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,~~March 31, 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
1.750% Notes due 2033	O33A	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~~ 673,222,491shares of common stock outstanding as of ~~October 19, 2017.~~

April 28, 2023.

Table of Contents

REALTY INCOME CORPORATION

Index to Form 10-Q

March 31, 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 25
		~~The Company~~Overview		20 25
		Recent Developments		23 26
		Liquidity and Capital Resources		26 28
		Results of Operations		31 34
		Funds from Operations Available to Common Stockholders ~~(FFO)~~( "FFO ") and Normalized Funds from Operations Available to Common Stockholders ("Normalized FFO ")		37 41
		Adjusted Funds from Operations Available to Common Stockholders ~~(AFFO)~~( "AFFO ")		38 43
		Property Portfolio Information		40 44
		Impact of Inflation		47 49
		Impact of Recent Accounting Pronouncements		47 49
		~~Other Information~~Critical Accounting Policies		47 49

Item 3:		Quantitative and Qualitative Disclosures About Market Risk		48 49

Item 4:		Controls and Procedures		49 50

PART II.		OTHER INFORMATION

Item 1A:		Risk Factors		51

Item 2:		Unregistered Sales of Equity Securities and Use of Proceeds		50

~~Item 6:~~51	~~Exhibits~~		50

~~SIGNATURE~~			53

Item 6:		Exhibits		52

SIGNATURE				54

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Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(dollars in thousands, except per share and share count 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

(unaudited)

March 31, 2023 December 31, 2022
ASSETS
Real estate held for investment, at cost:
Land $ 13,324,929 $ 12,948,835
Buildings and improvements 30,803,410 29,707,751
Total real estate held for investment, at cost 44,128,339 42,656,586
Less accumulated depreciation and amortization (5,188,105) (4,904,165)
Real estate held for investment, net 38,940,234 37,752,421
Real estate and lease intangibles held for sale, net 24,445 29,535
Cash and cash equivalents 164,576 171,102
Accounts receivable, net 617,359 567,963
Lease intangible assets, net 5,256,795 5,168,366
Goodwill 3,731,478 3,731,478
Other assets, net 2,366,551 2,252,227
Total assets $ 51,101,438 $ 49,673,092
LIABILITIES AND EQUITY
Distributions payable $ 173,223 $ 165,710
Accounts payable and accrued expenses 422,365 399,137
Lease intangible liabilities, net 1,445,133 1,379,436
Other liabilities 789,903 774,787
Line of credit payable and commercial paper 1,304,858 2,729,040
Term loan, net 1,297,966 249,755
Mortgages payable, net 850,580 853,925
Notes payable, net 15,430,072 14,278,013
Total liabilities 21,714,100 20,829,803
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 shares authorized, 673,206,775 and 660,300,195 shares issued and outstanding as of March 31, 2023, and December 31, 2022, respectively 34,958,608 34,159,509
Distributions in excess of net income (5,772,923) (5,493,193)
Accumulated other comprehensive income 73,421 46,833
Total stockholders’ equity 29,259,106 28,713,149
Noncontrolling interests 128,232 130,140
Total equity 29,387,338 28,843,289
Total liabilities and equity $ 51,101,438 $ 49,673,092

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

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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 and share count data) (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 March 31,
2023 2022
REVENUE
Rental (including reimbursable) $ 925,289 $ 799,565
Other 19,110 7,778
Total revenue 944,399 807,343
EXPENSES
Depreciation and amortization 451,477 403,762
Interest 154,132 106,403
Property (including reimbursable) 69,397 52,342
General and administrative 34,167 32,699
Provisions for impairment 13,178 7,038
Merger and integration-related costs 1,307 6,519
Total expenses 723,658 608,763
Gain on sales of real estate 4,279 10,156
Foreign currency and derivative gain (loss), net 10,322 (590)
Equity in income of unconsolidated entities — 954
Other income, net 2,730 1,852
Income before income taxes 238,072 210,952
Income taxes (11,950) (10,981)
Net income 226,122 199,971
Net income attributable to noncontrolling interests (1,106) (602)
Net income available to common stockholders $ 225,016 $ 199,369
Amounts available to common stockholders per common share:
Net Income, basic and diluted $ 0.34 $ 0.34
Weighted average common shares outstanding:
Basic 660,462,399 593,827,299
Diluted 661,238,844 594,041,839
Net income available to common stockholders $ 225,016 $ 199,369
Total other comprehensive income:
Foreign currency translation adjustment 28,750 (10,706)
Unrealized (loss) gain on derivatives, net (2,162) 43,690
Total other comprehensive income $ 26,588 $ 32,984
Comprehensive income available to common stockholders $ 251,604 $ 232,353

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

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Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

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

EQUITY

(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.~~

Three months ended March 31, 2023, and 2022

Shares of
common
stock Common
stock and
paid in
capital Distributions
in excess of
net income Accumulated
other
comprehensive income Total
stockholders’
equity Noncontrolling
interests Total
equity
Balance, December 31, 2021 591,261,991 $ 29,578,212 $ (4,530,571) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400
Net income — — 199,369 — 199,369 602 199,971
Other comprehensive income — — — 32,984 32,984 — 32,984
Distributions paid and payable — — (440,910) — (440,910) (882) (441,792)
Share issuances, net of costs 10,171,808 660,044 — — 660,044 — 660,044
Share-based compensation, net 132,782 (1,882) — — (1,882) — (1,882)
Balance, March 31, 2022 601,566,581 $ 30,236,374 $ (4,772,112) $ 37,917 $ 25,502,179 $ 76,546 $ 25,578,725
Balance, December 31, 2022 660,300,195 $ 34,159,509 $ (5,493,193) $ 46,833 $ 28,713,149 $ 130,140 $ 28,843,289
Net income — — 225,016 — 225,016 1,106 226,122
Other comprehensive income — — — 26,588 26,588 — 26,588
Distributions paid and payable — — (504,746) — (504,746) (3,014) (507,760)
Share issuances, net of costs 12,706,141 798,901 — — 798,901 — 798,901
Share-based compensation, net 200,439 198 — — 198 — 198
Balance, March 31, 2023 673,206,775 $ 34,958,608 $ (5,772,923) $ 73,421 $ 29,259,106 $ 128,232 $ 29,387,338

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

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Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands) (unaudited)

Three months ended March 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 226,122 $ 199,971
Adjustments to net income:
Depreciation and amortization 451,477 403,762
Amortization of share-based compensation 6,300 5,002
Non-cash revenue adjustments (19,127) (14,180)
Amortization of net premiums on mortgages payable (3,200) (3,561)
Amortization of net premiums on notes payable (15,532) (15,740)
Amortization of deferred financing costs 6,474 3,445
(Loss) gain on interest rate swaps (1,801) 722
Foreign currency and unrealized derivative (gain) loss, net (8,942) 590
Gain on sales of real estate (4,279) (10,156)
Equity in income of unconsolidated entities — (954)
Distributions from unconsolidated entities — 729
Provisions for impairment on real estate 13,178 7,038
Change in assets and liabilities
Accounts receivable and other assets 42,081 (17,698)
Accounts payable, accrued expenses and other liabilities 38,483 (45,491)
Net cash provided by operating activities 731,234 513,479
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate (1,675,136) (1,525,836)
Improvements to real estate, including leasing costs (13,860) (13,471)
Proceeds from sales of real estate 28,594 122,235
Insurance proceeds received 6,282 15,892
Non-refundable escrow deposits (23,599) (16,828)
Net cash used in investing activities (1,677,719) (1,418,008)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders (497,245) (438,280)
Borrowings on line of credit and commercial paper programs 4,249,746 2,311,812
Payments on line of credit and commercial paper programs (5,690,060) (2,328,990)
Proceeds from term loan 1,029,383 —
Proceeds from notes payable issued 1,090,968 676,631
Principal payments on mortgages payable (1,233) (43,589)
Proceeds from common stock offerings, net 796,190 656,094
Proceeds from dividend reinvestment and stock purchase plan 2,711 2,799
Distributions to noncontrolling interests (1,479) (882)
Net (payments) receipts on derivative settlements (6,452) 903
Debt issuance costs (16,603) (9,692)
Other items, including shares withheld upon vesting (6,102) (5,733)
Net cash provided by financing activities 949,824 821,073
Effect of exchange rate changes on cash and cash equivalents 13,545 (6,063)
Net increase (decrease) in cash, cash equivalents and restricted cash 16,884 (89,519)
Cash, cash equivalents and restricted cash, beginning of period 226,881 332,369
Cash, cash equivalents and restricted cash, end of period $ 243,765 $ 242,850

For supplemental disclosures, see note 14, Supplemental Disclosures of Cash Flow Information.

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

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Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~

March 31, 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”.

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 months ended March 31, 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. We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and assesses our performance.

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.

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). ~~We have no unconsolidated investments.~~

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Table of Contents

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


	March 31, 2023		December 31, 2022
Net real estate	$	926,907	$	920,032
Total assets	$	1,075,099	$	1,082,346
Total liabilities	$	56,905	$	60,127

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. taxes, and income taxes for the U.K. and Spain.

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

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

Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a ~~portion~~straight-line basis over the lease 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 contractually obligated reimbursements by our clients, a component of ~~goodwill~~rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis.

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

The COVID-19 pandemic and the measures taken to limit its spread have negatively impacted the economy across many industries, including the industries in which some of our clients operate. We continue to 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 (including trends arising from the COVID-19 pandemic) 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

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Table of Contents

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.

The majority of concessions granted to our ~~applicable property sales, which results in~~clients as a ~~reduction~~result of the ~~carrying amount 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~~COVID-19 pandemic have been rent deferrals with the original ~~methodology for assigning goodwill. As we sell properties, our goodwill will likely continue to gradually decrease over time. Based on our analyses of goodwill during~~lease term unchanged. In accordance with the ~~second quarters of 2017 and 2016, we determined there was no impairment on our existing goodwill.~~

D~~. In May 2014,~~guidance provided by the Financial Accounting Standards Board ~~(FASB) issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~~~. This ASU,~~("FASB") staff, we have elected to account for these leases as ~~amended by ASU 2015-14,~~ ~~Revenue from Contracts with Customers: Deferral~~if the right of deferral existed in the ~~Effective Date~~~~, outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers,~~lease contract 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.”~~

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~~Table of Contents~~

~~In February 2016, FASB issued ASU 2016-02 (Topic 842,~~ ~~Leases)~~~~, which amended Topic 840,~~ ~~Leases.~~ ~~Under this amended topic, the accounting applied by a lessor is largely unchanged from that applied under Topic 840,~~ ~~Leases~~~~. The large majority of operating leases should remain classified as operating leases, and lessors should~~therefore continue to recognize lease ~~income for those leases on a generally straight-line basis over~~revenue in accordance with the lease ~~term~~. ~~The amendments included~~contract in ~~this topic~~effect. In limited circumstances, the undiscounted cash flows resulting from deferrals granted increased significantly from original lease terms, which required us to account for these as lease modifications and resulted in an insignificant impact to consolidated rental revenue. Similarly, rent abatements granted, which are effective, on a retrospective or modified retrospective basis, for interim and annual periods beginning after December 15, 2018. We have not yet adopted this topic and are currently evaluating the 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~~also accounted for as ~~acquisitions (or disposals)~~lease modifications, have impacted our rental revenue by an insignificant amount.

As of ~~assets or businesses. The ASU is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We elected~~March 31, 2023, other than the information related to ~~adopt this ASU early, effective October 1, 2017. As a result of this new guidance,~~the reserves recorded to date, 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 willdo not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable. However, since the impact to rent collections for our clients affected by the COVID-19 pandemic is ongoing, we do not know the types of future concessions, if any, that will ultimately be granted, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

Recent Accounting Pronouncements. The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a ~~material~~significant impact on our consolidated financial ~~statements or related disclosures.~~

3.statements.

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

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(dollars in thousands):


A.	Accounts receivable, net, consist of the following at:	March 31, 2023		December 31, 2022
	Straight-line rent receivables, net	$	403,702	$	363,993
	Client receivables, net	213,657		203,970
		$	617,359	$	567,963


B.	Lease intangible assets, net, consist of the following at:	March 31, 2023		December 31, 2022
	In-place leases	$	5,518,701	$	5,324,565
	Accumulated amortization of in-place leases	(1,561,739)		(1,409,878)
	Above-market leases	1,778,381		1,697,367
	Accumulated amortization of above-market leases	(478,548)		(443,688)
		$	5,256,795	$	5,168,366


C.	Other assets, net, consist of the following at:	March 31, 2023		December 31, 2022
	Financing receivables	$	997,684	$	933,116
	Right of use asset - operating leases, net	596,597		603,097
	Right of use asset - financing leases	531,326		467,920
	Restricted escrow deposits	50,009		37,627
	Prepaid expenses	47,177		28,128
	Impounds related to mortgages payable	29,180		18,152
	Derivative assets and receivables – at fair value	27,180		83,100
	Credit facility origination costs, net	15,963		17,196
	Corporate assets, net	12,919		12,334
	Investment in sales type lease	5,977		5,951
	Non-refundable escrow deposits	23,599		5,667

	Other items	28,940		39,939
		$	2,366,551	$	2,252,227

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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 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.

D. Accounts payable and accrued expenses consist of the following at: March 31, 2023 December 31, 2022
Notes payable - interest payable $ 147,510 $ 129,202
Derivative liabilities and payables – at fair value 66,349 64,724
Property taxes payable 42,333 45,572
Accrued income taxes 30,470 22,626
Accrued property expenses 30,176 25,290
Value-added tax payable 24,500 23,375
Accrued costs on properties under development 23,776 26,559
Mortgages, term loans, and credit line - interest payable 7,498 4,404
Merger and integration-related costs 6,464 1,464
Other items 43,289 55,921
$ 422,365 $ 399,137

E. Lease intangible liabilities, net, consist of the following at: March 31, 2023 December 31, 2022
Below-market leases $ 1,708,146 $ 1,617,870
Accumulated amortization of below-market leases (263,013) (238,434)
$ 1,445,133 $ 1,379,436

F. Other liabilities consist of the following at: March 31, 2023 December 31, 2022
Lease liability - operating leases, net $ 433,666 $ 440,096
Rent received in advance and other deferred revenue 286,322 269,645
Lease liability - financing leases 49,342 49,469
Security deposits 20,573 15,577
$ 789,903 $ 774,787

3. Investments in Real Estate

We acquire land, buildings and improvements necessary for the successful operations of commercial ~~tenants.~~

clients.

A.Acquisitions ~~During~~of Real Estate

Below is a summary of our acquisitions for 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~~period indicated below:


	Number of Properties	Leasable Square Feet (in thousands)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)
Three months ended March 31, 2023 (2)
Acquisitions - U.S.	197	5,926	$	1,048.9	10.0	7.0	%
Acquisitions - Europe	20	2,437	389.7		12.6	7.6	%
Total acquisitions	217	8,363	$	1,438.6	10.7	7.2	%
Properties under development (3)	122	2,319	235.6		14.8	6.0	%
Total (4)	339	10,682	$	1,674.2	11.2	7.0	%

(1)The initial weighted average ~~contractual~~cash 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 consist of 96.6% retail and 3.4% industrial, based on rental revenue. None 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 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 initial weighted average contractual 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.~~

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~~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 $0.7 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 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 the $956.9 million we invested~~

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Table of Contents

(2)None of our investments during the ~~first nine~~three months ended March 31, 2023 caused any one client to be 10% or more of ~~2017, $16.4~~our total assets at March 31, 2023.

(3)Includes three U.K. development properties that represent an investment of £3.8 million ~~was invested in 13~~during the three months ended March 31, 2023, converted at the applicable exchange rate on the funding dates.

(4)Our clients occupying the new properties are 85.5% retail and 14.5% industrial based on annualized contractual rent. Approximately 42% of the annualized contractual rent generated from acquisitions during the three months ended March 31, 2023 is from our investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the three months ended March 31, 2023 had no contingent consideration. The aggregate purchase price of the assets acquired during the three months ended March 31, 2023 has been allocated as follows (in millions):


	Acquisitions - USD		Acquisitions - Sterling
Land (1)	$	243.9	£	74.2
Buildings and improvements	794.6		153.0
Lease intangible assets (2)	231.9		38.1
Other assets (3)	59.8		54.5
Lease intangible liabilities (4)	(84.7)		(3.8)
Other liabilities (5)	(0.6)		—
	$	1,244.9	£	316.0

(1)Sterling-denominated land includes £1.7 million 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 11.3 years.

(3)USD-denominated other assets consist entirely of ~~7.3%. Of the $1.1 billion we invested~~$59.8 million of financing receivables with above-market terms. Sterling-denominated other assets consist of£8.6 million of financing receivables with above-market terms and £45.8 million of right-of-use assets accounted for as finance leases.

(4)The weighted average amortization period for acquired lease intangible liabilities is 18.8 years.

(5)USD-denominated other liabilities consist entirely of $0.6 million of deferred rent on certain below-market leases.

The properties acquired during the ~~first nine~~three months ended March 31, 2023 generated total revenues of ~~2016, $87.7~~$7.3 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~~$2.8 million during the ~~first nine~~three months ~~of 2017 and 2016, respectively.~~

C.ended March 31, 2023.

B. Investments in Existing Properties

During the ~~first nine~~three months ~~of 2017,~~ended March 31, 2023, we capitalized costs of ~~$9.5~~$13.8 million on existing properties in our portfolio, consisting of ~~$1.2~~$13.3 million for non-recurring building improvements, $0.4 million for re-leasing costs, ~~$536,000~~and $0.1 million for recurring capital ~~expenditures and $7.8 million for non-recurring building improvements.~~expenditures. In comparison, during the ~~first nine~~three months ~~of 2016,~~ended March 31, 2022, we capitalized costs of ~~$5.3~~$12.0 million on existing properties in our portfolio, consisting of ~~$564,000 for re-leasing costs, $486,000 for recurring capital expenditures and $4.2~~$9.6 million for non-recurring building ~~improvements.~~

D.improvements, $2.4 million for re-leasing costs and less than $0.1 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~~assets, 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~~three months ~~of 2017~~ended March 31, 2023, and ~~2016~~2022 were ~~$79.1~~$157.4 million and ~~$69.6~~$160.1 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~~three months ~~of 2017~~ended March 31, 2023, and ~~2016~~2022 were ~~$10.2~~$39.8 million, and ~~$6.7~~$21.9 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.

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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~~March 31, 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 $ (45,162) $ 459,375
2024 (54,192) 552,774
2025 (47,292) 477,383
2026 (39,501) 425,893
2027 (30,827) 369,300
Thereafter 362,274 1,672,237
Totals $ 145,300 $ 3,956,962

D. Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):
Three months ended March 31,
2023 2022
Number of properties 26 34
Net sales proceeds $ 28.6 $ 122.2
Gain on sales of real estate $ 4.3 $ 10.2

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 ~~as of September 30, 2017~~ provide for ~~financing~~USD borrowings at the ~~London~~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 ~~commonly referred to as LIBOR,~~(“EURIBOR”), plus ~~0.90% with~~0.725%, and a revolving credit facility ~~commitment~~ fee of ~~0.15%~~0.125%, for all-in ~~drawn~~ pricing of ~~1.05%~~0.85% 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,~~one-month EURIBOR.

As of March 31, 2023, credit facility origination costs of ~~$5.1~~$16.0 millionare included in other assets, net, as compared to $17.2 million at December 31, 2022, on our consolidated balance ~~sheet.~~sheets. These costs are being amortized over the remaining term of our revolving credit facility.

~~At September 30, 2017,~~

As of March 31, 2023, we had a borrowing capacity of ~~$1.34~~$3.1 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of ~~$658.0~~$1.1 billion, comprised of$770.0 million USD and £305.0 million Sterling 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%~~3.7% and 1.1% during the ~~first nine~~three months ~~of 2017~~ended March 31, 2023, and ~~1.4% during the first nine months of 2016.~~2022, respectively. At ~~September 30, 2017 and 2016, the~~March 31, 2023, our weighted average interest rate on borrowings outstanding under our revolving credit facility was ~~2.2% and 1.4%, respectively.~~5.4%. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at ~~September 30, 2017~~ March 31, 2023,we were in compliance with the covenants onunder our revolving credit facility.

B. Commercial Paper Programs

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Table of Contents

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 March 31, 2023,the balance of borrowings outstanding under our commercial paper programs was $157.5 million, consisting entirely of €145.0 million of Euro-denominated 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 3.5% and 0.5% for the three months ended March 31, 2023, and 2022, respectively. As of March 31, 2023, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.1%. 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.

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 March 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings. The 2023 term loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at our option. Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for USD-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans. In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate. As of March 31, 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 March 31, 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 March 31, 2023, deferred financing costs of$6.5 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~~March 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~~three months ~~of 2017,~~ended March 31, 2023, we ~~made $123.5~~made$1.2 million in principal payments. During the three months ended March 31, 2022, we made $43.6 million in principal payments, including the full repayment of ~~seven mortgages in full~~one mortgage for ~~$118.6~~$42.5 million. No mortgages were assumed during the ~~first nine~~three 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 March 31, 2023, or 2022. 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,~~March 31, 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~~ $0.7 millionat ~~September 30, 2017~~March 31, 2023 and ~~$324,000~~$0.8 million at December 31, ~~2016.~~2022. These costs are being amortized over the remaining term of each mortgage.

-12-

Table of Contents

The following ~~is a summary of all~~table summarizes our mortgages payable as of ~~September 30, 2017~~March 31, 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
March 31, 2023	136	4.8	%	3.4	%	1.1	$	842.1	$	8.5	$	850.6
December 31, 2022	136	4.8	%	3.3	%	1.4	$	842.3	$	11.6	$	853.9

(1)At ~~September 30, 2017, there were 29 mortgages on 63 properties, while~~March 31, 2023 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 March 31, 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% at September 30, 2017, while effective~~6.9% March 31, 2023 and December 31, 2022, respectively.

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

2022, respectively.

The following table summarizes the maturity of mortgages payable as of March 31, 2023, excluding net premiums of ~~$4.8~~$9.2 million and deferred ~~finance~~financing costs of ~~$249,000, as of September 30, 2017~~$0.7 million (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	$	20.9
2024	740.5
2025	42.9
2026	12.0
2027	22.3
Thereafter	3.5
Totals	$	842.1

-13-

Table of Contents

7. Notes Payable

A. General

Our senior unsecured notes and bonds ~~consist of~~are USD-denominated and Sterling-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 millions):


	Principal Amount (Currency Denomination)		Carrying Value (USD) as of
			March 31, 2023		December 31, 2022
4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (1)	$	500	$	500	$	500
3.875% notes, issued in June 2014 and due in July 2024	$	350	350		350
3.875% notes, issued in April 2018 and due in April 2025	$	500	500		500
4.625% notes, $550 issued October 2018, of which $544 was exchanged in November 2021, both due in November 2025 (1)	$	550	550		550
5.050% notes, issued in January 2023 and due in January 2026	$	500	500		—
0.750% notes, issued December 2020 and due in March 2026	$	325	325		325
4.875% notes, $600 issued June 2016, of which $596 was exchanged in November 2021, both due in June 2026 (1)	$	600	600		600
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	$	650	650		650
1.875% notes, issued in January 2022 and due in January 2027	£	250	309		301
3.000% notes, issued in October 2016 and due in January 2027	$	600	600		600
1.125% notes, issued in July 2021 and due in July 2027	£	400	495		482
3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (1)	$	600	600		600
3.650% notes, issued in December 2017 and due in January 2028	$	550	550		550
3.400% notes, $600 issued June 2020, of which $598 was exchanged in November 2021, both due in January 2028 (1)	$	600	600		600
2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (1)	$	500	500		500
3.250% notes, issued in June 2019 and due in June 2029	$	500	500		500
3.100% notes, $600 issued December 2019, of which $596 was exchanged in November 2021, both due in December 2029 (1)(2)	$	599	599		599
4.850% notes, issued in January 2023 and due in March 2030	$	600	600		—
3.160% notes, issued in June 2022 and due in June 2030	£	140	173		169
1.625% notes, issued in October 2020 and due December 2030	£	400	495		482
3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031	$	950	950		950
3.180% notes, issued in June 2022 and due in June 2032	£	345	427		416
5.625% notes, issued in October 2022 and due in October 2032	$	750	750		750
2.850% notes, $700 issued November 2020, of which $699 was exchanged in November 2021, both due in December 2032 (1)	$	700	700		700
1.800% notes, issued in December 2020 and due in March 2033	$	400	400		400
1.750% notes, issued in July 2021 and due in July 2033	£	350	433		422
2.730% notes, issued in May 2019 and due in May 2034	£	315	390		379
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	$	250	250		250
3.390% notes, issued in June 2022 and due in June 2037	£	115	142		138
2.500% notes, issued in January 2022 and due in January 2042	£	250	309		301
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	$	550	550		550
Total principal amount			$	15,297	$	14,114
Unamortized net premiums, deferred financing costs and basis adjustment on interest rate swaps designated as fair value hedge (3)			133		164

			$	15,430	$	14,278

-14-

Table of Contents

(1) Carrying Value (USD) includes the portion of the VEREIT OP notes that remained outstanding, totaling $39.1 million 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 aggregate at March 31, 2023 and December 31, 2022, that were not exchanged in the exchange offers commenced by us with respect to the outstanding bonds of VEREIT OP in connection with the consummation of the merger with VEREIT (the "Exchange Offers").

(2) These notes were originally issued by VEREIT OP in December of 2019 for the principal amount of $600 million. The amount of Realty Income debt issued through the Exchange Offers was $599 million, resulting from cancellations due to late tenders that forfeited the early participation premium of $30 per $1,000 principal amount and cash paid in lieu of fractional shares.

(3) In January 2023, we entered into three-year, fixed-to-variable interest rate swaps, which are accounted for as fair value hedges. See Note 10, Financial Instruments and Fair Value Measurements, for further details.

The following table summarizes the maturity of our notes and bonds payable as of ~~September 30, 2017,~~March 31, 2023, excluding $133.3 million related to unamortized ~~original issuance discounts and~~net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedge (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

2024	$	850
2025	1,050
2026	2,075
2027	2,004
Thereafter	9,318
Totals	$	15,297

As of ~~September 30, 2017,~~March 31, 2023, the weighted average interest rate on our notes and bonds payable was ~~4.3%~~3.4%, which includes the effect of the interest rate swaps, and the weighted average remaining years until maturity was ~~7.9~~6.8 years.

~~B. Note Repayment~~

~~In September 2017,~~

Interest incurred on all of the notes and bonds was $130.3 million and$103.1 million for the three months ended March 31, 2023, and 2022, respectively.

Our outstanding notes and bonds are unsecured; accordingly, we ~~repaid~~have not pledged any assets as collateral for these or any other obligations. Interest on our ~~$175.0~~£400 million of ~~outstanding 5.375% notes, plus accrued and unpaid interest.~~

~~C. Note Issuances~~

~~In March 2017, we issued $300 million of 4.650%~~1.625% senior unsecured notes ~~due 2047, or the 2047 Notes, and $400~~issued in October 2020, our £400 million of ~~4.125%~~1.125% 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.~~ July 2021, our £350 million of 1.750% senior unsecured notes also issued in July 2021, our £250 million of 1.875% senior unsecured notes issued in January 2022, and £250 million of 2.500% senior unsecured notes also issued in January 2022 is paid annually. Interest on our remaining senior unsecured note and bond obligations is paid semiannually.

All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. At March 31, 2023, we were in compliance with these covenants.

B. Note Issuances

During the three months ended March 31, 2023, and 2022, we issued the following notes and bonds (in millions):


First Quarter 2023 Issuances	Date of Issuance	Maturity Date	Principal amount used		Price of par value		Effective semi-annual 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	%


First Quarter 2022 Issuances	Date of Issuance	Maturity Date	Principal amount used		Price of par value		Effective semi-annual yield to maturity
1.875% Notes	January 2022	January 2027	£	250.0	99.487	%	1.974	%
2.500% Notes	January 2022	January 2042	£	250.0	98.445	%	2.584	%

The ~~net~~ proceeds from each of ~~approximately $705.2 million from the~~these offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

~~9. Redemption~~

-15-

Table of ~~Preferred Stock~~

Contents

In April ~~2017,~~2023, we ~~redeemed~~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. See note 17, Subsequent Events, for further details.

8. Issuances of Common Stock

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

Under our current ATM program, we may offer and sell up to 120,000,000 shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE under the ticker symbol "O" at prevailing market prices or at negotiated prices. Upon settlement, subject to certain exceptions, we may elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which cases we may not receive any proceeds (in the ~~16,350,000~~case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our ~~6.625% Monthly Income Class F Preferred Stock~~common stock (in the case of net share settlement) to the relevant forward purchaser. As of March 31, 2023, we had 45,081,312additional shares remaining for ~~$25 per share, plus accrued dividends.~~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.

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


	Three months ended March 31,
		2023		2022
Shares of common stock issued under the ATM program(1)		12,664,478		10,073,209

Gross proceeds		$	801.7	$	660.2
Sales agents' commissions		(5.3)		(3.9)
Other offering expenses		(0.2)		(0.1)
Net proceeds		$	796.2	$	656.2

(1) During the ~~first nine~~three months ended March 31, 2023, 25,538,809 shares were sold and 12,664,478 were settled pursuant to forward sale confirmations. In addition, as of ~~2017, we incurred a charge of $13.4 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~~31, 2023, 19,619,215 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 price of ~~$29.7 million, the~~$62.59 per share. We currently expect to fully settle forward sale agreements outstanding by June 30, 2023, representing $1.2 billion in net proceeds, ~~of $704.9 million~~for which the weighted average forward price at March 31, 2023 was $62.17 per share. Our forward sale confirmations are accounted for as equity instruments, as we have determined the agreements meet the derivatives and hedging guidance scope exception. No shares were ~~used~~sold pursuant 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,~~forward sale confirmations during the ~~net proceeds of $383.6 million were used to repay borrowings under our credit facility.~~

three months ended March 31, 2022.

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 common shares to be issued. ~~During the first nine months of 2017,~~At March 31, 2023, we ~~issued 1,155,883~~had 11,118,162 shares ~~and raised approximately $67.8 million~~remaining for future issuance 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~~our DRSPP ~~through September 30, 2017, 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, 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~~program.

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


	Three months ended March 31,
		2023		2022
Shares of common stock issued under the DRSPP program		41,663		41,371
Gross proceeds		$	2.7	$	2.8

9. Noncontrolling Interests

There are four entities with noncontrolling interests that 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~~operating partnership, (Realty Income, L.P.), a joint venture acquired in December 2019, 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 partnership units issued by Tau Operating Partnership, 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 in Tau Operating Partnership, and consolidate the entity.

In June 2013, we completed the acquisition of a portfolio of properties by issuing common partnership units 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 entity 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~~development joint ventures (one acquired in December 2020 and possess the ability to control the business and manage the affairs of these entities. At September 30, 2017, we and our subsidiaries held 95.0% and 74.0% interests, respectively, and fully consolidated these entitiesone acquired in ~~our consolidated financial statements.~~ May 2021).The following table represents the change in the carrying value of all noncontrolling interests through ~~September 30, 2017~~March 31, 2023 (dollars in thousands):

-12-

-16-

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


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







Carrying value at December 31, 2022	$	115,801	$	14,339	$	130,140

Distributions (2)	(1,411)		(1,603)		(3,014)
Allocation of net income	973		133		1,106

Carrying value at March 31, 2023	$	115,363	$	12,869	$	128,232

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

2022.

(2) ~~534,546 Realty Income, L.P. units were issued on June 27, 2013,~~Include 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 three months ended March 31, 2023.

10. Financial Instruments and ~~88,182 remain outstanding as of December 31, 2016 and 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.~~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.

•Level 1 – Unadjusted quoted prices in active markets

Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

•Level 2 – Valuation Technique Using Observable Inputs

Financial instruments classified as Level 2 are valued using quoted prices for identical instruments in markets that are not considered to be active, or quoted prices for similar assets or liabilities in active markets, or valuation techniques in which all significant inputs are observable or can be corroborated by observable market data for substantially the entire contractual term of the financial asset or liability.

•Level 3 – Valuation Technique Using Significant Unobservable Inputs

Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the inputs, or other analytical techniques.

We ~~believe~~evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period. Changes in the ~~carrying values reflected~~type of inputs may result in ~~our consolidated balance sheets reasonably approximate~~a reclassification for certain assets. We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent.

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

The fair ~~values for~~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 and terms that are consistent with market, except for~~rate charged on the borrowing, which is based on the daily SOFR. The fair value of our ~~notes receivable issued in connection with property sales, mortgages payable and our senior notes and bonds payable, which~~financial instruments not carried at fair value are disclosed as follows ~~(dollars in~~(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

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March 31, 2023	Carrying value		Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)	$	842.1	$	820.0
Notes and bonds payable (2)	$	15,296.7	$	13,833.5


December 31, 2022	Carrying value		Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)	$	842.3	$	810.4
Notes and bonds payable (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 $9.2 million at ~~September 30, 2017,~~March 31, 2023, and ~~$6.4~~$12.4 million at December 31, ~~2016.~~2022. Also excludes deferred financing costs of ~~$249,000~~$0.7 million at ~~September 30, 2017,~~March 31, 2023, and ~~$324,000~~$0.8 million at December 31, ~~2016.~~

2022.

(2)Excludes non-cash ~~original issuance~~premiums and discounts recorded on notes payable. The unamortized balance of the ~~original issuance discounts is $7.1~~net premiums was$200.0 million at ~~September 30, 2017,~~March 31, 2023, and ~~$19.8~~$224.6 million at December 31, ~~2016.~~2022. Also excludes deferred financing costs of ~~$24.2~~$66.3 million and basis adjustment on interest rate swaps designated as fair value hedges of $0.4 million at ~~September 30, 2017~~March 31, 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~~mortgages payable assumed in connection with ~~property sales~~acquisitions 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.

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 March 31, 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.

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 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, one property classified as held for sale, and six properties classified as held for investment.

In comparison, 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.

-14-

rent.

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Table of Contents

~~15.~~

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

Three months ended March 31,
2023 2022
Carrying value prior to impairment $ 35.6 $ 44.8
Less: total provisions for impairment (13.2) (7.0)
Carrying value after impairment $ 22.4 $ 37.8

Derivative Designated as Hedging Instruments

In order to hedge the foreign currency risk associated with interest payments on 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 forward contracts are included in the assessment of 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 2023 term loans, we executed six one-year variable-to-fixed interest rate swaps maturing January 2024. We designated these interest rate swaps as cash flow hedges in accordance with Topic 815, Derivatives and Hedging. The interest rate swaps are recorded on the consolidated balances sheets at fair value. Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

In January 2023, we issued $500.0 million of 5.05% senior unsecured notes due January 13, 2026, which are callable at par on January 13, 2024. In conjunction with the pricing of the 2026 notes, we executed two three-year, fixed-to-variable interest rate swaps totaling $500.0 million, which are subject to the counterparties' right to terminate the swaps at any time following the 2026 notes par call date. We designated these interest rate swaps as fair value hedges in accordance with Topic 815, Derivatives and Hedging. These interest rate swaps are recorded on the consolidated balances sheets at fair value, with changes in fair value recognized in earnings. The carrying value of the hedged item on the balance sheet is adjusted through earnings by the equal and offsetting amount of the change in fair value of the swaps. For the three months ended March 31, 2023, such adjustments decreased the carrying value of notes payable by $0.4 million. Interest accruals on the swaps are recorded as adjustments to interest expense on the hedged item.

In March 2023, we entered into six interest rate swaption agreements to mitigate the impact of fluctuating interest rates, 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 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. We designated the swaptions as qualifying hedging instruments and accounted for these derivatives as cash flow hedges. Changes in fair value of the swaptions have been recorded in AOCI.

The following table summarizes the amount of unrecognized gain (loss) on derivatives in other comprehensive income (in thousands):

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Table of Contents

Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships 2023 2022
Currency swaps $ — $ 1,895
Interest rate swaps (1,720) 39,005
Foreign currency forwards (5,113) 2,790
Interest rate swaption (1,287) —
Total derivatives in cash flow hedging relationships $ (8,120) $ 43,690
Derivatives in Fair Value Hedging Relationships
Currency swaps $ 5,958 $ —
Total derivatives in fair value hedging relationships $ 5,958 $ —
Total unrealized (loss) gain on derivatives $ (2,162) $ 43,690
The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands):
Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income 2023 2022
Currency swaps Foreign currency and derivative gain (loss), net $ — $ 6,114
Interest rate swaps Interest expense 1,480 (2,530)
Foreign currency forwards Foreign currency and derivative gain (loss), net 1,431 —
Total derivatives in cash flow hedging relationships $ 2,911 $ 3,584
Derivatives in Fair Value Hedging Relationships
Currency swaps Foreign currency and derivative gain (loss), net $ 294 $ —
Total derivatives in fair value hedging relationships $ 294 $ —
Net increase to net income $ 3,205 $ 3,584
We expect to reclassify $12.8 million from AOCI as a decrease to interest expense relating to interest rate swaps and $7.9 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months.
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 gain (loss), net' in the consolidated statements of income and comprehensive income.
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The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):
Three months ended March 31,
2023 2022
Realized foreign currency and derivative gain (loss), net:
Loss on the settlement of undesignated derivatives $ (345) $ (2,681)
Gain on the settlement of designated derivatives reclassified from AOCI 1,725 6,114
Gain (loss) on the settlement of transactions with third parties 1,326 (52)
Total realized foreign currency and derivative gain, net $ 2,706 $ 3,381
Unrealized foreign currency and derivative gain (loss), net:
(Loss) gain on the change in fair value of undesignated derivatives $ (782) $ 22,720
Gain (loss) on remeasurement of certain assets and liabilities 8,398 (26,691)
Total unrealized foreign currency and derivative gain (loss), net $ 7,616 $ (3,971)
Total foreign currency and derivative gains (losses), net $ 10,322 $ (590)
The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2023 and December 31, 2022 (dollars in millions):
Derivative Type
Number of Instruments (1)
Accounting Classification Notional Amount as of
Weighted Average Strike Rate (2)
Maturity Date (3)
Fair Value - asset (liability) as of
Derivatives Designated as Hedging Instruments March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022
Interest rate swaps 9 Derivative $ 1,630.0 $ 250.0 4.26% Jan 2024 - Jan 2026 $ 5.3 $ 5.6
Interest rate swaptions 6 Derivative 1,000.0 — (4) Feb 2034 6.3 —
Cross-currency swaps 3 Derivative 320.0 320.0 (5) Oct 2032 (33.1) (33.3)
Foreign currency forwards 24 Derivative 155.9 185.5 (6) Apr 2023 - Aug 2024 11.0 16.1
$ 3,105.9 $ 755.5 $ (10.5) $ (11.6)
Derivatives not Designated as Hedging Instruments
Currency exchange swaps (7)
2 Derivative $ 475.9 $ 2,427.7 (8) April 2023 $ (1.1) $ 58.8
Cross-currency swaps 3 Derivative 280.0 280.0 (5) Oct 2032 (29.3) (29.5)
$ 755.9 $ 2,707.7 $ (30.4) $ 29.3
Total of all Derivatives $ 3,861.8 $ 3,463.2 $ (40.9) $ 17.7
(1)This column represents the number of instruments outstanding as of March 31, 2023.
(2)Weighted average strike rate is calculated using the notional value as of March 31, 2023.
(3)This column represents maturity dates for instruments outstanding as of March 31, 2023.
(4)Represent purchase swaptions with a strike rate of 3.75% and a sold swaption 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 1.35.
(7)Represent one GBP currency exchange swap with a notional amount of $61.6 million and one EUR currency exchange swap with an associated notional amount of $414.3 million as of March 31, 2023.
(8)Weighted average EUR-USD exchange rate of1.09 and GBP-USD exchange rate of 1.23.

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.
-21-
Table of Contents

11.LessorOperating Leases
A.At March 31, 2023, we owned or held interests in 12,492properties. Of the 12,492 properties, 12,263, or98.2%, are single-client properties, and the remaining are multi-client properties. At March 31, 2023, 131 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, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.
Rent based on a percentage of our client's gross sales, or percentage rent, for the three months ended March 31, 2023, and 2022 was$4.1 million, and $3.7 million, respectively.
B.Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2023, and 2022.

12. 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:


	Three months ended March 31,
Month	2023		2022
January	$	0.2485	$	0.2465
February	0.2485		0.2465
March	0.2545		0.2465









Total	$	0.7515	$	0.7395

At ~~September 30, 2017,~~March 31, 2023, a distribution of ~~$0.212~~$0.2550 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.

13. 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.

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:

Three months ended March 31,
2023 2022
Weighted average shares used for the basic net income per share computation 660,462,399 593,827,299
Incremental shares from share-based compensation 407,962 214,540
Dilutive effect of forward ATM offerings 368,483 —
Weighted average shares used for diluted net income per share computation 661,238,844 594,041,839
Unvested shares from share-based compensation that were anti-dilutive 127,350 70,256
Weighted average partnership common units convertible to common shares that were anti-dilutive 1,795,167 1,060,709
Weighted average forward ATM offerings that were anti-dilutive 45,817 —

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Table of Contents

14. 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 consolidated financial statements:~~

A. ~~During 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 of the properties are incorporated into one 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~~periods indicated below (dollars in thousands):

-16-


	Three months ended March 31,
	2023		2022
Supplemental disclosures:
Cash paid for interest	$	146,461	$	118,187
Cash paid for income taxes	$	2,768	$	12,318
Non-cash activities:
Net (decrease) increase in fair value of derivatives	$	(58,667)	$	85,032

~~Table~~The following table provides a reconciliation 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~~cash and cash equivalents reported within the consolidated balance sheets to the total 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.~~the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands):

March 31, 2023 March 31, 2022
Cash and cash equivalents shown in the consolidated balance sheets $ 164,576 $ 151,624
Restricted escrow deposits (1)
50,009 84,066
Impounds related to mortgages payable (1)
29,180 7,160
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 243,765 $ 242,850

(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 legally entitled to, but that is not immediately available to us. As a result, these amounts were considered restricted as of the dates presented.

15. 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 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.

year ended December 31, 2022.

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~~$6.3 million and $5.0 million during the ~~third quarter of 2017, $2.7 million during the third quarter of 2016, $10.6 million during the first nine~~three months ~~of 2017~~ended March 31, 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~~three months ~~of 2017,~~ended March 31, 2023, we granted ~~119,564~~170,241 shares of common stock under the 2021 Plan. Our restricted stock awards granted to employees ~~under~~vest over a service period not exceeding four-years.

During the ~~2012 Plan. Of these shares, 72,626~~three months ended March 31, 2023, we also granted 13,375 restricted stock units, all of which vest over a four-year service ~~period, and 46,938 shares vest over a five-year service~~ period. Additionally, we granted 28,000 shares under the 2012 Plan to the independent members of our Board of Directors in May 2017 as their annual grant of shares, of which 20,000 shares vested immediately and 8,000 shares vest annually, in equal parts, over a three-year service period.

As of ~~September 30, 2017,~~March 31, 2023, the remaining unamortized share-based compensation expense related to restricted stock awards and units totaled ~~$20.2~~$23.0 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~~conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

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~~Table of Contents~~

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

During the ~~first nine~~three months ~~of 2017,~~ended March 31, 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~~

-23-

Table 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.

Contents

As of ~~September 30, 2017,~~March 31, 2023, the remaining share-based compensation expense related to the performance shares ~~and restricted stock units~~ totaled ~~$10.0~~$27.7 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.

16. 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,~~March 31, 2023, we had commitments of ~~$8.8~~$14.9 million, ~~for~~which primarily relate to re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of ~~September 30, 2017,~~March 31, 2023, we had committed ~~$78.9~~$509.5 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 April 2023 and August 2024.

17. Subsequent Events

A. Dividends

In ~~October 2017,~~April 2023, we declared a dividend of ~~$0.212~~$0.2550 per share to our common stockholders, which will be paid in ~~November 2017.~~

May 2023.

B. ATM Forward Offerings

As of May 4, 2023, ATM forward agreements for a total of 23.4 million shares remain unsettled with total expected net proceeds of approximately $1.5 billion of which 3.8 million shares were executed in April 2023.

C. Notes Issuance

In April 2023, we issued $400.0 million of 4.70% senior unsecured notes due December 2028 (the "2028 Notes") and $600.0 million of 4.90% senior unsecured notes due July 2033 (the "2033 Notes"). The public offering price for the 2028 Notes was 98.949% of the principal amount for an effective semi-annual yield to maturity of 4.912% and the public offering price for the 2033 Notes was 98.020% of the principal amount for an effective semi-annual yield to maturity of 5.148%.

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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 ~~strategy, plans, or intentions of management. Forward-looking statements are subject to risks, uncertainties,~~our business and ~~assumptions about Realty Income Corporation, including, among other things:~~

·~~Our anticipated~~portfolio (including our growth ~~strategies;~~

·~~Our~~strategies and our intention to acquire or dispose of additional properties and the timing of these ~~acquisitions;~~

·~~Our intention to sell~~acquisitions and dispositions), re-lease, re-development and speculative development of properties and expenditures related thereto; future operations and results; the ~~timing~~announcement of ~~these property sales;~~

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

·~~Anticipated~~operating results, strategy, plans, and the intentions of management; and trends in our business, including trends in the market for long-term net leases of freestanding, ~~single-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;~~

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~~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; the continued evolution of the COVID-19 pandemic 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 any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT, Inc. in November 2021 will be achieved.

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

agreements with our commercial clients.

At ~~September 30, 2017, we owned a~~March 31, 2023, our diversified ~~portfolio:~~

·~~Of 5,062~~portfolio consisted of:

•Owned or held interests in 12,492 properties;

·~~With an~~

•An occupancy rate of ~~98.3%~~99.0%, or ~~4,976~~12,361 properties leased and 86131 properties available for ~~lease;~~

·~~Leased to 251 different commercial tenants~~lease or sale;

•Clients doing business in 4784 separate industries;

·~~Located~~

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Table of Contents

•Locations in ~~49 states~~all 50 United States ("U.S."), Puerto Rico, the United Kingdom ("U.K."), Spain, and ~~Puerto Rico;~~

·~~With over 86.4~~Italy;

•Approximately 246.7 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.~~

Of the 5,062 properties in the portfolio, 5,034, or 99.4%, are single-tenant properties, and the remaining are multi-tenant properties. At September 30, 2017, of the 5,034 single-tenant properties, 4,949 were leased with a

•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-

9.4years; and

~~Table~~•An average leasable space per property of ~~Contents~~

~~Investment Philosophy~~

~~We believe that owning an actively managed, diversified~~approximately 19,750 square feet; approximately 13,300 square feet per retail property and approximately 229,300 square feet per industrial property.

Of the 12,492 properties in the portfolio at March 31, 2023, 12,263, or 98.2%, are single-client properties, of ~~commercial~~which 12,134 were leased, and the remaining are multi–client properties.

At March 31, 2023, approximately 40.8% of our total portfolio annualized contractual rent comes from properties ~~under long-term, net lease agreements produces consistent and predictable income. A net lease typically requires the tenant~~leased to ~~be responsible for monthly~~our investment grade clients, their subsidiaries or affiliated companies. At March 31, 2023, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented approximately 40.5% of our annualized rent and ~~certain property operating expenses including property taxes, insurance, and maintenance. In addition, tenants~~12 of ~~our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases,~~these clients have investment grade credit ratings or ~~(3) additional rent calculated as a percentage~~are subsidiaries or affiliates 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, as of September 30, 2017, consisted of 5,062 properties located in 49 states and Puerto Rico, leased to 251 different commercial tenants doing business in 47 industries. Each of the 47 industries represented in our property portfolio individually accounted for no more ~~than 10.8% of our rental revenue for the quarter ended September 30, 2017.~~

~~Investment Strategy~~

Our investment strategy is to acquire real estate leased to regional and national tenants. When identifying new properties for 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 92% of our annualized retail ~~rental revenue at September 30, 2017~~contractual rent as ofMarch 31, 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.~~

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~~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 $59.6 million and ~~market conditions;~~

·~~Store profitability 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. At September 30, 2017, our top 20 tenants represent approximately 53% of our annualized revenue and ten of these tenants have investment grade credit ratings or are subsidiaries of investment grade companies.

~~Portfolio and Asset Management Strategy~~

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

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

·~~Rent increases at 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~~$44.0 million for the ~~portfolio.~~

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~~Table of Contents~~

~~We continually monitor our portfolio for any changes that could affect the performance of our tenants, our tenants’ industries,~~three months ended March 31, 2023, 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.~~

At 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 portfolio 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~~54-year policy of paying monthly dividends. In addition, we increased the dividend ~~five~~ threetimes during ~~2017.~~2023. As of ~~October 2017,~~April 2023, we have paid 80102 consecutive quarterly dividend increases and increased the dividend 93120 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

The dividends paid per share during the ~~first nine~~three months ~~of 2017~~ended March 31, 2023, totaled approximately ~~$1.891,~~$0.7515, as compared to approximately ~~$1.786~~$0.7395 during the ~~first nine~~three months ~~of 2016,~~ended March 31, 2022, an increase of ~~$0.105,~~$0.0120, or ~~5.9%~~1.6%.

The monthly dividend of ~~$0.212~~$0.2550 per share represents a current annualized dividend of ~~$2.544~~$3.06 per share, and an annualized dividend yield of ~~approximately 4.4%~~4.8% based on the last reported sale price of our common stock on the NYSE of ~~$57.19~~$63.32 on ~~September 30, 2017.~~March 31, 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.

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Table of Contents

Acquisitions During the ~~Third Quarter~~Three Months Ended March 31, 2023

Below is a listing of ~~2017~~

~~During~~our acquisitions in the ~~third quarter of 2017, we invested $264.9 million in 56 new properties~~U.S. and ~~properties under development or expansion, with an estimated~~Europe for the period indicated below:


	Number of Properties	Leasable Square Feet (in thousands)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)
Three months ended March 31, 2023 (2)
Acquisitions - U.S.	197	5,926	$	1,048.9	10.0	7.0	%
Acquisitions - Europe	20	2,437	389.7		12.6	7.6	%
Total acquisitions	217	8,363	$	1,438.6	10.7	7.2	%
Properties under development (3)	122	2,319	235.6		14.8	6.0	%
Total (4)	339	10,682	$	1,674.2	11.2	7.0	%

(1)The initial weighted average ~~contractual~~cash lease rate of 7.0%. The 56 new properties and properties under development or expansion are located in 16 states, will contain approximately 949,000 leasable square feet and are 100% leased, with a weighted average lease term 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.

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~~Table~~ Contractual net operating income used in the calculation of ~~Contents~~

initial weighted average cash lease yield includes approximately $0.7 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 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 the $264.9 million we invested~~

(2)None of our investments 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~~three 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 investmentsended March 31, 2023, caused any one ~~tenant~~client to be10% or more of our total assets at ~~September 30, 2017.~~

~~Of the $956.9~~March 31, 2023.

(3)Includes three U.K. development properties that represent investments of £3.8 million ~~we invested~~Sterling during the ~~first nine~~three months ended March 31, 2023, converted at the applicable exchange rate on the funding date.

(4)Our clients occupying the new properties are 85.5% retail and 14.5% industrial based on annualized contractual rent. Approximately 42% of ~~2017, $16.4~~the annualized contractual rent generated from acquisitions during the three months ended March 31, 2023, is from our investment grade rated clients, their subsidiaries or affiliated companies.

Note Issuances

In January 2023, we issued $500.0 million ~~was invested~~of 5.05% senior unsecured notes due January 2026 and $600.0 million of 4.85% senior unsecured notes due March 2030.

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.

Term Loans

In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in ~~13 properties under development or expansion with an estimated initial weighted average contractual lease rate~~total borrowings. As of ~~7.3%.~~

~~Portfolio Discussion~~

~~Leasing Results~~

~~At September 30, 2017,~~March 31, 2023, we had 86$1.1 billion in multicurrency borrowings under our new term loan agreement, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings. See note5, Term Loans, for further details.

Portfolio Discussion

Leasing Results

At March 31, 2023, we had 131 properties available for lease or sale out of ~~5,062~~12,492 properties in our portfolio, ~~which represents~~representing a ~~98.3%~~99.0% 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. 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:



Properties available for lease at December 31, 2022			126
Lease expirations (1)			192
Re-leases to same client			(155)
Re-leases to new client			(6)
Vacant dispositions			(26)
Properties available for lease at March 31, 2023			131

(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.

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Table of Contents

During the ~~first nine~~three months ~~of 2017, 164 properties were re-leased to existing tenants, six were re-leased to~~ended March 31, 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~~$36.1 million, as compared to the previous annual rent of $35.5 million on ~~these~~the same ~~properties of $32.02 million, which represents~~units, representing a rent recapture rate of ~~106.5%~~101.7% on the ~~properties~~units re-leased. We re-leased ~~during the first nine months~~two units to new clients without a period of ~~2017.~~

vacancy, and six 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.

~~At September 30, 2017,~~

Impact of COVID-19

Certain of our ~~average annualized~~clients have been slower to recover economically from the effects of the COVID-19 pandemic (including those in the theater industry). However, even in light of this, during 2023 we have continued to collect contractual rent across our total portfolio at levels that are consistent with pre-pandemic rent collection. We cannot assure that our historical rent collections will be indicative of our future rental ~~revenue was approximately $13.89 per square foot on~~collections as the 4,976 leased properties in our portfolio. At September 30, 2017, we classified four properties with a carrying amount of $2.9 million as held for sale on our balance sheet. The expected sale of these properties does not represent a strategic shift thatextent to which the COVID-19 pandemic (or future pandemics) will ~~have a major effect on~~impact our operations and ~~financial results~~those of our clients in the future is not known and ~~accordingly, they are not reported as discontinued operations.~~will depend on future developments. The ~~expected sale of these properties is consistent with our active disposition efforts 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.

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~~Table of Contents~~

In the first nine months of 2017, we capitalized costs of $9.5 million on existing properties in 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 lifeimpact of the ~~property.~~

~~The majority~~COVID-19 pandemic, or future pandemics, on us, our business, our clients, and the economy generally is discussed further in "Item 1A, Risk Factors" in Part I 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~~Annual Report 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 priceForm 10-K for the ~~2047 Notes was 99.97% of~~year ended December 31, 2022.

Theater Industry Update

For 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 millionperiod 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,~~January 2023 through April 2023, 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~~collected all of the ~~16,350,000 shares~~contractual rent(1) across our theater portfolio. As of March 31, 2023, we had cumulative reserves of $33.0 million on properties leased to Cineworld Group plc and its affiliates ("Cineworld"), the parent of the entities that lease certain of our ~~6.625% Monthly Income Class F Preferred Stock~~theater portfolios, including Regal Cinemas, which commenced Chapter 11 reorganization proceedings during September 2022. These reserves for ~~$25 per share, plus accrued dividends. During~~Cineworld, representing a reduction of rental revenue, primarily relate to contractual rent and expense recoveries recorded during the ~~first nine months of 2017, we incurred a charge of $13.4 million, representing~~COVID-19 pandemic in 2020, and during 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~~fourth quarter of ~~2017, compared~~2022, and exclude straight-line rent reserves. Total receivables, net of reserves and excluding straight line rent receivables, from Cineworld and its affiliates were $14.1 million at March 31, 2023, which include both deferred contractual rent and deferred expense recoveries.

(1) We define contractual rent as the monthly aggregate cash amount charged to ~~$70.3 million~~clients, inclusive of monthly base rent receivables. Charged amounts have not been adjusted for any COVID-19 related rent relief granted and include contractual rent from any clients in ~~the third quarter~~bankruptcy.

Impact 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~~Real Estate 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.

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Credit Markets

~~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~~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,~~capital. We continually monitor the commercial real estate and global credit markets carefully and, if required, will make decisions to adjust 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.

business strategy accordingly.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

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, property development, and capital expenditures, by issuing common stock, preferred stock, ~~and~~ long-term unsecured notes and ~~bonds.~~term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital ~~structure; however, we may issue additional preferred stock or debt securities.~~structure. We may issue common stock when we believe ~~that~~ our share price is at a level that allows for the proceeds of ~~any~~an offering to be accretively invested into additional ~~properties. In addition, we may issue common stock~~properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term 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.

Our primary cash obligations, for the current year and subsequent years, are included in the “Table of Obligations,” 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, ~~borrowing on~~borrowings under our revolving credit facility, short-term term loans, and ~~periodically~~under our commercial paper programs, and through public securities offerings.

As of

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Table of Contents

March 31, 2023, there are approximately$1.2 billionof obligations becoming due during 2023, which we expect to fund 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 (after deducting outstanding borrowings under our commercial paper programs).
We may choose to mitigate our financial exposure to exchange rate risk for properties acquired outside the U.S. through the issuance of debt securities denominated in the same local currency and through currency derivatives. We may leave a portion of our foreign cash flow unhedged to reinvest in additional properties in the same local currency.

Conservative Capital Structure

We believe that our stockholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet and solid interest and fixed charge coverage ratios. At ~~September 30, 2017,~~March 31, 2023, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable, ~~and~~revolving credit facility ~~borrowings~~and commercial paper were ~~$5.81~~$18.7 billion, or approximately ~~26.5%~~30.5% of our total market capitalization of ~~$21.95~~$61.5 billion.

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~~Table of Contents~~

We define our total market capitalization at ~~September 30, 2017~~March 31, 2023, as the sum of:

•Shares of our common stock outstanding of ~~281,778,537~~673,206,775, plus total common units outstanding of ~~405,204,~~1,795,167, multiplied by the last reported sales price of our common stock on the NYSE of ~~$57.19~~$63.32 per share on ~~September 30, 2017,~~March 31, 2023, or ~~$16.14~~$42.7 billion;

•Outstanding borrowings of ~~$658.0~~$1.1 billion on our revolving credit facility, comprised of $770.0 million USD and £305.0 million Sterling borrowings;

•Outstanding borrowings of $157.5 million on our ~~credit facility;~~

·commercial paper programs, consisting entirely of €145.0 million of Euro-denominated borrowings;

•Outstanding mortgages payable of ~~$336.5~~$842.1 million, excluding net mortgage premiums of ~~$4.8~~$9.2 million and deferred financing costs of ~~$249,000;~~

·$0.7 million;

•Outstanding borrowings ~~of $320.0 million~~ on our term loans of $1.3 billion, excluding deferred financing costs of ~~$653,000;~~$6.5 million; and

•Outstanding senior unsecured notes and bonds of ~~$4.5~~$15.3 billion, including Sterling-denominated notes of £2.6 billion, and excluding $133.3 million related to unamortized ~~original issuance discounts of $7.1 million and~~net premiums, deferred financing costs, ~~of $24.2 million.~~

and basis adjustment on interest rate swaps designated as fair value hedges.

Universal Shelf Registration

In ~~December 2015,~~June 2021, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in ~~December 2018.~~June 2024. 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.

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Equity Capital Raising

Under our At-the-Market ~~(ATM)~~("ATM") Program,

~~In September 2015, we established an “at-the-market” equity distribution~~ ~~program, or our ATM program, pursuant~~ up to ~~which we were permitted to offer and sell~~120,000,000 shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers’ transactions on the NYSE at prevailing market prices, at prices related to prevailing market prices or at negotiated ~~prices.~~prices or by any other methods permitted by applicable law. We currently expect to fully physically cash settle any forward sale agreement with the respective forward purchaser on one or more dates specified by us on or prior to the maturity date of such forward sale agreement, in which case we expect to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward sale agreement multiplied by the relevant forward price per share. During the ~~third quarter of 2017,~~three months ended March 31, 2023, we issued ~~7,570,813~~12,664,478 shares and raised ~~approximately $435.6~~$796.2 million of net proceeds under the ATM programs. With respect to forward sales pursuant to our ATM program, we do not initially receive any proceeds from any sale of shares of our common stock borrowed by a forward purchaser and sold through a forward seller.As of March 31, 2023, there were 19,619,215 shares of common stock subject to forward sale agreements through our ATM program, with a weighted average initial price of $62.59 per share, representing approximately $1.2 billion in estimated net proceeds (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), which have been executed but not settled. The weighted average forward price at March 31, 2023 was $62.17 per share, after price deduction and adjustments. As of March 31, 2023, we had 45,081,312 shares remaining for future issuance under our ATM program. ~~During~~We anticipate maintaining 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~~availability of our ATM program ~~through September 30, 2017, we have issued all 12,000,000~~in the future, including the replenishment of authorized 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~~

issuable thereunder.

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(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~~three months ~~of 2017,~~ended March 31, 2023, we issued ~~1,155,883~~41,663 shares and raised approximately ~~$67.8~~$2.7 million under our DRSPP. At March 31, 2023, we had 11,118,162 shares remaining for future issuance under our DRSPP ~~of which we issued 927,695 shares and raised $54.7 million under the waiver approval process.~~

~~$2.0 Billion~~ program.

Revolving Credit Facility

We have a ~~$2.0~~$4.25 billion unsecured revolving ~~credit facility, or our~~multicurrency credit facility 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 U.S. dollars. Our revolving credit facility also has a $1.0 billion ~~accordion~~ expansion ~~option.~~feature, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings ~~as of September 30, 2017~~ provide for ~~financing~~USD borrowings at ~~the London Interbank Offered Rate, commonly referred to as 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.~~ SOFR, British Pound Sterling at SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and 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.

The borrowing rate is subject to an interest rate floor 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.~~in different currencies. Our credit facility is unsecured and accordingly, we have not pledged any assets as collateral for this ~~obligation.~~

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obligation.

~~Table of Contents~~

At ~~September 30, 2017,~~March 31, 2023, we had a borrowing capacity of ~~$1.34~~$3.1 billion available on our revolving credit facility (subject to customary conditions to borrowings) and an outstanding balance of ~~$658.0 million.~~$1.1 billion, comprised of $770.0 million USD and £305.0 million Sterling borrowings. The weighted average interest rate on borrowings under our revolving credit facility during the ~~first nine~~three months ~~of 2017~~ended March 31, 2023, was ~~1.9%~~3.7% per annum. ~~We must comply with~~Our revolving credit facility is subject to various ~~financial~~leverage and ~~other covenants in our credit facility. At September 30, 2017,~~interest coverage ration limitations, and as of March 31, 2023, we were in compliance with these covenants. We expect to use our credit facility to acquire additional properties and for other general corporate purposes. Any additional borrowings will increase our exposure to interest rate risk.

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.

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At March 31, 2023, we had an outstanding balance of $157.5 million, consisting entirely of €145.0 million of Euro-denominated borrowings. The weighted average interest rate on borrowings under our commercial paper programs was 3.5% for the three months ended March 31, 2023. The commercial paper borrowings outstanding at March 31, 2023 matured in April 2023. 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.

We generally use our credit facility and commercial paper borrowings 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 more permanent financing, ~~which may include~~including the issuance of ~~common stock, preferred stock~~equity 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.

~~Term Loans~~

~~In June 2015, in conjunction with entering into~~ We regularly review our credit facility and commercial paper programs and may seek to extend, renew or replace our credit facility and commercial paper programs, to the extent we deem appropriate.

Term Loans

In 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 March 31, 2023, we had $1.1 billion in multicurrency borrowings under our new term loan agreement, 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. 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 March 31, 2023, the effective interest rate, after giving effect to the interest rate swap, was 5.0%.

We also have a $250.0 million senior unsecured term loan, ~~maturing June 30, 2020. Borrowing under this term loan bears interest at 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 March 31, 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, or ARCT, we entered into a $70 million senior unsecured term loan maturing in January 2018. Borrowing under~~after giving effect to 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%~~was 3.8%.

~~Mortgage Debt~~

As of ~~September 30, 2017,~~March 31, 2023, we were in compliance with the covenants contained in the term loans.

Mortgage Debt

As of March 31, 2023, we had ~~$336.5~~$842.1 million of mortgages payable, ~~all~~ of which £30.6 million related to a Sterling-denominated mortgage. Over a majority of our mortgages payable were assumed in connection with our merger with VEREIT, Inc. in November 2021 or with our property acquisitions. ~~Additionally, at September 30, 2017,~~No mortgages were assumed during the three months ended March 31, 2023. At March 31, 2023, we had net premiums totaling ~~$4.8~~$9.2 millionon these mortgages and deferred financing costs of ~~$249,000.~~$0.7 million. We expect 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~~three months ~~of 2017,~~ended March 31, 2023, we made ~~$123.5~~$1.2 million in principal ~~payments, including~~payments. Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the ~~repayment~~prior consent of ~~seven mortgages~~the lender. At March 31, 2023, we were in ~~full for $118.6 million.~~

compliance with these covenants.

Notes Outstanding

~~Our~~

As of March 31, 2023, 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 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 constituteshad a ~~further issuance of, and formed a single series with, the $250 million aggregate~~total principal amount of $15.3 billion, including Sterling- denominated notes of £2.6 billion, and excluding $133.3 million related to unamortized net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedges.

See note 7, Notes Payable, to our consolidated financial statements for the full list of senior unsecured notes and bonds, along with maturity dates. Please note that this listing does not include the $400.0 million of 4.70% senior unsecured notes due ~~2026,~~December 2028 and $600.0 million of 4.90% senior unsecured notes due July 2033, which were 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.

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April 2023.

~~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~~March 31, 2023. Interest on ~~all~~our £400 million of 1.625% senior unsecured notes issued in October 2020, our £400 million of 1.125% senior unsecured notes issued in July 2021, our £350 million of 1.750% senior unsecured notes also issued in July 2021, our £250 million of 1.875% senior unsecured notes issued in January 2022, and £250 million of 2.500% senior unsecured notes also issued in January 2022 is paid annually. Interest on our remaining senior unsecured 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

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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~~March 31, 2023, are:

~~Note Covenants~~	~~Required~~		~~Actual~~
Note Covenants		Required		Actual
Limitation on incurrence of total debt				< 60% of adjusted assets	40.6	~~39.5%~~ %
Limitation on incurrence of secured debt				< 40% of adjusted assets	1.9	~~2.4%~~ %
Debt service ~~and fixed charge~~ coverage (trailing 12 months)(1)		> 1.5x		> ~~1.5 x~~			~~4.7x~~ 4.6x
Maintenance of total unencumbered assets				> 150% of unsecured debt	252.8	~~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~~April 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 (i), (ii) and (iii) of the preceding sentence occurred as of ~~October~~April 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~~March 31, 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

Net income available to common stockholders $ 895,058
Plus: interest expense, excluding the amortization of deferred financing costs 496,358
Less: gain on extinguishment of debt (367)
Plus: provision for taxes 46,152
Plus: depreciation and amortization 1,718,104
Plus: provisions for impairment 32,001
Plus: pro forma adjustments 302,673
Less: gain on sales of real estate (97,080)
Income available for debt service, as defined $ 3,392,899
Total pro forma debt service charge $ 730,667
Debt service and fixed charge coverage ratio 4.6

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,~~March 31, 2023, we had cash and cash equivalents totaling ~~$3.2 million.~~

$164.6 million, inclusive of£75.8 million denominated in Sterling and €30.2 million denominated in Euro.

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.~~

facility and commercial paper programs.

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,~~March 31, 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 March 31, 2023: Moody's Investors Service has assigned a rating of ~~BBB+~~P-2 and Standard & Poor's Ratings Group has assigned a rating of A-2.

Based on our credit agency ratings as of March 31, 2023, interest rates under our credit facility for U.S. borrowings would have been at the SOFR, plus 0.725% with a ~~“stable” outlook.~~

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SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of

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~~Based on our ratings as of September 30, 2017, the~~

0.8826% over SONIA, and for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility ~~interest rate as of September 30, 2017 was LIBOR plus 0.90% with a facility commitment~~ fee of ~~0.15%~~0.125%, for all-in ~~drawn~~ pricing of ~~1.05%~~0.85% over ~~LIBOR. Our~~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 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.

Table of Obligations

The following table summarizes the maturity of each of our obligations as of ~~September 30, 2017~~March 31, 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


Year due	Credit Facility and Commercial Paper Programs (1)		Senior Unsecured Notes and Bonds (2)		Term Loans (3)		Mortgages Payable (4)		Interest (5)		Ground Leases Paid by Realty Income (5)		Ground Leases Paid by Our Clients (7)		Other (8)		Totals
2023	$	157.5	$	—	$	—	$	20.9	$	511.1	$	7.9	$	23.4	$	485.5	$	1,206.3
2024	—		850.0		1,304.5		740.5		603.2		13.3		30.6		34.9		3,577.0
2025	—		1,050.0		—		42.9		523.5		11.5		30.0		1.7		1,659.6
2026	1,147.4		2,075.0		—		12.0		436.2		17.2		29.2		0.8		3,717.8
2027	—		2,004.0		—		22.3		358.6		8.9		26.3		0.3		2,420.4
Thereafter	—		9,317.7		—		3.5		1,602.7		288.0		266.5		1.2		11,479.6
Totals	$	1,304.9	$	15,296.7	$	1,304.5	$	842.1	$	4,035.3	$	346.8	$	406.0	$	524.4	$	24,060.7

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

At March 31, 2023, there were $1.1 billion borrowings under our revolving credit facility. Commercial paper programs outstanding at March 31, 2023 were $157.5 million, which matured in April 2023.

(2)Excludes ~~non-cash original issuance discounts recorded on notes payable. The~~$133.3 million related to unamortized ~~balance of the original issuance discounts at September 30, 2017 is $7.1 million. Also excludes~~net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedges. The table of ~~$24.2 million.~~

obligations also excludes the April 2023 issuances of $400.0 million of senior unsecured notes due December 2028 and $600.0 million of senior unsecured notes due July 2033.

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

$6.5 million.

(4)Excludes both non-cash net premiums recorded on the mortgages ~~payable. The unamortized balance~~payable of ~~these net premiums at September 30, 2017, is $4.8 million. Also excludes~~$9.2 million and deferred financing costs of ~~$249,000.~~

$0.7 million.

(5)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.

Excludes interest on the April 2023 issuances of $400.0 million of senior unsecured notes due December 2028 and $600.0 million of senior unsecured notes due July 2033.

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

(7)Our ~~tenants,~~clients, who are generally ~~sub-tenants~~sub-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”~~“Other” consists of ~~$78.9~~$509.5 million of commitments under construction contracts, and ~~$8.8~~$14.9 million ~~of commitments~~ for ~~tenant improvements~~re-leasing costs, recurring capital expenditures, and ~~leasing costs.~~

non-recurring building improvements.

Our credit facility, commercial paper programs, 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~~

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.

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~~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%~~95.3% of our estimated taxable income of ~~$493.4 million.~~$1.90 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

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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 $0.7515 per share to ~~common~~ stockholders induring the ~~first nine~~three months ~~of 2017 totaled~~ ~~$510.0 million,~~ ended March 31, 2023, representing ~~81.8%~~76.7% 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 $0.98.

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, 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 months ended March 31, 2023 and 2022.

Total Revenue

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


	Three months ended March 31,
		2023		2022		Change
REVENUE
Rental (excluding reimbursable)		$	865,709	$	755,562	$	110,147
Rental (reimbursable)		59,580		44,003		15,577
Other		19,110		7,778		11,332
Total revenue		$	944,399	$	807,343	$	137,056

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Table of Contents

Rental Revenue (excluding reimbursable)

The table below summarizes our rental revenue (excluding reimbursable, dollars in thousands):


			Three months ended March 31,
	Number of Properties	Square Footage (1)	2023		2022		Change
Properties acquired during 2023 & 2022	1,548	38,670,402	$	136,301	$	5,904	$	130,397
Same store rental revenue (2)	10,728	191,114,310	719,701		718,088		1,613
Orion Divestiture	92	10,093,123	—		413		(413)
Constant currency adjustment (3)	N/A	N/A	(1,619)		4,634		(6,253)
Properties sold during and prior to 2023	210	5,438,143	794		5,655		(4,861)
Straight-line rent and other non-cash adjustments	N/A	N/A	1,851		8,249		(6,398)
Vacant rents, development and other (4)	216	8,362,042	5,440		10,910		(5,470)
Other excluded revenue (5)	N/A	N/A	3,241		1,709		1,532
Totals			$	865,709	$	755,562	$	110,147

(1)Excludes 5,902,586 square feet from properties ground leased to clients and ~~22%~~2,679,071 square feet from properties with no land or building ownership.

(2)The same store rental revenue percentage increase for the three months ended March 31, 2023 as compared with the same period in the prior year is 0.2%.

(3)For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of March 31, 2023, of 1.24 British Pound Sterling ("GBP")/USD and 1.09 Euro ("EUR")/USD. None of the properties in Italy met our same store pool definition for the periods presented.

(4)Relates to the aggregate of (i) rental revenue from properties (191 properties comprising 7,613,225 square feet) that were available for lease during part of 2023 or 2022, and (ii) rental revenue for properties (25 properties comprising 748,817 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented.

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

For purposes of determining the same store rent property pool, we include all properties that were owned for the entire year-to-date period, for both the current and prior year, except for properties during the current or prior year that; (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 12,492 properties in the portfolio at March 31, 2023, 12,263, or 98.2%, are single-client properties and the remaining are multi-client properties. Of the 12,263 single-client properties, 12,134, or 98.9%, were net leased at March 31, 2023.

Of the 13,119 in-place leases in the portfolio, which excludes 185 vacant units, 11,049, or 84.2%, 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 above rent provisions.

Rent based on a percentage of our client's gross sales, or percentage rent, was $4.1 million and $3.7 million for the three months ended March 31, 2023 and 2022, respectively. Percentage rent represents less than 1.0% of rental revenue.

At March 31, 2023, our portfolio of 12,492 properties was 99.0% leased with 131 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022, and 98.6% leased with 156 properties available for lease at March 31, 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, such as the COVID-19 pandemic.

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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 $15.6 million, which is proportional to 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 $11.3 million due to a higher number of leases with above-market terms, which is proportional to overall portfolio growth.

Total Expenses

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


	Three months ended March 31,
		2023			2022			Change
EXPENSES
Depreciation and amortization		$	451,477		$	403,762		$	47,715
Interest		154,132			106,403			47,729
Property (excluding reimbursable)		9,817			8,339			1,478
Property (reimbursable)		59,580			44,003			15,577
General and administrative		34,167			32,699			1,468
Provisions for impairment		13,178			7,038			6,140
Merger and integration-related costs		1,307			6,519			(5,212)
Total expenses		$	723,658		$	608,763		$	114,895
Total revenue (1)		$	884,819		$	763,340
General and administrative expenses as a percentage of total revenue (1)		3.9		%	4.3		%
Property expenses (excluding reimbursable) as a percentage of total revenue (1)		1.1		%	1.1		%

(1) Excludes rental revenue (reimbursable).

Depreciation and Amortization

Depreciation and amortization increased by $47.7 million primarily due to overall portfolio growth from acquisitions. As discussed in the sections entitled “Funds from Operations ("FFO") Available to Common Stockholders and Normalized Funds from Operations ("Normalized FFO") Available to Common Stockholders" and “Adjusted Funds from Operations ("AFFO") Available to Common Stockholders,” depreciation and amortization is a non-cash item that is added back to net income available to common stockholders for our calculation of FFO, Normalized FFO, and AFFO.

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Interest Expense

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


	Three months ended March 31,
		2023			2022
Interest on our credit facility, commercial paper, term loans, notes, mortgages and interest rate swaps		$	167,966		$	120,962
Credit facility commitment fees		1,328			937
Amortization of debt origination and deferred financing costs		6,071			3,123
(Loss) gain on interest rate swaps		(1,801)			722
Amortization of net mortgage premiums		(3,200)			(3,561)
Amortization of net note premiums		(15,532)			(15,740)
Capital lease obligation		403			335
Interest capitalized		(1,103)			(375)
Interest expense		$	154,132		$	106,403

Credit facility, commercial paper, term loans, mortgages and notes
Average outstanding balances (dollars in thousands)		$	18,658,173		$	15,529,939
Average interest rates		3.59		%	3.07		%

The increase in interest expense for the three months ended March 31, 2023 is primarily due to the following: (i) January 2023 issuances of $500.0 million and $600.0 million in principle of notes, (ii) the January 2023 issuance of our 2023 term loans, (iii) the October 2022 issuance of $750.0 million in principal of notes, (iv) the June 2022 issuance of £600 million in principal of Sterling denominated notes, and (v) the January 2022 issuance of £500 million in principal of Sterling-denominated notes as well as higher average balances and rates on the credit facility and commercial paper borrowings, all of which was partially offset by lower mortgage interest as a result of mortgage payoffs.

During the three months ended March 31, 2023, the weighted average interest rate on our principal borrowings consisted of:

•Revolving credit facility of $1.1 billion was 3.7%;

•Commercial paper of $157.5 million was 3.5%;

•Term loans of $1.3 billion was 4.6%;

•Mortgages payable of $842.1 million was 4.8%;

•Notes and bonds payable of $15.3 billion was 3.4%; and

•Notes, bonds, mortgages, term loans, and credit facility and commercial paper of$18.7 billion was3.6%.

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. Expenses related to properties available for lease and non-net-leased properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees. General portfolio costs include, but are not limited to, insurance, legal, property inspections, and title search fees.

Property expenses (excluding reimbursable) increased $1.5 million for the three months ended March 31, 2023 primarily due to our increased portfolio size, resulting in higher property taxes and insurance.

Property Expenses (reimbursable)

Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients. Property expenses (reimbursable) increased by $15.6 million for the three months ended March 31, 2023, 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.

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General and administrative expenses increased $1.5 million for the three months ended March 31, 2023, primarily due to higher payroll-related compensation costs associated with the growth of the company.

Provisions for Impairment

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


	Three months ended March 31,
	2023		2022
Carrying value prior to impairment	$	35.6	$	44.8
Less: total provisions for impairment	(13.2)		(7.0)
Carrying value after impairment	$	22.4	$	37.8

Depending on impairment triggering events during the applicable period, impairments are typically recorded for properties sold, in the process of being sold, vacant, in bankruptcy, or experiencing difficulties with collection of rent.

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 $1.3 million and $6.5 million of merger and integration-related transaction costs during the three months ended March 31, 2023, and 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 March 31,
		2023		2022
Number of properties sold		26		34
Net sales proceeds		$	28.6	$	122.2
Gain on sales of real estate		$	4.3	$	10.2

Foreign Currency and Derivative Gain (Loss), Net

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

Foreign currency and derivative gain, net for the three months ended March 31, 2022 was $10.3 million and primarily comprised of foreign currency gains related to the remeasurement of intercompany debt.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities for the three months ended March 31, 2022, related to three equity method investments acquired in our merger with VEREIT, Inc. in November 2021, which were all sold during 2022.

Other Income, Net

Certain miscellaneous non-recurring revenue is included in other income, net. The increase of $0.9 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was related to other non-recurring settlements.

Income Taxes
Income taxes are for city and state income and franchise taxes, and for international income taxes accrued or paid by us and our subsidiaries. The increase in income taxes for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, is primarily attributable to our increased volume of U.K. investments, which contributed to higher U.K. income taxes.

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Net Income Available to Common Stockholders

The following summarizes our net income available to common stockholders (dollars in millions, except per share data):


	Three months ended March 31,
		2023		2022		% Change
Net income available to common stockholders		$	225.0	$	199.4	12.8	%
Net income per share (1)		$	0.34	$	0.34	0.0	%

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

The calculation to determine net income available to common stockholders includes provisions for impairment, gain from the sale of properties, and foreign currency gain and loss, which can vary from period to period based on timing and significantly impact net income available to common stockholders.

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) real estate depreciation and amortization, (iv) provisions for impairment, (v) merger and integration-related costs, (vi) gain on sales of real estate, (vii) foreign currency and derivative (gain) loss, net (as described in the Adjusted Funds from Operations section), and (viii) our proportionate share of interest expense and real estate depreciation and amortization 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, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDAre and annualized Pro Forma Adjusted EBITDAre, respectively.

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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 March 31,
	2023			2022
Net income	$	226,122		$	199,971
Interest	154,132			106,403

Income taxes	11,950			10,981
Depreciation and amortization	451,477			403,762
Provisions for impairment	13,178			7,038
Merger and integration-related costs	1,307			6,519
Gain on sales of real estate	(4,279)			(10,156)
Foreign currency and derivative (gains) losses, net	(10,322)			590

Proportionate share of adjustments for unconsolidated entities	—			1,092
Quarterly Adjusted EBITDAre	$	843,565		$	726,200
Annualized Adjusted EBITDAre (1)	$	3,374,260		$	2,904,800
Annualized Pro Forma Adjustments	$	83,015		$	61,312
Annualized Pro Forma Adjusted EBITDAre	$	3,457,275		$	2,966,112
Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts	$	18,748,217		$	15,695,516
Proportionate share for unconsolidated entities debt, excluding deferred financing costs	—			86,006
Less: Cash and cash equivalents	(164,576)			(151,624)
Net Debt (2)	$	18,583,641		$	15,629,898

Net Debt/Annualized Adjusted EBITDAre	5.5		x	5.4		x
Net Debt/Annualized Pro Forma Adjusted EBITDAre	5.4		x	5.3		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, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents.

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


	Three months ended March 31,
Dollars in thousands	2023		2022
Annualized pro forma adjustments from properties acquired or stabilized	$	85,835	$	64,805
Annualized pro forma adjustments from properties disposed	(2,820)		(3,493)
Annualized Pro forma Adjustments	$	83,015	$	61,312

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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 March 31,
		2023		2022		% Change
FFO available to common stockholders		$	684.3	$	601.4	13.8	%
FFO per share (1)		$	1.03	$	1.01	2.0	%
Normalized FFO available to common stockholders		$	685.6	$	607.9	12.8	%
Normalized FFO per share (1)		$	1.04	$	1.02	2.0	%

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

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):

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	Three months ended March 31,
		2023		2022
Net income available to common stockholders		$	225,016	$	199,369
Depreciation and amortization		451,477		403,762
Depreciation of furniture, fixtures and equipment		(542)		(478)
Provisions for impairment		13,178		7,038
Gain on sales of real estate		(4,279)		(10,156)
Proportionate share of adjustments for unconsolidated entities		—		2,235
FFO adjustments allocable to noncontrolling interests		(559)		(354)
FFO available to common stockholders		$	684,291	$	601,416
FFO allocable to dilutive noncontrolling interests		1,420		808
Diluted FFO		$	685,711	$	602,224

FFO available to common stockholders		$	684,291	$	601,416
Merger and integration-related costs		1,307		6,519
Normalized FFO available to common stockholders		$	685,598	$	607,935
Normalized FFO allocable to dilutive noncontrolling interests		1,420		808
Diluted Normalized FFO		$	687,018	$	608,743

FFO per common share
Basic		$	1.04	$	1.01
Diluted		$	1.03	$	1.01

Normalized FFO per common share, basic and diluted		$	1.04	$	1.02


Distributions paid to common stockholders		$	497,245	$	438,280
FFO available to common stockholders in excess of distributions paid to common stockholders		$	187,046	$	163,136
Normalized FFO available to common stockholders in excess of distributions paid to common stockholders		$	188,353	$	169,655
Weighted average number of common shares used for FFO and Normalized FFO:
Basic		660,462,399		593,827,299
Diluted		663,034,011		595,102,548

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.

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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 March 31,					% Change
		2023		2022
AFFO available to common stockholders		$	650.7	$	580.1		12.2	%
AFFO per share (1)		$	0.98	$	0.98		0.0	%

(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.

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 March 31,
		2023		2022
Net income available to common stockholders		$	225,016	$	199,369
Cumulative adjustments to calculate Normalized FFO (1)		460,582		408,566
Normalized FFO available to common stockholders		685,598		607,935

Amortization of share-based compensation		6,300		5,002
Amortization of net debt premiums and deferred financing costs (2)		(13,688)		(17,096)
Non-cash (gain) loss on interest rate swaps		(1,801)		722
Straight-line impact of cash settlement on interest rate swaps (3)		1,797		—
Leasing costs and commissions		(444)		(2,373)
Recurring capital expenditures		(53)		(13)
Straight-line rent and expenses, net		(36,485)		(27,822)
Amortization of above and below-market leases, net		17,358		13,642
Proportionate share of adjustments for unconsolidated entities		—		(2,064)
Other adjustments (4)		(7,854)		2,165
AFFO available to common stockholders		$	650,728	$	580,098
AFFO allocable to dilutive noncontrolling interests		1,431		820
Diluted AFFO		$	652,159	$	580,918

AFFO per common share:
Basic		$	0.99	$	0.98
Diluted		$	0.98	$	0.98

Distributions paid to common stockholders		$	497,245	$	438,280

AFFO available to common stockholders in excess of distributions paid to common stockholders		$	153,483	$	141,818
Weighted average number of common shares used for computation per share:
Basic		660,462,399		593,827,299
Diluted		663,034,011		595,102,548

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

(2)Includes the amortization of premiums and discounts on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

(3)Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps, 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 do not qualify for hedge accounting, obligations related to financing lease liabilities, and adjustments allocable to noncontrolling interests.

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

PROPERTY PORTFOLIO INFORMATION

At March 31, 2023, out of the 12,492 properties that we owned or held interest in, 12,361 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:

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	Percentage of Total Portfolio Annualized Contractual Rent by Industry (1)
	As of
	Mar 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019

Grocery stores	10.2%	10.0%	10.2%	9.8%	7.9%
Convenience stores	8.7	8.6	9.1	11.9	12.3
Dollar stores	7.3	7.4	7.5	7.6	7.9
Home improvement	5.8	5.6	5.1	4.3	2.9
Restaurants - quick service	5.8	6.0	6.6	5.3	5.8
Drug stores	5.8	5.7	6.6	8.2	8.8
Restaurants - casual dining	4.9	5.1	5.9	2.8	3.2
Health and fitness	4.3	4.4	4.7	6.7	7.0
Automotive service	4.0	4.0	3.2	2.7	2.6
General merchandise	3.8	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, and in Italy, starting in October 2022.

Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of March 31, 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	12,103	160,734,000	$	2,905,859	82.0	%
Industrial	351	80,486,500	469,304		13.3
Gaming	1	3,096,700	100,000		2.8
Other (2)	37	2,411,200	64,502		1.9
Totals	12,492	246,728,400	$	3,539,665	100.0	%

(1)Includes leasable building square footage. Excludes 2,962 acres of leased land categorized as agriculture at March 31, 2023.

(2)"Other" includes 27 properties classified as agriculture, consisting of approximately 272,400 leasable square feet and $37.4 million in annualized contractual rent and ten properties classified as office, consisting of approximately 2.1 million leasable square feet and $27.1 million in annualized contractual rent.

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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 March 31, 2023:

Client
Number of
Leases
Percentage of Total Portfolio Annualized Contractual Rent (1)
Dollar General 1,540 4.0 %
Walgreens 357 3.6
7-Eleven 635 3.4
Dollar Tree / Family Dollar 1,135 3.4
Wynn Resorts 1 2.8
FedEx 80 2.5
LA Fitness 76 2.0
B&Q (Kingfisher) 41 1.8
Sainsbury's 28 1.8
BJ's Wholesale Clubs 33 1.7
CVS Pharmacy 191 1.6
Wal-Mart / Sam's Club 67 1.6
Lifetime Fitness 21 1.5
Tractor Supply 180 1.4
AMC Theaters 35 1.3
Red Lobster 200 1.3
Regal Cinemas (Cineworld) 41 1.3
Tesco 18 1.3
Lowe's 40 1.2
Kroger 36 1.1
Total 4,755 40.5 %

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

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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 March 31, 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 429 10 4,268,600 $ 66,738 1.9 %
2024 679 35 12,808,900 147,337 4.2
2025 897 36 14,527,100 206,217 5.8
2026 821 33 16,498,300 193,593 5.5
2027 1,401 35 22,055,800 284,740 8.0
2028 1,380 49 26,266,900 312,930 8.8
2029 961 20 20,324,200 252,442 7.1
2030 573 20 15,529,100 182,571 5.2
2031 530 39 21,992,200 248,711 7.0
2032 962 34 17,626,300 251,387 7.1
2033 628 16 14,970,100 185,924 5.3
2034 568 7 10,437,000 216,862 6.1
2035 427 3 5,200,000 112,124 3.2
2036 420 8 7,636,300 137,516 3.9
2037 477 9 8,292,500 130,712 3.7
2038-2143 1,551 61 25,745,000 609,861 17.2
Totals 12,704 415 244,178,300 $ 3,539,665 100.0 %
(1)Leases on our multi-client properties are counted separately in the table above. This table excludes 185 vacant units.

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Geographic Diversification
The following table sets forth certain geographic information regarding our property portfolio as of March 31, 2023 (dollars in thousands):
Location
Number of
Properties
Percent Leased
Approximate
Leasable
Square Feet
Percentage of Total Portfolio Annualized Contractual Rent
Alabama 397 98 % 4,316,200 1.9 %
Alaska 6 100 299,700 0.1
Arizona 247 100 3,722,600 2.0
Arkansas 243 100 2,654,100 1.1
California 350 99 11,494,900 5.7
Colorado 169 99 2,687,100 1.4
Connecticut 24 96 1,191,000 0.4
Delaware 24 100 141,100 0.1
Florida 792 99 10,133,400 5.0
Georgia 555 99 9,078,600 3.5
Hawaii 22 100 47,800 0.2
Idaho 27 100 189,100 0.1
Illinois 543 99 12,869,300 5.2
Indiana 416 99 8,151,900 2.7
Iowa 105 100 3,432,300 0.9
Kansas 189 100 4,656,000 1.1
Kentucky 364 99 6,200,700 1.7
Louisiana 339 100 5,129,700 1.8
Maine 55 100 1,091,000 0.5
Maryland 79 97 3,067,500 1.3
Massachusetts 91 100 6,201,200 4.1
Michigan 473 99 5,836,800 2.7
Minnesota 257 99 4,296,000 1.9
Mississippi 285 100 4,302,700 1.2
Missouri 383 98 5,150,900 1.8
Montana 24 100 223,100 0.1
Nebraska 80 98 1,132,500 0.4
Nevada 74 100 2,665,700 0.9
New Hampshire 31 97 568,200 0.3
New Jersey 145 97 2,243,100 1.6
New Mexico 107 100 1,343,500 0.6
New York 245 98 4,559,000 2.8
North Carolina 403 98 8,224,600 3.0
North Dakota 21 100 427,800 0.2
Ohio 693 99 15,519,600 4.1
Oklahoma 313 99 4,232,700 1.7
Oregon 41 100 650,400 0.4
Pennsylvania 342 97 6,230,800 2.5
Rhode Island 7 100 101,700 0.1
South Carolina 313 99 4,445,600 1.8
South Dakota 33 100 518,700 0.2
Tennessee 447 98 7,220,300 2.5
Texas 1,569 99 26,003,600 10.3
Utah 37 100 1,537,500 0.5
Vermont 7 100 134,900 0.1
Virginia 364 99 7,335,600 2.4
Washington 79 100 1,783,500 0.9
West Virginia 78 100 758,600 0.4
Wisconsin 284 100 5,767,000 1.9
Wyoming 23 100 157,700 0.1
Puerto Rico 6 100 59,400 0.1
United Kingdom 232 100 21,506,500 10.3
Spain 52 100 3,960,100 1.0
Italy 7 100 1,075,100 0.4
Totals/average 12,492 99 % 246,728,400 100.0 %
-48-
Table of Contents

IMPACT OF ~~OPERATIONS~~

~~Critical Accounting Policies~~

INFLATION

Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index, or retail price index in the case of certain leases in the U.K. (typically subject to ceilings), or increases in the clients’ sales volumes. 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 use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our clients' ability to pay rent. Additionally, inflationary periods may cause us to experience increased costs of financing, make it difficult to refinance debt at attractive rates or at all, and may adversely affect the properties we can acquire if the cost of financing an acquisition is in excess of our anticipated earnings from such property, thereby limiting the properties that can be acquired.

IMPACT OF 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.

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~~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%.~~

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~~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:

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~~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.

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Table of Contents

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.~~March 31, 2023. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):

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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	$	20.9	4.42	%	$	157.5	3.12	%
2024	2,895.0		4.68	%	—		—
2025	1,092.9		4.23	%	—		—
2026	1,587.1		3.72	%	1,647.3		3.60	%
2027	2,026.3		2.67	%	—		—
Thereafter	9,321.2		3.37	%	—		—
Totals (1)	$	16,943.4	3.60	%	$	1,804.8	3.56	%
Fair Value (2)	$	15,458.3			$	1,804.6

~~Table~~(1)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.

(2)We base the estimated fair value 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.

the publicly-traded fixed rate senior notes and bonds at March 31, 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 March 31, 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 March 31, 2023.

The table above incorporates only those exposures that exist as of ~~September 30, 2017.~~March 31, 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 March 31, 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 million~~$1.15 billion at ~~September 30, 2017,~~March 31, 2023, a 1% change in interest rates would change our interest rate costs by ~~$6.6~~$11.5 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.

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Table of Contents

As of and for the quarter ended ~~September 30, 2017,~~March 31, 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 March 31, 2023 our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

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~~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~~March 31, 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 in "Item 1A, Risk Factors" in Part I of our Annual Report on Form 10-K

for the year ended December 31, 2022. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 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
January 1, 2023 — January 31, 2023	53,210	$	63.43
February 1, 2023 — February 28, 2023	40,640	$	67.09
March 1, 2023 — March 31, 2023	87	$	63.47
Total	93,937	$	65.01

(1)All 93,937 shares of common stock atpurchased during the three months ended March 31, 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 ~~weighted average price~~purchase of ~~$55.42, in July 2017;~~

·~~125 shares~~such common stock.

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Table of ~~stock, at a weighted average price of $57.55, in August 2017; and~~

·~~67 shares of stock, at a weighted average price of $57.70, in September 2017.~~

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 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 ~~January 7, 2013~~June 25, 2021 (File No. 001-13374), and incorporated herein by reference).

~~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 of the Company 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)~~

~~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~~






Instruments defining the rights 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).~~ security holders, including indentures

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~~Table of Contents~~

~~3.5~~

4.1

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 (File No. 001-13374) and incorporated herein by reference).

~~4.2~~




















































4.2		Form of ~~5.875% Senior Notes~~5.050% Note due ~~2035~~2026 issued on January 13, 2023 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on ~~March 11, 2005~~January 13, 2023 (File No. 001-13374) and incorporated herein by reference).
4.3
~~4.3~~	~~Officer’s Certificate pursuant to sections 201, 301 and 303~~Form 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~~4.850% Note due ~~2035~~2030 issued on January 13, 2023 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on ~~March 11, 2005~~January 13, 2023 (File No. 001-13374) and incorporated herein by reference).
4.4
~~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~~Officers’ Certificate dated January 13, 2023 pursuant to ~~sections~~Sections 201, 301 and 303 of the Indenture dated ~~October 28, 1998 between the Company and The Bank~~as 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).~~

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~~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 the terms of a new series of debt securities entitled ~~“2.000%~~“5.050% Notes due ~~2018”~~2026” and ~~establishing~~ a new series of debt securities entitled ~~“3.250%~~“4.850% Notes due ~~2022”~~2030” and including the forms of debt securities of each such series (filed as exhibit 4.4 to the Company’s Form 8-K, filed on ~~October 10, 2012~~January 13, 2023 (File No. 001-13374) and incorporated herein by reference).
4.5
~~4.15~~	Form of ~~4.650%~~4.700% Note due 2028 issued on April 14, 2023 ~~(filed~~(filed as ~~exhibit 4.2~~ part of e xhibit 4.4 to ~~Company’s~~the Company's Form 8-K, filed on ~~July 16, 2013~~April 14, 2023 (File No. 001-13374) and incorporated herein by ~~reference)~~referen ce).
4.6		Form of 4.900% Note due 2033 issued on April 14, 2023 (filed as part of e xhibit 4.4 to the Company's Form 8-K , filed on April 14, 2023 (File No. 001-13374) and incorporated herein by reference).
~~4.16~~ 4.7		~~Officer’s~~Officers’ Certificate dated April 14, 2023 pursuant to ~~sections~~Sections 201, 301 and 303 of the Indenture dated as of October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing the terms of a new series of debt securities entitled ~~“4.650%~~“4.700% Notes due ~~2023”~~2028” and a new series of debt securities entitled “4.900% Notes due 2033” and including the forms of debt securities of each such series (filed as ~~exhibit 4.3~~ e xhibit 4.4 to the ~~Company’s~~Company's Form 8-K, filed on ~~July 16, 2013~~April 14, 2023 (File No. 001-13374) and incorporated herein by referen ce).

Material Contracts
























10.1+		Form of Restricted Stock Agreement for Executive Officers under the Realty Income Corporation 2021 Incentive Award Plan (filed as exhibit 10.25 to the Company's Form 10-K, filed on February 22, 2023 (File No. 001-13374) and incorporated herein by reference).
10.2+
~~4.17~~	Form of ~~3.875% Note due 2024~~Restricted Stock Agreement for Executive Officers (Christie Kelly) under the Realty Income Corporation 2021 Incentive Award Plan (filed as exhibit ~~4.2~~10.26 to ~~Company’s~~the Company's Form ~~8-K,~~10-K, filed on ~~June 25, 2014~~February 22, 2023 (File No. 001-13374) and incorporated herein by reference).
10.3+
~~4.18~~	~~Officer’s Certificate pursuant to sections 201, 301 and 303~~Form of Performance Share Award Agreement for Executive Officers under 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”Realty Income Corporation 2021 Incentive Award Plan (filed as exhibit ~~4.3~~10.27 to the ~~Company’s~~Company's Form ~~8-K,~~10-K, filed on ~~June 25, 2014~~February 22, 2023 (File No. 001-13374) and incorporated herein by reference).
10.4+
~~4.19~~	Form of ~~4.125% Note due 2026~~Performance Share Award Agreement for Executive Officers (Christie Kelly) under the Realty Income Corporation 2021 Incentive Award Plan (filed as exhibit ~~4.2~~10.28 to ~~Company’s~~the Company's Form ~~8-K,~~10-K, filed on ~~September 23, 2014~~February 22, 2023 (File No. 001-1337 4) and incorporated herein by reference).
10.5+		Realty Income Corporation Retirement Policy, effective as of November 7, 2022 (filed as exhibit 10.29 to the Company's Form 1 0-K , filed on February 22, 2023 (File No. 001-1 3374 ) 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~~ 10.6		~~Officer’s Certificate pursuant to sections 201, 301~~Term Loan Agreement, dated January 6, 2023, by 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).

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~~Table of Contents~~

~~Material Contracts~~

~~10.1~~	~~Second Amendment to~~among Realty Income Corporation, ~~2012 Incentive Award Plan~~as borrower, the lender parties thereto, as lenders, and Toronto Dominion (Texas) LLC, as administrative agent (filed as exhibit 10.1 to the Company’s Form 8-K, filed on ~~February 17, 2017~~January 6, 2023 (File N o . 001-13374) 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.~~ R ule 13a-14(a) of the Securities Exchange Act of 1934 as a dopted pursuant to Section 302 of the Sarbanes-Oxley Act of 20 02 .
31.2*
*31.2	~~Rule 13a-14(a) Certifications as filed by~~Cer tification of the Chief Financial Officer pursuant to ~~SEC release No. 33-8212 and 34-47551.~~ R ule 13a-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 20 0 2.
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.

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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.
+ Indicates a management contract or compensatory plan or arrangement.

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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~~ May 4, 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		Total stockholders’ equity		Noncontrolling interests		Total equity
Balance, December 31, 2021	591,261,991	$	29,578,212	$	(4,530,571)	$	4,933	$	25,052,574	$	76,826	$	25,129,400
Net income	—	—		199,369		—		199,369		602		199,971
Other comprehensive income	—	—		—		32,984		32,984		—		32,984
Distributions paid and payable	—	—		(440,910)		—		(440,910)		(882)		(441,792)
Share issuances, net of costs	10,171,808	660,044		—		—		660,044		—		660,044
Share-based compensation, net	132,782	(1,882)		—		—		(1,882)		—		(1,882)
Balance, March 31, 2022	601,566,581	$	30,236,374	$	(4,772,112)	$	37,917	$	25,502,179	$	76,546	$	25,578,725

Balance, December 31, 2022	660,300,195	$	34,159,509	$	(5,493,193)	$	46,833	$	28,713,149	$	130,140	$	28,843,289
Net income	—	—		225,016		—		225,016		1,106		226,122
Other comprehensive income	—	—		—		26,588		26,588		—		26,588
Distributions paid and payable	—	—		(504,746)		—		(504,746)		(3,014)		(507,760)
Share issuances, net of costs	12,706,141	798,901		—		—		798,901		—		798,901

Share-based compensation, net	200,439	198		—		—		198		—		198
Balance, March 31, 2023	673,206,775	$	34,958,608	$	(5,772,923)	$	73,421	$	29,259,106	$	128,232	$	29,387,338

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


D.	Accounts payable and accrued expenses consist of the following at:	March 31, 2023		December 31, 2022
	Notes payable - interest payable	$	147,510	$	129,202
	Derivative liabilities and payables – at fair value	66,349		64,724
	Property taxes payable	42,333		45,572
	Accrued income taxes	30,470		22,626
	Accrued property expenses	30,176		25,290
	Value-added tax payable	24,500		23,375
	Accrued costs on properties under development	23,776		26,559
	Mortgages, term loans, and credit line - interest payable	7,498		4,404
	Merger and integration-related costs	6,464		1,464
	Other items	43,289		55,921
		$	422,365	$	399,137


E.	Lease intangible liabilities, net, consist of the following at:	March 31, 2023		December 31, 2022
	Below-market leases	$	1,708,146	$	1,617,870
	Accumulated amortization of below-market leases	(263,013)		(238,434)
		$	1,445,133	$	1,379,436


F.	Other liabilities consist of the following at:	March 31, 2023		December 31, 2022
	Lease liability - operating leases, net	$	433,666	$	440,096
	Rent received in advance and other deferred revenue	286,322		269,645
	Lease liability - financing leases	49,342		49,469
	Security deposits	20,573		15,577
		$	789,903	$	774,787

	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	$	(45,162)	$	459,375
2024	(54,192)		552,774
2025	(47,292)		477,383
2026	(39,501)		425,893
2027	(30,827)		369,300
Thereafter	362,274		1,672,237
Totals	$	145,300	$	3,956,962

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


	Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships		2023		2022
Currency swaps		$	—	$	1,895
Interest rate swaps		(1,720)		39,005
Foreign currency forwards		(5,113)		2,790
Interest rate swaption		(1,287)		—
Total derivatives in cash flow hedging relationships		$	(8,120)	$	43,690
Derivatives in Fair Value Hedging Relationships
Currency swaps		$	5,958	$	—

Total derivatives in fair value hedging relationships		$	5,958	$	—
Total unrealized (loss) gain on derivatives		$	(2,162)	$	43,690


		Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income		2023		2022
Currency swaps	Foreign currency and derivative gain (loss), net		$	—	$	6,114
Interest rate swaps	Interest expense		1,480		(2,530)
Foreign currency forwards	Foreign currency and derivative gain (loss), net		1,431		—
Total derivatives in cash flow hedging relationships			$	2,911	$	3,584

Derivatives in Fair Value Hedging Relationships
Currency swaps	Foreign currency and derivative gain (loss), net		$	294	$	—

Total derivatives in fair value hedging relationships			$	294	$	—
Net increase to net income			$	3,205	$	3,584


Derivative Type	Number of Instruments (1)	Accounting Classification	Notional Amount as of				Weighted Average Strike Rate (2)	Maturity Date (3)	Fair Value - asset (liability) as of

Derivatives Designated as Hedging Instruments			March 31, 2023		December 31, 2022				March 31, 2023		December 31, 2022

Interest rate swaps	9	Derivative	$	1,630.0	$	250.0	4.26%	Jan 2024 - Jan 2026	$	5.3	$	5.6
Interest rate swaptions	6	Derivative	1,000.0		—		(4)	Feb 2034	6.3		—
Cross-currency swaps	3	Derivative	320.0		320.0		(5)	Oct 2032	(33.1)		(33.3)
Foreign currency forwards	24	Derivative	155.9		185.5		(6)	Apr 2023 - Aug 2024	11.0		16.1


			$	3,105.9	$	755.5			$	(10.5)	$	(11.6)
Derivatives not Designated as Hedging Instruments
Currency exchange swaps (7)	2	Derivative	$	475.9	$	2,427.7	(8)	April 2023	$	(1.1)	$	58.8
Cross-currency swaps	3	Derivative	280.0		280.0		(5)	Oct 2032	(29.3)		(29.5)

			$	755.9	$	2,707.7			$	(30.4)	$	29.3
Total of all Derivatives			$	3,861.8	$	3,463.2			$	(40.9)	$	17.7

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


	March 31, 2023		March 31, 2022








Cash and cash equivalents shown in the consolidated balance sheets	$	164,576	$	151,624
Restricted escrow deposits (1)	50,009		84,066
Impounds related to mortgages payable (1)	29,180		7,160
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	243,765	$	242,850

	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

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	$	895,058
Plus: interest expense, excluding the amortization of deferred financing costs	496,358
Less: gain on extinguishment of debt	(367)
Plus: provision for taxes	46,152
Plus: depreciation and amortization	1,718,104
Plus: provisions for impairment	32,001
Plus: pro forma adjustments	302,673
Less: gain on sales of real estate	(97,080)

Income available for debt service, as defined	$	3,392,899

Total pro forma debt service charge	$	730,667

Debt service and fixed charge coverage ratio	4.6

																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)
Dollar General	1,540	4.0	%
Walgreens	357	3.6
7-Eleven	635	3.4
Dollar Tree / Family Dollar	1,135	3.4
Wynn Resorts	1	2.8
FedEx	80	2.5
LA Fitness	76	2.0
B&Q (Kingfisher)	41	1.8
Sainsbury's	28	1.8
BJ's Wholesale Clubs	33	1.7
CVS Pharmacy	191	1.6
Wal-Mart / Sam's Club	67	1.6
Lifetime Fitness	21	1.5
Tractor Supply	180	1.4
AMC Theaters	35	1.3
Red Lobster	200	1.3
Regal Cinemas (Cineworld)	41	1.3
Tesco	18	1.3
Lowe's	40	1.2
Kroger	36	1.1
Total	4,755	40.5	%


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	429	10	4,268,600	$	66,738	1.9	%
2024	679	35	12,808,900	147,337		4.2
2025	897	36	14,527,100	206,217		5.8
2026	821	33	16,498,300	193,593		5.5
2027	1,401	35	22,055,800	284,740		8.0
2028	1,380	49	26,266,900	312,930		8.8
2029	961	20	20,324,200	252,442		7.1
2030	573	20	15,529,100	182,571		5.2
2031	530	39	21,992,200	248,711		7.0
2032	962	34	17,626,300	251,387		7.1
2033	628	16	14,970,100	185,924		5.3
2034	568	7	10,437,000	216,862		6.1
2035	427	3	5,200,000	112,124		3.2
2036	420	8	7,636,300	137,516		3.9
2037	477	9	8,292,500	130,712		3.7
2038-2143	1,551	61	25,745,000	609,861		17.2
Totals	12,704	415	244,178,300	$	3,539,665	100.0	%


Location	Number of Properties	Percent Leased		Approximate Leasable Square Feet	Percentage of Total Portfolio Annualized Contractual Rent
Alabama	397	98	%	4,316,200	1.9	%
Alaska	6	100		299,700	0.1
Arizona	247	100		3,722,600	2.0
Arkansas	243	100		2,654,100	1.1
California	350	99		11,494,900	5.7
Colorado	169	99		2,687,100	1.4
Connecticut	24	96		1,191,000	0.4
Delaware	24	100		141,100	0.1
Florida	792	99		10,133,400	5.0
Georgia	555	99		9,078,600	3.5
Hawaii	22	100		47,800	0.2
Idaho	27	100		189,100	0.1
Illinois	543	99		12,869,300	5.2
Indiana	416	99		8,151,900	2.7
Iowa	105	100		3,432,300	0.9
Kansas	189	100		4,656,000	1.1
Kentucky	364	99		6,200,700	1.7
Louisiana	339	100		5,129,700	1.8
Maine	55	100		1,091,000	0.5
Maryland	79	97		3,067,500	1.3
Massachusetts	91	100		6,201,200	4.1
Michigan	473	99		5,836,800	2.7
Minnesota	257	99		4,296,000	1.9
Mississippi	285	100		4,302,700	1.2
Missouri	383	98		5,150,900	1.8
Montana	24	100		223,100	0.1
Nebraska	80	98		1,132,500	0.4
Nevada	74	100		2,665,700	0.9
New Hampshire	31	97		568,200	0.3
New Jersey	145	97		2,243,100	1.6
New Mexico	107	100		1,343,500	0.6
New York	245	98		4,559,000	2.8
North Carolina	403	98		8,224,600	3.0
North Dakota	21	100		427,800	0.2
Ohio	693	99		15,519,600	4.1
Oklahoma	313	99		4,232,700	1.7
Oregon	41	100		650,400	0.4
Pennsylvania	342	97		6,230,800	2.5
Rhode Island	7	100		101,700	0.1
South Carolina	313	99		4,445,600	1.8
South Dakota	33	100		518,700	0.2
Tennessee	447	98		7,220,300	2.5
Texas	1,569	99		26,003,600	10.3
Utah	37	100		1,537,500	0.5
Vermont	7	100		134,900	0.1
Virginia	364	99		7,335,600	2.4
Washington	79	100		1,783,500	0.9
West Virginia	78	100		758,600	0.4
Wisconsin	284	100		5,767,000	1.9
Wyoming	23	100		157,700	0.1
Puerto Rico	6	100		59,400	0.1
United Kingdom	232	100		21,506,500	10.3
Spain	52	100		3,960,100	1.0
Italy	7	100		1,075,100	0.4
Totals/average	12,492	99	%	246,728,400	100.0	%