What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 508 added, 364 removed, 547 unchanged (61% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts) (unaudited)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Real estate held for investment, at cost:

9 unchanged sentences

Goodwill 4,991,342 3,731,478

Investment in unconsolidated entities 1,203,263 1,172,118

Other assets, net 3,478,588 3,368,643

11 unchanged sentences

Commitments and contingencies (Note 20)

6.000 % Series A cumulative redeemable preferred stock and paid in capital, par value $ 0.01 per share, 69,900 shares authorized, 6,900 shares and no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, liquidation preference $ 25.00 per share

$ 167,394 $ —

Stockholders’ equity:

Common stock and paid in capital, par value $ 0.01 per share, 1,300,000 shares authorized, 723,894 and 660,300 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively

Common stock and paid in capital, par value $ 0.01 per share, 1,300,000 shares authorized, 870,756 and 752,460 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

$ 46,220,761 $ 39,629,709

9 unchanged sentences

(in thousands, except per share amounts) (unaudited)

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Rental (including reimbursable) $ 1,208,169 $ 925,289

9 unchanged sentences

Gain on sales of real estate 16,574 4,279

Foreign currency and derivative (loss) gain, net ( 2,813 ) ( 22,893 ) 4,957 ( 16,003 )

Gain on extinguishment of debt — 240 — 367

Equity in income and impairment of investment in unconsolidated entities — ( 662 ) 411 ( 6,335 )

Foreign currency and derivative gain, net 4,046 10,322

Equity in (losses) earnings of unconsolidated entities ( 1,676 ) —

Other income, net 5,446 2,730

3 unchanged sentences

Net income attributable to noncontrolling interests ( 1,615 ) ( 1,106 )

Net income attributable to the Company 132,284 225,016

Preferred stock dividends ( 2,588 ) —

Net income available to common stockholders $ 129,696 $ 225,016

5 unchanged sentences

Net income available to common stockholders $ 129,696 $ 225,016

Total other comprehensive loss

Total other comprehensive (loss) income

Foreign currency translation adjustment ( 18,036 ) 28,750

Unrealized gain (loss) on derivatives, net 8,922 ( 2,162 )

Total other comprehensive loss $ ( 54,208 ) $ ( 47,317 ) $ ( 4,984 ) $ ( 29,871 )

Total other comprehensive (loss) income

$ ( 9,114 ) $ 26,588

Comprehensive income available to common stockholders $ 120,582 $ 251,604

3 unchanged sentences

(in thousands) (unaudited)

Three months ended September 30, 2023, and 2022

Three months ended March 31, 2024, and 2023

stock Preferred

capital Shares of

capital Distributions

net income Accumulated

comprehensive income (loss) Total

comprehensive income Total

stockholders’

equity Noncontrolling

equity Non-controlling

interests Total

Balance, June 30, 2023

Balance, December 31, 2023

— $ — 752,460 $ 39,629,709 $ ( 6,762,136 ) $ 73,894 $ 32,941,467 $ 165,502 $ 33,106,969

3 unchanged sentences

Share issuances, net of costs — — 9,663 546,656 — — 546,656 — 546,656

Shares issued with merger 6,900 167,394 108,308 6,043,641 — — 6,043,641 — 6,043,641

Contributions by noncontrolling interests — — — — — — — 214 214

1 unchanged sentence

— — 325 755 — — 755 — 755

Balance, September 30, 2023

723,894 $ 38,031,829 $ ( 6,416,534 ) $ 41,849 $ 31,657,144 $ 166,274 $ 31,823,418

Balance, June 30, 2022

617,564 $ 31,303,383 $ ( 4,999,150 ) $ 22,379 $ 26,326,612 $ 76,267 $ 26,402,879

Net income — — 219,567 — 219,567 720 220,287

Other comprehensive loss — — — ( 47,317 ) ( 47,317 ) — ( 47,317 )

Distributions paid and payable — — ( 461,429 ) — ( 461,429 ) ( 1,070 ) ( 462,499 )

Issuance of common partnership units — — — — — 51,221 51,221

Share issuances, net of costs 9,582 694,708 — — 694,708 — 694,708

Share-based compensation, net — 4,978 — — 4,978 — 4,978

Balance, September 30, 2022

Balance, March 31, 2024

6,900 $ 167,394 870,756 $ 46,220,761 $ ( 7,299,514 ) $ 64,780 $ 38,986,027 $ 165,063 $ 39,151,090

Nine months ended September 30, 2023 and 2022

capital Distributions

net income Accumulated

comprehensive

income (loss) Total

stockholders’

equity Noncontrolling

interests Total

Balance, December 31, 2022

Net income — — 653,904 — 653,904 3,248 657,152

Other comprehensive loss — — — ( 4,984 ) ( 4,984 ) — ( 4,984 )

Distributions paid and payable — — ( 1,577,245 ) — ( 1,577,245 ) ( 7,108 ) ( 1,584,353 )

Share issuances, net of costs 63,348 3,858,347 — — 3,858,347 3,858,347

Contributions by noncontrolling interests — — — — — 39,994 39,994

Share-based compensation, net 246 13,973 — — 13,973 — 13,973

Balance, September 30, 2023

— $ — 660,300 $ 34,159,509 $ ( 5,493,193 ) $ 46,833 $ 28,713,149 $ 130,140 $ 28,843,289

Balance December 31, 2021 591,262 $ 29,578,212 $ ( 4,530,571 ) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400

Net income — — — — 225,016 — 225,016 1,106 226,122

Other comprehensive loss — — — ( 29,871 ) ( 29,871 ) — ( 29,871 )

Other comprehensive income — — — — — 26,588 26,588 — 26,588

Distributions paid and payable — — — — ( 504,746 ) — ( 504,746 ) ( 3,014 ) ( 507,760 )

Issuance of common partnership units — — — — — 51,221 51,221

Share issuances, net of costs — — 12,706 798,901 — — 798,901 — 798,901

Share-based compensation, net — — 201 198 — — 198 — 198

Balance, September 30, 2022

Balance, March 31, 2023

— $ — 673,207 $ 34,958,608 $ ( 5,772,923 ) $ 73,421 $ 29,259,106 $ 128,232 $ 29,387,338

3 unchanged sentences

(in thousands) (unaudited)

Nine months ended September 30,

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Non-cash revenue adjustments ( 30,586 ) ( 19,127 )

Gain on extinguishment of debt — ( 367 )

Amortization of net premiums on mortgages payable ( 122 ) ( 3,200 )

1 unchanged sentence

Amortization of deferred financing costs 5,819 6,474

(Loss) gain on interest rate swaps ( 5,390 ) 2,181

Gain on interest rate swaps ( 1,800 ) ( 1,801 )

Foreign currency and unrealized derivative gain, net ( 12,570 ) ( 8,942 )

Gain on sales of real estate ( 16,574 ) ( 4,279 )

Equity in income and impairment of investment in unconsolidated entities ( 411 ) 6,335

Distributions from unconsolidated entities — 1,605

Provisions for impairment on real estate 59,801 16,379

Equity in losses of unconsolidated entities 1,676 —

Distributions on common equity from unconsolidated entities 5,249 —

Provisions for impairment 89,489 13,178

Change in assets and liabilities

5 unchanged sentences

Improvements to real estate, including leasing costs ( 9,628 ) ( 13,860 )

Investment in unconsolidated entities ( 38,070 ) —

Proceeds from sales of real estate 95,624 28,594

Return of investment from unconsolidated entities 3,927 1,401

Net proceeds from sale of unconsolidated entities — 107,621

Proceeds from note receivable 5,468 —

1 unchanged sentence

Non-refundable escrow deposits — ( 23,599 )

Net cash acquired in merger 93,683 —

Net cash used in investing activities ( 388,810 ) ( 1,677,719 )

1 unchanged sentence

Cash distributions to common stockholders ( 636,499 ) ( 497,245 )

Cash distributions to preferred stockholders ( 2,588 ) —

Borrowings on line of credit and commercial paper programs 8,018,932 4,249,746

1 unchanged sentence

Proceeds from term loan — 1,029,383

Principal payment on term loan ( 250,000 ) —

Proceeds from notes payable issued 1,250,000 1,090,968

Principal payment on notes payable ( 499,999 ) —

Principal payments on mortgages payable ( 621,175 ) ( 1,233 )

2 unchanged sentences

Distributions to noncontrolling interests ( 2,268 ) ( 1,479 )

Net receipts on derivative settlements 2,191 7,474

Net payments on derivative settlements — ( 6,452 )

Debt issuance costs ( 28,603 ) ( 16,603 )

2 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 2,279 ) 13,545

Net increase (decrease) in cash, cash equivalents and restricted cash 203,783 ( 43,456 )

Net increase in cash, cash equivalents and restricted cash 404,611 16,884

Cash, cash equivalents and restricted cash, beginning of period 292,175 226,881

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

Summary of Significant Accounting Policies

Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”), a Maryland corporation, is an S&P 500 company and real estate partner to the world's leading companies.

The Company was founded in 1969 and our shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol “O”.

As of March 31, 2024, we owned or held interests in a diversified portfolio of 15,485 properties located in all 50 states of the United States ("U.S."), the United Kingdom ("U.K."), and six other countries in Europe, with approximately 334.2 million square feet of leasable space.

In January 2024, we completed our merger with Spirit Realty Capital, Inc.

For more details, please see note 2 , Merger with Spirit Realty Capital, Inc.

Basis of Presentation .

Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) was founded in 1969 and is organized as a Maryland corporation.

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

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

As of September 30, 2023, we owned or held interests in a diversified portfolio of 13,282 properties located in all 50 states of the United States ("U.S."), Puerto Rico, the United Kingdom ("U.K."), Spain, Italy, and Ireland, with approximately 262.6 million square feet of leasable space.

Our accompanying unaudited consolidated financial statements were prepared from our books and records in accordance with accounting principles generally accepted in the United States of America ("U.S.

In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented have been included.

Operating results for the three and nine months ended September 30, 2023 are not necessarily an indication of the results that may be expected for the entire year.

Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2022, which are included in our 2022 Annual Report on Form 10-K , as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

Intercompany accounts and transactions are eliminated in consolidation.

Dollar ("USD") is our reporting currency.

2 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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

Intercompany accounts and transactions are eliminated in consolidation.

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

In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items.

In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented have been included.

Operating results for the three months ended March 31, 2024 are not necessarily an indication of the results that may be expected for the entire year.

Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2023, which are included in our 2023 Annual Report on Form 10-K , as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

Principles of Consolidation.

1 unchanged sentence

We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification ("ASC") 810, Consolidation.

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

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

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

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

A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

be significant to the VIE.

An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE.

1 unchanged sentence

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

At September 30, 2023, Realty Income, L.P.

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

Below is a summary of selected financial data of consolidated VIEs included in the consolidated balance sheets at September 30, 2023, and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022

At March 31, 2024, we are considered the primary beneficiary of Realty Income, L.P.

and certain investments, including investments in joint ventures.

Below is a summary of selected financial data of such consolidated VIEs, included on our consolidated balance sheets at March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

Net real estate

6 unchanged sentences

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

Reclassification .

Certain prior period amounts have been reclassified to conform to the current year presentation.

Value-added tax receivable is included in 'Other assets, net', in the consolidated balance sheets.

Previously, this was categorized as 'Accounts receivable, net' in the consolidated balance sheets.

Use of Estimates.

13 unchanged sentences

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

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

For our international territories, we are liable for taxes in the U.K.

Accordingly, provisions have been made for U.K.

8 unchanged sentences

The majority of our leases are accounted for as operating leases.

Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term.

Any rental revenue contingent upon our client’s sales, or percentage rent, is recognized only after our client exceeds their sales breakpoint.

Rental increases based upon changes in the consumer price indexes are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements.

Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred.

Under this method, leases that have fixed and d eterminable rent increases are recognized on a straight-line basis over the lease term.

Any rental revenue contingent upon a client’s sales, or percentage rent, is recognized only after such client exceeds its sales breakpoint.

Rental increases based upon changes in the consumer price indices are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements.

Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a

component of rental revenue, in the period when such costs are incurred.

Taxes and operating expenses paid directly by our clients are recorded on a net basis.

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

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

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

We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends and other facts and circumstances related to the applicable clients.

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

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

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

Concentration of Credit Risk.

There were no clients who accounted for more than more than 10% of our total revenue for each of the nine months ended September 30, 2023, and 2022.

Recent Accounting Pronouncements.

The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

Recent Accounting Standards Not Yet Adopted.

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes , to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures.

The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively.

Early adoption is permitted.

We are currently evaluating the impact on our financial statement disclosures.

In November 2023, FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting , establishing improvements to reportable segments disclosures to enhance segment reporting under Topic 280.

This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments.

This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic 280, not just entity level disclosures.

The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and the amendments should be applied retrospectively to all periods presented in the financial statements.

We are currently evaluating the impact on our financial statement disclosures.

Merger with Spirit Realty Capital, Inc.

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

On January 23, 2024, we completed our merger with Spirit.

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

At the effective time of the Merger (the “Effective Time”), (i) each outstanding share of Spirit common stock, par value $ 0.05 per share, automatically converted into 0.762 (the “Exchange Ratio”) of a newly issued share of our common stock, subject to adjustments as set forth in the Merger Agreement, and cash in lieu of fractional shares, and (ii) each outstanding share of Spirit’s 6.000 % Series A Cumulative Redeemable Preferred Stock, par value $ 0.01 per share, converted into the right to receive one share of newly issued Realty Income 6.000 % Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock.

Immediately prior to the Effective Time, each award of outstanding restricted Spirit common stock and Spirit performance share award was cancelled and converted into Realty Income common stock, using the Exchange Ratio.

For more details, see note 16, Redeemable Preferred Stock.

The primary reason for the merger was to expand our size, scale and diversification, in order to further position us as the real estate partner of choice for large net lease transactions.

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

The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data):

Shares of Spirit common stock exchanged (1)

Exchange Ratio 0.762

Shares of Realty Income common stock issued 108,308,064

Opening price of Realty Income common stock on January 23, 2024 $ 55.80

Fair value of Realty Income common stock issued to the former holders of Spirit common stock $ 6,043,590

Shares of Realty Income Series A preferred stock issued in exchange for Spirit Series A preferred stock 6,900,000

Opening price of Realty Income Series A preferred stock on January 23, 2024 $ 24.26

Fair value of Realty Income Series A preferred stock issued to the former holders of Spirit Series A preferred stock $ 167,394

Cash paid for fractional shares $ 51

Fair value of Spirit restricted stock and performance awards attributable to post-combination costs (2)

Consideration transferred $ 6,186,284

(1) Includes 142,136,567 shares of Spirit common stock outstanding as of January 23, 2024, which were converted into Realty Income common stock at the Effective Time at an Exchange Ratio of 0.762 per share of Spirit common stock.

The portion of the converted unvested Spirit Restricted Stock Awards related to post-combination expense is removed in footnote (2) below.

(2) Represents the fair value of fully vested Spirit restricted stock and performance share awards that were accelerated and converted into Realty Income common stock at the Effective Time, reflecting the value attributable to post-combination services.

Spirit restricted stock and performance share awards are included in Spirit's outstanding common stock as of the merger date.

The fair value attributable to pre-combination services was $ 41.7 million and is included in the consideration transferred above.

Preliminary Purchase Price Allocation

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

Land $ 1,853,895

Buildings and improvements 4,859,162

Total real estate held for investment 6,713,057

Real estate and lease intangibles held for sale 35,650

Cash and cash equivalents 93,683

Accounts receivable 12,959

Lease intangible assets (1)

Goodwill 1,259,864

Other assets 174,672

Total assets acquired $ 10,504,500

Accounts payable and accrued expenses $ 56,407

Lease intangible liabilities (2)

Other liabilities 101,954

Term loan 1,300,000

Notes payable 2,481,486

Total liabilities assumed $ 4,318,216

Net assets acquired, at fair value $ 6,186,284

Total purchase price $ 6,186,284

(1) The weighted average amortization period for acquired lease intangible assets is 10.8 years.

(2) The weighted average amortization period for acquired lease intangible liabilities is 8.3 years.

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

Measurement period adjustments will be recorded in the

period in which they are determined, as if they had been completed at the acquisition date.

As of March 31, 2024, we had not finalized the determination of fair values allocated to certain assets and liabilities.

Accordingly, certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, loss contingencies, and goodwill are subject to change.

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

A preliminary estimate of approximately $ 1.26 billion has been allocated to goodwill.

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

The recognized goodwill is attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and corporate overhead cost savings.

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

Merger and Integration-Related Costs

In conjunction with our merger with Spirit, we incurred merger-related transaction costs of $ 94.1 million during the three months ended March 31, 2024, primarily consisting of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger.

Unaudited Pro Forma Financial Information

The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2024 and 2023, respectively, as if our merger with Spirit had occurred on January 1, 2023 (in millions, except per share data).

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

Three months ended March 31,

Total revenues $ 1,307.7 $ 1,133.6

Net income $ 234.4 $ 195.9

Basic and diluted earnings per share $ 0.27 $ 0.25

Our consolidated results of operations for the three months ended March 31, 2024 include $ 155.0 million of revenues and $ 6.9 million of net income associated with the results of operations of Spirit from the merger closing date of January 23, 2024 to March 31, 2024.

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

Accounts receivable, net, consist of the following at:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Straight-line rent receivables, net $ 563,589 $ 516,692

2 unchanged sentences

Lease intangible assets, net, consist of the following at:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

In-place leases

$ 7,319,435 $ 5,500,404

Accumulated amortization of in-place leases

( 1,857,044 ) ( 1,409,878 )

Above-market leases

2,215,208 1,811,400

Accumulated amortization of in-place leases

( 1,902,925 ) ( 1,746,377 )

Accumulated amortization of above-market leases

( 596,148 ) ( 549,319 )

Other items 1,758 1,799

$ 7,037,328 $ 5,017,907

Other assets, net, consist of the following at:

September 30, 2023 December 31, 2022

Financing receivables $ 1,638,967 $ 933,116

March 31, 2024 December 31, 2023

Financing receivables, net $ 1,566,714 $ 1,570,943

Right of use asset - financing leases 705,006 706,837

Right of use asset - operating leases, net 649,936 594,712

Loan receivable, net 253,426 205,339

Value-added tax receivable 82,619 100,672

Impounds related to mortgages payable 45,224 18,152

Derivative assets and receivables – at fair value 44,753 83,100

Prepaid expenses 62,806 33,252

Restricted escrow deposits 41,311 37,627

Credit facility origination costs, net 13,497 17,196

Derivative assets and receivables – at fair value 52,492 21,170

Corporate assets, net 13,378 12,948

Interest receivable 11,046 6,139

Credit facility origination costs, net 11,030 12,264

Impounds related to mortgages payable 10,226 53,005

Restricted escrow deposits 6,401 6,247

Investment in sales type lease 6,076 6,056

3 unchanged sentences

Accounts payable and accrued expenses consist of the following at:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Notes payable - interest payable $ 239,333 $ 218,811

Accrued costs on properties under development 87,672 26,559

Property taxes payable 87,316 45,572

Derivative liabilities and payables - at fair value 105,809 119,620

Value-added tax payable 91,844 64,885

Accrued income taxes 46,378 22,626

Accrued costs on properties under development 86,276 65,967

Property taxes payable 82,442 78,809

Accrued property expenses 52,464 54,208

Accrued income taxes 51,516 61,070

Accrued merger-related costs 24,088 4,551

Mortgages, term loans, and credit line - interest payable 8,575 8,580

2 unchanged sentences

Lease intangible liabilities, net, consist of the following at:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Below-market leases

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Other liabilities consist of the following at:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Lease liability - operating leases, net $ 480,303 $ 425,213

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Security deposits 34,031 28,250

Other acquisition liabilities 1,610 1,647

$ 900,106 $ 811,650

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Acquisitions of Real Estate

Below is a summary of our acquisitions for the nine months ended September 30, 2023:

Below is a summary of our acquisitions for the three months ended March 31, 2024:

Properties Leasable

(in thousands) Investment

(in thousands, unaudited) Investment

($ in millions) Weighted

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Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $ 3.7 million received as settlement credits as reimbursement of free rent periods for the nine months ended September 30, 2023.

Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $ 0.5 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 2024.

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

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

(2) Includes £ 32.6 million of investments in four U.K.

development properties and € 25.9 million of investment in two Spain development properties, converted at the applicable exchange rates on the funding dates.

(3) Our clients occupying the new properties are 89.7 % retail, 10.0 % industrial, and 0.3 % other property types based on annualized contractual rent.

Approximately 25 % of the annualized contractual rent generated from acquisitions during the nine months ended September 30, 2023 is from investment grade rated clients, their subsidiaries, or affiliated companies.

The aggregate purchase price of the assets acquired during the nine months ended September 30, 2023 has been allocated as follows (in millions):

(2) Includes £ 8.7 million of investments in U.K.

development properties and € 8.4 million of investments in Spain development properties, converted at the applicable exchange rates on the funding dates.

(3) Our clients occupying the new properties are 89.7 % retail and 10.3 % industrial based on net operating income.

Approximately 41.0 % of the net operating income generated from acquisitions during the three months ended March 31, 2024 is from investment grade rated clients, their subsidiaries, or affiliated companies.

The aggregate purchase price of the assets acquired during the three months ended March 31, 2024 has been allocated as follows (in millions):

Acquisitions - USD Acquisitions - Sterling Acquisitions - Euro

$ 727.7 £ 434.7 € 17.3

Land $ 18.4 £ 59.0 € 2.0

Buildings and improvements 88.9 124.3 5.0

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Other assets (2)

560.3 326.1 1.6

Lease intangible liabilities (3)

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$ 128.1 £ 232.8 € 7.9

$ 4,181.0 £ 1,695.0 € 57.9

(1) Sterling-denominated land includes £ 3.2 million of right of use assets under long-term ground leases.

(1) The weighted average amortization period for acquired lease intangible assets is 9.4 years.

(2) USD-denominated other assets consist entirely of financing receivables with above-market terms.

Sterling-denominated other assets consist of £ 135.3 million of financing receivables with above-market terms and £ 190.8 million of right-of-use assets accounted for as finance leases.

(3) The weighted average amortization period for acquired lease intangible liabilities is 12.0 years.

(5) USD-denominated other liabilities consist entirely of deferred rent on certain below-market leases.

The properties acquired during the nine months ended September 30, 2023 generated total revenues of $ 174.4 million and net income of $ 91.6 million during the nine months ended September 30, 2023.

The properties acquired during the three months ended March 31, 2024 generated total revenue and net income of $ 2.6 million and $ 0.9 million, respectively.

Investments in Existing Properties

During the nine months ended September 30, 2023, we capitalized costs of $ 43.6 million on existing properties in our portfolio, consisting of $ 36.5 million for non-recurring building improvements, $ 6.9 million for re-leasing costs, and $ 0.2 million for recurring capital expenditures.

In comparison, during the nine months ended September 30, 2022, we capitalized costs of $ 70.6 million on existing properties in our portfolio, consisting of $ 63.7 million for non-recurring building improvements, $ 3.9 million for re-leasing costs, and $ 3.0 million for recurring capital expenditures.

During the three months ended March 31, 2024, we capitalized costs of $ 7.4 million on existing properties in our portfolio, consisting of $ 6.4 million for non-recurring building improvements, $ 0.9 million for re-leasing costs, and less than $ 0.1 million for recurring capital expenditures.

In comparison, during the three months ended March 31, 2023, we capitalized costs of $ 13.8 million on existing properties in our portfolio, consisting of $ 13.3 million for non-recurring building improvements, $ 0.4 million for re-leasing costs, and $ 0.1 million for recurring capital expenditures.

Properties with Existing Leases

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

The amounts amortized to expense for all of our in-place leases, for the nine months ended September 30, 2023, and 2022 were $ 489.2 million and $ 476.8 million, respectively.

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

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the nine months ended September 30, 2023 and 2022 were $ 48.6 million and $ 41.2 million, respectively.

The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2024, and 2023 were $ 211.5 million and $ 157.4 million, respectively.

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

The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2024, and 2023 were $ 9.1 million and $ 14.6 million, respectively.

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

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at September 30, 2023 (dollars in thousands):

(decrease) to

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The following table summarizes our properties sold during the periods indicated below (dollars in millions):

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

Number of properties 46 26

1 unchanged sentence

Gain on sales of real estate $ 16.6 $ 4.3

Investments in Unconsolidated Entities

The following is a summary of our investments in unconsolidated entities as of March 31, 2024 and December 31, 2023 (dollars in thousands):

Ownership % Number of Properties Carrying Amount (1) of Investment as of

Investment As of March 31, 2024

March 31, 2024 December 31, 2023

Bellagio Las Vegas Joint Venture - Common Equity Interest 21.9 % 1 $ 287,972 $ 296,097

Bellagio Las Vegas Joint Venture - Preferred Equity Interest n/a n/a 650,000 650,000

Data Center Development Joint Venture 80.0 % 2 265,291 226,021

Total investment in unconsolidated entities $ 1,203,263 $ 1,172,118

(1) The total carrying amount of the investments was greater than the underlying equity in net assets (i.e., basis difference) by $ 2.2 million as of March 31, 2024.

Bellagio Las Vegas Joint Venture Interests

Our investment in the joint venture that owns a 95.0 % interest in the real estate of The Bellagio Las Vegas includes $ 301.4 million of common equity for an indirect interest of 21.9 % in the property and a $ 650.0 million preferred equity interest.

During the three months ended March 31, 2024, we recognized interest income of $ 13.0 million for 8.1 % preferential cumulative distributions within 'Other revenue' in our consolidated statements of income and comprehensive income.

The unconsolidated entity had total debt outstanding of $ 3.0 billion as of March 31, 2024, all of which was non-recourse to us with limited customary exceptions.

Data Center Development Joint Venture

We own an 80.0 % equity interest in a data center development joint venture;

however, we are not the primary beneficiary because we do not have power to direct activities that significantly impact the joint venture's economic performance.

Our maximum exposure to loss associated with this VIE is limited to our equity investment and our pro rata share of the remaining $ 70.1 million of estimated development costs for the first phase of the project.

Investments in Loans

The following table presents information about our loans as of March 31, 2024 and December 31, 2023 (dollars in thousands):

March 31, 2024

Amortized Cost Allowance (1)

Carrying Amount (2)

Senior Secured Notes Receivable (3)

$ 182,121 $ ( 3,700 ) $ 178,421

Mortgage Loans 66,277 — 66,277

Unsecured Loan 9,763 ( 1,035 ) 8,728

Total $ 258,160 $ ( 4,735 ) $ 253,426

December 31, 2023

Amortized Cost Allowance (1)

Carrying Amount (2)

Senior Secured Note Receivable $ 174,337 $ ( 2,498 ) $ 171,839

Mortgage Loan 33,500 — 33,500

Total $ 207,837 $ ( 2,498 ) $ 205,339

(1) During the three months ended March 31, 2024, our allowance for credit losses increased by $ 2.2 million, almost entirely attributable to the loans we acquired in conjunction with our merger with Spirit.

(2) The total carrying amount of the investment in loans excludes accrued interest of $ 8.7 million and $ 3.4 million as of March 31, 2024 and December 31, 2023, respectively, which is recorded to 'Other assets, net' on our consolidated balance sheets.

(3) Includes a loan acquired in conjunction with our merger with Spirit with an estimated acquisition date fair value of $ 7.8 million.

Since it was a purchased credit deteriorated loan, we recorded the initial expected credit loss of $ 1.0 million by adjusting the amortized cost basis.

Senior Secured Notes Receivable

We own a Sterling-denominated senior secured note with a principal amount of £ 142.0 million, equivalent to $ 179.5 million as of March 31, 2024.

The interest only note bears interest at Sterling Overnight Indexed Average (“SONIA”) plus 6.75 % and matures in October 2029.

We paid £ 136.7 million for the note and accounted for the

discount at amortized cost.

The discount is being amortized over the term of the note.

In conjunction with our merger with Spirit, we acquired a senior secured note receivable with a principal amount of $ 9.9 million.

This interest only note bears interest at Secured Overnight Financing Rate ("SOFR") plus 4.00 % and matures in July 2028 .

Mortgage Loans

We have a $ 33.5 million mortgage loan which is collateralized by nine automotive service properties located across seven different states.

The interest only loan bears interest at 8.25 % subject to annual increases and matures in October 2038.

In conjunction with our merger with Spirit, we acquired a mortgage loan with a principal amount of $ 33.0 million and estimated its fair value to be $ 32.8 million at the acquisition date.

This 10 % fixed-rate, interest only loan is collateralized by four single-tenant properties and matures in March 2025.

In April 2024, this $ 33.0 million loan was repaid in full.

Unsecured Loan

In conjunction with our merger with Spirit, we acquired an 11.0 % fixed-rate, unsecured loan with a principal amount of $ 11.0 million.

It was recorded at its acquisition-date fair value of $ 9.8 million and is included in 'Other assets' on our consolidated balance sheets.

This interest only loan matures in December 2026 .

Revolving Credit Facility and Commercial Paper Programs

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 USD.

We have a $ 4.25 billion unsecured revolving multi-currency 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 USD.

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

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

As of September 30, 2023, we had a borrowing capacity of $ 3.8 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 481.5 million, comprised of £ 372.0 million Sterling and € 26.0 million Euro borrowings, as compared to an outstanding balance at December 31, 2022 of $ 2.0 billion, comprised of € 1.8 billion Euro and £ 70.0 million Sterling borrowings.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 4.8 % and 1.7 % during the nine months ended September 30, 2023, and 2022, respectively.

At September 30, 2023, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 5.9 %.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at September 30, 2023, we were in compliance with the covenants under our revolving credit facility.

As of September 30, 2023, credit facility origination costs of $ 13.5 million are included in other assets, net, as compared to $ 17.2 million at December 31, 2022, on our consolidated balance sheets.

Under our revolving credit facility, our current investment grade credit ratings provide for 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 SONIA, plus 0.725 % with a SONIA adjustment charge of 0.0326 % and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.8826 % over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725 %, and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.85 % over one-month EURIBOR.

As of March 31, 2024, we had a borrowing capacity of $ 3.44 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 0.8 billion, comprised entirely of Sterling borrowings.

There was no outstanding balance at December 31, 2023.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 6.2 % and 3.7 % during the three months ended March 31, 2024, and 2023, respectively.

At March 31, 2024, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 5.9 %.

Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2024, we were in compliance with the covenants under our revolving credit facility.

As of March 31, 2024, credit facility origination costs of $ 11.0 million are included in 'Other assets, net', as compared to $ 12.3 million at December 31, 2023, on our consolidated balance sheets.

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

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Our Euro-denominated unsecured commercial paper program may be issued in USD or various foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper market.

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

The commercial paper ranks pari passu in right of payment with all of our other unsecured senior indebtedness outstanding, exclusive of unexchanged VEREIT and Spirit bonds, from time to time, including borrowings under our revolving credit facility, our term loans and our outstanding senior unsecured notes (and is structurally subordinated to all our subsidiary debt).

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

As of September 30, 2023, the balance of borrowings outstanding under our commercial paper programs was $ 376.8 million, consisting entirely of Euro borrowings, as compared to $ 701.8 million outstanding commercial paper borrowings, including € 361.0 million of Euro-denominated borrowings, at December 31, 2022.

The weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.7 % and 1.3 % for the nine months ended September 30, 2023, and 2022, respectively.

As of September 30, 2023, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.0 %.

As of March 31, 2024, the balance of borrowings outstanding under our commercial paper programs was $ 216.0 million, comprised entirely of Euro-denominated borrowings ("EUR borrowings"), as compared to $ 764.4 million outstanding commercial paper borrowings, including € 583.0 million of EUR borrowings, at December 31, 2023.

The weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.5 % and 3.5 % for the three months ended March 31, 2024, and 2023, respectively.

As of March 31, 2024, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.2 %.

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

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

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

The 2023 term loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at our option, with an anticipated repayment date of January 2026.

We 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.

In January 2024, in connection with our merger with Spirit, we entered into an amended and restated term loan agreement (which replaced Spirit's then-existing term loans with various lenders).

The amended and restated term loan agreements are fixed through interest rate swaps at a weighted average interest rate of 3.9 %.

Pursuant to the amended and restated term loan agreement, we borrowed $ 800.0 million in aggregate total borrowings, $ 300.0 million of which matures in August 2025 and $ 500.0 million of which matures in August 2027 (the “$ 800 million term loan agreement”).

We also entered into an amended and restated term loan agreement pursuant to which we borrowed $ 500.0 million in aggregate total borrowings which matures in June 2025 (the “$ 500 million term loan agreement”).

Our 2023 term loan agreement allows us to incur up to an aggregate of $ 1.5 billion in multi-currency borrowings.

As of March 31, 2024, we had $ 1.1 billion in multi-currency 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 twelve-month maturity extension available at our 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 conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate.

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

We also have a $ 250.0 million senior unsecured term loan, which matures in March 2024.

In conjunction with this term loan, we also entered into an interest rate swap.

As of September 30, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8 %.

At September 30, 2023, deferred financing costs of $ 2.3 million are included net of the term loans principal balance, as compared to $ 0.2 million related to our $ 250.0 million term loan at December 31, 2022, on our consolidated balance sheets.

In January 2024, we entered into interest rate swaps which fix our per annum interest rate at 4.9 % until term loan maturity in January 2026.

Deferred financing costs were $ 2.5 million at March 31, 2024 and are included net of the term loans principal balance, as compared to $ 0.1 million related to our 2023 term loans at December 31, 2023, on our consolidated balance sheets.

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

As of September 30, 2023, we were in compliance with the covenants contained in the term loans.

As of March 31, 2024, we were in compliance with the covenants contained in the term loans.

Mortgages Payable

During the nine months ended September 30, 2023, we made $ 20.8 million in principal payments, including the full repayment of two mortgages for $ 17.4 million.

No mortgages were assumed during the nine months ended September 30, 2023.

During the three months ended March 31, 2024, we made $ 621.2 million in principal payments, including the full repayment of two mortgages for $ 620.0 million.

No mortgages were assumed during the three months ended March 31, 2024.

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

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

At September 30, 2023, we were in compliance with these covenants.

The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $ 0.6 million at September 30, 2023 and $ 0.8 million at December 31, 2022.

At March 31, 2024, we were in compliance with these covenants.

The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $ 0.4 million at March 31, 2024 and December 31, 2023, respectively.

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

The following table summarizes our mortgages payable as of September 30, 2023 and December 31, 2022 (dollars in millions):

The following table summarizes our mortgages payable as of March 31, 2024 and December 31, 2023 (dollars in millions):

Properties (1)

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Balance Unamortized

Premium (Discount)

Financing Costs

September 30, 2023 131 4.8 % 3.3 % 0.7 $ 822.0 $ 2.3 $ 824.2

March 31, 2024 49 4.3 % 4.6 % 1.3 $ 201.0 $ ( 0.9 ) $ 200.1

December 31, 2023 131 4.8 % 3.3 % 0.4 $ 822.4 $ ( 0.8 ) $ 821.6

(1) At September 30, 2023, there were 16 mortgages on 131 properties and at December 31, 2022, there were 18 mortgages on 136 properties.

(1) At March 31, 2024, there were 14 mortgages on 49 properties and at December 31, 2023, there were 16 mortgages on 131 properties.

With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity.

At September 30, 2023 and December 31, 2022, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0 % to 6.9 % at September 30, 2023 and December 31, 2022, respectively.

(3) Effective interest rates ranged from 1.3 % to 6.6 % and 2.7 % to 6.6 % at September 30, 2023 and December 31, 2022, respectively.

The following table summarizes the maturity of mortgages payable as of September 30, 2023, excluding $ 2.3 million related to unamortized net premiums and deferred financing costs (dollars in millions):

At March 31, 2024 and December 31, 2023, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0 % to 6.9 % at March 31, 2024 and December 31, 2023, respectively.

(3) Effective interest rates ranged from 0.8 % to 6.6 % and 0.5 % to 6.6 % at March 31, 2024 and December 31, 2023, respectively.

The following table summarizes the maturity of mortgages payable as of March 31, 2024, excluding $ 0.9 million related to unamortized net discounts and deferred financing costs (dollars in millions):

Year of Maturity

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Notes Payable

At September 30, 2023, our senior unsecured notes and bonds are USD-denominated, Sterling-denominated, and Euro-denominated.

At March 31, 2024, our senior unsecured notes and bonds are USD-denominated, Sterling-denominated, and Euro-denominated.

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

The carrying value within the table below includes a portion of certain outstanding notes that have been assumed in both current and historical mergers that were not exchanged for new notes issued by Realty Income.

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

(i) cash and cash equivalents, (ii) future cash flows from operations, (ii) issuances of common stock or debt, (iv) additional borrowings under our revolving credit facility and (v) investment dispositions and/or credit investment repayments.

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

Carrying Value (USD) as of

Maturity Dates Principal (Currency Denomination) September 30, 2023 December 31, 2022

Maturity Dates Principal (Currency Denomination) Carrying Value (USD) as of

March 31, 2024 December 31, 2023

4.600 % Notes due 2024

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4.450 % Notes due 2026 (1)

September 15, 2026 $ 299,968 299,968 —

4.125 % Notes due 2026

October 15, 2026 $ 650,000 650,000 650,000

4 unchanged sentences

3.200 % Notes due 2027 (1)

January 15, 2027 $ 299,984 299,984 —

1.125 % Notes due 2027 (2)

July 13, 2027 £ 400,000 505,640 509,520

6 unchanged sentences

2.100 % Notes due 2028 (1)

March 15, 2028 $ 449,994 449,994 —

Maturity Dates Principal (Currency Denomination) Carrying Value (USD) as of

March 31, 2024 December 31, 2023

2.200 % Notes due 2028

June 15, 2028 $ 499,959 499,959 499,959

2 unchanged sentences

4.750 % Notes due 2029

February 15, 2029 $ 450,000 450,000 —

3.250 % Notes due 2029

June 15, 2029 $ 500,000 500,000 500,000

4.000 % Notes due 2029 (1)

July 15, 2029 $ 399,999 399,999 —

3.100 % Notes due 2029

December 15, 2029 $ 599,291 599,291 599,291

3.400 % Notes due 2030 (1)

January 15, 2030 $ 500,000 500,000 —

4.850 % Notes due 2030

March 15, 2030 $ 600,000 600,000 600,000

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3.200 % Notes due 2031 (1)

February 15, 2031 $ 449,995 449,995 —

5.750 % Notes due 2031 (2)

December 5, 2031 £ 300,000 379,230 382,140

2.700 % Notes due 2032 (1)

February 15, 2032 $ 350,000 350,000 —

3.180 % Notes due 2032

June 30, 2032 £ 345,000 436,115 439,461

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5.125 % Notes due 2034

February 15, 2034 $ 800,000 800,000 —

2.730 % Notes due 2034

May 20, 2034 £ 315,000 398,192 401,247

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6.000 % Notes due 2039 (2)

December 5, 2039 £ 450,000 568,845 573,210

2.500 % Notes due 2042 (2)

January 14, 2042 £ 250,000 316,025 318,450

2 unchanged sentences

Total principal amount $ 22,002,130 $ 18,562,064

Unamortized net premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (2)

Unamortized net (discounts) premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (3)

( 254,126 ) 40,255

$ 21,748,004 $ 18,602,319

(1) In connection with our merger with Spirit, we completed our debt exchange offer to exchange all outstanding notes issued by Spirit Realty, L.P.

("Spirit OP") on January 23, 2024 for new notes issued by Realty Income.

Prior to the completion of our merger with Spirit on January 23, 2024, these notes were not the obligation of Realty Income.

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

(2) Interest paid annually.

Interest on the remaining senior unsecured notes and bond obligations included in the table is paid semi-annually.

(2) In January 2023, in conjunction with the pricing of these senior unsecured notes due January 2026, we entered into three-year , fixed-to-variable interest rate swaps, which are accounted for as fair value hedges.

(3) As a result of our merger with Spirit, the carrying values of the senior notes exchanged were adjusted to fair value.

In conjunction with the pricing of our senior unsecured notes due January 2026, we entered into three-year , fixed-to-variable interest rate swaps, which are accounted for as fair value hedges.

See note 13, Derivative Instruments for further details.

The following table summarizes the maturity of our notes and bonds payable as of September 30, 2023, excluding $ 64.8 million related to unamortized net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedges (dollars in millions):

The following table summarizes the maturity of our notes and bonds payable as of March 31, 2024, excluding $ 254.1 million related to unamortized net discounts, deferred financing costs, and basis adjustments on interest rate swaps designated as fair value hedges (dollars in millions):

Year of Maturity

Thereafter 13,405.8

As of September 30, 2023, the weighted average interest rate on our notes and bonds payable was 3.7 %, and the weighted average remaining years until maturity was 6.6 years.

Interest incurred on all of the notes and bonds was $ 159.7 million and $ 107.9 million for the three months ended September 30, 2023, and 2022, respectively, and $ 434.1 million and $ 314.0 million for the nine months ended September 30, 2023, and 2022, respectively.

As of March 31, 2024, the weighted average interest rate on our notes and bonds payable was 3.8 %, and the weighted average remaining years until maturity was 6.5 years.

Interest incurred on all of the notes and bonds was $ 200.5 million and $ 130.3 million for the three months ended March 31, 2024, and 2023, respectively.

Our outstanding notes and bonds are unsecured;

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and (iv) the maintenance at all times of total unencumbered assets not less than 150 % of our outstanding unsecured debt.

At September 30, 2023, we were in compliance with these covenants.

At March 31, 2024, we were in compliance with these covenants.

Note Issuances

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

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

During the three months ended March 31, 2024, we issued the following notes and bonds (in millions):

2024 Issuances Date of Issuance Maturity Date Principal amount Price of par value Effective yield to maturity

4.750 % Notes

January 2023 January 2026 $ 500.0 (1)

January 2024 February 2029 $ 450.0

99.23 % 4.923 %

5.125 % Notes

January 2023 March 2030 $ 600.0 98.813 % 5.047 %

4.700 % Notes

April 2023 December 2028 $ 400.0 98.949 % 4.912 %

4.900 % Notes

April 2023 July 2033 $ 600.0 98.020 % 5.148 %

4.875 % Notes

July 2023 July 2030 € 550.0 99.421 % 4.975 %

5.125 % Notes

July 2023 July 2034 € 550.0 99.506 % 5.185 %

(1) In January 2023, we issued $ 500 million of 5.05 % senior unsecured notes due January 13, 2026, which are callable at par on January 13, 2024.

Issuances of Common Stock

At-the-Market ("ATM") Program

In August 2023, we replaced our prior ATM program with a new 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 under the ticker symbol "O" at prevailing market prices or at negotiated prices.

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

Of the 120.0 million shares of our common stock available for sale under the prior ATM program at its inception, a total of 101.8 million of those shares were sold, the remainder of which were terminated.

As of September 30, 2023, we had 102.7 million shares remaining for future issuance under our new ATM program.

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

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

Three months ended

September 30, Nine months ended

September 30,

January 2024 February 2034 $ 800.0 98.91 % 5.265 %

Note Exchange Offers Associated with our Merger with Spirit

As part of our merger with Spirit, Realty Income exchanged the following notes issued by Spirit OP, a wholly owned subsidiary of the Company with notes of identical terms issued by Realty Income (in millions):

Series of Spirit Notes Tenders and Consents Received as of the Expiration Date Percentage of Total Outstanding Principal Amount of Such Series of Spirit Notes

4.450 % Notes due September 2026

$ 291.7 97.24 %

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

3.200 % Notes due January 2027

$ 292.7 97.56 %

Gross proceeds $ 883.0 $ 696.6 $ 3,880.4 $ 2,424.1

Sales agents' commissions and other offering expenses ( 9.7 ) ( 5.2 ) ( 30.4 ) ( 20.0 )

Net proceeds $ 873.3 $ 691.4 $ 3,850.0 $ 2,404.1

(1) During the three and nine months ended September 30, 2023, 23.5 million and 69.7 million shares were sold, respectively, and 15.1 million and 63.2 million shares were settled pursuant to forward sale confirmations, respectively.

In addition, as of September 30, 2023, 13.3 million shares of common stock subject to forward sale confirmations have been executed, but not settled, at a weighted average initial gross price of $ 56.61 per share.

We currently expect to fully settle forward sale agreements outstanding by December 31, 2023, representing $ 749.3 million in net proceeds, for which the weighted average forward price at September 30, 2023 was $ 56.47 per share.

Dividend Reinvestment and Stock Purchase Plan ("DRSPP")

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

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

Our DRSPP authorizes up to 26.0 million common shares to be issued.

At September 30, 2023, we had 11.0 million shares remaining for future issuance under our DRSPP program.

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

Three months ended

September 30, Nine months ended

September 30,

2.100 % Notes due March 2028

$ 443.8 98.62 %

Shares of common stock issued under the DRSPP program 51,951 43,430 137,732 128,061

Gross proceeds $ 3.0 $ 3.0 $ 8.4 $ 8.7

4.000 % Notes due July 2029

$ 391.7 97.93 %

3.400 % Notes due January 2030

$ 484.5 96.91 %

3.200 % Notes due February 2031

$ 445.0 98.90 %

2.700 % Notes due February 2032

$ 347.6 99.31 %

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

Across the various note classes, Realty Income had a success rate of approximately 98.1 % on the exchange, resulting in a cash payment of $ 2.7 million to participating noteholders.

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

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

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

Noncontrolling Interests

As of September 30, 2023, we have seven entities with noncontrolling interests that we consolidate, consisting of our operating partnership, (Realty Income, L.P.), a joint venture formed in July 2023 in connection with the acquisition of properties, a joint venture acquired in December 2019, and four development joint ventures ( one acquired in December 2020, one acquired in May 2021, one acquired in April 2023, and one acquired in September 2023).

The following table represents the change in the carrying value of all noncontrolling interests through September 30, 2023 (in thousands):

As of March 31, 2024, we have eight entities with noncontrolling interests that we consolidate, including an operating partnership, Realty Income, L.P., and interests in consolidated property partnerships not wholly-owned by us.

The following table represents the change in the carrying value of all noncontrolling interests through March 31, 2024 (in thousands):

Realty Income, L.P.

Noncontrolling

Interests Total

Other Noncontrolling Interests Total

Carrying value at December 31, 2023

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Contributions

— 39,994 39,994

Distributions ( 1,423 ) ( 845 ) ( 2,268 )

( 4,243 ) ( 2,865 ) ( 7,108 )

Allocation of net income

1,402 213 1,615

Carrying value at September 30, 2023

Carrying value at March 31, 2024

$ 114,051 $ 51,012 $ 165,063

(1) 1,795,167 units were outstanding as of both September 30, 2023 and December 31, 2022.

(2) Includes contributions of $ 39.2 million for the issuance of a 5.0 % joint venture interest as partial consideration paid on property acquisitions, contributions of $ 0.4 million related to a 5.0 % interest in a development joint venture, and contributions of $ 0.4 million related to a 3.0 % interest in a development joint venture.

(3) Includes a non-cash reduction of noncontrolling interest of $ 1.5 million from our partner's responsibility to absorb construction cost overages for a development joint venture during the nine months ended September 30, 2023.

(1) 1,795,167 units were outstanding as of both March 31, 2024 and December 31, 2023.

At March 31, 2024, we are considered the primary beneficiary of Realty Income, L.P.

and other VIEs.

For further information, see note 1, Summary of Significant Accounting Policies .

Fair Value Measurements

6 unchanged sentences

• Level 3 – Inputs that are unobservable and significant to the overall fair value measurement

The following tables present the carrying values and estimated fair values of financial instruments as of September 30, 2023 and December 31, 2022 (in millions):

September 30, 2023

We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period.

Changes in the type of inputs may result in a reclassification for certain assets.

We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent.

The following tables present the carrying values and estimated fair values of financial instruments as of March 31, 2024 and December 31, 2023 (in millions):

March 31, 2024

Hierarchy Level

Carrying Value Level 1 Level 2 Level 3

Loans receivable $ 253.4 $ — $ 190.7 $ 67.3

Derivative assets 52.5 — 52.5 —

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Carrying Value Level 1 Level 2 Level 3

Loans receivable $ 205.3 $ — $ 171.8 $ 33.5

Derivative assets 21.2 — 21.2 —

5 unchanged sentences

Financial Instruments Not Measured at Fair Value on our Consolidated Balance Sheets

The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature.

The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature.

The aggregate fair value of our term loans approximates carrying value due to the frequent repricing of the variable interest rate charged on the borrowing.

The following table reflects the carrying amounts and estimated fair values of our financial instruments not measured at fair value on our consolidated balance sheets (in millions):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Carrying value

4 unchanged sentences

$ 22,002.1 $ 20,580.5 $ 18,562.1 $ 17,603.7

(1) Excludes non-cash net premiums recorded on the mortgages payable.

The unamortized balance of these net premiums was $ 2.8 million at September 30, 2023, and $ 12.4 million at December 31, 2022.

Also excludes deferred financing costs of $ 0.6 million at September 30, 2023, and $ 0.8 million at December 31, 2022.

(2) Excludes non-cash net premiums recorded on notes payable.

The unamortized balance of the net premiums was $ 147.5 million at September 30, 2023, and $ 224.6 million at December 31, 2022.

Also excludes deferred financing costs of $ 78.4 million and basis adjustment on interest rate swaps designated as fair value hedges of $ 4.4 million at September 30, 2023, and $ 60.7 million of deferred financing costs at December 31, 2022.

(1) Excludes non-cash net premiums and discounts recorded on the mortgages payable.

The unamortized balance of these net discounts was $ 0.5 million at March 31, 2024, and $ 0.4 million of net discounts at December 31, 2023.

Also excludes deferred financing costs of $ 0.4 million at March 31, 2024 and December 31, 2023, respectively.

(2) Excludes non-cash net premiums and discounts recorded on notes payable.

The unamortized balance of the net discounts was $ 159.4 million at March 31, 2024, and $ 125.3 million of net premiums at December 31, 2023.

Also excludes deferred financing costs of $ 93.1 million and a favorable basis adjustment on interest rate swaps designated as fair value hedges of $ 1.6 million at March 31, 2024, and deferred financing costs of $ 83.8 million and a favorable basis adjustment on interest rate swaps designated as fair value hedges of $ 1.3 million at December 31, 2023.

The estimated fair values of our mortgages payable and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread.

Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy.

The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable.

Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy.

Financial Instruments Measured at Fair Value on a Recurring Basis

4 unchanged sentences

In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties.

However, at September 30, 2023, and December 31, 2022, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 on the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties.

However, at March 31, 2024, and December 31, 2023, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we determined that our derivative valuations in their entirety are classified as level two.

5 unchanged sentences

The following table summarizes our provisions for impairment on real estate investments during the periods indicated below (in millions):

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

Carrying value prior to impairment $ 191.1 $ 35.6

total provisions for impairment (1) (2)

( 88.2 ) ( 13.2 )

Carrying value after impairment $ 102.9 $ 22.4

(1) Excludes provision for current expected credit loss of $ 1.3 million at March 31, 2024.

(2) Real estate assets that were deemed to be impaired for the three months ended March 31, 2024 primarily relate to two office properties which were acquired and retained in our merger with VEREIT, Inc.

("VEREIT") in 2021.

The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs.

We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.

We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of such real estate.

Estimating future cash flows is highly subjective and estimates can differ materially from actual results.

2 unchanged sentences

We may enter into derivative financial instruments to offset these underlying economic risks.

Derivative Designated as Hedging Instruments - Cash Flow Hedges

In order to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling ("GBP") and Euro ("EUR"), we have a hedging strategy to enter into foreign currency forward contracts to sell GBP, USD, and EUR and buy EUR, USD, and GBP.

These foreign currency forwards are designated as cash flow hedges.

Derivatives Designated as Hedging Instruments - Cash Flow Hedges

We enter into foreign currency forward contracts to sell British Pound Sterling ("GBP") and Euro ("EUR") and buy USD to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in GBP and EUR.

Forward points on the forward contracts are included in the assessment of hedge effectiveness.

Amounts reported in other comprehensive income related to foreign currency derivative contracts will be reclassified to other gain and (loss) in the same period during which the hedged forecasted transactions affect earnings.

To add stability to interest expense and to manage our exposure to interest rate movements associated with our term loans, we executed variable-to-fixed interest rate swaps.

These interest rate swaps are designated as cash flow hedges.

The interest rate swaps are recorded on the consolidated balance sheets at fair value.

Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

To mitigate the impact of fluctuating interest rates, we have also entered into interest rate swaption agreements, structured as a swaption corridor, in anticipation of issuing USD denominated bonds.

Interest rate swaption corridors are a combination of two swaption positions, whereby we purchase a payer swaption, which is an option that allows us to enter into a swap where we will pay the fixed rate and receive the floating rate of the swap, and sell a payer swaption, which is an option that provides the counterparty with the right to enter into a swap where we will receive the fixed rate and pay the floating rate of the swap.

For the swaption corridor entered into during March 2023, the combination of purchasing the payer swaption and selling the swaption resulted in a premium being paid of $ 7.6 million.

The interest rate swaptions are designated as cash flow hedges.

Changes in fair value of the swaptions have been recorded in AOCI.

Derivative Designated as Hedging Instruments - Fair Value Hedges

Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges.

The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and variable-rate debt.

We also execute variable-to-fixed interest rate swaps to add stability to interest expense and to manage our exposure to interest rate movements associated with our term loans and may also enter into interest rate swaption agreements.

Derivatives Designated as Hedging Instruments - Fair Value Hedges

Periodically, we enter into and designate fixed-to-floating interest rate swaps to manage interest rate risk by managing our mix of fixed-rate and variable-rate debt.

These swaps involve the receipt of fixed-rate amounts for variable interest rate payments over the life of the swaps without exchange of the underlying principal amount.

We also designate some of our cross-currency swaps as fair value hedges.

The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign-denominated debt.

For these hedges, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross-currency basis spread from the assessment of hedge effectiveness (the "excluded component").

Changes in the fair value of the cross-currency swaps attributable to changes in the spot rates on the final notional exchanges and changes in the value of the hedged assets due to changes in the spot rates are recorded in 'Foreign currency and derivative (loss) gain, net'.

Changes in the fair value of the cross-currency swaps attributable to the excluded components are recorded to other comprehensive income and will be recognized in 'Foreign currency and derivative (loss) gain, net' on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments.

We also designate some of our cross-currency swaps as fair value hedges as we use them to hedge foreign currency risk associated with changes in spot rates on foreign-denominated debt.

For these hedging instruments, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross-currency basis spread from the assessment of hedge effectiveness (the "excluded component").

Changes in the fair value of the cross-currency swaps attributable to these excluded components are recorded to other comprehensive income and subsequently recognized in 'Foreign currency and derivative gain, net' on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments.

Derivatives Designated as Hedging Instruments - Net Investment Hedges

To mitigate the foreign currency exchange rate variations associated with our investment in EUR-denominated foreign operations, we may enter into derivative instruments, such as cross-currency swaps that qualify as net investment hedges under the criteria prescribed in accordance with ASC Topic 815-20, Hedging - General .

We use the spot method of assessing hedge effectiveness and apply the consistent election to the excluded component by recognizing changes in the fair value of the hedging instruments attributable to the excluded component in the same manner as described above.

Any difference between the change in the fair value of the excluded components and the amounts recognized in earnings is reported in other comprehensive income as part of the foreign cumulative translation adjustment.

The gain or loss on the portion of the derivative instruments included in the assessment of effectiveness is reported in other comprehensive income as part of the 'Foreign currency translation adjustment' line item, to the extent the relationship is highly effective.

If our net investment changes during a reporting period, the hedge relationship will be assessed for whether a de-designation is warranted (only if the hedge notional amount is outside of prescribed tolerance).

Further, certain EUR-denominated bonds and borrowings under our Revolving Credit Facility and Term Loans (all as defined in Notes 7 and 8 , respectively) may be also designated as, and are

effective as, net investment hedge.

Changes in the value of such borrowings, related to changes in the spot rates, will be recorded in the same manner as foreign currency translation adjustments.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These derivative contracts generally mature within one year and are not designated as hedge instruments for accounting purposes.

As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative (loss) gain, net' in the consolidated statements of income and comprehensive income.

The following table summarizes the terms and fair values of our derivative financial instruments at September 30, 2023 and December 31, 2022 (dollars in millions):

As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative gain, net' in our consolidated statements of income and comprehensive income.

The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2024 and December 31, 2023 (dollars in millions):

Derivative Type

4 unchanged sentences

Fair Value - asset (liability) as of

Derivatives Designated as Hedging Instruments September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Derivatives Designated as Hedging Instruments March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

Interest rate swaps (4)

9 $ 1,630.0 $ 250.0 4.26 % Jan 2024 - Jan 2026 $ 1.3 $ 5.6

Interest rate swaptions 6 1,000.0 — (4) Feb 2034 21.7 —

Cross-currency swaps

12 $ 2,680.0 $ 1,630.0 3.71 % Jun 2025 - Aug 2027 $ 43.9 $ 0.3

Interest rate swaptions (5)

— — 1,000.0 — — 2.6

Cross-currency swaps - Fair Value

3 320.0 320.0 (6) Oct 2032 ( 53.7 ) ( 59.8 )

Foreign currency forwards 26 160.7 185.5 (6) Oct 2023 - Dec 2024 10.1 16.1

Cross-currency swaps - Net Investment

3 280.0 280.0 (7) Oct 2032 ( 47.8 ) ( 53.2 )

Foreign currency forwards 24 217.8 162.3 (8) Apr 2024 - Jun 2025 2.2 2.7

$ 3,497.8 $ 3,392.3 $ ( 55.4 ) $ ( 107.4 )

1 unchanged sentence

Currency exchange swaps

6 $ 1,650.6 $ 2,427.7 (7) Oct 2023 $ 6.6 $ 58.8

Cross-currency swaps 3 280.0 280.0 (5) Oct 2032 ( 34.7 ) ( 29.5 )

4 $ 1,476.3 $ 1,810.6 (9) Apr 2024 - May 2024 $ 2.1 $ 8.9

$ 1,476.3 $ 1,810.6 $ 2.1 $ 8.9

Total of all Derivatives $ 4,974.1 $ 5,202.9 $ ( 53.3 ) $ ( 98.5 )

(1) This column represents the number of instruments outstanding as of September 30, 2023.

(2) Weighted average strike rate is calculated using the notional value as of September 30, 2023.

(3) This column represents maturity dates for instruments outstanding as of September 30, 2023.

(4) Represent purchased payer swaptions with a strike rate of 3.75 % and sold payer swaptions with a strike rate of 4.25 %.

(1) This column represents the number of instruments outstanding as of March 31, 2024.

(2) Weighted average strike rate is calculated using the notional value as of March 31, 2024.

(3) This column represents maturity dates for instruments outstanding as of March 31, 2024.

(4) During the three months ended March 31, 2024, we entered into five variable-to-fixed interest rate swaps when we extended maturity of the 2023 term loans and designated them as cash flow hedges.

We also designated five variable-to-fixed interest rate swaps we acquired from Spirit as cash flow hedges to mitigate the interest rate risk associated with the term loans we assumed in conjunction with our merger with Spirit.

The acquisition date fair value of these derivatives was $ 35.1 million in total and will be reclassified from AOCI to interest expense over the remaining life of the term loans on a systematic and rational basis.

(5) There were six interest swaptions equal to $ 1 billion in notional entered into in March 2023, of which $ 800 million was terminated in January 2024 in connection with a senior unsecured note issuance.

A total termination premium of $ 3.4 million we received was deferred in other comprehensive income and will be recognized in interest expense over the 10-year tenor of the notes due 2034.

The remaining swaption of the $ 200 million notional expired in January 2024.

(6) USD fixed rate of 5.625 % and EUR weighted average fixed rate of 4.681 %.

(7) USD fixed rate of 5.625 % and EUR weighted average fixed rate of 4.716 %.

(8) Weighted average forward GBP-USD exchange rate of 1.28 .

(7) Weighted average EUR-GBP exchange rates each of 0.86 .

We measure our derivatives at fair value and include the balances within other assets and accounts payable as well as accrued expenses on our consolidated balance sheets.

(9) Weighted average exchange rates of 0.86 for EUR-GBP and 1.27 for GBP-USD.

We measure our derivatives at fair value and include the balances within 'Other assets, net' and 'Accounts payable and accrued expenses' on our consolidated balance sheets.

We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default.

The following table summarizes the amount of unrealized gain (loss) on derivatives in other comprehensive income (in thousands):

Three months ended

September 30, Nine months ended

September 30,

The following table summarizes the amount of unrealized gain (loss) on derivatives and foreign currency translation adjustments in other comprehensive income (in thousands):

Three months ended March 31,

Derivatives in Cash Flow Hedging Relationships 2024 2023

Cross-currency swaps $ — $ — $ — $ ( 5,091 )

Interest rate swaps $ 9,916 $ ( 1,720 )

3 unchanged sentences

Derivatives in Fair Value Hedging Relationships

Cross-currency swaps $ ( 3,917 ) $ — $ ( 8,691 ) $ —

Cross-currency swaps - Fair Value $ ( 2,141 ) $ 5,958

Total derivatives in fair value hedging relationships $ ( 2,141 ) $ 5,958

Total unrealized gain (loss) on derivatives $ 7,193 $ 41,914 $ ( 1,379 ) $ 119,058

Total unrealized gain (loss) on derivatives, net $ 8,922 $ ( 2,162 )

Derivatives in Net Investment Hedging Relationships

Cross-currency swaps - Net Investment $ 4,873 $ —

Total unrealized gain recorded in foreign currency translation adjustment $ 4,873 $ —

The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands):

Three months ended

September 30, Nine months ended

September 30,

Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income 2023 2022 2023 2022

Cross-currency swaps Foreign currency and derivative (loss) gain, net

$ — $ 2,784 $ — $ 30,425

Three months ended March 31,

Derivatives in Cash Flow Hedging Relationships Location of Gain Recognized in Income

Interest rate swaps Interest expense $ 8,932 $ 1,480

Foreign currency forwards Foreign currency and derivative (loss) gain, net

1,662 — 3,985 —

Foreign currency forwards Foreign currency and derivative gain, net

Interest rate swaptions Interest expense ( 982 ) —

1 unchanged sentence

Derivatives in Fair Value Hedging Relationships

Cross-currency swaps Foreign currency and derivative (loss) gain, net

$ 570 $ — $ 1,054 $ —

Cross-currency swaps - Fair Value Foreign currency and derivative gain, net $ 461 $ 294

Total derivatives in fair value hedging relationships $ 461 $ 294

Derivatives in Net Investment Hedging Relationships

Cross-currency swaps - Net Investment Foreign currency and derivative gain, net $ 869 $ —

Total derivatives in net investment hedging relationships $ 869 $ —

Net increase to net income

We expect to reclassify $ 9.8 million from AOCI as a decrease to interest expense relating to interest rate swaps and interest rate swaptions and $ 11.4 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months.

The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):

Three months ended

September 30, Nine months ended

September 30,

$ 11,391 $ 3,205

Realized foreign currency and derivative gain (loss), net:

Gain on the settlement of undesignated derivatives $ 11,432 $ 4,050 $ 10,106 $ 80,677

We expect to reclassify $ 24.0 million from AOCI as a decrease to interest expense relating to interest rate swaps and $ 3.3 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months.

The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):

Three months ended March 31,

Realized foreign currency and derivative (loss) gain, net:

Loss on the settlement of undesignated derivatives $ ( 15,265 ) $ ( 345 )

Gain on the settlement of designated derivatives reclassified from AOCI 3,441 1,725

Gain (loss) on the settlement of transactions with third parties 410 ( 111 ) 1,685 ( 41 )

Total realized foreign currency and derivative gain, net $ 14,075 $ 6,723 $ 16,830 $ 111,061

(Loss) gain on the settlement of transactions with third parties ( 6 ) 1,326

Total realized foreign currency and derivative (loss) gain, net $ ( 11,830 ) $ 2,706

Unrealized foreign currency and derivative gain (loss), net:

Gain (loss) on the change in fair value of undesignated derivatives $ 2,138 $ ( 782 )

Loss on remeasurement of certain assets and liabilities ( 29,798 ) ( 5,128 ) ( 16,607 ) ( 162,570 )

Total unrealized foreign currency and derivative loss, net $ ( 16,888 ) $ ( 29,616 ) $ ( 11,873 ) $ ( 127,064 )

Total foreign currency and derivative (loss) gain, net $ ( 2,813 ) $ ( 22,893 ) $ 4,957 $ ( 16,003 )

Gain on remeasurement of certain assets and liabilities 13,738 8,398

Total unrealized foreign currency and derivative gain, net $ 15,876 $ 7,616

Total foreign currency and derivative gain, net $ 4,046 $ 10,322

Lessor Operating Leases

At September 30, 2023, we owned or held interests in 13,282 properties.

At March 31, 2024, we owned or held interests in 15,485 properties.

Of the 15,485 properties, 15,189 , or 98.1 %, are single-client properties, and the remaining are multi-client properties.

At September 30, 2023, 159 properties were available for lease or sale.

At March 31, 2024, 217 properties were available for lease or sale.

The majority of our leases are accounted for as operating leases.

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

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

Percentage rent for the nine months ended September 30, 2023, and 2022 was $ 8.0 million, and $ 8.3 million, respectively.

Distributions Paid and Payable

The vast majority of our leases are net leases where our client pays or reimburses us for property taxes and assessments and carries insurance coverage for public liability, property damage, fire, and extended coverage.

Rent based on a percentage of our client's gross sales, or percentage rent, for the three months ended March 31, 2024, and 2023 was $ 5.3 million, and $ 4.1 million, respectively.

No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2024, and 2023.

Stockholders' Equity

We pay monthly distributions to our common stockholders.

The following is a summary of monthly distributions paid per common share for the periods indicated below:

Three months ended March 31,

January $ 0.2565 $ 0.2485

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March 0.2565 0.2545

April 0.2550 0.2470

May 0.2550 0.2470

June 0.2550 0.2470

July 0.2555 0.2475

August 0.2555 0.2475

September 0.2555 0.2475

$ 0.7695 $ 0.7515

At September 30, 2023, a distribution of $ 0.2560 per common share was payable and was paid in October 2023.

At March 31, 2024, a distribution of $ 0.2570 per common share was payable and was paid in April 2024.

At-the-Market ("ATM") Program

Under our current ATM program, which we entered into in August 2023, we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE under the ticker symbol "O" at prevailing market prices or at negotiated prices.

As of March 31, 2024, we had 76.7 million shares remaining for future issuance under our ATM program.

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

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

Three months ended March 31,

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

Gross proceeds $ 547.0 $ 801.7

Sales agents' commissions and other offering expenses ( 3.5 ) ( 5.5 )

Net proceeds $ 543.5 $ 796.2

(1) During the three months ended March 31, 2024, 4.6 million shares were sold, and 9.6 million shares were settled pursuant to forward sale confirmations.

In addition, as of March 31, 2024, 1.2 million shares of common stock subject to forward sale confirmations have been executed, but not settled, at a weighted average initial gross price of $ 54.00 per share.

We currently expect to fully settle forward sale agreements outstanding by June 30, 2024, representing $ 62.9 million in net proceeds, for which the weighted average forward price at March 31, 2024 was $ 53.70 per share.

Dividend Reinvestment and Stock Purchase Plan ("DRSPP")

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

It 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 26.0 million common shares to be issued.

At March 31, 2024, we had 10.9 million shares remaining for future issuance under our DRSPP program.

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

Three months ended March 31,

Shares of common stock issued under the DRSPP program 58 42

Gross proceeds $ 3.1 $ 2.7

Redeemable Preferred Stock

As part of the Merger Agreement with Spirit, each outstanding share of Spirit’s 6.000 % Series A Cumulative Redeemable Preferred Stock, par value $ 0.01 per share, converted into the right to receive one share of newly issued Realty Income 6.000 % Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock, resulting in 6.9 million shares of Realty Income Series A Preferred Stock issued.

We are authorized to issue up to 69.9 million shares of our preferred stock.

As of March 31, 2024, we had 6.9 million shares of our preferred stock outstanding.

The 6.000 % Series A Cumulative Redeemable Preferred Stock trades on the NYSE under the ticker symbol "O PR".

The 6.000 % Series A Cumulative Redeemable Preferred Stock is classified as mezzanine equity on our consolidated balance sheets as it is contingently redeemable for cash or the value of the property, rights or securities to be paid or distributed upon the occurrence of a change of control event, which is not solely within our control.

Our preferred stock pays cumulative cash dividends at the rate of 6.000 % per annum on their liquidation preference of $ 25.00 per share (equivalent to $ 1.50 per share on an annual basis).

We may, at our option, redeem the 6.000 % Series A Cumulative Redeemable Preferred Stock, in whole or in part, at any time for cash at a redemption price of $ 25.00 per share, plus any accrued and unpaid dividends up to, but excluding, the redemption date.

Dividends are payable quarterly in arrears on or about the last day of March, June, September and December of each year.

During the three months ended March 31, 2024, we paid one quarterly dividend to holders of our preferred stock totaling $ 0.375 per share, or $ 2.6 million.

Common Stock Incentive Plan

This note should be read in conjunction with the more complete discussion of the Realty Income 2021 Incentive Award Plan (the "2021 Plan"), included in note 19 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023.

The amount of share-based compensation costs recognized in 'General and administrative' in our consolidated statements of income and comprehensive income was $ 9.3 million and $ 6.3 million during the three months ended March 31, 2024, and 2023, respectively.

In connection with the Merger, each outstanding Spirit restricted stock award and performance share award was cancelled and converted into Realty Income common stock, using the Exchange Ratio in accordance with the Merger Agreement.

The issuance is excluded from the sections below, as the awards were not granted under the 2021 Plan.

The aggregate fair value of fully vested Spirit awards converted into Realty Income common stock was $ 66.5 million, of which i.) $ 41.7 million related to pre-combination services and is included in the consideration transferred in the merger and ii.) $ 24.8 million of expense was recognized in January in merger and integration-related costs related to the value attributable to post-combination services.

For more details, please see note 2, Merger with Spirit Realty Capital, Inc.

Restricted Stock and Restricted Stock Units

During the three months ended March 31, 2024, we granted 296,871 shares of common stock under the 2021 Plan.

This included 4,000 total shares of restricted stock granted to the new independent member of our Board of Directors, which vest in equal parts over a three-year service period.

Our restricted stock awards granted to employees vest over a service period not exceeding four-years .

During the three months ended March 31, 2024, we also granted 30,322 restricted stock units, all of which vest over a four-year service period.

As of March 31, 2024, the remaining unamortized share-based compensation expense related to restricted stock awards and units totaled $ 29.5 million, which is being amortized on a straight-line basis over the service period of each applicable award.

The amount of share-based compensation is based on the fair value of the stock at the grant date.

We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

Performance Shares

During the three months ended March 31, 2024, we granted 274,358 performance shares, as well as dividend equivalent rights, to our executive officers.

The performance shares are earned based on our Total Shareholder Return ("TSR") performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service.

As of March 31, 2024, the remaining share-based compensation expense related to the performance shares totaled $ 29.7 million.

The performance shares are being recognized on a tranche-by-tranche basis over the service period.

The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation model.

Net Income per Common Share

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The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation (shares in thousands):

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

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

6 unchanged sentences

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

1,795 1,244 1,795 1,123

Weighted average forward ATM offerings that were anti-dilutive 453 46

1 unchanged sentence

The following table summarizes our supplemental cash flow information during the periods indicated below (in thousands):

Nine months ended

September 30,

Three months ended March 31,

Supplemental disclosures:

2 unchanged sentences

Non-cash activities:

Net (decrease) increase in fair value of derivatives $ ( 51,386 ) $ 146,310

Increase in noncontrolling interests from property acquisitions $ 39,156 $ —

Mortgages assumed at fair value $ — $ 45,079

Issuance of common partnership units of Realty Income, L.P.

The following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents, and restricted cash reported within the consolidated statements of cash flows (in thousands):

September 30, 2023 September 30, 2022

Net increase (decrease) in fair value of derivatives $ 45,133 $ ( 58,667 )

Term loans assumed at fair value $ 1,300,000 $ —

Notes payable assumed at fair value $ 2,481,486 $ —

The following table provides a reconciliation of cash and cash equivalents reported on our consolidated balance sheets to the total of the cash, cash equivalents, and restricted cash reported within our consolidated statements of cash flows (in thousands):

March 31, 2024 March 31, 2023

Cash and cash equivalents shown in the consolidated balance sheets $ 680,159 $ 164,576

Restricted escrow deposits (1)

41,311 90,639

Impounds related to mortgages payable (1)

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Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 696,786 $ 243,765

(1) Included within other assets, net on the consolidated balance sheets (see note 2, Supplemental Detail for Certain Components of Consolidated Balance Sheets ).

(1) Included within 'other assets, net' on our consolidated balance sheets (see note 3, Supplemental Detail for Certain Components of Consolidated Balance Sheets ).

These amounts consist of cash that we are legally entitled to, but that is not immediately available to us.

As a result, these amounts were considered restricted as of the dates presented.

Common Stock Incentive Plan

In March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income 2021 Incentive Award Plan, or 2021 Plan.

This note should be read in conjunction with the more complete discussion of our 2021 Plan included in note 17 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

The amount of share-based compensation costs recognized in 'General and administrative' in the consolidated statements of income and comprehensive income was $ 6.2 million and $ 5.1 million during the three months ended September 30, 2023, and 2022, respectively, and $ 20.2 million and $ 16.7 million during the nine months ended September 30, 2023, and 2022, respectively.

Restricted Stock and Restricted Stock Units

During the nine months ended September 30, 2023, we granted 220,970 shares of common stock under the 2021 Plan.

This included 40,000 total shares of restricted stock granted to the independent members of our Board of Directors in connection with our annual awards in May 2023, 20,000 shares of which vested immediately and 20,000 shares of which vest in equal parts over a three-year service period.

Our restricted stock awards granted to employees vest over a service period not exceeding four-years .

During the nine months ended September 30, 2023, we also granted 15,065 restricted stock units, all of which vest over a four-year service period.

As of September 30, 2023, the remaining unamortized share-based compensation expense related to restricted stock awards and units totaled $ 18.7 million, which is being amortized on a straight-line basis over the service period of each applicable award.

The amount of share-based compensation is based on the fair value of the stock at the grant date.

Performance Shares

During the nine months ended September 30, 2023, we granted 193,868 performance shares, as well as dividend equivalent rights, to our executive officers.

The performance shares are earned based on our Total Shareholder Return (TSR) performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service.

As of September 30, 2023, the remaining share-based compensation expense related to the performance shares totaled $ 20.9 million.

The performance shares are being recognized on a tranche-by-tranche basis over the service period.

The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation model.

Commitments and Contingencies

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We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.

At September 30, 2023, we had commitments of $ 19.5 million, which primarily relate to re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of September 30, 2023, we had committed $ 903.6 million under construction contracts related to development projects, which have estimated rental revenue commencement dates between October 2023 and October 2024.

At March 31, 2024, we had commitments of $ 101.4 million, which primarily relate to tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

In addition, as of March 31, 2024, we had committed $ 536.1 million under construction contracts related to development projects, which have estimated rental revenue commencement dates between April 2024 and March 2026.

Subsequent Events

In October 2023, we declared a dividend of $ 0.2560 per share to our common stockholders, which will be paid in November 2023.

Agreement and Plan of Merger

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

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

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

Stock, par value $ 0.01 per share, will be converted into the right to receive one share of newly issued Realty Income 6.000 % Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock.

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

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

Investment in Joint Venture

In October 2023, we completed our previously announced $ 950.0 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc.

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

The investment included approximately $ 300.0 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 April 2024, we declared a dividend of $ 0.2570 per share to our common stockholders, which will be paid in May 2024.

Loan Repayment

In April 2024, a $ 33.0 million secured loan to an operator of Emagine Theaters, assumed in the Spirit merger, was repaid in full.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements