REALTY INCOME CORP 10-Q

Item 1. Financial Statements REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share and share count data) March 31, 2022 December 31, 2021 ASSETS (unaudited) Real estate held for investment, at cost: Land $ 11,158,545 $ 10,753,750 Buildings and improvements 25,648,515 25,155,178 Total real estate held for investment, at cost 36,807,060 35,908,928 Less accumulated depreciation and amortization ( 4,169,539 ) ( 3,949,798 ) Real estate held for investment, net 32,637,521 31,959,130 Real estate and lease intangibles held for sale, net 84,446 30,470 Cash and cash equivalents 151,624 258,579 Accounts receivable, net 468,165 426,768 Lease intangible assets, net 5,187,280 5,275,304 Goodwill 3,711,981 3,676,705 Investment in unconsolidated entities 141,191 140,967 Other assets, net 1,679,809 1,369,579 Total assets $ 44,062,017 $ 43,137,502 LIABILITIES AND EQUITY Distributions payable $ 149,549 $ 146,919 Accounts payable and accrued expenses 305,574 351,128 Lease intangible liabilities, net 1,350,370 1,308,221 Other liabilities 746,304 759,197 Line of credit payable and commercial paper 1,519,625 1,551,376 Term loan, net 249,606 249,557 Mortgages payable, net 1,093,599 1,141,995 Notes payable, net 13,068,665 12,499,709 Total liabilities 18,483,292 18,008,102 Commitments and contingencies Stockholders’ equity: Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 601,566,581 and 591,261,991 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively 30,236,374 29,578,212 Distributions in excess of net income ( 4,772,112 ) ( 4,530,571 ) Accumulated other comprehensive income 37,917 4,933 Total stockholders’ equity 25,502,179 25,052,574 Noncontrolling interests 76,546 76,826 Total equity 25,578,725 25,129,400 Total liabilities and equity $ 44,062,017 $ 43,137,502 The accompanying notes to consolidated financial statements are an integral part of these statements. -2- Table of Content s REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (dollars in thousands, except per share data) (unaudited) Three months ended March 31, 2022 2021 REVENUE Rental (including reimbursable) $ 799,565 $ 439,365 Other 7,778 2,889 Total revenue 807,343 442,254 EXPENSES Depreciation and amortization 403,762 177,985 Interest 106,403 73,075 Property (including reimbursable) 52,342 28,499 General and administrative 32,699 20,796 Provisions for impairment 7,038 2,720 Merger and integration-related costs 6,519 — Total expenses 608,763 303,075 Gain on sales of real estate 10,156 8,401 Foreign currency and derivative gains (losses), net ( 590 ) 804 Loss on extinguishment of debt — ( 46,473 ) Equity in income of unconsolidated entities 954 — Other income, net 1,852 550 Income before income taxes 210,952 102,461 Income taxes ( 10,981 ) ( 6,225 ) Net income 199,971 96,236 Net income attributable to noncontrolling interests ( 602 ) ( 296 ) Net income available to common stockholders $ 199,369 $ 95,940 Amounts available to common stockholders per common share: Net Income, basic and diluted $ 0.34 $ 0.26 Weighted average common shares outstanding: Basic 593,827,299 371,522,607 Diluted 594,041,839 371,601,901 Other comprehensive income: Net income available to common stockholders $ 199,369 $ 95,940 Foreign currency translation adjustment ( 10,706 ) ( 259 ) Unrealized gain on derivatives, net 43,690 46,409 Comprehensive income available to common stockholders $ 232,353 $ 142,090 The accompanying notes to consolidated financial statements are an integral part of these statements. -3- Table of Content s REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (dollars in thousands) (unaudited) Three Months Ended March 31, 2022, and 2021 Shares of common stock Common stock and paid in capital Distributions in excess of net income Accumulated other comprehensive income (loss) Total stockholders’ equity Noncontrolling interests Total equity Balance, December 31, 2020 361,303,445 $ 14,700,050 $ ( 3,659,933 ) $ ( 54,634 ) $ 10,985,483 $ 32,247 $ 11,017,730 Net income — — 95,940 — 95,940 296 96,236 Other comprehensive income — — — 46,150 46,150 — 46,150 Distributions paid and payable — — ( 263,667 ) — ( 263,667 ) ( 402 ) ( 264,069 ) Share issuances, net of costs 12,118,394 672,221 — — 672,221 — 672,221 Share-based compensation, net 87,983 ( 1,255 ) — — ( 1,255 ) — ( 1,255 ) Balance, March 31, 2021 373,509,822 $ 15,371,016 $ ( 3,827,660 ) $ ( 8,484 ) $ 11,534,872 $ 32,141 $ 11,567,013 Balance, December 31, 2021 591,261,991 $ 29,578,212 $ ( 4,530,571 ) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400 Net income — — 199,369 — 199,369 602 199,971 Other comprehensive income — — — 32,984 32,984 — 32,984 Distributions paid and payable — — ( 440,910 ) — ( 440,910 ) ( 882 ) ( 441,792 ) Share issuances, net of costs 10,171,808 660,044 — — 660,044 — 660,044 Share-based compensation, net 132,782 ( 1,882 ) — — ( 1,882 ) — ( 1,882 ) Balance, March 31, 2022 601,566,581 $ 30,236,374 $ ( 4,772,112 ) $ 37,917 $ 25,502,179 $ 76,546 $ 25,578,725 The accompanying notes to consolidated financial statements are an integral part of these statements. -4- Table of Content s REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Three months ended March 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 199,971 $ 96,236 Adjustments to net income: Depreciation and amortization 403,762 177,985 Amortization of share-based compensation 5,002 3,697 Non-cash revenue adjustments ( 14,180 ) ( 1,163 ) Loss on extinguishment of debt — 46,473 Amortization of net premiums on mortgages payable ( 3,561 ) ( 280 ) Amortization of net premiums on notes payable ( 15,740 ) ( 85 ) Amortization of deferred financing costs 3,445 2,739 Loss on interest rate swaps 722 722 Foreign currency and derivative (gains) losses, net 590 ( 804 ) Gain on sales of real estate ( 10,156 ) ( 8,401 ) Income from unconsolidated entities ( 954 ) — Distributions from unconsolidated entities 729 — Provisions for impairment on real estate 7,038 2,720 Change in assets and liabilities Accounts receivable and other assets ( 17,698 ) ( 21,367 ) Accounts payable, accrued expenses and other liabilities ( 45,491 ) ( 32,019 ) Net cash provided by operating activities 513,479 266,453 CASH FLOWS FROM INVESTING ACTIVITIES Investment in real estate ( 1,525,836 ) ( 1,026,690 ) Improvements to real estate, including leasing costs ( 13,471 ) ( 1,741 ) Proceeds from sales of real estate 122,235 34,705 Insurance proceeds received 15,892 — Non-refundable escrow deposits ( 16,828 ) — Net cash used in investing activities ( 1,418,008 ) ( 993,726 ) CASH FLOWS FROM FINANCING ACTIVITIES Cash distributions to common stockholders ( 438,280 ) ( 260,697 ) Borrowings on line of credit and commercial paper program 2,311,812 1,413,694 Payments on line of credit and commercial paper program ( 2,328,990 ) ( 735,489 ) Proceeds from notes and bonds payable issued 676,631 — Principal payment on notes payable — ( 950,000 ) Principal payments on mortgages payable ( 43,589 ) ( 18,110 ) Payments upon extinguishment of debt — ( 47,235 ) Proceeds from dividend reinvestment and stock purchase plan 2,799 2,654 Proceeds from common stock offerings, net 656,094 669,590 Distributions to noncontrolling interests ( 882 ) ( 402 ) Net receipts on derivative settlements 903 845 Debt issuance costs ( 9,692 ) — Other items, including shares withheld upon vesting ( 5,733 ) ( 4,974 ) Net cash provided by financing activities 821,073 69,876 Effect of exchange rate changes on cash and cash equivalents ( 6,063 ) 48 Net decrease in cash, cash equivalents and restricted cash ( 89,519 ) ( 657,349 ) Cash, cash equivalents and restricted cash, beginning of period 332,369 850,679 Cash, cash equivalents and restricted cash, end of period $ 242,850 $ 193,330 For supplemental disclosures, see note 16. The accompanying notes to consolidated financial statements are an integral part of these statements. -5- Table of Content s REALTY INCOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 (unaudited) 1. Basis of Presentation The consolidated financial statements of Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) were prepared from our books and records without audit and include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2021, which are included in our 2021 Annual Report on Form 10-K , as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report. The U.S. Dollar (“USD”) is our functional currency. Unless otherwise indicated, all dollar amounts are expressed in United States USD. For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in accumulated other comprehensive income, or AOCI, in the consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period. We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in foreign currency and derivative gains (losses), net in the consolidated statements of income. At March 31, 2022, we owned 11,288 properties, located in all 50 U.S. states, Puerto Rico, the United Kingdom (U.K.,) and Spain, consisting of approximately 213.9 million leasable square feet. 2. Summary of Significant Accounting Policies and Procedures and New Accounting Standards Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. Voting interest entities are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests. Variable interest entities (“VIEs”) are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interest that was created or assumed as part of a business combination or asset acquisition was recognized at fair value as of the date of the transaction (see note 11, Noncontrolling Interests ). Income Taxes. We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT -6- Table of Content s operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income, we generally will not be required to pay federal corporate income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries. Lease Revenue Recognition and Accounts Receivable. The COVID-19 pandemic and the measures taken to limit its spread have negatively impacted the economy across many industries, including the industries in which some of our clients operate. These impacts may continue as the duration and severity of the pandemic increases. As a result, we have closely monitored the collectability of our accounts receivable and continue to evaluate the potential impacts of the COVID-19 pandemic and the measures taken to limit its spread on our business and industry segments as the situation continues to evolve and more information becomes available. We continue to assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842, Leases . We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends (including trends arising from the COVID-19 pandemic) and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized. The majority of concessions granted to our clients as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged. In accordance with the guidance provided by the Financial Accounting Standards Board (FASB) staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in effect. In limited circumstances, the undiscounted cash flows resulting from deferrals granted increased significantly from original lease terms, which required us to account for these as lease modifications and resulted in an insignificant impact to consolidated rental revenue. Similarly, rent abatements granted, which are also accounted for as lease modifications, have impacted our rental revenue by an insignificant amount. As of March 31, 2022, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable. However, since the conversations regarding rent collections for our clients affected by the COVID-19 pandemic are ongoing and we do not currently know the types of future concessions, if any, that will ultimately be granted, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available. Investment in Unconsolidated Entities. We account for our investment in unconsolidated entity arrangements using the equity method of accounting as we have the ability to exercise significant influence, but not control, over operating and financing policies of these investments. We have determined that none of the unconsolidated entities would be considered VIEs under the applicable accounting guidance. Our equity method investments were acquired in our merger with VEREIT. As a result, the investments were recorded at fair value and subsequently will be adjusted for our share of equity in the entities' earnings and distributions received. The step-up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the assumed debt. Investment in unconsolidated entities is included in the accompanying consolidated balance sheets. We record our proportionate share of net income from the unconsolidated entities in other income, net in the consolidated statements of income and comprehensive income. Newly Issued Accounting Standards. In July 2021, the FASB issued ASU 2021-05 establishing Topic 842, Lessors - Certain Leases with Variable Lease Payments . ASU 2021-05 improves ASC 842 classification guidance as it relates to a lessor's accounting for certain leases with variable lease payments. This guidance requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss. This guidance is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements. -7- Table of Content s In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform . ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020, and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. We are currently evaluating the impact that the expected market transition from LIBOR to alternative references rates will have on our financial statements as well as the applicability of the aforementioned expedients and exceptions provided in ASU 2020-04. 3. Merger with VEREIT, Inc. Merger with VEREIT On November 1, 2021, we completed our merger with VEREIT, Inc. For further details, see note 3. Merger with VEREIT, Inc. and Orion Office REIT Inc. Divestiture , to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021. Our merger with VEREIT has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations , with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data): Shares of VEREIT common stock and VEREIT Operating Partnership, L.P. ("OP") common units exchanged (1) 229,304,035 Exchange Ratio 0.705 161,659,345 Less: Fractional shares settled in cash ( 1,545 ) Shares of Realty Income common stock and Realty Income L.P. units issued 161,657,800 Adjusted opening price of Realty common stock on November 1, 2021 (2) $ 71.236 Fair value of Realty common stock issued to former holders of VEREIT common stock and VEREIT OP common units $ 11,515,855 Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3) 44,020 Total non-cash consideration 11,559,875 Cash paid for fractional shares 110 VEREIT indebtedness paid off in connection with the merger (4) 500,414 Consideration transferred $ 12,060,399 (1) Includes 229,152,001 shares of VEREIT common stock and 152,034 VEREIT OP common units outstanding as of November 1, 2021. Under the Merger Agreement, these shares and units were converted to Realty Income common stock, or in certain instances, Realty Income L.P. units, at an Exchange Ratio of 0.705 per share of VEREIT common stock or VEREIT OP common unit, as applicable. (2) The fair value of Realty Income common stock issued to former holders of VEREIT common stock and VEREIT OP common units is based on the per share opening price of Realty Income common stock of $ 71.00 on November 1, 2021, adjusted for the monthly dividend of $ 0.236 per share that former holders of VEREIT common stock and VEREIT OP common units were eligible to receive when such dividend was paid on November 15, 2021. (3) Represents the fair value of fully vested deferred stock unit awards of VEREIT common stock (“VEREIT DSU Awards”) which were converted into Realty Income common stock upon our merger with VEREIT, as well as the estimated fair value of the Realty Income replacement employee and executive stock options and restricted stock units that were granted at the closing date of our merger with VEREIT and which were attributable to pre-combination services. (4) Represents the outstanding balance of the VEREIT revolving credit facility repaid by Realty Income in connection with the closing of the merger. The amount shown in the table above was based upon the balance outstanding immediately prior to November 1, 2021. -8- Table of Content s A. Preliminary Purchase Price Allocation The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands): ASSETS Land $ 3,021,906 Buildings 8,677,467 Total real estate held for investment 11,699,373 Cash and cash equivalents 128,411 Accounts receivable 53,355 Lease intangible assets (1) 3,204,773 Goodwill 3,698,123 Investment in unconsolidated entities 194,876 Other assets 308,910 Total assets acquired $ 19,287,821 LIABILITIES Accounts payable and accrued expenses $ 139,836 Lease intangible liabilities (2) 949,349 Other liabilities 320,893 Mortgages payable 869,027 Notes payable 4,946,965 Total liabilities assumed $ 7,226,070 Net assets acquired, at fair value $ 12,061,751 Noncontrolling interests $ 1,352 Total purchase price $ 12,060,399 (1) The weighted average amortization period for acquired lease intangible assets is 9.3 years . (2) The weighted average amortization period for acquired lease intangible liabilities is 25.5 years . The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Measurement period adjustments will be recorded in the future period in which they are determined, as if they had been completed at the acquisition date. The finalization of our purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed up to a year after the date of our merger with VEREIT, which could be material. Due to the timing and complexity of the merger, we recorded the assets acquired and liabilities assumed at their preliminary estimated fair values. As of March 31, 2022, we had not finalized the determination of fair values allocated to certain assets and liabilities, including land, buildings, lease intangible assets, lease intangible liabilities, and the allocation of goodwill. The preliminary purchase price allocation is subject to change as we complete our analysis of the fair value at the date of the transactions, which could have an impact on our consolidated financial statements. A preliminary estimate of approximately $ 3.70 billion has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill is attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the employee workforce onboarded from VEREIT following the closing of the merger. Goodwill has not yet been allocated to our individual operating segments; the allocation is pending the finalization of our purchase accounting. None of the goodwill recognized is expected to be deductible for tax purposes. B. Merger and Integration-related Costs In conjunction with our merger with VEREIT, we incurred approximately $ 6.5 million of transaction costs during the three months ended March 31, 2022. There were no comparable costs incurred during the three months ended -9- Table of Content s March 31, 2021, as the merger was first announced in April 2021 and associated costs began to accrue during the second quarter of 2021. Merger and integration-related costs for the three months ended March 31, 2022, primarily consist of attorney fees, accountant fees and additional incremental and non-recurring costs necessary to convert data and systems, retain employees and otherwise enable us to operate the acquired business or assets efficiently. C. Unaudited Pro Forma Financial Information Our consolidated results of operations for the three months ended March 31, 2022, include $ 258.3 million of revenues and $ 17.0 million of net income associated with the results of operations of VEREIT OP. The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2021, as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data). There are no pro forma adjustments for the three months ended March 31, 2022, as the merger was completed November 1, 2021. Amounts for the three months ended March 31, 2022, are presented for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. In accordance with ASC 805, Business Combinations , the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc. Three Months Ended March 31, 2022 2021 Total revenues $ 807.3 $ 742.5 Net income $ 200.0 $ 189.8 Basic and diluted earnings per share $ 0.34 $ 0.36 4. Supplemental Detail for Certain Components of Consolidated Balance Sheets (dollars in thousands): A. Accounts Receivable, net, consist of the following at: March 31, 2022 December 31, 2021 Straight-line rent receivables, net $ 261,302 $ 231,943 Client receivables, net 206,863 194,825 $ 468,165 $ 426,768 B. Lease intangible assets, net, consist of the following at: March 31, 2022 December 31, 2021 In-place leases $ 4,879,348 $ 4,791,846 Accumulated amortization of in-place leases ( 956,982 ) ( 804,050 ) Above-market leases 1,601,305 1,591,382 Accumulated amortization of above-market leases ( 336,391 ) ( 303,874 ) $ 5,187,280 $ 5,275,304 -10- Table of Content s C. Other assets, net, consist of the following at: March 31, 2022 December 31, 2021 Right of use asset - operating leases, net $ 610,601 $ 631,515 Financing receivables 438,743 323,921 Right of use asset - financing leases 369,908 218,332 Restricted escrow deposits 84,066 68,541 Derivative assets and receivables – at fair value 74,694 29,593 Prepaid expenses 35,165 18,062 Non-refundable escrow deposits 16,828 28,560 Corporate assets, net 11,534 10,915 Investment in sales type lease 7,506 7,492 Impounds related to mortgages payable 7,160 5,249 Note receivable 4,732 4,455 Credit facility origination costs, net 3,661 4,352 Other items 15,211 18,592 $ 1,679,809 $ 1,369,579 D. Accounts payable and accrued expenses consist of the following at: March 31, 2022 December 31, 2021 Notes payable - interest payable $ 111,171 $ 108,227 Property taxes payable 32,200 36,173 Derivative liabilities and payables – at fair value 30,728 70,617 Value-added tax payable 22,728 11,297 Accrued property expenses 21,160 27,344 Accrued costs on properties under development 19,560 19,665 Accrued income taxes 17,305 19,152 Merger and integration related costs 5,205 10,699 Mortgages, term loans, and credit line - interest payable 4,099 3,874 Other items 41,418 44,080 $ 305,574 $ 351,128 E. Lease intangible liabilities, net, consist of the following at: March 31, 2022 December 31, 2021 Below-market leases $ 1,523,238 $ 1,460,701 Accumulated amortization of below-market leases ( 172,868 ) ( 152,480 ) $ 1,350,370 $ 1,308,221 F. Other liabilities consist of the following at: March 31, 2022 December 31, 2021 Lease liability - operating leases, net $ 440,084 $ 461,748 Rent received in advance and other deferred revenue 253,731 242,122 Security deposits 11,323 11,340 Lease liability - financing leases 41,166 43,987 $ 746,304 $ 759,197 -11- Table of Content s 5. Investments in Real Estate We acquire land, buildings and improvements necessary for the successful operations of commercial clients. A. Acquisitions During the Three Months Ended March 31, 2022, and 2021 Below is a summary of our acquisitions for the three months ended March 31, 2022: Number of Properties Leasable Square Feet (in thousands) Investment ($ in millions) Weighted Average Lease Term (Years) Initial Average Cash Lease Yield (1) Three months ended March 31, 2022 (2) Acquisitions - U.S. 139 2,627 $ 629.8 15.0 5.7 % Acquisitions - Europe 21 2,772 794.2 8.9 5.5 % Total acquisitions 160 5,399 $ 1,424.0 11.8 5.6 % Properties under development (3) 53 1,868 131.3 17.3 5.7 % Total (4) 213 7,267 $ 1,555.3 12.3 5.6 % (1) The initial average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that 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 $ 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 weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. (2) None of our investments during the 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 £ 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 26 % of the rental revenue generated from acquisitions during the three months ended March 31, 2022, is from investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the three months ended March 31, 2022, which had no associated contingent consideration, were allocated as follows (in millions): Acquisitions - U.S. Acquisitions - U.K. Three months ended March 31, 2022 (USD) (£ Sterling) Land $ 203.5 £ 208.7 Buildings and improvements 368.5 237.1 Lease intangible assets (1) 59.0 96.5 Other assets (2) 117.8 98.3 Lease intangible liabilities (3) ( 8.4 ) ( 46.4 ) Other liabilities (4) ( 12.5 ) — $ 727.9 £ 594.2 (1) The weighted average amortization period for acquired lease intangible assets is 10.8 years. (2) U.S. other assets consists of $ 99.6 million of financing receivables with above-market terms and $ 18.2 million of right-of-use assets accounted for as finance leases. U.K. other assets consists entirely of right-of-use assets accounted for as finance leases. (3) The weighted average amortization period for acquired lease intangible liabilities is 10.3 years. (4) U.S. other liabilities consists entirely of deferred rent on certain below-market leases. The properties acquired during the three months ended March 31, 2022, which were all accounted for as asset acquisitions, generated total revenues of $ 7.2 million and net income of $ 2.7 million during the three months ended March 31, 2022. -12- Table of Content s Below is a summary of our acquisitions for the three months ended March 31, 2021: Number of Properties Leasable Square Feet (in thousands) Investment ($ in millions) Weighted Average Lease Term (Years) Initial Average Cash Lease Yield (1) Three months ended March 31, 2021 (1) Acquisitions - U.S. 77 2,299 $ 566.9 13.5 5.6 % Acquisitions - Europe 12 933 403.0 10.6 4.9 % Total acquisitions 89 3,232 $ 969.9 12.4 5.3 % Properties under development - U.S. 21 1,597 57.9 15.5 5.6 % Total (2) 110 4,829 $ 1,027.8 12.6 5.3 % (1) None of our investments during the three months ended March 31, 2021, caused any one client to be 10% or more of our total assets at March 31, 2021. (2) Our clients occupying the new properties are 65.1 % retail and 34.9 % industrial, based on rental revenue. Approximately 39 % of the rental revenue generated from acquisitions during the three months ended March 31, 2021, was from investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the three months ended March 31, 2021, which had no associated contingent consideration, were allocated as follows (in millions): Acquisitions - U.S. Acquisitions - U.K. Three months ended March 31, 2021 (USD) (£ Sterling) Land (1) $ 208.0 £ 117.3 Buildings and improvements 295.8 129.0 Lease intangible assets (2) 94.5 44.8 Other assets (3) 16.7 — Lease intangible liabilities (4) ( 1.4 ) ( 0.9 ) Other liabilities (5) ( 21.6 ) — $ 592.0 £ 290.2 (1) U.K. land includes £ 560,000 of right of use assets under long-term ground leases. (2) The weighted average amortization period for acquired lease intangible assets is 16.8 years. (3) U.S. other assets consists entirely of financing receivables with above-market terms. (4) The weighted average amortization period for acquired lease intangible liabilities is 11.9 years. (5) U.S. other liabilities consists of deferred rent on certain below-market leases. The properties acquired during the three months ended March 31, 2021, which were all accounted for as asset acquisitions, generated total revenues of $ 5.1 million and net income of $ 2.0 million during the three months ended March 31, 2021. B. Investments in Existing Properties During the three months ended March 31, 2022, we capitalized costs of $ 12.0 million on existing properties in our portfolio, consisting of $ 2.4 million for re-leasing costs, $ 13,000 for recurring capital expenditures, and $ 9.6 million for non-recurring building improvements. In comparison, during the three months ended March 31, 2021, we capitalized costs of $ 1.5 million on existing properties in our portfolio, consisting of $ 706,000 for re-leasing costs, $ 23,000 for recurring capital expenditures, and $ 769,000 for non-recurring building improvements. C. Properties with Existing Leases Of the $ 1.56 billion we invested during the three months ended March 31, 2022, approximately $ 131.3 million related to development. Of the $ 1.42 billion invested outside of development, $ 969.5 million was used to acquire 52 properties with existing leases. In comparison, of the $ 1.03 billion we invested during the three months ended March 31, 2021, $ 57.9 million related to development. Of the $ 969.9 million invested outside of development, $ 856.8 million was used to acquire 68 properties with existing leases. The value of the in-place and above-market leases is recorded to lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to lease intangible liabilities, net on our consolidated balance sheets. The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2022, and 2021 were $ 160.1 million and $ 35.8 million, respectively. -13- Table of Content s The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2022, and 2021 were $ 21.9 million and $ 12.4 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate. The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at March 31, 2022 (dollars in thousands): Net increase (decrease) to rental revenue Increase to amortization expense 2022 $ ( 39,868 ) $ 464,651 2023 ( 51,544 ) 534,554 2024 ( 45,665 ) 474,373 2025 ( 39,619 ) 406,059 2026 ( 31,334 ) 361,695 Thereafter 293,486 1,681,034 Totals $ 85,456 $ 3,922,366 D. Gain on Sales of Real Estate The following table summarizes our properties sold during the periods indicated below (dollars in millions): Three months ended March 31, 2022 2021 Number of properties 34 27 Net sales proceeds $ 122.2 $ 34.7 Gain on sales of real estate $ 10.2 $ 8.4 E. Investment in Unconsolidated Entities The following is a summary of our investments in unconsolidated entities as of March 31, 2022 (in thousands): Ownership % (1) Number of Properties Carrying Amount of Investment as of (2) Equity in Income (2) Investment March 31, 2022 March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021 Industrial Partnerships 20 % 7 $ 141,191 $ 140,967 $ 954 $ — (1) Our ownership interest reflects legal ownership interest. Legal ownership may, at times, not equal our economic interest in the listed properties because of various provisions in certain entity agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, our actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with legal ownership interests. (2) The total carrying amount of the investments was greater than the underlying equity in net assets by $ 100.4 million as of March 31, 2022. The difference relates to a step-up in fair value of the investment net assets acquired in connection with the merger with VEREIT on November 1, 2021. The step up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the mortgages payable. Prior to November 1, 2021, we did not own any unconsolidated entities. The aggregate debt outstanding for unconsolidated entities was $ 431.8 million as of March 31, 2022, and December 31, 2021, all of which is non-recourse to us with limited customary exceptions which vary from loan to loan. Each of us and our unconsolidated entity partners are subject to the provisions of the applicable entity agreements for our unconsolidated partnerships, which include provisions for when additional contributions may be required to fund certain cash shortfalls. -14- Table of Content s 6. Revolving Credit Facility and Commercial Paper Program A. Credit Facility 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 revolving credit facility allows us to borrow in up to 14 currencies, including U.S. dollars, and has a $ 1.0 billion expansion option, which is subject to obtaining lender commitments. Under our credit facility, our investment grade credit ratings as of March 31, 2022, provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775 % with a facility commitment fee of 0.125 %, for all-in drawn pricing of 0.90 % over LIBOR. The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings change. We also have other interest rate options available to us under our revolving credit facility. Our revolving credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation. LIBOR is in the process of being discontinued. While certain U.S. dollar LIBOR settings will continue to be published on the current basis until June 30, 2023, all other LIBOR settings either are no longer being published or are being published only for a limited time and only on a “synthetic” basis (i.e., not on the basis of submissions made by panel banks). The regulator of the administrator of LIBOR has prohibited any new use of LIBOR by firms subject to its supervision, and certain regulators in the United States have stated that no new contracts using U.S. dollar LIBOR should be entered into after 2021. Our revolving credit facility and term loan facility were amended in December 2021 to include provisions for establishing alternative reference rates when LIBOR is no longer available. In April 2022, we amended our Credit Facility. See note 20, Subsequent Events. At March 31, 2022, credit facility origination costs of $ 3.7 million are included in other assets, net, as compared to $ 4.4 million at December 31, 2021, on our consolidated balance sheet. These costs are being amortized over the remaining term of our revolving credit facility. At March 31, 2022, we had a borrowing capacity of $ 2.43 billion available on our revolving credit facility (subject to customary conditions to borrowing) and $ 569.6 million outstanding balance, as compared to an outstanding balance at December 31, 2021, of $ 650.0 million. The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.1 % during the three months ended March 31, 2022, and 0.8 % during the three months ended March 31, 2021. At March 31, 2022, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 1.2 %. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2022, we were in compliance with the covenants on our revolving credit facility. B. Commercial Paper Program We have a U.S. dollar-denominated unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $ 1.0 billion. The commercial paper ranks on a parity in right of payment with all of our other unsecured senior indebtedness outstanding from time to time, including borrowings under our revolving credit facility, our term loan and our outstanding senior unsecured notes. Proceeds from commercial paper borrowings are generally used for general corporate purposes. As of March 31, 2022, the balance of borrowings outstanding under our commercial paper program was $ 950.0 million as compared to $ 901.4 million outstanding commercial paper borrowings at December 31, 2021. The weighted average interest rate on outstanding borrowings under our commercial paper program was 0.5 % for the three months ended March 31, 2022, and 0.3 % for the three months ended March 31, 2021. As of March 31, 2022, our weighted average interest rate on borrowings outstanding under our commercial paper program was 0.8 %. We use our $ 3.0 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper program. The commercial paper borrowings generally carry a term of less than a year. -15- Table of Content s 7. Term Loans In October 2018, in conjunction with entering into our current revolving credit facility, we entered into a $ 250.0 million senior unsecured term loan, which matures in March 2024. Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.85 %. In conjunction with this term loan, we also entered into an interest rate swap, which effectively fixes our per annum interest on this term loan at 3.89 %. At March 31, 2022, deferred financing costs of $ 394,000 are included net of the term loan principal balance, as compared to $ 443,000 at December 31, 2021, on our consolidated balance sheet. These costs are being amortized over the remaining term of the term loan . 8. Mortgages Payable During the three months ended March 31, 2022, we made $ 43.6 million in principal payments, including the repayment of one mortgage in full for $ 42.5 million. During the three months ended March 31, 2021, we made $ 18.1 million in principal payments, including the repayment of three mortgages in full for $ 17.2 million. No mortgages were assumed during the three months ended March 31, 2022, or the three months ended March 31, 2021. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan. Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender. At March 31, 2022, we were in compliance with these covenants. The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, was $ 713,000 at March 31, 2022, and $ 790,000 at December 31, 2021. These costs are being amortized over the remaining term of each mortgage. The following table summarizes our mortgages payable as of March 31, 2022, and December 31, 2021, respectively (dollars in thousands): As Of Number of Properties (1) Weighted Average Stated Interest Rate (2) Weighted Average Effective Interest Rate (3) Weighted Average Remaining Years Until Maturity Remaining Principal Balance Unamortized Premium and Deferred Financing Costs Balance, net Mortgage Payable Balance 3/31/2022 221 4.8 % 3.4 % 1.6 $ 1,069,311 $ 24,288 $ 1,093,599 12/31/2021 267 4.8 % 3.5 % 1.8 $ 1,114,129 $ 27,866 $ 1,141,995 (1) At March 31, 2022, there were 21 mortgages on 221 properties. At December 31, 2021, there were 22 mortgages on 267 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At March 31, 2022, and December 31, 2021, all mortgages were at fixed interest rates. (2) Stated interest rates ranged from 3.0 % to 6.9 % at each of March 31, 2022, and December 31, 2021. (3) Effective interest rates ranged from 2.6 % to 6.0 % at each of March 31, 2022, and December 31, 2021. The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 25.0 million and deferred financing costs of $ 713,000 , as of March 31, 2022 (dollars in millions): Year of Maturity Principal 2022 $ 227.5 2023 62.1 2024 733.0 2025 40.8 2026 1.2 Thereafter 4.7 Totals $ 1,069.3 -16- Table of Content s 9. Notes Payable A. General Our senior unsecured notes and bonds are U.S. dollar denominated and Sterling denominated. Foreign denominated notes are converted at the applicable exchange rate on the balance sheet date. The following are sorted by maturity date (in millions): Principal Amount (Currency Denomination) Carrying Value (USD) as of March 31, 2022 December 31, 2021 4.600 % notes, $ 500 issued February 2014, of which $ 485 was exchanged in November 2021, both due in February 2024 (1) $ 500 $ 500 $ 500 3.875 % notes, issued in June 2014 and due in July 2024 $ 350 350 350 3.875 % notes, issued in April 2018 and due in April 2025 $ 500 500 500 4.625 % notes, $ 550 issued October 2018, of which $ 544 was exchanged in November 2021, both due in November 2025 (1) $ 550 550 550 0.750 % notes, issued December 2020 and due in March 2026 $ 325 325 325 4.875 % notes, $ 600 issued June 2016, of which $ 596 was exchanged in November 2021, both due in June 2026 (1) $ 600 600 600 4.125 % notes, $ 250 issued in September 2014 and $ 400 issued in March 2017, both due in October 2026 $ 650 650 650 1.875 % notes, issued in January 2022 and due in January 2027 £ 250 329 — 3.000 % notes, issued in October 2016 and due in January 2027 $ 600 600 600 1.125 % notes, issued in July 2021 and due in July 2027 £ 400 526 541 3.950 % notes, $ 600 issued August 2017, of which $ 594 was exchanged in November 2021, both due in August 2027 (1) $ 600 600 600 3.650 % notes, issued in December 2017 and due in January 2028 $ 550 550 550 3.400 % notes, $ 600 issued June 2020, of which $ 598 was exchanged in November 2021, both due in January 2028 (1) $ 600 600 600 2.200 % notes, $ 500 issued November 2020, of which $ 497 was exchanged in November 2021, both due in June 2028 (1) $ 500 500 500 3.250 % notes, issued in June 2019 and due in June 2029 $ 500 500 500 3.100 % notes, $ 600 issued December 2019, of which $ 596 was exchanged in November 2021, both due in December 2029 (1)(2) $ 599 599 599 1.625 % notes, issued in October 2020 and due December 2030 £ 400 526 541 3.250 % notes, $ 600 issued in May 2020 and $ 350 issued in July 2020, both due in January 2031 $ 950 950 950 2.850 % notes, $ 700 issued November 2020, of which $ 699 was exchanged in November 2021, both due in December 2032 (1) $ 700 700 700 1.800 % notes, issued in December 2020 and due in March 2033 $ 400 400 400 1.750 % notes, issued in July 2021 and due in July 2033 £ 350 460 474 2.730 % notes, issued in May 2019 and due in May 2034 £ 315 413 427 5.875 % bonds, $ 100 issued in March 2005 and $ 150 issued in June 2011, both due in March 2035 $ 250 250 250 2.500 % notes, issued in January 2022 and due in January 2042 £ 250 329 — 4.650 % notes, $ 300 issued in March 2017 and $ 250 issued in December 2017, both due in March 2047 $ 550 550 550 Total principal amount $ 12,857 $ 12,257 Unamortized net premiums and deferred financing costs 212 243 $ 13,069 $ 12,500 (1) Carrying Value (USD) includes the portion of the VEREIT OP notes that remained outstanding, totaling $ 39.1 million in the aggregate at each of March 31, 2022, and December 31, 2021, that were not exchanged in the exchange offers commenced by us with respect to the outstanding bonds of VEREIT OP in connection with the consummation of the merger with VEREIT (the "Exchange Offers"). (2) These notes were originally issued by VEREIT OP in December of 2019 for the principal amount of $ 600 million. The amount of Realty Income debt issued through the Exchange Offers was $ 599 million, resulting from cancellations due to late tenders that forfeited the early participation premium of $ 30 per $1,000 principal amount and cash paid in lieu of fractional shares. -17- Table of Content s In April 2022 we entered into a definitive agreement for the private placement of £ 600 million of senior unsecured notes. See note 20, Subsequent Events . The following table summarizes the maturity of our notes and bonds payable as of March 31, 2022, excluding net unamortized premiums of $ 272.7 million and deferred financing costs of $ 60.6 million (dollars in millions): Year of Maturity Principal 2024 $ 850 2025 1,050 2026 1,575 Thereafter 9,382 Totals $ 12,857 As of March 31, 2022, the weighted average interest rate on our notes and bonds payable was 3.2 % and the weighted average remaining years until maturity was 7.7 years. Interest incurred on all of the notes and bonds was $ 103.1 million and $ 63.2 million for the three months ended March 31, 2022, and March 31, 2021, respectively. Our outstanding notes and bonds are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations. Interest on our £ 400 million of 1.625 % senior unsecured notes issued in October 2020, our £ 400 million of 1.125 % senior unsecured notes issued in July 2021, our £ 350 million of 1.750 % senior unsecured notes also issued in July 2021, our £ 250 million of 1.875 % senior unsecured notes issued in January 2022, and £ 250 million of 2.500 % senior unsecured notes also issued in January 2022 is paid annually. Interest on our remaining senior unsecured note and bond obligations is paid semiannually. All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60 %; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40 %; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and(iv) the maintenance at all times of total unencumbered assets not less than 150 % of our outstanding unsecured debt. At March 31, 2022, we were in compliance with these covenants. B. Note Repayment In January 2021, we redeemed all $ 950.0 million in principal amount of our outstanding 3.250 % notes due October 2022, plus accrued and unpaid interest. As a result of the early redemption, we recognized a $ 46.5 million loss on extinguishment of debt on our consolidated statement of income for the three months ended March 31, 2021. There were no comparable repayments for the three months ended March 31, 2022. C. Note Issuances During the three months ended March 31, 2022, we issued the following notes and bonds (in millions): First Quarter 2022 Issuances Date of Issuance Maturity Date Principal amount used Price of par value Effective yield to maturity 1.875 % Notes January 2022 January 2027 £ 250 99.487 % 1.974 % 2.500 % Notes January 2022 January 2042 £ 250 98.445 % 2.584 % There were no comparable note issuances during the three months ended March 31, 2021. The proceeds from each of these offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes 10. Issuances of Common Stock A. Issuances of Common Stock in Underwritten Public Offerings In January 2021, we issued 12,075,000 shares of common stock in an underwritten public offering, including 1,575,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares. -18- Table of Content s After deducting underwriting discounts of $ 19.3 million, the net proceeds of $ 669.6 million were used to fund property acquisitions and for general corporate purposes and working capital. There were no comparative offerings during the three months ended March 31, 2022. B. At-the-Market (ATM) Program 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 New York Stock Exchange ("NYSE: O") at prevailing market prices or at negotiated prices. 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. During the three months ended March 31, 2022, we issued 10,073,209 shares and raised approximately $ 660.2 million of gross proceeds under the ATM program. We did no t issue any shares under the ATM program during the three months ended March 31, 2021. C. Dividend Reinvestment and Stock Purchase Plan Our Dividend Reinvestment and Stock Purchase Plan, or our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26,000,000 common shares to be issued. At March 31, 2022, we had 11,294,008 shares remaining for future issuance under our DRSPP program. The following table outlines common stock issuances pursuant to our DRSPP program (dollars in millions): Three months ended March 31, 2022 2021 Shares of common stock issued under the DRSPP program 41,371 43,394 Gross proceeds $ 2.8 $ 2.7 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 no t issue shares under the waiver approval process during the three months ended March 31, 2022, or 2021. 11. Noncontrolling Interests There are four entities with noncontrolling interests that we consolidate, including an operating partnership, Realty Income, L.P., a joint venture acquired in 2019, and two development joint ventures, one acquired in 2020 and one acquired in May 2021. The following table represents the change in the carrying value of all noncontrolling interests through March 31, 2022 (dollars in thousands): Realty Income, L.P. units (1) Other Noncontrolling Interests Total Carrying value at December 31, 2021 $ 62,416 $ 14,410 $ 76,826 Distributions ( 814 ) ( 68 ) ( 882 ) Allocation of net income 544 58 602 Carrying value at March 31, 2022 $ 62,146 $ 14,400 $ 76,546 (1) 242,007 units were issued on March 30, 2018, 131,790 units were issued on April 30, 2018, 89,322 units were issued on March 28, 2019, 56,400 units were issued on November 1, 2021, 300,604 units were issued on November 30, 2021, and 240,586 units were issued on December 30, 2021. 1,060,709 remained outstanding as of both March 31, 2022, and December 31, 2021 . At March 31, 2022, Realty Income, L.P. and certain of our joint venture investments are considered VIEs in which we were deemed the primary beneficiary based on our controlling financial interests. Below is a summary of -19- Table of Content s selected financial data of consolidated VIEs included in the consolidated balance sheets at March 31, 2022, and December 31, 2021 (in thousands): March 31, 2022 December 31, 2021 Net real estate $ 693,411 $ 688,229 Total assets $ 795,068 $ 795,670 Total liabilities $ 54,957 $ 57,057 12. Financial Instruments and Fair Value Measurements Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820, Fair Value Measurements and Disclosures , sets forth a fair value hierarchy that categorizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. • Level 1 – Unadjusted quoted prices in active markets Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. • Level 2 – Valuation Technique Using Observable Inputs Financial instruments classified as Level 2 are valued using quoted prices for identical instruments in markets that are not considered to be active, or quoted prices for similar assets or liabilities in active markets, or valuation techniques in which all significant inputs are observable or can be corroborated by observable market data for substantially the entire contractual term of the financial asset or liability. • Level 3 – Valuation Technique Using Significant Unobservable Inputs Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the inputs, or other analytical techniques. We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period. Changes in the type of inputs may result in a reclassification for certain assets. We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent. Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature. The fair value of our financial instruments not carried at fair value are disclosed as follows (in millions): -20- Table of Content s March 31, 2022 Carrying value Estimated fair value Mortgages payable assumed in connection with acquisitions (1) $ 1,069.3 $ 1,060.5 Notes and bonds payable (2) $ 12,856.6 $ 12,653.3 December 31, 2021 Carrying value Estimated fair value Mortgages payable assumed in connection with acquisitions (1) $ 1,114.1 $ 1,154.7 Notes and bonds payable (2) $ 12,257.3 $ 13,114.5 (1) Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums was $ 25.0 million at March 31, 2022, and $ 28.7 million at December 31, 2021. Also excludes deferred financing costs of $ 713,000 at March 31, 2022, and $ 790,000 at December 31, 2021. (2) Excludes non-cash premiums and discounts recorded on notes payable. The unamortized balance of the net premiums was $ 272.7 million at March 31, 2022, and $ 295.5 million at December 31, 2021. Also excludes deferred financing costs of $ 60.6 million at March 31, 2022, and $ 53.1 million at December 31, 2021. The estimated fair values of our mortgages payable assumed in connection with acquisitions and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy. The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable, including the senior notes and bonds payable assumed in the debt exchange offer on November 9, 2021, in connection with our merger with VEREIT. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy. Financial Instruments Measured at Fair Value on a Recurring Basis For derivative assets and liabilities, we utilize interest rate swaps and forward-starting swaps to manage interest rate risk, and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility . Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at March 31, 2022, and December 31, 2021, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two. Items Measured at Fair Value on a Non-Recurring Basis Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments only under certain circumstances, such as when an impairment write-down occurs. -21- Table of Content s The following table summarizes our provisions for impairment during the periods indicated below (dollars in millions): Three Months Ended March 31, 2022 2021 Total provisions for impairment (1) $ 7.0 $ 2.7 Number of properties: Classified as held for sale 18 1 Classified as held for investment — 2 Sold 16 18 (1) During the three months ended March 31, 2022, we recorded total provisions for impairment of $ 7.0 million, which reduced the carrying value of the properties from $ 44.8 million to their estimated fair value of $ 37.8 million. During the three months ended March 31, 2021, we recorded total provisions for impairment of $ 2.7 million, which reduced the carrying value of the properties from $ 16.0 million to their estimated fair value of $ 13.3 million. Derivative Designated as Hedging Instruments In order to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling, or GBP, we initiated a hedging strategy to enter into foreign currency forward contracts to sell GBP and buy U.S. Dollars, or USD. These foreign currency forwards are designated as cash flow hedges. Forward points on the forward contracts are included in the assessment of hedge effectiveness. Amounts reported in other comprehensive income (loss) related to foreign currency derivative contracts will be reclassified to other gains and (losses) in the same period during which the hedged forecasted transactions affect earnings. As of March 31, 2022, we had one interest rate swap in place on our $ 250.0 million unsecured term loan. Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. We designated this interest rate swap as a cash flow hedge in accordance with Topic 815, Derivatives and Hedging . This interest rate swap is recorded on the consolidated balances sheets at fair value. Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and are amortized through interest expense over the term of the associated debt. The following table summarizes the amount of unrealized gain (loss) on derivatives in other comprehensive income during the periods indicated below (in thousands): Three Months Ended March 31, Derivatives in Cash Flow Hedging Relationships 2022 2021 Currency swaps $ 1,895 $ ( 1,620 ) Interest rate swaps 39,005 48,029 Foreign currency forwards 2,790 — Total unrealized gain on derivatives $ 43,690 $ 46,409 The following table summarizes the amount of gain (loss) on derivatives reclassified from accumulated other comprehensive income (loss) during the periods indicated below (in thousands): Three Months Ended March 31, Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income 2022 2021 Currency swaps Foreign currency and derivative gains (losses), net $ 6,114 $ ( 1,152 ) Interest rate swaps Interest expense ( 2,530 ) ( 2,541 ) Net increase (decrease) to net income $ 3,584 $ ( 3,693 ) We expect to reclassify $ 6.1 million from AOCI as an increase to interest expense relating to interest rate swaps and $ 5.3 million from AOCI to foreign currency gain relating to cross-currency swaps within the next twelve months. -22- Table of Content s Derivatives Not Designated as Hedging Instruments Based on our potential exposure to changes in foreign currency exchange rate, primarily in British Pound Sterling and, to a lesser extent, the Euro, we initiated a program in the third quarter of 2021 to enter into foreign currency collars. A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices. Our foreign currency collars generally have maturities of five months or less and are not designated as hedge instruments for accounting purposes. The gains or loss on these derivative contracts are recognized in Foreign currency and derivative gains (losses), net based on the changes in fair value. In addition, we enter into currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the British Pound Sterling and Euro. These derivative contracts generally mature within one to three months and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative gains (losses), net' in the consolidated statements of income and comprehensive income. The following table details our foreign currency and derivative gains (losses), net included in income (in thousands): Three Months Ended March 31, 2022 2021 Realized foreign currency and derivative gains (losses), net: Losses on the settlement of undesignated derivatives $ ( 2,681 ) $ — Gains (losses) on the settlement of designated derivatives reclassified from AOCI 6,114 ( 1,152 ) Loss on the settlement of transactions with third parties ( 52 ) — Total realized foreign currency and derivative gains, net 3,381 ( 1,152 ) Unrealized foreign currency and derivative gains (losses), net: Gains on the change in fair value of undesignated derivatives 22,720 3,724 Losses on remeasurement of certain assets and liabilities ( 26,691 ) ( 1,768 ) Total unrealized foreign currency and derivative gains (losses), net ( 3,971 ) 1,956 Total foreign currency and derivative gains (losses), net $ ( 590 ) $ 804 -23- Table of Content s The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2022, and December 31, 2021 (dollars in millions): Derivative Type Number of Instruments (1) Accounting Classification Notional Amount as of Weighted Average Strike Rate (2) Maturity Date (3) Fair Value - asset (liability) as of Derivatives Designated as Hedging Instruments March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 Interest rate swap 1 Derivative $ 250.0 $ 250.0 3.04 % March 2024 $ ( 3.2 ) $ ( 11.9 ) Cross-currency swaps (4) 4 Derivative 166.3 166.3 (5) May 2034 ( 7.2 ) ( 13.8 ) Foreign currency forwards 29 Derivative 166.4 176.1 (6) Apr 2022 - Aug 2024 10.3 7.6 Forward-starting swaps (7) 4 Derivative 300.0 300.0 1.86 % Nov 2032 - Jun 2033 14.9 ( 3.2 ) Forward-starting swaps (7) 2 Hybrid Debt 200.0 200.0 1.93 % Nov 2032 - Jun 2033 6.5 ( 5.1 ) $ 1,082.7 $ 1,092.4 $ 21.3 $ ( 26.4 ) Derivatives not Designated as Hedging Instruments Currency exchange swaps (8) 4 Derivative 1,361.4 1,639.5 (9) Apr 2022 - Jul 2022 22.7 ( 14.7 ) Total of all Derivatives $ 2,444.1 $ 2,731.9 $ 44.0 $ ( 41.1 ) (1) This column represents the number of instruments outstanding as of March 31, 2022. (2) Weighted average strike rate is calculated using the current notional value as of March 31, 2022. (3) This column represents maturity dates for instruments outstanding as of March 31, 2022. (4) Represents four British Pound Sterling, or GBP, cross-currency swaps with notional amount of $ 166.3 million. (5) GBP fixed rates initially at 4.82 % and escalating to 10.96 %, and USD weighted average fixed rate at 9.78 %. (6) Weighted average forward GBP-USD exchange rate of 1.41 . (7) There were five treasury rate locks entered into during February 2020 that were terminated in June 2020 and converted into six forward starting interest rate swaps through a cashless settlement. (8) Represents two GBP currency exchange swaps with notional amount of $ 1.09 billion and two Euro, or EUR, currency exchange swaps with notional amount of $ 268.3 million. (9) Weighted average Forward GBP-USD exchange rate of 1.34 and Weighted Average Forward EUR-USD exchange rate of 1.11 . We measure our derivatives at fair value and include the balances within other assets and accounts payable and accrued expenses on our consolidated balance sheets. We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default. We utilize interest rate swaps and forward-starting swaps to manage interest rate risk and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility. To comply with the provisions of ASC 820, Fair Value Measurement , we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. -24- Table of Content s 13. Operating Leases A. At March 31, 2022, we owned 11,288 properties in all 50 U.S. states, Puerto Rico, the U.K. and Spain. Of the 11,288 properties, 11,180 , or 99.0 %, are single-client properties, and the remaining are multi-client properties. At March 31, 2022, 156 properties were available for lease or sale. Substantially all of our leases are net leases where our client pays or reimburses us for property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage. Rent based on a percentage of our client's gross sales, or percentage rents, for the three months ended March 31, 2022, and 2021 was $ 3.7 million and $ 1.0 million, respectively. B. Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2022, and 2021. 14. Distributions Paid and Payable We pay monthly distributions to our common stockholders. The following is a summary of monthly distributions paid per common share for the three months ended March 31, 2022, and 2021: Month 2022 2021 January $ 0.2465 $ 0.2345 February 0.2465 0.2345 March 0.2465 0.2345 Total $ 0.7395 $ 0.7035 At March 31, 2022, a distribution of $ 0.2470 per common share was payable and was paid in April 2022. 15. Net Income per Common Share Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation: Three months ended March 31, 2022 2021 Weighted average shares used for the basic net income per share computation 593,827,299 371,522,607 Incremental shares from share-based compensation 214,540 79,294 Weighted average shares used for diluted net income per share computation 594,041,839 371,601,901 Unvested shares from share based compensation that were anti-dilutive 70,256 220,946 Weighted average partnership common units convertible to common shares that were anti-dilutive 1,060,709 463,119 -25- Table of Content s 16. Supplemental Disclosures of Cash Flow Information The following table summarizes our supplemental cash flow information during the periods indicated below (dollars in thousands): Three months ended March 31, 2022 2021 Supplemental disclosures: Cash paid for interest $ 118,187 $ 94,825 Cash paid for income taxes $ 12,318 $ 3,444 Non-cash activities: Net increase in fair value of derivatives $ 85,032 $ 48,171 The following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands): March 31, 2022 March 31, 2021 Cash and cash equivalents shown in the consolidated balance sheets $ 151,624 $ 183,984 Restricted escrow deposits (1) 84,066 7,776 Impounds related to mortgages payable (1) 7,160 1,570 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 242,850 $ 193,330 (1) Included within other assets, net on the consolidated balance sheets (see note 4). These amounts consist of cash that we are legally entitled to, but that is not immediately available to us. As a result, these amounts were considered restricted as of the dates presented. 17. Segment Information We evaluate performance and make resource allocation decisions on an industry by industry basis. For financial reporting purposes, we have grouped our clients into 70 activity segments. All of the properties are incorporated into one of the applicable segments. Unless otherwise specified, all segments listed below are located within the U.S. Because almost all of our leases require our clients to pay or reimburse us for operating expenses, rental revenue is the only component of segment profit and loss we measure. Our investments in industries outside of the U.S. are managed as separate operating segments. -26- Table of Content s The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective clients (dollars in thousands): Assets, as of: March 31, 2022 December 31, 2021 Segment net real estate: Automotive service $ 894,082 $ 852,151 Beverages 360,894 362,570 Convenience stores - U.S. 2,896,397 2,844,800 Dollar stores 2,296,944 2,303,906 Drug stores 2,141,458 2,182,432 Financial services 565,437 576,065 General merchandise - U.S. 1,304,448 1,289,735 Grocery stores - U.S. (1) 1,590,169 1,517,237 Grocery stores - U.K. (1) 2,004,833 1,963,057 Health and fitness 1,303,126 1,325,932 Health care - U.S. 671,638 670,864 Home furnishings - U.S. 715,142 583,564 Home improvement - U.S. 956,195 946,870 Home improvement - U.K. 846,093 780,308 Restaurants - casual dining 1,988,707 2,016,017 Restaurants - quick service - U.S. 2,681,001 2,689,806 Theaters - U.S. 738,894 750,877 Transportation services 1,039,295 1,039,220 Wholesale club 873,026 865,658 Other non-reportable segments 6,848,753 6,427,803 Total net real estate $ 32,716,532 $ 31,988,872 Intangible assets: Automotive service 123,378 125,543 Beverages 17,077 17,452 Convenience stores - U.S. 255,578 275,548 Dollar stores 348,709 366,319 Drug stores 345,852 355,779 Financial services 87,572 92,986 General merchandise - U.S. 251,379 254,343 Grocery stores - U.S. (1) 370,607 378,181 Grocery stores - U.K. (1) 443,576 426,714 Health and fitness 118,271 125,586 Health care - U.S. 100,396 103,143 Home furnishings - U.S. 203,480 210,654 Home improvement - U.S. 206,915 207,637 Home improvement - U.K. 158,519 158,667 Restaurants - casual dining 402,818 416,653 Restaurants - quick service - U.S. 247,549 270,092 Theaters - U.S. 32,369 33,527 Transportation services 119,598 125,971 Wholesale club 156,165 155,032 Other non-reportable segments 1,202,826 1,176,298 Goodwill (2) 3,711,981 3,676,705 Other corporate assets 2,440,870 2,195,800 Total assets $ 44,062,017 $ 43,137,502 (1) As of March 31, 2022, grocery stores - Spain was not a reportable segment. (2) Goodwill has not yet been allocated to our individual operating segments; the allocation is pending the finalization of our purchase accounting. -27- Table of Content s Three months ended March 31, Revenue 2022 2021 Segment rental revenue: Automotive service $ 20,395 $ 9,918 Beverages 9,535 8,952 Convenience stores - U.S. 65,943 50,128 Dollar stores 54,114 32,506 Drug stores 47,699 35,048 Financial services 13,834 7,718 General merchandise - U.S. 26,288 15,234 Grocery stores - U.S. (1) 36,267 19,681 Grocery stores - U.K. (1) 34,147 20,858 Health and fitness 35,810 28,610 Health care - U.S. 13,749 6,522 Home furnishings - U.S. 17,180 2,956 Home improvement - U.S. 22,086 13,038 Home improvement - U.K. 15,748 4,478 Restaurants - casual dining 47,510 11,748 Restaurants - quick service - U.S. 55,524 23,465 Theaters - U.S. 34,173 19,656 Transportation services 24,251 16,432 Wholesale club 18,663 9,941 Other non-reportable segments and contractually obligated reimbursements by our clients 206,649 102,476 Rental (including reimbursable) 799,565 439,365 Other 7,778 2,889 Total revenue $ 807,343 $ 442,254 (1) As of March 31, 2022, grocery stores - Spain was not a reportable segment. 18. Common Stock Incentive Plan In March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income 2021 Incentive Award Plan, or 2021 Plan. This note should be read in conjunction with the more complete discussion of our 2021 Plan included in note 16 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 5.0 million and $ 3.7 million during the three months ended March 31, 2022, and 2021, respectively. A. Restricted Stock During the three months ended March 31, 2022, we granted 110,426 shares of common stock under the 2021 Plan. As of March 31, 2022, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 15.1 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares. -28- Table of Content s B. Performance Shares and Restricted Stock Units During the three months ended March 31, 2022, we granted 154,840 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our Total Shareholder Return (TSR) performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service. During the three months ended March 31, 2022, we also granted 24,456 restricted stock units, all of which vest over a four-year service period. These restricted stock units have the same economic rights as shares of restricted stock. As of March 31, 2022, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $ 27.6 million. The fair value of the performance shares were estimated on the date of grant using a Monte Carlo Simulation model. The performance shares are being recognized on a tranche-by-tranche basis over the service period. The amount of share-based compensation for the restricted stock units is based on the fair value of our common stock at the grant date. The expense amortization period for restricted stock units is the lesser of the four-year service period or the period over which the awardee reaches the qualifying retirement age. For employees who have already met the qualifying retirement age, restricted stock units are fully expensed at the grant date. C. Stock Options We did no t grant any stock options during the first three months ended March 31, 2022. During the three months ended March 31, 2022, we recorded $ 47,000 of expense related to stock options. There was no comparable expense for the three months ended March 31, 2021. As of March 31, 2022, there was no unamortized expense relating to our outstanding stock options. 19. Commitments and Contingencies In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations. At March 31, 2022, we had commitments of $ 55.0 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of March 31, 2022, we had committed $ 485.7 million under construction contracts related to development projects, which is expected to be paid in the next twelve months. In anticipation of entering into the agreements related to the private placement offering (see note 20, Subsequent Events ) in March 2022, we entered into an indemnity agreement with the investors to reimburse for certain transaction related costs associated with the private placement should the notes ultimately not be issued. As of March 31, 2022, we have not recognized any liability associated with the guarantee as the current exposure was insignificant and the likelihood of ultimately incurring a loss was remote. 20. Subsequent Events A. Dividends In April 2022, we declared a dividend of $ 0.2470 per share to our common stockholders, which will be paid in May 2022. B. Credit Facility Amendment In April 2022, we amended and restated our unsecured revolving credit facility to increase the borrowing capacity to $ 4.25 billion and to extend the initial term to June 2026, among other things. The amended and restated credit facility is otherwise substantively consistent with the prior credit agreement entered into in August 2019. C. Private Placement Offering In April 2022, we entered into a definitive agreement for the private placement of £ 140 million of senior unsecured notes due 2030, £ 345 million of senior unsecured notes due 2032, and £ 115 million of senior unsecured notes due 2037. The combined notes, if issued, are expected to have a weighted average tenor of approximately 10.5 years, and a weighted average fixed interest rate of 3.22 %.