REALTY INCOME CORP 10-Q

Item 1: Financial Statements REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) March 31, 2024 December 31, 2023 ASSETS Real estate held for investment, at cost: Land $ 16,787,731 $ 14,929,310 Buildings and improvements 39,674,812 34,657,094 Total real estate held for investment, at cost 56,462,543 49,586,404 Less accumulated depreciation and amortization ( 6,392,472 ) ( 6,072,118 ) Real estate held for investment, net 50,070,071 43,514,286 Real estate and lease intangibles held for sale, net 78,254 31,466 Cash and cash equivalents 680,159 232,923 Accounts receivable, net 789,244 710,536 Lease intangible assets, net 7,037,328 5,017,907 Goodwill 4,991,342 3,731,478 Investment in unconsolidated entities 1,203,263 1,172,118 Other assets, net 3,478,588 3,368,643 Total assets $ 68,328,249 $ 57,779,357 LIABILITIES AND EQUITY Distributions payable $ 225,757 $ 195,222 Accounts payable and accrued expenses 802,652 738,526 Lease intangible liabilities, net 1,740,200 1,406,853 Other liabilities 900,106 811,650 Line of credit payable and commercial paper 1,022,516 764,390 Term loan, net 2,370,455 1,331,841 Mortgages payable, net 200,075 821,587 Notes payable, net 21,748,004 18,602,319 Total liabilities $ 29,009,765 $ 24,672,388 Commitments and contingencies (Note 20) 6.000 % Series A cumulative redeemable preferred stock and paid in capital, par value $ 0.01 per share, 69,900 shares authorized, 6,900 shares and no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, liquidation preference $ 25.00 per share $ 167,394 $ — Stockholders’ equity: Common stock and paid in capital, par value $ 0.01 per share, 1,300,000 shares authorized, 870,756 and 752,460 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively $ 46,220,761 $ 39,629,709 Distributions in excess of net income ( 7,299,514 ) ( 6,762,136 ) Accumulated other comprehensive income 64,780 73,894 Total stockholders’ equity $ 38,986,027 $ 32,941,467 Noncontrolling interests 165,063 165,502 Total equity $ 39,151,090 $ 33,106,969 Total liabilities and equity $ 68,328,249 $ 57,779,357 The accompanying notes to consolidated financial statements are an integral part of these statements. -2- Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share amounts) (unaudited) Three months ended March 31, 2024 2023 REVENUE Rental (including reimbursable) $ 1,208,169 $ 925,289 Other 52,316 19,110 Total revenue 1,260,485 944,399 EXPENSES Depreciation and amortization 581,064 451,477 Interest 240,614 154,132 Property (including reimbursable) 89,361 69,397 General and administrative 40,842 34,167 Provisions for impairment 89,489 13,178 Merger and integration-related costs 94,104 1,307 Total expenses 1,135,474 723,658 Gain on sales of real estate 16,574 4,279 Foreign currency and derivative gain, net 4,046 10,322 Equity in (losses) earnings of unconsolidated entities ( 1,676 ) — Other income, net 5,446 2,730 Income before income taxes 149,401 238,072 Income taxes ( 15,502 ) ( 11,950 ) Net income 133,899 226,122 Net income attributable to noncontrolling interests ( 1,615 ) ( 1,106 ) Net income attributable to the Company 132,284 225,016 Preferred stock dividends ( 2,588 ) — Net income available to common stockholders $ 129,696 $ 225,016 Amounts available to common stockholders per common share: Net income, basic and diluted $ 0.16 $ 0.34 Weighted average common shares outstanding: Basic 834,940 660,462 Diluted 835,242 661,239 Net income available to common stockholders $ 129,696 $ 225,016 Total other comprehensive (loss) income Foreign currency translation adjustment ( 18,036 ) 28,750 Unrealized gain (loss) on derivatives, net 8,922 ( 2,162 ) Total other comprehensive (loss) income $ ( 9,114 ) $ 26,588 Comprehensive income available to common stockholders $ 120,582 $ 251,604 The accompanying notes to consolidated financial statements are an integral part of these statements. -3- Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Three months ended March 31, 2024, and 2023 Shares of preferred stock Preferred stock and paid in capital Shares of common stock Common stock and paid in capital Distributions in excess of net income Accumulated other comprehensive income Total stockholders’ equity Non-controlling interests Total equity Balance, December 31, 2023 — $ — 752,460 $ 39,629,709 $ ( 6,762,136 ) $ 73,894 $ 32,941,467 $ 165,502 $ 33,106,969 Net income — — — — 132,284 — 132,284 1,615 133,899 Other comprehensive loss — — — — — ( 9,114 ) ( 9,114 ) — ( 9,114 ) Distributions paid and payable — — — — ( 669,662 ) — ( 669,662 ) ( 2,268 ) ( 671,930 ) Share issuances, net of costs — — 9,663 546,656 — — 546,656 — 546,656 Shares issued with merger 6,900 167,394 108,308 6,043,641 — — 6,043,641 — 6,043,641 Contributions by noncontrolling interests — — — — — — — 214 214 Share-based compensation, net — — 325 755 — — 755 — 755 Balance, March 31, 2024 6,900 $ 167,394 870,756 $ 46,220,761 $ ( 7,299,514 ) $ 64,780 $ 38,986,027 $ 165,063 $ 39,151,090 Balance, December 31, 2022 — $ — 660,300 $ 34,159,509 $ ( 5,493,193 ) $ 46,833 $ 28,713,149 $ 130,140 $ 28,843,289 Net income — — — — 225,016 — 225,016 1,106 226,122 Other comprehensive income — — — — — 26,588 26,588 — 26,588 Distributions paid and payable — — — — ( 504,746 ) — ( 504,746 ) ( 3,014 ) ( 507,760 ) Share issuances, net of costs — — 12,706 798,901 — — 798,901 — 798,901 Share-based compensation, net — — 201 198 — — 198 — 198 Balance, March 31, 2023 — $ — 673,207 $ 34,958,608 $ ( 5,772,923 ) $ 73,421 $ 29,259,106 $ 128,232 $ 29,387,338 The accompanying notes to consolidated financial statements are an integral part of these statements. -4- Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three months ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 133,899 $ 226,122 Adjustments to net income: Depreciation and amortization 581,064 451,477 Amortization of share-based compensation 34,003 6,300 Non-cash revenue adjustments ( 30,586 ) ( 19,127 ) Amortization of net premiums on mortgages payable ( 122 ) ( 3,200 ) Amortization of net premiums on notes payable ( 4,150 ) ( 15,532 ) Amortization of deferred financing costs 5,819 6,474 Gain on interest rate swaps ( 1,800 ) ( 1,801 ) Foreign currency and unrealized derivative gain, net ( 12,570 ) ( 8,942 ) Gain on sales of real estate ( 16,574 ) ( 4,279 ) Equity in losses of unconsolidated entities 1,676 — Distributions on common equity from unconsolidated entities 5,249 — Provisions for impairment 89,489 13,178 Change in assets and liabilities Accounts receivable and other assets ( 32,682 ) 42,081 Accounts payable, accrued expenses and other liabilities 25,958 38,483 Net cash provided by operating activities 778,673 731,234 CASH FLOWS FROM INVESTING ACTIVITIES Investment in real estate ( 535,903 ) ( 1,675,136 ) Improvements to real estate, including leasing costs ( 9,628 ) ( 13,860 ) Investment in unconsolidated entities ( 38,070 ) — Proceeds from sales of real estate 95,624 28,594 Proceeds from note receivable 5,468 — Insurance proceeds received 16 6,282 Non-refundable escrow deposits — ( 23,599 ) Net cash acquired in merger 93,683 — Net cash used in investing activities ( 388,810 ) ( 1,677,719 ) CASH FLOWS FROM FINANCING ACTIVITIES Cash distributions to common stockholders ( 636,499 ) ( 497,245 ) Cash distributions to preferred stockholders ( 2,588 ) — Borrowings on line of credit and commercial paper programs 8,018,932 4,249,746 Payments on line of credit and commercial paper programs ( 7,748,935 ) ( 5,690,060 ) Proceeds from term loan — 1,029,383 Principal payment on term loan ( 250,000 ) — Proceeds from notes payable issued 1,250,000 1,090,968 Principal payment on notes payable ( 499,999 ) — Principal payments on mortgages payable ( 621,175 ) ( 1,233 ) Proceeds from common stock offerings, net 543,538 796,190 Proceeds from dividend reinvestment and stock purchase plan 3,117 2,711 Distributions to noncontrolling interests ( 2,268 ) ( 1,479 ) Net payments on derivative settlements — ( 6,452 ) Debt issuance costs ( 28,603 ) ( 16,603 ) Other items, including shares withheld upon vesting ( 8,493 ) ( 6,102 ) Net cash provided by financing activities 17,027 949,824 Effect of exchange rate changes on cash and cash equivalents ( 2,279 ) 13,545 Net increase in cash, cash equivalents and restricted cash 404,611 16,884 Cash, cash equivalents and restricted cash, beginning of period 292,175 226,881 Cash, cash equivalents and restricted cash, end of period $ 696,786 $ 243,765 For supplemental disclosures, see note 19 , S upplemental Disclosures of Cash Flow Information . The accompanying notes to consolidated financial statements are an integral part of these statements. -5- Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (unaudited) 1. Summary of Significant Accounting Policies Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”), a Maryland corporation, is an S&P 500 company and real estate partner to the world's leading companies. The Company was founded in 1969 and our shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol “O”. As of March 31, 2024, we owned or held interests in a diversified portfolio of 15,485 properties located in all 50 states of the United States ("U.S."), the United Kingdom ("U.K."), and six other countries in Europe, with approximately 334.2 million square feet of leasable space. In January 2024, we completed our merger with Spirit Realty Capital, Inc. (“Spirit”). For more details, please see note 2 , Merger with Spirit Realty Capital, Inc. Basis of Presentation . These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Intercompany accounts and transactions are eliminated in consolidation. The U.S. Dollar ("USD") is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD. For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income' ("AOCI"), on our consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period. We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and derivative gain, net' in our consolidated statements of income and comprehensive income. In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented have been included. Operating results for the three months ended March 31, 2024 are not necessarily an indication of the results that may be expected for the entire year. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2023, which are included in our 2023 Annual Report on Form 10-K , as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report. Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification ("ASC") 810, Consolidation. Voting interest entities ("VOEs") are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests. Variable interest entities ("VIEs") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially -6- Table of Contents be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. At March 31, 2024, we are considered the primary beneficiary of Realty Income, L.P. and certain investments, including investments in joint ventures. Below is a summary of selected financial data of such consolidated VIEs, included on our consolidated balance sheets at March 31, 2024 and December 31, 2023 (in thousands): March 31, 2024 December 31, 2023 Net real estate $ 2,847,404 $ 2,866,272 Total assets $ 3,582,159 $ 3,588,720 Total liabilities $ 140,588 $ 134,366 The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that were created or assumed as part of a business combination or asset acquisition were recognized at fair value as of the date of the transaction (see note 11, Noncontrolling Interests ). Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Reporting. We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and assesses our performance. Income Taxes. We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S. income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries ("TRS"). A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of TRS entities enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. For our international territories, we are liable for taxes in the U.K. and Spain. Accordingly, provisions have been made for U.K. and Spain income taxes. Therefore, the income taxes recorded on our consolidated statements of income and comprehensive income represent amounts accrued or paid by Realty Income and its subsidiaries for U.S. income taxes on our TRS entities, city and state income and franchise taxes, and income taxes for the U.K. and Spain. Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes primarily due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things. We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements. Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and d eterminable rent increases are recognized on a straight-line basis over the lease term. Any rental revenue contingent upon a client’s sales, or percentage rent, is recognized only after such client exceeds its sales breakpoint. Rental increases based upon changes in the consumer price indices are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements. Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a -7- Table of Contents component of rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis. Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms. We assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under ASC 842, Leases . We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all of the lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized. Recent Accounting Standards Not Yet Adopted. In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes , to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the impact on our financial statement disclosures. In November 2023, FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting , establishing improvements to reportable segments disclosures to enhance segment reporting under Topic 280. This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments. This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic 280, not just entity level disclosures. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and the amendments should be applied retrospectively to all periods presented in the financial statements. We are currently evaluating the impact on our financial statement disclosures. 2. Merger with Spirit Realty Capital, Inc. On October 29, 2023, we entered into an Agreement and Plan of Merger (as amended, or the “Merger Agreement”) with Saints MD Subsidiary, Inc., (“Merger Sub”) a Maryland corporation and direct wholly owned subsidiary of Realty Income and Spirit, a Maryland corporation. On January 23, 2024, we completed our merger with Spirit. Pursuant to the terms and subject to the conditions of the Merger Agreement, Spirit merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”). At the effective time of the Merger (the “Effective Time”), (i) each outstanding share of Spirit common stock, par value $ 0.05 per share, automatically converted into 0.762 (the “Exchange Ratio”) of a newly issued share of our common stock, subject to adjustments as set forth in the Merger Agreement, and cash in lieu of fractional shares, and (ii) each outstanding share of Spirit’s 6.000 % Series A Cumulative Redeemable Preferred Stock, par value $ 0.01 per share, converted into the right to receive one share of newly issued Realty Income 6.000 % Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock. Immediately prior to the Effective Time, each award of outstanding restricted Spirit common stock and Spirit performance share award was cancelled and converted into Realty Income common stock, using the Exchange Ratio. For more details, see note 16, Redeemable Preferred Stock. The primary reason for the merger was to expand our size, scale and diversification, in order to further position us as the real estate partner of choice for large net lease transactions. -8- Table of Contents Our merger with Spirit has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations , with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data): Shares of Spirit common stock exchanged (1) 142,136,567 Exchange Ratio 0.762 Shares of Realty Income common stock issued 108,308,064 Opening price of Realty Income common stock on January 23, 2024 $ 55.80 Fair value of Realty Income common stock issued to the former holders of Spirit common stock $ 6,043,590 Shares of Realty Income Series A preferred stock issued in exchange for Spirit Series A preferred stock 6,900,000 Opening price of Realty Income Series A preferred stock on January 23, 2024 $ 24.26 Fair value of Realty Income Series A preferred stock issued to the former holders of Spirit Series A preferred stock $ 167,394 Cash paid for fractional shares $ 51 Less: Fair value of Spirit restricted stock and performance awards attributable to post-combination costs (2) $ ( 24,751 ) Consideration transferred $ 6,186,284 (1) Includes 142,136,567 shares of Spirit common stock outstanding as of January 23, 2024, which were converted into Realty Income common stock at the Effective Time at an Exchange Ratio of 0.762 per share of Spirit common stock. The portion of the converted unvested Spirit Restricted Stock Awards related to post-combination expense is removed in footnote (2) below. (2) Represents the fair value of fully vested Spirit restricted stock and performance share awards that were accelerated and converted into Realty Income common stock at the Effective Time, reflecting the value attributable to post-combination services. Spirit restricted stock and performance share awards are included in Spirit's outstanding common stock as of the merger date. The fair value attributable to pre-combination services was $ 41.7 million and is included in the consideration transferred above. A. Preliminary Purchase Price Allocation The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands): ASSETS Land $ 1,853,895 Buildings and improvements 4,859,162 Total real estate held for investment 6,713,057 Real estate and lease intangibles held for sale 35,650 Cash and cash equivalents 93,683 Accounts receivable 12,959 Lease intangible assets (1) 2,214,615 Goodwill 1,259,864 Other assets 174,672 Total assets acquired $ 10,504,500 LIABILITIES Accounts payable and accrued expenses $ 56,407 Lease intangible liabilities (2) 378,369 Other liabilities 101,954 Term loan 1,300,000 Notes payable 2,481,486 Total liabilities assumed $ 4,318,216 Net assets acquired, at fair value $ 6,186,284 Total purchase price $ 6,186,284 (1) The weighted average amortization period for acquired lease intangible assets is 10.8 years. (2) The weighted average amortization period for acquired lease intangible liabilities is 8.3 years. The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Measurement period adjustments will be recorded in the -9- Table of Contents period in which they are determined, as if they had been completed at the acquisition date. As of March 31, 2024, we had not finalized the determination of fair values allocated to certain assets and liabilities. Accordingly, certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, loss contingencies, and goodwill are subject to change. The finalization of our purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed up to a year after the date of our merger with Spirit, which could be material. A preliminary estimate of approximately $ 1.26 billion has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill is attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and corporate overhead cost savings. None of the goodwill recognized is expected to be deductible for tax purposes. B. Merger and Integration-Related Costs In conjunction with our merger with Spirit, we incurred merger-related transaction costs of $ 94.1 million during the three months ended March 31, 2024, primarily consisting of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger. C. Unaudited Pro Forma Financial Information The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2024 and 2023, respectively, as if our merger with Spirit had occurred on January 1, 2023 (in millions, except per share data). The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. Three months ended March 31, 2024 2023 Total revenues $ 1,307.7 $ 1,133.6 Net income $ 234.4 $ 195.9 Basic and diluted earnings per share $ 0.27 $ 0.25 Our consolidated results of operations for the three months ended March 31, 2024 include $ 155.0 million of revenues and $ 6.9 million of net income associated with the results of operations of Spirit from the merger closing date of January 23, 2024 to March 31, 2024. -10- Table of Contents 3. Supplemental Detail for Certain Components of Consolidated Balance Sheets (in thousands): A. Accounts receivable, net, consist of the following at: March 31, 2024 December 31, 2023 Straight-line rent receivables, net $ 563,589 $ 516,692 Client receivables, net 225,655 193,844 $ 789,244 $ 710,536 B. Lease intangible assets, net, consist of the following at: March 31, 2024 December 31, 2023 In-place leases $ 7,319,435 $ 5,500,404 Above-market leases 2,215,208 1,811,400 Accumulated amortization of in-place leases ( 1,902,925 ) ( 1,746,377 ) Accumulated amortization of above-market leases ( 596,148 ) ( 549,319 ) Other items 1,758 1,799 $ 7,037,328 $ 5,017,907 C. Other assets, net, consist of the following at: March 31, 2024 December 31, 2023 Financing receivables, net $ 1,566,714 $ 1,570,943 Right of use asset - financing leases 705,006 706,837 Right of use asset - operating leases, net 649,936 594,712 Loan receivable, net 253,426 205,339 Value-added tax receivable 82,619 100,672 Prepaid expenses 62,806 33,252 Derivative assets and receivables – at fair value 52,492 21,170 Corporate assets, net 13,378 12,948 Interest receivable 11,046 6,139 Credit facility origination costs, net 11,030 12,264 Impounds related to mortgages payable 10,226 53,005 Restricted escrow deposits 6,401 6,247 Investment in sales type lease 6,076 6,056 Non-refundable escrow deposits — 200 Other items 47,432 38,859 $ 3,478,588 $ 3,368,643 D. Accounts payable and accrued expenses consist of the following at: March 31, 2024 December 31, 2023 Notes payable - interest payable $ 239,333 $ 218,811 Derivative liabilities and payables - at fair value 105,809 119,620 Value-added tax payable 91,844 64,885 Accrued costs on properties under development 86,276 65,967 Property taxes payable 82,442 78,809 Accrued property expenses 52,464 54,208 Accrued income taxes 51,516 61,070 Accrued merger-related costs 24,088 4,551 Mortgages, term loans, and credit line - interest payable 8,575 8,580 Other items 60,305 62,025 $ 802,652 $ 738,526 E. Lease intangible liabilities, net, consist of the following at: March 31, 2024 December 31, 2023 Below-market leases $ 2,099,389 $ 1,728,027 Accumulated amortization of below-market leases ( 359,189 ) ( 321,174 ) $ 1,740,200 $ 1,406,853 -11- Table of Contents F. Other liabilities consist of the following at: March 31, 2024 December 31, 2023 Lease liability - operating leases, net $ 480,303 $ 425,213 Rent received in advance and other deferred revenue 328,572 312,195 Lease liability - financing leases 55,590 44,345 Security deposits 34,031 28,250 Other acquisition liabilities 1,610 1,647 $ 900,106 $ 811,650 4. Investments in Real Estate A. Acquisitions of Real Estate Below is a summary of our acquisitions for the three months ended March 31, 2024: Number of Properties Leasable Square Feet (in thousands, unaudited) Investment ($ in millions) Weighted Average Lease Term (Years) Initial Weighted Average Cash Lease Yield (1) Acquisitions - U.S. 5 194 $ 16.0 8.9 7.1 % Acquisitions - Europe 8 1,064 302.6 6.2 8.2 % Total acquisitions 13 1,258 $ 318.6 6.3 8.2 % Properties under development (2) 140 5,410 241.3 15.9 7.3 % Total (3) 153 6,668 $ 559.9 10.2 7.8 % (1) The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $ 0.5 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 2024. In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. (2) Includes £ 8.7 million of investments in U.K. development properties and € 8.4 million of investments in Spain development properties, converted at the applicable exchange rates on the funding dates. (3) Our clients occupying the new properties are 89.7 % retail and 10.3 % industrial based on net operating income. Approximately 41.0 % of the net operating income generated from acquisitions during the three months ended March 31, 2024 is from investment grade rated clients, their subsidiaries, or affiliated companies. The aggregate purchase price of the assets acquired during the three months ended March 31, 2024 has been allocated as follows (in millions): Acquisitions - USD Acquisitions - Sterling Acquisitions - Euro Land $ 18.4 £ 59.0 € 2.0 Buildings and improvements 88.9 124.3 5.0 Lease intangible assets (1) 21.0 50.4 1.1 Other assets (2) 3.0 — — Lease intangible liabilities (3) ( 3.2 ) ( 0.9 ) ( 0.2 ) Other liabilities — — — $ 128.1 £ 232.8 € 7.9 (1) The weighted average amortization period for acquired lease intangible assets is 9.4 years. (2) USD-denominated other assets consist entirely of financing receivables with above-market terms. (3) The weighted average amortization period for acquired lease intangible liabilities is 12.0 years. The properties acquired during the three months ended March 31, 2024 generated total revenue and net income of $ 2.6 million and $ 0.9 million, respectively. -12- Table of Contents B. Investments in Existing Properties During the three months ended March 31, 2024, we capitalized costs of $ 7.4 million on existing properties in our portfolio, consisting of $ 6.4 million for non-recurring building improvements, $ 0.9 million for re-leasing costs, and less than $ 0.1 million for recurring capital expenditures. In comparison, during the three months ended March 31, 2023, we capitalized costs of $ 13.8 million on existing properties in our portfolio, consisting of $ 13.3 million for non-recurring building improvements, $ 0.4 million for re-leasing costs, and $ 0.1 million for recurring capital expenditures. C. Properties with Existing Leases The value of the in-place and above-market leases is recorded to 'Lease intangible assets, net' on our consolidated balance sheets, and the value of the below-market leases is recorded to 'Lease intangible liabilities, net' on our consolidated balance sheets. The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2024, and 2023 were $ 211.5 million and $ 157.4 million, respectively. The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue in our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2024, and 2023 were $ 9.1 million and $ 14.6 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate. The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at March 31, 2024 (dollars in thousands): Net increase (decrease) to rental revenue Increase to amortization expense 2024 $ ( 28,512 ) $ 634,920 2025 ( 35,497 ) 760,879 2026 ( 38,003 ) 672,398 2027 ( 37,681 ) 576,646 2028 ( 30,633 ) 489,554 Thereafter 291,466 2,282,113 Totals $ 121,140 $ 5,416,510 D. Gain on Sales of Real Estate The following table summarizes our properties sold during the periods indicated below (dollars in millions): Three months ended March 31, 2024 2023 Number of properties 46 26 Net sales proceeds $ 95.6 $ 28.6 Gain on sales of real estate $ 16.6 $ 4.3 -13- Table of Contents 5. Investments in Unconsolidated Entities The following is a summary of our investments in unconsolidated entities as of March 31, 2024 and December 31, 2023 (dollars in thousands): Ownership % Number of Properties Carrying Amount (1) of Investment as of Investment As of March 31, 2024 March 31, 2024 December 31, 2023 Bellagio Las Vegas Joint Venture - Common Equity Interest 21.9 % 1 $ 287,972 $ 296,097 Bellagio Las Vegas Joint Venture - Preferred Equity Interest n/a n/a 650,000 650,000 Data Center Development Joint Venture 80.0 % 2 265,291 226,021 Total investment in unconsolidated entities $ 1,203,263 $ 1,172,118 (1) The total carrying amount of the investments was greater than the underlying equity in net assets (i.e., basis difference) by $ 2.2 million as of March 31, 2024. A. Bellagio Las Vegas Joint Venture Interests Our investment in the joint venture that owns a 95.0 % interest in the real estate of The Bellagio Las Vegas includes $ 301.4 million of common equity for an indirect interest of 21.9 % in the property and a $ 650.0 million preferred equity interest. During the three months ended March 31, 2024, we recognized interest income of $ 13.0 million for 8.1 % preferential cumulative distributions within 'Other revenue' in our consolidated statements of income and comprehensive income. The unconsolidated entity had total debt outstanding of $ 3.0 billion as of March 31, 2024, all of which was non-recourse to us with limited customary exceptions. B. Data Center Development Joint Venture We own an 80.0 % equity interest in a data center development joint venture; however, we are not the primary beneficiary because we do not have power to direct activities that significantly impact the joint venture's economic performance. Our maximum exposure to loss associated with this VIE is limited to our equity investment and our pro rata share of the remaining $ 70.1 million of estimated development costs for the first phase of the project. 6. Investments in Loans The following table presents information about our loans as of March 31, 2024 and December 31, 2023 (dollars in thousands): March 31, 2024 Amortized Cost Allowance (1) Carrying Amount (2) Senior Secured Notes Receivable (3) $ 182,121 $ ( 3,700 ) $ 178,421 Mortgage Loans 66,277 — 66,277 Unsecured Loan 9,763 ( 1,035 ) 8,728 Total $ 258,160 $ ( 4,735 ) $ 253,426 December 31, 2023 Amortized Cost Allowance (1) Carrying Amount (2) Senior Secured Note Receivable $ 174,337 $ ( 2,498 ) $ 171,839 Mortgage Loan 33,500 — 33,500 Total $ 207,837 $ ( 2,498 ) $ 205,339 (1) During the three months ended March 31, 2024, our allowance for credit losses increased by $ 2.2 million, almost entirely attributable to the loans we acquired in conjunction with our merger with Spirit. (2) The total carrying amount of the investment in loans excludes accrued interest of $ 8.7 million and $ 3.4 million as of March 31, 2024 and December 31, 2023, respectively, which is recorded to 'Other assets, net' on our consolidated balance sheets. (3) Includes a loan acquired in conjunction with our merger with Spirit with an estimated acquisition date fair value of $ 7.8 million. Since it was a purchased credit deteriorated loan, we recorded the initial expected credit loss of $ 1.0 million by adjusting the amortized cost basis. A. Senior Secured Notes Receivable We own a Sterling-denominated senior secured note with a principal amount of £ 142.0 million, equivalent to $ 179.5 million as of March 31, 2024. The interest only note bears interest at Sterling Overnight Indexed Average (“SONIA”) plus 6.75 % and matures in October 2029. We paid £ 136.7 million for the note and accounted for the -14- Table of Contents discount at amortized cost. The discount is being amortized over the term of the note. In conjunction with our merger with Spirit, we acquired a senior secured note receivable with a principal amount of $ 9.9 million. This interest only note bears interest at Secured Overnight Financing Rate ("SOFR") plus 4.00 % and matures in July 2028 . B. Mortgage Loans We have a $ 33.5 million mortgage loan which is collateralized by nine automotive service properties located across seven different states. The interest only loan bears interest at 8.25 % subject to annual increases and matures in October 2038. In conjunction with our merger with Spirit, we acquired a mortgage loan with a principal amount of $ 33.0 million and estimated its fair value to be $ 32.8 million at the acquisition date. This 10 % fixed-rate, interest only loan is collateralized by four single-tenant properties and matures in March 2025. In April 2024, this $ 33.0 million loan was repaid in full. C. Unsecured Loan In conjunction with our merger with Spirit, we acquired an 11.0 % fixed-rate, unsecured loan with a principal amount of $ 11.0 million. It was recorded at its acquisition-date fair value of $ 9.8 million and is included in 'Other assets' on our consolidated balance sheets. This interest only loan matures in December 2026 . 7. Revolving Credit Facility and Commercial Paper Programs A. Credit Facility We have a $ 4.25 billion unsecured revolving multi-currency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including USD. Our revolving credit facility also has a $ 1.0 billion expansion option, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings provide for USD borrowings at the Secured Overnight Financing Rate ("SOFR"), plus 0.725 % with a SOFR adjustment charge of 0.10 % and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.95 % over SOFR, British Pound Sterling at the SONIA, plus 0.725 % with a SONIA adjustment charge of 0.0326 % and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.8826 % over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725 %, and a revolving credit facility fee of 0.125 %, for all-in pricing of 0.85 % over one-month EURIBOR. As of March 31, 2024, we had a borrowing capacity of $ 3.44 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $ 0.8 billion, comprised entirely of Sterling borrowings. There was no outstanding balance at December 31, 2023. The weighted average interest rate on outstanding borrowings under our revolving credit facility was 6.2 % and 3.7 % during the three months ended March 31, 2024, and 2023, respectively. At March 31, 2024, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 5.9 %. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2024, we were in compliance with the covenants under our revolving credit facility. As of March 31, 2024, credit facility origination costs of $ 11.0 million are included in 'Other assets, net', as compared to $ 12.3 million at December 31, 2023, on our consolidated balance sheets. These costs are being amortized over the remaining term of our revolving credit facility. B. Commercial Paper Programs We have a USD-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $ 1.5 billion, as well as a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $ 1.5 billion (or foreign currency equivalent). Our Euro-denominated unsecured commercial paper program may be issued in USD or various foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper market. The commercial paper ranks pari passu in right of payment with all of our other unsecured senior indebtedness outstanding, exclusive of unexchanged VEREIT and Spirit bonds, from time to time, including borrowings under our revolving credit facility, our term loans and our outstanding senior unsecured notes (and is structurally subordinated to all our subsidiary debt). Proceeds from commercial paper borrowings are used for general corporate purposes. -15- Table of Contents As of March 31, 2024, the balance of borrowings outstanding under our commercial paper programs was $ 216.0 million, comprised entirely of Euro-denominated borrowings ("EUR borrowings"), as compared to $ 764.4 million outstanding commercial paper borrowings, including € 583.0 million of EUR borrowings, at December 31, 2023. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.5 % and 3.5 % for the three months ended March 31, 2024, and 2023, respectively. As of March 31, 2024, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.2 %. We use our $ 4.25 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper programs. The commercial paper borrowings generally carry a term of less than a year . We review our credit facility and commercial paper programs and may seek to extend, renew or replace our credit facility and commercial paper programs, to the extent we deem appropriate. 8. Term Loans 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. Deferred financing costs were $ 2.5 million at March 31, 2024 and are included net of the term loans principal balance, as compared to $ 0.1 million related to our 2023 term loans at December 31, 2023, on our consolidated balance sheets. These costs are being amortized over the remaining term of the term loans. As of March 31, 2024, we were in compliance with the covenants contained in the term loans. 9. Mortgages Payable During the three months ended March 31, 2024, we made $ 621.2 million in principal payments, including the full repayment of two mortgages for $ 620.0 million. No mortgages were assumed during the three months ended March 31, 2024. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan. Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender. At March 31, 2024, we were in compliance with these covenants. The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $ 0.4 million at March 31, 2024 and December 31, 2023, respectively. These costs are being amortized over the remaining term of each mortgage. -16- Table of Contents The following table summarizes our mortgages payable as of March 31, 2024 and December 31, 2023 (dollars in millions): As Of Number of Properties (1) Weighted Average Stated Interest Rate (2) Weighted Average Effective Interest Rate (3) Weighted Average Remaining Years Until Maturity Remaining Principal Balance Unamortized Premium (Discount) and Deferred Financing Costs Balance, net Mortgage Payable Balance March 31, 2024 49 4.3 % 4.6 % 1.3 $ 201.0 $ ( 0.9 ) $ 200.1 December 31, 2023 131 4.8 % 3.3 % 0.4 $ 822.4 $ ( 0.8 ) $ 821.6 (1) At March 31, 2024, there were 14 mortgages on 49 properties and at December 31, 2023, there were 16 mortgages on 131 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At March 31, 2024 and December 31, 2023, all mortgages were at fixed interest rates. (2) Stated interest rates ranged from 3.0 % to 6.9 % at March 31, 2024 and December 31, 2023, respectively. (3) Effective interest rates ranged from 0.8 % to 6.6 % and 0.5 % to 6.6 % at March 31, 2024 and December 31, 2023, respectively. The following table summarizes the maturity of mortgages payable as of March 31, 2024, excluding $ 0.9 million related to unamortized net discounts and deferred financing costs (dollars in millions): Year of Maturity Principal 2024 $ 119.3 2025 43.7 2026 12.0 2027 22.3 2028 1.3 Thereafter 2.4 Totals $ 201.0 10. Notes Payable A. General At March 31, 2024, our senior unsecured notes and bonds are USD-denominated, Sterling-denominated, and Euro-denominated. Foreign-denominated notes are converted at the applicable exchange rate on the balance sheet date. The carrying value within the table below includes a portion of certain outstanding notes that have been assumed in both current and historical mergers that were not exchanged for new notes issued by Realty Income. We expect to fund the next twelve months of obligations through a combination of the following: (i) cash and cash equivalents, (ii) future cash flows from operations, (ii) issuances of common stock or debt, (iv) additional borrowings under our revolving credit facility and (v) investment dispositions and/or credit investment repayments. The following are sorted by maturity date (in thousands): Maturity Dates Principal (Currency Denomination) Carrying Value (USD) as of March 31, 2024 December 31, 2023 4.600 % Notes due 2024 February 6, 2024 $ 499,999 $ — $ 499,999 3.875 % Notes due 2024 July 15, 2024 $ 350,000 350,000 350,000 3.875 % Notes due 2025 April 15, 2025 $ 500,000 500,000 500,000 4.625 % Notes due 2025 November 1, 2025 $ 549,997 549,997 549,997 5.050 % Notes due 2026 January 13, 2026 $ 500,000 500,000 500,000 0.750 % Notes due 2026 March 15, 2026 $ 325,000 325,000 325,000 4.875 % Notes due 2026 June 1, 2026 $ 599,997 599,997 599,997 4.450 % Notes due 2026 (1) September 15, 2026 $ 299,968 299,968 — 4.125 % Notes due 2026 October 15, 2026 $ 650,000 650,000 650,000 1.875 % Notes due 2027 (2) January 14, 2027 £ 250,000 316,025 318,450 3.000 % Notes due 2027 January 15, 2027 $ 600,000 600,000 600,000 3.200 % Notes due 2027 (1) January 15, 2027 $ 299,984 299,984 — 1.125 % Notes due 2027 (2) July 13, 2027 £ 400,000 505,640 509,520 3.950 % Notes due 2027 August 15, 2027 $ 599,873 599,873 599,873 3.650 % Notes due 2028 January 15, 2028 $ 550,000 550,000 550,000 3.400 % Notes due 2028 January 15, 2028 $ 599,816 599,816 599,816 2.100 % Notes due 2028 (1) March 15, 2028 $ 449,994 449,994 — -17- Table of Contents Maturity Dates Principal (Currency Denomination) Carrying Value (USD) as of March 31, 2024 December 31, 2023 2.200 % Notes due 2028 June 15, 2028 $ 499,959 499,959 499,959 4.700 % Notes due 2028 December 15, 2028 $ 400,000 400,000 400,000 4.750 % Notes due 2029 February 15, 2029 $ 450,000 450,000 — 3.250 % Notes due 2029 June 15, 2029 $ 500,000 500,000 500,000 4.000 % Notes due 2029 (1) July 15, 2029 $ 399,999 399,999 — 3.100 % Notes due 2029 December 15, 2029 $ 599,291 599,291 599,291 3.400 % Notes due 2030 (1) January 15, 2030 $ 500,000 500,000 — 4.850 % Notes due 2030 March 15, 2030 $ 600,000 600,000 600,000 3.160 % Notes due 2030 June 30, 2030 £ 140,000 176,974 178,332 4.875 % Notes due 2030 (2) July 6, 2030 € 550,000 594,055 607,915 1.625 % Notes due 2030 (2) December 15, 2030 £ 400,000 505,640 509,520 3.250 % Notes due 2031 January 15, 2031 $ 950,000 950,000 950,000 3.200 % Notes due 2031 (1) February 15, 2031 $ 449,995 449,995 — 5.750 % Notes due 2031 (2) December 5, 2031 £ 300,000 379,230 382,140 2.700 % Notes due 2032 (1) February 15, 2032 $ 350,000 350,000 — 3.180 % Notes due 2032 June 30, 2032 £ 345,000 436,115 439,461 5.625 % Notes due 2032 October 13, 2032 $ 750,000 750,000 750,000 2.850 % Notes due 2032 December 15, 2032 $ 699,655 699,655 699,655 1.800 % Notes due 2033 March 15, 2033 $ 400,000 400,000 400,000 1.750 % Notes due 2033 (2) July 13, 2033 £ 350,000 442,435 445,830 4.900 % Notes due 2033 July 15, 2033 $ 600,000 600,000 600,000 5.125 % Notes due 2034 February 15, 2034 $ 800,000 800,000 — 2.730 % Notes due 2034 May 20, 2034 £ 315,000 398,192 401,247 5.125 % Notes due 2034 (2) July 6, 2034 € 550,000 594,055 607,915 5.875 % Bonds due 2035 March 15, 2035 $ 250,000 250,000 250,000 3.390 % Notes due 2037 June 30, 2037 £ 115,000 145,372 146,487 6.000 % Notes due 2039 (2) December 5, 2039 £ 450,000 568,845 573,210 2.500 % Notes due 2042 (2) January 14, 2042 £ 250,000 316,025 318,450 4.650 % Notes due 2047 March 15, 2047 $ 550,000 550,000 550,000 Total principal amount $ 22,002,130 $ 18,562,064 Unamortized net (discounts) premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (3) ( 254,126 ) 40,255 $ 21,748,004 $ 18,602,319 (1) In connection with our merger with Spirit, we completed our debt exchange offer to exchange all outstanding notes issued by Spirit Realty, L.P. ("Spirit OP") on January 23, 2024 for new notes issued by Realty Income. Prior to the completion of our merger with Spirit on January 23, 2024, these notes were not the obligation of Realty Income. Additional details regarding the exchange offers are provided in the Note Exchange Offers Associated with our Merger with Spirit section below. (2) Interest paid annually. Interest on the remaining senior unsecured notes and bond obligations included in the table is paid semi-annually. (3) As a result of our merger with Spirit, the carrying values of the senior notes exchanged were adjusted to fair value. In conjunction with the pricing of our senior unsecured notes due January 2026, we entered into three-year , fixed-to-variable interest rate swaps, which are accounted for as fair value hedges. See note 13, Derivative Instruments for further details. -18- Table of Contents The following table summarizes the maturity of our notes and bonds payable as of March 31, 2024, excluding $ 254.1 million related to unamortized net discounts, deferred financing costs, and basis adjustments on interest rate swaps designated as fair value hedges (dollars in millions): Year of Maturity Principal 2024 $ 350.0 2025 1,050.0 2026 2,375.0 2027 2,321.5 2028 2,499.8 Thereafter 13,405.8 Totals $ 22,002.1 As of March 31, 2024, the weighted average interest rate on our notes and bonds payable was 3.8 %, and the weighted average remaining years until maturity was 6.5 years. Interest incurred on all of the notes and bonds was $ 200.5 million and $ 130.3 million for the three months ended March 31, 2024, and 2023, respectively. Our outstanding notes and bonds are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations. All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60 %; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40 %; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150 % of our outstanding unsecured debt. At March 31, 2024, we were in compliance with these covenants. B. Note Issuances During the three months ended March 31, 2024, we issued the following notes and bonds (in millions): 2024 Issuances Date of Issuance Maturity Date Principal amount Price of par value Effective yield to maturity 4.750 % Notes January 2024 February 2029 $ 450.0 99.23 % 4.923 % 5.125 % Notes January 2024 February 2034 $ 800.0 98.91 % 5.265 % C. Note Exchange Offers Associated with our Merger with Spirit As part of our merger with Spirit, Realty Income exchanged the following notes issued by Spirit OP, a wholly owned subsidiary of the Company with notes of identical terms issued by Realty Income (in millions): Series of Spirit Notes Tenders and Consents Received as of the Expiration Date Percentage of Total Outstanding Principal Amount of Such Series of Spirit Notes 4.450 % Notes due September 2026 $ 291.7 97.24 % 3.200 % Notes due January 2027 $ 292.7 97.56 % 2.100 % Notes due March 2028 $ 443.8 98.62 % 4.000 % Notes due July 2029 $ 391.7 97.93 % 3.400 % Notes due January 2030 $ 484.5 96.91 % 3.200 % Notes due February 2031 $ 445.0 98.90 % 2.700 % Notes due February 2032 $ 347.6 99.31 % -19- Table of Contents To induce holders of the Spirit OP notes to participate in the exchange, Realty Income offered noteholders electing to exchange their notes a cash payment equal to 10 basis points of the note principal amount held. Across the various note classes, Realty Income had a success rate of approximately 98.1 % on the exchange, resulting in a cash payment of $ 2.7 million to participating noteholders. The exchange was accounted for as a modification of the existing Spirit OP notes assumed in our merger with Spirit . The interest rate, interest payment dates, redemption terms and maturity of each series of Realty Income notes issued by Realty Income in the exchange offers were the same as those of the corresponding series of Spirit notes exchanged. With respect to the notes originally issued by Spirit OP that remained outstanding, we amended the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants in such indenture. 11. Noncontrolling Interests As of March 31, 2024, we have eight entities with noncontrolling interests that we consolidate, including an operating partnership, Realty Income, L.P., and interests in consolidated property partnerships not wholly-owned by us. The following table represents the change in the carrying value of all noncontrolling interests through March 31, 2024 (in thousands): Realty Income, L.P. units (1) Other Noncontrolling Interests Total Carrying value at December 31, 2023 $ 114,072 $ 51,430 $ 165,502 Contributions — 214 214 Distributions ( 1,423 ) ( 845 ) ( 2,268 ) Allocation of net income 1,402 213 1,615 Carrying value at March 31, 2024 $ 114,051 $ 51,012 $ 165,063 (1) 1,795,167 units were outstanding as of both March 31, 2024 and December 31, 2023. At March 31, 2024, we are considered the primary beneficiary of Realty Income, L.P. and other VIEs. For further information, see note 1, Summary of Significant Accounting Policies . 12. Fair Value Measurements Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820, Fair Value Measurements and Disclosures , sets forth a fair value hierarchy that categorizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. • Level 1 – Quoted market prices in active markets for identical assets and liabilities • Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other market-corroborated inputs • Level 3 – Inputs that are unobservable and significant to the overall fair value measurement -20- Table of Contents We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period. Changes in the type of inputs may result in a reclassification for certain assets. We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent. The following tables present the carrying values and estimated fair values of financial instruments as of March 31, 2024 and December 31, 2023 (in millions): March 31, 2024 Hierarchy Level Carrying Value Level 1 Level 2 Level 3 Assets: Loans receivable $ 253.4 $ — $ 190.7 $ 67.3 Derivative assets 52.5 — 52.5 — Total assets $ 305.9 $ — $ 243.2 $ 67.3 Liabilities: Mortgages payable $ 201.0 $ — $ — $ 194.6 Notes and bonds payable 22,002.1 — 20,580.5 — Derivative liabilities 105.8 — 105.8 — Total liabilities $ 22,308.9 $ — $ 20,686.3 $ 194.6 December 31, 2023 Hierarchy Level Carrying Value Level 1 Level 2 Level 3 Assets: Loans receivable $ 205.3 $ — $ 171.8 $ 33.5 Derivative assets 21.2 — 21.2 — Total assets $ 226.5 $ — $ 193.0 $ 33.5 Liabilities: Mortgages payable $ 822.4 $ — $ — $ 814.5 Notes and bonds payable 18,562.1 — 17,603.7 — Derivative liabilities 119.6 — 119.6 — Total liabilities $ 19,504.1 $ — $ 17,723.3 $ 814.5 A. Financial Instruments Not Measured at Fair Value on our Consolidated Balance Sheets The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature. The aggregate fair value of our term loans approximates carrying value due to the frequent repricing of the variable interest rate charged on the borrowing. -21- Table of Contents The following table reflects the carrying amounts and estimated fair values of our financial instruments not measured at fair value on our consolidated balance sheets (in millions): March 31, 2024 December 31, 2023 Carrying value Fair value Carrying value Fair value Mortgages payable (1) $ 201.0 $ 194.6 $ 822.4 $ 814.5 Notes and bonds payable (2) $ 22,002.1 $ 20,580.5 $ 18,562.1 $ 17,603.7 (1) Excludes non-cash net premiums and discounts recorded on the mortgages payable. The unamortized balance of these net discounts was $ 0.5 million at March 31, 2024, and $ 0.4 million of net discounts at December 31, 2023. Also excludes deferred financing costs of $ 0.4 million at March 31, 2024 and December 31, 2023, respectively. (2) Excludes non-cash net premiums and discounts recorded on notes payable. The unamortized balance of the net discounts was $ 159.4 million at March 31, 2024, and $ 125.3 million of net premiums at December 31, 2023. Also excludes deferred financing costs of $ 93.1 million and a favorable basis adjustment on interest rate swaps designated as fair value hedges of $ 1.6 million at March 31, 2024, and deferred financing costs of $ 83.8 million and a favorable basis adjustment on interest rate swaps designated as fair value hedges of $ 1.3 million at December 31, 2023. The estimated fair values of our mortgages payable and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level 3 of the fair value hierarchy. The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level 2 of the fair value hierarchy. B. Financial Instruments Measured at Fair Value on a Recurring Basis For derivative assets and liabilities, we may utilize interest rate swaps, interest rate swaptions, and forward-starting swaps to manage interest rate risk, and cross-currency swaps, currency exchange swaps, and foreign currency forwards to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility . Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 on the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at March 31, 2024, and December 31, 2023, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two. For more details on our derivatives, see note 13, Derivative Instruments . C. Items Measured at Fair Value on a Non-Recurring Basis Impairment of Real Estate Investments Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments only under certain circumstances, such as when an impairment write-down occurs. Depending on impairment triggering events during the applicable period, impairments are typically recorded for properties sold, in the process of being sold, vacant, in bankruptcy, or experiencing difficulties with collection of rent. -22- Table of Contents The following table summarizes our provisions for impairment on real estate investments during the periods indicated below (in millions): Three months ended March 31, 2024 2023 Carrying value prior to impairment $ 191.1 $ 35.6 Less: total provisions for impairment (1) (2) ( 88.2 ) ( 13.2 ) Carrying value after impairment $ 102.9 $ 22.4 (1) Excludes provision for current expected credit loss of $ 1.3 million at March 31, 2024. (2) Real estate assets that were deemed to be impaired for the three months ended March 31, 2024 primarily relate to two office properties which were acquired and retained in our merger with VEREIT, Inc. ("VEREIT") in 2021. The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of such real estate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results. 13. Derivative Instruments In the normal course of business, our operations are exposed to economic risks from interest rates and foreign currency exchange rates. We may enter into derivative financial instruments to offset these underlying economic risks. Derivatives Designated as Hedging Instruments - Cash Flow Hedges We enter into foreign currency forward contracts to sell British Pound Sterling ("GBP") and Euro ("EUR") and buy USD to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in GBP and EUR. Forward points on the forward contracts are included in the assessment of hedge effectiveness. We also execute variable-to-fixed interest rate swaps to add stability to interest expense and to manage our exposure to interest rate movements associated with our term loans and may also enter into interest rate swaption agreements. Derivatives Designated as Hedging Instruments - Fair Value Hedges Periodically, we enter into and designate fixed-to-floating interest rate swaps to manage interest rate risk by managing our mix of fixed-rate and variable-rate debt. These swaps involve the receipt of fixed-rate amounts for variable interest rate payments over the life of the swaps without exchange of the underlying principal amount. We also designate some of our cross-currency swaps as fair value hedges as we use them to hedge foreign currency risk associated with changes in spot rates on foreign-denominated debt. For these hedging instruments, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross-currency basis spread from the assessment of hedge effectiveness (the "excluded component"). Changes in the fair value of the cross-currency swaps attributable to these excluded components are recorded to other comprehensive income and subsequently recognized in 'Foreign currency and derivative gain, net' on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments. Derivatives Designated as Hedging Instruments - Net Investment Hedges To mitigate the foreign currency exchange rate variations associated with our investment in EUR-denominated foreign operations, we may enter into derivative instruments, such as cross-currency swaps that qualify as net investment hedges under the criteria prescribed in accordance with ASC Topic 815-20, Hedging - General . We use the spot method of assessing hedge effectiveness and apply the consistent election to the excluded component by recognizing changes in the fair value of the hedging instruments attributable to the excluded component in the same manner as described above. Any difference between the change in the fair value of the excluded components and the amounts recognized in earnings is reported in other comprehensive income as part of the foreign cumulative translation adjustment. The gain or loss on the portion of the derivative instruments included in the assessment of effectiveness is reported in other comprehensive income as part of the 'Foreign currency translation adjustment' line item, to the extent the relationship is highly effective. If our net investment changes during a reporting period, the hedge relationship will be assessed for whether a de-designation is warranted (only if the hedge notional amount is outside of prescribed tolerance). Further, certain EUR-denominated bonds and borrowings under our Revolving Credit Facility and Term Loans (all as defined in Notes 7 and 8 , respectively) may be also designated as, and are -23- Table of Contents effective as, net investment hedge. Changes in the value of such borrowings, related to changes in the spot rates, will be recorded in the same manner as foreign currency translation adjustments. Derivatives Not Designated as Hedging Instruments We enter into foreign currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the USD, our reporting currency, and GBP and EUR. These derivative contracts generally mature within one year and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative gain, net' in our consolidated statements of income and comprehensive income. The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2024 and December 31, 2023 (dollars in millions): Derivative Type Number of Instruments (1) Notional Amount as of Weighted Average Strike Rate (2) Maturity Date (3) Fair Value - asset (liability) as of Derivatives Designated as Hedging Instruments March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023 Interest rate swaps (4) 12 $ 2,680.0 $ 1,630.0 3.71 % Jun 2025 - Aug 2027 $ 43.9 $ 0.3 Interest rate swaptions (5) — — 1,000.0 — — 2.6 Cross-currency swaps - Fair Value 3 320.0 320.0 (6) Oct 2032 ( 53.7 ) ( 59.8 ) Cross-currency swaps - Net Investment 3 280.0 280.0 (7) Oct 2032 ( 47.8 ) ( 53.2 ) Foreign currency forwards 24 217.8 162.3 (8) Apr 2024 - Jun 2025 2.2 2.7 $ 3,497.8 $ 3,392.3 $ ( 55.4 ) $ ( 107.4 ) Derivatives not Designated as Hedging Instruments Currency exchange swaps 4 $ 1,476.3 $ 1,810.6 (9) Apr 2024 - May 2024 $ 2.1 $ 8.9 $ 1,476.3 $ 1,810.6 $ 2.1 $ 8.9 Total of all Derivatives $ 4,974.1 $ 5,202.9 $ ( 53.3 ) $ ( 98.5 ) (1) This column represents the number of instruments outstanding as of March 31, 2024. (2) Weighted average strike rate is calculated using the notional value as of March 31, 2024. (3) This column represents maturity dates for instruments outstanding as of March 31, 2024. (4) During the three months ended March 31, 2024, we entered into five variable-to-fixed interest rate swaps when we extended maturity of the 2023 term loans and designated them as cash flow hedges. We also designated five variable-to-fixed interest rate swaps we acquired from Spirit as cash flow hedges to mitigate the interest rate risk associated with the term loans we assumed in conjunction with our merger with Spirit. The acquisition date fair value of these derivatives was $ 35.1 million in total and will be reclassified from AOCI to interest expense over the remaining life of the term loans on a systematic and rational basis. (5) There were six interest swaptions equal to $ 1 billion in notional entered into in March 2023, of which $ 800 million was terminated in January 2024 in connection with a senior unsecured note issuance. A total termination premium of $ 3.4 million we received was deferred in other comprehensive income and will be recognized in interest expense over the 10-year tenor of the notes due 2034. The remaining swaption of the $ 200 million notional expired in January 2024. (6) USD fixed rate of 5.625 % and EUR weighted average fixed rate of 4.681 %. (7) USD fixed rate of 5.625 % and EUR weighted average fixed rate of 4.716 %. (8) Weighted average forward GBP-USD exchange rate of 1.28 . (9) Weighted average exchange rates of 0.86 for EUR-GBP and 1.27 for GBP-USD. We measure our derivatives at fair value and include the balances within 'Other assets, net' and 'Accounts payable and accrued expenses' on our consolidated balance sheets. We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default. -24- Table of Contents The following table summarizes the amount of unrealized gain (loss) on derivatives and foreign currency translation adjustments in other comprehensive income (in thousands): Three months ended March 31, Derivatives in Cash Flow Hedging Relationships 2024 2023 Interest rate swaps $ 9,916 $ ( 1,720 ) Foreign currency forwards ( 570 ) ( 5,113 ) Interest rate swaptions 1,717 ( 1,287 ) Total derivatives in cash flow hedging relationships $ 11,063 $ ( 8,120 ) Derivatives in Fair Value Hedging Relationships Cross-currency swaps - Fair Value $ ( 2,141 ) $ 5,958 Total derivatives in fair value hedging relationships $ ( 2,141 ) $ 5,958 Total unrealized gain (loss) on derivatives, net $ 8,922 $ ( 2,162 ) Derivatives in Net Investment Hedging Relationships Cross-currency swaps - Net Investment $ 4,873 $ — Total unrealized gain recorded in foreign currency translation adjustment $ 4,873 $ — The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands): Three months ended March 31, Derivatives in Cash Flow Hedging Relationships Location of Gain Recognized in Income 2024 2023 Interest rate swaps Interest expense $ 8,932 $ 1,480 Foreign currency forwards Foreign currency and derivative gain, net 2,111 1,431 Interest rate swaptions Interest expense ( 982 ) — Total derivatives in cash flow hedging relationships $ 10,061 $ 2,911 Derivatives in Fair Value Hedging Relationships Cross-currency swaps - Fair Value Foreign currency and derivative gain, net $ 461 $ 294 Total derivatives in fair value hedging relationships $ 461 $ 294 Derivatives in Net Investment Hedging Relationships Cross-currency swaps - Net Investment Foreign currency and derivative gain, net $ 869 $ — Total derivatives in net investment hedging relationships $ 869 $ — Net increase to net income $ 11,391 $ 3,205 We expect to reclassify $ 24.0 million from AOCI as a decrease to interest expense relating to interest rate swaps and $ 3.3 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months. -25- Table of Contents The following table details our foreign currency and derivative gains (losses), net included in income (in thousands): Three months ended March 31, 2024 2023 Realized foreign currency and derivative (loss) gain, net: Loss on the settlement of undesignated derivatives $ ( 15,265 ) $ ( 345 ) Gain on the settlement of designated derivatives reclassified from AOCI 3,441 1,725 (Loss) gain on the settlement of transactions with third parties ( 6 ) 1,326 Total realized foreign currency and derivative (loss) gain, net $ ( 11,830 ) $ 2,706 Unrealized foreign currency and derivative gain (loss), net: Gain (loss) on the change in fair value of undesignated derivatives $ 2,138 $ ( 782 ) Gain on remeasurement of certain assets and liabilities 13,738 8,398 Total unrealized foreign currency and derivative gain, net $ 15,876 $ 7,616 Total foreign currency and derivative gain, net $ 4,046 $ 10,322 14. Lessor Operating Leases At March 31, 2024, we owned or held interests in 15,485 properties. Of the 15,485 properties, 15,189 , or 98.1 %, are single-client properties, and the remaining are multi-client properties. At March 31, 2024, 217 properties were available for lease or sale. The majority of our leases are accounted for as operating leases. The vast majority of our leases are net leases where our client pays or reimburses us for property taxes and assessments and carries insurance coverage for public liability, property damage, fire, and extended coverage. Rent based on a percentage of our client's gross sales, or percentage rent, for the three months ended March 31, 2024, and 2023 was $ 5.3 million, and $ 4.1 million, respectively. No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2024, and 2023. 15. Stockholders' Equity A. Common Stock We pay monthly distributions to our common stockholders. The following is a summary of monthly distributions paid per common share for the periods indicated below: Three months ended March 31, Month 2024 2023 January $ 0.2565 $ 0.2485 February 0.2565 0.2485 March 0.2565 0.2545 Total $ 0.7695 $ 0.7515 At March 31, 2024, a distribution of $ 0.2570 per common share was payable and was paid in April 2024. B. At-the-Market ("ATM") Program Under our current ATM program, which we entered into in August 2023, we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE under the ticker symbol "O" at prevailing market prices or at negotiated prices. Upon settlement, subject to certain exceptions, we may elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which cases we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser. 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. -26- Table of Contents The following table outlines common stock issuances pursuant to our ATM programs (dollars in millions, shares in thousands): Three months ended March 31, 2024 2023 Shares of common stock issued under the ATM program (1) 9,604 12,664 Gross proceeds $ 547.0 $ 801.7 Sales agents' commissions and other offering expenses ( 3.5 ) ( 5.5 ) Net proceeds $ 543.5 $ 796.2 (1) During the three months ended March 31, 2024, 4.6 million shares were sold, and 9.6 million shares were settled pursuant to forward sale confirmations. In addition, as of March 31, 2024, 1.2 million shares of common stock subject to forward sale confirmations have been executed, but not settled, at a weighted average initial gross price of $ 54.00 per share. We currently expect to fully settle forward sale agreements outstanding by June 30, 2024, representing $ 62.9 million in net proceeds, for which the weighted average forward price at March 31, 2024 was $ 53.70 per share. C. Dividend Reinvestment and Stock Purchase Plan ("DRSPP") Our DRSPP provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. It also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26.0 million common shares to be issued. At March 31, 2024, we had 10.9 million shares remaining for future issuance under our DRSPP program. The following table outlines common stock issuances pursuant to our DRSPP program (dollars in millions, shares in thousands): Three months ended March 31, 2024 2023 Shares of common stock issued under the DRSPP program 58 42 Gross proceeds $ 3.1 $ 2.7 16. Redeemable Preferred Stock As part of the Merger Agreement with Spirit, each outstanding share of Spirit’s 6.000 % Series A Cumulative Redeemable Preferred Stock, par value $ 0.01 per share, converted into the right to receive one share of newly issued Realty Income 6.000 % Series A Cumulative Redeemable Preferred Stock, having substantially the same terms as the Spirit Series A Preferred Stock, resulting in 6.9 million shares of Realty Income Series A Preferred Stock issued. We are authorized to issue up to 69.9 million shares of our preferred stock. As of March 31, 2024, we had 6.9 million shares of our preferred stock outstanding. The 6.000 % Series A Cumulative Redeemable Preferred Stock trades on the NYSE under the ticker symbol "O PR". The 6.000 % Series A Cumulative Redeemable Preferred Stock is classified as mezzanine equity on our consolidated balance sheets as it is contingently redeemable for cash or the value of the property, rights or securities to be paid or distributed upon the occurrence of a change of control event, which is not solely within our control. Our preferred stock pays cumulative cash dividends at the rate of 6.000 % per annum on their liquidation preference of $ 25.00 per share (equivalent to $ 1.50 per share on an annual basis). We may, at our option, redeem the 6.000 % Series A Cumulative Redeemable Preferred Stock, in whole or in part, at any time for cash at a redemption price of $ 25.00 per share, plus any accrued and unpaid dividends up to, but excluding, the redemption date. Dividends are payable quarterly in arrears on or about the last day of March, June, September and December of each year. During the three months ended March 31, 2024, we paid one quarterly dividend to holders of our preferred stock totaling $ 0.375 per share, or $ 2.6 million. 17. Common Stock Incentive Plan This note should be read in conjunction with the more complete discussion of the Realty Income 2021 Incentive Award Plan (the "2021 Plan"), included in note 19 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. -27- Table of Contents The amount of share-based compensation costs recognized in 'General and administrative' in our consolidated statements of income and comprehensive income was $ 9.3 million and $ 6.3 million during the three months ended March 31, 2024, and 2023, respectively. In connection with the Merger, each outstanding Spirit restricted stock award and performance share award was cancelled and converted into Realty Income common stock, using the Exchange Ratio in accordance with the Merger Agreement. The issuance is excluded from the sections below, as the awards were not granted under the 2021 Plan. The aggregate fair value of fully vested Spirit awards converted into Realty Income common stock was $ 66.5 million, of which i.) $ 41.7 million related to pre-combination services and is included in the consideration transferred in the merger and ii.) $ 24.8 million of expense was recognized in January in merger and integration-related costs related to the value attributable to post-combination services. For more details, please see note 2, Merger with Spirit Realty Capital, Inc. A. Restricted Stock and Restricted Stock Units During the three months ended March 31, 2024, we granted 296,871 shares of common stock under the 2021 Plan. This included 4,000 total shares of restricted stock granted to the new independent member of our Board of Directors, which vest in equal parts over a three-year service period. Our restricted stock awards granted to employees vest over a service period not exceeding four-years . During the three months ended March 31, 2024, we also granted 30,322 restricted stock units, all of which vest over a four-year service period. As of March 31, 2024, the remaining unamortized share-based compensation expense related to restricted stock awards and units totaled $ 29.5 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares. B. Performance Shares During the three months ended March 31, 2024, we granted 274,358 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our Total Shareholder Return ("TSR") performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50 % on the first and second January 1 after the end of the three-year performance period, subject to continued service. As of March 31, 2024, the remaining share-based compensation expense related to the performance shares totaled $ 29.7 million. The performance shares are being recognized on a tranche-by-tranche basis over the service period. The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation model. 18. Net Income per Common Share Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. -28- Table of Contents The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation (shares in thousands): Three months ended March 31, 2024 2023 Weighted average shares used for the basic net income per share computation 834,940 660,462 Incremental shares from share-based compensation 289 408 Dilutive effect of forward ATM offerings 13 369 Weighted average shares used for diluted net income per share computation 835,242 661,239 Unvested shares from share-based compensation that were anti-dilutive 188 127 Weighted average partnership common units convertible to common shares that were anti-dilutive 1,795 1,795 Weighted average forward ATM offerings that were anti-dilutive 453 46 19. Supplemental Disclosures of Cash Flow Information The following table summarizes our supplemental cash flow information during the periods indicated below (in thousands): Three months ended March 31, 2024 2023 Supplemental disclosures: Cash paid for interest $ 229,182 $ 146,461 Cash paid for income taxes $ 21,582 $ 2,768 Non-cash activities: Net increase (decrease) in fair value of derivatives $ 45,133 $ ( 58,667 ) Term loans assumed at fair value $ 1,300,000 $ — Notes payable assumed at fair value $ 2,481,486 $ — The following table provides a reconciliation of cash and cash equivalents reported on our consolidated balance sheets to the total of the cash, cash equivalents, and restricted cash reported within our consolidated statements of cash flows (in thousands): March 31, 2024 March 31, 2023 Cash and cash equivalents shown in the consolidated balance sheets $ 680,159 $ 164,576 Restricted escrow deposits (1) 6,401 50,009 Impounds related to mortgages payable (1) 10,226 29,180 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 696,786 $ 243,765 (1) Included within 'other assets, net' on our consolidated balance sheets (see note 3, Supplemental Detail for Certain Components of Consolidated Balance Sheets ). These amounts consist of cash that we are legally entitled to, but that is not immediately available to us. As a result, these amounts were considered restricted as of the dates presented. 20. Commitments and Contingencies In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations. At March 31, 2024, we had commitments of $ 101.4 million, which primarily relate to tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of March 31, 2024, we had committed $ 536.1 million under construction contracts related to development projects, which have estimated rental revenue commencement dates between April 2024 and March 2026. -29- Table of Contents 21. Subsequent Events A. Dividends In April 2024, we declared a dividend of $ 0.2570 per share to our common stockholders, which will be paid in May 2024. B. Loan Repayment In April 2024, a $ 33.0 million secured loan to an operator of Emagine Theaters, assumed in the Spirit merger, was repaid in full. -30- Table of Contents