What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-03 · 163 added, 150 removed, 591 unchanged (35% of the section changed)

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

Forward-looking statements include discussions of our business and portfolio (including our growth strategies and our intention to acquire or dispose of additional domestic and international properties and the timing of these acquisitions and dispositions), re-lease, re-development and speculative development of properties and expenditures related thereto;

Forward-looking statements include discussions of our business and portfolio (including growth strategies and intentions to acquire or dispose of properties including the timing and terms), re-leases, re-development and speculative development of properties and expenditures related thereto;

future operations and results;

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acts of terrorism and war;

and any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT, Inc.

in November 2021 will be achieved.

and the structure, timing and completion of the announced merger between us and Spirit Realty Capital, Inc., a Maryland corporation (“Spirit”) and any effects of the announcement, pendency or completion of the announced merger, including the anticipated benefits therefrom.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

As of June 30, 2023, we owned or held interests in 13,118 properties located in all 50 U.S.

As of September 30, 2023, we owned or held interests in 13,282 properties located in all 50 U.S.

states, Puerto Rico, the United Kingdom ("U.K."), Spain, Italy, and Ireland, with approximately 262.6 million square feet of leasable space leased to clients doing business in 85 separate industries.

Of the 13,118 properties in our portfolio as of June 30, 2023, 12,882, or 98.2%, were single-client properties, of which 12,747 were leased, and the remaining were multi–client properties.

Our total portfolio of 13,118 properties as of June 30, 2023 had a weighted average remaining

lease term (excluding rights to extend a lease at the option of the client) of approximately 9.6 years.

Total portfolio annualized contractual rent on our leases as of June 30, 2023 was $3.76 billion.

As of June 30, 2023, approximately 39.7% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of June 30, 2023, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 40.8% of our annualized rent and 11 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Approximately 93% of our annualized retail contractual rent as of June 30, 2023, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $87.7 million and $41.0 million for the three months ended June 30, 2023, and 2022, respectively, and $147.3 million and $85.0 million during the six months ended June 30, 2023 and 2022, respectively.

Of the 13,282 properties in our portfolio as of September 30, 2023, 13,032, or 98.1%, were single-client properties, of which 12,875 were leased, and the remaining were multi–client properties.

Our total portfolio of 13,282 properties as of September 30, 2023 had a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of

approximately 9.7 years.

Total portfolio annualized contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables) on our leases as of September 30, 2023 was $3.87 billion.

As of September 30, 2023, approximately 39.0% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of September 30, 2023, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 40.9% of our annualized rent and 10 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Approximately 93% of our annualized retail contractual rent as of September 30, 2023, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $61.3 million and $44.1 million for the three months ended September 30, 2023, and 2022, respectively, and $208.6 million and $129.0 million during the nine months ended September 30, 2023, and 2022, respectively.

RECENT DEVELOPMENTS

Increases in Monthly Dividends to Common Stockholders

We have continued our 54-year policy of paying monthly dividends.

In addition, we increased the dividend four times during 2023.

As of July 2023, we have paid 103 consecutive quarterly dividend increases and increased the dividend 121 times since our listing on the NYSE in 1994.

We have continued our 54-year history of paying monthly dividends.

In addition, we increased the dividend five times during 2023.

As of October 2023, we have paid 104 consecutive quarterly dividend increases and increased the dividend 122 times since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2023:

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4th increase Jun 2023 Jul 2023 $0.2555 $0.0005

The dividends paid per share during the six months ended June 30, 2023, totaled approximately $1.5165, as compared to approximately $1.4805 during the six months ended June 30, 2022, an increase of $0.036, or 2.4%.

The monthly dividend of $0.2555 per share represents a current annualized dividend of $3.066 per share, and an annualized dividend yield of 5.1% based on the last reported sale price of our common stock on the NYSE of $59.79 on June 30, 2023.

5th increase Sep 2023 Oct 2023 $0.2560 $0.0005

The dividends paid per share during the nine months ended September 30, 2023, totaled approximately $2.2830, as compared to approximately $2.2230 during the nine months ended September 30, 2022, an increase of $0.06, or 2.7%.

The monthly dividend of $0.2560 per share represents a current annualized dividend of $3.072 per share, and an annualized dividend yield of 6.2% based on the last reported sale price of our common stock on the NYSE of $49.94 on September 30, 2023.

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

Acquisitions During the Three and Six Months Ended June 30, 2023

During the three months ended June 30, 2023, we invested $3.1 billion in 710 properties and properties under development or expansion at an initial weighted average cash lease yield of 6.9% .

Of such properties, as of June 30, 2023, approximately 18% of the total annualized contractual rent of such properties was attributable to properties leased to investment grade clients.

During the six months ended June 30, 2023, we invested $4.8 billion in 997 properties and properties under development or expansion at an initial weighted average cash lease yield of 6.9% .

Of such properties, as of June 30, 2023, approximately 26% of the total annualized contractual rent of such properties was attributable to properties leased to investment grade clients.

Acquisitions During the Three and Nine Months Ended September 30, 2023

During the three months ended September 30, 2023, we invested $2.0 billion in 289 properties and properties under development or expansion at an initial weighted average cash lease yield of 6.9%.

Of such properties, as of September 30, 2023, approximately 20% of the total annualized contractual rent of such properties was attributable to properties leased to investment grade clients.

During the nine months ended September 30, 2023, we invested $6.8 billion in 1,187 properties and properties under development or expansion at an initial weighted average cash lease yield of 6.9%.

Of such properties, as of September 30, 2023, approximately 25% of the total annualized contractual rent of such properties was attributable to properties leased to investment grade clients.

See note 3, Investments in Real Estate, to the consolidated financial statements for further details.

Equity Capital Raising

During the three months ended June 30, 2023, we raised $2.2 billion of net proceeds from the sale of common stock, primarily through our At-The-Market (ATM) program, with a weighted average price of $61.89.

As of June 30, 2023, 4.9 million shares of common stock subject to forward sale confirmations have been executed but not settled.

In August 2023, we replaced our prior At-The-Market (ATM) program with a new ATM program, pursuant to which we may offer and sell up to 120.0 million shares of common stock.

During the three months ended September 30, 2023, we raised $0.9 billion of net proceeds from the sale of common stock, primarily through our ATM program, with a weighted average price of $58.58.

As of September 30, 2023, 13.3 million shares of common stock subject to forward sale confirmations have been executed but not settled.

See note 8, Issuances of Common Stock, for further details.

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Leasing Results

At June 30, 2023, we had 137 properties available for lease or sale out of 13,118 properties in our portfolio, representing a 99.0% occupancy rate based on the number of properties in the portfolio.

Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards .

At September 30, 2023, we had 159 properties available for lease or sale out of 13,282 properties in our portfolio, representing a 98.8% occupancy rate based on the number of properties in the portfolio.

Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards, and properties with possession pending.

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

Three months ended June 30, 2023

Properties available for lease at March 31, 2023

Three months ended September 30, 2023

Properties available for lease at June 30, 2023

Lease expirations (1)

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Vacant dispositions (20)

Properties available for lease at June 30, 2023

Six months ended June 30, 2023

Properties available for lease at September 30, 2023

Nine months ended September 30, 2023

Properties available for lease at December 31, 2022 126

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Vacant dispositions (74)

Properties available for lease at June 30, 2023

Properties available for lease at September 30, 2023

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

During the three months ended June 30, 2023, the new annualized contractual rent on re-leases was $51.7 million, as compared to the previous annual rent of $50.0 million on the same units, representing a rent recapture rate of 103.4% on the units re-leased.

We re-leased two units to new clients without a period of vacancy, and 11 units to new clients after a period of vacancy.

During the six months ended June 30, 2023, the new annualized contractual rent on re-leases was $87.8 million, as compared to the previous annual rent of $85.5 million on the same units, representing a rent recapture rate of 102.7% on the units re-leased.

We re-leased four units to new clients without a period of vacancy, and 17 units to new clients after a period of vacancy.

During the three months ended September 30, 2023, the new annualized contractual rent on re-leases was $57.6 million, as compared to the previous annual rent of $53.9 million on the same units, representing a rent recapture rate of 106.9% on the units re-leased.

We re-leased three units to new clients without a period of vacancy, and 10 units to new clients after a period of vacancy.

During the nine months ended September 30, 2023, the new annualized contractual rent on re-leases was $145.4 million, as compared to the previous annual rent of $139.4 million on the same units, representing a rent recapture rate of 104.3% on the units re-leased.

We re-leased seven units to new clients without a period of vacancy, and 27 units to new clients after a period of vacancy.

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

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

Anticipated Transition of Chief Financial Officer Role

On June 22, 2023, we announced the planned retirement of Christie Kelly as of Executive Vice President, Chief Financial Officer (CFO) and Treasurer, and the anticipated transition of that role to Jonathan Pong, currently the company's Senior Vice President, Head of Corporate Finance as part of our planned succession process, in each case, effective January 1, 2024.

Theater Industry Update

As previously disclosed, Cineworld Group plc and its affiliates ("Cineworld") commenced Chapter 11 reorganization proceedings during September 2022.

As of June 30, 2023, we own 35 properties leased to Cineworld, which represent 1.1% of our total portfolio annualized contractual rent.

D uring the three months ended June 30, 2023, we collected approximately 99.0% of contractual rent across our entire theater portfolio.

Uncollected rent during the period was primarily related to unpaid contractual rent at properties leased to Cineworld, but subsequently rejected as part of the bankruptcy process.

We remain in negotiations with Cineworld regarding the terms and conditions of the leases at the properties Cineworld currently operates.

We expect to reach final resolution on these matters in 2023.

As of June 30, 2023, we had cumulative reserves of $31.4 million on properties leased to Cineworld with total receivables, net of reserves, of $12.9 million.

These reserves for Cineworld, representing a reduction of rental revenue, primarily relate to contractual rent and expense recoveries recorded during the COVID-19 pandemic in 2020, and during the fourth quarter of 2022, and exclude straight-line rent reserves.

(1) We define contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables.

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

Agreement and Plan of Merger

On October 29, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Saints MD Subsidiary, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Merger Sub”), and Spirit Realty Capital, Inc., a Maryland corporation (“Spirit”).

Pursuant to the terms and conditions of the Merger Agreement, upon the closing, Spirit will be merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”).

Pursuant to the terms and subject to the conditions of the Merger Agreement, at the date and time the Merger becomes effective, (i) each outstanding share of Spirit common stock, par value $0.05 per share (other than the Excluded Common Shares (as defined in the Merger Agreement)) will automatically be converted into 0.762 of a newly issued share our common stock, subject to adjustment as set forth in the Merger Agreement, and cash in lieu of fractional shares, and (ii) each outstanding share of Spirit’s 6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, will be converted into the right to receive one share of newly issued Realty Income 6.000% Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock.

The Merger Agreement contains customary covenants, representations, and warranties, as well as certain termination rights for us and Spirit, in each case, as more fully described in the Merger Agreement.

The consummation of the Merger is also subject to certain customary closing conditions, including receipt of the approval by the stockholders of Spirit, and certain customary termination rights.

Investment in Bellagio Las Vegas

In October 2023, we completed our previously announced $950 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc.

in a new joint venture that owns a 95% interest in the real estate of The Bellagio Las Vegas.

The investment included approximately $300 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650 million preferred equity interest in the joint venture with an expected rate of return of 8.1%.

Cineworld Bankruptcy Resolution

As previously disclosed, Cineworld Group plc and its affiliates ("Cineworld") commenced Chapter 11 reorganization proceedings during September 2022, at which time we owned 41 properties leased to Cineworld.

In the second quarter of 2023, Cineworld rejected 6 leases as part of the bankruptcy process.

On July 31, 2023, Cineworld emerged from Chapter 11 bankruptcy.

As of September 30, 2023, we owned 35 properties leased to Cineworld, which represented 1.1% of our total portfolio's annual contractual rent.

On October 1, 2023, we entered into a comprehensive restructuring agreement with Cineworld on the 35 properties we own.

Pursuant to this agreement, Cineworld committed to long-term leases on 28 of the properties, with a weighted average lease term of approximately 10 years, while remaining on short-term leases with terms of one year or less on 7 of the properties.

Of the 28 properties with long-term leases, the base rent recapture rate is 75%, which does not include percentage rent that was added to all properties and there were no tenant improvements or additional capital commitments made.

In addition, the restructuring agreement amended certain terms on deferred rent obligations owed to us, including both full and partial forgiveness of deferred rent for certain properties.

As these deferrals were accounted for on a cash basis or fully reserved for, there was no impact to our overall Cineworld receivables, net of reserves, as a result of these amendments and any recoveries beyond this will be recognized upon collection.

Impact of Inflation

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Moreover, our strategic focus on the use of net lease agreements reduces our exposure to rising property expenses due to inflation because the client is responsible for property expenses.

Even though the utilization of net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our clients' ability to pay rent.

Additionally, inflationary periods may cause us to experience increased costs of financing, make it difficult to refinance debt at attractive rates or at all, and may adversely affect the properties we can acquire if the cost of financing an acquisition is in excess of our anticipated earnings from such property, thereby limiting the properties that can be acquired.

Even though the utilization of net leases reduces our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our clients' ability to pay rent.

Additionally, inflationary periods may cause us to

experience increased costs of financing, make it difficult to refinance debt at attractive rates or at all, and may adversely affect the properties we can acquire if the cost of financing an acquisition is in excess of our anticipated earnings from such property, thereby limiting the properties that can be acquired.

Impact of Real Estate and Credit Markets

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LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2023, we had approximately $3.5 billion of liquidity, which consists of cash and cash equivalents of approximately $253.7 million, including £113.9 million denominated in Sterling and €40.2 million denominated in Euro, and $3.3 billion of availability under our $4.25 billion unsecured revolving credit facility, after deducting $122.7 million in commercial paper borrowings under our commercial paper programs (comprised of a $1.5 billion U.S.

dollar-denominated unsecured commercial paper program and $1.5 billion, or foreign currency equivalent, Euro-denominated unsecured commercial paper program).

As of September 30, 2023, we had $4.5 billion of liquidity, which consists of cash and cash equivalents of $344.1 million, including £93.1 million denominated in Sterling and €47.9 million denominated in Euro, unsettled ATM forward equity of $749.3 million, and $3.4 billion of availability under our $4.25 billion unsecured revolving credit facility, after deducting $376.8 million in commercial paper borrowings under our commercial paper programs.

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

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

As of June 30, 2023, there are approximately $1.1 billion of obligations becoming due through the remainder of 2023, which we expect to fund through a combination of the following:

We expect to fund the next twelve months of obligations through a combination of the following:

• Cash and cash equivalents;

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Our goal is to deliver dependable monthly dividends to our stockholders that increase over time.

Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate acquisitions, property development, and capital expenditures, by issuing common stock, preferred stock, long-term unsecured notes and term loan borrowings.

Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate acquisitions, investments in loans, property development, and capital expenditures by issuing common stock, preferred stock, long-term unsecured notes, and term loan borrowings.

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

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Capitalization

As of June 30, 2023, our total market capitalization was $62.0 billion.

Total market capitalization consisted of $42.5 billion of common equity (based on the June 30, 2023 closing price on the NYSE of $59.79 and assuming the conversion of common units of Realty Income, L.P.) and total outstanding borrowings of $19.5 billion on our senior unsecured notes and bonds, term loans, mortgages payable, revolving credit facility and commercial paper (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt to market capitalization was 31.5% at June 30, 2023.

As of June 30, 2023, there were approximately 4.9 million shares of common stock subject to forward sale agreements through our ATM program, representing approximately $0.3 billion in expected net proceeds and a weighted average initial price of $59.33 per share, which have been executed at a weighted average price of $58.72 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates), but not settled.

During the six months ended June 30, 2023, we settled approximately 48.1 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $3.0 billion of net proceeds.

Under our current ATM program, we may offer and sell up to 120.0 million 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.

As of June 30, 2023, we had 24.3 million additional shares remaining for future issuance under our ATM program.

As of September 30, 2023, our total market capitalization was $56.6 billion.

Total market capitalization consisted of $36.2 billion of common equity (based on the September 30, 2023 closing price on the NYSE of $49.94 and assuming the conversion of common units of Realty Income, L.P.) and total outstanding borrowings of $20.4 billion on our senior unsecured notes and bonds, term loans, mortgages payable, revolving credit facility and commercial paper (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt to market capitalization was 36.0% at September 30, 2023.

As of September 30, 2023, there were approximately 13.3 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $749.3 million in expected net proceeds, which have been executed at a weighted average price of $56.47 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates).

During the nine months ended September 30, 2023, we settled approximately 63.2 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $3.9 billion of net proceeds.

As of September 30, 2023, we had 102.7 million 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.

Debt and Financing Activities

At June 30, 2023, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable, revolving credit facility and commercial paper were $19.5 billion, with a weighted average maturity of 5.9 years and a weighted average interest rate of 3.79%.

As of June 30, 2023, approximately 92% of our total debt was fixed rate debt.

See notes 4 through 7 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the six months ended June 30, 2023 below.

At September 30, 2023, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable, revolving credit facility and commercial paper were $20.4 billion, with a weighted average maturity of 5.8 years and a weighted average interest rate of 3.8%.

As of September 30, 2023, approximately 93% of our total debt was fixed rate debt.

See notes 4 through 7 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the nine months ended September 30, 2023 below.

Note Issuances

During the six months ended June 30, 2023, we issued the following notes and bonds (in millions):

Note Issuance Date of Issuance Maturity Date Principal amount Price of par value Effective semi-annual yield to maturity

During the nine months ended September 30, 2023, we issued the following notes and bonds (in millions):

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

January 2023 January 2026 $ 500.0 99.618 % 5.189 %

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April 2023 July 2033 $ 600.0 98.020 % 5.148 %

In July 2023, we issued €550.0 million of 4.875% senior unsecured notes due July 2030 (the “2030 Notes”), and €550.0 million of 5.125% senior unsecured notes due July 2034 (the “2034 Notes”).

The public offering price for the 2030 Notes was 99.421% of the principal amount for an effective annual yield to maturity of 4.975%, and the public offering price for the 2034 Notes was 99.506% of the principal amount for an effective annual yield to maturity of 5.185%.

New Term Loan

July 2023 July 2030 € 550.0 99.421 % 4.975 %

July 2023 July 2034 € 550.0 99.506 % 5.185 %

In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings.

As of June 30, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings.

As of September 30, 2023, we had $1.0 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings.

The 2023 term loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at our option.

In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate.

As of June 30, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%.

As of September 30, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%.

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

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

The actual amounts as of June 30, 2023, are:

The actual amounts as of September 30, 2023, are:

Note Covenants

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

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on July 1, 2022 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of July 1, 2022, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at June 30, 2023 (in thousands, for trailing twelve months):

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on October 1, 2022 and subject to certain additional adjustments.

(i), (ii) and (iii) of the preceding sentence occurred as of October 1, 2022, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at September 30, 2023 (in thousands, for trailing twelve months):

Net income available to common stockholders

interest expense, excluding the amortization of deferred financing costs

gain on extinguishment of debt

provision for taxes

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

As of June 30, 2023, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

As of September 30, 2023, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

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

In addition, we were assigned the following ratings on our commercial paper at June 30, 2023:

In addition, we were assigned the following ratings on our commercial paper at September 30, 2023:

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

Based on our credit agency ratings as of June 30, 2023, interest rates under our credit facility for U.S.

Based on our credit agency ratings as of September 30, 2023, interest rates under our credit facility for U.S.

borrowings would have been at the 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, for British Pound Sterling borrowings, at the 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 for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.

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Material Cash Requirements

The following table summarizes the maturity of each of our obligations as of June 30, 2023 (dollars in millions):

The following table summarizes the maturity of each of our obligations as of September 30, 2023 (dollars in millions):

Credit Facility and Commercial Paper (1)

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

At June 30, 2023, there were $867.5 million borrowings under our revolving credit facility, and commercial paper programs outstanding were $122.7 million, which matured in July 2023.

At September 30, 2023, there were $481.5 million borrowings under our revolving credit facility, and commercial paper programs outstanding were $376.8 million, which matured in October 2023.

(2) The maturity date for our 2023 multi-currency term loan assumes the two twelve-month extensions available at the Company's option are fully exercised.

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

It excludes interest on the July 2023 issuances of €550.0 million of senior unsecured notes due July 2030 and €550.0 million of senior unsecured notes due July 2034.

(4) We currently pay the ground lessors directly for the rent under the ground leases.

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

In 2022, our cash distributions to common stockholders totaled $1.81 billion, or approximately 95.3% of our estimated taxable income of $1.90 billion.

In 2022, our cash distributions to common stockholders totaled $1.81 billion, or approximately 97.8% of our taxable income of $1.85 billion.

Certain measures are available to us to reduce or eliminate our tax exposure as a REIT, and accordingly, no provision for federal income taxes, other than our taxable REIT subsidiaries (each, a "TRS"), has been made.

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

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

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

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

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

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

We distributed $1.5165 per share to stockholders during the six months ended June 30, 2023, representing 76.6% of our diluted AFFO per share of $1.98.

We distributed $2.2830 per share to stockholders during the nine months ended September 30, 2023, representing 76.4% of our diluted AFFO per share of $2.99.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, FFO, Normalized FFO, AFFO, cash flow from operations, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, our debt service requirements, and any other factors the Board of Directors may deem relevant.

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

capital gains dividend, or that such amounts constitute “qualified dividend income” subject to a reduced rate of tax.

Distributions of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to stockholders as ordinary income, except to the extent that we recognize capital gains and declare a capital gains dividend, or that such amounts constitute “qualified dividend income” subject to a reduced rate of tax.

The maximum tax rate of non-corporate taxpayers for “qualified dividend income” is generally 20%.

In general, dividends payable by REITs are not eligible for the reduced tax rate on qualified dividend income, except to the extent that certain holding requirements have been met with respect to the REIT’s stock and the REIT’s dividends are attributable to dividends received from certain taxable corporations (such as our TRSs) or to income that was subject to tax at the corporate or REIT level (for example, if we distribute taxable income that we retained and paid tax on in the prior taxable year).

dividends payable by REITs are not eligible for the reduced tax rate on qualified dividend income, except to the extent that certain holding requirements have been met with respect to the REIT’s stock and the REIT’s dividends are attributable to dividends received from certain taxable corporations (such as our TRSs) or to income that was subject to tax at the corporate or REIT level (for example, if we distribute taxable income that we retained and paid tax on in the prior taxable year).

However, non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026.

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RESULTS OF OPERATIONS

The following is a comparison of our results of operations for the three and six months ended June 30, 2023 and 2022.

The following is a comparison of our results of operations for the three and nine months ended September 30, 2023 and 2022.

Total Revenue

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Rental Revenue (excluding reimbursable)

The table below summarizes our rental revenue (excluding reimbursable) in the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

The table below summarizes our rental revenue (excluding reimbursable) in the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

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Totals $ 947,549 $ 781,883 $ 165,666 $ 2,720,806 $ 2,297,272 $ 423,534

(1) Same store rental revenue increased by 2.0% and 1.1% for the three and six months ended June 30, 2023 as compared to the same periods in 2022, respectively.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2023, of 1.27 British Pound Sterling ("GBP")/USD and 1.09 Euro ("EUR")/USD.

(1) Same store rental revenue increased by 2.2% and 1.6% for the three and nine months ended September 30, 2023 as compared to the same periods in 2022, respectively.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of September 30, 2023, of 1.22 British Pound Sterling ("GBP")/USD and 1.06 Euro ("EUR")/USD.

None of the properties in Italy and Ireland met our same store pool definition for the periods presented.

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base rent increases tied to inflation (typically subject to ceilings), percentage rent based on a percentage of the clients’ gross sales, fixed increases, or a combination of two or more of the aforementioned rent provisions.

Rent based on a percentage of our client's gross sales, or percentage rent, was $1.7 million in the three months ended June 30, 2023, $2.2 million for the three months ended June 30, 2022, $5.8 million for the six months ended June 30, 2023, and $6.0 million for the six months ended June 30, 2022.

Rent based on a percentage of our client's gross sales, or percentage rent, was $2.2 million in the three months ended September 30, 2023, $2.3 million for the three months ended September 30, 2022, $8.0 million for the nine months ended September 30, 2023, and $8.3 million for the nine months ended September 30, 2022.

Percentage rent represents less than 1.0% of rental revenue.

At June 30, 2023, our portfolio of 13,118 properties was 99.0% leased with 137 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022, and 98.9% leased with 132 properties available for lease at June 30, 2022.

At September 30, 2023, our portfolio of 13,282 properties was 98.8% leased with 159 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022, and 98.9% leased with 131 properties available for lease at September 30, 2022.

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

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

however, it is possible that the number of properties available for lease or sale could increase in the future, given the nature of economic cycles and other unforeseen global events.

Rental Revenue (reimbursable)

A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses.

Contractually obligated reimbursements by our clients increased by $46.8 million and $62.3 million for the three and six months ended June 30, 2023 as compared with the same periods in 2022, respectively, primarily due to higher recoverable real estate tax taxes from overall portfolio growth.

Contractually obligated reimbursements by our clients increased by $17.3 million and $79.6 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, primarily due to higher recoverable real estate tax taxes from overall portfolio growth.

Other Revenue

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

Other revenue increased by $14.3 million and $25.6 million for the three and six months ended June 30, 2023 as compared to the same periods in 2022, respectively, due to a higher number of leases with above-market terms in recent acquisitions.

Other revenue increased by $18.9 million and $44.5 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, due to a higher number of leases with above-market terms in recent acquisitions.

Total Expenses

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Depreciation and Amortization

Depreciation and amortization increased by $62.8 million and $110.6 million for the three and six months ended June 30, 2023 as compared to the same periods in 2022, respectively, primarily due to overall portfolio growth from acquisitions.

Depreciation and amortization increased by $76.6 million and $187.1 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, primarily due to overall portfolio growth from acquisitions.

Interest Expense

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Weighted average interest rates 3.93 % 3.21 % 3.81 % 3.16 %

Interest expense increased by $73.7 million and $121.5 million for the three and six months ended June 30, 2023 as compared to the same periods in 2022, primarily due to higher average debt and weighted average interest.

Interest expense increased by $66.7 million and $188.2 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, primarily due to higher average debt and weighted average interest.

See notes to the accompanying consolidated financial statements additional information regarding our indebtedness.

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Property expenses (excluding reimbursable) consist of costs associated with properties available for lease, non-net-leased properties and general portfolio expenses and include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees.

Property expenses (excluding reimbursable) decreased $4.2 million and $2.8 million for the three and six months ended June 30, 2023 as compared with the same periods in 2022, respectively, primarily due to our decrease in property tax expense.

Property expenses (excluding reimbursable) increased by $1.0 million for the three months ended September 30, 2023 and decreased $1.8 million for the nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, which was primarily impacted by property tax expense.

Property Expenses (reimbursable)

Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients.

Property expenses (reimbursable) increased by $46.8 million and $62.3 million for the three and six months ended June 30, 2023 as compared with the same periods in 2022, respectively, which is proportional to overall portfolio growth.

Property expenses (reimbursable) increased by $17.3 million and $79.6 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, which is proportional to overall portfolio growth.

General and Administrative Expenses

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

General and administrative expenses increased $2.7 million and $4.2 million for the three and six months ended June 30, 2023 as compared with the same periods in 2022, respectively, primarily due to higher payroll-related compensation costs associated with the growth of the company.

General and administrative expenses increased by $1.4 million and $5.6 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, primarily due to higher payroll-related compensation costs associated with the growth of the company.

Provisions for Impairment

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

We incurred approximately $0.3 million and $1.6 million of merger and integration-related transaction costs during the three and six months ended June 30, 2023, respectively, compared to approximately $2.7 million and $9.2 million during the three and six months ended June 30, 2022, respectively, in conjunction with our merger with VEREIT, Inc.

We incurred approximately $2.9 million and $4.5 million of merger and integration-related transaction costs during the three and nine months ended September 30, 2023, respectively, compared to approximately $3.7 million and $13.0 million during the three and nine months ended September 30, 2022, respectively, in conjunction with our merger with VEREIT, Inc.

in November 2021.

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

Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from AOCI.

Net foreign currency and derivative (loss) gain, net for the three and six months ended June 30, 2023 was a loss of $2.6 million and a gain of $7.8 million, respectively, primarily due to foreign currency fluctuations on undesignated foreign currency exchange swap agreements.

Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated other comprehensive income ("AOCI").

Net foreign currency and derivative (loss) gain, net for the three and nine months ended September 30, 2023 was a loss of $2.8 million and a gain of $5.0 million, respectively, primarily due to foreign currency fluctuations related to the remeasurement of intercompany debt.

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 will not occur, $20.0 million gain was reclassified from AOCI.

As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the nine months ended September 30, 2022.

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

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Equity in income of unconsolidated entities relates to three equity method investments acquired in our merger with VEREIT, Inc.

in November 2021, which were all sold during 2022.

The income for the three and six months ended June 30, 2023 is attributable to distributions in excess of our basis.

Following the sale of the properties, distributions primarily result from the release of holdbacks from property sales, refunds from taxing authorities and distributions of operating cash.

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

in November 2021, which were all sold during the third quarter of 2022.

The loss for the three and nine months ended September 30, 2022 was primarily driven by an other than temporary impairment related to the sale of these investments.

Following the sale of the properties, distributions primarily result from the release of hold backs from property sales, refunds from taxing authorities and distributions of operating cash.

The income for the nine months ended September 30, 2023 is attributable to distributions in excess of our basis.

Other Income, Net

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

The increase of $0.2 million and $1.1 million for the three and six months ended June 30, 2023 as compared to the same periods in 2022, respectively, was primarily due to higher interest income earned on cash balances from an increase in interest rates.

The increase of $5.0 million and $6.1 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, was primarily due to higher interest income earned on money market accounts and an increase in gain on insurance proceeds from recoveries on property losses exceeding our carrying value.

Income taxes primarily consist of international income taxes accrued or paid by us and our subsidiaries, as well as to state and local taxes.

The decrease of $1.7 million and $0.8 million in income taxes for the three and six months ended June 30, 2023, as compared to the same periods in 2022, is primarily attributable to lower UK tax rates.

The increase of $1.2 million and $0.4 million in income taxes for the three and nine months ended September 30, 2023, as compared with the same periods in 2022, is primarily attributable to higher taxable income in the UK;

partially offset by lower UK tax rates.

NON-GAAP FINANCIAL MEASURES

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Our definition of “Adjusted EBITDA re ” is generally consistent with the Nareit definition, other than our adjustments to remove foreign currency and derivative gain and loss, excluding gain and loss from the settlement of foreign currency forwards not designated as hedges (which is consistent with our previous calculations of "Adjusted EBITDA").

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

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

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

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

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

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

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

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

The following is a reconciliation of net income (which we believe is the most comparable U.S.

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Net income $ 233,877 $ 220,287

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Gain on sales of real estate (7,572) (42,883)

Foreign currency and derivative losses (gains), net 2,552 (7,480)

Foreign currency and derivative losses, net 2,813 22,893

Gain on settlement of foreign currency forwards — 2,784

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Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 20,388,406 $ 16,142,608

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

Cash and cash equivalents (344,129) (187,745)

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

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

(2) Net Debt is total debt per our consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, less cash and cash equivalents.

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

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Annualized pro forma adjustments from properties acquired or stabilized $ 79,141 $ 68,589

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Diluted Normalized FFO $ 740,405 $ 601,885 $ 2,117,120 $ 1,822,948

FFO per common share

Basic $ 1.02 $ 1.01 $ 2.06 $ 2.02

Diluted $ 1.02 $ 1.01 $ 2.05 $ 2.02

FFO per common share, basic and diluted $ 1.04 $ 0.97 $ 3.09 $ 2.99

Normalized FFO per common share, basic and diluted $ 1.04 $ 0.97 $ 3.10 $ 3.01

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

(3) Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps, over the term of the $750.0 million of 5.625% senior unsecured notes due October 2032.

(3) Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps in October 2022, over the term of the $750.0 million of 5.625% senior unsecured notes due October 2032.

(4) Includes foreign currency gain and loss as a result of intercompany debt and remeasurement transactions, mark-to-market adjustments on investments and derivatives that are non-cash in nature, straight-line payments from cross-currency swaps, obligations related to financing lease liabilities, and adjustments allocable to noncontrolling interests.

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PROPERTY PORTFOLIO INFORMATION

At June 30, 2023, out of the 13,118 properties that we owned or held interest in, 12,981 properties were leased under net lease agreements.

At September 30, 2023, out of the 13,282 properties that we owned or held interest in, 13,123 properties were leased under net lease agreements.

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

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

Convenience Stores 11.1% 8.6% 9.1% 11.9% 12.3%

Grocery 11.4% 10.0% 10.2% 9.8% 7.9%

Convenience Stores 10.6 8.6 9.1 11.9 12.3

Dollar Stores 7.2 7.4 7.5 7.6 7.9

Home Improvement 5.9 5.6 5.1 4.3 2.9

Drug Stores 5.9 5.7 6.6 8.2 8.8

Home Improvement 5.8 5.6 5.1 4.3 2.9

Restaurants-Quick Service 5.3 6.0 6.6 5.3 5.8

Restaurants-Casual Dining 4.8 5.1 5.9 2.8 3.2

Health and Fitness 4.2 4.4 4.7 6.7 7.0

Restaurants-Casual 4.6 5.1 5.9 2.8 3.2

Automotive Service 4.2 4.0 3.2 2.7 2.6

Health and Fitness 4.1 4.4 4.7 6.7 7.0

General Merchandise 3.7 3.7 3.7 3.4 2.5

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Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2023 (dollars in thousands):

The following table sets forth certain property type information regarding our property portfolio as of September 30, 2023 (dollars in thousands):

Property Type

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(1) Includes leasable building square footage.

Excludes 2,962 acres of leased land categorized as agriculture at June 30, 2023.

(2) "Other" includes 27 properties classified as agriculture, consisting of approximately 0.3 million leasable square feet and $37.4 million in annualized contractual rent and ten properties classified as office, consisting of approximately 2.1 million leasable square feet and $27.2 million in annualized contractual rent.

Excludes 2,962 acres of leased land categorized as agriculture at September 30, 2023.

(2) "Other" includes 27 properties classified as agriculture, consisting of approximately 0.3 million leasable square feet and $37.6 million in annualized contractual rent and 10 properties classified as office, consisting of approximately 2.1 million leasable square feet and $27.3 million in annualized contractual rent, as well as one land parcel under development.

Client Diversification

The following table sets forth the 20 largest clients in our property portfolio, expressed as a percentage of total portfolio annualized contractual rent, which does not give effect to deferred rent, at June 30, 2023:

Client Number of

Leases Percentage of Total Portfolio Annualized Contractual Rent (1)

Dollar General 1,579 3.8 %

Walgreens 369 3.9 %

Dollar General 1,630 3.9

Dollar Tree / Family Dollar 1,195 3.3

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Regal Cinemas (Cineworld) 35 1.1

Lowe's 40 1.1

Total 5,305 40.9 %

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Lease Expirations

The following table sets forth certain information regarding the timing of the lease term expirations in our portfolio (excluding rights to extend a lease at the option of the client) and their contribution to total portfolio annualized contractual rent as of June 30, 2023 (dollars in thousands):

Total Portfolio (1)

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Geographic Diversification

The following table sets forth certain geographic information regarding our property portfolio as of June 30, 2023 (dollars in thousands):

The following table sets forth certain geographic information regarding our property portfolio as of September 30, 2023 (dollars in thousands):

Percent Leased

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Puerto Rico 6 100 59,400 *

United Kingdom 241 100 23,003,000 10.5

Spain 53 100 3,960,100 0.9

Italy 7 100 1,075,100 0.4

Ireland 4 100 311,500 0.1

Italy 7 100 1,075,100 0.4

Spain 54 100 3,960,100 0.9

United Kingdom 289 100 27,412,800 12.3

Totals/average

13,282 98 % 262,561,900 100.0 %

• *Less than 0.1%

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

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What changed 10-Q

Item 2. Management’s Discussion and Analysis