REALTY INCOME CORP [O] Filings

10-Q 1 o-20240930.htm 10-Q o-20240930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2024, or

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

Commission File Number 1-13374

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)


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

11995 El Camino Real, San Diego, California 92130

(Address of Principal Executive Offices)

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

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, $0.01 Par Value	O	New York Stock Exchange
1.125% Notes due 2027	O27A	New York Stock Exchange
1.875% Notes due 2027	O27B	New York Stock Exchange
5.000% Notes due 2029	O29B	New York Stock Exchange
1.625% Notes due 2030	O30	New York Stock Exchange
4.875% Notes due 2030	O30A	New York Stock Exchange
5.750% Notes due 2031	O31A	New York Stock Exchange
1.750% Notes due 2033	O33A	New York Stock Exchange
5.125% Notes due 2034	O34	New York Stock Exchange
6.000% Notes due 2039	O39	New York Stock Exchange
5.250% Notes due 2041	O41	New York Stock Exchange
2.500% Notes due 2042	O42	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Table of Contents

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

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

As of October 31, 2024, there were 875,211,050 shares of common stock outstanding.

Table of Contents

REALTY INCOME CORPORATION

Index to Form 10-Q

September 30, 2024


PART I.	FINANCIAL INFORMATION	Page
Item 1:	Financial Statements (Unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Income and Comprehensive Income	3
	Consolidated Statements of Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4:	Controls and Procedures	51
PART II.	OTHER INFORMATION
Item 1A:	Risk Factors	52
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 5:	Other Information	52
Item 6:	Exhibits	53

SIGNATURE		54

-1-

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts) (unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Real estate held for investment, at cost:
Land	$	17,140,719	$	14,929,310
Buildings and improvements	40,608,341		34,657,094
Total real estate held for investment, at cost	57,749,060		49,586,404
Less accumulated depreciation and amortization	(7,066,449)		(6,072,118)
Real estate held for investment, net	50,682,611		43,514,286
Real estate and lease intangibles held for sale, net	60,467		31,466
Cash and cash equivalents	396,956		232,923
Accounts receivable, net	835,328		710,536
Lease intangible assets, net	6,600,058		5,017,907
Goodwill	4,932,199		3,731,478
Investment in unconsolidated entities	1,224,974		1,172,118
Other assets, net	3,736,173		3,368,643
Total assets	$	68,468,766	$	57,779,357
LIABILITIES AND EQUITY
Distributions payable	$	233,139	$	195,222
Accounts payable and accrued expenses	880,122		738,526
Lease intangible liabilities, net	1,676,549		1,406,853
Other liabilities	863,683		811,650
Line of credit payable and commercial paper	427,546		764,390
Term loans, net	2,428,279		1,331,841
Mortgages payable, net	197,522		821,587
Notes payable, net	23,092,216		18,602,319
Total liabilities	$	29,799,056	$	24,672,388
Commitments and contingencies (note 20)

Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 875,197 and 752,460 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	$	46,505,688	$	39,629,709
Distributions in excess of net income	(8,151,359)		(6,762,136)
Accumulated other comprehensive income	103,463		73,894
Total stockholders’ equity	$	38,457,792	$	32,941,467
Noncontrolling interests	211,918		165,502
Total equity	$	38,669,710	$	33,106,969
Total liabilities and equity	$	68,468,766	$	57,779,357

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

-2-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share amounts) (unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
REVENUE
Rental (including reimbursable)	$	1,271,153	$	1,008,862	$	3,764,050	$	2,929,440
Other	59,762		30,242		166,793		73,268
Total revenue	1,330,915		1,039,104		3,930,843		3,002,708
EXPENSES
Depreciation and amortization	602,339		495,566		1,788,973		1,419,321
Interest	261,261		184,121		748,806		522,110
Property (including reimbursable)	92,154		70,981		281,366		235,081
General and administrative	41,869		35,525		127,781		106,521
Provisions for impairment	96,920		16,808		282,867		59,801
Merger, transaction, and other costs	8,610		2,884		105,468		4,532
Total expenses	1,103,153		805,885		3,335,261		2,347,366
Gain on sales of real estate	50,563		7,572		92,290		19,675
Foreign currency and derivative (loss) gain, net	(1,672)		(2,813)		2,885		4,957

Equity in earnings of unconsolidated entities	5,087		—		5,440		411
Other income, net	4,739		7,235		16,293		12,985
Income before income taxes	286,479		245,213		712,490		693,370
Income taxes	(15,355)		(11,336)		(46,499)		(36,218)
Net income	271,124		233,877		665,991		657,152
Net income attributable to noncontrolling interests	(1,639)		(404)		(4,831)		(3,248)
Net income attributable to the Company	269,485		233,473		661,160		653,904
Preferred stock dividends	(2,588)		—		(7,763)		—
Excess of redemption value over carrying value of preferred shares redeemed	(5,116)		—		(5,116)		—
Net income available to common stockholders	$	261,781	$	233,473	$	648,281	$	653,904
Amounts available to common stockholders per common share:

Net income, basic and diluted	$	0.30	$	0.33	$	0.75	$	0.96


Weighted average common shares outstanding:
Basic	870,665		709,165		858,679		681,419
Diluted	872,052		709,543		859,462		682,129
Net income available to common stockholders	$	261,781	$	233,473	$	648,281	$	653,904
Total other comprehensive income (loss)
Foreign currency translation adjustment	74,615		(61,401)		59,797		(3,605)
Unrealized (loss) gain on derivatives, net	(46,474)		7,193		(30,228)		(1,379)
Total other comprehensive income (loss)	$	28,141	$	(54,208)	$	29,569	$	(4,984)
Comprehensive income available to common stockholders	$	289,922	$	179,265	$	677,850	$	648,920

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

-3-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands) (unaudited)

Three months ended September 30, 2024, and 2023



	Shares of preferred stock	Preferred stock and paid in capital		Shares of common stock	Common stock and paid in capital		Distributions in excess of net income		Accumulated other comprehensive income		Total stockholders’ equity		Non-controlling interests		Total equity
Balance, June 30, 2024	6,900	$	167,394	870,848	$	46,230,789	$	(7,724,318)	$	75,322	$	38,581,793	$	165,277	$	38,747,070
Net income	—	—		—	—		269,485		—		269,485		1,639		271,124
Other comprehensive income	—	—		—	—		—		28,141		28,141		—		28,141
Distributions paid and payable	—	—		—	—		(691,410)				(691,410)		(2,740)		(694,150)

Share issuances, net of costs	—	—		4,354	269,272		—		—		269,272		—		269,272
Contributions by noncontrolling interests	—	—		—	—		—		—		—		489		489
Issuance of common partnership units	—	—		—	(768)		—		—		(768)		47,253		46,485
Preferred shares redeemed	(6,900)	(167,394)		—	—		(5,116)		—		(5,116)		—		(5,116)
Share-based compensation, net	—	—		(5)	6,395		—		—		6,395		—		6,395
Balance, September 30, 2024	—	$	—	875,197	$	46,505,688	$	(8,151,359)	$	103,463	$	38,457,792	$	211,918	$	38,669,710

Balance, June 30, 2023	—	$	—	708,773	$	37,149,380	$	(6,102,226)	$	96,057	$	31,143,211	$	167,932	$	31,311,143
Net income	—	—		—	—		233,473		—		233,473		404		233,877
Other comprehensive loss	—	—		—	—		—		(54,208)		(54,208)		—		(54,208)
Distributions paid and payable	—	—		—	—		(547,781)		—		(547,781)		(2,497)		(550,278)
Share issuances, net of costs	—	—		15,122	876,253		—		—		876,253		—		876,253
Contributions by noncontrolling interests	—	—		—	—		—		—		—		435		435
Share-based compensation, net	—	—		(1)	6,196		—		—		6,196		—		6,196
Balance, September 30, 2023	—	$	—	723,894	$	38,031,829	$	(6,416,534)	$	41,849	$	31,657,144	$	166,274	$	31,823,418


Nine months ended September 30, 2024 and 2023

	Shares of preferred stock	Preferred stock and paid in capital		Shares of common stock	Common stock and paid in capital		Distributions in excess of net income		Accumulated other comprehensive income		Total stockholders’ equity		Non-controlling interests		Total equity
Balance, December 31, 2023	—	$	—	752,460	$	39,629,709	$	(6,762,136)	$	73,894	$	32,941,467	$	165,502	$	33,106,969
Net income	—	—		—	—		661,160		—		661,160		4,831		665,991
Other comprehensive income	—	—		—	—		—		29,569		29,569		—		29,569
Distributions paid and payable	—	—		—	—		(2,045,267)		—		(2,045,267)		(7,438)		(2,052,705)

Share issuances, net of costs	—	—		14,073	818,724		—		—		818,724		—		818,724
Shares issued with merger	6,900	167,394		108,308	6,043,641		—		—		6,043,641		—		6,043,641
Contributions by noncontrolling interests	—	—		—	—		—		—		—		1,770		1,770
Issuance of common partnership units	—	—		—	(768)		—		—		(768)		47,253		46,485
Preferred shares redeemed	(6,900)	(167,394)		—	—		(5,116)		—		(5,116)		—		(5,116)
Share-based compensation, net	—	—		356	14,382		—		—		14,382		—		14,382
Balance, September 30, 2024	—	$	—	875,197	$	46,505,688	$	(8,151,359)	$	103,463	$	38,457,792	$	211,918	$	38,669,710

Balance December 31, 2022	—	$	—	660,300	$	34,159,509	$	(5,493,193)	$	46,833	$	28,713,149	$	130,140	$	28,843,289
Net income	—	—		—	—		653,904		—		653,904		3,248		657,152
Other comprehensive loss	—	—		—	—		—		(4,984)		(4,984)		—		(4,984)
Distributions paid and payable	—	—		—	—		(1,577,245)		—		(1,577,245)		(7,108)		(1,584,353)
Share issuances, net of costs	—	—		63,348	3,858,347		—		—		3,858,347		—		3,858,347
Contributions by noncontrolling interests	—	—		—	—		—		—		—		39,994		39,994
Share-based compensation, net	—	—		246	13,973		—		—		13,973		—		13,973
Balance, September 30, 2023	—	$	—	723,894	$	38,031,829	$	(6,416,534)	$	41,849	$	31,657,144	$	166,274	$	31,823,418

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

-4-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Nine months ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	665,991	$	657,152
Adjustments to net income:
Depreciation and amortization	1,788,973		1,419,321
Amortization of share-based compensation	47,671		20,154
Non-cash revenue adjustments	(95,324)		(51,272)
Amortization of net premiums on mortgages payable	(18)		(9,597)
Amortization of net premiums on notes payable	(3,883)		(45,647)
Amortization of deferred financing costs	17,694		19,498
Foreign currency and unrealized derivative (gain) loss, net	(33,582)		10,188
Non-cash interest expense (income)	9,179		(5,390)
Gain on sales of real estate	(92,290)		(19,675)
Equity in earnings of unconsolidated entities	(5,440)		(411)
Distributions on common equity from unconsolidated entities	15,608		—
Provisions for impairment	282,867		59,801
Change in assets and liabilities
Accounts receivable and other assets	40,338		(17,538)
Accounts payable, accrued expenses and other liabilities	(36,471)		161,527
Net cash provided by operating activities	2,601,313		2,198,111
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(1,611,794)		(6,702,140)
Improvements to real estate, including leasing costs	(85,204)		(47,107)
Investment in unconsolidated entities	(57,014)		—
Investment in loans	(377,490)		—
Proceeds from sales of real estate	451,365		92,772
Return of investment from unconsolidated entities	—		3,927

Proceeds from note receivable	51,562		—
Insurance proceeds received	2,418		15,177
Non-refundable escrow deposits	(38,750)		(1,188)
Net cash acquired in merger	93,683		—
Net cash used in investing activities	(1,571,224)		(6,638,559)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(1,999,858)		(1,555,679)
Cash distributions to preferred stockholders	(7,763)		—
Borrowings on line of credit and commercial paper programs	24,698,502		33,021,401
Payments on line of credit and commercial paper programs	(25,079,449)		(34,909,165)
Proceeds from term loan	—		1,029,383
Principal payment on term loan	(250,000)		—
Proceeds from notes payable issued	2,657,925		3,263,294
Principal payment on notes payable	(849,999)		—
Principal payments on mortgages payable	(626,321)		(20,842)

Proceeds from common stock offerings, net	809,910		3,849,963
Proceeds from dividend reinvestment and stock purchase plan	8,814		8,382
Redemption of preferred stock	(172,510)		—
Distributions to noncontrolling interests	(7,185)		(5,585)
Net receipts on derivative settlements	—		2,191
Debt issuance costs	(59,285)		(35,014)

Other items, including shares withheld upon vesting	(8,591)		(6,181)
Net cash (used in) provided by financing activities	(885,810)		4,642,148
Effect of exchange rate changes on cash and cash equivalents	11,423		2,083
Net increase in cash, cash equivalents and restricted cash	155,702		203,783
Cash, cash equivalents and restricted cash, beginning of period	292,175		226,881
Cash, cash equivalents and restricted cash, end of period	$	447,877	$	430,664

For supplemental disclosures, see note 19, Supplemental Disclosures of Cash Flow Information.

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

-5-

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(unaudited)

1. Summary of Significant Accounting Policies

Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”), a Maryland corporation, is an S&P 500 company and real estate partner to the world's leading companies. The Company was founded in 1969 and our shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol “O”.

As of September 30, 2024, we owned or held interests in a diversified portfolio of 15,457 properties located in all 50 states of the United States ("U.S."), the United Kingdom ("U.K."), and six other countries in Europe, with approximately 336.6 million square feet of leasable space.

In January 2024, we completed our merger with Spirit Realty Capital, Inc. (“Spirit”). For more details, please see note 2, Merger with Spirit Realty Capital, Inc.

Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Intercompany accounts and transactions are eliminated in consolidation. The U.S. dollar ("USD") is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD.

For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income' ("AOCI") on our consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period.

We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and derivative (loss) gain, net' in our consolidated statements of income and comprehensive income. In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items.

In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarily an indication of the results that may be expected for the entire year. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2023, which are included in our 2023 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

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

Voting interest entities ("VOEs") are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests.

Variable interest entities ("VIEs") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially

-6-

Table of Contents

be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances.

At September 30, 2024, we are considered the primary beneficiary of Realty Income, L.P. and certain investments, including investments in joint ventures. Below is a summary of selected financial data of such consolidated VIEs, included on our consolidated balance sheets at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Net real estate	$	2,907,604	$	2,866,272
Total assets	$	3,549,127	$	3,588,720
Total liabilities	$	154,092	$	134,366

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

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

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

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

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

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

Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Any rental revenue contingent upon a client’s sales, or percentage rent, is recognized only after such client exceeds its sales breakpoint. Rental increases based upon changes in the consumer price indices are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements. Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis.

-7-

Table of Contents

Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for above-market leases acquired through sale-leaseback transactions.

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

Loans Receivable. We hold our loans receivable for long-term investment. We recognize interest income on loans receivable using the effective-interest method. Direct costs associated with originating loans, along with any premium or discount, are deferred and amortized as an adjustment to interest income over the term of the loan using the effective interest method. When management identifies the full recovery of the contractually specified payments of principal and interest of a loan is less than probable, we evaluate the expected loss amount and place it on non-accrual status. We made the accounting policy election to record accrued interest on our loan portfolio separate from our loan receivable and other lending investments. These loans and the related interest receivable are presented in 'Other assets, net' on our consolidated balance sheets.

Financing Receivables. For properties we acquire that qualify as sale-leaseback transactions and the purchase price is in excess of the fair value of the real estate acquired, the difference is accounted for as financing receivables, presented within 'Other assets, net' on our consolidated balance sheets. Rent payments are allocated between rental income and the financing receivable. Interest income on the financing receivable is recognized using the interest rate implicit in the leaseback and presented within 'Other' revenue in our consolidated statement of income and comprehensive income.

Allowance for Credit Losses. The allowance for credit losses, which is recorded as a reduction to loans receivable and financing receivable within 'Other assets, net' on our consolidated balance sheets, is measured using a probability of default method based on our clients' respective credit ratings, our historical experience, and the expected value of the underlying collateral upon its repossession. If we determine a financing receivable no longer shares risk characteristics with other financing receivables in the pool, we evaluate the financing receivable for expected credit losses on an individual basis. Included in our model are factors that incorporate forward-looking information. Changes in our allowance for credit losses are presented in 'Provisions for impairment' in our consolidated statements of income and comprehensive income.

The following summarizes the activity within the allowance for credit losses related to loans and financing receivable for the nine months ended September 30, 2024 (in millions):


	Loans Receivable		Financing Receivable		Total
Allowance for credit losses at December 31, 2023	$	2.5	$	2.4	$	4.9
Provision for credit losses (1)	4.5		69.8		74.3
Initial allowance for PCD assets (2)	1.8		—		1.8
Write-offs (3)	(1.8)		—		(1.8)
Foreign currency remeasurement	0.4		—		0.4
Allowance for credit losses at September 30, 2024	$	7.4	$	72.2	$	79.6

(1) During the nine months ended September 30, 2024, provisions for credit losses on loans receivable were primarily attributable to loans acquired during 2024. The increase in provision for credit losses on financing receivables is primarily due to a client in the convenience store industry that has defaulted on their lease payments and was fully reserved for as of September 30, 2024.

(2) Includes the recognition of an initial expected credit loss of $1.8 million for a purchased credit deteriorated ("PCD") loan we acquired in conjunction with our merger with Spirit.

(3) Includes a reduction due to the sale of a PCD loan in September 2024.

-8-

Table of Contents

Merger, Transaction, and Other Costs.

Merger, transaction, and other costs include (i) merger-related transaction costs, primarily consisting of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to a merger, (ii) organization costs for potential strategic ventures and business lines, (iii) corporate facilities lease termination costs, and (iv) other costs that do not align with the ongoing operations of our business. During the three and nine months ended September 30, 2024, we incurred $8.6 million and $105.5 million, respectively, of merger, transaction, and other costs consisting primarily of $2.9 million and $99.8 million, respectively, of transaction and integration-related costs related to Spirit and $5.1 million for each of the respective periods related to the lease termination of a legacy corporate facility.

Recent Accounting Standards Not Yet Adopted.

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes, to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the impact on our financial statement disclosures.

In November 2023, FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting, establishing improvements to reportable segments disclosures to enhance segment reporting under Topic 280. This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments. This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic 280, not just entity level disclosures. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and the amendments should be applied retrospectively to all periods presented in the financial statements. We are currently evaluating the impact on our financial statement disclosures.

2. Merger with Spirit Realty Capital, Inc.

On October 29, 2023, we entered into an Agreement and Plan of Merger (as amended, or the “Merger Agreement”) with Saints MD Subsidiary, Inc., (“Merger Sub”) a Maryland corporation and direct wholly owned subsidiary of Realty Income and Spirit, a Maryland corporation.

On January 23, 2024, we completed our merger with Spirit. Pursuant to the terms and subject to the conditions of the Merger Agreement, Spirit merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”). At the effective time of the Merger (the “Effective Time”), (i) each outstanding share of Spirit common stock, par value $0.05 per share, automatically converted into 0.762 (the “Exchange Ratio”) of a newly issued share of our common stock, subject to adjustments as set forth in the Merger Agreement, and cash in lieu of fractional shares, and (ii) each outstanding share of Spirit’s 6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, converted into the right to receive one share of newly issued Realty Income 6.000% Series A Cumulative Redeemable Preferred Stock (“Realty Income Series A preferred stock”), having substantially the same terms as the Spirit Series A Preferred Stock. Immediately prior to the Effective Time, each award of outstanding restricted Spirit common stock and Spirit performance share award was cancelled and converted into Realty Income common stock, using the Exchange Ratio. For more details, see note 16, Series A Preferred Stock.

The primary reason for the merger was to expand our size, scale and diversification, in order to further position us as the real estate partner of choice for large net lease transactions.

-9-

Table of Contents

Our merger with Spirit has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data):


Shares of Spirit common stock exchanged (1)	142,136,567
Exchange Ratio	0.762
Shares of Realty Income common stock issued	108,308,064
Opening price of Realty Income common stock on January 23, 2024	$	55.80
Fair value of Realty Income common stock issued to the former holders of Spirit common stock	$	6,043,590
Shares of Realty Income Series A preferred stock issued in exchange for Spirit Series A preferred stock	6,900,000
Opening price of Realty Income Series A preferred stock on January 23, 2024	$	24.26
Fair value of Realty Income Series A preferred stock issued to the former holders of Spirit Series A preferred stock	$	167,394
Cash paid for fractional shares	$	51
Less: Fair value of Spirit restricted stock and performance awards attributable to post-combination costs (2)	$	(24,751)
Consideration transferred	$	6,186,284

(1) Includes 142,136,567 shares of Spirit common stock outstanding as of January 23, 2024, which were converted into Realty Income common stock at the Effective Time at an Exchange Ratio of 0.762 per share of Spirit common stock. The portion of the converted unvested Spirit Restricted Stock Awards related to post-combination expense is removed in footnote (2) below.

(2) Represents the fair value of fully vested Spirit restricted stock and performance share awards that were accelerated and converted into Realty Income common stock at the Effective Time, reflecting the value attributable to post-combination services. Spirit restricted stock and performance share awards are included in Spirit's outstanding common stock as of the merger date. The fair value attributable to pre-combination services was $41.7 million and is included in the consideration transferred above.

A. Preliminary Purchase Price Allocation

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


	At Acquisition Date As Reported March 31, 2024		Measurement Period Adjustments		At Acquisition Date As Reported September 30, 2024
ASSETS
Land	$	1,853,895	$	3,247	$	1,857,142
Buildings and improvements	4,859,162		90,314		4,949,476
Total real estate held for investment	6,713,057		93,561		6,806,618
Real estate and lease intangibles held for sale	35,650		(1,583)		34,067
Cash and cash equivalents	93,683		—		93,683
Accounts receivable	12,959		(145)		12,814
Lease intangible assets (1)	2,214,615		(32,804)		2,181,811
Goodwill	1,259,864		(59,143)		1,200,721
Other assets (2)	174,672		(1,881)		172,791
Total assets acquired	$	10,504,500	$	(1,995)	$	10,502,505
LIABILITIES
Accounts payable and accrued expenses	$	56,407	$	(1,934)	$	54,473
Lease intangible liabilities (3)	378,369		(203)		378,166
Other liabilities	101,954		142		102,096
Term loans	1,300,000		—		1,300,000
Notes payable	2,481,486		—		2,481,486
Total liabilities assumed	$	4,318,216	$	(1,995)	$	4,316,221
Net assets acquired, at fair value	$	6,186,284	$	—	$	6,186,284
Total purchase price	$	6,186,284	$	—	$	6,186,284

(1) The weighted average amortization period for acquired lease intangible assets is 10.8 years.

(2) Includes $53.9 million of gross contractual loans receivable, the fair value of which was $47.1 million, and we expect to collect substantially all of the loans receivable as of the acquisition date.

(3) The weighted average amortization period for acquired lease intangible liabilities is 8.2 years.

-10-

Table of Contents

The assessment of fair value is considered preliminary and is based on a valuation prepared by the Company with assistance of a third-party valuation specialist. We are in the process of finalizing our review of the inputs used in the valuation to ensure accuracy and procedures are performed within our policy. Accordingly, certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, loss contingencies, and goodwill are subject to change. We expect to complete our purchase accounting assessment in the fourth quarter of 2024.

Measurement period adjustments are recorded in the period in which they are determined, as if they had been completed at the acquisition date. The measurement period adjustments recorded in the nine months ended September 30, 2024 resulted from updated valuations related to real estate assets and liabilities, in addition to loans receivable. The adjustments were determined based on additional information that existed at the acquisition date but was not contemplated in our initial fair value assessment and resulted in a decrease to goodwill of $59.1 million.

A preliminary estimate of approximately $1.20 billion has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill is attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and corporate overhead cost savings. None of the goodwill recognized is expected to be deductible for tax purposes.

B. Merger, transaction, and other costs
In conjunction with our merger with Spirit, we incurred $2.9 million and $99.8 million of merger-related transaction costs during the three and nine months ended September 30, 2024, respectively, primarily consisting of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger.

C. Unaudited Pro Forma Financial Information

The following unaudited pro forma information presents a summary of our combined results of operations for the nine months ended September 30, 2024 and three and nine months ended September 30, 2023, respectively, as if our merger with Spirit had occurred on January 1, 2023 (in millions, except per share data). The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.


	Three months ended September 30,		Nine months ended September 30,
	2023		2024		2023
Total revenues	$	1,239.3	$	3,978.8	$	3,595.3
Net income	$	250.5	$	759.4	$	673.3
Basic and diluted earnings per share	$	0.31	$	0.88	$	0.85

Our consolidated results of operations for the three and nine months ended September 30, 2024 include $202.8 million and $563.8 million of revenues, respectively, and $40.2 million and $96.0 million of net income, respectively, associated with the results of operations of Spirit from the merger closing date of January 23, 2024 to September 30, 2024.

-11-

Table of Contents

3. Supplemental Detail for Certain Components of Consolidated Balance Sheets (in thousands):


A.	Accounts receivable, net, consist of the following at:	September 30, 2024		December 31, 2023
	Straight-line rent receivables, net	$	662,569	$	516,692
	Client receivables, net	172,759		193,844
		$	835,328	$	710,536


B.	Lease intangible assets, net, consist of the following at:	September 30, 2024		December 31, 2023
	In-place leases	$	7,393,345	$	5,500,404
	Above-market leases	2,225,473		1,811,400
	Accumulated amortization of in-place leases	(2,318,087)		(1,746,377)
	Accumulated amortization of above-market leases	(702,732)		(549,319)
	Other items	2,059		1,799
		$	6,600,058	$	5,017,907


C.	Other assets, net, consist of the following at:	September 30, 2024		December 31, 2023
	Financing receivables, net	$	1,500,862	$	1,570,943
	Right of use asset - financing leases, net	671,831		706,837
	Right of use asset - operating leases, net	624,939		594,712
	Loan receivable, net	622,593		205,339
	Prepaid expenses	58,520		33,252
	Value-added tax receivable	49,412		100,672
	Non-refundable escrow deposits	38,750		200
	Restricted escrow deposits	37,317		6,247
	Interest receivable	25,712		6,139
	Derivative assets and receivables - at fair value	15,524		21,170
	Impounds related to mortgages payable	13,604		53,005
	Corporate assets, net	12,576		12,948
	Credit facility origination costs, net	8,564		12,264
	Investment in sales type lease	6,120		6,056
	Other items	49,849		38,859
		$	3,736,173	$	3,368,643


D.	Accounts payable and accrued expenses consist of the following at:	September 30, 2024		December 31, 2023
	Notes payable - interest payable	$	245,089	$	218,811
	Derivative liabilities and payables - at fair value	158,024		119,620
	Property taxes payable	104,752		78,809
	Accrued costs on properties under development	78,833		65,967
	Accrued income taxes	77,287		61,070
	Accrued property expenses	63,912		54,208
	Value-added tax payable	55,676		64,885
	Accrued merger-related costs	18,786		4,551
	Mortgages, term loans, and credit line - interest payable	4,239		8,580
	Other items	73,524		62,025
		$	880,122	$	738,526


E.	Lease intangible liabilities, net, consist of the following at:	September 30, 2024		December 31, 2023
	Below-market leases	$	2,120,722	$	1,728,027
	Accumulated amortization of below-market leases	(444,173)		(321,174)
		$	1,676,549	$	1,406,853


F.	Other liabilities consist of the following at:	September 30, 2024		December 31, 2023
	Lease liability - operating leases	$	458,545	$	425,213
	Rent received in advance and other deferred revenue	317,206		312,195
	Lease liability - financing leases	55,262		44,345
	Security deposits	31,008		28,250
	Other acquisition liabilities	1,662		1,647
		$	863,683	$	811,650

-12-

Table of Contents

4. Investments in Real Estate

A. Acquisitions of Real Estate

Below is a summary of our acquisitions for the nine months ended September 30, 2024:


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

Acquisitions - U.S.	87	2,370	$	414.3	13.4	7.5	%
Acquisitions - Europe	29	2,457	744.4		6.8	7.8	%
Total acquisitions	116	4,827	$	1,158.7	9.1	7.7	%
Properties under development (2)	182	6,306	548.9		15.6	7.4	%
Total (3)	298	11,133	$	1,707.6	11.1	7.6	%

(1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $1.2 million received as settlement credits as reimbursement of free rent periods for the nine months ended September 30, 2024.

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

(2)Includes £50.6 million of Sterling-denominated investments, and €38.9 million of Euro-denominated investments, converted at the applicable exchange rates on the funding dates.

(3)Our clients occupying the new properties are 84.9% retail and 15.1% industrial based on net operating income. Approximately 28% of the net operating income generated from acquisitions during the nine months ended September 30, 2024 was from investment grade rated clients, their subsidiaries, or affiliated companies at the date of acquisition.

The aggregate purchase price of the assets acquired during the nine months ended September 30, 2024 has been allocated as follows (in millions):


	Acquisitions - USD		Acquisitions - Sterling		Acquisitions - Euro
Land	$	117.1	£	134.2	€	15.5
Buildings and improvements	413.1		302.2		41.6
Lease intangible assets (1)	87.5		97.0		12.3
Other assets (2)	13.8		—		—
Lease intangible liabilities (3)	(32.5)		(5.5)		(2.5)

	$	599.0	£	527.9	€	66.9

(1)The weighted average amortization period for acquired lease intangible assets is 8.8 years.

(2)USD-denominated other assets consist entirely of financing receivables with above-market terms.