What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-07 · 250 added, 275 removed, 479 unchanged (52% of the section changed)

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

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

Forward-looking statements include discussions of our business and portfolio;

growth strategies and intentions to acquire or dispose of properties (including timing, partners, clients and terms);

re-leases, re-development and speculative development of properties and expenditures related thereto;

future operations and results;

the announcement of operating results, strategy, plans, and the intentions of management;

and trends in our business, including trends in the market for long-term net leases of freestanding, single-client properties.

Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation which may cause our actual future results to differ materially from expected results.

settlement of shares of common stock sold pursuant to forward sale confirmations under our ATM program;

and trends in our business, including trends in the market for long-term leases of freestanding, single-client properties.

Forward-looking statements are subject to risks, uncertainties, and assumptions about the Company which may cause our actual future results to differ materially from expected results.

Some of the factors that could cause actual results to differ materially are, among others, our continued qualification as a real estate investment trust;

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inflation and its impact on our clients and us;

access to debt and equity capital markets and other sources of funding;

access to debt and equity capital markets and other sources of funding (including the terms and partners of such funding);

continued volatility and uncertainty in the credit markets and broader financial markets;

other risks inherent in the real estate business including our clients' defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters;

other risks inherent in the real estate business including our clients' solvency, client defaults under leases, increased client bankruptcies, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters;

impairments in the value of our real estate assets;

changes in domestic and foreign income tax laws and rates;

our clients' solvency;

property ownership through joint ventures and partnerships which may limit control of the underlying investments;

current or future epidemics or pandemics, measures taken to limit their spread, the impacts on us, our business, our clients (including those in the theater and fitness industries), and the economy generally;

property ownership through joint ventures, partnerships and other arrangements which may limit control of the underlying investments;

epidemics or pandemics including measures taken to limit their spread, the impacts on us, our business, our clients, and the economy generally;

the loss of key personnel;

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acts of terrorism and war;

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

and the anticipated benefits from mergers and acquisitions including from the merger (the "Merger") with Spirit Realty Capital, Inc.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K , for the year ended December 31, 2023.

Readers are cautioned not to place undue reliance on forward-looking statements.

Forward-looking statements are not guarantees of future plans and performance and speak only as of the date this quarterly report was filed with the Securities and Exchange Commission ("SEC").

Forward-looking statements are not guarantees of future plans and performance and speak only as of the date this quarterly report was filed with the Securities and Exchange Commission (the "SEC").

Actual plans and operating results may differ materially from what is expressed or forecasted in this quarterly report and forecasts made in the forward-looking statements discussed in this quarterly report might not materialize.

We do not undertake any obligation to update forward-looking statements or publicly release the results of any forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

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

We invest in people and places to deliver dependable monthly dividends that increase over time.

The Company is structured as a real estate investment trust ("REIT"), requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to its stockholders.

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

Realty Income was founded in 1969 and listed on the New York Stock Exchange ("NYSE") in 1994 under the trading symbol "O".

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

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

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

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

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

approximately 9.7 years.

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

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

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

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

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

Realty Income (NYSE:

O), an S&P 500 company, is real estate partner to the world's leading companies.

Founded in 1969, we invest in diversified commercial real estate and have a portfolio of over 15,450 properties in all 50 U.S.

states, the U.K., and six other countries in Europe.

We are known as "The Monthly Dividend Company ® ," and have a mission to deliver stockholders dependable monthly dividends that grow over time.

Since our founding, we have declared 646 consecutive monthly dividends and are a member of the S&P 500 Dividend Aristocrats ® index for having increased our dividend for the last 25 consecutive years.

As of March 31, 2024, we owned or held interests in 15,485 properties, with approximately 334.2 million square feet of leasable space leased to 1,552 clients doing business in 89 separate industries.

Of the 15,485 properties in our portfolio as of March 31, 2024, 15,189, or 98.1%, were single-client properties, of which 14,978 were leased, and the remaining were multi–client properties.

Our total portfolio of 15,485 properties as of March 31, 2024 had a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 9.8 years.

Total portfolio annualized contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables) on our leases as of March 31, 2024 was $4.79 billion.

As of March 31, 2024, approximately 36.2% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of March 31, 2024, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 36.3% of our annualized rent and 10 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Approximately 91% of our annualized retail contractual rent as of March 31, 2024, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $72.7 million and $59.6 million for the three months ended March 31, 2024, and 2023, respectively.

RECENT DEVELOPMENTS

Closing of Spirit Merger

On January 23, 2024, we closed on our previously announced stock-for-stock merger with Spirit (formerly NYSE:

The Merger is further described in note 2, Merger with Spirit Realty Capital, Inc.

, to the consolidated financial statements.

We assumed the Spirit portfolio, which consisted of 2,018 U.S.

retail, industrial and other properties across 49 states.

Increases in Monthly Dividends to Common Stockholders

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

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

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

The following table summarizes our dividend increases in 2023:

In addition, we increased the dividend twice during 2024.

As of April 2024, we have paid 106 consecutive quarterly dividend increases and increased the dividend 124 times since our listing on the NYSE in 1994.

2024 Dividend increases

Declared Month

Paid Dividend

per share Increase

Month Declared Month Paid Monthly Dividend per share Increase per share

1st increase Dec 2023 Jan 2024 $ 0.2565 $ 0.0005

2nd increase Feb 2023 Mar 2023 $0.2545 $0.0060

3rd increase Mar 2023 Apr 2023 $0.2550 $0.0005

4th increase Jun 2023 Jul 2023 $0.2555 $0.0005

5th increase Sep 2023 Oct 2023 $0.2560 $0.0005

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

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

2nd increase Mar 2024 Apr 2024 $ 0.2570 $ 0.0005

The dividends paid per share during 2024 totaled $0.7695, as compared to $0.7515 during 2023, an increase of $0.018, or 2.4%.

The monthly dividend of $0.257 per share represents a current annualized dividend of $3.084 per share, and an annualized dividend yield of 5.7% based on the last reported sale price of our common stock on the NYSE of $54.10 on March 31, 2024.

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

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

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

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

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

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

Investments During the Three Months Ended March 31, 2024

During the three months ended March 31, 2024, we invested $0.6 billion at an initial weighted average cash yield of 7.8%, in 153 properties and properties under development or expansion.

See note 4 , Investments in Real Estate, to the consolidated financial statements for further details.

Equity Capital Raising

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

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

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

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

During the three months ended March 31, 2024, we raised $550.1 million of proceeds from the sale of common stock, at a weighted average price of $56.93 per share, primarily through proceeds from the sale of common stock through our ATM program.

The ATM program issuances during the three months ended March 31, 2024 included 9.6 million shares issued pursuant to forward sale confirmations.

As of March 31, 2024, 1.2 million shares of common stock subject to forward sale confirmations have been executed but not settled.

See note 15 , Stockholders' Equity , to the consolidated financial statements for further details.

Note Issuances

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

In April 2023, we issued $400.0 million of 4.70% senior unsecured notes due December 2028 and $600.0 million of 4.90% senior unsecured notes due July 2033.

In January 2023, we issued $500.0 million of 5.050% senior unsecured notes due January 2026 and $600.0 million of 4.85% senior unsecured notes due March 2030.

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

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

(“Spirit OP”).

See note 10, Notes Payable , to the consolidated financial statements for further details.

Portfolio Discussion

Leasing Results

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

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

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

Three months ended September 30, 2023

Properties available for lease at June 30, 2023

Lease expirations (1)

Re-leases to same client (257)

Re-leases to new client (11)

Vacant dispositions (20)

Properties available for lease at September 30, 2023

Nine months ended September 30, 2023

At March 31, 2024, we had 217 properties available for lease or sale out of 15,485 properties in our portfolio, which represents a 98.6% occupancy rate based on the number of properties in our portfolio.

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

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

Three months ended March 31, 2024

Properties available for lease at December 31, 2023

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Vacant dispositions (43)

Properties available for lease at September 30, 2023

Properties available for lease at March 31, 2024

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

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

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

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

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

(2) Includes 26 properties acquired through the merger with Spirit in January 2024.

During the three months ended March 31, 2024, the new annualized contractual rent on re-leases was $59.37 million, as compared to the previous annual rent of $56.91 million on the same units, representing a rent recapture rate of 104.3% on the units re-leased.

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

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

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

Agreement and Plan of Merger

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

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

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

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

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

Investment in Bellagio Las Vegas

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

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

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

Cineworld Bankruptcy Resolution

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

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

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

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

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

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

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

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

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

Impact of Inflation

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

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

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

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

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

Additionally, inflationary periods may cause us to

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

Impact of Real Estate and Credit Markets

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

Impact of Real Estate and Capital Markets

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

As of March 31, 2024, we had $4.0 billion of liquidity, which consists of cash and cash equivalents of $680.2 million, unsettled ATM forward equity of $62.9 million, and $3.2 billion of availability under our $4.25 billion unsecured revolving credit facility, net of $806.5 million of borrowing on the revolving credit facility and after deducting $216.0 million in borrowings under our commercial paper programs.

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

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• Issuances of common stock or debt;

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

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

• Investment dispositions and/or credit investment repayments.

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

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

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

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

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

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Capitalization

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

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

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

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

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

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

As of March 31, 2024, our total market capitalization was $73.6 billion.

Total market capitalization consisted of $47.2 billion of common equity (based on the March 31, 2024 closing price on the NYSE of $54.10 and assuming the conversion of 1.8 million common units of Realty Income, L.P.), aggregate liquidation value (based on a redemption price of $25.00 per share) of 6.000% Series A Cumulative Redeemable Preferred Stock of $0.2 billion, and total outstanding borrowings of $26.3 billion on our revolving credit facility, commercial paper, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt and preferred stock to total market capitalization was 35.9% at March 31, 2024.

Universal Shelf Registration

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

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

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

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

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

As of March 31, 2024, there were approximately 1.2 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $62.9 million in expected net proceeds, which have been executed at a weighted average price of $53.70 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates).

During the three months ended March 31, 2024, we settled approximately 9.6 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $543.5 million of net proceeds.

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.

Debt and Financing Activities

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

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

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

Debt Financing Activities

At March 31, 2024, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $25.6 billion, with a weighted average maturity of 5.9 years and a weighted average interest rate of 3.9%.

As of March 31, 2024, approximately 94% of our total debt was fixed rate debt.

See notes 7 through 10 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the three months ended March 31, 2024 below.

Note Issuances

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

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

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

January 2023 January 2026 $ 500.0 99.618 % 5.189 %

January 2023 March 2030 $ 600.0 98.813 % 5.047 %

April 2023 December 2028 $ 400.0 98.949 % 4.912 %

April 2023 July 2033 $ 600.0 98.020 % 5.148 %

July 2023 July 2030 € 550.0 99.421 % 4.975 %

July 2023 July 2034 € 550.0 99.506 % 5.185 %

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.

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%.

January 2024 February 2029 $ 450.0 99.23 % 4.923 %

January 2024 February 2034 $ 800.0 98.91 % 5.265 %

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

Note Repayment

During the three months ended March 31, 2024, we repaid the following notes, plus accrued and unpaid interest upon maturity (in millions):

Note Repayment Date of Issuance Maturity Date Principal amount

February 2014 February 2024 $ 500.0

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 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.

Term Loan Redemption

During the three months ended March 31, 2024, we repaid our $250.0 million senior unsecured term loan in full upon maturity.

Mortgages Repaid

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.

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

These calculations, which are not based on accounting principles generally accepted in the United States of America ("U.S.

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

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

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

The actual amounts as of March 31, 2024, are:

Note Covenants

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

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

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

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

Net income available to common stockholders

(i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on April 1, 2023 and subject to certain additional adjustments.

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of April 1, 2023, nor does it purport to reflect our debt service coverage ratio for any future period.

The following is our calculation of debt service and fixed charge coverage at March 31, 2024 (in thousands, for trailing twelve months):

Net income attributable to the Company

interest expense, excluding the amortization of deferred financing costs

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Total pro forma debt service charge

Debt service and fixed charge coverage ratio

Debt service coverage ratio

Fixed Charge Coverage Ratio

The fixed charge coverage ratio is calculated in exactly the same manner as the debt service coverage ratio, except that preferred stock dividends are also added to the denominator.

Similar to the debt service coverage ratio, we consider the fixed charge coverage ratio to be an appropriate supplemental measure of a company’s ability to make its interest and preferred stock dividend payments.

Our calculations of both debt service and fixed charge coverage ratios may be different from the calculations used by other companies and, therefore, comparability may be limited.

The presentation of debt service and fixed charge coverage ratios should not be considered alternatives to any U.S.

GAAP operating performance measures.

Below is our calculation of fixed charges at March 31, 2024 (in thousands, for the trailing twelve months):

Income available for debt service, as defined

Pro forma debt service charge plus preferred stock dividends

Fixed charge coverage ratio

Credit Agency Ratings

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

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

As of March 31, 2024, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

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

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

In addition, we were assigned the following ratings on our commercial paper at March 31, 2024:

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

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

borrowings would have been at the SOFR, plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.

Based on our credit agency ratings as of March 31, 2024, interest rates under our credit facility for U.S.

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

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

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Material Cash Requirements

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

The following table summarizes the maturity of each of our obligations as of March 31, 2024 (dollars in millions):

Credit Facility and Commercial Paper (1)

Senior Unsecured Notes Term

Payable Interest (3)

Unsecured Term

Mortgages Payable Senior Unsecured Notes and Bonds Interest (3)

Leases Paid by the Company (4)

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

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

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

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

At March 31, 2024, there were $806.5 million of outstanding borrowings under our revolving credit facility.

Commercial paper programs outstanding were $216.0 million at March 31, 2024, which mature between April 2024 and May 2024.

(2) The maturity date for our 2023 term loans assumes a twelve-month extension available at the company's option is exercised.

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

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

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

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

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

(6) “Other” consists of $903.6 million of commitments under construction contracts, and $19.5 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

(6) “Other” consists of $536.1 million of commitments under construction contracts, and $101.4 million for tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

Investments in Unconsolidated Entities

As of March 31, 2024, our pro-rata share of secured debt of unconsolidated entities was approximately $659.2 million.

DIVIDEND POLICY

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

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

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

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

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

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

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

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

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

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

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

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

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

We distributed $0.7695 per share to stockholders during the three months ended March 31, 2024, representing 74.8% of our diluted Adjusted Funds from Operations Available to Common Stockholders ("AFFO") per share of $1.03.

The preferred stockholders receive cumulative distributions at a rate of 6.000% per annum on the $25.00 per share liquidation preference (equivalent to $1.50 per annum per share).

Dividends on our preferred stock are current.

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

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

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

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

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

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

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

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

None of the distributions to our common stockholders, made or deemed to have been made in 2022, were classified as a return of capital for federal income tax purposes.

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

RESULTS OF OPERATIONS

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

The following is a comparison of our results of operations for the three months ended March 31, 2024 and 2023.

Total Revenue

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 Change 2023 2022 Change

Three months ended March 31,

2024 2023 Change

Rental (excluding reimbursable)

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Rental Revenue (excluding reimbursable)

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

Number of Properties Three months ended

September 30, Nine months ended

September 30,

2023 2022 Change 2023 2022 Change

The table below summarizes our rental revenue (excluding reimbursable) for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Number of Properties Three months ended March 31,

2024 2023 Change

Properties acquired during 2024 & 2023

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Totals $ 1,135,454 $ 865,709 $ 269,745

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

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

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

(1) The same store rental revenue percentage increase for the three months ended March 31, 2024 as compared to the same period in 2023 is 0.8%.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of March 31, 2024.

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

In addition, the same store pool excludes properties assumed on January 23, 2024 as a result of our merger with Spirit.

(3) Relates to the aggregate of (i) rental revenue from 318 properties that were available for lease during part of 2024 or 2023, and (ii) rental revenue for 42 properties under development or completed developments that do not meet our same store pool definition for the periods presented.

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

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

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

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

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

Percentage rent represents less than 1.0% of rental revenue.

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

Rent based on a percentage of our client's gross sales, or percentage rent, was $5.3 million and $4.1 million for the three months ended March 31, 2024 and 2023, respectively, which represents less than 1% of rental revenue.

At March 31, 2024, our portfolio of 15,485 properties was 98.6% leased with 217 properties available for lease or sale, as compared to 98.6% leased with 193 properties available for lease at December 31, 2023, and 99.0% leased with 131 properties available for lease at March 31, 2023.

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

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

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

The increase in contractually obligated reimbursements by our clients for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to higher recoverable real estate taxes and higher recoverable common area maintenance expenses from overall portfolio growth.

Other Revenue

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

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

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

The increase in other revenue for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to higher interest income on financing receivables of $12.6 million driven by an increase in recent sale-leaseback transactions with above-market lease terms, in addition to an increase of $20.4 million from interest income earned on loans and preferred equity investments.

Total Expenses

The following summarizes our total expenses (in thousands):

Three months ended

September 30, Nine months ended

September 30,

2023 2022 Change 2023 2022 Change

Three months ended March 31,

2024 2023 Change

Depreciation and amortization $ 581,064 $ 451,477 $ 129,587

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

3.6 % 4.3 % 3.8 % 4.3 %

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

1.0 % 1.1 % 0.9 % 1.2 %

(1) Excludes rental revenue (reimbursable).

Depreciation and Amortization

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

The increase in depreciation and amortization for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to overall portfolio growth from acquisitions.

Interest Expense

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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

Three months ended March 31,

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

$ 243,102 $ 167,966

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Amortization of debt origination and deferred financing costs 5,819 6,071

(Gain) loss on interest rate swaps (1,790) 734 (5,390) 2,180

Amortization of net mortgage premiums (3,201) (3,327) (9,597) (10,418)

Amortization of net note premiums (14,989) (15,762) (45,647) (47,185)

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

Amortization of net mortgage premiums and discounts (122) (3,200)

Amortization of net note premiums and discounts (4,150) (15,532)

Capital lease obligation 431 403

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Interest expense $ 240,614 $ 154,132

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

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

Average outstanding balances $ 24,663,786 $ 18,658,173

Weighted average interest rates 4.03 % 3.59 %

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

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

The increase in interest expense for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to higher average debt and weighted average interest.

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

Property Expenses (excluding reimbursable)

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

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

The increase in property expenses (excluding reimbursable) for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily impacted by higher property taxes, repairs and maintenance, and property insurance.

Property Expenses (reimbursable)

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

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

The increase in property expenses (reimbursable) for the three months ended March 31, 2024 is proportional to overall portfolio growth.

General and Administrative Expenses

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

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

The increase in general and administrative expenses for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to higher payroll-related compensation costs associated with the growth of the company.

Provisions for Impairment

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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

The increase in impairment for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to two office properties which were acquired and retained in our merger with VEREIT, Inc.

("VEREIT") in 2021, summarized in the following table (dollars in millions):

Three months ended March 31,

Carrying value prior to impairment $ 191.1 $ 35.6

total provisions for impairment (1)

(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.

Merger and Integration-Related Costs

Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, and incremental and non-recurring costs necessary to convert data and systems, retain employees, and otherwise enable us to operate the acquired business or assets efficiently.

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

in November 2021.

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.

For the three months ended March 31, 2023, we incurred $1.3 million of merger and integration-related transaction costs in conjunction with our VEREIT merger in November 2021.

Gain on Sales of Real Estate

The following summarizes our property dispositions (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 sold 46 26

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Gain on sales of real estate $ 16.6 $ 4.3

Foreign Currency and Derivative (Loss) Gain, Net

Foreign Currency and Derivative Gain, Net

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

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

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

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

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

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

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

Equity in Income and Impairment of Investment in Unconsolidated Entities

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

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

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

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

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

Derivative gain and loss are primarily related to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated Other Comprehensive Income ("AOCI").

Foreign currency and derivative gain, net was $4.0 million and $10.3 million, for the three months ended March 31, 2024 and 2023, respectively, primarily due to foreign currency fluctuations related to the remeasurement of intercompany debt.

Equity in (Losses) Earnings of Unconsolidated Entities

Equity in (losses) earnings for the three months ended March 31, 2024 primarily relates to investments made in two unconsolidated joint ventures during the fourth quarter of 2023.

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

Other Income, Net

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

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

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

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

partially offset by lower UK tax rates.

The increase of $2.7 million for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily due to an increase in miscellaneous revenue.

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

The increase in income taxes for the three months ended March 31, 2024 as compared with the same period in 2023 is primarily attributable to higher taxable income in the U.K.

NON-GAAP FINANCIAL MEASURES

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

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

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

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

GAAP measure) to Adjusted EBITDA re and Annualized Pro Forma EBITDA re calculations for the period indicated below (dollars in thousands):

Three months ended

September 30,

GAAP measure) to Adjusted EBITDA re and Annualized Pro Forma EBITDA re calculations for the periods indicated below (dollars in thousands):

Three months ended March 31,

Net income $ 133,899 $ 226,122

240,614 154,132

Gain on extinguishment of debt — (240)

15,502 11,950

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Provisions for impairment

89,489 13,178

Merger and integration-related costs 94,104 1,307

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

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

Gain on settlement of foreign currency forwards — 2,784

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

Proportionate share of adjustments from unconsolidated entities 15,236 —

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Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 25,598,604 $ 18,748,217

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

Cash and cash equivalents (680,159) (164,576)

$ 25,577,635 $ 18,583,641

Preferred Stock 167,394 —

Net Debt and Preferred Stock $ 25,745,029 $ 18,583,641

Net Debt/Annualized Adjusted EBITDA re (3)

Net Debt/Annualized Pro Forma Adjusted EBITDA re

Net Debt and Preferred/ Annualized Adjusted EBITDA re

Net Debt and Preferred/ Annualized Pro Forma Adjusted EBITDA re

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

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

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

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

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

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

Three months ended

September 30,

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

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

Three months ended March 31,

Annualized pro forma adjustments from properties acquired or stabilized $ 83,152 $ 85,835

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

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

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

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

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 % Change 2023 2022 % Change

Three months ended March 31,

2024 2023 % Change

FFO available to common stockholders

$ 785.7 $ 684.3 14.8 %

FFO per share (1)

FFO per common share (1)

$ 0.94 $ 1.03 (8.7) %

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$ 879.8 $ 685.6 28.3 %

Normalized FFO per share (1)

Normalized FFO per common share (1)

$ 1.05 $ 1.04 1.0 %

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

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

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Depreciation of furniture, fixtures and equipment (623) (542)

Provisions for impairment 16,808 1,650 59,801 16,379

Provisions for impairment of real estate 88,197 13,178

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

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Diluted Normalized FFO $ 881,127 $ 687,018

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

FFO per common share:

Basic $ 0.94 $ 1.04

Diluted $ 0.94 $ 1.03

Normalized FFO per common share, basic and diluted $ 1.05 $ 1.04

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

Three months ended

September 30, Nine months ended

September 30,

2023 2022 % Change 2023 2022 % Change

Three months ended March 31,

2024 2023 % Change

AFFO available to common stockholders

$ 862.9 $ 650.7 32.6 %

AFFO per share (1)

AFFO per common share (1)

$ 1.03 $ 0.98 5.1 %

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Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

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

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Normalized FFO available to common stockholders 879,787 685,598

Gain on extinguishment of debt — (240) — (367)

Amortization of share-based compensation 9,252 6,300

Amortization of net debt premiums and deferred financing costs (2)

Amortization of net debt discounts (premiums) and deferred financing costs (2)

4,201 (13,688)

Non-cash (gain) loss on interest rate swaps (1,790) 735 (5,390) 2,181

Non-cash gain on interest rate swaps (1,800) (1,801)

Non-cash change in allowance for credit losses 1,292 —

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

1,797 — 5,392 —

Leasing costs and commissions (927) (444)

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

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

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

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

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

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

(4) Includes non-cash foreign currency losses (gains) from remeasurement to USD, mark-to-market adjustments on investments and derivatives that are non-cash in nature, straight-line payments from cross-currency swaps, obligations related to financing lease liabilities, and adjustments allocable to noncontrolling interests.

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

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PROPERTY PORTFOLIO INFORMATION

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

At March 31, 2024, out of the 15,485 properties that we owned or held interests in, 15,268 properties were primarily leased under net lease agreements.

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

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(1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients' gross sales above a specified level.

We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, but excluding percentage rent and reimbursements from clients, as of the balance sheet date, multiplied by 12, excluding percentage rent.

We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, as of the balance sheet date, multiplied by 12, excluding percentage rent, interest income on loans and preferred equity investments, and including our pro rata share of such revenues from properties owned by unconsolidated joint ventures.

We believe total portfolio annualized contractual rent is a useful supplemental operating measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter.

Total portfolio annualized contractual rent has not been reduced to reflect reserves recorded as adjustments to U.S.

GAAP rental revenue in the periods presented and excludes unconsolidated entities.

GAAP rental revenue in the periods presented.

Top 10 Industry Concentrations

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Dollar Stores 6.5 7.1 7.4 7.5 7.6

Drug Stores 5.9 5.7 6.6 8.2 8.8

Home Improvement 6.1 5.9 5.6 5.1 4.3

Drug Stores 5.0 5.5 5.7 6.6 8.2

Restaurants-Quick Service 4.9 5.2 6.0 6.6 5.3

Restaurants-Casual 4.6 5.1 5.9 2.8 3.2

Automotive Service 4.6 4.3 4.0 3.2 2.7

Health and Fitness 4.4 3.9 4.4 4.7 6.7

Restaurants-Casual Dining 4.3 4.4 5.1 5.9 2.8

General Merchandise 3.4 3.7 3.7 3.7 3.4

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

Europe consists of properties in the U.K., starting in May 2019, in Spain, starting in September 2021, in Italy, starting in October 2022, and in Ireland, starting in June 2023.

Property Type Composition

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

The following table sets forth certain property type information regarding our property portfolio as of March 31, 2024 (dollars in thousands):

Property Type

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Industrial 558 114,205,300 704,234 14.7

Gaming 1 3,096,700 100,000 2.6

2 5,053,400 159,695 3.3

66 4,692,500 110,994 2.4

Totals 15,485 334,223,900 $ 4,787,407 100.0 %

(1) Includes leasable building square footage.

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

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

(1) Excludes 2,962 acres of leased land categorized as agriculture at March 31, 2024.

(2) Includes our pro rata share of leasable square feet of properties owned by unconsolidated joint ventures.

(3) "Other" primarily includes 27 properties classified as agriculture with $38.1 million in annualized contractual rent, 14 properties classified as office with $43.3 million in annualized contractual rent, and 21 properties classified as country club with $22.1 million in annualized contractual rent.

Client Diversification

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

Client Number of

Leases Percentage of Total Portfolio Annualized Contractual Rent (1)

Walgreens 369 3.9 %

Dollar General 1,760 3.4 %

Walgreens 403 3.4

Dollar Tree / Family Dollar 1,380 3.1

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Wynn Resorts 1 2.1

Lifetime Fitness 36 1.9

BJ's Wholesale Club 44 1.6

(B&Q) Kingfisher 52 1.6

Sainsbury's 36 1.5

LA Fitness 70 1.7

BJ's Wholesale Clubs 33 1.6

Lifetime Fitness 23 1.5

CVS Pharmacy 216 1.3

Wal-Mart / Sam's Club 67 1.4

LA Fitness 68 1.3

MGM (Bellagio) 1 1.2

Walmart / Sam's Club 72 1.2

Tractor Supply 207 1.2

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Red Lobster 216 1.1

Regal Cinemas (Cineworld) 35 1.1

Total 5,724 36.3 %

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

Excludes non-rental contractual income on loans and preferred equity investments.

Lease Expirations

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

Total Portfolio (1)

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Geographic Diversification

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

The following table sets forth certain geographic information regarding our property portfolio as of March 31, 2024 (dollars in thousands):

Percent Leased

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Puerto Rico 6 100 59,400 *

Virgin Islands 1 100 38,000 *

France 28 100 1,406,800 0.3

Germany 4 100 189,900 *

Ireland 4 100 311,200 0.1

Italy 31 100 2,329,400 0.6

Portugal 4 100 142,300 *

Spain 90 100 6,772,600 1.3

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

For information on the impact of new accounting standards on our business, see note 1, Basis of Presentation , to our Consolidated Financial Statements.

For information on the impact of new accounting standards on our business, see note 1, Summary of Significant Accounting Policies , to our Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis