REALTY INCOME CORPORATION

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REALTY INCOME CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/05/2022 | 04:16pm EDT

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                           FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act
of 1934, as amended. When used in this quarterly report, the words "estimated",
"anticipated", "expect", "believe", "intend" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
include, without limitation, discussions of strategy, plans and intentions and
statements regarding estimated or future results of operations, financial
condition or prospects (including, without limitation, estimated and future
funds from operations ("FFO"), adjusted funds from operations ("AFFO") and
normalized and adjusted FFO and net income, estimated initial weighted average
contractual lease rates, estimated square footage of properties under
development or expansion, the timing, prices and other terms of potential or
planned acquisitions, statements regarding initial cash lease yields on or
percentages of investment grade clients that are lessees of properties that we
have acquired or intend or agreed to acquire or that are under development or
expansion, statements regarding the payment, dependability and amount of and
potential increases in future common stock dividends, statements regarding
future cash flow or cash generation, statements regarding our ability to meet
our liquidity needs, and statements regarding the anticipated or projected
impact of our merger with VEREIT on our business, results of operations,
financial condition or prospects). Forward-looking statements are subject to
risks, uncertainties, and assumptions about Realty Income Corporation,
including, among other things:

•Our access to capital and other sources of funding;
•Our anticipated growth strategies;
•Our intention to acquire additional properties and the timing of these
acquisitions;
•Our intention to sell properties and the timing of these property sales;
•Our intention to re-lease vacant properties;
•Anticipated trends in our business, including trends in the market for
long-term net leases of freestanding, single-client properties;
•Future expenditures for development projects;
•The impact of the COVID-19 pandemic, or future pandemics, on us, our business,
our clients, or the economy generally; and
•The uncertainties regarding whether the anticipated benefits or results of our
merger with VEREIT will be achieved.

Future events and actual results, financial and otherwise, may differ materially
from the results discussed or implied by the forward-looking statements. In
particular, forward-looking statements regarding estimated or future results of
operations or financial condition, estimated or future acquisitions of
properties, or the estimated or potential impact of our merger with VEREIT are
based upon numerous assumptions and estimates and are inherently subject to
substantial uncertainties and actual results of operations, financial condition,
property acquisitions and the impacts of our merger with VEREIT may differ
materially from those expressed or implied in the forward-looking statements,
particularly if actual events differ from those reflected in the estimates and
assumptions upon which such forward-looking statements are based. Some of the
factors that could cause actual results to differ materially are:

•Our continued qualification as a real estate investment trust;
•General domestic and foreign business and economic conditions;
•Competition;
•Fluctuating interest and currency rates;
•Access to debt and equity capital markets;
•Continued volatility and uncertainty in the credit markets and broader
financial markets;
•Other risks inherent in the real estate business including our clients'
defaults under leases, potential liability relating to environmental matters,
illiquidity of real estate investments, and potential damages from natural
disasters;
•Impairments in the value of our real estate assets;
•Changes in income tax laws and rates;
•The continued evolution of the COVID-19 pandemic and the measures taken to
limit its spread, and its impacts on us, our business, our clients, or the
economy generally;
•The timing and pace of reopening efforts at the local, state and national level
in response to the COVID-19 pandemic and developments, such as the unexpected
surges in COVID-19 cases, that cause a delay in or postponement of reopenings;
•The outcome of any legal proceedings to which we are a party, or which may
occur in the future;
•Acts of terrorism and war; and
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•Any effects of uncertainties regarding whether the anticipated benefits or
results of our merger with VEREIT will be achieved.

Additional factors that may cause future events and actual results, financial or
otherwise, to differ, potentially materially, from those discussed in or implied
by the forward-looking statements include those discussed in the sections
entitled "Business", "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on

Form 10-K , for the fiscal year ended December 31, 2021.


Readers are cautioned not to place undue reliance on forward-looking statements.
Those forward-looking statements are not guarantees of future performance and
speak only as of the date that this quarterly report was filed with the
Securities and Exchange Commission, or SEC. While forward-looking statements
reflect our good faith beliefs, they are not guarantees of future performance.
We undertake no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date of this quarterly report or to reflect the
occurrence of unanticipated events. In light of these risks and uncertainties,
the forward-looking events discussed in this quarterly report might not occur.

                                  THE COMPANY

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. The Company is
structured as a real estate investment trust ("REIT"), requiring us annually to
distribute at least 90% of our taxable income (excluding net capital gains) in
the form of dividends to its stockholders. The monthly dividends are supported
by the cash flow generated from real estate owned under long-term net lease
agreements with our commercial clients.

Realty Income was founded in 1969 and listed on the New York Stock Exchange
(NYSE: O) in 1994. Over the past 53 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 March 31, 2022, we owned a diversified portfolio:


•Consisting of 11,288 properties;
•With an occupancy rate of 98.6%, or 11,132 properties leased and 156 properties
available for lease or sale;
•With clients doing business in 70 separate industries;
•Located in all 50 U.S. states, Puerto Rico, the United Kingdom (U.K.) and
Spain;
•With approximately 213.9 million square feet of leasable space;
•With a weighted average remaining lease term (excluding rights to extend a
lease at the option of the client) of approximately 8.9 years; and
•With an average leasable space per property of approximately 18,950 square
feet; approximately 12,660 square feet per retail property and approximately
244,460 square feet per industrial property.

Of the 11,288 properties in the portfolio at March 31, 2022, 11,180, or 99.0%,
are single-client properties, of which 11,026 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 $44.0 million and $21.7 million for the three months
ended March 31, 2022, and 2021, respectively.

Investment Philosophy
We believe that owning an actively managed, diversified portfolio of commercial
properties under long-term, net lease agreements produces consistent and
predictable income. A net lease typically requires the client to be responsible
for monthly rent and certain property operating expenses including property
taxes, insurance, and maintenance. In addition, clients of our properties
typically pay rent increases based on: (1) fixed increases, (2) increases tied
to inflation (typically subject to ceilings), or (3) additional rent calculated
as a percentage of the clients' gross sales above a specified level. We believe
that a portfolio of properties under long-term net lease agreements with our
commercial clients generally produces a more predictable income stream than many
other types of real estate portfolios, while continuing to offer the potential
for growth in rental income.
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Diversification is also a key component of our investment philosophy. We believe
that diversification of the portfolio by client, industry, geography, and
property type leads to more consistent and predictable income for our
stockholders by reducing vulnerability that can come with any single
concentration. Our investment activities have led to a diversified property
portfolio that, as of March 31, 2022, consisted of 11,288 properties located in
all 50 U.S. states, Puerto Rico, the U.K. and Spain, and doing business in 70
industries. None of the 70 industries represented in our property portfolio
accounted for more than 9.1% of our annualized contractual rent as of March 31,
2022.

With expanded scale from our merger with VEREIT, we hope to serve our existing
clients better and to partner with new clients that require the larger and more
diversified balance sheet we now provide. Equally, as we look to continue to
expand geographically across Europe, we hope to partner with new multinational
clients that seek a real estate partner with an expanding geographic footprint.

Investment Strategy
We seek to invest in high-quality real estate that our clients consider
important to the successful operation of their businesses. We generally seek to
acquire commercial real estate that has some or all of the following
characteristics:

•Properties in markets or locations important to our clients;
•Properties that we deem to be profitable for our clients (e.g., retail stores
or revenue generating sites);
•Properties with strong demographic attributes relative to the specific business
drivers of our clients;
•Properties with real estate valuations that approximate replacement costs;
•Properties with rental or lease payments that approximate market rents for
similar properties;
•Properties that can be purchased with the simultaneous execution or assumption
of long-term net lease agreements, offering both current income and the
potential for future rent increases;
•Properties that leverage relationships with clients, sellers, investors, or
developers as part of a long-term strategy; and
•Properties that leverage our proprietary insights, including predictive
analytics (e.g., through the selection of locations and geographic markets we
expect to remain strong or strengthen in the future).

We typically seek to invest in properties owned or leased by clients that are
already or could become leaders in their respective businesses supported by
mechanisms including (but not limited to) occupancy of prime real estate
locations, pricing, merchandise assortment, service, quality, economies of
scale, consumer branding, e-commerce, and advertising. In addition, we
frequently acquire large portfolios of properties net leased to different
clients operating in a variety of industries. We have an internal team dedicated
to sourcing such opportunities, often using our relationships with various
clients, owners/developers, brokers and advisers to uncover and secure
transactions. We also undertake thorough research and analysis to identify what
we consider to be appropriate property locations, clients, and industries for
investment. This research expertise is instrumental to uncovering net lease
opportunities in markets where we believe we can add value.

In selecting potential investments, we generally look for clients with the following attributes:


•Reliable and sustainable cash flow, including demonstrated economic resiliency;
•Revenue and cash flow from multiple sources;
•Are willing to sign a long-term lease (10 or more years); and
•Are large owners and users of real estate.

From a retail perspective, our investment strategy is to target clients that
have a service, non-discretionary, and/or low-price-point component to their
business. Our investments are usually with clients who have demonstrated
resiliency to e-commerce or have a strong omni channel retail strategy, uniting
brick-and-mortar and mobile browsing, both of which reflect the continued
importance of last mile retail, the movement of goods to their final
destination, real estate as part of a customer experience and supply chain
strategy. Our overall investments (including last mile retail) are driven by an
optimal portfolio strategy that, among other considerations, targets allocation
ranges by asset class and industry. We review our strategy periodically and
stress test our portfolio in a variety of positive and negative economic
scenarios to ensure we deliver consistent earnings growth and value creation
across economic cycles. As a result of the execution of this strategy,
approximately 93% of our annualized retail contractual rent on March 31, 2022,
is derived from our clients with a service, non-discretionary, and/or low price
point component to their business. From a non-retail perspective, we target
industrial properties leased to industry leaders, the majority of which are
investment grade rated companies. We believe these characteristics enhance the
stability of the rental revenue generated from these properties.
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After applying this investment strategy, we pursue those transactions where we
believe we can achieve an attractive investment spread over our cost of capital
and favorable risk-adjusted returns. We will continue to evaluate all
investments for consistency with our objective of owning net lease assets.

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


•The aforementioned overall real estate characteristics, including demographics,
replacement cost, and comparative rental rates;
•Industry, client (including credit profile), and market conditions;
•Store profitability for retail locations if profitability data is available;
and
•The importance of the real estate location to the operations of the clients'
business.

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

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

We conduct comprehensive reviews of the business segments and industries in
which our clients operate. Prior to entering into any transaction, our research
department conducts a review of a client's credit quality. The information
reviewed may include reports and filings, including any public credit ratings,
financial statements, debt and equity analyst reports, and reviews of corporate
credit spreads, stock prices, market capitalization, and other financial
metrics. We conduct additional due diligence, including additional financial
reviews of the client, and continue to monitor our clients' credit quality on an
ongoing basis by reviewing the available information previously discussed, and
providing summaries of these findings to management.

At March 31, 2022, approximately 43% of our total portfolio annualized
contractual rent comes from properties leased to our investment grade clients,
their subsidiaries or affiliated companies. At March 31, 2022, our top 20
clients (based on percentage of total portfolio annualized contractual rent)
represented approximately 42% of our annualized rent and 12 of these clients
have investment grade credit ratings or are subsidiaries or affiliates of
investment grade companies.

Asset Management Strategy In addition to pursuing new properties for investment, we seek to increase earnings and dividends through active asset management.

Generally, our asset management efforts seek to achieve:


•Rent increases at the expiration of existing leases, when market conditions
permit;
•Optimum exposure to certain clients, industries, and markets through re-leasing
vacant properties and selectively selling properties;
•Maximum asset-level returns on properties that are re-leased or sold;
•Additional value creation from the existing portfolio by enhancing individual
properties, pursuing alternative uses, and deriving ancillary revenue; and
•Investment opportunities in new asset classes for the portfolio.

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

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•Generate higher returns; •Enhance the credit quality of our real estate portfolio; •Extend our average remaining lease term; and/or •Strategically decrease client, industry, or geographic concentration.

The active management of the portfolio is an essential component of our long-term strategy of maintaining high occupancy.


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

                              RECENT DEVELOPMENTS

Increases in Monthly Dividends to Common Stockholders
We have continued our 53-year policy of paying monthly dividends. In addition,
we increased the dividend two times during 2022. As of April 2022, we have paid
98 consecutive quarterly dividend increases and increased the dividend 115 times
since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2022:

                                 Month         Month       Dividend       Increase
2022 Dividend increases       Declared          Paid      per share      per share
1st increase                  Dec 2021      Jan 2022    $  0.2465      $  0.0005
2nd increase                  Mar 2022      Apr 2022    $  0.2470      $  0.0005

The dividends paid per share during the three months ended March 31, 2022, totaled approximately $0.7395, as compared to approximately $0.7035 during the three months ended March 31, 2021, an increase of $0.036, or 5.1%.


The monthly dividend of $0.2470 per share represents a current annualized
dividend of $2.9640 per share, and an annualized dividend yield of approximately
4.3% based on the last reported sale price of our common stock on the NYSE of
$69.30 on March 31, 2022. Although we expect to continue our policy of paying
monthly dividends, we cannot guarantee that we will maintain our current level
of dividends, that we will continue our pattern of increasing dividends per
share, or what our actual dividend yield will be in any future period.

Acquisitions During the Three Months Ended March 31, 2022
Below is a listing of our acquisitions in the U.S. and Europe for the periods
indicated below:
                                                                                                                   Weighted                   Initial
                                                                       Leasable          Investment                 Average                   Average
                                          Number of                 Square Feet               ($ in              Lease Term                Cash Lease
                                         Properties              (in thousands)           millions)                 (Years)                 Yield (1)
Three months ended March 31, 2022
(2)
Acquisitions - U.S.                       139                      2,627              $    629.8                 15.0                          5.7  %
Acquisitions - Europe                      21                      2,772                   794.2                  8.9                          5.5  %
Total acquisitions                        160                      5,399              $  1,424.0                 11.8                          5.6  %
Properties under development (3)           53                      1,868                   131.3                 17.3                          5.7  %
Total (4)                                 213                      7,267              $  1,555.3                 12.3                          5.6  %


(1)The initial 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 average cash yield includes approximately
$4.3 million received as settlement credits for 16 properties as reimbursement
of free rent periods for the three months ended March 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
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development or expansion, the initial 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 three months ended March 31, 2022, caused
any one client to be 10% or more of our total assets at March 31, 2022.
(3)Includes one U.K. development property that represents an investment of
£1.7 million Sterling during the three months ended March 31, 2022, converted at
the applicable exchange rate on the funding date.
(4)Our clients occupying the new properties are 85.4% retail and 14.6%
industrial, based on rental revenue. Approximately 26% of the rental revenue
generated from acquisitions during the three months ended March 31, 2022, is
from our investment grade rated clients, their subsidiaries or affiliated
companies.

Announcement of Transaction with Wynn Resorts
In February 2022, we announced that we had signed a definitive agreement with
Wynn Resorts, Limited to acquire the Encore Boston Harbor Resort and Casino for
$1.7 billion under a long-term net lease agreement. This sale-leaseback
transaction, which is expected to close in the fourth quarter of 2022, is
expected to be executed at a 5.9% initial weighted average cash lease yield and
includes an initial lease term of 30 years with annual rent growth of 1.75% for
the first ten years and the greater of 1.75% or CPI (capped at 2.5%) over the
remaining lease term. The lease also includes an additional 30-year option to
renew upon expiration. This transaction is subject to numerous uncertainties,
including various closing conditions, and there can be no assurance that the
transaction will be consummated on the terms or timetable currently
contemplated, or at all.

 Leasing Results
At March 31, 2022, we had 156 properties available for lease out of 11,288
properties in our portfolio, which represents a 98.6% occupancy rate based on
the number of properties in our portfolio.

Below is a summary of our portfolio activity for the periods indicated below:
            Three months ended March 31, 2022
            Properties available for lease at December 31, 2021    164
            Lease expirations (1)                                  133
            Re-leases to same client                               (99)
            Re-leases to new client                                (11)
            Vacant dispositions                                    (31)
            Properties available for lease at March 31, 2022       156


(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 March 31, 2022, the annual new rent on re-leases
was $31.69 million, as compared to the previous annual rent of $29.84 million on
the same units, representing a rent recapture rate of 106.2% on the units
re-leased. We re-leased three units to new clients without a period of vacancy,
and 12 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.

At March 31, 2022, our average annualized contractual rent was approximately
$14.19 per square foot on the 11,132 leased properties in our portfolio. At
March 31, 2022, we classified 47 properties, with a carrying amount of
$84.4 million, as real estate and lease intangibles held for sale, net on our
balance sheet. The expected sale of these properties does not represent a
strategic shift that will have a major effect on our operations and financial
results and is consistent with our existing disposition strategy to further
enhance our real estate portfolio and maximize portfolio returns.

Investments in Existing Properties
During the three months ended March 31, 2022, we capitalized costs of $12.0
million on existing properties in our portfolio, consisting of $2.4 million for
re-leasing costs, $13,000 for recurring capital expenditures, and $9.6 million
for non-recurring building improvements.

The majority of our building improvements relate to roof repairs, HVAC improvements, and parking lot resurfacing and replacements. The amounts of our capital expenditures can vary significantly, depending on the rental market,

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credit worthiness of our clients, the lease term and the willingness of our clients to pay higher rents over the terms of the leases.


We define recurring capital expenditures as mandatory and recurring landlord
capital expenditure obligations that have a limited useful life. We define
non-recurring capital expenditures as property improvements in which we invest
additional capital that extend the useful life of the properties.

Capital Raising
During the three months ended March 31, 2022, we raised $663.0 million of gross
proceeds from the sale of common stock at a weighted average price of $65.55 per
share, primarily through proceeds from the sale of common stock through our
At-The-Market (ATM) program.

Note Issuances
In April 2022, we entered into a definitive agreement for the private placement
of £140 million of senior unsecured notes due 2030, £345 million of senior
unsecured notes due 2032, and £115 million of senior unsecured notes due 2037.
The combined notes, if issued, are expected to have a weighted average tenor of
approximately 10.5 years, and a weighted average fixed interest rate of 3.22%.
We currently anticipate closing to occur during the second quarter of 2022.

In January 2022, we issued £250.0 million of 1.875% senior unsecured notes due
January 2027 (the "January 2027 Notes") and £250.0 million of 2.500% senior
unsecured notes due January 2042 (the "January 2042 Notes"). The public offering
price for the January 2027 Notes was 99.487% of the principal amount, for an
effective semi-annual yield to maturity of 1.974%, and the public offering price
for the January 2042 Notes was 98.445% of the principal amount, for an effective
semi-annual yield to maturity of 2.584%. Combined, the new issues of the January
2027 Notes and the January 2042 Notes have a weighted average term of
approximately 12.5 years and a weighted average effective semi-annual yield to
maturity of approximately 2.28%.

New, Expanded Revolving Credit Facility
In April 2022, we entered a new $4.25 billion unsecured credit facility to amend
and restate our previous $3.0 billion unsecured credit facility, which was due
to expire in March 2023. The new revolving credit facility matures in June 2026
and includes two six-month extensions that can be exercised at our option.
Similar to our previous revolving credit facility, the new revolving credit
facility also has a $1.0 billion expansion feature, which is subject to
obtaining lender commitments. As of March 31, 2022, the balance of borrowings
outstanding under our previous revolving credit facility was $569.6 million, and
we had a cash balance of $151.6 million.

Select Financial Results
The following summarizes our select financial results (dollars in millions,
except per share data):

                                                            Three months ended March 31,                 % Increase
                                                            2022                    2021
Total revenue                                     $        807.3       $           442.3                                    82.5  %

Net income available to common stockholders (1) $ 199.4 $

         95.9                                   107.9  %
Net income per share (2)                          $         0.34       $            0.26                                    30.8  %
Funds from operations available to common
stockholders ("FFO")                              $        601.4       $           267.7                                   124.7  %
FFO per share (2)                                 $         1.01       $            0.72                                    40.3  %
Normalized funds from operations available to
common stockholders ("Normalized FFO")            $        607.9       $           267.7                                   127.1  %
Normalized FFO per share (2)                      $         1.02       $            0.72                                    41.7  %
Adjusted funds from operations available to
common stockholders ("AFFO")                      $        580.1       $           318.2                                    82.3  %
AFFO per share (2)                                $         0.98       $            0.86                                    14.0  %


(1) The calculation to determine net income available to common stockholders
includes provisions for impairment, gains from the sale of real estate, and
foreign currency gains and losses. These items can vary from quarter to quarter
and can significantly impact net income available to common stockholders and
period to period comparisons.

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

Our financial results during the three months ended March 31, 2021, were impacted by a $46.5 million loss on extinguishment of debt due to the January 2021 early redemption of the 3.250% notes due October 2022.

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

                        LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy
Historically, we have met our long-term capital needs by issuing common stock,
long-term unsecured notes and bonds, term loans under our revolving credit
facility, and preferred stock. Over the long term, we believe that common stock
should be the majority of our capital structure; however, we may also raise
funds from debt or other equity securities. We may issue common stock when we
believe that our share price is at a level that allows for the proceeds of any
offering to be accretively invested into additional properties. In addition, we
may issue common stock to permanently finance properties that were initially
financed by our revolving credit facility, commercial paper program, or debt
securities. However, we cannot assure you that we will have access to the
capital markets at all times and at terms that are acceptable to us.

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 on our credit facility
and under our commercial paper program and through public securities offerings.
As of March 31, 2022, there are $2.1 billion of obligations becoming due through
the remainder of 2022, which we expect to fund through a combination of cash
flows from operations, issuances of common stock or debt, and additional
borrowings under our revolving credit facility and rolling over borrowings under
our commercial paper program.

We may choose to mitigate our financial exposure to exchange rate risk for
properties acquired outside the U.S. through the issuance of debt securities
denominated in the same local currency and through currency derivatives. We may
leave a portion of our foreign cash flow unhedged to reinvest in additional
properties in the same local currency.

Conservative Capital Structure
We believe that our stockholders are best served by a conservative capital
structure. Therefore, we seek to maintain a conservative debt level on our
balance sheet and solid interest and fixed charge coverage ratios. At March 31,
2022, our total outstanding borrowings of senior unsecured notes and bonds, term
loan, mortgages payable, revolving credit facility and commercial paper were
$15.78 billion, or approximately 27.4% of our total market capitalization of
$57.54 billion.

We define our total market capitalization at March 31, 2022, as the sum of:


•Shares of our common stock outstanding of 601,566,581, plus total common units
outstanding of 1,060,709, multiplied by the last reported sales price of our
common stock on the NYSE of $69.30 per share on March 31, 2022, or $41.76
billion;
•Outstanding borrowings of $569.6 million on our revolving credit facility;
•Outstanding borrowings of $950.0 million on our commercial paper program;
•Outstanding mortgages payable of $1.07 billion, excluding net mortgage premiums
of $25.0 million and deferred financing costs of $713,000;
•Outstanding borrowings of $250.0 million on our term loan, excluding deferred
financing costs of $394,000;
•Outstanding senior unsecured notes and bonds of $12.86 billion, including
Sterling-denominated notes of £1.97 billion, and excluding unamortized net
premiums of $272.7 million and deferred financing costs of $60.6 million; and
•Our proportionate share of outstanding debt from unconsolidated entities of
$86.0 million, excluding premiums and deferred financing costs.

Universal Shelf Registration
In June 2021, we filed a shelf registration statement with the SEC, which is
effective for a term of three years and will expire in June 2024. In accordance
with SEC rules, the amount of securities to be issued pursuant to this shelf
registration statement was not specified when it was filed and there is no
specific dollar limit. The securities covered by this registration statement
include (1) common stock, (2) preferred stock, (3) debt securities,
(4) depositary
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shares representing fractional interests in shares of preferred stock,
(5) warrants to purchase debt securities, common stock, preferred stock, or
depositary shares, and (6) any combination of these securities. We may
periodically offer one or more of these securities in amounts, prices and on
terms to be announced when and if these securities are offered. The specifics of
any future offerings, along with the use of proceeds of any securities offered,
will be described in detail in a prospectus supplement, or other offering
materials, at the time of any offering.

At-the-Market ("ATM") Program
Under our "at-the-market" equity distribution plan, or our ATM program, up to
69,088,433 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 or at negotiated prices. During the
three months ended March 31, 2022, we issued 10,073,209 shares and raised
approximately $660.2 million of gross proceeds under the ATM program. At March
31, 2022, we had 19,314,282 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.

Dividend Reinvestment and Stock Purchase Plan
Our Dividend Reinvestment and Stock Purchase Plan, or our DRSPP, provides our
common stockholders, as well as new investors, with a convenient and economical
method of purchasing our common stock and reinvesting their distributions. Our
DRSPP also allows our current stockholders to buy additional shares of common
stock by reinvesting all or a portion of their distributions. Our DRSPP
authorizes up to 26,000,000 common shares to be issued. Our DRSPP includes a
waiver approval process, allowing larger investors or institutions, per a formal
approval process, to purchase shares at a small discount, if approved by us. We
did not issue shares under the waiver approval process during the three months
ended March 31, 2022. During the three months ended March 31, 2022, we issued
41,371 shares and raised approximately $2.8 million under our DRSPP. At March
31, 2022, we had 11,294,008 shares remaining for future issuance under our DRSPP
program.

Revolving Credit Facility
In April 2022, we entered a new $4.25 billion unsecured revolving credit
facility to amend and restate our previous $3.0 billion unsecured revolving
credit facility, which was due to expire in March 2023. This new multicurrency
credit facility 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. Similar to our previous credit facility, our new
revolving credit facility also has a $1.0 billion expansion feature, which is
subject to obtaining lender commitments. Under the new revolving credit
facility, our current investment grade credit ratings provide for financing on
U.S. Dollar 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 and 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.

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 as well. Our new credit facility is
unsecured and, accordingly, we have not pledged any assets as collateral for
this obligation.

At March 31, 2022, we had a borrowing capacity of $2.4 billion available on our
previous revolving credit facility and an outstanding balance of $569.6 million.
The weighted average interest rate on borrowings under our revolving credit
facility during the three months ended March 31, 2022, was 1.1% per annum. We
must comply with various financial and other covenants in our credit
facility. At March 31, 2022, we were in compliance with these covenants. We
expect to use our credit facility to acquire additional properties and for other
general corporate purposes. Any additional borrowings will increase our exposure
to interest rate risk.

Commercial Paper Program
We have a U.S. dollar-denominated unsecured commercial paper program. Under the
terms of the program, we may issue unsecured commercial paper notes up to a
maximum aggregate amount outstanding of $1.0 billion. Borrowings under this
program generally mature in one year or less. At March 31, 2022, we had an
outstanding balance of $950.0 million. The weighted average interest rate on
borrowings under our commercial paper program was 0.5% for the three months
ended March 31, 2022. We use our $3.0 billion revolving credit facility as a
liquidity backstop for the repayment of the notes issued under the commercial
paper program.

The commercial paper borrowings outstanding at March 31, 2022, mature between April 2022 and December 2022. We generally use our credit facility and commercial paper borrowings for the short-term financing of new property

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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 program and may seek to extend, renew or replace our credit
facility and commercial paper program, to the extent we deem appropriate.

Term Loan
In October 2018, in conjunction with entering into our revolving credit
facility, we entered into a $250.0 million senior unsecured term loan, which
matures in March 2024, and is governed by the credit agreement that governs our
revolving credit facility. Borrowing under this term loan bears interest at the
current one-month LIBOR, plus 0.85%. In conjunction with this term loan, we also
entered into an interest rate swap which effectively fixes our per annum
interest on this term loan at 3.89%.

Mortgage Debt
As of March 31, 2022, we had $1.07 billion of mortgages payable, the majority of
which were assumed in connection with our property acquisitions, including ten
mortgages from our merger with VEREIT in 2021 totaling $839.1 million, of which
one mortgage for $42.5 million was paid off during the three months ended March
31, 2022, and a Sterling-denominated mortgage payable of £30.8 million.
Additionally, at March 31, 2022, we had net premiums totaling $25.0 million on
these mortgages and deferred financing costs of $713,000. 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 three months ended
March 31, 2022, we made $43.6 million in principal payments, including the
repayment of one mortgage in full for $42.5 million.
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Notes Outstanding
Our senior unsecured note and bond obligations consist of the following as of
March 31, 2022, sorted by maturity date (in millions):
                                                                     As of March 31, 2022
                                                             Principal Amount
                                                                    (Currency           Carrying Value
                                                                Denomination)                    (USD)

4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (1)

                                                 $             500          $           500
3.875% notes, issued in June 2014 and due in July 2024   $             350                      350
3.875% notes, issued in April 2018 and due in April 2025 $             500                      500

4.625% notes, $550 issued October 2018, of which $544 was exchanged in November 2021, both due in November 2025 (1)

                                                 $             550                      550
0.750% notes, issued December 2020 and due in March 2026 $             325                      325

4.875% notes, $600 issued June 2016, of which $596 was exchanged in November 2021, both due in June 2026 (1) $

             600                      600

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

           $             650                      650

1.875% notes, issued in January 2022 and due in January 2027

                                                     £             250                      329

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

                                                     $             600                      600
1.125% notes, issued in July 2021 and due in July 2027   £             400                      526

3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (1) $

             600                      600

3.650% notes, issued in December 2017 and due in January 2028

                                                     $             550                      550

3.400% notes, $600 issued June 2020, of which $598 was exchanged in November 2021, both due in January 2028 (1) $

             600                      600

2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (1)

                                                      $             500                      500
3.250% notes, issued in June 2019 and due in June 2029   $             500                      500

3.100% notes, $600 issued December 2019, of which $596 was exchanged in November 2021, both due in December 2029 (1)(2)

                                              $             599                      599

1.625% notes, issued in October 2020 and due December 2030

                                                     £             400                      526

3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031

                      $             950                      950

2.850% notes, $700 issued November 2020, of which $699 was exchanged in November 2021, both due in December 2032 (1)

                                                 $             700                      700

1.800% notes, issued in December 2020 and due in March 2033

                                                     $             400                      400
1.750% notes, issued in July 2021 and due in July 2033   £             350                      460
2.730% notes, issued in May 2019 and due in May 2034     £             315                      413

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

                     $             250                      250

2.500% notes, issued in January 2022 and due in January 2042

                                                     £             250                      329

4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047

                 $             550                      550
Total principal amount                                                              $        12,857
Unamortized net premiums and deferred financing costs                                           212
                                                                                    $        13,069


(1) Carrying Value (USD) as of March 31, 2022, includes the portion of the
VEREIT OP notes that remained outstanding, totaling $39.1 million in the
aggregate, that were not exchanged in the exchange offers commenced by us with
respect to the outstanding bonds of VEREIT Operating Partnership, L.P. ("VEREIT
OP") in connection with the consummation of the merger with VEREIT (the
"Exchange Offers").
(2) These notes were originally issued by VEREIT OP in December 2019 for the
principal amount of $600 million. The amount of Realty Income debt issued
through the Exchange Offers was $599 million, resulting from cancellations due
to late tenders that forfeited the early participation premium of $30 per $1,000
principal amount and cash paid in lieu of fractional shares.
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In April 2022 we entered into a definitive agreement for the private placement
of £140 million of senior unsecured notes due 2030, £345 million of senior
unsecured notes due 2032, and £115 million of senior unsecured notes due 2037.
The combined notes, if issued, are expected to have a weighted average tenor of
approximately 10.5 years, and a weighted average fixed interest rate of 3.22%.

All of our outstanding notes and bonds have fixed interest rates and contain
various covenants, with which we remained in compliance as of March 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. generally accepted
accounting principles ("GAAP") measurements, 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 March 31,
2022, are:
Note Covenants                                    Required                  

Actual

Limitation on incurrence of total debt            < 60% of adjusted assets     41.1  %
Limitation on incurrence of secured debt          < 40% of adjusted assets      2.9  %
Debt service coverage (trailing 12 months) (1)    > 1.5x                    

5.6

Maintenance of total unencumbered assets > 150% of unsecured debt

252.3 %



(1)  Our debt service coverage ratio is calculated on a pro forma basis for the
preceding four-quarter period on the assumptions that: (i) the incurrence of any
debt (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
April 1, 2021 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 April 1, 2021, 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 March 31, 2022 (in thousands, for trailing twelve months):
Net income available to common stockholders                                $             462,884

Plus: interest expense, excluding the amortization of deferred financing costs

                                                                                    345,454
Plus: loss on extinguishment of debt                                                      50,706
Plus: provision for taxes                                                                 36,413
Plus: depreciation and amortization                                                    1,123,612
Plus: provisions for impairment                                                           43,285
Plus: pro forma adjustments                                                              733,983
Less: gain on sales of real estate                                          

(57,553)


Income available for debt service, as defined                              $           2,738,784

Total pro forma debt service charge                                        $             491,346

Debt service and fixed charge coverage ratio                                                 5.6


Cash Reserves
We are organized to operate as an equity REIT that acquires and leases
properties and distributes to stockholders, in the form of monthly cash
distributions, a substantial portion of our net cash flow generated from leases
on our properties. We intend to retain an appropriate amount of cash as working
capital. At March 31, 2022, we had cash and cash equivalents totaling $151.6
million, inclusive of £86.8 million Sterling and €7.2 million 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 program.
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Credit Agency Ratings
The borrowing interest rates under our revolving credit facility are based upon
our ratings assigned by credit rating agencies. As of March 31, 2022, 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 March 31, 2022: 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 March 31, 2022, interest rates under
our new credit facility for U.S. borrowings would have been at the Secured
Overnight Financing Rate ("SOFR"), plus 0.725% with a SOFR adjustment charge of
0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95%
over SOFR and, for British Pound Sterling borrowings, at the Sterling Overnight
Indexed Average ("SONIA"), plus 0.725% with a SONIA adjustment charge of 0.0326%
and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826%
over SONIA. In addition, our new credit facility provides that the interest
rates can range between: (i) SOFR/SONIA, plus 1.40% if our credit rating is
lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii)
SOFR/SONIA, 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 range 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.

Table of Obligations
The following table summarizes the maturity of each of our obligations as of
March 31, 2022 (dollars in millions):
                                             Senior                                                      Ground
                Credit Facility and Unsecured Notes                                              Leases Paid by              Ground
    Year of        Commercial Paper             and        Term       Mortgages                   Realty Income      Leases Paid by
   Maturity             Program (1)       Bonds (2)    Loan (3)     Payable (4)     Interest (5)            (6)     Our Clients (7)     Other (8)        Totals
     2022       $          950.0    $          -    $      -    $      227.5    $       352.4    $       6.9    $           23.0    $    517.4    $  2,077.2
     2023                  569.6               -           -            62.1            467.4            9.2                30.7          23.3       1,162.3
     2024                      -           850.0       250.0           733.0            414.4           12.1                30.1             -       2,289.6
     2025                      -         1,050.0           -            40.8            368.8           10.8                29.6             -       1,500.0
     2026                      -         1,575.0           -             1.2            317.4            9.2                27.5             -       1,930.3
  Thereafter                   -         9,381.6           -             4.7          1,480.1          270.9               226.5             -      11,363.8

Totals $ 1,519.6 $ 12,856.6 $ 250.0 $ 1,069.3 $ 3,400.5 $ 319.1 $ 367.4 $ 540.7

$ 20,323.2



(1)As of March 31, 2022, the initial term of our previous credit facility would
have expired in March 2023, and included, at our option, two six-month
extensions. In April 2022, we amended and restated our unsecured credit
facility, or our new credit facility, in order to increase the borrowing
capacity to $4.25 billion and extend the initial term to June 2026 with two
six-months extensions that can be exercised at our option. The amended and
restated new credit facility is otherwise substantively consistent with our
previous credit agreement. We also have an unsecured commercial paper program,
with outstanding borrowings of $950.0 million, which mature between April 2022
and December 2022.
(2)Excludes non-cash net premiums recorded on notes payable of $272.7 million
and deferred financing costs of $60.6 million.
(3)Excludes deferred financing costs of $394,000.
(4)Excludes both non-cash net premiums recorded on the mortgages payable of
$25.0 million and deferred financing costs of $713,000.
(5)Interest on the term loan, notes, bonds, mortgages payable, previous credit
facility and commercial paper program has been calculated based on outstanding
balances at period end through their respective maturity dates. Excludes
interest from the April 2022 private placement of £140 million of senior
unsecured notes due 2030, £345 million of senior unsecured notes due 2032, and
£115 million of senior unsecured notes due 2037. We currently expect closing to
occur during the second quarter of 2022.
(6)Realty Income currently pays 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 $485.7 million of commitments under construction
contracts, $55.0 million for re-leasing costs, recurring capital expenditures,
and non-recurring building improvements.

Our credit facility, commercial paper program, term loan, and notes payable obligations are unsecured. Accordingly, we have not pledged any assets as collateral for these obligations.

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Unconsolidated Investments
As a result of our merger with VEREIT, we assumed an equity method investment in
three unconsolidated entities. We are responsible to fund 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 these
investments at this time. The debt held by the unconsolidated entities is
secured by its properties, though is non-recourse to us with limited customary
exceptions which vary from loan to loan.

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

Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P. each on a per unit basis that is generally 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 2021, our cash distributions to
common stockholders totaled $1.17 billion, or approximately 149.4% of our
estimated taxable income of $783.3 million. Our estimated taxable income
reflects non-cash deductions for depreciation and amortization. Our estimated
taxable income is presented to show our compliance with REIT dividend
requirements and is not a measure of our liquidity or operating performance. We
intend to continue to make distributions to our stockholders that are sufficient
to meet this dividend requirement and that will reduce or eliminate our exposure
to income taxes. Furthermore, we believe our cash on hand and funds from
operations are sufficient to support our current level of cash distributions to
our stockholders. Our cash distributions to common stockholders in the three
months ended March 31, 2022, totaled $438.3 million, representing 75.6% of our
adjusted funds from operations available to common stockholders of approximately
$580.1 million. In comparison, our cash distributions to common stockholders in
2021 totaled $1.17 billion, representing 78.5% of our adjusted funds from
operations available to common stockholders of $1.49 billion.

Future distributions will be at the discretion of our Board of Directors and
will depend on, among other things, our results of operations, FFO, Normalized
FFO, AFFO, cash flow from operations, financial condition, capital requirements,
the annual distribution requirements under the REIT provisions of the Internal
Revenue Code of 1986, as amended, 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 taxable REIT subsidiaries) 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 67.3% of the distributions to our common stockholders, made or
deemed to have been made in 2021, were classified as a return of capital for
federal income tax purposes.
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                             RESULTS OF OPERATIONS

Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with 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 to our
consolidated financial statements in our Annual Report on   Form     10-K   for
the year ended December 31, 2021.

In order to prepare our consolidated financial statements according to the
rules and guidelines set forth by GAAP, many subjective judgments must be made
with regard to critical accounting policies. 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.
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The following is a comparison of our results of operations for the three months ended March 31, 2022, to the three months ended March 31, 2021.


Total Revenue
The following summarizes our total revenue (dollars in thousands):
                                                             Three months ended March 31,
                                                                2022                 2021                 $ Increase
REVENUE
Rental (excluding reimbursable)                 $            755,562       $   417,688                                  $   337,874
Rental (reimbursable)                                         44,003            21,677                                       22,326
Other                                                          7,778             2,889                                        4,889
Total revenue                                   $            807,343       $   442,254                                  $   365,089

The increase in total revenue primarily relates to the merger with VEREIT and acquisitions from January 1, 2021, through March 31, 2022.


Rental Revenue (excluding reimbursable)
The table below summarizes the increase in rental revenue (excluding
reimbursable) in the three months ended March 31, 2022, compared to the three
months ended March 31, 2021 (dollars in thousands):

                                                                                                   Three months ended March 31,           Increase/(Decrease)
                                 Number of Properties          Square Footage (1)                     2022                 2021                      $ Change
Properties acquired during
2022 & 2021                            1,235                   29,069,157               $        98,518          $     5,049          $             

93,469

Same store rental revenue              9,728                  169,816,153                       629,886              605,266                        24,620
Orion Divestiture                         92                   10,093,123                           413               44,197                       (43,784)
Constant currency adjustment
(2)                                               N/A                         N/A                 1,215                1,225                           

(10)

Properties sold prior to 2022            318                    6,615,724                           627               12,851                       

(12,224)

Straight-line rent and other
non-cash adjustments                              N/A                         N/A                 8,252                1,456                         

6,796

Vacant rents, development and
other (3)                                325                    6,932,900                        16,651               13,790                         2,861
Less: VEREIT same store
rental revenue (4)                                N/A                         N/A                     -             (266,146)                      266,146
Totals                                                                                  $       755,562          $   417,688          $            337,874


(1) Excludes 5,910,715 square feet from properties ground leased to clients and
2,164,712 square feet from properties with no land or building ownership.
(2) For purposes of comparability, same store rental revenue is presented on a
constant currency basis using the exchange rate as of March 31, 2022, of 1.31
GBP/USD. None of the properties in Spain met our same store pool definition for
the periods presented.
(3) Relates to the aggregate of (i) rental revenue from properties (313
properties comprising 6,850,516 square feet) that were available for lease
during part of 2022 or 2021, (ii) rental revenue for properties (12 properties
comprising 82,384 square feet) under development, and (iii) rental revenue that
is not contractual base rent such as lease termination settlements.
(4) Amounts for the three months ended March 31, 2021 represent same store
rental revenue from VEREIT properties, which were not included in our financial
statements prior to the close of the merger on November 1, 2021.

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. 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. If
the property was owned by VEREIT for the full comparative period and each of the
other criterion were met, the property was included in our same store property
pool. 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.
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Our calculation of same store rental revenue includes rent deferred for future
payment as a result of lease concessions we granted in response to the COVID-19
pandemic and recognized under the practical expedient provided by the Financial
Accounting Standards Board (FASB). 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. If the property was owned by
VEREIT for the full comparative period and each of the other criterion were met,
the property was included in our same store property pool. Our calculation of
same store rental revenue also includes uncollected rent for which we have not
granted a lease concession. If these applicable amounts of rent deferrals and
uncollected rent were excluded from our calculation of same store rental
revenue, the increases for the three months ended March 31, 2022, relative to
the comparable periods for 2021 would have been 4.4%.

Of the 11,288 properties in the portfolio at March 31, 2022, 11,180, or 99.0%,
are single-client properties and the remaining are multi-client properties. Of
the 11,180 single-client properties, 11,026, or 98.6%, were net leased at March
31, 2022.

Of the 11,501 in-place leases in the portfolio, which excludes 201 vacant units, 9,839 or 85.5% were under leases that provide for increases in rents through:

•Base rent increases tied to inflation (typically subject to ceilings); •Percentage rent based on a percentage of the clients' gross sales; •Fixed increases; or •A combination of two or more of the above rent provisions.


Percentage rent, which is included in rental revenue, was $3.7 million in the
three months ended March 31, 2022, and $1.0 million in the three months ended
March 31, 2021. We anticipate percentage rent to be less than 1% of rental
revenue for 2022.

At March 31, 2022, our portfolio of 11,288 properties was 98.6% leased with 156
properties available for lease, as compared to 98.5% leased, with 164 properties
available for lease at December 31, 2021, and 98.0% leased with 131 properties
available for lease at March 31, 2021. It has been our experience that
approximately 1% to 4% of our property portfolio will be unleased at any given
time; however, it is possible that the number of properties available for lease
or sale could increase in the future, given the nature of economic cycles and
other unforeseen global events, such as the ongoing COVID-19 pandemic and the
measures taken to limit its spread.

Rental Revenue (reimbursable)
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.

Other Revenue Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms.

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Total Expenses
The following summarizes our total expenses (dollars in thousands):
                                                          Three months ended March 31,
                                                             2022                 2021                       $ Increase
EXPENSES
Depreciation and amortization                  $      403,762           $   177,985                                        $   225,777
Interest                                              106,403                73,075                                             33,328
Property (excluding reimbursable)                       8,339                 6,822                                              1,517
Property (reimbursable)                                44,003                21,677                                             22,326
General and administrative                             32,699                20,796                                             11,903
Provisions for impairment                               7,038                 2,720                                              4,318
Merger and integration-related costs                    6,519                     -                                              6,519
Total expenses                                 $      608,763           $   303,075                                        $   305,688
Total revenue (1)                              $      763,340           $   420,577
General and administrative expenses as a
percentage of total revenue (1)                           4.3   %               4.9  %
Property expenses (excluding reimbursable) as
a percentage of total revenue (1)                         1.1   %           

1.6 %

(1) Excludes rental revenue (reimbursable).


Depreciation and Amortization
The increase in depreciation and amortization for the three months ended March
31, 2022, was primarily due to the acquisition of properties in 2021 and 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.
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Interest Expense
The following is a summary of the components of our interest expense (dollars in
thousands):
                                                                       

Three months ended March 31,

                                                                        2022                   2021

Interest on our credit facility, commercial paper, term loan, notes, mortgages and interest rate swaps

            $       120,962          $      69,528
Credit facility commitment fees                                       937                    938

Amortization of debt origination and deferred financing costs

                                                               3,123                  2,661
Loss on interest rate swaps                                           722                    722
Amortization of net mortgage premiums                              (3,561)                  (280)
Amortization of net note premiums                                 (15,740)                   (85)
Interest capitalized                                                 (375)                  (486)
Capital lease obligation                                              322                     77
Interest on deferred financing leases                                  13                      -
Interest expense                                          $       106,403   

$ 73,075

Credit facility, commercial paper, term loan, mortgages and notes Average outstanding balances (dollars in thousands) $ 15,529,939

       $   8,293,374
Average interest rates                                               3.07  %                3.27  %


The increase in interest expense for the three months ended March 31, 2022 is
primarily due the January 2022 issuance of £500 million in principal of Sterling
denominated notes, 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,
the July 2021 issuance of £750 million in principal of Sterling denominated
notes, and higher average balances and 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.

During the three months ended March 31, 2022, the weighted average interest rate on our:


•Revolving credit facility outstanding borrowings of $569.6 million was 1.1%;
•Commercial paper outstanding borrowings of $950.0 million was 0.5%;
•Term loan outstanding of $250.0 million (excluding deferred financing costs of
$394,000) was swapped to fixed at 3.9%;
•Mortgages payable of $1.07 billion (excluding net premiums totaling $25.0
million and deferred financing costs of $713,000 on these mortgages) was 4.8%;
•Notes and bonds payable of $12.86 billion (excluding net unamortized original
issue premiums of $272.7 million and deferred financing costs of $60.6 million)
was 3.2%; and
•Notes, bonds, mortgages, term loan, and credit facility and commercial paper
borrowings of $15.7 billion (excluding all net premiums and deferred financing
costs) was 3.1%.

Property Expenses (excluding reimbursable)
Property expenses (excluding reimbursable) consist of costs associated with
properties available for lease, non-net-leased properties and general portfolio
expenses. Expenses related to properties available for lease and non-net-leased
properties include, but are not limited to, property taxes, maintenance,
insurance, utilities, property inspections and legal fees. General portfolio
costs include, but are not limited to, insurance, legal, property inspections,
and title search fees. At March 31, 2022, 156 properties were available for
lease or sale, as compared to 164 at December 31, 2021, and 131 at March 31,
2021.

The increase in property expenses (excluding reimbursable) for the three months
ended March 31, 2022, is primarily due to the increase in portfolio size,
resulting in higher utilities, repairs and maintenance, property-related legal
expenses, and property taxes.
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Property Expenses (reimbursable)
The increase in property expenses (reimbursable) for the three months ended
March 31, 2022, was primarily attributable to our increased portfolio size,
which contributed to higher operating expenses as a result of our acquisitions
in 2021 and the three months ended March 31, 2022, and an increase in ground
lease rent, insurance, and property taxes paid on behalf of our clients.

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

The increase in general and administrative expenses for the three months ended
March 31, 2022, is primarily due to higher payroll-related costs and higher
corporate-level professional fees associated with the growth of the company,
including the merger with VEREIT. At March 31, 2022, the headcount was 384
versus 225 at March 31, 2021.

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

                                                      Three months ended 

March 31,

                                                                   2022     

2021

Total provisions for impairment     $           7.0                        $ 2.7
Number of properties:
Classified as held for sale                      18                         

1

Classified as held for investment                 -                            2
Sold                                             16                           18


Merger and Integration-related Costs
In conjunction with our merger with VEREIT, we incurred approximately
$6.5 million of merger and integration-related transaction costs during the
three months ended March 31, 2022, respectively. The merger and
integration-related costs incurred to date primarily consist of advisory fees,
attorney fees, accountant fees and additional incremental and non-recurring
costs necessary to convert data and systems, retain employees and otherwise
enable us to operate the acquired VEREIT business and assets efficiently. There
were no comparable merger and integration-related costs for the three months
ended March 31, 2021.

Gain on Sales of Real Estate
The following summarizes our property dispositions (dollars in millions):
                                                       Three months ended 

March 31,

                                                                   2022     

2021

       Number of properties sold                    34                      

27

       Net sales proceeds             $          122.2                    

$ 34.7

       Gain on sales of real estate   $           10.2                    

$ 8.4



Foreign Currency and Derivative Gains (Losses), Net
We borrow in the functional currencies of the countries in which we invest. Net
foreign currency gains and losses are primarily related to the remeasurement of
intercompany debt from foreign subsidiaries. Gains and losses on foreign
currency are largely offset by derivative gains and losses.

Derivative gains and losses relate to mark-to-market adjustments on derivatives
that do not qualify for hedge accounting. Net derivative gains and losses are
primarily related to realized and unrealized short term currency exchange swaps.
Gains and losses on derivatives are largely offset by foreign currency gains and
losses.

Loss on Extinguishment of Debt
In January 2021, we completed the early redemption on all $950.0 million in
principal amount of outstanding 3.250% notes due October 2022, plus accrued and
unpaid interest. As a result of the early redemption, we recognized a $46.5
million loss on extinguishment of debt for the three months ended March 31,
2021. There were no comparable redemptions of debt for the three months ended
March 31, 2022.
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Equity in Income of Unconsolidated Entities
Equity in income of unconsolidated entities for the three months ended March 31,
2022, relates to three equity method investments that were acquired in our
merger with VEREIT. There were no comparative investments for the three months
ended March 31, 2021.

Other Income, Net
Certain miscellaneous non-recurring revenue is included in other income, net.
The increase in the three months ended March 31, 2022, compared to the three
months ended March 31, 2021, is primarily related to insurance proceeds received
from property losses.

Income Taxes Income taxes are for city and state income and franchise taxes, and for international income taxes accrued or paid by us and our subsidiaries. The increase in income taxes for the three months ended March 31, 2022, was primarily attributable to our increased volume of U.K. investments, which contributed to higher U.K. income taxes as compared to the same period in 2021.

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

                                                        Three months ended 

March 31,

                                                       2022                     2021           % Increase
Net income available to common
stockholders                               $          199.4       $             95.9                                  107.9  %
Net income per share (1)                   $           0.34       $             0.26                                   30.8  %

(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, gains from the sale of properties, and foreign currency gains and losses, which can vary from period to period based on timing and significantly impact net income available to the Company and available to common stockholders.


The increase in net income available to common stockholders for the three months
ended March 31, 2022, compared to the three months ended March 31, 201 primarily
related to the increase in the size of our portfolio due to the merger with
VEREIT, which closed on November 1, 2021. In addition, net income available to
common stockholders for the three months ended March 31, 2021, was impacted by a
$46.5 million loss on extinguishment of debt due to the January 2021 early
redemption of the 3.250% notes due October 2022.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real
Estate (Adjusted EBITDAre)
The National Association of Real Estate Investment Trusts (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 gains and losses (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) loss 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 gains and losses, net (as described in
the Adjusted Funds from Operations section), and (ix) our proportionate share of
interest expense and real estate depreciation and amortization from
unconsolidated entities. Our Adjusted EBITDAre may not be comparable to Adjusted
EBITDAre reported by other companies or as defined by Nareit, and other
companies may interpret or define Adjusted EBITDAre differently than we do.
Management believes Adjusted EBITDAre to be a meaningful measure of a REIT's
performance because it provides a view of our operating performance, analyzes
our ability to meet interest payment obligations before the effects of income
tax, depreciation and amortization expense, provisions for impairment, gains 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
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EBITDAre metric, which we refer to as Annualized Adjusted EBITDAre, is
meaningful because it represents the Company's current earnings run rate for the
period presented. Annualized Adjusted EBITDAre should be considered along with,
but not as an alternative to net income as a measure of our operating
performance. Management also uses our ratio of net debt-to-Annualized Adjusted
EBITDAre as a measure of leverage in assessing the Company's financial
performance, which is calculated as net debt (which we define as total debt per
the consolidated balance sheet, excluding deferred financing costs and net
premiums and discounts, but including our proportionate share on debt from
unconsolidated entities, less cash and cash equivalents), divided by annualized
quarterly Adjusted EBITDAre.

The following is a reconciliation of net income available to common stockholders
(which we believe is the most comparable GAAP measure) to adjusted EBITDAre and
Annualized Adjusted EBITDAre calculations for the periods indicated below
(dollars in thousands):
                                                                            

Three months ended March 31,

                                                                                2022                   2021
Net income                                                   $        199,971              $      96,236
Interest                                                              106,403                     73,075
Loss on extinguishment of debt                                              -                     46,473
Income taxes                                                           10,981                      6,225
Depreciation and amortization                                         403,762                    177,985
Provisions for impairment                                               7,038                      2,720
Merger and integration-related costs                                    6,519                          -
Gain on sales of real estate                                          (10,156)                    (8,401)
Foreign currency and derivative (gains) losses, net                       590                       (804)

Proportionate share of adjustments for unconsolidated entities

                                                                1,092                          -
Quarterly Adjusted EBITDAre                                  $        726,200              $     393,509
Annualized Adjusted EBITDAre (1)                             $      2,904,800              $   1,574,036

Total debt per the consolidated balance sheet, excluding deferred financing costs and net premiums and discounts $ 15,695,516

              $   8,566,505

Proportionate share for unconsolidated entities debt, excluding deferred financing costs

                                     86,006                          -
Less: Cash and cash equivalents                                      (151,624)                  (183,984)
Net Debt (2)                                                 $     15,629,898              $   8,382,521
Net Debt/Annualized Adjusted EBITDAre (3)                                 5.4                        5.3


(1) We calculate Annualized Adjusted EBITDAre by multiplying the Quarterly
Adjusted EBITDAre by four.
(2) Net Debt is total debt per our consolidated balance sheet, excluding
deferred financing costs and net premiums and discounts, but including our
proportionate share on debt from unconsolidated entities, less cash and cash
equivalents.
(3) During 2021, Net Debt was adjusted to exclude deferred financing costs and
net premiums and discounts. The adjustment of Net Debt did not impact the
calculation for the three months ended March 31, 2021.

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

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (Normalized FFO)

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


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
gains 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.
                                                         Three months ended 

March 31,

                                                       2022                      2021                 % Increase

FFO available to common stockholders $ 601.4 $

     267.7                                        124.7  %
FFO per share (1)                          $           1.01       $              0.72                                         40.3  %
Normalized FFO available to common
stockholders                               $          607.9       $             267.7                                        127.1  %
Normalized FFO per share (1)               $           1.02       $              0.72                                         41.7  %


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


FFO and Normalized FFO for the three months ended March 31, 2021, was impacted
was impacted by a $46.5 million loss on extinguishment of debt due to the
January 2021 early redemption of the 3.250% notes due October 2022. The
following is a reconciliation of net income available to common stockholders
(which we believe is the most comparable GAAP measure) to FFO and Normalized
FFO. Also presented is information regarding distributions paid to common
stockholders and the weighted average number of common shares used for the basic
and diluted computation per share (dollars in thousands, except per share
amounts):
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Three months ended March 31,

                                                                             2022                    2021
Net income available to common stockholders                    $       199,369          $       95,940
Depreciation and amortization                                          403,762                 177,985
Depreciation of furniture, fixtures and equipment                         (478)                   (371)
Provisions for impairment                                                7,038                   2,720
Gain on sales of real estate                                           (10,156)                 (8,401)

Proportionate share of adjustments for unconsolidated entities 2,235

                       -
FFO adjustments allocable to noncontrolling interests                     (354)                   (166)
FFO available to common stockholders                           $       601,416          $      267,707
FFO allocable to dilutive noncontrolling interests                         808                       -
Diluted FFO                                                    $       

602,224 $ 267,707


FFO available to common stockholders                           $       601,416          $      267,707
Merger and integration-related costs                                     6,519                       -
Normalized FFO available to common stockholders                $       607,935          $      267,707
Normalized FFO allocable to dilutive noncontrolling interests              808                       -
Diluted Normalized FFO                                         $       

608,743 $ 267,707


FFO per common share, basic and diluted                        $          

1.01 $ 0.72


Normalized FFO per common share, basic and diluted             $          

1.02 $ 0.72


Distributions paid to common stockholders                      $       438,280          $      260,697
FFO available to common stockholders in excess of
distributions paid to common stockholders                      $       

163,136 $ 7,010 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders

                      $       169,655          $        7,010
Weighted average number of common shares used for FFO and
normalized FFO:
Basic                                                              593,827,299             371,522,607
Diluted                                                            595,102,548             371,601,901


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.

     ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)

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

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.


                                                         Three months ended 

March 31,

                                                       2022                      2021                 % Increase

AFFO available to common stockholders $ 580.1 $

    318.2                                      82.3  %
AFFO per share (1)                         $           0.98       $              0.86                                      14.0  %


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Table of Content s (1) All per share amounts are presented on a diluted per common share basis.


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

The following is a reconciliation of net income available to common stockholders
(which we believe is the most comparable GAAP measure) to Normalized FFO and
AFFO. Also presented is information regarding distributions paid to common
stockholders and the weighted average number of common shares used for the basic
and diluted computation per share (dollars in thousands, except per share
amounts):
                                                                      Three months ended March 31,
                                                                           2022               2021
Net income available to common stockholders                  $       199,369    $        95,940
Cumulative adjustments to calculate Normalized FFO (1)               408,566            171,767
Normalized FFO available to common stockholders                      607,935            267,707
Loss on extinguishment of debt                                             -             46,473
Amortization of share-based compensation                               5,002              3,697

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

                                                            (17,096)             1,385
Loss on interest rate swaps                                              722                722
Straight-line payments from cross-currency swaps (3)                     517                618
Leasing costs and commissions                                         (2,373)              (706)
Recurring capital expenditures                                           (13)               (23)
Straight-line rent                                                   (27,822)           (10,463)
Amortization of above and below-market leases, net                    13,642              9,300

Proportionate share of adjustments for unconsolidated entities

                                                              (2,064)                 -
Other adjustments (4)                                                  1,648               (488)
AFFO available to common stockholders                        $       580,098    $       318,222
AFFO allocable to dilutive noncontrolling interests                      820                351
Diluted AFFO                                                 $       

580,918 $ 318,573


AFFO per common share, basic and diluted                     $          

0.98 $ 0.86


Distributions paid to common stockholders                    $       

438,280 $ 260,697

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

                    $       141,818    $        57,525
Weighted average number of common shares used for
computation per share:
Basic                                                            593,827,299        371,522,607
Diluted                                                          595,102,548        372,065,020


(1)See reconciling items for Normalized FFO presented under "Funds from
Operations Available to Common Stockholders (FFO) and Normalized Funds from
Operations Available to Common Stockholders (Normalized FFO)."
(2) Includes the amortization of premiums and discounts on notes payable and
assumption of our mortgages payable, which are being amortized over the life of
the applicable debt, and costs incurred and capitalized upon issuance and
exchange of our notes payable, assumption of our mortgages payable and issuance
of our term loans, which are also being amortized over the lives of the
applicable debt. No costs associated with our credit facility agreements or
annual fees paid to credit rating agencies have been included.
(3) Straight-line payments from cross-currency swaps represent quarterly
payments in U.S. dollars received by us from counterparties in exchange for
associated foreign currency payments. These USD payments are fixed and
determinable for the duration of the associated hedging transaction.
(4) 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, and
foreign currency gains and losses as a result of intercompany debt and
remeasurement transactions.
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We believe the non-GAAP financial measure AFFO provides useful information to
investors because it is a widely accepted industry measure of the operating
performance of real estate companies that is used by industry analysts and
investors who look at and compare those companies. In particular, AFFO provides
an additional measure to compare the operating performance of different REITs
without having to account for differing depreciation assumptions and other
unique revenue and expense items which are not pertinent to measuring a
particular company's on-going operating performance. Therefore, we believe that
AFFO is an appropriate supplemental performance metric, and that the most
appropriate GAAP performance metric to which AFFO should be reconciled is net
income available to common stockholders.

Presentation of the information regarding FFO, Normalized FFO, and AFFO is
intended to assist the reader in comparing the operating performance of
different REITs, although it should be noted that not all REITs calculate FFO,
Normalized FFO, and AFFO in the same way, so comparisons with other REITs may
not be meaningful. Furthermore, FFO, Normalized FFO, and AFFO are not
necessarily indicative of cash flow available to fund cash needs and should not
be considered as alternatives to net income as an indication of our performance.
FFO, Normalized FFO, and AFFO should not be considered as alternatives to
reviewing our cash flows from operating, investing, and financing activities. In
addition, FFO, Normalized FFO, and AFFO should not be considered as measures of
liquidity, our ability to make cash distributions, or our ability to pay
interest payments.

                         PROPERTY PORTFOLIO INFORMATION

At March 31, 2022, we owned a diversified portfolio:


•Consisting of 11,288 properties;
•With an occupancy rate of 98.6%, or 11,132 properties leased and 156 properties
available for lease or sale;
•With clients doing business in 70 separate industries;
•Located in all 50 U.S. states, Puerto Rico, the U.K. and Spain;
•With approximately 213.9 million square feet of leasable space;
•With a weighted average remaining lease term (excluding rights to extend a
lease at the option of the client) of approximately 8.9 years; and
•With an average leasable space per property of approximately 18,950 square
feet; approximately 12,660 square feet per retail property and approximately
244,460 square feet per industrial property.

At March 31, 2022, 11,132 properties were leased under net lease agreements. A
net lease typically requires the client to be responsible for monthly rent and
certain property operating expenses including property taxes, insurance, and
maintenance. In addition, clients of our properties typically pay rent increases
based on: (1) fixed increases, (2) increases tied to inflation (typically
subject to ceilings), or (3) additional rent calculated as a percentage of the
clients' gross sales above a specified level.

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


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Industry Diversification The following table sets forth certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent:

Percentage of Total Portfolio Annualized Contractual Rent by Industry

                                                                                                             As of
                                           Mar 31,                          Dec 31,                         Dec 31,                          Dec 31,                         Dec 31,
                                             2022                            2021                             2020                             2019                            2018
U.S.
Aerospace                                    0.4%                            0.4%                             0.6%                             0.8%                            0.9%
Apparel stores                               1.5                              1.5                             1.3                              1.1                             1.2
Automotive collision services                1.0                              1.0                             1.1                              1.0                             0.9
Automotive parts                             1.5                              1.5                             1.6                              1.6                             1.7
Automotive service                           3.3                              3.2                             2.7                              2.6                             2.3
Automotive tire services                     1.6                              1.8                             2.0                              2.1                             2.3
Beverages                                    1.3                              1.3                             2.1                              2.0                             2.4
Child care                                   1.5                              1.5                             2.1                              2.1                             2.2
Consumer electronics                         0.6                              0.6                             0.3                              0.3                             0.3
Consumer goods                               0.7                              0.7                             0.6                              0.6                             0.7
Convenience stores                           9.1                              9.1                             11.9                             12.3                            12.6
Crafts and novelties                         1.0                              1.0                             0.9                              0.6                             0.6
Diversified industrial                       1.1                              1.0                             0.8                              0.7                             0.8
Dollar stores                                7.4                              7.5                             7.6                              7.9                             7.3
Drug stores                                  6.4                              6.6                             8.2                              8.8                             9.4
Education                                    0.1                              0.1                             0.2                              0.2                             0.3
Energy                                       0.4                              0.4                              -                                -                               -
Entertainment                                0.9                              0.8                             0.3                              0.3                             0.3
Equipment services                           0.3                              0.3                             0.3                              0.4                             0.4
Financial services                           2.0                              2.0                             1.8                              2.0                             2.4
Food processing                              0.7                              0.7                             0.7                              0.7                             0.5
General merchandise                          3.4                              3.5                             3.4                              2.5                             2.1
Government services                           *                                *                              0.6                              0.7                             0.9
Grocery stores                               4.9                              4.9                             4.9                              5.2                             5.0
Health and beauty                            0.2                              0.2                             0.2                              0.2                             0.2
Health and fitness                           4.6                              4.7                             6.7                              7.0                             7.1
Health care                                  1.8                              1.9                             1.5                              1.6                             1.6
Home furnishings                             2.5                              2.2                             0.7                              0.8                             0.8
Home improvement                             3.0                              3.1                             3.1                              2.9                             2.8
Machinery                                    0.1                              0.1                             0.1                              0.1                             0.1
Motor vehicle dealerships                    1.2                              1.3                             1.6                              1.6                             1.8
Office supplies                              0.2                              0.2                             0.1                              0.2                             0.2
Other manufacturing                          0.5                              0.5                             0.4                              0.6                             0.7
Packaging                                    0.6                              0.6                             0.9                              0.8                             1.0
Paper                                         *                                *                              0.1                              0.1                             0.1
Pet supplies and services                    1.0                              0.9                             0.7                              0.7                             0.5
Restaurants - casual dining                  5.8                              5.9                             2.8                              3.2                             3.3
Restaurants - quick service                  6.5                              6.5                             5.3                              5.8                             6.3
Shoe stores                                  0.2                              0.2                             0.2                              0.2                             0.5
Sporting goods                               1.4                              1.5                             0.7                              0.8                             0.9
Telecommunications                           0.1                              0.1                             0.5                              0.5                             0.6
Theaters                                     3.3                              3.4                             5.6                              6.1                             5.3
Transportation services                      3.3                              3.4                             3.9                              4.3                             5.0
Wholesale clubs                              2.5                              2.5                             2.4                              2.5                             2.9
Other                                        0.7                              0.9                             0.3                              0.8                             0.8
Total U.S.                                  90.6%                            91.5%                           93.8%                            97.3%                           100.0%
Europe (1)
Grocery stores                               5.5                              5.3                             4.9                              2.7                              -
Health care                                  0.1                              0.1                             0.1                               -                               -
Home improvement                             2.0                              2.0                             1.2                               -                               -
Warehousing and storage                      0.2                              0.2                              -                                -                               -
Other                                        1.6                              0.9                              *                                *                               -
Total Europe                                 9.4%                            8.5%                             6.2%                             2.7%                             -%
Totals                                      100.0%                          100.0%                           100.0%                           100.0%                          100.0%

* Less than 0.1% (1) Europe consists of properties in the U.K., starting in May 2019, and in Spain, starting in September 2021.

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Property Type Composition
The following table sets forth certain property type information regarding our
property portfolio as of March 31, 2022 (dollars in thousands):
                                                                      Approximate           Total Portfolio             Percentage of Total
                                         Number of                       Leasable                Annualized            Portfolio Annualized
Property Type                           Properties                Square Feet (1)          Contractual Rent                Contractual Rent
Retail                                      10,967                    138,843,400       $      2,506,807                            83.6  %
Industrial                                     298                     72,849,200                431,852                            14.4
Other (2)                                       23                      2,201,000                 57,745                             2.0
Totals                                      11,288                    213,893,600       $      2,996,404                           100.0  %


(1)Includes leasable building square footage. Excludes 3,600 acres of leased
land categorized as agriculture at March 31, 2022.
(2)"Other" includes seven properties classified as office, consisting of
approximately 2.0 million leasable square feet and $29.2 million in annualized
contractual rent, and 16 properties classified as agriculture, consisting of
approximately 191,000 leasable square feet and $28.6 million in annualized
contractual rent.

Client Diversification
The following table sets forth the 20 largest clients in our property portfolio,
expressed as a percentage of total portfolio annualized contractual rent, which
does not give effect to deferred rent, at March 31, 2022:
                                                                                                Percentage of Total
                                                                         Number of             Portfolio Annualized
Client                                                                      Leases             Contractual Rent (1)
Walgreens                                                                 338                                4.0  %
7-Eleven                                                                  627                                3.9  %
Dollar General                                                          1,272                                3.9  %
Dollar Tree / Family Dollar                                             1,022                                3.5  %
FedEx                                                                      80                                2.9  %
LA Fitness                                                                 79                                2.4  %
Sainsbury's                                                                26                                2.2  %
BJ's Wholesale Clubs                                                       32                                1.9  %
CVS Pharmacy                                                              183                                1.8  %
Wal-Mart / Sam's Club                                                      65                                1.7  %
AMC Theatres                                                               35                                1.6  %
B&Q (Kingfisher)                                                           25                                1.6  %
Regal Cinemas (Cineworld)                                                  41                                1.5  %
Red Lobster                                                               201                                1.5  %
Tesco                                                                      16                                1.5  %
Tractor Supply                                                            160                                1.4  %
Lifetime Fitness                                                           16                                1.4  %
Home Depot                                                                 29                                1.2  %
Fas Mart (GPM Investments)                                                261                                1.0  %
Circle K (Couche-Tard)                                                    253                                1.0  %
Total                                                                        4,761                          42.2  %

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

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Lease Expirations
The following table sets forth certain information regarding the timing of the
lease term expirations in our portfolio (excluding rights to extend a lease at
the option of the client) and their contribution to total portfolio annualized
contractual rent as of March 31, 2022 (dollars in thousands):
                                                            Total Portfolio (1)

                               Expiring                                  Approximate          Total Portfolio            Percentage of Total
                                Leases                                      Leasable               Annualized           Portfolio Annualized
      Year               Retail             Non-Retail                   Square Feet         Contractual Rent               Contractual Rent
      2022                  278                     11               3,632,900             $        49,642                            1.8  %
      2023                  756                     28              11,488,900                     144,672                            4.8
      2024                  671                     31              13,443,300                     153,759                            5.1
      2025                  812                     34              13,690,000                     193,912                            6.5
      2026                  754                     32              15,420,500                     177,284                            5.9
      2027                 1210                     31              20,916,600                     241,978                            8.1
      2028                  976                     33              18,754,100                     227,455                            7.6
      2029                  827                     16              17,396,700                     214,227                            7.1
      2030                  507                     17              14,217,400                     163,226                            5.4
      2031                  435                     36              20,035,100                     229,907                            7.7
      2032                  602                     15               9,422,000                     175,515                            5.9
      2033                  513                     13              11,893,600                     153,254                            5.1
      2034                  504                      5               9,377,400                     192,605                            6.4
      2035                  379                      3               4,290,300                      99,117                            3.3
      2036                  381                      6               6,577,100                     123,353                            4.1
  2037 - 2059             1,555                     30              20,667,500                     456,498                           15.2
     Totals              11,160                    341             211,223,400             $     2,996,404                          100.0  %

(1)Leases on our multi-client properties are counted separately in the table above. This table excludes 201 vacant units.

                                      -58-
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  Table of Content    s
Geographic Diversification
The following table sets forth certain state-by-state information regarding our
property portfolio as of March 31, 2022 (dollars in thousands):
                                                                                                 Approximate             Percentage of Total
                                                Number of                                           Leasable            Portfolio Annualized
Location                                       Properties        Percent Leased                  Square Feet                Contractual Rent
Alabama                                               384                 96  %                    4,122,400                          2.0  %
Alaska                                                  6                100                         299,700                          0.1
Arizona                                               228                100                       3,496,000                          1.9
Arkansas                                              226                 99                       2,453,000                          1.1
California                                            323                 99                      11,326,400                          6.4
Colorado                                              158                 98                       2,570,800                          1.5
Connecticut                                            27                100                       1,244,600                          0.5
Delaware                                               26                100                         192,000                          0.2
Florida                                               702                 99                       9,515,800                          5.3
Georgia                                               494                 99                       7,997,700                          3.6
Hawaii                                                 22                100                          47,800                          0.2
Idaho                                                  27                100                         189,100                          0.1
Illinois                                              462                 98                      11,796,100                          5.0
Indiana                                               387                 99                       6,701,900                          2.9
Iowa                                                   89                 98                       3,501,800                          1.0
Kansas                                                173                100                       4,465,600                          1.2
Kentucky                                              172                 97                       3,413,800                          1.3
Louisiana                                             308                 99                       4,888,700                          2.2
Maine                                                  55                 98                       1,008,300                          0.5
Maryland                                               73                 96                       2,748,000                          1.3
Massachusetts                                          91                 99                       3,109,400                          1.4
Michigan                                              450                 98                       5,303,000                          2.8
Minnesota                                             230                100                       3,495,200                          2.0
Mississippi                                           275                100                       4,156,000                          1.4
Missouri                                              343                 99                       4,736,900                          2.0
Montana                                                21                100                         204,500                          0.1
Nebraska                                               75                 99                       1,013,000                          0.4
Nevada                                                 72                100                       2,638,200                          1.0
New Hampshire                                          30                100                         567,900                          0.4
New Jersey                                            142                 98                       2,233,300                          1.8
New Mexico                                            102                 99                       1,299,200                          0.7
New York                                              241                 99                       4,315,400                          3.2
North Carolina                                        377                 99                       7,692,000                          3.2
North Dakota                                           22                 86                         352,300                          0.2
Ohio                                                  663                 98                      15,126,700                          4.6
Oklahoma                                              286                 98                       3,958,900                          1.8
Oregon                                                 42                 98                         658,900                          0.4
Pennsylvania                                          330                 99                       5,861,400                          2.8
Rhode Island                                            7                 86                         109,800                          0.1
South Carolina                                        285                 99                       3,912,700                          2.0
South Dakota                                           29                100                         428,400                          0.2
Tennessee                                             374                 98                       6,475,400                          2.6
Texas                                                1450                 98                      23,908,100                         10.7
Utah                                                   36                100                       1,529,500                          0.5
Vermont                                                 7                100                         134,900                          0.1
Virginia                                              347                 97                       5,918,800                          2.5
Washington                                             77                 99                       1,711,900                          0.9
West Virginia                                          74                100                         726,000                          0.4
Wisconsin                                             245                100                       4,444,400                          1.9
Wyoming                                                23                100                         157,700                          0.1
Puerto Rico                                             6                100                          59,400                          0.1
Spain                                                  43                100                       2,492,000                          0.7
U.K.                                                  151                100                      13,182,900                          8.7
Totals/average                                     11,288                 99  %                  213,893,600                        100.0  %


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Table of Content s

                              IMPACT OF INFLATION

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

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

                   IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

For information on the impact of new accounting standards on our business, see note 2 of the Notes to the Consolidated Financial Statements.

                               OTHER INFORMATION

Our common stock is listed on the NYSE under the ticker symbol "O" with a CUSIP
number of 756109-104. Our 1.625% notes due December 2030 are listed on the NYSE
under the ticker symbol "O30" with a CUSIP number of 756109-AY0. Our 1.875%
notes due January 2027 are listed on the NYSE under the ticker symbol "O27B"
with a CUSIP number of 756109-BM5. Our 1.125% notes due July 2027 are listed on
the NYSE under the ticker symbol "O27A" with a CUSIP number of 756109-BB9. Our
1.750% notes due July 2033 are listed on the NYSE under the ticker symbol "O33A"
with a CUSIP number of 756109-BC7. Our 2.500% notes due January 2042 are listed
on the NYSE under the ticker symbol "O42" with a CUSIP number of 756109-BN3. Our
central index key number is 726728.

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

© Edgar Online, source Glimpses

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