What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-02 · 345 added, 446 removed, 725 unchanged (52% of the section changed)

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

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FORWARD-LOOKING STATEMENTS

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When used in this quarterly report, the words “estimated”, “anticipated”, “expect”, “believe”, “intend” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements include discussions of strategy, plans, or intentions of management.

Forward-looking statements include, without limitation, discussions of strategy, plans and intentions and statements regarding estimated or future results of operations, financial condition or prospects (including, without limitation, estimated and future funds from operations (“FFO”), adjusted funds from operations (“AFFO”) and normalized and adjusted FFO and net income, estimated initial weighted average contractual lease rates, estimated square footage of properties under development or expansion, the timing, prices and other terms of potential or planned acquisitions, statements regarding initial cash lease yields on or percentages of investment grade clients that are lessees of properties that we have acquired or intend or agreed to acquire or that are under development or expansion, statements regarding the payment, dependability and amount of and potential increases in future common stock dividends, statements regarding future cash flow or cash generation, statements regarding our ability to meet our liquidity needs, and statements regarding the anticipated or projected impact of our merger with VEREIT on our business, results of operations, financial condition or prospects).

Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation, including, among other things:

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

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

(the "Mergers") will be achieved.

• The uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT will be achieved.

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

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

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

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

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• Acts of terrorism and war;

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

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

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

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• Any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT will be achieved.

Additional factors that may cause future events and actual results, financial or otherwise, to differ, potentially materially, from those discussed in or implied by the forward-looking statements include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , for the fiscal year ended December 31, 2021.

Readers are cautioned not to place undue reliance on forward-looking statements.

Those forward-looking statements are not guarantees of future performance and speak only as of the date that this quarterly report was filed with the Securities and Exchange Commission, or SEC.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance.

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

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

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

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

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

Realty Income was founded in 1969 and listed on the New York Stock Exchange (NYSE:

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

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

• Of 7,018 properties;

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

At March 31, 2022, we owned a diversified portfolio:

• Consisting of 11,288 properties;

• With an occupancy rate of 98.6%, or 11,132 properties leased and 156 properties available for lease or sale;

• Doing business in 60 separate industries;

• With clients doing business in 70 separate industries;

• Located in all 50 U.S.

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approximately 12,660 square feet per retail property and approximately 244,460 square feet per industrial property.

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

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

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

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

Of the 11,288 properties in the portfolio at March 31, 2022, 11,180, or 99.0%, are single-client properties, of which 11,026 were leased, and the remaining are multi–client properties.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $44.0 million and $21.7 million for the three months ended March 31, 2022, and 2021, respectively.

Investment Philosophy

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

(1) fixed increases, (2) increases in the consumer price index (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients’ gross sales above a specified level.

(1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients’ gross sales above a specified level.

We believe that a portfolio of properties under long-term net lease agreements with our commercial clients generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

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Diversification is also a key component of our investment philosophy.

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

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

Our investment activities have led to a diversified property portfolio that, as of March 31, 2022, consisted of 11,288 properties located in all 50 U.S.

states, Puerto Rico, the U.K.

and Spain, and doing business in 70 industries.

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

None of the 70 industries represented in our property portfolio accounted for more than 9.1% of our annualized contractual rent as of March 31, 2022.

With expanded scale from our merger with VEREIT, we hope to serve our existing clients better and to partner with new clients that require the larger and more diversified balance sheet we now provide.

Equally, as we look to continue to expand geographically across Europe, we hope to partner with new multinational clients that seek a real estate partner with an expanding geographic footprint.

Investment Strategy

When identifying new properties for investment, we generally focus on acquiring high-quality real estate that our clients consider important to the successful operation of their businesses.

We generally seek to acquire real estate that has the following characteristics:

• Properties that are freestanding, commercially-zoned with a single client;

• Properties that are in significant markets or strategic locations critical to generating revenue for our clients (i.e.

they need the property in which they operate in order to conduct their business);

• Properties that we deem to be profitable for the clients and/or can generally be characterized as important to the successful operations of our business;

• Properties that are located within attractive demographic areas relative to the business of our clients;

We seek to invest in high-quality real estate that our clients consider important to the successful operation of their businesses.

We generally seek to acquire commercial real estate that has some or all of the following characteristics:

• Properties in markets or locations important to our clients;

• Properties that we deem to be profitable for our clients (e.g., retail stores or revenue generating sites);

• Properties with strong demographic attributes relative to the specific business drivers of our clients;

• Properties with real estate valuations that approximate replacement costs;

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• Properties that can be purchased with the simultaneous execution or assumption of long-term net lease agreements, offering both current income and the potential for future rent increases;

We seek to invest in properties owned or leased by clients that are already or could become leaders in their respective businesses supported by mechanisms including (but not limited to) occupancy of prime real estate locations, pricing, merchandise assortment, service, quality, economies of scale, consumer branding, e-commerce, and advertising.

In addition, we frequently acquire large portfolios of single-client properties net leased to different clients operating in a variety of industries.

• Properties that leverage relationships with clients, sellers, investors, or developers as part of a long-term strategy;

• Properties that leverage our proprietary insights, including predictive analytics (e.g., through the selection of locations and geographic markets we expect to remain strong or strengthen in the future).

We typically seek to invest in properties owned or leased by clients that are already or could become leaders in their respective businesses supported by mechanisms including (but not limited to) occupancy of prime real estate locations, pricing, merchandise assortment, service, quality, economies of scale, consumer branding, e-commerce, and advertising.

In addition, we frequently acquire large portfolios of properties net leased to different clients operating in a variety of industries.

We have an internal team dedicated to sourcing such opportunities, often using our relationships with various clients, owners/developers, brokers and advisers to uncover and secure transactions.

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This research expertise is instrumental to uncovering net lease opportunities in markets where we believe we can add value.

In selecting potential investments, we look for clients with the following attributes:

• Reliable and sustainable cash flow;

In selecting potential investments, we generally look for clients with the following attributes:

• Reliable and sustainable cash flow, including demonstrated economic resiliency;

• Revenue and cash flow from multiple sources;

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From a retail perspective, our investment strategy is to target clients that have a service, non-discretionary, and/or low-price-point component to their business.

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

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

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

Our investments are usually with clients who have demonstrated resiliency to e-commerce or have a strong omni channel retail strategy, uniting brick-and-mortar and mobile browsing, both of which reflect the continued importance of last mile retail, the movement of goods to their final destination, real estate as part of a customer experience and supply chain strategy.

Our overall investments (including last mile retail) are driven by an optimal portfolio strategy that, among other considerations, targets allocation ranges by asset class and industry.

We review our strategy periodically and stress test our portfolio in a variety of positive and negative economic scenarios to ensure we deliver consistent earnings growth and value creation across economic cycles.

As a result of the execution of this strategy, approximately 93% of our annualized retail contractual rent on March 31, 2022, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

From a non-retail perspective, we target industrial properties leased to industry leaders, the majority of which are investment grade rated companies.

We believe these characteristics enhance the stability of the rental revenue generated from these properties.

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After applying this investment strategy, we pursue those transactions where we believe we can achieve an attractive investment spread over our cost of capital and favorable risk-adjusted returns.

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

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

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

At March 31, 2022, approximately 43% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

At March 31, 2022, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 42% of our annualized rent and 12 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Asset Management Strategy

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Our active asset management strategy pursues asset sales when we believe the reinvestment of the sale proceeds will:

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• Generate higher returns;

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RECENT DEVELOPMENTS

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, Inc., or VEREIT.

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

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

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

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

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

Merger-related Costs

In conjunction with our 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 Related to the Mergers

To date, purported stockholders of VEREIT filed 12 lawsuits challenging disclosures related to the Merger, and purported stockholders of Realty Income filed one lawsuit challenging the disclosures related to the Merger.

Each lawsuit seeks, among other things, injunction 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 are without merit and intend to defend against them vigorously.

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.

Theater Industry Update

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

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

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

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

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

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

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

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

Straight-line rent reserves (reserve reversals) — 0.2

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

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

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

Increases in Monthly Dividends to Common Stockholders

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

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

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

In addition, we increased the dividend two times during 2022.

As of April 2022, we have paid 98 consecutive quarterly dividend increases and increased the dividend 115 times since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2022:

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2nd increase Mar 2022 Apr 2022 $ 0.2470 $ 0.0005

3rd increase Jun 2021 Jul 2021 $ 0.2355 $ 0.0005

4th increase Sept 2021 Oct 2021 $ 0.2360 $ 0.0005

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

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

The dividends paid per share during the three months ended March 31, 2022, totaled approximately $0.7395, as compared to approximately $0.7035 during the three months ended March 31, 2021, an increase of $0.036, or 5.1%.

The monthly dividend of $0.2470 per share represents a current annualized dividend of $2.9640 per share, and an annualized dividend yield of approximately 4.3% based on the last reported sale price of our common stock on the NYSE of $69.30 on March 31, 2022.

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

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

Acquisitions During the Three Months Ended March 31, 2022

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

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Properties Leasable

Square Feet Investment

($ in thousands) Weighted

(in thousands) Investment

($ in millions) Weighted

(Years) Initial

Three months ended September 30, 2021 (2)

Acquisitions - U.S.

(in 32 states)

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

Acquisitions - Europe (U.K.

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

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

Properties under development (3)

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

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

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.

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

Acquisitions - Europe 21 2,772 794.2 8.9 5.5 %

Total acquisitions 160 5,399 $ 1,424.0 11.8 5.6 %

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

Contractual net operating income used in the calculation of initial average cash yield includes approximately $2.4 million received as settlement credits for 31 properties as reimbursement of free rent periods for the three months ended September 30, 2021 and approximately $3.2 million received as settlement credits for 35 properties as reimbursement of free rent periods for the nine months ended September 30, 2021.

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

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

(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 three and nine months ended September 30, 2021, converted at the applicable exchange rate on the funding date.

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

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

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

Portfolio Discussion

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

Announcement of Transaction with Wynn Resorts

In February 2022, we announced that we had signed a definitive agreement with Wynn Resorts, Limited to acquire the Encore Boston Harbor Resort and Casino for $1.7 billion under a long-term net lease agreement.

This sale-leaseback transaction, which is expected to close in the fourth quarter of 2022, is expected to be executed at a 5.9% initial weighted average cash lease yield and includes an initial lease term of 30 years with annual rent growth of 1.75% for the first ten years and the greater of 1.75% or CPI (capped at 2.5%) over the remaining lease term.

The lease also includes an additional 30-year option to renew upon expiration.

This transaction is subject to numerous uncertainties, including various closing conditions, and there can be no assurance that the transaction will be consummated on the terms or timetable currently contemplated, or at all.

Leasing Results

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

At March 31, 2022, we had 156 properties available for lease out of 11,288 properties in our portfolio, which represents a 98.6% occupancy rate based on the number of properties in our portfolio.

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

Three months ended September 30, 2021

Properties available for lease at June 30, 2021

Lease expirations (1)

Re-leases to same client (35)

Re-leases to new client (8)

Vacant dispositions (23)

Properties available for lease at September 30, 2021

Nine months ended September 30, 2021

Three months ended March 31, 2022

Properties available for lease at December 31, 2021

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Vacant dispositions (31)

Properties available for lease at September 30, 2021

Properties available for lease at March 31, 2022

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

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

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

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

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

During the three months ended March 31, 2022, the annual new rent on re-leases was $31.69 million, as compared to the previous annual rent of $29.84 million on the same units, representing a rent recapture rate of 106.2% on the units re-leased.

We re-leased three units to new clients without a period of vacancy, and 12 units to new clients after a period of vacancy.

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

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

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

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

At March 31, 2022, our average annualized contractual rent was approximately $14.19 per square foot on the 11,132 leased properties in our portfolio.

At March 31, 2022, we classified 47 properties, with a carrying amount of $84.4 million, as real estate and lease intangibles held for sale, net on our balance sheet.

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

Investments in Existing Properties

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

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

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.

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

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

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

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

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

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Capital Raising

During the three months ended September 30, 2021, we raised $1.63 billion from the sale of common stock at a weighted average price of $67.93 per share, primarily through proceeds from the sale of common stock through our At-The-Market (ATM) program and the July 2021 raising of $594.1 million from the issuance of 9,200,000 shares of common stock in an underwritten public offering, inclusive of 1,200,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.

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

In August 2021, following the issuance and sale of 74,911,567 shares under our prior ATM equity distribution plans, or our prior ATM programs, we established a new ATM equity distribution plan, or our new ATM program, pursuant to which up to 69,088,433 additional shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices.

During the three months ended March 31, 2022, we raised $663.0 million of gross proceeds from the sale of common stock at a weighted average price of $65.55 per share, primarily through proceeds from the sale of common stock through our At-The-Market (ATM) program.

Note Issuances

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

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

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

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

Early Redemption of 3.250% Notes Due October 2022

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

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

Loss on extinguishment of debt is excluded in our calculation of AFFO.

Impact of COVID-19

We continue to work diligently with our clients most affected by the pandemic to understand their business operations and financial liquidity and their ability to satisfy their contractual obligations to us.

As we carefully navigate this difficult economic period with our clients, our focus is on finding resolutions that preserve the long-term relationships we have built with many of our clients.

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

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

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

In addition, as we believe to be the case with many retail landlords, we have received many short-term rent relief requests, most often in the form of rent deferral requests, or requests for further discussion from clients.

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

Our rent collections for the periods

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

Percentages of Contractual Rent Collected as of September 30, 2021

July 31, 2021

August 31, 2021

September 30, 2021

Quarter Ended

September 30, 2021

Contractual rent collected (1) across total portfolio

99.4% 99.5% 99.7% 99.5%

Contractual rent collected (1) from our top 20 clients (2)

99.6% 99.8% 99.9% 99.8%

Contractual rent collected (1) from our investment grade clients (3)

100.0% 100.0% 100.0% 100.0%

Contractual rent collected from our theater clients 99.6% 99.6% 99.6% 99.6%

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

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

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

Charged amounts have not been adjusted for any COVID-19 related rent relief granted and include contractual rents from any clients in bankruptcy.

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

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

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

As the adverse impacts of the COVID-19 pandemic and the measures taken to limit its spread continue to evolve, the ability of our clients to continue to pay rent to us may further diminish, and therefore we cannot assure you that our historical rental collections are indicative of our rental collections in the future.

As a result of the impacts of the COVID-19 pandemic and the measures taken to limit its spread, our revenues in the foreseeable future may decline, and that decline may continue or increase in subsequent periods as long as such impacts continue to exist.

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%.

We currently anticipate closing to occur during the second quarter of 2022.

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

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

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

New, Expanded Revolving Credit Facility

In April 2022, we entered a new $4.25 billion unsecured credit facility to amend and restate our previous $3.0 billion unsecured credit facility, which was due to expire in March 2023.

The new revolving credit facility matures in June 2026 and includes two six-month extensions that can be exercised at our option.

Similar to our previous revolving credit facility, the new revolving credit facility also has a $1.0 billion expansion feature, which is subject to obtaining lender commitments.

As of March 31, 2022, the balance of borrowings outstanding under our previous revolving credit facility was $569.6 million, and we had a cash balance of $151.6 million.

Select Financial Results

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

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

2021 2020 2021 2020

Three months ended March 31, % Increase

Total revenue $ 807.3 $ 442.3 82.5 %

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

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

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

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

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

Our financial results during the three months ended March 31, 2021, were impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022.

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

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Capital Philosophy

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

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

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

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

As of March 31, 2022, there are $2.1 billion of obligations becoming due through the remainder of 2022, which we expect to fund through a combination of cash flows from operations, issuances of common stock or debt, and additional borrowings under our revolving credit facility and rolling over borrowings under our commercial paper program.

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

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

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

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

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

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

At March 31, 2022, our total outstanding borrowings of senior unsecured notes and bonds, term loan, mortgages payable, revolving credit facility and commercial paper were $15.78 billion, or approximately 27.4% of our total market capitalization of $57.54 billion.

We define our total market capitalization at March 31, 2022, as the sum of:

• Shares of our common stock outstanding of 601,566,581, plus total common units outstanding of 1,060,709, multiplied by the last reported sales price of our common stock on the NYSE of $69.30 per share on March 31, 2022, or $41.76 billion;

• Outstanding borrowings of $569.6 million on our revolving credit facility;

• Outstanding borrowings of $950.0 million on our commercial paper program;

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

• Outstanding mortgages payable of $1.07 billion, excluding net mortgage premiums of $25.0 million and deferred financing costs of $713,000;

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $394,000;

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

• Outstanding senior unsecured notes and bonds of $12.86 billion, including Sterling-denominated notes of £1.97 billion, and excluding unamortized net premiums of $272.7 million and deferred financing costs of $60.6 million;

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

Universal Shelf Registration

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

The securities covered by this registration statement include (1) common stock, (2) preferred stock, (3) debt securities, (4) depositary shares representing fractional interests in shares of preferred stock, (5) warrants to purchase debt securities, common stock, preferred stock, or depositary shares, and (6) any combination of these securities.

The securities covered by this registration statement include (1) common stock, (2) preferred stock, (3) debt securities, (4) depositary

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shares representing fractional interests in shares of preferred stock, (5) warrants to purchase debt securities, common stock, preferred stock, or depositary shares, and (6) any combination of these securities.

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

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

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

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

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

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.

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.

Issuance of Common Stock

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

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

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

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

Dividend Reinvestment and Stock Purchase Plan

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

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

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

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

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

Revolving Credit Facility and Commercial Paper Program

We have a $3.0 billion unsecured revolving credit facility with an initial term that expires in March 2023 and includes, at our option, two six-month extensions.

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

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

Under our revolving credit facility, our investment grade credit ratings as of 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.

We did not issue shares under the waiver approval process during the three months ended March 31, 2022.

During the three months ended March 31, 2022, we issued 41,371 shares and raised approximately $2.8 million under our DRSPP.

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

Revolving Credit Facility

In April 2022, we entered a new $4.25 billion unsecured revolving credit facility to amend and restate our previous $3.0 billion unsecured revolving credit facility, which was due to expire in March 2023.

This new multicurrency credit facility matures in June 2026, includes two six-month extensions that can be exercised at our option and allows us to borrow in up to 14 currencies, including U.S.

Similar to our previous credit facility, our new revolving credit facility also has a $1.0 billion expansion feature, which is subject to obtaining lender commitments.

Under the new revolving credit facility, our current investment grade credit ratings provide for financing on U.S.

Dollar borrowings at the Secured Overnight Financing Rate (“SOFR”), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR and British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA.

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

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

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

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

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

We also have other interest rate options available to us in different currencies as well.

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

At March 31, 2022, we had a borrowing capacity of $2.4 billion available on our previous revolving credit facility and an outstanding balance of $569.6 million.

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

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

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

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

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

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

In August 2020, we established a U.S.

Commercial Paper Program

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.

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

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

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

At March 31, 2022, we had an outstanding balance of $950.0 million.

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

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.

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

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

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

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acquisitions.

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

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

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

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

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

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Mortgage Debt

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

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

As of March 31, 2022, we had $1.07 billion of mortgages payable, the majority of which were assumed in connection with our property acquisitions, including ten mortgages from our merger with VEREIT in 2021 totaling $839.1 million, of which one mortgage for $42.5 million was paid off during the three months ended March 31, 2022, and a Sterling-denominated mortgage payable of £30.8 million.

Additionally, at March 31, 2022, we had net premiums totaling $25.0 million on these mortgages and deferred financing costs of $713,000.

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

During the 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 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.

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Notes Outstanding

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

As of September 30, 2021

Our senior unsecured note and bond obligations consist of the following as of March 31, 2022, sorted by maturity date (in millions):

As of March 31, 2022

Principal Amount (Currency Denomination) Carrying Value (USD)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total principal amount $ 12,857

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

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

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

Unamortized net premiums and deferred financing costs 212

(1) Carrying Value (USD) as of March 31, 2022, includes the portion of the VEREIT OP notes that remained outstanding, totaling $39.1 million in the aggregate, that were not exchanged in the exchange offers commenced by us with respect to the outstanding bonds of VEREIT Operating Partnership, L.P.

("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 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.

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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%.

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of March 31, 2022.

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.

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

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

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

The actual amounts as of September 30, 2021 are:

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

The actual amounts as of March 31, 2022, are:

Note Covenants

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

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

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

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

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on April 1, 2021 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of April 1, 2021, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at March 31, 2022 (in thousands, for trailing twelve months):

Net income available to common stockholders

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

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

At March 31, 2022, we had cash and cash equivalents totaling $151.6 million, inclusive of £86.8 million Sterling and €7.2 million Euro.

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

We intend, however, to use permanent or long-term capital to fund property acquisitions and to repay future borrowings under our credit facility and commercial paper program.

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Credit Agency Ratings

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

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

As of March 31, 2022, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

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

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

In addition, we were assigned the following ratings on our commercial paper at March 31, 2022:

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

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

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

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

Based on our credit agency ratings as of March 31, 2022, interest rates under our new credit facility for U.S.

borrowings would have been at the Secured Overnight Financing Rate (“SOFR”), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR and, for British Pound Sterling borrowings, at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA.

In addition, our new credit facility provides that the interest rates can range between:

(i) SOFR/SONIA, plus 1.40% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) SOFR/SONIA, plus 0.70% if our credit rating is A/A2 or higher.

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

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Table of Obligations

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

The following table summarizes the maturity of each of our obligations as of March 31, 2022 (dollars in millions):

Maturity Credit Facility and Commercial Paper Program (1)

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Totals $ 1,519.6 $ 12,856.6 $ 250.0 $ 1,069.3 $ 3,400.5 $ 319.1 $ 367.4 $ 540.7 $ 20,323.2

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

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

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

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

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

(1) As of March 31, 2022, the initial term of our previous credit facility would have expired in March 2023, and included, at our option, two six-month extensions.

In April 2022, we amended and restated our unsecured credit facility, or our new credit facility, in order to increase the borrowing capacity to $4.25 billion and extend the initial term to June 2026 with two six-months extensions that can be exercised at our option.

The amended and restated new credit facility is otherwise substantively consistent with our previous credit agreement.

We also have an unsecured commercial paper program, with outstanding borrowings of $950.0 million, which mature between April 2022 and December 2022.

(2) Excludes non-cash net premiums recorded on notes payable of $272.7 million and deferred financing costs of $60.6 million.

(3) Excludes deferred financing costs of $394,000.

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

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

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $25.0 million and deferred financing costs of $713,000.

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

Excludes interest from the April 2022 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.

We currently expect closing to occur during the second quarter of 2022.

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

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

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

(8) “Other” consists of $485.7 million of commitments under construction contracts, $55.0 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

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

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

No Unconsolidated Investments

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

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Unconsolidated Investments

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

We are responsible to fund our proportionate share of any operating cash deficits pursuant to the governance documents of the applicable entities.

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

The debt held by the unconsolidated entities is secured by its properties, though is non-recourse to us with limited customary exceptions which vary from loan to loan.

Dividend Policy

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Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P.

on a per unit basis that is generally equal to the amount paid per share to our common stockholders.

each on a per unit basis that is generally equal to the amount paid per share to our common stockholders.

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

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

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

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

In 2021, our cash distributions to common stockholders totaled $1.17 billion, or approximately 149.4% of our estimated taxable income of $783.3 million.

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

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

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

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

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

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

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, FFO, Normalized FFO, AFFO, cash flow from operations, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of

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

Our cash distributions to common stockholders in the three months ended March 31, 2022, totaled $438.3 million, representing 75.6% of our adjusted funds from operations available to common stockholders of approximately $580.1 million.

In comparison, our cash distributions to common stockholders in 2021 totaled $1.17 billion, representing 78.5% of our adjusted funds from operations available to common stockholders of $1.49 billion.

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

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Approximately 67.3% of the distributions to our common stockholders, made or deemed to have been made in 2021, were classified as a return of capital for federal income tax purposes.

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RESULTS OF OPERATIONS

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

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.

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

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

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

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

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

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

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

However, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

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

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

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

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

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

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The following is a comparison of our results of operations for the three months ended March 31, 2022, to the three months ended March 31, 2021.

Total Revenue

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

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

2021 2020 2021 2020 Three Months Nine Months

Three months ended March 31, $ Increase

Rental (excluding reimbursable)

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$ 807,343 $ 442,254 $ 365,089

The increase in total revenue primarily relates to the merger with VEREIT and acquisitions from January 1, 2021, through March 31, 2022 .

Rental Revenue (excluding reimbursable)

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

Three Months Ended September 30, Increase/(Decrease)

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three months ended March 31, 2022, compared to the three months ended March 31, 2021 (dollars in thousands):

Three months ended March 31, Increase/(Decrease)

Number of Properties Square Footage (1)

2022 2021 $ Change

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

Properties acquired during 2022 & 2021 1,235 29,069,157 $ 98,518 $ 5,049 $ 93,469

Same store rental revenue 9,728 169,816,153 629,886 605,266 24,620

Orion Divestiture 92 10,093,123 413 44,197 (43,784)

Constant currency adjustment (2)

N/A N/A 1,215 1,225 (10)

Properties sold subsequent to December 31, 2019 224 4,652,875 158 3,362 (3,204)

Properties sold prior to 2022 318 6,615,724 627 12,851 (12,224)

Straight-line rent and other non-cash adjustments N/A N/A 8,252 1,456 6,796

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325 6,932,900 16,651 13,790 2,861

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

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

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

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

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

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

Nine Months Ended September 30, Increase/(Decrease)

Number of Properties Square Footage (1)

2021 2020 $ Change

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

Same store rental revenue 6,099 96,727,907 1,127,320 1,105,333 21,987

Constant currency adjustment (2)

VEREIT same store rental revenue (4)

N/A N/A — (266,146) 266,146

Properties sold subsequent to December 31, 2019 224 4,652,875 2,125 13,609 (11,484)

Straight-line rent and other non-cash adjustments N/A N/A 5,033 532 4,501

Vacant rents, development and other (3)

163 2,944,601 17,350 21,984 (4,634)

Totals $ 755,562 $ 417,688 $ 337,874

(1) Excludes 5,910,715 square feet from properties ground leased to clients and 2,164,712 square feet from properties with no land or building ownership.

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

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of March 31, 2022, of 1.31 GBP/USD.

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

(3) Relates to the aggregate of (i) rental revenue from properties (313 properties comprising 6,850,516 square feet) that were available for lease during part of 2022 or 2021, (ii) rental revenue for properties (12 properties comprising 82,384 square feet) under development, and (iii) rental revenue that is not contractual base rent such as lease termination settlements.

(4) Amounts for the three months ended March 31, 2021 represent same store rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021.

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

(i) were vacant at any time, (ii) were under development or redevelopment, or (iii) were involved in eminent domain and rent was reduced.

Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our same store pool criterion, except for the requirement that the property be owned for the full comparative period.

If the property was owned by VEREIT for the full comparative period and each of the other criterion were met, the property was included in our same store property pool.

Each of the exclusions from the same store pool are separately addressed within the applicable sentences above, explaining the changes in rental revenue for the period.

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

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

Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our Same Store Pool criterion, except for the requirement that the property be owned for the full comparative period.

If the property was owned by VEREIT for the full comparative period and each of the other criterion were met, the property was included in our same store property pool.

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

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

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

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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

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

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

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

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

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three months ended March 31, 2022, relative to the comparable periods for 2021 would have been 4.4%.

Of the 11,288 properties in the portfolio at March 31, 2022, 11,180, or 99.0%, are single-client properties and the remaining are multi-client properties.

Of the 11,180 single-client properties, 11,026, or 98.6%, were net leased at March 31, 2022.

Of the 11,501 in-place leases in the portfolio, which excludes 201 vacant units, 9,839 or 85.5% were under leases that provide for increases in rents through:

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

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

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

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

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

Percentage rent, which is included in rental revenue, was $3.7 million in the three months ended March 31, 2022, and $1.0 million in the three months ended March 31, 2021.

We anticipate percentage rent to be less than 1% of rental revenue for 2022.

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

At March 31, 2022, our portfolio of 11,288 properties was 98.6% leased with 156 properties available for lease, as compared to 98.5% leased, with 164 properties available for lease at December 31, 2021, and 98.0% leased with 131 properties available for lease at March 31, 2021.

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

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Other Revenue

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

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

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

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Total Expenses

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

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

2021 2020 2021 2020 Three months

Three months ended March 31, $ Increase

Depreciation and amortization

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General and administrative 32,699 20,796 11,903

23,813 16,514 66,458 56,541 7,299 9,917

Provisions for impairment

7,038 2,720 4,318

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

Merger and integration-related costs 6,519 — 6,519

Total expenses

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General and administrative expenses as a percentage of total revenue (1)

5.1 % 4.3 % 5.0 % 4.5 %

Property expenses (excluding reimbursable) as a percentage of total revenue (1)

1.2 % 1.9 % 1.6 % 1.5 %

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

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

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

(1) Excludes rental revenue (reimbursable).

Depreciation and Amortization

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

The increase in depreciation and amortization for the three months ended March 31, 2022, was primarily due to the acquisition of properties in 2021 and the merger with VEREIT.

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

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Interest Expense

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

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

2021 2020 2021 2020

Three months ended March 31,

Interest on our credit facility, commercial paper, term loan, notes, mortgages and interest rate swaps $ 120,962 $ 69,528

Credit facility commitment fees

958 958 2,844 2,854

Amortization of debt origination and deferred financing costs 3,123 2,661

Loss on interest rate swaps

734 1,123 2,180 3,116

Amortization of net mortgage premiums

(3,561) (280)

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

Amortization of net note premiums (15,740) (85)

Interest capitalized (375) (486)

Capital lease obligation 322 77

Interest on deferred financing leases 13 —

Interest expense

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3.07 % 3.27 %

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

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

The increase in interest expense for the three months ended March 31, 2022 is primarily due the January 2022 issuance of £500 million in principal of Sterling denominated notes, the issuance of $4.65 billion in principal of notes associated with the exchange offer and assumption of $839.1 million in principal of mortgage debt, both associated with our merger with VEREIT in November 2021, the July 2021 issuance of £750 million in principal of Sterling denominated notes, and higher average balances and rates on the credit facility and commercial paper borrowings, partially offset by the December 2021 early redemption on all $750.0 million in principal of the 4.650% notes due August 2023, and the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022.

During the three months ended March 31, 2022, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $569.6 million was 1.1%;

• Commercial paper outstanding borrowings of $950.0 million was 0.5%;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $394,000) was swapped to fixed at 3.9%;

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

• Mortgages payable of $1.07 billion (excluding net premiums totaling $25.0 million and deferred financing costs of $713,000 on these mortgages) was 4.8%;

• Notes and bonds payable of $12.86 billion (excluding net unamortized original issue premiums of $272.7 million and deferred financing costs of $60.6 million) was 3.2%;

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

• Notes, bonds, mortgages, term loan, and credit facility and commercial paper borrowings of $15.7 billion (excluding all net premiums and deferred financing costs) was 3.1%.

Property Expenses (excluding reimbursable)

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

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

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

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

At March 31, 2022, 156 properties were available for lease or sale, as compared to 164 at December 31, 2021, and 131 at March 31, 2021.

The increase in property expenses (excluding reimbursable) for the three months ended March 31, 2022, is primarily due to the increase in portfolio size, resulting in higher utilities, repairs and maintenance, property-related legal expenses, and property taxes.

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Property Expenses (reimbursable)

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

The increase in property expenses (reimbursable) for the three months ended March 31, 2022, was primarily attributable to our increased portfolio size, which contributed to higher operating expenses as a result of our acquisitions in 2021 and the three months ended March 31, 2022, and an increase in ground lease rent, insurance, and property taxes paid on behalf of our clients.

General and Administrative Expenses

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

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

The increase in general and administrative expenses for the three months ended March 31, 2022, is primarily due to higher payroll-related costs and higher corporate-level professional fees associated with the growth of the company, including the merger with VEREIT.

At March 31, 2022, the headcount was 384 versus 225 at March 31, 2021.

Provisions for Impairment

The following table summarizes 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

Three months ended March 31,

Total provisions for impairment $ 7.0 $ 2.7

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Classified as held for investment — 2

Sold 12 26 40 43

Merger-related Costs

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

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

Merger and Integration-related Costs

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

The merger and integration-related costs incurred to date primarily consist of advisory fees, 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 VEREIT business and assets efficiently.

There were no comparable merger and integration-related costs for the three months ended March 31, 2021.

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

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

Three months ended March 31,

Number of properties sold 34 27

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

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

Net foreign currency gains and losses are primarily related to the remeasurement of intercompany debt from foreign subsidiaries.

Gains and losses on foreign currency are largely offset by derivative gains and losses.

Derivative gains and losses relate to mark-to-market adjustments on derivatives that do not qualify for hedge accounting.

Net derivative gains and losses are primarily related to realized and unrealized short term currency exchange swaps.

Gains and losses on derivatives are largely offset by foreign currency gains and losses.

Loss on Extinguishment of Debt

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

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

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

As a result of the early redemption, we recognized a $46.5 million loss on extinguishment of debt for the nine months ended September 30, 2021.

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

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

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

There were no comparable redemptions of debt for the three months ended March 31, 2022.

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Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities for the three months ended March 31, 2022, relates to three equity method investments that were acquired in our merger with VEREIT.

There were no comparative investments for the three months ended March 31, 2021.

Other Income, Net

Certain miscellaneous non-recurring revenue is included in other income, net.

The increase in the three months ended March 31, 2022, compared to the three months ended March 31, 2021, is primarily related to insurance proceeds received from property losses.

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

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

The increase in income taxes for the three months ended March 31, 2022, was primarily attributable to our increased volume of U.K.

investments, which contributed to higher U.K.

income taxes as compared to the same periods in 2020.

income taxes as compared to the same period in 2021.

Net Income Available to Common Stockholders

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

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

2021 2020 2021 2020 Three months

Three months ended March 31, % Increase

Net income available to common stockholders

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

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

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

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

The increase in net income available to common stockholders for the three months ended March 31, 2022, compared to the three months ended March 31, 201 primarily related to the increase in the size of our portfolio due to the merger with VEREIT, which closed on November 1, 2021.

In addition, net income available to common stockholders for the three months ended March 31, 2021, was impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022.

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

The National Association of Real Estate Investment Trusts (Nareit) came to the conclusion that a Nareit-defined EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDA re ) would provide investors with a consistent measure to help make investment decisions among REITs.

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

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

The National Association of Real Estate Investment Trusts (Nareit) established an EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDA re ) it believed would provide investors with a consistent measure to help make investment decisions among REITs.

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

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

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

Management believes Adjusted EBITDA re to be a meaningful measure of a REIT’s performance because it is widely followed by industry analysts, lenders and investors.

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

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

Management believes Adjusted EBITDA re to be a meaningful measure of a REIT’s performance because it provides a view of our operating performance, analyzes our ability to meet interest payment obligations before the effects of income tax, depreciation and amortization expense, provisions for impairment, gains on sales of real estate and other items, as defined above, that affect comparability, including the removal of non-recurring and non-cash items that industry observers believe are less relevant to evaluating the operating performance of a company.

In addition, EBITDA re is widely followed by industry analysts, lenders, investors, rating agencies, and others as a means of evaluating the operational cash generating capacity of a company prior to servicing debt obligations.

Management also believes the use of an annualized quarterly Adjusted

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EBITDA re metric, which we refer to as Annualized Adjusted EBITDA re , is meaningful because it represents the Company’s current earnings run rate for the period presented.

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

We define Annualized Pro Forma Adjusted EBITDA re as Annualized

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

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

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

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

Three months ended September 30,

Management also uses our ratio of net debt-to-Annualized Adjusted EBITDA re as a measure of leverage in assessing the Company's financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDA re.

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to adjusted EBITDA re and Annualized Adjusted EBITDA re calculations for the periods indicated below (dollars in thousands):

Three months ended March 31,

Net income $ 199,971 $ 96,236

106,403 73,075

76,156 76,806

Loss on extinguishment of debt — 46,473

2 unchanged sentences

Provisions for impairment

11,011 105,095

Merger-related costs 16,783 —

Merger and integration-related costs 6,519 —

Gain on sales of real estate

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Foreign currency and derivative (gains) losses, net 590 (804)

Proportionate share of adjustments for unconsolidated entities 1,092 —

Quarterly Adjusted EBITDA re

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$ 2,904,800 $ 1,574,036

Annualized Pro forma Adjustments 43,910 24,586

Annualized Pro forma Adjusted EBITDA re

$ 1,797,510 $ 1,475,178

Total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts $ 15,695,516 $ 8,566,505

Proportionate share for unconsolidated entities debt, excluding deferred financing costs 86,006 —

Cash and cash equivalents (151,624) (183,984)

$ 15,629,898 $ 8,382,521

Net Debt/Annualized Adjusted EBITDA re (3)

Net Debt/Annualized Pro forma Adjusted EBITDA re

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

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

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

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

The Annualized Pro Forma Adjustments consist of adjustments to incorporate operating income from properties we acquired or stabilized during the applicable quarter and to remove operating income from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable quarter.

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

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

Three months ended September 30,

Dollars in thousands 2021 2020

Annualized pro forma adjustments from properties acquired or stabilized $ 45,901 $ 25,200

Annualized pro forma adjustments from properties disposed (1,991) (614)

Annualized Pro forma Adjustments $ 43,910 $ 24,586

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

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

The adjustment of Net Debt did not impact the calculation for the three months ended March 31, 2021.

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

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

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

2021 2020 2021 2020 Three months

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

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

We define diluted FFO and diluted normalized FFO as FFO and normalized FFO adjusted for dilutive noncontrolling interests.

Three months ended March 31, % Increase

FFO available to common stockholders

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

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

FFO and Normalized FFO for the three months ended March 31, 2021, was impacted was impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022.

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

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

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

2021 2020 2021 2020

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Three months ended March 31,

Net income available to common stockholders

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Provisions for impairment

11,011 105,095 30,977 123,442

Gain on sales of real estate

(10,156) (8,401)

Proportionate share of adjustments for unconsolidated entities 2,235 —

FFO adjustments allocable to noncontrolling interests (354) (166)

5 unchanged sentences

$ 601,416 $ 267,707

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

Merger and integration-related costs 6,519 —

Normalized FFO available to common stockholders $ 607,935 $ 267,707

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Diluted 595,102,548 371,601,901

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

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

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

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

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

2021 2020 2021 2020 Three months

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

We define diluted AFFO as AFFO adjusted for dilutive noncontrolling interests.

Three months ended March 31, % Increase

AFFO available to common stockholders

2 unchanged sentences

$ 0.98 $ 0.86 14.0 %

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

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

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

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

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

2021 2020 2021 2020

Net income available to common

stockholders (1)

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

Three months ended March 31,

Net income available to common stockholders $ 199,369 $ 95,940

Cumulative adjustments to calculate Normalized FFO (1)

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Normalized FFO available to common stockholders 607,935 267,707

Executive severance charge (3)

Loss on extinguishment of debt — 46,473

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

Amortization of deferred financing costs (4)

Amortization of net debt premiums and deferred financing costs (2)

(17,096) 1,385

Amortization of net mortgage premiums (673) (310) (1,158) (1,020)

Loss on interest rate swaps 722 722

Straight-line payments from cross-currency swaps (3)

513 614 1,715 1,960

Leasing costs and commissions (2,373) (706)

2 unchanged sentences

Amortization of above and below-market leases, net 13,642 9,300

Proportionate share of adjustments for unconsolidated entities (2,064) —

Other adjustments (4)

2,834 (1,828) 2,253 463

AFFO available to common stockholders $ 580,098 $ 318,222

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Diluted AFFO $ 580,918 $ 318,573

AFFO per common share:

Basic $ 0.91 $ 0.82 $ 2.64 $ 2.56

Diluted $ 0.91 $ 0.81 $ 2.64 $ 2.55

AFFO per common share, basic and diluted $ 0.98 $ 0.86

Distributions paid to common stockholders $ 438,280 $ 260,697

3 unchanged sentences

Diluted 595,102,548 372,065,020

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

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

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

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

The deferred financing costs are being amortized over the lives of the respective notes payable, mortgages and term loan.

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

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

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

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

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

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

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PROPERTY PORTFOLIO INFORMATION

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

• Of 7,018 properties;

At March 31, 2022, we owned a diversified portfolio:

• Consisting of 11,288 properties;

• With an occupancy rate of 98.6%, or 11,132 properties leased and 156 properties available for lease or sale;

• Doing business in 60 separate industries;

• With clients doing business in 70 separate industries;

• Located in all 50 U.S.

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approximately 12,660 square feet per retail property and approximately 244,460 square feet per industrial property.

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

At March 31, 2022, 11,132 properties were leased under net lease agreements.

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

In addition, our clients are typically subject to future rent increases based on increases in the consumer price index (typically subject to ceilings), additional rent calculated as a percentage of the client's gross sales above a specified level, or fixed increases.

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

(1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients' gross sales above a specified level.

We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, but excluding percentage rent and reimbursements from clients, as of the balance sheet date, multiplied by 12, excluding percentage rent.

We believe total portfolio annualized contractual revenue is a useful supplemental operating measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter.

Total portfolio annualized contractual rent has not been reduced to reflect reserves recorded as reductions to GAAP rental revenue in the periods presented.

Total portfolio annualized contractual rent has not been reduced to reflect reserves and reserve reversals recorded as adjustments to GAAP rental revenue in the periods presented and excludes unconsolidated entities.

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Industry Diversification

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Education 0.1 0.1 0.2 0.2 0.3

Electric utilities * 0.1 0.1 0.1 0.1 0.1

Energy 0.4 0.4 — — —

Entertainment 0.9 0.8 0.3 0.3 0.3

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

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Property Type Composition

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

The following table sets forth certain property type information regarding our property portfolio as of March 31, 2022 (dollars in thousands):

Property Type

Square Feet (1)

Total Portfolio Annualized Contractual Rent as of

September 30, 2021

Percentage of Total Portfolio Annualized Contractual Rent

6,828 87,092,000 $ 1,579,991 83.7 %

Total Portfolio Annualized Contractual Rent Percentage of Total Portfolio Annualized Contractual Rent

10,967 138,843,400 $ 2,506,807 83.6 %

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(1) Includes leasable building square footage.

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

Excludes 3,600 acres of leased land categorized as agriculture at March 31, 2022.

(2) "Other" includes seven properties classified as office, consisting of approximately 2.0 million leasable square feet and $29.2 million in annualized contractual rent, and 16 properties classified as agriculture, consisting of approximately 191,000 leasable square feet and $28.6 million in annualized contractual rent.

Client Diversification

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

Client Number of

Percentage of Total Portfolio Annualized Contractual Rent (1)

7-Eleven 592 5.7 %

Walgreens 338 4.0 %

7-Eleven 627 3.9 %

Dollar General 1,272 3.9 %

FedEx 42 3.4 %

Dollar Tree / Family Dollar 1,022 3.5 %

Sainsbury's 24 3.2 %

FedEx 80 2.9 %

LA Fitness 79 2.4 %

AMC Theaters 34 2.5 %

Regal Cinemas (Cineworld) 41 2.4 %

Sainsbury's 26 2.2 %

BJ's Wholesale Clubs 32 1.9 %

CVS Pharmacy 183 1.8 %

Wal-Mart / Sam's Club 65 1.7 %

Life Time Fitness 16 2.1 %

AMC Theatres 35 1.6 %

B&Q (Kingfisher) 25 1.6 %

Regal Cinemas (Cineworld) 41 1.5 %

Red Lobster 201 1.5 %

Tesco 16 1.5 %

BJ's Wholesale Clubs 18 1.8 %

Tractor Supply 160 1.4 %

Lifetime Fitness 16 1.4 %

Home Depot 29 1.2 %

Treasury Wine Estates 17 1.4 %

Circle K (Couche-Tard) 237 1.4 %

CVS Pharmacy 89 1.4 %

Kroger 22 1.3 %

Fas Mart (GPM Investments) 261 1.0 %

Circle K (Couche-Tard) 253 1.0 %

Total 4,761 42.2 %

1 unchanged sentence

therefore, the individual percentages may not sum to the total.

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Lease Expirations

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

Total Portfolio (1)

Total Portfolio Annualized Contractual Rent as of

September 30, 2021

Percentage of Total Portfolio Annualized Contractual Rent

2021 61 7 631,300 $ 11,938 0.6 %

Total Portfolio Annualized Contractual Rent Percentage of Total Portfolio Annualized Contractual Rent

2022 278 11 3,632,900 $ 49,642 1.8 %

14 unchanged sentences

2037 - 2059 1,555 30 20,667,500 456,498 15.2

Totals 11,160 341 211,223,400 $ 2,996,404 100.0 %

(1) Leases on our multi-client properties are counted separately in the table above.

This table excludes 201 vacant units.

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Geographic Diversification

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

The following table sets forth certain state-by-state information regarding our property portfolio as of March 31, 2022 (dollars in thousands):

Percent Leased

60 unchanged sentences

11,288 99 % 213,893,600 100.0 %

* Less than 0.1%

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IMPACT OF INFLATION

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

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

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

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

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

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

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

OTHER INFORMATION

1 unchanged sentence

Our 1.625% notes due December 2030 are listed on the NYSE under the ticker symbol "O30" with a CUSIP number of 756109-AY0.

Our 1.875% notes due January 2027 are listed on the NYSE under the ticker symbol "O27B" with a CUSIP number of 756109-BM5.

Our 1.125% notes due July 2027 are listed on the NYSE under the ticker symbol "O27A" with a CUSIP number of 756109-BB9 .

Our 1.750% notes due July 2033 are listed on the NYSE under the ticker symbol "O33A" with a CUSIP number of 756109-BC7.

Our 2.500% notes due January 2042 are listed on the NYSE under the ticker symbol "O42" with a CUSIP number of 756109-BN3.

Our central index key number is 726728.

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis