What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-02 · 534 added, 495 removed, 552 unchanged (65% of the section changed)

3 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

ASSETS (unaudited)

9 unchanged sentences

Lease intangible assets, net 5,187,280 5,275,304

Goodwill 3,711,981 3,676,705

Investment in unconsolidated entities 141,191 140,967

Other assets, net 1,679,809 1,369,579

12 unchanged sentences

Stockholders’ equity:

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

Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 601,566,581 and 591,261,991 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively

30,236,374 29,578,212

Distributions in excess of net income ( 4,772,112 ) ( 4,530,571 )

Accumulated other comprehensive loss

( 1,076 ) ( 54,634 )

Accumulated other comprehensive income 37,917 4,933

Total stockholders’ equity 25,502,179 25,052,574

3 unchanged sentences

The accompanying notes to consolidated financial statements are an integral part of these statements.

Table of Content s

REALTY INCOME CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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

2021 2020 2021 2020

Three months ended March 31,

Rental (including reimbursable) $ 799,565 $ 439,365

6 unchanged sentences

Provisions for impairment 7,038 2,720

Merger-related costs 16,783 — 30,081 —

Merger and integration-related costs 6,519 —

Total expenses 608,763 303,075

2 unchanged sentences

Loss on extinguishment of debt — ( 46,473 )

Equity in income of unconsolidated entities 954 —

Other income, net 1,852 550

Income before income taxes 210,952 102,461

11 unchanged sentences

Foreign currency translation adjustment ( 10,706 ) ( 259 )

Unrealized gain (loss) on derivatives, net 16,852 1,602 52,428 ( 34,794 )

Unrealized gain on derivatives, net 43,690 46,409

Comprehensive income available to common stockholders $ 232,353 $ 142,090

The accompanying notes to consolidated financial statements are an integral part of these statements.

Table of Content s

REALTY INCOME CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(dollars in thousands) (unaudited)

Three Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022, and 2021

capital Distributions

4 unchanged sentences

interests Total

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

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

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

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

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

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

Balance, September 30, 2021

Balance, December 31, 2020

361,303,445 $ 14,700,050 $ ( 3,659,933 ) $ ( 54,634 ) $ 10,985,483 $ 32,247 $ 11,017,730

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

Net income — — 95,940 — 95,940 296 96,236

2 unchanged sentences

Share issuances, net of costs 12,118,394 672,221 — — 672,221 — 672,221

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

Share-based compensation, net

87,983 ( 1,255 ) — — ( 1,255 ) — ( 1,255 )

Balance, September 30, 2020

Balance, March 31, 2021

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

Nine Months Ended September 30, 2021 and 2020

capital Distributions

net income Accumulated

comprehensive

income (loss) Total

stockholders’

equity Noncontrolling

interests Total

Balance, December 31, 2021

Net income — — 355,415 — 355,415 865 356,280

Other comprehensive income — — — 53,558 53,558 — 53,558

Distributions paid and payable — — ( 808,435 ) — ( 808,435 ) ( 1,198 ) ( 809,633 )

Share issuances, net of costs 42,777,850 2,743,039 — — 2,743,039 — 2,743,039

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

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

Balance, September 30, 2021

591,261,991 $ 29,578,212 $ ( 4,530,571 ) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400

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

Net income — — 199,369 — 199,369 602 199,971

Other comprehensive loss — — — ( 35,344 ) ( 35,344 ) — ( 35,344 )

Other comprehensive income — — — 32,984 32,984 — 32,984

Distributions paid and payable — — ( 440,910 ) — ( 440,910 ) ( 882 ) ( 441,792 )

Share issuances, net of costs 10,171,808 660,044 — — 660,044 — 660,044

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

Share-based compensation, net 132,782 ( 1,882 ) — — ( 1,882 ) — ( 1,882 )

Balance, September 30, 2020

Balance, March 31, 2022

601,566,581 $ 30,236,374 $ ( 4,772,112 ) $ 37,917 $ 25,502,179 $ 76,546 $ 25,578,725

The accompanying notes to consolidated financial statements are an integral part of these statements.

Table of Content s

REALTY INCOME CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(dollars in thousands) (unaudited)

Nine months ended September 30,

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

$ 356,280 $ 278,356

Net income $ 199,971 $ 96,236

Adjustments to net income:

Depreciation and amortization 403,762 177,985

564,606 501,997

Amortization of share-based compensation 5,002 3,697

12,484 13,420

Non-cash revenue adjustments ( 14,180 ) ( 1,163 )

( 12,722 ) ( 5,544 )

Loss on extinguishment of debt — 46,473

Amortization of net premiums on mortgages payable ( 3,561 ) ( 280 )

( 1,158 ) ( 1,020 )

Amortization of net premiums on notes payable ( 15,740 ) ( 85 )

Amortization of deferred financing costs 3,445 2,739

2 unchanged sentences

Gain on sales of real estate ( 10,156 ) ( 8,401 )

( 35,396 ) ( 53,565 )

Income from unconsolidated entities ( 954 ) —

Distributions from unconsolidated entities 729 —

Provisions for impairment on real estate 7,038 2,720

30,977 123,442

Change in assets and liabilities

Accounts receivable and other assets ( 17,698 ) ( 21,367 )

( 46,670 ) ( 59,747 )

Accounts payable, accrued expenses and other liabilities ( 45,491 ) ( 32,019 )

39,248 ( 6,082 )

Net cash provided by operating activities 513,479 266,453

970,066 809,805

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in real estate ( 1,525,836 ) ( 1,026,690 )

( 3,709,894 ) ( 1,286,289 )

Improvements to real estate, including leasing costs ( 13,471 ) ( 1,741 )

( 11,159 ) ( 10,336 )

Proceeds from sales of real estate 122,235 34,705

123,533 181,925

Insurance and other proceeds received

Insurance proceeds received 15,892 —

Non-refundable escrow deposits ( 16,828 ) —

Net cash used in investing activities ( 1,418,008 ) ( 993,726 )

( 3,602,952 ) ( 1,111,826 )

CASH FLOWS FROM FINANCING ACTIVITIES

Cash distributions to common stockholders ( 438,280 ) ( 260,697 )

( 797,847 ) ( 716,535 )

Borrowings on line of credit and commercial paper program 2,311,812 1,413,694

Payments on line of credit and commercial paper program ( 2,328,990 ) ( 735,489 )

Principal payment on term loan

— ( 250,000 )

Proceeds from notes and bonds payable issued 676,631 —

Principal payment on notes payable — ( 950,000 )

( 950,000 ) ( 250,000 )

Principal payments on mortgages payable ( 43,589 ) ( 18,110 )

( 55,983 ) ( 73,711 )

Payments upon extinguishment of debt — ( 47,235 )

( 51,218 ) ( 9,445 )

Proceeds from common stock offerings, net

1,263,235 728,883

Proceeds from dividend reinvestment and stock purchase plan 2,799 2,654

Proceeds from At-the-Market (ATM) program, net 1,471,595 442,157

Proceeds from common stock offerings, net 656,094 669,590

Distributions to noncontrolling interests ( 882 ) ( 402 )

( 1,198 ) ( 1,195 )

Net receipts on derivative settlements 903 845

1 unchanged sentence

Other items, including shares withheld upon vesting ( 5,733 ) ( 4,974 )

( 6,451 ) ( 14,783 )

Net cash provided by financing activities 821,073 69,876

2,332,016 968,762

Effect of exchange rate changes on cash and cash equivalents ( 6,063 ) 48

( 3,711 ) 1,265

Net (decrease) increase in cash, cash equivalents and restricted cash ( 304,581 ) 668,006

Net decrease in cash, cash equivalents and restricted cash ( 89,519 ) ( 657,349 )

Cash, cash equivalents and restricted cash, beginning of period 332,369 850,679

850,679 71,005

Cash, cash equivalents and restricted cash, end of period $ 242,850 $ 193,330

$ 546,098 $ 739,011

For supplemental disclosures, see note 16.

The accompanying notes to consolidated financial statements are an integral part of these statements.

Table of Content s

REALTY INCOME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Basis of Presentation

1 unchanged sentence

Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2021, which are included in our 2021 Annual Report on Form 10-K , as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

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

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

Dollar (“USD”) is our functional currency.

Unless otherwise indicated, all dollar amounts are expressed in United States USD.

For our consolidated subsidiaries whose functional currency is not the U.S.

dollar, we translate their financial statements into U.S.

dollars at the time we consolidate those subsidiaries’ financial statements.

Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date.

The resulting translation adjustments are included in accumulated other comprehensive income, or AOCI, in the consolidated balance sheets.

Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate.

Income statement accounts are translated using the average exchange rate for the period.

We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency.

When the debt is remeasured to the functional currency of the entity, a gain or loss can result.

The resulting adjustment is reflected in foreign currency and derivative gains (losses), net in the consolidated statements of income.

At March 31, 2022, we owned 11,288 properties, located in all 50 U.S.

states, Puerto Rico, the United Kingdom (U.K.,) and Spain, consisting of approximately 213.9 million leasable square feet.

Summary of Significant Accounting Policies and Procedures

Summary of Significant Accounting Policies and Procedures and New Accounting Standards

Principles of Consolidation.

The accompanying consolidated financial statements include the accounts of Realty Income and other subsidiaries for which we make operating and financial decisions (i.e., control), after elimination of all material intercompany balances and transactions.

We consolidate entities that we control and record a noncontrolling interest for the portion that we do not own.

Noncontrolling interest that was created or assumed as part of a business combination or asset acquisition was recognized at fair value as of the date of the transaction (see note 11).

We have no unconsolidated investments.

Federal Income Taxes.

These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest.

We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation.

Voting interest entities are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities.

We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests.

Variable interest entities (“VIEs”) are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above.

A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE.

We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur.

We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances.

The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest.

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

Noncontrolling interest that was created or assumed as part of a business combination or asset acquisition was recognized at fair value as of the date of the transaction (see note 11, Noncontrolling Interests ).

Income Taxes.

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

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

Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income.

Under the REIT

Table of Content s

operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income.

Assuming our dividends equal or exceed our taxable net income, we generally will not be required to pay federal corporate income taxes on such income.

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

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

income taxes.

Lease Revenue Recognition and Accounts Receivable.

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

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

These impacts may continue as the duration and severity of the pandemic increases.

As a result, we have closely monitored the collectability of our accounts receivable and continue to evaluate the potential impacts of the COVID-19 pandemic and the measures taken to limit its spread on our business and industry segments as the situation continues to evolve and more information becomes available.

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

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

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

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

We currently anticipate future concessions to be similar.

We continue to assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842, Leases .

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

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

If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized.

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

In accordance with the guidance provided by the Financial Accounting Standards Board (FASB) staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in effect.

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

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

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

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

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

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

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

2021 2020 2021 2020

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

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

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

As of September 30, 2021, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable.

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

As of March 31, 2022, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable.

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

Investment in Unconsolidated Entities.

We account for our investment in unconsolidated entity arrangements using the equity method of accounting as we have the ability to exercise significant influence, but not control, over operating and financing policies of these investments.

We have determined that none of the unconsolidated entities would be considered VIEs under the applicable accounting guidance.

Our equity method investments were acquired in our merger with VEREIT.

As a result, the investments were recorded at fair value and subsequently will be adjusted for our share of equity in the entities' earnings and distributions received.

The step-up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the assumed debt.

Investment in unconsolidated entities is included in the accompanying consolidated balance sheets.

We record our proportionate share of net income from the unconsolidated entities in other income, net in the consolidated statements of income and comprehensive income.

Newly Issued Accounting Standards.

3 unchanged sentences

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

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

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Table of Content s

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

3 unchanged sentences

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

Reclassification.

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

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

Agreement and Plan of Merger

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

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

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

Pursuant to the terms of the Merger Agreement and subject to the terms thereof, upon the consummation of the Mergers, (i) each outstanding share of VEREIT common stock, and each outstanding common partnership unit of VEREIT OP owned by any of its partners other than VEREIT, Realty Income or their respective affiliates, was automatically

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

For more information, see Note 22, Subsequent Events .

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

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

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

Merger-related Costs

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

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

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

In connection with these services, we expect to be required to pay success-based fees to the extent that certain conditions, including the closing of the Merger and consummation of the Orion Divestiture, are met.

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

Litigation Relating to the Mergers

To date, purported stockholders of VEREIT filed 12 lawsuits challenging disclosures related to the Merger ( Stein v.

VEREIT, Inc., et.

1:21-cv-01409 (D.

Md., June 7, 2021) (the “Stein Complaint”);

VEREIT, Inc., et.

1:21-cv-00845 (D.

Del., June 10, 2021) (the “Bowles Complaint”);

VEREIT, Inc., et.

1:21-cv-05270 (D.

S.D.N.Y., June 14, 2021) (the “Leach Complaint”);

VEREIT, Inc., et.

1:21-cv-05286 (D.

S.D.N.Y., June 15, 2021) (the “Jenkins Complaint”);

VEREIT, Inc., et.

1:21-cv-05357 (D.

S.D.N.Y., June 17, 2021) (the “Tacka Complaint”);

Congregation Zichron Moishe v.

VEREIT, Inc., et.

1:21-cv-01729 (D.

Colo., June 24, 2021) (the “Congregation Zichron Moishe Complaint”);

VEREIT, Inc., et al.

1:21-cv-01758 (D.

June 28, 2021) (the “Mishra Complaint”) ;

VEREIT, Inc., et.

1:21-cv-01791 (D.

July 1, 2021) (the “Walker Complaint”);

Ciccotelli v.

VEREIT, Inc., et.

2:21-cv-02983 (D.

July 2, 2021) (the “Ciccotelli Complaint”);

VEREIT, Inc., et.

1:21-cv-06129 (D.

S.D.N.Y July 16, 2021) (the “Upton Complaint”);

VEREIT, Inc., et al.

1:21-cv-06212 (S.D.N.Y.

July 21, 2021) (the “Matten Complaint”);

and Halberstam v.

VEREIT, Inc., et al.

1:21-cv-02000 (D.

July 23, 2021 (the “Halberstam Complaint”)).

Purported stockholders of Realty Income filed one lawsuit challenging the disclosures related to the Merger ( Boyko v.

Realty Income Corp., et.

1:21-cv-01653 (D.

Colo., June 16, 2021) (the “Boyko Complaint,” and collectively, the “Complaints”)).

A stockholder of Realty Income also sent the Company a demand disclosure letter on June 30, 2021 (the “Demand Letter”).

The Stein, Leach, Tacka, Matten and Halberstam Complaints name VEREIT and the members of the VEREIT board of directors as defendants.

The Congregation Zichron Moishe, Mishra, Walker and Upton Complaints name VEREIT, VEREIT OP, and the members of the VEREIT board of directors as defendants.

The Bowles and Ciccotelli Complaints name VEREIT, the members of the VEREIT board of directors, VEREIT OP, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants.

The Jenkins Complaint names VEREIT, the members of the VEREIT board of directors, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants.

The Boyko Complaint names Realty Income and the members of the Realty Income board of directors as defendants.

The Demand Letter is addressed to Realty Income and the members of the Realty Income board of directors.

The Complaints each allege generally that the entities and individual defendants named in such Complaint violated Section 14(a) and Rule 14a-9 promulgated thereunder and that the individual defendants violated Section 20(a) of the Exchange Act by preparing and disseminating a registration statement that misstates or omits certain allegedly material information.

The Demand Letter includes similar allegations.

Furthermore, the Jenkins Complaint also alleges that:

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

all material information to VEREIT’s stockholders;

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

Each Complaint seeks, among other things, injunctive relief enjoining the consummation of the Merger, if the Merger is consummated, rescission or rescissory damages and an award of the plaintiff’s costs, including attorneys’ and experts’ fees.

The defendants believe that all of the claims asserted in the Complaints are without merit and intend to defend against them vigorously.

On July 30, 2021, VEREIT filed a Form 8-K containing supplemental disclosures regarding the Mergers and related transactions in response to allegations set forth in the Complaints and the Demand letter.

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

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

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

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

Merger with VEREIT, Inc.

Merger with VEREIT

On November 1, 2021, we completed our merger with VEREIT, Inc.

For further details, see note 3.

Merger with VEREIT, Inc.

and Orion Office REIT Inc.

Divestiture , to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our merger with VEREIT has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations , with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value.

The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data):

Shares of VEREIT common stock and VEREIT Operating Partnership, L.P.

("OP") common units exchanged (1)

Exchange Ratio 0.705

Fractional shares settled in cash ( 1,545 )

Shares of Realty Income common stock and Realty Income L.P.

units issued 161,657,800

Adjusted opening price of Realty common stock on November 1, 2021 (2)

Fair value of Realty common stock issued to former holders of VEREIT common stock and VEREIT OP common units $ 11,515,855

Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3)

Total non-cash consideration 11,559,875

Cash paid for fractional shares 110

VEREIT indebtedness paid off in connection with the merger (4)

Consideration transferred $ 12,060,399

(1) Includes 229,152,001 shares of VEREIT common stock and 152,034 VEREIT OP common units outstanding as of November 1, 2021.

Under the Merger Agreement, these shares and units were converted to Realty Income common stock, or in certain instances, Realty Income L.P.

units, at an Exchange Ratio of 0.705 per share of VEREIT common stock or VEREIT OP common unit, as applicable.

(2) The fair value of Realty Income common stock issued to former holders of VEREIT common stock and VEREIT OP common units is based on the per share opening price of Realty Income common stock of $ 71.00 on November 1, 2021, adjusted for the monthly dividend of $ 0.236 per share that former holders of VEREIT common stock and VEREIT OP common units were eligible to receive when such dividend was paid on November 15, 2021.

(3) Represents the fair value of fully vested deferred stock unit awards of VEREIT common stock (“VEREIT DSU Awards”) which were converted into Realty Income common stock upon our merger with VEREIT, as well as the estimated fair value of the Realty Income replacement employee and executive stock options and restricted stock units that were granted at the closing date of our merger with VEREIT and which were attributable to pre-combination services.

(4) Represents the outstanding balance of the VEREIT revolving credit facility repaid by Realty Income in connection with the closing of the merger.

The amount shown in the table above was based upon the balance outstanding immediately prior to November 1, 2021.

Table of Content s

Preliminary Purchase Price Allocation

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

Land $ 3,021,906

Buildings 8,677,467

Total real estate held for investment 11,699,373

Cash and cash equivalents 128,411

Accounts receivable 53,355

Lease intangible assets (1)

Goodwill 3,698,123

Investment in unconsolidated entities 194,876

Other assets 308,910

Total assets acquired $ 19,287,821

Accounts payable and accrued expenses $ 139,836

Lease intangible liabilities (2)

Other liabilities 320,893

Mortgages payable 869,027

Notes payable 4,946,965

Total liabilities assumed $ 7,226,070

Net assets acquired, at fair value $ 12,061,751

Noncontrolling interests $ 1,352

Total purchase price $ 12,060,399

(1) The weighted average amortization period for acquired lease intangible assets is 9.3 years .

(2) The weighted average amortization period for acquired lease intangible liabilities is 25.5 years .

The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared.

Measurement period adjustments will be recorded in the future period in which they are determined, as if they had been completed at the acquisition date.

The finalization of our purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed up to a year after the date of our merger with VEREIT, which could be material.

Due to the timing and complexity of the merger, we recorded the assets acquired and liabilities assumed at their preliminary estimated fair values.

As of March 31, 2022, we had not finalized the determination of fair values allocated to certain assets and liabilities, including land, buildings, lease intangible assets, lease intangible liabilities, and the allocation of goodwill.

The preliminary purchase price allocation is subject to change as we complete our analysis of the fair value at the date of the transactions, which could have an impact on our consolidated financial statements.

A preliminary estimate of approximately $ 3.70 billion has been allocated to goodwill.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed.

The recognized goodwill is attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the employee workforce onboarded from VEREIT following the closing of the merger.

Goodwill has not yet been allocated to our individual operating segments;

the allocation is pending the finalization of our purchase accounting.

None of the goodwill recognized is expected to be deductible for tax purposes.

Merger and Integration-related Costs

In conjunction with our merger with VEREIT, we incurred approximately $ 6.5 million of transaction costs during the three months ended March 31, 2022.

There were no comparable costs incurred during the three months ended

Table of Content s

March 31, 2021, as the merger was first announced in April 2021 and associated costs began to accrue during the second quarter of 2021.

Merger and integration-related costs for the three months ended March 31, 2022, primarily consist of attorney fees, accountant fees and additional incremental and non-recurring costs necessary to convert data and systems, retain employees and otherwise enable us to operate the acquired business or assets efficiently.

Unaudited Pro Forma Financial Information

Our consolidated results of operations for the three months ended March 31, 2022, include $ 258.3 million of revenues and $ 17.0 million of net income associated with the results of operations of VEREIT OP.

The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2021, as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data).

There are no pro forma adjustments for the three months ended March 31, 2022, as the merger was completed November 1, 2021.

Amounts for the three months ended March 31, 2022, are presented for comparative purposes.

The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.

In accordance with ASC 805, Business Combinations , the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc.

Three Months Ended March 31,

Total revenues $ 807.3 $ 742.5

Net income $ 200.0 $ 189.8

Basic and diluted earnings per share $ 0.34 $ 0.36

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

Accounts Receivable, net, consist of the following at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Straight-line rent receivables, net $ 261,302 $ 231,943

2 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

In-place leases

7 unchanged sentences

$ 5,187,280 $ 5,275,304

Table of Content s

Other assets, net, consist of the following at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Right of use asset - operating leases, net $ 610,601 $ 631,515

1 unchanged sentence

Right of use asset - financing leases 369,908 218,332

Derivative assets and receivables - at fair value 43,941 10

Restricted escrow deposits 84,066 68,541

Derivative assets and receivables – at fair value 74,694 29,593

Prepaid expenses 35,165 18,062

Goodwill 13,947 14,180

Corporate assets, net 8,203 8,598

Non-refundable escrow deposits 16,828 28,560

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

Corporate assets, net 11,534 10,915

Investment in sales type lease 7,506 7,492

Impounds related to mortgages payable 7,160 5,249

Note receivable 4,732 4,455

Credit facility origination costs, net 3,661 4,352

Other items 15,211 18,592

1 unchanged sentence

Accounts payable and accrued expenses consist of the following at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Notes payable - interest payable $ 111,171 $ 108,227

Derivative liabilities and payables - at fair value 50,216 73,356

Property taxes payable 32,200 36,173

Derivative liabilities and payables – at fair value 30,728 70,617

Value-added tax payable 22,728 11,297

Accrued property expenses 21,160 27,344

Accrued costs on properties under development 19,560 19,665

Accrued income taxes 17,305 19,152

Merger-related costs 14,591 —

Value-added tax payable 7,796 8,077

Mortgages, term loans, credit line - interest payable and interest rate swaps 1,064 1,044

Merger and integration related costs 5,205 10,699

Mortgages, term loans, and credit line - interest payable 4,099 3,874

Other items 41,418 44,080

1 unchanged sentence

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Below-market leases

4 unchanged sentences

Other liabilities consist of the following at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Lease liability - operating leases, net $ 440,084 $ 461,748

Rent received in advance and other deferred revenue 253,731 242,122

Lease liability - financing leases 35,677 6,256

Security deposits 11,323 11,340

Lease liability - financing leases 41,166 43,987

$ 746,304 $ 759,197

Table of Content s

Investments in Real Estate

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

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

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

Acquisitions During the Three Months Ended March 31, 2022, and 2021

Below is a summary of our acquisitions for the three months ended March 31, 2022:

Properties Leasable

Square Feet Investment

($ in thousands) Weighted

(in thousands) Investment

($ in millions) Weighted

(Years) Initial Average Cash Lease Yield (1)

Nine months ended September 30, 2021 (2)

Three months ended March 31, 2022 (2)

Acquisitions - U.S.

(in 38 states)

139 2,627 $ 629.8 15.0 5.7 %

Acquisitions - Europe (U.K.

Acquisitions - Europe

21 2,772 794.2 8.9 5.5 %

5 unchanged sentences

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 $ 3.2 million received as settlement credits for 35 properties as reimbursement of free rent periods for the nine months ended September 30, 2021.

Contractual net operating income used in the calculation of initial average cash yield includes approximately $ 4.3 million received as settlement credits for 16 properties as reimbursement of free rent periods for the three months ended March 31, 2022.

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 the nine months ended September 30, 2021 caused any one client to be 10% or more of our total assets at September 30, 2021.

(2) None of our investments during the three months ended March 31, 2022, caused any one client to be 10% or more of our total assets at March 31, 2022.

(3) Includes one U.K.

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

development property that represents an investment of £ 1.7 million Sterling during the three months ended March 31, 2022, converted at the applicable exchange rate on the funding date.

(4) Our clients occupying the new properties are 85.4 % retail and 14.6 % industrial, based on rental revenue.

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

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

Approximately 26 % of the rental revenue generated from acquisitions during the three months ended March 31, 2022, is from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the three months ended March 31, 2022, which had no associated contingent consideration, were allocated as follows (in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Acquisitions - Spain

Nine months ended September 30, 2021

(USD) (£ Sterling) (€ Euro)

$ 621.0 £ 283.9 € 36.6

Three months ended March 31, 2022

(USD) (£ Sterling)

Land $ 203.5 £ 208.7

Buildings and improvements 368.5 237.1

Lease intangible assets (1)

350.4 173.5 23.3

Other assets (2)

3 unchanged sentences

$ 727.9 £ 594.2

$ 2,141.2 £ 1,020.8 € 96.2

land includes £ 1.3 million of right of use assets under long-term ground leases.

(1) The weighted average amortization period for acquired lease intangible assets is 10.8 years.

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

other assets consists of $ 99.6 million of financing receivables with above-market terms and $ 18.2 million of right-of-use assets accounted for as finance leases.

other assets consists entirely of right-of-use assets accounted for as finance leases.

(3) The weighted average amortization period for acquired lease intangible liabilities is 10.3 years.

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

other liabilities consists entirely of a GBP mortgage premium.

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

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

Properties Leasable Square Feet Investment

($ in thousands) Weighted

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

The properties acquired during the three months ended March 31, 2022, which were all accounted for as asset acquisitions, generated total revenues of $ 7.2 million and net income of $ 2.7 million during the three months ended March 31, 2022.

Table of Content s

Below is a summary of our acquisitions for the three months ended March 31, 2021:

Properties Leasable

(in thousands) Investment

($ in millions) Weighted

(Years) Initial Average Cash Lease Yield (1)

Nine months ended September 30, 2020 (1)

Three months ended March 31, 2021 (1)

Acquisitions - U.S.

(in 28 states)

77 2,299 $ 566.9 13.5 5.6 %

Acquisitions - U.K.

Acquisitions - Europe

12 933 403.0 10.6 4.9 %

3 unchanged sentences

110 4,829 $ 1,027.8 12.6 5.3 %

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

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

(1) None of our investments during the three months ended March 31, 2021, caused any one client to be 10% or more of our total assets at March 31, 2021.

(2) Our clients occupying the new properties are 65.1 % retail and 34.9 % industrial, based on rental revenue.

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

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

Approximately 39 % of the rental revenue generated from acquisitions during the three months ended March 31, 2021, was from investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the three months ended March 31, 2021, which had no associated contingent consideration, were allocated as follows (in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Nine months ended September 30, 2020

Three months ended March 31, 2021

(USD) (£ Sterling)

4 unchanged sentences

Lease intangible liabilities (4)

( 1.4 ) ( 0.9 )

Other liabilities (5)

$ 592.0 £ 290.2

land includes £ 6.5 million of right of use assets under long-term ground leases.

land includes £ 560,000 of right of use assets under long-term ground leases.

(2) The weighted average amortization period for acquired lease intangible assets is 16.8 years.

other assets consists of $ 19.1 million of financing receivables with above-market terms and $ 689,000 of right of use assets under ground leases.

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

other assets consists entirely of financing receivables with above-market terms.

(4) The weighted average amortization period for acquired lease intangible liabilities is 11.9 years.

other liabilities consists entirely of lease liabilities under ground leases.

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

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

The properties acquired during the three months ended March 31, 2021, which were all accounted for as asset acquisitions, generated total revenues of $ 5.1 million and net income of $ 2.0 million during the three months ended March 31, 2021.

Investments in Existing Properties

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

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

During the three months ended March 31, 2022, we capitalized costs of $ 12.0 million on existing properties in our portfolio, consisting of $ 2.4 million for re-leasing costs, $ 13,000 for recurring capital expenditures, and $ 9.6 million for non-recurring building improvements.

In comparison, during the three months ended March 31, 2021, we capitalized costs of $ 1.5 million on existing properties in our portfolio, consisting of $ 706,000 for re-leasing costs, $ 23,000 for recurring capital expenditures, and $ 769,000 for non-recurring building improvements.

Properties with Existing Leases

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

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

Of the $ 1.56 billion we invested during the three months ended March 31, 2022, approximately $ 131.3 million related to development.

Of the $ 1.42 billion invested outside of development, $ 969.5 million was used to acquire 52 properties with existing leases.

In comparison, of the $ 1.03 billion we invested during the three months ended March 31, 2021, $ 57.9 million related to development.

Of the $ 969.9 million invested outside of development, $ 856.8 million was used to acquire 68 properties with existing leases.

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

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

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

The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2022, and 2021 were $ 160.1 million and $ 35.8 million, respectively.

Table of Content s

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

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

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2022, and 2021 were $ 21.9 million and $ 12.4 million, respectively.

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

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at September 30, 2021 (dollars in thousands):

(decrease) to

rental revenue

6 unchanged sentences

Totals $ 85,456 $ 3,922,366

Gain on Sales of Real Estate

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

Three months ended March 31,

Number of properties 34 27

Net sales proceeds $ 122.2 $ 34.7

Gain on sales of real estate $ 10.2 $ 8.4

Investment in Unconsolidated Entities

The following is a summary of our investments in unconsolidated entities as of March 31, 2022 (in thousands):

Ownership % (1)

Number of Properties Carrying Amount of Investment as of (2)

Equity in Income (2)

Investment March 31, 2022

March 31, 2022

March 31, 2021 March 31, 2022 March 31, 2021

Industrial Partnerships 20 % 7 $ 141,191 $ 140,967 $ 954 $ —

(1) Our ownership interest reflects legal ownership interest.

Legal ownership may, at times, not equal our economic interest in the listed properties because of various provisions in certain entity agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns.

As a result, our actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with legal ownership interests.

(2) The total carrying amount of the investments was greater than the underlying equity in net assets by $ 100.4 million as of March 31, 2022.

The difference relates to a step-up in fair value of the investment net assets acquired in connection with the merger with VEREIT on November 1, 2021.

The step up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the mortgages payable.

Prior to November 1, 2021, we did not own any unconsolidated entities.

The aggregate debt outstanding for unconsolidated entities was $ 431.8 million as of March 31, 2022, and December 31, 2021, all of which is non-recourse to us with limited customary exceptions which vary from loan to loan.

Each of us and our unconsolidated entity partners are subject to the provisions of the applicable entity agreements for our unconsolidated partnerships, which include provisions for when additional contributions may be required to fund certain cash shortfalls.

Table of Content s

Revolving Credit Facility and Commercial Paper Program

3 unchanged sentences

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

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

Under our credit facility, our investment grade credit ratings as of March 31, 2022, provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775 % with a facility commitment fee of 0.125 %, for all-in drawn pricing of 0.90 % over LIBOR.

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

1 unchanged sentence

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

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

LIBOR is in the process of being discontinued.

While certain U.S.

dollar LIBOR settings will continue to be published on the current basis until June 30, 2023, all other LIBOR settings either are no longer being published or are being published only for a limited time and only on a “synthetic” basis (i.e., not on the basis of submissions made by panel banks).

The regulator of the administrator of LIBOR has prohibited any new use of LIBOR by firms subject to its supervision, and certain regulators in the United States have stated that no new contracts using U.S.

dollar LIBOR should be entered into after 2021.

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.

In April 2022, we amended our Credit Facility.

See note 20, Subsequent Events.

At March 31, 2022, credit facility origination costs of $ 3.7 million are included in other assets, net, as compared to $ 4.4 million at December 31, 2021, on our consolidated balance sheet.

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

At September 30, 2021 and December 31, 2020, we had a borrowing capacity of $ 3.0 billion available on our revolving credit facility (subject to customary conditions to borrowing) and no outstanding balance.

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

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

At March 31, 2022, we had a borrowing capacity of $ 2.43 billion available on our revolving credit facility (subject to customary conditions to borrowing) and $ 569.6 million outstanding balance, as compared to an outstanding balance at December 31, 2021, of $ 650.0 million.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.1 % during the three months ended March 31, 2022, and 0.8 % during the three months ended March 31, 2021.

At March 31, 2022, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 1.2 %.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2022, we were in compliance with the covenants on our revolving credit facility.

Commercial Paper Program

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

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

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

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

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

The weighted average interest rate on outstanding borrowings under our commercial paper program was 0.2 % for the nine months ended September 30, 2021 and 0.3 % from the inception of the program through September 30, 2020.

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

As of March 31, 2022, the balance of borrowings outstanding under our commercial paper program was $ 950.0 million as compared to $ 901.4 million outstanding commercial paper borrowings at December 31, 2021.

The weighted average interest rate on outstanding borrowings under our commercial paper program was 0.5 % for the three months ended March 31, 2022, and 0.3 % for the three months ended March 31, 2021.

As of March 31, 2022, our weighted average interest rate on borrowings outstanding under our commercial paper program was 0.8 %.

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

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

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

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

Table of Content s

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

1 unchanged sentence

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

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

At March 31, 2022, deferred financing costs of $ 394,000 are included net of the term loan principal balance, as compared to $ 443,000 at December 31, 2021, on our consolidated balance sheet.

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

Mortgages Payable

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

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

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

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

During the three months ended March 31, 2022, we made $ 43.6 million in principal payments, including the repayment of one mortgage in full for $ 42.5 million.

During the three months ended March 31, 2021, we made $ 18.1 million in principal payments, including the repayment of three mortgages in full for $ 17.2 million.

No mortgages were assumed during the three months ended March 31, 2022, or the three months ended March 31, 2021.

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

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

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

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

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

The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, was $ 865,000 at September 30, 2021 and $ 973,000 at December 31, 2020.

At March 31, 2022, we were in compliance with these covenants.

The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, was $ 713,000 at March 31, 2022, and $ 790,000 at December 31, 2021.

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

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

The following table summarizes our mortgages payable as of March 31, 2022, and December 31, 2021, respectively (dollars in thousands):

Properties (1)

4 unchanged sentences

12/31/2021 267 4.8 % 3.5 % 1.8 $ 1,114,129 $ 27,866 $ 1,141,995

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

(1) At March 31, 2022, there were 21 mortgages on 221 properties.

At December 31, 2021, there were 22 mortgages on 267 properties.

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

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

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

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

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

At March 31, 2022, and December 31, 2021, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0 % to 6.9 % at each of March 31, 2022, and December 31, 2021.

(3) Effective interest rates ranged from 2.6 % to 6.0 % at each of March 31, 2022, and December 31, 2021.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 25.0 million and deferred financing costs of $ 713,000 , as of March 31, 2022 (dollars in millions):

Year of Maturity

Thereafter 4.7

Table of Content s

Notes Payable

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

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

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

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

$ — $ — $ 950

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

Our senior unsecured notes and bonds are U.S.

dollar denominated and Sterling denominated.

Foreign denominated notes are converted at the applicable exchange rate on the balance sheet date.

The following are sorted by maturity date (in millions):

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

March 31, 2022 December 31, 2021

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

$ 500 $ 500 $ 500

3 unchanged sentences

$ 500 500 500

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

$ 550 550 550

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

$ 325 325 325

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

$ 600 600 600

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

$ 650 650 650

1.875 % notes, issued in January 2022 and due in January 2027

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

1 unchanged sentence

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

£ 400 526 541

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

$ 600 600 600

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

$ 550 550 550

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

$ 600 600 600

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

$ 500 500 500

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

$ 500 500 500

3.100 % notes, $ 600 issued December 2019, of which $ 596 was exchanged in November 2021, both due in December 2029 (1)(2)

$ 599 599 599

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

2 unchanged sentences

$ 950 950 950

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

$ 700 700 700

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

1 unchanged sentence

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

£ 350 460 474

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

2 unchanged sentences

$ 250 250 250

2.500 % notes, issued in January 2022 and due in January 2042

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

1 unchanged sentence

Total principal amount $ 12,857 $ 12,257

Unamortized net original issuance premiums and deferred financing costs ( 44 ) ( 35 )

Unamortized net premiums and deferred financing costs 212 243

$ 13,069 $ 12,500

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

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

(1) Carrying Value (USD) includes the portion of the VEREIT OP notes that remained outstanding, totaling $ 39.1 million in the aggregate at each of March 31, 2022, and December 31, 2021, that were not exchanged in the exchange offers commenced by us with respect to the outstanding bonds of VEREIT OP in connection with the consummation of the merger with VEREIT (the "Exchange Offers").

(2) These notes were originally issued by VEREIT OP in December of 2019 for the principal amount of $ 600 million.

The amount of Realty Income debt issued through the Exchange Offers was $ 599 million, resulting from cancellations due to late tenders that forfeited the early participation premium of $ 30 per $1,000 principal amount and cash paid in lieu of fractional shares.

Table of Content s

In April 2022 we entered into a definitive agreement for the private placement of £ 600 million of senior unsecured notes.

See note 20, Subsequent Events .

The following table summarizes the maturity of our notes and bonds payable as of March 31, 2022, excluding net unamortized premiums of $ 272.7 million and deferred financing costs of $ 60.6 million (dollars in millions):

Year of Maturity

Thereafter 9,382

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

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

Additionally, with the exception of our £ 400 million of 1.625 % senior unsecured notes issued in October 2020, our £ 400 million of 1.125 % senior unsecured notes issued in July 2021, and £ 350 million of 1.750 % senior

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

As of March 31, 2022, the weighted average interest rate on our notes and bonds payable was 3.2 % and the weighted average remaining years until maturity was 7.7 years.

Interest incurred on all of the notes and bonds was $ 103.1 million and $ 63.2 million for the three months ended March 31, 2022, and March 31, 2021, respectively.

Our outstanding notes and bonds are unsecured;

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

Interest on our £ 400 million of 1.625 % senior unsecured notes issued in October 2020, our £ 400 million of 1.125 % senior unsecured notes issued in July 2021, our £ 350 million of 1.750 % senior unsecured notes also issued in July 2021, our £ 250 million of 1.875 % senior unsecured notes issued in January 2022, and £ 250 million of 2.500 % senior unsecured notes also issued in January 2022 is paid annually.

Interest on our remaining senior unsecured note and bond obligations is paid semiannually.

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

(i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60 %;

(ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40 %;

(iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times;

and(iv) the maintenance at all times of total unencumbered assets not less than 150 % of our outstanding unsecured debt.

At March 31, 2022, we were in compliance with these covenants.

Note Repayment

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

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

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

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

As a result of the early redemption, we recognized a $ 46.5 million loss on extinguishment of debt on our consolidated statement of income for the three months ended March 31, 2021.

There were no comparable repayments for the three months ended March 31, 2022.

Note Issuances

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

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

1.125 % notes

July 2021 July 2027 £ 400 99.31 % 1.24 %

1.750 % notes

July 2021 July 2033 £ 350 99.84 % 1.76 %

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

During the three months ended March 31, 2022, we issued the following notes and bonds (in millions):

First Quarter 2022 Issuances

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

1.875 % Notes

May 2020 January 2031 $ 600 98.99 % 3.36 %

January 2022 January 2027 £ 250 99.487 % 1.974 %

2.500 % Notes

July 2020 January 2031 $ 350 108.24 % 2.34 %

(1) In July 2020, we issued $ 350.0 million of 3.250 % senior unsecured notes due January 2031 (the "2031 Notes"), which constituted a further issuance of, and formed a single series with, the $ 600.0 million of 2031 Notes issued in May 2020.

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

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

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

January 2022 January 2042 £ 250 98.445 % 2.584 %

There were no comparable note issuances during the three months ended March 31, 2021.

The proceeds from each of these offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes

Issuances of Common Stock

Issuances of Common Stock in Underwritten Public Offerings

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

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

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

Table of Content s

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

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

After deducting underwriting discounts and other offering costs of $ 21.2 million, the net proceeds of $ 728.9 million were

used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

There were no comparative offerings during the three months ended March 31, 2022.

At-the-Market (ATM) Program

1 unchanged sentence

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

At September 30, 2021, we had 54,299,611 shares remaining for future issuance under our ATM program.

At March 31, 2022, we had 19,314,282 shares remaining for future issuance under our ATM program.

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

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

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

2021 2020 2021 2020

Shares of common stock issued under the ATM program 14,788,822 5,536,619 21,378,420 7,047,768

Gross proceeds $ 1,032.3 $ 346.5 $ 1,487.1 $ 442.2

During the three months ended March 31, 2022, we issued 10,073,209 shares and raised approximately $ 660.2 million of gross proceeds under the ATM program.

We did no t issue any shares under the ATM program during the three months ended March 31, 2021.

Dividend Reinvestment and Stock Purchase Plan

2 unchanged sentences

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

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

At March 31, 2022, we had 11,294,008 shares remaining for future issuance under our DRSPP program.

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

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

2021 2020 2021 2020

Three months ended March 31,

Shares of common stock issued under the DRSPP program 41,371 43,394

1 unchanged sentence

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

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

We did no t issue shares under the waiver approval process during the three months ended March 31, 2022, or 2021.

Noncontrolling Interests

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

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

The following table represents the change in the carrying value of all noncontrolling interests through March 31, 2022 (dollars in thousands):

Realty Income, L.P.

2 unchanged sentences

$ 62,416 $ 14,410 $ 76,826

Contributions — 2,106 2,106

Distributions

1 unchanged sentence

Allocation of net income

Carrying value at September 30, 2021

Carrying value at March 31, 2022

$ 62,146 $ 14,400 $ 76,546

(1) 242,007 units were issued on March 30, 2018, 131,790 units were issued on April 30, 2018, and 89,322 units were issued on March 28, 2019.

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

In May 2021, we completed the acquisition of a development property by acquiring a controlling interest in a joint venture.

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

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

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

and certain of our joint venture investments are considered variable interest entities, or VIEs, in which we were deemed the primary beneficiary based on our controlling financial interests.

Below is a summary of selected financial data of consolidated VIEs included in the consolidated balance sheets at September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

(1) 242,007 units were issued on March 30, 2018, 131,790 units were issued on April 30, 2018, 89,322 units were issued on March 28, 2019, 56,400 units were issued on November 1, 2021, 300,604 units were issued on November 30, 2021, and 240,586 units were issued on December 30, 2021.

1,060,709 remained outstanding as of both March 31, 2022, and December 31, 2021 .

At March 31, 2022, Realty Income, L.P.

and certain of our joint venture investments are considered VIEs in which we were deemed the primary beneficiary based on our controlling financial interests.

Below is a summary of

Table of Content s

selected financial data of consolidated VIEs included in the consolidated balance sheets at March 31, 2022, and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Net real estate

4 unchanged sentences

Financial Instruments and Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The disclosure for assets and liabilities measured at fair value requires allocation to a three-level valuation hierarchy.

This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

ASC 820, Fair Value Measurements and Disclosures , sets forth a fair value hierarchy that categorizes inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs.

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

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

September 30, 2021 Carrying value

• Level 1 – Unadjusted quoted prices in active markets

Financial instruments are classified as Level 1 if their value is observable in an active market.

Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions.

An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

• Level 2 – Valuation Technique Using Observable Inputs

Financial instruments classified as Level 2 are valued using quoted prices for identical instruments in markets that are not considered to be active, or quoted prices for similar assets or liabilities in active markets, or valuation techniques in which all significant inputs are observable or can be corroborated by observable market data for substantially the entire contractual term of the financial asset or liability.

• Level 3 – Valuation Technique Using Significant Unobservable Inputs

Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs).

Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the inputs, or other analytical techniques.

We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period.

Changes in the type of inputs may result in a reclassification for certain assets.

We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent.

Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets

The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature.

The fair value of our financial instruments not carried at fair value are disclosed as follows (in millions):

Table of Content s

March 31, 2022 Carrying value

Estimated fair value

10 unchanged sentences

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

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

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

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

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

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

The unamortized balance of these net premiums was $ 25.0 million at March 31, 2022, and $ 28.7 million at December 31, 2021.

Also excludes deferred financing costs of $ 713,000 at March 31, 2022, and $ 790,000 at December 31, 2021.

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

The unamortized balance of the net premiums was $ 272.7 million at March 31, 2022, and $ 295.5 million at December 31, 2021.

Also excludes deferred financing costs of $ 60.6 million at March 31, 2022, and $ 53.1 million at December 31, 2021.

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

Because this methodology includes

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

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

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

The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable, including the senior notes and bonds payable assumed in the debt exchange offer on November 9, 2021, in connection with our merger with VEREIT.

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

Foreign Currency Forward Contracts Designated as Hedging Instruments

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

Financial Instruments Measured at Fair Value on a Recurring Basis

For derivative assets and liabilities, we utilize interest rate swaps and forward-starting swaps to manage interest rate risk, and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk.

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

This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility .

Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

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

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

However, at March 31, 2022, and December 31, 2021, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we determined that our derivative valuations in their entirety are classified as level two.

Items Measured at Fair Value on a Non-Recurring Basis

Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments only under certain circumstances, such as when an impairment write-down occurs.

Table of Content s

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

Three Months Ended March 31,

Total provisions for impairment (1)

Number of properties:

Classified as held for sale 18 1

Classified as held for investment — 2

(1) During the three months ended March 31, 2022, we recorded total provisions for impairment of $ 7.0 million, which reduced the carrying value of the properties from $ 44.8 million to their estimated fair value of $ 37.8 million.

During the three months ended March 31, 2021, we recorded total provisions for impairment of $ 2.7 million, which reduced the carrying value of the properties from $ 16.0 million to their estimated fair value of $ 13.3 million.

Derivative Designated as Hedging Instruments

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

Dollars, or USD.

1 unchanged sentence

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

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

Amounts reported in other comprehensive income (loss) related to foreign currency derivative contracts will be reclassified to other gains and (losses) in the same period during which the hedged forecasted transactions affect earnings.

As of March 31, 2022, we had one interest rate swap in place on our $ 250.0 million unsecured term loan.

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

We designated this interest rate swap as a cash flow hedge in accordance with Topic 815, Derivatives and Hedging .

This interest rate swap is recorded on the consolidated balances sheets at fair value.

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

The following table summarizes the amount of unrealized gain (loss) on derivatives in other comprehensive income during the periods indicated below (in thousands):

Three Months Ended March 31,

Derivatives in Cash Flow Hedging Relationships 2022 2021

Currency swaps $ 1,895 $ ( 1,620 )

Interest rate swaps 39,005 48,029

Foreign currency forwards 2,790 —

Total unrealized gain on derivatives $ 43,690 $ 46,409

The following table summarizes the amount of gain (loss) on derivatives reclassified from accumulated other comprehensive income (loss) during the periods indicated below (in thousands):

Three Months Ended March 31,

Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income 2022 2021

Currency swaps Foreign currency and derivative

gains (losses), net

$ 6,114 $ ( 1,152 )

Interest rate swaps Interest expense ( 2,530 ) ( 2,541 )

Net increase (decrease) to net income $ 3,584 $ ( 3,693 )

We expect to reclassify $ 6.1 million from AOCI as an increase to interest expense relating to interest rate swaps and $ 5.3 million from AOCI to foreign currency gain relating to cross-currency swaps within the next twelve months.

Table of Content s

Derivatives Not Designated as Hedging Instruments

2 unchanged sentences

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

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

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

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

The gains or loss on these derivative contracts are recognized in Foreign currency and derivative gains (losses), net based on the changes in fair value.

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

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

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

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

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

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

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

The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):

Three Months Ended March 31,

Realized foreign currency and derivative gains (losses), net:

Losses on the settlement of undesignated derivatives $ ( 2,681 ) $ —

Gains (losses) on the settlement of designated derivatives reclassified from AOCI

6,114 ( 1,152 )

Loss on the settlement of transactions with third parties ( 52 ) —

Total realized foreign currency and derivative gains, net 3,381 ( 1,152 )

Unrealized foreign currency and derivative gains (losses), net:

Gains on the change in fair value of undesignated derivatives 22,720 3,724

Losses on remeasurement of certain assets and liabilities ( 26,691 ) ( 1,768 )

Total unrealized foreign currency and derivative gains (losses), net ( 3,971 ) 1,956

Total foreign currency and derivative gains (losses), net $ ( 590 ) $ 804

Table of Content s

The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2022, and December 31, 2021 (dollars in millions):

Derivative Type

Number of Instruments (1)

Accounting Classification Hedge Designation

Notional Amount

Accounting Classification Notional Amount as of

Weighted Average Strike Rate (2)

Maturity Date (3)

Fair Value - asset (liability)

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

2021 2020 2021 2020

Fair Value - asset (liability) as of

Derivatives Designated as Hedging Instruments March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Interest rate swap

1 Derivative Cash flow

$ 250.0 $ 250.0 3.04 % 03/2024 $ ( 16.1 ) $ ( 22.6 )

1 Derivative $ 250.0 $ 250.0 3.04 % March 2024 $ ( 3.2 ) $ ( 11.9 )

Cross-currency swaps (4)

4 Derivative Cash flow

166.4 166.4 (6) 05/2034 ( 10.4 ) ( 21.4 )

Currency exchange swaps (5)

2 Derivative N/A

1,179.3 625.0 (7) 10/2021 16.4 ( 8.2 )

4 Derivative 166.3 166.3 (5) May 2034 ( 7.2 ) ( 13.8 )

Foreign currency forwards 29 Derivative 166.4 176.1 (6) Apr 2022 - Aug 2024 10.3 7.6

Forward-starting swaps (7)

4 Derivative Cash flow

300.0 300.0 1.86 % 11/2032 - 06/2033 ( 0.8 ) ( 16.5 )

4 Derivative 300.0 300.0 1.86 % Nov 2032 - Jun 2033 14.9 ( 3.2 )

Forward-starting swaps (7)

2 Hybrid debt Cash flow

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

Foreign currency collars (9)

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

Foreign currency forwards 35 Derivative Cash flow

184.3 — (10) 10/2021 - 08/2024 8.5 —

2 Hybrid Debt 200.0 200.0 1.93 % Nov 2032 - Jun 2033 6.5 ( 5.1 )

$ 1,082.7 $ 1,092.4 $ 21.3 $ ( 26.4 )

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

All hedges remained effective through September 30, 2021.

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

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

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

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

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

Derivatives not Designated as Hedging Instruments

Currency exchange swaps (8)

4 Derivative 1,361.4 1,639.5 (9) Apr 2022 - Jul 2022 22.7 ( 14.7 )

Total of all Derivatives $ 2,444.1 $ 2,731.9 $ 44.0 $ ( 41.1 )

(1) This column represents the number of instruments outstanding as of March 31, 2022.

(2) Weighted average strike rate is calculated using the current notional value as of March 31, 2022.

(3) This column represents maturity dates for instruments outstanding as of March 31, 2022.

(4) Represents four British Pound Sterling, or GBP, cross-currency swaps with notional amount of $ 166.3 million.

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

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

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

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

(9) Represents GBP-USD foreign currency collars.

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

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

(8) Represents two GBP currency exchange swaps with notional amount of $ 1.09 billion and two Euro, or EUR, currency exchange swaps with notional amount of $ 268.3 million.

(9) Weighted average Forward GBP-USD exchange rate of 1.34 and Weighted Average Forward EUR-USD exchange rate of 1.11 .

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

5 unchanged sentences

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

However, at September 30, 2021 and December 31, 2020, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

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

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

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

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

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

Table of Content s

Operating Leases

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

At March 31, 2022, we owned 11,288 properties in all 50 U.S.

states, Puerto Rico, the U.K.

Of the 11,288 properties, 11,180 , or 99.0 %, are single-client properties, and the remaining are multi-client properties.

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

At March 31, 2022, 156 properties were available for lease or sale.

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

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

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

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

Gain on Sales of Real Estate

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

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

2021 2020 2021 2020

Number of properties 27 37 96 66

Net sales proceeds $ 31.9 $ 51.3 $ 123.5 $ 184.9

Gain on sales of real estate $ 12.1 $ 13.7 $ 35.4 $ 53.6

Provisions for Impairment

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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

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

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

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

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

A property that is

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

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

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

2021 2020 2021 2020

Total provisions for impairment $ 11.0 $ 105.1 $ 31.0 $ 123.4

Number of properties:

Classified as held for sale 11 1 12 2

Classified as held for investment — 16 12 23

Sold 12 26 40 43

Rent based on a percentage of our client's gross sales, or percentage rents, for the three months ended March 31, 2022, and 2021 was $ 3.7 million and $ 1.0 million, respectively.

Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2022, and 2021.

Distributions Paid and Payable

We pay monthly distributions to our common stockholders.

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

The following is a summary of monthly distributions paid per common share for the three months ended March 31, 2022, and 2021:

January $ 0.2465 $ 0.2345

1 unchanged sentence

March 0.2465 0.2345

April 0.2350 0.2330

May 0.2350 0.2330

June 0.2350 0.2330

July 0.2355 0.2335

August 0.2355 0.2335

September 0.2355 0.2335

$ 0.7395 $ 0.7035

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

At March 31, 2022, a distribution of $ 0.2470 per common share was payable and was paid in April 2022.

Net Income per Common Share

2 unchanged sentences

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

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

2021 2020 2021 2020

Three months ended March 31,

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

7 unchanged sentences

1,060,709 463,119

Table of Content s

Supplemental Disclosures of Cash Flow Information

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

Nine months ended September 30,

Three months ended March 31,

Supplemental disclosures:

1 unchanged sentence

Cash paid for income taxes $ 12,318 $ 3,444

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

Non-cash activities:

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

Sterling-denominated mortgage (1)

Non-refundable deposits $ — $ 13,803

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

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

September 30, 2021 September 30, 2020

Net increase in fair value of derivatives $ 85,032 $ 48,171

The following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands):

March 31, 2022 March 31, 2021

Cash and cash equivalents shown in the consolidated balance sheets

16 unchanged sentences

are managed as separate operating segments.

Table of Content s

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

Assets, as of:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Segment net real estate:

Automotive service $ 894,082 $ 852,151

$ 434,668 $ 328,340

361,274 347,366

221,946 216,718

Convenience stores

Beverages 360,894 362,570

Convenience stores - U.S.

2,896,397 2,844,800

Dollar stores 2,296,944 2,303,906

1,550,889 1,420,210

1,502,930 1,555,106

Drug stores 2,141,458 2,182,432

Financial services 565,437 576,065

361,002 374,508

General merchandise

General merchandise - U.S.

1,304,448 1,289,735

4 unchanged sentences

Health and fitness 1,303,126 1,325,932

Health care - U.S.

671,638 670,864

Home furnishings - U.S.

715,142 583,564

Home improvement - U.S.

3 unchanged sentences

Restaurants - casual dining 1,988,707 2,016,017

486,625 515,226

Restaurants - quick service - U.S.

3 unchanged sentences

Transportation services 1,039,295 1,039,220

782,170 729,640

Wholesale club 873,026 865,658

455,390 407,584

Other non-reportable segments 6,848,753 6,427,803

3,777,716 3,042,916

Total net real estate $ 32,716,532 $ 31,988,872

19,822,529 17,485,156

Intangible assets:

1 unchanged sentence

Beverages 17,077 17,452

Child care 19,419 19,848

Convenience stores 152,875 121,151

Convenience stores - U.S.

255,578 275,548

Dollar stores 348,709 366,319

1 unchanged sentence

Financial services 87,572 92,986

General merchandise 136,367 108,646

General merchandise - U.S.

251,379 254,343

Grocery stores - U.S.

3 unchanged sentences

Health and fitness 118,271 125,586

Health care - U.S.

100,396 103,143

Home furnishings - U.S.

203,480 210,654

Home improvement - U.S.

10 unchanged sentences

Other non-reportable segments 1,202,826 1,176,298

Other corporate assets 1,732,373 1,544,474

3,711,981 3,676,705

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

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

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

Other corporate assets 2,440,870 2,195,800

Total assets $ 44,062,017 $ 43,137,502

(1) As of March 31, 2022, grocery stores - Spain was not a reportable segment.

(2) Goodwill has not yet been allocated to our individual operating segments;

the allocation is pending the finalization of our purchase accounting.

Table of Content s

Three months ended March 31,

Revenue 2022 2021

2 unchanged sentences

Beverages 9,535 8,952

Child care 8,872 8,710 26,186 26,959

Convenience stores 53,649 47,807 154,865 141,310

Convenience stores - U.S.

65,943 50,128

Dollar stores 54,114 32,506

1 unchanged sentence

Financial services 13,834 7,718

General merchandise 17,539 12,937 49,625 36,341

General merchandise - U.S.

26,288 15,234

Grocery stores - U.S.

3 unchanged sentences

Health and fitness 35,810 28,610

Health care - U.S.

Home furnishings - U.S.

Home improvement - U.S.

1 unchanged sentence

Home improvement - U.K.

10,294 448 21,442 448

Restaurants - casual dining 47,510 11,748

10 unchanged sentences

Total revenue $ 807,343 $ 442,254

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

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

(1) As of March 31, 2022, grocery stores - Spain was not a reportable segment.

Common Stock Incentive Plan

In March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income 2021 Incentive Award Plan, or 2021 Plan, to enable us to motivate, attract and retain the services of directors, employees and consultants, considered essential to our long-term success.

The 2021 Plan offers our directors, employees and consultants an opportunity to own our stock and/or rights that will reflect our growth, development and financial success.

Under the terms of the 2021 Plan, the aggregate number of shares of our common stock subject to options, stock purchase rights, or SPR, stock appreciation rights, or SAR, and other awards, will be no more 8,924,231 shares.

The maximum number of shares that may be subject to options, SPR, SAR and other awards granted under the plan to any individual in any calendar year may not exceed 3,200,000 , and the maximum aggregate amount of cash that may be paid in cash during any calendar year with respect to one or more shares payable in cash shall be $ 10.0 million.

The 2021 Plan replaced the Realty Income Corporation 2012 Incentive Award Plan, or the 2012 Plan, which was set to expire in March 2022.

No further awards will be granted under the 2012 Plan.

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

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

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

In March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income 2021 Incentive Award Plan, or 2021 Plan.

This note should be read in conjunction with the more complete discussion of our 2021 Plan included in note 16 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 5.0 million and $ 3.7 million during the three months ended March 31, 2022, and 2021, respectively.

Restricted Stock

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

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

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

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

During the three months ended March 31, 2022, we granted 110,426 shares of common stock under the 2021 Plan.

As of March 31, 2022, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 15.1 million, which is being amortized on a straight-line basis over the service period of each applicable award.

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

We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

Table of Content s

Performance Shares and Restricted Stock Units

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

During the three months ended March 31, 2022, we granted 154,840 performance shares, as well as dividend equivalent rights, to our executive officers.

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

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

During the three months ended March 31, 2022, we also granted 24,456 restricted stock units, all of which vest over a four-year service period.

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

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

As of March 31, 2022, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $ 27.6 million.

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

3 unchanged sentences

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

Stock Options

We did no t grant any stock options during the first three months ended March 31, 2022.

During the three months ended March 31, 2022, we recorded $ 47,000 of expense related to stock options.

There was no comparable expense for the three months ended March 31, 2021.

As of March 31, 2022, there was no unamortized expense relating to our outstanding stock options.

Commitments and Contingencies

1 unchanged sentence

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

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

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

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

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

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

At March 31, 2022, we had commitments of $ 55.0 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of March 31, 2022, we had committed $ 485.7 million under construction contracts related to development projects, which is expected to be paid in the next twelve months.

In anticipation of entering into the agreements related to the private placement offering (see note 20, Subsequent Events ) in March 2022, we entered into an indemnity agreement with the investors to reimburse for certain transaction related costs associated with the private placement should the notes ultimately not be issued.

As of March 31, 2022, we have not recognized any liability associated with the guarantee as the current exposure was insignificant and the likelihood of ultimately incurring a loss was remote.

Subsequent Events

Dividend Increases

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

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

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

of Realty common stock.

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

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

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

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

In April 2022, we declared a dividend of $ 0.2470 per share to our common stockholders, which will be paid in May 2022.

Credit Facility Amendment

In April 2022, we amended and restated our unsecured revolving credit facility to increase the borrowing capacity to $ 4.25 billion and to extend the initial term to June 2026, among other things.

The amended and restated credit facility is otherwise substantively consistent with the prior credit agreement entered into in August 2019.

Private Placement Offering

In April 2022, we entered into a definitive agreement for the private placement of £ 140 million of senior unsecured notes due 2030, £ 345 million of senior unsecured notes due 2032, and £ 115 million of senior unsecured notes due 2037.

The combined notes, if issued, are expected to have a weighted average tenor of approximately 10.5 years, and a weighted average fixed interest rate of 3.22 %.

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

What changed 10-Q

Item 1. Financial Statements