{ "ticker": "O", "company": "Realty Income Corporation", "filing_type": "10-K", "year_current": "2024", "year_prior": "2023", "summary": { "added": 47, "removed": 22, "modified": 51, "unchanged": 36, "total_current": 134, "total_prior": 109 }, "source": "SEC EDGAR", "url": "https://riskdiff.com/o/2024-vs-2023/", "markdown_url": "https://riskdiff.com/o/2024-vs-2023/index.md", "json_url": "https://riskdiff.com/o/2024-vs-2023/index.json", "generated": "2026-06-01", "ai_summary": null, "risks": [ { "status": "ADDED", "current_title": "Our historical and unaudited pro forma condensed combined financial statements may not be representative of our results after the Merger and the transactions contemplated by the Merger Agreement.", "prior_title": null, "current_body": "The Merger and the transactions contemplated by the Merger Agreement were completed in January 2024. Accordingly, our historical financial statements and our operating results for the periods prior to such time do not give effect to those transactions. In addition, the unaudited pro forma condensed combined financial statements related to such transactions that we have previously prepared were created for informational purposes only and do not purport to be indicative of the financial position or results of operations that actually would have occurred had the Merger and the transactions contemplated by the Merger Agreement been completed as of the dates indicated, nor does it purport to be indicative of our future operating results or financial position after the Merger and the transactions contemplated by the Merger Agreement. The unaudited pro forma condensed combined financial statements reflect adjustments, which were based upon preliminary estimates, to allocate the purchase price to Spirit’s assets and liabilities and certain estimates and assumptions regarding the Merger and the transactions contemplated by the Merger Agreement that we and Spirit believe are reasonable under the circumstances. In addition, the unaudited pro forma condensed combined financial statements do not reflect other future events that occur after the Merger and the transactions contemplated by the Merger Agreement, including the costs related to the planned integration of the two companies and any future nonrecurring charges resulting from the Merger and the transactions contemplated by the Merger Agreement, and do not consider potential impacts of current market conditions on revenues or expense efficiencies. As a result, we cannot assure you that our historical and unaudited pro forma condensed combined financial statements will be representative of our results for future periods." }, { "status": "ADDED", "current_title": "Our common stockholders will be diluted by the Merger.", "prior_title": null, "current_body": "At the closing of the Merger, we issued approximately 108.0 million additional shares of common stock. Consequently, as a result of this dilution, our common stockholders as of immediately prior to the Merger have less voting control and influence over our management and policies after the effective time of the Merger than they previously exercised over our management and policies." }, { "status": "ADDED", "current_title": "Cybersecurity Governance", "prior_title": null, "current_body": "The Board of Directors considers cybersecurity risk as part of its risk oversight function, and the Audit Committee of our Board oversees Realty Income's cybersecurity and other information technology risk exposures and the steps taken by management to monitor and control such exposures. Our cybersecurity risk profile and cybersecurity program status are reported to the Audit Committee on a quarterly basis. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity, and the full Board also receives briefings from management on our cybersecurity risk management program, as appropriate. Our management team, including the Cybersecurity Risk Committee chaired by our Head of IT and comprised of functional leaders across the Company, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our management team has extensive experience implementing and operating cybersecurity technologies, policies, and procedures throughout various industries and includes a Certified Information Systems Security Professional with ISC2. Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. Item 2: Properties Information pertaining to our properties can be found under Item 1. Item 3: Legal Proceedings Information regarding legal proceedings is included in note 20, Commitments and Contingencies, to the consolidated financial statements. Item 4: Mine Safety Disclosures None. PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" }, { "status": "ADDED", "current_title": "Market Information", "prior_title": null, "current_body": "Our common stock is traded on the NYSE under the ticker symbol “O.” Holders There were approximately 13,800 registered holders of record of our common stock as of January 31, 2024. This figure does not reflect the beneficial ownership of shares of our common stock. 23 23 23 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Repurchases of Equity Securities", "prior_title": null, "current_body": "During the three months ended December 31, 2023, the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the Realty Income 2021 Incentive Award Plan, (the \"2021 Plan\"): Period Total Number of Shares Purchased Average Price Paid per ShareOctober 1, 2023 — October 31, 20232,242 $49.06 November 1, 2023 — November 30, 20231,283 $51.92 December 1, 2023 — December 31, 202311,735 $57.22 Total 15,260 $55.58 Item 6: Reserved 24 24 24 Table of Contents Table of Contents Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations" }, { "status": "ADDED", "current_title": "Closing of Spirit Realty Capital Merger", "prior_title": null, "current_body": "On January 23, 2024, we closed on our previously announced merger with Spirit, which is further described in note 21, Subsequent Events, to the consolidated financial statements. The Spirit portfolio consisted of 2,018 U.S. retail, industrial and other properties across 49 states. With assets that are highly complementary to our existing portfolio, this transaction enhances the diversification and depth of our real estate portfolio and will allow us to strengthen our longstanding relationships with existing clients and curate new ones." }, { "status": "ADDED", "current_title": "Increases in Monthly Dividends to Common Stockholders", "prior_title": null, "current_body": "We have continued our 55-year history of paying monthly dividends. In addition, we increased the dividend five times during 2023 and once during 2024. As of February 2024, we have paid 105 consecutive quarterly dividend increases and increased the dividend 123 times since our listing on the NYSE in 1994. 2023 Dividend increasesMonth DeclaredMonth PaidMonthly Dividend per shareIncrease per share1st increaseDec 2022Jan 2023$0.2485 $0.0005 2nd increaseFeb 2023Mar 2023$0.2545 $0.0060 3rd increaseMar 2023Apr 2023$0.2550 $0.0005 4th increaseJun 2023Jul 2023$0.2555 $0.0005 5th increaseSep 2023Oct 2023$0.2560 $0.0005 2024 Dividend increase1st increaseDec 2023Jan 2024$0.2565 $0.0005" }, { "status": "ADDED", "current_title": "2024 Dividend increase", "prior_title": null, "current_body": "The dividends paid per share during 2023 totaled $3.051, as compared to $2.967 during 2022, an increase of $0.084, or 2.8%. 25 25 25 Table of Contents Table of Contents The monthly dividend of $0.2565 per share represents a current annualized dividend of $3.0780 per share, and an annualized dividend yield of 5.4% based on the last reported sale price of our common stock on the NYSE of $57.42 on December 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." }, { "status": "ADDED", "current_title": "Investments During 2023", "prior_title": null, "current_body": "During the year ended December 31, 2023, we invested $9.5 billion at an initial weighted average cash yield of 7.1%, including an investment in 1,408 properties, properties under development or expansion, investments in loans and a preferred equity investment. See notes 4, Investments in Real Estate, 5, Investments in Unconsolidated Entities, and 6, Investments in Loans, to the consolidated financial statements for further details." }, { "status": "ADDED", "current_title": "Equity Capital Raising", "prior_title": null, "current_body": "We have an At-The-Market (\"ATM\") program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices or by any other methods permitted by applicable law. During 2023, we raised $5.5 billion of net proceeds from the sale of common stock, at a weighted average price of $59.79 per share, primarily through proceeds from the sale of common stock through our At-the-Market (\"ATM\") Program. The ATM program issuances during 2023 included 91.7 million shares issued pursuant to forward sale confirmations. As of December 31, 2023, 6.2 million shares of common stock subject to forward sale confirmations have been executed but not settled. See note 11, Issuances of Common Stock, to the consolidated financial statements for further details." }, { "status": "ADDED", "current_title": "Appointment of New Chief Financial Officer and Treasurer (\"CFO\")", "prior_title": null, "current_body": "Effective January 1, 2024, Jonathan Pong was appointed Executive Vice President, CFO and Treasurer, replacing Christie Kelly, our former CFO, upon her planned retirement that was announced in June 2023. 26 26 26 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Portfolio Discussion", "prior_title": null, "current_body": "Leasing Results At December 31, 2023, we had 193 properties available for lease or sale out of 13,458 properties in our portfolio, which represents a 98.6% occupancy rate based on the number of properties in our portfolio. Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards, properties with possession pending, and include properties owned by unconsolidated joint ventures. Below is a summary of our portfolio activity for the periods indicated below: Three months ended December 31, 2023Properties available for lease at September 30, 2023159 Lease expirations (1)266 Re-leases to same client(164)Re-leases to new client(26)Vacant dispositions(42)Properties available for lease at December 31, 2023193 Properties available for lease at September 30, 2023 Lease expirations (1) Properties available for lease at December 31, 2023 Year ended December 31, 2023Properties available for lease at December 31, 2022126 Lease expirations (1)984 Re-leases to same client(750)Re-leases to new client(51)Vacant dispositions(116)Properties available for lease at December 31, 2023193 Properties available for lease at December 31, 2022 Lease expirations (1) Properties available for lease at December 31, 2023 (1)Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above. During the three months ended December 31, 2023, the new annualized contractual rent on re-leases was $52.7 million, as compared to the previous annual rent of $50.8 million on the same units, representing a rent recapture rate of 103.6% on the units re-leased, which excludes restructurings associated with the Cineworld bankruptcy. Including Cineworld restructured leases that resulted in lease extensions, the recapture rate was 94.1% for the three months ended December 31, 2023. We re-leased 20 units to new clients without a period of vacancy, and 12 units to new clients after a period of vacancy. During the year ended December 31, 2023, the new annualized contractual rent on re-leases was $198.1 million, as compared to the previous annual rent of $190.3 million on the same units, representing a rent recapture rate of 104.1% on the units re-leased, which excludes restructurings associated with the Cineworld bankruptcy. Including Cineworld restructured leases that resulted in lease extensions, the recapture rate was 101.1% for the year ended December 31, 2023. We re-leased 27 units to new clients without a period of vacancy, and 39 units to new clients after a period of vacancy. As part of our re-leasing costs, we pay leasing commissions to unrelated, third-party real estate brokers consistent with the commercial real estate industry standard, and sometimes provide rent concessions to our clients. We do not consider the collective impact of the leasing commissions or rent concessions to our clients to be material to our financial position or results of operations." }, { "status": "ADDED", "current_title": "Pan European Sale and Leaseback with Decathlon SE (\"Decathlon\")", "prior_title": null, "current_body": "We entered the markets of France, Germany, and Portugal for the first time through sale-leaseback transactions with affiliates of Decathlon, a world leader in retail sporting goods and an investment grade rated company, for €527.0 million, which includes 82 retail properties located in France, Germany, Italy, Portugal, and Spain." }, { "status": "ADDED", "current_title": "Investments in Unconsolidated Joint Ventures", "prior_title": null, "current_body": "In October 2023, we completed our previously announced $951.4 million acquisition of common and preferred interests from Blackstone Real Estate Trust, Inc. (\"BREIT\") in a new joint venture that owns a 95% interest in the real estate of The Bellagio Las Vegas. The investment included $301.4 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650.0 million preferred equity interest in the joint venture with an expected rate of return of 8.1%. 27 27 27 Table of Contents Table of Contents In November 2023, we established a joint venture with Digital Realty Trust, Inc. (\"Digital Realty\") to support the development of two build-to-suit data centers in Northern Virginia. We invested approximately $199.8 million to acquire an 80% equity interest in the venture, while Digital Realty maintains a 20% interest. Each partner will fund its pro rata share of the remaining $117.7 million estimated development cost for the first phase of the project, which is slated for completion in mid-2024. See note 5, Investments in Unconsolidated Entities, to the consolidated financial statements for further details." }, { "status": "ADDED", "current_title": "Impact of Real Estate and Credit Markets", "prior_title": null, "current_body": "In the commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, the global capital 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 global capital markets carefully and, if required, will make decisions to adjust our business strategy accordingly." }, { "status": "ADDED", "current_title": "Capitalization", "prior_title": null, "current_body": "As of December 31, 2023, our total market capitalization was $65.4 billion. Total market capitalization consisted of $43.3 billion of common equity (based on the December 31, 2023 closing price on the NYSE of $57.42 and assuming the conversion of common units of Realty Income, L.P.) and total outstanding borrowings of $22.1 billion on our revolving credit facility, commercial paper, term loans, mortgages payable, senior unsecured notes and bonds, and our proportionate share of unconsolidated entities' debt (excluding unamortized deferred financing costs, discounts, and premiums). Our total debt to market capitalization was 33.8% at December 31, 2023." }, { "status": "ADDED", "current_title": "ATM Program", "prior_title": null, "current_body": "As of December 31, 2023, there were approximately 6.2 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $337.8 million in expected net proceeds, which have been executed at a weighted average price of $54.70 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates). During the year ended December 31, 2023, we settled approximately 91.7 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $5.4 billion of net proceeds. As of December 31, 2023, we had 81.3 million shares remaining for future issuance under our ATM program. We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder." }, { "status": "ADDED", "current_title": "Debt and Financing Activities", "prior_title": null, "current_body": "At December 31, 2023, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $21.5 billion, with a weighted average maturity of 5.9 years and a weighted average interest rate of 3.9%. As of December 31, 2023, approximately 94% of our total debt was fixed rate debt. See notes 7 through 10 to the consolidated financial statements for additional information about our outstanding debt, along with our debt financing activities during the year ended December 31, 2023 below. 29 29 29 Table of Contents Table of Contents Note Issuances During the year ended December 31, 2023, we issued the following notes and bonds (in millions): Note IssuanceDate of IssuanceMaturity DatePrincipal amountPrice of par valueEffective yield to maturity5.050% NotesJanuary 2023January 2026$500.0 99.618 %5.189 %4.850% NotesJanuary 2023March 2030$600.0 98.813 %5.047 %4.700% NotesApril 2023December 2028$400.0 98.949 %4.912 %4.900% NotesApril 2023July 2033$600.0 98.020 %5.148 %4.875% NotesJuly 2023July 2030€550.0 99.421 %4.975 %5.125% NotesJuly 2023July 2034€550.0 99.506 %5.185 %5.750% NotesDecember 2023December 2031£300.0 99.298 %5.862 %6.000% NotesDecember 2023December 2039£450.0 99.250 %6.075 % 5.050% Notes 4.850% Notes 4.700% Notes 4.900% Notes 4.875% Notes 5.125% Notes 5.750% Notes 6.000% Notes In January 2024, we issued $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034. In connection with the Merger, we also completed the $2.7 billion exchange in principal of outstanding notes issued by Spirit OP. See note 21, Subsequent Events, to the consolidated financial statements for further details. 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 total borrowings. As of December 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings. The 2023 term loans mature in January 2025 with one remaining 12-month maturity extension available at our option. In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate. As of December 31, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%. Covenants The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our senior notes and bonds. These calculations, which are not based on accounting principles generally accepted in U.S. 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 December 31, 2023, are: Note CovenantsRequiredActualLimitation on incurrence of total debt< 60% of adjusted assets39.7 %Limitation on incurrence of secured debt< 40% of adjusted assets1.6 %Debt service coverage (trailing 12 months) (1)> 1.5x4.7xMaintenance of total unencumbered assets> 150% of unsecured debt257.9 %" }, { "status": "ADDED", "current_title": "Material Cash Requirements", "prior_title": null, "current_body": "The following table summarizes the maturity of each of our obligations as of December 31, 2023 (dollars in millions): Credit Facility and Commercial Paper (1)Unsecured TermLoans (2)Mortgages PayableSenior Unsecured Notes and Bonds (3)Interest (4)GroundLeases Paid by the Company (5)GroundLeases Paid byOur Clients (6)Other (7)Totals2024$764.4 $250.0 $740.5 $850.0 $773.8 $14.3 $30.4 $728.5 $4,151.9 2025— — 44.0 1,050.0 700.4 12.6 29.8 29.1 1,865.9 2026— 1,082.0 12.0 2,075.0 587.5 18.3 28.9 11.0 3,814.7 2027— — 22.3 2,027.8 525.9 10.1 26.9 0.3 2,613.3 2028— — 1.3 2,049.8 443.0 9.9 23.5 — 2,527.5 Thereafter— — 2.3 10,509.5 2,173.6 303.8 242.6 3.8 13,235.6 Totals$764.4 $1,332.0 $822.4 $18,562.1 $5,204.2 $369.0 $382.1 $772.7 $28,208.9" }, { "status": "ADDED", "current_title": "Investments in Unconsolidated Entities", "prior_title": null, "current_body": "As of December 31, 2023, our pro-rata share of secured debt of unconsolidated entities was approximately $659.2 million. 31 31 31 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "DIVIDEND POLICY", "prior_title": null, "current_body": "Distributions are paid monthly to holders of shares of our common stock. Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P., each on a per unit basis that is equal to the amount paid per share to our common stockholders. In order to maintain our status as a REIT for federal income tax purposes, we generally are required to distribute dividends to our stockholders aggregating annually at least 90% of our taxable income (excluding net capital gains), and we are subject to income tax to the extent we distribute less than 100% of our taxable income (including net capital gains). In 2023, our cash distributions to common stockholders totaled $2.11 billion, or approximately 115.9% of estimated taxable income of $1.82 billion. Certain measures are available to us to reduce or eliminate our tax exposure as a REIT, and accordingly, no provision for federal income taxes, other than our taxable REIT subsidiaries (each, a \"TRS\"), has been made. 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. We distributed $3.051 per share to stockholders during 2023, representing 76.3% of our diluted Adjusted Funds from Operations Available to Common Stockholders (\"AFFO\") per share of $4.00. Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, Funds from Operations Available to Common Stockholders (\"FFO\"), Normalized Funds from Operations Available to Common Stockholders (\"Normalized FFO\"), AFFO, cash flow from operations, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, our debt service requirements, and any other factors the Board of Directors may deem relevant. In addition, our credit facility contains financial covenants that could limit the amount of distributions payable by us in the event of a default, and which prohibit the payment of distributions on our common 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 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 6.8% of the distributions to our common stockholders, made or deemed to have been made in 2023, were classified as a return of capital for federal income tax purposes. 32 32 32 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Depreciation and Amortization", "prior_title": null, "current_body": "The increase in depreciation and amortization for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to overall portfolio growth from acquisitions." }, { "status": "ADDED", "current_title": "Credit facility, commercial paper, term loans, mortgages and senior unsecured notes and bonds", "prior_title": null, "current_body": "34 34 34 Table of Contents Table of Contents The increase in interest expense for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher average debt and weighted average interest. See notes to the accompanying consolidated financial statements for additional information regarding our indebtedness." }, { "status": "ADDED", "current_title": "CRITICAL ACCOUNTING POLICIES", "prior_title": null, "current_body": "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. This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 1, Summary of Significant Accounting Policies, to our consolidated financial statements in this annual report on Form 10-K for the year ended December 31, 2023. In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S. GAAP, many subjective judgments must be made with regard to critical accounting policies." }, { "status": "ADDED", "current_title": "Provisions for Impairment - Real Estate Assets", "prior_title": null, "current_body": "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. If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, 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. 37 37 37 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Recent Accounting Standards Not Yet Adopted.", "prior_title": null, "current_body": "In December 2023, the Financial Accounting Standards Board (\"FASB\") issued Accounting Standards Update (\"ASU\") 2023-09, Income Taxes, to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the impact on our financial statement disclosures. In November 2023, FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting, establishing improvements to reportable segments disclosures to enhance segment reporting under Topic 280. This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments. This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic 280, not just entity level disclosures. The guidance will be effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and the amendments should be applied retrospectively to all periods presented in the financial statements. We are currently evaluating the impact on our financial statement disclosures." }, { "status": "ADDED", "current_title": "amortization", "prior_title": null, "current_body": "expense 64 64 64 Table of Contents Table of Contents D. Gain on Sales of Real Estate The following table summarizes our properties sold during the periods indicated below (dollars in millions):Years ended December 31,202320222021Number of properties121 170 154 Net sales proceeds$117.4 $436.1 $250.3 Gain on sales of real estate$25.7 $103.0 $55.8" }, { "status": "ADDED", "current_title": "5. Investments in Unconsolidated Entities", "prior_title": null, "current_body": "The following is a summary of our investments in unconsolidated entities as of December 31, 2023 and 2022 (in thousands): Ownership % Number of PropertiesCarrying Amount(1) of Investment as of InvestmentAs of December 31, 202312/31/202312/31/2022Bellagio Las Vegas Joint Venture - Common Equity Interest21.9%1$296,097 $— Bellagio Las Vegas Joint Venture - Preferred Equity Interestn/an/a650,000 — Data Center Development Joint Venture80.0%2226,021 — Industrial Partnerships20.0%—— — Total investment in unconsolidated entities$1,172,118 $—" }, { "status": "ADDED", "current_title": "As of December 31, 2023", "prior_title": null, "current_body": "(1) The total carrying amount of the investments was greater than the underlying equity in net assets (i.e., basis difference) by $2.2 million as of December 31, 2023. Equity in income and impairment of investment in unconsolidated entities consists of the following (in thousands): Years ended December 31,Investment202320222021Bellagio Las Vegas Joint Venture - Common Equity Interest$2,139 $— $— Data Center Development Joint Venture— — — Industrial Partnerships407 (6,448)1,106 Equity in income and impairment of investment in unconsolidated entities$2,546 $(6,448)$1,106" }, { "status": "ADDED", "current_title": "Equity in income and impairment of investment in unconsolidated entities", "prior_title": null, "current_body": "A. Bellagio Las Vegas Joint Venture Interests In October 2023, we invested $951.4 million to acquire common and preferred interests from Blackstone Real Estate Trust, Inc. (\"BREIT\") in a joint venture that owns a 95.0% interest in the real estate of The Bellagio Las Vegas. The investment included $301.4 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650.0 million preferred equity interest in the joint venture. The unconsolidated entity had total debt outstanding of $3.0 billion as of December 31, 2023, all of which was non-recourse to us with limited customary exceptions. The Company's preferred equity investment entitles it to certain preferential cumulative distributions out of operating and capital proceeds pursuant to the terms and conditions of the preferred equity. There is no maturity date on the preferred equity investment, which bears interest of 8.1%, payable monthly in arrears in cash, with rate increases commencing in year 7. BREIT may cause the joint venture to redeem all or a portion of the preferred equity investment, and Realty Income may cause the joint venture to redeem all or a portion of the preferred equity investment if BREIT or its affiliates cease to control the joint venture, in each case, for a cash payment equaling the sum of the amount to be redeemed plus, prior to the first anniversary of the transaction, a redemption fee of 3.0%, or, after the first anniversary and prior to the fourth anniversary of the transaction, a redemption fee of 2.0%. Interest income is determined by applying the interest rate to the sum of the outstanding balance of preferred equity and any accrued but unpaid interests. During the year ended December 31, 2023, we recognized interest income of $13.0 million included within 'Other revenue' in our consolidated statements of income and comprehensive income. 65 65 65 Table of Contents Table of Contents We have determined that this joint venture is a VIE, and we are not the primary beneficiary as we do not have power to direct activities that most significantly impact the joint venture's economic performance. As a holder of preferred interests, we do not receive any additional voting rights, nor do we have conversion and redemption rights. Our maximum exposure to loss associated with this VIE is limited to our common and preferred equity investments. B. Data Center Development Joint Venture In November 2023, we established a joint venture with Digital Realty Trust, Inc. (\"Digital Realty\") to support the development of two build-to-suit data centers in Northern Virginia. We invested $201.2 million to acquire an 80.0% equity interest in the venture, while Digital Realty maintains a 20.0% interest. We have determined that this joint venture is a VIE. While we have an 80.0% interest in the joint venture, we are not the primary beneficiary because we do not have power to direct activities that significantly impact the joint venture's economic performance as we were not engaged when the joint venture partner initially developed the construction plan and entered into the lease agreement. Digital Realty is the managing member, and we do not have substantive kick-out rights. We will continuously evaluate whether we are the primary beneficiary as the power to direct activities that most significantly affect economic performance can change over the life of the joint venture. Our maximum exposure to loss associated with this VIE is limited to our equity investment and our pro rata share of the remaining $117.7 million of estimated development costs for the first phase of the project. C. Industrial Partnerships All seven assets held by our industrial partnerships were sold during the year ended December 31, 2022. As the portion of the net proceeds applied to our investment basis that we expected to receive at closing was less than our $121.4 million carrying amount of investment in unconsolidated entities, we recognized an other than temporary impairment of $8.5 million during the year ended December 31, 2022. The other than temporary impairments are included in 'Equity in income and impairment of investment in unconsolidated entities' in our consolidated statements of income and comprehensive income for the periods presented." }, { "status": "ADDED", "current_title": "6. Investments in Loans", "prior_title": null, "current_body": "The following table presents information about our loans as of December 31, 2023 (dollars in thousands): Amortized CostAllowanceCarrying Amount (1)Senior Secured Note Receivable$174,337 $(2,498)$171,839 Mortgage Loan33,500 — 33,500 Total$207,837 $(2,498)$205,339" }, { "status": "ADDED", "current_title": "Carrying Amount (1)", "prior_title": null, "current_body": "(1) The total carrying amount of the investment in loans excludes accrued interest of $3.4 million as of December 31, 2023, which is recorded to 'Other assets, net' on our consolidated balance sheets. (1) accrued interest A. Senior Secured Note Receivable In November 2023, the Company purchased a Sterling-denominated senior secured note with a principal amount of £142.0 million, equivalent to $180.9 million as of December 31, 2023. The interest only note bears interest at Sterling Overnight Indexed Average (“SONIA”) plus 6.75% and matures in October 2029. The Company paid £136.7 million for the note and accounted for the discount at amortized cost. The discount is being amortized over the term of the note. B. Mortgage Loan In October 2023, the Company issued a $33.5 million mortgage loan which is collateralized by nine automotive service properties located across seven different states. The interest only loan bears interest at 8.25% subject to annual increases and matures in October 2038." }, { "status": "ADDED", "current_title": "As OfNumber ofProperties (1)WeightedAverageStatedInterestRate (2)WeightedAverageEffectiveInterestRate (3)WeightedAverageRemainingYears UntilMaturityRemainingPrincipalBalanceUnamortizedPremium (Discount)and DeferredFinancing CostsBalance, netMortgagePayableBalanceDecember 31, 20231314.8 %3.3 %0.4$822.4 $(0.8)$821.6 December 31, 20221364.8 %3.3 %1.4$842.3 $11.6 $853.9", "prior_title": null, "current_body": "As Of Number of Properties (1) Weighted Average Stated Interest Rate (2) Weighted Average Effective Interest Rate (3)" }, { "status": "ADDED", "current_title": "Year of Maturity", "prior_title": null, "current_body": "Principal Totals 68 68 68 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "10. Notes Payable", "prior_title": null, "current_body": "A. General At December 31, 2023, our senior unsecured notes and bonds are USD-denominated, Sterling-denominated, and Euro-denominated. Foreign-denominated notes are converted at the applicable exchange rate on the balance sheet date. The following are sorted by maturity date (in thousands): Carrying Value (USD) as ofMaturity DatesPrincipal (Currency Denomination)December 31, 2023December 31, 20224.600% Notes due 2024February 6, 2024$499,999 $499,999 $499,999 3.875% Notes due 2024July 15, 2024$350,000 350,000 350,000 3.875% Notes due 2025April 15, 2025$500,000 500,000 500,000 4.625% Notes due 2025November 1, 2025$549,997 549,997 549,997 5.050% Notes due 2026January 13, 2026$500,000 500,000 — 0.750% Notes due 2026March 15, 2026$325,000 325,000 325,000 4.875% Notes due 2026June 1, 2026$599,997 599,997 599,997 4.125% Notes due 2026October 15, 2026$650,000 650,000 650,000 1.875% Notes due 2027 (1)January 14, 2027£250,000 318,450 301,225 3.000% Notes due 2027January 15, 2027$600,000 600,000 600,000 1.125% Notes due 2027 (1)July 13, 2027£400,000 509,520 481,960 3.950% Notes due 2027August 15, 2027$599,873 599,873 599,873 3.650% Notes due 2028January 15, 2028$550,000 550,000 550,000 3.400% Notes due 2028January 15, 2028$599,816 599,816 599,816 2.200% Notes due 2028June 15, 2028$499,959 499,959 499,959 4.700% Notes due 2028December 15, 2028$400,000 400,000 — 3.250% Notes due 2029June 15, 2029$500,000 500,000 500,000 3.100% Notes due 2029December 15, 2029$599,291 599,291 599,291 4.850% Notes due 2030March 15, 2030$600,000 600,000 — 3.160% Notes due 2030June 30, 2030£140,000 178,332 168,686 4.875% Notes due 2030 (1)July 6, 2030€550,000 607,915 — 1.625% Notes due 2030 (1)December 15, 2030£400,000 509,520 481,960 3.250% Notes due 2031January 15, 2031$950,000 950,000 950,000 5.750% Notes due 2031 (1)December 5, 2031£300,000 382,140 — 3.180% Notes due 2032June 30, 2032£345,000 439,461 415,691 5.625% Notes due 2032October 13, 2032$750,000 750,000 750,000 2.850% Notes due 2032December 15, 2032$699,655 699,655 699,655 1.800% Notes due 2033March 15, 2033$400,000 400,000 400,000 1.750% Notes due 2033 (1)July 13, 2033£350,000 445,830 421,715 4.900% Notes due 2033July 15, 2033$600,000 600,000 — 2.730% Notes due 2034May 20, 2034£315,000 401,247 379,544 5.125% Notes due 2034 (1)July 6, 2034€550,000 607,915 — 5.875% Bonds due 2035March 15, 2035$250,000 250,000 250,000 3.390% Notes due 2037June 30, 2037£115,000 146,487 138,563 6.000% Notes due 2039 (1)December 5, 2039£450,000 573,210 — 2.500% Notes due 2042 (1)January 14, 2042£250,000 318,450 301,225 4.650% Notes due 2047March 15, 2047$550,000 550,000 550,000 Total principal amount$18,562,064 $14,114,156 Unamortized net premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (2)40,255 163,857 $18,602,319 $14,278,013 4.600% Notes due 2024 3.875% Notes due 2024 3.875% Notes due 2025 4.625% Notes due 2025 5.050% Notes due 2026 0.750% Notes due 2026 4.875% Notes due 2026 4.125% Notes due 2026 1.875% Notes due 2027 (1) 3.000% Notes due 2027 1.125% Notes due 2027 (1) 3.950% Notes due 2027 3.650% Notes due 2028 3.400% Notes due 2028 2.200% Notes due 2028 4.700% Notes due 2028 3.250% Notes due 2029 3.100% Notes due 2029 4.850% Notes due 2030 3.160% Notes due 2030 4.875% Notes due 2030 (1) 1.625% Notes due 2030 (1) 3.250% Notes due 2031 5.750% Notes due 2031 (1) 3.180% Notes due 2032 5.625% Notes due 2032 2.850% Notes due 2032 1.800% Notes due 2033 1.750% Notes due 2033 (1) 4.900% Notes due 2033 2.730% Notes due 2034 5.125% Notes due 2034 (1) 5.875% Bonds due 2035 3.390% Notes due 2037 6.000% Notes due 2039 (1) 2.500% Notes due 2042 (1) 4.650% Notes due 2047 Unamortized net premiums, deferred financing costs, and cumulative basis adjustment on fair value hedge (2) (1) Interest paid annually. Interest on the remaining senior unsecured notes and bond obligations included in the table is paid semi-annually. (2) In January 2023, in conjunction with the pricing of these senior unsecured notes due January 2026, we entered into three-year, fixed-to-variable interest rate swaps, which are accounted for as fair value hedges. See note 14, Derivative Instruments for further details. 69 69 69 Table of Contents Table of Contents The following table summarizes the maturity of our notes and bonds payable as of December 31, 2023, excluding $40.3 million related to unamortized net premiums, deferred financing costs, and basis adjustment on interest rate swaps designated as fair value hedges (dollars in millions): Year of MaturityPrincipal2024$850.0 20251,050.0 20262,075.0 20272,027.8 20282,049.8 Thereafter10,509.5 Totals$18,562.1" }, { "status": "ADDED", "current_title": "12. Noncontrolling Interests", "prior_title": null, "current_body": "As of December 31, 2023, we have seven entities with noncontrolling interests that we consolidate, including an operating partnership, Realty Income, L.P., and interests in consolidated property partnerships not wholly-owned by us. At December 31, 2023, outstanding common partnership units in Realty Income, L.P. represented 6.9% ownership interest in Realty Income L.P. We hold the remaining 93.1% interest and consolidate the entity. None of our common partnership units have voting rights. 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 1.02934 due to the Orion Divestiture, subject to certain exceptions. Prior to the Orion Divestiture, the conversion ratio was one to one. These issuances 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. The following table represents the change in the carrying value of all noncontrolling interests through December 31, 2023 (in thousands): Realty Income, L.P. units (1)OtherNoncontrollingInterestsTotalCarrying value at December 31, 2021$62,416 $14,410 $76,826 Contributions (2)51,221 — 51,221 Reallocation of equity3,210 — 3,210 Distributions(3,818)(307)(4,125)Allocation of net income2,772 236 3,008 Carrying value at December 31, 2022$115,801 $14,339 $130,140 Contributions (3)— 40,097 40,097 Distributions (4)(5,663)(3,677)(9,340)Allocation of net income3,934 671 4,605 Carrying value at December 31, 2023$114,072 $51,430 $165,502" }, { "status": "ADDED", "current_title": "Realty Income, L.P. units (1)", "prior_title": null, "current_body": "Carrying value at December 31, 2021 Contributions (2) Carrying value at December 31, 2022 Contributions (3) Distributions (4) Allocation of net income Carrying value at December 31, 2023 (1) 1,795,167 units were outstanding as of both December 31, 2023 and December 31, 2022. 1,060,709 units were outstanding as of December 31, 2021. (2) In September 2022, we issued 734,458 common partnership units in Realty Income, L.P. in connection with the acquisition of nine properties and recorded $51.2 million of contributions to noncontrolling interests. (3) Primarily related to contributions of $39.2 million for the issuance of a 5.0% joint venture interest as partial consideration paid on property acquisitions. The remaining amount represents contributions for two development joint ventures. (4) Includes a non-cash reduction of noncontrolling interest of $1.5 million from our partner's responsibility to absorb construction cost overages for a development joint venture during the year ended December 31, 2023. At December 31, 2023, we are considered the primary beneficiary of Realty Income, L.P. and other VIEs. For further information, see note 1, Summary of Significant Accounting Policies. At December 31, 2023, we are considered the primary beneficiary of Realty Income, L.P. and other VIEs. For further information, see note 72 72 72 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "13. Fair Value Measurements", "prior_title": null, "current_body": "Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820, Fair Value Measurements and Disclosures, sets forth a fair value hierarchy that categorizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. •Level 1 – Quoted market prices in active markets for identical assets and liabilities •Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other market-corroborated inputs •Level 3 – Inputs that are unobservable and significant to the overall fair value measurement We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period. Changes in the type of inputs may result in a reclassification for certain assets. We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent. The following tables present the carrying values and estimated fair values of financial instruments as of December 31, 2023 and 2022 (in millions): December 31, 2023Hierarchy LevelCarrying ValueLevel 1Level 2Level 3Assets:Loans receivable (1) $205.3 $— $171.8 $33.5 Derivative assets21.2 — 21.2 — Total assets$226.5 $— $193.0 $33.5 Liabilities:Mortgages payable$822.4$— $— $814.5 Notes and bonds payable18,562.1— 17,603.7 — Derivative liabilities119.6 — 119.6 — Total liabilities$19,504.1 $— $17,723.3 $814.5 Loans receivable (1) (1) Considering the proximity of time between the issuance and measurement of the two loans acquired during the fourth quarter of 2023, we have concluded that the carrying value reasonably approximates the estimated fair value at December 31, 2023. We determined our investment in mortgage loan is categorized as level 3 of the fair value hierarchy given our experience with mortgage borrowings. December 31, 2022Hierarchy LevelCarrying ValueLevel 1Level 2Level 3Assets:Derivative assets$83.1 $— $83.1 $— Total assets$83.1 $— $83.1 $— Liabilities:Mortgages payable$842.3$— $— $810.4 Notes and bonds payable14,114.2— 12,522.8 — Derivative liabilities64.7 — 64.7 — Total liabilities$15,021.2 $— $12,587.5 $810.4 73 73 73 Table of Contents Table of Contents A. Financial Instruments Not Measured at Fair Value on our Consolidated Balance Sheets The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature. The aggregate fair value of our term loans approximates carrying value due to the frequent repricing of the variable interest rate charged on the borrowing. The following table reflects the carrying amounts and estimated fair values of our financial instruments not measured at fair value on our consolidated balance sheets (in millions): December 31, 2023December 31, 2022Carrying valueFair valueCarrying valueFair valueMortgages payable (1)$822.4$814.5 $842.3$810.4 Notes and bonds payable (2)$18,562.1$17,603.7 $14,114.2$12,522.8" }, { "status": "ADDED", "current_title": "Carrying value", "prior_title": null, "current_body": "Fair value Mortgages payable (1) Notes and bonds payable (2) (1)Excludes non-cash net premiums or discounts recorded on the mortgages payable. The unamortized balance of these net discounts was $0.4 million at December 31, 2023, and $12.4 million of net premiums at December 31, 2022. Also excludes deferred financing costs of $0.4 million at December 31, 2023, and $0.8 million at December 31, 2022. (2)Excludes non-cash net premiums recorded on notes payable. The unamortized balance of the net premiums was $125.3 million at December 31, 2023, and $224.6 million at December 31, 2022. Also excludes deferred financing costs of $83.8 million and a favorable basis adjustment on interest rate swaps designated as fair value hedges of $1.3 million at December 31, 2023, and $60.7 million of deferred financing costs at December 31, 2022. The estimated fair values of our mortgages payable and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level 3 of the fair value hierarchy. The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level 2 of the fair value hierarchy. B. Financial Instruments Measured at Fair Value on a Recurring Basis For derivative assets and liabilities, we may utilize interest rate swaps, interest rate swaptions, and forward-starting swaps to manage interest rate risk, and cross-currency swaps, currency exchange swaps, and foreign currency forwards to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility. Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 on the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at December 31, 2023, and 2022, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two. For more details on our derivatives, see note 14, Derivative Instruments. C. Items Measured at Fair Value on a Non-Recurring Basis Impairment of Real Estate Investments Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments only under certain circumstances, such as when an impairment write-down occurs. 74 74 74 Table of Contents Table of Contents 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. The following table summarizes our provisions for impairment on real estate investments during the periods indicated below (in millions): Years ended December 31,202320222021Carrying value prior to impairment$194.5 $140.9 $169.2 Less: total provisions for impairment (1)(82.2)(25.9)(39.0)Carrying value after impairment$112.3 $115.0 $130.2 Less: total provisions for impairment (1) (1) Excludes provision for current expected credit loss of $4.9 million at December 31, 2023. The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of such real estate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results." }, { "status": "ADDED", "current_title": "14. Derivative Instruments", "prior_title": null, "current_body": "Derivative Instruments In the normal course of business, our operations are exposed to economic risks from interest rates and foreign currency exchange rates. We may enter into derivative financial instruments to offset these underlying economic risks. Derivative Designated as Hedging Instruments - Cash Flow Hedges We entered into foreign currency forward contracts to sell GBP, USD, and EUR and buy EUR, USD, and GBP to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling (\"GBP\") and Euro (\"EUR\"). Forward points on the forward contracts are included in the assessment of hedge effectiveness. We executed variable-to-fixed interest rate swaps to add stability to interest expense and to manage our exposure to interest rate movements associated with our term loans. To mitigate the impact of fluctuating interest rates, we also entered into interest rate swaption agreements during March 2023, structuring them as swaption corridors, in anticipation of issuing USD denominated bonds. Interest rate swaption corridors are a combination of two swaption positions. Specifically, we purchased a payer swaption, 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 we also sold a payer swaption, 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. The total premium paid for the March 2023 transaction was $7.6 million. All three hedging instruments are designated as cash flow hedges. Derivative Designated as Hedging Instruments - Fair Value Hedges Periodically, we enter into and designate fixed-to-floating interest rate swaps to manage interest rate risk by managing our mix of fixed-rate and variable-rate debt. These swaps involve the receipt of fixed-rate amounts for variable interest rate payments over the life of the swaps without exchange of the underlying principal amount. We also designate some of our cross-currency swaps as fair value hedges as we use them to hedge foreign currency risk associated with changes in spot rates on foreign-denominated debt. For these hedging instruments, we have elected to exclude the change in fair value of the cross-currency swaps related to both time value and cross-currency basis spread from the assessment of hedge effectiveness (the \"excluded component\"). Changes in the fair value of the cross-currency swaps attributable to these excluded components are recorded to other comprehensive income and subsequently recognized in 'Foreign currency and derivative (loss) gain, net' on a systematic and rational basis, as net cash settlements and interest accruals on the respective cross currency swaps occur, over the remaining life of the hedging instruments. Derivative Designated as Hedging Instruments - Net Investment Hedges During the fourth quarter of 2023, we designated the three existing cross-currency swaps that had not been designated as hedging instruments through the third quarter of 2023 as net investment hedges to mitigate the risks associated with our investment in EUR-denominated foreign operations. These cross-currency swaps qualify as net investment hedges under the criteria prescribed in accordance with ASC Topic 815-20, Hedging - General. We use the spot method of assessing hedge effectiveness and apply the consistent election to the excluded component by 75 75 75 Table of Contents Table of Contents recognizing changes in the fair value of the hedging instruments attributable to the excluded component in the same manner as described above. Any difference between the change in the fair value of the excluded components and the amounts recognized in earnings is reported in other comprehensive income as part of the foreign cumulative translation adjustment. The gain or loss on the portion of the derivative instruments included in the assessment of effectiveness is reported in other comprehensive income as part of the 'Foreign currency translation adjustment' line item, to the extent the relationship is highly effective. If the company’s net investment changes during a reporting period, the hedge relationship will be assessed for whether a de-designation is warranted (only if the hedge notional amount is outside of prescribed tolerance). Derivatives Not Designated as Hedging Instruments We enter into foreign currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the USD, our reporting currency, and GBP and EUR. These derivative contracts generally mature within one year and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative (loss) gain, net' in our consolidated statements of income and comprehensive income. The following table summarizes the terms and fair values of our derivative financial instruments at December 31, 2023 and 2022 (dollars in millions): Derivative TypeNumber of Instruments (1)Notional Amount as ofWeighted Average Strike Rate (2)Maturity Date (3)Fair Value - asset (liability) as ofDerivatives Designated as Hedging InstrumentsDecember 31, 2023December 31, 2022December 31, 2023December 31, 2022Interest rate swaps9$1,630.0 $250.04.26%Jan 2024 - Jan 2026$0.3 $5.6 Interest rate swaptions61,000.0 — (4)Feb 20342.6 — Cross-currency swaps - Fair Value (5)3320.0 320.0(6)Oct 2032(59.8)(33.3)Cross-currency swaps - Net Investment (5)3280.0 —(7)Oct 2032(53.2)— Foreign currency forwards22162.3 185.5(8)Jan 2024 - Dec 20242.7 16.1 $3,392.3 $755.5 $(107.4)$(11.6)Derivatives not Designated as Hedging InstrumentsCurrency exchange swaps4$1,810.6 $2,427.7(9)Jan 2024 - Feb 2024$8.9 $58.8 Cross-currency swaps (5)0— 280.0—%Oct 2032— (29.5)$1,810.6 $2,707.7 $8.9 $29.3 Total of all Derivatives$5,202.9 $3,463.2 $(98.5)$17.7" }, { "status": "ADDED", "current_title": "Fair Value - asset (liability) as of", "prior_title": null, "current_body": "Interest rate swaps Cross-currency swaps - Fair Value (5) Cross-currency swaps - Net Investment (5) Currency exchange swaps Cross-currency swaps (5) (1)This column represents the number of instruments outstanding as of December 31, 2023. (2)Weighted average strike rate is calculated using the notional value as of December 31, 2023. (3)This column represents maturity dates for instruments outstanding as of December 31, 2023. (4)Represent purchased payer swaptions with a strike rate of 3.75% and sold payer swaptions with a strike rate of 4.25%. (5)In October 2022, we entered into six cross-currency swaps to exchange €612 million for $600 million maturing in October 2032. We redesignated $280 million of three cross-currency swaps as net investment hedges in December 2023. (6)USD fixed rate of 5.625% and EUR weighted average fixed rate of 4.681%. (7)USD fixed rate of 5.625% and EUR weighted average fixed rate of 4.716%. (8)Weighted average forward GBP-USD exchange rate of 1.30. (9)Weighted average exchange rates of 1.27 for GBP-USD and 0.86 for EUR-GBP. (9) We measure our derivatives at fair value and include the balances within 'Other assets, net' and 'Accounts payable and accrued expenses' on our consolidated balance sheets. We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default. 76 76 76 Table of Contents Table of Contents The following table summarizes the amount of unrealized gain (loss) on derivatives and foreign currency translation adjustments in other comprehensive income (in thousands): Years ended December 31,Derivatives in Cash Flow Hedging Relationships202320222021Cross-currency swaps$— $(5,091)$8,232 Interest rate swaps(11,171)98,310 34,659 Foreign currency forwards (13,349)8,540 7,557 Interest rate swaptions1,857 — — Total derivatives in cash flow hedging relationships$(22,663)$101,759 $50,448 Derivatives in Fair Value Hedging RelationshipsCross-currency swaps - Fair Value$(14,602)$(4,705)$— Total derivatives in fair value hedging relationships$(14,602)$(4,705)$— Total unrealized (loss) gain on derivatives, net$(37,265)$97,054 $50,448 Derivatives in Net Investment Hedging RelationshipsCross-currency swaps - Net Investment$(4,272)$— $— Total unrealized loss recorded in foreign currency translation adjustment$(4,272)$— $—" }, { "status": "ADDED", "current_title": "Total unrealized (loss) gain on derivatives, net", "prior_title": null, "current_body": "The following table summarizes the amount of gain (loss) on derivatives reclassified from AOCI (in thousands): Years ended December 31,Derivatives in Cash Flow Hedging RelationshipsLocation of Gain (Loss) Recognized in Income202320222021Cross-currency swapsForeign currency and derivative (loss) gain, net$— $30,814 $3,541 Interest rate swapsInterest expense15,794 (4,487)(10,343)Foreign currency forwardsForeign currency and derivative (loss) gain, net4,251 2,139 — Interest rate swaptionsInterest expense(6,859)— — Total derivatives in cash flow hedging relationships$13,186 $28,466 $(6,802)Derivatives in Fair Value Hedging RelationshipsCross-currency swaps - Fair ValueForeign currency and derivative (loss) gain, net$1,415 $(29,708)$— Total derivatives in fair value hedging relationships$1,415 $(29,708)$— Derivatives in Net Investment Hedging RelationshipsCross-currency swaps - Net InvestmentForeign currency and derivative (loss) gain, net$62 $— $— Total derivatives in net investment hedging relationships$62 $— $— Net increase (decrease) to net income $14,663 $(1,242)$(6,802)" }, { "status": "ADDED", "current_title": "Location of Gain (Loss) Recognized in Income", "prior_title": null, "current_body": "Foreign currency and derivative (loss) gain, net Foreign currency and derivative (loss) gain, net Foreign currency and derivative (loss) gain, net" }, { "status": "ADDED", "current_title": "Net increase (decrease) to net income", "prior_title": null, "current_body": "We expect to reclassify $8.0 million from AOCI as a decrease to interest expense relating to interest rate swaps and interest rate swaptions and $3.6 million from AOCI to foreign currency gain relating to foreign currency forwards within the next twelve months. 77 77 77 Table of Contents Table of Contents The following table details our foreign currency and derivative gains (losses), net included in income (in thousands): Years ended December 31,202320222021Realized foreign currency and derivative gain (loss), net:Gain on the settlement of undesignated derivatives$18,051 $204,392 $24,392 Gain on the settlement of designated derivatives reclassified from AOCI5,728 3,245 3,541 Gain (loss) on the settlement of transactions with third parties583 (553)(134)Total realized foreign currency and derivative gain, net$24,362 $207,084 $27,799 Unrealized foreign currency and derivative gain (loss), net:(Loss) gain on the change in fair value of undesignated derivatives$(5,231)$29,316 $(14,714)Loss on remeasurement of certain assets and liabilities(32,545)(249,711)(12,375)Total unrealized foreign currency and derivative loss, net$(37,776)$(220,395)$(27,089)Total foreign currency and derivative (loss) gain, net$(13,414)$(13,311)$710" }, { "status": "ADDED", "current_title": "15. Lessor Operating Leases", "prior_title": null, "current_body": "Operating Leases At December 31, 2023, we owned or held interests in 13,458 properties. Of the 13,458 properties, 13,197, or 98.1%, are single-client properties, and the remaining are multi-client properties. At December 31, 2023, 193 properties were available for lease or sale. The majority of our leases are accounted for as operating leases. The vast majority of our leases are net leases where our client pays or reimburses us for property taxes and assessments and carries insurance coverage for public liability, property damage, fire, and extended coverage. Rent based on a percentage of our client's gross sales, or percentage rent, for the years ended December 31, 2023, 2022, and 2021 was $14.8 million, $14.9 million, and $6.5 million, respectively. At December 31, 2023, minimum future annual rental revenue to be received on the operating leases for the next five years and thereafter are as follows (in thousands): Future Minimum Operating Lease PaymentsFuture Minimum Direct Financing and Sale-Type Lease Payments (1)2024$4,006,574 $1,037 20253,918,126 812 20263,747,064 814 20273,531,235 751 20283,222,392 710 Thereafter24,768,619 25,139 Totals$43,194,010 $29,263" }, { "status": "ADDED", "current_title": "Future Minimum Direct Financing and Sale-Type Lease Payments (1)", "prior_title": null, "current_body": "(1) Related to six properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties. Two properties are subject to sales-type leases and, therefore, revenue is recognized as sales-type lease income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties. No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2023, 2022, and 2021. 78 78 78 Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "16. Distributions Paid and Payable", "prior_title": null, "current_body": "We pay monthly distributions to our common stockholders. The following is a summary of monthly distributions paid per common share for the periods indicated below: 202320222021January$0.2485$0.2465 $0.2345 February0.24850.2465 0.2345 March0.25450.2465 0.2345 April0.25500.2470 0.2350 May0.25500.2470 0.2350 June0.2550 0.2470 0.2350 July0.2555 0.2475 0.2355 August0.2555 0.2475 0.2355 September0.2555 0.2475 0.2355 October0.25600.2480 0.2360 November0.25600.2480 0.2360 December0.25600.2480 0.2460 Total$3.0510 $2.9670 $2.8330 Total At December 31, 2023, a distribution of $0.2565 per common share was payable and was paid in January 2024. At December 31, 2022, a distribution of $0.2485 per common share was payable and was paid in January 2023. The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years: 202320222021Ordinary income$2.8434500 $2.7867654 $1.5146899 Nontaxable distributions0.2075500 — 3.2925615 Total capital gain distribution— 0.1802346 0.0854609 Totals (1)$3.0510000 $2.9670000 $4.8927123 Totals (1) (1) The amount distributed in 2021 includes the $2.060 tax distribution of Orion shares, that occurred in conjunction with the Orion Divestiture on November 12, 2021, after our merger with VEREIT on November 1, 2021. The fair market value of these shares for tax distribution was determined to be $20.6272 per share, which was calculated using the five-day volume weighted average share price after issuance." }, { "status": "REMOVED", "current_title": null, "prior_title": "The COVID-19 pandemic has disrupted our operations and the effects of the pandemic are expected to continue to have an adverse effect on our business, results of operations, financial condition and liquidity.", "prior_body": "The COVID-19 pandemic, including the continued spread of new variants and the measures taken to limit its spread, has had, and other pandemics in the future could have, adverse repercussions across global economies and financial markets, as well as on us and our clients. Factors that have contributed or may contribute in the future to the adverse impact of the COVID-19 pandemic and the measures taken to limit its spread on the business, results of operations, financial condition and liquidity of us and our clients include, without limitation, the following: •Operational limitations or issues at properties operated by our clients resulting from government action (including travel bans, border closings, business closures, quarantine, vaccine and testing requirements, shelter-in-place or similar orders requiring that people remain in their homes); •Reduced economic activity, customer traffic, consumer confidence or discretionary spending, the deterioration in our or our clients’ ability to operate in affected areas, and any delays in the supply of products or services to our clients may impact certain of our clients’ businesses, results of operations, financial condition and liquidity and may cause certain of our clients to be unable to meet their obligations to us in full, or at all, and to seek, whether through negotiation, restructuring or bankruptcy, reductions or deferrals in their rent payments and other obligations to us or early termination of their leases; •Difficulties with supply chain disruptions and in leasing, selling or redeveloping properties or renewing expiring or terminated leases on terms we consider acceptable, or at all; •Difficulties accessing bank lending, capital markets and other financial markets on attractive terms, or at all, may adversely affect our cost of capital, our access to capital to grow our business (including through acquisitions, development opportunities and other strategic transactions) and to fund our business operations, our ability to pay dividends on our common stock, our ability to pay the principal of and interest on our indebtedness, and our other liabilities on a timely basis, and may adversely affect our clients’ ability to fund their business operations and meet their obligations to us and others; •Potential negative impacts on our credit ratings, the interest rates on our borrowings, and our future compliance with financial covenants under our credit facility and other debt instruments, which could result in a default and potentially an acceleration of indebtedness, any of which could negatively impact our ability to make additional borrowings under our revolving credit facility, sell commercial paper notes under our commercial paper programs, incur other indebtedness, pay dividends on our common stock and pay the principal of and interest on our indebtedness and our other obligations when due; •The impact of the COVID-19 pandemic on the market value of certain of our properties has led to impairment charges and may require that we incur further impairment charges, asset write-downs or similar charges; •The impact on the ability of our employees, including members of our management team or board of directors, to fulfill their duties to us; and •A general decline in business activity and demand for real estate transactions could adversely affect our ability to grow our portfolio of properties. Most of our clients operate retail businesses, many of which have been disproportionately impacted by certain of the issues described above, and may continue to be disproportionately impacted in the future. The extent to which the COVID-19 pandemic continues to impact our operations and those of our clients will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or limit its impact, and the direct and indirect economic effects of the pandemic and containment measures. Likewise, the deterioration of global economic conditions as a result of the pandemic may ultimately lead to a further decrease in occupancy levels and rental rates across our portfolio as our clients (including those in the theater 23 23 23 Table of Contents Table of Contents industry) reduce or defer their spending, institute restructuring plans or file for bankruptcy. Some of our clients have experienced temporary closures of some or all of their properties or have substantially altered or reduced their operations in response to the COVID-19 pandemic, and additional clients may do so in the future. To the extent the COVID-19 pandemic or other epidemics or pandemics in the future adversely affect economic conditions and financial markets, as well as the business, results of operations, financial conditions and liquidity of us and our clients, they may also have the effect of heightening many of the risks described elsewhere in this “Risk Factors” section and our historical information regarding our business, properties, results of operations, financial condition or liquidity may not be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us, our properties or our business." }, { "status": "REMOVED", "current_title": null, "prior_title": "Distributions Declared (1)", "prior_body": "2022 2021 (1) Common stock cash distributions are declared monthly by us based on financial results for the prior months. At December 31, 2022, a distribution of $0.2485 per common share had been declared and was paid in January 2023. B. There were approximately 12,300 registered holders of record of our common stock as of December 31, 2022. We estimate that our total number of stockholders is approximately 1.5 million when we include both registered and beneficial holders of our common stock. 36 36 36 Table of Contents Table of Contents C. During the three months ended December 31, 2022, the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plans of Realty Income Corporation: Period Total Number of Shares Purchased (1)Average Price Paid per ShareOctober 1, 2022 — October 31, 20229,514 $55.58 November 1, 2022 — November 31, 20221,464 $64.52 December 1, 2022 — December 31, 20221,547 $63.39 Total 12,525 $57.59" }, { "status": "REMOVED", "current_title": null, "prior_title": "Conservative Capital Structure", "prior_body": "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 December 31, 2022, our total outstanding borrowings of senior unsecured notes and bonds, $250.0 million term loan, mortgages payable, revolving credit facility and commercial paper were $17.9 billion, or approximately 29.9% of our total market capitalization of $59.9 billion. We define our total market capitalization at December 31, 2022, as the sum of: •Shares of our common stock outstanding of 660,300,195, plus total common units outstanding of 1,795,167, multiplied by the last reported sales price of our common stock on the NYSE of $63.43 per share on December 31, 2022, or $42.0 billion; •Outstanding borrowings of $2.0 billion on our revolving credit facility, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings; •Outstanding borrowings of $701.8 million on our commercial paper programs, including €361.0 million of Euro-denominated borrowings; •Outstanding mortgages payable of $842.3 million, excluding net mortgage premiums of $12.4 million and deferred financing costs of $0.8 million; •Outstanding borrowings on our $250.0 million term loan, excluding deferred financing costs of $0.2 million; and •Outstanding senior unsecured notes and bonds of $14.1 billion, including Sterling-denominated notes of £2.57 billion, and excluding unamortized net premiums of $224.6 million and deferred financing costs of $60.7 million." }, { "status": "REMOVED", "current_title": null, "prior_title": "Revolving Credit Facility", "prior_body": "We have a $4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option and allows us to borrow in up to 14 currencies, including U.S. dollars. Our revolving credit facility also has a $1.0 billion expansion feature, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings provide for financing on USD borrowings at the Secured Overnight Financing Rate (\"SOFR\"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR. 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 in different currencies. Our credit facility is unsecured and accordingly, we have not pledged any assets as collateral for this obligation. At December 31, 2022, we had a borrowing capacity of $2.2 billion available on our revolving credit facility (subject to customary conditions to borrowings) and an outstanding balance of $2.0 billion, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings. The weighted average interest rate on borrowings under our revolving credit facility during the year ended December 31, 2022, was 1.8% per annum. Our revolving credit facility is subject to various leverage and interest coverage ration limitations, as at December 31, 2022, we were in compliance with 39 39 39 Table of Contents Table of Contents 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." }, { "status": "REMOVED", "current_title": null, "prior_title": "Commercial Paper Programs", "prior_body": "During July 2022, our USD-denominated unsecured commercial paper program was amended to increase the maximum aggregate amount of outstanding notes from $1.0 billion to $1.5 billion. We also established 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), which may be issued in U.S. Dollars or various other 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 note market. At December 31, 2022, we had an outstanding balance of $701.8 million, including €361.0 million of Euro-denominated borrowings. The weighted average interest rate on borrowings under our commercial paper programs was 1.6% for the year ended December 31, 2022. The commercial paper borrowings outstanding at December 31, 2022 have matured and will mature between January 2023 and February 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, including the issuance of 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. 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 On January 6, 2023 we entered into the Term Loan Agreement governing our term loan, pursuant to which we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings. The Term Loan Agreement also permits us to incur additional term loans, up to an aggregate of $1.5 billion in total borrowings. The Term Loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at the company's 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 October 2018, in conjunction with entering into our current revolving credit facility, we entered into a $250.0 million senior unsecured term loan, which matures in March 2024. Prior to April 2022, borrowing under this term loan bore interest at the current one-month London Inter-Bank Offered Rate (“LIBOR”), plus 0.85%. In connection with entering into our new unsecured credit facility in April 2022, the previous LIBOR benchmark rate was replaced with daily SOFR, based on a five-day lookback period, and, due to our current credit ratings, is not subject to a credit spread adjustment. In conjunction with this term loan, we also entered into an interest rate swap, which was based off the daily SOFR through June 30, 2022. As of December 31, 2022, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.83%." }, { "status": "REMOVED", "current_title": null, "prior_title": "Mortgage Debt", "prior_body": "As of December 31, 2022, we had $842.3 million of mortgages payable, of which £30.7 million related to a Sterling-denominated mortgage. The majority of our mortgages payable were assumed in connection with our merger with VEREIT or with our property acquisitions, including the assumption of eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022. At December 31, 2022, we had net premiums totaling $12.4 million on these mortgages and deferred financing costs of $0.8 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 year ended December 31, 2022, we made $312.2 million in principal payments, including the repayment of 12 mortgages in full for $308.0 million. 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 December 31, 2022, we were in compliance with these covenants. 40 40 40 Table of Contents Table of Contents" }, { "status": "REMOVED", "current_title": null, "prior_title": "Notes Outstanding", "prior_body": "As of December 31, 2022, our senior unsecured note and bond obligations had a total principal amount of $14.1 billion, including Sterling- denominated notes of £2.57 billion, and excluding net unamortized premiums of $224.6 million and deferred financing costs of $60.7 million. See note 9. Notes Payable to our consolidated financial statements for the full list of senior unsecured notes and bonds, by maturity date. The following table summarizes the maturity of our notes and bonds payable as of December 31, 2022, excluding net unamortized premiums of $224.6 million and deferred financing costs of $60.7 million (dollars in millions): Year of MaturityPrincipal2024$850 20251,050 20261,575 20271,983 Thereafter8,656 Totals$14,114" }, { "status": "REMOVED", "current_title": null, "prior_title": "Table of Obligations", "prior_body": "The following table summarizes the maturity of each of our obligations as of December 31, 2022 (dollars in millions): Year dueCredit Facility and Commercial Paper Programs (1)Senior Unsecured Notes andBonds (2)$250.0 million TermLoan (3)MortgagesPayable (4)Interest (5)GroundLeases Paid byRealty Income (6)GroundLeases Paid byOur Clients (7)Other (8)Totals2023$701.8 $— $— $22.0 $591.5 $10.6 $31.2 $607.4 $1,964.5 2024— 850.0 250.0 740.5 571.1 13.3 30.7 19.8 2,475.4 2025— 1,050.0 — 42.0 505.9 11.5 30.0 — 1,639.4 20262,027.2 1,575.0 — 12.0 416.6 17.2 29.2 0.8 4,078.0 2027— 1,983.1 — 22.3 327.7 8.9 26.3 — 2,368.3 Thereafter— 8,656.1 — 3.5 1,520.3 287.6 264.5 — 10,732.0 Totals$2,729.0 $14,114.2 $250.0 $842.3 $3,933.1 $349.1 $411.9 $628.0 $23,257.6" }, { "status": "REMOVED", "current_title": null, "prior_title": "Unconsolidated Investments", "prior_body": "As a result of our VEREIT merger, we assumed an equity method investment in three unconsolidated entities. In 2022, all seven assets owned by our industrial partnerships acquired in connection with the VEREIT merger were sold. The gross purchase price for the properties was $905.0 million and we collected $114.0 million of net proceeds (after mortgage defeasance and closing costs) to date, representing our proportionate share of partnership distributions. Up until the point of sale of these properties, we were responsible for funding our proportionate share of any operating cash deficits pursuant to the governance documents of the applicable entities. There are no further material commitments related to those investments." }, { "status": "REMOVED", "current_title": null, "prior_title": "Rental Revenue (excluding reimbursable)", "prior_body": "The table below summarizes our rental revenue (excluding reimbursable, dollars in thousands): Years ended December 31,Increase/(Decrease)Number of PropertiesSquare Footage (1)20222021$ ChangeProperties acquired during 2022 & 20212,314 53,632,497 $550,676 $134,652 $416,024 Same store rental revenue(2)9,615 167,391,055 2,453,030 2,410,302 42,728 Orion Divestiture(3)92 10,093,123 430 154,444 (154,014)Constant currency adjustment(4)N/AN/A4,483 18,020 (13,537)Properties sold during and prior to 2022426 9,771,221 18,465 57,659 (39,194)Straight-line rent and other non-cash adjustmentsN/AN/A20,778 20,711 67 Vacant rents, development and other (5)308 7,257,983 55,903 52,341 3,562 Other excluded revenue (6)N/AN/A11,210 10,551 659 Less: VEREIT rental revenue (7)N/AN/A— (898,573)898,573 Totals$3,114,975 $1,960,107 $1,154,868" }, { "status": "REMOVED", "current_title": null, "prior_title": "Square Footage (1)", "prior_body": "Same store rental revenue(2) Orion Divestiture(3) Constant currency adjustment(4) Vacant rents, development and other (5) Other excluded revenue (6) Less: VEREIT rental revenue (7) (1)Excludes 5,909,738 square feet from properties ground leased to clients and 2,654,136 square feet from properties with no land or building ownership. (2)The same store rental revenue percentage increase for the year ended December 31, 2022 as compared with the same period in the prior year is 1.8%. (3)Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion Office REIT Inc. (\"Orion\"). On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders (including legacy VEREIT stockholders who received shares of our common stock in our merger with VEREIT) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date, which we refer to as the Orion Divestiture. (4)For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2022, of 1.20 British Pound Sterling (\"GBP\")/USD. None of the properties in Spain or Italy met our same store pool definition for the periods presented. (5)Relates to the aggregate of (i) rental revenue from properties (292 properties comprising 6,552,442 square feet) that were available for lease during part of 2022 or 2021, and (ii) rental revenue for properties (16 properties comprising 705,541 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented. (6)Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements. (7)Amounts for the year ended December 31, 2021 represent rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021. The table below summarizes the increase in rental revenue (excluding reimbursable) in 2021 compared to 2020 (dollars in thousands): Years Ended December 31, Increase/(Decrease)Number of PropertiesSquare Footage (1)20212020$ ChangeProperties acquired during 2021 & 20204,953 105,839,422 $413,546 $51,951 $361,595 Same store rental revenue (2)6,046 93,607,451 1,457,648 1,418,502 39,146 Orion Divestiture92 10,074,923 45,047 50,401 (5,354)Constant currency adjustment (3)N/AN/A2,025 (2,861)4,886 Properties sold during and prior to 2021283 5,930,654 6,668 21,919 (15,251)Straight-line rent and other non-cash adjustmentsN/AN/A11,646 (3,587)15,233 Vacant rents, development and other (4)137 2,650,240 11,296 14,422 (3,126)Other excluded revenue (5)N/AN/A12,231 9,424 2,807 Totals$1,960,107 $1,560,171 $399,936" }, { "status": "REMOVED", "current_title": null, "prior_title": "Depreciation and Amortization", "prior_body": "The increase in depreciation and amortization is primarily due to the acquisition of properties in 2022 and 2021, which was partially offset by property sales in those same periods. The 2021 acquisition volume was primarily driven by the merger with VEREIT. As discussed in the sections entitled “Funds from Operations Available to Common Stockholders (FFO) and Normalized Funds from Operations Available to Common Stockholders (Normalized 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, Normalized FFO, and AFFO. 47 47 47 Table of Contents Table of Contents" }, { "status": "REMOVED", "current_title": null, "prior_title": "Credit facility, commercial paper, $250.0 million term loan, mortgages and notes", "prior_body": "The increase in interest expense for the year ended December 31, 2022 is primarily due to the following: (i) the October 2022 issuance of $750.0 million in principal of notes, (ii) the June 2022 issuance of £600 million in principal of Sterling-denominated notes, (iii) the January 2022 issuance of £500 million in principal of Sterling-denominated notes, (iv) the issuance of $4.65 billion in principal of notes associated with the exchange offer and assumption of $839.1 million in principal of mortgage debt, both associated with our merger with VEREIT in November 2021, and (v) the July 2021 issuance of £750 million in principal of Sterling-denominated notes, as well as higher average balances and interest rates on the credit facility and commercial paper borrowings, partially offset by the December 2021 early redemption on all $750.0 million in principal of the 4.650% notes due August 2023, and the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022. The increase in interest expense for the year ended December 31, 2021 is primarily due to the issuance of $4.65 billion in principal of notes associated with our merger with VEREIT as discussed above, the issuance of senior unsecured notes during 2020 and 2021 outside of our merger with VEREIT, which included aggregate totals of $1.68 billion in principal of USD-denominated notes and £1.15 billion in principal of Sterling-denominated notes, partially offset by the early redemptions during 2021 and 2020 of $1.2 billion of notes, increases in amortization of net note and mortgage premiums, and lower average balances on our credit facility and commercial paper borrowings. During the year ended December 31, 2022, the weighted average interest rate on our: •Revolving credit facility outstanding borrowings of $2.0 billion was 1.8%; •Commercial paper outstanding borrowings of $701.8 million was 1.6%; •Term loan outstanding of $250.0 million (excluding deferred financing costs of $0.2 million) was swapped to fixed at 3.8%; •Mortgages payable of $842.3 million (excluding net premiums totaling $12.4 million and deferred financing costs of $0.8 million on these mortgages) was 4.8%; •Notes and bonds payable of $14.1 billion (excluding net unamortized original issue premiums of $224.6 million and deferred financing costs of $60.7 million) was 3.3%; and •Notes, bonds, mortgages, $250.0 million term loan, and credit facility and commercial paper borrowings of $17.9 billion (excluding all net premiums and deferred financing costs) was 3.15%. 48 48 48 Table of Contents Table of Contents" }, { "status": "REMOVED", "current_title": null, "prior_title": "Gain (loss) on extinguishment of debt", "prior_body": "We redeemed the following principal amounts (in millions) of certain outstanding notes and mortgages, prior to their maturity. As a result of these early redemptions, we recognized the following losses on extinguishment of debt (in millions) in the consolidated statements of income and comprehensive income. There were no comparable repayments for the year ended December 31, 2022.Gain (Loss) on Extinguishment of Debt2021 RepaymentsPrincipal Amount (1)Amount of LossPeriod Recognized 4.650% notes due August 2023 redeemed in December 2021$750.0 $46.4 December 31, 2021Mortgage due June 2022 redeemed in October 2021$9.6 $0.3 December 31, 2021Mortgage due June 2032 redeemed in September 2021$12.5 $4.0 September 30, 20213.250% notes due October 2022 redeemed in January 2021$950.0 $46.5 March 31, 2021Total 2021 repayments$97.2 2020 Repayments5.750% notes due January 2021 redeemed in January 2020$250.0 $9.8 March 31, 2020" }, { "status": "REMOVED", "current_title": null, "prior_title": "Net Income Available to Common Stockholders", "prior_body": "The following summarizes our net income available to common stockholders (dollars in millions, except per share data): Years ended December 31,% Increase/(Decrease)2022202120202022versus 20212021versus2020Net income available to common stockholders$869.4$359.5$395.5141.8 %(9.1)%Net income per share (1)$1.42$0.87$1.1463.2 %(23.7)% Net income available to common stockholders Net income per share (1) (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. The increase in net income available to common stockholders for the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily related to the increase in the size of our portfolio due to the merger with VEREIT, which closed on November 1, 2021, gain on insurance proceeds from recoveries on property losses exceeding our carrying value, and $13.9 million of merger and integration-related costs related to our merger with VEREIT. The increases were partially offset by reserves to rental revenue of $4.0 million (of which $1.7 million was related to straight-line rent receivables) for the year ended December 31, 2022. Net income available to common stockholders for the year ended December 31, 2021, was impacted by the following transactions: (i) a $97.2 million loss on extinguishment of debt, which primarily includes $46.5 million related to the January 2021 early redemption of the 3.250% notes due October 2022 recorded in the three months ended March 31, 2021 and $46.4 million related to the December 2021 early redemption of the 4.650% notes due August 2023 recorded in the three months ended December 31, 2021, (ii) $167.4 million of merger and integration-related costs related to our merger with VEREIT, and (iii) $14.7 million of reserves to rental revenue (of which $4.5 million was related to straight-line rent receivables). Net income available to common stockholders for the year ended December 31, 2020 was primarily impacted by the following transactions: (i) $147.2 million of provisions for impairment, (ii) $52.5 million in net reserves recorded as a reduction of rental revenue, (iii) a $9.8 million loss on extinguishment of debt due to the January 2020 early redemption of the 5.750% notes due January 2021, and (iv) a $3.5 million executive severance charge for our former CFO. 51 51 51 Table of Contents Table of Contents" }, { "status": "REMOVED", "current_title": null, "prior_title": "IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS", "prior_body": "For information on the impact of new accounting standards on our business, see note 2, Summary of Significant Accounting Policies and Procedures and New Accounting Standards, to our Consolidated Financial Statements. Item 7A: 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." }, { "status": "REMOVED", "current_title": null, "prior_title": "1.Organization and Operation", "prior_body": "Realty Income Corporation (“Realty Income,” the “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”. Over the past 54 years, we have been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients. At December 31, 2022, we owned or held interests in 12,237 properties, with approximately 236.8 million leasable square feet. Information with respect to number of properties, leasable square feet, average initial lease term and initial weighted average cash lease yield is unaudited. Our financial results for the years ended December 31, 2022 and 2021 reflect our merger with VEREIT, Inc. (\"VEREIT\"), following the consummation of the merger on November 1, 2021. Our financial results for the year ended December 31, 2020 do not reflect the merger. For more details, please see note 3, Merger with VEREIT, Inc. and Orion Office REIT Inc. Divestiture." }, { "status": "REMOVED", "current_title": null, "prior_title": "Year ended December 31, 2022 (2)", "prior_body": "Acquisitions - Europe Properties under development (3) Total (4) (1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent, 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 yield includes approximately $10.5 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2022. In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. (2)None of our investments during the year ended December 31, 2022 caused any one client to be 10% or more of our total assets at December 31, 2022. (3)Includes five U.K. development properties that represent an investment of £40.9 million during the year ended December 31, 2022, converted at the applicable exchange rate on the funding date. (4)Our clients occupying the new properties are 71.4% retail, 19.1% gaming, 6.5% industrial and 3.0% other property types (including 2.7% agricultural and 0.3% office) based on rental revenue. Approximately 23% of the rental revenue generated from acquisitions during the year ended December 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the year ended December 31, 2022, which had no associated contingent consideration, were allocated as follows (in millions): Year ended December 31, 2022Acquisitions - USD (1)Acquisitions - SterlingAcquisitions - EuroLand (2)$1,568.6 £640.5 €118.0 Buildings and improvements3,853.6 663.0 156.8 Lease intangible assets (3)458.6 247.8 51.1 Other assets (4)634.1 203.0 5.4 Lease intangible liabilities (5)(94.9)(60.1)— Other liabilities (6)(46.0)(4.9)— $6,374.0 £1,689.3 €331.3" }, { "status": "REMOVED", "current_title": null, "prior_title": "Acquisitions - USD (1)", "prior_body": "Land (2) Lease intangible assets (3) Other assets (4) Lease intangible liabilities (5) Other liabilities (6) (1)Included in USD-denominated acquisitions was an investment of $1.7 billion into a single property in the gaming industry. The acquisition was allocated as (i) $419.5 million to land, (ii) $1.28 billion to buildings and improvements, (iii) $13.2 million of right-of-use assets accounted for as operating leases included in 'Other assets' and (iv) $9.3 million of lease liabilities under operating leases included in 'Other liabilities'. (2)Sterling-denominated land includes £42.5 million of right of use assets under long-term ground leases. (3)The weighted average amortization period for acquired lease intangible assets is 11.6 years. 80 80 80 Table of Contents Table of Contents (4)USD-denominated other assets consists of $585.7 million of financing receivables with above-market terms and $32.8 million of right-of-use assets accounted for as finance leases, and $15.6 million of right of use assets under ground leases. Sterling-denominated other assets consists of £12.2 million of financing receivables with above-market terms, £188.4 million of right-of-use assets accounted for as finance leases and £2.4 million of right-of-use assets accounted for as operating leases. Euro-denominated other assets consists entirely of financing receivables with above-market terms. (5)The weighted average amortization period for acquired lease intangible liabilities is 14.2 years. (6)USD-denominated other liabilities consists of $28.0 million of deferred rent on certain below-market leases, $11.5 million of lease liabilities under ground leases, and $8.6 million of lease liabilities under financing leases. Sterling-denominated other liabilities consists of £2.4 million of lease liabilities under operating leases and £2.5 million of deferred rent on certain below-market leases. The properties acquired during the year ended December 31, 2022 generated total revenues of $211.3 million and net income of $79.0 million during the year ended December 31, 2022. Below is a summary of our acquisitions for the year ended December 31, 2021 (information is unaudited and excludes properties assumed on November 1, 2021 in conjunction with our merger with VEREIT): Number ofPropertiesLeasableSquare Feet(in thousands, unaudited)Investment($ in millions)WeightedAverageLease Term(Years)Initial Weighted Average Cash Lease Yield (1)Year ended December 31, 2021 (2)Acquisitions - U.S.714 14,727 $3,608.6 14.15.5 %Acquisitions - Europe 129 9,196 2,558.9 11.65.5 %Total acquisitions843 23,923 $6,167.5 13.15.5 %Properties under development (3)68 2,682 243.3 15.76.0 %Total (4)911 26,605 $6,410.8 13.25.5 %" }, { "status": "REMOVED", "current_title": null, "prior_title": "Year ended December 31, 2021 (2)", "prior_body": "Acquisitions - Europe Properties under development (3) Total (4) (1)Contractual net operating income used in the calculation of initial weighted average cash yield includes approximately $8.5 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2021. (2)None of our investments during the year ended December 31, 2021 caused any one client to be 10% or more of our total assets at December 31, 2021. (3)Includes one U.K. development property that represents an investment of £7.0 million during the year ended December 31, 2021, converted at the applicable exchange rate on the funding date. (4) Our clients occupying the new properties are 83.6% retail and 16.4% industrial, based on rental revenue. Approximately 40% of the rental revenue generated from acquisitions during the year ended December 31, 2021, was from investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the year ended December 31, 2021, which had no associated contingent consideration, were allocated as follows (in millions): Year ended December 31, 2021Acquisitions - USDAcquisitions - SterlingAcquisitions - EuroLand (1)$1,054.4 £438.9 €106.2 Buildings and improvements1,802.6 888.0 173.4 Lease intangible assets (2)547.8 248.9 34.9 Other assets (3)530.2 40.4 21.9 Lease intangible liabilities (4)(91.6)(7.1)— Other liabilities (5)(127.6)(0.3)(16.0)$3,715.8 £1,608.9 €320.4" }, { "status": "REMOVED", "current_title": null, "prior_title": "amortization", "prior_body": "expense D. Gain on Sales of Real Estate The following table summarizes our properties sold during the periods indicated below, excluding our proportionate share of net proceeds from the disposition of properties by our unconsolidated industrial partnerships for 2022 and 2021 and the properties disposed from the spin-off of office properties to Orion in November 2021 (dollars in millions): Years ended December 31,202220212020Number of properties168 154 126 Net sales proceeds$434.9 $250.3 $262.5 Gain on sales of real estate$102.7 $55.8 $76.2 These property sales do not represent a strategic shift that will have a major effect on our operations and financial results, and therefore do not require presentation as discontinued operations. 82 82 82 Table of Contents Table of Contents E. Investment in Unconsolidated Entities The following is a summary of our investments in unconsolidated entities as of December 31, 2022 (in thousands):" }, { "status": "REMOVED", "current_title": null, "prior_title": "December 31, 2022", "prior_body": "(1) Our ownership interest reflects legal ownership interest. Legal ownership may, at times, not equal our economic interest in the listed properties because of various provisions in certain entity agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, our actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with legal ownership interests. (2) All seven assets held by our industrial partnerships were sold during the year ended December 31, 2022. As the portion of the net proceeds applied to our investment basis that we expected to receive at closing was less than our $121.4 million carrying amount of investment in unconsolidated entities, we recognized an other than temporary impairment of $8.5 million during the year ended December 31, 2022. The other than temporary impairments are included in 'Equity in income and impairment of investment in unconsolidated entities' in the consolidated statements of income and comprehensive income for the periods presented. As a result of the merger with VEREIT, we assumed a preferred equity interest in the development of one distribution center for which we were entitled to receive a cumulative preferred return of 9% per year on the initial contribution of $22.8 million along with a share in the profit earned in the event of the sale of the property to a third party. Under the acquisition method of accounting, this preferred equity interest was adjusted to its fair value of $38.1 million at the time of the merger. During December 2021, the distribution center was sold to a third party and we received proceeds of $38.3 million and recorded a $0.2 million gain on disposition. The aggregate debt outstanding for unconsolidated entities was $431.8 million as of December 31, 2021, all of which was non-recourse to us with limited customary exceptions that varied from loan to loan. There was no aggregate debt outstanding as of December 31, 2022, as all seven properties owned by our industrial partnerships were sold during the year ended December 31, 2022, and the debt underlying each of the seven properties was either defeased or prepaid in connection with the sales. Each of us and our unconsolidated entity partners were subject to the provisions of the applicable entity agreements for our unconsolidated partnerships, which included provisions for when additional contributions might be required to fund certain cash shortfalls." }, { "status": "MODIFIED", "current_title": "Property taxes may increase without notice.", "prior_title": "Property taxes may increase without notice.", "similarity_score": 0.919, "confidence": "high", "key_changes": [ "Reworded sentence: \"Real estate property taxes on our properties (including properties we develop or acquire) may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities.\"" ], "current_body": "Real estate property taxes on our properties (including properties we develop or acquire) may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. While the majority of our leases are under a net lease structure, some or all of such property taxes may not be collectible from our clients.", "prior_body": "The real property taxes on our properties and any other properties that we develop or acquire in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. While 31 31 31 Table of Contents Table of Contents the majority of our leases are under a net lease structure, some or all of such property taxes may not be collectible from our clients." }, { "status": "MODIFIED", "current_title": "7. Revolving Credit Facility and Commercial Paper Programs", "prior_title": "6.Revolving Credit Facility and Commercial Paper Programs", "similarity_score": 0.917, "confidence": "high", "key_changes": [ "Reworded sentence: \"Credit Facility We have a $4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including USD.\"", "Reworded sentence: \"Under our revolving credit facility, our current investment grade credit ratings provide for USD borrowings at the Secured Overnight Financing Rate (\"SOFR\"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at 66 66 66 Table of Contents Table of Contents the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.\"", "Reworded sentence: \"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).\"", "Reworded sentence: \"As of December 31, 2023, the balance of borrowings outstanding under our commercial paper programs was $764.4 million, including €583.0 million of Euro-denominated borrowings, as compared to $701.8 million outstanding commercial paper borrowings, including €361.0 million of EUR borrowings, at December 31, 2022.\"", "Reworded sentence: \"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.\"" ], "current_body": "A. Credit Facility We have a $4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including USD. Our revolving credit facility also has a $1.0 billion expansion option, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings provide for USD borrowings at the Secured Overnight Financing Rate (\"SOFR\"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at 66 66 66 Table of Contents Table of Contents the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR. As of December 31, 2023, we had a borrowing capacity of $4.25 billion available on our revolving credit facility (subject to customary conditions to borrowing) and no outstanding balance as compared to an outstanding balance at December 31, 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 4.8% during the year ended December 31, 2023, and 1.8% during the year ended December 31, 2022. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2023, we were in compliance with the covenants under our revolving credit facility. As of December 31, 2023, credit facility origination costs of $12.3 million are included in 'Other assets, net', as compared to $17.2 million at December 31, 2022, on our consolidated balance sheets. These costs are being amortized over the remaining term of our revolving credit facility. B. Commercial Paper Programs We have a USD-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.5 billion, as well as a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent). Our Euro-denominated unsecured commercial paper program may be issued in USD or various foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper market. The commercial paper ranks on a parity in right of payment with all of our other unsecured senior indebtedness outstanding from time to time, including borrowings under our revolving credit facility, our term loans and our outstanding senior unsecured notes. Proceeds from commercial paper borrowings are used for general corporate purposes. As of December 31, 2023, the balance of borrowings outstanding under our commercial paper programs was $764.4 million, including €583.0 million of Euro-denominated borrowings, as compared to $701.8 million outstanding commercial paper borrowings, including €361.0 million of EUR borrowings, at December 31, 2022. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.8% for the year ended December 31, 2023, and 1.6% for the year ended December 31, 2022. As of December 31, 2023, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 4.4%. We use our $4.25 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper programs. The commercial paper borrowings generally carry a term of less than a year. We 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.", "prior_body": "A. Credit Facility We have a $4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including U.S dollars. Our revolving credit facility also has a $1.0 billion expansion option, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings provide for financing on USD borrowings at the Secured Overnight Financing Rate (\"SOFR\"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR. As of December 31, 2022, credit facility origination costs of $17.2 million are included in other assets, net, as compared to $4.4 million at December 31, 2021, on our consolidated balance sheets. These costs are being amortized over the remaining term of our revolving credit facility. As of December 31, 2022, we had a borrowing capacity of $2.2 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $2.0 billion, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings, as compared to an outstanding balance at December 31, 2021 of $650.0 million, consisting entirely of USD borrowings. The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.8% during the year ended December 31, 2022, and 0.9% during the year ended December 31, 2021. At December 31, 2022, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 2.6%. Our 83 83 83 Table of Contents Table of Contents revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2022, we were in compliance with the covenants under our revolving credit facility. B. Commercial Paper Programs During July 2022, our USD-denominated unsecured commercial paper program was amended to increase the maximum aggregate amount of outstanding notes from $1.0 billion to $1.5 billion. Also during July 2022, we established a new 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), which 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 December 31, 2022, the balance of borrowings outstanding under our commercial paper programs was $701.8 million, including €361.0 million of Euro-denominated borrowings, as compared to $901.4 million outstanding commercial paper borrowings, consisting entirely of USD-denominated borrowings at December 31, 2021. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 1.6% for the year ended December 31, 2022, and 0.2% for the year ended December 31, 2021. As of December 31, 2022, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.4%. 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. As of December 31, 2022, the balance of borrowings outstanding under our commercial paper programs was $701.8 million, including €361.0 million of Euro-denominated borrowings, as compared to $901.4 million outstanding commercial paper borrowings, consisting entirely of USD-denominated borrowings at December 31, 2021. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 1.6% for the year ended December 31, 2022, and 0.2% for the year ended December 31, 2021. As of December 31, 2022, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.4%. 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" }, { "status": "MODIFIED", "current_title": "FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (\"FFO\") AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (\"Normalized FFO\")", "prior_title": "FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS", "similarity_score": 0.909, "confidence": "high", "key_changes": [ "Reworded sentence: \"The following summarizes our FFO and Normalized FFO (dollars in millions, except per share data): Years ended December 31,20232022% ChangeFFO available to common stockholders$2,822.1$2,471.914.2 %FFO per common share (1)$4.07$4.040.7 %Normalized FFO available to common stockholders$2,836.6$2,485.814.1 %Normalized FFO per common share (1)$4.09$4.060.7 % FFO available to common stockholders FFO per common share (1) Normalized FFO available to common stockholders Normalized FFO per common share (1) (1) All per share amounts are presented on a diluted per common share basis.\"", "Reworded sentence: \"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): Years ended December 31,20232022Net income available to common stockholders$872,309 $869,408 Depreciation and amortization1,895,177 1,670,389 Depreciation of furniture, fixtures and equipment(2,239)(2,014)Provisions for impairment of real estate82,208 25,860 Gain on sales of real estate(25,667)(102,957)Proportionate share of adjustments for unconsolidated entities (1)4,205 12,812 FFO adjustments allocable to noncontrolling interests(3,855)(1,605)FFO available to common stockholders$2,822,138 $2,471,893 FFO allocable to dilutive noncontrolling interests5,552 3,979 Diluted FFO$2,827,690 $2,475,872 FFO available to common stockholders$2,822,138 $2,471,893 Merger and integration-related costs14,464 13,897 Normalized FFO available to common stockholders$2,836,602 $2,485,790 Normalized FFO allocable to dilutive noncontrolling interests5,552 3,979 Diluted Normalized FFO$2,842,154 $2,489,769 FFO per common share:Basic$4.08 $4.04 Diluted$4.07 $4.04 Normalized FFO per common share:Basic$4.10 $4.06 Diluted$4.09 $4.06 Distributions paid to common stockholders$2,111,793 $1,813,432 FFO available to common stockholders in excess of distributions paid to common stockholders$710,345 $658,461 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders$724,809 $672,358 Weighted average number of common shares used for FFO and Normalized FFO:Basic692,298 611,766 Diluted694,819 613,473 Proportionate share of adjustments for unconsolidated entities (1) (1)Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022.\"", "Reworded sentence: \"41 41 41 Table of Contents Table of Contents\"" ], "current_body": "We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gain on property sales. We define Normalized FFO, a non-GAAP financial measure, as FFO excluding merger and integration-related costs related to our merger with VEREIT. We define 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): Years ended December 31,20232022% ChangeFFO available to common stockholders$2,822.1$2,471.914.2 %FFO per common share (1)$4.07$4.040.7 %Normalized FFO available to common stockholders$2,836.6$2,485.814.1 %Normalized FFO per common share (1)$4.09$4.060.7 % FFO available to common stockholders FFO per common share (1) Normalized FFO available to common stockholders Normalized FFO per common share (1) (1) All per share amounts are presented on a diluted per common share basis. 40 40 40 Table of Contents Table of Contents The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. GAAP measure) to FFO and Normalized FFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted computation per share (dollars in thousands, except per share amounts): Years ended December 31,20232022Net income available to common stockholders$872,309 $869,408 Depreciation and amortization1,895,177 1,670,389 Depreciation of furniture, fixtures and equipment(2,239)(2,014)Provisions for impairment of real estate82,208 25,860 Gain on sales of real estate(25,667)(102,957)Proportionate share of adjustments for unconsolidated entities (1)4,205 12,812 FFO adjustments allocable to noncontrolling interests(3,855)(1,605)FFO available to common stockholders$2,822,138 $2,471,893 FFO allocable to dilutive noncontrolling interests5,552 3,979 Diluted FFO$2,827,690 $2,475,872 FFO available to common stockholders$2,822,138 $2,471,893 Merger and integration-related costs14,464 13,897 Normalized FFO available to common stockholders$2,836,602 $2,485,790 Normalized FFO allocable to dilutive noncontrolling interests5,552 3,979 Diluted Normalized FFO$2,842,154 $2,489,769 FFO per common share:Basic$4.08 $4.04 Diluted$4.07 $4.04 Normalized FFO per common share:Basic$4.10 $4.06 Diluted$4.09 $4.06 Distributions paid to common stockholders$2,111,793 $1,813,432 FFO available to common stockholders in excess of distributions paid to common stockholders$710,345 $658,461 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders$724,809 $672,358 Weighted average number of common shares used for FFO and Normalized FFO:Basic692,298 611,766 Diluted694,819 613,473 Proportionate share of adjustments for unconsolidated entities (1) (1)Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022. We consider FFO and Normalized FFO to be appropriate supplemental measures of a REIT’s operating performance as they are based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO, and adds back merger and integration-related costs, for Normalized FFO. 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. 41 41 41 Table of Contents Table of Contents", "prior_body": "We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trusts' definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gain on property sales. We define Normalized FFO, a non-GAAP financial measure, as FFO excluding merger and integration-related costs related to our merger with VEREIT. We define 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): Years ended December 31,% Increase/(Decrease)2022202120202022versus 20212021versus2020FFO available to common stockholders$2,471.9$1,240.6$1,142.199.3 %8.6 %FFO per share (1)$4.04$2.99$3.3135.1 %(9.7)%Normalized FFO available to common stockholders$2,485.8$1,408.0$1,142.176.5 %23.3 %Normalized FFO per share (1)$4.06$3.39$3.3119.8 %2.4 % FFO available to common stockholders FFO per share (1) Normalized FFO available to common stockholders Normalized FFO per share (1) (1) All per share amounts are presented on a diluted per common share basis. FFO and Normalized FFO for the years ended December 31, 2022, 2021 and 2020 were impacted by the same transactions listed under \"Net Income Available to Common Stockholders\" on page 51, with the exception of provisions for impairment, which do not impact FFO and Normalized FFO. 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): 54 54 54 Table of Contents Table of Contents Years ended December 31,202220212020Net income available to common stockholders$869,408 $359,456 $395,486 Depreciation and amortization1,670,389 897,835 677,038 Depreciation of furniture, fixtures and equipment(2,014)(1,026)(588)Provisions for impairment25,860 38,967 147,232 Gain on sales of real estate(102,957)(55,798)(76,232)Proportionate share of adjustments for unconsolidated entities (1)12,812 1,931 — FFO adjustments allocable to noncontrolling interests(1,605)(785)(817)FFO available to common stockholders$2,471,893 $1,240,580 $1,142,119 FFO allocable to dilutive noncontrolling interests3,979 — 1,418 Diluted FFO$2,475,872 $1,240,580 $1,143,537 FFO available to common stockholders$2,471,893 $1,240,580 $1,142,119 Merger and integration-related costs13,897 167,413 — Normalized FFO available to common stockholders$2,485,790 $1,407,993 $1,142,119 Normalized FFO allocable to dilutive noncontrolling interests3,979 1,642 1,418 Diluted Normalized FFO$2,489,769 $1,409,635 $1,143,537 FFO per common share, basic and diluted$4.04 $2.99 $3.31 Normalized FFO per common share:Basic$4.06 $3.40 $3.31 Diluted$4.06 $3.39 $3.31 Distributions paid to common stockholders$1,813,432 $1,169,026 $964,167 FFO available to common stockholders in excess of distributions paid to common stockholders$658,461 $71,554 $177,952 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders$672,358 $238,967 $177,952 Weighted average number of common shares used for FFO:Basic611,765,815 414,535,283 345,280,126 Diluted613,472,663 414,769,846 345,878,377 Weighted average number of common shares used for Normalized FFO:Basic611,765,815 414,535,283 345,280,126 Diluted613,472,663 415,270,063 345,878,377 Proportionate share of adjustments for unconsolidated entities (1) (1)Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022. We consider FFO and Normalized FFO to be appropriate supplemental measures of a REIT’s operating performance as they are based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for FFO, and adds back merger and integration-related costs, for Normalized FFO. 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. 55 55 55 Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "1. Summary of Significant Accounting Policies", "prior_title": "2. Summary of Significant Accounting Policies and Procedures and New Accounting Standards", "similarity_score": 0.905, "confidence": "high", "key_changes": [ "Added sentence: \"Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) was founded in 1969 and is organized as a Maryland corporation.\"", "Added sentence: \"We invest in commercial real estate and have elected to be taxed as a real estate investment trust (\"REIT\").\"", "Added sentence: \"We are listed on the New York Stock Exchange (\"NYSE\") under the symbol “O”.\"", "Added sentence: \"As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 states of the United States (\"U.S.\"), Puerto Rico, the United Kingdom (\"U.K.\"), France, Germany, Ireland, Italy, Portugal, and Spain, with approximately 272.1 million square feet of leasable space.\"", "Added sentence: \"Information with respect to number of properties, leasable square feet, average initial lease term and initial weighted average cash yield is unaudited.\"" ], "current_body": "Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) was founded in 1969 and is organized as a Maryland corporation. We invest in commercial real estate and have elected to be taxed as a real estate investment trust (\"REIT\"). We are listed on the New York Stock Exchange (\"NYSE\") under the symbol “O”. As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 states of the United States (\"U.S.\"), Puerto Rico, the United Kingdom (\"U.K.\"), France, Germany, Ireland, Italy, Portugal, and Spain, with approximately 272.1 million square feet of leasable space. Information with respect to number of properties, leasable square feet, average initial lease term and initial weighted average cash yield is unaudited. Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (\"U.S. GAAP\"). Intercompany accounts and transactions are eliminated in consolidation. The U.S. Dollar (\"USD\") is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD. For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income', (\"AOCI\"), on our consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period. We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and derivative (loss) gain, net' in our consolidated statements of income and comprehensive income. In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items. Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification (\"ASC\") 810, Consolidation. Voting interest entities (\"VOEs\") are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests. Variable interest entities (\"VIEs\") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. At December 31, 2023, we are considered the primary beneficiary of Realty Income, L.P. and certain investments, including investments in joint ventures. Below is a summary of selected financial data of such consolidated VIEs, included on our consolidated balance sheets at December 31, 2023 and 2022 (in thousands): 54 54 54 Table of Contents Table of Contents December 31, 2023December 31, 2022Net real estate$2,866,272$920,032 Total assets$3,588,720$1,082,346 Total liabilities$134,366$60,127 Net real estate Total assets Total liabilities The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that were created or assumed as part of a business combination or asset acquisition were recognized at fair value as of the date of the transaction (see note 12, Noncontrolling Interests). Reclassification. Certain prior period amounts have been reclassified to conform to the current year presentation. Value-added tax receivable is included in 'Other assets, net', on our consolidated balance sheets. Previously, this was categorized as 'Accounts receivable, net' on our consolidated balance sheets. Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. For more detail, see note 17, Net Income per Common Share. Net Income per Common Share. Cash Equivalents and Restricted Cash. We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Restricted cash includes cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the U.S. Internal Revenue Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e. escrow deposits for future acquisitions). Cash accounts maintained on behalf of Realty Income in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, Realty Income has not experienced any losses in such accounts. Income Taxes. We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S. income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries (\"TRS\"). A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of TRS entities enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. For our international territories, we are liable for taxes in the 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, 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. 55 55 55 Table of Contents Table of Contents We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements. Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a 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 indices are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements. Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis. Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms. We assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under ASC 842, Leases. We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all of lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized. Loans Receivable. The loans we acquired during 2023 are classified as held for investment and are carried at their amortized cost basis. We recognize interest income on loans receivable using the effective-interest method. Direct costs associated with originating loans, along with any premium or discount, are deferred and amortized as an adjustment to interest income over the term of the loan using the effective interest method. When management identifies the full recovery of the contractually specified payments of principal and interest of a loan is less than probable, we evaluate the expected loss amount and place it on non-accrual status. We made the accounting policy election to record accrued interest on our loan portfolio separate from our loan receivable and other lending investments. These loans and the related interest receivable are presented in 'Other assets, net' on our consolidated balance sheets. Loans Receivable . The loans we acquired during 2023 are classified as held for investment and Allowance for Credit Losses. The allowance for credit losses, which is recorded as a reduction to loans receivable and financing receivable within 'Other assets, net' on our consolidated balance sheets, is measured using a probability of default method based on our client's respective credit ratings and the expected value of the underlying collateral upon its repossession. Included in our model are factors that incorporate forward-looking information. Allowance for credit losses is presented in 'Provisions for impairment' in our consolidated statements of income and comprehensive income. During the year ended December 31, 2023, we recognized a provision for credit losses of $4.9 million, which includes $2.5 million of allowances on loans receivable and $2.4 million of allowances on financing receivables. Gain on Sales of Real Estate. When real estate is sold, the carrying amount of the applicable assets is derecognized with a corresponding gain from the sale recognized in our consolidated statements of income and comprehensive income. We record a gain on sale of real estate pursuant to provisions under ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. We determine whether we would have a controlling financial interest in the property after the sale. We record a gain from the sale of real estate provided that various criteria, relating to the terms of the sale and any subsequent involvement by us with the real estate, have been met. Gain on Sales of Real Estate . When real estate is sold, the carrying amount of the applicable assets is derecognized with a corresponding gain from the sale recognized in our consolidated statements of income and comprehensive income. We record a gain on sale of real estate pursuant to provisions under ASC 610-20 , Gains and Losses from the Derecognition of Nonfinancial Assets Allocation of the Purchase Price of Real Estate Acquisitions. We evaluate whether or not substantially all of the value of acquired assets is concentrated in a single identifiable asset or group of identifiable assets to determine whether a transaction is accounted for as an asset acquisition or a business combination. A majority of our 56 56 56 Table of Contents Table of Contents acquisitions qualify as asset acquisitions, and the transaction costs associated with those acquisitions are capitalized. On the other hand, we expense the transaction costs and categorize them as merger and integration-related costs on our consolidated statements of income and comprehensive income for transactions that qualify as a business combination. For business combinations, we recognize the amount of any purchase consideration that exceeds the fair value of all identified assets acquired and liabilities assumed as goodwill and may record measurement period adjustments within one year of the acquisition date as permitted under ASC 805, Business Combinations. For asset acquisitions, we allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value of in-place leases and the value of in-place leases, as applicable. Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent. 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 values of the land, building and improvements, and identified intangible assets and liabilities, utilizing market-based evidence and commonly applied valuation approaches. In addition, any assumed notes payable or mortgages 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, client 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. Our estimated fair value determinations are based on management’s judgment, utilizing various factors, including: market land and building values, market rental rates, discount rates and capitalization rates. Our methodology for measuring and allocating the fair value of real estate acquisitions includes both observable market data (categorized as level 2 on the three-level valuation hierarchy of ASC 820, Fair Value Measurement), and unobservable inputs that reflect our own internal assumptions (categorized as level 3 under ASC 820). Given the significance of the unobservable inputs we believe the allocations of fair value of real estate acquisitions should be categorized as level 3 under ASC 820. From time to time, we have used, and may continue to use, the assistance of independent third parties specializing in real estate valuations to prepare our purchase price allocations. The allocation of tangible assets (which includes land and buildings/improvements) of an acquired property with an in-place lease is based upon relative fair value. Land is typically valued utilizing the sales comparison (or market) approach. Buildings and improvements are typically valued under the replacement cost approach. In allocating the fair value to identified intangibles for above-market or below-market leases, an amount is recorded based on the present value of the difference between (i) the contractual amount to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rate for the corresponding in-place lease, measured over the remaining assumed contract term of the lease. The value of in-place leases is determined by our estimated costs related to acquiring a client and the carrying costs that would be incurred over the vacancy period to locate a client if the property were vacant, considering market conditions and costs to execute similar leases at the time of acquisition. 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 consolidated statements of income and comprehensive income. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are recorded to revenue or expense as appropriate. Real Estate and Lease Intangibles Held for Sale. We generally reclassify assets to held for sale when the disposition has been approved, there are no known contingencies relating to the sale and the consummation of the disposition is considered probable within one year. Upon classifying a real estate investment as held for sale, we will no longer recognize depreciation expense related to the depreciable assets of the property. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less the estimated cost to dispose of the assets. Twenty-nine properties were classified as held for sale at December 31, 2023. If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we will reclassify the property as held for investment. We measure and record 57 57 57 Table of Contents Table of Contents a property that is reclassified as held for investment at the lower of (i) its carrying value before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment or (ii) the estimated fair value at the date of the subsequent decision not to sell. Investment in Unconsolidated Entities. Investments in unconsolidated entities of which we are not considered the primary beneficiary, include VIEs and are accounted for using the equity method as we have the ability to exercise significant influence over operating and financing policies of these investments. We initially recognize the fair value of our contribution as an equity method investment. We subsequently adjust these balances for our proportionate share of net earnings/losses of the entities, distributions received and contributions made. Transaction costs related to the formation of equity method investments are also capitalized, resulting in a basis difference. This basis difference is amortized over the estimated useful life of the respective underlying assets and/or liabilities. The carrying value of our investment is included in 'Investment in unconsolidated entities' on our consolidated balance sheets. We record our proportionate share of net income from the unconsolidated entities in 'Equity in income and impairment of investment in unconsolidated entities' in our consolidated statements of income and comprehensive income. With regard to distributions from unconsolidated entities, we have elected the nature of distribution approach as the information is available to us to determine the nature of the underlying activity that generated the distributions. In accordance with such approach, cash flows generated from the operations of an unconsolidated entity are classified as a return on investment (cash inflow from operating activities) and cash flows that are generated from other activities, such as property sales, debt refinancing or sale and redemptions of our investments of our investments are classified as a return of investment (cash inflow from investing activities). Our contribution to the unconsolidated entities or any distributions from them as returns of investment are classified as investing activities. Our investment in unconsolidated entities includes preferred interests. Upon acquisition, we assess whether such investment should be considered debt or equity securities based on investment terms. As of December 31, 2023, our investment balance includes preferred interests classified as equity securities without a readily determinable fair value, for which we elect to apply the measurement alternative and record the value of the investment at cost, less any applicable impairment. Goodwill. Upon the closing of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. Goodwill. Deferred Financing Costs. Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining or originating financing. Deferred financing costs, other than those associated with the line of credit, are presented on our consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. Deferred financing costs related to the line of credit are included in 'other assets, net' in the accompanying consolidated balance sheets. These costs are amortized to interest expense over the terms of the respective financing agreements that approximates the effective interest method. Deferred Financing Costs. Depreciation and Amortization. Land, buildings and improvements are recorded and stated at cost. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized. We cease capitalization when the property is available for occupancy upon substantial completion of property improvements to accommodate the client's use, but in any event no later than one year from the completion of major construction activity. Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: 58 58 58 Table of Contents Table of Contents Buildings25 to 35 yearsBuilding improvements4 to 35 yearsEquipment5 to 25 yearsLease commissions and property improvements to accommodate the client's useThe shorter of the term of the related lease or useful lifeAcquired in-place leasesRemaining terms of the respective leases 25 to 35 years 4 to 35 years 5 to 25 years Provisions for Impairment - Real Estate Assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value. Key assumptions that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures and property sales capitalization rates. For further details, see note 13, Fair Value Measurements. Provisions for Impairment - Goodwill. Goodwill is not amortized, but is subject to impairment reviews annually, or more frequently if necessary. Goodwill is qualitatively assessed to determine whether a quantitative impairment assessment is necessary. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. We perform our annual goodwill impairment assessment as of June 30. During the years ended December 31, 2023, 2022 and 2021, there were no impairments of goodwill. Provisions for Impairment - Investment in Unconsolidated Entities. During our ownership of properties that are accounted for under the equity method and considered unconsolidated entities, and when circumstances indicate that a decrease in the value of an equity method investment has occurred that is other than temporary, we recognize an impairment loss, which requires significant judgment. To determine whether the impairment loss is other-than-temporary, we consider whether it has the ability and intent to hold the investment until the carrying value is fully recovered. We evaluate the impairment of our investment in unconsolidated entities in accordance with accounting standards for equity investments by first reviewing each investment for indicators of impairment. If indicators are present, we estimate the fair value of the investments. If the carrying value of the investment is greater than the estimated fair value, we make an assessment of whether the impairment is temporary or other-than-temporary. In making this assessment, we consider the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the entity, and our intent and ability to retain the interest long enough for a recovery in market value. The investment is then reduced to its estimated fair value if conclusions indicate the impairment is other than temporary. Provisions for Impairment - Investment in Unconsolidated Entities. Equity Offering Costs. Underwriting commissions and offering costs have been reflected as a reduction of additional paid-in-capital on our consolidated balance sheets. Derivative and Hedging Activities. Derivatives are financial arrangements among two or more parties with returns linked to or “derived” from an underlying equity, debt, commodity, other asset, liability, interest rate, foreign exchange rate or another index, or the occurrence or nonoccurrence of a specified event. The settlement of a derivative is determined by its underlying notional amount specified in the contract. Derivative contracts may be entered into outright or embedded within a non-derivative host contract, and may be listed, traded on exchanges or privately negotiated directly between two parties. We actively manage interest rate and foreign currency exposures arising from our liquidity and funding activities using derivative instruments. We record all derivatives on the balance sheet at fair value. The majority of inputs used to value our derivatives fall within level 2 of the fair value hierarchy. The recognition of changes in the fair value of derivatives is recorded in net income unless the derivative is designated as a cash flow or net investment hedge, in which case the change in fair value is recorded in other comprehensive income and subsequently reclassified to a designated account in our consolidated statements of income and comprehensive income in the periods during which the hedged transaction affects earnings. Segment Reporting. Our business is characterized as owning and leasing commercial properties under long-term, mostly triple net lease agreements (whereby clients are responsible for property taxes, insurance and maintenance 59 59 59 Table of Contents Table of Contents costs), and these economic characteristics are similar across various property types, geographic locations, and industries in which our clients operate. Information reviewed by our chief operating decision maker in evaluating performance and allocating resources are primarily operating results and cash flow analysis for the overall company. Therefore, we operate and manage the business in one operating and reportable segment. ASC 280, Segment Reporting, requires certain entity-wide annual disclosures for entities with a single reportable segment. The following table disaggregates domestic and international revenue by major asset types and geographic regions (in millions): ASC 280, Segment Reporting, Years ended December 31,2023U.S.U.K.Other (1)TotalRetail$2,754.2 $374.0 $65.4 $3,193.6 Industrial 515.4 43.7 — 559.1 Other (2)205.5 — — 205.5 Rental (including reimbursable)$3,475.1 $417.7 $65.4 $3,958.2 Other revenue 120.8 Total revenue $4,079.0 2022U.S.U.K.Other (1)TotalRetail$2,455.9 $243.3 $30.9 $2,730.1 Industrial 465.2 30.2 — 495.4 Other (2)74.2 — — 74.2 Rental (including reimbursable)$2,995.3 $273.5 $30.9 $3,299.7 Other revenue 44.0 Total revenue $3,343.7 2021U.S.U.K.Other (1)TotalRetail$1,566.7 $138.9 $4.2 $1,709.8 Industrial 261.5 9.6 — 271.1 Other (2)84.1 — — 84.1 Rental (including reimbursable)$1,912.3 $148.5 $— $2,065.0 Other revenue 15.5 Total revenue $2,080.5 Other (1) Other (2) Other (1) Other (2) Other (1) Other (2) (1) Other includes properties in Spain, starting in September 2021, in Italy, starting in October 2022, in Ireland, starting in June 2023, and in France, Germany, and Portugal starting in December 2023. (2) Other includes the following asset types: office, agriculture and gaming. Long-lived assets include items such as property, plant, equipment and right-of-use assets subject to operating and finance leases. As of December 31, 2023, no individual country or asset-type represented more than 10% of total revenue, other than as presented in the tables above. In addition, as of December 31, 2023, no individual country or asset-type represented more than 10% of the total assets, other than as presented in the tables below. The following table disaggregates domestic and international total long-lived assets (in millions): As of December 31,20232022U.S.U.K.Other (1)TotalU.S.U.K.Other (1)TotalLong-lived assets$36,577.1 $6,787.1 $1,496.1 $44,860.3 $33,685.6 $4,596.1 $582.7 $38,864.4 Remaining assets12,919.1 10,808.7 Total assets$57,779.4 $49,673.1 Other (1) Other (1) (1) Other includes properties in Spain, starting in September 2021, in Italy, starting in October 2022, in Ireland, starting in June 2023, and in France, Germany, and Portugal, starting in December 2023. (1) Other includes properties in Spain, starting in September 2021, in Italy, starting in October 2022, 60 60 60 Table of Contents Table of Contents", "prior_body": "Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (\"U.S. GAAP\"). Intercompany accounts and transactions are eliminated in consolidation. The U.S. Dollar (\"USD\") is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD. For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income', (\"AOCI\"), in the consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period. We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and derivative (loss) gain, net' in the consolidated statements of income and comprehensive income. Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification (\"ASC\") 810, Consolidation. Voting interest entities are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests. Variable interest entities (\"VIEs\") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. 68 68 68 Table of Contents Table of Contents The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that were created or assumed as part of a business combination or asset acquisition were recognized at fair value as of the date of the transaction (see note 11, Noncontrolling Interests). At December 31, 2022, Realty Income, L.P. and certain of our 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 on our consolidated balance sheets at December 31, 2022 and 2021 (in thousands): December 31, 2022December 31, 2021Net real estate$920,032$688,229 Total assets$1,082,346$795,670 Total liabilities$60,127$57,057 Net real estate Total assets Total liabilities Reclassification. Certain reclassifications have been made to the prior years’ consolidated statements of cash flows to conform to current year presentation. Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Use of Estimates . The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 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. For more detail, see note 15, Net Income per Common Share. Cash Equivalents and Restricted Cash. We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Restricted cash includes cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the U.S. Internal Revenue Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e. escrow deposits for future acquisitions). Cash accounts maintained on behalf of Realty Income in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, Realty Income has not experienced any losses in such accounts. Income Taxes. We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S. income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries (\"TRS\"). A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of a TRS 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, 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. 69 69 69 Table of Contents Table of Contents We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements. We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements. Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Any rental revenue contingent upon our client’s sales 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 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 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. As of December 31, 2022, the majority of concessions granted to our clients as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged. In accordance with the guidance provided by the Financial Accounting Standards Board (\"FASB\") staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in 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 also accounted for as lease modifications, have impacted our rental revenue by an insignificant amount. Unless otherwise specified, references to reserves recorded as a reduction of rental revenue include amounts reserved for in the current period, as well as unrecognized contractual rental revenue and unrecognized straight-line rental revenue for leases accounted for on a cash basis. The following table summarizes net reserves to rental revenue (in millions): to rental revenue (in millions): Years ended December 31,202220212020Rental revenue reserves$2.3 $10.2 $44.1 Straight-line rent reserves1.7 4.5 8.4 Total rental revenue reserves$4.0 $14.7 $52.5 As of December 31, 2022, other than the information related to the reserves recorded to date, we do 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 conversations regarding rent collections for our clients affected by the COVID-19 pandemic are ongoing and we do not currently 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. 70 70 70 Table of Contents Table of Contents Gain on Sales of Real Estate. When real estate is sold, the carrying amount of the applicable assets is derecognized with a corresponding gain from the sale recognized in our consolidated statements of income and comprehensive income. We record a gain on sale of real estate pursuant to provisions under ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. We determine whether we would have a controlling financial interest in the property after the sale. We record a gain from the sale of real estate provided that various criteria, relating to the terms of the sale and any subsequent involvement by us with the real estate, have been met. Gain on Sales of Real Estate . When real estate is sold, the carrying amount of the applicable assets is derecognized with a corresponding gain from the sale recognized in our consolidated statements of income and comprehensive income. We record a gain on sale of real estate pursuant to provisions under ASC 610-20 , Gains and Losses from the Derecognition of Nonfinancial Assets Allocation of the Purchase Price of Real Estate Acquisitions. A majority of our acquisitions qualify as asset acquisitions and the transaction costs associated with those acquisitions are capitalized. However, our merger with VEREIT was comprised of both inputs and substantive processes that together significantly contributed to the ability to create outputs and, therefore, was considered a business. As a result, the merger with VEREIT qualified as a business combination and, accordingly, the transaction costs were expensed and categorized as merger and integration-related costs on our consolidated statements of income and comprehensive income. In accordance with ASC Topic 805, Business Combinations, adjustments to the allocated purchase price were made within one year of the closing date of our merger with VEREIT as acquisition date uncertainties were resolved (for more details on our merger with VEREIT, please see note 3, Merger with VEREIT, Inc. and Orion Office REIT Inc. Divestiture). Apart from our merger with VEREIT, a majority of our acquisitions qualify as asset acquisitions. Therefore when acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value of in-place leases and the value of in-place leases, as applicable. Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent. 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 values of the land, building and improvements, and identified intangible assets and liabilities, utilizing market-based evidence and commonly applied valuation approaches. In addition, any assumed notes payable or mortgages 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, client 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. Our estimated fair value determinations are based on management’s judgment, utilizing various factors, including: market land and building values, market rental rates, discount rates and capitalization rates. Our methodology for measuring and allocating the fair value of real estate acquisitions includes both observable market data (categorized as level 2 on the three-level valuation hierarchy of ASC Topic 820, Fair Value Measurement), and unobservable inputs that reflect our own internal assumptions (categorized as level 3 under ASC Topic 820). Given the significance of the unobservable inputs we believe the allocations of fair value of real estate acquisitions should be categorized as level 3 under ASC Topic 820. From time to time, we have used, and may continue to use, the assistance of independent third parties specializing in real estate valuations to prepare our purchase price allocations. The allocation of tangible assets (which includes land and buildings/improvements) of an acquired property with an in-place lease is based upon relative fair value. Land is typically valued utilizing the sales comparison (or market) approach. Buildings and improvements are typically valued under the replacement cost approach. In allocating the fair value to identified intangibles for above-market or below-market leases, an amount is recorded based on the present value of the difference between (i) the contractual amount to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rate for the corresponding in-place lease, measured over the remaining assumed contract term of the lease. The value of in-place leases is determined by our estimated costs related to acquiring a client and the carrying costs that would be incurred over the vacancy period to locate a client if the property were vacant, considering market conditions and costs to execute similar leases at the time of acquisition. 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 consolidated statements of income and comprehensive income. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of 71 71 71 Table of Contents Table of Contents the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are recorded to revenue or expense as appropriate. Real Estate and Lease Intangibles Held for Sale. We generally reclassify assets to held for sale when the disposition has been approved, there are no known contingencies relating to the sale and the consummation of the disposition is considered probable within one year. Upon classifying a real estate investment as held for sale, we will no longer recognize depreciation expense related to the depreciable assets of the property. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less the estimated cost to dispose of the assets. Twenty-two properties were classified as held for sale at December 31, 2022. If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we will reclassify the property as held for investment. We measure and record a property that is reclassified as held for investment at the lower of (i) its carrying value before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment or (ii) the estimated fair value at the date of the subsequent decision not to sell. Investment in Unconsolidated Entities. During the year ended December 31, 2022, all seven properties owned by our industrial partnerships and accounted for under the equity method were sold. For further details, see note 5, Investments in Real Estate. Investment in Unconsolidated Entities. During the year ended December 31, 2022, all seven properties owned by our industrial partnerships and accounted for under the equity method were sold. For further details, see note 5, Investments in Real Estate. We accounted for our investment in unconsolidated entity arrangements using the equity method of accounting as we had the ability to exercise significant influence, but not control, over operating and financing policies of these investments. We had determined that none of the unconsolidated entities would be considered VIEs under the applicable accounting guidance. Our equity method investments were acquired in our merger with VEREIT. As a result, the investments were recorded at fair value and subsequently would be adjusted for our share of equity in the entities' earnings and distributions received. The step-up in fair value was allocated to the individual investment assets and liabilities and were amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the assumed debt. The carrying value of our investment was included in 'Investment in unconsolidated entities' in the accompanying consolidated balance sheet as of December 31, 2021. We recorded our proportionate share of net income from the unconsolidated entities in 'Equity in income and impairment of investment in unconsolidated entities' in the consolidated statements of income and comprehensive income for the years ended December 31, 2022 and 2021. Goodwill. Upon the closing of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. In connection with our merger with VEREIT, we recorded goodwill as a result of consideration exceeding the net assets acquired. For further details, see note 3, Merger with VEREIT, Inc. and Orion Office REIT Inc. Divestiture. Deferred Financing Costs. Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining or originating financing. Deferred financing costs, other than those associated with the line of credit, are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. Deferred financing costs related to the line of credit are included in other assets, net in the accompanying consolidated balance sheets. These costs are amortized to interest expense over the terms of the respective financing agreements that approximates the effective interest method. Depreciation and Amortization. Land, buildings and improvements are recorded and stated at cost. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized. We cease capitalization when the property is available for occupancy upon substantial completion of property improvements to accommodate the client's use, but in any event no later than one year from the completion of major construction activity. Depreciation and Amortization . Land, buildings and improvements are recorded and stated at cost. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized. We cease capitalization when the property is available for occupancy upon substantial completion of property improvements to accommodate the client's use, but in any event no later than one year from the completion of major construction activity. Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: 72 72 72 Table of Contents Table of Contents Buildings25 years or 35 yearsBuilding improvements4 to 35 yearsEquipment5 to 25 yearsLease commissions and property improvements to accommodate the client's useThe shorter of the term of the related lease or useful lifeAcquired in-place leasesRemaining terms of the respective leases 25 years or 35 years 4 to 35 years 5 to 25 years Provisions for Impairment - Real Estate Assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value. Key assumptions that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures and property sales capitalization rates. For further details, see note 12, Financial Instruments and Fair Value Measurements. Provisions for Impairment - Goodwill. Goodwill is not amortized, but is subject to impairment reviews annually, or more frequently if necessary. Goodwill is qualitatively assessed to determine whether a quantitative impairment assessment is necessary. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. We perform our annual goodwill impairment assessment as of June 30. During the years ended December 31, 2022, 2021 and 2020, there were no impairments of goodwill. Provisions for Impairment - Investment in Unconsolidated Entities. As part of our merger with VEREIT in November 2021, we acquired seven properties owned by industrial partnerships. These properties, which were subsequently sold during the year ended December 31, 2022, were accounted for under the equity method and considered unconsolidated entities. During our ownership of those properties and when circumstances indicated that a decrease in the value of an equity method investment had occurred that was other than temporary, we recognized an impairment loss, which required significant judgment. To determine whether the impairment loss was other-than-temporary, we considered whether it had the ability and intent to hold the investment until the carrying value was fully recovered. We evaluated the impairment of our investment in unconsolidated entities in accordance with accounting standards for equity investments by first reviewing each investment for indicators of impairment. If indicators were present, we estimated the fair value of the investments. If the carrying value of the investment was greater than the estimated fair value, we made an assessment of whether the impairment was temporary or other-than-temporary. In making this assessment, we considered the length of time and the extent to which fair value had been less than cost, the financial condition and near-term prospects of the entity, and our intent and ability to retain the interest long enough for a recovery in market value. The investment was reduced to its estimated fair value if conclusions indicated the impairment was other than temporary. For further details, see note 5, Investments in Real Estate. Equity Offering Costs. Underwriting commissions and offering costs have been reflected as a reduction of additional paid-in-capital on our consolidated balance sheets. Equity Offering Costs. Underwriting commissions and offering costs have been reflected as a reduction of additional paid-in-capital on our consolidated balance sheets. Derivative and Hedging Activities. Derivatives are financial arrangements among two or more parties with returns linked to or “derived” from an underlying equity, debt, commodity, other asset, liability, interest rate, foreign exchange rate or another index, or the occurrence or nonoccurrence of a specified event. The settlement of a derivative is determined by its underlying notional amount specified in the contract. Derivative contracts may be entered into outright or embedded within a non-derivative host contract, and may be listed, traded on exchanges or privately negotiated directly between two parties. Derivative and Hedging Activities . Derivatives are financial arrangements among two or more parties with returns linked to or “derived” from an underlying equity, debt, commodity, other asset, liability, interest rate, foreign exchange rate or another index, or the occurrence or nonoccurrence of a specified event. The settlement of a derivative is determined by its underlying notional amount specified in the contract. Derivative contracts may be entered into outright or embedded within a non-derivative host contract, and may be listed, traded on exchanges or privately negotiated directly between two parties. We actively manage our risk exposures which arise from our liquidity and funding activities using derivative instruments which hedge for interest rate risk, foreign exchange risk, or both. We record all derivatives on the balance sheet at fair value. The recognition of changes in the fair value of derivatives is recorded in net income unless the derivative is designated in a cash flow or net investment hedge accounting relationship in which case the change in fair value is recorded in other comprehensive income until such time as the designated hedged item impacts net income. 73 73 73 Table of Contents Table of Contents Segment Reporting. During the second quarter of 2022, a re-evaluation of our business and management structure led to a change in identification of operating and reportable segments. As we have grown in size and scale over recent years, including through the acquisition of VEREIT in November 2021, management has shifted its focus to operating performance, seeking investments with attractive yields and risk adjusted returns regardless of client industry or geography. Our chief operating decision maker relies primarily on cash flow analysis at the consolidated level to make decisions about allocating resources. As a result, we reorganized our business activities into one operating and reportable segment. ASC Topic 280, Segment Reporting, establishes standards for the manner in which enterprises report information about operating segments. We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis (whereby clients are responsible for property taxes, insurance and maintenance costs). That business activity spans various geographic boundaries and includes property types and clients engaged in various industries, but ultimately all business activity involves similar economic characteristics of owning and leasing commercial properties under long-term, net lease agreements. Therefore, we operate and manage the business in one operating and reportable segment. This segmental presentation is consistent with the information provided to our chief operating decision maker to make decisions about allocating resources and assessing our performance. ASC 280 requires certain entity-wide annual disclosures for entities with a single reportable segment. The following table disaggregates domestic and international revenue by major asset types and geographic regions (in millions): Segment Reporting. During the second quarter of 2022, a re-evaluation of our business and management structure led to a change in identification of operating and reportable segments. As we have grown in size and scale over recent years, including through the acquisition of VEREIT in November 2021, management has shifted its focus to operating performance, seeking investments with attractive yields and risk adjusted returns regardless of client industry or geography. Our chief operating decision maker relies primarily on cash flow analysis at the consolidated level to make decisions about allocating resources. As a result, we reorganized our business activities into one operating and reportable segment. ASC Topic 280, Segment Reporting Years ended December 31,2022U.S.U.K.Other (1)TotalRetail$2,455.9 $243.3 $30.9 $2,730.1 Industrial 465.2 30.2 — 495.4 Other (2)74.2 — — 74.2 Rental (including reimbursable)$2,995.3 $273.5 $30.9 $3,299.7 Other revenue 44.0 Total revenue $3,343.7 2021U.S.U.K.Other (1)TotalRetail$1,566.7 $138.9 $4.2 $1,709.8 Industrial 261.5 9.6 — $271.1 Other (2)84.1 — — $84.1 Rental (including reimbursable)$1,912.3 $148.5 $4.2 $2,065.0 Other revenue 15.5 Total revenue $2,080.5 2020U.S.U.K.Other (1)TotalRetail$1,312.5 $55.9 $— $1,368.4 Industrial 184.6 1.3 — 185.9 Other (2)85.2 — — 85.2 Rental (including reimbursable)$1,582.3 $57.2 $— $1,639.5 Other revenue 7.6 Total revenue $1,647.1 Other (1) Other (2) Other (1) Other (2) Other (1) Other (2) (1) Other includes properties in Spain, starting in September 2021 and in Italy, starting in October 2022. (2) Other includes the office, agriculture and gaming asset types, with gaming starting in December 2022. Long-lived assets include items such as property, plant, equipment and right-of-use assets subject to operating and finance leases. As of December 31, 2022, no individual country or asset-type representing more than 10% of total revenue, other than as presented in the tables above. In addition, as of December 31, 2022, no individual country or asset-type representing more than 10% of the total assets, other than as presented in the tables below. The 74 74 74 Table of Contents Table of Contents following table disaggregates domestic and international total long-lived assets (in millions): As of December 31,20222021U.S.U.K.Other (1)TotalU.S.U.K.Other (1)TotalLong-lived assets$33,685.6 $4,596.1 $582.7 $38,864.4 $29,323.8 $3,206.6 $314.3 $32,844.7 Remaining assets10,808.7 10,292.8 Total assets$49,673.1 $43,137.5 following table disaggregates domestic and international total long-lived assets (in millions): Other (1) Other (1) (1) Other includes properties in Spain, starting in September 2021 and in Italy, starting in October 2022. Recently Adopted Accounting Standards In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020, and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. During 2022, all of our debt and derivative instruments were converted from LIBOR to SOFR. The interest rate swap on our term loan, which was converted to a Secured Overnight Financing Rate (\"SOFR\") benchmark from the London Inter-Bank Offered Rate (“LIBOR”) during June 2022, continues to be accounted for as a cash flow hedge. The adoption of this guidance had no impact on our consolidated financial statements. Recently Adopted Accounting Standards In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform . ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020, and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. During 2022, all of our debt and derivative instruments were converted from LIBOR to SOFR. The interest rate swap on our term loan, which was converted to a Secured Overnight Financing Rate (\"SOFR\") benchmark from the London Inter-Bank Offered Rate (“LIBOR”) during June 2022, continues to be accounted for as a cash flow hedge. The adoption of this guidance had no impact on our consolidated financial statements." }, { "status": "MODIFIED", "current_title": "ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (\"AFFO\")", "prior_title": "ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS", "similarity_score": 0.899, "confidence": "high", "key_changes": [ "Reworded sentence: \"The following summarizes our AFFO (dollars in millions, except per share data): Years ended December 31,20232022% ChangeAFFO available to common stockholders$2,774.9$2,401.415.6 %AFFO per common share (1)$4.00$3.922.0 % AFFO available to common stockholders AFFO per common share (1) (1) All per share amounts are presented on a diluted per common share basis.\"", "Reworded sentence: \"42 42 42 Table of Contents Table of Contents The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S.\"", "Reworded sentence: \"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): Years ended December 31,20232022Net income available to common stockholders$872,309 $869,408 Cumulative adjustments to calculate Normalized FFO (1)1,964,293 1,616,382 Normalized FFO available to common stockholders2,836,602 2,485,790 Gain on extinguishment of debt— (367)Amortization of share-based compensation26,227 21,617 Amortization of net debt premiums and deferred financing costs (2)(44,568)(67,150)Non-cash (gain) loss on interest rate swaps(7,189)718 Non-cash change in allowance for credit losses4,874 — Straight-line impact of cash settlement on interest rate swaps (3)7,190 1,558 Leasing costs and commissions(9,878)(5,236)Recurring capital expenditures(331)(587)Straight-line rent and expenses, net(141,130)(120,252)Amortization of above and below-market leases, net79,101 63,243 Proportionate share of adjustments for unconsolidated entities932 (4,239)Other adjustments (4)23,040 26,264 AFFO available to common stockholders$2,774,870 $2,401,359 AFFO allocable to dilutive noncontrolling interests5,540 4,033 Diluted AFFO$2,780,410 $2,405,392 AFFO per common share:Basic$4.01 $3.93 Diluted$4.00 $3.92 Distributions paid to common stockholders$2,111,793 $1,813,432 AFFO available to common stockholders in excess of distributions paid to common stockholders$663,077 $587,927 Weighted average number of common shares used for computation per share:Basic692,298 611,766 Diluted694,819 613,473 Cumulative adjustments to calculate Normalized FFO (1) Amortization of net debt premiums and deferred financing costs (2) Straight-line impact of cash settlement on interest rate swaps (3) Other adjustments (4) (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\")\".\"", "Reworded sentence: \"(3)Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps in October 2022, over the term of the $750.0 million of 5.625% senior unsecured notes due October 2032.\"", "Reworded sentence: \"43 43 43 Table of Contents Table of Contents 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.\"" ], "current_body": "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): Years ended December 31,20232022% ChangeAFFO available to common stockholders$2,774.9$2,401.415.6 %AFFO per common share (1)$4.00$3.922.0 % AFFO available to common stockholders AFFO per common share (1) (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. 42 42 42 Table of Contents Table of Contents The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. GAAP measure) to Normalized FFO and AFFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted computation per share (dollars in thousands, except per share amounts): Years ended December 31,20232022Net income available to common stockholders$872,309 $869,408 Cumulative adjustments to calculate Normalized FFO (1)1,964,293 1,616,382 Normalized FFO available to common stockholders2,836,602 2,485,790 Gain on extinguishment of debt— (367)Amortization of share-based compensation26,227 21,617 Amortization of net debt premiums and deferred financing costs (2)(44,568)(67,150)Non-cash (gain) loss on interest rate swaps(7,189)718 Non-cash change in allowance for credit losses4,874 — Straight-line impact of cash settlement on interest rate swaps (3)7,190 1,558 Leasing costs and commissions(9,878)(5,236)Recurring capital expenditures(331)(587)Straight-line rent and expenses, net(141,130)(120,252)Amortization of above and below-market leases, net79,101 63,243 Proportionate share of adjustments for unconsolidated entities932 (4,239)Other adjustments (4)23,040 26,264 AFFO available to common stockholders$2,774,870 $2,401,359 AFFO allocable to dilutive noncontrolling interests5,540 4,033 Diluted AFFO$2,780,410 $2,405,392 AFFO per common share:Basic$4.01 $3.93 Diluted$4.00 $3.92 Distributions paid to common stockholders$2,111,793 $1,813,432 AFFO available to common stockholders in excess of distributions paid to common stockholders$663,077 $587,927 Weighted average number of common shares used for computation per share:Basic692,298 611,766 Diluted694,819 613,473 Cumulative adjustments to calculate Normalized FFO (1) Amortization of net debt premiums and deferred financing costs (2) Straight-line impact of cash settlement on interest rate swaps (3) Other adjustments (4) (1)See reconciling items for Normalized FFO presented under “Funds from Operations Available to Common Stockholders (\"FFO\") and Normalized Funds from Operations Available to Common Stockholders (\"Normalized FFO\")\". (2)Includes the amortization of net premiums on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included. (3)Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps in October 2022, over the term of the $750.0 million of 5.625% senior unsecured notes due October 2032. (4)Includes non-cash foreign currency losses (gains) from remeasurement to USD, mark-to-market adjustments on investments and derivatives that are non-cash in nature, straight-line payments from cross-currency swaps, obligations related to financing lease liabilities, and adjustments allocable to noncontrolling interests. 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. 43 43 43 Table of Contents Table of Contents 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. Item 7A: 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.", "prior_body": "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): Years ended December 31,% Increase2022202120202022versus 20212021versus2020AFFO available to common stockholders$2,401.4$1,488.8$1,172.661.3 %27.0 %AFFO per share (1)$3.92$3.59$3.399.2 %5.9 % AFFO available to common stockholders AFFO per share (1) (1) All per share amounts are presented on a diluted per common share basis. The increases in AFFO for the years ended December 31, 2022 and 2021 were primarily attributable to the increase in the size of our portfolio, especially as it relates to the impact from our merger with VEREIT, which closed on November 1, 2021. These increases were partially offset by reserves recorded as a reduction of rental revenue of $4.0 million, $14.7 million and $52.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. 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): 56 56 56 Table of Contents Table of Contents Years ended December 31,202220212020Net income available to common stockholders$869,408 $359,456 $395,486 Cumulative adjustments to calculate Normalized FFO (1)1,616,382 1,048,537 746,633 Normalized FFO available to common stockholders2,485,790 1,407,993 1,142,119 Executive severance charge (2)— — 3,463 (Gain) loss on extinguishment of debt(367)97,178 9,819 Amortization of share-based compensation21,617 16,234 14,727 Amortization of net debt premiums and deferred financing costs (3)(67,150)(6,182)3,710 Non-cash loss on interest rate swaps718 2,905 4,353 Straight-line impact of cash settlement on interest rate swaps (4)1,558 — — Leasing costs and commissions(5,236)(6,201)(1,859)Recurring capital expenditures(587)(1,202)(198)Straight-line rent and expenses, net(120,252)(61,350)(26,502)Amortization of above and below-market leases, net63,243 37,970 22,940 Proportionate share of adjustments for unconsolidated entities(4,239)(1,948)— Other adjustments (5)26,264 3,356 54 AFFO available to common stockholders$2,401,359 $1,488,753 $1,172,626 AFFO allocable to dilutive noncontrolling interests4,033 1,619 1,438 Diluted AFFO$2,405,392 $1,490,372 $1,174,064 AFFO per common share:Basic$3.93 $3.59 $3.40 Diluted$3.92 $3.59 $3.39 Distributions paid to common stockholders$1,813,432 $1,169,026 $964,167 AFFO available to common stockholders in excess of distributions paid to common stockholders$587,927 $319,727 $208,459 Weighted average number of common shares used for computation per share:Basic611,765,815 414,535,283 345,280,126 Diluted613,472,663 415,270,063 345,878,377 Cumulative adjustments to calculate Normalized FFO (1) Executive severance charge (2) Amortization of net debt premiums and deferred financing costs (3) Straight-line impact of cash settlement on interest rate swaps (4) Other adjustments (5) (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)The executive severance charge represents the incremental costs incurred upon our former CFO's departure in March 2020, consisting of $1.6 million of cash, $1.8 million of share-based compensation expense and $58,000 of professional fees. (3)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. (4)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 13, 2032. (5)Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, foreign currency gain and loss as a result of intercompany debt and remeasurement transactions and straight-line payments from cross-currency swaps. 57 57 57 Table of Contents Table of Contents We believe the non-GAAP financial measure AFFO provides useful information to investors because it is a widely accepted industry measure of the operating performance of real estate companies that is used by industry analysts and investors who look at and compare those companies. In particular, AFFO provides an additional measure to compare the operating performance of different REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate U.S. GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders. Presentation of the information regarding FFO, Normalized FFO, and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO, Normalized FFO, and AFFO in the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO, Normalized FFO, and AFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as alternatives to net income as an indication of our performance. FFO, Normalized FFO, and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities. In addition, FFO, Normalized FFO, and AFFO should not be considered as measures of liquidity, our ability to make cash distributions, or our ability to pay interest payments." }, { "status": "MODIFIED", "current_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "prior_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "similarity_score": 0.894, "confidence": "high", "key_changes": [ "Reworded sentence: \"51 51 51 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES\"" ], "current_body": "50 50 50 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES", "prior_body": "64 64 64 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES" }, { "status": "MODIFIED", "current_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "prior_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "similarity_score": 0.893, "confidence": "high", "key_changes": [ "Reworded sentence: \"50 50 50 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES\"" ], "current_body": "50 50 50 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES", "prior_body": "64 64 64 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES" }, { "status": "MODIFIED", "current_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "prior_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "similarity_score": 0.891, "confidence": "high", "key_changes": [ "Reworded sentence: \"52 52 52 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES\"" ], "current_body": "50 50 50 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES", "prior_body": "64 64 64 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES" }, { "status": "MODIFIED", "current_title": "Orion Divestiture", "prior_title": "Orion Divestiture", "similarity_score": 0.888, "confidence": "high", "key_changes": [ "Reworded sentence: \"On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date.\"", "Reworded sentence: \"For more detail, see note 16, Distributions Paid and Payable.\"", "Removed sentence: \"78 78 78 Table of Contents Table of Contents In connection with the divestiture, we entered into certain agreements with Orion to effect our legal and structural separation, including a transition services agreement (\"TSA\") and reverse TSA to provide certain administrative and other services for a limited time, and tax matters.\"" ], "current_body": "Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion. On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date. The fair market value of these shares for tax distribution was determined to be $20.6272 per share, which was calculated using the five-day volume weighted average share price after issuance. For more detail, see note 16, Distributions Paid and Payable. In conjunction with the Orion Divestiture, we incurred approximately $1.9 million and $6.0 million of transaction costs during the year ended December 31, 2022 and 2021, which were included in 'Merger and integration-related costs' within our consolidated statements of income and comprehensive income. As part of the Orion Divestiture, Orion paid us a dividend of $425.0 million and reimbursed $170.2 million to us for the early redemption of mortgage loans underlying the contributed assets prior to the effectuation of the Orion Divestiture. The distribution of Orion resulted in the derecognition of net assets of $1.74 billion, which net of the aforementioned cash payments of $595.2 million, resulted in a reduction to additional paid in capital of $1.14 billion.", "prior_body": "Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion. On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders (including legacy VEREIT stockholders who received shares of our common stock in our merger with VEREIT) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date, which we refer to as the Orion Divestiture. The fair market value of these shares for tax distribution was determined to be $20.6272 per share, which was calculated using the five-day volume weighted average share price after issuance. For more detail, see note 14, Distributions Paid and Payable. Following the Orion Divestiture, Orion began operating as a separate, independent public company. In conjunction with the Orion Divestiture, we incurred approximately $6.0 million of transaction costs during the year ended December 31, 2021, which were included in the $167.4 million of merger and integration-related costs within our consolidated statements of income and comprehensive income. We incurred $1.9 million of transaction costs relating to the Orion Divestiture during the year ended December 31, 2022. As part of the Orion Divestiture, Orion paid us a dividend of $425.0 million and reimbursed $170.2 million to us for the early redemption of mortgage loans underlying the contributed assets prior to the effectuation of the Orion Divestiture. The distribution of Orion resulted in the derecognition of net assets of $1.74 billion, which net of the aforementioned cash payments of $595.2 million, resulted in a reduction to additional paid in capital of $1.14 billion. 78 78 78 Table of Contents Table of Contents In connection with the divestiture, we entered into certain agreements with Orion to effect our legal and structural separation, including a transition services agreement (\"TSA\") and reverse TSA to provide certain administrative and other services for a limited time, and tax matters." }, { "status": "MODIFIED", "current_title": "Our acquisition of additional properties may have a significant effect on our business, liquidity, financial position and/or results of operations.", "prior_title": "Our acquisition of additional properties may have a significant effect on our business, liquidity, financial position and/or results of operations.", "similarity_score": 0.888, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our future success will depend, in part, upon our ability to manage our mergers and acquisitions, acquisitions, and expansion opportunities under prevailing market conditions.\"", "Reworded sentence: \"We cannot provide any assurances that we will be successful in consummating future mergers and acquisitions or acquisitions on favorable terms or that we will realize expected cash yields, operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits.\"", "Reworded sentence: \"We have made and may continue to make acquisitions of properties (including through the use of alternative acquisition structures such as joint ventures, partnerships, fund and other structures) that fall outside our historical focus on freestanding, single-client, net lease retail locations in the U.S.\"" ], "current_body": "Our future success will depend, in part, upon our ability to manage our mergers and acquisitions, acquisitions, and expansion opportunities under prevailing market conditions. We are regularly engaged in the process of identifying, analyzing, underwriting, and negotiating possible acquisition transactions. We cannot provide any assurances that we will be successful in consummating future mergers and acquisitions or acquisitions on favorable terms or that we will realize expected cash yields, operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits. Our inability to consummate one or more acquisitions on such terms, our failure to adequately underwrite and identify risks and obligations when acquiring properties, or our failure to realize the intended benefits from one or more acquisitions, could have a significant adverse effect on our business, liquidity, financial position and/or results of operations, including as a result of our incurrence of additional indebtedness and related interest expense and our assumption of unforeseen contingent liabilities in connection with completed acquisitions. We have made and may continue to make acquisitions of properties (including through the use of alternative acquisition structures such as joint ventures, partnerships, fund and other structures) that fall outside our historical focus on freestanding, single-client, net lease retail locations in the U.S. We may be exposed to a variety of new risks by expanding into new property types (e.g., non-retail businesses), geographies, lease and acquisition structures, and clients who engage in non-retail businesses. These risks may be enhanced by our limited experience in managing new property types, geographies, lease and acquisition structures, clients. and the laws and/or culture of non-U.S. geographies.", "prior_body": "Our future success will depend, in part, upon our ability to manage our acquisitions and expansion opportunities under prevailing market conditions. We are regularly engaged in the process of identifying, analyzing, underwriting, and negotiating possible acquisition transactions. We cannot provide any assurances that we will be successful in consummating future acquisitions on favorable terms or that we will realize expected cash lease yields, operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits. Our inability to consummate one or more acquisitions on such terms, our failure to adequately underwrite and identify risks and obligations when acquiring properties, or our failure to realize the intended benefits from one or more acquisitions, could have a significant adverse effect on our business, liquidity, financial position and/or results of operations, including as a result of our incurrence of additional indebtedness and related interest expense and our assumption of unforeseen contingent liabilities in connection with completed acquisitions. We have made and may continue to make selected acquisitions of properties that fall outside our historical focus on freestanding, single-client, net lease retail locations in the U.S. We may be exposed to a variety of new risks by expanding into new property types and/or new jurisdictions outside the U.S. and from properties leased to our clients who engage in non-retail businesses. These risks may include limited experience in managing certain types of new properties, new types of real estate locations and lease structures, and the laws and culture of non-U.S. jurisdictions." }, { "status": "MODIFIED", "current_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "prior_title": "The accompanying notes to consolidated financial statements are an integral part of these statements.", "similarity_score": 0.885, "confidence": "high", "key_changes": [ "Reworded sentence: \"53 53 53 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES\"" ], "current_body": "50 50 50 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES", "prior_body": "64 64 64 Table of Contents Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES" }, { "status": "MODIFIED", "current_title": "General and Administrative Expenses", "prior_title": "General and Administrative Expenses", "similarity_score": 0.882, "confidence": "high", "key_changes": [ "Reworded sentence: \"The increase in general and administrative expenses for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher payroll-related compensation costs associated with the growth of the company.\"" ], "current_body": "General and administrative expenses are expenditures related to the operations of our company, including employee-related costs, professional fees, and other general overhead costs associated with running our business. The increase in general and administrative expenses for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher payroll-related compensation costs associated with the growth of the company.", "prior_body": "General and administrative expenses are expenditures related to the operations of our company, including employee-related costs, professional fees, and other general overhead costs associated with running our business. The increase in general and administrative expenses for the year ended December 31, 2022 is primarily due to higher payroll-related costs, corporate-level professional fees, corporate occupancy costs, and information technology costs associated with the growth of the company, including the merger with VEREIT. The increase in general and administrative expenses for 2021 is primarily due to higher payroll-related costs and corporate-level professional fees." }, { "status": "MODIFIED", "current_title": "Foreign Currency Exchange Rates", "prior_title": "Foreign Currency Exchange Rates", "similarity_score": 0.866, "confidence": "high", "key_changes": [ "Reworded sentence: \"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.\"", "Reworded sentence: \"45 45 45 Table of Contents Table of Contents Item 8: Financial Statements and Supplementary Data Table of Contents A.Reports of Independent Registered Public Accounting FirmB.Consolidated Balance Sheets, December 31, 2023 and 2022C.Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2023, 2022, and 2021D.Consolidated Statements of Equity, Years ended December 31, 2023, 2022, and 2021E.Consolidated Statements of Cash Flows, Years ended December 31, 2023, 2022, and 2021F.Notes to Consolidated Financial StatementsG.Schedule III Real Estate and Accumulated Depreciation Schedules not filed: All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes.\"" ], "current_body": "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. 45 45 45 Table of Contents Table of Contents Item 8: Financial Statements and Supplementary Data Table of Contents A.Reports of Independent Registered Public Accounting FirmB.Consolidated Balance Sheets, December 31, 2023 and 2022C.Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2023, 2022, and 2021D.Consolidated Statements of Equity, Years ended December 31, 2023, 2022, and 2021E.Consolidated Statements of Cash Flows, Years ended December 31, 2023, 2022, and 2021F.Notes to Consolidated Financial StatementsG.Schedule III Real Estate and Accumulated Depreciation Schedules not filed: All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes. Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets, December 31, 2023 and 2022 Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Equity, Years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Cash Flows, Years ended December 31, 2023, 2022, and 2021 Notes to Consolidated Financial Statements Schedule III Real Estate and Accumulated Depreciation 46 46 46 Table of Contents Table of Contents", "prior_body": "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, foreign currency collars, 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. 59 59 59 Table of Contents Table of Contents Item 8: Financial Statements and Supplementary Data Table of Contents A.Reports of Independent Registered Public Accounting FirmB.Consolidated Balance Sheets, December 31, 2022 and 2021C.Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2022, 2021, and 2020D.Consolidated Statements of Equity, Years ended December 31, 2022, 2021, and 2020E.Consolidated Statements of Cash Flows, Years ended December 31, 2022, 2021, and 2020F.Notes to Consolidated Financial StatementsG.Schedule III Real Estate and Accumulated Depreciation Schedules not filed: All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes. Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets, December 31, 2022 and 2021 Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2022, 2021, and 2020 Consolidated Statements of Equity, Years ended December 31, 2022, 2021, and 2020 Consolidated Statements of Cash Flows, Years ended December 31, 2022, 2021, and 2020 Notes to Consolidated Financial Statements Schedule III Real Estate and Accumulated Depreciation 60 60 60 Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Merger and Integration-Related Costs", "prior_title": "Merger and Integration-Related Costs", "similarity_score": 0.843, "confidence": "high", "key_changes": [ "Reworded sentence: \"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.\"" ], "current_body": "Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, and incremental and non-recurring costs necessary to convert data and systems, retain employees, and otherwise enable us to operate the acquired business or assets efficiently. For the year ended December 31, 2023, we incurred $14.5 million of merger and integration-related costs, the majority of which was related to the Spirit merger that closed in January 2024. For the year ended December 31, 2022, we incurred $13.9 million of merger and integration-related transaction costs in conjunction with our VEREIT merger.", "prior_body": "In conjunction with our merger with VEREIT, we incurred approximately $13.9 million and $167.4 million of merger and integration-related transaction costs during the years ended December 31, 2022 and 2021, respectively. There were no such costs incurred during the year ended December 31, 2020. Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, SEC filing fees and additional 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." }, { "status": "MODIFIED", "current_title": "Foreign Currency and Derivative (Loss) Gain, Net", "prior_title": "Foreign Currency and Derivative Gains (Losses), Net", "similarity_score": 0.823, "confidence": "high", "key_changes": [ "Reworded sentence: \"Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated Other Comprehensive Income (\"AOCI\").\"", "Reworded sentence: \"As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022.\"" ], "current_body": "We borrow in the functional currencies of the countries in which we invest. Net foreign currency gain and loss are primarily related to the remeasurement of intercompany debt from foreign subsidiaries. Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated Other Comprehensive Income (\"AOCI\"). Foreign currency and derivative (loss) gain, net for the year ended December 31, 2023 was a loss of $13.4 million, primarily due to foreign currency fluctuations related to the remeasurement of intercompany debt. In June 2022, following the early prepayment of our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries, we terminated the four cross-currency swaps used to hedge the foreign currency exposure of the intercompany loan. As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022. The reclassification from AOCI was offset by $7.9 million in losses from the intercompany loan remeasurement on the final exchange.", "prior_body": "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. Gain and loss on foreign currency are largely offset by derivative gain and loss. Derivative gain and loss relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting. Net derivative gain and loss are primarily related to realized and unrealized short term currency exchange swaps. Gain and loss on derivatives are largely offset by foreign currency gain and loss. In June 2022, following the early prepayment of our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries, we terminated the four cross-currency swaps used to hedge the foreign currency exposure of the intercompany loan. As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from accumulated other comprehensive income (\"AOCI\"), to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022. The reclassification from AOCI was offset by $7.9 million in losses from the intercompany loan remeasurement on the final exchange." }, { "status": "MODIFIED", "current_title": "Rental Revenue (reimbursable)", "prior_title": "Rental Revenue (reimbursable)", "similarity_score": 0.818, "confidence": "high", "key_changes": [ "Reworded sentence: \"The increase in contractually obligated reimbursements by our clients for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher recoverable real estate tax taxes from overall portfolio growth.\"" ], "current_body": "A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses. The increase in contractually obligated reimbursements by our clients for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher recoverable real estate tax taxes from overall portfolio growth.", "prior_body": "A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses. The increase in contractually obligated reimbursements by our clients in the periods presented is primarily due to the growth of our portfolio due to acquisitions." }, { "status": "MODIFIED", "current_title": "Principal Amount (1)", "prior_title": "Principal Amount (1)", "similarity_score": 0.807, "confidence": "high", "key_changes": [ "Reworded sentence: \"4.650% notes due August 2023 redeemed in December 2021 3.25% notes due October 2022 redeemed in January 2021 (1) The redeemed principal amounts presented exclude the amounts we paid in accrued and unpaid interest.\"" ], "current_body": "4.650% notes due August 2023 redeemed in December 2021 3.25% notes due October 2022 redeemed in January 2021 (1) The redeemed principal amounts presented exclude the amounts we paid in accrued and unpaid interest.", "prior_body": "4.650% notes due August 2023 redeemed in December 2021 Mortgage due June 2022 redeemed in October 2021 Mortgage due June 2032 redeemed in September 2021 3.250% notes due October 2022 redeemed in January 2021 5.750% notes due January 2021 redeemed in January 2020 (1) The redeemed principal amounts presented exclude the amounts we paid in accrued and unpaid interest." }, { "status": "MODIFIED", "current_title": "Property Expenses (excluding reimbursable)", "prior_title": "Property Expenses (excluding reimbursable)", "similarity_score": 0.783, "confidence": "high", "key_changes": [ "Reworded sentence: \"Property expenses (excluding reimbursable) consist of costs associated with properties available for lease, non-net-leased properties and general portfolio expenses and include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees.\"" ], "current_body": "Property expenses (excluding reimbursable) consist of costs associated with properties available for lease, non-net-leased properties and general portfolio expenses and include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees. The increase in property expenses (excluding reimbursable) for the year ended December 31, 2023 as compared with the same period in 2022 is primarily impacted by property tax and property management expenses.", "prior_body": "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. At December 31, 2022, 126 properties were available for lease or sale, as compared to 164 at December 31, 2021, and 140 at December 31, 2020. The increase in property expenses (excluding reimbursable) for the years ended December 31, 2022 and 2021 is primarily due to the increase in portfolio size, resulting in higher utilities, repairs and maintenance, property-related legal expenses, property taxes, insurance expenses and reserves for contractually obligated reimbursements by our clients." }, { "status": "MODIFIED", "current_title": "Lease Yield (1)", "prior_title": "Year ended December 31, 2021", "similarity_score": 0.764, "confidence": "high", "key_changes": [ "Reworded sentence: \"Acquisitions - Europe Properties under development (2) Total (3) (1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property.\"", "Reworded sentence: \"The amounts amortized to expense for all of our in-place leases, for the years ended December 31, 2023, 2022 and 2021 were $651.1 million, $634.9 million, and $247.6 million, respectively.\"", "Reworded sentence: \"The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2023 (dollars in thousands): Net increase (decrease) torental revenueIncrease toamortizationexpense2024$(57,431)$593,845 2025(51,025)512,189 2026(43,447)456,383 2027(34,900)395,966 2028(24,525)336,868 Thereafter356,100 1,458,777 Totals$144,772 $3,754,028\"" ], "current_body": "Acquisitions - Europe Properties under development (2) Total (3) (1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $4.4 million received as settlement credits as reimbursement of free rent periods for the year ended December 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 initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. (2)Includes £34.3 million of investments in U.K. development properties and €29.3 million of investment in Spain development properties, converted at the applicable exchange rates on the funding dates. (3)Our clients occupying the new properties are 88.7% retail, 8.5% industrial, and 2.8% other property types based on net operating income. Approximately 31.4% of the net operating income generated from acquisitions during the year ended December 31, 2023 is from investment grade rated clients, their subsidiaries, or affiliated companies. 63 63 63 Table of Contents Table of Contents The aggregate purchase price of the assets acquired during the year ended December 31, 2023 has been allocated as follows (in millions): Acquisitions - USDAcquisitions - SterlingAcquisitions - EuroLand (1)$779.5 £477.2 €288.6 Buildings and improvements2,842.5 909.0 462.3 Lease intangible assets (2)430.0 130.1 36.8 Other assets (3)559.9 257.3 35.2 Lease intangible liabilities (4)(115.1)(12.4)(0.9)Other liabilities (5)(9.1)(2.6)(9.6)$4,487.7 £1,758.6 €812.4 Land (1) Lease intangible assets (2) Other assets (3) Lease intangible liabilities (4) Other liabilities (5) (1)Sterling-denominated land includes £7.1 million of right of use assets under long-term ground leases. (2)The weighted average amortization period for acquired lease intangible assets is 11.3 years. (3)USD-denominated other assets consist entirely of financing receivables with above-market terms. Sterling-denominated other assets primarily consist of £66.1 million of financing receivables with above-market terms and £191.1 million of right-of-use assets accounted for as finance leases. Euro-denominated other assets consist of €17.4 million of financing receivables with above-market terms, €10.6 million of right-of-use assets accounted for as finance leases and €7.2 million of right-of-use assets under ground leases. (4)The weighted average amortization period for acquired lease intangible liabilities is 16.9 years. (5)USD-denominated other liabilities consist entirely of deferred rent on certain below-market leases. Sterling-denominated other liabilities primarily consist of £2.3 million of deferred rent on certain below-market leases and £0.2 million of lease liabilities under financing leases. Euro-denominated other liabilities consists of €1.6 million of deferred rent on certain below-market leases, €4.4 million of lease liabilities under ground leases, €2.1 million of lease liabilities under financing leases, and €1.5 million of other liabilities. (5) USD-denominated other liabilities consist The properties acquired during the year ended December 31, 2023 generated total revenue and net income of $302.3 million and $152.4 million, respectively. B. Investments in Existing Properties During the year ended December 31, 2023, we capitalized costs of $59.8 million on existing properties in our portfolio, consisting of $49.6 million for non-recurring building improvements, $9.9 million for re-leasing costs, and $0.3 million for recurring capital expenditures. In comparison, during the year ended December 31, 2022, we capitalized costs of $96.7 million on existing properties in our portfolio, consisting of $88.3 million for non-recurring building improvements, $5.2 million for re-leasing costs, and $3.2 million for recurring capital expenditures. C. Properties with Existing Leases The value of the in-place and above-market leases is recorded to 'Lease intangible assets, net' on our consolidated balance sheets, and the value of the below-market leases is recorded to 'Lease intangible liabilities, net' on our consolidated balance sheets. The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the years ended December 31, 2023, 2022 and 2021 were $651.1 million, $634.9 million, and $247.6 million, respectively. The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue in our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the years ended December 31, 2023, 2022 and 2021 were $61.5 million, $55.6 million, and $35.4 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate. The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2023 (dollars in thousands): Net increase (decrease) torental revenueIncrease toamortizationexpense2024$(57,431)$593,845 2025(51,025)512,189 2026(43,447)456,383 2027(34,900)395,966 2028(24,525)336,868 Thereafter356,100 1,458,777 Totals$144,772 $3,754,028", "prior_body": "Land (1) Lease intangible assets (2) Other assets (3) Lease intangible liabilities (4) Other liabilities (5) (1) Sterling-denominated land includes £8.2 million of right of use assets under long-term ground leases. (2) The weighted average amortization period for acquired lease intangible assets is 12.7 years. (3) USD-denominated other assets consists of $179.7 million of financing receivables with above-market terms, $85.0 million of right-of-use assets accounted for as finance leases, $5.8 million in investments in sales-type leases, and $259.7 million of right of use assets under ground leases. Sterling-denominated other assets consists of £7.2 million of financing receivables with above-market terms and £33.2 million of right-of-use assets accounted for as finance leases. Euro-denominated other assets consists entirely of financing receivables with above-market terms. (4) The weighted average amortization period for acquired lease intangible liabilities is 15.9 years. (5) USD-denominated other liabilities consists of $26.9 million of deferred rent on certain below-market leases, $67.4 million of lease liabilities under ground leases and $33.3 million of lease liabilities under financing leases. Sterling-denominated other liabilities consists entirely of a mortgage premium. Euro-denominated other liabilities consists entirely of deferred rent on certain below-market leases. 81 81 81 Table of Contents Table of Contents The properties acquired during the year ended December 31, 2021, which were all accounted for as asset acquisitions, generated total revenues of $136.6 million and net income of $25.8 million during the year ended December 31, 2021. B. Investments in Existing Properties During the year ended December 31, 2022, we capitalized costs of $96.7 million on existing properties in our portfolio, consisting of $88.3 million for non-recurring building improvements, $5.2 million for re-leasing costs, and $3.2 million for recurring capital expenditures. In comparison, during the year ended December 31, 2021, we capitalized costs of $21.9 million on existing properties in our portfolio, consisting of $14.6 million for non-recurring building improvements, $6.3 million for re-leasing costs, and $1.0 million for recurring capital expenditures. C. Properties with Existing Leases The value of the in-place and above-market leases is recorded to 'Lease intangible assets, net' on our consolidated balance sheets, and the value of the below-market leases is recorded to 'Lease intangible 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 years ended December 31, 2022, 2021 and 2020 were $634.9 million, $247.5 million, and $134.6 million, respectively. The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue in 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 years ended December 31, 2022, 2021 and 2020 were $111.7 million, $54.6 million, and $30.9 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate. The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2022 (dollars in thousands): Netincrease (decrease) torental revenueIncrease toamortizationexpense2023$(56,782)$589,541 2024(50,525)522,895 2025(43,963)451,177 2026(36,100)402,028 2027(27,926)348,289 Thereafter341,053 1,600,757 Totals$125,757 $3,914,687 Net increase" }, { "status": "MODIFIED", "current_title": "Balance, net", "prior_title": "Balance, net", "similarity_score": 0.76, "confidence": "high", "key_changes": [ "Reworded sentence: \"(1)At December 31, 2023, there were 16 mortgages on 131 properties and at December 31, 2022, there were 18 mortgages on 136 properties.\"", "Reworded sentence: \"At December 31, 2023 and December 31, 2022, all mortgages were at fixed interest rates.\"" ], "current_body": "(1)At December 31, 2023, there were 16 mortgages on 131 properties and at December 31, 2022, there were 18 mortgages on 136 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At December 31, 2023 and December 31, 2022, all mortgages were at fixed interest rates. (2) Stated interest rates ranged from 3.0% to 6.9% at December 31, 2023 and December 31, 2022, respectively. (3) Effective interest rates ranged from 0.5% to 6.6% and 2.7% to 6.6% at December 31, 2023 and December 31, 2022, respectively. The following table summarizes the maturity of mortgages payable as of December 31, 2023, excluding $0.8 million related to unamortized net discounts and deferred financing costs (dollars in millions): Year of MaturityPrincipal2024$740.5202544.0202612.0202722.320281.3Thereafter2.3Totals$822.4", "prior_body": "(1)At December 31, 2022, there were 18 mortgages on 136 properties. At December 31, 2021, there were 22 mortgages on 267 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At December 31, 2022 and December 31, 2021, all mortgages were at fixed interest rates. (2) Stated interest rates ranged from 3.0% to 6.9% at December 31, 2022 and 2021, respectively. (3) Effective interest rates ranged from 2.7% to 6.6% and 2.6% to 6.0% at December 31, 2022 and 2021, respectively. The following table summarizes the maturity of mortgages payable, excluding net premiums of $12.4 million and deferred financing costs of $0.8 million as of December 31, 2022 (dollars in millions): Year of MaturityPrincipal2023$22.02024740.5202542.0202612.0202722.3Thereafter3.5Totals$842.3" }, { "status": "MODIFIED", "current_title": "3. Supplemental Detail for Certain Components of Consolidated Balance Sheets (in thousands):", "prior_title": "4. Supplemental Detail for Certain Components of Consolidated Balance Sheets (dollars in thousands):", "similarity_score": 0.757, "confidence": "high", "key_changes": [ "Reworded sentence: \"(in thousands): A.Accounts receivable, net, consist of the following at:December 31, 2023December 31, 2022Straight-line rent receivables, net$516,692 $363,993 Client receivables, net193,844 179,244 $710,536 $543,237 A.\"" ], "current_body": "(in thousands): A.Accounts receivable, net, consist of the following at:December 31, 2023December 31, 2022Straight-line rent receivables, net$516,692 $363,993 Client receivables, net193,844 179,244 $710,536 $543,237 A. B.Lease intangible assets, net, consist of the following at:December 31, 2023December 31, 2022In-place leases$5,500,404 $5,324,565 Accumulated amortization of in-place leases(1,746,377)(1,409,878)Above-market leases1,811,400 1,697,367 Accumulated amortization of above-market leases(549,319)(443,688)Other items1,799 — $5,017,907 $5,168,366 C.Other assets, net, consist of the following at:December 31, 2023December 31, 2022Financing receivables, net$1,570,943 $933,116 Right of use asset - financing leases706,837 467,920 Right of use asset - operating leases, net594,712 603,097 Loan receivable, net205,339 — Value-added tax receivable100,672 24,726 Prepaid expenses33,252 28,128 Impounds related to mortgages payable53,005 18,152 Derivative assets and receivables – at fair value21,170 83,100 Corporate assets, net12,948 12,334 Credit facility origination costs, net12,264 17,196 Restricted escrow deposits6,247 37,627 Interest receivable6,139 — Investment in sales type lease6,056 5,951 Non-refundable escrow deposits200 5,667 Other items38,859 39,939 $3,368,643 $2,276,953 Lease intangible assets, net, consist of the following at: In-place leases Accumulated amortization of in-place leases Above-market leases Accumulated amortization of above-market leases Other assets, net, consist of the following at: Right of use asset - financing leases Right of use asset - financing leases Right of use asset - operating leases, net Right of use asset - operating leases, net 62 62 62 Table of Contents Table of Contents D.Accounts payable and accrued expenses consist of the following at:December 31, 2023December 31, 2022Notes payable - interest payable$218,811 $129,202 Derivative liabilities and payables – at fair value119,620 64,724 Property taxes payable78,809 45,572 Accrued costs on properties under development65,967 26,559 Value-added tax payable64,885 23,375 Accrued income taxes61,070 22,626 Accrued property expenses54,208 25,290 Mortgages, term loans, and credit line - interest payable8,580 5,868 Other items66,576 55,921 $738,526 $399,137 Accounts payable and accrued expenses consist of the following at: E.Lease intangible liabilities, net, consist of the following at:December 31, 2023December 31, 2022Below-market leases$1,728,027 $1,617,870 Accumulated amortization of below-market leases(321,174)(238,434)$1,406,853 $1,379,436 Lease intangible liabilities, net, consist of the following at: Below-market leases Accumulated amortization of below-market leases F.Other liabilities consist of the following at:December 31, 2023December 31, 2022Lease liability - operating leases, net$425,213 $440,096 Rent received in advance and other deferred revenue 312,195 269,645 Lease liability - financing leases44,345 49,469 Security deposits28,250 15,577 Other acquisition liabilities1,647 — $811,650 $774,787 Other liabilities consist of the following at: Lease liability - operating leases, net Lease liability - operating leases, net Lease liability - financing leases Lease liability - financing leases", "prior_body": "A.Accounts receivable, net, consist of the following at:December 31, 2022December 31, 2021Straight-line rent receivables, net$363,993 $231,943 Client receivables, net203,970 194,825 $567,963 $426,768 A. B.Lease intangible assets, net, consist of the following at:December 31, 2022December 31, 2021In-place leases$5,324,565 $4,791,846 Accumulated amortization of in-place leases(1,409,878)(804,050)Above-market leases1,697,367 1,591,382 Accumulated amortization of above-market leases(443,688)(303,874)$5,168,366 $5,275,304 Lease intangible assets, net, consist of the following at: In-place leases Accumulated amortization of in-place leases Above-market leases Accumulated amortization of above-market leases C.Other assets, net, consist of the following at:December 31, 2022December 31, 2021Financing receivables$933,116 $323,921 Right of use asset - operating leases, net603,097 631,515 Right of use asset - financing leases467,920 218,332 Derivative assets and receivables – at fair value83,100 29,593 Restricted escrow deposits37,627 68,541 Prepaid expenses28,128 18,062 Impounds related to mortgages payable18,152 5,249 Credit facility origination costs, net17,196 4,352 Corporate assets, net12,334 10,915 Investment in sales type lease5,951 7,492 Non-refundable escrow deposits5,667 28,560 Note receivable— 4,455 Other items39,939 18,592 $2,252,227 $1,369,579 Other assets, net, consist of the following at: Right of use asset - operating leases, net Right of use asset - operating leases, net Right of use asset - financing leases Right of use asset - financing leases D.Accounts payable and accrued expenses consist of the following at:December 31, 2022December 31, 2021Notes payable - interest payable$129,202 $108,227 Derivative liabilities and payables – at fair value64,724 70,617 Property taxes payable45,572 36,173 Accrued costs on properties under development26,559 19,665 Accrued property expenses25,290 27,344 Value-added tax payable23,375 11,297 Accrued income taxes22,626 19,152 Mortgages, term loans, and credit line - interest payable4,404 3,874 Merger and integration-related costs1,464 10,699 Other items55,921 44,080 $399,137 $351,128 Accounts payable and accrued expenses consist of the following at: E.Lease intangible liabilities, net, consist of the following at:December 31, 2022December 31, 2021Below-market leases$1,617,870 $1,460,701 Accumulated amortization of below-market leases(238,434)(152,480)$1,379,436 $1,308,221 Lease intangible liabilities, net, consist of the following at: Below-market leases Accumulated amortization of below-market leases 79 79 79 Table of Contents Table of Contents F.Other liabilities consist of the following at:December 31, 2022December 31, 2021Lease liability - operating leases, net$440,096 $461,748 Rent received in advance and other deferred revenue 269,645 242,122 Lease liability - financing leases49,469 43,987 Security deposits15,577 11,340 $774,787 $759,197 Other liabilities consist of the following at: Lease liability - operating leases, net Lease liability - operating leases, net Lease liability - financing leases Lease liability - financing leases" }, { "status": "MODIFIED", "current_title": "CONSOLIDATED STATEMENTS OF CASH FLOWS", "prior_title": "CONSOLIDATED STATEMENTS OF CASH FLOWS", "similarity_score": 0.756, "confidence": "high", "key_changes": [ "Reworded sentence: \"(in thousands) Years ended December 31,202320222021CASH FLOWS FROM OPERATING ACTIVITIESNet income$876,914 $872,416 $360,747 Adjustments to net income:Depreciation and amortization1,895,177 1,670,389 897,835 Amortization of share-based compensation26,227 21,617 41,773 Non-cash revenue adjustments(62,029)(57,009)(23,380)(Gain) loss on extinguishment of debt— (367)97,178 Amortization of net premiums on mortgages payable(12,803)(13,622)(3,498)Amortization of net premiums on notes payable(60,657)(62,989)(10,349)Amortization of deferred financing costs26,670 15,613 12,333 (Gain) loss on interest rate swaps(7,189)718 2,905 Foreign currency and unrealized derivative loss, net37,776 220,948 27,223 Gain on sales of real estate(25,667)(102,957)(55,798)Equity in income and impairment of investment in unconsolidated entities(2,546)6,448 (1,106)Distributions from unconsolidated entities5,807 1,605 365 Provisions for impairment87,082 25,860 38,967 Change in assets and liabilitiesAccounts receivable and other assets(111,286)(29,524)(38,292)Accounts payable, accrued expenses and other liabilities285,293 (5,290)(24,714)Net cash provided by operating activities2,958,769 2,563,856 1,322,189 CASH FLOWS FROM INVESTING ACTIVITIESInvestment in real estate(8,053,595)(8,886,436)(6,313,076)Improvements to real estate, including leasing costs(68,692)(95,514)(19,080)Investment in unconsolidated entities(1,179,306)— — Investment in loans(201,621)— — Proceeds from sales of real estate117,354 436,115 250,536 Return of investment from unconsolidated entities3,927 1,401 38,345 Net proceeds from sale of unconsolidated entities— 108,088 — Proceeds from note receivable— 5,867 — Insurance proceeds received27,279 49,070 — Non-refundable escrow deposits(200)(5,667)(28,390)Net cash paid in merger— — (366,030)Net cash used in investing activities(9,354,854)(8,387,076)(6,437,695)CASH FLOWS FROM FINANCING ACTIVITIESCash distributions to common stockholders(2,111,793)(1,813,431)(1,169,026)Borrowings on line of credit and commercial paper programs77,338,040 28,539,299 9,082,206 Payments on line of credit and commercial paper programs(79,398,193)(27,434,617)(7,508,332)Proceeds from term loan 1,029,383 — — Proceeds from notes payable issued4,239,745 2,154,662 1,033,387 Principal payment on notes payable— — (1,700,000)Principal payments on mortgages payable(22,015)(312,234)(66,575)Payments upon extinguishment of debt— — (96,583)Proceeds from common stock offerings, net 5,439,462 4,556,028 4,442,725 Proceeds from dividend reinvestment and stock purchase plan11,519 11,654 11,232 Distributions to noncontrolling interests(7,725)(3,935)(1,707)Net receipts on derivative settlements7,853 79,763 3,266 Debt issuance costs(81,898)(34,156)(13,405)Net cash received from Orion Divestiture— — 593,484 Other items, including shares withheld upon vesting(7,022)(4,790)(33,552)Net cash provided by financing activities6,437,356 5,738,243 4,577,120 Effect of exchange rate changes on cash and cash equivalents24,023 (20,511)20,076 Net increase (decrease) in cash, cash equivalents and restricted cash65,294 (105,488)(518,310)Cash, cash equivalents and restricted cash, beginning of period226,881 332,369 850,679 Cash, cash equivalents and restricted cash, end of period$292,175 $226,881 $332,369 For supplemental disclosures, see note 18, Supplemental Disclosures of Cash Flow Information.\"" ], "current_body": "(in thousands) Years ended December 31,202320222021CASH FLOWS FROM OPERATING ACTIVITIESNet income$876,914 $872,416 $360,747 Adjustments to net income:Depreciation and amortization1,895,177 1,670,389 897,835 Amortization of share-based compensation26,227 21,617 41,773 Non-cash revenue adjustments(62,029)(57,009)(23,380)(Gain) loss on extinguishment of debt— (367)97,178 Amortization of net premiums on mortgages payable(12,803)(13,622)(3,498)Amortization of net premiums on notes payable(60,657)(62,989)(10,349)Amortization of deferred financing costs26,670 15,613 12,333 (Gain) loss on interest rate swaps(7,189)718 2,905 Foreign currency and unrealized derivative loss, net37,776 220,948 27,223 Gain on sales of real estate(25,667)(102,957)(55,798)Equity in income and impairment of investment in unconsolidated entities(2,546)6,448 (1,106)Distributions from unconsolidated entities5,807 1,605 365 Provisions for impairment87,082 25,860 38,967 Change in assets and liabilitiesAccounts receivable and other assets(111,286)(29,524)(38,292)Accounts payable, accrued expenses and other liabilities285,293 (5,290)(24,714)Net cash provided by operating activities2,958,769 2,563,856 1,322,189 CASH FLOWS FROM INVESTING ACTIVITIESInvestment in real estate(8,053,595)(8,886,436)(6,313,076)Improvements to real estate, including leasing costs(68,692)(95,514)(19,080)Investment in unconsolidated entities(1,179,306)— — Investment in loans(201,621)— — Proceeds from sales of real estate117,354 436,115 250,536 Return of investment from unconsolidated entities3,927 1,401 38,345 Net proceeds from sale of unconsolidated entities— 108,088 — Proceeds from note receivable— 5,867 — Insurance proceeds received27,279 49,070 — Non-refundable escrow deposits(200)(5,667)(28,390)Net cash paid in merger— — (366,030)Net cash used in investing activities(9,354,854)(8,387,076)(6,437,695)CASH FLOWS FROM FINANCING ACTIVITIESCash distributions to common stockholders(2,111,793)(1,813,431)(1,169,026)Borrowings on line of credit and commercial paper programs77,338,040 28,539,299 9,082,206 Payments on line of credit and commercial paper programs(79,398,193)(27,434,617)(7,508,332)Proceeds from term loan 1,029,383 — — Proceeds from notes payable issued4,239,745 2,154,662 1,033,387 Principal payment on notes payable— — (1,700,000)Principal payments on mortgages payable(22,015)(312,234)(66,575)Payments upon extinguishment of debt— — (96,583)Proceeds from common stock offerings, net 5,439,462 4,556,028 4,442,725 Proceeds from dividend reinvestment and stock purchase plan11,519 11,654 11,232 Distributions to noncontrolling interests(7,725)(3,935)(1,707)Net receipts on derivative settlements7,853 79,763 3,266 Debt issuance costs(81,898)(34,156)(13,405)Net cash received from Orion Divestiture— — 593,484 Other items, including shares withheld upon vesting(7,022)(4,790)(33,552)Net cash provided by financing activities6,437,356 5,738,243 4,577,120 Effect of exchange rate changes on cash and cash equivalents24,023 (20,511)20,076 Net increase (decrease) in cash, cash equivalents and restricted cash65,294 (105,488)(518,310)Cash, cash equivalents and restricted cash, beginning of period226,881 332,369 850,679 Cash, cash equivalents and restricted cash, end of period$292,175 $226,881 $332,369 For supplemental disclosures, see note 18, Supplemental Disclosures of Cash Flow Information.", "prior_body": "(dollars in thousands) Years ended December 31,202220212020CASH FLOWS FROM OPERATING ACTIVITIESNet income$872,416 $360,747 $396,506 Adjustments to net income:Depreciation and amortization1,670,389 897,835 677,038 Amortization of share-based compensation21,617 41,773 16,503 Non-cash revenue adjustments(57,009)(23,380)(3,562)(Gain) loss on extinguishment of debt(367)97,178 9,819 Amortization of net premiums on mortgages payable(13,622)(3,498)(1,258)Amortization of net premiums on notes payable(62,989)(10,349)(1,754)Amortization of deferred financing costs15,613 12,333 11,003 Loss on interest rate swaps718 2,905 4,353 Foreign currency and unrealized derivative loss (gain), net220,948 27,223 (14,510)Gain on sales of real estate(102,957)(55,798)(76,232)Equity in income and impairment of investment in unconsolidated entities 6,448 (1,106)— Distributions from unconsolidated entities 1,605 365 — Provisions for impairment on real estate25,860 38,967 147,232 Change in assets and liabilitiesAccounts receivable and other assets(29,524)(38,292)(79,240)Accounts payable, accrued expenses and other liabilities(5,290)(24,714)29,645 Net cash provided by operating activities2,563,856 1,322,189 1,115,543 CASH FLOWS FROM INVESTING ACTIVITIESInvestment in real estate(8,886,436)(6,313,076)(2,283,130)Improvements to real estate, including leasing costs(95,514)(19,080)(8,708)Proceeds from sales of real estate436,115 250,536 259,459 Return of investment from unconsolidated entities 1,401 38,345 — Net proceeds from sale of unconsolidated entities108,088 — — Proceeds from note receivable5,867 — — Insurance proceeds received49,070 — — Non-refundable escrow deposits(5,667)(28,390)— Net cash paid in merger— (366,030)— Net cash used in investing activities(8,387,076)(6,437,695)(2,032,379)CASH FLOWS FROM FINANCING ACTIVITIESCash distributions to common stockholders(1,813,431)(1,169,026)(964,167)Borrowings on line of credit and commercial paper programs28,539,299 9,082,206 3,528,042 Payments on line of credit and commercial paper programs(27,434,617)(7,508,332)(4,246,755)Principal payment on term loan— — (250,000)Proceeds from notes payable issued2,154,662 1,033,387 2,200,488 Principal payment on notes payable— (1,700,000)(250,000)Principal payments on mortgages payable(312,234)(66,575)(108,789)Payments upon extinguishment of debt— (96,583)(9,445)Proceeds from common stock offerings, net 4,556,028 4,442,725 1,823,821 Proceeds from dividend reinvestment and stock purchase plan11,654 11,232 9,109 Distributions to noncontrolling interests(3,935)(1,707)(1,596)Net receipts on derivative settlements79,763 3,266 4,106 Debt issuance costs(34,156)(13,405)(19,456)Net cash received from Orion Divestiture— 593,484 — Other items, including shares withheld upon vesting(4,790)(33,552)(23,279)Net cash provided by financing activities5,738,243 4,577,120 1,692,079 Effect of exchange rate changes on cash and cash equivalents(20,511)20,076 4,431 Net (decrease) increase in cash, cash equivalents and restricted cash(105,488)(518,310)779,674 Cash, cash equivalents and restricted cash, beginning of period332,369 850,679 71,005 Cash, cash equivalents and restricted cash, end of period$226,881 $332,369 $850,679 For supplemental disclosures, see note 16, Supplemental Disclosures of Cash Flow Information." }, { "status": "MODIFIED", "current_title": "Equity in Income and Impairment of Investment in Unconsolidated Entities", "prior_title": "Equity in Income and Impairment of Investment in Unconsolidated Entities", "similarity_score": 0.75, "confidence": "high", "key_changes": [ "Reworded sentence: \"Equity in income for the year ended December 31, 2023 primarily relates to investments made in two unconsolidated joint ventures during the fourth quarter of 2023.\"" ], "current_body": "Equity in income for the year ended December 31, 2023 primarily relates to investments made in two unconsolidated joint ventures during the fourth quarter of 2023. See note 5, Investments in Unconsolidated Entities, to the consolidated financial statements for further details. The loss for the year ended December 31, 2022 was primarily driven by an other than temporary impairment related to the sale of three equity method investments acquired in our merger with VEREIT in November 2021.", "prior_body": "Equity in income and impairment of investment in unconsolidated entities for the years ended December 31, 2022 and 2021 relate to three equity method investments that were acquired in our merger with VEREIT. The loss for the year ended December 31, 2022 is primarily driven by an other than temporary impairment. There were no comparative investments for the year ended December 31, 2020. During 2022 all seven of the properties owned by our industrial partnerships acquired in connection with the VEREIT merger were sold." }, { "status": "MODIFIED", "current_title": "Years ended December 31, 2023, 2022 and 2021", "prior_title": "Years Ended December 31, 2022, 2021 and 2020", "similarity_score": 0.741, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Shares ofcommonstockCommonstock andpaid incapitalDistributionsin excess ofnet incomeAccumulated other comprehensive income (loss)Totalstockholders’equityNoncontrollinginterestsTotalequityBalance, December 31, 2020361,303 $14,700,050 $(3,659,933)$(54,634)$10,985,483 $32,247 $11,017,730 Net income— — 359,456 — 359,456 1,291 360,747 Other comprehensive income— — — 59,567 59,567 — 59,567 Shares issued in merger162,044 11,556,715 — — 11,556,715 3,160 11,559,875 Orion Divestiture— (1,140,769)— — (1,140,769)(1,352)(1,142,121)Distributions paid and payable— — (1,230,094)— (1,230,094)(1,868)(1,231,962)Share issuances, net of costs67,777 4,453,953 — — 4,453,953 — 4,453,953 Contributions by noncontrolling interests— — — — — 43,390 43,390 Reallocation of equity— 42 — — 42 (42)— Share-based compensation, net138 8,221 — — 8,221 — 8,221 Balance, December 31, 2021591,262 $29,578,212 $(4,530,571)$4,933 $25,052,574 $76,826 $25,129,400 Net income— — 869,408 — 869,408 3,008 872,416 Other comprehensive income— — — 41,900 41,900 — 41,900 Distributions paid and payable— — (1,832,030)— (1,832,030)(4,125)(1,836,155)Share issuances, net of costs68,876 4,570,766 — — 4,570,766 — 4,570,766 Contributions by noncontrolling interests — — — — — 51,221 51,221 Reallocation of equity— (3,210)— — (3,210)3,210 — Share-based compensation, net162 13,741 — — 13,741 — 13,741 Balance, December 31, 2022660,300 $34,159,509 $(5,493,193)$46,833 $28,713,149 $130,140 $28,843,289 Net income— — 872,309 — 872,309 4,605 876,914 Other comprehensive income— — — 27,061 27,061 — 27,061 Distributions paid and payable— — (2,141,252)— (2,141,252)(9,340)(2,150,592)Contributions by noncontrolling interests— — — — — 40,097 40,097 Share issuance, net of costs91,902 5,450,982 — — 5,450,982 — 5,450,982 Share-based compensation, net258 19,218 — — 19,218 — 19,218 Balance, December 31, 2023752,460 $39,629,709 $(6,762,136)$73,894 $32,941,467 $165,502 $33,106,969 Balance, December 31, 2020 Balance, December 31, 2021 Balance, December 31, 2022 Balance, December 31, 2023\"" ], "current_body": "Shares ofcommonstockCommonstock andpaid incapitalDistributionsin excess ofnet incomeAccumulated other comprehensive income (loss)Totalstockholders’equityNoncontrollinginterestsTotalequityBalance, December 31, 2020361,303 $14,700,050 $(3,659,933)$(54,634)$10,985,483 $32,247 $11,017,730 Net income— — 359,456 — 359,456 1,291 360,747 Other comprehensive income— — — 59,567 59,567 — 59,567 Shares issued in merger162,044 11,556,715 — — 11,556,715 3,160 11,559,875 Orion Divestiture— (1,140,769)— — (1,140,769)(1,352)(1,142,121)Distributions paid and payable— — (1,230,094)— (1,230,094)(1,868)(1,231,962)Share issuances, net of costs67,777 4,453,953 — — 4,453,953 — 4,453,953 Contributions by noncontrolling interests— — — — — 43,390 43,390 Reallocation of equity— 42 — — 42 (42)— Share-based compensation, net138 8,221 — — 8,221 — 8,221 Balance, December 31, 2021591,262 $29,578,212 $(4,530,571)$4,933 $25,052,574 $76,826 $25,129,400 Net income— — 869,408 — 869,408 3,008 872,416 Other comprehensive income— — — 41,900 41,900 — 41,900 Distributions paid and payable— — (1,832,030)— (1,832,030)(4,125)(1,836,155)Share issuances, net of costs68,876 4,570,766 — — 4,570,766 — 4,570,766 Contributions by noncontrolling interests — — — — — 51,221 51,221 Reallocation of equity— (3,210)— — (3,210)3,210 — Share-based compensation, net162 13,741 — — 13,741 — 13,741 Balance, December 31, 2022660,300 $34,159,509 $(5,493,193)$46,833 $28,713,149 $130,140 $28,843,289 Net income— — 872,309 — 872,309 4,605 876,914 Other comprehensive income— — — 27,061 27,061 — 27,061 Distributions paid and payable— — (2,141,252)— (2,141,252)(9,340)(2,150,592)Contributions by noncontrolling interests— — — — — 40,097 40,097 Share issuance, net of costs91,902 5,450,982 — — 5,450,982 — 5,450,982 Share-based compensation, net258 19,218 — — 19,218 — 19,218 Balance, December 31, 2023752,460 $39,629,709 $(6,762,136)$73,894 $32,941,467 $165,502 $33,106,969 Balance, December 31, 2020 Balance, December 31, 2021 Balance, December 31, 2022 Balance, December 31, 2023", "prior_body": "Shares ofcommonstockCommonstock andpaid incapitalDistributionsin excess ofnet incomeAccumulated other comprehensive income (loss)Totalstockholders’equityNoncontrollinginterestsTotalequityBalance, December 31, 2019333,619,106 $12,873,849 $(3,082,291)$(17,102)$9,774,456 $29,702 $9,804,158 Net income— — 395,486 — 395,486 1,020 396,506 Other comprehensive loss— — — (37,532)(37,532)— (37,532)Distributions paid and payable— — (973,128)— (973,128)(1,596)(974,724)Share issuances, net of costs27,564,163 1,817,978 — — 1,817,978 — 1,817,978 Contributions by noncontrolling interests— — — — — 3,168 3,168 Reallocation of equity— 47 — — 47 (47)— Share-based compensation, net120,176 8,176 — — 8,176 — 8,176 Balance, December 31, 2020361,303,445 $14,700,050 $(3,659,933)$(54,634)$10,985,483 $32,247 $11,017,730 Net income— — 359,456 — 359,456 1,291 360,747 Other comprehensive income— — — 59,567 59,567 — 59,567 Shares issued in merger162,043,548 11,556,715 — — 11,556,715 3,160 11,559,875 Orion Divestiture— (1,140,769)— — (1,140,769)(1,352)(1,142,121)Distributions paid and payable— — (1,230,094)— (1,230,094)(1,868)(1,231,962)Share issuances, net of costs67,777,279 4,453,953 — — 4,453,953 — 4,453,953 Contributions by noncontrolling interests — — — — — 43,390 43,390 Reallocation of equity— 42 — — 42 (42)— Share-based compensation, net137,719 8,221 — — 8,221 — 8,221 Balance, December 31, 2021591,261,991 $29,578,212 $(4,530,571)$4,933 $25,052,574 $76,826 $25,129,400 Net income— — 869,408 — 869,408 3,008 872,416 Other comprehensive income— — — 41,900 41,900 — 41,900 Distributions paid and payable— — (1,832,030)— (1,832,030)(4,125)(1,836,155)Contributions by noncontrolling interests— — — — — 51,221 51,221 Share issuance, net of costs68,875,984 4,570,766 — — 4,570,766 — 4,570,766 Reallocation of equity— (3,210)— — (3,210)3,210 — Share-based compensation, net162,220 13,741 — — 13,741 — 13,741 Balance, December 31, 2022660,300,195 $34,159,509 $(5,493,193)$46,833 $28,713,149 $130,140 $28,843,289 Balance, December 31, 2019 Balance, December 31, 2020 Balance, December 31, 2021 Balance, December 31, 2022" }, { "status": "MODIFIED", "current_title": "9. Mortgages Payable", "prior_title": "8.Mortgages Payable", "similarity_score": 0.731, "confidence": "medium", "key_changes": [ "Added sentence: \"During the year ended December 31, 2023, we made $22.0 million in principal payments, including the full repayment of two mortgages for $17.4 million.\"", "Reworded sentence: \"No mortgages were assumed during the year ended December 31, 2023.\"", "Removed sentence: \"During the year ended December 31, 2022, we made $312.2 million in principal payments, including the full repayment of 12 mortgages for $308.0 million.\"", "Removed sentence: \"During the year ended December 31, 2021, we made $66.6 million in principal payments, including the full repayment of seven mortgages for $63.0 million.\"", "Removed sentence: \"We assumed eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022, as compared to the assumption of 11 mortgages totaling $881.1 million in principal, including ten mortgages from our merger with VEREIT totaling $839.1 million and one Sterling-denominated mortgage on one property totaling £31.0 million for the year ended December 31, 2021.\"" ], "current_body": "During the year ended December 31, 2023, we made $22.0 million in principal payments, including the full repayment of two mortgages for $17.4 million. During the year ended December 31, 2022, we made $312.2 million in principal payments, including the full repayment of 12 mortgages for $308.0 million. No mortgages were assumed during the year ended December 31, 2023. We assumed eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan. Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender. At December 31, 2023, we were in compliance with these covenants. The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $0.4 million and $0.8 million at December 31, 2023 and 2022, respectively. These costs are being amortized over the remaining term of each mortgage. The following table summarizes our mortgages payable as of December 31, 2023 and 2022 (dollars in millions):", "prior_body": "During the year ended December 31, 2022, we made $312.2 million in principal payments, including the full repayment of 12 mortgages for $308.0 million. During the year ended December 31, 2021, we made $66.6 million in principal payments, including the full repayment of seven mortgages for $63.0 million. We assumed eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022, as compared to the assumption of 11 mortgages totaling $881.1 million in principal, including ten mortgages from our merger with VEREIT totaling $839.1 million and one Sterling-denominated mortgage on one property totaling £31.0 million for the year ended December 31, 2021. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan. During the year ended December 31, 2022, we made $312.2 million in principal payments, including the full repayment of 12 mortgages for $308.0 million. During the year ended December 31, 2021, we made $66.6 million in principal payments, including the full repayment of seven mortgages for $63.0 million. We assumed eight mortgages on 17 properties totaling $45.1 million during the year ended December 31, 2022, as compared to the assumption of 11 mortgages totaling $881.1 million in principal, including ten mortgages from our merger with VEREIT totaling $839.1 million and one Sterling-denominated mortgage on one property totaling £31.0 million for the year ended December 31, 2021. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan. 84 84 84 Table of Contents Table of Contents In September 2021, we completed the early redemption on $12.5 million in principal of a mortgage due June 2032, plus accrued and unpaid interest. In October 2021, we completed the early redemption on $9.6 million in principal of a mortgage due June 2022, plus accrued and unpaid interest. As a result of the early redemptions in September and October of 2021, we recognized total losses of $4.3 million on extinguishment of debt during the year ended December 31, 2021. There were no comparable mortgage redemptions during the years ended December 31, 2022 or 2020. 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 December 31, 2022, we were in compliance with these covenants. The balance of our deferred financing costs, which are classified as part of 'Mortgages payable, net', on our consolidated balance sheets, was $0.8 million at December 31, 2022 and 2021, respectively. These costs are being amortized over the remaining term of each mortgage. The following table summarizes our mortgages payable as of December 31, 2022 and 2021 (dollars in thousands): As OfNumber ofProperties (1)WeightedAverageStatedInterestRate (2)WeightedAverageEffectiveInterestRate (3)WeightedAverageRemainingYears UntilMaturityRemainingPrincipalBalanceUnamortizedPremiumand DeferredFinancing CostsBalance, netMortgagePayableBalanceDecember 31, 20221364.8 %3.3 %1.4$842,343 $11,582 $853,925 December 31, 20212674.8 %3.5 %1.8$1,114,129 $27,866 $1,141,995 As Of Number of Properties (1) Weighted Average Stated Interest Rate (2) Weighted Average Effective Interest Rate (3)" }, { "status": "MODIFIED", "current_title": "Rental Revenue (excluding reimbursable)", "prior_title": "Square Footage (1)", "similarity_score": 0.728, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The table below summarizes our rental revenue (excluding reimbursable) for the years ended December 31, 2023 and 2022 (dollars in thousands): Number of PropertiesYears ended December 31,20232022ChangeProperties acquired during 2023 & 20222,608$808,797 $184,684 $624,113 Same store rental revenue (1)10,4982,851,747 2,799,549 52,198 Constant currency adjustment (2)N/A(10,001)(11,228)1,227 Properties sold during and prior to 20233125,246 30,371 (25,125)Straight-line rent and other non-cash adjustmentsN/A(34,721)20,871 (55,592)Vacant rents, development and other (3)35260,097 83,266 (23,169)Other excluded revenue (4)N/A2,784 7,459 (4,675)Totals$3,683,949 $3,114,972 $568,977 Properties acquired during 2023 & 2022 Same store rental revenue (1) Constant currency adjustment (2) Properties sold during and prior to 2023 Vacant rents, development and other (3) Other excluded revenue (4) (1)The same store rental revenue percentage increase for the year ended December 31, 2023 as compared to the same period in 2022 is 1.9%.\"", "Removed sentence: \"Beginning with the first quarter of 2022, properties acquired through the merger with VEREIT were considered under each element of our same store pool criterion, except for the requirement that the property be owned for the full comparative period.\"", "Removed sentence: \"If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our same store property pool.\"", "Reworded sentence: \"Of the 14,262 in-place leases in the portfolio, which excludes 270 vacant units, 11,717, or 82.2%, were under leases that provide for increases in rents through: base rent increases tied to inflation (typically subject to ceilings), percentage rent based on a percentage of the clients’ gross sales, fixed increases, or a combination of two or more of the aforementioned rent provisions.\"" ], "current_body": "The table below summarizes our rental revenue (excluding reimbursable) for the years ended December 31, 2023 and 2022 (dollars in thousands): Number of PropertiesYears ended December 31,20232022ChangeProperties acquired during 2023 & 20222,608$808,797 $184,684 $624,113 Same store rental revenue (1)10,4982,851,747 2,799,549 52,198 Constant currency adjustment (2)N/A(10,001)(11,228)1,227 Properties sold during and prior to 20233125,246 30,371 (25,125)Straight-line rent and other non-cash adjustmentsN/A(34,721)20,871 (55,592)Vacant rents, development and other (3)35260,097 83,266 (23,169)Other excluded revenue (4)N/A2,784 7,459 (4,675)Totals$3,683,949 $3,114,972 $568,977 Properties acquired during 2023 & 2022 Same store rental revenue (1) Constant currency adjustment (2) Properties sold during and prior to 2023 Vacant rents, development and other (3) Other excluded revenue (4) (1)The same store rental revenue percentage increase for the year ended December 31, 2023 as compared to the same period in 2022 is 1.9%. (2)For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2023. None of the properties in France, Germany, Ireland, Italy, or Portugal met our same store pool definition for the periods presented. (3)Relates to the aggregate of (i) rental revenue from 325 properties that were available for lease during part of 2023 or 2022, and (ii) rental revenue for 27 properties under development or completed developments that do not meet our same store pool definition for the periods presented. (4)Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination. For purposes of determining the same store rent property pool, we include all properties that were owned for the entire year-to-date period, for both the current and prior year, except for properties during the current or prior year that; (i) were vacant at any time, (ii) were under development or redevelopment, or (iii) were involved in eminent domain and rent was reduced. Each of the exclusions from the same store pool are separately addressed within the applicable sentences above, explaining the changes in rental revenue for the period. Of the 14,262 in-place leases in the portfolio, which excludes 270 vacant units, 11,717, or 82.2%, were under leases that provide for increases in rents through: base rent increases tied to inflation (typically subject to ceilings), percentage rent based on a percentage of the clients’ gross sales, fixed increases, or a combination of two or more of the aforementioned rent provisions. Rent based on a percentage of our client's gross sales, or percentage rent, was $14.8 million and $14.9 million for the years ended December 31, 2023 and 2022, respectively, which represents less than 1% of rental revenue. At December 31, 2023, our portfolio of 13,458 properties was 98.6% leased with 193 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022. 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. 33 33 33 Table of Contents Table of Contents", "prior_body": "Same store rental revenue(2) Orion Divestiture(3) Constant currency adjustment(4) Vacant rents, development and other (5) Other excluded revenue (6) Less: VEREIT rental revenue (7) (1)Excludes 5,909,738 square feet from properties ground leased to clients and 2,654,136 square feet from properties with no land or building ownership. (2)The same store rental revenue percentage increase for the year ended December 31, 2022 as compared with the same period in the prior year is 1.8%. (3)Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion Office REIT Inc. (\"Orion\"). On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders (including legacy VEREIT stockholders who received shares of our common stock in our merger with VEREIT) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date, which we refer to as the Orion Divestiture. (4)For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2022, of 1.20 British Pound Sterling (\"GBP\")/USD. None of the properties in Spain or Italy met our same store pool definition for the periods presented. (5)Relates to the aggregate of (i) rental revenue from properties (292 properties comprising 6,552,442 square feet) that were available for lease during part of 2022 or 2021, and (ii) rental revenue for properties (16 properties comprising 705,541 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented. (6)Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements. (7)Amounts for the year ended December 31, 2021 represent rental revenue from VEREIT properties, which were not included in our financial statements prior to the close of the merger on November 1, 2021. The table below summarizes the increase in rental revenue (excluding reimbursable) in 2021 compared to 2020 (dollars in thousands): Years Ended December 31, Increase/(Decrease)Number of PropertiesSquare Footage (1)20212020$ ChangeProperties acquired during 2021 & 20204,953 105,839,422 $413,546 $51,951 $361,595 Same store rental revenue (2)6,046 93,607,451 1,457,648 1,418,502 39,146 Orion Divestiture92 10,074,923 45,047 50,401 (5,354)Constant currency adjustment (3)N/AN/A2,025 (2,861)4,886 Properties sold during and prior to 2021283 5,930,654 6,668 21,919 (15,251)Straight-line rent and other non-cash adjustmentsN/AN/A11,646 (3,587)15,233 Vacant rents, development and other (4)137 2,650,240 11,296 14,422 (3,126)Other excluded revenue (5)N/AN/A12,231 9,424 2,807 Totals$1,960,107 $1,560,171 $399,936" }, { "status": "MODIFIED", "current_title": "Merger with VEREIT", "prior_title": "Merger with VEREIT", "similarity_score": 0.709, "confidence": "medium", "key_changes": [ "Reworded sentence: \"On November 1, 2021, we completed our acquisition of VEREIT, Inc.\"", "Reworded sentence: \"Merger and Integration-Related CostsIn conjunction with our merger with VEREIT, we incurred merger-related transaction costs of $4.8 million, $13.9 million, and $167.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.\"", "Reworded sentence: \"Year ended December 31, 2021 Total revenues$3,084.3 Net income$734.6 Basic and diluted earnings per share$1.27 The unaudited pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if our merger with VEREIT had been completed on January 1, 2020: merger and integration-related costs of $167.4 million were excluded within the pro forma financial information for 2021.\"" ], "current_body": "On November 1, 2021, we completed our acquisition of VEREIT, Inc. (\"VEREIT\"), and the merger was consummated. Pursuant to the terms of the Merger Agreement and subject to the terms thereof, upon the consummation of the merger, (i) each outstanding share of VEREIT common stock, and each outstanding common partnership unit of VEREIT Operating Partnership, L.P., (\"VEREIT OP\") owned by any of its partners other than VEREIT, Realty Income or their respective affiliates, was automatically converted into 0.705 of newly issued shares of our common stock, or in certain instances, Realty Income L.P. units, and (ii) each VEREIT OP outstanding common unit owned by VEREIT, Realty Income or their respective affiliates remained outstanding as partnership interests in the surviving entity. Each outstanding VEREIT stock option and restricted stock unit that were unvested as of November 1, 2021 were converted into equivalent options and restricted stock units, in each case with respect to the share of the Company's common stock, using the equity award exchange ratio in accordance with the Merger Agreement. A. Merger and Integration-Related CostsIn conjunction with our merger with VEREIT, we incurred merger-related transaction costs of $4.8 million, $13.9 million, and $167.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, public filing fees and additional 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. B. Unaudited Pro Forma Financial Information Our consolidated results of operations for year ended December 31, 2021 include $176.3 million of revenues and $36.7 million of net income associated with the results of operations of VEREIT OP. The following unaudited pro forma information presents a summary of our combined results of operations for the year ended December 31, 2021 as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data). The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results. In accordance with ASC 805, Business Combinations, the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc. (\"Orion\"). Year ended December 31, 2021 Total revenues$3,084.3 Net income$734.6 Basic and diluted earnings per share$1.27 The unaudited pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if our merger with VEREIT had been completed on January 1, 2020: merger and integration-related costs of $167.4 million were excluded within the pro forma financial information for 2021. 61 61 61 Table of Contents Table of Contents", "prior_body": "On April 29, 2021, we entered into an Agreement and Plan of Merger, as amended, (the \"Merger Agreement\"), with VEREIT, its operating partnership, VEREIT Operating Partnership, L.P., (\"VEREIT OP\"), and two newly formed subsidiaries. Pursuant to the terms of the Merger Agreement, (i) one of the newly formed subsidiaries of us agreed to merge with and into VEREIT OP, with VEREIT OP as the surviving entity, which we refer to as the Partnership Merger, and (ii) immediately thereafter, VEREIT agreed to merge with and into the other newly formed subsidiary of us, with our subsidiary as the surviving corporation, which we refer to collectively as the merger. The primary reason for the Merger was to expand our size, scale and diversification, in order to further enhance our competitive advantages and accelerate our investment activities. On November 1, 2021, we completed our acquisition of VEREIT, and the merger was consummated. Pursuant to the terms of the Merger Agreement and subject to the terms thereof, upon the consummation of the merger, (i) each outstanding share of VEREIT common stock, and each outstanding common partnership unit of VEREIT OP owned by any of its partners other than VEREIT, Realty Income or their respective affiliates, was automatically converted into 0.705 of newly issued shares of our common stock, or in certain instances, Realty Income L.P. units, and (ii) each VEREIT OP outstanding common unit owned by VEREIT, Realty Income or their respective affiliates remained outstanding as partnership interests in the surviving entity. Each outstanding VEREIT stock option and restricted stock unit that were unvested as of November 1, 2021 were converted into equivalent options and restricted stock units, in each case with respect to the share of the Company's common stock, using the equity award exchange ratio in accordance with the Merger Agreement. For more details, see note 17, Common Stock Incentive Plan. 75 75 75 Table of Contents Table of Contents Our merger with VEREIT has been accounted for using the acquisition method of accounting in accordance with ASC, 805, Business Combinations, with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data): Shares of VEREIT common stock and VEREIT OP common units exchanged (1)229,304,035 Exchange Ratio0.705161,659,345Less: Fractional shares settled in cash(1,545)Shares of Realty Income common stock and Realty Income L.P. units issued161,657,800Adjusted opening price of Realty common stock on November 1, 2021 (2)$71.236 Fair value of Realty common stock issued to former holders of VEREIT common stock and VEREIT OP common units $11,515,855 Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3)44,020 Total non-cash consideration$11,559,875 Cash paid for fractional shares110 VEREIT indebtedness paid off in connection with the merger (4)500,414 Consideration transferred$12,060,399 Shares of VEREIT common stock and VEREIT OP common units exchanged (1) Adjusted opening price of Realty common stock on November 1, 2021 (2) Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3) VEREIT indebtedness paid off in connection with the merger (4) (1) Includes 229,152,001 shares of VEREIT common stock and 152,034 VEREIT OP common units outstanding as of November 1, 2021. Under the Merger Agreement, these shares and units were converted to Realty Income common stock, or in certain instances, Realty Income L.P. units, at an Exchange Ratio of 0.705 per share of VEREIT common stock or VEREIT OP common unit, as applicable. (2) The fair value of Realty Income common stock issued to former holders of VEREIT common stock and VEREIT OP common units is based on the per share opening price of Realty Income common stock of $71.00 on November 1, 2021, adjusted for the monthly dividend of $0.236 per share that former holders of VEREIT common stock and VEREIT OP common units were eligible to receive when such dividend was paid on November 15, 2021. (3) Represents the fair value of fully vested deferred stock unit awards of VEREIT common stock (“VEREIT DSU Awards”) which were converted into Realty Income common stock upon our merger with VEREIT, as well as the estimated fair value of the Realty Income replacement employee and executive stock options and restricted stock units that were granted at the closing date of our merger with VEREIT and which were attributable to pre-combination services. (4) Represents the outstanding balance of the VEREIT revolving credit facility repaid by Realty Income in connection with the closing of the merger. The amount shown in the table above was based upon the balance outstanding immediately prior to November 1, 2021. 76 76 76 Table of Contents Table of Contents A. Purchase Price Allocation The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands): As of November 1, 2021ASSETSLand$3,021,906 Buildings8,677,467 Total real estate held for investment11,699,373 Cash and cash equivalents128,411 Accounts receivable53,355 Lease intangible assets (1)3,204,773 Goodwill3,717,620 Investment in unconsolidated entities175,379 Other assets308,910 Total assets acquired$19,287,821 LIABILITIESAccounts payable and accrued expenses$139,836 Lease intangible liabilities (2)949,349 Other liabilities320,893 Mortgages payable869,027 Notes payable4,946,965 Total liabilities assumed$7,226,070 Net assets acquired, at fair value$12,061,751 Noncontrolling interests$1,352 Total purchase price$12,060,399 Lease intangible assets (1) Lease intangible liabilities (2) (1) The weighted average amortization period for acquired lease intangible assets is 9.3 years. (2) The weighted average amortization period for acquired lease intangible liabilities is 25.5 years. The initial assessment of fair value provided in our Annual Report on Form 10-K for the year ended December 31, 2021 was preliminary and was based on information that was available to management at the time the consolidated financial statements were prepared. Measurement period adjustments were recorded during the year ended December 31, 2022 in the period in which they were determined, as if they had been completed at the acquisition date. Before the first anniversary of the merger date, final measurement period adjustments, as reflected in the table above, resulted in a net increase of $54.8 million to goodwill from the initial valuation, reflecting a decrease of $15.8 million in land, $7.6 million in building, $22.6 million in lease intangible assets, $19.5 million in investment in unconsolidated entities, $9.9 million in other assets, offset by decrease of $4.4 million in lease intangible liabilities, $16.1 million in other liabilities and $0.1 million in mortgages payable. Approximately $3.72 billion was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill was attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the 77 77 77 Table of Contents Table of Contents employee workforce onboarded from VEREIT following the closing of the merger. None of the goodwill recognized is deductible for tax purposes. B. Merger and Integration-Related CostsIn conjunction with our merger with VEREIT, we incurred merger-related transaction costs of $13.9 million and $167.4 million for the years ended December 31, 2022 and 2021, respectively. Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, SEC filing fees and additional 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. C. Unaudited Pro Forma Financial Information Our consolidated results of operations for the years ended December 31, 2022 and 2021, include $1.02 billion and $176.3 million of revenues, respectively, and $62.4 million and $36.7 million of net income associated with the results of operations of VEREIT OP, respectively. The following unaudited pro forma information presents a summary of our combined results of operations for the years ended December 31, 2021 and 2020, as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data). There are no pro forma adjustments for the year ended December 31, 2022, as the merger was completed November 1, 2021. The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. In accordance with ASC 805, Business Combinations, the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc. (\"Orion\"). Years ended December 31,20212020Total revenues$3,084.3 $2,835.5 Net income$734.6 $325.9 Basic and diluted earnings per share$1.27 $0.64 The unaudited pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if our merger with VEREIT had been completed on January 1, 2020: merger and integration-related costs of $167.4 million were excluded within the pro forma financial information for 2021, but included for 2020." }, { "status": "MODIFIED", "current_title": "Property Expenses (reimbursable)", "prior_title": "Property Expenses (reimbursable)", "similarity_score": 0.702, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients.\"" ], "current_body": "Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients. The increase in property expenses (reimbursable) for the year ended December 31, 2023 is proportional to overall portfolio growth.", "prior_body": "The increase in property expenses (reimbursable) for the years ended December 31, 2022 and 2021, is primarily attributable to our increased portfolio size, which contributed to higher operating expenses as a result of our acquisitions during the years ended December 31, 2022 and 2021, and an increase in ground lease rent, insurance, and property taxes paid on behalf of our clients." }, { "status": "MODIFIED", "current_title": "on variable rate debt", "prior_title": "on variable rate debt", "similarity_score": 0.673, "confidence": "medium", "key_changes": [ "Reworded sentence: \"(1) (2) (3) Thereafter Totals (4) Fair Value (5) (1)In conjunction with our $250.0 million senior unsecured term loan, which matures in March 2024, we entered into an interest rate swap, and as of December 31, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8%.\"", "Reworded sentence: \"At December 31, 2023, our outstanding mortgages payable, notes, and bonds had fixed interest rates.\"" ], "current_body": "(1) (2) (3) Thereafter Totals (4) Fair Value (5) (1)In conjunction with our $250.0 million senior unsecured term loan, which matures in March 2024, we entered into an interest rate swap, and as of December 31, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8%. (2)The maturity date for our 2023 term loans reflects the closing of our previous twelve-month extension option and assumes the additional twelve-month extension available at the company's option is exercised. In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps, which fix our per annum interest rate at 5.0% over the initial term. Accordingly, the 2023 term loans have been presented as fixed rate debt as of December 31, 2023 in the table above. (3)In January 2023, we issued $500.0 million of 5.05% senior unsecured notes due January 13, 2026, which were callable at par beginning on January 13, 2024. In conjunction with the pricing of these senior unsecured notes due January 2026, we executed 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. (4)Excludes net premiums and discounts recorded on mortgages payable, net premiums recorded on notes payable, deferred financing costs on term loans, mortgages payable, notes payable, and the basis adjustment on interest rate swaps designated as fair value hedges on notes payable. 44 44 44 Table of Contents Table of Contents (5)We base the estimated fair value of our fixed rate mortgages and private senior notes payable at December 31, 2023, on the relevant forward interest rate curve, plus an applicable credit-adjusted spread. We base the estimated fair value of the publicly traded fixed rate senior notes and bonds at December 31, 2023, on the indicative market prices and recent trading activity of our senior notes and bonds payable. We believe that the carrying values of the line of credit, commercial paper borrowings, and term loan balances reasonably approximate their estimated fair values at December 31, 2023. The table above incorporates only those exposures that exist as of December 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. At December 31, 2023, our outstanding mortgages payable, notes, and bonds had fixed interest rates. Interest on our credit facility and commercial paper borrowings and term loans is variable. However, the variable interest rate feature on our term loans have been mitigated by interest rate swap agreements. At December 31, 2023, a 1% change in interest rates on our variable-rate debt would change our interest costs by $12.6 million.", "prior_body": "Thereafter Totals (1) Fair Value (2) (1)Excludes net premiums recorded on mortgages payable, net premiums recorded on notes payable and deferred financing costs on mortgages payable, notes payable, and our $250.0 million term loan. At December 31, 2022, the unamortized balance of net premiums on mortgages payable is $12.4 million, the unamortized balance of net premiums on notes payable is $224.6 million, and the balance of deferred financing costs on mortgages payable is $0.8 million, on notes payable is $60.7 million, and on the $250.0 million term loan is $0.2 million. (2)We base the estimated fair value of the publicly-traded fixed rate senior notes and bonds at December 31, 2022, 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 December 31, 2022, 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 $250.0 million term loan balance reasonably approximate their estimated fair values at December 31, 2022. The table above incorporates only those exposures that exist as of December 31, 2022. 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. At December 31, 2022, our outstanding notes, bonds and mortgages payable had fixed interest rates. Interest on our credit facility and commercial paper borrowings and $250.0 million term loan balance is variable. However, the variable interest rate feature on our $250.0 million term loan has been mitigated by an interest rate swap agreement. Based on our revolving credit facility balance of $2.0 billion at December 31, 2022, a 1% change in interest rates would change our interest rate costs by $20.3 million per year." }, { "status": "MODIFIED", "current_title": "Allocation of the Purchase Price of Real Estate Acquisitions", "prior_title": "Critical Accounting Policies", "similarity_score": 0.647, "confidence": "medium", "key_changes": [ "Removed sentence: \"Our consolidated financial statements have been prepared in accordance with U.S.\"", "Removed sentence: \"GAAP and are the basis for our discussion and analysis of financial condition and results of operations.\"", "Removed sentence: \"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.\"", "Removed sentence: \"We believe that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition.\"", "Removed sentence: \"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.\"" ], "current_body": "Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed. When acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value and the value of in-place leases, as applicable. Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent. 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 of the land, building and improvements, and identified intangible assets and liabilities and is often based upon the various characteristics of the market where the property is located. In addition, any assumed mortgages 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, client 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.", "prior_body": "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. 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 this Annual Report on Form 10-K for the year ended December 31, 2022. 43 43 43 Table of Contents Table of Contents In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S. GAAP, many subjective judgments must be made with regard to critical accounting policies. Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed. When acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value and the value of in-place leases, as applicable. Additionally, above-market rents on certain leases under which we are a lessor are accounted for as financing receivables amortizing over the lease term, while below-market rents on certain leases under which we are a lessor are accounted for as prepaid rent. 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 of the land, building and improvements, and identified intangible assets and liabilities and is often based upon the various characteristics of the market where the property is located. In addition, any assumed mortgages 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, client 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. If estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property, a fair value analysis is performed and, to the extent the estimated fair value is less than the current book value, a provision for impairment is recorded to reduce the book value to estimated fair value. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, 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." }, { "status": "MODIFIED", "current_title": "Long-Term Liquidity Requirements", "prior_title": "Capital Philosophy", "similarity_score": 0.632, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our goal is to deliver dependable monthly dividends to our stockholders that increase over time.\"", "Removed sentence: \"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.\"", "Removed sentence: \"We expect to fund our operating expenses and other short-term liquidity requirements, including property acquisitions and development costs, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs, and cash distributions to common stockholders, primarily through cash provided by operating activities, borrowings under our revolving credit facility, short-term term loans, and under our commercial paper programs, and through public securities offerings.\"", "Removed sentence: \"As of December 31, 2022, there are approximately $2.0 billion of 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).\"", "Removed sentence: \"We may choose to mitigate our financial exposure to exchange rate risk for properties acquired outside the U.S.\"" ], "current_body": "Our goal is to deliver dependable monthly dividends to our stockholders that increase over time. Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate acquisitions, investments in loans, property development, and capital expenditures by issuing common stock, preferred stock, long-term unsecured notes, and term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital structure. We may issue common stock when we believe our share price is at a level that allows for the proceeds of an offering to be accretively invested into additional properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term debt 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.", "prior_body": "Our goal is to deliver dependable monthly dividends to our shareholders 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 37 37 37 Table of Contents Table of Contents acquisitions, property development, and capital expenditures, by issuing common stock, preferred stock, long-term unsecured notes and term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital structure. We may issue common stock when we believe our share price is at a level that allows for the proceeds of an offering to be accretively invested into additional properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term debt 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 stockholders, primarily through cash provided by operating activities, borrowings under our revolving credit facility, short-term term loans, and under our commercial paper programs, and through public securities offerings. As of December 31, 2022, there are approximately $2.0 billion of 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." }, { "status": "MODIFIED", "current_title": "Gain on Sales of Real Estate", "prior_title": "Gain on Sales of Real Estate", "similarity_score": 0.627, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The following summarizes our property dispositions (dollars in millions): Years ended December 31,20232022Number of properties sold121 170 Net sales proceeds$117.4 $436.1 Gain on sales of real estate$25.7 $103.0 35 35 35 Table of Contents Table of Contents\"" ], "current_body": "The following summarizes our property dispositions (dollars in millions): Years ended December 31,20232022Number of properties sold121 170 Net sales proceeds$117.4 $436.1 Gain on sales of real estate$25.7 $103.0 35 35 35 Table of Contents Table of Contents", "prior_body": "The following summarizes our property dispositions, excluding our proportionate share of net proceeds from the disposition of properties by our consolidated industrial partnerships in 2022 (dollars in millions): 49 49 49 Table of Contents Table of Contents Years ended December 31,202220212020Number of properties sold168 154 126 Net sales proceeds$434.9 $250.3 $262.5 Gain on sales of real estate$102.7 $55.8 $76.2" }, { "status": "MODIFIED", "current_title": "CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME", "prior_title": "CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME", "similarity_score": 0.614, "confidence": "medium", "key_changes": [ "Reworded sentence: \"(in thousands, except per share amounts) Years ended December 31, 202320222021REVENUERental (including reimbursable)$3,958,150 $3,299,657 $2,064,958 Other120,843 44,024 15,505 Total revenue4,078,993 3,343,681 2,080,463 EXPENSESDepreciation and amortization1,895,177 1,670,389 897,835 Interest730,423 465,223 323,644 Property (including reimbursable)316,964 226,330 133,605 General and administrative144,536 138,459 96,980 Provisions for impairment87,082 25,860 38,967 Merger and integration-related costs14,464 13,897 167,413 Total expenses3,188,646 2,540,158 1,658,444 Gain on sales of real estate25,667 102,957 55,798 Foreign currency and derivative (loss) gain, net(13,414)(13,311)710 Gain (loss) on extinguishment of debt— 367 (97,178)Equity in income and impairment of investment in unconsolidated entities2,546 (6,448)1,106 Other income, net23,789 30,511 9,949 Income before income taxes928,935 917,599 392,404 Income taxes(52,021)(45,183)(31,657)Net income876,914 872,416 360,747 Net income attributable to noncontrolling interests(4,605)(3,008)(1,291)Net income available to common stockholders$872,309 $869,408 $359,456 Amounts available to common stockholders per common share:Net income, basic and diluted$1.26 $1.42 $0.87 Weighted average common shares outstanding:Basic692,298 611,766 414,535 Diluted693,024 612,181 414,770 Net income available to common stockholders$872,309 $869,408 $359,456 Total other comprehensive gainForeign currency translation adjustment64,326 (55,154)9,119 Unrealized (loss) gain on derivatives, net(37,265)97,054 50,448 Total other comprehensive gain$27,061 $41,900 $59,567 Comprehensive income available to common stockholders$899,370 $911,308 $419,023\"" ], "current_body": "(in thousands, except per share amounts) Years ended December 31, 202320222021REVENUERental (including reimbursable)$3,958,150 $3,299,657 $2,064,958 Other120,843 44,024 15,505 Total revenue4,078,993 3,343,681 2,080,463 EXPENSESDepreciation and amortization1,895,177 1,670,389 897,835 Interest730,423 465,223 323,644 Property (including reimbursable)316,964 226,330 133,605 General and administrative144,536 138,459 96,980 Provisions for impairment87,082 25,860 38,967 Merger and integration-related costs14,464 13,897 167,413 Total expenses3,188,646 2,540,158 1,658,444 Gain on sales of real estate25,667 102,957 55,798 Foreign currency and derivative (loss) gain, net(13,414)(13,311)710 Gain (loss) on extinguishment of debt— 367 (97,178)Equity in income and impairment of investment in unconsolidated entities2,546 (6,448)1,106 Other income, net23,789 30,511 9,949 Income before income taxes928,935 917,599 392,404 Income taxes(52,021)(45,183)(31,657)Net income876,914 872,416 360,747 Net income attributable to noncontrolling interests(4,605)(3,008)(1,291)Net income available to common stockholders$872,309 $869,408 $359,456 Amounts available to common stockholders per common share:Net income, basic and diluted$1.26 $1.42 $0.87 Weighted average common shares outstanding:Basic692,298 611,766 414,535 Diluted693,024 612,181 414,770 Net income available to common stockholders$872,309 $869,408 $359,456 Total other comprehensive gainForeign currency translation adjustment64,326 (55,154)9,119 Unrealized (loss) gain on derivatives, net(37,265)97,054 50,448 Total other comprehensive gain$27,061 $41,900 $59,567 Comprehensive income available to common stockholders$899,370 $911,308 $419,023", "prior_body": "(dollars in thousands, except per share and share count data) Years ended December 31, 202220212020REVENUERental (including reimbursable)$3,299,657 $2,064,958 $1,639,533 Other44,024 15,505 7,554 Total revenue3,343,681 2,080,463 1,647,087 EXPENSESDepreciation and amortization1,670,389 897,835 677,038 Interest465,223 323,644 309,336 Property (including reimbursable)226,330 133,605 104,603 General and administrative138,459 96,980 73,215 Provisions for impairment25,860 38,967 147,232 Merger and integration-related costs13,897 167,413 — Total expenses2,540,158 1,658,444 1,311,424 Gain on sales of real estate102,957 55,798 76,232 Foreign currency and derivative (loss) gain, net(13,311)710 4,585 Gain (loss) on extinguishment of debt367 (97,178)(9,819)Equity in income and impairment of investment in unconsolidated entities(6,448)1,106 — Other income, net30,511 9,949 4,538 Income before income taxes917,599 392,404 411,199 Income taxes(45,183)(31,657)(14,693)Net income872,416 360,747 396,506 Net income attributable to noncontrolling interests(3,008)(1,291)(1,020)Net income available to common stockholders$869,408 $359,456 $395,486 Amounts available to common stockholders per common share:Net IncomeBasic$1.42 $0.87 $1.15 Diluted$1.42 $0.87 $1.14 Weighted average common shares outstanding:Basic611,765,815 414,535,283 345,280,126 Diluted612,180,519 414,769,846 345,415,258 Net income available to common stockholders$869,408 $359,456 $395,486 Total other comprehensive income (loss):Foreign currency translation adjustment(55,154)9,119 (2,606)Unrealized gain (loss) on derivatives, net97,054 50,448 (34,926)Total other comprehensive income (loss)$41,900 $59,567 $(37,532)Comprehensive income available to common stockholders$911,308 $419,023 $357,954" }, { "status": "MODIFIED", "current_title": "11. Issuances of Common Stock", "prior_title": "Equity Capital Raising", "similarity_score": 0.614, "confidence": "medium", "key_changes": [ "Reworded sentence: \"At-the-Market (\"ATM\") Program In August 2023, we replaced our prior ATM program with a new ATM program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE under the ticker symbol \"O\" at prevailing market prices or at negotiated prices.\"", "Reworded sentence: \"The following table outlines common stock issuances pursuant to our ATM programs (dollars in millions, shares in thousands): Years ended December 31,202320222021Shares of common stock issued under the ATM program(1)91,69968,60846,291Gross proceeds$5,483.2 $4,599.4 $3,207.9 Sales agents' commissions and other offering expenses(43.7)(43.4)(28.4)Net proceeds$5,439.5 $4,556.0 $3,179.5 Shares of common stock issued under the ATM program(1) (1) During the year ended December 31, 2023, 91.1 million shares were sold and 91.7 million shares were settled pursuant to forward sale confirmations.\"", "Reworded sentence: \"Our DRSPP authorizes up to 26.0 million common shares to be issued.\"" ], "current_body": "A. At-the-Market (\"ATM\") Program In August 2023, we replaced our prior ATM program with a new ATM program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE under the ticker symbol \"O\" at prevailing market prices or at negotiated prices. Upon settlement, subject to certain exceptions, we may elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which cases we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser. Of the 120.0 million shares of our common stock available for sale under the prior ATM program at its inception, a total of 101.8 million of those shares were sold, the remainder of which were terminated. As of December 31, 2023, we had 81.3 million shares remaining for future issuance under our new ATM program. We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder. The following table outlines common stock issuances pursuant to our ATM programs (dollars in millions, shares in thousands): Years ended December 31,202320222021Shares of common stock issued under the ATM program(1)91,69968,60846,291Gross proceeds$5,483.2 $4,599.4 $3,207.9 Sales agents' commissions and other offering expenses(43.7)(43.4)(28.4)Net proceeds$5,439.5 $4,556.0 $3,179.5 Shares of common stock issued under the ATM program(1) (1) During the year ended December 31, 2023, 91.1 million shares were sold and 91.7 million shares were settled pursuant to forward sale confirmations. In addition, as of December 31, 2023, 6.2 million shares of common stock subject to forward sale confirmations have been executed, but not settled, at a weighted average initial gross price of $55.03 per share. We currently expect to fully settle forward sale agreements outstanding by June 30, 2024, representing $337.8 million in net proceeds, for which the weighted average forward price at December 31, 2023 was $54.70 per share. (1) B. Dividend Reinvestment and Stock Purchase Plan (\"DRSPP\") Our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26.0 million common shares to be issued. At December 31, 2023, we had 11.0 million shares remaining for future issuance under our DRSPP program. The following table outlines common stock issuances pursuant to our DRSPP program (dollars in millions, shares in thousands): Years ended December 31,202320222021Shares of common stock issued under the DRSPP program198176 168 Gross proceeds$11.5 $11.7 $11.2 71 71 71 Table of Contents Table of Contents C. Issuance of Common Stock in Connection with VEREIT Acquisition On November 1, 2021, we completed our acquisition of VEREIT. As a result of the merger, former VEREIT common stockholders, VEREIT OP common unitholders and awardees of vested share awards separated from Realty Income and received approximately 162 million shares of Realty Income common stock, based on the shares of VEREIT common stock and common units of VEREIT OP outstanding as of October 29, 2021. D. Issuances of Common Stock in Underwritten Public Offerings During 2021, we issued an aggregate of 21.3 million shares of common stock, including 2.8 million shares purchased by the underwriters upon the exercise of their option to purchase additional shares. After deducting underwriting discounts, the aggregate net proceeds of $1.3 billion were used to fund investment opportunities, for general corporate purposes and working capital. There were no comparative offerings during the years ended December 31, 2023 or 2022.", "prior_body": "Under our ATM program, up to 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 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 year ended December 31, 2022, we issued 68,608,176 shares and raised approximately $4.6 billion 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 December 31, 2022, there were 6,744,884 shares of common stock subject to forward sale agreements through our ATM program, with a weighted average initial price of $63.31 per share, representing approximately $0.4 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 December 31, 2022 was $62.59 per share, after price deduction and adjustments. After deducting the 6,744,884 shares sold pursuant to forward sale confirmations that remained outstanding as of December 31, 2022, we had 70,620,121 shares remaining for future issuance under our ATM program. We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder. Our Dividend Reinvestment and Stock Purchase Plan, (our \"DRSPP\"), provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26,000,000 common shares to be issued. Our DRSPP includes a waiver approval process, allowing larger investors or institutions, per a formal approval process, to purchase shares at a small discount, if approved by us. We did not issue shares under the waiver approval process during the year ended December 31, 2022. During the year ended December 31, 2022, we issued 175,554 shares and raised approximately $11.7 million under our DRSPP. At December 31, 2022, we had 11,159,825 shares remaining for future issuance under our DRSPP program. There were no issuances of common stock in underwritten public offerings during the year ended December 31, 2022." }, { "status": "MODIFIED", "current_title": "Total Expenses", "prior_title": "Total Expenses", "similarity_score": 0.594, "confidence": "low", "key_changes": [ "Reworded sentence: \"The following summarizes our total expenses (in thousands): Years ended December 31,20232022ChangeDepreciation and amortization$1,895,177$1,670,389$224,788Interest730,423465,223265,200Property (excluding reimbursable)42,76341,6451,118Property (reimbursable)274,201184,68589,516General and administrative144,536138,4596,077Provisions for impairment87,08225,86061,222Merger and integration-related costs14,46413,897567Total expenses$3,188,646$2,540,158$648,488Total revenue (1)$3,804,792$3,158,996General and administrative expenses as a percentage of total revenue (1)3.8 %4.4 %Property expenses (excluding reimbursable) as a percentage of total revenue (1)1.1 %1.3 % Total revenue (1) General and administrative expenses as a percentage of total revenue (1) Property expenses (excluding reimbursable) as a percentage of total revenue (1) (1) Excludes rental revenue (reimbursable).\"" ], "current_body": "The following summarizes our total expenses (in thousands): Years ended December 31,20232022ChangeDepreciation and amortization$1,895,177$1,670,389$224,788Interest730,423465,223265,200Property (excluding reimbursable)42,76341,6451,118Property (reimbursable)274,201184,68589,516General and administrative144,536138,4596,077Provisions for impairment87,08225,86061,222Merger and integration-related costs14,46413,897567Total expenses$3,188,646$2,540,158$648,488Total revenue (1)$3,804,792$3,158,996General and administrative expenses as a percentage of total revenue (1)3.8 %4.4 %Property expenses (excluding reimbursable) as a percentage of total revenue (1)1.1 %1.3 % Total revenue (1) General and administrative expenses as a percentage of total revenue (1) Property expenses (excluding reimbursable) as a percentage of total revenue (1) (1) Excludes rental revenue (reimbursable).", "prior_body": "The following summarizes our total expenses (dollars in thousands): Years ended December 31,Increase/(Decrease)2022202120202022versus 20212021versus2020EXPENSESDepreciation and amortization$1,670,389 $897,835 $677,038 $772,554 $220,797 Interest465,223 323,644 309,336 141,579 14,308 Property (excluding reimbursable)41,648 28,754 25,241 12,894 3,513 Property (reimbursable)184,682 104,851 79,362 79,831 25,489 General and administrative (2)138,459 96,980 73,215 41,479 23,765 Provisions for impairment25,860 38,967 147,232 (13,107)(108,265)Merger and integration-related costs13,897 167,413 — (153,516)167,413 Total expenses$2,540,158 $1,658,444 $1,311,424 $881,714 $347,020 Total revenue (1)$3,158,999 $1,975,612 1,567,725 General and administrative expenses as a percentage of total revenue (1)4.4 %4.9 %4.4 %Property expenses (excluding reimbursable) as a percentage of total revenue (1)1.3 %1.5 %1.6 % EXPENSES Interest Property (reimbursable) General and administrative (2) Provisions for impairment Total expenses Total revenue (1) General and administrative expenses as a percentage of total revenue (1) Property expenses (excluding reimbursable) as a percentage of total revenue (1) (1) Excludes rental revenue (reimbursable). (2) General and administrative expenses for 2020 included an executive severance charge related to the departure of our former Chief Financial Officer (\"CFO\") in March 2020. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $3.5 million and was recorded to general and administrative expense. In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for 2020, we have excluded this executive severance charge to arrive at a normalized general and administrative amount of $69.8 million which was used for our calculation." }, { "status": "MODIFIED", "current_title": "Our Clients (6)", "prior_title": "Our Clients (7)", "similarity_score": 0.575, "confidence": "low", "key_changes": [ "Reworded sentence: \"Other (7) (1) The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions.\"", "Reworded sentence: \"(7) “Other” consists of $740.0 million of commitments under construction contracts, and $32.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.\"" ], "current_body": "Other (7) (1) The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions. At December 31, 2023, there were no borrowings under our revolving credit facility, and commercial paper programs outstanding were $764.4 million, which matured between January 2024 and February 2024. (2) The maturity date for our 2023 term loans reflects the closing of our previous twelve-month extension option and assumes the additional twelve-month extension available at the company's option is exercised. (3) Excludes our January 2024 issuance of $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034. (4) Interest on the commercial paper programs, term loans, mortgages payable, and senior unsecured notes and bonds has been calculated based on outstanding balances at period end through their respective maturity dates. Excludes interest on the January 2024 issuances of $450.0 million of unsecured senior notes due February 2029 and $800.0 million of unsecured senior notes due February 2034. (5) We currently pay the ground lessors directly for the rent under the ground leases. (6) Our clients, who are generally sub-tenants clients under ground leases, are responsible for paying the rent under these ground leases. In the event our client fails to pay the ground lease rent, we are primarily responsible. (7) “Other” consists of $740.0 million of commitments under construction contracts, and $32.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.", "prior_body": "Other (8) (1)The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions. At December 31, 2022, there were $2.0 billion borrowings under our revolving credit facility. Commercial paper programs outstanding at December 31, 2022 were $701.8 million, which have matured and will mature between January 2023 and February 2023. (2)Excludes non-cash net premiums recorded on notes payable of $224.6 million and deferred financing costs of $60.7 million. The table of obligations also excludes the January 2023 issuances of $500.0 million of senior unsecured notes due January 2026, which are callable at par on January 13, 2024, and $600.0 million of senior unsecured notes due March 2030, which are callable at par on January 15, 2030. (3)Excludes deferred financing costs of $0.2 million as well as the approximately $1.0 billion multicurrency unsecured term loan entered into in January 2023. (4)Excludes both non-cash net premiums recorded on the mortgages payable of $12.4 million and deferred financing costs of $0.8 million. (5)Interest on the term loan, notes, bonds, mortgages payable, credit facility and commercial paper programs has been calculated based on outstanding balances at period end through their respective maturity dates. Excludes interest on the multicurrency term loan entered into January 2023 for approximately$1.0 billion, which matures January 2024, as well as on our January 2023 issuances of $500 million of senior unsecured notes, which are callable at par on January 13, 2024, and $600 million of senior unsecured notes due March 2030. (6)We currently pay the ground lessors directly for the rent under the ground leases. (7)Our clients, who are generally sub-clients under ground leases, are responsible for paying the rent under these ground leases. In the event our client fails to pay the ground lease rent, we are primarily responsible. (8)“Other” consists of $606.3 million of commitments under construction contracts, and $21.7 million for re-leasing costs, recurring capital expenditures, and 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." }, { "status": "MODIFIED", "current_title": "Inflation (including prolonged inflationary periods) may adversely affect our results of operations, financial condition and liquidity.", "prior_title": "Inflation (including prolonged inflationary periods) may adversely affect our financial condition and results of operations.", "similarity_score": 0.559, "confidence": "low", "key_changes": [ "Reworded sentence: \"Increased inflation or anticipated inflationary periods, such as the period in which we are currently in, could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations.\"", "Reworded sentence: \"Government regulations may limit the indices we can utilize in lease adjustments thereby limiting our ability to increase rent.\"", "Reworded sentence: \"government plans to migrate away from the Retail Price Index (\"RPI\"), to alternatives such as the Consumer Price Index including owner occupiers' housing costs, that may result in a lower measure of inflation and, in turn, have a negative impact on our lease revenue currently tied to RPI in the U.K.\"", "Reworded sentence: \"Item 1B: Unresolved Staff Comments There are no unresolved staff comments.\"" ], "current_body": "Increased inflation or anticipated inflationary periods, such as the period in which we are currently in, could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses). Government regulations may limit the indices we can utilize in lease adjustments thereby limiting our ability to increase rent. 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. The U.K. government plans to migrate away from the Retail Price Index (\"RPI\"), to alternatives such as the Consumer Price Index including owner occupiers' housing costs, that may result in a lower measure of inflation and, in turn, have a negative impact on our lease revenue currently tied to RPI in the U.K. Inflationary periods may cause us to experience increased costs of financing, making it difficult to incur or 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. To the extent periods of high inflation are prolonged, these results may be exacerbated. Item 1B: Unresolved Staff Comments There are no unresolved staff comments. Item 1C: Cybersecurity We maintain a cyber risk management program to identify, assess, manage, mitigate, and respond to cybersecurity threats. We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) and use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. The program is integrated within our enterprise risk management system and addresses our IT networks and related systems that are essential to the operation of our business. We maintain controls and procedures, including third-party oversight procedures, and cybersecurity training for all employees on an annual basis, which are designed to ensure prompt escalation of cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management in a timely manner. We work with third parties that assist us to identify, assess, and manage cybersecurity risks, including professional services firms, consulting firms, threat intelligence service providers, and penetration testing firms. Our cybersecurity program and designated incident response team are comprised of key employees, and third-party information security experts from leading cybersecurity incident response firms, who are responsible for efficiently and effectively responding to cybersecurity incidents. We have established comprehensive incident response and recovery plans and continue to evaluate the effectiveness of those plans. Our Cybersecurity Risk Committee, chaired by our Head of IT, and comprised of functional leaders, provides oversight, direction and guidance related to the cybersecurity risk management decisions. We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See “Risk Factors – We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.” 22 22 22 Table of Contents Table of Contents", "prior_body": "Increased inflation or anticipated inflationary periods could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses). Government regulations may limit the indices we can utilize in lease adjustments and, in turn, limit our ability to increase rent in our leases. 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. The U.K. government plans to migrate away from the Retail Price Index (RPI), which has been widely used in lease adjustments, to alternatives such as the Consumer Price Index including owner occupiers' housing costs (CPIH), that may result in a lower measure of inflation and, in turn, have a negative impact on our lease revenue currently tied to RPI in the U.K. 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. All of these may have an adverse effect on our results of operations, financial condition and liquidity. To the extent periods of high inflation are prolonged, these results may be exacerbated. 35 35 35 Table of Contents Table of Contents Item 1B: Unresolved Staff Comments There are no unresolved staff comments. Item 2: Properties Information pertaining to our properties can be found under Item 1. Item 3: Legal Proceedings We are subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations. Item 4: Mine Safety Disclosures None. PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities A. Our common stock is traded on the NYSE under the ticker symbol “O.” The following table shows the high and low sales prices per share for our common stock as reported by the NYSE, and distributions declared per share of common stock for the periods indicated. Price Per Shareof Common Stock HighLowDistributions Declared (1)2022 First Quarter$72.55 $63.90 $0.7400 Second Quarter75.40 62.29 0.7415 Third Quarter75.11 57.61 0.7430 Fourth Quarter66.44 55.50 0.7445 Total $2.9690 2021 First Quarter$64.60 $57.00 $0.7040 Second Quarter71.84 63.64 0.7055 Third Quarter72.75 64.86 0.7070 Fourth Quarter74.60 64.98 0.7285 Total $2.8450" }, { "status": "MODIFIED", "current_title": "Other Income, Net", "prior_title": "Other Income, Net", "similarity_score": 0.554, "confidence": "low", "key_changes": [ "Reworded sentence: \"Certain miscellaneous non-recurring revenue is included in 'other income, net'.\"" ], "current_body": "Certain miscellaneous non-recurring revenue is included in 'other income, net'. The decrease of $6.7 million for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to lower gains on insurance proceeds from recoveries on property losses exceeding our carrying value. Income TaxesIncome taxes primarily consist of international income taxes accrued or paid by us and our subsidiaries, as well as state and local taxes. The increase in income taxes for the year ended December 31, 2023 as compared with the same period in 2022 is primarily attributable to higher taxable income in the UK; partially offset by lower UK tax rates. 36 36 36 Table of Contents Table of Contents", "prior_body": "Certain miscellaneous non-recurring revenue is included in other income, net. The increase for the year ended December 31, 2022 as compared to 2021, is primarily related to an increase in gain on insurance proceeds from recoveries on property losses exceeding our carrying value, an increase in gain from the involuntary conversions of real estate, gains on land sales and higher interest income due to higher average cash balances. 50 50 50 Table of Contents Table of Contents The increase for the year ended December 31, 2021 as compared to the year ended December 31, 2020, is primarily related to an increase in gain on insurance proceeds from recoveries on property losses exceeding our carrying value and an increase in gain from the involuntary conversions of real estate, which was partially offset by a decrease in interest income from lower average cash balances. Income TaxesIncome 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 years ended December 31, 2022 and 2021 is primarily attributable to our increased volume of U.K. investments, which contributed to higher U.K. income taxes for both years." }, { "status": "MODIFIED", "current_title": "Total Revenue", "prior_title": "Total Revenue", "similarity_score": 0.53, "confidence": "low", "key_changes": [ "Reworded sentence: \"The following summarizes our total revenue (dollars in thousands): Years ended December 31,20232022ChangeRental (excluding reimbursable)$3,683,949 $3,114,972 $568,977 Rental (reimbursable)274,201 184,685 89,516 Other120,843 44,024 76,819 Total revenue$4,078,993 $3,343,681 $735,312 Rental (excluding reimbursable) Rental (reimbursable) Other Total revenue\"" ], "current_body": "The following summarizes our total revenue (dollars in thousands): Years ended December 31,20232022ChangeRental (excluding reimbursable)$3,683,949 $3,114,972 $568,977 Rental (reimbursable)274,201 184,685 89,516 Other120,843 44,024 76,819 Total revenue$4,078,993 $3,343,681 $735,312 Rental (excluding reimbursable) Rental (reimbursable) Other Total revenue", "prior_body": "The following summarizes our total revenue (dollars in thousands): Years ended December 31,Increase2022202120202022versus 20212021versus2020REVENUERental (excluding reimbursable)$3,114,975 $1,960,107 $1,560,171 $1,154,868 $399,936 Rental (reimbursable)184,682 104,851 79,362 $79,831 $25,489 Other44,024 15,505 7,554 $28,519 $7,951 Total revenue$3,343,681 $2,080,463 $1,647,087 $1,263,218 $433,376 2022 versus 2021 2021 versus 2020 REVENUE Rental (excluding reimbursable) Rental (reimbursable) Other Total revenue The increase in total revenue primarily relates to the merger with VEREIT and acquisitions for the years ended December 31, 2022 and 2021. 44 44 44 Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Other Revenue", "prior_title": "Other Revenue", "similarity_score": 0.529, "confidence": "low", "key_changes": [ "Reworded sentence: \"Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms and interest income recognized on client loans and preferred equity investments.\"" ], "current_body": "Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms and interest income recognized on client loans and preferred equity investments. The increase in other revenue for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher interest income on financing receivables of $60.9 million driven by an increase in recent sale-leaseback transactions with above-market lease terms, in addition to an increase of $17.0 million from interest income earned on new loans and preferred equity investments entered into during the year.", "prior_body": "Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms. The increases in the periods presented are due to additional leases with above-market terms, which is proportional to overall portfolio growth. 46 46 46 Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "8. Term Loans", "prior_title": "7.Term Loans", "similarity_score": 0.521, "confidence": "low", "key_changes": [ "Reworded sentence: \"In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings.\"" ], "current_body": "In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings. As of December 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings. The 2023 term loans mature in January 2025, with one remaining twelve-month maturity extension available at our option. Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for USD-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans. In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate. As of December 31, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%. We also have a $250.0 million senior unsecured term loan, which matures in March 2024. In conjunction with this term loan, we entered into an interest rate swap and as of December 31, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8%. 67 67 67 Table of Contents Table of Contents At December 31, 2023, deferred financing costs of $0.1 million are included net of the term loans principal balance, as compared to $0.2 million related to our $250.0 million term loan at December 31, 2022, on our consolidated balance sheets. These costs are being amortized over the remaining term of the term loans. As of December 31, 2023, we were in compliance with the covenants contained in the term loans. At December 31, 2023, deferred financing costs of", "prior_body": "In October 2018, in conjunction with entering into our current revolving credit facility, we entered into a $250.0 million senior unsecured term loan, which matures in March 2024. Prior to April 2022, borrowing under this term loan bore interest at the current one-month London Inter-Bank Offered Rate (“LIBOR”), plus 0.85%. In connection with entering into our new unsecured credit facility in April 2022, the previous LIBOR benchmark rate was replaced with daily SOFR, based on a five-day lookback period, and, due to our current credit ratings, is not subject to a credit spread adjustment. In conjunction with this term loan, we also entered into an interest rate swap, which was based off the daily SOFR through June 30, 2022. As of December 31, 2022, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.83%. At December 31, 2022, deferred financing costs of $0.2 million are included net of the term loan principal balance, as compared to $0.4 million at December 31, 2021, on our consolidated balance sheets. These costs are being amortized over the remaining term of the term loan. During January 2023, we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings under an unsecured term loan initially maturing January 2024. See note 19, Subsequent Events for further details. During January 2023, we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings under an unsecured term loan initially maturing January 2024. See note 19, Subsequent Events" }, { "status": "MODIFIED", "current_title": "Note Issuances", "prior_title": "2022 Issuances", "similarity_score": 0.517, "confidence": "low", "key_changes": [ "Reworded sentence: \"In January 2024, we issued $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034.\"" ], "current_body": "In January 2024, we issued $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034. In connection with the Merger, we also completed the $2.7 billion exchange in principal of outstanding notes issued by Spirit Realty, L.P. (“Spirit OP”). See note 21, Subsequent Events, to the consolidated financial statements for further details. In December 2023, we issued £300.0 million of 5.750% senior unsecured notes due December 2031 and £450.0 million of 6.000% senior unsecured notes due December 2039. In July 2023, we issued €550.0 million of 4.875% senior unsecured notes due July 2030 and €550.0 million of 5.125% senior unsecured notes due July 2034. In April 2023, we issued $400.0 million of 4.700% senior unsecured notes due December 2028 and $600.0 million of 4.900% senior unsecured notes due July 2033. In January 2023, we issued $500.0 million of 5.050% senior unsecured notes due January 2026 and $600.0 million of 4.850% senior unsecured notes due March 2030. See note 10. Notes Payable, to the consolidated financial statements for further details.", "prior_body": "1.875% Notes 2.500% Notes 3.160% Notes 3.180% Notes 3.390% Notes 5.625% Notes In January 2023, we issued $500 million of 5.05% senior unsecured notes due January 2026 and $600 million of 4.85% senior unsecured notes due March 2030. See Note 19, Subsequent Events to our consolidated financial statements. All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of December 31, 2022. Interest on 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 U.S. GAAP, are presented to investors to show our ability to incur additional debt under the terms of our senior notes and bonds as well as to disclose our current compliance with such covenants and are not measures of our liquidity or performance. The actual amounts as of December 31, 2022, are: Note CovenantsRequiredActualLimitation on incurrence of total debt< 60% of adjusted assets40.3 %Limitation on incurrence of secured debt< 40% of adjusted assets2.0 %Debt service coverage (trailing 12 months) (1)> 1.5x5.2xMaintenance of total unencumbered assets> 150% of unsecured debt255.4 %" }, { "status": "MODIFIED", "current_title": "Following the Merger, we may be unable to integrate the operations of Spirit successfully, or realize the anticipated synergies and related benefits of the Merger and the transactions contemplated by the Merger Agreement or do so within the anticipated time frame.", "prior_title": "We may not be able to realize the anticipated synergies and related benefits of the merger with VEREIT and the transactions contemplated by the Merger Agreement.", "similarity_score": 0.516, "confidence": "low", "key_changes": [ "Reworded sentence: \"The Merger involves the combination of two companies which operated as independent public companies.\"" ], "current_body": "The Merger involves the combination of two companies which operated as independent public companies. We will be required to devote significant management attention and resources to integrating the operations of Spirit. Potential difficulties we may encounter in the integration process include the following: •the inability to successfully combine Spirit’s operations with ours in a manner that permits the combined company to achieve operating efficiencies (including with the integration of information technology systems), cost savings and efficiencies, revenues, synergies or other benefits either in the time frame anticipated or at all; •lost revenue and clients as a result of certain clients of either us or Spirit deciding not to do business with the combined company; •the continued complexities associated with managing a multi-national combined company, integrating certain personnel from the two companies, and the complexities associated with the separation of personnel; •the complexities of combining two companies with different histories, regulatory restrictions, markets and clients; •the failure to retain key employees of either of the two companies; •potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger and the transactions contemplated by the Agreement and Plan of Merger, dated October 29, 2023 (the “Merger Agreement”), by and among the Company, Saints MD Subsidiary, Inc., a Maryland corporation and wholly owned subsidiary of the Company, and Spirit; and •performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Merger and integrating Spirit's operations with ours. In addition, as disclosed, certain legal proceedings were instituted against us, Spirit, and the former Spirit directors and we may see additional legal proceedings instituted in the future. The pendency and outcome of any legal proceedings is uncertain and may result in additional costs, expenses and the diversion of management’s attention 18 18 18 Table of Contents Table of Contents all of which could have an adverse effect on our business, operating results and price of our common stock or our ability to raise additional capital.", "prior_body": "The merger involved the combination of two companies which operated as independent public companies. While we devoted significant management attention and resources to integrating the business practices and operations of VEREIT, it is possible that we may be unable to realize expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits." }, { "status": "MODIFIED", "current_title": "CONSOLIDATED BALANCE SHEETS", "prior_title": "CONSOLIDATED BALANCE SHEETS", "similarity_score": 0.513, "confidence": "low", "key_changes": [ "Reworded sentence: \"(in thousands, except per share amounts) December 31, 2023December 31, 2022ASSETSReal estate held for investment, at cost:Land$14,929,310 $12,948,835 Buildings and improvements34,657,094 29,707,751 Total real estate held for investment, at cost49,586,404 42,656,586 Less accumulated depreciation and amortization(6,072,118)(4,904,165)Real estate held for investment, net43,514,286 37,752,421 Real estate and lease intangibles held for sale, net31,466 29,535 Cash and cash equivalents232,923 171,102 Accounts receivable, net710,536 543,237 Lease intangible assets, net5,017,907 5,168,366 Goodwill3,731,478 3,731,478 Investment in unconsolidated entities1,172,118 — Other assets, net3,368,643 2,276,953 Total assets$57,779,357 $49,673,092 LIABILITIES AND EQUITYDistributions payable$195,222 $165,710 Accounts payable and accrued expenses738,526 399,137 Lease intangible liabilities, net1,406,853 1,379,436 Other liabilities811,650 774,787 Line of credit payable and commercial paper764,390 2,729,040 Term loan, net1,331,841 249,755 Mortgages payable, net821,587 853,925 Notes payable, net18,602,319 14,278,013 Total liabilities24,672,388 20,829,803 Commitments and contingencies (Note 20)Stockholders’ equity:Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 752,460 and 660,300 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively39,629,709 34,159,509 Distributions in excess of net income(6,762,136)(5,493,193)Accumulated other comprehensive income73,894 46,833 Total stockholders’ equity32,941,467 28,713,149 Noncontrolling interests165,502 130,140 Total equity33,106,969 28,843,289 Total liabilities and equity$57,779,357 $49,673,092 Commitments and contingencies (Note 20) Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 752,460 and 660,300 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively\"" ], "current_body": "(in thousands, except per share amounts) December 31, 2023December 31, 2022ASSETSReal estate held for investment, at cost:Land$14,929,310 $12,948,835 Buildings and improvements34,657,094 29,707,751 Total real estate held for investment, at cost49,586,404 42,656,586 Less accumulated depreciation and amortization(6,072,118)(4,904,165)Real estate held for investment, net43,514,286 37,752,421 Real estate and lease intangibles held for sale, net31,466 29,535 Cash and cash equivalents232,923 171,102 Accounts receivable, net710,536 543,237 Lease intangible assets, net5,017,907 5,168,366 Goodwill3,731,478 3,731,478 Investment in unconsolidated entities1,172,118 — Other assets, net3,368,643 2,276,953 Total assets$57,779,357 $49,673,092 LIABILITIES AND EQUITYDistributions payable$195,222 $165,710 Accounts payable and accrued expenses738,526 399,137 Lease intangible liabilities, net1,406,853 1,379,436 Other liabilities811,650 774,787 Line of credit payable and commercial paper764,390 2,729,040 Term loan, net1,331,841 249,755 Mortgages payable, net821,587 853,925 Notes payable, net18,602,319 14,278,013 Total liabilities24,672,388 20,829,803 Commitments and contingencies (Note 20)Stockholders’ equity:Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 752,460 and 660,300 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively39,629,709 34,159,509 Distributions in excess of net income(6,762,136)(5,493,193)Accumulated other comprehensive income73,894 46,833 Total stockholders’ equity32,941,467 28,713,149 Noncontrolling interests165,502 130,140 Total equity33,106,969 28,843,289 Total liabilities and equity$57,779,357 $49,673,092 Commitments and contingencies (Note 20) Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 752,460 and 660,300 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively", "prior_body": "(dollars in thousands, except per share and share count data) December 31, 2022December 31, 2021ASSETSReal estate held for investment, at cost:Land$12,948,835 $10,753,750 Buildings and improvements29,707,751 25,155,178 Total real estate held for investment, at cost42,656,586 35,908,928 Less accumulated depreciation and amortization(4,904,165)(3,949,798)Real estate held for investment, net37,752,421 31,959,130 Real estate and lease intangibles held for sale, net29,535 30,470 Cash and cash equivalents171,102 258,579 Accounts receivable, net567,963 426,768 Lease intangible assets, net5,168,366 5,275,304 Goodwill3,731,478 3,676,705 Investment in unconsolidated entities— 140,967 Other assets, net2,252,227 1,369,579 Total assets$49,673,092 $43,137,502 LIABILITIES AND EQUITYDistributions payable$165,710 $146,919 Accounts payable and accrued expenses399,137 351,128 Lease intangible liabilities, net1,379,436 1,308,221 Other liabilities774,787 759,197 Line of credit payable and commercial paper2,729,040 1,551,376 Term loan, net249,755 249,557 Mortgages payable, net853,925 1,141,995 Notes payable, net14,278,013 12,499,709 Total liabilities20,829,803 18,008,102 Commitments and contingenciesStockholders’ equity:Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 and 740,200,000 shares authorized, 660,300,195 and 591,261,991 shares issued and outstanding as of December 31, 2022, and 2021, respectively34,159,509 29,578,212 Distributions in excess of net income(5,493,193)(4,530,571)Accumulated other comprehensive income46,833 4,933 Total stockholders’ equity28,713,149 25,052,574 Noncontrolling interests130,140 76,826 Total equity28,843,289 25,129,400 Total liabilities and equity$49,673,092 $43,137,502 Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 and 740,200,000 shares authorized, 660,300,195 and 591,261,991 shares issued and outstanding as of December 31, 2022, and 2021, respectively" }, { "status": "MODIFIED", "current_title": "Expected Maturity Data", "prior_title": "Expected Maturity Data", "similarity_score": 0.5, "confidence": "low", "key_changes": [ "Reworded sentence: \"The following table summarizes the maturity of our debt as of December 31, 2023 (dollars in millions): Year of Principal DueFixed ratedebtWeighted average rateon fixed rate debtVariable ratedebtWeighted average rateon variable rate debt2024$1,840.5(1)4.48 %$764.4 4.37 %20251,094.04.23 %— — 20262,669.0(2)4.18 %500.0 (3)3.05 %20272,050.12.66 %— — 20282,051.13.43 %— — Thereafter10,511.83.91 %— — Totals (4)$20,216.53.84 %$1,264.4 3.85 %Fair Value (5)$19,250.2$1,264.3\"" ], "current_body": "The following table summarizes the maturity of our debt as of December 31, 2023 (dollars in millions): Year of Principal DueFixed ratedebtWeighted average rateon fixed rate debtVariable ratedebtWeighted average rateon variable rate debt2024$1,840.5(1)4.48 %$764.4 4.37 %20251,094.04.23 %— — 20262,669.0(2)4.18 %500.0 (3)3.05 %20272,050.12.66 %— — 20282,051.13.43 %— — Thereafter10,511.83.91 %— — Totals (4)$20,216.53.84 %$1,264.4 3.85 %Fair Value (5)$19,250.2$1,264.3", "prior_body": "Year of Principal DueFixed ratedebtWeighted average rateon fixed rate debtVariable ratedebtWeighted average rateon variable rate debt2023$22.04.44 %$701.8 3.41 %20241,840.54.48 — — 20251,092.04.23 — — 20261,587.03.72 2,027.2 3.65 20272,005.42.68 — — Thereafter8,659.63.27 — — Totals (1)$15,206.53.46 %$2,729.0 3.59 %Fair Value (2)$13,583.2$2,729.0" }, { "status": "MODIFIED", "current_title": "Provisions for Impairment", "prior_title": "Provisions for Impairment", "similarity_score": 0.496, "confidence": "low", "key_changes": [ "Reworded sentence: \"Provisions for impairment consist of impairment on long-lived assets and allowances for credit losses on financing receivables and loans.\"" ], "current_body": "Provisions for impairment consist of impairment on long-lived assets and allowances for credit losses on financing receivables and loans. The increase in impairment for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher provisions for impairment associated with our real estate assets, summarized in the following table (dollars in millions): Years ended December 31,20232022Carrying value prior to impairment$194.5 $140.9 Less: total provisions for impairment (1)(82.2)(25.9)Carrying value after impairment$112.3 $115.0 Less: total provisions for impairment (1) (1) Excludes provision for current expected credit loss of $4.9 million at December 31, 2023.", "prior_body": "The following table summarizes provisions for impairment during the periods indicated below (dollars in millions): Years ended December 31,202220212020Carrying value prior to impairment$140.9 $169.2 $260.8 Less: total provisions for impairment(25.9)(39.0)(147.2)Carrying value after impairment$115.0 $130.2 $113.6 The impairments for the years ended December 31, 2022 and 2021 primarily relate to properties sold, in the process of being sold, or vacant. We identify the impact of the COVID-19 pandemic as an impairment triggering event for properties occupied by certain of our clients experiencing difficulties meeting their lease obligations to us. After considering the impacts of the COVID-19 pandemic on the key assumptions, we determined that the carrying values of 38 properties classified as held for investment for the year ended December 31, 2020 were not recoverable. As a result, we recorded provisions for impairment of $105.0 million for the year ended December 31, 2020 on the applicable properties impacted by the COVID-19 pandemic." }, { "status": "MODIFIED", "current_title": "The following discussion and analysis reflect our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7. \"Management’s Discussion and Analysis of Financial Condition and Results of Operations\" in our Annual Report on Form 10-K for the year ended December 31, 2022.", "prior_title": "Total Number of Shares Purchased (1)", "similarity_score": 0.486, "confidence": "low", "key_changes": [ "Reworded sentence: \"GENERAL Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for over 25 consecutive years.\"", "Reworded sentence: \"As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 U.S.\"" ], "current_body": "GENERAL Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for over 25 consecutive years. We invest in people and places to deliver dependable monthly dividends that increase over time. We are structured as a REIT requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term net lease agreements with our commercial clients. As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 U.S. states, Puerto Rico, the U.K., France, Germany, Ireland, Italy, Portugal, and Spain, with approximately 272.1 million square feet of leasable space to clients doing business in 86 separate industries. Of the 13,458 properties in the portfolio at December 31, 2023, 13,197, or 98.1%, are single-client properties, of which 13,007 were leased, and the remaining are multi-client properties. Our total portfolio has a weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.8 years. Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $274.2 million, $184.7 million and $104.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.", "prior_body": "(1)All 12,525 shares of common stock purchased during the three months ended December 31, 2022 were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plan of Realty Income Corporation. The withholding of common stock by us could be deemed a purchase of such common stock. Item 6: Reserved Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations GENERAL Realty Income, The Monthly Dividend Company®, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for over 25 consecutive years. We invest in people and places to deliver dependable monthly dividends that increase over time. We are structured as a REIT requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term net lease agreements with our commercial clients. Realty Income was founded in 1969, and listed on the NYSE under the ticker symbol \"O\" in 1994. Over the past 54 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients. At December 31, 2022, our diversified portfolio consisted of: •Owned or held interests in 12,237 properties; •An occupancy rate of 99.0%, or 12,111 properties leased and 126 properties available for lease or sale; •Clients doing business in 84 separate industries; •Locations in all 50 U.S. states, Puerto Rico, the U.K., Spain, and Italy; •Approximately 236.8 million square feet of leasable space; •A weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.5 years; and •An average leasable space per property of approximately 19,350 square feet, approximately 13,000 square feet per retail property and approximately 234,100 square feet per industrial property. Of the 12,237 properties in the portfolio at December 31, 2022, 12,018, or 98.2%, are single-client properties, of which 11,894 were leased, and the remaining are multi-client properties. Unless otherwise specified, references to rental revenue in the Management's Discussion and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from clients for recoverable real estate taxes and operating expenses totaling $184.7 million, $104.9 million and $79.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. In addition, references to reserves recorded as a reduction of rental revenue include amounts reserved for in the current period, as well as unrecognized contractual revenue and unrecognized straight-line rental revenue for leases accounted for on a cash basis." }, { "status": "MODIFIED", "current_title": "Year of Maturity", "prior_title": "Year of Maturity", "similarity_score": 0.486, "confidence": "low", "key_changes": [ "Reworded sentence: \"Totals As of December 31, 2023, the weighted average interest rate on our notes and bonds payable was 3.8%, and the weighted average remaining years until maturity was 6.7 years.\"" ], "current_body": "Principal Totals 68 68 68 Table of Contents Table of Contents", "prior_body": "Principal Totals During the year ended December 31, 2022, we issued the following notes and bonds (in millions): 2022 IssuancesDate of IssuanceMaturity DatePrincipal amount usedPrice of par valueEffective yield to maturity1.875% NotesJanuary 2022January 2027£250 99.487 %1.974 %2.500% NotesJanuary 2022January 2042£250 98.445 %2.584 %3.160% NotesJune 2022June 2030£140 100.000 %3.160 %3.180% NotesJune 2022June 2032£345 100.000 %3.180 %3.390% NotesJune 2022June 2037£115 100.000 %3.390 %5.625% NotesOctober 2022October 2032$750 99.879 %5.641 %" }, { "status": "MODIFIED", "current_title": "Interest Expense", "prior_title": "Interest Expense", "similarity_score": 0.475, "confidence": "low", "key_changes": [ "Reworded sentence: \"The following is a summary of the components of our interest expense (in thousands): Years ended December 31,20232022Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps$788,344$523,384Credit facility commitment fees5,3574,908Amortization of debt origination and deferred financing costs26,67014,149(Gain) loss on interest rate swaps(7,189)718Amortization of net mortgage premiums(12,803)(13,622)Amortization of net note premiums(60,657)(62,989)Capital lease obligation1,5091,464Interest capitalized(10,808)(2,789)Interest expense$730,423$465,223Credit facility, commercial paper, term loans, mortgages and senior unsecured notes and bondsAverage outstanding balances$20,537,222$16,460,928Weighted average interest rates3.83 %3.15 % Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps\"" ], "current_body": "The following is a summary of the components of our interest expense (in thousands): Years ended December 31,20232022Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps$788,344$523,384Credit facility commitment fees5,3574,908Amortization of debt origination and deferred financing costs26,67014,149(Gain) loss on interest rate swaps(7,189)718Amortization of net mortgage premiums(12,803)(13,622)Amortization of net note premiums(60,657)(62,989)Capital lease obligation1,5091,464Interest capitalized(10,808)(2,789)Interest expense$730,423$465,223Credit facility, commercial paper, term loans, mortgages and senior unsecured notes and bondsAverage outstanding balances$20,537,222$16,460,928Weighted average interest rates3.83 %3.15 % Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps", "prior_body": "The following is a summary of the components of our interest expense (dollars in thousands): Years ended December 31,202220212020Interest on our credit facility, commercial paper, $250.0 million term loan, notes, mortgages and interest rate swaps$523,384 $320,370 $293,879 Credit facility commitment fees4,908 3,801 3,812 Amortization of debt origination and deferred financing costs14,149 11,695 10,694 Loss on interest rate swaps718 2,905 4,132 Amortization of net mortgage premiums(13,622)(3,498)(1,258)Amortization of net note premiums(62,989)(10,349)(1,754)Interest capitalized(2,789)(1,926)(480)Capital lease obligation1,464 646 311 Interest expense$465,223 $323,644 $309,336 Credit facility, commercial paper, $250.0 million term loan, mortgages and notesAverage outstanding balances (dollars in thousands)$16,460,928 $10,024,343 $8,240,829 Average interest rates3.15 %3.11 %3.48 % Interest on our credit facility, commercial paper, $250.0 million term loan, notes, mortgages and interest rate swaps" }, { "status": "MODIFIED", "current_title": "4. Investments in Real Estate", "prior_title": "5. Investments in Real Estate", "similarity_score": 0.473, "confidence": "low", "key_changes": [ "Reworded sentence: \"Acquisitions of Real Estate Below is a summary of our acquisitions for the year ended December 31, 2023 (unaudited): Number ofPropertiesLeasableSquare Feet(in thousands, unaudited)Investment($ in millions)WeightedAverageLease Term(Years)Initial WeightedAverage CashLease Yield (1)Acquisitions - U.S.\"" ], "current_body": "A. Acquisitions of Real Estate Below is a summary of our acquisitions for the year ended December 31, 2023 (unaudited): Number ofPropertiesLeasableSquare Feet(in thousands, unaudited)Investment($ in millions)WeightedAverageLease Term(Years)Initial WeightedAverage CashLease Yield (1)Acquisitions - U.S. 838 15,030 $3,802.3 15.96.9 %Acquisitions - Europe 177 14,737 3,080.4 13.77.1 %Total acquisitions1,015 29,767 $6,882.7 14.97.0 %Properties under development (2)390 8,094 1,270.3 16.46.8 %Total (3)1,405 37,861 $8,153.0 15.17.0 % Initial Weighted", "prior_body": "We acquire land, buildings and improvements necessary for the successful operations of commercial clients. A. Acquisitions During the Years ended December 31, 2022, and 2021 Below is a summary of our acquisitions for the year ended December 31, 2022 (unaudited): Number ofPropertiesLeasableSquare Feet(in thousands, unaudited)Investment($ in millions)WeightedAverageLease Term(Years)Initial WeightedAverage CashLease Yield (1)Year ended December 31, 2022 (2)Acquisitions - U.S. 990 15,774 $5,746.4 19.36.0 %Acquisitions - Europe 94 11,179 2,441.3 8.96.0 %Total acquisitions1,084 26,953 $8,187.7 16.36.0 %Properties under development (3)217 5,500 807.6 15.05.3 %Total (4)1,301 32,453 $8,995.3 16.25.9 % Initial Weighted" }, { "status": "MODIFIED", "current_title": "LIQUIDITY AND CAPITAL RESOURCES", "prior_title": "Cash Reserves", "similarity_score": 0.468, "confidence": "low", "key_changes": [ "Reworded sentence: \"As of December 31, 2023, we had $4.1 billion of liquidity, which consists of cash and cash equivalents of $232.9 million, including £46.1 million denominated in Sterling and €43.6 million denominated in Euro, unsettled ATM forward equity of $337.8 million, and $3.5 billion of availability under our $4.25 billion unsecured revolving credit facility, after deducting $764.4 million in borrowings under our commercial paper programs.\"", "Added sentence: \"28 28 28 Table of Contents Table of Contents\"" ], "current_body": "As of December 31, 2023, we had $4.1 billion of liquidity, which consists of cash and cash equivalents of $232.9 million, including £46.1 million denominated in Sterling and €43.6 million denominated in Euro, unsettled ATM forward equity of $337.8 million, and $3.5 billion of availability under our $4.25 billion unsecured revolving credit facility, after deducting $764.4 million in borrowings under our commercial paper programs. We use our unsecured revolving credit facility as a liquidity backstop for the repayment of the notes issued under these programs. Our primary cash obligations, for the current year and subsequent years, are included in the “Material Cash Requirements” table, which is presented later in this section. We expect to fund our operating expenses and other short-term liquidity requirements, including property acquisitions and development costs, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs, and cash distributions to common stockholders, primarily through cash provided by operating activities, borrowings under our revolving credit facility, short-term term loans, and under our commercial paper programs, and through public securities offerings. We expect to fund the next twelve months of obligations through a combination of the following: •Cash and cash equivalents; •Future cash flows from operations; •Issuances of common stock or debt; and •Additional borrowings under our revolving credit facility and our term loan (after deducting outstanding borrowings under our commercial paper programs). We believe that our cash and cash equivalents on hand, cash provided from operating activities, and borrowing 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 and commercial paper programs. 28 28 28 Table of Contents Table of Contents", "prior_body": "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 December 31, 2022, we had cash and cash equivalents totaling $171.1 million, inclusive of £74.3 million denominated in Sterling and €17.8 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 and commercial paper programs." }, { "status": "UNCHANGED", "current_title": "If we fail to qualify as a REIT, it could adversely impact us, and the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.", "prior_title": "If we fail to qualify as a REIT, it could adversely impact us, and the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.", "current_body": "We believe that, commencing with our taxable year ended December 31, 1994, we have been organized and have operated, and we intend to continue to operate, so as to qualify as a REIT under Sections 856 through 860 of the Code. However, we cannot make any assurances that we have been organized or have operated in a manner that has satisfied the requirements for qualification as a REIT, or that we will continue to be organized or operate in a manner that will allow us to continue to qualify as a REIT. Qualification as a REIT involves the satisfaction of numerous requirements under highly technical and complex Code provisions, for which there are only limited judicial and administrative interpretations, as well as the determination of various factual matters and circumstances not entirely within our control. As we have recently expanded into new geographies and transactional structures, and may continue to do so in the future, the analyses of our REIT qualification, and our ability to ensure such qualification, have become, and may become in the future, more complex. For example, in order to qualify as a REIT, at least 95% of our gross income in each year must be derived from qualifying sources, and we must pay distributions to stockholders aggregating annually at least 90% of our taxable income (excluding net capital gains). If we fail to satisfy any of the requirements for qualification as a REIT, we may be subject to certain penalty taxes or, in some circumstances, we may fail to qualify as a REIT. If we were to fail to qualify as a REIT in any taxable year: •We would be required to pay regular U.S. federal corporate income tax on our taxable income; •We would not be allowed a deduction for amounts distributed to our stockholders in computing our taxable income; •We could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost; •We would no longer be required to make distributions to stockholders; and •This treatment would substantially reduce amounts available for investment or distribution to stockholders because of the additional tax liability for the years involved, which could have a material adverse effect on the market price of our capital stock and the value of our debt securities. Even if we qualify for and maintain our REIT status, we may be subject to certain federal, state, local and foreign taxes on our income and property. For example, if we have net income from a prohibited transaction, that income will be subject to a 100% tax. In addition, our taxable REIT subsidiaries are subject to federal, state and, in some cases, foreign taxes at the applicable tax rates on their income and property. Any failure to comply with legal and regulatory tax obligations could adversely affect our ability to conduct business and could adversely affect the market price of our capital stock and the value of our debt securities." }, { "status": "UNCHANGED", "current_title": "Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness.", "prior_title": "Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness.", "current_body": "Our ability to make distributions on our common stock and any outstanding preferred stock and payments on our indebtedness, and to fund planned acquisitions and capital expenditures will depend on our ability to generate cash in the future. We cannot make any assurances that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock and any outstanding preferred stock, to pay our indebtedness, or to fund our other liquidity needs." }, { "status": "UNCHANGED", "current_title": "In order to grow we need to continue to acquire investment properties. The acquisition of investment properties may be subject to competitive pressures.", "prior_title": "In order to grow we need to continue to acquire investment properties. The acquisition of investment properties may be subject to competitive pressures.", "current_body": "We face competition in the acquisition and operation of our properties. We expect competition from businesses, individuals, fiduciary accounts and plans, and other entities engaged in real estate investment and financing. This competition may result in a higher cost for properties we wish to purchase." }, { "status": "UNCHANGED", "current_title": "We depend on key personnel.", "prior_title": "We depend on key personnel.", "current_body": "We depend on the efforts of our executive officers and key employees. The loss of the services of our executive officers and key employees could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal and interest on our debt securities and other indebtedness and to make distributions to our stockholders. It is possible that we will not be able to recruit additional personnel with equivalent experience in the net lease industry or retain employees to the same extent as in the past." }, { "status": "UNCHANGED", "current_title": "Inherent limitations of internal controls over financial statements, disclosure controls and safeguarding of assets may adversely impact our financial condition and results of operations.", "prior_title": "Inherent limitations of internal controls over financial statements, disclosure controls and safeguarding of assets may adversely impact our financial condition and results of operations.", "current_body": "Our internal controls over financial reporting, disclosure controls and procedures and our operating internal controls may not prevent or detect financial misstatements or loss of assets because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to financial statement and disclosure accuracy and safeguarding of assets. Failures in our internal controls could result in adverse consequences in our financial reporting and operations, including delays, additional costs, impairment in our ability to access capital, adverse impacts to investor confidence, regulatory review, or litigation." }, { "status": "UNCHANGED", "current_title": "Our charter contains restrictions upon ownership of our common stock.", "prior_title": "Our charter contains restrictions upon ownership of our common stock.", "current_body": "Our charter contains restrictions on ownership and transfer of our common stock intended to, among other purposes, assist us in maintaining our status as a REIT for U.S. federal and/or state income tax purposes. For example, our charter restricts any person from acquiring beneficial or constructive ownership of more than 9.8% (by value or by number of shares, whichever is more restrictive) of our outstanding shares of common stock. These restrictions could have anti-takeover effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of our common stock." }, { "status": "UNCHANGED", "current_title": "We may face extensive regulations from gaming and other regulatory authorities regarding current and future gaming properties.", "prior_title": "We may face extensive regulations from gaming and other regulatory authorities regarding current and future gaming properties.", "current_body": "As a landlord of a gaming facility or future gaming facilities, we may be impacted by the risks associated with the gaming industry. The ownership, operation, and management of gaming facilities are subject to pervasive regulation. Gaming authorities also retain great discretion such that gaming regulations can impact our gaming clients, individuals associated with the operation of gaming properties, and us as the owner of the real estate and landlord related to such facilities. Gaming laws and regulations can impact all facets of a gaming property, including but not limited to alcoholic beverages, environmental matters, employees, health care, currency transactions, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted, which could adversely affect our operating results, and may also result in additional taxes or licensing fees imposed on us and our gaming clients. In addition, subject to certain administrative due process requirements, gaming regulators generally have broad authority to conduct investigations into the conduct or associations of our officers or certain investors to ensure compliance with applicable standards and suitability to hold a gaming license, and to deny any application or limit, condition, restrict, revoke, or suspend any gaming license, registration, or finding of suitability or approval, or fine any person licensed, registered, or found suitable or qualified as a licensee. As a result, our ability to obtain or maintain our required licenses and approvals, or avoid penalties related thereto, may be subject to risks, including risks outside of our control, and cannot be predicted. Were a tenant unable to continue to perform under a lease, because of the highly regulated nature of the industry, it may be difficult to re-lease gaming properties. This difficulty may be exacerbated to the extent the gaming property is located in a geography that does not have an expansive gaming footprint, such as one of the properties, in which we are invested. A transfer of interest, including a new lease, will likely require approval of regulators and the licensing of a new gaming operator tenant." }, { "status": "UNCHANGED", "current_title": "We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets.", "prior_title": "We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets.", "current_body": "We have in the past and may in the future acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership units in an operating partnership, which could result in stockholder dilution through the issuance of operating partnership units that, under certain circumstances, may be exchanged for shares of our common stock. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to restrictions on our ability to dispose of, or refinance the debt on, the acquired properties in order to protect the contributors’ ability to defer recognition of taxable gain. Similarly, we may be required to incur or maintain debt we would otherwise not incur so we can allocate the debt to the contributors to maintain their tax bases. In the event we take any action that incurs taxable gain allocated to these contributors, we may be required to make them whole under tax protection agreements. These restrictions could limit our ability to manage, control, sell or refinance an asset at a time, or on terms, that would be favorable absent such restrictions." }, { "status": "UNCHANGED", "current_title": "An uninsured loss or a loss that exceeds the policy limits on our properties could subject us to lost capital or revenue on those properties.", "prior_title": "An uninsured loss or a loss that exceeds the policy limits on our properties could subject us to lost capital or revenue on those properties.", "current_body": "Our leases generally require our clients to indemnify and hold us harmless from liabilities resulting from injury to persons, air, water, land or property, due to activities conducted on the properties, except for claims arising from the negligence or intentional misconduct of us or our agents. Additionally, clients are generally required, at the client’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. The insurance policies our clients are required to maintain for property damage are generally in amounts not less than the full replacement cost of the improvements less slab, foundations, supports and other customarily excluded improvements. Our clients are generally required to maintain general liability coverage depending on the client and the industry in which the client operates. Many of our properties are also covered by flood and earthquake insurance policies (subject to substantial deductibles) obtained and paid for by our clients as part of their risk management programs. Additionally, we have obtained blanket liability, flood and earthquake (subject to substantial deductibles) and property damage insurance policies to protect us and our properties against loss should the indemnities and insurance policies provided by the 16 16 16 Table of Contents Table of Contents clients fail to restore the properties to their condition prior to a loss. We do not carry insurance for certain losses and certain types of losses may be either uninsurable or not economically insurable. However, should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, we could lose all or part of our capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. We also face the risk that our insurance carriers may not be able to provide payment under any potential claims that might arise under the terms of our insurance policies, and we may not have the ability to purchase insurance policies we desire. In addition, although we obtain title insurance policies on our properties to help protect us and our properties against title defects (such as adverse claims of ownership, liens or other encumbrances), there may be certain title defects that our title insurance will not cover. If a material title defect related to any of our properties is not adequately covered by a title insurance policy, we could lose some or all of our capital invested in and our anticipated profits from such property, cause a financial misstatement or damage our reputation." }, { "status": "UNCHANGED", "current_title": "As a property owner, we may be subject to unknown environmental liabilities.", "prior_title": "As a property owner, we may be subject to unknown environmental liabilities.", "current_body": "Investments in real property can create a potential for environmental liability. An owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We can face such liability regardless of our knowledge of the contamination; the timing of the contamination; the cause of the contamination; or the party responsible for the contamination of the property. There may be environmental conditions associated with our properties of which we are unaware. A number of our properties are leased to operators of convenience stores that sell petroleum-based fuels, to operators of oil change and tune-up facilities, and operators that use chemicals and other waste products. These facilities and some other of our properties, use, or may have used in the past, underground lifts or storage tanks for the storage of petroleum-based or waste products, which could create a potential for the release of hazardous substances. Certain of our other properties, particularly those leased for industrial-type purposes, may also involve operations or activities that could give rise to environmental liabilities. The presence of hazardous substances on a property may adversely affect our client's ability to continue to operate that property or our ability to lease or sell that property and we may incur substantial remediation costs or third-party liability claims. Although our leases generally require our clients to operate in compliance with all applicable federal, state, and local environmental laws, ordinances and regulations, and to indemnify us against any environmental liabilities arising from the clients’ activities on the properties, we could nevertheless be subject to liability, including strict liability, by virtue of our ownership interest. There also can be no assurance that our clients could or would satisfy their indemnification obligations under their leases. The discovery of environmental liabilities attached to our properties could have an adverse effect on our results of operations, our financial condition, or our ability to make distributions to stockholders and to pay the principal of and interest on our debt securities and other indebtedness. Some of our properties were built during the period when asbestos was commonly used in building construction and we may acquire other buildings that contain asbestos in the future. Environmental laws govern the presence, maintenance, and removal of asbestos-containing materials, or ACMs, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, that they adequately inform or train those who may come into contact with asbestos and that they undertake special precautions, including removal or other abatement in the event that asbestos is disturbed during renovation or demolition of a building. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. 9 9 9 Table of Contents Table of Contents While we have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to environmental contamination, if environmental contamination should exist on any of our properties, we could be subject to liability, including strict liability, by virtue of our ownership interest. In addition, while we maintain environmental insurance policies, it is possible that our insurance could be insufficient to address any particular environmental situation and/or that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all. Our clients are generally responsible for, and indemnify us against, liabilities for environmental matters that arise during the lease terms as a result of clients’ activities on the properties. However, it is possible that one or more of our clients could fail to have sufficient funds to cover any such indemnification or to meet applicable state financial assurance obligations or such environmental contamination may predate our client's lease term, and thus we may still be obligated to pay for any such environmental liabilities." }, { "status": "UNCHANGED", "current_title": "Negative market conditions or adverse events affecting our existing or potential clients, or the industries in which they operate, could have an adverse impact on our ability to attract new clients, re-lease space, collect rent or renew leases, which could adversely affect our cash flow from operations and inhibit growth.", "prior_title": "Negative market conditions or adverse events affecting our existing or potential clients, or the industries in which they operate, could have an adverse impact on our ability to attract new clients, re-lease space, collect rent or renew leases, which could adversely affect our cash flow from operations and inhibit growth.", "current_body": "Cash flow from operations depends in part on our ability to lease space to our clients on economically favorable terms and to collect rent from our clients on a timely basis. We could be adversely affected by various facts and events over which we have limited or no control, such as: •Lack of demand in areas where our properties are located; •Inability to retain existing clients and attract new clients; •Oversupply of space and changes in market rental rates; •Declines in our clients’ creditworthiness and ability to pay rent, which may be affected by their operations (including as a result from changes in consumer behaviors or preferences impacting our clients operations), economic downturns and competition within their industries from other operators; •Defaults by and bankruptcies of clients, failure of clients to pay rent on a timely basis, or failure of our clients to comply with their contractual obligations; •Changes in laws, rules or regulations that negatively impact clients or our properties; •Epidemics, pandemics or outbreaks of illness, disease or virus that affect countries or regions in which our clients and their parent companies operate or in which our properties or corporate headquarters are located; •Changes in consumer behaviors (e.g., decrease in discretionary consumer spending), preferences or demographics impacting our clients' operations; •Supply chain disruptions; •Economic or physical decline of the areas where the properties are located; and •Deterioration of physical condition of our properties. If our clients do not renew their leases as they expire, we may not be able to rent or sell the properties. Leases that are renewed, and some new leases for properties that are re-leased, may have terms that are less economically favorable than expiring lease terms, or may require us to incur significant costs, such as renovations, improvements on behalf of the client or lease transaction costs. Negative market conditions may cause us to sell vacant properties for less than their carrying value, which could result in impairments. Any of these events could adversely affect our cash flow from operations and our ability to make distributions to our stockholders and service our indebtedness. A significant portion of the costs of owning property, such as real estate taxes, insurance and maintenance, are not necessarily reduced when circumstances cause a decrease in rental revenue from the properties. In a weakened financial condition, our clients may not be able to pay these costs of ownership and we may be unable to recover these operating expenses from them. At any time, any of our clients may experience a downturn in its business that may weaken its operating results or overall financial condition. As a result, a client may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. Any client bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in the termination of our client’s lease and material losses to us. Further, the occurrence of a client bankruptcy or insolvency could diminish or eliminate the income we receive from our client’s lease or leases. A bankruptcy court might authorize a client to terminate one or more of its leases with us. If that happens, our claim against the bankrupt client for unpaid future 8 8 8 Table of Contents Table of Contents rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent we are owed under the leases (it is also possible that we may not receive any unpaid future rent under terminated leases) or we may elect not to pursue claims against a client for terminated leases. Claims we have for unpaid past rent, if any, may not be paid in full, or at all. Client bankruptcies within a given property may also adversely impact our ability to re-release that property at favorable terms, or at all. Moreover, in the case of a client’s leases that are not terminated as the result of its bankruptcy, we may be required or elect to reduce the rent payable under those leases or provide other concessions, reducing amounts we receive under those leases. As a result, client bankruptcies may have a material adverse effect on our results of operations and financial condition. Any of these events could adversely affect our cash flow from operations and our ability to make distributions to stockholders and service our indebtedness. Downturns in any of our industries could adversely affect our clients (including, for example, the recent challenges faced by our clients in the theater industry), which in turn could also have a material adverse effect on our financial position, results of operations and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock and any outstanding preferred stock. In addition, some of our properties are leased to clients that may have limited financial and other resources and, therefore, they are more likely to be adversely affected by a downturn in their respective businesses, including any downturns that have resulted or may result from the COVID-19 pandemic or other epidemics or pandemics, or in the regional, national or international economy. Furthermore, we have made and may continue to make selected acquisitions of properties that fall outside our historical focus on freestanding, single-client, net-lease retail locations in the U.S. As a result, we may be exposed to a variety of new risks by expanding into new property types and/or new jurisdictions outside the U.S. and properties leased to clients engaged in non-retail businesses. These risks may include limited experience in managing certain types of new properties, new types of real estate locations and lease structures, and the laws and culture of non-U.S. jurisdictions." }, { "status": "UNCHANGED", "current_title": "Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us, the market price of our common stock, and may make it more difficult or costly for us to raise capital.", "prior_title": "Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us, the market price of our common stock, and may make it more difficult or costly for us to raise capital.", "current_body": "Historically, there have been periods where the global equity and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of equity and debt securities to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in certain cases have resulted in the unavailability of certain types of financing. Uncertainty in the equity and credit markets may negatively impact our ability to access additional financing at reasonable terms, which may adversely affect our ability to make acquisitions. A prolonged downturn in the equity or credit markets may cause us to refinance at higher rates, seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to buy or sell properties, may adversely affect the price we purchase or receive for properties, as we and prospective buyers may 21 21 21 Table of Contents Table of Contents experience increased costs of financing or difficulties in obtaining financing. These events in the equity and credit markets may make it more difficult or costly for us to raise capital through the issuance of common stock, preferred stock or debt securities. These disruptions in the financial markets also may have a material adverse effect on the market value of our common stock and debt securities, the income we receive from our properties and the lease rates we can charge for our properties, as well as other unknown adverse effects on us or the economy in general." }, { "status": "UNCHANGED", "current_title": "The market value of our capital stock and debt securities could be substantially affected by various factors.", "prior_title": "The market value of our capital stock and debt securities could be substantially affected by various factors.", "current_body": "The market value of our capital stock and debt securities will depend on many factors, which may change from time to time and may be outside of our control, including: •Prevailing interest rates, increases in which may have an adverse effect on the market value of our capital stock and debt securities; •The market for similar securities issued by other REITs; •General economic, political and financial market conditions; •The financial condition, performance and prospects of us, our clients and our competitors; •Changes in legal and regulatory taxation obligations; •Litigation and regulatory proceedings; •Changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry; •Changes in our credit ratings; •Actual or anticipated variations in quarterly operating results of us and our competitors; and •Failure to achieve the perceived benefits of the Merger and the transactions contemplated by the Merger Agreement or if the effect of the Merger and the transactions contemplated by the Merger Agreement on our results of operations or financial condition is not consistent with the expectations of financial or industry analysts. In addition, over the last several years, prices of common stock and debt securities in the U.S., trading markets have experienced extreme price fluctuations, and the market values of our common stock and debt securities have also fluctuated significantly during this period. As a result of these and other factors, investors who purchase our capital stock and debt securities may experience a decrease, which could be substantial and rapid, in the market value of our capital stock and debt securities, including decreases unrelated to our operating performance or prospects. 19 19 19 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "Our business is subject to risks associated with climate change and our sustainability strategies.", "prior_title": "Our business is subject to risks associated with climate change and our sustainability strategies.", "current_body": "Our business is subject to risks associated with the effects of climate change, and a resulting shift to a lower carbon economy, and may be subject to further risks in the future. Climate change could adversely affect our business through both chronic and acute perils including, but not limited to, extreme weather, changes in precipitation and temperature, and rising sea levels, all of which may result in physical damage to, or a decrease in demand for, our properties located in the areas affected by these conditions, and may adversely impact consumer behaviors, preferences and spending for our clients, which may impact their ability to fulfill their obligations under our leases, or our ability to re-lease the properties in the future. In addition, should the impact of climate change be severe or occur for lengthy periods of time, connectivity, labor and supply chains could impact business continuity for ourselves and our clients. Chronic climate change may lead to increased costs for us and our clients to adapt to the demands and expectations of climate change or lower carbon usage, including with respect to heating, cooling or electricity costs, retrofitting properties to be more energy efficient or comply with new rules or regulations, or other unforeseen costs. These risks could adversely affect our reputation, financial condition or results of operations. We seek to promote effective energy efficiency and other sustainability strategies and compliance with federal, state and international laws and regulations related to climate change, both internally and with our clients. Our sustainability strategies and efforts to comply with changes in federal, state and international laws and regulations on climate change could result in significant capital expenditures to improve our existing properties or properties we may acquire. Any changes to such laws and regulations could also result in increased operating costs or capital expenditures at our properties. If we are unable to comply with laws and regulations on climate change or implement effective sustainability strategies, our reputation among our clients and investors may be damaged and we may incur fines and/or penalties. Moreover, there can be no assurance that any of our sustainability strategies 17 17 17 Table of Contents Table of Contents will result in reduced operating costs, higher occupancy or higher rental rates or deter our existing clients from relocating to properties owned by our competitors. In addition, tenants of net-leased properties are responsible for maintenance and other day-to-day management of the properties. This lack of control over our net-leased properties makes it difficult for us to collect property-level environmental metrics and to enforce sustainability initiatives, which may impact our ability to comply with certain regulatory disclosure requirements to which we are subject (such as the anticipated changes to the SEC’s climate-related disclosure rules) or comply effectively with established Environmental, Social and Governance (\"ESG\") frameworks and standards, such as the Global Real Estate Sustainability Benchmarks, Task Force for Climate-Related Financial Disclosures (“TCFD”) and the Sustainability Accounting Standards Board. If we are unable to successfully collect the data necessary to comply with these disclosure requirements, we may be subject to increased regulatory risk and if such data is incomplete or unfavorable, our relationship with our investors, our stock price, and our access to capital may be negatively impacted." }, { "status": "UNCHANGED", "current_title": "The value of certain of our investment in real property may be reduced as the result of the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives.", "prior_title": "The value of certain of our investment in real property may be reduced as the result of the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives.", "current_body": "Certain of our investments have the benefit of governmental tax incentives aimed at inducing property users to relocate to incentivize development in areas and neighborhoods which have not historically seen robust commercial development. These incentives typically have specific sunset provisions and may be subject to governmental discretion in the eligibility or award of the applicable incentives. The expiration of these incentive programs or the inability of potential clients or users to be eligible for or to obtain governmental approval of the incentives, or the inability to remain compliant with such programs, may have an adverse effect on the value of our investment, cash flow and net income, and may result in impairment charges." }, { "status": "UNCHANGED", "current_title": "Real estate ownership is subject to particular conditions that may have a negative impact on our revenue.", "prior_title": "Real estate ownership is subject to particular conditions that may have a negative impact on our revenue.", "current_body": "We are subject to all of the inherent risks associated with the ownership of real estate. In particular, we face the risk that rental revenue from our properties may be insufficient to cover all corporate operating expenses, debt service payments on indebtedness we incur, and distributions on our capital stock. Additional real estate ownership risks include: •Adverse changes in general or local economic conditions; •Changes in supply of, or demand for, similar or competing properties; •Changes in interest rates and operating expenses (including energy costs, shortages and rationing); •Competition within an industry and for our clients; •Changes in market rents; •Inability to lease properties upon termination of existing leases; •Renewal of leases at lower rental rates; •Inability to collect rental revenue from our clients due to financial hardship, including bankruptcy; 13 13 13 Table of Contents Table of Contents •Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate; •Uninsured property liability; •Property damage or casualty losses; •Unexpected expenditures for capital improvements, including requirements to bring properties into compliance with applicable federal, state and local laws; •The need to periodically renovate and repair our properties; •Risks assumed as manager for development or redevelopment projects; •Physical or weather-related damage to properties; •The potential risk of functional obsolescence of properties over time; •Acts of terrorism and war; •Changes in consumer behaviors, preferences or demographics; •The impacts of climate change; and •Acts of God and other factors beyond the control of our management." }, { "status": "UNCHANGED", "current_title": "Report of Independent Registered Public Accounting Firm", "prior_title": "Report of Independent Registered Public Accounting Firm", "current_body": "To the Stockholders and Board of Directors Realty Income Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Realty Income Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the Fair Value of Land in Real Estate Acquisitions As discussed in Note 4 to the consolidated financial statements, during 2023 the Company acquired $8.2 billion of real estate properties. As discussed in Note 1, the purchase price of a real estate acquisition is typically allocated among the individual components of both tangible and intangible assets and liabilities acquired based on their estimated relative fair values. We identified the evaluation of the fair value of land in real estate acquisitions as a critical audit matter. Specifically, the measurement of the fair values of land is dependent upon significant assumptions of market land values for which relevant external market data is not always readily available. Subjective and complex auditor judgment was required in evaluating the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions. 47 47 47 Table of Contents Table of Contents The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to allocate the purchase price of real estate acquisitions. This included controls over the measurement of the fair value of land. For a selection of real estate acquisitions, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating a selection of the Company’s acquired land values by comparing them to independently developed ranges using market data from industry transaction databases and published industry reports. /s/ KPMG LLP We have served as the Company’s auditor since 1993. San Diego, California February 21, 2024 48 48 48 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "Distribution requirements imposed by law limit our flexibility.", "prior_title": "Distribution requirements imposed by law limit our flexibility.", "current_body": "To maintain our status as a REIT for federal income tax purposes, we generally are required to distribute to our stockholders at least 90% of our taxable income, excluding net capital gains, each year. We also are subject to tax at regular corporate rates to the extent that we distribute less than 100% of our taxable income (including net capital gains) each year. In addition, we are subject to a 4% nondeductible excise tax to the extent that we fail to distribute during any calendar year at least the sum of 85% of our ordinary income for that calendar year, 95% of our capital gain net income for the calendar year, and any amount of that income that was not distributed in prior years. We intend to continue to make distributions to our stockholders to comply with the distribution requirements of the Code as well as to reduce our exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT." }, { "status": "UNCHANGED", "current_title": "Real estate property investments are illiquid. We may not be able to acquire or dispose of properties when desired or on favorable terms.", "prior_title": "Real estate property investments are illiquid. We may not be able to acquire or dispose of properties when desired or on favorable terms.", "current_body": "Real estate investments are relatively illiquid. Our ability to quickly buy, sell or exchange any of our properties in response to changes in economic and other conditions will be limited and U.S. and foreign tax and regulatory regimes and authorities may impose or have the effect of restricting or limiting our ability to sell properties. No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations." }, { "status": "UNCHANGED", "current_title": "We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.", "prior_title": "We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.", "current_body": "We, like all businesses, are subject to cyber-attacks and security incidents, which threaten the confidentiality, integrity, and availability of our systems and information resources. Cyber-attacks are malicious cyber activity and a security incident is a successful cyber-attack that has the potential to expose sensitive data, internal systems, or otherwise disrupt business operations. Those attacks and incidents may be due to intentional or unintentional acts by employees, contractors or third-parties, who seek to gain unauthorized access to our or our service providers’ systems to disrupt operations, corrupt data, or steal confidential information through malware, computer viruses, ransomware, social engineering (e.g., phishing attachments to e-mails) or other vectors. The risk of a cybersecurity breach or operational disruption, particularly through a cyber incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, particularly as remote working has become more common. Our information technology (“IT”) networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our clients. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption (such as the implementation of systems and/or vendors that provide constant monitoring of our IT networks and related systems for cyber-attacks and incidents); however, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. While we maintain some of our own critical IT networks and related systems, we depend on third-parties to provide important software, technologies, tools and a broad array of services and functions, such as payroll, human resources, electronic communications, data storage, and certain finance and treasury functions, among others. In the ordinary course of our business, we collect, process, transmit and store sensitive data, within our own systems and utilize those of third-party providers, including intellectual property, our proprietary business information and that of our clients, suppliers and business partners, as well as personally identifiable information. 20 20 20 Table of Contents Table of Contents Our measures to prevent, detect and mitigate these threats may not be successful in preventing a security incident or data breach or limiting the effects of such a breach. This is particularly so because attack methodologies change frequently or are not recognized until launched, and we also may be unable to investigate or remediate incidents because attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. Our clients, joint venture partners, or other third parties with whom we do business may themselves become subject to cyberattacks or security incidents, over which we may have no control, and which could have an indirect adverse impact on them, us or our business relationship. The primary risks that could directly result from the occurrence of a cyberattack or security incident include operational interruption, damage to our relationship with our clients, reputational damage, and private data exposure. We could be required to expend significant capital and other resources to address an attack or incident, which may not be covered or fully covered by our insurance and which may involve payments for investigations, forensic analyses, legal advice, public relations advice, system repair or replacement, or other services, in addition to any remedies or relief that may result from legal proceedings. Our financial results may be negatively impacted by any such attacks and incidents or any resulting negative media attention. Further, while we carry cyber liability insurance, such insurance may not be adequate to cover all losses related to such events." }, { "status": "UNCHANGED", "current_title": "Report of Independent Registered Public Accounting Firm", "prior_title": "Report of Independent Registered Public Accounting Firm", "current_body": "To the Stockholders and Board of Directors Realty Income Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Realty Income Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the Fair Value of Land in Real Estate Acquisitions As discussed in Note 4 to the consolidated financial statements, during 2023 the Company acquired $8.2 billion of real estate properties. As discussed in Note 1, the purchase price of a real estate acquisition is typically allocated among the individual components of both tangible and intangible assets and liabilities acquired based on their estimated relative fair values. We identified the evaluation of the fair value of land in real estate acquisitions as a critical audit matter. Specifically, the measurement of the fair values of land is dependent upon significant assumptions of market land values for which relevant external market data is not always readily available. Subjective and complex auditor judgment was required in evaluating the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions. 47 47 47 Table of Contents Table of Contents The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to allocate the purchase price of real estate acquisitions. This included controls over the measurement of the fair value of land. For a selection of real estate acquisitions, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating a selection of the Company’s acquired land values by comparing them to independently developed ranges using market data from industry transaction databases and published industry reports. /s/ KPMG LLP We have served as the Company’s auditor since 1993. San Diego, California February 21, 2024 48 48 48 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "Interest Rates", "prior_title": "Interest Rates", "current_body": "We are exposed to interest rate changes primarily as a result of our credit facility and commercial paper programs, term loans, mortgages payable, and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower our overall borrowing costs. To achieve these objectives, we issue long-term notes and bonds, primarily at fixed rates. In order to mitigate and manage the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, interest rate swaptions, interest rate locks and caps. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks, including counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. To limit counterparty credit risk, we will seek to enter into such agreements with major financial institutions with favorable credit ratings. There can be no assurance that we will be able to adequately protect against the foregoing risks or realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging activities. We do not enter into any derivative transactions for speculative or trading purposes. The following table presents, by year of expected maturity, the principal amounts, average interest rates and estimated fair values of our fixed and variable rate debt as of December 31, 2023. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):" }, { "status": "UNCHANGED", "current_title": "Future issuances of equity securities could dilute the interest of holders of our common stock.", "prior_title": "Future issuances of equity securities could dilute the interest of holders of our common stock.", "current_body": "Our future growth will depend, in large part, upon our ability to raise additional capital. Raising additional capital through the issuance of equity securities can dilute the interests of holders of our common stock. The interests of our common stockholders could also be diluted by the issuance of shares of common stock pursuant to stock incentive plans. Our Board of Directors is authorized to cause us to issue preferred stock of any class or series with dividend, voting and other rights as determined by our Board of Directors (such as the shares of preferred stock that were issued in connection with the closing of the Merger with Spirit) which could dilute, or otherwise adversely affect, the interest of holders of our common stock." }, { "status": "UNCHANGED", "current_title": "Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (\"Adjusted EBITDAre\")", "prior_title": "Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (\"Adjusted EBITDAre\")", "current_body": "Nareit established an EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDAre) it believed would provide investors with a consistent measure to help make investment decisions among REITs. Our definition of “Adjusted EBITDAre” is generally consistent with the Nareit definition, other than our adjustments to remove foreign currency and derivative gain and loss, excluding gain and loss from the settlement of foreign currency forwards not designated as hedges (which is consistent with our previous calculations of \"Adjusted EBITDA\"). We define Adjusted EBITDAre, a non-GAAP financial measure, for the most recent quarter as earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) income and franchise taxes, (iii) gain on extinguishment of debt, (iv) real estate depreciation and amortization, (v) provisions for impairment, (vi) merger and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gain and loss, net, (ix) gain on settlement of foreign currency forwards, and (x) our proportionate share of adjustments from unconsolidated entities. Our Adjusted EBITDAre may not be comparable to Adjusted EBITDAre reported by other companies or as defined by Nareit, and other companies may interpret or define Adjusted EBITDAre differently than we do. Management believes Adjusted EBITDAre to be a meaningful measure of a REIT’s performance because it provides a view of our operating performance, analyzes our ability to meet interest payment obligations before the effects of income tax, depreciation and amortization expense, provisions for impairment, gain on sales of real estate and other items, as defined above, that affect comparability, including the removal of non-recurring and non-cash items that industry observers believe are less relevant to evaluating the operating performance of a company. In addition, EBITDAre is widely followed by industry analysts, lenders, investors, rating agencies, and others as a means of evaluating the operational cash generating capacity of a company prior to servicing debt obligations. Management also believes the use of an annualized quarterly Adjusted EBITDAre metric, which we refer to as Annualized Adjusted EBITDAre, is meaningful because it represents our current earnings run rate for the period presented. Annualized Adjusted EBITDAre and Annualized Pro Forma Adjusted EBITDAre, as defined below, are also used to determine the vesting of performance share awards granted to executive officers. Annualized Adjusted EBITDAre should be considered along with, but not as an alternative to net income as a measure of our operating performance. We define Annualized Pro Forma Adjusted EBITDAre as Annualized Adjusted EBITDAre, subject to certain adjustments to incorporate Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDAre from properties we disposed of during the applicable quarter, and include transaction accounting adjustments in accordance with U.S. GAAP, giving pro forma effect to all transactions as if they occurred at the beginning of the applicable period. Our calculation includes all adjustments consistent with the requirements to present Adjusted EBITDAre on a pro forma basis in accordance with Article 11 of Regulation S-X. The Annualized Pro Forma Adjustments are consistent with the debt service coverage ratio calculated under financial covenants for our senior unsecured notes. We believe Annualized Pro Forma Adjusted EBITDAre is a useful non-GAAP supplemental measure, as it excludes properties that were no longer owned at the balance sheet date and includes the annualized rent from properties acquired during the quarter. Management also uses our ratios of net debt-to-Annualized Adjusted EBITDAre and net debt-to Annualized Pro Forma Adjusted EBITDAre as measures of leverage in assessing our financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share of debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDAre and annualized Pro Forma Adjusted EBITDAre, respectively. 38 38 38 Table of Contents Table of Contents The following is a reconciliation of net income (which we believe is the most comparable U.S. GAAP measure) to Adjusted EBITDAre and Annualized Pro Forma EBITDAre calculations for the periods indicated below (dollars in thousands): Three months ended December 31,20232022Net income$219,762 $228,336 Interest208,313 131,290 Loss on extinguishment of debt— — Income taxes15,803 9,381 Depreciation and amortization475,856 438,174 Provisions for impairment27,281 9,481 Merger and integration-related costs9,932 903 Gain on sales of real estate(5,992)(9,346)Foreign currency and derivative loss (gain), net18,371 (2,692)Gain on settlement of foreign currency forwards— 2,139 Proportionate share of adjustments from unconsolidated entities14,983 113 Quarterly Adjusted EBITDAre$984,309 $807,779 Annualized Adjusted EBITDAre (1)$3,937,236 $3,231,116 Annualized Pro Forma Adjustments $74,919 $119,876 Annualized Pro Forma Adjusted EBITDAre$4,012,155 $3,350,992 Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $21,480,869 $17,935,539 Proportionate share of unconsolidated entities debt, excluding deferred financing costs659,190 — Less: Cash and cash equivalents(232,923)(171,102)Net Debt (2)$21,907,136 $17,764,437 Net Debt/Annualized Adjusted EBITDAre5.6 x5.5 xNet Debt/Annualized Pro Forma Adjusted EBITDAre5.5 x5.3 x Interest Income taxes Depreciation and amortization Provisions for impairment Quarterly Adjusted EBITDAre Annualized Adjusted EBITDAre (1) Annualized Pro Forma Adjusted EBITDAre Net Debt (2) Net Debt/Annualized Adjusted EBITDAre Net Debt/Annualized Pro Forma Adjusted EBITDAre (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 of 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 (dollars in thousands): Three months ended December 31,20232022Annualized pro forma adjustments from properties acquired or stabilized$77,012 $120,408 Annualized pro forma adjustments from properties disposed(2,093)(532)Annualized Pro forma Adjustments$74,919 $119,876 39 39 39 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "Credit Agency Ratings", "prior_title": "Credit Agency Ratings", "current_body": "The borrowing interest rates under our revolving credit facility are based upon our ratings assigned by credit rating agencies. As of December 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 A3 with a “stable” outlook and Standard & Poor’s Ratings Group has assigned a rating of A- with a “stable” outlook. In addition, we were assigned the following ratings on our commercial paper at December 31, 2023: Moody's Investors Service has assigned a rating of P-2 and Standard & Poor's Ratings Group has assigned a rating of A-2. Based on our credit agency ratings as of December 31, 2023, interest rates under our credit facility for U.S. borrowings would have been at the SOFR, plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.95% over SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.8826% over SONIA, and for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.85% over one-month EURIBOR. In addition, our credit facility provides that the interest rates can range between: (i) SOFR/SONIA/EURIBOR, plus 1.40% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) SOFR/SONIA/EURIBOR, plus 0.70% if our credit rating is A/A2 or higher. In addition, our credit facility provides for a facility commitment fee based on our credit ratings, which ranges from: (i) 0.30% for a rating lower than BBB-/Baa3 or unrated, and (ii) 0.10% for a credit rating of 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." }, { "status": "UNCHANGED", "current_title": "Natural disasters, terrorist attacks, cyber attacks, other acts of violence or war, or other unexpected events may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.", "prior_title": "Natural disasters, terrorist attacks, other acts of violence or war, or other unexpected events may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.", "current_body": "Natural disasters, terrorist attacks, cyber attacks, other acts of violence or war, or other unexpected events (e.g., pandemics or epidemics) may negatively affect our operations, the market price of our capital stock and the value of our debt securities. There can be no assurance that events like these will not occur or have a direct impact on our clients, our business or the U.S. or world generally. If events like these were to occur, they could materially interrupt our business operations, cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in or prolong an economic recession in the U.S. or abroad. Any of these occurrences could have a significant adverse impact on our operating results and revenues and on the market price of our capital stock and on the value of our debt securities. It could also have an adverse effect on our ability to pay principal and interest on our debt securities or other indebtedness and to make distributions to our stockholders." }, { "status": "UNCHANGED", "current_title": "Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unanticipated expenditures that could adversely impact our results of operations.", "prior_title": "Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unintended expenditures that could adversely impact our results of operations.", "current_body": "Our properties are generally required to comply with the Americans with Disabilities Act of 1990, or the ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants. The clients to whom we lease properties are obligated by law to comply with the ADA provisions and, in many cases, the clients are generally obligated to cover costs associated with compliance pursuant to the terms of their applicable leases. If required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these clients to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could materially adversely affect our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. In addition, our properties must be in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders." }, { "status": "UNCHANGED", "current_title": "Litigation risks could affect our business.", "prior_title": "Litigation risks could affect our business.", "current_body": "From time to time, we are involved in legal proceedings, lawsuits, and other claims including those that may arise out of mergers and acquisitions, acquisitions, development opportunities, dispositions, joint ventures, and other strategic transactions. An unfavorable resolution of litigation may have a material adverse effect on our business, results of operations and financial condition. Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management." }, { "status": "UNCHANGED", "current_title": "We are subject to risks associated with debt and preferred stock financing.", "prior_title": "We are subject to risks associated with debt and preferred stock financing.", "current_body": "We intend to incur additional indebtedness in the future, including borrowings under our $4.25 billion unsecured revolving credit facility and our $3.0 billion commercial paper programs. Our revolving credit facility grants us the option, subject to obtaining lender commitments and other customary conditions, to expand the borrowing limits thereunder to up to $5.25 billion. The credit agreement governing our revolving credit facility also governs our $250.0 million unsecured term loan facility due March 2024 and, on January 6, 2023, we entered into the term loan agreement (the “2023 term loan agreement”) governing our 2023 term loans, pursuant to which we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings. The 2023 term loan agreement also permits us to incur additional term loans, up to an aggregate of $1.5 billion in total borrowings, pursuant to an accordion expansion feature, which is subject to obtaining lender commitments and other customary conditions. The term loans pursuant to our 2023 term loan agreement mature in January 2025 with one remaining 12-month maturity extension available at our option. At December 31, 2023, we also had a total of $18.6 billion of outstanding unsecured senior debt securities (excluding unamortized net original issuance premiums, deferred financing costs and basis adjustments on interest rate swaps designated as fair value hedges), including approximately $4.2 billion denominated in Sterling (of which $1.2 billion is related to our privately placed Sterling notes), $1.2 billion denominated in Euro thereunder, and approximately $822.4 million of outstanding mortgage debt (excluding unamortized net discounts and deferred financing costs). 11 11 11 Table of Contents Table of Contents In connection with the consummation of the closing of the Merger on January 23, 2024, we effectively assumed Spirit’s existing term loans with various lenders. Specifically, on January 22, 2024, we entered into an amended and restated term loan agreement, pursuant to which we borrowed $800 million in aggregate total borrowings, $300 million of which matures on August 22, 2025 and $500 million of which matures on August 20, 2027 (the “$800 million term loan agreement”), and an amended and restated term loan agreement pursuant to which we borrowed $500 million in aggregate total borrowings which matures on June 16, 2025. The $800 million term loan agreement and the $500 million term loan agreement became effective upon the closing of the Merger on January 23, 2024. Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted Secured Overnight Financing Rate (\"SOFR\") for US Dollar-denominated loans, adjusted Sterling Overnight Indexed Average (“SONIA”) for Sterling-denominated loans, and Euro Interbank Offered Rate (“EURIBOR”) for Euro-denominated loans. In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps which fix our per annum interest rate at 5.0% over the initial term. In addition, as a result of the Merger, all outstanding secured indebtedness, liabilities, and other indebtedness of Spirit and its subsidiaries, including $2.75 billion of additional senior unsecured notes that were originally issued by Spirit Realty Capital, L.P., substantially all of which were exchanged for senior unsecured notes issued by us, became indebtedness and liabilities of ours or our subsidiaries, as the case may be, which substantially increased the total secured indebtedness and the total liabilities and other indebtedness of us and our subsidiaries. Pursuant to our unsecured commercial paper programs we may offer and sell up to $3.0 billion of commercial paper at any time. We use our revolving credit facility as a liquidity backstop for the repayment of notes issued under the commercial paper programs. Specifically, we maintain unused borrowing capacity under our revolving credit facility equal to the aggregate principal amount of borrowings outstanding under our commercial paper programs from time to time. We may in the future enter into amendments and restatements of our revolving credit facility and term loan facilities, or enter into new revolving credit facilities or term loan facilities, and any such amended, restated or replacement revolving credit facilities or term loan facilities may increase the amounts we are entitled to borrow, subject to customary conditions, compared to our current revolving credit facility and term loan facilities, or we may incur other indebtedness. We may also in the future increase the size of our commercial paper programs or establish new commercial paper programs. We expect that we will continue to use our current and any new revolving credit facilities we may enter into (in each case as the same may be expanded, amended or restated, if applicable, from time to time), as a liquidity backstop for the repayment of notes issued under our current or any new commercial paper programs that we may maintain from time to time. To the extent that new indebtedness is added to our current debt levels, the related risks that we now face would increase. As a result, we are and will be subject to risks associated with debt financing, including the risk that our cash flow could be insufficient to make required payments on our debt or to pay dividends on our common stock. We also face variable interest rate risk as the interest rates on our revolving credit facility, term loan facilities, and commercial paper programs are variable (subject to our interest rate swaps on our term loan facilities, in effect from time to time), and the interest rates on any credit facilities and term loan facilities we may enter into in the future may be variable, and could therefore increase over time. In addition, commercial paper borrowings are short-term obligations and the interest rate on newly issued commercial paper varies according to market conditions at the time of issuance. Similarly, some of the indebtedness to which we have become subject to subsequent to the Merger may also bear interest at variable rates. In addition, while we may enter into hedging and other derivatives instruments to mitigate our exposure to fluctuations in borrowing and currency rates, we may not realize the anticipated benefits from these arrangements or they may be insufficient to mitigate our exposure. We also face the risk that we may be unable to refinance or repay our debt as it comes due. Given past disruptions in the financial markets and ongoing global financial uncertainties, we also face the risk that one or more of the participants in our revolving credit facility may be unwilling or unable to lend us money. We have incurred and may continue to incur indebtedness that is denominated in local currencies to fund our international investments and operations. However, it is possible that such indebtedness may be insufficient or may be on unacceptable terms requiring us to use non-local currency indebtedness. In such event, we may be subject to foreign exchange rate volatility. While we may enter into hedging and other derivatives instruments to mitigate our exposure to fluctuations in foreign exchange rates, we may not realize the anticipated benefits from these arrangements or these arrangements may be insufficient to mitigate our exposure. Our revolving credit facility, our term loan facilities, and our mortgage loan documents contain provisions that could limit or, in certain cases, prohibit the payment of dividends and other distributions to holders of our common stock 12 12 12 Table of Contents Table of Contents and any outstanding preferred stock. The credit agreements governing our revolving credit facility and term loan facilities provide that, if an event of default (as defined in the credit agreements, as applicable) exists, we may not pay any dividends or make other distributions on (except distributions payable in shares of a given class of our stock to the stockholders of that class), or repurchase or redeem, among other things, any shares of our common stock or any outstanding preferred stock, during any period of four consecutive fiscal quarters in an aggregate amount in excess of the greater of (i) the sum of 95% of our adjusted funds from operations (as defined in the credit agreements, as applicable) for that period plus the aggregate amount of cash distributions made to holders of our outstanding preferred stock for that period, and (ii) the minimum amount of cash distributions required to be made to our stockholders in order to maintain our status as a REIT for federal income tax purposes and to avoid the payment of income or excise taxes that would otherwise be imposed under specified sections of the Code on income we do not distribute to our stockholders, except we may repurchase or redeem shares of our outstanding preferred stock, if any, with net proceeds from the issuance of shares of our common stock or preferred stock. The credit agreements each provide that, in the event of a failure to pay principal, interest, or any other amount payable thereunder when due or upon the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to us or with respect to one or more of our subsidiaries that in the aggregate meet a significance test set forth in the credit agreements, we and our subsidiaries (other than our wholly-owned subsidiaries) may not pay dividends or make other distributions on (except for (a) distributions payable in shares of a given class of our stock to the stockholders of that class and (b) dividends and distributions described in (ii) above), or repurchase or redeem, among other things, any shares of our common stock or preferred stock. If any such event of default under the applicable credit agreements (or under any other credit agreement or debt instrument with similar terms that we may in the future enter into or be subject to) were to occur, it would likely have a material adverse effect on the market price of our outstanding common stock and any outstanding preferred stock and on the market value of our debt securities which could limit the amount of dividends or other distributions payable to holders of our common stock and any outstanding preferred stock or the amount of interest and principal we are able to pay on our indebtedness, or prevent us from paying those dividends, other distributions, interest or principal altogether, and may adversely affect our ability to qualify, or prevent us from qualifying, as a REIT. Our indebtedness could also have other important consequences to holders of our common stock, outstanding preferred stock, and our debt securities, including: increasing our vulnerability to general adverse economic and industry conditions; limiting our ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, and general corporate requirements; limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and putting us at a disadvantage compared to our competitors with less indebtedness. If we default under a credit facility, loan agreement, or other debt instrument, the lenders will generally have the right to demand immediate repayment of the principal and interest on all of their loans and, in the case of secured indebtedness, to exercise their rights to seize and sell the collateral. Moreover, a default under a single loan or debt instrument may trigger cross-default or cross-acceleration provisions in other indebtedness and debt instruments, giving the holders of such other indebtedness and debt instruments similar rights to demand immediate repayment and to seize and sell any collateral." }, { "status": "UNCHANGED", "current_title": "Volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements.", "prior_title": "Volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements.", "current_body": "Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), and receivables. Often these estimates require the use of market data values and involve estimates of future performance or receivables collectability all of which can be difficult to accurately predict. Although management believes it has been prudent and used reasonable judgment in making these estimates, it is possible actual results may differ from these estimates." }, { "status": "UNCHANGED", "current_title": "Impact of Inflation", "prior_title": "IMPACT OF INFLATION", "current_body": "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. Moreover, our strategic focus on the use of net lease agreements reduces our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Even though the utilization of net leases reduces our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our 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." }, { "status": "UNCHANGED", "current_title": "Universal Shelf Registration", "prior_title": "Universal Shelf Registration", "current_body": "On February 16, 2024, we filed a new shelf registration statement with the SEC, which is effective for a term of three years and will expire in February 2027. 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." }, { "status": "UNCHANGED", "current_title": "Legislative or other actions affecting REITs could have a negative effect on us or our investors.", "prior_title": "Legislative or other actions affecting REITs could have a negative effect on us or our investors.", "current_body": "The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Services, or the IRS, and the U.S. Department of the Treasury, or the Treasury. Changes to the tax laws, with or without retroactive application, could adversely affect us or our investors, including holders of our common stock or debt securities. We cannot predict how changes in the tax laws might affect us or our investors. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT, the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in us. Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other 10 10 10 Table of Contents Table of Contents entities more attractive relative to an investment in a REIT. In addition, the tax treatment of certain of our sale-leaseback transactions could change, which could make such sale-leaseback transactions less attractive to potential sellers and lessees and negatively impact our operations." }, { "status": "UNCHANGED", "current_title": "We are subject to additional risks from our international investments and debt.", "prior_title": "We are subject to additional risks from our international investments and debt.", "current_body": "We have acquired and may continue to invest in properties outside of the U.S. These investments may expose us to a variety of risks that are different from and in addition to those commonly found in the U.S. Our international investments are subject to additional risks, including: •The laws, rules and regulations applicable in such jurisdictions outside of the U.S., including those related to property ownership and control by foreign entities; •Complying with a wide variety of foreign laws, including corruption, employment, data protection, energy usage, health and safety and environmental regulations which may require capital expenditures to maintain or bring our 14 14 14 Table of Contents Table of Contents foreign properties into compliance with applicable regulations and/or may require disclosure of various environmental, social and governance matters; •Fluctuations in exchange rates between foreign currencies and the U.S. dollar (including risks related to their impact on our results of operations, hedging and other derivative arrangements used to mitigate our exposure to fluctuations in foreign currency rates, translational reporting risks, and exchange controls); •As we may not have or have only a limited number of properties within a jurisdiction, our experience in that market and with local business may be limited, and our operating costs may be disproportionately higher until the number of properties within a jurisdiction grows; •We may face challenges with expanding into current or new jurisdictions, such as identifying and securing investment opportunities, hiring and retaining employees, extended time periods for acquiring or disposing of investments, which may increase the cost of funding an investment, and potentially experiencing different cultural and business practices related to employees, rent adjustments, ground leases, and property ownership requirements and limitations; •Challenges in establishing effective controls and procedures to manage and regulate operations in different regions and to monitor and ensure compliance with applicable regulations, such as applicable laws related to corrupt practices, employment, licensing, construction, energy usage, climate change or environmental compliance; •Unexpected or other changes in regulatory requirements (including disclosure requirements), tax, tariffs, trade barriers and other laws within jurisdictions outside the U.S. or between the U.S. and such jurisdictions; •Potentially adverse tax consequences with respect to our properties and/or investment vehicles; •Initial limited investments within certain regions or countries may result in industry or client concentration risks; •The impact of regional or country-specific business cycles, inflation and economic instability, including deterioration in political relations with the U.S., instability in, or further withdrawals from, the European Union or other international trade alliances or agreements; and •Political instability, uncertainty over property rights, civil unrest, acts of war, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities. We also engage external property managers and other third parties, who assist with managing our international properties. If a property manager or third party fails to meet its obligations or terminates its services, we may need to find a replacement; however, these services may be on less favorable terms and conditions, or we may not be able to find a suitable replacement in a timely manner or at all. We have incurred and may continue to incur indebtedness that is denominated in local currencies to fund our international investments and operations. However, it is possible that such indebtedness may be insufficient or may be on unacceptable terms requiring us to use non-local currency indebtedness. In such event, we may be subject to foreign exchange rate volatility which may be impacted by various factors, including those described above. While we may enter into hedging and other derivatives instruments to mitigate our exposure to fluctuations in foreign exchange rates, we may not realize the anticipated benefits from these arrangements or these arrangements may be insufficient to mitigate our exposure. For more information, see “—We are subject to risks associated with debt and preferred stock financing.” If we are unable to adequately address these risks, they could have a significant adverse effect on our operations." }, { "status": "UNCHANGED", "current_title": "Note Covenants", "prior_title": "Note Covenants", "current_body": "Required Actual Limitation on incurrence of total debt < 60% of adjusted assets Limitation on incurrence of secured debt < 40% of adjusted assets Debt service coverage (trailing 12 months) (1) > 1.5x Maintenance of total unencumbered assets > 150% of unsecured debt (1) Our debt service coverage ratio is calculated on a pro forma basis for the preceding four-quarter period on the assumptions that: (i) the incurrence of any debt (as defined in the covenants) incurred by us since the first day of such four-quarter period and the application of the proceeds therefrom (including to refinance other debt since the first day of such four-quarter period), (ii) the repayment or retirement of any of our debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on January 1, 2023 and subject to certain additional adjustments. Such pro forma ratio has been prepared on the basis required by that debt service covenant, reflects various estimates and assumptions and is subject to other uncertainties, and therefore does not purport to reflect what our actual debt service coverage ratio would have been had transactions referred to in clauses (i), (ii) and (iii) of the preceding sentence occurred as of January 1, 2023, nor does it purport to reflect our debt service coverage ratio for any future period. The following is our calculation of debt service and fixed charge coverage at December 31, 2023 (in thousands, for trailing twelve months): Net income available to common stockholders$872,309Plus: interest expense, excluding the amortization of deferred financing costs703,883Plus: provision for taxes52,021Plus: depreciation and amortization1,895,177Plus: provisions for impairment82,208Plus: pro forma adjustments360,009Less: gain on sales of real estate(25,667)Income available for debt service, as defined$3,939,940Total pro forma debt service charge$837,945Debt service and fixed charge coverage ratio4.7x Net income available to common stockholders Plus: interest expense, excluding the amortization of deferred financing costs Plus: provision for taxes Plus: depreciation and amortization Plus: provisions for impairment Plus: pro forma adjustments Less: gain on sales of real estate Income available for debt service, as defined Total pro forma debt service charge Debt service and fixed charge coverage ratio 30 30 30 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "We may engage in development, speculative development, or expansion projects or invest in new asset classes, which would subject us to additional risks that could negatively impact our operations.", "prior_title": "We may engage in development, speculative development, or expansion projects or invest in new assets, which would subject us to additional risks that could negatively impact our operations.", "current_body": "We may engage in development, speculative development, or other expansion projects, which could require us to raise additional capital and obtain additional state and local permits. A decision by any governmental agency not to issue a required permit or substantial delays in the permitting process could cause us to incur penalties, delay us from receiving rental payments or result in us receiving reduced rental payments, or prevent us from pursuing the development, speculative development, or expansion project altogether. Additionally, any such new development, speculative development, or expansion project may not operate at designed capacity or may cost more to operate than we expect. The inability to successfully complete development, speculative development, or expansion projects or to complete them on a timely basis could adversely affect our business and results of operations. 15 15 15 Table of Contents Table of Contents We have recently increased on investments in assets and transaction structures that are outside of our traditional business, including entering into new asset classes, such as casinos and vertical farms, and entering into (or expanding our use of) new transaction structures, such as joint ventures, lending, and increased exploration of sale-leaseback transactions. In addition, in the future, we may invest in new or different assets or enter into new transaction structures that may or may not be closely related to our current business. These new assets and transaction structures may have new, different or increased risks than what we are currently exposed to in our business and we may not be able to manage these risks successfully. Additionally, when investing in such new assets or transaction structures, we will be exposed to the risk that those assets or structures, or the income generated thereby, will affect our ability to meet the requirements to maintain our REIT status, or will subject us to additional regulatory requirements or limitations. If we are not able to successfully manage the risks associated with such new assets, it could have an adverse effect on our business, results of operations and financial condition." } ] }