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Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-22 · 303 added, 426 removed, 278 unchanged (72% of the section changed)

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

The following discussion and analysis reflect our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7.

"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.

Realty Income, The Monthly Dividend Company ® , is an S&P 500 company and member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for over 25 consecutive years.

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

Realty Income was founded in 1969, and listed on the NYSE under the ticker symbol "O" in 1994.

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.

At December 31, 2022, our diversified portfolio consisted of:

• Owned or held interests in 12,237 properties;

• An occupancy rate of 99.0%, or 12,111 properties leased and 126 properties available for lease or sale;

• Clients doing business in 84 separate industries;

• Locations in all 50 U.S.

states, Puerto Rico, the U.K., Spain, and Italy;

• Approximately 236.8 million square feet of leasable space;

• A weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.5 years;

• An average leasable space per property of approximately 19,350 square feet, approximately 13,000 square feet per retail property and approximately 234,100 square feet per industrial property.

As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 U.S.

states, Puerto Rico, the U.K., France, Germany, Ireland, Italy, Portugal, and Spain, with approximately 272.1 million square feet of leasable space to clients doing business in 86 separate industries.

Of the 13,458 properties in the portfolio at December 31, 2023, 13,197, or 98.1%, are single-client properties, of which 13,007 were leased, and the remaining are multi-client properties.

Our total portfolio has a weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.8 years.

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 $274.2 million, $184.7 million and $104.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

RECENT DEVELOPMENTS

Closing of Spirit Realty Capital Merger

On January 23, 2024, we closed on our previously announced merger with Spirit, which is further described in note 21, Subsequent Events, to the consolidated financial statements.

The Spirit portfolio consisted of 2,018 U.S.

retail, industrial and other properties across 49 states.

With assets that are highly complementary to our existing portfolio, this transaction enhances the diversification and depth of our real estate portfolio and will allow us to strengthen our longstanding relationships with existing clients and curate new ones.

Increases in Monthly Dividends to Common Stockholders

We have continued our 55-year history of paying monthly dividends.

In addition, we increased the dividend five times during 2023 and once during 2024.

As of February 2024, we have paid 105 consecutive quarterly dividend increases and increased the dividend 123 times since our listing on the NYSE in 1994.

2023 Dividend increases

Month Declared Month Paid Monthly Dividend per share Increase per share

1st increase Dec 2022 Jan 2023 $ 0.2485 $ 0.0005

2nd increase Feb 2023 Mar 2023 $ 0.2545 $ 0.0060

3rd increase Mar 2023 Apr 2023 $ 0.2550 $ 0.0005

4th increase Jun 2023 Jul 2023 $ 0.2555 $ 0.0005

5th increase Sep 2023 Oct 2023 $ 0.2560 $ 0.0005

2024 Dividend increase

1st increase Dec 2023 Jan 2024 $ 0.2565 $ 0.0005

The dividends paid per share during 2023 totaled $3.051, as compared to $2.967 during 2022, an increase of $0.084, or 2.8%.

The monthly dividend of $0.2565 per share represents a current annualized dividend of $3.0780 per share, and an annualized dividend yield of 5.4% based on the last reported sale price of our common stock on the NYSE of $57.42 on December 31, 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.

Investments During 2023

During the year ended December 31, 2023, we invested $9.5 billion at an initial weighted average cash yield of 7.1%, including an investment in 1,408 properties, properties under development or expansion, investments in loans and a preferred equity investment.

See notes 4 , Investments in Real Estate, 5, Investments in Unconsolidated Entities, and 6, Investments in Loans, to the consolidated financial statements for further details.

Equity Capital Raising

We have an At-The-Market ("ATM") program, pursuant to which 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 at prevailing market prices or at negotiated prices or by any other methods permitted by applicable law.

During 2023, we raised $5.5 billion of net proceeds from the sale of common stock, at a weighted average price of $59.79 per share, primarily through proceeds from the sale of common stock through our At-the-Market ("ATM") Program.

The ATM program issuances during 2023 included 91.7 million shares issued pursuant to forward sale confirmations.

As of December 31, 2023, 6.2 million shares of common stock subject to forward sale confirmations have been executed but not settled.

See note 11 , Issuances of Common Stock , to the consolidated financial statements for further details.

Note Issuances

In January 2024, we issued $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034.

In connection with the Merger, we also completed the $2.7 billion exchange in principal of outstanding notes issued by Spirit Realty, L.P.

(“Spirit OP”).

See note 21, Subsequent Events, to the consolidated financial statements for further details.

In December 2023, we issued £300.0 million of 5.750% senior unsecured notes due December 2031 and £450.0 million of 6.000% senior unsecured notes due December 2039.

In July 2023, we issued €550.0 million of 4.875% senior unsecured notes due July 2030 and €550.0 million of 5.125% senior unsecured notes due July 2034.

In April 2023, we issued $400.0 million of 4.700% senior unsecured notes due December 2028 and $600.0 million of 4.900% senior unsecured notes due July 2033.

In January 2023, we issued $500.0 million of 5.050% senior unsecured notes due January 2026 and $600.0 million of 4.850% senior unsecured notes due March 2030.

See note 10 .

Notes Payable , to the consolidated financial statements for further details.

Appointment of New Chief Financial Officer and Treasurer ("CFO")

Effective January 1, 2024, Jonathan Pong was appointed Executive Vice President, CFO and Treasurer, replacing Christie Kelly, our former CFO, upon her planned retirement that was announced in June 2023.

Portfolio Discussion

Leasing Results

At December 31, 2023, we had 193 properties available for lease or sale out of 13,458 properties in our portfolio, which represents a 98.6% occupancy rate based on the number of properties in our portfolio.

Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards, properties with possession pending, and include properties owned by unconsolidated joint ventures.

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

Three months ended December 31, 2023

Properties available for lease at September 30, 2023

Lease expirations (1)

Re-leases to same client (164)

Re-leases to new client (26)

Vacant dispositions (42)

Properties available for lease at December 31, 2023

Year ended December 31, 2023

Properties available for lease at December 31, 2022

Lease expirations (1)

Re-leases to same client (750)

Re-leases to new client (51)

Vacant dispositions (116)

Properties available for lease at December 31, 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 December 31, 2023, the new annualized contractual rent on re-leases was $52.7 million, as compared to the previous annual rent of $50.8 million on the same units, representing a rent recapture rate of 103.6% on the units re-leased, which excludes restructurings associated with the Cineworld bankruptcy.

Including Cineworld restructured leases that resulted in lease extensions, the recapture rate was 94.1% for the three months ended December 31, 2023.

We re-leased 20 units to new clients without a period of vacancy, and 12 units to new clients after a period of vacancy.

During the year ended December 31, 2023, the new annualized contractual rent on re-leases was $198.1 million, as compared to the previous annual rent of $190.3 million on the same units, representing a rent recapture rate of 104.1% on the units re-leased, which excludes restructurings associated with the Cineworld bankruptcy.

Including Cineworld restructured leases that resulted in lease extensions, the recapture rate was 101.1% for the year ended December 31, 2023.

We re-leased 27 units to new clients without a period of vacancy, and 39 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.

Pan European Sale and Leaseback with Decathlon SE ("Decathlon")

We entered the markets of France, Germany, and Portugal for the first time through sale-leaseback transactions with affiliates of Decathlon, a world leader in retail sporting goods and an investment grade rated company, for €527.0 million, which includes 82 retail properties located in France, Germany, Italy, Portugal, and Spain.

Investments in Unconsolidated Joint Ventures

In October 2023, we completed our previously announced $951.4 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc.

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

The investment included $301.4 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650.0 million preferred equity interest in the joint venture with an expected rate of return of 8.1%.

In November 2023, we established a joint venture with Digital Realty Trust, Inc.

("Digital Realty") to support the development of two build-to-suit data centers in Northern Virginia.

We invested approximately $199.8 million to acquire an 80% equity interest in the venture, while Digital Realty maintains a 20% interest.

Each partner will fund its pro rata share of the remaining $117.7 million estimated development cost for the first phase of the project, which is slated for completion in mid-2024.

See note 5, Investments in Unconsolidated Entities, to the consolidated financial statements for further details.

Impact of Inflation

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

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

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

During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation and other costs.

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 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

In the commercial real estate market, property prices generally continue to fluctuate.

Likewise, during certain periods, the global capital markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital.

We continually monitor the commercial real estate and global capital markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

Our goal is to deliver dependable monthly dividends to our shareholders 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

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acquisitions, 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.

We may issue common stock when we believe our share price is at a level that allows for the proceeds of an offering to be accretively invested into additional properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term debt securities.

However, we cannot assure you that we will have access to the capital markets at all times and at terms that are acceptable to us.

Our primary cash obligations, for the current year and subsequent years, are included in the “Table of Obligations,” which is presented later in this section.

As of December 31, 2023, we had $4.1 billion of liquidity, which consists of cash and cash equivalents of $232.9 million, including £46.1 million denominated in Sterling and €43.6 million denominated in Euro, unsettled ATM forward equity of $337.8 million, and $3.5 billion of availability under our $4.25 billion unsecured revolving credit facility, after deducting $764.4 million in 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.

Our primary cash obligations, for the current year and subsequent years, are included in the “Material Cash Requirements” table, which is presented later in this section.

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 December 31, 2022, there are approximately $2.0 billion of obligations becoming due during 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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• Issuances of common stock or debt;

• Additional borrowings under our revolving credit facility (after deducting outstanding borrowings under our commercial paper programs).

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

through the issuance of debt securities denominated in the same local currency and through currency derivatives.

We may leave a portion of our foreign cash flow unhedged to reinvest in additional properties in the same local currency.

Conservative Capital Structure

We believe that our stockholders are best served by a conservative capital structure.

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

At December 31, 2022, our total outstanding borrowings of senior unsecured notes and bonds, $250.0 million term loan, mortgages payable, revolving credit facility and commercial paper were $17.9 billion, or approximately 29.9% of our total market capitalization of $59.9 billion.

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

• Shares of our common stock outstanding of 660,300,195, plus total common units outstanding of 1,795,167, multiplied by the last reported sales price of our common stock on the NYSE of $63.43 per share on December 31, 2022, or $42.0 billion;

• Outstanding borrowings of $2.0 billion on our revolving credit facility, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings;

• Outstanding borrowings of $701.8 million on our commercial paper programs, including €361.0 million of Euro-denominated borrowings;

• Outstanding mortgages payable of $842.3 million, excluding net mortgage premiums of $12.4 million and deferred financing costs of $0.8 million;

• Outstanding borrowings on our $250.0 million term loan, excluding deferred financing costs of $0.2 million;

• Outstanding senior unsecured notes and bonds of $14.1 billion, including Sterling-denominated notes of £2.57 billion, and excluding unamortized net premiums of $224.6 million and deferred financing costs of $60.7 million.

• Additional borrowings under our revolving credit facility and our term loan (after deducting outstanding borrowings under our commercial paper programs).

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

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

Long-Term Liquidity Requirements

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, 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.

However, we cannot assure you that we will have access to the capital markets at all times and at terms that are acceptable to us.

Capitalization

As of December 31, 2023, our total market capitalization was $65.4 billion.

Total market capitalization consisted of $43.3 billion of common equity (based on the December 31, 2023 closing price on the NYSE of $57.42 and assuming the conversion of common units of Realty Income, L.P.) and total outstanding borrowings of $22.1 billion on our revolving credit facility, commercial paper, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt to market capitalization was 33.8% at December 31, 2023.

Universal Shelf Registration

In June 2021, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in June 2024.

On February 16, 2024, we filed a new shelf registration statement with the SEC, which is effective for a term of three years and will expire in February 2027.

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

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

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

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these securities are offered.

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

The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

Equity Capital Raising

Under our ATM program, up to 120,000,000 shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers’ transactions on the NYSE at prevailing market prices, at prices related to prevailing market prices or at negotiated prices or by any other methods permitted by applicable law.

We currently expect to fully physically cash 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.

During the year ended December 31, 2022, we issued 68,608,176 shares and raised approximately $4.6 billion of net proceeds under the ATM programs.

With respect to forward sales pursuant to our ATM program, we do not initially receive any proceeds from any sale of shares of our common stock borrowed by a forward purchaser and sold through a forward seller.

As of December 31, 2022, there were 6,744,884 shares of common stock subject to forward sale agreements through our ATM program, with a weighted average initial price of $63.31 per share, representing approximately $0.4 billion in estimated net proceeds (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), which have been executed but not settled.

The weighted average forward price at December 31, 2022 was $62.59 per share, after price deduction and adjustments.

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

As of December 31, 2023, there were approximately 6.2 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $337.8 million in expected net proceeds, which have been executed at a weighted average price of $54.70 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 year ended December 31, 2023, we settled approximately 91.7 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $5.4 billion of net proceeds.

As of December 31, 2023, we had 81.3 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.

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

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

Our DRSPP authorizes up to 26,000,000 common shares to be issued.

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

We did not issue shares under the waiver approval process during the year ended December 31, 2022.

During the year ended December 31, 2022, we issued 175,554 shares and raised approximately $11.7 million under our DRSPP.

At December 31, 2022, we had 11,159,825 shares remaining for future issuance under our DRSPP program.

There were no issuances of common stock in underwritten public offerings during the year ended December 31, 2022.

Revolving Credit Facility

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.

Our revolving credit facility also has a $1.0 billion expansion feature, 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.

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 in different currencies.

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

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

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

Our revolving credit facility is subject to various leverage and interest coverage ration limitations, as at December 31, 2022, we were in compliance with

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these covenants.

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

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

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.

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

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

At December 31, 2022, we had an outstanding balance of $701.8 million, including €361.0 million of Euro-denominated borrowings.

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

The commercial paper borrowings outstanding at December 31, 2022 have matured and will mature between January 2023 and February 2023.

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.

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

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

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

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

On January 6, 2023 we entered into 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 in outstanding borrowings.

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.

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

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

Mortgage Debt

As of December 31, 2022, we had $842.3 million of mortgages payable, of which £30.7 million related to a Sterling-denominated mortgage.

The majority of our mortgages payable were assumed in connection with our merger with VEREIT or with our property acquisitions, including the assumption of eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022.

At December 31, 2022, we had net premiums totaling $12.4 million on these mortgages and deferred financing costs of $0.8 million.

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

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

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.

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Notes Outstanding

As of December 31, 2022, our senior unsecured note and bond obligations had a total principal amount of $14.1 billion, including Sterling- denominated notes of £2.57 billion, and excluding net unamortized premiums of $224.6 million and deferred financing costs of $60.7 million.

Notes Payable to our consolidated financial statements for the full list of senior unsecured notes and bonds, by maturity date.

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

Debt and Financing Activities

At December 31, 2023, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $21.5 billion, with a weighted average maturity of 5.9 years and a weighted average interest rate of 3.9%.

As of December 31, 2023, approximately 94% of our total debt was fixed rate debt.

See notes 7 through 10 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the year ended December 31, 2023 below.

Note Issuances

During the year ended December 31, 2023, 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

January 2022 January 2027 £ 250 99.487 % 1.974 %

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 %

June 2022 June 2030 £ 140 100.000 % 3.160 %

June 2022 June 2032 £ 345 100.000 % 3.180 %

June 2022 June 2037 £ 115 100.000 % 3.390 %

October 2022 October 2032 $ 750 99.879 % 5.641 %

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 to our consolidated financial statements.

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

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

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

January 2023 March 2030 $ 600.0 98.813 % 5.047 %

April 2023 December 2028 $ 400.0 98.949 % 4.912 %

April 2023 July 2033 $ 600.0 98.020 % 5.148 %

July 2023 July 2030 € 550.0 99.421 % 4.975 %

July 2023 July 2034 € 550.0 99.506 % 5.185 %

December 2023 December 2031 £ 300.0 99.298 % 5.862 %

December 2023 December 2039 £ 450.0 99.250 % 6.075 %

In January 2024, we issued $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034 .

In connection with the Merger, we also completed the $2.7 billion exchange in principal of outstanding notes issued by Spirit OP.

See note 21, Subsequent Events, to the consolidated financial statements for further details.

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 December 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings.

The 2023 term loans mature in January 2025 with one remaining 12-month maturity extension available 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 December 31, 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.

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

These calculations, which are not based on accounting principles generally accepted in U.S.

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.

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(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 January 1, 2023 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 January 1, 2022, nor does it purport to reflect our debt service coverage ratio for any

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future period.

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 January 1, 2023, 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 December 31, 2023 (in thousands, for trailing twelve months):

1 unchanged sentence

interest expense, excluding the amortization of deferred financing costs

gain on extinguishment of debt

provision for taxes

6 unchanged sentences

Debt service and fixed charge coverage ratio

Cash Reserves

We are organized to operate as an equity REIT that acquires and leases properties and distributes to stockholders, in the form of monthly cash distributions, a substantial portion of our net cash flow generated from leases on our properties.

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

At December 31, 2022, we had cash and cash equivalents totaling $171.1 million, inclusive of £74.3 million denominated in Sterling and €17.8 million denominated in Euro.

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

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

Credit Agency Ratings

4 unchanged sentences

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 December 31, 2022, interest rates under our new 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 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.

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

Based on our credit agency ratings as of December 31, 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 drawn 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 drawn 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 drawn pricing of 0.85% over one-month EURIBOR.

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

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

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

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

(i) 0.30% for a rating lower than BBB-/Baa3 or unrated, and (ii) 0.10% for a credit rating of A/A2 or higher.

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Moreover, a rating is not a recommendation to buy, sell or hold our debt securities, preferred stock or common stock.

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Table of Obligations

Material Cash Requirements

The following table summarizes the maturity of each of our obligations as of December 31, 2023 (dollars in millions):

Year due Credit Facility and Commercial Paper Programs (1)

Senior Unsecured Notes and

$250.0 million Term

Leases Paid by

Realty Income (6)

Credit Facility and Commercial Paper (1)

Unsecured Term

Mortgages Payable Senior Unsecured Notes and Bonds (3)

Leases Paid by the Company (5)

Leases Paid by

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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 December 31, 2022, there were $2.0 billion borrowings under our revolving credit facility.

Commercial paper programs outstanding at December 31, 2022 were $701.8 million, which have matured and will mature between January 2023 and February 2023.

(2) Excludes non-cash net premiums recorded on notes payable of $224.6 million and deferred financing costs of $60.7 million.

The table of obligations also excludes the January 2023 issuances of $500.0 million of senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $600.0 million of senior unsecured notes due March 2030, which are callable at par on January 15, 2030.

(3) Excludes deferred financing costs of $0.2 million as well as the approximately $1.0 billion multicurrency unsecured term loan entered into in January 2023.

(4) Excludes both non-cash net premiums recorded on the mortgages payable of $12.4 million and deferred financing costs of $0.8 million.

(5) Interest on the term loan, 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.

Excludes interest on the multicurrency term loan entered into January 2023 for approximately$1.0 billion, which matures January 2024, as well as on our January 2023 issuances of $500 million of senior unsecured notes, which are callable at par on January 13, 2024, and $600 million of senior unsecured notes due March 2030.

At December 31, 2023, there were no borrowings under our revolving credit facility, and commercial paper programs outstanding were $764.4 million, which matured between January 2024 and February 2024.

(2) The maturity date for our 2023 term loans reflects the closing of our previous twelve-month extension option and assumes the additional twelve-month extension available at the company's option is exercised.

(3) Excludes our January 2024 issuance of $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034.

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

Excludes interest on the January 2024 issuances of $450.0 million of unsecured senior notes due February 2029 and $800.0 million of unsecured senior notes due February 2034.

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

(7) Our clients, who are generally sub-clients under ground leases, are responsible for paying the rent under these ground leases.

(6) Our clients, who are generally sub-tenants clients under ground leases, are responsible for paying the rent under these ground leases.

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

(7) “Other” consists of $740.0 million of commitments under construction contracts, and $32.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

Our credit facility, commercial paper programs, term loans, and notes payable obligations are unsecured.

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

Unconsolidated Investments

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

In 2022, all seven assets owned by our industrial partnerships acquired in connection with the VEREIT merger were sold.

The gross purchase price for the properties was $905.0 million and we collected $114.0 million of net proceeds (after mortgage defeasance and closing costs) to date, representing our proportionate share of partnership distributions.

Up until the point of sale of these properties, we were responsible for funding our proportionate share of any operating cash deficits pursuant to the governance documents of the applicable entities.

There are no further material commitments related to those investments.

Investments in Unconsolidated Entities

As of December 31, 2023, our pro-rata share of secured debt of unconsolidated entities was approximately $659.2 million.

DIVIDEND POLICY

Distributions are paid monthly to holders of shares of our common stock.

Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P., each on a per unit basis that is equal to the amount paid per share to our common stockholders.

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

In 2023, our cash distributions to common stockholders totaled $2.11 billion, or approximately 115.9% of estimated taxable income of $1.82 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.

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 $3.051 per share to stockholders during 2023, representing 76.3% of our diluted Adjusted Funds from Operations Available to Common Stockholders ("AFFO") per share of $4.00.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, Funds from Operations Available to Common Stockholders ("FFO"), Normalized Funds from Operations Available to Common Stockholders ("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.

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).

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.

Distributions in excess of earnings and profits generally will first be treated as a non-taxable reduction in the stockholders’ basis in their stock, but not below zero.

Distributions in excess of that basis generally will be taxable as a capital gain to stockholders who hold their shares as a capital asset.

Approximately 6.8% of the distributions to our common stockholders, made or deemed to have been made in 2023, were classified as a return of capital for federal income tax purposes.

RESULTS OF OPERATIONS

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S.

GAAP and are the basis for our discussion and analysis of financial condition and results of operations.

Preparing our consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements.

We believe that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition.

We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes.

However, actual results may differ from these estimates and assumptions.

This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 2, Summary of Significant Accounting Policies and Procedures and New Accounting Standards , to our consolidated financial statements in this Annual Report on Form 10-K for the year ended December 31, 2022.

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In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S.

GAAP, many subjective judgments must be made with regard to critical accounting policies.

Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed.

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 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 value of the land, building and improvements, and identified intangible assets and liabilities and is often based upon the various characteristics of the market where the property is located.

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

The estimated fair values of our mortgages payable have been calculated by discounting the future cash flows using applicable interest rates that have been adjusted for factors, such as industry type, client investment grade, maturity date, and comparable borrowings for similar assets.

The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenue and expenses.

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

If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value.

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

If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.

The carrying value of our real estate is the largest component of our consolidated balance sheets.

Our strategy of primarily holding properties, long-term, directly decreases the likelihood of their carrying values not being recoverable, thus requiring the recognition of an impairment.

However, if our strategy, or one or more of the above assumptions were to change in the future, an impairment may need to be recognized.

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

The following is a comparison of our results of operations for the years ended December 31, 2022, 2021 and 2020.

The following is a comparison of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Total Revenue

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

Years ended December 31, Increase

2022 2021 2020 2022

Years ended December 31,

2023 2022 Change

Rental (excluding reimbursable)

5 unchanged sentences

$ 4,078,993 $ 3,343,681 $ 735,312

The increase in total revenue primarily relates to the merger with VEREIT and acquisitions for the years ended December 31, 2022 and 2021 .

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Rental Revenue (excluding reimbursable)

The table below summarizes our rental revenue (excluding reimbursable, dollars in thousands):

Years ended December 31, Increase/(Decrease)

Number of Properties Square Footage (1)

2022 2021 $ Change

Properties acquired during 2022 & 2021 2,314 53,632,497 $ 550,676 $ 134,652 $ 416,024

Same store rental revenue (2)

9,615 167,391,055 2,453,030 2,410,302 42,728

Orion Divestiture (3)

92 10,093,123 430 154,444 (154,014)

Constant currency adjustment (4)

N/A N/A 4,483 18,020 (13,537)

Properties sold during and prior to 2022 426 9,771,221 18,465 57,659 (39,194)

Straight-line rent and other non-cash adjustments N/A N/A 20,778 20,711 67

Vacant rents, development and other (5)

308 7,257,983 55,903 52,341 3,562

Other excluded revenue (6)

N/A N/A 11,210 10,551 659

VEREIT rental revenue (7)

N/A N/A — (898,573) 898,573

Totals $ 3,114,975 $ 1,960,107 $ 1,154,868

(1) Excludes 5,909,738 square feet from properties ground leased to clients and 2,654,136 square feet from properties with no land or building ownership.

(2) The same store rental revenue percentage increase for the year ended December 31, 2022 as compared with the same period in the prior year is 1.8%.

(3) 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.

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.

(4) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2022, of 1.20 British Pound Sterling ("GBP")/USD.

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

(5) Relates to the aggregate of (i) rental revenue from properties (292 properties comprising 6,552,442 square feet) that were available for lease during part of 2022 or 2021, and (ii) rental revenue for properties (16 properties comprising 705,541 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented.

(6) Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements.

(7) Amounts for the year ended December 31, 2021 represent rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021.

The table below summarizes the increase in rental revenue (excluding reimbursable) in 2021 compared to 2020 (dollars in thousands):

Years Ended December 31, Increase/(Decrease)

Number of Properties Square Footage (1)

The table below summarizes our rental revenue (excluding reimbursable) for the years ended December 31, 2023 and 2022 (dollars in thousands):

Number of Properties Years ended December 31,

2023 2022 Change

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10,498 2,851,747 2,799,549 52,198

Orion Divestiture 92 10,074,923 45,047 50,401 (5,354)

Constant currency adjustment (2)

N/A N/A 2,025 (2,861) 4,886

N/A (10,001) (11,228) 1,227

Properties sold during and prior to 2023

312 5,246 30,371 (25,125)

Straight-line rent and other non-cash adjustments N/A N/A 11,646 (3,587) 15,233

Straight-line rent and other non-cash adjustments N/A (34,721) 20,871 (55,592)

Vacant rents, development and other (3)

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Other excluded revenue (4)

N/A N/A 12,231 9,424 2,807

N/A 2,784 7,459 (4,675)

Totals $ 3,683,949 $ 3,114,972 $ 568,977

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(1) Excludes 5,869,364 square feet from properties ground leased to clients and 2,100,990 square feet from properties with no land or building ownership.

(2) The same store rental revenue percentage increase for the year ended December 31, 2021 as compared with the same period in the

prior year is 2.8%.

(3) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2021 of 1.35 GBP/USD.

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

In addition, the same store pool excludes properties assumed on November 1, 2021 as a result of our merger with VEREIT.

(4) Relates to the aggregate of (i) rental revenue from properties (128 properties comprising 2,292,635 square feet) that were available for lease during part of 2021 or 2020, (ii) rental revenue for properties (nine properties comprising 357,605 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented.

(5) Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements.

(1) The same store rental revenue percentage increase for the year ended December 31, 2023 as compared to the same period in 2022 is 1.9%.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2023.

None of the properties in France, Germany, Ireland, Italy, or Portugal met our same store pool definition for the periods presented.

(3) Relates to the aggregate of (i) rental revenue from 325 properties that were available for lease during part of 2023 or 2022, and (ii) rental revenue for 27 properties under development or completed developments that do not meet our same store pool definition for the periods presented.

(4) Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination.

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

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

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

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

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

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

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

If these applicable amounts of rent deferrals and uncollected rent were excluded from our calculation of same store rental revenue, the increases for 2022 relative to 2021 and 2021 relative to 2020 would have been 2.3% and 7.7%, respectively.

Of the 12,237 properties in the portfolio at December 31, 2022, 12,018, or 98.2%, are single-client properties and the remaining are multi-client properties.

Of the 12,018 single-client properties, 11,894, or 99.0%, were net leased at December 31, 2022.

Of the 14,262 in-place leases in the portfolio, which excludes 270 vacant units, 11,717, or 82.2%, were under leases that provide for increases in rents through:

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

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

• Fixed increases;

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

Rent based on a percentage of our client's gross sales, or percentage rent, was $14.9 million, $6.5 million and $5.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Percentage rent represents less than 1% of rental revenue.

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 $14.8 million and $14.9 million for the years ended December 31, 2023 and 2022, respectively, which represents less than 1% of rental revenue.

At December 31, 2023, our portfolio of 13,458 properties was 98.6% leased with 193 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 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.

The increase in contractually obligated reimbursements by our clients in the periods presented is primarily due to the growth of our portfolio due to acquisitions.

The increase in contractually obligated reimbursements by our clients for the year ended December 31, 2023 as compared with the same period in 2022 is 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.

The increases in the periods presented are due to additional leases with above-market terms, which is proportional to overall portfolio growth.

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Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms and interest income recognized on client loans and preferred equity investments.

The increase in other revenue for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher interest income on financing receivables of $60.9 million driven by an increase in recent sale-leaseback transactions with above-market lease terms, in addition to an increase of $17.0 million from interest income earned on new loans and preferred equity investments entered into during the year.

Total Expenses

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

Years ended December 31, Increase/(Decrease)

2022 2021 2020 2022

The following summarizes our total expenses (in thousands):

Years ended December 31,

2023 2022 Change

Depreciation and amortization $ 1,895,177 $ 1,670,389 $ 224,788

465,223 323,644 309,336 141,579 14,308

Interest 730,423 465,223 265,200

Property (excluding reimbursable) 42,763 41,645 1,118

Property (reimbursable) 274,201 184,685 89,516

184,682 104,851 79,362 79,831 25,489

General and administrative 144,536 138,459 6,077

138,459 96,980 73,215 41,479 23,765

Provisions for impairment 87,082 25,860 61,222

25,860 38,967 147,232 (13,107) (108,265)

Merger and integration-related costs 14,464 13,897 567

Total expenses $ 3,188,646 $ 2,540,158 $ 648,488

$ 2,540,158 $ 1,658,444 $ 1,311,424 $ 881,714 $ 347,020

Total revenue (1)

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

4.4 % 4.9 % 4.4 %

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

1.3 % 1.5 % 1.6 %

(1) Excludes rental revenue (reimbursable).

(2) General and administrative expenses for 2020 included an executive severance charge related to the departure of our former Chief Financial Officer ("CFO") in March 2020.

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

In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $69.8 million which was used for our calculation.

Depreciation and Amortization

The increase in depreciation and amortization is primarily due to the acquisition of properties in 2022 and 2021, which was partially offset by property sales in those same periods.

The 2021 acquisition volume was primarily driven by the merger with VEREIT.

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

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The increase in depreciation and amortization for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to overall portfolio growth from acquisitions.

Interest Expense

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

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

Years ended December 31,

2022 2021 2020

Interest on our credit facility, commercial paper, $250.0 million term loan, notes, mortgages and interest rate swaps

Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps

$ 788,344 $ 523,384

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Amortization of debt origination and deferred financing costs 26,670 14,149

Loss on interest rate swaps 718 2,905 4,132

(Gain) loss on interest rate swaps (7,189) 718

Amortization of net mortgage premiums (12,803) (13,622)

Amortization of net note premiums (60,657) (62,989)

Interest capitalized (2,789) (1,926) (480)

Capital lease obligation 1,509 1,464

Interest capitalized (10,808) (2,789)

Interest expense $ 730,423 $ 465,223

Credit facility, commercial paper, $250.0 million term loan, mortgages and notes

Average outstanding balances (dollars in thousands) $ 16,460,928 $ 10,024,343 $ 8,240,829

Average interest rates 3.15 % 3.11 % 3.48 %

The increase in interest expense for the year ended December 31, 2022 is primarily due to the following:

(i) the October 2022 issuance of $750.0 million in principal of notes, (ii) the June 2022 issuance of £600 million in principal of Sterling-denominated notes, (iii) the January 2022 issuance of £500 million in principal of Sterling-denominated notes, (iv) the issuance of $4.65 billion in principal of notes associated with the exchange offer and assumption of $839.1 million in principal of mortgage debt, both associated with our merger with VEREIT in November 2021, and (v) the July 2021 issuance of £750 million in principal of Sterling-denominated notes, as well as higher average balances and interest rates on the credit facility and commercial paper borrowings, partially offset by the December 2021 early redemption on all $750.0 million in principal of the 4.650% notes due August 2023, and the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022.

The increase in interest expense for the year ended December 31, 2021 is primarily due to the issuance of $4.65 billion in principal of notes associated with our merger with VEREIT as discussed above, the issuance of senior unsecured notes during 2020 and 2021 outside of our merger with VEREIT, which included aggregate totals of $1.68 billion in principal of USD-denominated notes and £1.15 billion in principal of Sterling-denominated notes, partially offset by the early redemptions during 2021 and 2020 of $1.2 billion of notes, increases in amortization of net note and mortgage premiums, and lower average balances on our credit facility and commercial paper borrowings.

During the year ended December 31, 2022, the weighted average interest rate on our:

• Revolving credit facility outstanding borrowings of $2.0 billion was 1.8%;

• Commercial paper outstanding borrowings of $701.8 million was 1.6%;

• Term loan outstanding of $250.0 million (excluding deferred financing costs of $0.2 million) was swapped to fixed at 3.8%;

• Mortgages payable of $842.3 million (excluding net premiums totaling $12.4 million and deferred financing costs of $0.8 million on these mortgages) was 4.8%;

• Notes and bonds payable of $14.1 billion (excluding net unamortized original issue premiums of $224.6 million and deferred financing costs of $60.7 million) was 3.3%;

• Notes, bonds, mortgages, $250.0 million term loan, and credit facility and commercial paper borrowings of $17.9 billion (excluding all net premiums and deferred financing costs) was 3.15%.

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Credit facility, commercial paper, term loans, mortgages and senior unsecured notes and bonds

Average outstanding balances $ 20,537,222 $ 16,460,928

Weighted average interest rates 3.83 % 3.15 %

The increase in interest expense for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher average debt and weighted average interest.

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

Property Expenses (excluding reimbursable)

Property expenses (excluding reimbursable) consist of costs associated with properties available for lease, non-net-leased properties and general portfolio expenses.

Expenses related to properties available for lease and non-net-leased properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees.

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

At December 31, 2022, 126 properties were available for lease or sale, as compared to 164 at December 31, 2021, and 140 at December 31, 2020.

The increase in property expenses (excluding reimbursable) for the years ended December 31, 2022 and 2021 is primarily due to the increase in portfolio size, resulting in higher utilities, repairs and maintenance, property-related legal expenses, property taxes, insurance expenses and reserves for contractually obligated reimbursements by our clients.

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.

The increase in property expenses (excluding reimbursable) for the year ended December 31, 2023 as compared with the same period in 2022 is primarily impacted by property tax and property management expenses.

Property Expenses (reimbursable)

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

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

The increase in property expenses (reimbursable) for the year ended December 31, 2023 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.

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

The increase in general and administrative expenses for 2021 is primarily due to higher payroll-related costs and corporate-level professional fees.

The increase in general and administrative expenses for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher payroll-related compensation costs associated with the growth of the company.

Provisions for Impairment

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

Provisions for impairment consist of impairment on long-lived assets and allowances for credit losses on financing receivables and loans.

The increase in impairment for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher provisions for impairment associated with our real estate assets, summarized in the following table (dollars in millions):

Years ended December 31,

2022 2021 2020

Carrying value prior to impairment $ 194.5 $ 140.9

total provisions for impairment (1)

(82.2) (25.9)

Carrying value after impairment $ 112.3 $ 115.0

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 of our clients experiencing difficulties meeting their lease obligations to us.

After considering the impacts of the COVID-19 pandemic on the key assumptions, we determined that the carrying values of 38 properties 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.

(1) Excludes provision for current expected credit loss of $4.9 million at December 31, 2023.

Merger and Integration-Related Costs

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

There were no such costs incurred during the year ended December 31, 2020.

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.

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.

For the year ended December 31, 2023, we incurred $14.5 million of merger and integration-related costs, the majority of which was related to the Spirit merger that closed in January 2024.

For the year ended December 31, 2022, we incurred $13.9 million of merger and integration-related transaction costs in conjunction with our VEREIT merger.

Gain on Sales of Real Estate

The following summarizes our property dispositions, excluding our proportionate share of net proceeds from the disposition of properties by our consolidated industrial partnerships in 2022 (dollars in millions):

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

Years ended December 31,

2022 2021 2020

Number of properties sold 121 170

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Gain on sales of real estate $ 25.7 $ 103.0

Foreign Currency and Derivative Gains (Losses), Net

Foreign Currency and Derivative (Loss) Gain, Net

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

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

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

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

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

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

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").

Foreign currency and derivative (loss) gain, net for the year ended December 31, 2023 was a loss of $13.4 million, 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 accumulated other comprehensive income ("AOCI"), to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022.

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 year ended December 31, 2022.

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

Gain (loss) on extinguishment of debt

We redeemed the following principal amounts (in millions) of certain outstanding notes and mortgages, 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.

Gain (Loss) on Extinguishment of Debt

2021 Repayments Principal Amount (1)

Amount of Loss Period Recognized

4.650% notes due August 2023 redeemed in December 2021

$ 750.0 $ 46.4 December 31, 2021

Mortgage due June 2022 redeemed in October 2021

$ 9.6 $ 0.3 December 31, 2021

Mortgage due June 2032 redeemed in September 2021

$ 12.5 $ 4.0 September 30, 2021

3.250% notes due October 2022 redeemed in January 2021

$ 950.0 $ 46.5 March 31, 2021

Total 2021 repayments $ 97.2

2020 Repayments

5.750% notes due January 2021 redeemed in January 2020

$ 250.0 $ 9.8 March 31, 2020

(1) The redeemed principal amounts presented exclude the amounts we paid in accrued and unpaid interest.

Equity in Income and Impairment of Investment in Unconsolidated Entities

Equity in income and impairment of investment in unconsolidated entities for the years ended December 31, 2022 and 2021 relate to three equity method investments that were acquired in our merger with VEREIT.

The loss for the year ended December 31, 2022 is primarily driven by an other than temporary impairment.

There were no comparative investments for the year ended December 31, 2020.

During 2022 all seven of the properties owned by our industrial partnerships acquired in connection with the VEREIT merger were sold.

Equity in income for the year ended December 31, 2023 primarily relates to investments made in two unconsolidated joint ventures during the fourth quarter of 2023.

See note 5, Investments in Unconsolidated Entities , to the consolidated financial statements for further details.

The loss for the year ended December 31, 2022 was primarily driven by an other than temporary impairment related to the sale of three equity method investments acquired in our merger with VEREIT in November 2021.

Other Income, Net

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

The increase for the year ended December 31, 2022 as compared to 2021, is primarily related to an increase in gain on insurance proceeds from recoveries on property losses exceeding our carrying value, an increase in gain from the involuntary conversions of real estate, gains on land sales and higher interest income due to higher average cash balances.

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The increase for the year ended December 31, 2021 as compared to the year ended December 31, 2020, is primarily related to an increase in gain on insurance proceeds from recoveries on property losses exceeding our carrying value and an increase in gain from the involuntary conversions of real estate, which was partially offset by a decrease in interest income from lower average cash balances.

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

The increase in income taxes for the years ended December 31, 2022 and 2021 is primarily attributable to our increased volume of U.K.

investments, which contributed to higher U.K.

income taxes for both years.

Net Income Available to Common Stockholders

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

Years ended December 31, % Increase/(Decrease)

2022 2021 2020 2022

Net income available to common stockholders

$ 869.4 $ 359.5 $ 395.5 141.8 % (9.1) %

Net income per share (1)

$ 1.42 $ 0.87 $ 1.14 63.2 % (23.7) %

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

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

The increase in net income available to common stockholders for the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily related to the increase in the size of our portfolio due to the merger with VEREIT, which closed on November 1, 2021, gain on insurance proceeds from recoveries on property losses exceeding our carrying value, and $13.9 million of merger and integration-related costs related to our merger with VEREIT.

The increases were partially offset by reserves to rental revenue of $4.0 million (of which $1.7 million was related to straight-line rent receivables) for the year ended December 31, 2022.

Net income available to common stockholders for the year ended December 31, 2021, was impacted by the following transactions:

(i) a $97.2 million loss on extinguishment of debt, which primarily includes $46.5 million related to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021 and $46.4 million related to the December 2021 early redemption of the 4.650% notes due August 2023 recorded in the three months ended December 31, 2021, (ii) $167.4 million of merger and integration-related costs related to our merger with VEREIT, and (iii) $14.7 million of reserves to rental revenue (of which $4.5 million was related to straight-line rent receivables).

Net income available to common stockholders for the year ended December 31, 2020 was primarily impacted by the following transactions:

(i) $147.2 million of provisions for impairment, (ii) $52.5 million in net reserves recorded as a reduction of rental revenue, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due January 2021, and (iv) a $3.5 million executive severance charge for our former CFO.

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The decrease of $6.7 million for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to lower gains 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 state and local taxes.

The increase in income taxes for the year ended December 31, 2023 as compared with the same period in 2022 is primarily attributable to higher taxable income in the UK;

partially offset by lower UK tax rates.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with U.S.

GAAP and are the basis for our discussion and analysis of financial condition and results of operations.

Preparing our consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements.

We believe that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition.

We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes.

However, actual results may differ from these estimates and assumptions.

This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 1, Summary of Significant Accounting Policies , to our consolidated financial statements in this annual report on Form 10-K for the year ended December 31, 2023.

In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S.

GAAP, many subjective judgments must be made with regard to critical accounting policies.

Allocation of the Purchase Price of Real Estate Acquisitions

Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed.

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 and the value of in-place leases, as applicable.

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

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

The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenue and expenses.

Provisions for Impairment - Real Estate Assets

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

If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.

The carrying value of our real estate is the largest component of our consolidated balance sheets.

Our strategy of primarily holding properties, long-term, directly decreases the likelihood of their carrying values not being recoverable, thus requiring the recognition of an impairment.

However, if our strategy, or one or more of the above assumptions were to change in the future, an impairment may need to be recognized.

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

NON-GAAP FINANCIAL MEASURES

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

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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) gain (loss) on extinguishment of debt, (iv) real estate depreciation and amortization, (v) provisions for impairment, (vi) merger and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gain, net (as described in the Adjusted Funds from Operations section), (ix) gain on settlement of foreign currency forwards, and (x) equity in income of investment in 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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Annualized Adjusted EBITDA re should be considered along with, but not as an alternative to net income as a measure of our operating performance.

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

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

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

2 unchanged sentences

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.

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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 of debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDA re and annualized Pro Forma Adjusted EBITDA re , respectively.

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

1 unchanged sentence

Three months ended December 31,

2022 2021 2020

Net income $ 219,762 $ 228,336

1 unchanged sentence

Loss on extinguishment of debt — —

9,381 10,128 4,500

Depreciation and amortization

1 unchanged sentence

Provisions for impairment

9,481 7,990 23,790

Merger and integration-related costs 9,932 903

Gain on sales of real estate (5,992) (9,346)

(9,346) (20,402) (22,667)

Foreign currency and derivative gains, net (2,692) (1,880) (3,311)

Foreign currency and derivative loss (gain), net 18,371 (2,692)

Gain on settlement of foreign currency forwards — 2,139

Proportionate share of adjustments for unconsolidated entities 113 1,581 —

Proportionate share of adjustments from unconsolidated entities 14,983 113

Quarterly Adjusted EBITDA re

6 unchanged sentences

Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 21,480,869 $ 17,935,539

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

Proportionate share of unconsolidated entities debt, excluding deferred financing costs 659,190 —

Cash and cash equivalents (232,923) (171,102)

$ 21,907,136 $ 17,764,437

Net Debt/Annualized Adjusted EBITDAre 5.5 x 6.0 x 5.4 x

Net Debt/Annualized Adjusted EBITDA re

Net Debt/Annualized Pro Forma Adjusted EBITDA re

5.3 x 5.3 x 5.3 x

(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.

As described above, the Annualized Pro Forma Adjustments, which includes transaction accounting adjustments in accordance with GAAP, consists of adjustments to incorporate the Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDA re from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the period, consistent with the requirements of Article 11 of Regulation S-X.

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

(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 of debt from unconsolidated entities, less cash and cash equivalents.

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

GAAP, consist of adjustments to incorporate the Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and remove Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the period, consistent with the requirements of Article 11 of Regulation S-X.

The following table summarizes our Annualized Pro Forma Adjusted EBITDAre calculation for the period indicated below (dollars in thousands):

Three months ended December 31,

Dollars in thousands 2022 2021 2020

Annualized pro forma adjustments from properties acquired or stabilized $ 77,012 $ 120,408

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Annualized Pro forma Adjustments $ 74,919 $ 119,876

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FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS

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

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

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

Years ended December 31, % Increase/(Decrease)

2022 2021 2020 2022

Years ended December 31,

2023 2022 % Change

FFO available to common stockholders

$ 2,822.1 $ 2,471.9 14.2 %

FFO per share (1)

FFO per common share (1)

$ 4.07 $ 4.04 0.7 %

1 unchanged sentence

$ 2,836.6 $ 2,485.8 14.1 %

Normalized FFO per share (1)

Normalized FFO per common share (1)

$ 4.09 $ 4.06 0.7 %

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

FFO and Normalized FFO for the years ended December 31, 2022, 2021 and 2020 were impacted by the same transactions listed under "Net Income Available to Common Stockholders" on page 51, with the exception of provisions for impairment, which do not impact FFO and Normalized FFO.

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

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

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Years ended December 31,

2022 2021 2020

Net income available to common stockholders $ 872,309 $ 869,408

1 unchanged sentence

Depreciation of furniture, fixtures and equipment (2,239) (2,014)

Provisions for impairment 25,860 38,967 147,232

Provisions for impairment of real estate 82,208 25,860

Gain on sales of real estate (25,667) (102,957)

Proportionate share of adjustments for unconsolidated entities (1)

12,812 1,931 —

FFO adjustments allocable to noncontrolling interests (3,855) (1,605)

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Diluted Normalized FFO $ 2,842,154 $ 2,489,769

FFO per common share, basic and diluted $ 4.04 $ 2.99 $ 3.31

FFO per common share:

Basic $ 4.08 $ 4.04

Diluted $ 4.07 $ 4.04

Normalized FFO per common share:

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Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 724,809 $ 672,358

Weighted average number of common shares used for FFO:

Basic 611,765,815 414,535,283 345,280,126

Diluted 613,472,663 414,769,846 345,878,377

Weighted average number of common shares used for Normalized FFO:

Weighted average number of common shares used for FFO and Normalized FFO:

Basic 692,298 611,766

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Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative.

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ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS

ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("AFFO")

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

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

Years ended December 31, % Increase

2022 2021 2020 2022

Years ended December 31,

2023 2022 % Change

AFFO available to common stockholders

$ 2,774.9 $ 2,401.4 15.6 %

AFFO per share (1)

AFFO per common share (1)

$ 4.00 $ 3.92 2.0 %

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

The increases in AFFO for the years ended December 31, 2022 and 2021 were primarily attributable to the increase in the size of our portfolio, especially as it relates to the impact from our merger with VEREIT, which closed on November 1, 2021.

These increases were partially offset by reserves recorded as a reduction of rental revenue of $4.0 million, $14.7 million and $52.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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Years ended December 31,

2022 2021 2020

Net income available to common stockholders $ 872,309 $ 869,408

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Normalized FFO available to common stockholders 2,836,602 2,485,790

Executive severance charge (2)

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

Gain on extinguishment of debt — (367)

Amortization of share-based compensation 26,227 21,617

1 unchanged sentence

(44,568) (67,150)

Non-cash loss on interest rate swaps 718 2,905 4,353

Non-cash (gain) loss on interest rate swaps (7,189) 718

Non-cash change in allowance for credit losses 4,874 —

Straight-line impact of cash settlement on interest rate swaps (3)

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

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

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

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

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

(4) 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 13, 2032.

(5) Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, foreign currency gain and loss as a result of intercompany debt and remeasurement transactions and straight-line payments from cross-currency swaps.

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(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 non-cash foreign currency losses (gains) from remeasurement to USD, 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.

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

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In addition, FFO, Normalized FFO, and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments.

IMPACT OF INFLATION

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

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

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

During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses).

Moreover, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses.

Even though 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.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

For information on the impact of new accounting standards on our business, see note 2, Summary of Significant Accounting Policies and Procedures and New Accounting Standards , to our Consolidated Financial Statements.

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 7. Management’s Discussion and Analysis