What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-23 · 680 added, 738 removed, 949 unchanged (60% of the section changed)

9 unchanged sentences

All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes.

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Report of Independent Registered Public Accounting Firm

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the Fair Value of Land in Real Estate Acquisitions

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There was a high degree of subjective and complex auditor judgment required in evaluating the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions.

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The following are the primary procedures we performed to address this critical audit matter.

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For a selection of real estate acquisitions, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating a selection of the Company’s acquired land values by comparing them to independently developed ranges using market data from industry transaction databases and published industry reports.

Business Combination

As discussed in Notes 2 and 3 to the consolidated financial statements, on November 1, 2021, the Company acquired VEREIT, Inc.

for $12.1 billion.

The transaction was accounted for as a business combination, and the acquired assets and assumed liabilities were recorded at their respective fair values.

The Company estimates the fair value of each property acquired, which is then allocated to land, buildings and improvements, and identified intangible assets and liabilities based on their estimated fair values.

We identified the evaluation of the fair values of certain acquired properties and the allocation of purchase price to land as a critical audit matter.

Specifically, the measurement of the fair values of certain acquired properties and allocation of purchase price to land is dependent upon significant assumptions for which relevant external market data is not always readily available.

Such assumptions include market land values, market rental rates, and capitalization rates.

There was a high degree of subjective and complex auditor judgment required to evaluate the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to allocate the purchase price of the VEREIT transaction.

This included controls over the selection and review of the significant assumptions used to estimate the fair value of certain properties acquired and the allocation of purchase price to land.

For a selection of properties, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating the significant assumptions used to estimate the fair value measurements of certain acquired properties and allocation of purchase price to land.

The evaluation included comparison of the Company’s assumptions noted above to independently developed ranges using market data from industry transaction databases, and published industry reports.

(signed) KPMG LLP

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February 22, 2023

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Report of Independent Registered Public Accounting Firm

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 22, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired VEREIT, Inc.

during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, VEREIT, Inc.’s internal control over financial reporting associated with total assets of $17.7 billion and total revenues of $176.3 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of VEREIT, Inc.

Basis for Opinion

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may

become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(signed) KPMG LLP

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February 22, 2023

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2021 and 2020

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

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

December 31, 2022 December 31, 2021

Real estate held for investment, at cost:

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Line of credit payable and commercial paper 2,729,040 1,551,376

Term loans, net 249,557 249,358

Term loan, net 249,755 249,557

Mortgages payable, net 853,925 1,141,995

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Stockholders’ equity:

Common stock and paid in capital, par value $ 0.01 per share, 740,200,000 shares authorized, 591,261,991 and 361,303,445 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

Common stock and paid in capital, par value $ 0.01 per share, 1,300,000,000 and 740,200,000 shares authorized, 660,300,195 and 591,261,991 shares issued and outstanding as of December 31, 2022, and 2021, respectively

34,159,509 29,578,212

Distributions in excess of net income ( 5,493,193 ) ( 4,530,571 )

Accumulated other comprehensive income (loss) 4,933 ( 54,634 )

Accumulated other comprehensive income 46,833 4,933

Total stockholders’ equity 28,713,149 25,052,574

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

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years Ended December 31, 2021, 2020 and 2019

(in thousands, except per share data)

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

Years ended December 31,

2022 2021 2020

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Gain on sales of real estate 102,957 55,798 76,232

Foreign currency and derivative gains, net 710 4,585 2,255

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

Equity in income of unconsolidated entities 1,106 — —

Foreign currency and derivative (loss) gain, net ( 13,311 ) 710 4,585

Gain (loss) on extinguishment of debt 367 ( 97,178 ) ( 9,819 )

Equity in income and impairment of investment in unconsolidated entities ( 6,448 ) 1,106 —

Other income, net 30,511 9,949 4,538

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Diluted 612,180,519 414,769,846 345,415,258

Other comprehensive income:

Net income available to common stockholders $ 869,408 $ 359,456 $ 395,486

Total other comprehensive income (loss):

Foreign currency translation adjustment ( 55,154 ) 9,119 ( 2,606 )

Unrealized gain (loss) on derivatives, net 97,054 50,448 ( 34,926 )

Total other comprehensive income (loss) $ 41,900 $ 59,567 $ ( 37,532 )

Comprehensive income available to common stockholders $ 911,308 $ 419,023 $ 357,954

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

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(dollars in thousands)

Years Ended December 31, 2022, 2021 and 2020

(in thousands, except share count data)

capital Distributions

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Contributions by noncontrolling interests — — — — — 3,168 3,168

Redemption of common units — ( 6,866 ) — — ( 6,866 ) ( 14,257 ) ( 21,123 )

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

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Net income — — 359,456 — 359,456 1,291 360,747

Other comprehensive loss — — — ( 37,532 ) ( 37,532 ) — ( 37,532 )

Other comprehensive income — — — 59,567 59,567 — 59,567

Shares issued in merger 162,043,548 11,556,715 — — 11,556,715 3,160 11,559,875

Orion Divestiture — ( 1,140,769 ) — — ( 1,140,769 ) ( 1,352 ) ( 1,142,121 )

Distributions paid and payable — — ( 1,230,094 ) — ( 1,230,094 ) ( 1,868 ) ( 1,231,962 )

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Other comprehensive income — — — 41,900 41,900 — 41,900

Shares issued in merger 162,043,548 11,556,715 — — 11,556,715 3,160 11,559,875

Orion Divestiture — ( 1,140,769 ) — — ( 1,140,769 ) ( 1,352 ) ( 1,142,121 )

Distributions paid and payable — — ( 1,832,030 ) — ( 1,832,030 ) ( 4,125 ) ( 1,836,155 )

Share issuances, net of costs 67,777,279 4,453,953 — — 4,453,953 — 4,453,953

Contributions by noncontrolling interests — — — — — 51,221 51,221

Share issuance, net of costs 68,875,984 4,570,766 — — 4,570,766 — 4,570,766

Reallocation of equity — ( 3,210 ) — — ( 3,210 ) 3,210 —

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

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2021, 2020 and 2019

(in thousands)

(dollars in thousands)

Years ended December 31,

2022 2021 2020

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Depreciation and amortization 1,670,389 897,835 677,038

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

Amortization of share-based compensation 21,617 41,773 16,503

Non-cash revenue and expense adjustments ( 23,380 ) ( 3,562 ) ( 9,338 )

Non-cash revenue adjustments ( 57,009 ) ( 23,380 ) ( 3,562 )

(Gain) loss on extinguishment of debt ( 367 ) 97,178 9,819

Amortization of net premiums on mortgages payable ( 13,622 ) ( 3,498 ) ( 1,258 )

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Loss on interest rate swaps 718 2,905 4,353

Foreign currency and derivative gains, net ( 710 ) ( 4,585 ) ( 2,255 )

Foreign currency and unrealized derivative loss (gain), net 220,948 27,223 ( 14,510 )

Gain on sales of real estate ( 102,957 ) ( 55,798 ) ( 76,232 )

Equity income of unconsolidated entities ( 1,106 ) — —

Equity in income and impairment of investment in unconsolidated entities 6,448 ( 1,106 ) —

Distributions from unconsolidated entities 1,605 365 —

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Proceeds from sales of real estate 436,115 250,536 259,459

Non-refundable escrow deposits ( 28,390 ) — ( 14,603 )

Return of investment from unconsolidated entities 1,401 38,345 —

Net proceeds from sale of unconsolidated entities 108,088 — —

Proceeds from note receivable 5,867 — —

Insurance proceeds received 49,070 — —

Non-refundable escrow deposits ( 5,667 ) ( 28,390 ) —

Net cash paid in merger — ( 366,030 ) —

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Cash distributions to common stockholders ( 1,813,431 ) ( 1,169,026 ) ( 964,167 )

Borrowings on line of credit and commercial paper program 9,082,206 3,528,042 2,816,632

Payments on line of credit and commercial paper program ( 7,508,332 ) ( 4,246,755 ) ( 2,365,368 )

Borrowings on line of credit and commercial paper programs 28,539,299 9,082,206 3,528,042

Payments on line of credit and commercial paper programs ( 27,434,617 ) ( 7,508,332 ) ( 4,246,755 )

Principal payment on term loan — — ( 250,000 )

Proceeds from notes and bonds payable issued 1,033,387 2,200,488 897,664

Proceeds from notes payable issued 2,154,662 1,033,387 2,200,488

Principal payment on notes payable — ( 1,700,000 ) ( 250,000 )

Payments upon extinguishment of debt ( 96,583 ) ( 9,445 ) —

Principal payments on mortgages payable ( 312,234 ) ( 66,575 ) ( 108,789 )

Payments upon extinguishment of debt — ( 96,583 ) ( 9,445 )

Proceeds from common stock offerings, net 4,556,028 4,442,725 1,823,821

Proceeds from dividend reinvestment and stock purchase plan 11,654 11,232 9,109

Proceeds from At-the-Market (ATM) program 3,179,490 1,094,938 1,264,518

Net cash received from Orion Divestiture 593,484 — —

Redemption of common units — — ( 21,123 )

Distributions to noncontrolling interests ( 3,935 ) ( 1,707 ) ( 1,596 )

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Debt issuance costs ( 34,156 ) ( 13,405 ) ( 19,456 )

Net cash received from Orion Divestiture — 593,484 —

Other items, including shares withheld upon vesting ( 4,790 ) ( 33,552 ) ( 23,279 )

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Net (decrease) increase in cash, cash equivalents and restricted cash ( 105,488 ) ( 518,310 ) 779,674

Cash, cash equivalents and restricted cash, beginning of year 850,679 71,005 21,071

Cash, cash equivalents and restricted cash, end of year $ 332,369 $ 850,679 $ 71,005

For supplemental disclosures, see note 15.

Cash, cash equivalents and restricted cash, beginning of period 332,369 850,679 71,005

Cash, cash equivalents and restricted cash, end of period $ 226,881 $ 332,369 $ 850,679

For supplemental disclosures, see note 16, Supplemental Disclosures of Cash Flow Information .

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

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REALTY INCOME CORPORATION AND SUBSIDIARIES

N OTES T O C ONSOLIDATED F INANCIAL S TATEMENTS

December 31, 2021, 2020, and 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Organization and Operation

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We invest in commercial real estate and have elected to be taxed as a real estate investment trust ("REIT").

We are listed on the New York Stock Exchange under the symbol “O”.

We are listed on the New York Stock Exchange ("NYSE") under the symbol “O”.

Over the past 54 years, we have been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients.

At December 31, 2021, we owned 11,136 properties, located in all 50 United States (U.S.) states, Puerto Rico, the United Kingdom (U.K.) and Spain, containing approximately 210.1 million leasable square feet.

At December 31, 2022, we owned or held interests in 12,237 properties, with approximately 236.8 million leasable square feet.

Information with respect to number of properties, leasable square feet, average initial lease term and initial weighted average cash lease yield is unaudited.

Unless otherwise indicated, all dollar amounts are expressed in U.S.

In November 2021, we completed our merger with VEREIT, Inc.

Our financial results for the years ended December 31, 2022 and 2021 reflect our merger with VEREIT, Inc.

("VEREIT"), following the consummation of the merger on November 1, 2021.

Our financial results for the year ended December 31, 2020 do not reflect the merger.

For more details, please see note 3, Merger with VEREIT, Inc.

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Intercompany accounts and transactions are eliminated in consolidation.

Dollar (“USD”) is our functional currency.

Dollar ("USD") is our reporting currency.

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

For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements.

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

The resulting translation adjustments are included in 'Accumulated other comprehensive income', ("AOCI"), in the consolidated balance sheets.

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

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

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

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

The resulting adjustment is reflected in 'Foreign currency and derivative (loss) gain, net' in the consolidated statements of income and comprehensive income.

Principles of Consolidation.

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

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

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

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

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

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

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

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

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

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

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

Below is a summary of selected financial data of consolidated VIEs included on our consolidated balance sheets at December 31, 2022 and 2021 (in thousands):

December 31, 2022 December 31, 2021

Net real estate

$ 920,032 $ 688,229

$ 1,082,346 $ 795,670

Total liabilities

$ 60,127 $ 57,057

Reclassification .

Certain reclassifications have been made to the prior years’ consolidated statements of cash flows to conform to current year presentation.

Use of Estimates .

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Actual results could differ from those estimates.

Reclassifications .

Certain reclassifications have been made to the prior years' consolidated financial statements to conform to current year presentation.

We began presenting 'Goodwill,' which was previously presented in 'Other assets, net,' in a separate caption within our consolidated balance sheets.

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

Furthermore, we began presenting

'Other income, net' which consists of certain miscellaneous non-recurring revenue previously presented in 'Other' within 'Revenue,' in a separate caption within our consolidated statements of income and comprehensive income.

These reclassifications have no effect on net income, total assets, accumulated earnings or cash flow statements as previously reported.

Net Income per Common Share.

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Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.

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

2021 2020 2019

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

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

Incremental shares from share-based compensation 234,563 135,132 322,265

Weighted average shares used for diluted net income per share computation

414,769,846 345,415,258 316,159,277

Unvested shares from share-based compensation that were anti-dilutive

45,404 70,581 8,113

Weighted average partnership common units convertible to common shares that were anti-dilutive

500,217 463,119 442,073

For more detail, see note 15, Net Income per Common Share .

Cash Equivalents and Restricted Cash .

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However, Realty Income has not experienced any losses in such accounts.

Income Taxes.

We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended.

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

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

Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S.

income taxes on such income.

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

A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable.

Our use of a TRS enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings.

For our international territories, we are liable for taxes in the United Kingdom and Spain.

Accordingly, provisions have been made for U.K.

and Spain income taxes.

Therefore, the income taxes recorded on our consolidated statements of income and comprehensive income represent amounts accrued or paid by Realty Income and its subsidiaries for U.S.

income taxes on our TRS entities, city and state income and franchise taxes, and income taxes for the U.K.

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes primarily due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things.

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We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met.

We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities.

Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements.

Lease Revenue Recognition and Accounts Receivable.

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Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms.

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

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

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

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

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

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

If we conclude the

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

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

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

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

We currently anticipate future concessions will be similar.

As of December 31, 2022, the majority of concessions granted to our clients as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged.

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

In limited circumstances, the undiscounted cash flows resulting from deferrals granted increased significantly from original lease terms, which required us to account for these as lease modifications, and resulted in an insignificant impact to consolidated rental revenue during 2020 and 2021.

Similarly, rent abatements granted, which are also accounted for as lease modifications, impacted our rental revenue by an insignificant amount during 2020 and 2021.

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

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

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

The following table summarizes reserves to rental revenue (in millions):

Year ended December 31,

The following table summarizes net reserves to rental revenue (in millions):

Years ended December 31,

2022 2021 2020

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

We also evaluated certain properties impacted by the COVID-19 pandemic for impairment (see note 14, Financial Instruments and Fair Value Measurements ).

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Gain on Sales of Real Estate .

When real estate is sold, the carrying amount of the applicable assets is derecognized with a corresponding gain from the sale recognized in our consolidated statements of income and comprehensive income.

We record a gain on sale of real estate pursuant to provisions under ASC 610-20 , Gains and Losses from the Derecognition of Nonfinancial Assets .

We determine whether we would have a controlling financial interest in the property after the sale.

We record a gain from the sale of real estate provided that various criteria, relating to the terms of the sale and any subsequent involvement by us with the real estate, have been met.

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A majority of our acquisitions qualify as asset acquisitions and the transaction costs associated with those acquisitions are capitalized.

However, our merger with VEREIT comprises both an input and substantive process that together significantly contributes to the ability to create outputs and therefore would be considered a business.

As a result, the merger with VEREIT qualified as a business combination and, accordingly, the transaction costs have been expensed and categorized as merger and integration-related costs on our consolidated statements of income and comprehensive income.

In accordance with ASC Topic 805, Business Combinations , adjustments to the allocated purchase price are able to be made within one year of the closing date of our merger with VEREIT as acquisition date uncertainties are resolved (for more details on our merger with VEREIT, please see note 3, Merger with VEREIT, Inc.

However, our merger with VEREIT was comprised of both inputs and substantive processes that together significantly contributed to the ability to create outputs and, therefore, was considered a business.

As a result, the merger with VEREIT qualified as a business combination and, accordingly, the transaction costs were expensed and categorized as merger and integration-related costs on our consolidated statements of income and comprehensive income.

In accordance with ASC Topic 805, Business Combinations , adjustments to the allocated purchase price were made within one year of the closing date of our merger with VEREIT as acquisition date uncertainties were resolved (for more details on our merger with VEREIT, please see note 3, Merger with VEREIT, Inc.

and Orion Office REIT Inc.

Divestiture ).

When acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to:

Apart from our merger with VEREIT, a majority of our acquisitions qualify as asset acquisitions.

Therefore when acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to:

(1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values.

Intangible assets and liabilities consist of above-market or below-market lease value of in-place leases and the value of in-place leases, as applicable.

Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as

prepaid rent.

In an acquisition of multiple properties, we must also allocate the purchase price among the properties.

The allocation of the purchase price is based on our assessment of estimated fair values of the land, building and improvements, and identified intangible assets and liabilities, and is often based upon various characteristics of the market where the property is located.

The allocation of the purchase price is based on our assessment of estimated fair values of the land, building and improvements, and identified intangible assets and liabilities, utilizing market-based evidence and commonly applied valuation approaches.

In addition, any assumed notes payable or mortgages are recorded at their estimated fair values.

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Buildings and improvements are typically valued under the replacement cost approach.

In allocating the fair value to identified intangibles for above-market or below-market leases, an amount is recorded based on the present value of the difference between (i) the contractual amount to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rate for the corresponding in-place lease, measured over the remaining term of the lease.

The value of in-place leases is determined by our estimated costs related to acquiring a client and the carrying costs that would be incurred over the vacancy period to locate a client if the property were vacant, considering market conditions and costs to execute similar leases at the time of acquisition.

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

The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of the respective leases.

The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of

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the respective leases.

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

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Assets held for sale are recorded at the lower of carrying value or estimated fair value, less the estimated cost to dispose of the assets.

Twenty-two properties were classified as held for sale at December 31, 2022.

If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we will reclassify the property as held for investment.

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

Thirty-three properties were classified as held for sale at December 31, 2021.

Investment in Unconsolidated Entities.

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

We have determined that none of the unconsolidated entities would be considered variable interest entities ("VIE") under the applicable accounting guidance.

During the year ended December 31, 2022, all seven properties owned by our industrial partnerships and accounted for under the equity method were sold.

For further details, see note 5, Investments in Real Estate.

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

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

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

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

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

estate assets, and the remaining term of the assumed debt.

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

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

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

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

The carrying value of our investment was included in 'Investment in unconsolidated entities' in the accompanying consolidated balance sheet as of December 31, 2021.

We recorded our proportionate share of net income from the unconsolidated entities in 'Equity in income and impairment of investment in unconsolidated entities' in the consolidated statements of income and comprehensive income for the years ended December 31, 2022 and 2021.

Upon the closing of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill.

In connection with our merger with VEREIT, we recorded goodwill as a result of consideration exceeding the net assets acquired.

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

the allocation is pending the finalization of our purchase accounting.

For further details, see note 3, Merger with VEREIT, Inc.

and Orion Office REIT Inc.

Divestiture .

Deferred Financing Costs.

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Deferred financing costs related to the line of credit are included in other assets, net in the accompanying consolidated balance sheets.

These costs are amortized to interest expense over the terms of the respective financing agreements that approximates with the effective interest method.

These costs are amortized to interest expense over the terms of the respective financing agreements that approximates the effective interest method.

Depreciation and Amortization .

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The estimated useful lives are as follows:

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Buildings 25 years or 35 years

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

For further details, see note 12, Financial Instruments and Fair Value Measurements.

Provisions for Impairment - Goodwill.

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Provisions for Impairment - Investment in Unconsolidated Entities.

When circumstances indicate that a decrease in value of an equity method investment has occurred that is other than temporary, an impairment loss should be recognized.

To determine whether an impairment is other-than-temporary, we consider whether it has the ability and intent to hold the investment until the carrying value is fully recovered.

We evaluate the recoverability of our investment in unconsolidated entities in accordance with accounting standards for equity investments by first reviewing each investment for indicators of impairment.

If indicators are present, we estimate the fair value of the

If the carrying value of the investment is greater than the estimated fair value, we make an assessment of whether the impairment is temporary or other-than-temporary.

In making this assessment, we consider the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the entity, and our intent and ability to retain its interest long enough for a recovery in market value.

If we conclude that the impairment is other than temporary, the investment is reduced to its estimated fair value.

The evaluation of an investment in an unconsolidated entity for potential impairment requires significant judgment.

Since our merger with VEREIT in November 2021, when we assumed our first unconsolidated entities, through December 31, 2021, there have been no impairments of equity method investments.

As part of our merger with VEREIT in November 2021, we acquired seven properties owned by industrial partnerships.

These properties, which were subsequently sold during the year ended December 31, 2022, were accounted for under the equity method and considered unconsolidated entities.

During our ownership of those properties and when circumstances indicated that a decrease in the value of an equity method investment had occurred that was other than temporary, we recognized an impairment loss, which required significant judgment.

To determine whether the impairment loss was other-than-temporary, we considered whether it had the ability and intent to hold the investment until the carrying value was fully recovered.

We evaluated the impairment of our investment in unconsolidated entities in accordance with accounting standards for equity investments by first reviewing each investment for indicators of impairment.

If indicators were present, we estimated the fair value of the investments.

If the carrying value of the investment was greater than the estimated fair value, we made an assessment of whether the impairment was temporary or other-than-temporary.

In making this assessment, we considered the length of time and the extent to which fair value had been less than cost, the financial condition and near-term prospects of the entity, and our intent and ability to retain the interest long enough for a recovery in market value.

The investment was reduced to its estimated fair value if conclusions indicated the impairment was other than temporary.

For further details, see note 5, Investments in Real Estate.

Equity Offering Costs.

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The recognition of changes in the fair value of derivatives is recorded in net income unless the derivative is designated in a cash flow or net investment hedge accounting relationship in which case the change in fair value is recorded in other comprehensive income until such time as the designated hedged item impacts net income.

Income Taxes .

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended.

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

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

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

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

A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable.

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

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things.

We regularly analyze our various federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met.

We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities.

Therefore, no provisions for uncertain income tax positions have been recorded in our financial statements.

Recently Issued Accounting Standards.

In July 2021, the FASB issued ASU 2021-05 establishing Topic 842, Lessors - Certain Leases with Variable Lease Payments .

ASU 2021-05 improves ASC 842 classification guidance as it relates to a lessor's accounting for certain leases with variable lease payments.

This guidance requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss.

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

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

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

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Segment Reporting.

During the second quarter of 2022, a re-evaluation of our business and management structure led to a change in identification of operating and reportable segments.

As we have grown in size and scale over recent years, including through the acquisition of VEREIT in November 2021, management has shifted its focus to operating performance, seeking investments with attractive yields and risk adjusted returns regardless of client industry or geography.

Our chief operating decision maker relies primarily on cash flow analysis at the consolidated level to make decisions about allocating resources.

As a result, we reorganized our business activities into one operating and reportable segment.

ASC Topic 280, Segment Reporting , establishes standards for the manner in which enterprises report information about operating segments.

We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis (whereby clients are responsible for property taxes, insurance and maintenance costs).

That business activity spans various geographic boundaries and includes property types and clients engaged in various industries, but ultimately all business activity involves similar economic characteristics of owning and leasing commercial properties under long-term, net lease agreements.

Therefore, we operate and manage the business in one operating and reportable segment.

This segmental presentation is consistent with the information provided to our chief operating decision maker to make decisions about allocating resources and assessing our performance.

ASC 280 requires certain entity-wide annual disclosures for entities with a single reportable segment.

The following table disaggregates domestic and international revenue by major asset types and geographic regions (in millions):

Years ended December 31,

Retail $ 2,455.9 $ 243.3 $ 30.9 $ 2,730.1

Industrial 465.2 30.2 — 495.4

74.2 — — 74.2

Rental (including reimbursable) $ 2,995.3 $ 273.5 $ 30.9 $ 3,299.7

Other revenue 44.0

Total revenue $ 3,343.7

Retail $ 1,566.7 $ 138.9 $ 4.2 $ 1,709.8

Industrial 261.5 9.6 — $ 271.1

84.1 — — $ 84.1

Rental (including reimbursable) $ 1,912.3 $ 148.5 $ 4.2 $ 2,065.0

Other revenue 15.5

Total revenue $ 2,080.5

Retail $ 1,312.5 $ 55.9 $ — $ 1,368.4

Industrial 184.6 1.3 — 185.9

85.2 — — 85.2

Rental (including reimbursable) $ 1,582.3 $ 57.2 $ — $ 1,639.5

Other revenue 7.6

Total revenue $ 1,647.1

(1) Other includes properties in Spain, starting in September 2021 and in Italy, starting in October 2022.

(2) Other includes the office, agriculture and gaming asset types, with gaming starting in December 2022.

Long-lived assets include items such as property, plant, equipment and right-of-use assets subject to operating and finance leases.

As of December 31, 2022, no individual country or asset-type representing more than 10% of total revenue, other than as presented in the tables above.

In addition, as of December 31, 2022, no individual country or asset-type representing more than 10% of the total assets, other than as presented in the tables below.

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following table disaggregates domestic and international total long-lived assets (in millions):

As of December 31,

Long-lived assets $ 33,685.6 $ 4,596.1 $ 582.7 $ 38,864.4 $ 29,323.8 $ 3,206.6 $ 314.3 $ 32,844.7

Remaining assets 10,808.7 10,292.8

Total assets $ 49,673.1 $ 43,137.5

(1) Other includes properties in Spain, starting in September 2021 and in Italy, starting in October 2022.

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

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

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The guidance may be elected over time as reference rate reform activities occur.

We are currently evaluating the impact

that the expected market transition from the London Interbank Offered Rate, commonly referred to as LIBOR, to alternative references rates will have on our financial statements as well as the applicability of the aforementioned expedients and exceptions provided in ASU 2020-04.

During 2022, all of our debt and derivative instruments were converted from LIBOR to SOFR.

The interest rate swap on our term loan, which was converted to a Secured Overnight Financing Rate ("SOFR") benchmark from the London Inter-Bank Offered Rate (“LIBOR”) during June 2022, continues to be accounted for as a cash flow hedge.

The adoption of this guidance had no impact on our consolidated financial statements.

Merger with VEREIT, Inc.

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Merger with VEREIT

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

On April 29, 2021, we entered into an Agreement and Plan of Merger, as amended, (the "Merger Agreement"), with VEREIT, its operating partnership, VEREIT Operating Partnership, L.P., ("VEREIT OP"), and two newly formed subsidiaries.

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

The primary reason for the Merger is to expand our size, scale and diversification, in order to further enhance our competitive advantages and accelerate our investment activities.

The primary reason for the Merger was to expand our size, scale and diversification, in order to further enhance our competitive advantages and accelerate our investment activities.

On November 1, 2021, we completed our acquisition of VEREIT, and the merger was consummated.

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For more details, see note 17, Common Stock Incentive Plan.

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

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

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

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

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

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

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

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

Preliminary Purchase Price Allocation

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

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Purchase Price Allocation

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

As of November 1, 2021

Land $ 3,021,906

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

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

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

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

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

As of December 31, 2021, we had not finalized the determination of fair values allocated to certain assets and liabilities, including land, buildings, lease intangible assets, lease intangible liabilities, and the allocation of goodwill.

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

A preliminary estimate of approximately $ 3.66 billion has been allocated to goodwill.

The initial assessment of fair value provided in our Annual Report on Form 10-K for the year ended December 31, 2021 was preliminary and was based on information that was available to management at the time the consolidated financial statements were prepared.

Measurement period adjustments were recorded during the year ended December 31, 2022 in the period in which they were determined, as if they had been completed at the acquisition date.

Before the first anniversary of the merger date, final measurement period adjustments, as reflected in the table above, resulted in a net increase of $ 54.8 million to goodwill from the initial valuation, reflecting a decrease of $ 15.8 million in land, $ 7.6 million in building, $ 22.6 million in lease intangible assets, $ 19.5 million in investment in unconsolidated entities, $ 9.9 million in other assets, offset by decrease of $ 4.4 million in lease intangible liabilities, $ 16.1 million in other liabilities and $ 0.1 million in mortgages payable.

Approximately $ 3.72 billion was allocated to goodwill.

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

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

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

the allocation is pending the

finalization of our purchase accounting.

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

The recognized goodwill was attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the

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employee workforce onboarded from VEREIT following the closing of the merger.

None of the goodwill recognized is deductible for tax purposes.

Merger and Integration-Related Costs

In conjunction with our merger with VEREIT, we incurred approximately $ 161.4 million of transaction costs during the year ended December 31, 2021, which were included in the $ 167.4 million of merger and integration-related costs within our consolidated statements of income and comprehensive income.

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

In conjunction with our merger with VEREIT, we incurred merger-related transaction costs of $ 13.9 million and $ 167.4 million for the years ended December 31, 2022 and 2021, respectively.

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.

Unaudited Pro Forma Financial Information

Our consolidated results of operations for the year ended December 31, 2021 include $ 176.3 million of revenues and $ 36.7 million of net loss associated with the results of operations of VEREIT OP from the merger closing date to December 31, 2021.

Our consolidated results of operations for the years ended December 31, 2022 and 2021, include $ 1.02 billion and $ 176.3 million of revenues, respectively, and $ 62.4 million and $ 36.7 million of net income associated with the results of operations of VEREIT OP, respectively.

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

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

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

The following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc.

Year Ended December 31,

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

Years ended December 31,

Total revenues $ 3,084.3 $ 2,835.5

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merger and integration-related costs of $ 167.4 million were excluded within the pro forma financial information for 2021, but included for 2020.

Litigation Relating to the Merger

Purported stockholders of VEREIT filed 12 lawsuits challenging disclosures related to the merger ( Stein v.

VEREIT, Inc., et.

1:21-cv-01409 (D.

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

VEREIT, Inc., et.

1:21-cv-00845 (D.

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

VEREIT, Inc., et.

1:21-cv-05270 (D.

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

VEREIT, Inc., et.

1:21-cv-05286 (D.

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

VEREIT, Inc., et.

1:21-cv-05357 (D.

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

Congregation Zichron Moishe v.

VEREIT, Inc., et.

1:21-cv-01729 (D.

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

VEREIT, Inc., et al.

1:21-cv-01758 (D.

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

VEREIT, Inc., et.

1:21-cv-01791 (D.

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

Ciccotelli v.

VEREIT, Inc., et.

2:21-cv-02983 (D.

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

VEREIT, Inc., et.

1:21-cv-06129 (D.

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

VEREIT, Inc., et al.

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

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

and Halberstam v.

VEREIT, Inc., et al.

1:21-cv-02000 (D.

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

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

Realty Income Corp., et.

1:21-cv-01653 (D.

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

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

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

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

The Bowles and Ciccotelli Complaints named VEREIT, the members of the VEREIT board of directors, VEREIT OP, Realty Income, Merger

Sub 1 and Merger Sub 2 as defendants.

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

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

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

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

The Demand Letter included similar allegations.

Furthermore, the Jenkins Complaint also alleged that:

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

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

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

The defendants believed that all of the claims asserted in the Complaints were without merit.

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

In light of these additional disclosures, between August 2, 2021 and October 27, 2021, plaintiffs’ counsel in all of the cases voluntarily dismissed their respective complaints.

Orion Divestiture

Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion Office REIT Inc., or Orion.

On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders (including legacy VEREIT stockholders who received shares of our common stock in our merger with VEREIT) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date, which we refer to as the Orion Divestiture.

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In conjunction with the Orion Divestiture, we incurred approximately $ 6.0 million of transaction costs during the year ended December 31, 2021, which were included in the $ 167.4 million of merger and integration-related costs within our consolidated statements of income and comprehensive income.

We incurred $ 1.9 million of transaction costs relating to the Orion Divestiture during the year ended December 31, 2022.

As part of the Orion Divestiture, Orion paid us a dividend of $ 425.0 million and reimbursed $ 170.2 million to us for the early redemption of mortgage loans underlying the contributed assets prior to the effectuation of the Orion Divestiture.

The distribution of Orion resulted in the derecognition of net assets of $ 1.74 billion, which net of the aforementioned cash payments of $ 595.2 million, resulted in a reduction to additional paid in capital of $ 1.14 billion.

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In connection with the divestiture, we entered into certain agreements with Orion to effect our legal and structural separation, including a transition services agreement ("TSA") and reverse TSA to provide certain administrative and other services for a limited time, and tax matters.

As of December 31, 2021, those agreements are still in effect.

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

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

Accounts receivable, net, consist of the following at:

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In-place leases

$ 5,324,565 $ 4,791,846

Accumulated amortization of in-place leases

( 1,409,878 ) ( 804,050 )

Above-market leases

1,697,367 1,591,382

Accumulated amortization of above-market leases

( 443,688 ) ( 303,874 )

$ 5,168,366 $ 5,275,304

Other assets, net, consist of the following at:

December 31, 2022 December 31, 2021

Right of use asset - operating leases, net $ 631,515 $ 112,049

Financing receivables $ 933,116 $ 323,921

Right of use asset - operating leases, net 603,097 631,515

Right of use asset - financing leases 467,920 218,332

Restricted escrow deposits 68,541 21,220

Derivative assets and receivables – at fair value 83,100 29,593

Non-refundable escrow deposits 28,560 1,000

Restricted escrow deposits 37,627 68,541

Prepaid expenses 28,128 18,062

Corporate assets, net 10,915 8,598

Investment in sales type leases 7,492 —

Impounds related to mortgages payable 18,152 5,249

Note receivable 4,455 —

Credit facility origination costs, net 17,196 4,352

Corporate assets, net 12,334 10,915

Investment in sales type lease 5,951 7,492

Non-refundable escrow deposits 5,667 28,560

Note receivable — 4,455

Other items 39,939 18,592

5 unchanged sentences

Property taxes payable 45,572 36,173

Accrued property expenses 27,344 5,401

Accrued costs on properties under development 26,559 19,665

Accrued income taxes 19,152 8,077

Accrued property expenses 25,290 27,344

Value-added tax payable 23,375 11,297

Merger and integration-related costs 10,699 —

Accrued income taxes 22,626 19,152

Mortgages, term loans, and credit line - interest payable 4,404 3,874

Merger and integration-related costs 1,464 10,699

Other items 55,921 44,080

3 unchanged sentences

Below-market leases

$ 1,617,870 $ 1,460,701

Accumulated amortization of below-market leases

( 238,434 ) ( 152,480 )

$ 1,379,436 $ 1,308,221

Tabl e of Contents

Other liabilities consist of the following at:

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

Acquisitions during 2021 and 2020

Below is a summary of our acquisitions for the year ended December 31, 2021 (information is unaudited and excludes properties assumed on November 1, 2021 in conjunction with our merger with VEREIT):

Number of Properties Leasable Square Feet Investment

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

Acquisitions During the Years ended December 31, 2022, and 2021

Below is a summary of our acquisitions for the year ended December 31, 2022 (unaudited):

Properties Leasable

(in thousands, unaudited) Investment

($ in millions) Weighted

(Years) Initial

Lease Yield (1)

Year ended December 31, 2022 (2)

Acquisitions - U.S.

(in 43 states)

990 15,774 $ 5,746.4 19.3 6.0 %

Acquisitions - Europe (U.K.

Acquisitions - Europe

94 11,179 2,441.3 8.9 6.0 %

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

Contractual net operating income used in the calculation of initial average cash yield includes approximately $ 8.5 million received as settlement credits for 41 properties as reimbursement of free rent periods for the year ended December 31, 2021.

Contractual net operating income used in the calculation of initial weighted average cash yield includes approximately $ 10.5 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2022.

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return.

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estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.

(2) None of our investments during 2021 caused any one client to be 10% or more of our total assets at December 31, 2021.

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

development properties, converted at the applicable exchange rate on the funding date.

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

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

Acquired properties accounted for as asset acquisitions during the year ended December 31, 2021, which had no associated contingent consideration, were allocated as follows (in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Acquisitions - Spain

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

(3) Includes five U.K.

development properties that represent an investment of £ 40.9 million during the year ended December 31, 2022, converted at the applicable exchange rate on the funding date.

(4) Our clients occupying the new properties are 71.4 % retail, 19.1 % gaming, 6.5 % industrial and 3.0 % other property types (including 2.7 % agricultural and 0.3 % office) based on rental revenue.

Approximately 23 % of the rental revenue generated from acquisitions during the year ended December 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies.

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

Year ended December 31, 2022

(USD) (£ Sterling) (€ Euro)

Acquisitions - USD (1)

Acquisitions - Sterling Acquisitions - Euro

$ 1,568.6 £ 640.5 € 118.0

9 unchanged sentences

$ 6,374.0 £ 1,689.3 € 331.3

land includes £ 5.5 million of right of use assets under long-term ground leases.

(1) Included in USD-denominated acquisitions was an investment of $ 1.7 billion into a single property in the gaming industry.

The acquisition was allocated as (i) $ 419.5 million to land, (ii) $ 1.28 billion to buildings and improvements, (iii) $ 13.2 million of right-of-use assets accounted for as operating leases included in 'Other assets' and (iv) $ 9.3 million of lease liabilities under operating leases included in 'Other liabilities'.

(2) Sterling-denominated land includes £ 42.5 million of right of use assets under long-term ground leases.

(3) The weighted average amortization period for acquired lease intangible assets is 11.6 years.

other assets consists of $ 161.5 million of financing receivables with above-market terms, $ 76.7 million of right-of-use assets accounted for as finance leases, $ 5.8 million in investments in sales-type leases, and $ 259.7 million of right of use assets under ground leases accounted for as operating leases.

other assets consists of £ 7.2 million of financing receivables with above-market terms, £ 33.2 million of right-of-use assets accounted for as finance leases, and £ 13,000 of right of use assets under ground leases accounted for as operating leases.

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

(4) The weighted average amortization period for acquired lease intangible liabilities i s 15.9 years.

other liabilities consists of $ 27.1 million of deferred rent on certain below-market leases, $ 67.4 million of lease liabilities under ground leases accounted for as operating leases, and $ 36.1 million for lease liabilities under financing leases.

other liabilities consists of £ 288,000 of a GBP mortgage premium and £ 13,000 of lease liabilities under ground leases.

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

Acquired properties accounted for as asset acquisitions during 2021 generated total revenues of $ 136.6 million and net income of $ 25.8 million during the year ended December 31, 2021.

Below is a summary of our acquisitions for the year ended December 31, 2020 (unaudited):

Number of Properties Leasable Square Feet Investment

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

Tabl e of Contents

(4) USD-denominated other assets consists of $ 585.7 million of financing receivables with above-market terms and $ 32.8 million of right-of-use assets accounted for as finance leases, and $ 15.6 million of right of use assets under ground leases.

Sterling-denominated other assets consists of £ 12.2 million of financing receivables with above-market terms, £ 188.4 million of right-of-use assets accounted for as finance leases and £ 2.4 million of right-of-use assets accounted for as operating leases.

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

(5) The weighted average amortization period for acquired lease intangible liabilities is 14.2 years.

(6) USD-denominated other liabilities consists of $ 28.0 million of deferred rent on certain below-market leases, $ 11.5 million of lease liabilities under ground leases, and $ 8.6 million of lease liabilities under financing leases.

Sterling-denominated other liabilities consists of £ 2.4 million of lease liabilities under operating leases and £ 2.5 million of deferred rent on certain below-market leases.

The properties acquired during the year ended December 31, 2022 generated total revenues of $ 211.3 million and net income of $ 79.0 million during the year ended December 31, 2022.

Below is a summary of our acquisitions for the year ended December 31, 2021 (information is unaudited and excludes properties assumed on November 1, 2021 in conjunction with our merger with VEREIT):

Properties Leasable

(in thousands, unaudited) Investment

($ in millions) Weighted

(Years) Initial Weighted Average Cash Lease Yield (1)

Year ended December 31, 2021 (2)

Acquisitions - U.S.

(in 30 states)

714 14,727 $ 3,608.6 14.1 5.5 %

Acquisitions - U.K.

Acquisitions - Europe

129 9,196 2,558.9 11.6 5.5 %

Total acquisitions 843 23,923 $ 6,167.5 13.1 5.5 %

Properties under Development - U.S.

Properties under development (3)

68 2,682 243.3 15.7 6.0 %

911 26,605 $ 6,410.8 13.2 5.5 %

(1) None of our investments during 2020 caused any one client to be 10% or more of our total assets at December 31, 2020.

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

(1) Contractual net operating income used in the calculation of initial weighted average cash yield includes approximately $ 8.5 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2021.

(2) None of our investments during the year ended December 31, 2021 caused any one client to be 10% or more of our total assets at December 31, 2021.

(3) Includes one U.K.

development property that represents an investment of £ 7.0 million during the year ended December 31, 2021, converted at the applicable exchange rate on the funding date.

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

Approximately 61 % of the rental revenue generated from acquisitions during 2020 is from our investment grade rated clients, their subsidiaries or affiliated companies.

Acquired properties accounted for as asset acquisitions during the year ended December 31, 2020, which had no associated contingent consideration, were allocated as follows (in millions):

Acquisitions - U.S.

Acquisitions - U.K.

Approximately 40 % of the rental revenue generated from acquisitions during the year ended December 31, 2021, was from investment grade rated clients, their subsidiaries or affiliated companies.

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

Year ended December 31, 2021

(USD) (£ Sterling)

Acquisitions - USD Acquisitions - Sterling Acquisitions - Euro

$ 1,054.4 £ 438.9 € 106.2

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Lease intangible assets (2)

547.8 248.9 34.9

Other assets (3)

530.2 40.4 21.9

Lease intangible liabilities (4)

2 unchanged sentences

( 127.6 ) ( 0.3 ) ( 16.0 )

land includes £ 88.8 million of right of use assets under long-term ground leases.

$ 3,715.8 £ 1,608.9 € 320.4

(1) Sterling-denominated land includes £ 8.2 million of right of use assets under long-term ground leases.

(2) The weighted average amortization period for acquired lease intangible assets is 12.7 years.

other assets consists of $ 51.9 million of financing receivables with above-market terms and $ 689,000 of right of use assets under ground leases.

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

(3) USD-denominated other assets consists of $ 179.7 million of financing receivables with above-market terms, $ 85.0 million of right-of-use assets accounted for as finance leases, $ 5.8 million in investments in sales-type leases, and $ 259.7 million of right of use assets under ground leases.

Sterling-denominated other assets consists of £ 7.2 million of financing receivables with above-market terms and £ 33.2 million of right-of-use assets accounted for as finance leases.

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

(4) The weighted average amortization period for acquired lease intangible liabilities is 15.9 years.

other liabilities consists entirely of lease liabilities under ground leases.

Acquired properties accounted for as asset acquisitions during 2020 generated total revenues of $ 54.6 million and net income of $ 19.4 million during the year ended December 31, 2020.

(5) USD-denominated other liabilities consists of $ 26.9 million of deferred rent on certain below-market leases, $ 67.4 million of lease liabilities under ground leases and $ 33.3 million of lease liabilities under financing leases.

Sterling-denominated other liabilities consists entirely of a mortgage premium.

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

Tabl e of Contents

The properties acquired during the year ended December 31, 2021, which were all accounted for as asset acquisitions, generated total revenues of $ 136.6 million and net income of $ 25.8 million during the year ended December 31, 2021.

Investments in Existing Properties

During 2021, we capitalized costs of $ 21.9 million on existing properties in our portfolio, consisting of $ 6.3 million for re-leasing costs, $ 978,000 for recurring capital expenditures and $ 14.6 million for non-recurring building improvements.

In comparison, during 2020, we capitalized costs of $ 7.0 million on existing properties in our portfolio, consisting of $ 1.8 million for re-leasing costs, $ 198,000 for recurring capital expenditures and $ 5.0 million for non-recurring building improvements.

During the year ended December 31, 2022, we capitalized costs of $ 96.7 million on existing properties in our portfolio, consisting of $ 88.3 million for non-recurring building improvements, $ 5.2 million for re-leasing costs, and $ 3.2 million for recurring capital expenditures.

In comparison, during the year ended December 31, 2021, we capitalized costs of $ 21.9 million on existing properties in our portfolio, consisting of $ 14.6 million for non-recurring building improvements, $ 6.3 million for re-leasing costs, and $ 1.0 million for recurring capital expenditures.

Properties with Existing Leases

Of the $ 6.41 billion we invested during 2021, which excludes the 3,895 properties assumed in conjunction with our merger with VEREIT on November 1, 2021, approximately $ 5.02 billion was used to acquire 557 properties with existing leases.

In comparison, of the $ 2.31 billion we invested during 2020, approximately $ 1.86 billion was used to acquire 127 properties with existing leases.

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

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

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

The amounts amortized to expense for all of our in-place leases, for 2021, 2020, and 2019 were $ 247.5 million, $ 134.6 million, and $ 112.0 million, respectively.

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for 2021, 2020, and 2019 were $ 54.6 million, $ 30.9 million, and $ 22.1 million, respectively.

The amounts amortized to expense for all of our in-place leases, for the years ended December 31, 2022, 2021 and 2020 were $ 634.9 million, $ 247.5 million, and $ 134.6 million, respectively.

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

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the years ended December 31, 2022, 2021 and 2020 were $ 111.7 million , $ 54.6 million, and $ 30.9 million, respectively.

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

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2021 (in thousands):

increase (decrease) to

rental revenue Increase to

(decrease) to

rental revenue

2023 $ ( 56,782 ) $ 589,541

6 unchanged sentences

Gain on Sales of Real Estate

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

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

in November 2021.

Year Ended December 31,

The following table summarizes our properties sold during the periods indicated below, excluding our proportionate share of net proceeds from the disposition of properties by our unconsolidated industrial partnerships for 2022 and 2021 and the properties disposed from the spin-off of office properties to Orion in November 2021 (dollars in millions):

Years ended December 31,

2022 2021 2020

3 unchanged sentences

These property sales do not represent a strategic shift that will have a major effect on our operations and financial results, and therefore do not require presentation as discontinued operations.

Tabl e of Contents

Investment in Unconsolidated Entities

1 unchanged sentence

Ownership % (1)

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

Equity in Income (2)

Investment December 31, 2021

December 31, 2021

Number of Properties Carrying Amount of Investment as of Equity in income and impairment of investment in unconsolidated entities for the year ended (2)

Investment (2)

As of December 31, 2022

December 31, 2022

December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2020

Industrial Partnerships 20 % — $ — $ 140,967 $ ( 6,448 ) $ 1,106 $ —

2 unchanged sentences

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

(2) Our unconsolidated entities are a result of our merger with VEREIT.

The total carrying amount of the investments was greater than the underlying equity in net assets by $ 100.3 million as of December 31, 2021.

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

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

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

(2) All seven assets held by our industrial partnerships were sold during the year ended December 31, 2022.

As the portion of the net proceeds applied to our investment basis that we expected to receive at closing was less than our $ 121.4 million carrying amount of investment in unconsolidated entities, we recognized an other than temporary impairment of $ 8.5 million during the year ended December 31, 2022.

The other than temporary impairments are included in 'Equity in income and impairment of investment in unconsolidated entities' in the consolidated statements of income and comprehensive income for the periods presented.

As a result of the merger with VEREIT, we assumed a preferred equity interest in the development of one distribution center for which we were entitled to receive a cumulative preferred return of 9 % per year on the initial contribution of $ 22.8 million along with a share in the profit earned in the event of the sale of the property to a third party.

1 unchanged sentence

During December 2021, the distribution center was sold to a third party and we received proceeds of $ 38.3 million and recorded a $ 0.2 million gain on disposition.

The aggregate debt outstanding for unconsolidated entities was $ 431.8 million as of December 31, 2021, which is non-recourse to us.

As our only equity method investment resulted from our merger with VEREIT on November 1, 2021, there was no debt relating to unconsolidated entities as of December 31, 2020.

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

Revolving Credit Facility and Commercial Paper Program

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

There was no aggregate debt outstanding as of December 31, 2022, as all seven properties owned by our industrial partnerships were sold during the year ended December 31, 2022, and the debt underlying each of the seven properties was either defeased or prepaid in connection with the sales.

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

Revolving Credit Facility and Commercial Paper Programs

Credit Facility

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

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

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

Under our credit facility, our investment grade credit ratings as of December 31, 2021 provide for financing at LIBOR plus 0.775 % with a facility commitment fee of 0.125 %, for all-in pricing of 0.90 % over LIBOR.

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

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

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

LIBOR is in the process of being discontinued.

While certain U.S.

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

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

dollar LIBOR should be entered into after 2021.

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

At December 31, 2021, credit facility origination costs of $ 4.4 million are included in other assets, net, as compared to $ 7.7 million at December 31, 2020, on our consolidated balance sheet.

We have a $ 4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including U.S dollars.

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

Under our revolving credit facility, our current investment grade credit ratings provide for financing on USD borrowings at the Secured Overnight Financing Rate ("SOFR"), plus 0.725 % with a SOFR adjustment charge of 0.10 % and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.95 % over SOFR, British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725 % with a SONIA adjustment charge of 0.0326 % and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.8826 % over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725 %, and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.85 % over one-month EURIBOR.

As of December 31, 2022, credit facility origination costs of $ 17.2 million are included in other assets, net, as compared to $ 4.4 million at December 31, 2021, on our consolidated balance sheets.

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

At December 31, 2021, we had a borrowing capacity of $ 2.35 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 650.0 million, as compared to no outstanding balance at December 31, 2020.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 0.9 % during 2021 and 1.5 % during 2020.

At December 31, 2021, the weighted average interest rate on borrowings outstanding under our revolving credit facility was 0.9 %.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2021, we were in compliance with the covenants on our revolving credit f acility.

Commercial Paper Program

We have a U.S.

dollar-denominated unsecured commercial paper program.

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

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

As of December 31, 2022, we had a borrowing capacity of $ 2.2 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 2.0 billion, comprised of € 1.8 billion Euro and £ 70.0 million Sterling borrowings, as compared to an outstanding balance at December 31, 2021 of $ 650.0 million, consisting entirely of USD borrowings.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.8 % during the year ended December 31, 2022, and 0.9 % during the year ended December 31, 2021.

At December 31, 2022, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 2.6 %.

Tabl e of Contents

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

Commercial Paper Programs

During July 2022, our USD-denominated unsecured commercial paper program was amended to increase the maximum aggregate amount of outstanding notes from $ 1.0 billion to $ 1.5 billion.

Also during July 2022, we 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 USD or various 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 market.

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

At December 31, 2021, the balance of borrowings outstanding under our commercial paper program was $ 901.4 million as compared to no outstanding borrowings at December 31, 2020.

The weighted average interest rate on borrowings under our commercial paper program was 0.2 % for 2021 and 0.3 % from inception of the plan in August 2020 through December 31, 2020.

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

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

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

As of December 31, 2022, the balance of borrowings outstanding under our commercial paper programs was $ 701.8 million, including € 361.0 million of Euro-denominated borrowings, as compared to $ 901.4 million outstanding commercial paper borrowings, consisting entirely of USD-denominated borrowings at December 31, 2021.

The weighted average interest rate on outstanding borrowings under our commercial paper programs was 1.6 % for the year ended December 31, 2022, and 0.2 % for the year ended December 31, 2021.

As of December 31, 2022, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.4 %.

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

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

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

Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.85 %.

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

At December 31, 2021, deferred financing costs of $ 443,000 are included net of the term loan principal balance, as compared to $ 642,000 at December 31, 2020, on our consolidated balance sheet.

Prior to April 2022, borrowing under this term loan bore interest at the current one-month London Inter-Bank Offered Rate (“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 daily SOFR through June 30, 2022.

As of December 31, 2022, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.83 %.

At December 31, 2022, deferred financing costs of $ 0.2 million are included net of the term loan principal balance, as compared to $ 0.4 million at December 31, 2021, on our consolidated balance sheets.

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

During January 2023, we borrowed an aggregate of approximately $ 1.0 billion in multicurrency borrowings under an unsecured term loan initially maturing January 2024.

See note 19, Subsequent Events for further details.

Mortgages Payable

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

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

During 2021, we assumed 11 mortgages totaling $ 881.1 million in principal, including ten mortgages from our merger with VEREIT totaling $ 839.1 million and a Sterling-denominated mortgage on one property totaling £ 31.0 million.

No mortgages were assumed during 2020.

During the year ended December 31, 2022, we made $ 312.2 million in principal payments, including the full repayment of 12 mortgages for $ 308.0 million.

During the year ended December 31, 2021, we made $ 66.6 million in principal payments, including the full repayment of seven mortgages for $ 63.0 million.

We assumed eight mortgages on 17 properties totaling $ 45.1 million during the year ended December 31, 2022, as compared to the assumption of 11 mortgages totaling $ 881.1 million in principal, including ten mortgages from our merger with VEREIT totaling $ 839.1 million and one Sterling-denominated mortgage on one property totaling £ 31.0 million for the year ended December 31, 2021.

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

Tabl e of Contents

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

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

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

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

As a result of the early redemptions in September and October of 2021, we recognized total losses of $ 4.3 million on extinguishment of debt during the year ended December 31, 2021.

There were no comparable mortgage redemptions during the years ended December 31, 2022 or 2020.

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

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

The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, at December 31, 2021 and 2020 was $ 790,000 and $ 973,000 , respectively.

The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $ 0.8 million at December 31, 2022 and 2021, respectively.

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

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

As Of Number of

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

Properties (1)

Weighted Average

Interest Rate (2)

Weighted Average

Effective Interest

Maturity Remaining

Balance Unamortized

Finance Costs

Balance, net Mortgage

267 4.8 % 3.5 % 1.8 $ 1,114,129 $ 27,866 $ 1,141,995

68 4.9 % 4.6 % 2.9 $ 299,631 $ 729 $ 300,360

Financing Costs

December 31, 2022 136 4.8 % 3.3 % 1.4 $ 842,343 $ 11,582 $ 853,925

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

(1) At December 31, 2022, there were 18 mortgages on 136 properties.

2 unchanged sentences

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

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

(3) Effective interest rates ranged from 2.6 % to 6.0 % and 4.0 % to 5.5 % at each of December 31, 2021 and 2020, respectively.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 28.7 million and deferred financing costs of $ 790,000 , as of December 31, 2021 (in millions):

Year of Maturity Principal

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

(3) Effective interest rates ranged from 2.7 % to 6.6 % and 2.6 % to 6.0 % at December 31, 2022 and 2021, respectively.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $ 12.4 million and deferred financing costs of $ 0.8 million as of December 31, 2022 (dollars in millions):

Year of Maturity

Thereafter 3.5

Totals $ 1,114.1

Tabl e of Contents

Notes Payable

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

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

December 31, 2021 December 31, 2020

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

$ 950 $ — $ 950

4.650 % notes, issued in July 2013 and due in August 2023 (2)

Our senior unsecured notes and bonds are USD-denominated and Sterling-denominated.

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

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

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

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

$ 500 $ 500 $ 500

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

3 unchanged sentences

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

$ 550 550 550

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

1 unchanged sentence

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

$ 600 600 600

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

$ 650 650 650

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

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

1 unchanged sentence

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

£ 400 482 541

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

$ 600 600 600

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

1 unchanged sentence

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

$ 600 600 600

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

$ 500 500 500

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

1 unchanged sentence

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

$ 599 599 599

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

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

2 unchanged sentences

$ 950 950 950

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

5.625 % notes, issued in October 2022 and due in October 2032

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

$ 700 700 700

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

1 unchanged sentence

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

£ 350 422 474

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

2 unchanged sentences

$ 250 250 250

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

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

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

3 unchanged sentences

$ 14,278 $ 12,500

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

(2) In December 2021, we completed the early redemption of all $ 750.0 million in principal amount.

(3) In connection with our merger with VEREIT, we completed our debt exchange offer to exchange certain outstanding notes issued by VEREIT on November 9, 2021 for new notes issued by Realty Income.

Please refer to Exchange Offers Associated with our Merger with VEREIT below for more details.

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

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

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

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

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

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

See note 19, Subsequent Events .

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2021, excluding unamortized net premiums of $ 295.5 million and deferred financing costs of $ 53.1 million (in millions):

Year of Maturity Principal

Tabl e of Contents

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2022, excluding net unamortized premiums of $ 224.6 million and deferred financing costs of $ 60.7 million (dollars in millions):

Year of Maturity

Thereafter 8,656

Totals $ 12,257

As of December 31, 2022, the weighted average interest rate on our notes and bonds payable was 3.4 % and the weighted average remaining years until maturity was 7.2 years.

Interest incurred on all of the notes and bonds was $ 286.4 million for 2021, $ 252.0 million for 2020 and $ 233.5 million for 2019.

The interest rate on each of these notes and bonds is fixed.

Interest incurred on all of the notes and bonds was $ 431.3 million, $ 286.4 million, and $ 252.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Our outstanding notes and bonds are unsecured;

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

Additionally, with the exception of our £ 400.0 million of 1.625 % senior unsecured notes issued in October 2020, our £ 400.0 million of 1.125 % senior unsecured notes issued in July 2021, £ 350.0 million of 1.750 % senior unsecured notes also issued in July 2021, our £ 250.0 million of 1.875 % senior unsecured notes issued in January 2022, and £ 250.0 million of 2.500 % senior unsecured notes also issued in January 2022, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

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

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

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

5 unchanged sentences

Note Repayments

We have redeemed the following principal amounts (in millions) of certain outstanding notes, prior to their maturity.

As a result of these early redemptions, we have recognized the following losses on extinguishment of debt (in millions) recognized in our consolidated statements of income and comprehensive income:

We redeemed the following principal amounts (in millions) of certain outstanding notes, prior to their maturity.

As a result of these early redemptions, we recognized the following losses on extinguishment of debt (in millions) in the consolidated statements of income and comprehensive income.

There were no comparable repayments for the year ended December 31, 2022.

Loss on Extinguishment of Debt

10 unchanged sentences

Note Issuances

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

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

During the years ended December 31, 2022, 2021, and 2020 we issued the following notes and bonds (in millions):

2022 Issuances

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

1.875 % Notes

January 2022 January 2027 £ 250 99.487 % 1.974 %

2.500 % Notes

January 2022 January 2042 £ 250 98.445 % 2.584 %

3.160 % Notes

June 2022 June 2030 £ 140 100.000 % 3.160 %

3.180 % Notes

June 2022 June 2032 £ 345 100.000 % 3.180 %

3.390 % Notes

June 2022 June 2037 £ 115 100.000 % 3.390 %

5.625 % Notes

October 2022 October 2032 $ 750 99.879 % 5.641 %

Tabl e of Contents

2021 Issuances

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

1.125 % Notes

July 2021 July 2027 £ 400 99.305 % 1.242 %

28 unchanged sentences

December 2020 March 2033 $ 400 98.47 % 1.941 %

2019 Issuances Date of Issuance Maturity Date Principal amount used Price of par value Effective yield to maturity

2.730 % notes

May 2019 May 2034 £ 315 100.00 % 2.73 %

3.250 % notes

June 2019 June 2029 $ 500 99.36 % 3.33 %

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

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

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

2 unchanged sentences

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

Additional details regarding the exchange offers are provided in the Exchange Offers Associated with our Merger with VEREIT section below.

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

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

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

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

The net proceeds from the October 2020 Sterling-denominated offering of £ 400.0 million approximated $ 508.2 million, as converted at the applicable exchange rate on the closing of the offering, and were used to repay GBP-denominated borrowings outstanding under our $ 3.0 billion revolving credit facility, to settle an outstanding

GBP/USD currency exchange swap arrangement and, to the extent not used for those purposes, to fund investment opportunities and for other general corporate purposes.

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

The gross proceeds from the May 2019 Sterling-denominated private placement of £ 315.0 million approximated $ 400.9 million, as converted at the applicable exchange rate on the closing of the offering, and were used to fund our initial investment in U.K.

The net proceeds of $ 493.5 million from the June 2019 note offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

Exchange Offers Associated with our Merger with VEREIT

As part of our merger with VEREIT, Realty Income exchanged the following notes issued by VEREIT OP with notes of identical terms issued by Realty Income (in millions):

Series of VEREIT Notes Tenders and Consents Received as of the Expiration Date (1)

Percentage of Total Outstanding Principal Amount of Such Series of VEREIT Notes

4.600% Notes due 2024 $ 485 97.06 %

4.625% Notes due 2025 $ 544 98.95 %

4.875% Notes due 2026 $ 596 99.29 %

3.950% Notes due 2027 $ 594 99.02 %

3.400% Notes due January 2028 $ 598 99.66 %

2.200% Notes due June 2028 $ 497 99.42 %

3.100% Notes due 2029 $ 597 99.48 %

2.850% Notes due 2032 $ 700 99.93 %

(1) The amount of VEREIT notes exchanged are higher than the amount that Realty Income issued as a result of 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.

To induce holders of the VEREIT OP notes to participate in the exchange, Realty Income offered noteholders electing to exchange their notes a cash payment equal to 10 basis points of the note principal amount held.

Across the various note classes, Realty Income had a success rate of approximately 99.2 % on the exchange, resulting in a cash payment of $ 4.6 million to participating noteholders.

This resulted in a cash payment of $ 4.6 million to participating noteholders.

The exchange was accounted for as a modification of the existing VEREIT OP notes assumed in our merger with VEREIT.

The interest rate, interest payment dates, redemption terms and maturity of each series of Realty Income notes issued by Realty Income in the exchange offers were the same as those of the corresponding series of VEREIT notes exchanged.

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

In January 2023, we issued $ 500 million of 5.05 % senior unsecured notes due January 2026 and $ 600 million of 4.85 % senior unsecured notes due March 2030.

See note 19, Subsequent Events for further details.

Tabl e of Contents

Issuances of Common Stock

4 unchanged sentences

and Orion Office REIT Inc.

Divestiture .

Issuances of Common Stock in Overnight Underwritten Public Offerings

Issuances of Common Stock in Underwritten Public Offerings

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

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

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

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

After deducting underwriting discounts

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

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

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

The net proceeds of $ 728.9 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

In May 2019, we issued 12,650,000 shares of common stock.

The net proceeds of $ 845.4 million were used to repay borrowings under our credit facility, to fund investment opportunities, and for other general corporate purposes.

There were no comparative offerings during the year ended December 31, 2022.

At-the-Market ("ATM") Program

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

O) at prevailing market prices or at negotiated prices.

At December 31, 2021, we had 29,387,491 shares remaining for future issuance under our 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 "at-the-market" equity distribution program, or our ATM 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 under the ticker symbol "O" at prevailing market prices or at negotiated prices.

After deducting 6,744,884 shares sold pursuant to forward sale confirmations that remained open at December 31, 2022, we had 70,620,121 additional shares remaining for future issuance under our ATM program.

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

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

Year Ended December 31,

Tabl e of Contents

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

Years ended December 31,

2022 2021 2020

Shares of common stock issued under the ATM program (1)

68,608,176 46,290,540 17,724,374

Gross proceeds $ 4,599.4 $ 3,207.9 $ 1,094.9

Dividend Reinvestment and Stock Purchase Plan

Our Dividend Reinvestment and Stock Purchase Plan ("DRSPP") provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions.

Sales agents' commissions ( 34.3 ) ( 27.3 ) ( 14.6 )

Other offering expenses ( 9.1 ) ( 1.1 ) ( 0.4 )

Net proceeds $ 4,556.0 $ 3,179.5 $ 1,079.9

(1) During the year ended December 31, 2022, 65,279,851 shares were sold and 58,534,967 settled pursuant to forward sale confirmations.

In addition, as of December 31, 2022, 6,744,884 shares of common stock subject to forward sale confirmations have been executed at a weighted average initial price of $ 63.31 per share but not settled.

Upon settlement, subject to certain exceptions, we may elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which cases we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser.

We currently expect to fully physically settle any forward sale agreement with the respective forward purchaser on one or more dates specified by us on or prior to the maturity date of such forward sale agreement, in which case we expect to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward sale agreement multiplied by the relevant forward price per share.

We currently expect to fully settle the outstanding forward sale agreements during the three months ended March 31, 2023, representing $ 0.4 billion in net proceeds, for which the weighted average forward price at December 31, 2022 was $ 62.59 per share.

Our forward sale confirmations are accounted for as equity instruments, as we have determined the agreements meet the derivatives and hedging guidance scope exception.

No shares were sold pursuant to forward sale confirmations during years ended December 31, 2021 and 2020.

Dividend Reinvestment and Stock Purchase Plan ("DRSPP")

Our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions.

Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions.

2 unchanged sentences

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

Year Ended December 31,

Years ended December 31,

2022 2021 2020

2 unchanged sentences

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

We did no t issue shares under the waiver approval process during 2021, 2020 or 2019.

We did no t issue shares under the waiver approval process during the years ended December 31, 2022, 2021 or 2020.

Noncontrolling Interests

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

From time to time, we complete the acquisitions of assets in by issuing additional common partnership units in Realty Income, L.P.

as consideration for the acquisitions.

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

In November 2021, we issued 300,604 common partnership units in Realty Income, L.P.

in connection with the acquisition of seven properties and recorded $ 20.4 million of non-controlling interests.

in connection with the acquisition of seven properties and recorded $ 20.4 million of noncontrolling interests.

In December 2021, we issued 240,586 common partnership units in Realty Income, L.P.

in connection with the acquisition of one property and recorded $ 16.6 million of non-controlling interests.

In addition, during November 2021 we issued 56,400 of common partnership units in Realty Income, L.P.

in connection with the acquisition of one property and recorded $ 16.6 million of noncontrolling interests.

In November 2021 we issued 56,400 of common partnership units in Realty Income, L.P.

in exchange for VEREIT OP units in connection with our merger with VEREIT and recorded noncontrolling interests of $ 1.8 million.

At December 31, 2021, outstanding common partnership units in Realty

represent 4.2 % ownership interest in Realty Income L.P.

In addition, during September 2022, we issued 734,458 common partnership units in Realty Income, L.P.

in connection with the acquisition of nine properties and recorded $ 51.2 million of contributions to noncontrolling interests.

At December 31, 2022, outstanding common partnership units in Realty Income, L.P.

represented 6.9 % ownership interest in Realty Income L.P.

We hold the remaining 93.1 % interest and consolidate the entity.

Tabl e of Contents

None of our common partnership units have voting rights.

9 unchanged sentences

At December 31, 2022, we and our subsidiaries held an 89.9 % interest, and consolidated this entity in our consolidated financial statements.

The following table represents the change in the carrying value of all noncontrolling interests through December 31, 2021 (in thousands):

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

Realty Income, L.P.

Noncontrolling

Interests Total

Carrying value at December 31, 2020

Reallocation of equity ( 47 ) — ( 47 )

Additions to noncontrolling interest — 3,168 3,168

Distributions ( 1,297 ) ( 299 ) ( 1,596 )

Allocation of net income 848 172 1,020

Carrying value at December 31, 2020

$ 24,100 $ 8,147 $ 32,247

7 unchanged sentences

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

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

1,060,709 units remained outstanding as of December 31, 2021.

At December 31, 2021 and 2020, respectively, Realty Income, L.P.

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

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

December 31, 2021 December 31, 2020

Net real estate $ 688,229 $ 635,963

Total assets $ 795,670 $ 723,668

Total liabilities $ 57,057 $ 47,962

Distributions Paid and Payable

We pay monthly distributions to our common stockholders.

The following is a summary of monthly distributions paid per common share for 2021, 2020 and 2019:

Month 2021 2020 2019

January $ 0.2345 $ 0.2275 $ 0.2210

February 0.2345 0.2325 0.2255

March 0.2345 0.2325 0.2255

April 0.2350 0.2330 0.2260

May 0.2350 0.2330 0.2260

June 0.2350 0.2330 0.2260

July 0.2355 0.2335 0.2265

August 0.2355 0.2335 0.2265

September 0.2355 0.2335 0.2265

October 0.2360 0.2340 0.2270

November 0.2360 0.2340 0.2270

December 0.2460 0.2340 0.2270

Total $ 2.8330 $ 2.7940 $ 2.7105

The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years:

2021 2020 2019

Ordinary income $ 1.5146899 $ 2.2798764 $ 2.1206964

Nontaxable distributions 3.2925615 0.4902835 0.5898036

Total capital gain distribution (1)

0.0854609 0.0238401 —

$ 4.8927123 $ 2.7940000 $ 2.7105000

(1) Unrecaptured Section 1250 Gain of $ 0.0649153 , or 1.327 % of the total common dividends paid in 2021, and Section 897 Gain of $ 0.0854609 , or 1.747 % of the total common dividends paid in 2021, both represent additional characterization of, and are part of, total capital gain distribution.

(2) The amount distributed in 2021 includes the $ 2.060 tax distribution of Orion shares, that occurred in conjunction with the Orion Divestiture on November 12, 2021, after our merger with VEREIT on November 1, 2021.

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

At December 31, 2021, a distribution of $ 0.2465 per common share was payable and was paid in January 2022.

At December 31, 2020, a distribution of $ 0.2345 per common share was payable and was paid in January 2021.

Lessor Operating Leases

At December 31, 2021, we owned 11,136 properties in all 50 U.S.

states, Puerto Rico, the U.K.

Of the 11,136 properties, 11,043 , or 99.2 %, are single-client properties, and the remaining are multi-client properties.

At December 31, 2021, 164 properties were available for lease or sale.

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

Rental revenue based on a percentage of our client's gross sales, or percentage rents, was $ 6.5 million for 2021, $ 5.1 million in 2020, and $ 8.0 million for 2019.

At December 31, 2021, minimum future annual rental revenue to be received on the operating leases for the next five years and thereafter are as follows (in thousands):

Future Minimum Operating Lease Payments Future Minimum Direct Financing Lease Payments (1)

2022 $ 2,900,002 $ 1,925

2023 2,824,724 1,565

Contributions 51,221 — 51,221

Distributions

( 3,818 ) ( 307 ) ( 4,125 )

Allocation of net income

2,772 236 3,008

Reallocation of equity 3,210 — 3,210

Carrying value at December 31, 2022

$ 115,801 $ 14,339 $ 130,140

Thereafter 14,918,244 484

Totals $ 28,222,310 $ 4,824

(1) Related to 18 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments.

Amounts reflect undiscounted cash flows to be received by the Company under the lease agreements on these respective properties.

No individual client's rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2021, 2020 or 2019.

(1) In September 2022, we issued 734,458 common partnership units in Realty Income, L.P.

in connection with the acquisition of nine properties and recorded $ 51.2 million of contributions to noncontrolling interests.

1,795,167 and 1,060,709 units were outstanding as of December 31, 2022 and 2021, respectively.

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

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

For further information, see note 2 Summary of Significant Accounting Policies and Procedures and New Accounting Standards.

Financial Instruments and Fair Value Measurements

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• Level 1 – Unadjusted quoted prices in active markets

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

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

The fair value of our $ 250 million term loan approximates carrying value due to the frequent repricing of the variable interest rate charged on the borrowing, which is based on the daily SOFR.

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

At December 31, 2021

Carrying value Estimated fair value

December 31, 2022 Carrying value

Estimated fair value

Mortgages payable assumed in connection with acquisitions (1)

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$ 14,114.2 $ 12,522.8

At December 31, 2020

Carrying value Estimated fair value

December 31, 2021 Carrying value

Estimated fair value

Mortgages payable assumed in connection with acquisitions (1)

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

The unamortized balance of these net premiums is $ 28.7 million at December 31, 2021, and $ 1.7 million at December 31, 2020.

Also excludes deferred financing costs of $ 790,000 at December 31, 2021, and $ 973,000 at December 31, 2020.

The unamortized balance of these net premiums was $ 12.4 million at December 31, 2022, and $ 28.7 million at December 31, 2021.

Also excludes deferred financing costs of $ 0.8 million at December 31, 2022, and $ 0.8 million at December 31, 2021.

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

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

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

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

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

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Financial Instruments Measured at Fair Value on a Recurring Basis

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

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

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

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Items Measured at Fair Value on a Non-Recurring Basis

Impairment of Real Estate Investments

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

During 2020, we identified the impact of the COVID-19 pandemic as an impairment triggering event for properties occupied by certain clients experiencing difficulties meeting their lease obligations to us.

The impairments for the years ended December 31, 2022 and 2021 primarily relate to properties sold, in the process of being sold, or vacant.

We identify the impact of the COVID-19 pandemic as an impairment triggering event for properties occupied by certain clients experiencing difficulties meeting their lease obligations to us.

After considering the impacts of the COVID-19 pandemic on the key assumptions noted above, we determined that the carrying values of 38 properti es classified as held for investment for the year ended December 31, 2020 were not recoverable.

As a result, we recorded provisions for impairment of $ 105.0 million for the year ended December 31, 2020 on the applicable properties impacted by the COVID-19 pandemic.

Of the provisions for impairment recorded during 2020

for properties impacted by the COVID-19 pandemic, a total of 13 assets occupied by certain of our clients in the theater industry were impaired for $ 83.8 million, which reduced the carrying value of the properties from $ 123.4 million to their estimated fair value of $ 39.6 million.

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

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

Year Ended December 31,

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

Years ended December 31,

2022 2021 2020

Carrying value prior to impairment $ 140.9 $ 169.2 $ 260.8

total provisions for impairment ( 25.9 ) ( 39.0 ) ( 147.2 )

Number of properties:

Classified as held for sale 16 1 —

Classified as held for investment 11 34 3

Sold 76 64 48

Carrying value after impairment $ 115.0 $ 130.2 $ 113.6

Derivative Designated as Hedging Instruments

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

Dollars, or USD.

In order to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling ("GBP") and Euros, we have a hedging strategy to enter into foreign currency forward contracts to sell GBP, USD, and Euro and buy Euro, USD, and GBP.

These foreign currency forwards are designated as cash flow hedges.

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

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

As of December 31, 2021, we had one interest rate swap in place on our $ 250.0 million unsecured term loan.

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

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

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

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

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

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In May 2019, we entered into four cross-currency swaps to exchange £ 130 million for $ 166 million maturing in May 2034, in order to hedge the foreign currency risk associated with our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries.

These cross-currency swaps were designated as cash flow hedges on their trade date.

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 was terminated and the future principal and interest associated with the prepaid intercompany loan did not occur, a $ 20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the three months ended June 30, 2022.

In October 2022, we entered into six cross-currency swaps to exchange € 612 million for $ 600 million maturing in October 2032, in order to hedge the foreign currency risk associated with our Euro-denominated intercompany loans receivable from our consolidated foreign subsidiaries.

We designated three of the six cross-currency swaps, exchanging € 326 million for $ 320 million, as fair value hedges of foreign denominated intercompany loans receivable (the "hedged assets").

The hedged assets are eliminated in consolidation, but remeasurement gains and losses pertaining to the hedged assets impact earnings as part of 'Foreign currency and derivative (loss) gain, net'.

For these hedges, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross currency basis spread from the assessment of hedge effectiveness (the "excluded component").

Changes in the fair value of the cross-currency swaps attributable to changes in the spot rates on the final notional exchanges and changes in the value of the hedged assets due to changes in the spot rates are recorded in 'Foreign currency and derivative (loss) gain, net'.

Changes in the fair value of the cross-currency swaps attributable to the excluded components are recorded to Other comprehensive income and will be recognized in Foreign currency and derivative (loss) gain, net on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments.

In February 2020, we entered into five forward starting treasury rate locks with notional amounts totaling $ 500.0 million.

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The notional amounts of the six swaps were first applied to the $ 400.0 million of 1.800 % notes due March 2033, with the remaining $ 100.0 million of notional applied to the $ 325.0 million of 0.750 % notes due March 2026.

However, we elected not to terminate any of the six forward starting interest rate swaps, and redesignated the swaps in a new hedging relationship to hedge our exposure to the changes in the 10-year US treasury rates in anticipation of potential future debt offerings between December 2020 and December 2023.

Due to the size of the initial net investment resulting from the termination value of the treasury rate locks being rolled into them, two of the six forward starting swaps were determined to be hybrid debt instruments containing embedded at-market swap derivative instruments.

As a result, we have bifurcated the derivative instrument and the debt instrument for those two forward starting interest rate swaps for accounting purposes.

The remaining four forward starting interest rates swaps are accounted for as derivative instruments.

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

In connection with our October 2022 offering of $ 750 million of 5.625 % unsecured notes, due October 13, 2032, we terminated the six forward starting interest rate swaps.

Upon the issuance of the October 2022 offering, the change in fair value on the six forward starting interest rate swaps with notional amounts totaling $ 500.0 million is being amortized through the AOCI balance through the term of the notes.

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

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

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

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

Changes to fair value are recorded to accumulated other comprehensive income (loss), or AOCI, and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

This interest

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rate swap, which was converted to a SOFR benchmark from LIBOR during June 2022, continues to be accounted for as a cash flow hedge.

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

Years ended December 31,

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Foreign currency forwards 8,540 7,557 —

Total derivatives in cash flow hedging relationships $ 101,759 $ 50,448 $ ( 34,926 )

Derivatives in Fair Value Hedging Relationships

Currency swaps ( 4,705 ) — —

Total unrealized gain (loss) on derivatives $ 97,054 $ 50,448 $ ( 34,926 )

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

The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands):

Years ended December 31,

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Interest rate swaps Interest expense ( 4,487 ) ( 10,343 ) ( 11,434 )

Foreign Currency Forwards Foreign currency and derivative gain, net 2,139 — —

Total derivatives in cash flow hedging relationships $ 28,466 $ ( 6,802 ) $ ( 15,051 )

Derivatives in Fair Value Hedging Relationships

Currency swaps Foreign currency and derivative loss, net ( 29,708 ) — —

Net decrease to net income $ ( 1,242 ) $ ( 6,802 ) $ ( 15,051 )

We expect to reclassify $ 9.4 million from AOCI as an increase to interest expense relating to interest rate swaps and $ 3.3 million from AOCI to foreign currency gain relating to cross-currency swaps within the next twelve months.

We expect to reclassify $ 11.9 million from AOCI as a decrease to interest expense relating to interest rate swaps and $ 9.8 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months.

Derivatives Not Designated as Hedging Instruments

Based on our potential exposure to changes in foreign currency exchange rate, primarily in British Pound Sterling and, to a lesser extent, the Euro, we initiated a program in the third quarter of 2021 to enter into foreign currency collars.

A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates.

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

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

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

As of December 31, 2021, we had no outstanding foreign currency collars.

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

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

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

The net gain from derivatives not designated in hedging relationships for 2021 totaled $ 9.7 million and resulted from short term currency exchange swaps and foreign currency collars.

The net loss from derivatives not designated in hedging relationships for 2020 totaled $ 14.5 million and resulted from short term currency exchange swaps.

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

We enter into foreign currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the U.S.

dollar, our reporting currency, and British Pound Sterling and Euro.

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

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

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

Years ended December 31,

2022 2021 2020

Realized foreign currency and derivative gain (loss), net:

Gain (loss) on the settlement of undesignated derivatives $ 204,392 $ 24,392 $ ( 6,344 )

Gain (loss) on the settlement of designated derivatives reclassified from AOCI 3,245 3,541 ( 3,617 )

Loss on the settlement of transactions with third parties ( 553 ) ( 134 ) ( 36 )

Total realized foreign currency and derivative gain (loss), net $ 207,084 $ 27,799 $ ( 9,997 )

Unrealized foreign currency and derivative gain (loss), net:

Gain (loss) on the change in fair value of undesignated derivatives $ 29,316 $ ( 14,714 ) $ ( 8,205 )

Gain (loss) on remeasurement of certain assets and liabilities ( 249,711 ) ( 12,375 ) 22,787

Total unrealized foreign currency and derivative gain (loss), net $ ( 220,395 ) $ ( 27,089 ) $ 14,582

Total foreign currency and derivative gains (losses), net

$ ( 13,311 ) $ 710 $ 4,585

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

Derivative Type

Number of Instruments (1)

Accounting Classification Notional Amount as of December 31,

Accounting Classification Notional Amount as of

Weighted Average Strike Rate (2)

Maturity Date (3)

Fair Value - asset (liability) as of December 31,

Derivatives Designated as Hedging Instruments 2021 2020 2021 2020

Fair Value - asset (liability) as of

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

Interest rate swap

1 Derivative $ 250.0 $ 250.0 3.04 % 03/2024 $ ( 11.9 ) $ ( 22.6 )

1 Derivative $ 250.0 $ 250.0 2.88 % March 2024 $ 5.6 $ ( 11.9 )

Cross-currency swaps (4)

4 Derivative 166.3 166.4 (5) 05/2034 ( 13.8 ) ( 21.4 )

Foreign currency forwards 32 Derivative 176.1 0.0 (6) 01/2022 - 08/2024 7.6 —

3 Derivative 320.0 166.3 (5) October 2032 ( 33.3 ) ( 13.8 )

Foreign currency forwards 30 Derivative 185.5 176.1 (6) Jan 2023 - Aug 2024 16.1 7.6

Forward-starting swaps (7)

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Currency exchange swaps (8)

4 Derivative 1,639.5 625.0 (9) 01/2022 - 02/2022 ( 14.7 ) ( 8.2 )

4 Derivative $ 2,427.7 $ 1,639.5 (9) January 2023 $ 58.8 $ ( 14.7 )

Cross-Currency Swaps (4)

3 Derivative 280.0 – (5) October 2032 ( 29.5 ) —

Total of all Derivatives $ 3,463.2 $ 2,731.9 $ 17.7 $ ( 41.1 )

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

(2) Weighted average strike rate is calculated using the current notional value as of December 31, 2021.

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

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

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

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

(4) In June 2022, we terminated four British Pound Sterling, or GBP, cross-currency swaps with a notional amount of $ 166.3 million.

In October 2022, we entered into six cross-currency swaps to exchange € 612 million for $ 600 million maturing in October 2032.

(5) USD fixed rate of 5.625 % and EUR weighted average fixed rate of 4.697 %.

(6) Weighted average forward GBP-USD exchange rate of 1.34 .

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

For full discussion of the hedging arrangements for these six forward starting swaps, please refer to Derivative Designated as Hedging Instruments above.

(8) Represents two British Pound Sterling, or GBP currency exchange swaps with notional amount of $ 1.36 billion and two Euro, or EUR currency exchange swaps with notional amount of $ 275.9 million.

(9) Weighted average Forward GBP-USD exchange rate of 1.34 and Weighted Average Forward EUR-USD exchange rate of 1.16 .

These forward starting interest rate swaps were terminated in connection with a senior unsecured note issuance in October 2022.

(8) Represents one GBP currency exchange swap with a notional amount of $ 836.4 million and three Euro ("EUR"), currency exchange swaps with an associated notional amount of $ 1.6 billion.

(9) Weighted Average Forward EUR-GBP exchange rate of 0.86 and Weighted Average Forward EUR-USD exchange rate of 1.05 .

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

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We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default.

Certain of our derivative transactions include credit support annex collateral agreements with derivative counterparties requiring collateral posting based on changes in value of the derivative.

As of December 31, 2021 and December 31, 2020, no collateral has been posted related to such arrangements .

Lessor Operating and Finance Leases

At December 31, 2022, we owned or held interests in 12,237 properties.

Of the 12,237 properties, 12,018 , or 98.2 %, are single-client properties, and the remaining are multi-client properties.

At December 31, 2022, 126 properties were available for lease or sale.

The majority of our leases are accounted for as operating leases.

Rent based on a percentage of our client's gross sales, or percentage rent, for the years ended December 31, 2022, 2021, and 2020 was $ 14.9 million, $ 6.5 million, and $ 5.1 million, respectively.

At December 31, 2022, minimum future annual rental revenue to be received on the operating leases for the next five years and thereafter are as follows (in thousands):

Future Minimum Operating Lease Payments Future Minimum Direct Financing and Sale-Type Lease Payments (1)

2023 $ 3,417,312 $ 2,024

2024 3,314,029 1,118

2025 3,162,006 893

2026 2,987,790 894

2027 2,769,839 771

Thereafter 20,149,647 25,848

Totals $ 35,800,623 $ 31,548

(1) Related to 17 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments.

Amounts reflected are the cash rent on these respective properties.

Two properties are subject to sales-type leases and, therefore, revenue is recognized as sales-type lease income on the discounted cash flows of the lease payments.

Amounts reflected are the cash rent on these respective properties.

No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2022, 2021, and 2020.

Distributions Paid and Payable

We pay monthly distributions to our common stockholders.

The following is a summary of monthly distributions paid per common share for the years ended December 31, 2022, 2021, and 2020:

2022 2021 2020

January $ 0.2465 $ 0.2345 $ 0.2275

February 0.2465 0.2345 0.2325

March 0.2465 0.2345 0.2325

April 0.2470 0.2350 0.2330

May 0.2470 0.2350 0.2330

June 0.2470 0.2350 0.2330

July 0.2475 0.2355 0.2335

August 0.2475 0.2355 0.2335

September 0.2475 0.2355 0.2335

October 0.2480 0.2360 0.2340

November 0.2480 0.2360 0.2340

December 0.2480 0.2460 0.2340

$ 2.9670 $ 2.8330 $ 2.7940

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At December 31, 2022, a distribution of $ 0.2485 per common share was payable and was paid in January 2023.

At December 31, 2021, a distribution of $ 0.2465 per common share was payable and was paid in January 2022.

The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years:

2022 2021 2020

Ordinary income $ 2.7867654 $ 1.5146899 $ 2.2798764

Nontaxable distributions — 3.2925615 0.4902835

Total capital gain distribution (1)

0.1802346 0.0854609 0.0238401

$ 2.9670000 $ 4.8927123 $ 2.7940000

(1) Unrecaptured Section 1250 Gain of $ 0.0784152 , or 2.643 % of the total common dividends paid in the year ended December 31, 2022, and Section 897 Gain of $ 0.1802346 , or 6.075 % of the total common dividends paid in the year ended December 31, 2022, both represent additional characterization of, and are part of, total capital gain distribution.

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

Net Income per Common Share

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

Years ended December 31,

2022 2021 2020

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

611,765,815 414,535,283 345,280,126

Incremental shares from share-based compensation 394,579 234,563 135,132

Dilutive effect of forward ATM offerings 20,125 — —

Weighted average shares used for diluted net income per share computation

612,180,519 414,769,846 345,415,258

Unvested shares from share-based compensation that were anti-dilutive 32,165 45,404 70,581

Weighted average partnership common units convertible to common shares that were anti-dilutive

1,292,114 500,217 463,119

Weighted average forward ATM offerings that were anti-dilutive 644,458 — —

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Supplemental Disclosures of Cash Flow Information

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

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

Years ended December 31,

2022 2021 2020

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Non-cash activities:

Increase (decrease) in net derivative liability position at fair value $ ( 40,489 ) $ 55,205 $ —

Net increase (decrease) in fair value of derivatives $ 58,753 $ 40,489 $ ( 55,205 )

Mortgages assumed at fair value (1)

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Notes payable assumed at fair value $ — $ 4,946,965 $ —

Non-cash assets and liabilities assumed in merger $ 11,559,875 $ — $ —

Non-cash assets and liabilities distributed in Orion Divestiture $ 1,142,121 $ — $ —

Adoption of Accounting Standards Codifications Topic 842, Leases

$ — $ — $ 131,982

Issuance of common partnership units of Realty Income, L.P.

$ 51,221 $ 38,783 $ —

Acquisition of a controlling interest $ — $ — $ 5,084

(1) For 2021, includes £ 31.0 million Sterling, converted at the applicable exchange rate on the date of transaction, for one mortgage and $ 869.1 million, estimated at fair value, for ten mortgages from our merger with VEREIT.

(2) For 2021, includes $ 1.8 million for the issuance of 56,400 units on November 1, 2021 that were a result of our merger with VEREIT, $ 20.4 million for the issuance of 300,604 units on November 30, 2021 that were a partial consideration for an acquisition of properties, and $ 16.6 million for the issuance of 240,586 units on December 30, 2021 that were issued to a new partner in connection with an industrial property contribution.

For 2019, includes $ 6.3 million for the issuance of 89,322 units on March 28, 2019 that were a partial consideration for an acquisition of properties.

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

Non-cash assets and liabilities assumed in merger $ — $ 11,559,875 $ —

Non-cash assets and liabilities distributed in Orion Divestiture $ — $ 1,142,121 $ —

(1) For the year ended December 31, 2021, includes £ 31.0 million sterling, converted at the applicable exchange rate on the date of transaction, for one mortgage and $ 869.1 million, estimated at fair value, for ten mortgages from our merger with VEREIT.

(2) For the year ended December 31, 2022, includes 734,458 common partnership units of Realty Income L.P.

that were issued in connection with the acquisition of nine properties.

For the year ended December 31, 2021, includes $ 1.8 million for the issuance of 56,400 units on November 1, 2021 that were a result of our merger with VEREIT, $ 20.4 million for the issuance of 300,604 units on November 30, 2021 that were a partial consideration for an acquisition of properties, and $ 16.6 million for the issuance of 240,586 units on December 30, 2021 that were issued to a new partner in connection with an industrial property contribution.

December 31, 2022 December 31, 2021

Cash and cash equivalents shown in the consolidated balance sheets

$ 171,102 $ 258,579

Restricted escrow deposits (1)

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Impounds related to mortgages payable (1)

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

Total cash, cash equivalents, and restricted cash shown in the consolidated

statements of cash flows

$ 226,881 $ 332,369

(1) Included within other assets, net on the consolidated balance sheets (see note 4).

(1) Included within other assets, net on the consolidated balance sheets (see note 4, Supplemental Detail for Certain Components of Consolidated Balance Sheets ).

These amounts consist of cash that we are legally entitled to, but that is not immediately available to us.

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Common Stock Incentive Plan

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

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

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

Except as noted below, the aggregate number of shares of our common stock subject to options, stock purchase rights, or SPR, stock appreciation rights, or SAR, and other awards, will be no more 8,924,231 shares.

Except as noted below, the aggregate number of shares of our common stock subject to options, stock purchase rights ("SPR"), stock appreciation rights ("SAR"), and other awards, will be no more 8,924,231 shares.

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

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

No further awards will be granted under the 2012 Plan.

The 2021 Plan replaced the Realty Income Corporation 2012 Incentive Award Plan (the"2012 Plan"), which was set to expire in March 2022 and from which no further awards have been granted.

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

In connection with the Merger, shares which remained available for issuance under the VEREIT, Inc.

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In connection with our merger with VEREIT, shares which remained available for issuance under the VEREIT, Inc.

2021 Equity Incentive Plan immediately prior to the closing of the merger (as adjusted by the Exchange Ratio) may be used for awards under the 2021 Plan and will not reduce the shares authorized for grant under the 2021 Plan, to the extent that awards using such shares (i) are permitted without stockholder approval under applicable stock exchange rules, (ii) are made only to VEREIT service providers or individuals who become Realty Income service providers following the date of the consummation of the merger, and (iii) are only granted under the 2021 Plan during the period commencing on the date of the consummation of the merger and ending on June 2, 2031.

As a result, 6,186,101 additional shares are available for issuance under the 2021 Plan.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $ 16.2 million during 2021, $ 16.5 million during 2020 (including $ 1.8 million of accelerated share-based compensation costs for our former Chief Financial Officer ("CFO")) and $ 13.7 million during 2019.

In connection with the Merger, each outstanding VEREIT, Inc.

As a result, 6,186,101 additional shares were available for issuance under the 2021 Plan.

The amount of share-based compensation costs recognized in 'General and administrative' in the consolidated statements of income and comprehensive income was $ 21.6 million, $ 16.2 million, and $ 16.5 million (including $ 1.8 million of accelerated share-based compensation costs for our former Chief Financial Officer) during the years ended December 31, 2022, 2021, and 2020, respectively.

Also, in connection with the merger, each outstanding VEREIT, Inc.

stock option and restricted stock unit that were unvested as of November 1, 2021 were converted into equivalent options and restricted stock units, in each case with respect to shares of the Company's common stock, using the equity award exchange ratio in accordance with the merger agreement.

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This issuance is excluded from the Restricted Stock Units and Stock Options sections below, as the awards were not granted under the 2021 Plan.

The aggregate fair value of the converted awards was $ 71.6 million, of which i.) $ 44.0 million related to pre-combination services and is included in the consideration transferred in the merger (please refer to Note 3, Merger with VEREIT and Orion Divestiture ), ii.) $ 25.6 million of expense was recognized during November in merger and integration-related costs related to the acceleration of vesting upon the separation of certain employees in connection with the merger, and iii.) $ 2.0 million will be amortized through general and administrative expenses over the remaining vesting term for former VEREIT, Inc.

and Orion Office REIT Inc.

Divestiture ), ii.) $ 25.6 million of expense was recognized during November in merger and integration-related costs related to the acceleration of vesting upon the separation of certain employees in connection with the merger, and iii.) $ 2.0 million will be amortized through general and administrative expenses over the remaining vesting term for former VEREIT, Inc.

employees who were retained by Realty Income.

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The following disclosures are inclusive of these adjustments, which has been labeled 'Equitable adjustment - Orion Divestiture' throughout.

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Restricted Stock

The following table summarizes our common stock grant activity under our 2021 and 2012 Plans.

The following table summarizes our common stock grant activity:

2022 2021 2020

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Shares granted (2)

156,274 $ 67.37 133,052 $ 64.27 103,473 $ 67.84

Shares vested ( 118,160 ) $ 63.95 ( 124,505 ) $ 61.57 ( 141,486 ) $ 56.94

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(1) Grant date fair value.

(2) Our restricted stock awards granted to employees vest over a service periods not exceeding four-years .

Effective November 1, 2022, and applied retroactively for all outstanding awards, restricted stock awards granted to employees with 10 years of continued service and 60 years of age will vest over the shorter of the original vesting term or the period through the date in which the awardee reaches age 60.

The vesting schedule for shares granted to non-employee directors is as follows:

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• For directors with eight or more years of service at the date of grant, there is immediate vesting as of the date the shares of stock are granted.

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

For the years ended December 31, 2022, 2021 and 2020, respectively, we granted 40,000 , 36,000 , and 36,000 total shares of restricted stock granted to the independent members of our Board of Directors in connection with our annual awards in May 2022, 2021 and 2020, respectively.

In addition, in November 2021, we granted 8,000 shares of restricted stock to the new members of our Board of Directors, which vest in equal parts over a three-year service period.

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

During 2021, 89,052 shares were granted to our employees, and vest over a four-year service period.

In connection with our annual awards, 20,000 , 24,000 , and 24,000 shares vested immediately and 20,000 , 12,000 , and 12,000 shares vest in equal parts over a three-year service period for the years ending December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, the remaining unamortized share-based compensation expense related to restricted stock totaled $ 11.4 million, which is being amortized on a straight-line basis over the service period of each applicable award.

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

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Performance Shares

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Total shareholder return (“TSR”) ranking relative to MSCI US REIT Index 55 % 70 % 70 %

TSR ranking relative to J.P.

Morgan Net Lease Peer Group N/A N/A 26 %

Dividend per share growth rate 20 % 15 % 15 %

Debt-to-Adjusted EBITDA re Ratio

Net Debt-to-Pro Forma Adjusted EBITDA re Ratio

Net Debt-to-Adjusted EBITDA re Ratio

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The performance period for the 2020 performance awards began on January 1, 2020 and ended on December 31, 2022.

The performance period for the 2020 performance awards began on January 1, 2020 and will end on

December 31, 2022.

The performance period for the 2021 performance awards began on January 1, 2021 and will end on December 31, 2023.

The performance period for the 2022 performance awards began on January 1, 2022 and will end on December 31, 2024.

On November 15, 2021, the Compensation Committee approved a one-time grant of performance share awards and a one-time cash bonus to certain of our named executives in connection with the completion of our merger with VEREIT and the transactions contemplated thereby, including the Orion Divestiture (the "VEREIT Transaction").

The awards were made to reward the executives for the successful consummation of the VEREIT Transaction and were intended to retain and motivate the executives to achieve optimal synergies and incentivize further growth from the merger.

The performance shares are earned based on our performance related to AFFO accretion ( 50 % weighting) and general and administrative expense synergies ( 50 % weighting), and vest 50 % upon the completion of the performance period.

The performance shares are earned based on our performance related to Adjusted Funds from Operations Available to Common Stockholders ("AFFO") accretion ( 50 % weighting) and general and administrative expense synergies ( 50 % weighting), and vest 50 % upon the completion of the performance period.

The remaining 50 % will vest on the one-year anniversary of the completion of the applicable performance period.

All vesting is subject to continued service.

The performance period is one year for the AFFO accretion targets from January 1, 2022 to December 31, 2022 and two years for the general and administrative expense synergies from January 1, 2022 to December 31, 2023.

The performance period was one year for the AFFO accretion targets from January 1, 2022 to December 31, 2022, and is two years for the general and administrative expense synergies from January 1, 2022 to December 31, 2023.

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

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Shares granted 174,940 $ 77.73 257,149 $ 64.18 136,729 $ 79.98

257,149 $ 64.18 136,729 $ 79.98 128,581 $ 65.34

Shares vested ( 74,247 ) $ 59.62 ( 109,113 ) $ 62.52 ( 139,012 ) $ 63.66

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(2) Effective with the Orion Divestiture on November 12, 2021, outstanding equity awards were adjusted by a conversion ratio of 1.002342 per one Realty Income share then held.

(3) 194,053 shares granted relate to annual performance grants and 63,096 shares granted relate to one-time grant of performance shares.

As of December 31, 2022, the remaining share-based compensation expense related to the performance shares totaled $ 15.9 million and is being recognized on a tranche-by-tranche basis over the service period.

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Restricted Stock Units

During 2021, 2020 and 2019, and in connection with our merger with VEREIT, we also granted restricted stock units that primarily vest over service periods of three or four-years and have the same economic rights as shares of restricted stock:

During 2022, 2021 and 2020, and in connection with our merger with VEREIT Inc., we also granted restricted stock units that primarily vest over service periods of three or four-years and have the same economic rights as shares of restricted stock:

2022 2021 2020

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(2) Effective with the Orion Divestiture on November 12, 2021, outstanding equity awards were adjusted by a conversion ratio of 1.002342 per one Realty Income share then held.

As of December 31, 2022, the remaining share-based compensation expense related to the restricted stock units totaled $ 1.4 million and is being recognized on a straight-line basis over the service period.

The amount of share-based compensation for the restricted stock units is based on the fair value of our common stock at the grant date.

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

As of December 31, 2021, the remaining share-based compensation expense related to the restricted stock units totaled $ 1.7 million and is being recognized on a straight-line basis over the service period.

Stock Options

During 2021, we also granted stock options, in connection with our merger with VEREIT.

The following inputs and assumptions were used to calculate the weighted-average fair values of the options granted at the date of grant as follows:

The following stock options were converted in connection with our merger with VEREIT, Inc.

in 2021 and there are no additional granted or outstanding stock options.

The fair value of the stock options as of their grant date is determined using the Black-Scholes option pricing model, which requires the input of assumptions including expected terms, expected volatility, dividend yield and risk-free rate.

The following table summarizes our stock option activity:

The following table summarizes our stock option activity during the year ended December 31, 2022:

Number of stock options Weighted average exercise price (1)

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Outstanding nonvested options, beginning of year 315,070 $ 52.89

Options exercised ( 262,267 ) $ 52.41

Options forfeited ( 7,424 ) $ 58.46

Outstanding nonvested options, end of each period 45,379 $ 54.75 5.8 $ 393,710

(1) Grant date fair value.

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The following table summarizes our stock option activity during the year ended December 31, 2021:

Number of stock options Weighted average exercise price (1)

Weighted average remaining contractual term (Years) Aggregate intrinsic value

Outstanding nonvested options, beginning of year —

Options granted (2)

709,426 $ 53.80

Equitable adjustment - Orion Divestiture (3)

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(1) Grant date fair value.

(2) During the year ended December 31, 2021, stock options were granted in connection with the VEREIT merger.

(3) Effective with the Orion Divestiture on November 12, 2021, outstanding equity awards were adjusted by a conversion ratio of 1.002342 per one Realty Income share then held.

Compensation expense for stock options is recognized on a straight-line basis over the service period described above.

In 2021, we recorded $ 68,000 of expense related to stock options.

As of December 31, 2021, there was $ 57,000 of unrecognized compensation expense related to stock options with a weighted-average remaining term of 0.2 years.

Segment Information

We evaluate performance and make resource allocation decisions on an industry by industry basis.

For financial reporting purposes, we have grouped our clients into 60 activity segments.

All of the properties are incorporated into one of the applicable segments.

Unless otherwise specified, all segments listed below are located within the U.S.

Because almost all of our leases require our clients to pay or reimburse us for operating expenses, rental revenue is the only component of segment profit and loss we measure.

Our investments in industries outside of the U.S.

are managed as separate operating segments.

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

Assets, as of December 31:

Segment net real estate:

Automotive service $ 852,151 $ 328,340

Beverages 362,570 347,366

Child care 347,680 216,718

Convenience stores - U.S.

2,844,800 2,101,005

Dollar stores 2,303,906 1,420,210

Drug stores 2,182,432 1,555,106

Financial services 576,065 374,508

General merchandise - U.S.

1,289,735 730,806

Grocery stores - U.S.

1,517,237 907,634

Grocery stores - U.K.

1,963,057 1,131,760

Health and fitness 1,325,932 1,050,791

Health care - U.S.

670,864 289,244

Home furnishings - U.S.

583,564 109,631

Home improvement - U.S.

946,870 608,222

Home improvement - U.K.

780,308 187,289

Restaurants - casual dining 2,016,017 515,226

Restaurants - quick service - U.S.

2,689,806 1,062,918

Theaters - U.S.

750,877 767,117

Transportation services 1,039,220 729,640

Wholesale club 865,658 407,584

Other non-reportable segments 6,080,123 2,644,041

Total net real estate $ 31,988,872 $ 17,485,156

Intangible assets:

Automotive service 125,543 55,018

Beverages 17,452 9,401

Child care 33,449 19,848

Convenience stores - U.S.

275,548 121,151

Dollar stores 366,319 77,176

Drug stores 355,779 167,975

Financial services 92,986 14,611

General merchandise - U.S.

254,343 108,646

Grocery stores - U.S.

378,181 181,764

Grocery stores - U.K.

426,714 282,211

Health and fitness 125,586 67,537

Health care - U.S.

103,143 21,032

Home furnishings - U.S.

210,654 9,336

Home improvement - U.S.

207,637 97,228

Home improvement - U.K.

158,667 57,369

Restaurants - casual dining 416,653 20,553

Restaurants - quick service - U.S.

270,092 47,517

Theaters - U.S.

33,527 28,292

Transportation services 125,971 53,902

Wholesale club 155,032 36,165

Other non-reportable segments 1,142,849 233,923

3,676,705 14,180

Other corporate assets 2,195,800 1,530,294

Total assets $ 43,137,502 $ 20,740,285

(1) During 2021, we invested in 43 properties in Spain.

As of December 31, 2021, grocery stores - Spain was not a reportable segment.

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

the allocation is pending the finalization of our purchase accounting.

Revenue for the years ended December 31, 2021 2020 2019

Segment rental revenue:

Automotive service $ 47,830 $ 35,090 $ 32,365

Beverages 37,284 32,771 31,807

Child care 36,425 35,643 31,749

Convenience stores - U.S.

217,175 189,658 166,755

Dollar stores 149,136 126,719 102,695

Drug stores 153,174 140,993 127,853

Financial services 36,831 30,531 30,189

General merchandise - U.S.

72,442 49,352 35,366

Grocery stores - U.S.

88,360 78,106 69,691

Grocery stores - U.K.

100,500 51,459 17,819

Health and fitness 115,878 104,744 105,896

Health care - U.S.

33,579 25,563 21,011

Home furnishings - U.S.

21,457 12,447 10,490

Home improvement - U.S.

62,076 46,392 42,351

Home improvement - U.K.

34,470 4,224 —

Restaurants - casual dining 71,338 46,265 45,238

Restaurants - quick service - U.S.

115,758 88,163 92,018

Theaters - U.S.

90,792 78,653 87,698

Transportation services 71,955 64,131 66,500

Wholesale club 46,061 38,713 38,117

Other non-reportable segments and contractually obligated reimbursements by our clients 462,437 359,916 329,210

Rental (including reimbursable) 2,064,958 1,639,533 1,484,818

Other 15,505 7,554 3,345

Total revenue $ 2,080,463 $ 1,647,087 $ 1,488,163

(1) During 2021, we invested in 43 properties in Spain.

As of December 31, 2021, grocery stores - Spain was not a reportable segment.

During the years ended December 31, 2022 and 2021, we recorded $ 47,000 and $ 68,000 of expense related to stock options, respectively.

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

Commitments and Contingencies

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

At December 31, 2021, we had commitments of $ 74.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of December 31, 2021, we had committed $ 285.7 million under construction contracts, the majority of which is expected to be paid in the next twelve months.

At December 31, 2022, we had commitments of $ 21.7 million, which primarily relate to re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of December 31, 2022, we had committed $ 606.3 million under construction contracts related to development projects, which have estimated rental revenue commencement dates between January 2023 and August 2024.

We have certain properties that are subject to ground leases, which are accounted for as operating leases.

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At December 31, 2022, the weighted average discount rate for finance leases is 3.40 % and the weighted average remaining lease term is 19.9 years.

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Subsequent Events

Dividend Payments

In January and February 2022, we declared a dividend of $ 0.2465 , which will be paid in February 2022 and March 2022, respectively.

In January 2023, we declared a dividend of $ 0.2485 per share to our common stockholders, which was paid in February 2023.

In addition, in February 2023, we declared a dividend of $ 0.2545 , which will be paid in March 2023.

Note Issuances

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

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

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

In January 2023, we issued $ 500 million of 5.05 % senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $ 600 million of 4.85 % senior unsecured notes due March 2030, which are callable at par on January 15, 2030.

The public offering price for the January 2026 Notes was 99.618 % of the principal amount for an effective semi-annual yield to maturity of 5.189 % and the public offering price for the March 2030 Notes was 98.813 % of the principal amount for an effective semi-annual yield to maturity of 5.047 % .

On January 6, 2023 we entered into a term loan agreement (the “Term Loan Agreement”) governing our term loan, pursuant to which we borrowed an aggregate of approximately $ 1.0 billion in multicurrency borrowings, including $ 90.0 million, £ 705.0 million and € 85.0 million (collectively, the “Term Loans”).

The Term Loan Agreement also permits us to incur additional term loans, up to an aggregate of $ 1.5 billion in total borrowings.

The Term Loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at the company's option.

Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for USD-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans.

ATM Forward Offerings

ATM forward agreements for a total of 13.4 million shares remain unsettled with total expected net proceeds of approximately $ 850 million, of which 6.7 million shares were executed in 2023.

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Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data