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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 366 added, 321 removed, 749 unchanged (48% 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, 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 include, without limitation, discussions of our business, portfolio, 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 or dispositions, 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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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 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.

In particular, forward-looking statements regarding estimated or future results of operations or financial condition, estimated or future acquisitions or dispositions 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 or dispositions 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;

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

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

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

At June 30, 2022, we owned a diversified portfolio:

• Consisting of 11,427 properties;

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approximately 12,840 square feet per retail property and approximately 240,450 square feet per industrial property.

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.

(1) Excludes four properties with ancillary leases only, such as cell towers and billboards, of which one was vacant.

Of the 11,427 properties in the portfolio at June 30, 2022, 11,289, or 98.8%, are single-client properties, of which 11,158 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 $41.0 million and $23.5 million for the three months ended June 30, 2022 and 2021, respectively, and $85.0 million and $45.2 million for the six months ended June 30, 2022 and 2021, respectively.

Investment Philosophy

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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 March 31, 2022, consisted of 11,288 properties located in all 50 U.S.

Our investment activities have led to a diversified property portfolio that, as of June 30, 2022, consisted of 11,427 properties located in all 50 U.S.

states, Puerto Rico, the U.K.

and Spain, and doing business in 72 industries.

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.

None of the 72 industries represented in our property portfolio accounted for more than 9.2% of our annualized contractual rent as of June 30, 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.

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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.

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.

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.

As a result of the execution of this strategy, approximately 93% of our annualized retail contractual rent on June 30, 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 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.

At June 30, 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 June 30, 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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We have continued our 53-year policy of paying monthly dividends.

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.

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

As of July 2022, we have paid 99 consecutive quarterly dividend increases and increased the dividend 116 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

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.

3rd increase Jun 2022 Jul 2022 $0.2475 $0.0005

The dividends paid per share during the six months ended June 30, 2022, totaled approximately $1.4805, as compared to approximately $1.4085 during the six months ended June 30, 2021, an increase of $0.072, or 5.1%.

The monthly dividend of $0.2475 per share represents a current annualized dividend of $2.9700 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 $68.26 on June 30, 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 Months Ended March 31, 2022

Acquisitions During the Three and Six Months Ended June 30, 2022

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

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($ in millions) Weighted

(Years) Initial

Three months ended March 31, 2022 (2)

(Years) Initial Weighted

Three months ended June 30, 2022 (2)

Acquisitions - U.S.

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237 8,014 $ 1,675.8 11.5 5.7 %

(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.

Six months ended June 30, 2022 (2)

Acquisitions - U.S.

289 5,551 $ 1,492.0 13.9 5.7 %

Acquisitions - Europe

51 5,391 1,471.2 9.0 5.6 %

Total acquisitions 340 10,942 $ 2,963.2 11.5 5.7 %

Properties under development (3)

83 2,721 267.9 15.9 5.7 %

423 13,663 $ 3,231.1 11.9 5.7 %

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

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

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

Contractual net operating income used in the calculation of initial average cash yield includes approximately $2.5 million and $6.8 million, received as settlement credits as reimbursement of free rent periods for the three and six months ended June 30, 2022, respectively.

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

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development or expansion, the initial average cash lease yield is computed as follows:

When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial 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.

(2) None of our investments during the three and six months ended June 30, 2022, caused any one client to be 10% or more of our total assets at June 30, 2022.

(3) Includes two U.K.

development properties that represent investments of £13.2 million and £14.9 million Sterling during the three and six months ended June 30, 2022, respectively, converted at the applicable exchange rate on the funding date.

(4) Our clients occupying the new properties are 89.2% retail and 10.8% industrial, based on rental revenue.

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.

Approximately 39% of the rental revenue generated from acquisitions during the three months ended June 30, 2022, is from our investment grade rated clients, their subsidiaries or affiliated companies.

(5) Our clients occupying the new properties are 87.4% retail and 12.6% industrial, based on rental revenue.

Approximately 33% of the rental revenue generated from acquisitions during the six months ended June 30, 2022, is from our investment grade rated clients, their subsidiaries or affiliated companies.

Announcement of Transaction with Wynn Resorts

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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.

Portfolio Discussion

Leasing Results

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.

At June 30, 2022, we had 132 properties available for lease out of 11,427 properties in our portfolio, representing a 98.9% occupancy rate based on the number of properties in the portfolio.

Our property-level occupancy rate at June 30, 2022 excludes four properties with ancillary leases only, such as cell towers and billboards, of which one was vacant .

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

Three months ended March 31, 2022

Three months ended June 30, 2022

Properties available for lease at March 31, 2022 156

Lease expirations (1)

Re-leases to same client (174)

Re-leases to new client (6)

Vacant dispositions (64)

Properties available for lease at June 30, 2022

Six months ended June 30, 2022

Properties available for lease at December 31, 2021

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Vacant dispositions (95)

Properties available for lease at March 31, 2022

Properties available for lease at June 30, 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 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.

During the three months ended June 30, 2022, the annual new rent on re-leases was $35.51 million, as compared to the previous annual rent of $33.63 million on the same units, representing a rent recapture rate of 105.6% 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 six months ended June 30, 2022, the annual new rent on re-leases was $67.20 million, as compared to the previous annual rent of $63.47 million on the same units, representing a rent recapture rate of 105.9% on the units re-leased.

We re-leased seven units to new clients without a period of vacancy, and 19 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 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.

At June 30, 2022, our average annualized contractual rent was approximately $14.13 per square foot on the 11,295 leased properties in our portfolio.

At June 30, 2022, we classified 36 properties, with a carrying amount of $66.3 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 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.

During the three months ended June 30, 2022, we capitalized costs of $25.8 million on existing properties in our portfolio, consisting of $0.8 million for re-leasing costs, $2.8 million for recurring capital expenditures, and $22.2 million for non-recurring building improvements.

During the six months ended June 30, 2022, we capitalized costs of $37.8 million on existing properties in our portfolio, consisting of $3.2 million re-leasing costs, $2.8 million for recurring capital expenditures, and $31.8 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,

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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.

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

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

We define non-recurring capital expenditures as property improvements in which we invest additional capital that extend the useful life of the properties.

Capital Raising

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.

Sale of Unconsolidated Joint Ventures

In July 2022, six of the seven properties owned by our industrial partnerships acquired in connection with the VEREIT merger were sold, with the seventh property expected to be sold later in the third quarter of 2022.

The gross purchase price for the properties is $905.0 million and our proportionate share of net proceeds (after mortgage defeasance and closing costs) is estimated to be approximately $120 million .

Equity Capital Raising

During the three and six months ended June 30, 2022, we raised $1.1 billion and $1.7 billion of gross proceeds from the sale of common stock, respectively, at a weighted average price of $67.13 and $66.51 per share, respectively, primarily through proceeds from the sale of common stock through our prior ATM program.

In June 2022, we replaced our prior ATM program, which authorized us to offer and sell up to 69,088,433 shares of common stock, with a new equity distribution program, pursuant to which we may offer and sell up to 120,000,000 shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices.

Note Issuances

In 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 June 2022, we closed on the previously announced private placement of £600.0 million of senior unsecured notes, which included £140.0 million of notes due 2030, £345.0 million of notes due 2032, and £115.0 million of notes due 2037.

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

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").

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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.

As of June 30, 2022, the balance of borrowings outstanding under our new revolving credit facility was $219.1 million, and we had a cash balance of $172.8 million.

Expansion of Commercial Paper Program

During July 2022, our U.S.

Dollar-denominated unsecured commercial paper program was amended to increase the maximum aggregate amount of outstanding notes from $1.0 billion to $1.5 billion.

We also established a new Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent), which may be issued in U.S.

Dollars or various other foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper note market.

The notes offered under our European commercial paper program will rank pari passu with all of our other unsecured senior indebtedness, including borrowings under our revolving credit facility and our term loan, and our outstanding senior notes, including under our U.S.

Dollar-denominated commercial paper program.

We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs.

Select Financial Results

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

Three months ended March 31, % Increase

Our merger with VEREIT occurred on November 1, 2021;

hence, our financial results do not include VEREIT financial results during the three and six months ended June 30, 2021.

Three months ended June 30, Six months ended June 30, % Increase

2022 2021 2022 2021 Three months Six months

Total revenue $ 810.4 $ 463.3 $ 1,617.8 $ 905.6 74.9 % 78.6 %

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$ 0.97 $ 0.88 $ 1.94 $ 1.73 10.2 % 12.1 %

(1) The calculation to determine net income available to common stockholders includes provisions for impairment, gains from the sale of real estate, and foreign currency gains and losses.

(1) The calculation to determine net income available to common stockholders includes provisions for impairment, gain from the sale of real estate, and foreign currency gain and loss.

These items can vary from quarter to quarter and can significantly impact net income available to common stockholders and period to period comparisons.

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

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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Our financial results during the three and six months ended June 30, 2022 were impacted by merger and integration-related costs of $2.7 million and $9.2 million, respectively, related to our merger with VEREIT.

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

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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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.

As of June 30, 2022, there are approximately $1.9 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 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;

At June 30, 2022, our total outstanding borrowings of senior unsecured notes and bonds, term loan, mortgages payable, revolving credit facility and commercial paper were $15.82 billion, or approximately 27.3% of our total market capitalization of $58.05 billion.

We define our total market capitalization at June 30, 2022, as the sum of:

• Shares of our common stock outstanding of 617,564,272, plus total common units outstanding of 1,060,709, multiplied by the last reported sales price of our common stock on the NYSE of $68.26 per share on June 30, 2022, or $42.23 billion;

• Outstanding borrowings of $219.1 million on our revolving credit facility;

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

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

• Outstanding mortgages payable of $928.9 million, excluding net mortgage premiums of $19.2 million and deferred financing costs of $1.0 million;

• Outstanding borrowings of $250.0 million on our term loan, excluding deferred financing costs of $344,000;

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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

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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.

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

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

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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 NYSE at prevailing market prices or at negotiated prices.

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.

Under our ATM program, up to 120,000,000 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.

Our ATM program replaced our prior ATM program in June 2022, which previously authorized us to offer and sell up to 69,088,433 shares of common stock.

During the three months ended June 30, 2022, we issued 15,899,972 shares, which were sold pursuant to forward sale confirmations, and raised approximately $1.07 billion of gross proceeds under the prior ATM program.

During the six months ended June 30, 2022, we issued 25,973,181 shares and raised approximately $1.73 billion of gross proceeds under the prior ATM program.

As of June 30, 2022, there were no open forward sale confirmations and we had 120,000,000 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.

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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 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.

We did not issue shares under the waiver approval process during the six months ended June 30, 2022.

During the three months ended June 30, 2022, we issued 43,260 shares and raised approximately $2.9 million under our DRSPP.

During the six months ended June 30, 2022, we issued 84,631 shares and raised approximately $5.7 million under our DRSPP.

At June 30, 2022, we had 11,250,748 shares remaining for future issuance under our DRSPP program.

Revolving Credit Facility

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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.

At June 30, 2022, we had a borrowing capacity of $4.03 billion available on our new revolving credit facility and an $219.1 million outstanding balance.

The weighted average interest rate on borrowings under our revolving credit facility during the six months ended June 30, 2022, was 1.5% per annum.

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

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

At June 30, 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.

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

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.

At June 30, 2022, we had an outstanding balance of $950.0 million.

The weighted average interest rate on borrowings under our commercial paper program was 0.8% for the six months ended June 30, 2022.

We use our $4.25 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper program.

The commercial paper borrowings outstanding at 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.

The commercial paper borrowings outstanding at June 30, 2022 have matured and will mature between July 2022 and January 2023.

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

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

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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.

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%.

During July 2022, our U.S.

Dollar-denominated unsecured commercial paper program was amended to increase the maximum aggregate amount of outstanding notes from $1.0 billion to $1.5 billion.

Dollars or various other foreign currencies, in each case, pursuant to customary terms in the European commercial paper note market.

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.

Prior to April 2022, borrowing under this term loan bore interest at the current one-month LIBOR, plus 0.85%.

In connection with entering into our new unsecured credit facility in April 2022, the previous LIBOR benchmark rate was replaced with daily SOFR, based on a five day lookback period, and, due to our current credit ratings, is not subject to a credit spread adjustment.

In conjunction with this term loan, we also entered into an interest rate swap, which was based off the one-month LIBOR through June 30, 2022.

As of June 30, 2022, the interest rate swap was also converted to SOFR.

As of June 30, 2022, the effective interest rate on this term loan, after giving effect to the interest rate swap, is 3.73%.

Mortgage Debt

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.

As of June 30, 2022, we had $928.9 million of mortgages payable, of which £33.4 million related to a Sterling-denominated mortgage.

The majority of our mortgages payable were assumed in connection with our property acquisitions, originally including ten mortgages from our merger with VEREIT in 2021 totaling $839.1 million, and eight mortgages on 17 properties totaling $45.1 million during the six months ended June 30, 2022.

At June 30, 2022, we had net premiums totaling $19.2 million on these mortgages and deferred financing costs of $1.0 million.

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 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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During the six months ended June 30, 2022, we made $226.0 million in principal payments, including the repayment of seven mortgages in full for $223.9 million (of which $168.2 million was paid off related to mortgages assumed from our merger with VEREIT).

Notes Outstanding

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

Our senior unsecured note and bond obligations consist of the following as of June 30, 2022, sorted by maturity date (in millions):

As of June 30, 2022

Principal Amount (Currency Denomination) Carrying Value (USD)

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

3.160% notes, issued in June 2022 and due in June 2030

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

3.180% notes, issued in June 2022 and due June in June 2032

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

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

3.390% notes, issued in June 2022 and due in June 2037

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

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Unamortized net premiums and deferred financing costs 198

(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.

(1) Carrying Value (USD) as of June 30, 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").

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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.

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

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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:

The actual amounts as of June 30, 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 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):

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on July 1, 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 July 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 June 30, 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 March 31, 2022, we had cash and cash equivalents totaling $151.6 million, inclusive of £86.8 million Sterling and €7.2 million Euro.

At June 30, 2022, we had cash and cash equivalents totaling $172.8 million, inclusive of £107.5 million Sterling and €12.3 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 March 31, 2022, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

As of June 30, 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 March 31, 2022:

In addition, we were

assigned the following ratings on our commercial paper at June 30, 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 credit agency ratings as of March 31, 2022, interest rates under our new credit facility for U.S.

Based on our credit agency ratings as of June 30, 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.

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Table of Obligations

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

The following table summarizes the maturity of each of our obligations as of June 30, 2022 (dollars in millions):

Maturity Credit Facility and Commercial Paper Program (1)

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Totals $ 1,169.1 $ 13,390.3 $ 250.0 $ 929.0 $ 3,526.2 $ 334.1 $ 360.0 $ 727.6 $ 20,686.3

(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.

(1) The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions.

At June 30, 2022, there were $219.1 million borrowings under our revolving credit facility.

Commercial paper program outstanding at June 30, 2022 were $950.0 million, which have matured and will mature between July 2022 and January 2023.

(2) Excludes non-cash net premiums recorded on notes payable of $257.0 million and deferred financing costs of $58.7 million.

(3) Excludes deferred financing costs of $344,000.

(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.

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $19.2 million and deferred financing costs of $1.0 million.

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

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

(8) “Other” consists of $678.6 million of commitments under construction contracts, and $49.0 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.

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Unconsolidated Investments

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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.

In July 2022, six of the seven properties owned by our industrial partnerships acquired in connection with the VEREIT merger were sold, with the seventh property

expected to be sold later in the third quarter of 2022.

Our proportionate share of net proceeds (after mortgage defeasance and closing costs) is estimated to be approximately $120 million .

Dividend Policy

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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 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.

Our cash distributions to common stockholders in the six months ended June 30, 2022, totaled $884.1 million, representing 76.0% of our adjusted funds from operations available to common stockholders of approximately $1.16 billion.

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.

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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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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.

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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.

The following is a comparison of our results of operations for the three and six months ended June 30, 2022, to the three and six months ended June 30, 2021.

Total Revenue

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

Three months ended March 31, $ Increase

Three months ended June 30, Six months ended June 30, $ Increase

2022 2021 2022 2021 Three Months Six Months

Rental (excluding reimbursable)

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$ 810,419 $ 463,298 $ 1,617,762 $ 905,552 $ 347,121 $ 712,210

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

The increase in total revenue primarily relates to the merger with VEREIT and acquisitions for the six months ended June 30, 2022 .

Rental Revenue (excluding reimbursable)

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)

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three months ended June 30, 2022, compared to the three months ended June 30, 2021 (dollars in thousands):

Three months ended June 30, Increase/(Decrease)

Number of Properties Square Footage (1)

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Same store rental revenue (2)

9,686 168,881,270 615,633 603,572 12,061

Orion Divestiture 92 10,093,123 525 44,393 (43,868)

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298 6,425,808 12,357 10,418 1,939

Other excluded revenue (5)

NA N/A 4,341 1,964 2,377

VEREIT same store rental revenue (6)

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(1) Excludes 5,907,790 square feet from properties ground leased to clients and 2,647,226 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 March 31, 2022, of 1.31 GBP/USD.

(2) The same store rental revenue percentage increase for the three months ended June 30, 2022 as compared with the same period in prior year is 2.0%.

(3) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2022, of 1.22 GBP/USD.

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

(4) Relates to the aggregate of (i) rental revenue from properties (285 properties comprising 5,721,191 square feet) that were available for lease during part of 2022 or 2021, (ii) rental revenue for properties (13 properties comprising 704,617 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.

(5) Primarily consists of lease termination revenue and reimbursements for tenant improvements.

(6) Amounts for the three months ended June 30, 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.

The table below summarizes the increase in rental revenue (excluding reimbursable) in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 (dollars in thousands):

Six months ended June 30, Increase/(Decrease)

Number of Properties Square Footage (1)

2022 2021 $ Change

Properties acquired during 2022 & 2021 1,443 34,622,989 $ 216,818 $ 25,413 $ 191,405

Same store rental revenue (2)

9,686 168,881,270 1,242,739 1,206,077 36,662

Orion Divestiture 92 10,093,123 938 88,590 (87,652)

Constant currency adjustment (3)

N/A N/A 7,857 7,462 395

Properties sold prior to 2022 357 8,679,230 2,972 34,240 (31,268)

Straight-line rent and other non-cash adjustments N/A N/A 12,251 8,865 3,386

Vacant rents, development and other (4)

298 6,425,808 25,531 20,534 4,997

Other excluded revenue (5)

N/A N/A 6,281 4,432 1,849

VEREIT same store rental revenue (6)

N/A N/A — (541,191) 541,191

Totals 1,515,387 854,422 660,965

(1) Excludes 5,907,790 square feet from properties ground leased to clients and 2,647,226 square feet from properties with no land or building ownership.

(2) The same store rental revenue percentage increase for the six months ended June 30, 2022 as compared with the same period in prior year is 3.0%.

(3) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2022, of 1.22 GBP/USD.

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

(5) Primarily consists of lease termination revenue and reimbursements for tenant improvements.

(6) Amounts for the six months ended June 30, 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;

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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).

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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 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.

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for the three and six months ended June 30, 2022 relative to the comparable periods for 2021 would have been 2.6% and 3.5%, respectively.

Of the 11,427 properties in the portfolio at June 30, 2022, 11,289, or 98.8%, are single-client properties and the remaining are multi-client properties.

Of the 11,289 single-client properties, 11,158, or 98.8%, were net leased at June 30, 2022.

Of the 11,769 in-place leases in the portfolio, which excludes 168 vacant units, 10,069, or 85.6%, were under leases that provide for increases in rents through:

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

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

Rent based on a percentage of our client's gross sales, or percentage rent, was $2.2 million in the three months ended June 30, 2022, $596,000 in the three months ended June 30, 2021, $6.0 million in the six months ended June 30, 2022, and $1.6 million in the six months ended June 30, 2021.

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

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;

At June 30, 2022, our portfolio of 11,427 properties was 98.9% leased with 132 properties available for lease, as compared to 98.5% leased with 164 properties available for lease at December 31, 2021, and 98.5% leased with 103 properties available for lease at June 30, 2021.

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

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

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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 March 31, $ Increase

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

2022 2021 2022 2021 Three Months Six Months

Depreciation and amortization $ 409,437 $ 187,789 $ 813,199 $ 365,774 $ 221,648 $ 447,425

110,121 73,674 216,524 146,749 36,447 69,775

106,403 73,075 33,328

Property (excluding reimbursable) 11,205 8,213 19,544 15,034 2,992 4,510

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

4.4 % 5.0 % 4.4 % 5.0 %

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

1.5 % 1.9 % 1.3 % 1.7 %

(1) Excludes rental revenue (reimbursable).

During 2021, we began presenting 'Other income, net', which consists of certain miscellaneous non-recurring revenue previously presented in 'Other' within 'Revenue,' in a separate caption in the consolidated statements of income and

comprehensive income.

Prior to this adjustment, general and administrative expenses as a percentage of total revenue was 4.9% for the six months end June 30, 2021.

There was no change for the three months ended June 30, 2021.

Depreciation and Amortization

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.

The increase in depreciation and amortization for the three and six months ended June 30, 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 March 31,

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

2022 2021 2022 2021

Interest on our credit facility, commercial paper, term loan, notes, mortgages and interest rate swaps $ 124,313 $ 70,203 $ 245,288 $ 139,731

3 unchanged sentences

Amortization of net mortgage premiums (3,530) (205) (7,091) (485)

(3,561) (280)

Amortization of net note premiums (15,683) (53) (31,423) (138)

1 unchanged sentence

Capital lease obligation 356 78 678 154

Interest on deferred financing leases 13 —

Interest expense $ 110,121 $ 73,674 $ 216,524 $ 146,749

$ 106,403 $ 73,075

Credit facility, commercial paper, term loan, mortgages and notes

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Average interest rates 3.08 % 3.02 % 3.10 % 3.14 %

3.07 % 3.27 %

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:

The increase in interest expense for the three and six months ended June 30, 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 six months ended June 30, 2022, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $219.1 million was 1.5%;

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• Term loan outstanding of $250.0 million (excluding deferred financing costs of $344,000) was swapped to fixed at 3.7%;

• 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%;

• Mortgages payable of $928.9 million (excluding net premiums totaling $19.2 million and deferred financing costs of $1.0 million on these mortgages) was 4.8%;

• Notes and bonds payable of $13.39 billion (excluding net unamortized original issue premiums of $257.0 million and deferred financing costs of $58.7 million) was 3.3%;

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

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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At June 30, 2022, 132 properties were available for lease or sale, as compared to 164 at December 31, 2021, and 103 at June 30, 2021.

The increase in property expenses (excluding reimbursable) for the three and six months ended June 30, 2022, is primarily due to the increase in portfolio size, resulting in higher utilities, repairs and maintenance and property-related legal expenses.

Property Expenses (reimbursable)

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.

The increase in property expenses (reimbursable) for the three and six months ended June 30, 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 six months ended June 30, 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 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.

The increase in general and administrative expenses for the three and six months ended June 30, 2022, is primarily due to higher payroll-related costs and higher corporate-level professional fees, information technology, and corporate occupancy costs associated with the growth of the company, including the merger with VEREIT.

At June 30, 2022, the headcount was 380 versus 239 at June 30, 2021.

Provisions for Impairment

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

Three months ended March 31,

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

2022 2021 2022 2021

Carrying value prior to impairment $ 64.5 $ 45.6 $ 98.2 $ 59.2

total provisions for impairment (7.7) (17.2) (14.7) (20.0)

Carrying value after impairment 56.8 28.4 83.5 39.2

Number of properties:

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Classified as held for investment 3 5 3 6

Sold 32 31 49 44

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.

In conjunction with our merger with VEREIT, we incurred approximately $2.7 million and $9.2 million of merger and integration-related transaction costs during the three and six months ended June 30, 2022, respectively, compared to approximately $13.3 million during the three and six months ended June 30, 2021.

Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, SEC filing 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.

Gain on Sales of Real Estate

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

Three months ended March 31,

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

2022 2021 2022 2021

Number of properties sold 70 42 104 69

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Gain on sales of real estate $ 40.6 $ 14.9 $ 50.7 $ 23.3

Foreign Currency and Derivative Gains (Losses), Net

Foreign Currency and Derivative Gain, Net

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

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.

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

Gain and loss on foreign currency are largely offset by derivative gain and loss.

Derivative gain and loss relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting.

Net derivative gain and loss are primarily related to realized and unrealized short term currency exchange swaps.

Gain and loss on derivatives are largely offset by foreign currency gain and loss.

In June 2022, following the early prepayment of our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries, we terminated the four cross-currency swaps used to hedge the foreign currency exposure of the intercompany loan.

As the hedge relationship has been terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million was reclassified from accumulated other comprehensive income, or AOCI, to Foreign currency and derivative gain, net during the three months ended June 30, 2022.

The reclassification from AOCI was offset by $7.9 million in losses from the intercompany loan remeasurement on the final exchange.

Loss on Extinguishment of Debt

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 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.

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

Equity in Income and Impairment of Investment in Unconsolidated Entities

Equity in income of unconsolidated entities for the three and six months ended June 30, 2022, relates to three equity method investments that were acquired in our merger with VEREIT.

The loss for the three and six months ended June 30, 2022 is primarily driven by an other than temporary impairment of $7.8 million.

There were no comparative investments for the three and six months ended June 30, 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.

The increase in the three and six months ended June 30, 2022, is primarily related to insurance proceeds received from property losses and other non-recurring settlements.

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 months ended March 31, 2022, was primarily attributable to our increased volume of U.K.

The increase in income taxes for the three and six months ended June 30, 2022, was primarily attributable to our increased volume of U.K.

investments, which contributed to higher U.K.

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

Three months ended March 31, % Increase

Three months ended June 30, Six months ended June 30, % Increase

2022 2021 2022 2021 Three Months Six Months

Net income available to common stockholders

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

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

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.

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

The increase in net income available to common stockholders for the six months ended June 30, 2022, compared to the six months ended June 30, 2021 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

six months ended June 30, 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) 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 definition of “Adjusted EBITDA re ” is generally consistent with the Nareit definition, other than our adjustments to remove foreign currency and derivative gain and loss, excluding gain and loss from the settlement of foreign currency forwards not designated as hedges, (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) gain 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 gain, 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 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.

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, gain 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.

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 our 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.

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

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,

We define Annualized Pro Forma Adjusted EBITDA re as Annualized Adjusted EBITDA re , subject to certain adjustments to incorporate Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDA re from properties we disposed of during the applicable quarter, and includes transaction accounting adjustments in accordance with U.S.

GAAP, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period.

Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDA re on a pro forma basis in accordance with Article 11 of Regulation S-X.

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

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.

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

The following 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 Pro Forma EBITDA re calculations for the periods indicated below (dollars in thousands):

Three months ended June 30,

Net income $ 223,822 $ 124,768

110,121 73,674

Loss on extinguishment of debt — 46,473

Gain on extinguishment of debt (127) —

Depreciation and amortization

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(40,572) (14,901)

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

Foreign currency and derivative gain, net (7,480) (400)

Gain on settlement of foreign currency forwards 2,106 —

Proportionate share of adjustments for unconsolidated entities 9,049 —

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$ 2,925,736 $ 1,642,796

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

Annualized Pro Forma Adjustments (2)

$ 55,756 $ 42,118

Annualized Pro Forma Adjusted EBITDA re

$ 2,981,492 $ 1,684,914

Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 15,738,383 $ 9,197,694

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

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$ 15,651,540 $ 8,966,530

Net Debt/Annualized Adjusted EBITDA re (3)

Net Debt/Annualized Adjusted EBITDAre (3)

Net Debt/Annualized Pro Forma Adjusted EBITDA re (3)

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

(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.

(2) Net Debt is total debt per our consolidated balance sheets, 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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The adjustment of Net Debt did not impact the calculation for the three months ended June 30, 2021.

As described above, the Annualized Pro Forma Adjustments, which includes transaction accounting adjustments in accordance with U.S.

GAAP, consists of adjustments to incorporate the Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDA re 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 period, consistent with the requirements of Article 11 of Regulation S-X.

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

Three months ended June 30,

Dollars in thousands 2022 2021

Annualized pro forma adjustments from properties acquired or stabilized $ 56,048 $ 42,120

Annualized pro forma adjustments from properties disposed (292) (2)

Annualized Pro forma Adjustments $ 55,756 $ 42,118

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

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

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

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

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

Three months ended March 31, % Increase

Three months ended June 30, Six months ended June 30, % Increase

2022 2021 2022 2021 Three Months Six Months

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 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.

FFO and Normalized FFO for the three and six months ended June 30, 2022 and 2021 were impacted by the same transactions listed under "Net Income Available To Common Stockholders" on page 40.

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):

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Three months ended March 31,

Net income available to common stockholders

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

2022 2021 2022 2021

Net income available to common stockholders $ 223,207 $ 124,479 $ 422,576 $ 220,419

Depreciation and amortization

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Provisions for impairment

7,691 17,246 14,729 19,966

Gain on sales of real estate

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Proportionate share of adjustments for unconsolidated entities (1)

9,860 — 12,095 —

FFO adjustments allocable to noncontrolling interests (319) (165) (673) (331)

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Diluted 603,091,375 374,804,142 599,201,411 373,434,863

(1) Includes an other than temporary impairment of $7.8 million on our investment in unconsolidated entities recognized in the three and six months ended June 30, 2022.

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

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

Three months ended March 31, % Increase

Three months ended June 30, Six months ended June 30, % Increase

2022 2021 2022 2021 Three months Six months

AFFO available to common stockholders

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$ 0.97 $ 0.88 $ 1.94 $ 1.73 10.2 % 12.1 %

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

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Three months ended March 31,

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

2022 2021 2022 2021

Net income available to common stockholders $ 223,207 $ 124,479 $ 422,576 $ 220,419

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Normalized FFO available to common stockholders 611,544 327,673 1,219,479 595,380

Loss on extinguishment of debt — 46,473

(Gain) loss on extinguishment of debt (127) — (127) 46,473

Amortization of share-based compensation 6,641 4,472 11,643 8,169

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

367 584 884 1,202

Leasing costs and commissions (794) (121) (3,167) (827)

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Other adjustments (4)

(4,264) (93) (2,616) (581)

AFFO available to common stockholders $ 583,728 $ 327,647 $ 1,163,826 $ 645,869

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Diluted AFFO $ 584,515 $ 327,991 $ 1,165,433 $ 646,564

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

AFFO per common share:

Basic $ 0.97 $ 0.88 $ 1.95 $ 1.73

Diluted $ 0.97 $ 0.88 $ 1.94 $ 1.73

Distributions paid to common stockholders $ 445,829 $ 263,358 $ 884,109 $ 524,056

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dollars received by us from counterparties in exchange for associated foreign currency payments.

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

(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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In June 2022, we terminated the four cross-currency swaps subject to this adjustment.

The three and six months ended June 30, 2022 include the adjustment through the termination date.

(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 gain and loss as a result of intercompany debt and remeasurement transactions.

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

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PROPERTY PORTFOLIO INFORMATION

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

At June 30, 2022, we owned a diversified portfolio:

• Consisting of 11,427 properties;

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approximately 12,840 square feet per retail property and approximately 240,450 square feet per industrial property.

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

(1) Excludes four properties with ancillary leases only, such as cell towers and billboards, of which one was vacant.

At June 30, 2022, 11,295 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.

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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

The following table sets forth certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent:

Top 10 Industry Concentrations

We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis.

That business activity spans various geographic boundaries and includes property types and clients engaged in various industries.

Even though we now only have a single segment, we believe our investors continue to view diversification as a key component of our investment philosophy and so we believe it is still important to present certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent:

Percentage of Total Portfolio Annualized Contractual Rent by Industry (1)

Aerospace 0.4% 0.4% 0.6% 0.8% 0.9%

Apparel stores 1.5 1.5 1.3 1.1 1.2

Automotive collision services 1.0 1.0 1.1 1.0 0.9

Automotive parts 1.5 1.5 1.6 1.6 1.7

Automotive service 3.3 3.2 2.7 2.6 2.3

Automotive tire services 1.6 1.8 2.0 2.1 2.3

Beverages 1.3 1.3 2.1 2.0 2.4

Child care 1.5 1.5 2.1 2.1 2.2

Consumer electronics 0.6 0.6 0.3 0.3 0.3

Consumer goods 0.7 0.7 0.6 0.6 0.7

Grocery stores 10.5% 10.2% 9.8% 7.9% 5.0%

Convenience stores 9.2 9.1 11.9 12.3 12.6

Crafts and novelties 1.0 1.0 0.9 0.6 0.6

Diversified industrial 1.1 1.0 0.8 0.7 0.8

Dollar stores 7.4 7.5 7.6 7.9 7.3

Restaurants - quick service 6.4 6.6 5.3 5.8 6.3

Drug stores 6.3 6.6 8.2 8.8 9.4

Education 0.1 0.1 0.2 0.2 0.3

Energy 0.4 0.4 — — —

Entertainment 0.9 0.8 0.3 0.3 0.3

Equipment services 0.3 0.3 0.3 0.4 0.4

Financial services 2.0 2.0 1.8 2.0 2.4

Food processing 0.7 0.7 0.7 0.7 0.5

General merchandise 3.4 3.5 3.4 2.5 2.1

Government services * * 0.6 0.7 0.9

Grocery stores 4.9 4.9 4.9 5.2 5.0

Health and beauty 0.2 0.2 0.2 0.2 0.2

Health and fitness 4.6 4.7 6.7 7.0 7.1

Health care 1.8 1.9 1.5 1.6 1.6

Home furnishings 2.5 2.2 0.7 0.8 0.8

Home improvement 3.0 3.1 3.1 2.9 2.8

Machinery 0.1 0.1 0.1 0.1 0.1

Motor vehicle dealerships 1.2 1.3 1.6 1.6 1.8

Office supplies 0.2 0.2 0.1 0.2 0.2

Other manufacturing 0.5 0.5 0.4 0.6 0.7

Packaging 0.6 0.6 0.9 0.8 1.0

Paper * * 0.1 0.1 0.1

Pet supplies and services 1.0 0.9 0.7 0.7 0.5

Restaurants - casual dining 5.7 5.9 2.8 3.2 3.3

Restaurants - quick service 6.5 6.5 5.3 5.8 6.3

Shoe stores 0.2 0.2 0.2 0.2 0.5

Sporting goods 1.4 1.5 0.7 0.8 0.9

Telecommunications 0.1 0.1 0.5 0.5 0.6

Theaters 3.3 3.4 5.6 6.1 5.3

Transportation services 3.3 3.4 3.9 4.3 5.0

Wholesale clubs 2.5 2.5 2.4 2.5 2.9

Other 0.7 0.9 0.3 0.8 0.8

90.6% 91.5% 93.8% 97.3% 100.0%

Grocery stores 5.5 5.3 4.9 2.7 —

Health care 0.1 0.1 0.1 — —

Home improvement 5.2 5.1 4.3 2.9 2.8

Warehousing and storage 0.2 0.2 — — —

Other 1.6 0.9 * * —

Total Europe 9.4% 8.5% 6.2% 2.7% —%

Totals 100.0% 100.0% 100.0% 100.0% 100.0%

* Less than 0.1%

Health and fitness 4.5 4.7 6.7 7.0 7.1

General merchandise 3.8 3.7 3.4 2.5 2.1

Automotive service 3.5 3.2 2.7 2.6 2.2

(1) The presentation of Top 10 Industry Concentrations combines total portfolio contractual rent from the U.S.

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

Table of Content s

Property Type Composition

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

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2022 (dollars in thousands):

Property Type

6 unchanged sentences

(1) Includes leasable building square footage.

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

Excludes 3,600 acres of leased land categorized as agriculture at June 30, 2022.

(2) "Other" includes seven properties classified as office, consisting of approximately 2.0 million leasable square feet and $25.2 million in annualized contractual rent, and 16 properties classified as agriculture, consisting of approximately 191,200 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 March 31, 2022:

Client Number of

1 unchanged sentence

Walgreens 340 4.0 %

7-Eleven 627 3.9 %

Dollar General 1,307 3.9

7-Eleven 632 3.9

Dollar Tree / Family Dollar 1,037 3.5

FedEx 80 2.9 %

LA Fitness 79 2.4

1 unchanged sentence

BJ's Wholesale Clubs 32 1.9

B&Q (Kingfisher) 34 1.8

CVS Pharmacy 183 1.7

1 unchanged sentence

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 %

Regal Cinemas (Cineworld) 41 1.5

Tractor Supply 163 1.4

1 unchanged sentence

Home Depot 29 1.2

Kroger 31 1.1

Fas Mart (GPM Investments) 260 1.0

Circle K (Couche-Tard) 253 1.0 %

Total 4,609 41.8 %

(1) Amounts for each client are calculated independently;

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

Table of Content s

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 March 31, 2022 (dollars in thousands):

Total Portfolio (1)

19 unchanged sentences

This table excludes 168 vacant units.

Table of Content s

Geographic Diversification

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

The following table sets forth certain state-by-state information regarding our property portfolio as of June 30, 2022 (dollars in thousands):

Percent Leased

Percentage of Total Portfolio Annualized Contractual Rent

384 96 % 4,122,400 2.0 %

6 100 299,700 0.1

228 100 3,496,000 1.9

226 99 2,453,000 1.1

323 99 11,326,400 6.4

158 98 2,570,800 1.5

27 100 1,244,600 0.5

26 100 192,000 0.2

702 99 9,515,800 5.3

494 99 7,997,700 3.6

Alabama 381 97 % 4,123,200 2.0 %

Alaska 6 100 299,700 0.1

Arizona 229 100 3,513,000 1.9

Arkansas 223 100 2,428,700 1.1

California 326 99 11,355,000 6.3

Colorado 163 98 2,634,700 1.5

Connecticut 25 100 1,237,300 0.5

Delaware 26 100 192,000 0.2

Florida 716 99 9,646,500 5.3

Georgia 502 99 8,057,800 3.6

Hawaii 22 100 47,800 0.2

27 100 189,100 0.1

462 98 11,796,100 5.0

387 99 6,701,900 2.9

89 98 3,501,800 1.0

173 100 4,465,600 1.2

172 97 3,413,800 1.3

308 99 4,888,700 2.2

55 98 1,008,300 0.5

73 96 2,748,000 1.3

Idaho 27 100 189,100 0.1

Illinois 474 98 12,232,700 5.3

Indiana 390 99 7,145,500 2.8

Iowa 91 99 2,631,800 0.9

Kansas 175 100 4,486,900 1.2

Kentucky 207 99 4,335,900 1.4

Louisiana 309 100 4,921,500 2.2

Maine 55 98 1,008,300 0.5

Maryland 73 96 2,822,700 1.3

Massachusetts 92 99 3,119,600 1.4

91 99 3,109,400 1.4

450 98 5,303,000 2.8

230 100 3,495,200 2.0

275 100 4,156,000 1.4

343 99 4,736,900 2.0

21 100 204,500 0.1

75 99 1,013,000 0.4

72 100 2,638,200 1.0

Michigan 446 99 5,250,300 2.8

Minnesota 231 100 3,513,100 2.0

Mississippi 279 99 4,206,900 1.4

Missouri 343 98 4,743,200 2.0

Montana 21 100 204,500 0.1

Nebraska 75 99 1,013,000 0.4

Nevada 72 99 2,638,200 1.0

New Hampshire 29 100 561,500 0.3

30 100 567,900 0.4

142 98 2,233,300 1.8

102 99 1,299,200 0.7

241 99 4,315,400 3.2

New Jersey 143 98 2,243,000 1.8

New Mexico 102 99 1,299,200 0.7

New York 240 99 4,311,000 3.1

North Carolina 377 99 7,700,000 3.2

377 99 7,692,000 3.2

22 86 352,300 0.2

663 98 15,126,700 4.6

286 98 3,958,900 1.8

42 98 658,900 0.4

330 99 5,861,400 2.8

7 86 109,800 0.1

North Dakota 22 86 352,300 0.2

Ohio 662 99 14,503,100 4.5

Oklahoma 283 99 3,911,600 1.7

Oregon 41 98 654,900 0.4

Pennsylvania 336 99 5,942,600 2.8

Rhode Island 7 86 109,800 0.1

South Carolina 284 99 3,909,100 1.9

285 99 3,912,700 2.0

29 100 428,400 0.2

374 98 6,475,400 2.6

1450 98 23,908,100 10.7

36 100 1,529,500 0.5

7 100 134,900 0.1

347 97 5,918,800 2.5

77 99 1,711,900 0.9

South Dakota 29 100 428,400 0.2

Tennessee 376 98 6,502,900 2.5

Texas 1,467 99 24,675,800 10.7

Utah 36 100 1,529,500 0.5

Vermont 7 100 134,900 0.1

Virginia 351 98 5,942,500 2.5

Washington 77 100 1,768,300 1.0

West Virginia 74 100 726,000 0.4

74 100 726,000 0.4

245 100 4,444,400 1.9

23 100 157,700 0.1

6 100 59,400 0.1

Wisconsin 251 100 4,768,100 1.9

Wyoming 23 100 157,700 0.1

Puerto Rico 6 100 59,400 0.1

Spain 43 100 2,492,000 0.7

151 100 13,182,900 8.7

United Kingdom 182 100 15,802,600 9.1

Totals/average

11,427 99 % 218,485,100 100.0 %

Table of Content s

IMPACT OF INFLATION

19 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