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REALTY INCOME CORP - Quarter Report: 2022 March (Form 10-Q)

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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 March 31, 2022, 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 ClassTrading Symbol(s)Name of Each Exchange On Which Registered
Common Stock, $0.01 Par ValueONew York Stock Exchange
1.125% Notes due 2027O27ANew York Stock Exchange
1.875% Notes due 2027O27BNew York Stock Exchange
1.625% Notes due 2030O30New York Stock Exchange
1.750% Notes due 2033O33ANew York Stock Exchange
2.500% Notes due 2042O42New 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

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


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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No 
There were 601,598,306 shares of common stock outstanding as of April 29, 2022.


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REALTY INCOME CORPORATION
Index to Form 10-Q
March 31, 2022
Page
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PART 1. FINANCIAL INFORMATION
Item 1.    Financial Statements
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share and share count data)
March 31, 2022December 31, 2021
ASSETS
(unaudited)
Real estate held for investment, at cost:
Land$11,158,545 $10,753,750 
Buildings and improvements25,648,515 25,155,178 
Total real estate held for investment, at cost36,807,060 35,908,928 
Less accumulated depreciation and amortization(4,169,539)(3,949,798)
Real estate held for investment, net32,637,521 31,959,130 
Real estate and lease intangibles held for sale, net84,446 30,470 
Cash and cash equivalents151,624 258,579 
Accounts receivable, net468,165 426,768 
Lease intangible assets, net5,187,280 5,275,304 
Goodwill3,711,981 3,676,705 
Investment in unconsolidated entities141,191 140,967 
Other assets, net1,679,809 1,369,579 
Total assets$44,062,017 $43,137,502 
LIABILITIES AND EQUITY
Distributions payable$149,549 $146,919 
Accounts payable and accrued expenses305,574 351,128 
Lease intangible liabilities, net1,350,370 1,308,221 
Other liabilities746,304 759,197 
Line of credit payable and commercial paper1,519,625 1,551,376 
Term loan, net249,606 249,557 
Mortgages payable, net1,093,599 1,141,995 
Notes payable, net13,068,665 12,499,709 
Total liabilities18,483,292 18,008,102 
Commitments and contingencies
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 601,566,581 and 591,261,991 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively
30,236,374 29,578,212 
Distributions in excess of net income(4,772,112)(4,530,571)
Accumulated other comprehensive income37,917 4,933 
Total stockholders’ equity25,502,179 25,052,574 
Noncontrolling interests76,546 76,826 
Total equity25,578,725 25,129,400 
Total liabilities and equity$44,062,017 $43,137,502 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data) (unaudited)
Three months ended March 31,
 20222021
REVENUE  
Rental (including reimbursable)$799,565 $439,365 
Other7,778 2,889 
Total revenue807,343 442,254 
EXPENSES
Depreciation and amortization403,762 177,985 
Interest106,403 73,075 
Property (including reimbursable)52,342 28,499 
General and administrative32,699 20,796 
Provisions for impairment7,038 2,720 
Merger and integration-related costs6,519 — 
Total expenses608,763 303,075 
Gain on sales of real estate10,156 8,401 
Foreign currency and derivative gains (losses), net(590)804 
Loss on extinguishment of debt— (46,473)
Equity in income of unconsolidated entities 954 — 
Other income, net1,852 550 
Income before income taxes210,952 102,461 
Income taxes(10,981)(6,225)
Net income199,971 96,236 
Net income attributable to noncontrolling interests(602)(296)
Net income available to common stockholders$199,369 $95,940 
Amounts available to common stockholders per common share:
Net Income, basic and diluted$0.34 $0.26 
Weighted average common shares outstanding:
Basic593,827,299 371,522,607 
Diluted594,041,839 371,601,901 
Other comprehensive income:
Net income available to common stockholders$199,369 $95,940 
Foreign currency translation adjustment(10,706)(259)
Unrealized gain on derivatives, net43,690 46,409 
Comprehensive income available to common stockholders$232,353 $142,090 
The accompanying notes to consolidated financial statements are an integral part of these statements.

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REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY 
(dollars in thousands) (unaudited)
Three Months Ended March 31, 2022, and 2021
Shares of
common
stock
Common
stock and
paid in
capital
Distributions
in excess of
net income
Accumulated
other
comprehensive income (loss)
Total
stockholders’
equity
Noncontrolling
interests
Total
equity
Balance, December 31, 2020
361,303,445 $14,700,050 $(3,659,933)$(54,634)$10,985,483 $32,247 $11,017,730 
Net income— — 95,940 — 95,940 296 96,236 
Other comprehensive income— — — 46,150 46,150 — 46,150 
Distributions paid and payable— — (263,667)— (263,667)(402)(264,069)
Share issuances, net of costs12,118,394 672,221 — — 672,221 — 672,221 
Share-based compensation, net
87,983 (1,255)— — (1,255)— (1,255)
Balance, March 31, 2021
373,509,822 $15,371,016 $(3,827,660)$(8,484)$11,534,872 $32,141 $11,567,013 
Balance, December 31, 2021
591,261,991 $29,578,212 $(4,530,571)$4,933 $25,052,574 $76,826 $25,129,400 
Net income— — 199,369 — 199,369 602 199,971 
Other comprehensive income— — — 32,984 32,984 — 32,984 
Distributions paid and payable— — (440,910)— (440,910)(882)(441,792)
Share issuances, net of costs10,171,808 660,044 — — 660,044 — 660,044 
Share-based compensation, net132,782 (1,882)— — (1,882)— (1,882)
Balance, March 31, 2022
601,566,581 $30,236,374 $(4,772,112)$37,917 $25,502,179 $76,546 $25,578,725 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) (unaudited)
Three months ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$199,971 $96,236 
Adjustments to net income:
Depreciation and amortization403,762 177,985 
Amortization of share-based compensation5,002 3,697 
Non-cash revenue adjustments(14,180)(1,163)
Loss on extinguishment of debt— 46,473 
Amortization of net premiums on mortgages payable(3,561)(280)
Amortization of net premiums on notes payable(15,740)(85)
Amortization of deferred financing costs3,445 2,739 
Loss on interest rate swaps722 722 
Foreign currency and derivative (gains) losses, net590 (804)
Gain on sales of real estate(10,156)(8,401)
Income from unconsolidated entities(954)— 
Distributions from unconsolidated entities 729 — 
Provisions for impairment on real estate7,038 2,720 
Change in assets and liabilities
Accounts receivable and other assets(17,698)(21,367)
Accounts payable, accrued expenses and other liabilities(45,491)(32,019)
Net cash provided by operating activities513,479 266,453 
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate(1,525,836)(1,026,690)
Improvements to real estate, including leasing costs(13,471)(1,741)
Proceeds from sales of real estate122,235 34,705 
Insurance proceeds received15,892 — 
Non-refundable escrow deposits(16,828)— 
Net cash used in investing activities(1,418,008)(993,726)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders(438,280)(260,697)
Borrowings on line of credit and commercial paper program2,311,812 1,413,694 
Payments on line of credit and commercial paper program(2,328,990)(735,489)
Proceeds from notes and bonds payable issued676,631 — 
Principal payment on notes payable— (950,000)
Principal payments on mortgages payable(43,589)(18,110)
Payments upon extinguishment of debt— (47,235)
Proceeds from dividend reinvestment and stock purchase plan2,799 2,654 
Proceeds from common stock offerings, net656,094 669,590 
Distributions to noncontrolling interests(882)(402)
Net receipts on derivative settlements903 845 
Debt issuance costs(9,692)— 
Other items, including shares withheld upon vesting(5,733)(4,974)
Net cash provided by financing activities821,073 69,876 
Effect of exchange rate changes on cash and cash equivalents(6,063)48 
Net decrease in cash, cash equivalents and restricted cash(89,519)(657,349)
Cash, cash equivalents and restricted cash, beginning of period332,369 850,679 
Cash, cash equivalents and restricted cash, end of period$242,850 $193,330 
For supplemental disclosures, see note 16.
The accompanying notes to consolidated financial statements are an integral part of these statements.
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REALTY INCOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(unaudited)
1.Basis of Presentation
The consolidated financial statements of Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) were prepared from our books and records without audit and include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2021, which are included in our 2021 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. The U.S. Dollar (“USD”) is our functional currency. Unless otherwise indicated, all dollar amounts are expressed in United States USD.
For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars 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, or AOCI, in the consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period.
We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in foreign currency and derivative gains (losses), net in the consolidated statements of income.
At March 31, 2022, we owned 11,288 properties, located in all 50 U.S. states, Puerto Rico, the United Kingdom (U.K.,) and Spain, consisting of approximately 213.9 million leasable square feet.
2.Summary of Significant Accounting Policies and Procedures and New Accounting Standards
Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation.

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

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

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 interest that was created or assumed as part of a business combination or asset acquisition was recognized at fair value as of the date of the transaction (see note 11, Noncontrolling Interests).
Income Taxes. We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT
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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, we generally will not be required to pay federal corporate 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.
Lease Revenue Recognition and Accounts Receivable. The COVID-19 pandemic and the measures taken to limit its spread have negatively impacted the economy across many industries, including the industries in which some of our clients operate. These impacts may continue as the duration and severity of the pandemic increases. As a result, we have closely monitored the collectability of our accounts receivable and continue to evaluate the potential impacts of the COVID-19 pandemic and the measures taken to limit its spread on our business and industry segments as the situation continues to evolve and more information becomes available.

We continue to assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842, Leases. We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends (including trends arising from the COVID-19 pandemic) and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized.

The majority of concessions granted to our clients as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged. In accordance with the guidance provided by the Financial Accounting Standards Board (FASB) staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in effect. In limited circumstances, the undiscounted cash flows resulting from deferrals granted increased significantly from original lease terms, which required us to account for these as lease modifications and resulted in an insignificant impact to consolidated rental revenue. Similarly, rent abatements granted, which are also accounted for as lease modifications, have impacted our rental revenue by an insignificant amount.

As of March 31, 2022, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable. However, since the conversations regarding rent collections for our clients affected by the COVID-19 pandemic are ongoing and we do not currently know the types of future concessions, if any, that will ultimately be granted, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.
Investment in Unconsolidated Entities. We account for our investment in unconsolidated entity arrangements using the equity method of accounting as we have the ability to exercise significant influence, but not control, over operating and financing policies of these investments. We have determined that none of the unconsolidated entities would be considered VIEs under the applicable accounting guidance. Our equity method investments were acquired in our merger with VEREIT. As a result, the investments were recorded at fair value and subsequently will be adjusted for our share of equity in the entities' earnings and distributions received. The step-up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the assumed debt. Investment in unconsolidated entities is included in the accompanying consolidated balance sheets. We record our proportionate share of net income from the unconsolidated entities in other income, net in the consolidated statements of income and comprehensive income.
Newly Issued Accounting Standards. In July 2021, the FASB issued ASU 2021-05 establishing Topic 842, Lessors - Certain Leases with Variable Lease Payments. ASU 2021-05 improves ASC 842 classification guidance as it relates to a lessor's accounting for certain leases with variable lease payments. This guidance requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss. This guidance is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.
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In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020, and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. We are currently evaluating the impact that the expected market transition from LIBOR to alternative references rates will have on our financial statements as well as the applicability of the aforementioned expedients and exceptions provided in ASU 2020-04.
3.Merger with VEREIT, Inc.
Merger with VEREIT
On November 1, 2021, we completed our merger with VEREIT, Inc. For further details, see note 3. Merger with VEREIT, Inc. and Orion Office REIT Inc. Divestiture, to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.
Our merger with VEREIT has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data):
Shares of VEREIT common stock and VEREIT Operating Partnership, L.P. ("OP") common units exchanged (1)
229,304,035 
Exchange Ratio0.705
161,659,345
Less: Fractional shares settled in cash(1,545)
Shares of Realty Income common stock and Realty Income L.P. units issued161,657,800
Adjusted opening price of Realty common stock on November 1, 2021 (2)
$71.236 
Fair value of Realty common stock issued to former holders of VEREIT common stock and VEREIT OP common units $11,515,855 
Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3)
44,020 
Total non-cash consideration11,559,875 
Cash paid for fractional shares110 
VEREIT indebtedness paid off in connection with the merger (4)
500,414 
Consideration transferred$12,060,399 
(1) Includes 229,152,001 shares of VEREIT common stock and 152,034 VEREIT OP common units outstanding as of November 1, 2021. Under the Merger Agreement, these shares and units were converted to Realty Income common stock, or in certain instances, Realty Income L.P. units, at an Exchange Ratio of 0.705 per share of VEREIT common stock or VEREIT OP common unit, as applicable.
(2) The fair value of Realty Income common stock issued to former holders of VEREIT common stock and VEREIT OP common units is based on the per share opening price of Realty Income common stock of $71.00 on November 1, 2021, adjusted for the monthly dividend of $0.236 per share that former holders of VEREIT common stock and VEREIT OP common units were eligible to receive when such dividend was paid on November 15, 2021.
(3) Represents the fair value of fully vested deferred stock unit awards of VEREIT common stock (“VEREIT DSU Awards”) which were converted into Realty Income common stock upon our merger with VEREIT, as well as the estimated fair value of the Realty Income replacement employee and executive stock options and restricted stock units that were granted at the closing date of our merger with VEREIT and which were attributable to pre-combination services.
(4) Represents the outstanding balance of the VEREIT revolving credit facility repaid by Realty Income in connection with the closing of the merger. The amount shown in the table above was based upon the balance outstanding immediately prior to November 1, 2021.

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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):
ASSETS
Land$3,021,906 
Buildings8,677,467 
Total real estate held for investment11,699,373 
Cash and cash equivalents128,411 
Accounts receivable53,355 
Lease intangible assets (1)
3,204,773 
Goodwill3,698,123 
Investment in unconsolidated entities194,876 
Other assets308,910 
Total assets acquired$19,287,821 
LIABILITIES
Accounts payable and accrued expenses$139,836 
Lease intangible liabilities (2)
949,349 
Other liabilities320,893 
Mortgages payable869,027 
Notes payable4,946,965 
Total liabilities assumed$7,226,070 
Net assets acquired, at fair value$12,061,751 
Noncontrolling interests$1,352 
Total purchase price$12,060,399 
(1) The weighted average amortization period for acquired lease intangible assets is 9.3 years.
(2) The weighted average amortization period for acquired lease intangible liabilities is 25.5 years.
The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Measurement period adjustments will be recorded in the future period in which they are determined, as if they had been completed at the acquisition date. The finalization of our purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed up to a year after the date of our merger with VEREIT, which could be material.
Due to the timing and complexity of the merger, we recorded the assets acquired and liabilities assumed at their preliminary estimated fair values. As of March 31, 2022, we had not finalized the determination of fair values allocated to certain assets and liabilities, including land, buildings, lease intangible assets, lease intangible liabilities, and the allocation of goodwill. The preliminary purchase price allocation is subject to change as we complete our analysis of the fair value at the date of the transactions, which could have an impact on our consolidated financial statements.
A preliminary estimate of approximately $3.70 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 overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the employee workforce onboarded from VEREIT following the closing of the merger. Goodwill has not yet been allocated to our individual operating segments; the allocation is pending the finalization of our purchase accounting. None of the goodwill recognized is expected to be deductible for tax purposes.
B.    Merger and Integration-related Costs
In conjunction with our merger with VEREIT, we incurred approximately $6.5 million of transaction costs during the three months ended March 31, 2022. There were no comparable costs incurred during the three months ended
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March 31, 2021, as the merger was first announced in April 2021 and associated costs began to accrue during the second quarter of 2021. Merger and integration-related costs for the three months ended March 31, 2022, primarily consist of 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 business or assets efficiently.
C.    Unaudited Pro Forma Financial Information
Our consolidated results of operations for the three months ended March 31, 2022, include $258.3 million of revenues and $17.0 million of net income associated with the results of operations of VEREIT OP.
The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2021, as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data). There are no pro forma adjustments for the three months ended March 31, 2022, as the merger was completed November 1, 2021. Amounts for the three months ended March 31, 2022, are presented for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. In accordance with ASC 805, Business Combinations, the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc.
Three Months Ended March 31,
20222021
Total revenues$807.3 $742.5 
Net income$200.0 $189.8 
Basic and diluted earnings per share$0.34 $0.36 

4.Supplemental Detail for Certain Components of Consolidated Balance Sheets (dollars in thousands):
A.
Accounts Receivable, net, consist of the following at:March 31, 2022December 31, 2021
Straight-line rent receivables, net$261,302 $231,943 
Client receivables, net206,863 194,825 
$468,165 $426,768 
B.
Lease intangible assets, net, consist of the following at:
March 31, 2022December 31, 2021
In-place leases
$4,879,348 $4,791,846 
Accumulated amortization of in-place leases
(956,982)(804,050)
Above-market leases
1,601,305 1,591,382 
Accumulated amortization of above-market leases
(336,391)(303,874)
$5,187,280 $5,275,304 
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C.
Other assets, net, consist of the following at:
March 31, 2022December 31, 2021
Right of use asset - operating leases, net$610,601 $631,515 
Financing receivables438,743 323,921 
Right of use asset - financing leases369,908 218,332 
Restricted escrow deposits84,066 68,541 
Derivative assets and receivables – at fair value74,694 29,593 
Prepaid expenses35,165 18,062 
Non-refundable escrow deposits16,828 28,560 
Corporate assets, net11,534 10,915 
Investment in sales type lease7,506 7,492 
Impounds related to mortgages payable7,160 5,249 
Note receivable4,732 4,455 
Credit facility origination costs, net3,661 4,352 
Other items15,211 18,592 
$1,679,809 $1,369,579 

D.
Accounts payable and accrued expenses consist of the following at:
March 31, 2022December 31, 2021
Notes payable - interest payable$111,171 $108,227 
Property taxes payable32,200 36,173 
Derivative liabilities and payables – at fair value30,728 70,617 
Value-added tax payable22,728 11,297 
Accrued property expenses21,160 27,344 
Accrued costs on properties under development19,560 19,665 
Accrued income taxes17,305 19,152 
Merger and integration related costs5,205 10,699 
Mortgages, term loans, and credit line - interest payable4,099 3,874 
Other items41,418 44,080 
$305,574 $351,128 

E.
Lease intangible liabilities, net, consist of the following at:
March 31, 2022December 31, 2021
Below-market leases
$1,523,238 $1,460,701 
Accumulated amortization of below-market leases
(172,868)(152,480)
$1,350,370 $1,308,221 

F.
Other liabilities consist of the following at:
March 31, 2022December 31, 2021
Lease liability - operating leases, net$440,084 $461,748 
Rent received in advance and other deferred revenue 253,731 242,122 
Security deposits11,323 11,340 
Lease liability - financing leases41,166 43,987 
$746,304 $759,197 
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5. Investments in Real Estate
We acquire land, buildings and improvements necessary for the successful operations of commercial clients.
A.    Acquisitions During the Three Months Ended March 31, 2022, and 2021
Below is a summary of our acquisitions for the three months ended March 31, 2022:
Number of
Properties
Leasable
Square Feet
(in thousands)
Investment
($ in millions)
Weighted
Average
Lease Term
(Years)
Initial Average Cash Lease Yield (1)
Three months ended March 31, 2022 (2)
Acquisitions - U.S. 139 2,627 $629.8 15.05.7 %
Acquisitions - Europe
21 2,772 794.2 8.95.5 %
Total acquisitions160 5,399 $1,424.0 11.85.6 %
Properties under development (3)
53 1,868 131.3 17.35.7 %
Total (4)
213 7,267 $1,555.3 12.35.6 %
(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 development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.
(2)None of our investments during the 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 investment grade rated clients, their subsidiaries or affiliated companies.
The acquisitions during the three months ended March 31, 2022, which had no associated contingent consideration, were allocated as follows (in millions):
Acquisitions - U.S.Acquisitions - U.K.
Three months ended March 31, 2022
(USD)(£ Sterling)
Land$203.5 £208.7 
Buildings and improvements368.5 237.1 
Lease intangible assets (1)
59.0 96.5 
Other assets (2)
117.8 98.3 
Lease intangible liabilities (3)
(8.4)(46.4)
Other liabilities (4)
(12.5)— 
$727.9 £594.2 
(1) The weighted average amortization period for acquired lease intangible assets is 10.8 years.
(2) U.S. other assets consists of $99.6 million of financing receivables with above-market terms and $18.2 million of right-of-use assets accounted for as finance leases. U.K. other assets consists entirely of right-of-use assets accounted for as finance leases.
(3) The weighted average amortization period for acquired lease intangible liabilities is 10.3 years.
(4) U.S. other liabilities consists entirely of deferred rent on certain below-market leases.
The properties acquired during the three months ended March 31, 2022, which were all accounted for as asset acquisitions, generated total revenues of $7.2 million and net income of $2.7 million during the three months ended March 31, 2022.
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Below is a summary of our acquisitions for the three months ended March 31, 2021:
Number of
Properties
Leasable
Square Feet
(in thousands)
Investment
($ in millions)
Weighted
Average
Lease Term
(Years)
Initial Average Cash Lease Yield (1)
Three months ended March 31, 2021 (1)
Acquisitions - U.S. 77 2,299 $566.9 13.55.6 %
Acquisitions - Europe
12 933 403.0 10.64.9 %
Total acquisitions89 3,232 $969.9 12.45.3 %
Properties under development - U.S.21 1,597 57.9 15.55.6 %
Total (2)
110 4,829 $1,027.8 12.65.3 %
(1)None of our investments during the three months ended March 31, 2021, caused any one client to be 10% or more of our total assets at March 31, 2021.
(2) Our clients occupying the new properties are 65.1% retail and 34.9% industrial, based on rental revenue. Approximately 39% of the rental revenue generated from acquisitions during the three months ended March 31, 2021, was from investment grade rated clients, their subsidiaries or affiliated companies.
The acquisitions during the three months ended March 31, 2021, which had no associated contingent consideration, were allocated as follows (in millions):
Acquisitions - U.S.Acquisitions - U.K.
Three months ended March 31, 2021
(USD)(£ Sterling)
Land (1)
$208.0 £117.3 
Buildings and improvements295.8 129.0 
Lease intangible assets (2)
94.5 44.8 
Other assets (3)
16.7 — 
Lease intangible liabilities (4)
(1.4)(0.9)
Other liabilities (5)
(21.6)— 
$592.0 £290.2 
(1) U.K. land includes £560,000 of right of use assets under long-term ground leases.
(2) The weighted average amortization period for acquired lease intangible assets is 16.8 years.
(3) U.S. other assets consists entirely of financing receivables with above-market terms.
(4) The weighted average amortization period for acquired lease intangible liabilities is 11.9 years.
(5) U.S. other liabilities consists of deferred rent on certain below-market leases.
The properties acquired during the three months ended March 31, 2021, which were all accounted for as asset acquisitions, generated total revenues of $5.1 million and net income of $2.0 million during the three months ended March 31, 2021.
B.    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. In comparison, during the three months ended March 31, 2021, we capitalized costs of $1.5 million on existing properties in our portfolio, consisting of $706,000 for re-leasing costs, $23,000 for recurring capital expenditures, and $769,000 for non-recurring building improvements.
C.    Properties with Existing Leases
Of the $1.56 billion we invested during the three months ended March 31, 2022, approximately $131.3 million related to development. Of the $1.42 billion invested outside of development, $969.5 million was used to acquire 52 properties with existing leases. In comparison, of the $1.03 billion we invested during the three months ended March 31, 2021, $57.9 million related to development. Of the $969.9 million invested outside of development, $856.8 million was used to acquire 68 properties with existing leases. The value of the in-place and above-market leases is recorded to lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to lease intangible liabilities, net on our consolidated balance sheets.
The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2022, and 2021 were $160.1 million and $35.8 million, respectively.
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The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2022, and 2021 were $21.9 million and $12.4 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.
The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at March 31, 2022 (dollars in thousands):
Net
increase
(decrease) to
rental revenue
Increase to
amortization
expense
2022$(39,868)$464,651 
2023(51,544)534,554 
2024(45,665)474,373 
2025(39,619)406,059 
2026(31,334)361,695 
Thereafter293,486 1,681,034 
Totals$85,456 $3,922,366 
D.          Gain on Sales of Real Estate
The following table summarizes our properties sold during the periods indicated below (dollars in millions):
Three months ended March 31,
20222021
Number of properties34 27 
Net sales proceeds$122.2 $34.7 
Gain on sales of real estate$10.2 $8.4 
E.           Investment in Unconsolidated Entities
The following is a summary of our investments in unconsolidated entities as of March 31, 2022 (in thousands):
Ownership % (1)
Number of Properties
Carrying Amount of Investment as of (2)
Equity in Income (2)
Investment
March 31, 2022
March 31, 2022
March 31, 2021March 31, 2022March 31, 2021
Industrial Partnerships20 %7$141,191 $140,967 $954 $— 
(1) Our ownership interest reflects legal ownership interest. Legal ownership may, at times, not equal our economic interest in the listed properties because of various provisions in certain entity agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, our actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with legal ownership interests.
(2) The total carrying amount of the investments was greater than the underlying equity in net assets by $100.4 million as of March 31, 2022. The difference relates to a step-up in fair value of the investment net assets acquired in connection with the merger with VEREIT on November 1, 2021. The step up in fair value was allocated to the individual investment assets and liabilities and is being amortized over the estimated useful life of the respective underlying tangible real estate assets, the lease term of the intangible real estate assets, and the remaining term of the mortgages payable. Prior to November 1, 2021, we did not own any unconsolidated entities.

The aggregate debt outstanding for unconsolidated entities was $431.8 million as of March 31, 2022, and December 31, 2021, all of which is non-recourse to us with limited customary exceptions which vary from loan to loan.

Each of us and our unconsolidated entity partners are subject to the provisions of the applicable entity agreements for our unconsolidated partnerships, which include provisions for when additional contributions may be required to fund certain cash shortfalls.
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6.Revolving Credit Facility and Commercial Paper Program
A.    Credit Facility
We have a $3.0 billion unsecured revolving credit facility with an initial term that expires in March 2023 and includes, at our option, two six-month extensions. The revolving credit facility allows us to borrow in up to 14 currencies, including U.S. dollars, and has a $1.0 billion expansion option, which is subject to obtaining lender commitments. Under our credit facility, our investment grade credit ratings as of March 31, 2022, provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR. The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings change. We also have other interest rate options available to us under our revolving credit facility. Our revolving credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

LIBOR is in the process of being discontinued. While certain U.S. dollar LIBOR settings will continue to be published on the current basis until June 30, 2023, all other LIBOR settings either are no longer being published or are being published only for a limited time and only on a “synthetic” basis (i.e., not on the basis of submissions made by panel banks). The regulator of the administrator of LIBOR has prohibited any new use of LIBOR by firms subject to its supervision, and certain regulators in the United States have stated that no new contracts using U.S. dollar LIBOR should be entered into after 2021. Our revolving credit facility and term loan facility were amended in December 2021 to include provisions for establishing alternative reference rates when LIBOR is no longer available.

In April 2022, we amended our Credit Facility. See note 20, Subsequent Events.
At March 31, 2022, credit facility origination costs of $3.7 million are included in other assets, net, as compared to $4.4 million at December 31, 2021, on our consolidated balance sheet. These costs are being amortized over the remaining term of our revolving credit facility.
At March 31, 2022, we had a borrowing capacity of $2.43 billion available on our revolving credit facility (subject to customary conditions to borrowing) and $569.6 million outstanding balance, as compared to an outstanding balance at December 31, 2021, of $650.0 million.
The weighted average interest rate on outstanding borrowings under our revolving credit facility was 1.1% during the three months ended March 31, 2022, and 0.8% during the three months ended March 31, 2021. At March 31, 2022, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 1.2%. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2022, we were in compliance with the covenants on our revolving credit facility.
B.    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. The commercial paper ranks on a parity in right of payment with all of our other unsecured senior indebtedness outstanding from time to time, including borrowings under our revolving credit facility, our term loan and our outstanding senior unsecured notes. Proceeds from commercial paper borrowings are generally used for general corporate purposes. As of March 31, 2022, the balance of borrowings outstanding under our commercial paper program was $950.0 million as compared to $901.4 million outstanding commercial paper borrowings at December 31, 2021. The weighted average interest rate on outstanding borrowings under our commercial paper program was 0.5% for the three months ended March 31, 2022, and 0.3% for the three months ended March 31, 2021. As of March 31, 2022, our weighted average interest rate on borrowings outstanding under our commercial paper program was 0.8%. 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 generally carry a term of less than a year.
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7.Term Loans
In October 2018, in conjunction with entering into our current revolving credit facility, we entered into a $250.0 million senior unsecured term loan, which matures in March 2024. 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%.
At March 31, 2022, deferred financing costs of $394,000 are included net of the term loan principal balance, as compared to $443,000 at December 31, 2021, on our consolidated balance sheet. These costs are being amortized over the remaining term of the term loan.
8.Mortgages Payable
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. During the three months ended March 31, 2021, we made $18.1 million in principal payments, including the repayment of three mortgages in full for $17.2 million. No mortgages were assumed during the three months ended March 31, 2022, or the three months ended March 31, 2021. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan.
Our mortgages contain customary covenants, such as limiting our ability to further mortgage each applicable property or to discontinue insurance coverage without the prior consent of the lender. At March 31, 2022, we were in compliance with these covenants.
The balance of our deferred financing costs, which are classified as part of mortgages payable, net, on our consolidated balance sheets, was $713,000 at March 31, 2022, and $790,000 at December 31, 2021. These costs are being amortized over the remaining term of each mortgage.
The following table summarizes our mortgages payable as of March 31, 2022, and December 31, 2021, respectively (dollars in thousands):

As Of
Number of
Properties (1)
Weighted
Average
Stated
Interest
Rate (2)
Weighted
Average
Effective
Interest
Rate (3)
Weighted
Average
Remaining
Years Until
Maturity
Remaining
Principal
Balance
Unamortized
Premium
and Deferred
Financing Costs
Balance, net
Mortgage
Payable
Balance
3/31/20222214.8 %3.4 %1.6$1,069,311 $24,288 $1,093,599 
12/31/20212674.8 %3.5 %1.8$1,114,129 $27,866 $1,141,995 
(1)At March 31, 2022, there were 21 mortgages on 221 properties. At December 31, 2021, there were 22 mortgages on 267 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At March 31, 2022, and December 31, 2021, all mortgages were at fixed interest rates.
(2) Stated interest rates ranged from 3.0% to 6.9% at each of March 31, 2022, and December 31, 2021.
(3) Effective interest rates ranged from 2.6% to 6.0% at each of March 31, 2022, and December 31, 2021.
The following table summarizes the maturity of mortgages payable, excluding net premiums of $25.0 million and deferred financing costs of $713,000, as of March 31, 2022 (dollars in millions):
Year of Maturity
Principal
2022$227.5
202362.1
2024733.0
202540.8
20261.2
Thereafter4.7
Totals
$1,069.3
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9.Notes Payable
A.    General
Our senior unsecured notes and bonds are U.S. dollar denominated and Sterling denominated. Foreign denominated notes are converted at the applicable exchange rate on the balance sheet date. The following are sorted by maturity date (in millions):
Principal Amount (Currency Denomination)Carrying Value (USD) as of
March 31, 2022December 31, 2021
4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (1)
$500 $500 $500 
3.875% notes, issued in June 2014 and due in July 2024
$350 350 350 
3.875% notes, issued in April 2018 and due in April 2025
$500 500 500 
4.625% notes, $550 issued October 2018, of which $544 was exchanged in November 2021, both due in November 2025 (1)
$550 550 550 
0.750% notes, issued December 2020 and due in March 2026
$325 325 325 
4.875% notes, $600 issued June 2016, of which $596 was exchanged in November 2021, both due in June 2026 (1)
$600 600 600 
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026
$650 650 650 
1.875% notes, issued in January 2022 and due in January 2027
£250 329 — 
3.000% notes, issued in October 2016 and due in January 2027
$600 600 600 
1.125% notes, issued in July 2021 and due in July 2027
£400 526 541 
3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (1)
$600 600 600 
3.650% notes, issued in December 2017 and due in January 2028
$550 550 550 
3.400% notes, $600 issued June 2020, of which $598 was exchanged in November 2021, both due in January 2028 (1)
$600 600 600 
2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (1)
$500 500 500 
3.250% notes, issued in June 2019 and due in June 2029
$500 500 500 
3.100% notes, $600 issued December 2019, of which $596 was exchanged in November 2021, both due in December 2029 (1)(2)
$599 599 599 
1.625% notes, issued in October 2020 and due December 2030
£400 526 541 
3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031
$950 950 950 
2.850% notes, $700 issued November 2020, of which $699 was exchanged in November 2021, both due in December 2032 (1)
$700 700 700 
1.800% notes, issued in December 2020 and due in March 2033
$400 400 400 
1.750% notes, issued in July 2021 and due in July 2033
£350 460 474 
2.730% notes, issued in May 2019 and due in May 2034
£315 413 427 
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035
$250 250 250 
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
$550 550 550 
Total principal amount$12,857 $12,257 
Unamortized net premiums and deferred financing costs212 243 
 $13,069 $12,500 
(1) Carrying Value (USD) includes the portion of the VEREIT OP notes that remained outstanding, totaling $39.1 million in the aggregate at each of March 31, 2022, and December 31, 2021, that were not exchanged in the exchange offers commenced by us with respect to the outstanding bonds of VEREIT OP in connection with the consummation of the merger with VEREIT (the "Exchange Offers").
(2) These notes were originally issued by VEREIT OP in December of 2019 for the principal amount of $600 million. The amount of Realty Income debt issued through the Exchange Offers was $599 million, resulting from cancellations due to late tenders that forfeited the early participation premium of $30 per $1,000 principal amount and cash paid in lieu of fractional shares.
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In April 2022 we entered into a definitive agreement for the private placement of £600 million of senior unsecured notes. See note 20, Subsequent Events.
The following table summarizes the maturity of our notes and bonds payable as of March 31, 2022, excluding net unamortized premiums of $272.7 million and deferred financing costs of $60.6 million (dollars in millions):
Year of Maturity
Principal
2024$850 
20251,050 
20261,575 
Thereafter9,382 
Totals
$12,857 
As of March 31, 2022, the weighted average interest rate on our notes and bonds payable was 3.2% and the weighted average remaining years until maturity was 7.7 years.
Interest incurred on all of the notes and bonds was $103.1 million and $63.2 million for the three months ended March 31, 2022, and March 31, 2021, respectively.
Our outstanding notes and bonds are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations. 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.
All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and(iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. At March 31, 2022, we were in compliance with these covenants.
B.    Note Repayment
In January 2021, we redeemed all $950.0 million in principal amount of our 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 on our consolidated statement of income for the three months ended March 31, 2021. There were no comparable repayments for the three months ended March 31, 2022.
C.    Note Issuances
During the three months ended March 31, 2022, we issued the following notes and bonds (in millions):
First Quarter 2022 Issuances
Date of IssuanceMaturity DatePrincipal amount usedPrice of par valueEffective yield to maturity
1.875% Notes
January 2022January 2027£250 99.487 %1.974 %
2.500% Notes
January 2022January 2042£250 98.445 %2.584 %

There were no comparable note issuances during the three months ended March 31, 2021.

The proceeds from each of these offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes
10.Issuances of Common Stock
A.    Issuances of Common Stock in Underwritten Public Offerings
In January 2021, we issued 12,075,000 shares of common stock in an underwritten public offering, including 1,575,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.
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After deducting underwriting discounts of $19.3 million, the net proceeds of $669.6 million were used to fund property acquisitions and for general corporate purposes and working capital.
There were no comparative offerings during the three months ended March 31, 2022.
B.    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 New York Stock Exchange ("NYSE: O") at prevailing market prices or at negotiated prices. 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. 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. We did not issue any shares under the ATM program during the three months ended March 31, 2021.
C.    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. At March 31, 2022, we had 11,294,008 shares remaining for future issuance under our DRSPP program.
The following table outlines common stock issuances pursuant to our DRSPP program (dollars in millions):
Three months ended March 31,
20222021
Shares of common stock issued under the DRSPP program41,37143,394
Gross proceeds$2.8 $2.7 
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, or 2021.

11.    Noncontrolling Interests
There are four entities with noncontrolling interests that we consolidate, including an operating partnership, Realty Income, L.P., a joint venture acquired in 2019, and two development joint ventures, one acquired in 2020 and one acquired in May 2021. The following table represents the change in the carrying value of all noncontrolling interests through March 31, 2022 (dollars in thousands):
Realty Income, L.P. units (1)
Other
Noncontrolling
Interests
Total
Carrying value at December 31, 2021
$62,416 $14,410 $76,826 
Distributions
(814)(68)(882)
Allocation of net income
544 58 602 
Carrying value at March 31, 2022
$62,146 $14,400 $76,546 
(1)  242,007 units were issued on March 30, 2018, 131,790 units were issued on April 30, 2018, 89,322 units were issued on March 28, 2019, 56,400 units were issued on November 1, 2021, 300,604 units were issued on November 30, 2021, and 240,586 units were issued on December 30, 2021. 1,060,709 remained outstanding as of both March 31, 2022, and December 31, 2021.
At March 31, 2022, Realty Income, L.P. and certain of our joint venture investments are considered VIEs in which we were deemed the primary beneficiary based on our controlling financial interests. Below is a summary of
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selected financial data of consolidated VIEs included in the consolidated balance sheets at March 31, 2022, and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Net real estate
$693,411$688,229 
Total assets
$795,068$795,670 
Total liabilities
$54,957$57,057 
12.    Financial Instruments and Fair Value Measurements
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).
ASC 820, Fair Value Measurements and Disclosures, sets forth a fair value hierarchy that categorizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Level 1 – Unadjusted quoted prices in active markets
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

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

Level 3 – Valuation Technique Using Significant Unobservable Inputs
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the inputs, or other analytical techniques.
We evaluate our hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from period to period. Changes in the type of inputs may result in a reclassification for certain assets. We have not historically had changes in classifications and do not expect that changes in classifications between levels will be frequent.
Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets
The fair value of short-term financial instruments such as cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, accounts payable, distributions payable, line of credit payable and commercial paper borrowings, and other liabilities approximate their carrying value in the accompanying consolidated balance sheets, due to their short-term nature. The fair value of our financial instruments not carried at fair value are disclosed as follows (in millions):

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March 31, 2022
Carrying value
Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)
$1,069.3$1,060.5 
Notes and bonds payable (2)
$12,856.6$12,653.3 
December 31, 2021
Carrying value
Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)
$1,114.1$1,154.7 
Notes and bonds payable (2)
$12,257.3$13,114.5 
(1)Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums was $25.0 million at March 31, 2022, and $28.7 million at December 31, 2021. Also excludes deferred financing costs of $713,000 at March 31, 2022, and $790,000 at December 31, 2021.
(2)Excludes non-cash premiums and discounts recorded on notes payable. The unamortized balance of the net premiums was $272.7 million at March 31, 2022, and $295.5 million at December 31, 2021. Also excludes deferred financing costs of $60.6 million at March 31, 2022, and $53.1 million at December 31, 2021.
The estimated fair values of our mortgages payable assumed in connection with acquisitions and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy.
The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable, including the senior notes and bonds payable assumed in the debt exchange offer on November 9, 2021, in connection with our merger with VEREIT. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy.
Financial Instruments Measured at Fair Value on a Recurring Basis
For derivative assets and liabilities, we utilize interest rate swaps and forward-starting swaps to manage interest rate risk, and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility.
Derivative fair values also include credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at March 31, 2022, and December 31, 2021, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two.
Items Measured at Fair Value on a Non-Recurring Basis
Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments only under certain circumstances, such as when an impairment write-down occurs.
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The following table summarizes our provisions for impairment during the periods indicated below (dollars in millions):
Three Months Ended March 31,
20222021
Total provisions for impairment (1)
$7.0 $2.7 
Number of properties:
Classified as held for sale18 
Classified as held for investment— 
Sold16 18 
(1) During the three months ended March 31, 2022, we recorded total provisions for impairment of $7.0 million, which reduced the carrying value of the properties from $44.8 million to their estimated fair value of $37.8 million. During the three months ended March 31, 2021, we recorded total provisions for impairment of $2.7 million, which reduced the carrying value of the properties from $16.0 million to their estimated fair value of $13.3 million.
Derivative Designated as Hedging Instruments
In order to hedge the foreign currency risk associated with interest payments on intercompany loans denominated in British Pound Sterling, or GBP, we initiated a hedging strategy to enter into foreign currency forward contracts to sell GBP and buy U.S. Dollars, or USD. These foreign currency forwards are designated as cash flow hedges. Forward points on the forward contracts are included in the assessment of hedge effectiveness. Amounts reported in other comprehensive income (loss) related to foreign currency derivative contracts will be reclassified to other gains and (losses) in the same period during which the hedged forecasted transactions affect earnings.
As of March 31, 2022, we had one interest rate swap in place on our $250.0 million unsecured term loan. Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. We designated this interest rate swap as a cash flow hedge in accordance with Topic 815, Derivatives and Hedging. This interest rate swap is recorded on the consolidated balances sheets at fair value. Changes to fair value are recorded to accumulated other comprehensive income, or AOCI, and are amortized through interest expense over the term of the associated debt.
The following table summarizes the amount of unrealized gain (loss) on derivatives in other comprehensive income during the periods indicated below (in thousands):
Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships20222021
Currency swaps$1,895 $(1,620)
Interest rate swaps39,005 48,029 
Foreign currency forwards 2,790 — 
Total unrealized gain on derivatives$43,690 $46,409 
The following table summarizes the amount of gain (loss) on derivatives reclassified from accumulated other comprehensive income (loss) during the periods indicated below (in thousands):
Three Months Ended March 31,
Derivatives in Cash Flow Hedging RelationshipsLocation of Gain (Loss) Recognized in Income20222021
Currency swaps
Foreign currency and derivative
gains (losses), net
$6,114 $(1,152)
Interest rate swapsInterest expense (2,530)(2,541)
Net increase (decrease) to net income $3,584 $(3,693)
We expect to reclassify $6.1 million from AOCI as an increase to interest expense relating to interest rate swaps and $5.3 million from AOCI to foreign currency gain relating to cross-currency swaps within the next twelve months.
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Derivatives Not Designated as Hedging Instruments
Based on our potential exposure to changes in foreign currency exchange rate, primarily in British Pound Sterling and, to a lesser extent, the Euro, we initiated a program in the third quarter of 2021 to enter into foreign currency collars. A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices. Our foreign currency collars generally have maturities of five months or less and are not designated as hedge instruments for accounting purposes. The gains or loss on these derivative contracts are recognized in Foreign currency and derivative gains (losses), net based on the changes in fair value.
In addition, we enter into currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the British Pound Sterling and Euro. These derivative contracts generally mature within one to three months and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through the caption entitled 'Foreign currency and derivative gains (losses), net' in the consolidated statements of income and comprehensive income.
The following table details our foreign currency and derivative gains (losses), net included in income (in thousands):
Three Months Ended March 31,
20222021
Realized foreign currency and derivative gains (losses), net:
Losses on the settlement of undesignated derivatives$(2,681)$— 
Gains (losses) on the settlement of designated derivatives reclassified from AOCI
6,114 (1,152)
Loss on the settlement of transactions with third parties(52)— 
Total realized foreign currency and derivative gains, net3,381 (1,152)
Unrealized foreign currency and derivative gains (losses), net:
Gains on the change in fair value of undesignated derivatives22,720 3,724 
Losses on remeasurement of certain assets and liabilities(26,691)(1,768)
Total unrealized foreign currency and derivative gains (losses), net(3,971)1,956 
Total foreign currency and derivative gains (losses), net$(590)$804 
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The following table summarizes the terms and fair values of our derivative financial instruments at March 31, 2022, and December 31, 2021 (dollars in millions):
Derivative Type
Number of Instruments (1)
Accounting Classification
Notional Amount as of
Weighted Average Strike Rate (2)
Maturity Date (3)
Fair Value - asset (liability) as of
Derivatives Designated as Hedging InstrumentsMarch 31, 2022December 31, 2021March 31, 2022December 31, 2021
Interest rate swap
1Derivative$250.0 $250.03.04%March 2024$(3.2)$(11.9)
Cross-currency swaps (4)
4Derivative166.3 166.3(5)May 2034(7.2)(13.8)
Foreign currency forwards29Derivative166.4 176.1(6)Apr 2022 - Aug 202410.3 7.6 
Forward-starting swaps (7)
4Derivative300.0 300.01.86%Nov 2032 - Jun 203314.9 (3.2)
Forward-starting swaps (7)
2Hybrid Debt200.0 200.01.93%Nov 2032 - Jun 20336.5 (5.1)
$1,082.7 $1,092.4 $21.3 $(26.4)
Derivatives not Designated as Hedging Instruments
Currency exchange swaps (8)
4Derivative1,361.4 1,639.5(9)Apr 2022 - Jul 202222.7 (14.7)
Total of all Derivatives$2,444.1 $2,731.9 $44.0 $(41.1)
(1)This column represents the number of instruments outstanding as of March 31, 2022.
(2)Weighted average strike rate is calculated using the current notional value as of March 31, 2022.
(3)This column represents maturity dates for instruments outstanding as of March 31, 2022.
(4)Represents four British Pound Sterling, or GBP, cross-currency swaps with notional amount of $166.3 million.
(5)GBP fixed rates initially at 4.82% and escalating to 10.96%, and USD weighted average fixed rate at 9.78%.
(6)Weighted average forward GBP-USD exchange rate of 1.41.
(7)There were five treasury rate locks entered into during February 2020 that were terminated in June 2020 and converted into six forward starting interest rate swaps through a cashless settlement.
(8)Represents two GBP currency exchange swaps with notional amount of $1.09 billion and two Euro, or EUR, currency exchange swaps with notional amount of $268.3 million.
(9)Weighted average Forward GBP-USD exchange rate of 1.34 and Weighted Average Forward EUR-USD exchange rate of 1.11.
We measure our derivatives at fair value and include the balances within other assets and accounts payable and accrued expenses on our consolidated balance sheets.
We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default.
We utilize interest rate swaps and forward-starting swaps to manage interest rate risk and cross-currency swaps, currency exchange swaps, foreign currency forwards and foreign currency collars to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility.
To comply with the provisions of ASC 820, Fair Value Measurement, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
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13.     Operating Leases
A. At March 31, 2022, we owned 11,288 properties in all 50 U.S. states, Puerto Rico, the U.K. and Spain. Of the 11,288 properties, 11,180, or 99.0%, are single-client properties, and the remaining are multi-client properties. At March 31, 2022, 156 properties were available for lease or sale.
Substantially all of our leases are net leases where our client pays or reimburses us for property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.
Rent based on a percentage of our client's gross sales, or percentage rents, for the three months ended March 31, 2022, and 2021 was $3.7 million and $1.0 million, respectively.
B. Major Clients - No individual client’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the three months ended March 31, 2022, and 2021.
14.    Distributions Paid and Payable
We pay monthly distributions to our common stockholders. The following is a summary of monthly distributions paid per common share for the three months ended March 31, 2022, and 2021:
Month
20222021
January$0.2465$0.2345 
February0.24650.2345 
March0.24650.2345 
Total
$0.7395 $0.7035 
At March 31, 2022, a distribution of $0.2470 per common share was payable and was paid in April 2022.
15.    Net Income per Common Share
Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.
The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation:
Three months ended March 31,
20222021
Weighted average shares used for the basic net income per share computation
593,827,299 371,522,607 
Incremental shares from share-based compensation214,540 79,294 
Weighted average shares used for diluted net income per share computation
594,041,839 371,601,901 
Unvested shares from share based compensation that were anti-dilutive
70,256 220,946 
Weighted average partnership common units convertible to common shares that were anti-dilutive
1,060,709 463,119 
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16.    Supplemental Disclosures of Cash Flow Information
The following table summarizes our supplemental cash flow information during the periods indicated below (dollars in thousands):
Three months ended March 31,
20222021
Supplemental disclosures:
Cash paid for interest$118,187 $94,825 
Cash paid for income taxes$12,318 $3,444 
Non-cash activities:
Net increase in fair value of derivatives$85,032 $48,171 
The following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands):
March 31, 2022March 31, 2021
Cash and cash equivalents shown in the consolidated balance sheets
$151,624 $183,984 
Restricted escrow deposits (1)
84,066 7,776 
Impounds related to mortgages payable (1)
7,160 1,570 
Total cash, cash equivalents, and restricted cash shown in the consolidated
statements of cash flows
$242,850 $193,330 
(1)  Included within other assets, net on the consolidated balance sheets (see note 4). These amounts consist of cash that we are legally entitled to, but that is not immediately available to us. As a result, these amounts were considered restricted as of the dates presented.
17.    Segment Information
We evaluate performance and make resource allocation decisions on an industry by industry basis. For financial reporting purposes, we have grouped our clients into 70 activity segments. All of the properties are incorporated into one of the applicable segments. Unless otherwise specified, all segments listed below are located within the U.S. Because almost all of our leases require our clients to pay or reimburse us for operating expenses, rental revenue is the only component of segment profit and loss we measure. Our investments in industries outside of the U.S. are managed as separate operating segments.
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The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective clients (dollars in thousands):
Assets, as of:March 31, 2022December 31, 2021
Segment net real estate:  
Automotive service$894,082 $852,151 
Beverages360,894 362,570 
Convenience stores - U.S.2,896,397 2,844,800 
Dollar stores2,296,944 2,303,906 
Drug stores2,141,458 2,182,432 
Financial services565,437 576,065 
General merchandise - U.S.1,304,448 1,289,735 
Grocery stores - U.S. (1)
1,590,169 1,517,237 
Grocery stores - U.K. (1)
2,004,833 1,963,057 
Health and fitness1,303,126 1,325,932 
Health care - U.S.671,638 670,864 
Home furnishings - U.S.715,142 583,564 
Home improvement - U.S.956,195 946,870 
Home improvement - U.K.846,093 780,308 
Restaurants - casual dining1,988,707 2,016,017 
Restaurants - quick service - U.S.2,681,001 2,689,806 
Theaters - U.S.738,894 750,877 
Transportation services1,039,295 1,039,220 
Wholesale club873,026 865,658 
Other non-reportable segments6,848,753 6,427,803 
Total net real estate$32,716,532 $31,988,872 
Intangible assets:
Automotive service123,378 125,543 
Beverages17,077 17,452 
Convenience stores - U.S.255,578 275,548 
Dollar stores348,709 366,319 
Drug stores345,852 355,779 
Financial services87,572 92,986 
General merchandise - U.S.251,379 254,343 
Grocery stores - U.S. (1)
370,607 378,181 
Grocery stores - U.K. (1)
443,576 426,714 
Health and fitness118,271 125,586 
Health care - U.S.100,396 103,143 
Home furnishings - U.S.203,480 210,654 
Home improvement - U.S.206,915 207,637 
Home improvement - U.K.158,519 158,667 
Restaurants - casual dining402,818 416,653 
Restaurants - quick service - U.S.247,549 270,092 
Theaters - U.S.32,369 33,527 
Transportation services119,598 125,971 
Wholesale club156,165 155,032 
Other non-reportable segments1,202,826 1,176,298 
Goodwill (2)
3,711,981 3,676,705 
Other corporate assets2,440,870 2,195,800 
Total assets$44,062,017 $43,137,502 
(1) As of March 31, 2022, grocery stores - Spain was not a reportable segment.
(2) Goodwill has not yet been allocated to our individual operating segments; the allocation is pending the finalization of our purchase accounting.
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Three months ended March 31,
Revenue20222021
Segment rental revenue:
Automotive service$20,395 $9,918 
Beverages9,535 8,952 
Convenience stores - U.S.65,943 50,128 
Dollar stores54,114 32,506 
Drug stores47,699 35,048 
Financial services13,834 7,718 
General merchandise - U.S.26,288 15,234 
Grocery stores - U.S. (1)
36,267 19,681 
Grocery stores - U.K. (1)
34,147 20,858 
Health and fitness35,810 28,610 
Health care - U.S.13,749 6,522 
Home furnishings - U.S.17,180 2,956 
Home improvement - U.S.22,086 13,038 
Home improvement - U.K.15,748 4,478 
Restaurants - casual dining47,510 11,748 
Restaurants - quick service - U.S.55,524 23,465 
Theaters - U.S.34,173 19,656 
Transportation services24,251 16,432 
Wholesale club18,663 9,941 
Other non-reportable segments and contractually obligated reimbursements by our clients
206,649 102,476 
Rental (including reimbursable)799,565 439,365 
Other7,778 2,889 
Total revenue$807,343 $442,254 
(1) As of March 31, 2022, grocery stores - Spain was not a reportable segment.
18.    Common Stock Incentive Plan
In March 2021, our Board of Directors adopted, and in May 2021, stockholders approved, the Realty Income 2021 Incentive Award Plan, or 2021 Plan. This note should be read in conjunction with the more complete discussion of our 2021 Plan included in note 16 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021
The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income and comprehensive income was $5.0 million and $3.7 million during the three months ended March 31, 2022, and 2021, respectively.
A.    Restricted Stock
During the three months ended March 31, 2022, we granted 110,426 shares of common stock under the 2021 Plan.
As of March 31, 2022, the remaining unamortized share-based compensation expense related to restricted stock totaled $15.1 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and conditions of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.
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B.    Performance Shares and Restricted Stock Units
During the three months ended March 31, 2022, we granted 154,840 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our Total Shareholder Return (TSR) performance relative to select industry indices and peer groups as well as achievement of certain operating metrics, and vest 50% on the first and second January 1 after the end of the three-year performance period, subject to continued service.
During the three months ended March 31, 2022, we also granted 24,456 restricted stock units, all of which vest over a four-year service period. These restricted stock units have the same economic rights as shares of restricted stock.
As of March 31, 2022, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $27.6 million. The fair value of the performance shares were estimated on the date of grant using a Monte Carlo Simulation model. The performance shares are being recognized on a tranche-by-tranche basis over the service period. The amount of share-based compensation for the restricted stock units is based on the fair value of our common stock at the grant date. The expense amortization period for restricted stock units is the lesser of the four-year service period or the period over which the awardee reaches the qualifying retirement age. For employees who have already met the qualifying retirement age, restricted stock units are fully expensed at the grant date.
C.    Stock Options
We did not grant any stock options during the first three months ended March 31, 2022. During the three months ended March 31, 2022, we recorded $47,000 of expense related to stock options. There was no comparable expense for the three months ended March 31, 2021. As of March 31, 2022, there was no unamortized expense relating to our outstanding stock options.
19.    Commitments and Contingencies
In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.
At March 31, 2022, we had commitments of $55.0 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of March 31, 2022, we had committed $485.7 million under construction contracts related to development projects, which is expected to be paid in the next twelve months.
In anticipation of entering into the agreements related to the private placement offering (see note 20, Subsequent Events) in March 2022, we entered into an indemnity agreement with the investors to reimburse for certain transaction related costs associated with the private placement should the notes ultimately not be issued. As of March 31, 2022, we have not recognized any liability associated with the guarantee as the current exposure was insignificant and the likelihood of ultimately incurring a loss was remote.
20.    Subsequent Events
A.    Dividends
In April 2022, we declared a dividend of $0.2470 per share to our common stockholders, which will be paid in May 2022.
B.     Credit Facility Amendment
In April 2022, we amended and restated our unsecured revolving credit facility to increase the borrowing capacity to $4.25 billion and to extend the initial term to June 2026, among other things. The amended and restated credit facility is otherwise substantively consistent with the prior credit agreement entered into in August 2019.
C.     Private Placement Offering
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%.
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
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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:
2022 Dividend increases
Month
Declared
Month
Paid
Dividend
per share
Increase
per share
1st increaseDec 2021Jan 2022$0.2465 $0.0005 
2nd increaseMar 2022Apr 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 $69.30 on March 31, 2022. Although we expect to continue our policy of paying monthly dividends, we cannot guarantee that we will maintain our current level of dividends, that we will continue our pattern of increasing dividends per share, or what our actual dividend yield will be in any future period.
Acquisitions During the Three Months Ended March 31, 2022
Below is a listing of our acquisitions in the U.S. and Europe for the periods indicated below:
Number of
Properties
Leasable
Square Feet
(in thousands)
Investment
($ in millions)
Weighted
Average
Lease Term
(Years)
Initial
Average
Cash Lease
Yield (1)
Three months ended March 31, 2022 (2)
Acquisitions - U.S.139 2,627 $629.8 15.0 5.7 %
Acquisitions - Europe21 2,772 794.2 8.9 5.5 %
Total acquisitions160 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
20222021
Total revenue$807.3$442.382.5 %
Net income available to common stockholders (1)
$199.4$95.9107.9 %
Net income per share (2)
$0.34$0.2630.8 %
Funds from operations available to common stockholders ("FFO")$601.4$267.7124.7 %
FFO per share (2)
$1.01$0.7240.3 %
Normalized funds from operations available to common stockholders ("Normalized FFO")$607.9$267.7127.1 %
Normalized FFO per share (2)
$1.02$0.7241.7 %
Adjusted funds from operations available to common stockholders ("AFFO")$580.1$318.282.3 %
AFFO per share (2)
$0.98$0.8614.0 %
(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 Denomination)Carrying Value (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 costs212 
$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):
Year of
Maturity
Credit Facility and Commercial Paper Program (1)
Senior Unsecured Notes and
Bonds (2)
Term
Loan (3)
Mortgages
Payable (4)
Interest (5)
Ground
Leases Paid by
Realty Income (6)
Ground
Leases Paid by
Our Clients (7)
Other (8)
Totals
2022$950.0 $— $— $227.5 $352.4 $6.9 $23.0 $517.4 $2,077.2 
2023569.6 — — 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,$ Increase
20222021
REVENUE
Rental (excluding reimbursable)
$755,562$417,688 $337,874 
Rental (reimbursable)
44,00321,677 22,326 
Other
7,7782,889 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)
20222021$ Change
Properties acquired during 2022 & 20211,235 29,069,157 $98,518 $5,049 $93,469 
Same store rental revenue9,728 169,816,153 629,886 605,266 24,620 
Orion Divestiture92 10,093,123 413 44,197 (43,784)
Constant currency adjustment (2)
N/AN/A1,215 1,225 (10)
Properties sold prior to 2022318 6,615,724 627 12,851 (12,224)
Straight-line rent and other non-cash adjustmentsN/AN/A8,252 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/AN/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 $1.0 million in the three months ended March 31, 2021. We anticipate percentage rent to be less than 1% of rental revenue for 2022.
At March 31, 2022, our portfolio of 11,288 properties was 98.6% leased with 156 properties available for lease, as compared to 98.5% leased, with 164 properties available for lease at December 31, 2021, and 98.0% leased with 131 properties available for lease at March 31, 2021. It has been our experience that approximately 1% to 4% of our property portfolio will be unleased at any given time; however, it is possible that the number of properties available for lease or sale could increase in the future, given the nature of economic cycles and other unforeseen global events, such as the ongoing COVID-19 pandemic and the measures taken to limit its spread.
Rental Revenue (reimbursable)
A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses. The increase in contractually obligated reimbursements by our clients in the periods presented is primarily due to the growth of our portfolio due to acquisitions.
Other Revenue
Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms.
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Total Expenses
The following summarizes our total expenses (dollars in thousands):
Three months ended March 31,$ Increase
20222021
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 administrative32,699 20,796 11,903 
Provisions for impairment
7,038 2,720 4,318 
Merger and integration-related costs6,519 — 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,
20222021
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 costs3,123 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 obligation322 77 
Interest on deferred financing leases13 — 
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,
20222021
Total provisions for impairment$7.0 $2.7 
Number of properties:
Classified as held for sale18 
Classified as held for investment— 
Sold16 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,
20222021
Number of properties sold34 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,% Increase
20222021
Net income available to common stockholders
$199.4$95.9107.9 %
Net income per share (1)
$0.34$0.2630.8 %
(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,
20222021
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 costs6,519 — 
Gain on sales of real estate
(10,156)(8,401)
Foreign currency and derivative (gains) losses, net590 (804)
Proportionate share of adjustments for unconsolidated entities1,092 — 
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 costs86,006 — 
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,% Increase
20222021
FFO available to common stockholders
$601.4$267.7124.7 %
FFO per share (1)
$1.01$0.7240.3 %
Normalized FFO available to common stockholders
$607.9$267.7127.1 %
Normalized FFO per share (1)
$1.02$0.7241.7 %
(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,
20222021
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 entities2,235 — 
FFO adjustments allocable to noncontrolling interests(354)(166)
FFO available to common stockholders
$601,416 $267,707 
FFO allocable to dilutive noncontrolling interests808 — 
Diluted FFO$602,224 $267,707 
FFO available to common stockholders
$601,416 $267,707 
Merger and integration-related costs6,519 — 
Normalized FFO available to common stockholders$607,935 $267,707 
Normalized FFO allocable to dilutive noncontrolling interests808 — 
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:
Basic593,827,299 371,522,607 
Diluted595,102,548 371,601,901 
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,% Increase
20222021
AFFO available to common stockholders
$580.1$318.282.3 %
AFFO per share (1)
$0.98$0.8614.0 %
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(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,
20222021
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 stockholders607,935 267,707 
Loss on extinguishment of debt— 46,473 
Amortization of share-based compensation5,002 3,697 
Amortization of net debt premiums and deferred financing costs (2)
(17,096)1,385 
Loss on interest rate swaps722 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, net13,642 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 interests820 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:
Basic593,827,299 371,522,607 
Diluted595,102,548 372,065,020 
(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,
2022
Dec 31,
2021
Dec 31,
2020
Dec 31,
2019
Dec 31,
2018
U.S.
Aerospace0.4%0.4%0.6%0.8%0.9%
Apparel stores1.51.51.31.11.2
Automotive collision services1.01.01.11.00.9
Automotive parts1.51.51.61.61.7
Automotive service3.33.22.72.62.3
Automotive tire services1.61.82.02.12.3
Beverages1.31.32.12.02.4
Child care1.51.52.12.12.2
Consumer electronics0.60.60.30.30.3
Consumer goods0.70.70.60.60.7
Convenience stores9.19.111.912.312.6
Crafts and novelties1.01.00.90.60.6
Diversified industrial1.11.00.80.70.8
Dollar stores7.47.57.67.97.3
Drug stores6.46.68.28.89.4
Education0.10.10.20.20.3
Energy0.40.4
Entertainment0.90.80.30.30.3
Equipment services0.30.30.30.40.4
Financial services2.02.01.82.02.4
Food processing0.70.70.70.70.5
General merchandise3.43.53.42.52.1
Government services**0.60.70.9
Grocery stores4.94.94.95.25.0
Health and beauty0.20.20.20.20.2
Health and fitness4.64.76.77.07.1
Health care1.81.91.51.61.6
Home furnishings2.52.20.70.80.8
Home improvement3.03.13.12.92.8
Machinery0.10.10.10.10.1
Motor vehicle dealerships1.21.31.61.61.8
Office supplies0.20.20.10.20.2
Other manufacturing0.50.50.40.60.7
Packaging0.60.60.90.81.0
Paper**0.10.10.1
Pet supplies and services1.00.90.70.70.5
Restaurants - casual dining5.85.92.83.23.3
Restaurants - quick service6.56.55.35.86.3
Shoe stores0.20.20.20.20.5
Sporting goods1.41.50.70.80.9
Telecommunications0.10.10.50.50.6
Theaters3.33.45.66.15.3
Transportation services3.33.43.94.35.0
Wholesale clubs2.52.52.42.52.9
Other0.70.90.30.80.8
Total U.S.90.6%91.5%93.8%97.3%100.0%
Europe (1)
Grocery stores5.55.34.92.7
Health care0.10.10.1
Home improvement2.02.01.2
Warehousing and storage0.20.2
Other1.60.9**
Total Europe9.4%8.5%6.2%2.7%—%
Totals100.0%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):
Property Type
Number of
Properties
Approximate
Leasable
Square Feet (1)
Total Portfolio Annualized Contractual RentPercentage of Total Portfolio Annualized Contractual Rent
Retail
10,967138,843,400$2,506,807 83.6 %
Industrial
29872,849,200431,852 14.4 
Other (2)
232,201,00057,745 2.0 
Totals
11,288213,893,600$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: 
Client
Number of
Leases
Percentage of Total Portfolio Annualized Contractual Rent (1)
Walgreens338 4.0 %
7-Eleven627 3.9 %
Dollar General1,272 3.9 %
Dollar Tree / Family Dollar1,022 3.5 %
FedEx80 2.9 %
LA Fitness79 2.4 %
Sainsbury's26 2.2 %
BJ's Wholesale Clubs32 1.9 %
CVS Pharmacy183 1.8 %
Wal-Mart / Sam's Club65 1.7 %
AMC Theatres35 1.6 %
B&Q (Kingfisher)25 1.6 %
Regal Cinemas (Cineworld)41 1.5 %
Red Lobster201 1.5 %
Tesco16 1.5 %
Tractor Supply160 1.4 %
Lifetime Fitness16 1.4 %
Home Depot29 1.2 %
Fas Mart (GPM Investments)261 1.0 %
Circle K (Couche-Tard)253 1.0 %
Total4,76142.2 %
(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
Leases
Approximate
Leasable
Square Feet
Total Portfolio Annualized Contractual RentPercentage of Total Portfolio Annualized Contractual Rent
Year
Retail
Non-Retail
2022278113,632,900 $49,642 1.8 %
20237562811,488,900 144,672 4.8 
20246713113,443,300 153,759 5.1 
20258123413,690,000 193,912 6.5 
20267543215,420,500 177,284 5.9 
202712103120,916,600 241,978 8.1 
20289763318,754,100 227,455 7.6 
20298271617,396,700 214,227 7.1 
20305071714,217,400 163,226 5.4 
20314353620,035,100 229,907 7.7 
2032602159,422,000 175,515 5.9 
20335131311,893,600 153,254 5.1 
203450459,377,400 192,605 6.4 
203537934,290,300 99,117 3.3 
203638166,577,100 123,353 4.1 
2037 - 20591,5553020,667,500 456,498 15.2 
Totals11,160341211,223,400 $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.

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Geographic Diversification
The following table sets forth certain state-by-state information regarding our property portfolio as of March 31, 2022 (dollars in thousands):
Location
Number of
Properties
Percent Leased
Approximate
Leasable
Square Feet
Percentage of Total Portfolio Annualized Contractual Rent
Alabama
38496 %4,122,4002.0 %
Alaska
6100 299,7000.1 
Arizona
228100 3,496,0001.9 
Arkansas
22699 2,453,0001.1 
California
32399 11,326,4006.4 
Colorado
15898 2,570,8001.5 
Connecticut
27100 1,244,6000.5 
Delaware
26100 192,0000.2 
Florida
70299 9,515,8005.3 
Georgia
49499 7,997,7003.6 
Hawaii22100 47,8000.2 
Idaho
27100 189,1000.1 
Illinois
46298 11,796,1005.0 
Indiana
38799 6,701,9002.9 
Iowa
8998 3,501,8001.0 
Kansas
173100 4,465,6001.2 
Kentucky
17297 3,413,8001.3 
Louisiana
30899 4,888,7002.2 
Maine
5598 1,008,3000.5 
Maryland
7396 2,748,0001.3 
Massachusetts
9199 3,109,4001.4 
Michigan
45098 5,303,0002.8 
Minnesota
230100 3,495,2002.0 
Mississippi
275100 4,156,0001.4 
Missouri
34399 4,736,9002.0 
Montana
21100 204,5000.1 
Nebraska
7599 1,013,0000.4 
Nevada
72100 2,638,2001.0 
New Hampshire
30100 567,9000.4 
New Jersey
14298 2,233,3001.8 
New Mexico
10299 1,299,2000.7 
New York
24199 4,315,4003.2 
North Carolina
37799 7,692,0003.2 
North Dakota
2286 352,3000.2 
Ohio
66398 15,126,7004.6 
Oklahoma
28698 3,958,9001.8 
Oregon
4298 658,9000.4 
Pennsylvania
33099 5,861,4002.8 
Rhode Island
786 109,8000.1 
South Carolina
28599 3,912,7002.0 
South Dakota
29100 428,4000.2 
Tennessee
37498 6,475,4002.6 
Texas
145098 23,908,10010.7 
Utah
36100 1,529,5000.5 
Vermont
7100 134,9000.1 
Virginia
34797 5,918,8002.5 
Washington
7799 1,711,9000.9 
West Virginia
74100 726,0000.4 
Wisconsin
245100 4,444,4001.9 
Wyoming
23100 157,7000.1 
Puerto Rico
6100 59,4000.1 
Spain43100 2,492,0000.7 
U.K.
151100 13,182,9008.7 
Totals/average
11,28899 %213,893,600100.0 %
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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.
Item 3:    Quantitative and Qualitative Disclosures about Market Risk
We are exposed to economic risks from interest rates and foreign currency exchange rates. A portion of these risks is hedged, but the risks may affect our financial statements.
Interest Rates
We are exposed to interest rate changes primarily as a result of our credit facility and commercial paper program, term loan, mortgages payable, and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower our overall borrowing costs. To achieve these objectives, we issue long-term notes and bonds, primarily at fixed rates.

In order to mitigate and manage the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, interest rate locks and caps. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks, including counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. To limit counterparty credit risk, we will seek to enter into such agreements with major financial institutions with favorable credit ratings. There can be no assurance that we will be able to adequately protect against the foregoing risks or realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging activities. We do not enter into any derivative transactions for speculative or trading purposes.
The following table presents, by year of expected maturity, the principal amounts, average interest rates and estimated fair values of our fixed and variable rate debt as of March 31, 2022. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):
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Expected Maturity Data
Year of Maturity
Fixed rate
debt
Weighted average rate
on fixed rate debt
Variable rate
debt
Weighted average rate
on variable rate debt
2022$227.54.72 %$950.0 0.83 %
202362.14.45 569.6 3.12 
20241,833.04.48 — — 
20251,090.84.22 — — 
20261,576.23.72 — — 
Thereafter
9,386.32.93 — — 
Totals (1)
$14,175.93.35 %$1,519.6 1.69 %
Fair Value (2)
$13,963.8$1,519.6 
(1)Excludes net premiums recorded on mortgages payable, net premiums recorded on notes payable and deferred financing costs on mortgages payable, notes payable, and our term loan. At March 31, 2022, the unamortized balance of net premiums on mortgages payable is $25.0 million, the unamortized balance of net premiums on notes payable is $272.7 million, and the balance of deferred financing costs on mortgages payable is $713,000, on notes payable is $60.6 million, and on the term loan is $394,000.
(2)We base the estimated fair value of the publicly-traded fixed rate senior notes and bonds at March 31, 2022, on the indicative market prices and recent trading activity of our senior notes and bonds payable. We base the estimated fair value of our fixed rate mortgages and private senior notes payable at March 31, 2022, on the relevant forward interest rate curve, plus an applicable credit-adjusted spread. We believe that the carrying values of the line of credit and commercial paper borrowings and term loan balance reasonably approximate their estimated fair values at March 31, 2022.
The table above incorporates only those exposures that exist as of March 31, 2022. It does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss, with respect to interest rate fluctuations, would depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates.
At March 31, 2022, our outstanding notes, bonds and mortgages payable had fixed interest rates. Interest on our credit facility and commercial paper borrowings and term loan balance is variable. However, the variable interest rate feature on our term loan has been mitigated by an interest rate swap agreement. Based on our revolving credit facility balance of $569.6 million at March 31, 2022, a 1% change in interest rates would change our interest rate costs by $5.7 million per year.
Foreign Currency Exchange Rates
We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments. Foreign currency market risk is the possibility that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates. We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge. We continuously evaluate and manage our foreign currency risk through the use of derivative financial instruments, including cross-currency swaps, currency exchange swaps, foreign currency collars, and foreign currency forward contracts with financial counterparties where practicable. Such derivative instruments are viewed as risk management tools and are not used for speculative or trading purposes.
Item 4:    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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As of and for the quarter ended March 31, 2022, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer.
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2022 our disclosure controls and procedures were effective and were operating at a reasonable assurance level.
Changes in Internal Controls
As a result of our merger with VEREIT in November 2021, we are operating two separate enterprise resource planning (ERP) systems to generate our financial statements. In 2022, we plan to integrate these two ERP platforms into one primary system. We have updated our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes for these parallel ERP systems, as we work towards enhanced automated controls through a central platform. Except as described above, there have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
PART II.    OTHER INFORMATION
Item 1A. Risk Factors
You should carefully consider the risks described in "Item 1A, Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
The following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plan of Realty Income Corporation:
47,916 shares of stock, at a weighted average price of $71.59, in January 2022;
23,717 shares of stock, at a weighted average price of $66.68, in February 2022; and
171 shares of stock, at a weighted average price of $65.94, in March 2022.
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Item 6:        Exhibits
Exhibit No.Description
Articles of Incorporation and Bylaws
2.1
2.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
Instruments defining the rights of security holders, including indentures
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
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4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
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4.37
4.38
4.39
4.40
4.41
4.42
4.43
4.44
4.45
4.46
4.47
4.48
4.49
4.50
4.51
4.52
4.53
4.54
4.55
4.56
Material Contracts
10.1+
10.2+
10.3+
10.4+
10.5
Certifications
*31.1
*31.2
*32
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Interactive Data Files
*101
The following materials from Realty Income Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2022 formatted in Inline Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.
*104
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline Extensible Business Reporting Language.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
REALTY INCOME CORPORATION
Date: May 5, 2022
/s/ SEAN P. NUGENT
Sean P. Nugent
Senior Vice President, Controller and Principal Accounting Officer
(Principal Accounting Officer)
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