What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-21 · 210 added, 196 removed, 385 unchanged (51% of the section changed)

3 unchanged sentences

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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

We are structured as a REIT requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders.

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

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

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

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

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

Realty Income (NYSE:

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

Founded in 1969, we invest in diversified commercial real estate and, as of December 31, 2024, have a portfolio of over 15,600 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 invest in people and places to deliver dependable monthly dividends that increase over time.

Since our founding, we have declared 656 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 December 31, 2024, we owned or held interests in 15,621 properties, with approximately 339.4 million square feet of leasable space leased to 1,565 clients doing business in 89 separate industries.

Of the 15,621 properties in our portfolio as of December 31, 2024, 15,316, or 98.0%, were single-client properties, and the remaining were multi–client properties.

Our total portfolio had a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 9.3 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 December 31, 2024 was $4.97 billion.

As of December 31, 2024, approximately 32.4% of our total portfolio annualized contractual rent came from properties leased to our investment grade clients, their subsidiaries or affiliated companies.

As of December 31, 2024, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 36.4% of our annualized rent and 10 of these clients had investment grade credit ratings or were subsidiaries or affiliates of investment grade companies.

Approximately 91% of our annualized retail contractual rent as of December 31, 2024, was 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 $303.1 million, $274.2 million, and $184.7 million for the years ended December 31, 2024, 2023, and 2022, respectively.

RECENT DEVELOPMENTS

Closing of Spirit Realty Capital Merger

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

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

retail, industrial and other properties across 49 states.

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

Increases in Monthly Dividends to Common Stockholders

We have continued our 56-year history of paying monthly dividends.

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

In addition, we have increased the dividend five times during 2024 and twice during 2025.

As of February 2025, we have paid 109 consecutive quarterly dividend increases and increased the dividend 129 times since our listing on the NYSE in 1994.

2 unchanged sentences

1st increase Dec 2023 Jan 2024 $ 0.2565 $ 0.0005

2nd increase Feb 2023 Mar 2023 $ 0.2545 $ 0.0060

3rd increase Mar 2023 Apr 2023 $ 0.2550 $ 0.0005

2nd increase Mar 2024 Apr 2024 $ 0.2570 $ 0.0005

3rd increase May 2024 Jun 2024 $ 0.2625 $ 0.0055

4th increase Jun 2024 Jul 2024 $ 0.2630 $ 0.0005

5th increase Sep 2024 Oct 2024 $ 0.2635 $ 0.0005

2024 Dividend increase

2025 Dividend increases

1st increase Dec 2024 Jan 2025 $ 0.2640 $ 0.0005

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

2nd increase Feb 2025 Mar 2025 $ 0.2680 $ 0.0040

The dividends paid per share during the year ended December 31, 2024 totaled $3.126, as compared to $3.051 during the year ended December 31, 2023, an increase of $0.075, or 2.5%.

The monthly dividend of $0.2680 per share represents a current annualized dividend of $3.216 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 $53.41 on December 31, 2024.

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

Investments During 2023

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

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

Closing of Spirit Merger

On January 23, 2024, we closed on our previously announced stock-for-stock merger with Spirit.

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

, to the consolidated financial statements contained in this annual report.

During the year ended December 31, 2024, we invested $3.9 billion at an initial weighted average cash yield of 7.4%, including an investment in 546 properties, properties under development or expansion, and investments in loans.

See notes 4 , Investments in Real Estate, 5, Investments in Unconsolidated Entities, and 6, Investments in Loans and Financing Receivables, to the consolidated financial statements contained in this annual report for further details.

During the year ended December 31, 2024, we sold 294 properties with total net proceeds received of $589.5 million.

Equity Capital Raising

We have an At-The-Market ("ATM") program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices or by any other methods permitted by applicable law.

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

During 2024, we raised $1.8 billion of proceeds from the sale of common stock, at a weighted average price of $58.33 per share, primarily through proceeds from the sale of common stock through our ATM program.

The ATM program issuances during 2024 included 30.2 million shares issued pursuant to forward sale confirmations.

As of December 31, 2024, 1.8 million shares of common stock subject to forward sale confirmations have been executed but not settled.

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

See note 15 , Stockholders' Equity , to the consolidated financial statements contained in this annual report 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.

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

1 unchanged sentence

(“Spirit OP”).

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

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

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

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

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

See note 10 .

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

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

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

See note 10, Notes Payable , to the consolidated financial statements contained in this annual report for further details.

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, to the consolidated financial statements contained in this annual report.

Portfolio Discussion

1 unchanged sentence

At December 31, 2024, we had 205 properties available for lease or sale out of 15,621 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, properties with possession pending, and include properties owned by unconsolidated joint ventures.

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:

14 unchanged sentences

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

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

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

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

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

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

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

During the three months ended December 31, 2024, the new annualized contractual rent on re-leases was $52.5 million, as compared to the previous annual rent of $48.9 million on the same units, representing a rent recapture rate of 107.4% on the units re-leased.

During the year ended December 31, 2024, the new annualized contractual rent on re-leases was $184.0 million, as compared to the previous annual rent of $174.2 million on the same units, representing a rent recapture rate of 105.6% on the units re-leased.

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

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

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

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

Investments in Unconsolidated Joint Ventures

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

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

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

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

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

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

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

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

Impact of Inflation

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

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

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

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

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

3 unchanged sentences

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

Impact of Real Estate and Credit Markets

Impact of Real Estate and Capital Markets

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

1 unchanged sentence

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

Impact of Current Macroeconomic Conditions

We continue to monitor developments related to macroeconomic factors that could have an adverse impact on our business and our clients.

Our clients face additional challenges, including potential changes in consumer confidence levels, behavior and spending and increased operational expenses, such as with respect to labor costs.

The extent of the future effects on our business, results of operations, cash flows, and growth strategies is highly uncertain and will ultimately depend on future developments, none of which can be predicted.

LIQUIDITY AND CAPITAL RESOURCES

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

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

As of December 31, 2024, we had $3.7 billion of liquidity, which consists of cash and cash equivalents of $445.0 million, unsettled ATM forward equity of $91.8 million, and $3.1 billion of availability under our $4.25 billion unsecured revolving credit facility, net of $1.1 billion of borrowing on the revolving credit facility and after deducting $67.3 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 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.

We expect to fund our operating expenses and other short-term liquidity requirements, including property acquisitions and development costs, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs, and cash distributions to common stockholders, primarily through cash provided by operating activities, borrowings under our revolving credit facility, short-term term loans, and under our commercial paper programs, and through public securities offerings.

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

• Cash and cash equivalents;

• Future cash flows from operations;

• Issuances of common stock or debt;

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

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.

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

• Additional borrowings under our revolving credit facility or commercial paper programs, which are backstopped by our credit facility;

• Short-term loans;

• Asset dispositions;

• Credit investment repayments

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 are sufficient to meet our liquidity needs for the next twelve months.

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

1 unchanged sentence

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

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

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

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

2 unchanged sentences

Capitalization

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

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

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

As of December 31, 2024, our total capitalization was $74.9 billion.

Total capitalization consisted of $47.8 billion of common equity (based on the December 31, 2024 closing price on the NYSE of $53.41 and assuming the conversion of 2.7 million common units of Realty Income, L.P.), and total outstanding borrowings of $27.2 billion on our revolving credit facility, commercial paper, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums).

Our total debt to capitalization was 36.3% at December 31, 2024.

Universal Shelf Registration

4 unchanged sentences

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.

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 at prevailing market prices or at negotiated prices or by any other methods permitted by applicable law.

As of December 31, 2024, there were approximately 1.8 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $91.8 million in expected net proceeds, which have been executed at a weighted average price of $51.80 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).

2 unchanged sentences

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

Debt and Financing Activities

Debt Financing Activities

At December 31, 2024, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $26.5 billion, with a weighted average maturity of 5.8 years and a weighted average interest rate of 3.9%.

As of December 31, 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 year ended December 31, 2023 below.

See notes 7 through 10 to the consolidated financial statements contained in this annual report for additional information about our outstanding debt, along with our debt financing activities during the year ended December 31, 2024 below.

Note Issuances

During the year ended December 31, 2023, we issued the following notes and bonds (in millions):

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

January 2023 January 2026 $ 500.0 99.618 % 5.189 %

January 2023 March 2030 $ 600.0 98.813 % 5.047 %

April 2023 December 2028 $ 400.0 98.949 % 4.912 %

April 2023 July 2033 $ 600.0 98.020 % 5.148 %

July 2023 July 2030 € 550.0 99.421 % 4.975 %

July 2023 July 2034 € 550.0 99.506 % 5.185 %

December 2023 December 2031 £ 300.0 99.298 % 5.862 %

December 2023 December 2039 £ 450.0 99.250 % 6.075 %

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

During the year ended December 31, 2024, we issued the following notes and bonds:

Note Issuances Date of Issuance Maturity Date Principal amount

(in millions) Price of par value Effective yield to maturity

January 2024 February 2029 $ 450.0 99.23 % 4.923 %

January 2024 February 2034 $ 800.0 98.91 % 5.265 %

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 OP.

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

In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings.

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

The 2023 term loans mature in January 2025 with one remaining 12-month maturity extension available at our option.

In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate.

As of December 31, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%.

See note 10, Notes Payable , to the consolidated financial statements contained in this annual report for further details.

Note Repayments

During the year ended December 31, 2024, we repaid the following notes, plus accrued and unpaid interest upon maturity:

Note Repayments Date of Issuance Maturity Date Principal amount

(in millions)

February 2014 February 2024 $ 500.0

June 2014 July 2024 $ 350.0

Term Loan Issuances

In January 2024, in connection with the Merger, 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”).

Term Loan Redemption

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

Mortgage Repayments

During the year ended December 31, 2024, we made $740.5 million in principal payments, including the full repayment of five mortgages for $735.9 million.

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

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

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

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

5 unchanged sentences

< 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

3 unchanged sentences

Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of January 1, 2024, 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 December 31, 2024 (in thousands, for trailing twelve months):

Net income available to common stockholders

Net income attributable to the Company

interest expense, excluding the amortization of deferred financing costs

14 unchanged sentences

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

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

borrowings would have been at the SOFR, plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.95% over SOFR, for British Pound Sterling ("GBP") borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.8826% over SONIA, and for Euro ("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.

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

6 unchanged sentences

These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that our ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.

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

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

Material Cash Requirements

2 unchanged sentences

Unsecured Term

Mortgages Payable Senior Unsecured Notes and Bonds (3)

Leases Paid by the Company (5)

Leases Paid by

Loans Mortgages Payable Senior Unsecured Notes and Bonds Interest (2)

Ground Leases Paid by the Company (3)

Ground Leases Paid by

Our Clients (4)

4 unchanged sentences

2028 — — 1.3 2,499.8 633.2 8.9 27.5 2.2 3,172.9

2029 — — 1.3 2,387.5 589.0 10.0 25.0 1.9 3,014.7

Thereafter — — 1.0 12,312.8 2,922.1 406.7 336.4 11.0 15,990.0

Totals $ 764.4 $ 1,332.0 $ 822.4 $ 18,562.1 $ 5,204.2 $ 369.0 $ 382.1 $ 772.7 $ 28,208.9

Total $ 1,130.2 $ 2,360.6 $ 81.3 $ 22,938.7 $ 6,728.8 $ 466.8 $ 483.6 $ 788.3 $ 34,978.3

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

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

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

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

At December 31, 2024, there were $1,062.9 million of outstanding borrowings under our revolving credit facility, and commercial paper programs outstanding were $67.3 million, which mature between January 2025 and March 2025.

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

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

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

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

(3) We currently pay the ground lessors directly for the rent under certain ground lease arrangements.

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

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

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

(5) “Other” consists of $683.3 million of commitments under construction contracts, $93.5 million for tenant improvements, re-leasing costs, recurring capital expenditures, and non-recurring building improvements, and $11.5 million for contingent purchase consideration obligations related to leasing activities for a multi-tenant property acquired.

Investments in Unconsolidated Entities

2 unchanged sentences

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 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.

In 2024, our cash distributions to common stockholders totaled $2.69 billion, or approximately 126.1% of our estimated taxable income of $2.13 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 estimated taxable income reflects non-cash deductions for depreciation and amortization.

2 unchanged sentences

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

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

We distributed $3.126 per share to stockholders during the year ended December 31, 2024, representing 74.6% of our diluted Adjusted Funds from Operations Available to Common Stockholders ("AFFO") per share of $4.19.

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.

5 unchanged sentences

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

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

Distributions in excess of that basis generally will be taxable as a capital gain to stockholders.

Approximately 30.4% of the distributions to our common stockholders, made or deemed to have been made in 2024, were classified as a return of capital for federal income tax purposes.

RESULTS OF OPERATIONS

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

The following is a comparison of our results of operations for the years ended December 31, 2024 and 2023.

Total Revenue

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

The following summarizes our total revenue (in millions):

Years ended December 31,

8 unchanged sentences

Rental Revenue (excluding reimbursable)

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

The table below summarizes the increase in rental revenue (excluding reimbursable) in the years ended December 31, 2024 and 2023 (dollars in millions):

Number of Properties Years ended December 31,

13 unchanged sentences

N/A 19.6 2.8 16.8

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

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

Total $ 4,740.6 $ 3,684.0 $ 1,056.6

(1) The same store rental revenue percentage increased by 0.5% for the year ended December 31, 2024 as compared with the same period in 2023.

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

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

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

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

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

In addition, the same store pool excludes properties assumed on January 23, 2024 as a result of the Merger.

(3) Relates to the aggregate of (i) rental revenue from 315 properties that were available for lease during part of 2024 or 2023 for the year ended December 31, 2024, and (ii) rental revenue for 50 properties under development or completed developments that do not meet our same store pool definition for the year ended December 31, 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.

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;

1 unchanged sentence

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

Of the 16,694 in-place leases in the portfolio, 13,734, or 82.3%, 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 client's gross sales, or percentage rent, was $14.8 million and $14.9 million for the years ended December 31, 2023 and 2022, respectively, which represents less than 1% of rental revenue.

At December 31, 2023, our portfolio of 13,458 properties was 98.6% leased with 193 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022.

Rent based on a percentage of our clients' gross sales, or percentage rent, was $16.0 million and $14.8 million for the years ended December 31, 2024 and 2023, respectively.

Percentage rent represents less than 1% of rental revenue.

At December 31, 2024, our portfolio of 15,621 properties was 98.7% leased with 205 properties available for lease or sale, as compared to 98.6% leased with 193 properties available for lease at December 31, 2023.

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

2 unchanged sentences

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

The increase in contractually obligated reimbursements by our clients for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher recoverable real estate tax taxes from overall portfolio growth.

Contractually obligated reimbursements by our clients increased by $28.9 million for the year ended December 31, 2024 as compared with the same period in 2023, primarily due to the growth of our portfolio due to acquisitions;

partially offset by lower recoverable taxes as a result of a modification of tax remittance terms with a client in the prior year.

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.

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

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

Years ended December 31,

2024 2023 Change

Interest income on financing receivables $ 124.4 $ 102.8 $ 21.6

Interest income on loans and preferred equity investments 100.0 16.8 83.2

Other 3.0 1.2 1.8

$ 227.4 $ 120.8 106.6

Total Expenses

The following summarizes our total expenses (in thousands):

The following summarizes our total expenses (in millions):

Years ended December 31,

6 unchanged sentences

Provisions for impairment 425.8 87.1 338.7

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

Merger, transaction, and other costs, net 96.3 14.5 81.8

Total expenses $ 4,489.3 $ 3,188.7 $ 1,300.6

5 unchanged sentences

Depreciation and Amortization

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

Depreciation and amortization increased by $500.4 million for the year ended December 31, 2024 as compared with the same period in 2023, primarily due to the Merger and the acquisitions of properties in 2023 and 2024, which were partially offset by property dispositions.

Real estate assets acquired in the Merger contributed an additional $413.4 million of depreciation and amortization for the year ended December 31, 2024.

Interest Expense

5 unchanged sentences

Amortization of debt origination and deferred financing costs 23,939 26,670

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

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

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

Gain on interest rate swaps (7,180) (7,189)

Amortization of net mortgage premiums and discounts 30 (12,803)

Amortization of net note premiums and discounts (3,309) (60,657)

Capital lease obligation 2,025 1,509

4 unchanged sentences

Weighted average interest rates 4.07 % 3.83 %

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

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

Interest expense increased by $286.6 million for the year ended December 31, 2024 as compared with the same period in 2023, primarily due to higher average borrowings and weighted average interest rates.

Included in the overall increase, $67.4 million was from lower non-cash amortization of debt discounts and premiums, primarily due to the amortization of the discount recorded to reflect the fair value of senior notes exchanged in the Merger.

These increases were partially offset by higher capitalized interest driven by increased development activity.

See notes to the accompanying consolidated financial statements contained in this annual report for additional information regarding our indebtedness.

Property Expenses (excluding reimbursable)

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

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

Property expenses (excluding reimbursable) increased by $31.8 million for the year ended December 31, 2024 as compared with the same period in 2023, 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.

The increase in property expenses (reimbursable) for the year ended December 31, 2023 is proportional to overall portfolio growth.

Property expenses (reimbursable) increased by $28.9 million for the year ended December 31, 2024 as compared with the same period in 2023 primarily due to an increase in portfolio size, resulting in higher common area maintenance, property taxes, and insurance expenses paid on behalf of our clients.

General and Administrative Expenses

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

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

General and administrative expenses increased by $32.4 million for the year ended December 31, 2024 as compared with the same period in 2023, primarily due to higher employee costs of $19.6 million and higher professional fees of $7.9 million as we continue to invest in our people and our platform.

Provisions for Impairment

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

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

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

Years ended December 31,

Carrying value prior to impairment $ 194.5 $ 140.9

total provisions for impairment (1)

(82.2) (25.9)

Carrying value after impairment $ 112.3 $ 115.0

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

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.

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

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

Provisions for impairment of real estate $ 319.0 $ 82.2

Provision for credit losses 106.8 4.9

Provisions for impairment $ 425.8 $ 87.1

Provisions for impairment increased by $338.7 million for the year ended December 31, 2024, as compared with the same period in 2023, as a result of increases of $236.8 million in impairment of real estate, primarily due to a higher number of properties impaired under the held for sale model, and $101.9 million in higher credit losses recognized on financing receivables for distressed clients accounted for under sales leaseback transactions.

Merger, Transaction, and Other Costs, Net

During the year ended December 31, 2024, we incurred $96.3 million of merger, transaction, and other costs, net consisting of $86.7 million 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 related to the lease termination of a legacy corporate facility, and $4.5 million of organization costs incurred related to our private fund.

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

Gain on Sales of Real Estate

4 unchanged sentences

Gain on sales of real estate $ 117.3 $ 25.7

Foreign Currency and Derivative (Loss) Gain, Net

Foreign Currency and Derivative Gain (Loss), Net

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

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

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

Foreign currency and derivative (loss) gain, net for the year ended December 31, 2023 was a loss of $13.4 million, primarily due to foreign currency fluctuations related to the remeasurement of intercompany debt.

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

As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022.

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

Equity in Income and Impairment of Investment in Unconsolidated Entities

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

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

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

Net foreign currency gain and loss are primarily related to the remeasurement of intercompany debt from foreign subsidiaries and outstanding borrowings denominated in the local currencies we invest in.

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 was a $3.4 million gain for the year ended December 31, 2024 as compared $13.4 million loss with the same period in 2023, primarily due to the impact of foreign currency fluctuations on the remeasurement of intercompany debt.

Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated entities was $7.8 million for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31, 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 decrease of $6.7 million for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to lower gains on insurance proceeds from recoveries on property losses exceeding our carrying value.

Other income, net decreased by $0.2 million for the year ended December 31, 2024 as compared with the same period in 2023, primarily due to lower gains on insurance proceeds, largely offset by higher interest on short-term investments.

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

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

partially offset by lower UK tax rates.

The increase of $14.6 million in income taxes for the year ended December 31, 2024 as compared with the same period in 2023 is primarily attributable to higher taxable income in the U.K.

Preferred Stock Dividends

The increase in preferred stock dividends of $7.8 million for the year ended December 31, 2024 as compared with the same period in 2023 is due to the issuance of Realty Income Series A Preferred Stock in connection with the 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 year ended December 31, 2024.

CRITICAL ACCOUNTING POLICIES

5 unchanged sentences

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

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

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

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

We believe the following are our most critical accounting policies and estimates:

Allocation of the Purchase Price of Real Estate Acquisitions

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

When acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to:

We evaluate whether or not substantially all of the value of acquired assets is concentrated in a single identifiable asset or group of identifiable assets to determine whether a transaction is accounted for as an asset acquisition or a business combination.

A majority of our acquisitions qualify as asset acquisitions and the transaction costs associated with those acquisitions are capitalized.

However, for transactions that qualify as business combinations, such as the Merger, we expense the transaction costs and categorize them as merger, transaction, and other costs, net in our consolidated statements of income and comprehensive income.

For business combinations, we recognize the amount of any purchase consideration that exceeds the fair value of all identified assets acquired and liabilities assumed as goodwill and may record measurement period adjustments within one year of the acquisition date as permitted under ASC 805, Business Combinations (for more details see note 2, Merger with Spirit Realty Capital, Inc.

to our consolidated financial statements contained in this annual report).

For asset acquisitions, we allocate the cost of real estate acquired, inclusive of transaction costs, to:

(1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values.

For business combinations, all assets acquired and liabilities assumed are recorded at fair value.

The difference between the purchase consideration and the aggregated fair value is recognized as goodwill or a gain on bargain purchase.

Intangible assets and liabilities consist of above-market or below-market lease value and the value of in-place leases, as applicable.

Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent.

Additionally, above-market rents on leases acquired through sale-leaseback transactions under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on leases under which we are a lessor are accounted for as prepaid rent.

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

4 unchanged sentences

Provisions for Impairment - Real Estate Assets

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

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

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

8 unchanged sentences

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 (which is consistent with our previous calculations of "Adjusted EBITDA").

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, net.

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, net, (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.

4 unchanged sentences

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

We define Annualized Pro Forma Adjusted EBITDA re as Annualized Adjusted EBITDA re , subject to certain adjustments to incorporate Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDA re from properties we disposed of during the applicable quarter, and 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.

1 unchanged sentence

The Annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes.

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

Management also uses our ratios of net debt-to-Annualized Adjusted EBITDA re and net debt-to Annualized Pro Forma Adjusted EBITDA re as measures of leverage in assessing our financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share 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.

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

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.

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

Three months ended December 31,

Three months ended

Net income $ 201,350 $ 219,762

208,313 131,290

Loss on extinguishment of debt — —

Interest 268,149 208,313

Income taxes 20,102 15,803

Depreciation and amortization 606,671 475,856

475,856 438,174

Provisions for impairment 142,966 27,281

Merger and integration-related costs 9,932 903

Merger, transaction, and other costs, net (9,176) 9,932

Gain on sales of real estate (24,985) (5,992)

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

Gain on settlement of foreign currency forwards — 2,139

Foreign currency and derivative (gain) loss, net (535) 18,371

Proportionate share of adjustments from unconsolidated entities 18,991 14,983

15 unchanged sentences

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

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

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

Three months ended December 31,

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

Annualized pro forma adjustments from properties disposed (2,093) (532)

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 annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes.

The following table summarizes our Annualized Pro Forma Adjustments related to our Annualized Pro Forma Adjusted EBITDA re calculation for the periods indicated below (in thousands):

Three months ended

Annualized pro forma adjustments from investments acquired or stabilized $ 82,848 $ 77,012

Annualized pro forma adjustments from investments disposed (3,705) (2,093)

Annualized Pro Forma Adjustments $ 79,143 $ 74,919

1 unchanged sentence

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

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

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

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

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

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

Years ended December 31,

24 unchanged sentences

FFO available to common stockholders $ 3,467,659 $ 2,822,138

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

Merger, transaction, and other costs, net 96,292 14,464

Normalized FFO available to common stockholders $ 3,563,951 $ 2,836,602

13 unchanged sentences

Diluted 865,842 694,819

(1) Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022.

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.

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, net, 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.

3 unchanged sentences

We define diluted AFFO as AFFO adjusted for dilutive noncontrolling interests.

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

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

Years ended December 31,

10 unchanged sentences

GAAP measure) to Normalized FFO and AFFO.

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.

Years ended December 31,

3 unchanged sentences

Normalized FFO available to common stockholders 3,563,951 2,836,602

Gain on extinguishment of debt — (367)

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

Amortization of share-based compensation 32,741 26,227

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

(44,568) (67,150)

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

Amortization of net debt discounts (premiums) and deferred financing costs 15,361 (44,568)

Amortization of acquired interest rate swap value (2)

Non-cash change in allowance for credit losses (3)

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

106,801 4,874

Leasing costs and commissions (8,558) (9,878)

2 unchanged sentences

Amortization of above and below-market leases, net 55,870 79,101

Deferred tax expense 3,552 —

Proportionate share of adjustments for unconsolidated entities (2,078) 932

Other adjustments (4)

23,040 26,264

AFFO available to common stockholders $ 3,621,437 $ 2,774,870

10 unchanged sentences

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

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

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 Merger.

(3) Credit losses primarily relate to the impairment of financing receivables.

(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, 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.

2 unchanged sentences

GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders.

Presentation of the information regarding FFO, Normalized FFO, and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO, Normalized FFO, and AFFO in the same way, so comparisons with other REITs may not be meaningful.

so comparisons with other REITs may not be meaningful.

Furthermore, FFO, Normalized FFO, and AFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as alternatives to net income as an indication of our performance.

2 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis