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Item 2. Management’s Discussion and Analysis

2024-11-05 compared with 2024-08-06 · 236 added, 195 removed, 571 unchanged (43% of the section changed)

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settlement of shares of common stock sold pursuant to forward sale confirmations under our At-the-Market (“ATM”) Program;

dividends, including the amount, timing and payment of dividends related thereto;

dividends, including the amount, timing and payments of dividends related thereto;

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

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

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

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

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

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

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

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

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

We are known as “The Monthly Dividend Company ® ,” and have a mission to invest in people and places to deliver dependable monthly dividends that increase over time.

Since our founding, we have declared 652 consecutive monthly dividends and are a member of the S&P 500 Dividend Aristocrats ® index for having increased our dividend for the last 30 consecutive years.

As of June 30, 2024, we owned or held interests in 15,450 properties, with approximately 335.3 million square feet of leasable space leased to 1,551 clients doing business in 90 separate industries.

Of the 15,450 properties in our portfolio as of June 30, 2024, 15,154, or 98.1%, were single-client properties, and the remaining were multi–client properties.

Our total portfolio of 15,450 properties as of June 30, 2024 had a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 9.6 years.

Total portfolio annualized contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables) on our leases as of June 30, 2024 was $4.85 billion.

As of June 30, 2024, approximately 36.0% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of June 30, 2024, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 36.2% of our annualized rent and 10 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Approximately 91% of our annualized retail contractual rent as of June 30, 2024, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $80.6 million and $87.7 million for the three months ended June 30, 2024, and 2023, respectively, and $153.3 million and $147.3 million for the six months ended June 30, 2024 and 2023, respectively.

As of September 30, 2024, we owned or held interests in 15,457 properties, with approximately 336.6 million square feet of leasable space leased to 1,552 clients doing business in 90 separate industries.

Of the 15,457 properties in our portfolio as of September 30, 2024, 15,156, or 98.1%, were single-client properties, and the remaining were multi–client properties.

Our total portfolio of 15,457 properties as of September 30, 2024 had a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 9.4 years.

Total portfolio annualized contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables) on our leases as of September 30, 2024 was $4.93 billion.

As of September 30, 2024, approximately 32.1% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of September 30, 2024, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 35.9% of our annualized rent and 10 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.

Approximately 91% of our annualized retail contractual rent as of September 30, 2024, is derived from our clients with a service, non-discretionary, and/or low price point component to their business.

Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $74.3 million and $61.3 million for the three months ended September 30, 2024, and 2023, respectively, and $227.6 million and $208.6 million for the nine months ended September 30, 2024 and 2023, respectively.

RECENT DEVELOPMENTS

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

In addition, we have increased the dividend four times during 2024.

As of July 2024, we have paid 107 consecutive quarterly dividend increases and increased the dividend 126 times since our listing on the New York Stock Exchange (“NYSE”) in 1994.

In addition, we have increased the dividend five times during 2024.

As of October 2024, we have paid 108 consecutive quarterly dividend increases and increased the dividend 127 times since our listing on the New York Stock Exchange (“NYSE”) in 1994.

2024 Dividend increases

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4th increase Jun 2024 Jul 2024 $ 0.2630 $ 0.0005

The dividends paid per share during the six months ended June 30, 2024 totaled $1.5460, as compared to $1.5165 during the six months ended June 30, 2023, an increase of $0.030, or 1.9%.

The monthly dividend of $0.2630 per share represents a current annualized dividend of $3.156 per share, and an annualized dividend yield of 6.0% based on the last reported sale price of our common stock on the NYSE of $52.82 on June 30, 2024.

5th increase Sep 2024 Oct 2024 $ 0.2635 $ 0.0005

The dividends paid per share during the nine months ended September 30, 2024 totaled $2.3350, as compared to $2.2830 during the nine months ended September 30, 2023, an increase of $0.052, or 2.3%.

The monthly dividend of $0.2635 per share represents a current annualized dividend of $3.162 per share, and an annualized dividend yield of 5.0% based on the last reported sale price of our common stock on the NYSE of $63.42 on September 30, 2024.

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

Investments During the Three and Six Months Ended June 30, 2024

During the three months ended June 30, 2024, we invested $0.8 billion at an initial weighted average cash yield of 7.9%, including an investment in 120 properties, properties under development or expansion, and an investment in a loan.

During the six months ended June 30, 2024, we invested $1.4 billion at an initial weighted average cash yield of 7.8%, including an investment in 198 properties, properties under development or expansion, and an investment in a loan.

Investments During the Three and Nine Months Ended September 30, 2024

During the three months ended September 30, 2024, we invested $0.7 billion at an initial weighted average cash yield of 7.4%, including an investment in 169 properties and properties under development or expansion.

During the nine months ended September 30, 2024, we invested $2.1 billion at an initial weighted average cash yield of 7.7%, including an investment in 300 properties, properties under development or expansion, and an investment in a loan.

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

Equity Capital Raising

During the three months ended September 30, 2024, we raised $271.0 million of proceeds from the sale of common stock, at a weighted average price of $62.25 per share, primarily through proceeds from the sale of common stock through our ATM program.

The ATM program issuances during the three months ended September 30, 2024 included 4.3 million shares issued pursuant to forward sale confirmations.

As of September 30, 2024, 16.8 million shares of common stock subject to forward sale confirmations have been executed but not settled.

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

Note Issuances

In September 2024, we issued £350.0 million of 5.000% senior unsecured notes due October 2029 and £350.0 million of 5.250% senior unsecured notes due September 2041.

In August 2024, we issued $500.0 million of 5.375% senior unsecured notes due September 2054.

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

Closing of Spirit Merger

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, to the consolidated financial statements.

Redemption of Preferred Stock

On September 30, 2024, we redeemed all 6.9 million shares outstanding of our 6.000% Series A Preferred Stock (“Realty Income Series A preferred stock”), which was converted from Spirit's outstanding preferred stock in connection with the Merger, at a redemption price of $25.00 per share, plus accrued and unpaid dividends.

For more details, see note 16, Series A Preferred Stock.

Client Update

As part of the initial purchase price allocation for the acquisition of a sale-leaseback in the convenience store industry, we recorded financing receivables for the excess of the purchase price over the fair value.

Following lease payment default by the tenant and our evaluation of recoverability, we recorded a provision for impairment of $63.9 million for the three months ended September 30, 2024, and $69.8 million for the nine months ended September 30, 2024, which accounted for a dilution impact of $0.07 and $0.08 per share, respectively, to our net income and funds from operations (“FFO”).

At September 30, 2024, the tenant's financing receivable balance has been fully reserved.

Portfolio Discussion

Leasing Results

At June 30, 2024, we had 185 properties available for lease or sale out of 15,450 properties in our portfolio, which represents a 98.8% occupancy rate based on the number of properties in our portfolio.

At September 30, 2024, we had 196 properties available for lease or sale out of 15,457 properties in our portfolio, which represents a 98.7% occupancy rate based on the number of properties in our portfolio.

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

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

Three months ended June 30, 2024

Properties available for lease at March 31, 2024

Three months ended September 30, 2024

Properties available for lease at June 30, 2024

Lease expirations (1)

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Vacant dispositions (59)

Properties available for lease at June 30, 2024

Six months ended June 30, 2024

Properties available for lease at September 30, 2024

Nine months ended September 30, 2024

Properties available for lease at December 31, 2023

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Vacant dispositions (166)

Properties available for lease at June 30, 2024

Properties available for lease at September 30, 2024

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

During the three months ended June 30, 2024, the new annualized contractual rent on re-leases was $33.73 million, as compared to the previous annual rent of $31.91 million on the same units, representing a rent recapture rate of 105.7% on the units re-leased.

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

During the six months ended June 30, 2024, the new annualized contractual rent on re-leases was $93.09 million, as compared to the previous annual rent of $88.82 million on the same units, representing a rent recapture rate of 104.8% on the units re-leased.

During the three months ended September 30, 2024, the new annualized contractual rent on re-leases was $38.41 million, as compared to the previous annual rent of $36.57 million on the same units, representing a rent recapture rate of 105.0% on the units re-leased.

We re-leased two units to new clients without a period of vacancy, and 14 units to new clients after a period of vacancy.

During the nine months ended September 30, 2024, the new annualized contractual rent on re-leases was $131.50 million, as compared to the previous annual rent of $125.39 million on the same units, representing a rent recapture rate of 104.9% on the units re-leased.

We re-leased 16 units to new clients without a period of vacancy, and 29 units to new clients after a period of vacancy.

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Disposition Strategy

During the six months ended June 30, 2024, we sold 122 properties with total net proceeds received of $201.9 million.

During the nine months ended September 30, 2024, we sold 214 properties with total net proceeds received of $451.4 million.

Our disposition strategy aims at further enhancing our portfolio and maximizing portfolio returns through the sale of select assets.

It remains a function of our proactive investment management approach, supported by several data-driven tools including our predictive analytics platform.

Appointment of New Chief Accounting Officer ("CAO")

Effective June 27, 2024, Neale Redington assumed his role as our Senior Vice President and CAO.

Impact of Inflation

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LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2024, we had $3.8 billion of liquidity, which consists of cash and cash equivalents of $442.8 million, unsettled ATM forward equity of $247.8 million, and $3.1 billion of availability under our $4.25 billion unsecured revolving credit facility, net of $846.6 million of borrowing on the revolving credit facility and after deducting $302.2 million in borrowings under our commercial paper programs.

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

As of September 30, 2024, we had $5.2 billion of liquidity, which consists of cash and cash equivalents of $397.0 million, unsettled ATM forward equity of $958.1 million, and $3.8 billion of availability under our $4.25 billion unsecured revolving credit facility, net of $427.5 million of borrowing on the revolving credit facility.

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

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

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• Future cash flows from operations;

• Issuances of common stock or debt;

• Issuances of common stock or debt, or other securities offerings;

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

• Short-term loans;

• Investment dispositions;

• Asset dispositions;

• Credit investment repayments

• Public securities offerings.

In addition to these sources of liquidity, we are exploring various capital diversification initiatives, including the establishment of a third-party private capital open-end fund.

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

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

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

stock, long-term unsecured notes, and term loan borrowings.

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

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Capitalization

As of June 30, 2024, our total market capitalization was $72.6 billion.

Total market capitalization consisted of $46.1 billion of common equity (based on the June 30, 2024 closing price on the NYSE of $52.82 and assuming the conversion of 1.8 million common units of Realty Income, L.P.), aggregate liquidation value (based on a redemption price of $25.00 per share) of 6.000% Series A Cumulative Redeemable Preferred Stock of $0.2 billion, and total

outstanding borrowings of $26.4 billion on our revolving credit facility, commercial paper, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt and preferred stock to total market capitalization was 36.5% at June 30, 2024.

As of September 30, 2024, our total capitalization was $82.8 billion.

Total capitalization consisted of $55.7 billion of common equity (based on the September 30, 2024 closing price on the NYSE of $63.42 and assuming the conversion of 2.7 million common units of Realty Income, L.P.), and total outstanding borrowings of $27.1 billion on our revolving credit facility, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt to capitalization was 32.7% at September 30, 2024.

Universal Shelf Registration

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

As of June 30, 2024, there were approximately 4.7 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $247.8 million in expected net proceeds, which have been executed at a weighted average price of $52.87 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates).

During the six months ended June 30, 2024, we settled approximately 9.6 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $543.3 million of net proceeds.

As of June 30, 2024, we had 73.2 million shares remaining for future issuance under our ATM program.

As of September 30, 2024, there were approximately 16.8 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $958.1 million in expected net proceeds, which have been executed at a weighted average price of $56.88 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates).

During the nine months ended September 30, 2024, we settled approximately 13.9 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $809.9 million of net proceeds.

As of September 30, 2024, we had 56.7 million shares remaining for future issuance under our ATM program.

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

Debt Financing Activities

At June 30, 2024, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $25.7 billion, with a weighted average maturity of 5.6 years and a weighted average interest rate of 3.9%.

As of June 30, 2024, approximately 94% of our total debt was fixed rate debt.

See notes 7 through 10 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the six months ended June 30, 2024 below.

At September 30, 2024, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $26.4 billion, with a weighted average maturity of 6.2 years and a weighted average interest rate of 3.9%.

As of September 30, 2024, approximately 96% of our total debt was fixed rate debt.

See notes 7 through 10 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the nine months ended September 30, 2024 below.

Note Issuances

During the six months ended June 30, 2024, we issued the following notes and bonds (in millions):

During the nine months ended September 30, 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

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January 2024 February 2034 $ 800.0 98.91 % 5.265 %

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

Note Repayment

During the six months ended June 30, 2024, we repaid the following notes, plus accrued and unpaid interest upon maturity (in millions):

Note Repayment Date of Repayment Maturity Date Principal amount

August 2024 September 2054 $ 500.0 98.37 % 5.486 %

September 2024 October 2029 £ 350.0 99.14 % 5.199 %

September 2024 September 2041 £ 350.0 96.21 % 5.601 %

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

(“Spirit OP”).

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

Note Repayments

During the nine months ended September 30, 2024, we repaid the following notes, plus accrued and unpaid interest upon maturity (in millions):

Note Repayment Date of Issuance Maturity Date Principal amount

February 2014 February 2024 $ 500.0

In July 2024, we repaid $350.0 million of outstanding 3.875% senior unsecured notes, plus accrued and unpaid interest, upon maturity.

June 2014 July 2024 $ 350.0

Term Loan Issuances

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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”).

Term Loan Redemption

During the six months ended June 30, 2024, we repaid our $250.0 million senior unsecured term loan in full upon maturity.

During the nine months ended September 30, 2024, we repaid our $250.0 million senior unsecured term loan in full upon maturity.

Mortgage Repayments

During the six months ended June 30, 2024, we made $622.4 million in principal payments, including the full repayment of two mortgages for $620.0 million.

During the nine months ended September 30, 2024, we made $626.3 million in principal payments, including the full repayment of three mortgages for $622.7 million.

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

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

The actual amounts as of June 30, 2024, are:

The actual amounts as of September 30, 2024, are:

Note Covenants

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< 40% of adjusted assets

Debt service coverage (trailing 12 months) (1)

Debt service and fixed charge coverage (trailing 12 months) (1)

Maintenance of total unencumbered assets

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

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

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

The following is our calculation of debt service and fixed charge coverage at June 30, 2024 (in thousands, for trailing twelve months):

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

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

Fixed charge coverage is calculated in the same manner as the debt service coverage.

The following is our calculation of debt service and fixed charge coverage at September 30, 2024 (in thousands, for trailing twelve months):

Net income attributable to the Company

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Total pro forma debt service charge

Debt service coverage ratio

Fixed Charge Coverage Ratio

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

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

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

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

GAAP operating performance measures.

Below is our calculation of fixed charges at June 30, 2024 (in thousands, for the trailing twelve months):

Income available for debt service, as defined

Pro forma debt service charge plus preferred stock dividends

Fixed charge coverage ratio

Debt service and fixed charge coverage ratio

Credit Agency Ratings

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

As of June 30, 2024, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

As of September 30, 2024, we were assigned the following investment grade corporate credit ratings on our senior unsecured notes and bonds:

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

In addition, we were assigned the following ratings on our commercial paper at June 30, 2024:

In addition, we were assigned the following ratings on our commercial paper at September 30, 2024:

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

Based on our credit agency ratings as of June 30, 2024, interest rates under our credit facility for U.S.

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

Based on our credit agency ratings as of September 30, 2024, interest rates under our credit facility for U.S.

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

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

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Material Cash Requirements

The following table summarizes the maturity of each of our obligations as of June 30, 2024 (dollars in millions):

The following table summarizes the maturity of each of our obligations as of September 30, 2024 (dollars in millions):

Credit Facility and Commercial Paper (1)

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Mortgages Payable Senior Unsecured Notes and Bonds Interest (3)

Leases Paid by the Company (4)

Leases Paid by

Ground Leases Paid by the Company (4)

Ground Leases Paid by

Our Clients (5)

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

At June 30, 2024, there were $846.6 million of outstanding borrowings under our revolving credit facility.

Commercial paper programs outstanding were $302.2 million at June 30, 2024, which matured in July 2024.

At September 30, 2024, there were $427.5 million of outstanding borrowings under our revolving credit facility.

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

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

(6) “Other” consists of $393.9 million of commitments under construction contracts, and $91.5 million for tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements.

(7) In July 2024, we repaid $350.0 million of outstanding 3.875% senior unsecured notes, plus accrued and unpaid interest, upon maturity.

(6) “Other” consists of $394.9 million of commitments under construction contracts, $77.8 million for tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements, and $15.7 million for contingent consideration obligations related to leasing activities for a multi-tenant property acquired.

Investments in Unconsolidated Entities

As of June 30, 2024, our pro-rata share of secured debt of unconsolidated entities was approximately $659.2 million.

As of September 30, 2024, our pro-rata share of secured debt of unconsolidated entities was approximately $659.2 million.

DIVIDEND POLICY

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

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

Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P., each on a per unit basis that is equal to the amount paid per share to our common stockholders (subject to the adjustment factor applicable to those units at the time of such distribution).

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

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

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

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

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

In 2023, our cash distributions to common stockholders totaled $2.11 billion, or approximately 134.4% of our taxable income of $1.57 billion.

Certain measures are available to us to reduce or eliminate our tax exposure as a REIT, and accordingly, no provision for U.S.

federal income taxes, other than our taxable REIT subsidiaries (each, a "TRS"), has been made.

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

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

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

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

We distributed $1.5460 per share to stockholders during the six months ended June 30, 2024, representing 74.0% of our diluted Adjusted Funds from Operations Available to Common Stockholders ("AFFO") per share of $2.09.

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

Dividends on our preferred stock are current.

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

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

We distributed $2.3350 per share to stockholders during the nine months ended September 30, 2024, representing 74.4% of our diluted Adjusted Funds from Operations Available to Common Stockholders ("AFFO") per share of $3.14.

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

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

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

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RESULTS OF OPERATIONS

The following is a comparison of our results of operations for the three and six months ended June 30, 2024 and 2023.

The following is a comparison of our results of operations for the three and nine months ended September 30, 2024 and 2023.

Total Revenue

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

The following summarizes our total revenue (in millions):

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2024 2023 Change 2024 2023 Change

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Rental Revenue (excluding reimbursable)

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three and six months ended June 30, 2024 compared to the same periods in 2023 (dollars in thousands):

The table below summarizes the increase in rental revenue (excluding reimbursable) in the three and nine months ended September 30, 2024 compared to the same periods in 2023 (dollars in thousands):

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Number of Properties 2024 2023 Change Number of Properties 2024 2023 Change

September 30,

Number of Properties 2024 2023 Change

Properties acquired during 2024 & 2023

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Constant currency adjustment (2)

N/A (39) (632) 593 N/A 708 (3,883) 4,591

N/A (4,636) (6,623) 1,987

Properties sold during and prior to 2024

493 1,144 12,773 (11,629)

Straight-line rent and other non-cash adjustments N/A 4,919 444 4,475 N/A 5,633 (6,013) 11,646

Straight-line rent and other non-cash adjustments N/A 799 (2,523) 3,322

Vacant rents, development and other (3)

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Other excluded revenue (4)

N/A 15,868 (278) 16,146 N/A 16,057 1,917 14,140

N/A (171) 690 (861)

Spirit rental revenue (5)

N/A — (181,203) 181,203 N/A — — —

N/A — (183,525) 183,525

Totals $ 1,196,805 $ 947,550 $ 249,255

(1) The same store rental revenue percentage increased by 0.2% and 0.4% for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of June 30, 2024.

Nine months ended

September 30,

Number of Properties 2024 2023 Change

Properties acquired during 2024 & 2023

3,538 $ 941,640 $ 155,379 $ 786,261

Same store rental revenue (1)

11,574 2,518,545 2,511,272 7,273

Constant currency adjustment (2)

N/A (21,486) (22,048) 562

Properties sold during and prior to 2024

351 12,345 31,037 (18,692)

Straight-line rent and other non-cash adjustments N/A 6,046 (17,109) 23,155

Vacant rents, development and other (3)

345 63,442 59,758 3,684

Other excluded revenue (4)

N/A 15,888 2,517 13,371

Totals $ 3,536,420 $ 2,720,806 $ 815,614

(1) The same store rental revenue percentage increased by 0.2% and 0.3% for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively.

(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of September 30, 2024.

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

(3) Relates to the aggregate of (i) rental revenue from 302 and 288 properties that were available for lease during part of 2024 or 2023 for the three and six months ended June 30, 2024, and (ii) rental revenue for 56 and 47 properties under development or completed developments that do not meet our same store pool definition for the periods presented three and six months ended June 30, 2024.

(4) Primarily consists of lease termination fees of $16.3 million and $16.8 million for the three and six months ended June 30, 2024, respectively, recognized as reimbursements for tenant improvements and rental revenue.

(5) Amounts for the three months ended June 30, 2023 represent rental revenue from Spirit properties, which were not included in our financial statements prior to the close of the merger on January 23, 2024.

(3) Relates to the aggregate of (i) rental revenue from 312 and 295 properties that were available for lease during part of 2024 or 2023 for the three and nine months ended September 30, 2024, and (ii) rental revenue for 59 and 50 properties under development or completed developments that do not meet our same store pool definition for the periods presented three and nine months ended September 30, 2024.

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

(5) Amounts for the three months ended September 30, 2023 represent rental revenue from Spirit properties, which were not included in our financial statements prior to the close of the merger on January 23, 2024.

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

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If the property was owned by Spirit for the full comparative period and each of the other criteria were met, the property was included in our Same Store Pool.

Accordingly, Spirit properties have been included in the Same Store Pool for the quarter and have been excluded for the year-to-date calculation.

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

Of the 16,424 in-place leases in the portfolio, which excludes 279 vacant units, 13,545, or 82.5%, were under leases that provide for increases in rents through:

Of the 16,490 in-place leases in the portfolio, 13,544, or 82.1%, were under leases that provide for increases in rents through:

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

Rent based on a percentage of our clients' gross sales, or percentage rent, was $2.4 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively, and $7.7 million and $5.8 million for the six months ended June 30, 2024 and 2023, respectively.

Rent based on a percentage of our clients' gross sales, or percentage rent, was $3.1 million and $2.2 million for the three months ended September 30, 2024 and 2023, respectively, and $10.8 million and $8.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Percentage rent represents less than 1.0% of rental revenue.

At June 30, 2024, our portfolio of 15,450 properties was 98.8% leased with 185 properties available for lease or sale, as compared to 98.6% leased with 193 properties available for lease at December 31, 2023, and 99.0% leased with 137 properties available for lease at June 30, 2023.

At September 30, 2024, our portfolio of 15,457 properties was 98.7% leased with 196 properties available for lease or sale, as compared to 98.6% leased with 193 properties available for lease at December 31, 2023, and 98.8% leased with 159 properties available for lease at September 30, 2023.

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

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

Contractually obligated reimbursements by our clients for the three months ended June 30, 2024 decreased by $7.2 million as compared with the same period in 2023, primarily due to lower real estate taxes from a modification of tax remittance terms with one of our clients in the prior year period.

For the six months ended June 30, 2024, contractually obligated reimbursements increased $6.0 million as compared with the same period in 2023, primarily due to the growth of our portfolio due to acquisitions.

Contractually obligated reimbursements by our clients increased by $13.0 million and $19.0 million for the three and nine months ended September 30, 2024, primarily due to the growth of our portfolio due to acquisitions, partially offset by lower taxes for the nine months ended September 30, 2024 due to a modification of tax remittance terms with one of our clients in 2023.

Other Revenue

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

Other revenue increased by $30.8 million and $64.0 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, primarily due to an increase of $24.0 million and $44.1 million from interest income earned on loans and preferred equity investments for the three and six months ended June 30, 2024, respectively, in addition to higher interest income on financing receivables of $6.3 million and $18.9 million for three and six months ended June 30, 2024, respectively, driven by an increase in recent sale-leaseback transactions with above-market lease terms.

The following summarizes our total other revenue (in millions):

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September 30, Nine months ended

September 30,

2024 2023 Change 2024 2023 Change

Interest income on financing receivables $ 31.3 $ 29.9 $ 1.4 $ 92.7 $ 72.5 $ 20.2

Interest income on loans and preferred equity investments 27.7 — 27.7 71.8 — 71.8

Other 0.8 0.3 0.5 2.3 0.8 1.5

$ 59.8 $ 30.2 $ 29.6 $ 166.8 $ 73.3 93.5

Total Expenses

The following summarizes our total expenses (in thousands):

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

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2024 2023 Change 2024 2023 Change

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Provisions for impairment 96.9 16.8 80.1 282.9 59.8 223.1

Merger and integration-related costs 2,754 341 2,413 96,858 1,648 95,210

Merger, transaction, and other costs 8.6 2.9 5.7 105.5 4.5 101.0

Total expenses $ 1,103.2 $ 805.9 $ 297.3 $ 3,335.3 $ 2,347.3 $ 988.0

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Depreciation and Amortization

Depreciation and amortization increased by $133.3 million and $262.9 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, primarily due to the Merger with Spirit and the acquisition of properties in 2024 and 2023.

Depreciation and amortization increased by $106.7 million and $369.7 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, primarily due to the merger with Spirit, the acquisitions of properties in 2023 and 2024;

partially offset by property dispositions.

The Spirit merger contributed an additional $111.2 million and $303.9 million of depreciation and amortization for the three and nine months ended September 30, 2024, respectively.

Interest Expense

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

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

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2024 2023 2024 2023

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Weighted average interest rates 4.03 % 3.93 % 3.99 % 3.81 %

Interest expense increased by $63.1 million and $149.6 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, primarily due to the following:

(i) issuance of EUR-denominated notes in July 2023, (ii) issuance of GBP-denominated notes in December 2023, (iii) issuance of USD notes in January 2024, (iv) non-cash interest expense related to the discount of Spirit notes assumed in the merger, and (v) higher average balances and interest rates on the credit facility and commercial paper borrowings, all of which were partially offset by an increase in capitalized interest.

Interest expense increased by $77.2 million and $226.7 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, primarily due to an increase in average borrowings and weighted average interest rates, primarily due to issuance of senior notes at higher fixed interest rates, partially offset by an increase in capitalized interest driven by an increase in development.

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

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

Property expenses (excluding reimbursable) increased by $12.3 million and $19.1 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, and was primarily impacted by higher property taxes, repairs and maintenance, and property insurance.

Property expenses (excluding reimbursable) increased by $8.2 million and $27.2 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, primarily due to a higher number of properties available for lease compared with the same periods in 2023, in addition to acquisitions in 2023 and 2024 in which the lease terms do not obligate the tenant to pay certain expenses, which resulted in higher repairs and maintenance costs, property insurance and taxes.

Property Expenses (reimbursable)

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

Property expenses (reimbursable) decreased by $7.2 million and increased by $6.0 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, consistent with changes in our contractually obligated reimbursements billed.

Property expenses (reimbursable) increased by $13.0 million and $19.0 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023.

General and Administrative Expenses

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

General and administrative expenses increased by $8.2 million and $14.9 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, primarily due to higher employee costs compared to the prior year.

General and administrative expenses increased by $6.4 million and $21.3 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, primarily due to higher employee costs of $4.6 million and $14.5 million, respectively, and higher professional fees of $1.7 million and $3.7 million, respectively.

Provisions for Impairment

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

Provisions for impairment for the three and six months ended June 30, 2024 relate primarily to two office properties which were acquired and retained in our merger with VEREIT, Inc.

("VEREIT") in 2021, 17 properties leased to clients in bankruptcies, as well as certain properties that are more likely than not to be sold in the next twelve months, summarized in the following table (dollars in millions):

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

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2024 2023 2024 2023

Carrying value prior to impairment $ 281.9 $ 97.0 $ 443.9 $ 125.5

total provisions for impairment (1)

Provisions for impairment of real estate (1)

$ 33.1 $ 16.8 $ 208.6 $ 59.8

Carrying value after impairment $ 194.7 $ 67.2 $ 268.5 $ 82.5

Number of properties:

Classified as held for sale 24 — 26 1

Classified as held for investment 41 7 50 8

Sold 33 27 53 47

(1) Excludes provision for current expected credit loss of $9.3 million and $10.5 million for the three and six months ended June 30, 2024, respectively.

Merger and Integration-Related Costs

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

During the three and six months ended June 30, 2024, we incurred $2.8 million and $96.9 million, respectively, of merger-related transaction costs primarily related to Spirit, which largely consisted of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger.

For the three and six months ended June 30, 2023, we incurred $0.3 million and $1.6 million of merger and integration-related transaction costs, respectively, in conjunction with our merger with VEREIT in November 2021.

Provision for credit losses (2)

63.8 — 74.3 —

Provisions for impairment $ 96.9 $ 16.8 $ 282.9 $ 59.8

(1) See note 12 , Fair Value Measurements , to the consolidated financial statements for further details.

(2) See note 1, Summary of Significant Accounting Policies , to the consolidated financial statements for further details.

Merger, Transaction, and Other Costs

During the three and nine months ended September 30, 2024, we incurred $8.6 million and $105.5 million, respectively, of merger, transaction, and other costs consisting of $2.9 million and $99.8 million, respectively of transaction and integration-related costs related to Spirit, which largely consisted of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger, as well as $5.1 million for each of the respective periods related to the lease termination of a legacy corporate facility.

For the three and nine months ended September 30, 2023, we incurred $2.9 million and $4.5 million of merger, transaction, and other costs, respectively, in conjunction with our merger with VEREIT in November 2021.

Gain on Sales of Real Estate

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2024 2023 2024 2023

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

Foreign currency and derivative gain (loss), net for the three and six months ended June 30, 2024 was a gain of $0.5 million and $4.6 million, respectively, primarily due to derivative gains reclassified from AOCI and undesignated foreign currency swaps offsetting losses on remeasurement of net foreign denominated liabilities.

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

Foreign currency and derivative (loss) gain, net increased by $1.1 million and decreased by $2.1 million for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, primarily due to fluctuations in foreign currency rates related to remeasurement of intercompany debt.

Equity in Earnings of Unconsolidated Entities

Equity in earnings for the three and six months ended June 30, 2024 primarily relates to our share of earnings in joint ventures that we made investments in during the fourth quarter of 2023.

Equity in earnings for the three and six months ended June 30, 2023 is attributable to distributions in excess of our basis related to three equity method investments acquired in our merger with VEREIT in November of 2021, all of which were sold in 2022.

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

Equity in earnings of unconsolidated entities was $5.1 million and $5.4 million for the three and nine months ended September 30, 2024, respectively, compared to $0.4 million for the nine months ended September 30, 2023.

There was no equity in earnings for the three months ended September 30, 2023.

The increase in equity in earnings of unconsolidated entities is due to an increase in our joint venture investments.

Other Income, Net

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

The increase of $3.1 million and $5.8 million for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, is primarily due to an increase in interest earned on cash and cash equivalents attributable to higher rates and average balances.

Other income, net decreased by $2.5 million for the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to a loss of $1.5 million on the sale of a loan, lower insurance proceeds, partially offset by higher interest income on short-term investments.

Other income, net increased by $3.3 million for the nine months ended September 30, 2024 as compared with the same period in 2023, primarily due to higher interest income on short-term investments, partially offset by lower insurance proceeds compared to the prior year.

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

The increase of $2.7 million and $6.3 million in income taxes for the three and six months ended June 30, 2024 as compared with the same periods in 2023, respectively, is primarily attributable to higher taxable income in the U.K.

The increase of $4.0 million and $10.3 million in income taxes for the three and nine months ended September 30, 2024 as compared with the same periods in 2023, respectively, is primarily attributable to higher taxable income in the U.K.

Preferred Stock Dividends

The increase in preferred stock dividends of $2.6 million and $7.8 million for the three and nine months ended September 30, 2024, respectively, as compared with the same period in 2023, is due to the issuance of Realty Income Series A Preferred Stock in connection with the Spirit merger.

Excess of Redemption Value over Carrying Value of Preferred Shares Redeemed

In September 2024, we redeemed all 6.9 million of Realty Income Series A Preferred Stock outstanding.

The excess of the $25.00 liquidation price per share over the carrying value of Realty Income Series A preferred stock redeemed resulted in a loss on redemption of $5.1 million for the three and nine months ended September 30, 2024.

NON-GAAP FINANCIAL MEASURES

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Nareit established an EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDA re ) it believed would provide investors with a consistent measure to help make investment decisions among REITs.

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

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

Our definition of “Adjusted EBITDA re ” is generally consistent with the Nareit definition, other than our adjustment to remove foreign currency and derivative gain and loss and merger, transaction, and other costs.

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

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

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Annualized Adjusted EBITDA re should be considered along with, but not as an alternative to net income as a measure of our operating performance.

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

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

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

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

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

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

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

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Three months ended

September 30,

Net income $ 271,124 $ 233,877

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96,920 16,808

Merger and integration-related costs 2,754 341

Merger, transaction, and other costs 8,610 2,884

Gain on sales of real estate (50,563) (7,572)

Foreign currency and derivative (gain) loss, net (511) 2,552

Foreign currency and derivative loss, net 1,672 2,813

Proportionate share of adjustments from unconsolidated entities 20,340 —

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$ 26,699,279 $ 20,044,277

Preferred Stock 167,394 —

Net Debt and Preferred Stock $ 26,096,057 $ 19,284,773

Net Debt/Annualized Adjusted EBITDA re

Net Debt/Annualized Pro Forma Adjusted EBITDA re

Net Debt and Preferred/ Annualized Adjusted EBITDA re

Net Debt and Preferred/ Annualized Pro Forma Adjusted EBITDA re

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

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

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

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

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

Three months ended

September 30,

Annualized pro forma adjustments from investments acquired or stabilized $ 32,378 $ 79,141

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

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

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

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

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June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 % Change 2024 2023 % Change

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September 30,

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FFO available to common stockholders $ 854,926 $ 736,146 $ 2,569,742 $ 2,108,422

Merger and integration-related costs 2,754 341 96,858 1,648

Merger, transaction, and other costs (1)

8,610 2,884 105,468 4,532

Normalized FFO available to common stockholders $ 863,536 $ 739,030 $ 2,675,210 $ 2,112,954

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Diluted Normalized FFO $ 865,003 $ 740,405 $ 2,679,612 $ 2,117,120

FFO per common share:

FFO per common share, basic and diluted:

$ 0.98 $ 1.04 $ 2.99 $ 3.09

Normalized FFO per common share:

Basic $ 0.99 $ 1.04 $ 3.12 $ 3.10

Diluted $ 0.99 $ 1.04 $ 3.11 $ 3.10

Normalized FFO per common share, basic and diluted $ 1.07 $ 1.02 $ 2.12 $ 2.06

Distributions paid to common stockholders $ 687,144 $ 543,343 $ 1,999,858 $ 1,555,679

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Diluted 873,974 711,338 861,300 683,925

We consider FFO and Normalized FFO to be appropriate supplemental measures of a REIT’s operating performance as they are based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO, and adds back merger and integration-related costs, for Normalized FFO.

(1) During the three and nine months ended September 30, 2024, we incurred $8.6 million and $105.5 million, respectively, of merger, transaction, and other costs consisting primarily of $2.9 million and $99.8 million, respectively, of transaction and integration-related costs related to Spirit and $5.1 million for each of the respective periods related to the lease termination of a legacy corporate facility.

We consider FFO and Normalized FFO to be appropriate supplemental measures of a REIT’s operating performance as they are based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO, and adds back merger, transaction, and other costs, for Normalized FFO.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time.

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September 30, Nine months ended

September 30,

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

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

These reclassifications had no impact on previously reported AFFO.

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September 30, Nine months ended

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Normalized FFO available to common stockholders 863,536 739,030 2,675,210 2,112,954

Excess of redemption value over carrying value of preferred shares redeemed 5,116 — 5,116 —

Amortization of share-based compensation 6,401 6,231 22,920 20,154

Amortization of net debt discounts (premiums) and deferred financing costs 4,861 (10,244) 9,861 (34,441)

Amortization of acquired interest rate swap value (2)

3,711 — 10,225 —

Non-cash gain on interest rate swaps (1,799) (1,799) (3,600) (3,600)

Non-cash change in allowance for credit losses 63,769 — 74,315 —

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

1,797 1,797 3,595 3,595

Leasing costs and commissions (2,841) (1,392) (5,897) (6,868)

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Diluted AFFO $ 917,039 $ 722,727 $ 2,703,930 $ 2,048,006

AFFO per common share, basic and diluted $ 1.06 $ 1.00 $ 2.09 $ 1.98

AFFO per common share:

Basic $ 1.05 $ 1.02 $ 3.14 $ 3.00

Diluted $ 1.05 $ 1.02 $ 3.14 $ 2.99

Distributions paid to common stockholders $ 687,144 $ 543,343 $ 1,999,858 $ 1,555,679

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

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

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

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

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

(2) Includes the amortization of the purchase price allocated to interest rate swaps acquired in the Spirit merger.

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

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

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PROPERTY PORTFOLIO INFORMATION

At June 30, 2024, out of the 15,450 properties that we owned or held interests in, 15,265 properties were primarily leased under net lease agreements.

At September 30, 2024, most of the properties in our portfolio were leased under net lease agreements.

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

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Home Improvement 6.0 5.9 5.6 5.1 4.3

Drug Stores 4.9 5.5 5.7 6.6 8.2

Restaurants-Quick Service 4.9 5.2 6.0 6.6 5.3

Drug Stores 4.8 5.5 5.7 6.6 8.2

Automotive Service 4.5 4.3 4.0 3.2 2.7

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Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2024 (dollars in thousands):

The following table sets forth certain property type information regarding our property portfolio as of September 30, 2024 (dollars in thousands):

Property Type

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(1) Represents leasable building square footage and includes our portfolio of unconsolidated joint ventures based on ownership percentage.

Excludes 2,962 acres of leased land categorized as agriculture at June 30, 2024.

Excludes 2,962 acres of leased land categorized as agriculture at September 30, 2024.

(2) "Other" primarily includes 15 properties classified as office with $46.0 million in annualized contractual rent, 27 properties classified as agriculture with $38.3 million in annualized contractual rent, three properties classified as data centers with $25.9 million in annualized contractual rent, and 21 properties classified as country clubs with $24.4 million in annualized contractual rent, as well as one land parcel under development.

Client Diversification

The following table sets forth the 20 largest clients in our property portfolio, expressed as a percentage of total portfolio annualized contractual rent, which does not give effect to deferred rent or interest earned on loans and preferred equity investments, at June 30, 2024:

Client Number of

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Lifetime Fitness 38 2.0

BJ's Wholesale Club 44 1.6

(B&Q) Kingfisher 51 1.6

Sainsbury's 37 1.6

BJ's Wholesale Club 44 1.6

CVS Pharmacy 213 1.2

LA Fitness 66 1.2

MGM (Bellagio) 1 1.2

Walmart / Sam's Club 72 1.2

Tractor Supply 207 1.2

MGM (Bellagio) (2)

AMC Theaters 39 1.1

Red Lobster 211 1.0

Walmart / Sam's Club 63 1.0

Home Depot 38 1.0

Total 5,548 35.9 %

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

(2) Represents our proportionate share of the common equity ownership in the unconsolidated joint venture.

Lease Expirations

The following table sets forth certain information regarding the timing of the lease term expirations in our portfolio (excluding rights to extend a lease at the option of the client) and their contribution to total portfolio annualized contractual rent as of June 30, 2024 (dollars in thousands):

Total Portfolio (1)

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(1) Leases on our multi-client properties are counted separately in the table above.

This table excludes 279 vacant units.

Geographic Diversification

The following table sets forth certain geographic information regarding our property portfolio as of June 30, 2024 (dollars in thousands):

The following table sets forth certain geographic information regarding our property portfolio as of September 30, 2024 (dollars in thousands):

Percent Leased

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

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

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

CRITICAL ACCOUNTING POLICIES

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis