income, Net

Beginning in 2021, certain miscellaneous non-recurring revenue has been reclassified from total revenue to other income, net in the consolidated statements of income and comprehensive income .

Interest income from our money market accounts was higher for 2020 as compared to 2019, which is primarily due to higher average investment balances.

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 2021 and 2020 was primarily attributable to our increased volume of U.K.

investments, which contributed to higher U.K.

income taxes for both years.

Net Income Available to Common Stockholders

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

Year Ended December 31, % Increase/(decrease)

2020 2019 2018 2020 versus 2019

2019 versus 2018

Year Ended December 31, % (Decrease)

2021 2020 2019 2021

Net income available to common stockholders

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

The calculation to determine net income available to common stockholders includes 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 attributable to the Company and available to common stockholders.

Net income available to common stockholders in 2020 was impacted by the following transactions:

(i) $147.2 million of provisions for impairment, (ii) $52.5 million in reserves recorded as a reduction of rental revenue, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due 2021, and (iv) a $3.5 million executive severance charge for our former CFO.

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 in 2021 was primarily impacted by the following transactions:

(i) a $97.2 million loss on extinguishment of debt, which primarily includes $46.5 million related to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021 and $46.4 million related to the December 2021 early redemption of the 4.650% notes due August 2023 recorded in the three months ended December 31, 2021, (ii) $167.4 million of merger and integration-related costs related to our merger with VEREIT and spin-off of office properties to Orion Office REIT Inc., (iii) $39.0 million of provisions for impairment, and (iv) $14.7 million in net reserves recorded as a reduction of rental revenue.

Net income available to common stockholders in 2020 was primarily impacted by the following transactions:

(i) $147.2 million of provisions for impairment, (ii) $52.5 million in net reserves recorded as a reduction of rental revenue, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due January 2021, and (iv) a $3.5 million executive severance charge for our former CFO.

For 2019, the only comparable charges were $40.2 million in provisions for impairment and $2.9 million in reserves recorded as a reduction of rental revenue.

Net income available to common stockholders in 2018 was impacted by a severance payment made to our former CEO in October 2018.

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

however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18.7 million.

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) gain on sales of real estate, (vi) foreign currency and derivative gains and losses, net, and (vii) executive severance charges (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 and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gains and losses, net (as described in the Adjusted Funds from Operations section), and (ix) our proportionate share of interest expense and real estate depreciation and amortization from unconsolidated entities.

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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Management also believes the use of an annualized quarterly Adjusted EBITDA re metric, which we refer to as Annualized Adjusted EBITDA re , is meaningful because it represents the Company’s current earnings run rate for the period presented.

The ratio of our total debt to our annualized quarterly Adjusted EBITDA re is also used to determine vesting of performance share awards granted to our executive officers.

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

Annualized Adjusted EBITDA re and Annualized Pro Forma Adjusted EBITDA re , as defined below, are also used to determine the vesting of performance share awards granted to executive officers.

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

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.

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

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

For the Quarter Ended December 31,

Our ratios of net debt-to-Annualized Adjusted EBITDA re and net debt-to-Annualized Pro Forma Adjusted EBITDA re , which are used by management as a measure of leverage, are calculated as net debt (which we define as total debt per our consolidated balance sheet,

excluding deferred financing costs and net premiums and discounts, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDA re and annualized Pro Forma Adjusted EBITDA re , respectively.

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

For the Three Months Ended December 31,

Dollars in thousands 2021 2020 2019

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Interest 100,739 78,764 75,073

Loss on extinguishment of debt 46,722 — —

Income taxes 10,128 4,500 1,736

Depreciation and amortization 333,229 175,041 156,594

Executive severance charge (2)

Provisions for impairment 7,990 23,790 8,950

Merger and integration-related costs 137,332 — —

Gain on sales of real estate (20,402) (22,667) (14,168)

Foreign currency and derivative gains, net (1,880) (3,311) (1,792)

Proportionate share of adjustments for unconsolidated entities 1,581 — —

Quarterly Adjusted EBITDA re

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$ 2,838,184 $ 1,522,978 $ 1,501,577

Total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts $ 15,172,849 $ 8,852,036 $ 7,930,350

Proportionate share for unconsolidated entities debt, excluding deferred financing costs

Cash and cash equivalents (258,579) (824,476) (54,011)

$ 15,000,276 $ 8,027,560 $ 7,876,339

Net Debt/Adjusted EBITDA re

Net Debt/Pro forma Adjusted EBITDA re (4)(5)

(1) Net income for 2020 was negatively impacted by $18.1 million of rent reserves recorded as reductions of rental revenue, of which $3.3 million relates to straight-line rent.

(2) The executive severance charge in 2018 reflects an $18.7 million severance charge for our former CEO upon his departure in October 2018.

(3) We calculate Annualized Adjusted EBITDAre by multiplying the Quarterly Adjusted EBITDAre by four.

(4) Net Debt is total debt per the consolidated balance sheet, less of cash and cash equivalents.

(1) Net income for the three months ended December 31, 2021 was negatively impacted by $827,000 of rent reserves recorded as reductions of rental revenue, of which $5.6 million was related to straight-line rent receivables, net of reserve reversals of $(4.8) million.

Net income for the three months ended December 31, 2020 was negatively impacted by $18.1 million of rent reserves recorded as reductions of rental revenue, of which $3.3 million relates to straight-line rent.

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

(3) Net Debt is total debt per our consolidated balance sheet, excluding deferred financing costs and net premiums and discounts, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents.

(4) Net Debt/Annualized Adjusted EBITDA re was 6.0x for the three months ended December 31, 2021, 5.4x for the three months ended December 31, 2020, and 5.5x for the three months ended December 31, 2019.

(5) During 2021, Net Debt was adjusted to exclude deferred financing costs and net premiums and discounts.

Under the prior calculation of Net Debt, which included deferred financing costs and net premiums and discounts, Net Debt/Adjusted EBITDA re was 5.3x for the three months ended December 31, 2020, and Net Debt/Pro forma Adjusted EBITDA re was 5.2x for the three months ended December 31, 2020.

The adjustment of Net Debt did not impact the calculations for the three months ended December 31, 2019, which were 5.5x for Net Debt/Adjusted EBITDA re and 5.2x for Net Debt/Pro forma Adjusted EBITDA re .

The Annualized Pro Forma Adjustments consist of 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.

For the three months ended December 31, 2021, the Annualized Pro Forma adjustments are inclusive of the effects of the merger.

The Annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes and bonds.

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Annualized Pro forma Adjustments $ 358,560 $ 25,910 $ 77,793

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

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

2020 2019 2018 2020 versus 2019

2019 versus 2018

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (Normalized FFO)

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

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, as FFO excluding merger and integration-related costs related to our merger with VEREIT.

% Increase/(Decrease)

2021 2020 2019 2021

FFO available to common stockholders

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$ 2.99 $ 3.31 $ 3.29 (9.7) % 0.6 %

Normalized FFO available to common stockholders

$ 1,408.0 $ 1,142.1 $ 1,039.6 23.3 % 9.9 %

Normalized FFO per share (1)

$ 3.39 $ 3.31 $ 3.29 2.4 % 0.6 %

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

FFO in 2020 was impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic, a loss on extinguishment of debt due to the early redemption of the 5.750% notes due 2021 in January 2020 and an executive severance charge for our former CFO in March 2020.

FFO in 2018 was impacted by a severance payment made to our former CEO in October 2018.

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

however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18.7 million.

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

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

FFO and Normalized FFO for 2021, 2020, and 2019 were primarily impacted by the same transactions listed under "Net Income Available To Common Stockholders" on page 59.

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.

2021 2020 2019

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Gain on sales of real estate (55,798) (76,232) (29,996)

Proportionate share of adjustments for unconsolidated entities 1,931 — —

FFO adjustments allocable to noncontrolling interests (785) (817) (477)

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Diluted FFO $ 1,240,580 $ 1,143,537 $ 1,040,994

FFO available to common stockholders $ 1,240,580 $ 1,142,119 $ 1,039,591

Merger and integration-related costs 167,413 — —

Normalized FFO available to common stockholders $ 1,407,993 $ 1,142,119 $ 1,039,591

Normalized FFO allocable to dilutive noncontrolling interests 1,642 1,418 1,403

Diluted Normalized FFO $ 1,409,635 $ 1,143,537 $ 1,040,994

FFO per common share, basic and diluted $ 2.99 $ 3.31 $ 3.29

Normalized FFO per common share:

Basic $ 3.40 $ 3.31 $ 3.29

Diluted $ 3.39 $ 3.31 $ 3.29

Distributions paid to common stockholders $ 1,169,026 $ 964,167 $ 852,134

FFO available to common stockholders in excess of distributions paid to common stockholders $ 71,554 $ 177,952 $ 187,457

$ 177,952 $ 187,457 $ 141,675

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

Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 238,967 $ 177,952 $ 187,457

Weighted average number of common shares used for FFO:

Basic 414,535,283 345,280,126 315,837,012

Diluted 414,769,846 345,878,377 316,601,350

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

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

Weighted average number of common shares used for Normalized FFO:

Basic 414,535,283 345,280,126 315,837,012

Diluted 415,270,063 345,878,377 316,601,350

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 and integration-related costs, for Normalized FFO.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time.

Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative.

The use of FFO is recommended by the REIT industry as a supplemental performance measure.

ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)

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

2020 2019 2018 2020 versus 2019

2019 versus 2018

We define AFFO, a non-GAAP measure, as FFO adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance.

2021 2020 2019 2021

AFFO available to common stockholders

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

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

AFFO during 2021 and 2020 was primarily impacted by reserves recorded as a reduction of rental revenue related to the COVID-19 pandemic.

During the second half of 2021, reserves recorded as a reduction of rental revenue were partially offset 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.

Other companies in our industry use a similar measurement, but they may use the term “CAD” (for Cash Available for Distribution), “FAD” (for Funds Available for Distribution) or other terms.

Most companies in our industry use a similar measurement, but they may use the term “CAD” (for Cash Available for Distribution), “FAD” (for Funds Available for Distribution) or other terms.

Our AFFO calculations may not be comparable to AFFO, CAD or FAD reported by other companies, and other companies may interpret or define such terms differently than we do.

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

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

2021 2020 2019

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$ 359,456 $ 395,486 $ 436,482

Cumulative adjustments to calculate FFO (2)

Cumulative adjustments to calculate Normalized FFO (2)

1,048,537 746,633 603,109

FFO available to common stockholders 1,142,119 1,039,591 903,257

Normalized FFO available to common stockholders 1,407,993 1,142,119 1,039,591

Executive severance charge (3)

3,463 — 18,651

Loss on extinguishment of debt 97,178 9,819 —

Amortization of share-based compensation 16,234 14,727 13,662

Amortization of deferred financing costs (4)

Amortization of net debt premiums and deferred financing costs (4)

(6,182) 3,710 3,339

Amortization of net mortgage premiums (1,258) (1,415) (1,520)

Loss (gain) on interest rate swaps 4,353 2,752 (2,733)

Loss on interest rate swaps 2,905 4,353 2,752

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

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Recurring capital expenditures (1,202) (198) (801)

Straight-line rent (26,502) (28,674) (24,687)

Straight-line rent and expenses (61,350) (26,502) (28,674)

Amortization of above and below-market leases 37,970 22,940 19,336

Proportionate share of adjustments for unconsolidated entities (1,948) — —

Other adjustments (6)

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AFFO available to common stockholders in excess of distributions paid to common stockholders $ 319,727 $ 208,459 $ 197,881

$ 208,459 $ 197,881 $ 162,976

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

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(1) As of December 31, 2021, there was $58.7 million of uncollected rent deferred as a result of lease concessions we granted in response to the COVID-19 pandemic and recognized under the practical expedient provided by the FASB and $41.3 million of uncollected rent for which we have not granted a lease concession.

Deferrals accounted for as modifications totaling $236,000 for 2020 have not been added back to AFFO.

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

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

The executive severance charge in 2018 represents the incremental costs incurred upon our former CEO's departure in October 2018, consisting of $9.8 million of cash, $17.9 million of share-based compensation expense and $574,000 of professional fees, reduced by $9.6 million accrued for CEO compensation prior to separation.

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

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

(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)."

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

(4) Includes the amortization of premiums and discounts on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt.

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

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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 investments and 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.

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Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders.

Presentation of the information regarding FFO and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO in the same way, so comparisons with other REITs may not be meaningful.

Furthermore, FFO and AFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as alternatives to net income as an indication of our performance.

FFO and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities.

In addition, FFO and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments.

Presentation of the information regarding FFO, Normalized FFO, and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO, Normalized FFO, and AFFO in the same way, so comparisons with other REITs may not be meaningful.

Furthermore, FFO, Normalized FFO, and AFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as alternatives to net income as an indication of our performance.

FFO, Normalized FFO, and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities.

In addition, FFO, Normalized FFO, and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments.

IMPACT OF INFLATION

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

Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index, or retail price index in the case of certain leases in the U.K.

(typically subject to ceilings), or increases in the clients’ sales volumes.

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

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Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.

IMPACT OF NEWLY ADOPTED ACCOUNTING STANDARDS

For information on the impact of newly adopted accounting standards on our business, see note 2 of the Notes to the Consolidated Financial Statements.

IMPACT OF RECENT ACCOUNTING STANDARDS

For information on the impact of new accounting standards on our business, see note 2 of the Notes to the Consolidated Financial Statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis