UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, ~~2017,~~2023, or

☐Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-13374

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)

	~~Maryland~~	~~33-0580106~~
Maryland			33-0580106
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification Number)

11995 El Camino Real, San Diego, California 92130

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (858) 284-5000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, $0.01 Par Value	O	New York Stock Exchange
1.125% Notes due 2027	O27A	New York Stock Exchange
1.875% Notes due 2027	O27B	New York Stock Exchange
1.625% Notes due 2030	O30	New York Stock Exchange
4.875% Notes due 2030	O30A	New York Stock Exchange
1.750% Notes due 2033	O33A	New York Stock Exchange
5.125% Notes due 2034	O34	New York Stock Exchange
2.500% Notes due 2042	O42	New York Stock Exchange

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No o

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer," “accelerated filer,” ~~“accelerated filer”~~"smaller reporting company," and ~~“smaller reporting company”~~"emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerx

☒

Accelerated filero

☐

Non-accelerated filero

☐

Smaller reporting companyo

☐

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x

☒

There were ~~281,785,414~~ 723,923,644shares of common stock outstanding as of ~~October 19, 2017.~~

November 3, 2023.

Table of Contents

REALTY INCOME CORPORATION

Index to Form 10-Q

September 30, 2023

~~REALTY INCOME CORPORATION~~
PART I.	FINANCIAL INFORMATION	Page
~~Index to Form 10-Q~~ Item 1:	Financial Statements (Unaudited)

~~September 30, 2017~~

~~PART I.~~	~~FINANCIAL INFORMATION~~		~~Page~~
~~Item 1:~~	~~Financial Statements~~

	Consolidated Balance Sheets		2
		Consolidated Statements of Income and Comprehensive Income			3
		Consolidated Statements of Equity			4
		Consolidated Statements of Cash Flows			4 5
		Notes to Consolidated Financial Statements			5 6

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Forward-Looking Statements		19 28
		~~The Company~~Overview			20 28
		Recent Developments			23 29
		Liquidity and Capital Resources			26 32
		Results of Operations			31 36
		~~Funds from Operations Available to Common Stockholders (FFO)~~Non-GAAP Financial Measures			37 40
		~~Adjusted Funds from Operations Available to Common Stockholders (AFFO)~~			38
	Property Portfolio Information		40 47
		~~Impact of Inflation~~			47
	Impact of Recent Accounting Pronouncements		47
		~~Other Information~~Critical Accounting Policies			47

Item 3:	Quantitative and Qualitative Disclosures About Market Risk			48 47

Item 4:	Controls and Procedures			49 48
PART II.		OTHER INFORMATION
~~PART II.~~Item 1A:		~~OTHER INFORMATION~~Risk Factors			49

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds			50 51
Item 5:		Other Information			52
Item 6:		Exhibits			50

~~SIGNATURE~~53			53

SIGNATURE					54

-1-

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. 1: Financial Statements

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~September 30, 2017 and December 31, 2016~~

(~~dollars~~ in thousands, except per share ~~data)~~

2017

2016

ASSETS

(unaudited)

Real estate, at cost:

Land

$
3,974,972

$
3,752,204

Buildings and improvements

10,634,965

10,112,212

Total real estate, at cost

14,609,937

13,864,416

Less accumulated depreciation and amortization

(2,265,035
)
(1,987,200
)
Net real estate held for investment

12,344,902

11,877,216

Real estate held for sale, net

2,874

26,575

Net real estate

12,347,776

11,903,791

Cash and cash equivalents

3,199

9,420

Accounts receivable, net

113,721

104,584

Acquired lease intangible assets, net

1,165,013

1,082,320

Goodwill

14,989

15,067

Other assets, net

56,721

37,689

Total assets

$
13,701,419

$
13,152,871

LIABILITIES AND EQUITY

Distributions payable

$
60,104

$
55,235

Accounts payable and accrued expenses

92,947

121,156

Acquired lease intangible liabilities, net

272,377

264,206

Other liabilities

115,037

85,616

Line of credit payable

658,000

1,120,000

Term loans, net

319,347

319,127

Mortgages payable, net

341,015

466,045

Notes payable, net

4,468,665

3,934,433

Total liabilities

6,327,492

6,365,818

Commitments and contingencies

Stockholders’ equity:

Preferred stock and paid in capital, par value $0.01 per share, 69,900,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and 16,350,000 issued and outstanding as of December 31, 2016, liquidation preference $25.00 per share

-

395,378

Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 281,778,537 shares issued and outstanding as of September 30, 2017 and 260,168,259 shares issued and outstanding as of December 31, 2016

9,488,043

8,228,594

Distributions in excess of net income

(2,133,614
)
(1,857,168
)
Total stockholders’ equity

7,354,429

6,766,804

Noncontrolling interests

19,498

20,249

Total equity

7,373,927

6,787,053

Total liabilities and equity

$
13,701,419

$
13,152,871

amounts) (unaudited)

September 30, 2023 December 31, 2022
ASSETS
Real estate held for investment, at cost:
Land $ 14,408,324 $ 12,948,835
Buildings and improvements 33,606,951 29,707,751
Total real estate held for investment, at cost 48,015,275 42,656,586
Less accumulated depreciation and amortization (5,781,056) (4,904,165)
Real estate held for investment, net 42,234,219 37,752,421
Real estate and lease intangibles held for sale, net 19,927 29,535
Cash and cash equivalents 344,129 171,102
Accounts receivable, net 678,441 543,237
Lease intangible assets, net 5,089,293 5,168,366
Goodwill 3,731,478 3,731,478
Other assets, net 3,239,433 2,276,953
Total assets $ 55,336,920 $ 49,673,092
LIABILITIES AND EQUITY
Distributions payable $ 187,288 $ 165,710
Accounts payable and accrued expenses 660,366 399,137
Lease intangible liabilities, net 1,426,264 1,379,436
Other liabilities 786,437 774,787
Line of credit payable and commercial paper 858,260 2,729,040
Term loan, net 1,287,995 249,755
Mortgages payable, net 824,240 853,925
Notes payable, net 17,482,652 14,278,013
Total liabilities 23,513,502 20,829,803
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 723,894 and 660,300 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively 38,031,829 34,159,509
Distributions in excess of net income (6,416,534) (5,493,193)
Accumulated other comprehensive income 41,849 46,833
Total stockholders’ equity 31,657,144 28,713,149
Noncontrolling interests 166,274 130,140
Total equity 31,823,418 28,843,289
Total liabilities and equity $ 55,336,920 $ 49,673,092

The accompanying notes to consolidated financial statements are an integral part of these statements.

-2-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

~~For the three and nine months ended September 30, 2017 and 2016~~

AND COMPREHENSIVE INCOME

(~~dollars~~ in thousands, except per share ~~data)~~amounts) (unaudited)

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
REVENUE

Rental

$
293,455

$
265,332

$
867,325

$
782,189
Tenant reimbursements

11,933

11,524

34,918

31,741
Other

1,532

318

2,872

1,399
Total revenue

306,920

277,174

905,115

815,329

EXPENSES

Depreciation and amortization

127,569

113,917

371,755

332,192
Interest

62,951

52,952

185,935

171,039
General and administrative

13,881

12,103

43,227

38,407
Property (including reimbursable)

17,267

15,678

52,828

45,454
Income taxes

1,133

894

2,621

2,812
Provisions for impairment

365

8,763

8,072

16,955
Total expenses

223,166

204,307

664,438

606,859
Gain on sales of real estate

4,319

4,335

17,689

15,283
Net income

88,073

77,202

258,366

223,753
Net income attributable to noncontrolling interests

(133
)
(130
)
(420
)
(623)
Net income attributable to the Company

87,940

77,072

257,946

223,130
Preferred stock dividends

-

(6,770
)
(3,911
)
(20,310)
Excess of redemption value over carrying value of preferred shares redeemed

-

-

(13,373
)
-
Net income available to common stockholders

$
87,940

$
70,302

$
240,662

$
202,820

Amounts available to common stockholders per common share:

Net income, basic and diluted

$
0.32

$
0.27

$
0.89

$
0.80

Weighted average common shares outstanding:

Basic

275,511,870

258,085,633

270,584,365

253,953,149

Diluted

276,050,671

258,673,914

271,126,114

254,540,323

Three months ended
September 30,
Nine months ended
September 30,
2023 2022 2023 2022
REVENUE
Rental (including reimbursable) $ 1,008,862 $ 825,946 $ 2,929,440 $ 2,426,311
Other 30,242 11,323 73,268 28,720
Total revenue 1,039,104 837,269 3,002,708 2,455,031
EXPENSES
Depreciation and amortization 495,566 419,016 1,419,321 1,232,215
Interest 184,121 117,409 522,110 333,933
Property (including reimbursable) 70,981 52,719 235,081 157,241
General and administrative 35,525 34,096 106,521 100,934
Provisions for impairment 16,808 1,650 59,801 16,379
Merger and integration-related costs 2,884 3,746 4,532 12,994
Total expenses 805,885 628,636 2,347,366 1,853,696
Gain on sales of real estate 7,572 42,883 19,675 93,611
Foreign currency and derivative (loss) gain, net (2,813) (22,893) 4,957 (16,003)
Gain on extinguishment of debt — 240 — 367
Equity in income and impairment of investment in unconsolidated entities — (662) 411 (6,335)
Other income, net 7,235 2,249 12,985 6,907
Income before income taxes 245,213 230,450 693,370 679,882
Income taxes (11,336) (10,163) (36,218) (35,802)
Net income 233,877 220,287 657,152 644,080
Net income attributable to noncontrolling interests (404) (720) (3,248) (1,937)
Net income available to common stockholders $ 233,473 $ 219,567 $ 653,904 $ 642,143
Amounts available to common stockholders per common share:
Net income, basic and diluted $ 0.33 $ 0.36 $ 0.96 $ 1.06
Weighted average common shares outstanding:
Basic 709,165 617,512 681,419 604,464
Diluted 709,543 617,957 682,129 604,836
Net income available to common stockholders $ 233,473 $ 219,567 $ 653,904 $ 642,143
Total other comprehensive loss
Foreign currency translation adjustment (61,401) (89,231) (3,605) (148,929)
Unrealized gain (loss) on derivatives, net 7,193 41,914 (1,379) 119,058
Total other comprehensive loss $ (54,208) $ (47,317) $ (4,984) $ (29,871)
Comprehensive income available to common stockholders $ 179,265 $ 172,250 $ 648,920 $ 612,272

The accompanying notes to consolidated financial statements are an integral part of these statements.

-3-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

~~For the nine~~EQUITY

(in thousands) (unaudited)

Three months ended September 30, ~~2017~~2023, and ~~2016~~

~~(dollars in thousands) (unaudited)~~

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$
258,366

$
223,753

Adjustments to net income:

Depreciation and amortization

371,755

332,192

Amortization of share-based compensation

10,641

9,204

Non-cash revenue adjustments

(2,783
)
(7,583
)
Amortization of net premiums on mortgages payable

(1,580
)
(2,669
)
Amortization of deferred financing costs

6,819

6,510

(Gain) loss on interest rate swaps

(1,228
)
5,835

Gain on sales of real estate

(17,689
)
(15,283
)
Provisions for impairment on real estate

8,072

16,955

Change in assets and liabilities

Accounts receivable and other assets

(2,342
)
2,964

Accounts payable, accrued expenses and other liabilities

10,067

7,332

Net cash provided by operating activities

640,098

579,210

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in real estate

(964,719
)
(1,027,917
)
Improvements to real estate, including leasing costs

(11,834
)
(5,295
)
Proceeds from sales of real estate

69,486

55,114

Insurance proceeds received

12,746

-

Collection of loans receivable

92

12,486

Restricted escrow deposits for Section 1031 tax-deferred exchanges and pending acquisitions

(19,452
)
(7,757
)
Net cash used in investing activities

(913,681
)
(973,369
)
CASH FLOWS FROM FINANCING ACTIVITIES

Cash distributions to common stockholders

(509,987
)
(453,774
)
Cash dividends to preferred stockholders

(6,168
)
(20,310
)
Borrowings on line of credit

1,189,000

3,120,000

Payments on line of credit

(1,651,000
)
(2,276,000
)
Proceeds from notes and bonds payable issued

711,812

-

Principal payment on notes payable

(175,000
)
(275,000
)
Proceeds from mortgages payable

-

9,963

Principal payments on mortgages payable

(123,524
)
(183,697
)
Redemption of preferred stock

(408,750
)
-

Proceeds from common stock offerings, net

704,938

383,572

Proceeds from dividend reinvestment and stock purchase plan

67,813

8,174

Proceeds from At-the-Market (ATM) program

487,998

85,780

Redemption of common units

-

(9,026
)
Distributions to noncontrolling interests

(1,652
)
(1,018
)
Debt issuance costs

(6,663
)
-

Other items, including shares withheld upon vesting

(11,455
)
(4,998
)
Net cash provided by financing activities

267,362

383,666

Net increase (decrease) in cash and cash equivalents

(6,221
)
(10,493
)
Cash and cash equivalents, beginning of period

9,420

40,294

Cash and cash equivalents, end of period

$
3,199

$
29,801

~~For supplemental disclosures, see note~~ ~~17.~~

2022

Shares of
common
stock Common
stock and
paid in
capital Distributions
in excess of
net income Accumulated
other
comprehensive income (loss) Total
stockholders’
equity Noncontrolling
interests Total
equity
Balance, June 30, 2023 708,773 $ 37,149,380 $ (6,102,226) $ 96,057 $ 31,143,211 $ 167,932 $ 31,311,143
Net income — — 233,473 — 233,473 404 233,877
Other comprehensive loss — — — (54,208) (54,208) — (54,208)
Distributions paid and payable — — (547,781) — (547,781) (2,497) (550,278)
Share issuances, net of costs 15,122 876,253 — — 876,253 — 876,253
Contributions by noncontrolling interests — — — — — 435 435
Share-based compensation, net (1) 6,196 — — 6,196 — 6,196
Balance, September 30, 2023 723,894 $ 38,031,829 $ (6,416,534) $ 41,849 $ 31,657,144 $ 166,274 $ 31,823,418
Balance, June 30, 2022 617,564 $ 31,303,383 $ (4,999,150) $ 22,379 $ 26,326,612 $ 76,267 $ 26,402,879
Net income — — 219,567 — 219,567 720 220,287
Other comprehensive loss — — — (47,317) (47,317) — (47,317)
Distributions paid and payable — — (461,429) — (461,429) (1,070) (462,499)
Issuance of common partnership units — — — — — 51,221 51,221
Share issuances, net of costs 9,582 694,708 — — 694,708 — 694,708
Share-based compensation, net — 4,978 — — 4,978 — 4,978
Balance, September 30, 2022 627,146 $ 32,003,069 $ (5,241,012) $ (24,938) $ 26,737,119 $ 127,138 $ 26,864,257
Nine months ended September 30, 2023 and 2022
Shares of
common
stock Common
stock and
paid in
capital Distributions
in excess of
net income Accumulated
other
comprehensive
income (loss) Total
stockholders’
equity Noncontrolling
interests Total
equity
Balance, December 31, 2022 660,300 $ 34,159,509 $ (5,493,193) $ 46,833 $ 28,713,149 $ 130,140 $ 28,843,289
Net income — — 653,904 — 653,904 3,248 657,152
Other comprehensive loss — — — (4,984) (4,984) — (4,984)
Distributions paid and payable — — (1,577,245) — (1,577,245) (7,108) (1,584,353)
Share issuances, net of costs 63,348 3,858,347 — — 3,858,347 3,858,347
Contributions by noncontrolling interests — — — — — 39,994 39,994
Share-based compensation, net 246 13,973 — — 13,973 — 13,973
Balance, September 30, 2023 723,894 $ 38,031,829 $ (6,416,534) $ 41,849 $ 31,657,144 $ 166,274 $ 31,823,418
Balance December 31, 2021 591,262 $ 29,578,212 $ (4,530,571) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400
Net income — — 642,143 — 642,143 1,937 644,080
Other comprehensive loss — — — (29,871) (29,871) — (29,871)
Distributions paid and payable — — (1,352,584) — (1,352,584) (2,846) (1,355,430)
Issuance of common partnership units — — — — — 51,221 51,221
Share issuances, net of costs 35,715 2,415,281 — — 2,415,281 — 2,415,281
Share-based compensation, net 169 9,576 — — 9,576 — 9,576
Balance, September 30, 2022 627,146 $ 32,003,069 $ (5,241,012) $ (24,938) $ 26,737,119 $ 127,138 $ 26,864,257

The accompanying notes to consolidated financial statements are an integral part of these statements.

-4-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Nine months ended
September 30,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 657,152 $ 644,080
Adjustments to net income:
Depreciation and amortization 1,419,321 1,232,215
Amortization of share-based compensation 20,154 16,742
Non-cash revenue adjustments (51,272) (37,538)
Gain on extinguishment of debt — (367)
Amortization of net premiums on mortgages payable (9,597) (10,418)
Amortization of net premiums on notes payable (45,647) (47,185)
Amortization of deferred financing costs 19,498 11,116
(Loss) gain on interest rate swaps (5,390) 2,181
Foreign currency and unrealized derivative gain, net 10,188 16,003
Gain on sales of real estate (19,675) (93,611)
Equity in income and impairment of investment in unconsolidated entities (411) 6,335
Distributions from unconsolidated entities — 1,605
Provisions for impairment on real estate 59,801 16,379
Change in assets and liabilities
Accounts receivable and other assets (17,538) 207,838
Accounts payable, accrued expenses and other liabilities 161,527 (32,009)
Net cash provided by operating activities 2,198,111 1,933,366
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate (6,702,140) (4,980,159)
Improvements to real estate, including leasing costs (47,107) (66,047)
Proceeds from sales of real estate 92,772 414,688
Return of investment from unconsolidated entities 3,927 1,401
Net proceeds from sale of unconsolidated entities — 107,621
Proceeds from note receivable — 5,867
Insurance proceeds received 15,177 16,046
Non-refundable escrow deposits (1,188) (28,556)
Net cash used in investing activities (6,638,559) (4,529,139)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders (1,555,679) (1,342,695)
Borrowings on line of credit and commercial paper programs 33,021,401 19,644,724
Payments on line of credit and commercial paper programs (34,909,165) (19,147,386)
Proceeds from term loan 1,029,383 —
Proceeds from notes payable issued 3,263,294 1,405,570
Principal payments on mortgages payable (20,842) (311,083)
Proceeds from common stock offerings, net 3,849,963 2,404,092
Proceeds from dividend reinvestment and stock purchase plan 8,382 8,708
Distributions to noncontrolling interests (5,585) (2,658)
Net receipts on derivative settlements 2,191 7,474
Debt issuance costs (35,014) (27,732)
Other items, including shares withheld upon vesting (6,181) (4,685)
Net cash provided by financing activities 4,642,148 2,634,329
Effect of exchange rate changes on cash and cash equivalents 2,083 (82,012)
Net increase (decrease) in cash, cash equivalents and restricted cash 203,783 (43,456)
Cash, cash equivalents and restricted cash, beginning of period 226,881 332,369
Cash, cash equivalents and restricted cash, end of period $ 430,664 $ 288,913

For supplemental disclosures, see note 15, Supplemental Disclosures of Cash Flow Information.

The accompanying notes to consolidated financial statements are an integral part of these statements.

-5-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~

2023

(unaudited)

1.~~Management Statement~~

~~The consolidated financial statements~~ Basis of Presentation

Realty Income Corporation (“Realty ~~Income”,~~Income,” the ~~“Company”, “we”,~~“Company,” “we,” “our” or “us”) was founded in 1969 and is organized as a Maryland corporation. We invest in commercial real estate and have elected to be taxed as a real estate investment trust ("REIT"). We are listed on the New York Stock Exchange ("NYSE") under the symbol “O”.

As of September 30, 2023, we owned or held interests in a diversified portfolio of 13,282 properties located in all 50 states of the United States ("U.S."), Puerto Rico, the United Kingdom ("U.K."), Spain, Italy, and Ireland, with approximately262.6 millionsquare feet of leasable space.

Our accompanying unaudited consolidated financial statements were prepared from our books and records ~~without audit and include~~in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods ~~presented.~~presented have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily an indication of the results that may be expected for the entire year. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, ~~2016,~~2022, which are included in our ~~2016~~2022 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

~~At September 30, 2017,~~ The U.S. dollar (“USD”) is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD.

For our consolidated subsidiaries whose functional currency is not the USD, we ~~owned 5,062 properties, located~~translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in ~~49 states~~effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income' ("AOCI") in the consolidated balance sheets. Certain balance sheet items, primarily equity and ~~Puerto Rico, containing over 86.4 million leasable square feet.~~

2.~~Summary~~capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period.

We and certain of ~~Significant Accounting Policies~~our consolidated subsidiaries have intercompany and ~~Procedures~~third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and ~~Recent Accounting Pronouncements~~

~~A. The accompanying~~derivative (loss) gain, net' in the consolidated statements of income and comprehensive income. Intercompany accounts and transactions are eliminated in consolidation.

Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities ~~for~~in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification ("ASC") 810, Consolidation.

Voting interest entities are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make ~~operating and financial~~ decisions ~~(i.e., control), after elimination of all material intercompany balances and transactions.~~about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests.

Variable interest entities ("VIEs") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we ~~control~~are the primary beneficiary of a VIE on an ongoing basis based on current facts and ~~record~~circumstances.

At September 30, 2023, Realty Income, L.P. and certain investments, including investments in joint ventures, are considered VIEs in which we were deemed the primary beneficiary based on our controlling financial interests.

-6-

Table of Contents

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


	September 30, 2023		December 31, 2022
Net real estate	$	2,494,915	$	920,032
Total assets	$	3,161,113	$	1,082,346
Total liabilities	$	119,552	$	60,127

The portion of a consolidated entity not owned by us is recorded as a noncontrolling ~~interest for the portion~~interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that ~~we do not own. Noncontrolling interest that was~~were created or assumed as part of a business combination ~~was~~or asset acquisition were recognized at fair value as of the date of the transaction (seenote ~~11)~~9, Noncontrolling Interests).

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

Value-added tax receivable is included in 'Other assets, net', in the consolidated balance sheets. Previously, this was categorized as 'Accounts receivable, net' in the consolidated balance sheets.

Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Segment Reporting. We ~~have no unconsolidated investments.~~

B.report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and assesses our performance.

Income Taxes. We have elected to be taxed as a ~~real estate investment trust, or~~ REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay ~~federal corporate~~U.S. income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT ~~subsidiaries. The~~subsidiaries ("TRS"). A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of TRS entities enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. For our international territories, we are liable for taxes in the United Kingdom and Spain. Accordingly, provisions have been made for U.K. and Spain income taxes. Therefore, the income taxes recorded on our consolidated statements of income and comprehensive income represent amounts accrued or paid by Realty Income and its subsidiaries for U.S. income taxes on our TRS entities, city and state income and franchise ~~taxes.~~

~~C. We assign a portion~~taxes, and income taxes for the U.K. and Spain.

Earnings and profits that determine the taxability of ~~goodwill~~distributions to ~~our applicable property sales, which results~~stockholders differ from net income reported for financial reporting purposes primarily due to differences in ~~a reduction~~the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the ~~carrying amount~~investments in properties for tax purposes, among other things.

We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements.

Lease Revenue Recognition and Accounts Receivable. The majority of our ~~goodwill. In order to allocate goodwill to the carrying amount of properties that we sell, we utilize a relative fair value approach based on the original methodology~~leases are accounted for assigning goodwill. As we sell properties, our goodwill will likely continue to gradually decrease over time. Based on our analyses of goodwill during the second quarters of 2017 and 2016, we determined there was no impairment on our existing goodwill.

D~~. In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~~~. This ASU,~~ as ~~amended by ASU 2015-14,~~ ~~Revenue from Contracts with Customers: Deferral of the Effective Date~~, outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers, and will apply to transactions such as the sale of real estate. This ASU, which is effective for interim and annual periods beginning after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also to provide certain additional disclosures. We will adopt this standard effective as of January 1, 2018 and will utilize the cumulative effect transition method of adoption. The adoption of this guidance will not have a material impact on our financial position or results of operations. We expect this standard will have an impact on the disclosure of certain lease and non-lease components of revenue from leases upon the adoption of the update ASU 2016-02, ~~Leases~~~~, but will not have a material impact on “total revenues.”~~

-5-

~~Table of Contents~~

~~In February 2016, FASB issued ASU 2016-02 (Topic 842,~~ ~~Leases)~~~~, which amended Topic 840,~~ ~~Leases.~~ operating leases. Under this ~~amended topic, the accounting applied by a lessor is largely unchanged from~~method, leases that ~~applied under Topic 840,~~ ~~Leases~~~~. The large majority of operating leases should remain classified as operating leases,~~have fixed and ~~lessors should continue to recognize lease income for those leases~~determinable rent increases are recognized on a ~~generally~~ straight-line basis over the lease ~~term~~. ~~The amendments~~term. Any rental revenue contingent upon our client’s sales, or percentage rent, is recognized only after our client exceeds their sales breakpoint. Rental increases based upon changes in the consumer price indexes are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements. Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in ~~this topic~~contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are ~~effective,~~incurred. Taxes and operating expenses paid directly by our clients are recorded on a ~~retrospective~~net basis.

-7-

Table of Contents

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

We assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842, Leases. We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized.

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

Recent Accounting Pronouncements.The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or ~~modified retrospective basis, for interim and annual periods beginning after December 15, 2018. We~~not expected to have ~~not yet adopted this topic and are currently evaluating the~~a significant impact ~~this amendment may have~~ on our consolidated financial statements.

~~In January 2017, FASB issued ASU 2017-01, which amends Topic 805,~~ ~~Business Combinations~~. The FASB issued this ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We elected to adopt this ASU early, effective October 1, 2017. As a result of this new guidance, we believe the majority of our future real estate transactions will qualify as asset acquisitions (or disposals), and future transaction costs associated with these acquisitions will be capitalized. The adoption of this topic will not have a material impact on our consolidated financial statements or related disclosures.

2. Supplemental Detail for Certain Components of Consolidated Balance Sheets

A.     Acquired lease intangible assets, net, consist of the following

September 30,

December 31,

(dollars in thousands) at:

2017

2016

Acquired in-place leases

  $
1,227,780

  $
1,164,075

Accumulated amortization of acquired in-place leases

(428,802
)
(358,040
)
Acquired above-market leases

479,098

365,005

Accumulated amortization of acquired above-market leases

(113,063
)
(88,720
)

  $
1,165,013

  $
1,082,320

September 30,

December 31,

B.     Other assets, net, consist of the following (dollars in thousands) at:

2017

2016

Restricted escrow deposits

23,698

4,246

Prepaid expenses

13,267

14,406

Corporate assets, net

5,566

3,585

Notes receivable issued in connection with property sales

5,298

5,390

Credit facility origination costs, net

5,094

7,303

Impounds related to mortgages payable

3,465

2,015

Other items

333

744

  $
56,721

  $
37,689

C.    Distributions payable consist of the following declared

September 30,

December 31,

distributions (dollars in thousands) at:

2017

2016

Common stock distributions

  $
60,018

  $
52,896

Preferred stock dividends

-

2,257

Noncontrolling interests distributions

86

82

  $
60,104

  $
55,235

D.    Accounts payable and accrued expenses consist of the

September 30,

December 31,

following (dollars in thousands) at:

2017

2016

Notes payable - interest payable

  $
41,801

  $
60,668

Property taxes payable

22,455

16,949

Accrued costs on properties under development

4,235

9,049

Mortgages, term loans, credit line - interest payable and interest rate swaps

3,793

5,432

Other items

20,663

29,058

  $
92,947

  $
121,156

-6-

(in thousands):


A.	Accounts receivable, net, consist of the following at:	September 30, 2023		December 31, 2022
	Straight-line rent receivables, net	$	484,423	$	363,993
	Client receivables, net	194,018		179,244
		$	678,441	$	543,237


B.	Lease intangible assets, net, consist of the following at:	September 30, 2023		December 31, 2022
	In-place leases	$	5,680,498	$	5,324,565
	Accumulated amortization of in-place leases	(1,857,044)		(1,409,878)
	Above-market leases	1,820,105		1,697,367
	Accumulated amortization of above-market leases	(554,266)		(443,688)
		$	5,089,293	$	5,168,366


C.	Other assets, net, consist of the following at:	September 30, 2023		December 31, 2022
	Financing receivables	$	1,638,967	$	933,116
	Right of use asset - financing leases	675,512		467,920
	Right of use asset - operating leases, net	595,148		603,097
	Value-added tax receivable	95,462		24,726
	Impounds related to mortgages payable	45,224		18,152
	Derivative assets and receivables – at fair value	44,753		83,100
	Prepaid expenses	42,220		28,128
	Restricted escrow deposits	41,311		37,627
	Credit facility origination costs, net	13,497		17,196
	Corporate assets, net	13,407		12,334
	Investment in sales type lease	6,030		5,951
	Non-refundable escrow deposits	1,188		5,667

	Other items	26,714		39,939
		$	3,239,433	$	2,276,953

-8-

Table of Contents

E.     Acquired lease intangible liabilities, net, consist of the

September 30,

December 31,

following (dollars in thousands) at:

2017

2016

Acquired below-market leases

  $
340,504

  $
318,926

Accumulated amortization of acquired below-market leases

(68,127
)
(54,720
)

  $
272,377

  $
264,206

F.     Other liabilities consist of the following

September 30,

December 31,

(dollars in thousands) at:

2017

2016

Rent received in advance and other deferred revenue (1)

  $
103,520

  $
74,098

Security deposits

6,268

6,502

Capital lease obligations

5,249

5,016

  $
115,037

  $
85,616

~~(1)~~ ~~In connection with Diageo’s sale~~


D.	Accounts payable and accrued expenses consist of the following at:	September 30, 2023		December 31, 2022
	Notes payable - interest payable	$	182,603	$	129,202
	Accrued costs on properties under development	87,672		26,559
	Property taxes payable	87,316		45,572
	Derivative liabilities and payables – at fair value	78,344		64,724
	Value-added tax payable	64,197		23,375
	Accrued income taxes	46,378		22,626
	Accrued property expenses	42,366		25,290
	Mortgages, term loans, and credit line - interest payable	8,188		5,868
	Other items	63,302		55,921
		$	660,366	$	399,137


E.	Lease intangible liabilities, net, consist of the following at:	September 30, 2023		December 31, 2022
	Below-market leases	$	1,737,936	$	1,617,870
	Accumulated amortization of below-market leases	(311,672)		(238,434)
		$	1,426,264	$	1,379,436


F.	Other liabilities consist of the following at:	September 30, 2023		December 31, 2022
	Lease liability - operating leases, net	$	426,575	$	440,096
	Rent received in advance and other deferred revenue	296,567		269,645
	Lease liability - financing leases	42,251		49,469
	Security deposits	21,044		15,577
		$	786,437	$	774,787

-9-

Table of its wine business to Treasury Wine Estates, we agreed to release Diageo from its guarantee of our leases in exchange for Diageo’s payment of $75 million of additional rent to us. The additional rent was paid in two equal installments, one of which was received in August 2016 for $37.5 million and was recorded as prepaid rent. The final payment of $37.5 million was received in January 2017, at which time Treasury Wine Estates became the guarantor of our leases on those properties. We have accounted for this transaction as a lease modification and the additional rent will be recognized on a straight-line basis over the remaining lease terms of approximately 15 years.

4.Contents

3. Investments in Real Estate

~~We acquire land, buildings and improvements necessary for the successful operations~~

A. Acquisitions of ~~commercial tenants.~~

A.~~Acquisitions During the First Nine Months of 2017 and 2016~~

During the first nine months of 2017, we invested $956.9 million in 177 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.5%. The 177 new properties and properties under development or expansion are located in 35 states, will contain approximately 4.3 million leasable square feet, and are 100% leased withReal Estate

Below is a weighted average lease term of 14.9 years. The tenants occupying the new properties operate in 21 industries and the property types consist of 96.6% retail and 3.4% industrial, based on rental revenue. Nonesummary of our ~~investments during 2017 caused any one tenant to be 10% or more of our total assets at September 30, 2017.~~

The $956.9 million invested during the first nine months of 2017 was allocated as follows: $233.7 million to land, $585.0 million to buildings and improvements, $152.7 million to intangible assets related to leases, and $14.5 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

~~The properties acquired during the first nine months of 2017 generated total revenues of $19.7 million and net income of $9.4 million during~~acquisitions for the nine months ended September 30, ~~2017.~~

~~In comparison, during the first nine months of 2016, we invested $1.1 billion in 236 properties and properties under development or expansion with an~~2023:


	Number of Properties	Leasable Square Feet (in thousands)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)

Acquisitions - U.S.	802	14,730	$	3,708.9	15.9	6.9	%
Acquisitions - Europe	80	8,608	2,191.6		15.6	7.1	%
Total acquisitions	882	23,338	$	5,900.5	15.8	7.0	%
Properties under development (2)	305	7,269	910.0		16.2	6.7	%
Total (3)	1,187	30,607	$	6,810.5	15.8	6.9	%

(1)The initial weighted average ~~contractual~~cash lease rate of 6.4%. The 236 properties and properties under development or expansion are located in 36 states, contain approximately 5.2 million leasable square feet, and are 100% leased with a weighted average lease term of 15.0 years. The tenants occupying those properties operate in 24 industries and the property types are 80.7% retail and 19.3% industrial, based on rental revenue.

The $1.1 billion invested during the first nine months of 2016 was allocated as follows: $267.8 million to land, $691.9 million to buildings and improvements, $140.4 million to intangible assets related to leases, and $26.3 million to intangible liabilities related to leases and other assumed liabilities. We also recorded mortgage premiums of $692,000. There was no contingent consideration associated with these acquisitions.

~~The properties acquired during the first nine months of 2016 generated total revenues of $22.5 million and net income of $11.2 million during the nine months ended September 30, 2016.~~

-7-

~~Table of Contents~~

~~The estimated initial weighted average contractual lease rate~~yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a ~~tenant~~client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

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

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the ~~estimated~~ initial weighted average ~~contractual~~cash lease ~~rate~~yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. Of

(2)Includes £32.6 million of investments in four U.K. development properties and €25.9 million of investment in two Spain development properties, converted at the ~~$956.9 million we invested~~applicable exchange rates on the funding dates.

(3)Our clients occupying the new properties are 89.7% retail, 10.0% industrial, and 0.3% other property types based on annualized contractual rent. Approximately 25% of the annualized contractual rent generated from acquisitions during the ~~first~~ nine months ended September 30, 2023 is from investment grade rated clients, their subsidiaries, or affiliated companies.

The aggregate purchase price of ~~2017, $16.4~~the assets acquired during the nine months ended September 30, 2023 has been allocated as follows (in millions):


	Acquisitions - USD		Acquisitions - Sterling		Acquisitions - Euro
Land (1)	$	727.7	£	434.7	€	17.3
Buildings and improvements	2,640.0		824.8		24.2
Lease intangible assets (2)	371.9		122.2		15.6
Other assets (3)	560.3		326.1		1.6
Lease intangible liabilities (4)	(110.2)		(11.0)		(0.8)
Other liabilities (5)	(8.7)		(1.8)		—
	$	4,181.0	£	1,695.0	€	57.9

(1)Sterling-denominated land includes £3.2 million ~~was invested in 13 properties~~of right of use assets under ~~development or expansion with an estimated initial~~long-term ground leases.

(2)The weighted average ~~contractual~~amortization period for acquired lease ~~rate~~intangible assets is 9.7 years.

(3)USD-denominated other assets consist entirely of ~~7.3%. Of the $1.1 billion we invested~~financing receivables with above-market terms. Sterling-denominated other assets consist of£135.3 million of financing receivables with above-market terms and £190.8 million of right-of-use assets accounted for as finance leases.

(4)The weighted average amortization period for acquired lease intangible liabilities is 11.1 years.

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

The properties acquired during the ~~first~~ nine months ended September 30, 2023 generated total revenues of ~~2016, $87.7~~$174.4 million ~~was invested in 30 properties under development or expansion with an estimated initial weighted average contractual lease rate~~and net income of ~~7.1%.~~

B.~~Acquisition Transaction Costs~~

~~Acquisition transaction costs of $229,000 and $119,000 were recorded to general and administrative expense on our consolidated statements of income~~$91.6 million during the ~~first~~ nine months ended September 30, 2023.

-10-

Table of ~~2017 and 2016, respectively.~~

C.Contents

B. Investments in Existing Properties

During the ~~first~~ nine months ~~of 2017,~~ended September 30, 2023, we capitalized costs of ~~$9.5~~$43.6 million on existing properties in our portfolio, consisting of ~~$1.2~~$36.5 million for non-recurring building improvements, $6.9 million for re-leasing costs, ~~$536,000~~and $0.2 million for recurring capital ~~expenditures and $7.8 million for non-recurring building improvements.~~expenditures. In comparison, during the ~~first~~ nine months ~~of 2016,~~ended September 30, 2022, we capitalized costs of ~~$5.3~~$70.6 million on existing properties in our portfolio, consisting of ~~$564,000 for re-leasing costs, $486,000 for recurring capital expenditures and $4.2~~$63.7 million for non-recurring building ~~improvements.~~

D.improvements, $3.9 million for re-leasing costs, and $3.0 million for recurring capital expenditures.

C. Properties with Existing Leases

Of the $956.9 million we invested during the first nine months of 2017, approximately $562.1 million was used to acquire 68 properties with existing leases. In comparison, of the $1.1 billion we invested during the first nine months of 2016, approximately $574.0 million was used to acquire 75 properties with existing leases.

The value of the in-place and above-market leases is recorded to ~~acquired lease~~'Lease intangible assets, ~~net~~net' on our consolidated balance sheets, and the value of the below-market leases is recorded to ~~acquired lease~~'Lease intangible liabilities, ~~net~~net' on our consolidated balance sheets.

The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the ~~first~~ nine months ~~of 2017~~ended September 30, 2023, and ~~2016~~2022 were ~~$79.1~~$489.2 million and ~~$69.6~~$476.8 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue ~~on our~~in the consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the ~~first~~ nine months ~~of 2017~~ended September 30, 2023 and ~~2016~~2022 were ~~$10.2~~$48.6 million and ~~$6.7~~$41.2 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.

-8-

~~Table of Contents~~

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the ~~acquired~~ above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at September 30, ~~2017 (in~~2023 (dollars in thousands):

Net

Increase to

decrease to

amortization

rental revenue

expense

2017

$
(3,919
)
$
25,466

2018

(15,439
)
100,085

2019

(14,457
)
89,847

2020

(13,688
)
83,940

2021

(12,396
)
75,819

Thereafter

(33,759
)
423,821

Totals

$
(93,658
)
$
798,978

Net increase
(decrease) to
rental revenue
Increase to
amortization
expense
2023 $ (15,270) $ 159,999
2024 (55,582) 580,180
2025 (48,736) 499,404
2026 (41,027) 444,691
2027 (32,426) 385,298
Thereafter 353,466 1,753,882
Totals $ 160,425 $ 3,823,454

D. Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):
Three months ended
September 30, Nine months ended
September 30,
2023 2022 2023 2022
Number of properties 24 35 79 139
Net sales proceeds $ 32.3 $ 142.4 $ 92.8 $ 414.7
Gain on sales of real estate $ 7.6 $ 42.9 $ 19.7 $ 93.6

-11-

Table of Contents

4. Revolving Credit Facility

and Commercial Paper Programs

A. Credit Facility

We have a ~~$2.0~~$4.25 billion unsecured revolving multicurrency credit facility ~~or our credit facility with an initial term~~ that ~~expires~~matures in June ~~2019 and~~2026, includes two six-month extensions that can be exercised at our option, ~~two six-month extensions.~~and allows us to borrow in up to 14 currencies, including USD. Our revolving credit facility also has a $1.0 billion ~~accordion~~ expansion ~~option.~~option, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings asprovide for USD borrowings at the Secured Overnight Financing Rate ("SOFR"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.

As of September 30, 2017 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.90% with a facility commitment fee of 0.15%, for all-in drawn pricing of 1.05% over LIBOR. The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings change. We also have other interest rate options available to us under our credit facility. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At September 30, 2017, credit facility origination costs of $5.1 million are included in other assets, net on our consolidated balance sheet. These costs are being amortized over the remaining term of our credit facility.

~~At September 30, 2017,~~2023, we had a borrowing capacity of ~~$1.34~~$3.8 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of ~~$658.0~~$481.5 million, comprised of £372.0 million Sterling and €26.0 million Euro borrowings, as compared to an outstanding balance ~~of $1.12 billion~~ at December 31, ~~2016.~~

2022 of $2.0 billion, comprised of€1.8 billion Euro and £70.0 million Sterling borrowings.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was ~~1.9%~~4.8% and 1.7% during the ~~first~~ nine months ~~of 2017~~ended September 30, 2023, and ~~1.4% during the first nine months of 2016.~~2022, respectively. At September 30, ~~2017 and 2016, the~~2023, our weighted average interest rate on borrowings outstanding under our revolving credit facility was ~~2.2% and 1.4%, respectively.~~5.9%. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at September 30, ~~2017~~ 2023,we were in compliance with the covenants under our revolving credit facility.

As of September 30, 2023, credit facility origination costs of$13.5 millionare included in other assets, net, as compared to $17.2 million at December 31, 2022, on our consolidated balance sheets. These costs are being amortized over the remaining term of our revolving credit facility.

B. Commercial Paper Programs

We have a USD-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.5 billion, as well as a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent). Our Euro-denominated unsecured commercial paper program may be issued in USD or various foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper market.

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

As of September 30, 2023,the balance of borrowings outstanding under our commercial paper programs was $376.8 million, consisting entirely of Euro borrowings, as compared to $701.8 million outstanding commercial paper borrowings, including €361.0 million of Euro-denominated borrowings, at December 31, 2022. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.7% and 1.3% for the nine months ended September 30, 2023, and 2022, respectively. As of September 30, 2023, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.0%. We use our $4.25 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper programs. The commercial paper borrowings generally carry a term of less than a year.

-12-

Table of Contents

5. Term Loans

In ~~June 2015, in conjunction with entering into our credit facility,~~January 2023, we entered into a ~~$250~~term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings. As of September 30, 2023, we had $1.0 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings. The 2023 term loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at our option, with an anticipated repayment date of January 2026. Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for USD-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans. In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate. As of September 30, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%.

We also have a $250.0 million senior unsecured term loan, ~~maturing on June 30, 2020. Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.95%.~~which matures in March 2024. In conjunction with this term loan, we also entered into an interest rate ~~swap which effectively fixes our per annum~~swap. As of September 30, 2023, the effective interest rate on this term loan, ~~at 2.67%.~~

In January 2013, in conjunction with our acquisition of American Realty Capital Trust, Inc., or ARCT, we entered into a $70 million senior unsecured term loan maturing January 2018. Borrowing under this term loan bears interest atafter giving effect to the ~~current one-month LIBOR, plus 1.20%. In conjunction with this term loan, we also entered into an~~ interest rate swap, ~~which effectively fixes~~was 3.8%.

At September 30, 2023, deferred financing costs of$2.3 million are included net of the term loans principal balance, as compared to $0.2 million related to our ~~per annum interest rate on this~~$250.0 million term loan at ~~2.15%.~~

~~Deferred financing~~December 31, 2022, on our consolidated balance sheets. These costs ~~of $1.2 million incurred in conjunction with the $250 million term loan and $303,000 incurred in conjunction with the $70 million term loan~~ are being amortized over the remaining ~~terms~~term of ~~each respective~~the term ~~loan. The net balance~~loans. As of ~~these deferred financing costs, which was $653,000 at~~ September 30, ~~2017, and $873,000 at December 31, 2016, is included within~~2023, we were in compliance with the covenants contained in the term ~~loans, net on our consolidated balance sheets.~~

7.loans.

6. Mortgages Payable

During the ~~first~~ nine months ~~of 2017,~~ended September 30, 2023, we made ~~$123.5~~$20.8 million in principal payments, including the full repayment of ~~seven~~two mortgages ~~in full~~ for ~~$118.6~~$17.4 million. No mortgages were assumed during the ~~first~~ nine months ~~of 2017.~~

-9-

~~Table of Contents~~

During the first nine months of 2016, we made $183.7 million in principal payments, including the repayment of eight mortgages in full for $161.5 million. Additionally, we assumed mortgages totaling $32.5 million, excluding net premiums. During the third quarter of 2016, we refinanced one of these assumed mortgages and received an additional $10.0 million in proceeds. The assumedended September 30, 2023. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions ~~for items such as solvency, bankruptcy, misrepresentation, fraud, misapplication of payments, environmental liabilities, failure~~which vary from loan to pay taxes, insurance premiums, liens on the property, violations of the single purpose entity requirements, and uninsured losses. We expect to pay off our outstanding mortgages as soon as prepayment penalties make it economically feasible to do so.

During the first nine months of 2016, aggregate net premiums totaling $692,000 were recorded upon the assumption of a mortgage with an above-market interest rate. Amortization of our net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages, using a method that approximates the effective-interest method. loan.

Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender. At September 30, ~~2017,~~2023, we were in compliance with these covenants.

The balance of our deferred financing costs, which are classified as part of ~~mortgages~~'Mortgages payable, ~~net,~~net', on our consolidated balance sheets, was ~~$249,000~~ $0.6 millionat September 30, ~~2017~~2023 and ~~$324,000~~$0.8 million at December 31, ~~2016.~~2022. These costs are being amortized over the remaining term of each mortgage.

The following ~~is a summary of all~~table summarizes our mortgages payable as of September 30, ~~2017~~2023 and December 31, ~~2016, respectively~~2022 (dollars in ~~thousands)~~millions):

Weighted

Weighted

Weighted

Unamortized

Average

Average

Average

Premium

Stated

Effective

Remaining

Remaining

and Deferred

Mortgage

Number of

Interest

Interest

Years Until

Principal

Finance Costs

Payable

As Of

Properties(1)

Rate(2)

Rate(3)

Maturity

Balance

Balance, net

Balance

9/30/17

63

4.9%

4.5%

4.3

$
336,484

$
4,531

$
341,015

12/31/16

127

4.9%

4.3%

4.0

$
460,008

$
6,037

$
466,045


As Of	Number of Properties (1)	Weighted Average Stated Interest Rate (2)		Weighted Average Effective Interest Rate (3)		Weighted Average Remaining Years Until Maturity	Remaining Principal Balance		Unamortized Premium and Deferred Financing Costs Balance, net		Mortgage Payable Balance
September 30, 2023	131	4.8	%	3.3	%	0.7	$	822.0	$	2.3	$	824.2
December 31, 2022	136	4.8	%	3.3	%	1.4	$	842.3	$	11.6	$	853.9

(1)At September 30, ~~2017,~~2023, there were 2916 mortgages on 63131 properties ~~while~~and at December 31, ~~2016,~~2022, there were 3618 mortgages on ~~127~~136 properties. ~~The~~With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. ~~The~~At September 30, 2023 and December 31, 2022, all mortgages ~~are~~were at fixed interest rates, except for four mortgages on four properties with a principal balance totaling $44.9 million at September 30, 2017, and six mortgages on 15 properties with a principal balance totaling $76.3 million at December 31, 2016. After factoring in arrangements which limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.5 million at September 30, 2017 and $38.2 million at December 31, 2016.

rates.

(2)Stated ~~interest rates ranged from 3.2% to 6.9% at September 30, 2017, while stated interest rates ranged from 2.4% to 6.9% at December 31, 2016.~~

~~(3)~~ ~~Effective~~ interest rates ranged from 3.0% to ~~5.5%~~6.9% at September 30, ~~2017, while effective~~2023 and December 31, 2022, respectively.

(3) Effective interest rates ranged from ~~2.5%~~1.3% to ~~8.8%~~6.6% and 2.7% to 6.6% at September 30, 2023 and December 31, ~~2016.~~

2022, respectively.

-13-

Table of Contents

The following table summarizes the maturity of mortgages payable ~~excluding net premiums of $4.8 million and deferred finance costs of $249,000,~~ as of September 30, ~~2017~~2023, excluding $2.3 million related to unamortized net premiums and deferred financing costs (dollars in millions):

Year of Maturity

Principal
2017

$
1.3
2018

21.9
2019

20.7
2020

82.4
2021

66.9
Thereafter

143.3

Totals

$
336.5

-10-


Year of Maturity	Principal
2023	$	1.3
2024	740.5
2025	42.4
2026	12.0
2027	22.3
Thereafter	3.5
Totals	$	822.0

-14-

Table of Contents

7. Notes Payable

A. General

~~Our~~

At September 30, 2023, our senior unsecured notes and bonds ~~consist of~~are USD-denominated, Sterling-denominated, and Euro-denominated. Foreign-denominated notes are converted at the applicable exchange rate on the balance sheet date. The following are sorted by maturity date ~~(dollars~~(in thousands):


				Carrying Value (USD) as of
	Maturity Dates	Principal (Currency Denomination)		September 30, 2023		December 31, 2022
4.600% Notes due 2024	February 6, 2024	$	499,999	$	499,999	$	499,999
3.875% Notes due 2024	July 15, 2024	$	350,000	350,000		350,000
3.875% Notes due 2025	April 15, 2025	$	500,000	500,000		500,000
4.625% Notes due 2025	November 1, 2025	$	549,997	549,997		549,997
5.050% Notes due 2026	January 13, 2026	$	500,000	500,000		—
0.750% Notes due 2026	March 15, 2026	$	325,000	325,000		325,000
4.875% Notes due 2026	June 1, 2026	$	599,997	599,997		599,997
4.125% Notes due 2026	October 15, 2026	$	650,000	650,000		650,000
1.875% Notes due 2027 (1)	January 14, 2027	£	250,000	305,075		301,225
3.000% Notes due 2027	January 15, 2027	$	600,000	600,000		600,000
1.125% Notes due 2027 (1)	July 13, 2027	£	400,000	488,120		481,960
3.950% Notes due 2027	August 15, 2027	$	599,873	599,873		599,873
3.650% Notes due 2028	January 15, 2028	$	550,000	550,000		550,000
3.400% Notes due 2028	January 15, 2028	$	599,816	599,816		599,816
2.200% Notes due 2028	June 15, 2028	$	499,959	499,959		499,959
4.700% Notes due 2028	December 15, 2028	$	400,000	400,000		—
3.250% Notes due 2029	June 15, 2029	$	500,000	500,000		500,000
3.100% Notes due 2029	December 15, 2029	$	599,291	599,291		599,291
4.850% Notes due 2030	March 15, 2030	$	600,000	600,000		—
3.160% Notes due 2030	June 30, 2030	£	140,000	170,842		168,686
4.875% Notes due 2030 (1)	July 6, 2030	€	550,000	582,120		—
1.625% Notes due 2030 (1)	December 15, 2030	£	400,000	488,120		481,960
3.250% Notes due 2031	January 15, 2031	$	950,000	950,000		950,000
3.180% Notes due 2032	June 30, 2032	£	345,000	421,004		415,691
5.625% Notes due 2032	October 13, 2032	$	750,000	750,000		750,000
2.850% Notes due 2032	December 15, 2032	$	699,655	699,655		699,655
1.800% Notes due 2033	March 15, 2033	$	400,000	400,000		400,000
1.750% Notes due 2033 (1)	July 13, 2033	£	350,000	427,105		421,715
4.900% Notes due 2033	July 15, 2033	$	600,000	600,000		—
2.730% Notes due 2034	May 20, 2034	£	315,000	384,395		379,544
5.125% Notes due 2034 (1)	July 6, 2034	€	550,000	582,120		—
5.875% Bonds due 2035	March 15, 2035	$	250,000	250,000		250,000
3.390% Notes due 2037	June 30, 2037	£	115,000	140,335		138,563
2.500% Notes due 2042 (1)	January 14, 2042	£	250,000	305,075		301,225
4.650% Notes due 2047	March 15, 2047	$	550,000	550,000		550,000
Total principal amount				$	17,417,897	$	14,114,156
Unamortized net premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (2)				64,755		163,857

				$	17,482,652	$	14,278,013

(1) Interest paid annually. Interest on the remaining senior unsecured notes and bond obligations included in ~~millions):~~

September 30,

December 31,

2017

2016

5.375% notes, issued in September 2005 and due in September 2017

$
-

$
175

2.000% notes, issued in October 2012 and due in January 2018

350

350

6.750% notes, issued in September 2007 and due in August 2019

550

550

5.750% notes, issued in June 2010 and due in January 2021

250

250

3.250% notes, issued in October 2012 and due in October 2022

450

450

4.650% notes, issued in July 2013 and due in August 2023

750

750

3.875% notes, issued in June 2014 and due in July 2024

350

350

4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026

650

250

3.000% notes, issued in October 2016 and due in January 2027

600

600

5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035

250

250

4.650% notes, issued in March 2017 and due in March 2047

300

-

Total principal amount

4,500

3,975

Unamortized original issuance discounts and deferred financing costs

(31
)
(41
)

$
4,469

$
3,934

the table is paid semi-annually.

(2) In January 2023, in conjunction with the pricing of these senior unsecured notes due January 2026, we entered into three-year, fixed-to-variable interest rate swaps, which are accounted for as fair value hedges. See Note 11, Derivative Instruments for further details.

-15-

Table of Contents

The following table summarizes the maturity of our notes and bonds payable as of September 30, ~~2017,~~2023, excluding $64.8 million related to unamortized ~~original issuance discounts and~~net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedges (dollars in millions):

Year of Maturity

Principal

2017

$
-

2018

350

2019

550

2020

-

2021

250

Thereafter

3,350

Totals

$
4,500


Year of Maturity	Principal
2023	$	—
2024	850.0
2025	1,050.0
2026	2,075.0
2027	1,993.1
Thereafter	11,449.8
Totals	$	17,417.9

As of September 30, ~~2017,~~2023, the weighted average interest rate on our notes and bonds payable was ~~4.3%~~3.7%, and the weighted average remaining years until maturity was ~~7.9~~6.6 years.

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

Our outstanding notes and bonds are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations.

All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. At September 30, 2023, we were in compliance with these covenants.

B. Note ~~Repayment~~

Issuances

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


	Date of Issuance	Maturity Date	Principal amount			Price of par value		Effective yield to maturity
5.050% Notes	January 2023	January 2026	$	500.0	(1)	99.618	%	5.189	%
4.850% Notes	January 2023	March 2030	$	600.0		98.813	%	5.047	%
4.700% Notes	April 2023	December 2028	$	400.0		98.949	%	4.912	%
4.900% Notes	April 2023	July 2033	$	600.0		98.020	%	5.148	%
4.875% Notes	July 2023	July 2030	€	550.0		99.421	%	4.975	%
5.125% Notes	July 2023	July 2034	€	550.0		99.506	%	5.185	%

(1) In ~~September 2017,~~January 2023, we ~~repaid our $175.0~~issued $500 million of ~~outstanding 5.375% notes, plus accrued and unpaid interest.~~

~~C. Note Issuances~~

~~In March 2017, we issued $300 million of 4.650%~~5.05% senior unsecured notes due ~~2047,~~January 13, 2026, which are callable at par on January 13, 2024.

-16-

Table of Contents

8. Issuances of Common Stock

A. At-the-Market ("ATM") Program

In August 2023, we replaced our prior ATM program with a new ATM program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the ~~2047 Notes,~~NYSE under the ticker symbol "O" at prevailing market prices or at negotiated prices. Upon settlement, subject to certain exceptions, we may elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which cases we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and ~~$400 million~~we may owe cash (in the case of ~~4.125% senior unsecured notes due 2026,~~cash settlement) or the 2026 Notes. The public offering price for the 2047 Notes was 99.97% of the principal amount for an effective yield to maturity of 4.65%. The public offering price for the 2026 Notes was 102.98% of the principal amount for an effective yield to maturity of 3.75%. The 2026 Notes constituted a further issuance of, and formed a single series with, the $250 million aggregate principal amount of senior notes due 2026, issued in September 2014. The net proceeds of approximately $705.2 million from the offerings were used to repay borrowings outstanding under our credit facility to fund investment opportunities, and for other general corporate purposes.

~~9. Redemption of Preferred Stock~~

~~In April 2017, we redeemed all of the 16,350,000~~ shares of our ~~6.625% Monthly Income Class F Preferred Stock~~common stock (in the case of net share settlement) to the relevant forward purchaser. Of the 120.0 million shares of our common stock available for ~~$25 per share, plus accrued dividends.~~ sale under the prior ATM program at its inception, a total of 101.8 million of those shares were sold, the remainder of which were terminated. As of September 30, 2023, we had 102.7 millionshares remaining for future issuance under our new ATM program. We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder.

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


	Three months ended September 30,			Nine months ended September 30,
		2023		2022		2023		2022
Shares of common stock issued under the ATM program(1)		15,070,342		9,532,853		63,209,973		35,506,034
Gross proceeds		$	883.0	$	696.6	$	3,880.4	$	2,424.1
Sales agents' commissions and other offering expenses		(9.7)		(5.2)		(30.4)		(20.0)
Net proceeds		$	873.3	$	691.4	$	3,850.0	$	2,404.1

(1) During the ~~first~~three and nine months ended September 30, 2023, 23.5 million and 69.7 million shares were sold, respectively, and 15.1 million and 63.2 million shares were settled pursuant to forward sale confirmations, respectively. In addition, as of ~~2017, we incurred a charge of $13.4~~September 30, 2023, 13.3 million ~~representing the Class F preferred stock original issuance costs that we paid in 2012.~~

-11-

~~Table of Contents~~

~~10. Equity~~

~~A. Issuance of Common Stock~~

~~In March 2017, we issued 11,850,000~~ shares of common ~~stock. After underwriting discounts and other offering costs~~stock subject to forward sale confirmations have been executed, but not settled, at a weighted average initial gross price of ~~$29.7~~$56.61 per share. We currently expect to fully settle forward sale agreements outstanding by December 31, 2023, representing $749.3 million ~~the~~in net proceeds, ~~of $704.9 million were used to repay borrowings under our credit facility.~~

~~In May 2016, we issued 6,500,000 shares of common stock. After underwriting discounts and other offering costs of $12.1 million,~~for which the ~~net proceeds of $383.6 million were used to repay borrowings under our credit facility.~~

weighted average forward price at September 30, 2023 was $56.47 per share.

B.~~Dividend Reinvestment and Stock Purchase Plan~~

~~Our~~ Dividend Reinvestment and Stock Purchase Plan ~~or the~~("DRSPP")

Our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. ~~The~~Our DRSPP authorizes up to ~~26,000,000~~26.0 million common shares to be issued. During the first nine months of 2017, we issued 1,155,883 shares and raised approximately $67.8 million under the DRSPP. During the first nine months of 2016, we issued 133,432 shares and raised approximately $8.2 million under the DRSPP. From the inception of the DRSPP throughAt September 30, ~~2017,~~2023, we had 11.0 million shares remaining for future issuance under our DRSPP program.

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


	Three months ended September 30,			Nine months ended September 30,
		2023		2022		2023		2022
Shares of common stock issued under the DRSPP program		51,951		43,430		137,732		128,061
Gross proceeds		$	3.0	$	3.0	$	8.4	$	8.7

9. Noncontrolling Interests

As of September 30, 2023, we have ~~issued 14,025,772 shares and raised approximately $659.7 million.~~

Our DRSPP includes a waiver approval process, allowing larger investors or institutions, per a formal approval process, to purchase shares at a small discount, if approved by us. During the first nine months of 2017,seven entities with noncontrolling interests that we issued 927,695 shares and raised $54.7 million under the waiver approval process. These shares are included in the total activity for 2017 noted in the preceding paragraph. We did not issue shares under the waiver approval process during the first nine months of 2016.

C.~~At-the-Market (ATM) Program~~

~~Through our “at-the-market” equity distribution~~ program, or our ATM program, we were permitted to offer and sell shares of common stock to, or through, a consortium of banks acting as our sales agents either by means of ordinary brokers’ transactions on the NYSE at prevailing market prices or at negotiated prices. During the first nine months of 2017, we issued 8,506,559 shares and raised approximately $488.0 million under the ATM program. During the first nine months of 2016, we issued 1,312,269 shares and raised approximately $85.8 million under the ATM program. From the inceptionconsolidate, consisting of our ~~ATM program through September 30, 2017, we have issued all 12,000,000 shares authorized by our ATM program and raised $691.1 million.~~

~~11. Noncontrolling Interests~~

~~In January 2013, we completed our acquisition of ARCT. Equity issued as consideration for this transaction included common and preferred~~operating partnership, ~~units issued by Tau Operating Partnership,~~(Realty Income, L.P.), ~~or Tau Operating Partnership, the consolidated subsidiary which owns properties acquired through the ARCT acquisition. We and our subsidiaries hold~~ a ~~99.4% interest~~joint venture formed in ~~Tau Operating Partnership, and consolidate the entity.~~

~~In June 2013, we completed~~July 2023 in connection with the acquisition of properties, a ~~portfolio of properties by issuing common partnership units~~joint venture acquired in Realty Income, L.P. The units were issued as consideration for the acquisition. At September 30, 2017, the remaining units from this issuance represent a 0.4% ownership in Realty Income, L.P. We hold the remaining 99.6% interests in this entityDecember 2019, and ~~consolidate the entity.~~

Neither of the common partnership units have voting rights. Both common partnership units are entitled to monthly distributions equal to the amount paid to common stockholders of Realty Income, and are redeemable in cash or Realty Income common stock, at our option, and at a conversion ratio of one to one, subject to certain exceptions. Noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the balance sheet was appropriate. We determined that the units meet the requirements to qualify for presentation as permanent equity.

~~In 2016, we completed the acquisition of two properties by acquiring a controlling interest in two separate joint ventures. We are the managing member of each of these~~four development joint ventures (one acquired in December 2020, one acquired in May 2021, one acquired in April 2023, and ~~possess the ability to control the business and manage the affairs~~one acquired in September 2023).

-17-

Table of ~~these entities. At September 30, 2017, we and our subsidiaries held 95.0% and 74.0% interests, respectively, and fully consolidated these entities in our consolidated financial statements.~~ Contents

The following table represents the change in the carrying value of all noncontrolling interests through September 30, ~~2017 (dollars in~~2023 (in thousands):

-12-


	Realty Income, L.P. units (1)		Other Noncontrolling Interests		Total







Carrying value at December 31, 2022	$	115,801	$	14,339	$	130,140
Contributions (2)	—		39,994		39,994
Distributions (3)	(4,243)		(2,865)		(7,108)
Allocation of net income	2,812		436		3,248

Carrying value at September 30, 2023	$	114,370	$	51,904	$	166,274

~~Table of Contents~~

Tau Operating

Realty Income, L.P.

Other
Noncontrolling

Partnership units(1)

units(2)

Interests

Total

Carrying value at December 31, 2016

$
13,405

$
2,216

$
4,628

$
20,249

Reallocation of equity

492

(26
)
19

485

Distributions

(602
)
(167
)
(887
)
(1,656
)
Allocation of net income

189

151

80

420

Carrying value at September 30, 2017

$
13,484

$
2,174

3,840

$
19,498

(1) ~~317,022 Tau Operating Partnership~~1,795,167 units were ~~issued on January 22, 2013 and remained~~ outstanding as of both September 30, ~~2017~~2023 andDecember 31, ~~2016.~~

2022.

(2)~~534,546 Realty Income, L.P. units were issued~~ Includes contributions of $39.2 million for the issuance of a 5.0% joint venture interest as partial consideration paid on ~~June 27, 2013,~~property acquisitions, contributions of $0.4 million related to a 5.0% interest in a development joint venture, and ~~88,182 remain outstanding as~~contributions of ~~December 31, 2016 and~~$0.4 million related to a 3.0% interest in a development joint venture.

(3) Includes a non-cash reduction of noncontrolling interest of $1.5 million from our partner's responsibility to absorb construction cost overages for a development joint venture during the nine months ended September 30, ~~2017.~~

Both Tau Operating Partnership and Realty Income, L.P. are considered VIEs in which we are deemed the primary beneficiary based on our controlling financial interests. Below is a summary of selected financial data of consolidated VIEs, including the joint ventures acquired during 2016, for which we are the primary beneficiary included in the consolidated balance sheets at September 30, 2017 and December 31, 2016 (in thousands):

September 30, 2017

December 31, 2016

Net real estate

$
2,976,562

$
3,040,903

Total assets

3,394,991

3,499,481

Total debt

210,998

251,047

Total liabilities

313,782

364,797

~~12.~~2023.

10. Fair Value ~~of Financial Instruments~~

Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement ~~date. The~~ ~~disclosure for assets~~date (the exit price).

ASC 820, Fair Value Measurements and ~~liabilities measured at~~Disclosures, sets forth a fair value ~~requires allocation to a three-level valuation hierarchy. This valuation~~ hierarchy ~~is based upon the transparency of~~that categorizes inputs to valuation techniques used to measure fair value. The hierarchy gives the ~~valuation of an asset~~highest priority to unadjusted quoted prices in active markets for identical assets or ~~liability as of the measurement date.~~liabilities and lowest priority to unobservable inputs. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

~~We believe~~

•Level 1 – Quoted market prices in active markets for identical assets and liabilities

•Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other market-corroborated inputs

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

The following tables present the carrying values ~~reflected in our consolidated balance sheets reasonably approximate the~~and estimated fair values ~~for~~of financial instruments as of September 30, 2023 and December 31, 2022 (in millions):


	September 30, 2023
			Hierarchy Level
	Carrying Value		Level 1		Level 2		Level 3
Assets:
Derivative assets	$	44.8	$	—	$	44.8	$	—
Total assets	$	44.8	$	—	$	44.8	$	—
Liabilities:
Mortgages payable	$	822.0	$	—	$	—	$	806.1
Notes and bonds payable	17,417.9		—		15,478.2		—
Derivative liabilities	78.3		—		78.3		—
Total liabilities	$	18,318.2	$	—	$	15,556.5	$	806.1

-18-

Table of Contents


	December 31, 2022
			Hierarchy Level
	Carrying Value		Level 1		Level 2		Level 3
Assets:
Derivative assets	$	83.1	$	—	$	83.1	$	—
Total assets	$	83.1	$	—	$	83.1	$	—
Liabilities:
Mortgages payable	$	842.3	$	—	$	—	$	810.4
Notes and bonds payable	14,114.2		—		12,522.8		—
Derivative liabilities	64.7		—		64.7		—
Total liabilities	$	15,021.2	$	—	$	12,587.5	$	810.4

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

The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, accounts payable, distributions payable, line of creditpayable ~~term loans~~ and ~~all~~commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term ~~nature or~~nature. The aggregate fair value of our term loans approximates carrying value due to the frequent repricing of the variable interest ~~rates~~rate charged on the borrowing.

The following table reflects the carrying amounts and ~~terms that are consistent with market, except for~~estimated fair values of our ~~notes receivable issued in connection with property sales, mortgages payable and~~financial instruments not measured at fair value on our ~~senior notes and bonds payable, which are disclosed as follows (dollars in~~consolidated balance sheets (in millions):

Carrying value per

Estimated fair

At September 30, 2017

balance sheet

value

Notes receivable issued in connection with property sales

$
5.3

$
5.4

Mortgages payable assumed in connection with acquisitions (1)

336.5

351.0

Notes and bonds payable (2)

4,500.0

4,714.7

Carrying value per

Estimated fair

At December 31, 2016

balance sheet

value

Notes receivable issued in connection with property sales

$
5.4

$
5.5

Mortgages payable assumed in connection with acquisitions (1)

460.0

468.7

Notes and bonds payable (2)

3,975.0

4,143.3


	September 30, 2023				December 31, 2022
	Carrying value		Fair value		Carrying value		Fair value
Mortgages payable (1)	$	822.0	$	806.1	$	842.3	$	810.4
Notes and bonds payable (2)	$	17,417.9	$	15,478.2	$	14,114.2	$	12,522.8

(1)Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums ~~is $4.8~~was $2.8 million at September 30, ~~2017,~~2023, and ~~$6.4~~$12.4 million at December 31, ~~2016.~~2022. Also excludes deferred financing costs of ~~$249,000~~$0.6 million at September 30, ~~2017,~~2023, and ~~$324,000~~$0.8 million at December 31, ~~2016.~~

2022.

(2)Excludes non-cash ~~original issuance discounts~~net premiums recorded on notes payable. The unamortized balance of the ~~original issuance discounts is $7.1~~net premiums was$147.5 million at September 30, ~~2017,~~2023, and ~~$19.8~~$224.6 million at December 31, ~~2016.~~2022. Also excludes deferred financing costs of ~~$24.2~~$78.4 million and basis adjustment on interest rate swaps designated as fair value hedges of $4.4 million at September 30, ~~2017~~2023, and ~~$20.8~~$60.7 million of deferred financing costs at December 31, ~~2016.~~

-13-

2022.

~~Table of Contents~~

The estimated fair values of our ~~notes receivable issued in connection with property sales~~mortgages payable and ~~our mortgages~~private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant ~~Treasury yield~~forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our ~~notes receivable and~~ mortgages payable is categorized as level three on the three-level valuation hierarchy.

The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy.

~~We record~~

B. Financial Instruments Measured at Fair Value on a Recurring Basis

For derivative assets and liabilities, we may utilize interest rate swaps, ~~on the consolidated balance sheet at fair value. At September 30, 2017,~~ interest rate swaptions, and forward-starting swaps ~~in a liability position valued at $871,000 were included in accounts payable and accrued expenses and~~to manage interest rate risk, and cross-currency swaps, ~~in an asset position valued at $73,000 were included in other assets, net on the consolidated balance sheet.~~currency exchange swaps, and foreign currency forwards to manage foreign currency risk. The ~~fair value~~valuation of ~~our interest rate swaps are based on~~these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each ~~swap, using both~~derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable ~~and unobservable~~ market-based inputs, including interest rate ~~curves. Because this methodology uses observable~~curves, spot and ~~unobservable inputs,~~forward rates, as well as option volatility.

Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the ~~unobservable inputs are not significant to~~respective counterparty’s nonperformance risk in the fair value ~~measurement,~~measurements. In adjusting the ~~measurement~~fair value of ~~interest rate swaps is categorized~~our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

-19-

Table of Contents

Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation ~~hierarchy.~~

~~13.~~~~Gain~~hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at September 30, 2023, and December 31, 2022, we assessed the significance of the impact of the credit valuation adjustments on ~~Sales~~the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two. For more details on our derivatives, see note 11, Derivative Instruments.

C. Items Measured at Fair Value on a Non-Recurring Basis

Impairment of Real Estate

During the third quarter of 2017, we sold 17 properties for $25.5 million, which resulted in a gain of $4.3 million. During the first nine months of 2017, we sold 46 properties for $69.5 million, which resulted in a gain of $17.7 million.

During the third quarter of 2016, we sold 24 properties for $19.6 million, which resulted in a gain of $4.3 million. During the first nine months of 2016, we sold 51 properties for $55.2 million, which resulted in a gain of $15.3 million.

~~14.~~~~Impairments~~

~~We review long-lived~~ Investments

Certain financial and nonfinancial assets ~~for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A provision is made for impairment if estimated futureoperating cash flows (undiscounted~~ and ~~without interest charges) plus estimated disposition proceeds (undiscounted)~~liabilities are less than the current book value of the property. Key factors that we utilize in this analysis include projected rental rates, estimated holding periods, historical sales and releases, capital expenditures and property sales capitalization rates. If a property is classified as held for sale, it is carriedmeasured at ~~the lower of carrying cost or estimated~~ fair value ~~less estimated cost~~on a non-recurring basis and are subject to ~~sell, and depreciation~~fair value adjustments only under certain circumstances, such as when an impairment write-down occurs.

Depending on impairment triggering events during the applicable period, impairments are typically recorded for properties sold, in the process of ~~the property ceases.~~

~~During the third quarter~~being sold, vacant, in bankruptcy, or experiencing difficulties with collection of ~~2017, we recorded total~~rent.

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


	Three months ended September 30,			Nine months ended September 30,
		2023		2022		2023		2022
Carrying value prior to impairment		$	37.5	$	48.1	$	161.4	$	107.0
Less: total provisions for impairment		(16.8)		(1.7)		(59.8)		(16.4)
Carrying value after impairment		$	20.7	$	46.4	$	101.6	$	90.6

The valuation of ~~$365,000~~impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results.

11. Derivative Instruments

In the normal course of business, our operations are exposed to economic risks from interest rates and foreign currency exchange rates. We may enter into derivative financial instruments to offset these underlying economic risks.

Derivative Designated as Hedging Instruments - Cash Flow Hedges

In order to hedge the foreign currency risk associated with interest payments on ~~three sold properties. For~~intercompany loans denominated in British Pound Sterling ("GBP") and Euro ("EUR"), we have a hedging strategy to enter into foreign currency forward contracts to sell GBP, USD, and EUR and buy EUR, USD, and GBP. These foreign currency forwards are designated as cash flow hedges. Forward points on the ~~first nine months~~forward contracts are included in the assessment of ~~2017,~~hedge effectiveness. Amounts reported in other comprehensive income related to foreign currency derivative contracts will be reclassified to other gain and (loss) in the same period during which the hedged forecasted transactions affect earnings.

To add stability to interest expense and to manage our exposure to interest rate movements associated with our term loans, we executed variable-to-fixed interest rate swaps. These interest rate swaps are designated as cash flow hedges. The interest rate swaps are recorded ~~total provisions for impairment of $8.1 million~~ on ~~ten sold properties, one property classified as held for sale,~~the consolidated balance sheets at fair value. Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and ~~six properties classified as held for investment.~~

~~In comparison, for~~subsequently reclassified into interest expense in the third quarter of 2016, we recorded total provisions for impairment of $8.8 million on 15 sold properties, two properties classified as held for investment, and one property classified as held for sale. Forsame periods during which the first nine months of 2016, we recorded total provisions for impairment of $17.0 million on 29 sold properties, two properties classified as held for investment, and one property classified as held for sale.

-14-

hedged transaction affects earnings.

-20-

Table of Contents

~~15.~~

To mitigate the impact of fluctuating interest rates, we have also entered into interest rate swaption agreements, structured as a swaption corridor, in anticipation of issuing USD denominated bonds. Interest rate swaption corridors are a combination of two swaption positions, whereby we purchase a payer swaption, which is an option that allows us to enter into a swap where we will pay the fixed rate and receive the floating rate of the swap, and sell a payer swaption, which is an option that provides the counterparty with the right to enter into a swap where we will receive the fixed rate and pay the floating rate of the swap. For the swaption corridor entered into during March 2023, the combination of purchasing the payer swaption and selling the swaption resulted in a premium being paid of $7.6 million. The interest rate swaptions are designated as cash flow hedges. Changes in fair value of the swaptions have been recorded in AOCI.

Derivative Designated as Hedging Instruments - Fair Value Hedges

Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and variable-rate debt. These swaps involve the receipt of fixed-rate amounts for variable interest rate payments over the life of the swaps without exchange of the underlying principal amount.

We also designate some of our cross-currency swaps as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign-denominated debt. For these hedges, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross-currency basis spread from the assessment of hedge effectiveness (the "excluded component"). Changes in the fair value of the cross-currency swaps attributable to changes in the spot rates on the final notional exchanges and changes in the value of the hedged assets due to changes in the spot rates are recorded in 'Foreign currency and derivative (loss) gain, net'. Changes in the fair value of the cross-currency swaps attributable to the excluded components are recorded to other comprehensive income and will be recognized in 'Foreign currency and derivative (loss) gain, net' on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments.

Derivatives Not Designated as Hedging Instruments

We enter into foreigncurrency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the USD, our reporting currency, and GBP and EUR. These derivative contracts generally mature within one year and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative (loss) gain, net' in the consolidated statements of income and comprehensive income.

-21-

Table of Contents

The following table summarizes the terms and fair values of our derivative financial instruments at September 30, 2023 and December 31, 2022 (dollars in millions):
Derivative Type
Number of Instruments(1)
Notional Amount as of
Weighted Average Strike Rate (2)
Maturity Date (3)
Fair Value - asset (liability) as of
Derivatives Designated as Hedging Instruments September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022
Interest rate swaps 9 $ 1,630.0 $ 250.0 4.26% Jan 2024 - Jan 2026 $ 1.3 $ 5.6
Interest rate swaptions 6 1,000.0 — (4) Feb 2034 21.7 —
Cross-currency swaps 3 320.0 320.0 (5) Oct 2032 (38.6) (33.3)
Foreign currency forwards 26 160.7 185.5 (6) Oct 2023 - Dec 2024 10.1 16.1
$ 3,110.7 $ 755.5 $ (5.5) $ (11.6)
Derivatives not Designated as Hedging Instruments
Currency exchange swaps 6 $ 1,650.6 $ 2,427.7 (7) Oct 2023 $ 6.6 $ 58.8
Cross-currency swaps 3 280.0 280.0 (5) Oct 2032 (34.7) (29.5)
$ 1,930.6 $ 2,707.7 $ (28.1) $ 29.3
Total of all Derivatives $ 5,041.3 $ 3,463.2 $ (33.6) $ 17.7

(1)This column represents the number of instruments outstanding as of September 30, 2023.
(2)Weighted average strike rate is calculated using the notional value as of September 30, 2023.
(3)This column represents maturity dates for instruments outstanding as of September 30, 2023.
(4)Represent purchased payer swaptions with a strike rate of 3.75% and sold payer swaptions with a strike rate of 4.25%.
(5)USD fixed rate of 5.625% and EUR weighted average fixed rate of 4.697%.
(6)Weighted average forward GBP-USD exchange rate of 1.31.
(7)Weighted average EUR-GBP exchange rates each of 0.86.
We measure our derivatives at fair value and include the balances within other assets and accounts payable as well as accrued expenses on our consolidated balance sheets.
We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default.
The following table summarizes the amount of unrealized gain (loss) on derivatives in other comprehensive income (in thousands):
Three months ended
September 30, Nine months ended
September 30,
Derivatives in Cash Flow Hedging Relationships 2023 2022 2023 2022
Cross-currency swaps $ — $ — $ — $ (5,091)
Interest rate swaps (7,172) 30,838 (5,328) 100,229
Foreign currency forwards 3,156 11,076 (6,039) 23,920
Interest rate swaptions 15,126 — 18,679 —
Total derivatives in cash flow hedging relationships $ 11,110 $ 41,914 $ 7,312 $ 119,058
Derivatives in Fair Value Hedging Relationships
Cross-currency swaps $ (3,917) $ — $ (8,691) $ —
Total derivatives in fair value hedging relationships $ (3,917) $ — $ (8,691) $ —
Total unrealized gain (loss) on derivatives $ 7,193 $ 41,914 $ (1,379) $ 119,058
-22-
Table of Contents

The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands):
Three months ended
September 30, Nine months ended
September 30,
Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income 2023 2022 2023 2022
Cross-currency swaps Foreign currency and derivative (loss) gain, net $ — $ 2,784 $ — $ 30,425
Interest rate swaps Interest expense 5,316 (1,286) 10,055 (5,969)
Foreign currency forwards Foreign currency and derivative (loss) gain, net 1,662 — 3,985 —
Interest rate swaptions Interest expense (2,250) — (4,609) —
Total derivatives in cash flow hedging relationships $ 4,728 $ 1,498 $ 9,431 $ 24,456
Derivatives in Fair Value Hedging Relationships
Cross-currency swaps Foreign currency and derivative (loss) gain, net $ 570 $ — $ 1,054 $ —
Total derivatives in fair value hedging relationships $ 570 $ — $ 1,054 $ —
Net increase to net income $ 5,298 $ 1,498 $ 10,485 $ 24,456
We expect to reclassify $9.8 million from AOCI as a decrease to interest expense relating to interest rate swaps and interest rate swaptions and $11.4 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months.
The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):
Three months ended
September 30, Nine months ended
September 30,
2023 2022 2023 2022
Realized foreign currency and derivative gain (loss), net:
Gain on the settlement of undesignated derivatives $ 11,432 $ 4,050 $ 10,106 $ 80,677
Gain on the settlement of designated derivatives reclassified from AOCI 2,233 2,784 5,039 30,425
Gain (loss) on the settlement of transactions with third parties 410 (111) 1,685 (41)
Total realized foreign currency and derivative gain, net $ 14,075 $ 6,723 $ 16,830 $ 111,061
Unrealized foreign currency and derivative gain (loss), net:
Gain (loss) on the change in fair value of undesignated derivatives $ 12,910 $ (24,488) $ 4,734 $ 35,506
Loss on remeasurement of certain assets and liabilities (29,798) (5,128) (16,607) (162,570)
Total unrealized foreign currency and derivative loss, net $ (16,888) $ (29,616) $ (11,873) $ (127,064)
Total foreign currency and derivative (loss) gain, net $ (2,813) $ (22,893) $ 4,957 $ (16,003)
-23-
Table of Contents

12.LessorOperating Leases
At September 30, 2023, we owned or held interests in 13,282properties. Of the 13,282 properties, 13,032, or98.1%, are single-client properties, and the remaining are multi-client properties. At September 30, 2023, 159 properties were available for lease or sale. The majority of our leases are accounted for as operating leases.
Substantially all of our leases are net leases where our client pays or reimburses us for property taxes and assessments and carries insurance coverage for public liability, property damage, fire, and extended coverage.
Rent based on a percentage of our client's gross sales, or percentage rent, for the three months ended September 30, 2023, and 2022 was$2.2 million, and $2.3 million, respectively. Percentage rent for the nine months ended September 30, 2023, and 2022 was$8.0 million, and $8.3 million, respectively.

13. Distributions Paid and Payable

A.~~Common Stock~~

We pay monthly distributions to our common stockholders. The following is a summary of monthly distributions paid per common share for the ~~first nine months of 2017 and 2016:~~

Month

2017

2016

January

$
0.2025000

$
0.1910000

February

0.2105000

0.1985000

March

0.2105000

0.1985000

April

0.2110000

0.1990000

May

0.2110000

0.1990000

June

0.2110000

0.1990000

July

0.2115000

0.1995000

August

0.2115000

0.1995000

September

0.2115000

0.2015000

Total

$
1.8910000

$
1.7855000

periods indicated below:



	2023		2022
January	$	0.2485	$	0.2465
February	0.2485		0.2465
March	0.2545		0.2465
April	0.2550		0.2470
May	0.2550		0.2470
June	0.2550		0.2470
July	0.2555		0.2475
August	0.2555		0.2475
September	0.2555		0.2475



Total	$	2.2830	$	2.2230

At September 30, ~~2017,~~2023, a distribution of ~~$0.212~~$0.2560 per common share was payable and was paid in October ~~2017.~~

B.~~Class F Preferred Stock~~

In April 2017, we redeemed all 16,350,000 shares of our Class F preferred stock. During the first three months of 2017, we paid three monthly dividends to holders of our Class F preferred stock totaling $0.414063 per share, or $3.9 million. In April 2017, we paid a final monthly dividend of $0.101215 per share, or $1.7 million, which was recorded as interest expense. During the first nine months of 2016, we paid nine monthly dividends to holders of our Class F preferred stock totaling $1.242189 per share, or $20.3 million.

~~16.~~2023.

14. Net Income per Common Share

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.

-24-

Table of Contents

The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share ~~computation.~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

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

275,511,870

258,085,633

270,584,365

253,953,149

Incremental shares from share-based compensation

221,779

271,259

224,727

270,152

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

317,022

317,022

317,022

317,022

Weighted average shares used for diluted net income per share computation

276,050,671

258,673,914

271,126,114

254,540,323

Unvested shares from share-based compensation that were anti-dilutive

15,798

224

17,719

231

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

88,182

97,312

88,182

235,446

~~17.~~computation (shares in thousands):

Three months ended
September 30, Nine months ended
September 30,
2023 2022 2023 2022
Weighted average shares used for the basic net income per share computation 709,165 617,512 681,419 604,464
Incremental shares from share-based compensation 378 355 360 342
Dilutive effect of forward ATM offerings — 90 350 30
Weighted average shares used for diluted net income per share computation 709,543 617,957 682,129 604,836
Unvested shares from share-based compensation that were anti-dilutive 309 68 243 37
Weighted average partnership common units convertible to common shares that were anti-dilutive 1,795 1,244 1,795 1,123
Weighted average forward ATM offerings that were anti-dilutive 535 563 460 188

15. Supplemental Disclosures of Cash Flow Information

~~Cash paid for interest was $198.8 million in the first nine months of 2017 and $190.8 million in the first nine months of 2016.~~

~~Interest capitalized to properties under development was $347,000 in the first nine months of 2017 and$344,000 in the first nine months of 2016.~~

~~Cash paid for income taxes was $4.0 million in the first nine months of 2017 and $3.6 million in the first nine months of 2016.~~

-15-

~~Table of Contents~~

The following ~~non-cash activities are included in~~table summarizes our supplemental cash flow information during the ~~accompanying~~periods indicated below (in thousands):


	Nine months ended September 30,
	2023		2022
Supplemental disclosures:
Cash paid for interest	$	501,162	$	363,518
Cash paid for income taxes	$	11,462	$	42,225
Non-cash activities:
Net (decrease) increase in fair value of derivatives	$	(51,386)	$	146,310
Increase in noncontrolling interests from property acquisitions	$	39,156	$	—
Mortgages assumed at fair value	$	—	$	45,079
Issuance of common partnership units of Realty Income, L.P.	$	—	$	51,221

The following table provides a reconciliation of cash and cash equivalents reported within the consolidated ~~financial statements:~~

A. ~~During~~balance sheets to the ~~first nine months of 2016, we assumed mortgages payable to third-party lenders of $32.5 million, and recorded $692,000 of net premiums.~~

B. ~~Accrued costs on properties under development resulted in an increase in buildings and improvements and accounts payable of $1.5 million at September 30, 2016.~~

~~18.~~~~Segment Information~~

~~We evaluate performance and make resource allocation decisions on an industry by industry basis. For financial reporting purposes, we have grouped our tenants into 47 activity segments. All~~total of the ~~properties~~cash, cash equivalents, and restricted cash reported within the consolidated statements of cash flows (in thousands):


	September 30, 2023		September 30, 2022








Cash and cash equivalents shown in the consolidated balance sheets	$	344,129	$	187,745
Restricted escrow deposits (1)	41,311		90,639
Impounds related to mortgages payable (1)	45,224		10,529
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	430,664	$	288,913

(1) Included within other assets, net on the consolidated balance sheets (see note2, Supplemental Detail for Certain Components of Consolidated Balance Sheets). These amounts consist of cash that we are ~~incorporated into one~~legally entitled to, but that is not immediately available to us. As a result, these amounts were considered restricted as of the ~~applicable segments. Because almost all of our leases require the tenant to pay operating expenses, rental revenue is the only component of segment profit and loss we measure.~~

~~The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants (dollars in thousands):~~

-16-

dates presented.

~~Table of Contents~~

September 30,

December 31,

Assets, as of:

2017

2016

Segment net real estate:

Apparel

$
174,162

$
175,418

Automotive service

215,004

152,220

Automotive tire services

248,638

238,151

Beverages

290,239

293,447

Child care

58,148

49,584

Convenience stores

1,004,692

1,050,285

Dollar stores

1,092,884

1,120,896

Drug stores

1,510,098

1,541,846

Financial services

393,395

408,228

General merchandise

268,059

248,040

Grocery stores

667,240

464,359

Health and fitness

842,325

823,697

Home improvement

360,866

311,459

Motor vehicle dealerships

206,732

197,713

Restaurants-casual dining

507,062

511,863

Restaurants-quick service

639,812

574,532

Theaters

538,781

370,732

Transportation services

782,024

796,717

Wholesale club

429,802

439,557

Other non-reportable segments

2,117,813

2,135,047

Total segment net real estate

12,347,776

11,903,791

Intangible assets:

Apparel

40,553

43,786

Automotive service

65,017

33,160

Automotive tire services

10,281

11,533

Beverages

2,087

2,280

Convenience stores

46,399

14,372

Dollar stores

47,061

51,249

Drug stores

173,863

182,981

Financial services

26,155

29,749

General merchandise

44,425

43,248

Grocery stores

121,654

65,412

Health and fitness

67,138

63,574

Home improvement

52,017

49,932

Motor vehicle dealerships

32,618

25,032

Restaurants-casual dining

20,574

22,058

Restaurants-quick service

46,300

43,356

Theaters

22,396

13,822

Transportation services

90,750

101,664

Wholesale club

30,378

32,723

Other non-reportable segments

225,347

252,389

Goodwill:

Automotive service

437

440

Automotive tire services

862

862

Child care

4,924

4,945

Convenience stores

2,004

2,008

Restaurants-casual dining

2,080

2,107

Restaurants-quick service

1,064

1,068

Other non-reportable segments

3,618

3,637

Other corporate assets

173,641

151,693

Total assets

$
13,701,419

$
13,152,871

-17-

~~Table of Contents~~

Three months ended

Nine months ended

September 30,

September 30,

Revenue

2017

2016

2017

2016

Segment rental revenue:

Apparel

$
4,718

$
5,106

$
14,613

$
14,860

Automotive service

6,416

5,322

18,257

14,814

Automotive tire services

7,383

7,135

22,158

21,618

Beverages

7,829

7,027

23,345

19,836

Child care

5,062

4,909

15,395

14,846

Convenience stores

27,874

22,757

83,143

68,410

Dollar stores

22,738

22,652

68,246

67,975

Drug stores

31,635

29,230

94,880

86,288

Financial services

7,058

4,267

21,377

12,832

General merchandise

6,296

5,149

17,263

13,702

Grocery stores

13,450

8,331

37,209

23,452

Health and fitness

22,416

21,444

65,810

64,293

Home improvement

7,816

6,732

21,826

18,884

Motor vehicle dealerships

5,749

5,215

18,240

15,025

Restaurants-casual dining

11,073

10,951

32,853

31,364

Restaurants-quick service

14,659

13,056

43,337

38,329

Theaters

14,947

12,689

41,405

38,846

Transportation services

15,635

15,196

46,656

42,038

Wholesale club

9,414

9,368

28,241

28,107

Other non-reportable segments

51,287

48,796

153,071

146,670

Total rental revenue

293,455

265,332

867,325

782,189

Tenant reimbursements

11,933

11,524

34,918

31,741

Other revenue

1,532

318

2,872

1,399

Total revenue

$
306,920

$
277,174

$
905,115

$
815,329

~~19.~~16. Common Stock Incentive Plan

In ~~2012,~~March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income ~~Corporation 2012~~2021 Incentive Award Plan, or 2021 Plan. This note should be read in conjunction with the ~~2012~~more complete discussion of our 2021 Plan ~~to enable us to motivate, attract and retain the services of directors and employees considered essential~~included in note 17 to our ~~long-term success. The 2012 Plan offers~~consolidated financial statements in our ~~directors and employees an opportunity to own our stock or rights that will reflect our growth, development and financial success. Under~~Annual Report on Form 10-K for the ~~terms~~year ended December 31, 2022.

-25-

Table of the 2012 plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 3,985,734 shares. The 2012 Plan has a term of ten years from the date it was adopted by our Board of Directors.

Contents

The amount of share-based compensation costs recognized in ~~general~~'General and ~~administrative expense on our~~administrative' in the consolidated statements of income and comprehensive income was ~~$3.4~~$6.2 million and $5.1 million during the ~~third quarter of 2017, $2.7~~three months ended September 30, 2023, and 2022, respectively, and $20.2 million and $16.7 million during the ~~third quarter of 2016, $10.6 million during the first~~ nine months ~~of 2017~~ended September 30, 2023, and ~~$9.2 million during the first nine months of 2016.~~

2022, respectively.

A. Restricted Stock

and Restricted Stock Units

During the ~~first~~ nine months ~~of 2017,~~ended September 30, 2023, we granted ~~119,564~~220,970 shares of common stock ~~to employees~~ under the ~~2012~~2021 Plan. ~~Of these~~This included 40,000 total shares ~~72,626 vest over a four-year service period, and 46,938 shares vest over a five-year service period. Additionally, we~~of restricted stock granted ~~28,000 shares under the 2012 Plan~~ to the independent members of our Board of Directors in connection with our annual awards in May ~~2017 as their annual grant of~~2023, 20,000 shares of which ~~20,000 shares~~ vested immediately and ~~8,000~~20,000 shares of which vest ~~annually,~~ in equal parts over a three-year service period.

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

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

As of September 30, ~~2017,~~2023, the remaining unamortized share-based compensation expense related to restricted stock awards and units totaled ~~$20.2~~$18.7 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and condition of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

-18-

~~Table of Contents~~

B. Performance Shares ~~and Restricted Stock Units~~

During the ~~first~~ nine months ~~of 2017,~~ended September 30, 2023, we granted ~~111,637~~193,868 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our ~~TSR~~Total Shareholder Return (TSR) performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50% on the first and second January 1 after the end of the ~~three year~~three-year performance period, subject to continued service.

During the first nine months of 2017, we also granted 10,191 restricted stock units of which 6,161 vest over a four-year service period, and the remaining 4,030 vest over a five-year service period. These restricted stock units have the same economic rights as shares of restricted stock.

As of September 30, ~~2017,~~2023, the remaining share-based compensation expense related to the performance shares ~~and restricted stock units~~ totaled ~~$10.0~~$20.9 million. ~~The fair value of the performance share was estimated on the date of grant using a Monte Carlo Simulation model.~~ The performance shares are being recognized on a tranche-by-tranche basis over the service period. The ~~amount of share-based compensation for the restricted stock units is based on the~~ fair value of ~~our common stock at~~ the performance shares was estimated on the date of grant ~~date. The restricted stock units are being recognized on~~using a ~~straight-line basis over the service period.~~

~~20.~~Monte Carlo Simulation model.

17. Commitments and Contingencies

In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.

At September 30, ~~2017,~~2023, we had commitments of ~~$8.8~~$19.5 million, ~~for~~which primarily relate to re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of September 30, ~~2017,~~2023, we had committed ~~$78.9~~$903.6 million under construction contracts related to development projects, which ~~is expected to be paid in the next twelve months.~~

~~21.~~have estimated rental revenue commencement dates between October 2023 and October 2024.

18. Subsequent Events

A. Dividends

In October ~~2017,~~2023, we declared a dividend of ~~$0.212~~$0.2560 per share to our common stockholders, which will be paid in November ~~2017.~~

2023.

B. Agreement and Plan of Merger

On October 29, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Saints MD Subsidiary, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Merger Sub”), and Spirit Realty Capital, Inc., a Maryland corporation (“Spirit”). Pursuant to the terms and conditions of the Merger Agreement, upon the closing, Spirit will be merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”).

-26-

Table of Contents

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

The Merger Agreement contains customary covenants, representations, and warranties, as well as certain termination rights for us and Spirit, in each case, as more fully described in the Merger Agreement. The consummation of the Merger is also subject to certain customary closing conditions, including receipt of the approval by the stockholders of Spirit, and certain customary termination rights.

C. Investment in Joint Venture

In October 2023, we completed our previously announced $950.0 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc. in a new joint venture that owns a 95% interest in the real estate of The Bellagio Las Vegas. The investment included approximately $300.0 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650.0 million preferred equity interest in the joint venture with an expected rate of return of 8.1%.

-27-

Table of Contents

Item 2.2:Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the documents incorporated by reference, ~~contains~~contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this quarterly report, the words ~~“estimated”, “anticipated”, “expect”, “believe”, “intend”~~“estimated,” “anticipated,” “expect,” “believe,” “intend,” “continue,” “should,” “may,” “likely,” “plans,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of our business and portfolio (including growth strategies and intentions to acquire or dispose of properties including the timing and terms), re-leases, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, orand the intentions of ~~management. Forward-looking statements are subject to risks, uncertainties,~~management; and ~~assumptions about Realty Income Corporation, including, among other things:~~

·~~Our anticipated growth strategies;~~

·~~Our intention to acquire additional properties and the timing of these acquisitions;~~

·~~Our intention to sell properties and the timing of these property sales;~~

·~~Our intention to re-lease vacant properties;~~

·~~Anticipated~~ trends in our business, including trends in the market for long-term net leases of freestanding, ~~single-tenant properties;~~single-client properties. Forward-looking statements are subject to risks, uncertainties, and

·~~Future expenditures for development projects.~~

~~Future events and~~ assumptions about Realty Income Corporation which may cause our actual future results ~~financial and otherwise, may~~to differ materially from ~~the results discussed in the forward-looking statements. In particular, some~~expected results. Some of the factors that could cause actual results to differ materially ~~are:~~

·~~Our~~are, among others, our continued qualification as a real estate investment trust;

·~~General~~ general domestic and foreign business, economic, or financial conditions; competition; fluctuating interest and ~~economic conditions;~~

-19-

~~Table of Contents~~

·~~Competition;~~

·~~Fluctuating interest~~currency rates;

·~~Access~~ inflation and its impact on our clients and us; access to debt and equity capital ~~markets;~~

·~~Continued~~markets and other sources of funding; continued volatility and uncertainty in the credit markets and broader financial markets;

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

·~~Impairments~~ impairments in the value of our real estate assets;

·~~Changes~~ changes in domestic and foreign income tax laws and rates; our clients' solvency; property ownership through joint ventures and partnerships which may limit control of the underlying investments; current or future epidemics or pandemics, measures taken to limit their spread, the impacts on us, our business, our clients (including those in the ~~tax laws~~theater and fitness industries), and the economy generally; the loss of key personnel; the ~~United States of America;~~

·~~The~~ outcome of any legal proceedings to which we are a party or which may occur in the future; ~~and~~

·~~Acts~~acts of terrorism and ~~war.~~

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

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016.~~

2022.

Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements ~~which~~are not guarantees of future plans and performance and speak only as of the date ~~that~~ this quarterly report was filed with the Securities and Exchange Commission ("SEC"). Actual plans and operating results may differ materially from what is expressed or ~~SEC. While~~forecasted in this quarterly report and forecasts made in the forward-looking statements ~~reflect our good faith beliefs, they are~~discussed in this quarterly report might not ~~guarantees of future performance.~~materialize. We do not undertake noany obligation to update forward-looking statements or publicly release the results of any ~~revisions to these~~ forward-looking statements that may be made to reflect events or circumstances after the date ~~of this quarterly report or to reflect the occurrence of unanticipated events. In light of~~ these ~~risks and uncertainties, the forward-looking events discussed in this quarterly report might not occur.~~

~~THE COMPANY~~

statements were made.

OVERVIEW

Realty Income, The Monthly Dividend Company®, is an S&P 500 company ~~dedicated~~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 ~~providing stockholders with~~deliver dependable monthly dividends that increase over time. The ~~company~~Company is structured as a real estate investment trust ~~or REIT,~~("REIT"), requiring itus annually to distribute at least 90% of ~~its~~our taxable income (excluding net capital gains) in the form of dividends to its stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term net lease agreements with ~~regional and national~~our commercial tenants. The company has in-house acquisition, portfolio management, asset management, real estate research, credit research, legal, finance and accounting, information technology, and capital markets capabilities.

clients.

Realty Income was founded in 1969 and listed on the New York Stock Exchange ~~(NYSE: O)~~("NYSE") in ~~1994.~~1994 under the trading symbol "O". Over the past 4854 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease ~~agreements. The company is a member~~agreements with our commercial clients.

As of ~~the S&P High Yield Dividend Aristocrats~~® ~~index for having increased its dividend every year for more than 20 consecutive years.~~

At September 30, ~~2017,~~2023, we owned ~~a diversified portfolio:~~

·~~Of 5,062 properties;~~

·~~With an occupancy rate of 98.3%~~or held interests in 13,282 properties located in all 50 U.S. states, Puerto Rico, the United Kingdom ("U.K."), ~~or 4,976 properties leased~~Spain, Italy, and ~~86 properties available for lease;~~

·~~Leased to 251 different commercial tenants doing business in 47 separate industries;~~

·~~Located in 49 states and Puerto Rico;~~

·~~With over 86.4~~Ireland, with approximately262.6 millionsquare feet of leasable ~~space; and~~

·~~With an average leasable~~ space ~~per property of approximately 17,080 square feet; approximately 11,840 square feet per retail property and 221,170 square feet per industrial property.~~

leased to clients doing business in 85 separate industries. Of the ~~5,062~~ 13,282properties in ~~the~~our portfolio ~~5,034,~~as of September 30, 2023, 13,032, or ~~99.4%~~98.1%, ~~are single-tenant~~were single-client properties, of which 12,875 were leased, and the remaining ~~are multi-tenant~~were multi–client properties. AtOur total portfolio of 13,282properties as of September 30, ~~2017, of the 5,034 single-tenant properties, 4,949 were leased with~~2023 had a weighted average remaining lease term (excluding rights to extend a lease at the option of the ~~tenant)~~client) of ~~approximately 9.6 years.~~

-20-

-28-

Table of Contents

~~Investment Philosophy~~

~~We believe that owning an actively managed, diversified~~

approximately 9.7 years. Total portfolio annualized contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of ~~commercial properties under long-term, net lease agreements produces consistent and predictable income. A net lease typically requires the tenant to be responsible for~~ monthly base rent ~~and certain property operating expenses including property taxes, insurance, and maintenance. In addition, tenants of~~receivables) on our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

Diversification is also a key component of our investment philosophy. We believe that diversification of the portfolio by tenant, industry, geography, and, to a certain extent, property type leads to more consistent and predictable income for our stockholders by reducing vulnerability that can come with any single concentration. Our investment activities have led to a diversified property portfolio that,leases as of September 30, ~~2017, consisted~~2023 was $3.87 billion.

As of ~~5,062~~September 30, 2023, approximately 39.0% of our total portfolio annualized contractual rent comes from properties ~~located in 49 states and Puerto Rico,~~ leased to ~~251 different commercial tenants doing business in 47 industries. Each~~our investment grade clients, their subsidiaries or affiliated companies. As of ~~the 47 industries~~September 30, 2023, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented ~~in our property portfolio individually accounted for no more~~ ~~than 10.8%~~approximately 40.9% of our ~~rental revenue for the quarter ended September 30, 2017.~~

~~Investment Strategy~~

~~Our~~annualized rent and 10 of these clients have investment ~~strategy is to acquire real estate leased to regional and national tenants. When identifying new properties for~~grade credit ratings or are subsidiaries or affiliates of investment we generally focus on acquiring high-quality real estate that tenants consider important to the successful operation of their business. We generally seek to acquire real estate that has the following characteristics:

·~~Properties that are freestanding, commercially-zoned with a single tenant;~~

·Properties that are in significant markets or strategic locations critical to generating revenue for regional and national tenants (i.e. they need the property in which they operate in order to conduct their business);

·~~Properties that we deem to be profitable for the tenants and/or can generally be characterized as important to the successful operations of the company’s business;~~

·~~Properties that are located within attractive demographic areas relative to the business of our tenants, generally fungible, and have good visibility and easy access to major thoroughfares;~~

·~~Properties with real estate valuations that approximate replacement costs;~~

·~~Properties with rental or lease payments that approximate market rents; and~~

·~~Properties that can be purchased with the simultaneous execution or assumption of long-term, net lease agreements, offering both current income and the potential for future rent increases.~~

We seek to invest in industries in which several, well-organized, regional and national tenants are capturing market share through the selection of prime real estate locations supported by superior service, quality control, economies of scale, consumer branding, and advertising. In addition, we frequently acquire large portfolios of single-tenant properties net leased to different tenants operating in a variety of industries. We have an internal team dedicated to sourcing such opportunities, often using our relationships with various tenants, owners/developers, and advisers to uncover and secure transactions. We also undertake thorough research and analysis to identify what we consider to be appropriate property locations, tenants, and industries for investment. This research expertise is instrumental to uncovering net lease opportunities in markets where we believe we can add value.

~~In selecting potential investments, we look for tenants with the following attributes:~~

·~~Tenants with reliable and sustainable cash flow;~~

·~~Tenants with revenue and cash flow from multiple sources;~~

·~~Tenants that are willing to sign a long-term lease (10 or more years); and~~

·~~Tenants that are large owners and users of real estate.~~

From a retail perspective, our investment strategy is to target tenants that have a service, non-discretionary, and/or low-price-point component to their business. We believe these characteristics better position tenants to~~operate in a variety of economic conditions and to compete more effectively with internet retailers. As a result of the execution of this strategy, over 90%~~grade companies. Approximately 93% of our annualized retail ~~rental revenue at~~ contractual rent as ofSeptember 30, ~~2017~~2023, is derived from ~~tenants~~our clients with a service, non-discretionary, and/or low price point component to their business. ~~From a non-retail perspective, we target industrial properties leased~~

Unless otherwise specified, references to ~~Fortune 1000, primarily investment grade rated companies. We believe these characteristics enhance the stability of the~~ rental revenue ~~generated~~in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from ~~these properties.~~

-21-

~~Table of Contents~~

~~After applying this investment strategy, we pursue those transactions where we can achieve an attractive investment spread over our cost of capital and favorable risk-adjusted returns.~~

~~Underwriting Strategy~~

~~In order to be considered~~clients for ~~acquisition, properties must meet stringent underwriting requirements. We have established a four-part analysis that examines each potential investment based on:~~

·~~The aforementioned overall~~recoverable real estate ~~characteristics, including demographics, replacement cost~~taxes and ~~comparative rental rates;~~

·~~Industry, tenant (including credit profile),~~operating expenses totaling $61.3 million and ~~market conditions;~~

·~~Store profitability~~$44.1 million for ~~retail locations if profitability data is available; and~~

·~~The importance of~~ the ~~real estate location to the operations of the tenants’ business.~~

We believe the principal financial obligations for most of our tenants typically include their bank and other debt, payment obligations to suppliers, and real estate lease obligations. Because we typically own the land and building in which a tenant conducts its business or which are critical to the tenant’s ability to generate revenue, we believe the risk of default on a tenant’s lease obligation is less than the tenant’s unsecured general obligations. It has been our experience that tenants must retain their profitable and critical locations in order to survive. Therefore, in the event of reorganization, they are less likely to reject a lease of a profitable or critical location because this would terminate their right to use the property.

Thus, as the property owner, we believe that we will fare better than unsecured creditors of the same tenant in the event of reorganization. If a property is rejected by the tenant during reorganization, we own the property and can either lease it to a new tenant or sell the property. In addition, we believe that the risk of default on real estate leases can be further mitigated by monitoring the performance of the tenants’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition.

Prior to entering into any transaction, our research department conducts a review of a tenant’s credit quality. The information reviewed may include reports and filings, including any public credit ratings, financial statements, debt and equity analyst reports, and reviews of corporate credit spreads, stock prices, market capitalization, and other financial metrics. We conduct additional due diligence, including additional financial reviews of the tenant and a more comprehensive review of the business segment and industry in which the tenant operates. We continue to monitor our tenants’ credit quality on an ongoing basis by reviewing the available information previously discussed, and providing summaries of these findings to management. We estimate that approximately 46% of our annualized rental revenue comes from properties leased to investment grade rated companies or their subsidiaries. Atthree months ended September 30, ~~2017, our top 20 tenants represent approximately 53% of our annualized revenue~~2023, and ~~ten of these tenants have investment grade credit ratings or are subsidiaries of investment grade companies.~~

~~Portfolio~~2022, respectively, and ~~Asset Management Strategy~~

~~In addition to pursuing new properties for investment, we seek to increase earnings~~$208.6 million and ~~distributions to stockholders through active portfolio and asset management.~~

~~Generally, our portfolio and asset management efforts seek to achieve:~~

·~~Rent increases at~~$129.0 million during the ~~expiration of existing leases, when market conditions permit;~~

·~~Optimum exposure to certain tenants, industries, and markets through re-leasing vacant properties and selectively selling properties;~~

·~~Maximum asset-level returns on properties that are re-leased or sold;~~

·~~Additional value creation from the existing portfolio by enhancing individual properties, pursuing alternative uses, and deriving ancillary revenue; and~~

·~~Investment opportunities in new asset classes for the portfolio.~~

-22-

~~Table of Contents~~

We continually monitor our portfolio for any changes that could affect the performance of our tenants, our tenants’ industries, and the real estate locations in which we have invested. We also regularly analyze our portfolio with a view towards optimizing its returns and enhancing its overall credit quality. Our active portfolio and asset management strategy pursues asset sales when we believe the reinvestment of the sale proceeds will:

·~~Generate higher returns;~~

·~~Enhance the credit quality of our real estate portfolio;~~

·~~Extend our average remaining lease term; and/or~~

·~~Decrease tenant, industry, or geographic concentration.~~

Atnine months ended September 30, 2017, we classified four properties with a carrying amount of $2.9 million as held for sale on our balance sheet. For 2017, we intend to continue our active disposition efforts to further enhance our real estate portfolio2023, and anticipate $125 to $175 million in property sales. We plan to invest these proceeds into new property acquisitions, if there are attractive opportunities available. However, we cannot guarantee that we will sell properties during the remainder of 2017 at our estimated values or be able to invest the property sale proceeds in new properties.

The active management of the portfolio is an essential component of our long-term strategy of maintaining high occupancy. Since 1970, our occupancy rate at the end of each year has never been below 96%. However, we cannot assure you that our future occupancy levels will continue to equal or exceed 96%.

~~Impact of Real Estate and Credit Markets~~

In the commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, the U.S. credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital. We continually monitor the commercial real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

2022, respectively.

RECENT DEVELOPMENTS

Increases in Monthly Dividends to Common Stockholders

We have continued our ~~48-year policy~~54-year history of paying monthly dividends. In addition, we increased the dividend fivetimes during ~~2017.~~2023. As of October ~~2017,~~2023, we have paid 80104 consecutive quarterly dividend increases and increased the dividend 93122 times since our listing on the NYSE in 1994.

Month

Month

Dividend

Increase

2017 Dividend increases

Declared

Paid

per share

per share

1st increase

Dec 2016

Jan 2017

$
0.2025

$
0.0005

2nd increase

Jan 2017

Feb 2017

$
0.2105

$
0.0080

3rd increase

Mar 2017

Apr 2017

$
0.2110

$
0.0005

4th increase

Jun 2017

Jul 2017

$
0.2115

$
0.0005

5th increase

Sep 2017

Oct 2017

$
0.2120

$
0.0005

The following table summarizes our dividend increases in 2023:

2023 Dividend increases

Month
Declared

Month
Paid

Dividend
per share

Increase
per share

1st increase

Dec 2022

Jan 2023

$0.2485

$0.0005

2nd increase

Feb 2023

Mar 2023

$0.2545

$0.0060

3rd increase

Mar 2023

Apr 2023

$0.2550

$0.0005

4th increase

Jun 2023

Jul 2023

$0.2555

$0.0005

5th increase

Sep 2023

Oct 2023

$0.2560

$0.0005

The dividends paid per share during the ~~first~~ nine months ~~of 2017~~ended September 30, 2023, totaled approximately ~~$1.891,~~$2.2830, as compared to approximately ~~$1.786~~$2.2230 during the ~~first~~ nine months ~~of 2016,~~ended September 30, 2022, an increase of ~~$0.105,~~$0.06, or ~~5.9%~~2.7%.

The monthly dividend of ~~$0.212~~$0.2560 per share represents a current annualized dividend of ~~$2.544~~$3.072 per share, and an annualized dividend yield of ~~approximately 4.4%~~6.2% based on the last reported sale price of our common stock on the NYSE of ~~$57.19~~$49.94 on September 30, ~~2017.~~2023. Although we expect to continue our policy of paying monthly dividends, we cannot guarantee that we will maintain our current level of dividends, that we will continue our pattern of increasing dividends per share, or what our actual dividend yield will be in any future period.

Acquisitions During the ~~Third Quarter of 2017~~

Three and Nine Months Ended September 30, 2023

During the ~~third quarter of 2017,~~three months ended September 30, 2023, we invested ~~$264.9 million~~$2.0 billion in ~~56 new~~289 properties and properties under development or expansion ~~with~~at an ~~estimated~~ initial weighted average cash lease yield of 6.9%. Of such properties, as of September 30, 2023, approximately 20%of the total annualized contractual ~~lease rate~~rent of ~~7.0%. The 56 new~~such properties was attributable to properties leased to investment grade clients.

During the nine months ended September 30, 2023, we invested $6.8 billion in 1,187 properties and properties under development or expansion ~~are located~~at an initial weighted average cash lease yield of 6.9%. Of such properties, as of September 30, 2023, approximately 25% of the total annualized contractual rent of such properties was attributable to properties leased to investment grade clients.

See note 3, Investments in ~~16 states, will contain approximately 949,000 leasable square feet~~Real Estate, to the consolidated financial statements for further details.

-29-

Table of Contents

Equity Capital Raising

In August 2023, we replaced our prior At-The-Market (ATM) program with a new ATM program, pursuant to which we may offer and ~~are 100% leased,~~sell up to 120.0 million shares of common stock.

During the three months ended September 30, 2023, we raised $0.9 billion of net proceeds from the sale of common stock, primarily through our ATM program, with a weighted average ~~lease term~~price of ~~15.2 years. The tenants occupying the new properties operate in ten industries and the property types are 100% retail, based on rental revenue.~~

~~The estimated initial weighted average contractual lease rate for a property is generally computed as estimated contractual net operating income, which, in the case~~$58.58. As of a net leased property, is equal to the aggregate base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a tenant could default on the payment of contractual rent, we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

-23-

~~Table of Contents~~

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the estimated initial weighted average contractual lease rate is computed as follows: estimated net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.

Of the $264.9 million we invested during the third quarter of 2017, $6.5 million was invested in six properties under development or expansion with an estimated initial weighted average contractual lease rate of 6.4%. We may continue to pursue development or expansion opportunities under similar arrangements in the future.

~~Acquisitions During the First Nine Months of 2017~~

During the first nine months of 2017, we invested $956.9 million in 177 new properties and properties under development or expansion, with an initial weighted average contractual lease rate of 6.5%. The 177 new properties and properties under development or expansion are located in 35 states, will contain approximately 4.3 million leasable square feet, and are 100% leased with a weighted average lease term of 14.9 years. The tenants occupying the new properties operate in 21 industries and the property types are 96.6% retail and 3.4% industrial, based on rental revenue. During the first nine months of 2017, none of our real estate investments caused any one tenant to be 10% or more of our total assets at September 30, ~~2017.~~

~~Of the $956.9~~2023, 13.3 million shares of common stock subject to forward sale confirmations have been executed but not settled. See note 8, Issuances of Common Stock, for further details.

Note Issuances

In July 2023, we ~~invested during the first nine months~~issued €550.0 million of ~~2017, $16.4~~4.875% senior unsecured notes due July 2030 and €550.0 million ~~was invested in 13 properties under development or expansion with an estimated initial weighted average contractual lease rate~~ of ~~7.3%.~~

5.125% senior unsecured notes due July 2034.

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

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

Portfolio Discussion

Leasing Results

At September 30, ~~2017,~~2023, we had 86159 properties available for lease or sale out of ~~5,062~~13,282 properties in our portfolio, ~~which represents~~representing a ~~98.3%~~98.8% occupancy rate based on the number of properties in the portfolio. Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards, and properties with possession pending. Below is a summary of our ~~portfolio. Since December 31, 2016, when we reported 84 properties available~~portfolio activity for ~~lease out of 4,944~~the period indicated below:


Three months ended September 30, 2023
Properties available for lease at June 30, 2023			137
Lease expirations (1)			310
Re-leases to same client			(257)
Re-leases to new client			(11)
Vacant dispositions			(20)
Properties available for lease at September 30, 2023			159

Nine months ended September 30, 2023
Properties available for lease at December 31, 2022			126
Lease expirations (1)			718
Re-leases to same client			(586)
Re-leases to new client			(25)
Vacant dispositions			(74)
Properties available for lease at September 30, 2023			159

(1)Includes scheduled and ~~a 98.3% occupancy rate, we:~~

·~~Had 217 lease~~unscheduled expirations (including leases rejected in bankruptcy);

·~~Re-leased 181 properties; and~~

·~~Sold 34 vacant properties.~~

Of, as well as future expirations resolved in the ~~181 properties re-leased during~~periods indicated above.

During the ~~first nine~~three months ~~of 2017, 164 properties were re-leased to existing tenants, six were re-leased to~~ended September 30, 2023, the new ~~tenants without vacancy, and eleven were re-leased to new tenants after a period of vacancy. The annual~~annualized contractual rent on ~~these 181 leases~~re-leases was ~~$34.09~~$57.6 million, as compared to the previous annual rent of $53.9 million on ~~these~~the same ~~properties of $32.02 million, which represents~~units, representing a rent recapture rate of ~~106.5%~~106.9% on the ~~properties~~units re-leased. We re-leased ~~during~~three units to new clients without a period of vacancy, and 10 units to new clients after a period of vacancy.

During the ~~first~~ nine months ended September 30, 2023, the new annualized contractual rent on re-leases was $145.4 million, as compared to the previous annual rent of ~~2017.~~

$139.4 million on the same units, representing a rent recapture rate of 104.3% on the units re-leased. We re-leased seven units to new clients without a period of vacancy, and 27 units to new clients after a period of vacancy.

As part of our re-leasing costs, we pay leasing commissions to unrelated, ~~third party~~third-party real estate brokers consistent with the commercial real estate industry standard, and sometimes provide ~~tenant~~ rent ~~concessions.~~concessions to our clients. We do not consider the collective impact of the leasing commissions or ~~tenant~~ rent concessions to our clients to be material to our financial position or results of operations.

-30-

Table of Contents

Agreement and Plan of Merger

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

Investment in Bellagio Las Vegas

In October 2023, we completed our previously announced $950 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc. in a new joint venture that owns a 95% interest in the real estate of The Bellagio Las Vegas. The investment included approximately $300 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650 million preferred equity interest in the joint venture with an expected rate of return of 8.1%.

Cineworld Bankruptcy Resolution

As previously disclosed, Cineworld Group plc and its affiliates ("Cineworld") commenced Chapter 11 reorganization proceedings during September 2022, at which time we owned 41 properties leased to Cineworld. In the second quarter of 2023, Cineworld rejected 6 leases as part of the bankruptcy process. On July 31, 2023, Cineworld emerged from Chapter 11 bankruptcy. As of September 30, ~~2017,~~2023, we owned 35 properties leased to Cineworld, which represented 1.1% of our ~~average annualized rental revenue was approximately $13.89 per square foot~~total portfolio's annual contractual rent.

On October 1, 2023, we entered into a comprehensive restructuring agreement with Cineworld on the ~~4,976 leased~~35 properties ~~in our portfolio. At September 30, 2017,~~ we ~~classified four~~own. Pursuant to this agreement, Cineworld committed to long-term leases on 28 of the properties, with a ~~carrying amount~~weighted average lease term of ~~$2.9 million~~approximately 10 years, while remaining on short-term leases with terms of one year or less on 7 of the properties. Of the 28 properties with long-term leases, the base rent recapture rate is 75%, which does not include percentage rent that was added to all properties and there were no tenant improvements or additional capital commitments made.

In addition, the restructuring agreement amended certain terms on deferred rent obligations owed to us, including both full and partial forgiveness of deferred rent for certain properties. As these deferrals were accounted for on a cash basis or fully reserved for, there was no impact to our overall Cineworld receivables, net of reserves, as ~~held~~a result of these amendments and any recoveries beyond this will be recognized upon collection.

Impact of Inflation

Leases generally provide for ~~sale~~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. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses).

Moreover, our strategic focus on the use of net lease agreements reduces our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Even though the utilization of net leases reduces our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our ~~balance sheet. The expected sale of these properties does not represent a strategic shift that will have a major effect on~~clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our ~~operations and financial results and, accordingly, they are not reported as discontinued operations. The expected sale of these properties is consistent with our active disposition efforts~~clients' ability to ~~further enhance our real estate portfolio and maximize portfolio returns.~~

~~Investments in Existing Properties~~

In the third quarter of 2017, we capitalized costs of $2.7 million on existing properties in our portfolio, consisting of $489,000 for re-leasing costs, $171,000 for recurring capital expenditures, and $2.0 million for non-recurring building improvements. In the third quarter of 2016, we capitalized costs of $1.6 million on existing properties in our portfolio, consisting of $287,000 for re-leasing costs, $240,000 for recurring capital expenditures, and $1.1 million for non-recurring building improvements.

-24-

pay rent. Additionally, inflationary periods may cause us to

-31-

Table of Contents

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

In the ~~first nine months~~commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, including the current market, the global credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of ~~2017, we capitalized costs of $9.5 million on existing properties in~~capital. We continually monitor the commercial real estate and global credit markets carefully and, if required, will make decisions to adjust our portfolio, consisting of $1.2 million for re-leasing costs, $536,000 for recurring capital expenditures, and $7.8 million for non-recurring building improvements. In the first nine months of 2016, we capitalized costs of $5.3 million on existing properties in our portfolio, consisting of $564,000 for re-leasing costs, $486,000 for recurring capital expenditures, and $4.2 million for non-recurring building improvements. We define recurring capital expenditures as mandatory and recurring landlord capital obligations that have a limited useful life. We define non-recurring capital expenditures as property improvements where we invest additional capital that extends the useful life of the property.

The majority of our building improvements relate to roof repairs, HVAC improvements, and parking lot resurfacing and replacements. The amounts of our capital expenditures can vary significantly, depending on the rental market, tenant credit worthiness, the lease term and the willingness of tenants to pay higher rents over the terms of the leases.

~~Note Issuance~~

In March 2017, we issued $300 million of 4.650% senior unsecured notes due 2047, or the 2047 Notes, and $400 million of 4.125% senior unsecured notes due 2026, or the 2026 Notes. The public offering price for the 2047 Notes was 99.97% of the principal amount for an effective yield to maturity of 4.65%. The public offering price for the 2026 Notes was 102.98% of the principal amount for an effective yield to maturity of 3.75%. The 2026 Notes constituted a further issuance of, and formed a single series with, the $250 million aggregate principal amount of senior notes due 2026, issued in September 2014. The net proceeds of approximately $705.2 million from the offerings were used to repay borrowings outstanding under our credit facility to fund investment opportunities and for other general corporate purposes.

~~Capital Raising~~

During the third quarter of 2017, we raised $443.7 million from the sale of common stock at a weighted average price of $57.53 per share. During the first nine months of 2017, we raised $1.3 billion from the sale of common stock at a weighted average price of $59.99 per share.

~~Redemption of Preferred Stock~~

In April 2017, we redeemed all of the 16,350,000 shares of our 6.625% Monthly Income Class F Preferred Stock for $25 per share, plus accrued dividends. During the first nine months of 2017, we incurred a charge of $13.4 million, representing the Class F preferred stock original issuance costs that we paid in 2012.

~~Net Income Available to Common Stockholders~~

Net income available to common stockholders was $87.9 million in the third quarter of 2017, compared to $70.3 million in the third quarter of 2016, an increase of $17.6 million. On a diluted per common share basis, net income was $0.32 in the third quarter of 2017, compared to $0.27 in the third quarter of 2016, an increase of $0.05, or 18.5%.

Net income available to common stockholders was $240.7 million in the first nine months of 2017, compared to $202.8 million in the first nine months of 2016, an increase of $37.9 million. On a diluted per common share basis, net income was $0.89 in the first nine months of 2017, as compared to $0.80 in the first nine months of 2016, an increase of $0.09, or 11.3%.

Net income and funds from operations available to common stockholders per share for the first nine months of 2017 were impacted by a $13.4 million non-cash redemption charge on the Class F preferred shares that were redeemed in April 2017, which represents $0.05 per share. This charge is for the excess in redemption value over the carrying value of the Class F preferred stock and represents the original issuance cost that was paid in 2012.

The calculation to determine net income available to common stockholders includes impairments, gains from the sale of properties and/or fair value adjustments on our interest rate swaps. These items vary from period to period based on the timing of property sales and the interest rate environment, and can significantly impact net income available to common stockholders.

-25-

business strategy accordingly.

~~Table of Contents~~

Gains from the sale of properties during the third quarters of 2017 and 2016, respectively, were $4.3 million. Gains from the sale of properties during the first nine months of 2017 were $17.7 million, as compared to gains from the sale of properties of $15.3 million during the first nine months of 2016.

~~Funds from Operations Available to Common Stockholders (FFO)~~

In the third quarter of 2017, our FFO increased by $22.9 million, or 12.2%, to $211.2 million, compared to $188.3 million in the third quarter of 2016. On a diluted per common share basis, FFO was $0.77 in the third quarter of 2017 and $0.73 in the third quarter of 2016, an increase of $0.04, or 5.5%.

In the first nine months of 2017, our FFO increased by $66.1 million, or 12.3%, to $601.7 million versus $535.6 million in the first nine months of 2016. On a diluted per common share basis, FFO was $2.22 in the first nine months of 2017, compared to $2.11 in the first nine months of 2016, an increase of $0.11, or 5.2%.

~~Adjusted Funds from Operations Available to Common Stockholders (AFFO)~~

In the third quarter of 2017, our AFFO increased by $27.0 million, or 14.5%, to $213.6 million, compared to $186.6 million in the third quarter of 2016. On a diluted common share basis, AFFO was $0.77 in the third quarter of 2017 and $0.72 in the third quarter of 2016, an increase of $0.05, or 6.9%.

In the first nine months of 2017, our AFFO increased by $79.9 million, or 14.7%, to $623.3 million versus $543.4 million in the first nine months of 2016. On a diluted per common share basis, AFFO was $2.30 in the first nine months of 2017, compared to $2.14 in the first nine months of 2016, an increase of $0.16, or 7.5%.

See our discussion of FFO and AFFO (which are not financial measures under generally accepted accounting principles, or GAAP), later in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this quarterly report, which includes a reconciliation of net income available to common stockholders to FFO and AFFO.

LIQUIDITY AND CAPITAL RESOURCES

~~Capital Philosophy~~

~~Historically,~~

As of September 30, 2023, we ~~have met~~had $4.5 billion of liquidity, which consists of cash and cash equivalents of $344.1 million, including £93.1 million denominated in Sterling and €47.9 million denominated in Euro, unsettled ATM forward equity of $749.3 million, and $3.4 billion of availability under our ~~long-term capital needs by issuing common stock, preferred stock and long-term~~$4.25 billion unsecured ~~notes and bonds. Over the long term, we believe that common stock should be the majority of~~revolving credit facility, after deducting $376.8 million in commercial paper borrowings under our ~~capital structure; however, we may issue additional preferred stock or debt securities.~~commercial paper programs. We ~~may issue common stock when we believe that~~use our ~~share price is at~~unsecured revolving credit facility as a ~~level that allows~~liquidity backstop for the ~~proceeds~~repayment of any offering to be accretively invested into additional properties. In addition, we may issue common stock to permanently finance properties that were initially financed by our credit facility or debt securities. However, we cannot assure you that we will have access to the ~~capital markets at all times and at terms that are acceptable to us.~~

notes issued under these programs.

Our primary cash obligations, for the current year and subsequent years, are included in the ~~“Table of Obligations,”~~“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 ~~and preferred~~ 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; and

•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 oncapacity is 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 ~~periodically through public securities offerings.~~

~~Conservative Capital Structure~~

Wecommercial paper programs.

Long-Term Liquidity Requirements

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. Over the long term, we believe that common stock should be the majority of our ~~stockholders are best served by a conservative~~ capital structure. ~~Therefore,~~We may issue common stock when we ~~seek~~believe our share price is at a level that allows for the proceeds of an offering to ~~maintain a conservative~~be accretively invested into additional properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term debt ~~level~~securities. However, we cannot assure you that we will have access to the capital markets at all times and at terms that are acceptable to us.

Capitalization

As of September 30, 2023, our total market capitalization was $56.6 billion. Total market capitalization consisted of $36.2 billion of common equity (based on the September 30, 2023 closing price on the NYSE of $49.94 and assuming the conversion of common units of Realty Income, L.P.) and total outstanding borrowings of $20.4 billion on our ~~balance sheet~~senior unsecured notes and ~~solid interest~~bonds, term loans, mortgages payable, revolving credit facility and ~~fixed charge coverage ratios.~~ commercial paper (excluding unamortized deferred financing costs, discounts, and premiums). Our total debt to market capitalization was 36.0% at September 30, 2023.

-32-

Table of Contents

ATM Program

As of September 30, 2023, there were approximately 13.3 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $749.3 million in expected net proceeds, which have been executed at a weighted average price of $56.47 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates). During the nine months ended September 30, 2023, we settled approximately 63.2 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $3.9 billion of net proceeds. As of September 30, 2023, we had 102.7 millionshares remaining for future issuance under our ATM program. We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder.

Debt and Financing Activities

At September 30, ~~2017,~~2023, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable, ~~and credit facility borrowings were $5.81 billion, or approximately 26.5% of our total market capitalization of $21.95 billion.~~

-26-

~~Table of Contents~~

~~We define our total market capitalization at September 30, 2017 as the sum of:~~

·Shares of our common stock outstanding of 281,778,537 plus total common units outstanding of 405,204, multiplied by the last reported sales price of our common stock on the NYSE of $57.19 per share on September 30, 2017, or $16.14 billion;

·~~Outstanding borrowings of $658.0 million on our credit facility;~~

·~~Outstanding mortgages payable of $336.5 million, excluding net mortgage premiums of $4.8 million and deferred financing costs of $249,000;~~

·~~Outstanding borrowings of $320.0 million on our term loans, excluding deferred financing costs of $653,000; and~~

·~~Outstanding senior unsecured notes and bonds of $4.5 billion, excluding unamortized original issuance discounts of $7.1 million and deferred financing costs of $24.2 million.~~

~~Universal Shelf Registration~~

In December 2015, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in December 2018. In accordance with SEC rules, the amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit. The securities covered by this registration statement include (1) common stock, (2) preferred stock, (3) debt securities, (4) depositary shares representing fractional interests in shares of preferred stock, (5) warrants to purchase debt securities, common stock, preferred stock, or depositary shares, and (6) any combination of these securities. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

~~At-the-Market (ATM) Program~~

~~In September 2015, we established an “at-the-market” equity distribution~~ program, or our ATM program, pursuant to which we were permitted to offer and sell shares of common stock to, or through, a consortium of banks acting as our sales agents by means of ordinary brokers’ transactions on the NYSE at prevailing market prices or at negotiated prices. During the third quarter of 2017, we issued 7,570,813 shares and raised approximately $435.6 million under the ATM program. During the first nine months of 2017, we issued 8,506,559 shares and raised approximately $488.0 million under the ATM program. From the inception of our ATM program through September 30, 2017, we have issued all 12,000,000 shares authorized by our ATM program and raised $691.1 million. Subject to market conditions, we may continue issuing shares under a new ATM program if and when such a program has been established.

~~Issuance of Common Stock~~

In March 2017, we issued 11,850,000 shares of common stock. After underwriting discounts and other offering costs of $29.7 million, the net proceeds of $704.9 million were used to repay borrowings under our credit facility.

~~Dividend Reinvestment and Stock Purchase Plan~~

Our Dividend Reinvestment and Stock Purchase Plan, or our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26,000,000 common shares to be issued. Our DRSPP includes a waiver approval process, allowing larger investors or institutions, per a formal approval process, to purchase shares at a small discount, if approved by us. During the first nine months of 2017, we issued 1,155,883 shares and raised approximately $67.8 million under our DRSPP, of which we issued 927,695 shares and raised $54.7 million under the waiver approval process.

~~$2.0 Billion Revolving Credit Facility~~

~~We have a $2.0 billion unsecured~~ revolving credit facility ~~or our credit facility, that expires in June 2019~~ and ~~includes, at our option, two six-month extensions. Our credit facility has a $1.0~~commercial paper were $20.4 billion, accordion expansion option. Under our credit facility, our investment grade credit ratings as of September 30, 2017 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.90%, with a ~~facility commitment fee~~weighted average maturity of ~~0.15%, for all-in drawn pricing of 1.05% over LIBOR. The borrowing rate is subject to an interest rate floor~~5.8 years and may change if our investment grade credit ratings were to change. We also have other interest rate options available to us under our credit facility. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

-27-

~~Table of Contents~~

~~At September 30, 2017, we had~~ a ~~borrowing capacity of $1.34 billion available on our credit facility and an outstanding balance of $658.0 million. The~~ weighted average interest rate ~~on borrowings~~of 3.8%. As of September 30, 2023, approximately 93% of our total debt was fixed rate debt. See notes 4 through 7 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the ~~first~~ nine months ~~of 2017 was 1.9% per annum. We must comply with various financial and other covenants in our credit facility. At~~ended September 30, ~~2017,~~2023 below.

Note Issuances

During the nine months ended September 30, 2023, we ~~were in compliance with these covenants. We expect to use our credit facility to acquire additional properties~~issued the following notes and ~~for other general corporate purposes. Any additional borrowings will increase our exposure to interest rate risk.~~

We generally use our credit facility for the short-term financing of new property acquisitions. Thereafter, we generally seek to refinance those borrowings with the net proceeds of long-term or permanent financing, which may include the issuance of common stock, preferred stock or debt securities. We cannot assure you, however, that we will be able to obtain any such refinancing, or that market conditions prevailing at the time of the refinancing will enable us to issue equity or debt securities at acceptable terms.

bonds (in millions):

Note Issuance Date of Issuance Maturity Date Principal amount Price of par value Effective yield to maturity
5.050% Notes January 2023 January 2026 $ 500.0 99.618 % 5.189 %
4.850% Notes January 2023 March 2030 $ 600.0 98.813 % 5.047 %
4.700% Notes April 2023 December 2028 $ 400.0 98.949 % 4.912 %
4.900% Notes April 2023 July 2033 $ 600.0 98.020 % 5.148 %
4.875% Notes July 2023 July 2030 € 550.0 99.421 % 4.975 %
5.125% Notes July 2023 July 2034 € 550.0 99.506 % 5.185 %

Term ~~Loans~~

Loan

In ~~June 2015, in conjunction with entering into our credit facility,~~January 2023, we entered into a ~~$250 million senior unsecured~~ term loan ~~maturing June~~agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings. As of September 30, ~~2020. Borrowing under this~~2023, we had $1.0 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings. The 2023 term ~~loan bears interest~~loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at ~~LIBOR, plus 0.95%.~~our option. In conjunction with ~~this~~our 2023 term ~~loan,~~loans, we ~~also~~ entered into an interest rate ~~swap~~swaps which ~~effectively fixes~~fix our per annum interest ~~rate on this term loan at 2.67%.~~

In January 2013, in conjunction with our acquisition of American Realty Capital Trust, or ARCT, we entered into a $70 million senior unsecured term loan maturing in January 2018. Borrowing under the term loan bears interest at LIBOR, plus 1.20%. In conjunction with this term loan, we also acquired an interest rate swap which effectively fixes our per annum interest rate on this term loan at 2.15%.

~~Mortgage Debt~~

rate. As of September 30, 2017, we had $336.5 million of mortgages payable, all of which were assumed in connection with our property acquisitions. Additionally, at September 30, 2017, we had net premiums totaling $4.8 million on these mortgages and deferred financing costs of $249,000. We expect2023, the effective interest rate, after giving effect to ~~pay off~~ the mortgages payable as soon as prepayment penalties have declined to a level that would make it economically feasible to do so. During the first nine months of 2017, we made $123.5 million in principal payments, including the repayment of seven mortgages in full for $118.6 million.

~~Notes Outstanding~~

~~Our senior unsecured note and bond obligations consist of the following as of September 30, 2017, sorted by maturity date (dollars in millions):~~

2.000% notes, issued in October 2012 and due in January 2018

$
350

6.750% notes, issued in September 2007 and due in August 2019

550

5.750% notes, issued in June 2010 and due in January 2021

250

3.250% notes, issued in October 2012 and due in October 2022

450

4.650% notes, issued in July 2013 and due in August 2023

750

3.875% notes, issued in June 2014 and due in July 2024

350

4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026

650

3.000% notes, issued in October 2016 and due in January 2027

600

5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035

250

4.650% notes, issued in March 2017 and due in March 2047

300

Total principal amount

4,500

Unamortized original issuance discounts and deferred financing costs

(31)

$
4,469

~~In March 2017, we issued $300 million of the 2047 Notes, and $400 million of the 2026 Notes. The public offering price for the 2047 Notes~~interest rate swaps, was ~~99.97% of the principal amount for an effective yield to maturity of 4.65%~~5.0%. The public offering price for the 2026 Notes was 102.98% of the principal amount for an effective yield to maturity of 3.75%. The 2026 Notes constitutes a further issuance of, and formed a single series with, the $250 million aggregate principal amount of senior notes due 2026, issued in September 2014. The net proceeds of approximately $705.2 million from this offering were used to repay borrowings outstanding under our credit facility to fund potential investment opportunities and for other general corporate purposes.

-28-

Covenants

~~Table of Contents~~

~~In September 2017, we repaid our $175 million of outstanding 5.375% notes.~~

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of September 30, 2017. Additionally, interest on all of our senior note and bond obligations is paid semiannually.

The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our senior notes and bonds. These calculations, which are not based on accounting principles generally accepted in the United States of America ("U.S. ~~GAAP measurements,~~GAAP"), are presented to investors to show our ability to incur additional debt under the terms of our senior notes and bonds as well as to disclose our current compliance with such covenants and are not measures of our liquidity or performance. The actual amounts as of September 30, ~~2017~~2023, are:

~~Note Covenants~~	~~Required~~		~~Actual~~
Note Covenants		Required		Actual
Limitation on incurrence of total debt				< 60% of adjusted assets	39.7	~~39.5%~~ %
Limitation on incurrence of secured debt				< 40% of adjusted assets	1.7	~~2.4%~~ %
Debt service ~~and fixed charge~~ coverage (trailing 12 months)(1)		> 1.5x		> ~~1.5 x~~			~~4.7x~~ 4.5x
Maintenance of total unencumbered assets				> 150% of unsecured debt	257.6	~~257.3%~~ %

(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~~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~~debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our ~~Debt~~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, ~~2016,~~2022 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

-33-

Table of Contents

(i), (ii) and (iii) of the preceding sentence occurred as of October 1, ~~2016,~~2022, nor does it purport to reflect our debt service coverage ratio for any future period. Our fixed charge coverage ratio is calculated in exactly the same manner as our debt service coverage ratio, except that preferred stock dividends are also added to the denominator; since we redeemed our Class F preferred dividends in April 2017, our fixed charge coverage ratio is equivalent to our debt service coverage ratio. The following is our calculation of debt service and fixed charge coverage at September 30, ~~2017~~2023 (in thousands, for trailing twelve months):

Net income attributable to the Company

$
350,387

Plus: interest expense

225,831

Plus: provision for taxes

3,070

Plus: depreciation and amortization

489,507

Plus: provisions for impairment

11,781

Plus: pro forma adjustments

44,980

Less: gain on sales of real estate

(24,386
)
Income available for debt service, as defined

$
1,101,170

Total pro forma debt service charge

$
233,120

Debt service coverage ratio

4.7

~~Cash Reserves~~

We are organized to operate as an equity REIT that acquires and leases properties and distributes to stockholders, in the form of monthly cash distributions, a substantial portion of our net cash flow generated from leases on our properties. We intend to retain an appropriate amount of cash as working capital. At September 30, 2017, we had cash and cash equivalents totaling $3.2 million.

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

Net income available to common stockholders $ 881,170
Plus: interest expense, excluding the amortization of deferred financing costs 630,215
Plus: provision for taxes 45,599
Plus: depreciation and amortization 1,857,495
Plus: provisions for impairment 69,282
Plus: pro forma adjustments 303,311
Less: gain on sales of real estate (29,022)
Income available for debt service, as defined $ 3,758,050
Total pro forma debt service charge $ 843,250
Debt service and fixed charge coverage ratio 4.5

Credit Agency Ratings

The borrowing interest rates under our revolving credit facility are based upon our ratings assigned by credit rating agencies. As of September 30, ~~2017,~~2023, 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 ~~Baa1~~A3 with a ~~“positive”~~“stable” outlook and Standard & Poor’s Ratings Group has assigned a rating of ~~BBB+~~A- with a ~~“positive” outlook, and Fitch Ratings~~“stable” outlook. In addition, we were assigned the following ratings on our commercial paper at September 30, 2023: Moody's Investors Service has assigned a rating of ~~BBB+ with~~P-2 and Standard & Poor's Ratings Group has assigned a ~~“stable” outlook.~~

-29-

~~Table~~rating of ~~Contents~~

A-2.

Based on our credit agency ratings as of September 30, ~~2017,~~2023, interest rates under our credit facility for U.S. borrowings would have been at the ~~facility interest rate as of September 30, 2017 was LIBOR~~SOFR, plus ~~0.90%~~0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility ~~commitment~~ fee of ~~0.15%~~0.125%, for all-in ~~drawn~~ pricing of ~~1.05%~~0.95% over ~~LIBOR. Our~~SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR. In addition, our credit facility provides that the interest ~~rate~~rates can range between: (i) ~~LIBOR~~SOFR/SONIA/EURIBOR, plus ~~1.55%~~1.40% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) ~~LIBOR~~SOFR/SONIA/EURIBOR, plus ~~0.85%~~0.70% if our credit rating is ~~A-/A3~~A/A2 or higher. In addition, our credit facility provides for a facility commitment fee based on our credit ratings, which ~~range~~ranges from: (i) 0.30% for a rating lower than BBB-/Baa3 or unrated, and (ii) ~~0.125%~~0.10% for a credit rating of ~~A-/A3~~A/A2 or higher.

We also issue senior debt securities from time to time and our credit ratings can impact the interest rates charged in those transactions. If our credit ratings or ratings outlook change, our cost to obtain debt financing could increase or decrease. The credit ratings assigned to us could change based upon, among other things, our results of operations and financial condition. 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.

-34-

Table of ~~Obligations~~

Contents

Material Cash Requirements

The following table summarizes the maturity of each of our obligations as of September 30, ~~2017~~2023 (dollars in millions):

Ground

Ground

Leases

Leases

Notes

Paid by

Paid by

Year of

Credit

and

Term

Mortgages

Realty

Our

Maturity

Facility
(1)
Bonds
(2)
Loan
(3)
Payable
(4)
Interest
(5)
Income
(6)
Tenants
(7)
Other
(8)
Totals

2017

$
-

$
-

$
-

$
1.3

$
30.2

$
0.4

$
3.4

$
-

$
35.3
2018

-

350.0

70.0

21.9

230.8

1.6

13.5

87.7

775.5
2019

658.0

550.0

-

20.7

219.6

1.5

13.4

-

1,463.2
2020

-

-

250.0

82.4

169.6

1.4

13.2

-

516.6
2021

-

250.0

-

66.9

152.5

1.2

12.9

-

483.5
Thereafter

-

3,350.0

-

143.3

922.5

22.1

106.9

-

4,544.8
Totals

$
658.0

$
4,500.0

$
320.0

$
336.5

$
1,725.2

$
28.2

$
163.3

$
87.7

$
7,818.9


	Credit Facility and Commercial Paper (1)		Senior Unsecured Notes		Term Loans (2)		Mortgages Payable		Interest (3)		Ground Leases Paid by the Company (4)		Ground Leases Paid by Our Clients (5)		Other (6)		Totals
2023	$	376.8	$	—	$	—	$	1.3	$	169.4	$	2.7	$	7.8	$	468.4	$	1,026.4
2024	—		850.0		250.0		740.5		751.6		13.5		30.7		430.4		3,066.7
2025	—		1,050.0		—		42.4		671.1		12.0		30.0		20.0		1,825.5
2026	481.5		2,075.0		1,040.2		12.0		538.3		17.6		29.3		0.6		4,194.5
2027	—		1,993.1		—		22.3		464.0		9.4		26.4		—		2,515.2
Thereafter	—		11,449.8		—		3.5		2,086.8		299.9		265.5		3.8		14,109.3
Totals	$	858.3	$	17,417.9	$	1,290.2	$	822.0	$	4,681.2	$	355.1	$	389.7	$	923.2	$	26,737.6

(1) The initial term of the credit facility expires in June ~~2019~~2026 and includes, at our option, two six-month extensions.

~~(2)~~ ~~Excludes non-cash original issuance discounts recorded on notes payable. The unamortized balance of the original issuance discounts at~~ At September 30, ~~2017 is $7.1 million. Also excludes deferred financing costs of $24.2 million.~~

~~(3)~~ ~~Excludes deferred financing costs of $653,000.~~

~~(4)~~ ~~Excludes non-cash net premiums recorded on~~2023, there were $481.5 million borrowings under our revolving credit facility, and commercial paper programs outstanding were $376.8 million, which matured in October 2023.

(2) The maturity date for our 2023 multi-currency term loan assumes the ~~mortgages payable. The unamortized balance of these net premiums~~two twelve-month extensions available at ~~September 30, 2017, is $4.8 million. Also excludes deferred financing costs of $249,000.~~

~~(5)~~the Company's option are fully exercised.

(3)Interest on the term loans, notes, bonds, mortgages payable, ~~and~~ credit facility and commercial paper programs has been calculated based on outstanding balances ~~as of September 30, 2017~~at period end through their respective maturity dates.

~~(6)~~ ~~Realty Income~~

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

~~(7)~~

(5)Our ~~tenants,~~clients, who are generally sub-tenants clients under ground leases, are responsible for paying the rent under these ground leases. In the event ~~a tenant~~our client fails to pay the ground lease rent, we are primarily responsible.

~~(8)~~ ~~“Other”~~

(6)“Other” consists of ~~$78.9~~$903.6 million of commitments under construction contracts, and ~~$8.8~~$19.5 million ~~of commitments~~ for ~~tenant improvements~~re-leasing costs, recurring capital expenditures, and ~~leasing costs.~~

~~Our credit facility, term loans, and notes payable obligations are unsecured. Accordingly, we have not pledged any assets as collateral for these obligations.~~

~~No Unconsolidated Investments~~

~~We have no unconsolidated investments, nor do we engage in trading activities involving energy or commodity contracts.~~

~~Dividend Policy~~

non-recurring building improvements.

DIVIDEND POLICY

Distributions are paid monthly to holders of shares of our common stock. Prior to the redemption of our Class F preferred stock in April 2017, distributions were paid monthly to holders of shares of our Class F preferred stock, in each case, if, and when, declared by our Board of Directors.

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

-30-

~~Table of Contents~~

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 ~~2016,~~2022, our cash distributions to ~~preferred and~~ common stockholders totaled ~~$637.6 million,~~$1.81 billion, or approximately ~~129.2%~~97.8% of our ~~estimated~~ taxable income of ~~$493.4 million.~~$1.85 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. 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. ~~Our cash distributions~~We distributed $2.2830 per share to ~~common~~ stockholders induring the ~~first~~ nine months ~~of 2017 totaled~~ ~~$510.0 million,~~ ended September 30, 2023, representing ~~81.8%~~76.4% of our adjusted funds from operations available to common stockholders of $623.3 million. In comparison, our 2016 cash distributions to common stockholders totaled $610.5 million, representing 82.9% of our adjusted funds from operations available to common stockholders of $736.4 million.

~~Prior to the redemption of our Class F preferred stock in April 2017, the Class F preferred stockholders received cumulative distributions at a rate of 6.625% per annum on the $25~~diluted AFFO per share ~~liquidation preference (equivalent to $1.65625 per annum per share).~~

of $2.99.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, FFO, Normalized FFO, AFFO, cash flow from operations, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, ~~or the Code,~~ 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 ~~the~~our common ~~or preferred~~ stock in the event that we fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facility.

Distributions of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to stockholders as ordinary income, except to the extent that we recognize capital gains and declare a capital gains dividend, or that such amounts constitute “qualified dividend income” subject to a reduced rate of tax. The maximum tax rate of non-corporate taxpayers for “qualified dividend income” is generally 20%. In general,

-35-

Table of Contents

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

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

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. ~~Approximately 21.5%~~None of the distributions to our common stockholders, made or deemed to have been made in ~~2016,~~2022, were classified as a return of capital for federal income tax purposes. ~~We estimate that~~

RESULTS OF OPERATIONS

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

Total Revenue

The following summarizes our total revenue (dollars in ~~2017, between 15%~~thousands):


	Three months ended September 30,						Nine months ended September 30,
	2023		2022		Change		2023		2022		Change
Rental (excluding reimbursable)	$	947,549	$	781,883	$	165,666	$	2,720,806	$	2,297,272	$	423,534
Rental (reimbursable)	61,313		44,063		17,250		208,634		129,039		79,595
Other	30,242		11,323		18,919		73,268		28,720		44,548
Total revenue	$	1,039,104	$	837,269	$	201,835	$	3,002,708	$	2,455,031	$	547,677

Rental Revenue (excluding reimbursable)

The table below summarizes our rental revenue (excluding reimbursable) in the three and ~~22%~~nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Number of Properties	Three months ended September 30,						Nine months ended September 30,
		2023		2022		Change		2023		2022		Change
Properties acquired during 2023 & 2022	2,391	$	225,631	$	52,214	$	173,417	$	546,147	$	85,763	$	460,384
Same store rental revenue (1)	10,577	716,015		700,869		15,146		2,140,980		2,107,396		33,584
Constant currency adjustment (2)	N/A	3,848		(2,997)		6,845		6,560		4,462		2,098
Properties sold during and prior to 2023	265	522		11,313		(10,791)		3,434		25,676		(22,242)
Straight-line rent and other non-cash adjustments	N/A	(10,151)		2,978		(13,129)		(16,307)		15,010		(31,317)
Vacant rents, development and other (3)	314	11,103		16,645		(5,542)		37,494		53,975		(16,481)
Other excluded revenue (4)	N/A	581		861		(280)		2,498		4,990		(2,492)
Totals		$	947,549	$	781,883	$	165,666	$	2,720,806	$	2,297,272	$	423,534

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

(2)For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of September 30, 2023, of 1.22 British Pound Sterling ("GBP")/USD and 1.06 Euro ("EUR")/USD. None of the properties in Italy and Ireland met our same store pool definition for the periods presented.

(3)Relates to the aggregate of (i) rental revenue from 287 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.

-36-

Table of Contents

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; (i) were vacant at any time, (ii) were under development or redevelopment, or (iii) were involved in eminent domain and rent was reduced. 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 14,044 in-place leases in the portfolio, which excludes 276 vacant units, 11,644, or 82.9%, 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 $2.2 million in the three months ended September 30, 2023, $2.3 million for the three months ended September 30, 2022, $8.0 million for the nine months ended September 30, 2023, and $8.3 million for the nine months ended September 30, 2022. Percentage rent represents less than 1.0% of rental revenue.

At September 30, 2023, our portfolio of 13,282 properties was 98.8% leased with 159 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022, and 98.9% leased with 131 properties available for lease at September 30, 2022. It has been our experience that approximately 1% to 4% of our property portfolio will be available for lease at any given time; however, it is possible that the number of properties available for lease or sale could increase in the future, given the nature of economic cycles and other unforeseen global events.

Rental Revenue (reimbursable)

A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses. Contractually obligated reimbursements by our clients increased by $17.3 million and $79.6 million for the three and nine months ended September 30, 2023 as compared with the same periods in2022, respectively, primarily due to higher recoverable real estate tax taxes from overall portfolio growth.

Other Revenue

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

Total Expenses

The following summarizes our total expenses (in thousands):


	Three months ended September 30,								Nine months ended September 30,
	2023			2022			Change		2023			2022			Change
Depreciation and amortization	$	495,566		$	419,016		$	76,550	$	1,419,321		$	1,232,215		$	187,106
Interest	184,121			117,409			66,712		522,110			333,933			188,177
Property (excluding reimbursable)	9,668			8,656			1,012		26,447			28,202			(1,755)
Property (reimbursable)	61,313			44,063			17,250		208,634			129,039			79,595
General and administrative	35,525			34,096			1,429		106,521			100,934			5,587
Provisions for impairment	16,808			1,650			15,158		59,801			16,379			43,422
Merger and integration-related costs	2,884			3,746			(862)		4,532			12,994			(8,462)
Total expenses	$	805,885		$	628,636		$	177,249	$	2,347,366		$	1,853,696		$	493,670
Total revenue (1)	$	977,791		$	793,206				$	2,794,074		$	2,325,992
General and administrative expenses as a percentage of total revenue (1)	3.6		%	4.3		%			3.8		%	4.3		%
Property expenses (excluding reimbursable) as a percentage of total revenue (1)	1.0		%	1.1		%			0.9		%	1.2		%

(1) Excludes rental revenue (reimbursable).

-37-

Table of Contents

Depreciation and Amortization

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

Interest Expense

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


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Interest on our credit facility, commercial paper, term loans, notes, mortgages and interest rate swaps	$	199,059		$	131,160		$	564,347		$	376,448
Credit facility commitment fees	1,358			1,358			3,999			3,521
Amortization of debt origination and deferred financing costs	6,930			3,653			19,498			10,056
(Gain) loss on interest rate swaps	(1,790)			734			(5,390)			2,180
Amortization of net mortgage premiums	(3,201)			(3,327)			(9,597)			(10,418)
Amortization of net note premiums	(14,989)			(15,762)			(45,647)			(47,185)
Capital lease obligation	378			382			1,183			1,060
Interest capitalized	(3,624)			(789)			(6,283)			(1,729)
Interest expense	$	184,121		$	117,409		$	522,110		$	333,933

Credit facility, commercial paper, term loans, mortgages and notes
Average outstanding balances	$	20,249,836		$	16,174,244		$	19,685,182		$	15,680,253
Weighted average interest rates	3.93		%	3.21		%	3.81		%	3.16		%

Interest expense increased by $66.7 million and $188.2 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, primarily due to higher average debt and weighted average interest. See notes to the accompanying consolidated financial statements additional information regarding our indebtedness.

Property Expenses (excluding reimbursable)

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

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

Property Expenses (reimbursable)

Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients. Property expenses (reimbursable) increased by $17.3 million and $79.6 million for the three and nine months ended September 30, 2023 as compared with the same periods in 2022, respectively, which is proportional to overall portfolio growth.

General and Administrative Expenses

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

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

-38-

Table of Contents

Provisions for Impairment

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


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Carrying value prior to impairment	$	37.5	$	48.1	$	161.4	$	107.0
Less: total provisions for impairment	(16.8)		(1.7)		(59.8)		(16.4)
Carrying value after impairment	$	20.7	$	46.4	$	101.6	$	90.6

Merger and Integration-Related Costs

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

We incurred approximately $2.9 million and $4.5 million of merger and integration-related transaction costs during the three and nine months ended September 30, 2023, respectively, compared to approximately $3.7 million and $13.0 millionduring thethree and nine months ended September 30, 2022, respectively, in conjunction with our merger with VEREIT, Inc. in November 2021.

Gain on Sales of Real Estate

The following summarizes our property dispositions (dollars in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Number of properties sold	24		35		79		139
Net sales proceeds	$	32.3	$	142.4	$	92.8	$	414.7
Gain on sales of real estate	$	7.6	$	42.9	$	19.7	$	93.6

Foreign Currency and Derivative (Loss) Gain, Net

We borrow in the functional currencies of the countries in which we invest. Net foreign currency gain and loss are primarily related to the remeasurement of intercompany debt from foreign subsidiaries.Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated other comprehensive income ("AOCI").

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

In June 2022, following the early prepayment of our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries, we terminated the four cross-currency swaps used to hedge the foreign currency exposure of the intercompany loan.As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the nine months ended September 30, 2022. The reclassification from AOCI was offset by $7.9 million in losses from the intercompany loan remeasurement on the final exchange.

Equity in Income and Impairment of Investment in Unconsolidated Entities

Equity in income of unconsolidated entities relates to three equity method investments acquired in our merger with VEREIT, Inc. in November 2021, which were all sold during the third quarter of 2022. The loss for the three and nine months ended September 30, 2022 was primarily driven by an other than temporary impairment related to the sale of these investments. Following the sale of the properties, distributions primarily result from the release of hold backs from property sales, refunds from taxing authorities and distributions of operating cash. The income for the nine months ended September 30, 2023 is attributable to distributions in excess of our basis.

-39-

Table of Contents

Other Income, Net

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

Income Taxes
Income taxes primarily consist of international income taxes accrued or paid by us and our subsidiaries, as well as to state and local taxes. The increase of $1.2 million and $0.4 million in income taxes for the three and nine months ended September 30, 2023, as compared with the same periods in 2022, is primarily attributable to higher taxable income in the UK; partially offset by lower UK tax rates.

NON-GAAP FINANCIAL MEASURES

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("Adjusted EBITDAre")

Nareit established an EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDAre) it believed would provide investors with a consistent measure to help make investment decisions among REITs. Our definition of “Adjusted EBITDAre” 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 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 EBITDAre differently than we do. Management believes Adjusted EBITDAre to be a meaningful measure of a REIT’s performance because it provides a view of our operating performance, analyzes our ability to meet interest payment obligations before the effects of income tax, depreciation and amortization expense, provisions for impairment, gain on sales of real estate and other items, as defined above, that affect comparability, including the removal of non-recurring and non-cash items that industry observers believe are less relevant to evaluating the operating performance of a company. In addition, EBITDAre is widely followed by industry analysts, lenders, investors, rating agencies, and others as a means of evaluating the operational cash generating capacity of a company prior to servicing debt obligations. Management also believes the use of an annualized quarterly Adjusted EBITDAre metric, which we refer to as Annualized Adjusted EBITDAre, is meaningful because it represents our current earnings run rate for the period presented. Annualized Adjusted EBITDAre and Annualized Pro Forma Adjusted EBITDAre, as defined below, are also used to determine the vesting of performance share awards granted to executive officers. Annualized Adjusted EBITDAre 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 EBITDAre as Annualized Adjusted EBITDAre, subject to certain adjustments to incorporate Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDAre from properties 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. Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDAre on a pro forma basis in accordance with 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. We believe Annualized Pro Forma Adjusted EBITDAre 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 EBITDAre and net debt-to Annualized Pro Forma Adjusted EBITDAre as measures of leverage in assessing our financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDAre and annualized Pro Forma Adjusted EBITDAre, respectively.

-40-

Table of Contents

The following is a reconciliation of net income (which we believe is the most comparable U.S. GAAP measure) to Adjusted EBITDAre andAnnualized Pro Forma EBITDAre calculations for the period indicated below (dollars in thousands):


	Three months ended September 30,
	2023			2022
Net income	$	233,877		$	220,287
Interest	184,121			117,409
Gain on extinguishment of debt	—			(240)
Income taxes	11,336			10,163
Depreciation and amortization	495,566			419,016
Provisions for impairment	16,808			1,650
Merger and integration-related costs	2,884			3,746
Gain on sales of real estate	(7,572)			(42,883)
Foreign currency and derivative losses, net	2,813			22,893
Gain on settlement of foreign currency forwards	—			2,784
Proportionate share of adjustments from unconsolidated entities	—			662
Quarterly Adjusted EBITDAre	$	939,833		$	755,487
Annualized Adjusted EBITDAre (1)	$	3,759,332		$	3,021,948
Annualized Pro Forma Adjustments	$	74,503		$	31,700
Annualized Pro Forma Adjusted EBITDAre	$	3,833,835		$	3,053,648
Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts	$	20,388,406		$	16,142,608
Less: Cash and cash equivalents	(344,129)			(187,745)
Net Debt (2)	$	20,044,277		$	15,954,863

Net Debt/Annualized Adjusted EBITDAre	5.3		x	5.3		x
Net Debt/Annualized Pro Forma Adjusted EBITDAre	5.2		x	5.2		x

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

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

As described above, the Annualized Pro Forma Adjustments, which include transaction accounting adjustments in accordance with U.S. GAAP, consist of adjustments to incorporate the Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and remove Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the period, consistent with the requirements of Article 11 of Regulation S-X. The following table summarizes our Annualized Pro Forma Adjusted EBITDAre calculation for the period indicated below (dollars in thousands):


	Three months ended September 30,
	2023		2022
Annualized pro forma adjustments from properties acquired or stabilized	$	79,141	$	68,589
Annualized pro forma adjustments from properties disposed	(4,638)		(36,889)
Annualized Pro forma Adjustments	$	74,503	$	31,700

-41-

Table of Contents

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("FFO") AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("Normalized FFO")

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gain on property sales. We define Normalized FFO, a non-GAAP financial measure, as FFO excluding merger and integration-related costs related to our merger with VEREIT, Inc. We define diluted FFO and diluted normalized FFO as FFO and normalized FFO adjusted for dilutive noncontrolling interests.

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


	Three months ended September 30,						Nine months ended September 30,
	2023		2022		% Change		2023		2022		% Change
FFO available to common stockholders	$	736.1	$	597.2	23.3	%	$	2,108.4	$	1,807.4	16.7	%
FFO per share (1)	$	1.04	$	0.97	7.2	%	$	3.09	$	2.99	3.3	%
Normalized FFO available to common stockholders	$	739.0	$	600.9	23.0	%	$	2,113.0	$	1,820.4	16.1	%
Normalized FFO per share (1)	$	1.04	$	0.97	7.2	%	$	3.10	$	3.01	3.0	%

(1) All per share amounts are presented on a diluted per common share basis.

-42-

Table of Contents

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. GAAP measure) to FFO and Normalized FFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted computation per share (dollars in thousands, except per share amounts):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income available to common stockholders	$	233,473	$	219,567	$	653,904	$	642,143
Depreciation and amortization	495,566		419,016		1,419,321		1,232,215
Depreciation of furniture, fixtures and equipment	(817)		(511)		(1,656)		(1,478)
Provisions for impairment	16,808		1,650		59,801		16,379
Gain on sales of real estate	(7,572)		(42,883)		(19,675)		(93,611)
Proportionate share of adjustments for unconsolidated entities	—		717		(465)		12,812
FFO adjustments allocable to noncontrolling interests	(1,312)		(402)		(2,808)		(1,075)
FFO available to common stockholders	$	736,146	$	597,154	$	2,108,422	$	1,807,385
FFO allocable to dilutive noncontrolling interests	1,375		985		4,166		2,569
Diluted FFO	$	737,521	$	598,139	$	2,112,588	$	1,809,954

FFO available to common stockholders	$	736,146	$	597,154	$	2,108,422	$	1,807,385
Merger and integration-related costs	2,884		3,746		4,532		12,994
Normalized FFO available to common stockholders	$	739,030	$	600,900	$	2,112,954	$	1,820,379
Normalized FFO allocable to dilutive noncontrolling interests	1,375		985		4,166		2,569
Diluted Normalized FFO	$	740,405	$	601,885	$	2,117,120	$	1,822,948

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



Normalized FFO per common share, basic and diluted	$	1.04	$	0.97	$	3.10	$	3.01


Distributions paid to common stockholders	$	543,343	$	458,586	$	1,555,679	$	1,342,695
FFO available to common stockholders in excess of distributions paid to common stockholders	$	192,803	$	138,568	$	552,743	$	464,690
Normalized FFO available to common stockholders in excess of distributions paid to common stockholders	$	195,687	$	142,314	$	557,275	$	477,684
Weighted average number of common shares used for FFO and Normalized FFO:
Basic	709,165		617,512		681,419		604,464
Diluted	711,338		619,201		683,925		605,958

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. 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. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative.

-43-

Table of Contents

ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("AFFO")

We define AFFO, a non-GAAP measure, as FFO adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance. We define diluted AFFO as AFFO adjusted for dilutive noncontrolling interests.

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


	Three months ended September 30,						Nine months ended September 30,
	2023		2022		% Change		2023		2022		% Change
AFFO available to common stockholders	$	721.4	$	603.6	19.5	%	$	2,043.8	$	1,767.4	15.6	%
AFFO per share (1)	$	1.02	$	0.98	4.1	%	$	2.99	$	2.92	2.4	%

(1) All per share amounts are presented on a diluted per common share basis.

We consider AFFO to be an appropriate supplemental measure of our performance. Most companies in our industry use a similar measurement, but they may use the term “CAD” (for Cash Available for Distribution), “FAD” (for Funds Available for Distribution) or other terms. Our AFFO calculations may not be comparable to AFFO, CAD or FAD reported by other companies, and other companies may interpret or define such terms differently than we do.

-44-

Table of Contents

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. 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):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income available to common stockholders	$	233,473	$	219,567	$	653,904	$	642,143
Cumulative adjustments to calculate Normalized FFO (1)	505,557		381,333		1,459,050		1,178,236
Normalized FFO available to common stockholders	739,030		600,900		2,112,954		1,820,379
Gain on extinguishment of debt	—		(240)		—		(367)
Amortization of share-based compensation	6,231		5,099		20,154		16,742
Amortization of net debt premiums and deferred financing costs (2)	(10,244)		(16,728)		(34,441)		(50,772)
Non-cash (gain) loss on interest rate swaps	(1,790)		735		(5,390)		2,181
Straight-line impact of cash settlement on interest rate swaps (3)	1,797		—		5,392		—
Leasing costs and commissions	(1,392)		(686)		(6,868)		(3,853)
Recurring capital expenditures	(52)		(273)		(190)		(459)
Straight-line rent and expenses, net	(42,791)		(29,628)		(113,239)		(85,004)
Amortization of above and below-market leases, net	24,939		17,422		61,967		47,466
Proportionate share of adjustments for unconsolidated entities	—		(85)		—		(4,239)
Other adjustments (4)	5,642		27,050		3,497		25,318
AFFO available to common stockholders	$	721,370	$	603,566	$	2,043,836	$	1,767,392
AFFO allocable to dilutive noncontrolling interests	1,357		1,006		4,170		2,613
Diluted AFFO	$	722,727	$	604,572	$	2,048,006	$	1,770,005

AFFO per common share:
Basic	$	1.02	$	0.98	$	3.00	$	2.92
Diluted	$	1.02	$	0.98	$	2.99	$	2.92
Distributions paid to common stockholders	$	543,343	$	458,586	$	1,555,679	$	1,342,695
AFFO available to common stockholders in excess of distributions paid to common stockholders	$	178,027	$	144,980	$	488,157	$	424,697
Weighted average number of common shares used for computation per share:
Basic	709,165		617,512		681,419		604,464
Diluted	711,338		619,201		683,925		605,958

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

-45-

Table of Contents

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. In particular, AFFO provides an additional measure to compare the operating performance of different REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate U.S. 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. 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. FFO, Normalized FFO, and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO, Normalized FFO, and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments.

-46-

Table of Contents

PROPERTY PORTFOLIO INFORMATION

At September 30, 2023, out of the 13,282 properties that we owned or held interest in, 13,123 properties were leased under net lease agreements. A net lease typically requires the client to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance. In addition, clients of our properties typically pay rent increases based on: (1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients' gross sales above a specified level.

We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, but excluding percentage rent and reimbursements from clients, as of the balance sheet date, multiplied by 12, excluding percentage rent. We believe total portfolio annualized contractual rent is a useful supplemental operating measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter. Total portfolio annualized contractual rent has not been reduced to reflect reserves recorded as adjustments to U.S. GAAP rental revenue in the periods presented and excludes unconsolidated entities.

Top 10 Industry Concentrations

We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis. That business activity spans various geographic boundaries and includes property types and clients engaged in various industries. Even though we have a single segment, we believe our investors continue to view diversification as a key component of our investment philosophy and so we believe it remains important to present certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent:


	Percentage of Total Portfolio Annualized Contractual Rent by Industry (1)
	As of
	Sept 30, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Grocery	11.4%	10.0%	10.2%	9.8%	7.9%
Convenience Stores	10.6	8.6	9.1	11.9	12.3
Dollar Stores	7.2	7.4	7.5	7.6	7.9
Drug Stores	5.9	5.7	6.6	8.2	8.8
Home Improvement	5.8	5.6	5.1	4.3	2.9
Restaurants-Quick Service	5.3	6.0	6.6	5.3	5.8
Restaurants-Casual	4.6	5.1	5.9	2.8	3.2
Automotive Service	4.2	4.0	3.2	2.7	2.6
Health and Fitness	4.1	4.4	4.7	6.7	7.0
General Merchandise	3.7	3.7	3.7	3.4	2.5

(1) The presentation of Top 10 Industry Concentrations combines total portfolio contractual rent from the U.S. and Europe. Europe consists of properties in the U.K., starting in May 2019, in Spain, starting in September 2021, in Italy, starting in October 2022,and in Ireland, starting in June 2023.

Property Type Composition

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


Property Type	Number of Properties	Approximate Leasable Square Feet (1)	Total Portfolio Annualized Contractual Rent		Percentage of Total Portfolio Annualized Contractual Rent
Retail	12,879	172,641,300	$	3,195,302	82.6	%
Industrial	364	84,412,700	507,054		13.1
Gaming	1	3,096,700	100,000		2.6
Other (2)	38	2,411,200	64,947		1.7
Totals	13,282	262,561,900	$	3,867,303	100.0	%

(1)Includes leasable building square footage. Excludes 2,962 acres of leased land categorized as agriculture at September 30, 2023.

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

Client Diversification

The following table sets forth the 20 largest clients in our property portfolio, expressed as a ~~return~~percentage of ~~capital.~~

~~RESULTS~~total portfolio annualized contractual rent, which does not give effect to deferred rent, at September 30, 2023:

Client Number of
Leases
Percentage of Total Portfolio Annualized Contractual Rent (1)
Walgreens 369 3.9 %
Dollar General 1,630 3.9
Dollar Tree / Family Dollar 1,195 3.3
7-Eleven 634 3.2
EG Group Limited 415 2.7
Wynn Resorts 1 2.6
FedEx 77 2.2
B&Q (Kingfisher) 50 1.8
Asda 37 1.8
Sainsbury's 35 1.7
LA Fitness 70 1.7
BJ's Wholesale Clubs 33 1.6
Lifetime Fitness 23 1.5
CVS Pharmacy 191 1.4
Wal-Mart / Sam's Club 67 1.4
Tractor Supply 186 1.3
Tesco 22 1.3
AMC Theaters 35 1.2
Red Lobster 200 1.2
Regal Cinemas (Cineworld) 35 1.1
Total 5,305 40.9 %

(1)Amounts for each client are calculated independently; therefore, the individual percentages may not sum to the total.

Lease Expirations

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

Total Portfolio (1)
Expiring
Leases
Approximate
Leasable
Square Feet
Total Portfolio Annualized Contractual Rent Percentage of Total Portfolio Annualized Contractual Rent
Year Retail Non-Retail
2023 168 — 1,267,300 $ 22,077 0.6 %
2024 512 24 9,024,300 106,600 2.8
2025 915 37 14,702,100 210,874 5.5
2026 855 33 16,010,500 195,882 5.1
2027 1,411 37 22,307,500 288,821 7.5
2028 1,570 55 28,194,800 344,960 8.9
2029 1,139 28 24,476,500 296,603 7.7
2030 592 20 15,875,400 188,126 4.9
2031 549 40 23,361,100 263,672 6.8
2032 973 33 17,883,200 254,462 6.6
2033 735 19 16,522,300 208,445 5.4
2034 602 8 10,828,000 225,474 5.7
2035 440 4 5,854,700 117,369 2.9
2036 438 8 7,956,100 143,290 3.7
2037 515 9 8,748,900 136,136 3.5
2038-2143 2,206 69 36,778,400 864,512 22.4
Totals 13,620 424 259,791,100 $ 3,867,303 100.0 %

(1)Leases on our multi-client properties are counted separately in the table above. This table excludes 276 vacant units.

Geographic Diversification

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

Location
Number of
Properties
Percent Leased Approximate Leasable Square Feet Percentage of Total Portfolio Annualized Contractual Rent
Alabama 405 98 % 4,395,600 1.8 %
Alaska 6 100 299,700 0.1
Arizona 254 99 4,000,600 1.8
Arkansas 260 93 2,817,700 1.0
California 353 99 12,452,300 5.4
Colorado 170 96 2,697,500 1.2
Connecticut 52 98 1,754,700 0.6
Delaware 24 100 141,100 0.1
Florida 886 99 10,557,200 5.2
Georgia 577 98 9,188,900 3.4
Hawaii 22 100 47,800 0.2
Idaho 27 100 189,100 0.1
Illinois 557 97 13,284,700 4.9
Indiana 428 97 8,200,500 2.5
Iowa 110 100 3,484,100 0.9
Kansas 195 97 4,691,500 1.0
Kentucky 377 99 6,342,100 1.6
Louisiana 355 99 5,289,700 1.9
Maine 85 99 1,208,700 0.6
Maryland 78 99 3,064,500 1.2
Massachusetts 207 99 6,664,300 4.6
Michigan 475 99 5,908,200 2.5
Minnesota 261 98 4,330,200 1.8
Mississippi 305 99 4,525,800 1.2
Missouri 394 99 5,467,600 1.9
Montana 24 100 223,100 0.1
Nebraska 81 99 1,131,600 0.3
Nevada 74 99 2,665,700 0.8
New Hampshire 54 98 667,300 0.5
New Jersey 145 97 2,277,000 1.5
New Mexico 110 100 1,354,200 0.6
New York 338 98 4,960,200 3.0
North Carolina 417 99 8,434,700 2.8
North Dakota 21 95 427,800 0.2
Ohio 716 98 16,067,600 4.0
Oklahoma 336 97 4,443,500 1.6
Oregon 42 100 650,400 0.3
Pennsylvania 344 97 6,226,800 2.3
Rhode Island 31 100 214,600 0.2
South Carolina 326 99 5,186,200 1.9
South Dakota 34 100 474,900 0.2
Tennessee 463 98 7,362,200 2.3
Texas 1,602 99 27,435,400 10.1
Utah 39 100 1,585,500 0.5
Vermont 18 100 173,500 0.1
Virginia 370 98 7,384,200 2.3
Washington 82 99 1,862,600 0.8
West Virginia 80 100 763,300 0.3
Wisconsin 289 100 6,608,900 2.0
Wyoming 23 100 157,700 0.1
Puerto Rico 6 100 59,400 *
Ireland 4 100 311,500 0.1
Italy 7 100 1,075,100 0.4
Spain 54 100 3,960,100 0.9
United Kingdom 289 100 27,412,800 12.3
Totals/average 13,282 98 % 262,561,900 100.0 %
•*Less than 0.1%

IMPACT OF ~~OPERATIONS~~

~~Critical Accounting Policies~~

RECENT ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with U.S. GAAP and are the basis for our discussion and analysis of financial condition and results of operations. Preparing our consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. We believe that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. There have been no material changes to the Critical Accounting Policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 2, Summary of Significant Accounting Policies and Procedures and New Accounting Standards, to our consolidated financial statements in our Annual ~~Report on Form 10-K for the year ended December 31, 2016.~~

-31-

Report.

~~Table of Contents~~

In order to prepare our consolidated financial statements according to the rules and guidelines set forth by GAAP, many subjective judgments must be made with regard to critical accounting policies. One of these judgments is our estimate for useful lives in determining depreciation expense for our properties. Depreciation on a majority of our buildings and improvements is computed using the straight-line method over an estimated useful life of 25 to 35 years for buildings and 4 to 20 years for improvements, which we believe are appropriate estimates of useful life. If we use a shorter or longer estimated useful life, it could have a material impact on our results of operations.

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 fair value of real estate acquired to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value of in-place leases, the value of in-place leases, and tenant relationships, as applicable. In an acquisition of multiple properties, we must also allocate the purchase price among the properties. The allocation of the purchase price is based on our assessment of estimated fair value and is often based upon the expected future cash flows of the property and various characteristics of the market where the property is located. In addition, any assumed mortgages receivable or payable and any assumed or issued noncontrolling interests are recorded at their estimated fair values. The estimated fair values of our mortgages payable have been calculated by discounting the future cash flows using applicable interest rates that have been adjusted for factors, such as industry type, tenant investment grade, maturity date, and comparable borrowings for similar assets. The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenue and expenses.

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. A provision is made for impairment 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. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, historical sales and releases, capital expenditures, and property sales capitalization rates. If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell. The carrying value of our real estate is the largest component of our consolidated balance sheets. Our strategy of primarily holding properties, long-term, directly decreases the likelihood of their carrying values not being recoverable, thus requiring the recognition of an impairment. However, if our strategy, or one or more of the above assumptions were to change in the future, an impairment may need to be recognized. If events should occur that require us to reduce the carrying value of our real estate by recording provisions for impairment, they could have a material impact on our results of operations.

~~The following is a comparison of our results of operations for the three and nine months ended September 30, 2017, to the three and nine months ended September 30, 2016.~~

~~Rental Revenue~~

Rental revenue was $293.5 million for the third quarter of 2017, as compared to $265.3 million for the third quarter of 2016, an increase of $28.2 million, or 10.6%. The increase in rental revenue in the third quarter of 2017 compared to the third quarter of 2016 is primarily attributable to:

·~~The 164 properties (3.8 million square feet) we acquired in 2017, which generated $11.6 million of rent in the third quarter of 2017;~~

·The 475 properties (7.6 million square feet) we acquired in 2016, which generated $28.6 million of rent in the third quarter of 2017, compared to $12.2 million in the third quarter of 2016, an increase of $16.4 million;

·~~Same store rents generated on 4,272 properties (71.7 million square feet) during the third quarter of 2017 and 2016, increased by $2.3 million, or 0.95% to $244.9 million from $242.6 million;~~

·~~A net decrease in straight-line rent and other non-cash adjustments to rent of $319,000 in the third quarter of 2017 as compared to the second quarter of 2016;~~

·~~A net decrease of $1.5 million relating to properties sold in the first nine months of 2017 and during 2016; and~~

·A net decrease of $318,000 relating to the aggregate of (i) rental revenue from properties (144 properties comprising 2.7 million square feet) that were available for lease during part of 2017 or 2016, (ii) rental revenue for seven properties under development, and (iii) lease termination settlements. In aggregate, the revenues for these items totaled $5.8 million in the third quarter of 2017, compared to $6.1 million in the third quarter of 2016.

-32-

~~Table of Contents~~

Rental revenue was $867.3 million for the first nine months of 2017, as compared to $782.2 million for the first nine months of 2016, an increase of $85.1 million, or 10.9%. The increase in rental revenue in the first nine months of 2017 compared to the first nine months of 2016 is primarily attributable to:

·~~The 164 properties (3.8 million square feet) we acquired in the first nine months of 2017, which generated $19.0 million of rent in the first nine months of 2017;~~

·The 475 properties (7.6 million square feet) we acquired in 2016, which generated $85.6 million of rent in the first nine months of 2017, compared to $19.0 million in the first nine months of 2016, an increase of $66.6 million;

·~~Same store rents generated on 4,272 properties (71.7 million square feet) during the first nine months of 2017 and 2016, increased by $7.4 million or 1.0%, to $734.8 million from $727.4 million;~~

·~~A net decrease in straight-line rent and other non-cash adjustments to rent of $1.9 million in the first nine months of 2017 as compared to the first nine months of 2016;~~

·~~A net decrease of $6.4 million relating to properties sold in the first nine months of 2017 and during 2016 that were reported in continuing operations; and~~

·A net increase of $350,000 relating to the aggregate of (i) rental revenue from properties (144 properties comprising 2.7 million square feet) that were available for lease during part of 2017 or 2016, (ii) rental revenue for seven properties under development, and (iii) lease termination settlements. In aggregate, the revenues for these items totaled $19.3 million in the first nine months of 2017 compared to $19.0 million in the first nine months of 2016.

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; (i) were vacant at any time, (ii) were under development or redevelopment, and (iii) were involved in eminent domain and rent was reduced. 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 5,062 properties in the portfolio at September 30, 2017, 5,034, or 99.4%, are single-tenant properties and the remaining are multi-tenant properties. Of the 5,034 single-tenant properties, 4,949, or 98.3%, were net leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.6 years at September 30, 2017. Of our 4,949 leased single-tenant properties, 4,374 or 88.4% were under leases that provide for increases in rents through:

·~~Base rent increases tied to a consumer price index (typically subject to ceilings);~~

·~~Percentage rent based on a percentage of the tenants’ gross sales;~~

·~~Fixed increases; or~~

·~~A combination of two or more of the above rent provisions.~~

Percentage rent, which is included in rental revenue, was $262,000 in the third quarter of 2017, and $286,000 in the third quarter of 2016. Percentage rent was $4.1 million in the first nine months of 2017, and $3.5 million in the first nine months of 2016. Percentage rent in the first nine months of 2017 was less than 1% of rental revenue and we anticipate percentage rent to be less than 1% of rental revenue for the remainder of 2017.

Our portfolio of real estate, leased primarily to regional and national tenants under net leases, continues to perform well and provides dependable lease revenue supporting the payment of monthly dividends to our stockholders. At September 30, 2017, our portfolio of 5,062 properties was 98.3% leased with 86 properties available for lease, as compared to 98.3% leased, with 84 properties available for lease at December 31, 2016, and 98.3% leased with 82 properties available for lease at September 30, 2016. It has been our experience that approximately 1% to 4% of our property portfolio will be unleased at any given time; however, it is possible that the number of properties available for lease could exceed these levels in the future.

~~Tenant Reimbursements~~

Contractually obligated reimbursements from tenants for recoverable real estate taxes and operating expenses were $11.9 million in the third quarter of 2017, compared to $11.5 million in the third quarter of 2016, and $34.9 million in the first nine months of 2017, compared to $31.7 million in the first nine months of 2016. The increase in tenant reimbursements is primarily due to acquisitions.

-33-

~~Table of Contents~~

~~Other Revenue~~

Other revenue, which comprises property-related revenue not included in rental revenue or tenant reimbursements, was $1.5 million in the third quarter of 2017, compared to $318,000 in the third quarter of 2016, and $2.9 million in the nine months ended September 30, 2017, compared to $1.4 million in the same period of 2016.

~~Depreciation and Amortization~~

Depreciation and amortization was $127.6 million for the third quarter of 2017, compared to $113.9 million for the third quarter of 2016. Depreciation and amortization was $371.8 million for the first nine months of 2017, compared to $332.2 million for the first nine months of 2016. The increase in depreciation and amortization in the first nine months of 2017 was primarily due to the acquisition of properties in 2016 and the first nine months of 2017, which was partially offset by property sales in those same periods. As discussed in the sections entitled “Funds from Operations Available to Common Stockholders (FFO)” and “Adjusted Funds from Operations Available to Common Stockholders (AFFO),” depreciation and amortization is a non-cash item that is added back to net income available to common stockholders for our calculation of FFO and AFFO.

~~Interest Expense~~

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

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

$
60,833

$
53,057

$
177,604

$
159,424

Credit facility commitment fees

767

766

2,275

2,283

Amortization of credit facility origination costs and deferred financing costs

2,058

2,049

6,722

6,278

(Gain) loss on interest rate swaps

(368
)
(2,051
)
(1,228
)
5,835

Dividend on preferred shares subject to redemption

-

-

2,257

-

Amortization of net mortgage premiums

(341
)
(814
)
(1,580
)
(2,669
)

Capital lease obligation

77

77

232

232

Interest capitalized

(75
)
(132
)
(347
)
(344
)

Interest expense

$
62,951

$
52,952

$
185,935

$
171,039

Credit facility, term loans, mortgages and notes

Average outstanding balances (dollars in thousands)

$
5,982,843

$
5,036,031

$
5,860,159

$
4,961,303

Average interest rates

4.03
%
4.12
%
4.00
%
4.20
%

The increase in interest expense for the first nine months of 2017 is primarily due to the March 2017 issuance of our 2047 and 2026 Notes and the dividends that accrued subsequent to the March 2017 notice of redemption date for the Class F preferred stock that were recorded to interest expense, partially offset by lower outstanding debt balances on mortgages payable as a result of the payoff of mortgages in 2016 and the first nine months of 2017.

Each quarter we adjust the carrying value of our interest rate swaps to fair value. Changes in the fair value of our interest rate swaps are recorded directly to interest expense. We recorded a gain on interest rate swaps of $1.2 million during the first nine months 2017 and a loss on interest rate swaps of $5.8 million during the first nine months of 2016.

~~At September 30, 2017, the weighted average interest rate on our:~~

·~~Term loans outstanding of $320.0 million (excluding deferred financing costs of $653,000) was 2.2%;~~

·~~Mortgages payable of $336.5 million (excluding net premiums totaling $4.8 million and deferred financing costs of $249,000 on these mortgages) was 4.9%;~~

·~~Credit facility outstanding borrowings of $658.0 million was 2.2%;~~

·~~Notes and bonds payable of $4.50 billion (excluding unamortized original issue discounts of $7.1 million and deferred financing costs of $24.2 million) was 4.3%; and~~

·~~Combined outstanding notes, bonds, mortgages, term loan and credit facility borrowings of $5.81 billion was 4.0%.~~

-34-

~~Table of Contents~~

~~General and Administrative Expenses~~

General and administrative expenses increased by $1.8 million to $13.9 million in the third quarter of 2017, compared to $12.1 million in the third quarter of 2016. General and administrative expenses increased by $4.8 million to $43.2 million for the first nine months of 2017, compared to $38.4 million in the first nine months of 2016. This increase was primarily due to more employees, higher compensation costs, and increased health insurance costs. Acquisition transaction costs included in general and administrative expenses were $19,000 for the third quarter of 2017, $34,000 for the third quarter of 2016, $229,000 for the first nine months of 2017 and $119,000 for the first nine months of 2016. In October 2017, we had 154 employees, as compared to 137 employees in October 2016.

Three months ended

Nine months ended

September 30,

September 30,

Dollars in thousands

2017

2016

2017

2016

General and administrative expenses

$
13,881

$
12,103

$
43,227

$
38,407

Total revenue(1)

294,987

265,650

870,197

783,588

General and administrative expenses as a percentage of total revenue

4.7
%
4.6
%
5.0
%
4.9
%

~~(1)~~ ~~Excludes tenant reimbursements revenue.~~

~~Property Expenses (including tenant reimbursable expenses)~~

Property expenses consist of costs associated with unleased properties, non-net-leased properties and general portfolio expenses, as well as contractually obligated reimbursable costs from tenants for recoverable real estate taxes and operating expenses. Expenses related to unleased properties and non-net-leased properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections, bad debt expense and legal fees. General portfolio costs include, but are not limited to, insurance, legal, property inspections, and title search fees. At September 30, 2017, 86 properties were available for lease, as compared to 84 at December 31, 2016 and 82 at September 30, 2016.

Property expenses were $17.3 million (including $11.9 million in reimbursable expenses) in the third quarter of 2017, and $15.7 million (including $11.5 million in reimbursable expenses) in the third quarter of 2016. Property expenses were $52.8 million (including $34.9 million in reimbursable expenses) in the first nine months of 2017 and $45.5 million (including $31.7 million in reimbursable expenses) in the first nine months of 2016. The increase in gross property expenses in the first nine months of 2017 is primarily attributable to the increased portfolio size, which contributed to higher contractually obligated reimbursements primarily due to our acquisitions during 2016 and the first nine months of 2017. We also incurred higher gross property expenses as a result of maintenance and utilities, property taxes, insurance, and bad debt expense on vacant properties.

Three months ended

Nine months ended

September 30,

September 30,

Dollars in thousands

2017

2016

2017

2016

Property expenses net of tenant reimbursements

$
5,334

$
4,154

$
17,910

$
13,713

Total revenue(1)

294,987

265,650

870,197

783,588

Property expenses net of tenant reimbursements as a percentage of total revenue

1.8
%
1.6
%
2.1
%
1.8
%

~~(1)~~ ~~Excludes tenant reimbursements revenue.~~

~~Income Taxes~~

Income taxes were $1.1 million in the third quarter of 2017, as compared to $894,000 in the third quarter of 2016. Income taxes were $2.6 million in the first nine months of 2017, as compared to $2.8 million in the first nine months of 2016. These amounts are for city and state income and franchise taxes paid by us and our subsidiaries.

-35-

~~Table of Contents~~

~~Provisions for Impairment~~

For the third quarter of 2017, we recorded total provisions for impairment of $365,000 on three sold properties. For the first nine months of 2017, we recorded total provisions for impairment of $8.1 million on ten sold properties, six properties classified as held for investment, and one property classified as held for sale. For the third quarter of 2016, we recorded total provisions for impairment of $8.8 million on 15 sold properties, two properties classified as held for investment, and one property classified as held for sale. For the first nine months of 2016, we recorded total provisions for impairment of $17.0 million on 29 sold properties, two properties classified as held for investment, and one property classified as held for sale.

~~Gain on Sales of Real Estate~~

In comparison, during the third quarter of 2016, we sold 24 properties for $19.6 million, which resulted in a gain of $4.3 million. During the first nine months of 2016, we sold 51 properties for $55.2 million, which resulted in a gain of $15.3 million.

~~Preferred Stock Dividends~~

Preferred stock dividends totaled $3.9 million in the first nine months of 2017. Additionally, in April 2017, we paid a final dividend on our Class F preferred stock of $1.7 million, which was recorded to interest expense. Preferred stock dividends totaled $6.8 million in the third quarter of 2016 and $20.3 million in the first nine months of 2016.

~~Excess of Redemption Value over Carrying Value of Preferred Shares Redeemed~~

When we issued the irrevocable notice of redemption on our Class F preferred stock in March 2017, we incurred a non-cash charge of $13.4 million for the excess of redemption value over the carrying value in the first nine months of 2017. The non-cash charge represents the Class F preferred stock original issuance cost that was paid in 2012.

~~Net Income Available to Common Stockholders~~

Net income available to stockholders was $87.9 million in the third quarter of 2017, compared to $70.3 million in the third quarter of 2016, an increase of $17.6 million. On a diluted per common share basis, net income was $0.32 in the third quarter of 2017, compared to $0.27 in the third quarter of 2016, an increase of $0.05, or 18.5%.

The calculation to determine net income available to common stockholders includes impairments, gains from the sale of properties and/or fair value adjustments on our interest rate swaps. These items vary from period to period based on the timing of property sales and can significantly impact net income available to common stockholders.

-36-

~~Table of Contents~~

~~Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)~~

Adjusted EBITDA, a non-GAAP financial measure, means, for the most recent quarter, earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) income and franchise taxes, (iii) depreciation and amortization, (iv) impairment losses, and (v) gain on sales of real estate. Our Adjusted EBITDA may not be comparable to Adjusted EBITDA reported by other companies that interpret the definitions of Adjusted EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT’s performance because it is widely followed by industry analysts, lenders and investors. Management also believes the use of an annualized quarterly Adjusted EBITDA metric is meaningful because it represents the Company’s current earnings run rate for the period presented. The ratio of our total debt to our annualized quarterly Adjusted EBITDA is also used to determine vesting of performance share awards granted to our executive officers. Adjusted EBITDA should be considered along with, but not as an alternative to net income as a measure of our operating performance. Our ratio of debt to Adjusted EBITDA, which is used by management as a measure of leverage, is calculated by annualizing quarterly Adjusted EBITDA and then dividing by our total debt per the consolidated balance sheet.

Three months ended

September 30, 2017

Dollars in thousands

2017

2016

Net income

$
88,073

$
77,202

Interest

62,951

52,952

Income taxes

1,133

894

Depreciation and amortization

127,569

113,917

Impairment loss

365

8,763

Gain on sales of real estate

(4,319)

(4,335)

Quarterly Adjusted EBITDA

$
275,772

$
249,393

Annualized Adjusted EBITDA(1)

$
1,103,088

$
997,572

Total Debt

$
5,787,027

$
5,250,697

Debt/Adjusted EBITDA

5.2

5.3

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

~~FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)~~

FFO for the third quarter of 2017 increased by $22.9 million, or 12.2%, to $211.2 million, compared to $188.3 million in the third quarter of 2016. On a diluted common share basis, FFO was $0.77 in the third quarter of 2017, compared to $0.73 in the third quarter of 2016, an increase of $0.04, or 5.5%.

In the first nine months of 2017, our FFO increased by $66.1 million, or 12.3%, to $601.7 million, compared to $535.6 million in the first nine months of 2016. On a diluted per common share basis, FFO was $2.22 in the first nine months of 2017, compared to $2.11 in the first nine months of 2016, an increase of $0.11, or 5.2%.

FFO per share for the first nine months of 2017 was impacted by a $13.4 million non-cash redemption charge on the Class F preferred shares that were redeemed in April 2017, which represents $0.05 per share. This charge is based on the excess of redemption value over the carrying value of the Class F preferred stock that represents the original issuance cost that was paid in 2012.

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to FFO. 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):

-37-

~~Table of Contents~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Net income available to common stockholders

$
87,940

$
70,302

$
240,662

$
202,820

Depreciation and amortization

127,569

113,917

371,755

332,192

Depreciation of furniture, fixtures and equipment

(133
)
(187
)
(440
)
(575
)
Provisions for impairment on investment properties

365

8,763

8,072

16,955

Gain on sales of investment properties

(4,319
)
(4,335
)
(17,689
)
(15,283
)
FFO adjustments allocable to noncontrolling interests

(230
)
(174
)
(683
)
(546
)
FFO available to common stockholders

$
211,192

$
188,286

$
601,677

$
535,563

FFO allocable to dilutive noncontrolling interests

220

-

659

-

Diluted FFO (1)

$
211,412

$
188,286

$
602,336

$
535,563

FFO per common share, basic and diluted (2)

$
0.77

$
0.73

$
2.22

$
2.11

Distributions paid to common stockholders

$
174,607

$
155,194

$
509,987

$
453,774

FFO available to common stockholders in excess of distributions paid to common stockholders

$
36,585

$
33,092

$
91,690

$
81,789

Weighted average number of common shares used for computation per share:

Basic

275,511,870

258,085,633

270,584,365

253,953,149

Diluted (2)

276,050,671

258,356,892

271,126,114

254,223,301

~~(1)~~Diluted FFO for the quarter and nine months ended September 30, 2017 include FFO allocable to dilutive noncontrolling interests. Noncontrolling interests were anti-dilutive for all other periods presented.

~~(2)~~The computation of diluted FFO does not assume conversion of securities that are exchangeable for common shares if the conversion of those securities would increase diluted FFO per share in a given period.

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

We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for 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. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. The use of FFO is recommended by the REIT industry as a supplemental performance measure. In addition, FFO is used as a measure of our compliance with the financial covenants of our credit facility.

~~ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)~~

AFFO for the third quarter of 2017 increased by $27.0 million, or 14.5%, to $213.6 million, compared to $186.6 million in the third quarter of 2016. On a diluted common share basis, AFFO was $0.77 in the third quarter of 2017, compared to $0.72 in the third quarter of 2016, an increase of $0.05, or 6.9%.

In the first nine months of 2017, our AFFO increased by $79.9 million, or 14.7%, to $623.3 million, compared to $543.4 million in the first nine months of 2016. On a diluted per common share basis, AFFO was $2.30 in the first nine months of 2017, compared to $2.14 in the first nine months of 2016, an increase of $0.16, or 7.5%. We consider AFFO to be an appropriate supplemental measure of our performance. Most companies in our industry use a similar measurement, but they may use the term “CAD” (for Cash Available for Distribution), “FAD” (for Funds Available for Distribution) or other terms.

-38-

~~Table of Contents~~

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to 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):

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Net income available to common stockholders

$
87,940

$
70,302

$
240,662

$
202,820

Cumulative adjustments to calculate FFO (1)

123,252

117,984

361,015

332,743

FFO available to common stockholders

211,192

188,286

601,677

535,563

Excess of redemption value over carrying value of Class F preferred share redemption

-

-

13,373

-

Amortization of share-based compensation

3,426

2,653

10,641

9,204

Amortization of deferred financing costs (2)

1,329

1,261

4,133

3,859

Amortization of net mortgage premiums

(341
)
(814
)
(1,580
)
(2,669
)
(Gain) loss on interest rate swaps

(368
)
(2,051
)
(1,228
)
5,835

Leasing costs and commissions

(489
)
(287
)
(1,248
)
(564
)
Recurring capital expenditures

(171
)
(240
)
(536
)
(486
)
Straight-line rent

(4,778
)
(4,779
)
(12,331
)
(14,253
)
Amortization of above and below-market leases

3,732

2,476

10,213

6,670

Other adjustments (3)

69

70

213

208

Total AFFO available to common stockholders

$
213,601

$
186,575

$
623,327

$
543,367

AFFO allocable to dilutive noncontrolling interests

299

-

885

500

Diluted AFFO (4)

$
213,900

$
186,575

$
624,212

$
543,867

AFFO per common share

Basic

$
0.78

$
0.72

$
2.30

$
2.14

Diluted (5)

$
0.77

$
0.72

$
2.30

$
2.14

Distributions paid to common stockholders

$
174,607

$
155,194

$
509,987

$
453,774

AFFO available to common stockholders in excess of distributions paid to common stockholders

$
38,994

$
31,381

$
113,340

$
89,593

Weighted average number of common shares used for computation per share:

Basic

275,511,870

258,085,633

270,584,365

253,953,149

Diluted (5)

276,138,853

258,356,892

271,214,296

254,458,747

~~(1)See reconciling items for FFO presented under “Funds from Operations Available to Common Stockholders (FFO).”~~

~~(2)~~Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and upon issuance of our term loans. The deferred financing costs are being amortized over the lives of the respective mortgages and term loans. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

~~(3)Includes adjustments allocable to both non-controlling interests and capital lease obligations.~~

~~(4)~~Diluted AFFO for the three months ended September 30, 2017, and for the nine months ended September 30, 2017 and September 30, 2016 include AFFO allocable to dilutive noncontrolling interests. Noncontrolling interests were anti-dilutive for the three months ended September 30, 2016.

~~(5)~~The computation of diluted AFFO does not assume conversion of securities that are convertible to common shares if the conversion of those securities would increase diluted AFFO per share in a given period.

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. In particular, AFFO provides an additional measure to compare the operating performance of different REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders.

-39-

~~Table of Contents~~

Presentation of the information regarding 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 and AFFO in the same way, so comparisons with other REITs may not be meaningful. Furthermore, 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. FFO and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments.

~~PROPERTY PORTFOLIO INFORMATION~~

~~At September 30, 2017, we owned a diversified portfolio:~~

·~~Of 5,062 properties;~~

·~~With an occupancy rate of 98.3%, or 4,976 properties leased and 86 properties available for lease;~~

·~~Leased to 251 different commercial tenants doing business in 47 separate industries;~~

·~~Located in 49 states and Puerto Rico;~~

·~~With over 86.4 million square feet of leasable space; and~~

·~~With an average leasable space per property of approximately 17,080 square feet; approximately 11,840 square feet per retail property and 221,170 square feet per industrial property.~~

At September 30, 2017, of our 5,062 properties, 4,976 were leased under net lease agreements. A net lease typically requires the tenant to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance. In addition, our tenants are typically subject to future rent increases based on increases in the consumer price index (typically subject to ceilings), additional rent calculated as a percentage of the tenants’ gross sales above a specified level, or fixed increases.

At September 30, 2017, our 251 commercial tenants, which we define as retailers with over 50 locations and non-retailers with over $500 million in annual revenues, represented approximately 95% of our annualized revenue. We had 266 additional tenants, representing approximately 5% of our annualized revenue at September 30, 2017, which brings our total tenant count to 517 tenants.

-40-

~~Table of Contents~~

~~Industry Diversification~~

The following table sets forth certain information regarding our property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

Percentage of Rental Revenue(1)

For the

Quarter Ended

For the Years Ended

September 30,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

2017

2016

2015

2014

2013

2012

Retail industries

Apparel stores

1.6
%
1.9
%
2.0
%
2.0
%
1.9
%
1.7
%

Automotive collision services

0.9

1.0

1.0

0.8

0.8

1.1

Automotive parts

1.2

1.3

1.4

1.3

1.2

1.0

Automotive service

2.2

1.9

1.9

1.8

2.1

3.1

Automotive tire services

2.5

2.7

2.9

3.2

3.6

4.7

Book stores

*

*

*

*

*

0.1

Child care

1.7

1.9

2.0

2.2

2.8

4.5

Consumer electronics

0.4

0.3

0.3

0.3

0.3

0.5

Convenience stores

9.5

8.7

9.2

10.1

11.2

16.3

Crafts and novelties

0.5

0.5

0.5

0.5

0.5

0.3

Dollar stores

7.8

8.6

8.9

9.6

6.2

2.2

Drug stores

10.8

11.2

10.6

9.5

8.1

3.5

Education

0.3

0.3

0.3

0.4

0.4

0.7

Entertainment

0.4

0.5

0.5

0.5

0.6

0.9

Equipment services

*

0.1

0.1

0.1

0.1

0.1

Financial services

2.1

1.4

1.3

1.4

1.5

0.2

General merchandise

1.9

1.5

1.4

1.2

1.1

0.6

Grocery stores

4.6

3.1

3.0

3.0

2.9

3.7

Health and fitness

7.6

8.1

7.7

7.0

6.3

6.8

Health care

0.8

0.9

1.0

1.1

1.1

-

Home furnishings

0.8

0.7

0.7

0.7

0.9

1.0

Home improvement

2.7

2.5

2.4

1.7

1.6

1.5

Jewelry

0.1

0.1

0.1

0.1

0.1

-

Motor vehicle dealerships

2.0

1.9

1.6

1.6

1.6

2.1

Office supplies

0.2

0.3

0.3

0.4

0.5

0.8

Pet supplies and services

0.6

0.6

0.7

0.7

0.8

0.6

Restaurants - casual dining

3.7

3.9

3.8

4.3

5.1

7.3

Restaurants - quick service

5.0

4.9

4.2

3.7

4.4

5.9

Shoe stores

0.3

0.5

0.5

0.1

0.1

0.1

Sporting goods

1.4

1.6

1.8

1.6

1.7

2.5

Telecommunications

*

*

-

-

-

-

Theaters

5.1

4.9

5.1

5.3

6.2

9.4

Transportation services

0.1

0.1

0.1

0.1

0.1

0.2

Wholesale clubs

3.2

3.6

3.8

4.1

3.9

3.2

Other

*

*

*

*

0.1

0.1

Retail industries

82.0
%
81.5
%
81.1
%
80.4
%
79.8
%
86.7
%

*~~Less than 0.1%~~

~~(1)Includes rental revenue for all properties owned at the end of each period presented, including revenue from properties reclassified as discontinued operations.~~

-41-

~~Table of Contents~~

~~Industry Diversification (continued)~~

Percentage of Rental Revenue(1)

For the

Quarter Ended

For the Years Ended

September 30,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

2017

2016

2015

2014

2013

2012

Non-retail industries

Aerospace

0.9
%
1.0
%
1.1
%
1.2
%
1.2
%
0.9
%

Beverages

2.7

2.6

2.7

2.8

3.3

5.1

Consumer appliances

0.6

0.5

0.6

0.5

0.6

0.1

Consumer goods

0.7

0.9

0.9

0.9

1.0

0.1

Crafts and novelties

0.2

0.1

0.1

0.1

0.1

-

Diversified industrial

0.8

0.9

0.8

0.5

0.2

0.1

Electric utilities

0.1

0.1

0.1

0.1

*

-

Equipment services

0.4

0.5

0.4

0.5

0.4

0.3

Financial services

0.3

0.4

0.4

0.4

0.5

0.4

Food processing

1.0

1.1

1.2

1.4

1.5

1.3

General merchandise

0.2

0.3

0.3

0.3

-

-

Government services

1.0

1.1

1.2

1.3

1.4

0.1

Health care

0.6

0.6

0.7

0.7

0.8

*

Home furnishings

0.1

0.1

0.2

0.2

0.2

-

Insurance

0.1

0.1

0.1

0.1

0.1

*

Machinery

0.1

0.1

0.1

0.2

0.2

0.1

Other manufacturing

0.8

0.8

0.7

0.7

0.6

-

Packaging

1.1

0.8

0.8

0.8

0.9

0.7

Paper

0.1

0.1

0.1

0.1

0.2

0.1

Shoe stores

0.2

0.2

0.2

0.8

0.9

-

Telecommunications

0.6

0.6

0.7

0.7

0.7

0.8

Transportation services

5.3

5.4

5.3

5.1

5.3

2.2

Other

0.1

0.2

0.2

0.2

0.1

1.0

Non-retail industries

18.0
%
18.5
%
18.9
%
19.6
%
20.2
%
13.3
%

Totals

100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%

*~~Less than 0.1%~~

~~(1)Includes rental revenue for all properties owned at the end of each period presented, including revenue from properties reclassified as discontinued operations.~~

-42-

~~Table of Contents~~

~~Property Type Composition~~

~~The following table sets forth certain property type information regarding our property portfolio as of September 30, 2017 (dollars in thousands):~~

Approximate

Rental Revenue for

Percentage of

Number of

Leasable

the Quarter Ended

Rental

Property Type

Properties

Square Feet

September 30, 2017
(1)
Revenue

Retail

4,890

57,896,500

$
234,181

79.9
%
Industrial

113

24,991,800

37,443

12.8

Office

44

3,403,200

15,002

5.1

Agriculture

15

184,500

6,571

2.2

Totals

5,062

86,476,000

$
293,197

100.0
%

~~(1)Includes rental revenue for all properties owned at September 30, 2017. Excludes revenue of $258 from sold properties.~~

~~Tenant Diversification~~

~~The following table sets forth the largest tenants in our property portfolio, expressed as a percentage of total rental revenue at September 30, 2017:~~

Tenant

Number of
Properties

% of Rental Revenue

Walgreens

203

6.6
%

FedEx

43

5.2
%

LA Fitness

53

4.1
%

Dollar General

525

4.0
%

Dollar Tree / Family Dollar

456

3.6
%

AMC Theatres

31

3.6
%

Circle K (Couche-Tard)

298

2.5
%

Walmart / Sam’s Club

40

2.4
%

BJ’s Wholesale Club

15

2.2
%

Treasury Wine Estates

17

2.1
%

CVS Pharmacy

70

1.9
%

Super America / Western Refining (Tesoro)

134

1.9
%

GPM Investments / Fas Mart

216

1.8
%

Regal Cinemas

22

1.8
%

Rite Aid

69

1.8
%

7-Eleven

111

1.7
%

Life Time Fitness

9

1.7
%

TBC Corporation (Sumitomo)

158

1.6
%

Kroger

13

1.3
%

NPC International

188

1.2
%

-43-

~~Table of Contents~~

~~Service Category Diversification for our Retail Properties~~

The following table sets forth certain information regarding the 4,890 retail properties included in our 5,062 total properties owned at September 30, 2017, classified according to the business types and the level of services they provide at the property level (dollars in thousands):

Number of

Retail Rental Revenue

Percentage of

Retail

for the Quarter Ended

Retail Rental

Properties

September 30, 2017
(1)
Revenue

Tenants Providing Services

Automotive collision services

57

$
2,742

1.2
%
Automotive service

272

6,388

2.7

Child care

203

5,062

2.2

Education

14

837

0.4

Entertainment

11

1,298

0.5

Equipment services

2

111

*

Financial services

222

6,039

2.6

Health and fitness

91

22,175

9.5

Health care

27

1,135

0.5

Telecommunications

1

21

*

Theaters

56

14,947

6.4

Transportation services

2

229

0.1

Other

7

78

*

965

61,062

26.1

Tenants Selling Goods and Services

Automotive parts (with installation)

69

1,617

0.7

Automotive tire services

193

7,383

3.1

Convenience stores

867

27,752

11.9

Motor vehicle dealerships

29

5,749

2.5

Pet supplies and services

12

738

0.3

Restaurants - casual dining

319

10,401

4.4

Restaurants - quick service

605

14,641

6.2

2,094

68,281

29.1

Tenants Selling Goods

Apparel stores

29

4,686

2.0

Automotive parts

84

1,975

0.8

Book stores

1

104

*

Consumer electronics

9

1,024

0.4

Crafts and novelties

14

1,551

0.7

Dollar stores

981

22,738

9.7

Drug stores

336

30,175

12.9

General merchandise

78

5,245

2.2

Grocery stores

101

13,483

5.8

Home furnishings

57

2,272

1.0

Home improvement

63

7,148

3.1

Jewelry

4

174

0.1

Office supplies

8

562

0.2

Shoe stores

2

182

0.1

Sporting goods

32

4,105

1.8

Wholesale clubs

32

9,414

4.0

1,831

104,838

44.8

Total Retail Properties

4,890

$
234,181

100.0
%

*~~Less than 0.1%~~

~~(1)Includes rental revenue for all retail properties owned at September 30, 2017. Excludes revenue of $59,016 from non-retail properties and $258 from sold properties.~~

-44-

~~Table of Contents~~

~~Lease Expirations~~

The following table sets forth certain information regarding our property portfolio regarding the timing of the lease term expirations in our portfolio (excluding rights to extend a lease at the option of the tenant) on our 4,949 net leased, single-tenant properties and their contribution to rental revenue for the quarter ended September 30, 2017 (dollars in thousands):

Total Portfolio(1)

Expiring

Approx.

% of

Leases

Leasable

Rental

Rental

Year

Retail

Non-Retail

Sq. Feet

Revenue
(2)
Revenue

2017

33

1

403,500

$
989

0.3
%
2018

233

5

2,616,200

9,227

3.2

2019

259

10

3,853,400

13,313

4.6

2020

208

10

4,147,800

12,175

4.2

2021

294

12

5,274,000

14,945

5.2

2022

347

18

9,302,400

19,415

6.7

2023

429

21

7,001,400

23,546

8.2

2024

202

11

3,684,000

11,415

4.0

2025

327

14

5,277,400

20,612

7.2

2026

315

5

4,562,000

15,741

5.5

2027

531

4

6,149,900

21,078

7.3

2028

296

9

7,078,000

18,308

6.4

2029

398

7

7,375,700

21,707

7.5

2030

82

13

2,437,900

14,542

5.1

2031

275

25

5,337,500

25,125

8.7

2032 - 2043

550

5

8,911,900

45,681

15.9

Totals

4,779

170

83,413,000

$
287,819

100.0
%

*~~Less than 0.1%~~

~~(1)~~Excludes 28 multi-tenant properties and 86 vacant properties, one of which is a vacant, multi-tenant property. The lease expirations for properties under construction are based on the estimated date of completion of those properties.

~~(2)Excludes revenue of $5,378 from 28 multi-tenant properties and 86 vacant properties, and $258 from sold properties at September 30, 2017.~~

-45-

~~Table of Contents~~

~~Geographic Diversification~~

~~The following table sets forth certain state-by-state information regarding our property portfolio as of September 30, 2017 (dollars in thousands):~~

Approximate

Rental Revenue for

Percentage of

Number of

Percent

Leasable

the Quarter Ended

Rental

State

Properties

Leased

Square Feet

September 30, 2017
(1)
Revenue

Alabama

160

98
%
1,505,800

$
5,492

1.9
%
Alaska

3

67

275,900

572

0.2

Arizona

110

99

1,766,200

6,460

2.2

Arkansas

57

100

843,800

1,830

0.6

California

186

99

5,378,600

28,063

9.6

Colorado

80

100

1,231,600

4,661

1.6

Connecticut

22

91

521,000

2,006

0.7

Delaware

18

100

93,000

718

0.2

Florida

373

99

4,073,400

17,217

5.9

Georgia

254

99

4,216,100

12,893

4.4

Idaho

12

100

87,000

407

0.1

Illinois

249

98

5,682,900

18,124

6.2

Indiana

173

98

2,154,600

8,499

2.9

Iowa

42

88

2,978,500

3,815

1.3

Kansas

94

96

1,857,100

4,811

1.6

Kentucky

63

98

1,469,400

4,038

1.4

Louisiana

97

97

1,340,800

4,132

1.4

Maine

15

100

174,700

1,121

0.4

Maryland

34

97

816,200

4,367

1.5

Massachusetts

80

98

734,100

3,583

1.2

Michigan

163

98

1,689,000

6,323

2.1

Minnesota

158

100

1,934,200

9,851

3.4

Mississippi

141

95

1,627,500

4,675

1.6

Missouri

146

97

2,891,900

9,089

3.1

Montana

11

100

87,000

469

0.2

Nebraska

38

100

806,500

2,270

0.8

Nevada

22

95

413,000

1,295

0.4

New Hampshire

19

100

315,800

1,491

0.5

New Jersey

73

99

909,600

4,882

1.7

New Mexico

31

100

348,500

1,017

0.3

New York

99

100

2,753,500

13,475

4.6

North Carolina

178

98

2,396,100

8,002

2.7

North Dakota

6

100

117,700

211

0.1

Ohio

248

98

6,579,900

15,637

5.3

Oklahoma

132

99

1,648,500

4,618

1.6

Oregon

28

100

593,300

2,290

0.8

Pennsylvania

166

99

1,944,000

8,382

2.9

Rhode Island

4

100

161,600

841

0.3

South Carolina

157

99

1,419,200

6,420

2.2

South Dakota

15

100

195,200

468

0.2

Tennessee

229

97

3,346,100

8,922

3.0

Texas

495

99

9,334,500

27,300

9.3

Utah

22

100

970,600

2,270

0.8

Vermont

5

100

98,000

486

0.2

Virginia

169

96

3,114,700

8,308

2.8

Washington

43

98

733,400

2,761

0.9

West Virginia

16

100

381,200

1,226

0.4

Wisconsin

116

100

2,381,800

6,964

2.4

Wyoming

6

100

54,700

296

0.1

Puerto Rico

4

100

28,300

149

*

Totals\Average

5,062

98
%
86,476,000

$
293,197

100.0
%

*~~Less than 0.1%~~

~~(1)Includes rental revenue for all properties owned at September 30, 2017. Excludes revenue of $258 from sold properties.~~

-46-

~~Table of Contents~~

~~IMPACT OF INFLATION~~

Tenant leases generally provide for limited increases in rent as a result of increases in the tenants’ sales volumes, increases in the consumer price index (typically subject to ceilings), or fixed increases. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.

Moreover, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the tenant is responsible for property expenses. Inflation and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue.

~~IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS~~

~~For information on the impact of recent accounting pronouncements on our business, see note 2 of the Notes to the Consolidated Financial Statements.~~

~~OTHER INFORMATION~~

~~Our common stock is listed on the NYSE under the ticker symbol “O” with a CUSIP number of 756109-104. Our central index key number is 726728.~~

We maintain a corporate website at www.realtyincome.com. On our website we make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, Form 3s, Form 4s, Form 5s, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we electronically file these reports with the Securities and Exchange Commission, or SEC. None of the information on our website is deemed to be part of this report.

~~Corporate Responsibility.~~ We are committed to providing an engaging, diverse, and safe work environment for our employees, to upholding our corporate responsibilities as a public company operating for the benefit of our stockholders, and to operating our company in an environmentally conscious manner. As The Monthly Dividend Company®, our mission is to provide our stockholders with monthly dividends that increase over time. How we manage and use the physical, financial and talent resources that enable us to achieve this mission, demonstrates our commitment to corporate responsibility.

~~Social Responsibility and Ethics.~~ An extension of our mission is our commitment to being socially responsible and conducting our business according to the highest ethical standards. Our employees are awarded compensation that is in line with those of our peers and competitors, including generous healthcare benefits for employees and their families; participation in a 401(k) plan with a matching contribution by Realty Income; competitive paid time-off benefits; and an infant-at-work program for new parents. Our employees have access to members of our Board of Directors to report anonymously, if desired, any suspicion of misconduct by any member of our senior management or executive team. We also have a longstanding commitment to equal employment opportunity and adhere to all Equal Employer Opportunity Policy guidelines. We apply the principles of full and fair disclosure in all of our business dealings, as outlined in our Corporate Code of Business Ethics. We are also committed to dealing fairly with all of our customers, suppliers, and competitors.

Realty Income and our employees have taken an active role in supporting our communities through civic involvement with charitable organizations, including our partnership with San Diego Habitat for Humanity, and corporate donations. Focusing our impact on social and environmentally sustainable areas our non-profit partnerships have resulted in approximately 725 employee volunteer hours during 2017, employee and corporate donations to fund local affordable housing, educational services to at-risk youth, funding local foodbanks, and toys for under-served children. Our dedication to being a responsible corporate citizen has a direct and positive impact in the communities in which we operate and contributes to the strength of our reputation and our financial performance.

~~Corporate Governance.~~ We believe that a company’s reputation for integrity and serving its stockholders responsibly is of utmost importance. We are committed to managing the company for the benefit of our stockholders and are focused on maintaining good corporate governance. Practices that illustrate this commitment include:

-47-

~~Table of Contents~~

·~~Our Board of Directors is comprised of eight directors, seven of which are independent, non-employee directors;~~

·~~Our Board of Directors is elected on an annual basis;~~

·~~We employ a majority vote standard for uncontested elections;~~

·Our Compensation Committee of the Board of Directors works with independent consultants in conducting annual compensation reviews for our key executives, and compensates each individual primarily based on reaching certain performance metrics that determine the success of our company; and

·~~We adhere to all other corporate governance principles outlined in our “Corporate Governance Guidelines” document on our website.~~

~~Environmental Practices.~~Our focus on conservationism is demonstrated by how we manage our day-to-day activities at our corporate headquarters. At our headquarters, we promote energy efficiency and encourage practices such as powering down office equipment at the end of the day, implementing file-sharing technology and automatic “duplex mode” to limit paper use, adopting an electronic approval system, carpooling to our headquarters, and recycling paper waste.

With respect to recycling and reuse practices, we encourage the use of recycled products and the recycling of materials during our operations. Cell phones, wireless devices and office equipment are recycled or donated whenever possible.

In addition, our headquarters was retrofitted according to the State of California energy efficiency standards (specifically following California Green Building Standards Code and Title 24 of the California Code of Regulations), with features such as an automatic lighting control system with light-harvesting technology, a Building Management System that monitors and controls energy use, an energy-efficient PVC roof and heating and cooling system, LED lighting, and drought-tolerant landscaping with recycled materials.

The properties in our portfolio are net leased to our tenants who are responsible for maintaining the buildings and are in control of their energy usage and environmental sustainability practices. We remain active in working with our tenants to promote environmental responsibility at the properties we own and to promote the importance of energy efficient facilities.

Our Asset Management team has engaged with a renewable energy development company to identify assets that would maximize energy efficiency initiatives throughout our property portfolio. These initiatives include solar energy arrays, battery storage, and charging stations. In addition, we continue to explore regional opportunities with our tenants, bringing our properties into compliance to qualify for city and county programs.

Item 3:Quantitative and Qualitative Disclosures about Market Risk

We are exposed to economic risks from interest rates and foreign currency exchange rates. A portion of these risks is hedged, but the risks may affect our financial statements.

Interest Rates

We are exposed to interest rate changes primarily as a result of our credit facility and commercial paper programs, term loans, mortgages payable, and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower our overall borrowing costs. To achieve these objectives, we issue long-term notes and bonds, primarily at fixed rates.

In order to mitigate and manage the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, interest rate swaptions, interest rate locks and caps. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks, including counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. To limit counterparty credit risk, we will seek to enter into such agreements with major financial institutions with favorable credit ratings. There can be no assurance that we will be able to adequately protect against the foregoing risks or realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging activities. We do not enter into any derivative transactions for speculative or trading purposes.

The following table presents, by year of expected maturity, the principal amounts, average interest rates and estimated fair values of our fixed and variable rate debt as of September 30, ~~2017.~~2023. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):

-48-

-47-

Table of Contents

Expected Maturity Data

Weighted average

Weighted average

Fixed rate

rate on fixed rate

Variable rate

rate on variable rate

Year of maturity

debt

debt

debt

debt

2017

$
1.2

5.52
%
$
0.1

3.38
%
2018

365.3

2.15

76.6

2.70

2019

554.5

6.74

674.2

2.70

2020

82.2

4.99

250.2

2.92

2021

310.1

5.72

6.8

4.42

Thereafter

3,478.4

4.11

14.9

4.37

Totals (1)

$
4,791.7

4.38
%
$
1,022.8

2.79
%
Fair Value (2)

$
5,020.6

$
1,023.1

(1) Excludes net premiums recorded on mortgages payable, original issuance discounts recorded on notes payable and deferred financing costs on mortgages payable, notes payable, and term loans. At September 30, 2017, the unamortized balance of net premiums on mortgages payable is $4.8 million, the unamortized balance of original issuance discounts on notes payable is $7.1 million, and the balance of deferred financing costs on mortgages payable is $249,000, on notes payable is $24.2 million, and on term loans is $653,000.

(2) We base the estimated fair value of the fixed rate senior notes and bonds at September 30, 2017 on the indicative market prices and recent trading activity of our senior notes and bonds payable. We base the estimated fair value of our fixed rate and variable rate mortgages at September 30, 2017 on the relevant forward interest rate curve, plus an applicable credit-adjusted spread. We believe that the carrying value of the credit facility balance and term loans balance reasonably approximate their estimated fair values at September 30, 2017.

Expected Maturity Data


Year of Principal Due	Fixed rate debt		Weighted average rate on fixed rate debt		Variable rate debt		Weighted average rate on variable rate debt
2023	$	1.3	4.84	%	$	376.8	4.04	%
2024	1,840.5		4.48	%	—		—
2025	1,092.4		4.23	%	—		—
2026 (1)	1,587.0		3.72	%	2,021.7		4.75	%
2027	2,015.4		2.68	%	—		—
Thereafter	11,453.3		3.66	%	—		—
Totals (2)	$	17,989.9	3.68	%	$	2,398.5	4.64	%
Fair Value (3)	$	16,040.8			$	2,392.0

(1) Assumes the two twelve-month extensions available at the Company's option on our 2023 term loans are fully exercised. As our interest rate swaps which fix our per annum interest rate expires upon the initial maturity date (excluding extensions), it becomes variable-rate debt starting in 2024 and is reflected in table above.

(2)Excludes net premiums recorded on mortgages payable, net premiums recorded on notes payable, deferred financing costs on mortgages payable, notes payable, and term loans, and basis adjustment on interest rate swaps designated as fair value hedges on notes payable.

(3)We base the estimated fair value of the publicly-traded fixed rate senior notes and bonds at September 30, 2023, on the indicative market prices and recent trading activity of our senior notes and bonds payable. We base the estimated fair value of our fixed rate mortgages and private senior notes payable at September 30, 2023, on the relevant forward interest rate curve, plus an applicable credit-adjusted spread. We believe that the carrying values of the line of credit and commercial paper borrowings and term loan balances reasonably approximate their estimated fair values at September 30, 2023.

The table above incorporates only those exposures that exist as of September 30, ~~2017.~~2023. It does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss, with respect to interest rate fluctuations, would depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates.

~~All of~~

At September 30, 2023, our outstanding notes, bonds and ~~bonds have~~mortgages payable had fixed interest rates. All of our mortgages payable, except four mortgages with principal balances totaling $44.9 million at September 30, 2017 have fixed interest rates. After factoring in arrangements that limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.5 million at September 30, 2017. Interest on our credit facility and commercial paper borrowings and term ~~loan balances~~loans is variable. However, the variable interest rate feature on our term loans ~~has~~have been mitigated by interest rate swap agreements.Based on our revolving credit facility balance of ~~$658.0~~$481.5 million at September 30, ~~2017,~~2023, a 1% change in interest rates would change our interest rate costs by ~~$6.6~~$4.8 million per year.

Foreign Currency Exchange Rates

We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments. Foreign currency market risk is the possibility that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates. We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge. We continuously evaluate and manage our foreign currency risk through the use of derivative financial instruments, including currency exchange swaps, and foreign currency forward contracts with financial counterparties where practicable. Such derivative instruments are viewed as risk management tools and are not used for speculative or trading purposes. Additionally, our inability to redeploy rent receipts from our international operations on a timely basis subjects us to foreign exchange risk.

Item 4:Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

-48-

Table of Contents

As of and for the quarter ended September 30, ~~2017,~~2023, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial ~~Officer~~. Officer.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2023 our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

-49-

~~Table of Contents~~

Changes in Internal Controls

There ~~were~~have been no changes toin our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II.OTHER INFORMATION

Item 1A: Risk Factors

You should carefully consider the risks described below and those risks described in "Item 1A, Risk Factors" in Part I of our Annual Report on Form 10-K

for the year ended December 31, 2022, as our business, financial condition and results of operations could be adversely affected by any of the risks and uncertainties described therein and herein.

Risks Related to the Proposed Merger

The announcement and pendency of the Merger may have an adverse effect on our business, operating results and price of our common stock.

We are subject to risks in connection with the announcement and pendency of the Merger, including, but not limited to, the following:

•Market reaction to the announcement and pendency of the Merger;

•Changes in our business, operating results, market price of our common stock and prospects generally;

•Market assessments of the likelihood that the Merger will be consummated;

•The amount of consideration offered per share is based on a fixed exchange ratio, and will not be adjusted to account for changes in our or Spirit’s respective business, assets, liabilities, prospects, outlook, financial condition or results of operations, or any other changes, during the pendency of the Merger, including any change in the market price of, analyst estimates of, or projections relating to, our common stock or Spirit’s common stock;

•Potential adverse effects on our relationships with our current clients, suppliers and other business partners, or those with which we are seeking to establish business relationships, due to uncertainties about the Merger;

•We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger, and many of these fees and costs are payable by us regardless of whether the Merger is consummated;

•We may incur unexpected costs, liabilities or delays in connection with or with respect to the Merger;

•Potential adverse effects to our ability to raise capital during the pendency of the Merger, or the impact of the Merger on our or Spirit’s existing or future indebtedness, or our ability to assume such indebtedness on favorable terms, or at all;

•Potential adverse effects on our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the Merger, and the possibility that our employees could lose productivity as a result of uncertainty regarding their employment following the Merger;

•The pendency and outcome of any legal proceedings that may be instituted against us, our directors, executive officers and others relating to the transactions contemplated by the Merger Agreement;

-49-

Table of Contents

•The inherent risks, costs and uncertainties associated with integrating the operations successfully and risks of not achieving all or any of the anticipated benefits of the Merger, or the risk that the anticipated benefits of the Merger may not be fully realized or take longer to realize than expected;

•Competitive pressures in the markets in which we and Spirit operate;

•Potential restrictions on the conduct of our business prior to the completion of the Merger pursuant to the terms of the Merger Agreement;

•The inability for our stockholders to realize the anticipated benefits of the Merger;

•The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; and

•The possibility of disruption to our business, including increased costs and diversion of management time and resources that could otherwise have been devoted to other opportunities that may have been beneficial to us.

Any of these risks could adversely affect our results of operations, financial condition and business prospects.

The Merger may not be completed on the terms or timeline currently contemplated, or at all. Completion of the Merger is subject to many conditions and if these conditions are not satisfied or waived, the Merger will not be completed, which could adversely affect our operations.

The closing of the Merger is subject to certain conditions, including: (1) approval by Spirit’s stockholders of the Merger; (2) the effectiveness of the registration statement on Form S-4 to be filed with the SEC by us in connection with the transactions contemplated by the Merger Agreement; (3) approval for listing on the New York Stock Exchange (“NYSE”) of the shares of our common stock and our Series A Preferred Stock to be issued in the Merger or reserved for issuance in connection therewith; (4) no injunction or law prohibiting the Merger; (5) accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications; (6) compliance by each party with its covenants in all material respects; (7) with respect to the other party, there not having occurred since the date of the Merger Agreement any event, development, change or occurrence that has had or would reasonably be expected to have had, individually or in the aggregate, a material adverse effect; (8) receipt by each of us and Spirit of an opinion to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and (9) receipt by Spirit of an opinion that we qualify as a REIT under the Code and receipt by us of an opinion that Spirit qualifies as a REIT under the Code.

We cannot provide assurance that these conditions to completing the Merger will be satisfied or waived, and accordingly, that the Merger will be completed on the terms or timeline that the parties anticipate or at all.

Failure to consummate the Merger may adversely affect our results of operations, financial condition and business prospects for many reasons, including, among others: (i) we will have incurred substantial costs relating to the Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration costs that have already been incurred or will continue to be incurred until the closing of the Merger, which could adversely affect our financial conditions, results of operations and ability to make distributions to its stockholders and to pay the principal of and interest on its debt securities and other indebtedness; (ii) the Merger, whether or not it closes, will divert the attention of our management instead of enabling it to more fully pursue other opportunities that could be beneficial to us, without realizing any of the benefits of having completed the Merger or the other transactions contemplated by the Merger Agreement; and (iii) any reputational harm due to the adverse perception of any failure to successfully complete the Merger.

Our common stockholders will be diluted by the Merger, if consummated.

The Merger will dilute the ownership position of our common stockholders. Additionally, upon the closing of the Merger, we will issue 6,900,000 shares of Series A Preferred Stock, which, in certain circumstances, can be converted into our common stock. Consequently, our common stockholders, as a general matter, will have less voting control and influence over our management and policies after the effective time of the Merger than they currently exercise over our management and policies.

Potential litigation instituted against us, Spirit or our respective directors challenging the proposed Merger may prevent the Merger from becoming effective within the expected timeframe or at all.

Potential litigation related to the Merger may result in injunctive or other relief prohibiting, delaying or otherwise adversely affecting the parties’ ability to complete the Merger. Such relief may prevent the Merger from becoming effective within the expected timeframe or at all. In addition, defending against such claims may be expensive and

-50-

Table of Contents

divert management’s attention and resources, which could adversely affect the respective businesses of us and Spirit.

We expect to incur substantial expenses related to the Merger and the transactions contemplated by the Merger Agreement.

We expect to incur substantial expenses in completing the Merger and integrating the operations of Spirit with ours. There are a large number of systems that must be integrated, separated or terminated in connection with the Merger, and the other transactions contemplated by the Merger Agreement, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While we have assumed that a certain level of transaction, integration and termination expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of the expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. The expenses in connection with the Merger and the transactions contemplated by the Merger Agreement are expected to be significant, although the aggregate amount and timing of such charges are uncertain.

Following the Merger, if consummated, we may be unable to integrate the operations of Spirit successfully, or realize the anticipated synergies and related benefits of the Merger and the transactions contemplated by the Merger Agreement or do so within the anticipated time frame.

The Merger involves the combination of two companies which currently operate as independent public companies. We will be required to devote significant management attention and resources to integrating the operations of Spirit. Potential difficulties we may encounter in the integration process include the following:

•the inability to successfully combine Spirit’s operations with ours in a manner that permits the combined company to achieve the cost savings anticipated to result from the Merger, which would result in some anticipated benefits of the Merger not being realized in the time frame anticipated or at all;

•lost sales and clients as a result of certain clients of either of us or Spirit deciding not to do business with the combined company;

•the continued complexities associated with managing a multi-national combined company, integrating certain personnel from the two companies, and the potential complexities associated with the separation of personnel;

•the complexities with combining two companies;

•the failure to retain key employees of either of the two companies;

•potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger and the transactions contemplated by the Merger Agreement; and

•performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Merger and integrating Spirit's operations with ours.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with clients, customers, vendors, joint venture partners and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect our business and financial results.

Item 2.2: Unregistered Sales of Equity Securities and Use of Proceeds

The following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the ~~2012~~2021 Incentive Award Plan of Realty Income Corporation:

·92


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share
July 1, 2023 — July 31, 2023	4	$	59.90
August 1, 2023 — August 31, 2023	180	$	60.57
September 1, 2023 — September 30, 2023	99	$	56.20
Total	283	$	59.03

(1)All 283 shares of common stock purchased during the three months ended September 30, 2023 were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plan of Realty Income Corporation. The withholding of common stock by us could be deemed a purchase of such common stock.

-51-

Table of Contents

Item 5: Other Information

Director and Officer Trading Arrangements

During the three months ended September 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Amendment and Restatement of Bylaws

On November 3, 2023, our Board of Directors approved the amendment and restatement of our Amended and Restated Bylaws (as so amended and restated, the “Amended and Restated Bylaws”) to, among other changes:

•address the universal proxy rules adopted by the SEC, including by clarifying that no person may solicit proxies in support of a director nominee other than the Board of Directors’ nominees unless such person has complied with Rule 14a-19 under the Securities Exchange Act of 1934, as amended, including applicable notice and solicitation requirements;

•enhance certain procedural mechanics and disclosure requirements in connection with stockholder nominations of directors and submissions of other proposals at stockholder meetings, including requiring additional background information and disclosures regarding proposing stockholders, proposed nominees and business, and other persons related to a ~~weighted average price~~stockholder’s solicitation of ~~$55.42,~~proxies;

•reserve the white proxy card for exclusive use by the Board of Directors;

•establish that derivative claims (other than actions arising under federal securities laws), claims alleging a breach of any duty owed by a director, officer or employee, claims pursuant to the Maryland General Corporation Law, our charter or Amended and Restated Bylaws and claims governed by the internal affairs doctrine be brought in ~~July 2017;~~

·~~125 shares~~any state court of ~~stock, at~~competent jurisdiction in Maryland (or, if such state courts do not have jurisdiction, the United States District Court located within the State of Maryland), unless the Company agrees otherwise;

•establish that claims arising under the Securities Act of 1933, as amended, be brought in the United States federal district courts, unless the Company agrees otherwise; and

•clarify the procedures for announcing the date, time and place of a ~~weighted average price~~reconvened meeting of ~~$57.55,~~stockholders in ~~August 2017;~~the event a meeting of stockholders is adjourned.

The Amended and

·~~67 shares~~ Restated Bylaws also include certain technical, modernizing and clarifying changes, including updates to provisions relating to virtual meetings to align with changes to the Maryland General Corporation Law.

The foregoing description of ~~stock, at~~the Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated Bylaws, a ~~weighted average price~~copy of ~~$57.70, in September 2017.~~

which is attached as Exhibit 3.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

-52-

Table of Contents

Item 6:Exhibits

~~Articles of Incorporation and By-Laws~~

~~Exhibit No.~~

~~Description~~

Exhibit No.

Description

~~2.1~~

Plans of acquisition, reorganization, arrangement, liquidation or succession

2.1

Agreement and Plan of Merger, dated as of ~~September 6, 2012,~~April 29, 2021, by and among Realty Income Corporation, ~~Tau~~Rams MD Acquisition Sub I, Inc., Rams Acquisition Sub II, LLC, VEREIT, Inc. and ~~American Realty Capital Trust, Inc.~~VEREIT Operating Partnership, L.P (filed as exhibit 2.1 to the ~~Company’s~~Company's Form 8-K, filed on ~~September 6, 2012~~April 30, 2021 (File No. 001-13374), and incorporated herein by reference).

2.2

~~2.2~~

First Amendment to Agreement and Plan of Merger, dated as of ~~January 6, 2013,~~June 25, 2021, by and among Realty Income Corporation, ~~Tau~~Rams MD Acquisition Sub I, Inc., Rams Acquisition Sub II, LLC, VEREIT, Inc. and ~~American~~VEREIT Operating Partnership, L.P (filed as exhibit 2.1 to the Company's Form 8-K, filed on June 25, 2021 (File No. 001-13374), and incorporated herein by reference).

2.3

Agreement and Plan of Merger, dated as of October 29 , 2023, by and among Realty Income Corporation, Saints MD Acquisition Sub, Inc. and Spirit Realty Capital, ~~Trust,~~ Inc. (filed as exhibit 2.1 to the ~~Company’s~~Company's Form 8-K, filed on ~~January 7, 2013~~October 30, 2023 and incorporated herein by reference).

Bylaws

~~3.1~~

3.1*

~~Articles of Incorporation of the Company, as amended by amendment No. 1 dated May 10, 2005 and amendment No. 2 dated May 10, 2005~~ ~~(filed as exhibit 3.1 to the Company’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference), amendment No. 3 dated July 29, 2011~~ ~~(filed as exhibit 3.1 to the Company’s Form 8-K, filed on August 2, 2011 and incorporated herein by reference); and amendment No. 4 dated June 21, 2012~~ ~~(filed as exhibit 3.1 to the Company’s Form 8-K, filed on June 21, 2012 and incorporated herein by reference)~~.

~~3.2~~

Amended and Restated ~~Bylaws~~ By l aws of the ~~Company~~ C ompany dated ~~June 16, 2015 (filed as exhibit 3.1 to the Company’s Form 8-K filed on June 17, 2015 and incorporated herein by reference)~~November 3, 2023

~~3.3~~

Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, dated February 3, 2012 (the “First Class F Articles Supplementary”) (filed as exhibit 3.1 to the Company’s Form 8-K, filed on February 3, 2012 and incorporated herein by reference).

~~3.4~~

Certificate of Correction to the First Class F Articles Supplementary, dated April 11, 2012 (filed as exhibit 3.2 to the Company’s Form 8-K, filed on April 17, 2012 and incorporated herein by reference).

-50-

~~Table of Contents~~

~~3.5~~

Articles Supplementary to the Articles of Incorporation of the Company classifying and designating additional shares of the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, dated April 17, 2012 (filed as exhibit 3.3 to the Company’s Form 8-K, filed on April 17, 2012 and incorporated herein by reference).

~~Instruments defining the rights of security holders, including indentures~~

~~4.1~~	Indenture dated as of October 28, 1998 between the Company and The Bank of New York (filed as exhibit 4.1 to the Company’s Form 8-K, filed on October 28, 1998 and incorporated herein by reference).

~~4.2~~		~~Form of 5.875% Senior Notes due 2035 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on March 11, 2005 and incorporated herein by reference).~~

~~4.3~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.875% Senior Debentures due 2035 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on March 11, 2005 and incorporated herein by reference).

~~4.4~~		~~Form of 5.375% Senior Notes due 2017 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on September 16, 2005 and incorporated herein by reference).~~

~~4.5~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.375% Senior Notes due 2017 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 16, 2005 and incorporated herein by reference).

~~4.6~~		~~Form of 6.75% Notes due 2019 (filed as exhibit 4.2 to Company’s Form 8-K, filed on September 5, 2007 and incorporated herein by reference).~~

~~4.7~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Trust Company, N.A., as Trustee, establishing a series of securities entitled 6.75% Senior Notes due 2019 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 5, 2007 and incorporated herein by reference).

~~4.8~~		~~Form of 5.750% Notes due 2021 (filed as exhibit 4.2 to Company’s Form 8-K, filed on June 29, 2010 and incorporated herein by reference).~~

~~4.9~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee, establishing a series of securities entitled 5.750% Notes due 2021 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on June 29, 2010 and incorporated herein by reference).

~~4.10~~		~~Form of Common Stock Certificate (filed as exhibit 4.16 to the Company’s Form 10-Q for the quarter ended September 30, 2011 and incorporated herein by reference).~~

~~4.11~~		Form of Preferred Stock Certificate representing the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock (filed as exhibit 4.1 to the Company’s Form 8-K, filed on February 3, 2012 and incorporated herein by reference).

~~4.12~~		~~Form of 2.000% Note due 2018 (filed as exhibit 4.2 to Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).~~

~~4.13~~		~~Form of 3.250% Note due 2022 (filed as exhibit 4.3 to Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).~~

-51-

~~Table of Contents~~

~~4.14~~	Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “2.000% Notes due 2018” and establishing a series of securities entitled “3.250% Notes due 2022” (filed as exhibit 4.4 to the Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).

~~4.15~~		~~Form of 4.650% Note due 2023 (filed as exhibit 4.2 to Company’s Form 8-K, filed on July 16, 2013 and incorporated herein by reference).~~

~~4.16~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “4.650% Notes due 2023” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on July 16, 2013 and incorporated herein by reference).

~~4.17~~		~~Form of 3.875% Note due 2024 (filed as exhibit 4.2 to Company’s Form 8-K, filed on June 25, 2014 and incorporated herein by reference).~~

~~4.18~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “3.875% Notes due 2024” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on June 25, 2014 and incorporated herein by reference).

~~4.19~~		~~Form of 4.125% Note due 2026 (filed as exhibit 4.2 to Company’s Form 8-K, filed on September 23, 2014 and incorporated herein by reference).~~

~~4.20~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “4.125% Notes due 2026” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 23, 2014 and incorporated herein by reference).

~~4.21~~		~~Form of 3.000% Note due 2027 (filed as exhibit 4.2 to Company’s Form 8-K, filed on October 12, 2016 and incorporated herein by reference).~~

~~4.22~~		Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “3.000% Notes due 2027” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on October 12, 2016 and incorporated herein by reference).

~~4.23~~		~~Form of 4.650% Note due 2047 (filed as exhibit 4.2 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).~~

~~4.24~~		~~Form of 4.125% Note due 2026 (filed as exhibit 4.3 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).~~

~~4.25~~		Officers’ Certificate pursuant to Sections 201, 301, and 303 of the Indenture dated October 28, 1998 between the Company and The bank of New York Mellon Trust Company, N.A. as successor trustee, establishing a series of securities entitled “4.650% Notes due 2047” and re-opening a series of securities entitled “4.125% Notes due 2026” (filed as exhibit 4.4 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).

-52-

~~Table of Contents~~

~~Material Contracts~~

~~10.1~~	~~Second Amendment to Realty Income Corporation 2012 Incentive Award Plan (filed as exhibit 10.1 to the Company’s Form 8-K, filed on February 17, 2017 and incorporated herein by reference).~~

~~10.2~~		Amended and Restated Employment Agreement dated February 14, 2017 between the Company and John P. Case (filed as exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2017 and incorporated herein by reference).

~~10.3~~		~~Form of Performance Share Award Agreement (filed as exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2017 and incorporated herein by reference).~~

~~Certifications~~

*31.1

































































Certifications
31.1*		~~Rule 13a-14(a) Certifications as filed by~~Certification of the Chief Executive Officer pursuant to ~~SEC release No. 33-8212 and 34-47551.~~Rule 13a-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
*31.2	~~Rule 13a-14(a) Certifications as filed by~~Certification of the Chief Financial Officer pursuant to ~~SEC release No. 33-8212 and 34-47551.~~Rule 13a-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**
*32	Section 1350 Certifications as furnished by the Chief Executive Officer and the Chief Financial Officer pursuant to ~~SEC release No. 33-8212 and 34-47551.~~Section 906 of the Sarbanes-Oxley Act of 2002.

~~Interactive Data Files~~

*101

The following materials from Realty Income Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.

Interactive Data Files

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document.

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document.

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

**Furnished herewith.

-53-

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			REALTY INCOME CORPORATION

Date: ~~October 26, 2017~~ November 7, 2023			/s/ SEAN P. NUGENT
			Sean P. Nugent
			Senior Vice President, Controller and Principal Accounting Officer
			(Principal Accounting Officer)

-53-

-54-

	2017			2016
ASSETS	(unaudited)
Real estate, at cost:
Land	$	3,974,972		$	3,752,204
Buildings and improvements	10,634,965			10,112,212
Total real estate, at cost	14,609,937			13,864,416
Less accumulated depreciation and amortization	(2,265,035		)	(1,987,200		)
Net real estate held for investment	12,344,902			11,877,216
Real estate held for sale, net	2,874			26,575
Net real estate	12,347,776			11,903,791
Cash and cash equivalents	3,199			9,420
Accounts receivable, net	113,721			104,584
Acquired lease intangible assets, net	1,165,013			1,082,320
Goodwill	14,989			15,067
Other assets, net	56,721			37,689
Total assets	$	13,701,419		$	13,152,871

LIABILITIES AND EQUITY
Distributions payable	$	60,104		$	55,235
Accounts payable and accrued expenses	92,947			121,156
Acquired lease intangible liabilities, net	272,377			264,206
Other liabilities	115,037			85,616
Line of credit payable	658,000			1,120,000
Term loans, net	319,347			319,127
Mortgages payable, net	341,015			466,045
Notes payable, net	4,468,665			3,934,433
Total liabilities	6,327,492			6,365,818

Commitments and contingencies

Stockholders’ equity:
Preferred stock and paid in capital, par value $0.01 per share, 69,900,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and 16,350,000 issued and outstanding as of December 31, 2016, liquidation preference $25.00 per share	-			395,378
Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 281,778,537 shares issued and outstanding as of September 30, 2017 and 260,168,259 shares issued and outstanding as of December 31, 2016	9,488,043			8,228,594
Distributions in excess of net income	(2,133,614		)	(1,857,168		)
Total stockholders’ equity	7,354,429			6,766,804
Noncontrolling interests	19,498			20,249
Total equity	7,373,927			6,787,053
Total liabilities and equity	$	13,701,419		$	13,152,871

			Three months ended							Nine months ended

			September 30,							September 30,

	2017				2016			2017				2016
REVENUE
Rental	$	293,455			$	265,332		$	867,325			$	782,189
Tenant reimbursements	11,933				11,524			34,918				31,741
Other	1,532				318			2,872				1,399
Total revenue	306,920				277,174			905,115				815,329

EXPENSES
Depreciation and amortization	127,569				113,917			371,755				332,192
Interest	62,951				52,952			185,935				171,039
General and administrative	13,881				12,103			43,227				38,407
Property (including reimbursable)	17,267				15,678			52,828				45,454
Income taxes	1,133				894			2,621				2,812
Provisions for impairment	365				8,763			8,072				16,955
Total expenses	223,166				204,307			664,438				606,859
Gain on sales of real estate	4,319				4,335			17,689				15,283
Net income	88,073				77,202			258,366				223,753
Net income attributable to noncontrolling interests	(133			)	(130		)	(420			)	(623)
Net income attributable to the Company	87,940				77,072			257,946				223,130
Preferred stock dividends	-				(6,770		)	(3,911			)	(20,310)
Excess of redemption value over carrying value of preferred shares redeemed	-				-			(13,373			)	-
Net income available to common stockholders	$	87,940			$	70,302		$	240,662			$	202,820

Amounts available to common stockholders per common share:
Net income, basic and diluted	$	0.32			$	0.27		$	0.89			$	0.80

Weighted average common shares outstanding:

Basic	275,511,870				258,085,633			270,584,365				253,953,149

Diluted	276,050,671				258,673,914			271,126,114				254,540,323

	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	258,366		$	223,753
Adjustments to net income:
Depreciation and amortization	371,755			332,192
Amortization of share-based compensation	10,641			9,204
Non-cash revenue adjustments	(2,783		)	(7,583		)
Amortization of net premiums on mortgages payable	(1,580		)	(2,669		)
Amortization of deferred financing costs	6,819			6,510
(Gain) loss on interest rate swaps	(1,228		)	5,835
Gain on sales of real estate	(17,689		)	(15,283		)
Provisions for impairment on real estate	8,072			16,955
Change in assets and liabilities
Accounts receivable and other assets	(2,342		)	2,964
Accounts payable, accrued expenses and other liabilities	10,067			7,332
Net cash provided by operating activities	640,098			579,210
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(964,719		)	(1,027,917		)
Improvements to real estate, including leasing costs	(11,834		)	(5,295		)
Proceeds from sales of real estate	69,486			55,114
Insurance proceeds received	12,746			-
Collection of loans receivable	92			12,486
Restricted escrow deposits for Section 1031 tax-deferred exchanges and pending acquisitions	(19,452		)	(7,757		)
Net cash used in investing activities	(913,681		)	(973,369		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(509,987		)	(453,774		)
Cash dividends to preferred stockholders	(6,168		)	(20,310		)
Borrowings on line of credit	1,189,000			3,120,000
Payments on line of credit	(1,651,000		)	(2,276,000		)
Proceeds from notes and bonds payable issued	711,812			-
Principal payment on notes payable	(175,000		)	(275,000		)
Proceeds from mortgages payable	-			9,963
Principal payments on mortgages payable	(123,524		)	(183,697		)
Redemption of preferred stock	(408,750		)	-
Proceeds from common stock offerings, net	704,938			383,572
Proceeds from dividend reinvestment and stock purchase plan	67,813			8,174
Proceeds from At-the-Market (ATM) program	487,998			85,780
Redemption of common units	-			(9,026		)
Distributions to noncontrolling interests	(1,652		)	(1,018		)
Debt issuance costs	(6,663		)	-
Other items, including shares withheld upon vesting	(11,455		)	(4,998		)
Net cash provided by financing activities	267,362			383,666
Net increase (decrease) in cash and cash equivalents	(6,221		)	(10,493		)
Cash and cash equivalents, beginning of period	9,420			40,294
Cash and cash equivalents, end of period	$	3,199		$	29,801


	Shares of common stock	Common stock and paid in capital		Distributions in excess of net income		Accumulated other comprehensive income (loss)		Total stockholders’ equity		Noncontrolling interests		Total equity
Balance, June 30, 2023	708,773	$	37,149,380	$	(6,102,226)	$	96,057	$	31,143,211	$	167,932	$	31,311,143
Net income	—	—		233,473		—		233,473		404		233,877
Other comprehensive loss	—	—		—		(54,208)		(54,208)		—		(54,208)
Distributions paid and payable	—	—		(547,781)		—		(547,781)		(2,497)		(550,278)
Share issuances, net of costs	15,122	876,253		—		—		876,253		—		876,253
Contributions by noncontrolling interests	—	—		—		—		—		435		435
Share-based compensation, net	(1)	6,196		—		—		6,196		—		6,196
Balance, September 30, 2023	723,894	$	38,031,829	$	(6,416,534)	$	41,849	$	31,657,144	$	166,274	$	31,823,418

Balance, June 30, 2022	617,564	$	31,303,383	$	(4,999,150)	$	22,379	$	26,326,612	$	76,267	$	26,402,879
Net income	—	—		219,567		—		219,567		720		220,287
Other comprehensive loss	—	—		—		(47,317)		(47,317)		—		(47,317)
Distributions paid and payable	—	—		(461,429)		—		(461,429)		(1,070)		(462,499)
Issuance of common partnership units	—	—		—		—		—		51,221		51,221
Share issuances, net of costs	9,582	694,708		—		—		694,708		—		694,708
Share-based compensation, net	—	4,978		—		—		4,978		—		4,978
Balance, September 30, 2022	627,146	$	32,003,069	$	(5,241,012)	$	(24,938)	$	26,737,119	$	127,138	$	26,864,257


Nine months ended September 30, 2023 and 2022

	Shares of common stock	Common stock and paid in capital		Distributions in excess of net income		Accumulated other comprehensive income (loss)		Total stockholders’ equity		Noncontrolling interests		Total equity
Balance, December 31, 2022	660,300	$	34,159,509	$	(5,493,193)	$	46,833	$	28,713,149	$	130,140	$	28,843,289
Net income	—	—		653,904		—		653,904		3,248		657,152
Other comprehensive loss	—	—		—		(4,984)		(4,984)		—		(4,984)
Distributions paid and payable	—	—		(1,577,245)		—		(1,577,245)		(7,108)		(1,584,353)
Share issuances, net of costs	63,348	3,858,347		—		—		3,858,347				3,858,347
Contributions by noncontrolling interests	—	—		—		—		—		39,994		39,994
Share-based compensation, net	246	13,973		—		—		13,973		—		13,973
Balance, September 30, 2023	723,894	$	38,031,829	$	(6,416,534)	$	41,849	$	31,657,144	$	166,274	$	31,823,418

Balance December 31, 2021	591,262	$	29,578,212	$	(4,530,571)	$	4,933	$	25,052,574	$	76,826	$	25,129,400
Net income	—	—		642,143		—		642,143		1,937		644,080
Other comprehensive loss	—	—		—		(29,871)		(29,871)		—		(29,871)
Distributions paid and payable	—	—		(1,352,584)		—		(1,352,584)		(2,846)		(1,355,430)
Issuance of common partnership units	—	—		—		—		—		51,221		51,221
Share issuances, net of costs	35,715	2,415,281		—		—		2,415,281		—		2,415,281
Share-based compensation, net	169	9,576		—		—		9,576		—		9,576
Balance, September 30, 2022	627,146	$	32,003,069	$	(5,241,012)	$	(24,938)	$	26,737,119	$	127,138	$	26,864,257

A. Acquired lease intangible assets, net, consist of the following	September 30,			December 31,
(dollars in thousands) at:	2017			2016
Acquired in-place leases	$	1,227,780		$	1,164,075
Accumulated amortization of acquired in-place leases	(428,802		)	(358,040		)
Acquired above-market leases	479,098			365,005
Accumulated amortization of acquired above-market leases	(113,063		)	(88,720		)
	$	1,165,013		$	1,082,320

	September 30,		December 31,
B. Other assets, net, consist of the following (dollars in thousands) at:	2017		2016
Restricted escrow deposits		23,698		4,246
Prepaid expenses	13,267		14,406
Corporate assets, net	5,566		3,585
Notes receivable issued in connection with property sales	5,298		5,390
Credit facility origination costs, net	5,094		7,303
Impounds related to mortgages payable	3,465		2,015
Other items	333		744
	$	56,721	$	37,689

	Net			Increase to
	decrease to			amortization
	rental revenue			expense
2017	$	(3,919	)	$	25,466
2018	(15,439		)	100,085
2019	(14,457		)	89,847
2020	(13,688		)	83,940
2021	(12,396		)	75,819
Thereafter	(33,759		)	423,821
Totals	$	(93,658	)	$	798,978


	Net increase (decrease) to rental revenue		Increase to amortization expense
2023	$	(15,270)	$	159,999
2024	(55,582)		580,180
2025	(48,736)		499,404
2026	(41,027)		444,691
2027	(32,426)		385,298
Thereafter	353,466		1,753,882
Totals	$	160,425	$	3,823,454

Year of Maturity	Principal
2017	$	1.3
2018	21.9
2019	20.7
2020	82.4
2021	66.9
Thereafter	143.3
Totals	$	336.5

	Tau Operating			Realty Income, L.P.			Other Noncontrolling
	Partnership units(1)			units(2)			Interests			Total
Carrying value at December 31, 2016	$	13,405		$	2,216		$	4,628		$	20,249
Reallocation of equity	492			(26		)	19			485
Distributions	(602		)	(167		)	(887		)	(1,656		)
Allocation of net income	189			151			80			420
Carrying value at September 30, 2017	$	13,484		$	2,174		3,840			$	19,498

	September 30, 2017		December 31, 2016
Net real estate	$	2,976,562	$	3,040,903
Total assets	3,394,991		3,499,481
Total debt	210,998		251,047
Total liabilities	313,782		364,797

	Carrying value per		Estimated fair
At September 30, 2017	balance sheet		value
Notes receivable issued in connection with property sales	$	5.3	$	5.4
Mortgages payable assumed in connection with acquisitions (1)	336.5		351.0
Notes and bonds payable (2)	4,500.0		4,714.7

	Carrying value per		Estimated fair
At December 31, 2016	balance sheet		value
Notes receivable issued in connection with property sales	$	5.4	$	5.5
Mortgages payable assumed in connection with acquisitions (1)	460.0		468.7
Notes and bonds payable (2)	3,975.0		4,143.3


Derivative Type	Number of Instruments(1)			Notional Amount as of						Weighted Average Strike Rate (2)	Maturity Date (3)		Fair Value - asset (liability) as of
Derivatives Designated as Hedging Instruments		September 30, 2023				December 31, 2022					September 30, 2023				December 31, 2022

Interest rate swaps	9			$	1,630.0			$	250.0	4.26%	Jan 2024 - Jan 2026		$	1.3			$	5.6
Interest rate swaptions	6			1,000.0				—		(4)	Feb 2034		21.7				—
Cross-currency swaps	3			320.0				320.0		(5)	Oct 2032		(38.6)				(33.3)
Foreign currency forwards	26			160.7				185.5		(6)	Oct 2023 - Dec 2024		10.1				16.1


				$	3,110.7			$	755.5				$	(5.5)			$	(11.6)
Derivatives not Designated as Hedging Instruments
Currency exchange swaps	6			$	1,650.6			$	2,427.7	(7)	Oct 2023		$	6.6			$	58.8
Cross-currency swaps	3			280.0				280.0		(5)	Oct 2032		(34.7)				(29.5)

				$	1,930.6			$	2,707.7				$	(28.1)			$	29.3
Total of all Derivatives		$	5,041.3			$	3,463.2				$	(33.6)			$	17.7


	Three months ended September 30,			Nine months ended September 30,
Derivatives in Cash Flow Hedging Relationships		2023		2022		2023		2022
Cross-currency swaps		$	—	$	—	$	—	$	(5,091)
Interest rate swaps		(7,172)		30,838		(5,328)		100,229
Foreign currency forwards		3,156		11,076		(6,039)		23,920
Interest rate swaptions		15,126		—		18,679		—
Total derivatives in cash flow hedging relationships		$	11,110	$	41,914	$	7,312	$	119,058
Derivatives in Fair Value Hedging Relationships
Cross-currency swaps		$	(3,917)	$	—	$	(8,691)	$	—

Total derivatives in fair value hedging relationships		$	(3,917)	$	—	$	(8,691)	$	—
Total unrealized gain (loss) on derivatives		$	7,193	$	41,914	$	(1,379)	$	119,058

Month	2017		2016

January	$	0.2025000	$	0.1910000
February	0.2105000		0.1985000
March	0.2105000		0.1985000
April	0.2110000		0.1990000
May	0.2110000		0.1990000
June	0.2110000		0.1990000
July	0.2115000		0.1995000
August	0.2115000		0.1995000
September	0.2115000		0.2015000


Total	$	1.8910000	$	1.7855000

	September 30,		December 31,
Assets, as of:	2017		2016
Segment net real estate:
Apparel	$	174,162	$	175,418
Automotive service	215,004		152,220
Automotive tire services	248,638		238,151
Beverages	290,239		293,447
Child care	58,148		49,584
Convenience stores	1,004,692		1,050,285
Dollar stores	1,092,884		1,120,896
Drug stores	1,510,098		1,541,846
Financial services	393,395		408,228
General merchandise	268,059		248,040
Grocery stores	667,240		464,359
Health and fitness	842,325		823,697
Home improvement	360,866		311,459
Motor vehicle dealerships	206,732		197,713
Restaurants-casual dining	507,062		511,863
Restaurants-quick service	639,812		574,532
Theaters	538,781		370,732
Transportation services	782,024		796,717
Wholesale club	429,802		439,557
Other non-reportable segments	2,117,813		2,135,047
Total segment net real estate	12,347,776		11,903,791

Intangible assets:
Apparel	40,553		43,786
Automotive service	65,017		33,160
Automotive tire services	10,281		11,533
Beverages	2,087		2,280
Convenience stores	46,399		14,372
Dollar stores	47,061		51,249
Drug stores	173,863		182,981
Financial services	26,155		29,749
General merchandise	44,425		43,248
Grocery stores	121,654		65,412
Health and fitness	67,138		63,574
Home improvement	52,017		49,932
Motor vehicle dealerships	32,618		25,032
Restaurants-casual dining	20,574		22,058
Restaurants-quick service	46,300		43,356
Theaters	22,396		13,822
Transportation services	90,750		101,664
Wholesale club	30,378		32,723
Other non-reportable segments	225,347		252,389

Goodwill:
Automotive service	437		440
Automotive tire services	862		862
Child care	4,924		4,945
Convenience stores	2,004		2,008
Restaurants-casual dining	2,080		2,107
Restaurants-quick service	1,064		1,068
Other non-reportable segments	3,618		3,637
Other corporate assets	173,641		151,693
Total assets	$	13,701,419	$	13,152,871

	Month	Month	Dividend		Increase

2017 Dividend increases	Declared	Paid	per share		per share
1st increase	Dec 2016	Jan 2017	$	0.2025	$	0.0005
2nd increase	Jan 2017	Feb 2017	$	0.2105	$	0.0080
3rd increase	Mar 2017	Apr 2017	$	0.2110	$	0.0005
4th increase	Jun 2017	Jul 2017	$	0.2115	$	0.0005
5th increase	Sep 2017	Oct 2017	$	0.2120	$	0.0005


Note Issuance	Date of Issuance	Maturity Date	Principal amount		Price of par value		Effective yield to maturity
5.050% Notes	January 2023	January 2026	$	500.0	99.618	%	5.189	%
4.850% Notes	January 2023	March 2030	$	600.0	98.813	%	5.047	%
4.700% Notes	April 2023	December 2028	$	400.0	98.949	%	4.912	%
4.900% Notes	April 2023	July 2033	$	600.0	98.020	%	5.148	%
4.875% Notes	July 2023	July 2030	€	550.0	99.421	%	4.975	%
5.125% Notes	July 2023	July 2034	€	550.0	99.506	%	5.185	%

2.000% notes, issued in October 2012 and due in January 2018	$	350
6.750% notes, issued in September 2007 and due in August 2019	550
5.750% notes, issued in June 2010 and due in January 2021	250
3.250% notes, issued in October 2012 and due in October 2022	450
4.650% notes, issued in July 2013 and due in August 2023	750
3.875% notes, issued in June 2014 and due in July 2024	350
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	650
3.000% notes, issued in October 2016 and due in January 2027	600
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	250
4.650% notes, issued in March 2017 and due in March 2047	300
Total principal amount	4,500
Unamortized original issuance discounts and deferred financing costs	(31)
	$	4,469

Net income attributable to the Company	$	350,387
Plus: interest expense	225,831
Plus: provision for taxes	3,070
Plus: depreciation and amortization	489,507
Plus: provisions for impairment	11,781
Plus: pro forma adjustments	44,980
Less: gain on sales of real estate	(24,386		)
Income available for debt service, as defined	$	1,101,170
Total pro forma debt service charge	$	233,120
Debt service coverage ratio	4.7


Net income available to common stockholders	$	881,170
Plus: interest expense, excluding the amortization of deferred financing costs	630,215

Plus: provision for taxes	45,599
Plus: depreciation and amortization	1,857,495
Plus: provisions for impairment	69,282
Plus: pro forma adjustments	303,311
Less: gain on sales of real estate	(29,022)

Income available for debt service, as defined	$	3,758,050

Total pro forma debt service charge	$	843,250

Debt service and fixed charge coverage ratio	4.5

																Ground			Ground
																Leases			Leases
				Notes												Paid by			Paid by
Year of	Credit			and			Term			Mortgages						Realty			Our
Maturity	Facility		(1)	Bonds		(2)	Loan		(3)	Payable		(4)	Interest		(5)	Income		(6)	Tenants		(7)	Other		(8)	Totals
2017	$	-		$	-		$	-		$	1.3		$	30.2		$	0.4		$	3.4		$	-		$	35.3
2018	-			350.0			70.0			21.9			230.8			1.6			13.5			87.7			775.5
2019	658.0			550.0			-			20.7			219.6			1.5			13.4			-			1,463.2
2020	-			-			250.0			82.4			169.6			1.4			13.2			-			516.6
2021	-			250.0			-			66.9			152.5			1.2			12.9			-			483.5
Thereafter	-			3,350.0			-			143.3			922.5			22.1			106.9			-			4,544.8
Totals	$	658.0		$	4,500.0		$	320.0		$	336.5		$	1,725.2		$	28.2		$	163.3		$	87.7		$	7,818.9


Client	Number of Leases	Percentage of Total Portfolio Annualized Contractual Rent (1)
Walgreens	369	3.9	%
Dollar General	1,630	3.9
Dollar Tree / Family Dollar	1,195	3.3
7-Eleven	634	3.2
EG Group Limited	415	2.7
Wynn Resorts	1	2.6
FedEx	77	2.2
B&Q (Kingfisher)	50	1.8
Asda	37	1.8
Sainsbury's	35	1.7
LA Fitness	70	1.7
BJ's Wholesale Clubs	33	1.6
Lifetime Fitness	23	1.5
CVS Pharmacy	191	1.4
Wal-Mart / Sam's Club	67	1.4
Tractor Supply	186	1.3
Tesco	22	1.3
AMC Theaters	35	1.2
Red Lobster	200	1.2
Regal Cinemas (Cineworld)	35	1.1
Total	5,305	40.9	%


	Total Portfolio (1)
	Expiring Leases		Approximate Leasable Square Feet	Total Portfolio Annualized Contractual Rent		Percentage of Total Portfolio Annualized Contractual Rent
Year	Retail	Non-Retail
2023	168	—	1,267,300	$	22,077	0.6	%
2024	512	24	9,024,300	106,600		2.8
2025	915	37	14,702,100	210,874		5.5
2026	855	33	16,010,500	195,882		5.1
2027	1,411	37	22,307,500	288,821		7.5
2028	1,570	55	28,194,800	344,960		8.9
2029	1,139	28	24,476,500	296,603		7.7
2030	592	20	15,875,400	188,126		4.9
2031	549	40	23,361,100	263,672		6.8
2032	973	33	17,883,200	254,462		6.6
2033	735	19	16,522,300	208,445		5.4
2034	602	8	10,828,000	225,474		5.7
2035	440	4	5,854,700	117,369		2.9
2036	438	8	7,956,100	143,290		3.7
2037	515	9	8,748,900	136,136		3.5
2038-2143	2,206	69	36,778,400	864,512		22.4
Totals	13,620	424	259,791,100	$	3,867,303	100.0	%


Location	Number of Properties	Percent Leased		Approximate Leasable Square Feet	Percentage of Total Portfolio Annualized Contractual Rent

Alabama	405	98	%	4,395,600	1.8	%
Alaska	6	100		299,700	0.1
Arizona	254	99		4,000,600	1.8
Arkansas	260	93		2,817,700	1.0
California	353	99		12,452,300	5.4
Colorado	170	96		2,697,500	1.2
Connecticut	52	98		1,754,700	0.6
Delaware	24	100		141,100	0.1
Florida	886	99		10,557,200	5.2
Georgia	577	98		9,188,900	3.4
Hawaii	22	100		47,800	0.2
Idaho	27	100		189,100	0.1
Illinois	557	97		13,284,700	4.9
Indiana	428	97		8,200,500	2.5
Iowa	110	100		3,484,100	0.9
Kansas	195	97		4,691,500	1.0
Kentucky	377	99		6,342,100	1.6
Louisiana	355	99		5,289,700	1.9
Maine	85	99		1,208,700	0.6
Maryland	78	99		3,064,500	1.2
Massachusetts	207	99		6,664,300	4.6
Michigan	475	99		5,908,200	2.5
Minnesota	261	98		4,330,200	1.8
Mississippi	305	99		4,525,800	1.2
Missouri	394	99		5,467,600	1.9
Montana	24	100		223,100	0.1
Nebraska	81	99		1,131,600	0.3
Nevada	74	99		2,665,700	0.8
New Hampshire	54	98		667,300	0.5
New Jersey	145	97		2,277,000	1.5
New Mexico	110	100		1,354,200	0.6
New York	338	98		4,960,200	3.0
North Carolina	417	99		8,434,700	2.8
North Dakota	21	95		427,800	0.2
Ohio	716	98		16,067,600	4.0
Oklahoma	336	97		4,443,500	1.6
Oregon	42	100		650,400	0.3
Pennsylvania	344	97		6,226,800	2.3
Rhode Island	31	100		214,600	0.2
South Carolina	326	99		5,186,200	1.9
South Dakota	34	100		474,900	0.2
Tennessee	463	98		7,362,200	2.3
Texas	1,602	99		27,435,400	10.1
Utah	39	100		1,585,500	0.5
Vermont	18	100		173,500	0.1
Virginia	370	98		7,384,200	2.3
Washington	82	99		1,862,600	0.8
West Virginia	80	100		763,300	0.3
Wisconsin	289	100		6,608,900	2.0
Wyoming	23	100		157,700	0.1
Puerto Rico	6	100		59,400	*

Ireland	4	100		311,500	0.1
Italy	7	100		1,075,100	0.4

Spain	54	100		3,960,100	0.9
United Kingdom	289	100		27,412,800	12.3
Totals/average	13,282	98	%	262,561,900	100.0	%
•*Less than 0.1%

			Three months ended
			September 30, 2017
Dollars in thousands	2017			2016
Net income	$	88,073		$	77,202
Interest	62,951			52,952
Income taxes	1,133			894
Depreciation and amortization	127,569			113,917
Impairment loss	365			8,763
Gain on sales of real estate	(4,319)			(4,335)
Quarterly Adjusted EBITDA	$	275,772		$	249,393

Annualized Adjusted EBITDA(1)	$	1,103,088		$	997,572
Total Debt	$	5,787,027		$	5,250,697
Debt/Adjusted EBITDA	5.2			5.3

	Percentage of Rental Revenue(1)
	For the
	Quarter Ended		For the Years Ended
	September 30,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
	2017		2016		2015		2014		2013		2012
Retail industries
Apparel stores	1.6	%	1.9	%	2.0	%	2.0	%	1.9	%	1.7	%
Automotive collision services	0.9		1.0		1.0		0.8		0.8		1.1
Automotive parts	1.2		1.3		1.4		1.3		1.2		1.0
Automotive service	2.2		1.9		1.9		1.8		2.1		3.1
Automotive tire services	2.5		2.7		2.9		3.2		3.6		4.7
Book stores	*		*		*		*		*		0.1
Child care	1.7		1.9		2.0		2.2		2.8		4.5
Consumer electronics	0.4		0.3		0.3		0.3		0.3		0.5
Convenience stores	9.5		8.7		9.2		10.1		11.2		16.3
Crafts and novelties	0.5		0.5		0.5		0.5		0.5		0.3
Dollar stores	7.8		8.6		8.9		9.6		6.2		2.2
Drug stores	10.8		11.2		10.6		9.5		8.1		3.5
Education	0.3		0.3		0.3		0.4		0.4		0.7
Entertainment	0.4		0.5		0.5		0.5		0.6		0.9
Equipment services	*		0.1		0.1		0.1		0.1		0.1
Financial services	2.1		1.4		1.3		1.4		1.5		0.2
General merchandise	1.9		1.5		1.4		1.2		1.1		0.6
Grocery stores	4.6		3.1		3.0		3.0		2.9		3.7
Health and fitness	7.6		8.1		7.7		7.0		6.3		6.8
Health care	0.8		0.9		1.0		1.1		1.1		-
Home furnishings	0.8		0.7		0.7		0.7		0.9		1.0
Home improvement	2.7		2.5		2.4		1.7		1.6		1.5
Jewelry	0.1		0.1		0.1		0.1		0.1		-
Motor vehicle dealerships	2.0		1.9		1.6		1.6		1.6		2.1
Office supplies	0.2		0.3		0.3		0.4		0.5		0.8
Pet supplies and services	0.6		0.6		0.7		0.7		0.8		0.6
Restaurants - casual dining	3.7		3.9		3.8		4.3		5.1		7.3
Restaurants - quick service	5.0		4.9		4.2		3.7		4.4		5.9
Shoe stores	0.3		0.5		0.5		0.1		0.1		0.1
Sporting goods	1.4		1.6		1.8		1.6		1.7		2.5
Telecommunications	*		*		-		-		-		-
Theaters	5.1		4.9		5.1		5.3		6.2		9.4
Transportation services	0.1		0.1		0.1		0.1		0.1		0.2
Wholesale clubs	3.2		3.6		3.8		4.1		3.9		3.2
Other	*		*		*		*		0.1		0.1
Retail industries	82.0	%	81.5	%	81.1	%	80.4	%	79.8	%	86.7	%

		Approximate	Rental Revenue for			Percentage of
	Number of	Leasable	the Quarter Ended			Rental
Property Type	Properties	Square Feet	September 30, 2017		(1)	Revenue
Retail	4,890	57,896,500	$	234,181		79.9	%
Industrial	113	24,991,800	37,443			12.8
Office	44	3,403,200	15,002			5.1
Agriculture	15	184,500	6,571			2.2
Totals	5,062	86,476,000	$	293,197		100.0	%

Tenant	Number of Properties	% of Rental Revenue

Walgreens	203	6.6	%
FedEx	43	5.2	%
LA Fitness	53	4.1	%
Dollar General	525	4.0	%
Dollar Tree / Family Dollar	456	3.6	%
AMC Theatres	31	3.6	%
Circle K (Couche-Tard)	298	2.5	%
Walmart / Sam’s Club	40	2.4	%
BJ’s Wholesale Club	15	2.2	%
Treasury Wine Estates	17	2.1	%
CVS Pharmacy	70	1.9	%
Super America / Western Refining (Tesoro)	134	1.9	%
GPM Investments / Fas Mart	216	1.8	%
Regal Cinemas	22	1.8	%
Rite Aid	69	1.8	%
7-Eleven	111	1.7	%
Life Time Fitness	9	1.7	%
TBC Corporation (Sumitomo)	158	1.6	%
Kroger	13	1.3	%
NPC International	188	1.2	%