Realty Income (O) 10-K risk factor changes: FY2020 vs FY2019

This “Risk Factors” section contains references to our “capital stock” and to our “stockholders.” Unless expressly stated otherwise, the references to our “capital stock” represent our common stock and any class or series of [removed: our] [added: outstanding] preferred stock, while the references to our “stockholders” represent holders of our common stock and any class or series of [removed: our] [added: outstanding] preferred stock.

[removed: | • |] [added: -] Businesses; [removed: |]

[removed: | • |] [added: -] Individuals; [removed: |]

[removed: | • |] [added: -] Fiduciary accounts and plans; and [removed: |]

[removed: | • |] [added: -] Other entities engaged in real estate investment and financing. [removed: |]

Negative market conditions or adverse events affecting our existing or potential [removed: tenants,] [added: clients,] or the industries in which they operate, could have an adverse impact on our ability to attract new [removed: tenants,] [added: clients,] re-lease space, collect rent or renew leases, which could adversely affect our cash flow from operations and inhibit growth.

Cash flow from operations depends in part on our ability to lease space to [removed: tenants] [added: our clients] on economically favorable [removed: terms.][added: terms and to collect rent from our clients on a timely basis.]

[removed: | • |] [added: -] Lack of demand in areas where our properties are located; [removed: |]

[removed: | • |] [added: -] Inability to retain existing [removed: tenants] [added: clients] and attract new [removed: tenants; |][added: clients;]

[removed: | • |] [added: -] Oversupply of space and changes in market rental rates; [removed: |]

[removed: | • |] [added: -] Declines in our [removed: tenants’] [added: clients’] creditworthiness and ability to pay rent, which may be affected by their operations, economic downturns and competition within their industries from other operators; [removed: |]

[removed: | • |] [added: -] Defaults by and bankruptcies of [removed: tenants,] [added: clients,] failure of [removed: tenants] [added: clients] to pay rent on a timely basis, or failure of [removed: tenants] [added: our clients] to comply with their contractual obligations; [removed: |]

[removed: | • |] [added: -] Economic or physical decline of the areas where the properties are located; and [removed: |]

[removed: | • |] [added: -] Deterioration of physical condition of our properties. [removed: |]

At any time, any [removed: tenant] [added: of our clients] may experience a downturn in its business that may weaken its operating results or overall financial condition.

As a result, a [removed: tenant] [added: client] may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become [removed: insolvent,] [added: insolvent] or declare bankruptcy.

Any [removed: tenant] [added: client] bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in the termination of the [removed: tenant’s] [added: our client’s] lease and material losses to us.

If [removed: tenants] [added: our clients] do not renew their leases as they expire, we may not be able to rent or sell the properties.

Furthermore, leases that are renewed, and some new leases for properties that are re-leased, may have terms that are less economically favorable than expiring lease terms, or may require us to incur significant costs, such as renovations, [removed: tenant improvements,] [added: improvements on behalf of the client] or lease transaction costs.

Any of these events could adversely affect [added: our] cash flow from operations and our ability to make distributions to [added: our] stockholders and service [added: our] indebtedness.

A significant portion of the costs of owning property, such as real estate taxes, [removed: insurance,] [added: insurance] and maintenance, are not necessarily reduced when circumstances cause a decrease in rental revenue from the properties.

In a weakened financial condition, [removed: tenants] [added: our clients] may not be able to pay these costs of ownership and we may be unable to recover these operating expenses from them.

Further, the occurrence of a [removed: tenant] [added: client] bankruptcy or insolvency could diminish the income we receive from [removed: the tenant’s] [added: our client’s] lease or leases.

In addition, a bankruptcy court might authorize [removed: the tenant] [added: our client] to terminate its leases with us.

If that happens, our claim against the bankrupt [removed: tenant] [added: client] for unpaid future rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent we are owed under the leases [added: (although it is possible that we may not receive any unpaid future rent under terminated leases)] or we may elect not to pursue claims against a [removed: tenant] [added: client] for terminated leases.

Moreover, in the case of a [removed: tenant’s] [added: client’s] leases that are not terminated as the result of its bankruptcy, we may be required or elect to reduce the rent payable under those leases or provide other concessions, reducing amounts we receive under those leases.

As a result, [removed: tenant] [added: client] bankruptcies may have a material adverse effect on our results of [removed: operations.][added: operations and financial condition.]

As of December 31, [removed: 2019, 94] [added: 2020, 140] of our properties were available for lease or sale.

[removed: For 2019,] [added: As of December 31, 2020,] our [removed: tenants] [added: clients] in the “convenience [removed: store”] [added: store - U.S.”] industry accounted for approximately 11.9% of our [removed: rental revenue.][added: annualized contractual rent.]

[removed: A downturn in this industry could have a material adverse effect on our financial] position, results of operations, our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock and [added: any outstanding] preferred stock.

Individually, each of the other industries in our property portfolio accounted for less than 10% of our [removed: rental revenue] [added: total portfolio annualized contractual rent] for [removed: 2019.][added: 2020.]

Nevertheless, downturns in these industries could also adversely affect our [removed: tenants,] [added: clients,] which in turn could also have a material adverse effect on our financial position, results of operations and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock, and [added: any outstanding] preferred stock.

In addition, some [removed: of our] properties are leased to [removed: tenants] [added: clients] that may have limited financial and other resources, and therefore, they are more likely to be adversely affected by a downturn in their respective [removed: businesses] [added: businesses, including any downturns that have resulted] or [added: may result from the COVID-19 pandemic, or] in the regional, national, or international economy.

[removed: | • |] [added: -] Our knowledge of the contamination; [removed: |]

[removed: | • |] [added: -] The timing of the contamination; [removed: |]

[removed: | • |] [added: -] The cause of the contamination; or [removed: |]

[removed: | • |] [added: -] The party responsible for the contamination of the property. [removed: |]

Although our leases generally require our [removed: tenants] [added: clients] to operate in compliance with all applicable federal, state, and local environmental laws, ordinances and regulations, and to indemnify us against any environmental liabilities arising from the [removed: tenants’] [added: clients’] activities on the property, we could nevertheless be subject to liability, including strict liability, by virtue of our ownership interest.

There also can be no assurance that our [removed: tenants] [added: clients] could or would satisfy their indemnification obligations under their leases.

[removed: It] [added: In addition, while we have environmental insurance policies that provide for a total limit of $15 million per occurrence and $70 million in the aggregate, it] is possible that our insurance could be insufficient to address any particular environmental situation and/or that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all.

Risks Related to Our Business and Industry

The COVID-19 pandemic has disrupted our operations and is expected to continue to have an adverse effect on our business, results of operations, financial condition and liquidity.

In late 2019, COVID-19 was first reported in Wuhan, China, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

The outbreak has spread globally and has led governments and other authorities around the world, including federal, state and local authorities in the United States and elsewhere, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders.

The COVID-19 pandemic has had, and other pandemics in the future could have, repercussions across global economies and financial markets.

The COVID-19 pandemic and the measures taken to limit its spread have adversely impacted regional, national and global economic activity and have contributed to significant volatility and negative pressure in financial markets.

The impact of the COVID-19 pandemic has been rapidly evolving and, as cases of COVID-19 have continued to increase and be identified, many countries, including the United States and United Kingdom, have reacted by, among other things, instituting quarantines and restricting travel.

Many national, state and local governments, including in areas where we own properties, have also reacted by instituting quarantines, restrictions on travel, shelter-in-place orders, restrictions on types of business that may continue to operate, school closures, limitations on attendance at events or other gatherings, and social distancing requirements, and additional national, state and local governments may implement similar restrictions.

In that regard, surges in COVID-19 cases have led many state and local governments to increase the scope and severity of some of these restrictions and to institute new restrictions.

As a result, the COVID-19 pandemic and the measures taken to limit its spread are negatively impacting the global, national and regional economies generally and many industries, directly or indirectly, and those impacts are likely to continue and may increase in severity, including potentially triggering a prolonged period of negative or limited economic growth.

Factors that have contributed or may contribute to the adverse impact of the COVID-19 pandemic and the measures taken to limit its spread on the business, results of operations, financial condition and liquidity of us and our clients include, without limitation, the following:

- A complete or partial closure of, or other operational limitations or issues at, properties operated by our clients resulting from government action (including travel bans, border closings, business closures, quarantine, shelter-in-place or similar orders requiring that people remain in their homes) or client action;

- Reduced economic activity, the deterioration in our or our clients’ ability to operate in affected areas and any delays in the supply of products or services to our clients may impact certain of our clients’ businesses, results of operations, financial condition and liquidity and may cause certain of our clients to be unable to meet their obligations to us in full, or at all, and to seek, whether through negotiation, restructuring or bankruptcy, reductions or deferrals in their rent payments and other obligations to us or early termination of their leases;

- We may experience difficulties, some of which may be related to unexpected supply chain disruptions, in leasing, selling or redeveloping vacant properties or renewing expiring or terminated leases on terms we consider acceptable, or at all;

- We may experience difficulty accessing the bank lending, capital markets and other financial markets on attractive terms, or at all, and a severe disruption or instability in the national or global financial markets or deterioration in credit and financing conditions may adversely affect our cost of capital, our access to capital to acquire additional properties necessary to grow our business and to fund our business operations, our ability to pay dividends on our common stock, our ability to pay the principal of and interest on our indebtedness, and our other liabilities on a timely basis, and our clients’ ability to fund their business operations and meet their obligations to us and others;

- The financial impact of the COVID-19 pandemic could negatively impact our credit ratings, the interest rates on our borrowings, and, if the COVID-19 pandemic continues for an extended period of time, our future compliance with financial covenants under our credit facility and other debt instruments, which could result in a default and

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potentially an acceleration of indebtedness, any of which could negatively impact our ability to make additional borrowings under our revolving credit facility, to sell commercial paper notes under our commercial paper program or incur other indebtedness, and pay dividends on our common stock and to pay the principal of and interest on our indebtedness, and our other obligations when due;

- The impact of the COVID-19 pandemic on the market value of our properties has led to impairment charges and may require that we incur further impairment charges, asset write-downs or similar charges;

- The impact on the ability of our employees, including members of our management team or board of directors, to fulfill their duties to us as a result of the COVID-19 pandemic, either as a result of measures taken to limit its spread or as a result of infection; and

- A general decline in business activity and demand for real estate transactions could adversely affect our ability to grow our portfolio of properties.

The extent to which the COVID-19 pandemic continues to impact our operations and those of our clients will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or limit its impact, and the direct and indirect economic effects of the pandemic and containment measures.

To date, the COVID-19 pandemic and the measures taken to limit its spread have adversely impacted and may continue to adversely impact, among other things, the ability of a number of our clients’ to generate adequate, or in certain cases, any revenue from their businesses, the ability or willingness of many of our clients to pay rent in full, or at all, or on a timely basis, and our ability to collect rent from our clients.

It may also adversely impact our ability to enforce remedies for the failure to pay rent, our occupancy levels, our ability to acquire properties or complete construction projects, and may otherwise negatively affect our business.

Certain industries in which our clients operate appear to have been disproportionately adversely impacted by the COVID-19 pandemic and the measures taken to mitigate its spread.

These adverse impacts have reduced the amount of rent we have been able to collect from our clients in those industries and may further decrease the likelihood of us collecting such rent in the future.

For example, in October 2020, two major theater operators that are clients of ours publicly announced financial difficulties from the COVID-19 pandemic, including sustained operating losses, the depletion of liquidity resources and the closure of locations.

In response to this information, we have recorded reserves as a reduction of rental revenue on certain theater leases related to those clients on an accrual basis and have recorded provisions for impairment on certain of our assets with respect to properties of which those theater operators are clients to reduce the carrying value of those assets to fair value.

Our ability to collect rent from these clients, from other clients in the theater industry, or from other clients who face similar hardships may be further adversely impacted as the COVID-19 pandemic and its adverse impacts on those clients continue.

In addition, if any of these or other clients declare bankruptcy or enter into similar corporate restructuring arrangements, they may seek to reject or renegotiate our existing leases, which could adversely affect our ability to collect rent that is owed or to collect future rent on those properties at anticipated rates, or at all, or to re-lease those properties on favorable terms.

As of December 31, 2020, our exposure to the theater industry was 5.6% of total portfolio annualized contractual rent.

In addition, most of our clients operate retail businesses that depend on customer traffic.

As a result, conditions that lead to a decline in customer traffic (including quarantine, shelter-in-place or similar orders requiring that people remain in their homes or orders requiring business closures or restricting business operations) have had and so long as those conditions continue to exist will continue to have an adverse effect on the business, results of operations, financial condition and liquidity of a number of our clients, and their willingness or ability to pay rent, to renew expiring leases or to enter into new leases on terms favorable to us, or at all.

In addition to the near-term effects of the COVID-19 pandemic on our clients and their businesses, we are unable to predict at this time the broader long-term impacts on consumer behavior in regard to brick-and-mortar retail and service-based businesses.

To the extent certain adverse factors, including but not limited to, continued patterns of consumer savings and unemployment, persist, certain discretionary businesses could have prolonged negative consequences as a result of shifts in long-term consumer behavior.

As a result of the foregoing, we cannot predict the number of our clients that will not pay rent in the future, nor can we predict whether our clients who have paid rent in the past will continue to do so or whether our clients who have deferred rent will pay such rent in the future.

As the COVID-19 pandemic continues, our clients may cease to pay their rent obligations to us in full or at all, and our clients may elect not to renew their leases, seek to terminate their leases, seek relief from their leases (including through negotiation, restructuring or bankruptcy), or decline to renew expiring leases or enter into new leases, all of which may adversely impact our rental revenue and occupancy rates,

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As of December 31, 2019, 100 of our properties under lease were unoccupied and available for sublease by the tenants, all of which were current with their rent and other obligations.

During 2019, each of our tenants accounted for less than 10% of our rental revenue.

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In addition, we believe we are in compliance in all material respects with all present federal, state, and local laws relating to ACMs.

Nevertheless, if environmental contamination should exist, we could be subject to liability, including strict liability, by virtue of our ownership interest.

Insurance and Indemnity. In March 2018, we entered into a ten-year environmental insurance policy that expires in March 2028, which replaced our previous ten-year environmental insurance policy.

The limits on our current policy are $10 million per occurrence and $60 million in the aggregate.

The limits on the excess policy are $5 million per occurrence and $10 million in the aggregate.

Therefore, the primary and excess ten-year policies together provide a total limit of $15 million per occurrence and $70 million in the aggregate.

It is possible that our insurance could be insufficient to address any particular environmental situation and that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all.

Our tenants are generally responsible for, and indemnify us against, liabilities for environmental matters that occur on our properties.

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Similarly, we may be required to incur or

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| • | Development oriented activities; |

We may be exposed to a variety of new risks by expanding into new property types and properties leased to tenants engaged in non-retail businesses, including risks resulting from our limited experience in managing, underwriting and assessing risks related to such properties or understanding the market dynamics applicable to such properties, tenants or lease structures, any of which could also have a significant adverse effect on our business, liquidity, financial position and/or results of operations.

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LIBOR is the subject of recent proposals for reform.

In 2017, the United Kingdom's Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

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eligible for such tax benefits.

The monthly dividends are supported by the cash flow generated from real estate owned under [removed: long-term,] [added: long-term] net lease agreements with [added: our] commercial [removed: tenants.][added: clients.]

Over the past [removed: 51] [added: 52] years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease [removed: agreements.][added: agreements with our commercial clients.]

[removed: As of February 2020, the] [added: The] company is a member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for [removed: the last] [added: over] 25 consecutive years.

At December 31, [removed: 2019,] [added: 2020,] we owned a diversified portfolio:

[removed: | • |] [added: -] With an occupancy rate of [removed: 98.6%,] [added: 97.9%,] or [removed: 6,389] [added: 6,452] properties leased and [removed: 94] [added: 140] properties available for [removed: lease; |][added: lease or sale;]

[removed: | • | Leased to 301 different commercial tenants doing] [added: - Doing] business in [removed: 50] [added: 51] separate industries; [removed: |]

[removed: | • |] [added: -] Located in 49 U.S. states, Puerto Rico and the United Kingdom (U.K.); [removed: |]

[removed: | • |] [added: -] With approximately [removed: 106.3] [added: 110.8] million square feet of leasable space; [removed: |]

[removed: | • |] [added: -] With a weighted average remaining lease term (excluding rights to extend a lease at the option of [removed: the tenant)] [added: our client)] of approximately [removed: 9.2] [added: 9.0] years; and [removed: |]

[removed: | • |] [added: -] With an average leasable space per property of approximately [removed: 16,393] [added: 16,810] square feet; approximately [removed: 11,800] [added: 12,340] square feet per retail property and [removed: 237,668] [added: 245,270] square feet per industrial property. [removed: |]

Of the [removed: 6,483] [added: 6,592] properties in the portfolio at December 31, [removed: 2019, 6,452,] [added: 2020, 6,555,] or [removed: 99.5%,] [added: 99.4%,] are [removed: single-tenant] [added: single-client] properties, of which [removed: 6,362] [added: 6,419] were leased, and the remaining are [removed: multi-tenant] [added: multi-client] properties.

Unless otherwise specified, references to rental revenue in the Management's Discuss and Analysis of Financial Condition and Results of Operations are exclusive of reimbursements from [removed: tenants] [added: clients] for recoverable real estate taxes and operating expenses totaling [removed: $69.1] [added: $79.4] million, [removed: $47.0] [added: $69.1] million and [removed: $46.1] [added: $47.0] million for [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] respectively.

Over the long term, we believe that common stock should be the majority of our capital structure; however, we may issue [removed: additional] preferred stock or debt securities.

In addition, we may issue common stock to permanently finance properties that were initially financed by our credit [removed: facility] [added: facility, commercial paper program,] or debt securities.

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 [removed: or preferred] stockholders, primarily through cash provided by operating activities, [removed: borrowing] [added: borrowings] on our credit facility and [removed: periodically] [added: under our commercial paper program and] through public securities offerings.

At December 31, [removed: 2019,] [added: 2020,] our total outstanding borrowings of senior unsecured notes and bonds, term [removed: loans,] [added: loan and] mortgages payable [removed: and credit facility borrowings] were [removed: $7.9] [added: $8.85] billion, or approximately [removed: 24.4%] [added: 28.2%] of our total market capitalization of [removed: $32.5] [added: $31.34] billion.

We define our total market capitalization at December 31, [removed: 2019] [added: 2020] as the sum of:

[removed: | • |] [added: -] Shares of our common stock outstanding of [removed: 333,619,106,] [added: 361,303,445,] plus total common units outstanding of 463,119, multiplied by the last reported sales price of our common stock on the NYSE of [removed: $73.63] [added: $62.17] per share on December 31, [removed: 2019,] [added: 2020,] or [removed: $24.6] [added: $22.49] billion; [removed: |]

[removed: | • |] [added: -] Outstanding mortgages payable of [removed: $408.4] [added: $299.6] million, excluding net mortgage premiums of [removed: $3.0] [added: $1.7] million and deferred financing costs of [removed: $1.3 million; |][added: $973,000;]

[removed: | • |] [added: -] Outstanding borrowings of [removed: $500.0] [added: $250.0] million on our term [removed: loans,] [added: loan,] excluding deferred financing costs of [removed: $956,000; and |][added: $642,000;]

[removed: | • |] [added: -] Outstanding senior unsecured notes and bonds of [removed: $6.3] [added: $8.30] billion, [added: including Sterling-denominated notes of £715.0 million, and] excluding unamortized net original issuance premiums of [removed: $6.3] [added: $14.6] million and deferred financing costs of [removed: $35.9 million. |][added: $49.2 million; and]

At-the-Market (ATM) [removed: Programs][added: Program]

Under our [removed: ATM] [added: "at-the-market"] equity distribution plan, or our ATM program, [removed: pursuant to which] up to 33,402,405 [removed: additional] 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.

At December 31, [removed: 2019,] [added: 2020,] we had [removed: 33,402,405] [added: 15,678,031] shares remaining for future issuance under our current ATM program.

We anticipate maintaining the availability of our ATM program in the future, including [removed: through replenishing] the [added: replenishment of] authorized shares issuable thereunder.

| | [added: | |] Year [removed: Ended] [added: ended] December 31, | | | | | | | [added: | | | | | | | |]

| | [added: | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | |

We did not issue shares under the waiver approval process during [removed: 2019 or 2018.][added: 2020.]

At December 31, [removed: 2019,] [added: 2020,] we had [removed: 11,652,668] [added: 11,503,379] shares remaining for future issuance under our DRSPP program.

Revolving Credit [removed: Facility][added: Facility and Commercial Paper Program]

[removed: Our credit facility consists of] [added: 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 [removed: extensions and a $250.0 million unsecured term loan due March 2024.][added: extensions.]

The [removed: unsecured] [added: multicurrency] revolving [removed: credit] facility allows us to borrow in up to 14 currencies, including U.S. [removed: dollars, and has a $1.0 billion expansion option.][added: dollars.]

Under our [added: revolving] credit facility, our investment grade credit ratings as of December 31, [removed: 2019] [added: 2020] 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 [removed: drawn] pricing of 0.90% over LIBOR.

At December 31, [removed: 2019,] [added: 2020,] we had [removed: a borrowing capacity of $2.3 billion available] [added: no outstanding borrowings] on our revolving credit facility and [removed: an outstanding balance] [added: available borrowing capacity] of [removed: $704.3 million, including £169.2 million Sterling.][added: $3.0 billion.]

The weighted average interest rate on borrowings [removed: outstanding] under our revolving credit facility during [removed: 2019] [added: 2020] was [removed: 3.1%] [added: 1.5%] per annum.

At December 31, [removed: 2019,] [added: 2020,] we were in compliance with these covenants.

We generally use our credit facility [added: and commercial paper borrowings] for the short-term financing of new property acquisitions.

We regularly review our credit facility and [added: commercial paper program and] may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

In October 2018, in conjunction with [added: entering into] our [added: revolving] credit facility, we entered into a $250.0 million senior unsecured term loan, which matures in March [removed: 2024.][added: 2024, and is governed by the credit agreement that governs our revolving credit facility.]

In June 2015, in conjunction with entering into our previous [added: revolving] credit facility, we entered into a $250.0 million senior unsecured term loan [removed: maturing] [added: which matured in] June 2020.

We refer to our tenants as clients because we strive to build mutually beneficial relationships and we believe their success is our success.

- Of 6,592 properties;

In addition, references to reserves recorded as a reduction of rental revenue include amounts reserved for in the current period, as well as unrecognized contractual rental revenue and unrecognized straight-line rental revenue for leases accounted for on a cash basis.

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- No borrowings outstanding on our revolving credit facility.

During 2020, we issued 17,724,374 shares and raised approximately $1.09 billion of gross proceeds under the ATM program.

Issuances of Common Stock

In March 2020, we issued 9,690,500 shares of common stock in an overnight underwritten public offering, including 690,500 shares purchased by the underwriters upon exercise of their option to purchase additional shares.

After deducting underwriting discounts and other offering costs of $21.2 million, the net proceeds of $728.9 million were primarily used to repay borrowings under our revolving credit facility.

In January 2021, we issued 12,075,000 shares of common stock in an overnight underwritten public offering, including 1,575,000 shares purchased by the underwriters upon exercise of their option to purchase additional shares. The company used the net proceeds from the offering, along with available cash and additional borrowings, to fund property acquisitions and for general corporate purposes and working capital.

During 2020, we issued 149,289 shares and raised approximately $9.1

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million under our DRSPP.

Our revolving credit facility has a $1.0 billion expansion option, which is subject to obtaining lender commitments.

In August 2020, we established a U.S. dollar-denominated unsecured commercial paper program.

Under the terms of the program we may, from time to time, 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 December 31, 2020, we had no outstanding commercial paper borrowings.

The weighted average interest rate on borrowings under our commercial paper program was 0.3% from inception of the plan through December 31, 2020.

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.

In June 2020, we repaid the term loan in full upon maturity.

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| --- | --- | --- | --- | --- | --- |

| 0.750% notes, issues December 2020 and due in March 2026 | | | 325 | | |

| 1.625% notes, issued in October 2020 and due December 2030 (2) | | | 547 | | |

| 3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031 | | | 950 | | |

| 1.800% notes, issued in December 2020 and due in March 2033 | | | 400 | | |

| | | | $ | 8,268 | |

(1) In January 2021, we completed the early redemption on all $950.0 million in principal amount of our outstanding 3.250% notes due October 2022, plus accrued and unpaid interest.

During the year ended December 31, 2020 we issued the following notes and bonds (in millions):

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2020 Issuances | | | | | | Date of Issuance | | | | | | Maturity date | | | | | | Principal amount issued | | | | | | Price of par value | | | | | | Effective yield to maturity | | |

| 3.250% notes | | | | | | May 2020 | | | | | | January 2031 | | | | | | $600 | | | | | | 98.99 | | % | | | | 3.36% | | |

| 3.250% notes | | | | | | July 2020 | | | | | | January 2031 | | | | | | $350 | | | | | | 108.24 | | % | | | | 2.34% | | |

| 1.625% notes | | | | | | October 2020 | | | | | | December 2030 | | | | | | £400 | | | | | | 99.19 | | % | | | | 1.71% | | |

| | |

| --- | --- |

| • | Of 6,483 properties; |

\- 35\-

| • | Outstanding borrowings of $704.3 million on our credit facility, including £169.2 million Sterling; |

The following table outlines the common stock issuance pursuant to our ATM program (dollars in millions):

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Shares of common stock issued under the ATM program | 17,051,456 | | | | 19,138,610 | | |

| Gross proceeds | $ | 1,274.5 | | | $ | 1,125.4 | |

\- 36\-

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

| Shares of common stock issued under the DRSPP program | 117,522 | | | | 166,268 | | |

| Gross proceeds | $ | 8.4 | | | $ | 9.1 | |

In August 2019, we amended and restated our unsecured credit facility, or our credit facility, in order to allow borrowings in multiple currencies.

The amended and restated credit facility is otherwise substantively consistent with the prior credit agreement entered into in October 2018.

The terms of this term loan were not impacted by the amendment and restatement of our credit agreement in August 2019.

In January 2013, in conjunction with our acquisition of American Realty Capital Trust, Inc., or ARCT, we entered into a $70.0 million senior unsecured term loan with an initial maturity date of January 2018.

Borrowing under this term loan bore interest at the current one-month LIBOR, plus 1.10%.

In conjunction with this term loan, we also entered into an interest rate swap, which, until its termination in January 2018, effectively fixed our per annum interest rate on this term loan at 2.05%.

In 2018, we entered into two separate six–month extensions of this loan, during which periods the interest was borne at the current one–month LIBOR, plus 0.90%.

In January 2019, we paid off the outstanding principal and interest on this term loan.

\- 37\-

| | | | |

| --- | --- | --- | --- |

| 5.750% notes, issued in June 2010 and due in January 2021 | $ | 250 | |

| | $ | 6,288 | |

In May 2019, we issued £315.0 million Sterling of 2.730% senior unsecured notes due 2034 through a private placement.

In June 2019, we issued $500.0 million of 3.250% senior unsecured notes due 2029, or the 2029 Notes.

The public offering price for the 2029 Notes was 99.36% of the principal amount, for an effective yield to maturity of 3.326% and net proceeds of approximately $492.2 million.

\- 38\-

our Debt since the first day of such four-quarter period, and (iii) any acquisition or disposition by us of any asset or group since the first day of such four quarters had in each case occurred on January 1, 2019, and subject to certain additional adjustments.

| Net income attributable to the Company | $ | 436,482 | |

Authorized Shares

In May 2019, our stockholders approved an increase in the number of authorized shares of our common stock under our articles of incorporation to 740,200,000 from 370,100,000.

\- 39\-

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2020 | $ | — | | | $ | — | | | $ | 250.0 | | | $ | 84.2 | | | $ | 286.7 | | | $ | 1.6 | | | $ | 13.5 | | | $ | 22.5 | | | $ | 658.5 | |

| 2021 | — | | | | 250.0 | | | | — | | | | 68.8 | | | | 269.7 | | | | 1.4 | | | | 13.3 | | | | — | | | | 603.2 | | |

We are exposed to interest rate changes primarily as a result of our credit [removed: facility,] [added: facility and commercial paper program,] term [removed: loans,] [added: loan,] mortgages payable, and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations.

To achieve these [removed: objectives] [added: 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 [removed: swaps] [added: swaps, interest rate locks] and caps.

The following table [removed: presents] [added: presents,] by year of expected maturity, the principal amounts, average interest rates and estimated fair values of our fixed [removed: and variable] rate debt as of December 31, [removed: 2019.][added: 2020.]

| Year of maturity | | [added: | | | |] Fixed rate debt | | | | [added: | |] Weighted average rate on fixed rate debt | | | [removed: Variable rate debt] | | | | [removed: Weighted average rate on variable rate debt] | | [added: | | | | | |]

| 2022 | | [added: | | | |] 1,061.8 | | | | [added: | |] 3.43 | | | [removed: —] | | | | [removed: —] | | [added: | | | | | |]

| 2023 | | [added: | | | |] 770.6 | | | | [added: | |] 4.64 | | | [removed: 704.3] | | | | [removed: 2.09] | [removed: %] | [added: | | | | | |]

| 2024 | | [added: | | | |] 712.2 | | | | [added: | |] 3.97 | | | [removed: —] | | | | | | [added: | | | | | |]

| Fair Value (2) | | [added: | | | |] $ | [removed: 7,743.7] [added: 9,883.4] | | | | | | [removed: $] | [removed: 704.3] | | | | | [added: | | | | | | | |]

(1) Excludes net premiums recorded on mortgages payable, net original issuance premiums recorded on notes payable and deferred financing costs on mortgages payable, notes payable, and [added: our] term [removed: loans.][added: loan.]

At December 31, [removed: 2019,] [added: 2020,] the unamortized balance of net premiums on mortgages payable is [removed: $3.0] [added: $1.7] million, the unamortized balance of net original issuance premiums on notes payable is [removed: $6.3] [added: $14.6] million, and the balance of deferred financing costs on mortgages payable is [removed: $1.3 million,] [added: $973,000,] on notes payable is [removed: $35.9] [added: $49.2] million, and on [added: our] term [removed: loans] [added: loan] is [removed: $956,000.][added: $642,000.]

(2) We base the estimated fair value of the [added: publicly-traded] fixed rate senior notes and bonds at December 31, [removed: 2019] [added: 2020] 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 [removed: and variable rate] mortgages at December 31, [removed: 2019] [added: 2020] on the relevant forward interest rate curve, plus an applicable credit-adjusted spread.

We believe that the carrying value of the [removed: credit facility balance and] term [removed: loans] [added: loan] balance reasonably [removed: approximate their] [added: approximates its] estimated fair [removed: values] [added: value] at December 31, [removed: 2019.][added: 2020.]

The table incorporates only those exposures that exist as of December 31, [removed: 2019.][added: 2020.]

[removed: All of] [added: At December 31, 2020,] our outstanding [removed: notes and] [added: notes,] bonds [removed: have] [added: and mortgages payable had] fixed interest rates.

Interest on our [added: revolving] credit facility and term loan [removed: balances] [added: balance] is variable.

However, the variable interest rate feature on our term [removed: loans] [added: loan] has been mitigated by [added: an] interest rate swap [removed: agreements.][added: agreement.]

Based on [removed: our] [added: a hypothetical] credit facility [removed: balance] [added: borrowing] of [removed: $704.3 million at December 31, 2019,] [added: $50 million,] a 1% change in interest [removed: rates] [added: rate] would change our interest [removed: rate] costs by [removed: $7.0 million per year.][added: $500,000 annually.]

[removed: During the second quarter of 2019, we commenced foreign operations and acquired real property in the U.K.] As a result, we are subject to currency fluctuations that may, from time to time, affect our financial condition and results of operations.

Increases or decreases in the value of [removed: the Great British Pound (Sterling)] [added: Sterling] relative to the U.S. dollar impact the amount of net income we earn from our investments in the U.K. We mitigate these foreign currency exposures with [removed: non–U.S.] [added: non-U.S.] denominated borrowings and [removed: cross–currency] [added: cross-currency] swaps.

\-60-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

There was no variable rate debt or debt that was not swapped to fixed at December 31, 2020.

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2021 | | | | | | $ | 44.2 | | | | | 5.55 | | % | | | | | | | | | | | | |

| 2025 | | | | | | 500.7 | | | | | | 3.88 | | | | | | | | | | | | | | |

| Thereafter | | | | | | 5,762.5 | | | | | | 3.18 | | | | | | | | | | | | | | |

| Totals (1) | | | | | | $ | 8,852.0 | | | | | 3.45 | | % | | | | | | | | | | | | |

At December 31, 2020, our credit facility balance was zero; however, we intend to borrow funds on our credit facility in the future.

During 2019, we commenced foreign operations and acquired real property in the U.K. and have continued to acquire U.K. properties in 2020.

\-61-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

\- 52\-

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2020 | | $ | 334.2 | | | 3.21 | % | | $ | — | | | — | % |

| 2021 | | 318.8 | | | | 5.72 | | | — | | | | — | |

| Thereafter | | 4,028.4 | | | | 3.79 | | | — | | | | — | |

| Totals (1) | | $ | 7,226.0 | | | 3.91 | % | | $ | 704.3 | | | 2.09 | % |

At December 31, 2019 all of our mortgages payable had fixed interest rates, except one variable rate mortgage on one property totaling $7.1 million, which has been swapped to a fixed interest rate.

\- 53\-

The monthly dividends are supported by the cash flow generated from real estate owned under [removed: long-term,] [added: long-term] net lease agreements with [added: our] commercial [removed: tenants.][added: clients.]

Over the past [removed: 51] [added: 52] years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease [removed: agreements.][added: agreements with our commercial clients.]

[removed: As of February 2020, the] [added: The] company is a member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for [removed: the last] [added: more than] 25 consecutive years.

At December 31, [removed: 2019,] [added: 2020,] we owned a diversified portfolio:

[removed: | • |] [added: -] With an occupancy rate of [removed: 98.6%,] [added: 97.9%,] or [removed: 6,389] [added: 6,452] properties leased and [removed: 94] [added: 140] properties available for [removed: lease; |][added: lease or sale;]

[removed: | • | Leased to 301 different commercial tenants doing] [added: - Doing] business in [removed: 50] [added: 51] separate industries; [removed: |]

[removed: | • |] [added: -] Located in 49 U.S. states, Puerto Rico and the United Kingdom (U.K.); [removed: |]

[removed: | • |] [added: -] With approximately [removed: 106.3] [added: 110.8] million square feet of leasable space; [removed: |]

[removed: | • |] [added: -] With a weighted average remaining lease term (excluding rights to extend a lease at the option of the [removed: tenant)] [added: client)] of approximately [removed: 9.2] [added: 9.0] years; and [removed: |]

[removed: | • |] [added: -] With an average leasable space per property of approximately [removed: 16,393] [added: 16,810] square feet; approximately [removed: 11,800] [added: 12,340] square feet per retail property and [removed: 237,668] [added: 245,270] square feet per industrial property. [removed: |]

Of the [removed: 6,483] [added: 6,592] properties in the portfolio at December 31, [removed: 2019, 6,452,] [added: 2020, 6,555,] or [removed: 99.5%,] [added: 99.4%,] are [removed: single-tenant] [added: single-client] properties, of which [removed: 6,362] [added: 6,419] were leased, and the remaining are [removed: multi-tenant] [added: multi-client] properties.

Our [removed: six] [added: eight] senior officers owned 0.05% of our outstanding common stock with a market value of [removed: $12.0] [added: $12.5] million at [removed: January 31, 2020.][added: February 15, 2021.]

Our directors and [removed: six] [added: seven] senior officers, as a group, owned [removed: 0.10%] [added: 0.15%] of our outstanding common stock with a market value of [removed: $37.8] [added: $34.3] million at [removed: January 31, 2020.][added: February 15, 2021.]

We have continued our [removed: 51-year] [added: 52-year] policy of paying monthly dividends.

In addition, we increased the dividend five times during [removed: 2019] [added: 2020] and [removed: twice] [added: once] during [removed: 2020.][added: 2021.]

As of February [removed: 2020,] [added: 2021,] we have paid [removed: 89] [added: 93] consecutive quarterly dividend increases and increased the dividend [removed: 105] [added: 109] times since our listing on the NYSE in 1994.

| | | [added: | | | |] Month | | [added: | | | |] Month | | [added: | | | |] Monthly Dividend | | | | [added: | |] Increase | | |

| [removed: 2019] [added: 2020] Dividend increases | | [added: | | | |] Declared | | [added: | | | |] Paid | | [added: | | | |] per share | | | | [added: | |] per share | | |

| 1st increase | | [added: | | | |] Dec [removed: 2018] [added: 2019] | | [added: | | | |] Jan [removed: 2019] [added: 2020] | | [added: | | | |] $ | [removed: 0.2210] [added: 0.2275] | | | [added: | |] $ | 0.0005 | |

| 2nd increase | | [added: | | | |] Jan [removed: 2019] [added: 2020] | | [added: | | | |] Feb [removed: 2019] [added: 2020] | | [added: | | | |] $ | [removed: 0.2255] [added: 0.2325] | | | [added: | |] $ | [removed: 0.0045] [added: 0.0050] | |

| 3rd increase | | [added: | | | |] Mar [removed: 2019] [added: 2020] | | [added: | | | |] Apr [removed: 2019] [added: 2020] | | [added: | | | |] $ | [removed: 0.2260] [added: 0.2330] | | | [added: | |] $ | 0.0005 | |

| 4th increase | | [added: | | | |] Jun [removed: 2019] [added: 2020] | | [added: | | | |] Jul [removed: 2019] [added: 2020] | | [added: | | | |] $ | [removed: 0.2265] [added: 0.2335] | | | [added: | |] $ | 0.0005 | |

| 5th increase | | [added: | | | |] Sep [removed: 2019] [added: 2020] | | [added: | | | |] Oct [removed: 2019] [added: 2020] | | [added: | | | |] $ | [removed: 0.2270] [added: 0.2340] | | | [added: | |] $ | 0.0005 | |

| [removed: 2020] [added: 2021] Dividend increases | | | | | | | | | | | | | [added: | | | | | | | | | | | | | |]

| 1st increase | | [added: | | | |] Dec [removed: 2019] [added: 2020] | | [added: | | | |] Jan [removed: 2020] [added: 2021] | | [added: | | | |] $ | [removed: 0.2275] [added: 0.2345] | | | [added: | |] $ | 0.0005 | |

The dividends paid per share during [removed: 2019] [added: 2020] totaled [removed: $2.7105,] [added: $2.7940,] as compared to [removed: $2.6305] [added: $2.7105] during [removed: 2018,] [added: 2019,] an increase of [removed: $0.08,] [added: $0.0835,] or [removed: 3.0%.][added: 3.1%.]

The monthly dividend of [removed: $0.2325] [added: $0.2345] per share represents a current annualized dividend of [removed: $2.79] [added: $2.81] per share, and an annualized dividend yield of approximately [removed: 3.8%] [added: 4.5%] based on the last reported sale price of our common stock on the [removed: NYSE of $73.63 on December 31, 2019.]

Acquisitions During [removed: 2019][added: 2020]

Below is a listing of our acquisitions in the U.S. and U.K. for the year ended December 31, [removed: 2019:][added: 2020:]

| | [removed: Number] [added: | | Number] of [removed: Properties] [added: Properties] | | | [added: | | | Leasable] Square [removed: Feet (in millions)] [added: Feet] | | | [removed: Investment] [added: | | | Investment] ($ in [removed: millions)] [added: thousands)] | | | | [removed: Weighted] [added: | | Weighted] Average Lease Term [removed: (Years)] [added: (Years)] | | | [removed: Initial] [added: | | | Initial] Average Cash Lease [removed: Yield] [added: Yield (1)] | | [added: |]

| [added: | | |] Year [removed: ended] [added: Ended] December [removed: 31, 2019 (1) |] [added: 31,] | | | | | | | | | | | | | | |

[removed: | (1) | None of our investments during 2019 caused any one tenant to be 10% or more of our total assets at December 31, 2019.] All of our [removed: 2019] investments in acquired properties [added: during 2020] are 100% leased at the acquisition date. [removed: |]

[removed: | (2) |] [added: (3)] Represents investments of [removed: £625.8] [added: £707.8] million Sterling during the year ended December 31, [removed: 2019] [added: 2020] converted at the applicable exchange rate on the date of acquisition. [removed: |]

[removed: The] [added: (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 [removed: a tenant] [added: our 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.

When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial average cash lease yield [added: 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.]

At December 31, [removed: 2019,] [added: 2020,] we had [removed: 94] [added: 140] properties available for lease out of [removed: 6,483] [added: 6,592] properties in our portfolio, which represents a [removed: 98.6%] [added: 97.9%] occupancy rate based on the number of properties in our portfolio.

| Properties available for lease at December 31, [removed: 2018] [added: 2019] | [removed: 80] | | [added: 94 | | |]

| Lease expirations [added: (1)] | [removed: 304] | | [added: 159 | | |]

| Re-leases to same [removed: tenant (1)] [added: client (2)] | [removed: (199] | [removed: )] | [added: (72) | | |]

We refer to our tenants as clients, because we strive to build mutually beneficial relationships and we believe their success is our success.

- Of 6,592 properties;

- With a weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.0 years; and

Our 1.625% notes due December 2030 are listed on the NYSE under the ticker symbol "O30" with a CUSIP number of 756109-AY0.

In January 2021, we had 210 employees, inclusive of two part-time employees, as compared to 196 employees, inclusive of two part-time employees, in January 2020.

\-2-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

Theater Industry Update

As of December 31, 2020, our clients in the theater industry represented 5.6% of our annualized contractual rent.

Given the ongoing disruption to this industry due to the COVID-19 pandemic, we performed a property-level analysis on the collectability of rent for our theater properties.

Our analysis involved the assignment of quartile rankings for each asset’s pre-pandemic EBITDAR relative to each operator’s overall footprint.

Other criteria utilized included an analysis of the property’s pre-pandemic annual EBITDA generation before corporate overhead, and real estate fundamentals.

As a result of this analysis at September 30, 2020, we determined that for 31 of our 78 theater properties it was no longer probable that we would collect substantially all of contractual rents due.

We fully reserved for six additional theater properties for which we do not possess unit level financial information.

Consequently, we reserved for 100% of the outstanding receivables for 37 theater properties at September 30, 2020.

Beginning October 2020, contractual rent from these 37 properties is accounted for on a cash basis.

Additionally, during November 2020, one of these properties was sold.

We fully reserved for one additional theater property at December 31, 2020.

At December 31, 2020, the receivables outstanding for our 77 theater properties totaled $48.6 million, net of $23.7 million of reserves, and includes $7.8 million of straight-line rent receivables, net of $1.8 million of reserves.

The monthly contractual rent associated with the 37 properties accounted for under the cash basis totaled approximately $2.8 million at December 31, 2020.

The following table summarizes reserves recorded as a reduction of rental revenue for theater properties (dollars in millions):

| | | | Three Months Ended | | | | | | Three Months Ended | | | | | | Year Ended | | |

| | | | September 30, 2020 | | | | | | December 31, 2020 | | | | | | December 31, 2020 | | |

| Rental revenue reserves | | | $ | 15.6 | | | | | $ | 8.1 | | | | | $ | 23.7 | |

| Straight-line rent reserves | | | 1.6 | | | | | | $ | 0.2 | | | | | $ | 1.8 | |

| Total rental revenue reserves | | | $ | 17.2 | | | | | $ | 8.3 | | | | | $ | 25.5 | |

Additionally, during the third quarter, we recorded provisions for impairment on 12 of the 37 theater properties for $79.0 million.

During the fourth quarter, we recorded provisions for impairment on one additional theater property for $4.8 million.

Impairment charges are not included in Nareit-defined funds from operations (FFO) available to commons stockholders or in our calculation of adjusted funds from operations (AFFO) available to commons stockholders.

See "Item 1A—Risk Factors" in Part I of this Annual Report on Form 10-K for more information regarding the actual and potential future impacts of the COVID-19 pandemic and the measures taken to limit its spread on our clients and our business, results of operations, financial condition and liquidity.

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

\-3-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

NYSE of $62.17 on December 31, 2020.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Acquisitions - U.S. *(in* *30 states)* | | | 202 | | | | | | 5,476,009 | | | | | | $ | 1,302,220 | | | | | 14.9 | | | | | | 5.8 | | % |

| Acquisitions - U.K. (3) | | | 24 | | | | | | 2,120,256 | | | | | | 920,934 | | | | | | 10.8 | | | | | | 6.1 | | % |

| | |

| --- | --- |

| • | Of 6,483 properties; |

In January 2020, we had 194 employees, as compared to 165 employees in January 2019.

\- 2\-

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2nd increase | | Jan 2020 | | Feb 2020 | | $ | 0.2325 | | | $ | 0.0050 | |

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Acquisitions - U.S. *(in 45 states)* | 753 | | | 11.6 | | | $ | 2,860.8 | | | 13.0 | | | 6.8 | % |

| Acquisitions - U.K. (2) | 18 | | | 1.6 | | | 797.8 | | | | 15.6 | | | 5.2 | % |

| Total Acquisitions | 771 | | | 13.2 | | | 3,658.6 | | | | 13.4 | | | 6.4 | % |

| Properties under Development - U.S. | 18 | | | 0.5 | | | 56.6 | | | | 15.1 | | | 7.3 | % |

| Total (3) | 789 | | | 13.7 | | | $ | 3,715.2 | | | 13.5 | | | 6.4 | % |

| (3) | The tenants occupying the new properties operate in 31 industries, and are 94.6% retail and 5.4% industrial, based on rental revenue. Approximately 36% of the rental revenue generated from acquisitions during 2019 is from investment grade rated tenants, their subsidiaries or affiliated companies. |

\- 3\-

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.

We may continue to pursue development or expansion opportunities under similar arrangements in the future.

The following table summarizes our leasing results for the year ended December 31, 2019:

| | | |

| --- | --- | --- |

Addition to the S&P 500 Dividend Aristocrats® Index

In February 2020, we were added to the S&P 500 Dividend Aristocrats® index for having increased our dividend every year for the last 25 consecutive years.

In January 2020, we announced that Paul Meurer, our EVP, Chief Financial Officer and Treasurer, is leaving the company.

To ensure a smooth transition, Mr. Meurer will serve as a senior advisor to the company through March 31, 2020.

The company has begun a search for a new Chief Financial Officer.

\- 4\-

At-the-Market (ATM) Program

In December 2019, following the issuance and sale of 50,597,595 shares under our prior ATM equity distribution plans, or our prior ATM programs, we established a new ATM equity distribution plan, or our new ATM program, pursuant to which up to 33,402,405 additional 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.

Acquisition of Properties from CIM Real Estate Finance Trust, Inc.

In December 2019, we completed the acquisition of 444 single-tenant retail properties from CIM Real Estate Finance Trust, Inc., a non-listed REIT which is sponsored by an affiliate of CIM Group, for approximately $1.2 billion, representing a portion of the previously announced transaction with CIM Real Estate Finance Trust, Inc. In connection with the acquisitions, we assumed existing mortgage debt of $130.8 million.

We acquired the remaining seven properties in this transaction for approximately $26 million in January 2020.

Christie Kelly Joins Board of Directors

In November 2019, we announced that Christie Kelly joined our Board of Directors.

Amended and Restated Credit Agreement

In August 2019, we amended and restated our unsecured credit facility, or our credit facility, in order to allow borrowings in multiple currencies.

The amended and restated credit facility is otherwise substantively consistent with the prior credit agreement entered into in October 2018.

The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings change.

We also have other interest rate options available to us under our credit facility.

[removed: ][added: ]

[removed: FORM 10-K][added: FORM 10-K]

For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2019][added: 2020]

Commission File [removed: Number 1-13374][added: Number 1-13374]

| Maryland | | [added: | | | |] 33-0580106 | [added: | |]

| (State or Other Jurisdiction of Incorporation or Organization) | | [added: | | | |] (IRS Employer Identification No.) | [added: | |]

11995 El Camino [removed: Real, San Diego, California, 92130][added: Real, San Diego, California, 92130]

| Title of each Class | [added: | |] Trading Symbol | [added: | |] Name of each exchange on which registered | [added: | |]

| Common Stock, $0.01 Par Value | [added: | |] O | [added: | |] New York Stock Exchange | [added: | |]

| | [added: | |] Large accelerated filer | [added: | |] ☒ | | [added: | | | |] Accelerated filer | [added: | |] ☐ | | [added: | | | |]

| | [added: | |] Non-accelerated filer | [added: | |] ☐ | | [added: | | | |] Smaller reporting company | [added: | |] ☐ | | [added: | | | |]

| | | | | [added: | | | | | | | |] Emerging growth company | [added: | |] ☐ | | [added: | | | |]

At June 30, [removed: 2019,] [added: 2020,] the aggregate market value of the Registrant’s shares of common stock, $0.01 par value, held by non-affiliates of the Registrant was [removed: $21.9] [added: $20.5] billion based upon the last reported sale price of [removed: $68.97] [added: $59.50] per share on the New York Stock Exchange on June [removed: 28, 2019,] [added: 30, 2020,] the last business day of the Registrant’s most recently completed second fiscal quarter.

At February [removed: 12, 2020,] [added: 15, 2021,] the number of shares of common stock outstanding was [removed: 333,627,261.][added: 373,390,661.]

Part III, Items 10, 11, 12, 13, and 14 incorporate by reference certain specific portions of the definitive Proxy Statement for Realty Income Corporation’s Annual Meeting to be held on May [removed: 12, 2020,] [added: 18, 2021,] to be filed pursuant to Regulation 14A.

| [PART [removed: I](#s957EDC9A0E9E526780739388FD408488)] [added: I](#i495e80b48418482fbb1b7ef1cfdc5d0f_10)] | | | [added: | | | | | |] Page | [added: | |]

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| | | [added: | | | |] [Recent [removed: Developments](#sA3E15C50DE695D1986852463AD3F31A6)] [added: Developments](#i495e80b48418482fbb1b7ef1cfdc5d0f_16)] | [removed: [3](#sA3E15C50DE695D1986852463AD3F31A6)] | [added: | [3](#i495e80b48418482fbb1b7ef1cfdc5d0f_16) | | |]

| | | [added: | | | |] [Dividend [removed: Policy](#s94A20904D043501EA4F0AF4B9C5EDAC6)] [added: Policy](#i495e80b48418482fbb1b7ef1cfdc5d0f_19)] | [removed: [6](#s94A20904D043501EA4F0AF4B9C5EDAC6)] | [added: | [9](#i495e80b48418482fbb1b7ef1cfdc5d0f_19) | | |]

| | | [added: | | | |] [Business Philosophy and [removed: Strategy](#s6E464192732251A880FA22F79452F88D)] [added: Strategy](#i495e80b48418482fbb1b7ef1cfdc5d0f_22)] | [removed: [7](#s6E464192732251A880FA22F79452F88D)] | [added: | [10](#i495e80b48418482fbb1b7ef1cfdc5d0f_22) | | |]

| | | [added: | | | |] [Property Portfolio [removed: Information](#sF91823A045B45B25A544C9596D0689F9)] [added: Information](#i495e80b48418482fbb1b7ef1cfdc5d0f_25)] | [removed: [14](#sF91823A045B45B25A544C9596D0689F9)] | [added: | [19](#i495e80b48418482fbb1b7ef1cfdc5d0f_25) | | |]

| | | [added: | | | |] [Forward-Looking [removed: Statements](#s6A7FF8AE4A7C54838EF7FC102DD31573)] [added: Statements](#i495e80b48418482fbb1b7ef1cfdc5d0f_28)] | [removed: [20](#s6A7FF8AE4A7C54838EF7FC102DD31573)] | [added: | [24](#i495e80b48418482fbb1b7ef1cfdc5d0f_28) | | |]

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| | | [added: | | | |] [Liquidity and Capital [removed: Resources](#s91E46B3997C65EA69E4F9721E2B843CA)] [added: Resources](#i495e80b48418482fbb1b7ef1cfdc5d0f_58)] | [removed: [35](#s91E46B3997C65EA69E4F9721E2B843CA)] | [added: | [42](#i495e80b48418482fbb1b7ef1cfdc5d0f_58) | | |]

| | | [added: | | | |] [Results of [removed: Operations](#sC19825CEFFC35D97AD31F9A4FB49408D)] [added: Operations](#i495e80b48418482fbb1b7ef1cfdc5d0f_61)] | [removed: [42](#sC19825CEFFC35D97AD31F9A4FB49408D)] | [added: | [50](#i495e80b48418482fbb1b7ef1cfdc5d0f_61) | | |]

| | | [added: | | | |] [Funds from Operations Available to Common Stockholders [removed: (FFO)](#s22DF504FEE455F5998894D0CA0A672D7)] [added: (FFO)](#i495e80b48418482fbb1b7ef1cfdc5d0f_64)] | [removed: [49](#s22DF504FEE455F5998894D0CA0A672D7)] | [added: | [57](#i495e80b48418482fbb1b7ef1cfdc5d0f_64) | | |]

| | | [added: | | | |] [Adjusted Funds from Operations Available to Common Stockholders [removed: (AFFO)](#s021E262FFE4D5435918DC04CB87C2E36)] [added: (AFFO)](#i495e80b48418482fbb1b7ef1cfdc5d0f_67)] | [removed: [50](#s021E262FFE4D5435918DC04CB87C2E36)] | [added: | [58](#i495e80b48418482fbb1b7ef1cfdc5d0f_67) | | |]

| | | [added: | | | |] [Impact of [removed: Inflation](#sBA2D060220D4590A8B41C6055C7B05BA)] [added: Inflation](#i495e80b48418482fbb1b7ef1cfdc5d0f_70)] | [removed: [52](#sBA2D060220D4590A8B41C6055C7B05BA)] | [added: | [60](#i495e80b48418482fbb1b7ef1cfdc5d0f_70) | | |]

| | | [added: | | | |] [Impact of Newly Adopted Accounting [removed: Standards](#s42A4450E262659E695A73C7F0A6B4D3B)] [added: Standards](#i495e80b48418482fbb1b7ef1cfdc5d0f_73)] | [removed: [52](#s42A4450E262659E695A73C7F0A6B4D3B)] | [added: | [60](#i495e80b48418482fbb1b7ef1cfdc5d0f_73) | | |]

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| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 1.625% Notes due 2030 | | | O30 | | | New York Stock Exchange | | |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [PART II](#i495e80b48418482fbb1b7ef1cfdc5d0f_46) | | | | | | | | | | | |

| | | | | | | [General](#i495e80b48418482fbb1b7ef1cfdc5d0f_55) | | | [42](#i495e80b48418482fbb1b7ef1cfdc5d0f_55) | | |

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [PART IV](#i495e80b48418482fbb1b7ef1cfdc5d0f_238) | | | | | | | | | | | |

| [SIGNATURES](#i495e80b48418482fbb1b7ef1cfdc5d0f_244) | | | | | | | | | [102](#i495e80b48418482fbb1b7ef1cfdc5d0f_244) | | |

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

| | | |

| --- | --- | --- |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | |

| --- | --- | --- | --- |

| [PART II](#s3DA8C5708A25557E84A0C55990790FEE) | | | |

| | | [General](#sFE1D2A382E2C5E5D9760EC1B4BB4DBF1) | [35](#sFE1D2A382E2C5E5D9760EC1B4BB4DBF1) |

| [PART IV](#s4728D94268B75998BBD858ABFBB63A01) | | | |

| [SIGNATURES](#s78BC1EF5202E5E5F9FFFE0031CBA8C80) | | | [91](#s78BC1EF5202E5E5F9FFFE0031CBA8C80) |

\-39-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

\- 32\-

| | | [added: | | | |] Price Per [removed: Share of] [added: Share of] Common Stock | | | | | | | | [added: | | | |] Distributions | | |

| | | [added: | | | |] High | | | | [added: | |] Low | | | | [added: | |] Declared (1) | | |

| 2019 | | | | | | | | | | | | | [added: | | | | | | | |]

| First Quarter | | [added: | | | |] $ | 74.14 | | | [added: | |] $ | 61.60 | | | [added: | |] $ | 0.6770 | |

| Second Quarter | | [added: | | | |] 73.94 | | | | [added: | |] 66.21 | | | | [added: | |] 0.6785 | | |

| Third Quarter | | [added: | | | |] 77.50 | | | | [added: | |] 67.70 | | | | [added: | |] 0.6800 | | |

| Fourth Quarter | | [added: | | | |] 82.17 | | | | [added: | |] 71.45 | | | | [added: | |] 0.6815 | | |

| Total | | | | | | | | | | [added: | | | | | | | |] $ | 2.7170 | |

At December 31, [removed: 2019,] [added: 2020,] a distribution of [removed: $0.2275] [added: $0.2345] per common share had been declared and was paid in January [removed: 2020.][added: 2021.]

There were [removed: 9,580] [added: approximately 9,500] registered holders of record of our common stock as of December 31, [removed: 2019.][added: 2020.]

We estimate that our total number of stockholders is approximately [removed: 575,000] [added: 735,000] when we include both registered and beneficial holders of our common stock.

During the fourth quarter of [removed: 2019,] [added: 2020,] the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2012 Incentive Award Plan of Realty Income Corporation:

[removed: | • | 140] [added: - 102] shares of stock, at a weighted average price of [removed: $77.00,] [added: $61.73,] in October [removed: 2019; |][added: 2020;]

[removed: | • | 6,560] [added: - 6,018] shares of stock, at a weighted average price of [removed: $76.40,] [added: $64.39,] in November [removed: 2019;] [added: 2020;] and [removed: |]

[removed: | • | 197] [added: - 83] shares of stock, at a weighted average price of [removed: $76.63,] [added: $60.40,] in December [removed: 2019. |][added: 2020.]

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2020 | | | | | | | | | | | | | | | | | | | | |

| First Quarter | | | | | | $ | 84.92 | | | | | $ | 38.00 | | | | | $ | 0.6980 | |

| Second Quarter | | | | | | 65.56 | | | | | | 43.41 | | | | | | 0.6995 | | |

| Third Quarter | | | | | | 66.80 | | | | | | 56.33 | | | | | | 0.7010 | | |

| Fourth Quarter | | | | | | 65.09 | | | | | | 57.09 | | | | | | 0.7025 | | |

| Total | | | | | | | | | | | | | | | | | | $ | 2.8010 | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2018 | | | | | | | | | | | | |

| First Quarter | | $ | 57.07 | | | $ | 47.26 | | | $ | 0.6575 | |

| Second Quarter | | 54.99 | | | | 48.81 | | | | 0.6590 | | |

| Third Quarter | | 59.18 | | | | 52.74 | | | | 0.6605 | | |

| Fourth Quarter | | 66.85 | | | | 55.56 | | | | 0.6620 | | |

| Total | | | | | | | | | | $ | 2.6390 | |

| | |

| --- | --- |

The following table sets forth our selected historical consolidated financial information for each of the five years in the period ended December 31, [removed: 2019.][added: 2020.]

The statements of income and comprehensive income data, the statements of equity data, the statements of cash flows data and the other data for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] and the balance sheet data as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] were derived from our audited consolidated financial statements included elsewhere in this Form 10-K.

The statements of income and comprehensive income data, the statements of equity data, the statements of cash flows data and the other data for the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the balance sheet data as of December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] were derived from our audited consolidated financial statements that are not included in this Form 10-K.

| As of or for the Years Ended December 31, | | [added: | | | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| Total assets (book value) | | [added: | | | |] $ | [removed: 18,554,796] [added: 20,740,285] | | | [added: | |] $ | [removed: 15,260,483] [added: 18,554,796] | | | [added: | |] $ | [removed: 14,058,166] [added: 15,260,483] | | | [added: | |] $ | [removed: 13,152,871] [added: 14,058,166] | | | [added: | |] $ | [removed: 11,845,379] [added: 13,152,871] | |

| Cash and cash equivalents | | [added: | | | | 824,476 | | | | | |] 54,011 | | | | [added: | |] 10,387 | | | | [removed: 6,898] | | [added: 6,898] | | [removed: 9,420] | | | | [removed: 40,294] [added: 9,420] | | |

| Total debt | | [added: | | | | 8,817,467 | | | | | |] 7,901,547 | | | | [added: | |] 6,499,976 | | | | [removed: 6,111,471] | | [added: 6,111,471] | | [removed: 5,839,605] | | | | [removed: 4,820,995] [added: 5,839,605] | | |

| Total liabilities | | [added: | | | | 9,722,555 | | | | | |] 8,750,638 | | | | [added: | |] 7,139,505 | | | | [removed: 6,667,458] | | [added: 6,667,458] | | [removed: 6,365,818] | | | | [removed: 5,292,046] [added: 6,365,818] | | |

| Total equity | | [added: | | | | 11,017,730 | | | | | |] 9,804,158 | | | | [added: | |] 8,120,978 | | | | [removed: 7,390,708] | | [added: 7,390,708] | | [removed: 6,787,053] | | | | [removed: 6,553,333] [added: 6,787,053] | | |

| Net cash provided by operating activities | | [added: | | | | 1,115,543 | | | | | |] 1,068,937 | | | | [added: | |] 940,742 | | | | [removed: 875,850] | | [added: 875,850] | | [removed: 799,863] | | | | [removed: 693,567] [added: 799,863] | | |

| Net change in cash, cash equivalents and restricted cash | | [added: | | | | 779,674 | | | | | |] 49,934 | | | | [added: | |] 8,929 | | | | [removed: (3,539] | | [removed: )] [added: (3,539)] | | [removed: (34,652] | | [removed: )] | | [removed: 4,152] [added: (34,652)] | | |

| Total revenue | | [added: | | | | 1,651,625 | | | | | |] 1,491,591 | | | | [added: | |] 1,327,838 | | | | [removed: 1,215,768] | | [added: 1,215,768] | | [removed: 1,103,172] | | | | [removed: 1,023,285] [added: 1,103,172] | | |

| Net income | | [added: | | | | 396,506 | | | | | |] 437,478 | | | | [added: | |] 364,598 | | | | [removed: 319,318] | | [added: 319,318] | | [removed: 316,477] | | | | [removed: 284,855] [added: 316,477] | | |

| Preferred stock dividends | | [added: | | | |] — | | | | [added: | |] — | | | | [removed: (3,911] | | [removed: )] [added: —] | | [removed: (27,080] | | [removed: )] | | [removed: (27,080] [added: (3,911)] | | [removed: )] | [added: | | | (27,080) | | |]

| Excess of redemption value over carrying value of preferred shares redeemed | | [removed: —] | | | | — | | | | [removed: (13,373] | | [removed: )] [added: —] | | [added: | | | |] — | | | | [added: | | (13,373) | | | | | |] — | | |

| Net income available to common stockholders | | [added: | | | | 395,486 | | | | | |] 436,482 | | | | [added: | |] 363,614 | | | | [removed: 301,514] | | [added: 301,514] | | [removed: 288,491] | | | | [removed: 256,686] [added: 288,491] | | |

| Cash distributions paid to common stockholders | | [added: | | | | 964,167 | | | | | |] 852,134 | | | | [added: | |] 761,582 | | | | [removed: 689,294] | | [added: 689,294] | | [removed: 610,516] | | | | [removed: 533,238] [added: 610,516] | | |

| Cash distributions paid per common share | | [added: | | | | 2.794000 | | | | | |] 2.710500 | | | | [added: | |] 2.630500 | | | | [removed: 2.527000] | | [added: 2.527000] | | [removed: 2.391500] | | | | [removed: 2.271417] [added: 2.391500] | | |

| Cash distributions declared per common share | | [added: | | | | 2.801000 | | | | | |] 2.717000 | | | | [added: | |] 2.639000 | | | | [removed: 2.537000] | | [added: 2.537000] | | [removed: 2.403000] | | | | [removed: 2.279000] [added: 2.403000] | | |

| Basic weighted average number of common shares outstanding | | [added: | | | | 345,280,126 | | | | | |] 315,837,012 | | | | [added: | |] 289,427,430 | | | | [removed: 273,465,680] | | [added: 273,465,680] | | [removed: 255,066,500] | | | | [removed: 235,767,932] [added: 255,066,500] | | |

| Diluted weighted average number of common shares outstanding | | [added: | | | | 345,415,258 | | | | | |] 316,159,277 | | | | [added: | |] 289,923,984 | | | | [removed: 273,936,752] | | [added: 273,936,752] | | [removed: 255,624,250] | | | | [removed: 236,208,390] [added: 255,624,250] | | |

\-40-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net income per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic | | | | | | 1.15 | | | | | | 1.38 | | | | | | 1.26 | | | | | | 1.10 | | | | | | 1.13 | | |

| Diluted | | | | | | 1.14 | | | | | | 1.38 | | | | | | 1.26 | | | | | | 1.10 | | | | | | 1.13 | | |

\-41-

[Table of](#i495e80b48418482fbb1b7ef1cfdc5d0f_7) [Contents](#i495e80b48418482fbb1b7ef1cfdc5d0f_7)

\- 33\-

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Basic and diluted net income per common share | | 1.38 | | | | 1.26 | | | | 1.10 | | | | 1.13 | | | | 1.09 | | |

\- 34\-

| A. | [added: | |] [Reports of Independent Registered Public Accounting [removed: Firm](#s5AD67F9FD2645CD3A3160D04783F26C5)] [added: Firm](#i495e80b48418482fbb1b7ef1cfdc5d0f_85)] | [added: | |]

| B. | [added: | |] [Consolidated Balance Sheets, December 31, [removed: 2019] [added: 2020] and [removed: 2018](#s810F384365135BE299B17C773C96F624)] [added: 2019](#i495e80b48418482fbb1b7ef1cfdc5d0f_91)] | [added: | |]

| C. | [added: | |] [Consolidated Statements of Income and Comprehensive Income, Years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s7365D904789E5BA696499B9BB9983234)] [added: 2018](#i495e80b48418482fbb1b7ef1cfdc5d0f_97)] | [added: | |]

| D. | [added: | |] [Consolidated Statements of Equity, Years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#sC48AD33C4B945B6BA595B1673F165FAC)] [added: 2018](#i495e80b48418482fbb1b7ef1cfdc5d0f_100)] | [added: | |]

| E. | [added: | |] [Consolidated Statements of Cash Flows, Years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s6B3DAC913FF55558A71D0FBE7EE945F5)] [added: 2018](#i495e80b48418482fbb1b7ef1cfdc5d0f_103)] | [added: | |]

| F. | [added: | |] [Notes to Consolidated Financial [removed: Statements](#s37C4DEAD699453DB90C5AC13D21606A6)] [added: Statements](#i495e80b48418482fbb1b7ef1cfdc5d0f_106)] | [added: | |]

| G. | [added: | |] [Consolidated [removed: Quarterly Financial] [added: Quarterly](#i495e80b48418482fbb1b7ef1cfdc5d0f_208) [Financial] Data (unaudited) for [removed: 2019] [added: 2020] and [removed: 2018](#s1137515F984A558DAF344EDCDAC20F25)] [added: 2019](#i495e80b48418482fbb1b7ef1cfdc5d0f_208)] | [added: | |]

| H. | [added: | |] [Schedule III Real Estate and Accumulated [removed: Depreciation](#s9e281c27a42a4339974717b1920dd202)] [added: Depreciation](#i495e80b48418482fbb1b7ef1cfdc5d0f_247)] | [added: | |]

| | [added: | |] Schedules not filed: All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes. | [added: | |]

We have audited the accompanying consolidated balance sheets of Realty [removed: Income] [added: income] Corporation and subsidiaries (the Company) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three‑year period ended December 31, [removed: 2019,] [added: 2020,] and the related notes and financial statement schedule III (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, [removed: 2019,] [added: 2020,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control [removed: -] [added: –] Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February [removed: 24, 2020] [added: 23, 2021] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements, the Company [removed: has] changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, *Leases*.

[removed: *Evaluating] [added: *Evaluation of] the fair [removed: value] [added: values] used in the allocation of the purchase price of real estate acquisitions*

As discussed in [removed: Notes 2 and] [added: Note] 4 to the consolidated financial statements, during [removed: 2019,] [added: 2020,] the Company acquired [removed: $3.7] [added: $2.3] billion of real estate properties.

[removed: The] [added: As discussed in Note 2, the] purchase price of a real estate acquisition is typically allocated to land, building and improvements, and identified lease related intangible assets and liabilities based on their estimated relative fair values.

We identified the evaluation of the [removed: measurement of the] fair values used in the purchase price allocated to land, building and improvements, and identified lease related intangible assets and liabilities as a critical audit matter.

[removed: Specifically, the measurement of the fair values of land, building and improvements, and identified lease] related intangible assets and liabilities is dependent upon [added: significant] assumptions that are subject to potential management bias and for which relevant external market data is not always readily available.

Such assumptions include market land and building values, market rental rates, [removed: discount rates] and [removed: capitalization] [added: discount] rates.

[removed: Given the sensitivity of the fair value measurements to changes in these assumptions, there] [added: There] was a high degree of subjective and complex auditor [removed: judgement] [added: judgment] required in evaluating [removed: them.][added: the fair value measurements given the sensitivity of the fair value measurements to changes in these assumptions.]

The [added: following are the] primary procedures we performed to address this critical audit [removed: matter included the following.][added: matter.]

[removed: We tested certain internal controls over the Company’s process to allocate the purchase price] [added: For a selection] of real estate [removed: acquisitions including controls over the selection] [added: acquisitions, we involved valuation professionals with specialized skills] and [removed: review of] [added: knowledge who assisted in evaluating] the [added: significant] assumptions [added: used] to estimate [added: the] fair [removed: value, including those used by third party] [added: value measurements to allocate the purchase price, and the qualifications of third-party] valuation professionals.

The evaluation included comparison of [removed: Company] [added: the Company’s] assumptions [added: noted above] to independently developed ranges using market data from industry transaction databases, [added: and] published industry [removed: reports and brokerage websites.][added: reports.]

For a selection of real estate [removed: acquisitions] [added: acquisitions,] we compared the amounts allocated to land, building and improvements, and lease related intangible assets and liabilities as a percentage of the total acquisition value to the Company’s historical allocation percentages for similar types of properties.

[removed: *Evaluating] [added: *Evaluation of] the provision for impairment of long-lived real estate assets*

As discussed in Note 2 to the consolidated financial statements, during [removed: 2019,] [added: 2020,] the Company recorded provisions for impairment of long-lived real estate assets of [removed: $40.2] [added: $147.2] million.

A provision for impairment is recorded if estimated future [removed: property level] operating cash flows (undiscounted and without interest charges) including estimated [removed: sales] [added: disposition] proceeds to be received are less than the current book value of the real estate asset.

These assumptions include the expected property holding period, projected [removed: market] rental rates, and current and terminal property capitalization rates.

Given the sensitivity of the [removed: property level] operating cash flow projections to changes in these assumptions, there was a high degree of subjective and complex auditor judgment required in evaluating [removed: them.][added: the assumptions.]

We [added: evaluated the design and] tested [added: the operating effectiveness of] certain internal controls over the Company’s process to [removed: measure] [added: identify] and [removed: record] [added: measure] impairments including selection and review of the assumptions [added: used] to [added: determine] the property level operating cash flow projections.

[removed: We] [added: For a selection of properties, we] evaluated the projected [removed: market] rental [removed: rate] [added: rates] and property holding period assumptions in the Company’s property level operating cash flow projections [removed: for a selection of properties] by comparing to [removed: existing] lease agreements, the Company’s historical holding period data, [removed: and] market data from industry transaction databases, [added: and] published industry [removed: reports and brokerage websites.][added: reports.]

We also involved [removed: real estate] valuation professionals with specialized skills and knowledge who assisted in evaluating the projected market rent and current and terminal capitalization rates utilized by the Company.