10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

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

For the quarterly period ended June 30, 2018, or

oTransition 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

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 ý     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes  ý   No  o

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

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
Emerging growth company o

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

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

There were 290,043,300 shares of common stock outstanding as of July 26, 2018.

REALTY INCOME CORPORATION

Index to Form 10-Q

June 30, 2018

PART I.	FINANCIAL INFORMATION	Page
Item 1:	Financial Statements
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Forward-Looking Statements	20
	The Company	21
	Recent Developments	24
	Liquidity and Capital Resources	27
	Results of Operations	33
	Funds from Operations Available to Common Stockholders (FFO)	40
	Adjusted Funds from Operations Available to Common Stockholders (AFFO)	41
	Property Portfolio Information	42
	Impact of Inflation	48
	Impact of Recent Accounting Pronouncements	48
	Other Information	48
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4:	Controls and Procedures	49
PART II.	OTHER INFORMATION
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6:	Exhibits	50
SIGNATURE		52

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PART 1. FINANCIAL INFORMATION

Item 1.    Financial Statements

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2018 and December 31, 2017

(dollars in thousands, except per share data)

	2018			2017
ASSETS	(unaudited)
Real estate, at cost:
Land	$	4,355,454		$	4,080,400
Buildings and improvements	11,313,624			10,936,069
Total real estate, at cost	15,669,078			15,016,469
Less accumulated depreciation and amortization	(2,509,065		)	(2,346,644		)
Net real estate held for investment	13,160,013			12,669,825
Real estate held for sale, net	70,029			6,674
Net real estate	13,230,042			12,676,499
Cash and cash equivalents	30,717			6,898
Accounts receivable, net	126,126			119,533
Acquired lease intangible assets, net	1,228,580			1,194,930
Goodwill	14,902			14,970
Other assets, net	43,707			45,336
Total assets	$	14,674,074		$	14,058,166
LIABILITIES AND EQUITY
Distributions payable	$	64,399		$	60,799
Accounts payable and accrued expenses	122,379			109,523
Acquired lease intangible liabilities, net	311,043			268,796
Other liabilities	123,582			116,869
Line of credit payable	534,000			110,000
Term loans, net	319,531			445,286
Mortgages payable, net	311,708			325,941
Notes payable, net	5,374,963			5,230,244
Total liabilities	7,161,605			6,667,458
Commitments and contingencies
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 290,024,275 shares issued and outstanding as of June 30, 2018 and 284,213,685 shares issued and outstanding as of December 31, 2017	9,925,543			9,624,264
Distributions in excess of net income	(2,449,793		)	(2,252,763		)
Total stockholders’ equity	7,475,750			7,371,501
Noncontrolling interests	36,719			19,207
Total equity	7,512,469			7,390,708
Total liabilities and equity	$	14,674,074		$	14,058,166

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

For the three and six months ended June 30, 2018 and 2017

(dollars in thousands, except per share data) (unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
REVENUE
Rental	$	313,870		$	288,049		$	620,418		$	573,870
Tenant reimbursements	11,395			11,756			22,695			22,985
Other	3,621			365			4,068			1,340
Total revenue	328,886			300,170			647,181			598,195
EXPENSES
Depreciation and amortization	133,999			123,089			265,102			244,186
Interest	66,628			63,679			126,043			122,985
General and administrative	17,954			15,781			33,638			29,346
Property (including reimbursable)	16,236			16,486			32,788			35,561
Income taxes	1,208			441			2,431			1,488
Provisions for impairment	3,951			2,274			18,172			7,706
Total expenses	239,976			221,750			478,174			441,272
Gain on sales of real estate	7,787			2,839			11,005			13,371
Net income	96,697			81,259			180,012			170,294
Net income attributable to noncontrolling interests	(317		)	(123		)	(469		)	(288		)
Net income attributable to the Company	96,380			81,136			179,543			170,006
Preferred stock dividends	—			—			—			(3,911		)
Excess of redemption value over carrying value of preferred shares redeemed	—			—			—			(13,373		)
Net income available to common stockholders	$	96,380		$	81,136		$	179,543		$	152,722
Amounts available to common stockholders per common share:
Net income, basic and diluted	$	0.34		$	0.30		$	0.63		$	0.57
Weighted average common shares outstanding:
Basic	284,928,969			272,588,332			284,469,689			268,024,691
Diluted	285,372,256			273,099,487			284,924,336			268,569,855

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

For the six months ended June 30, 2018 and 2017

(dollars in thousands) (unaudited)

	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	180,012		$	170,294
Adjustments to net income:
Depreciation and amortization	265,102			244,186
Amortization of share-based compensation	8,657			7,215
Non-cash revenue adjustments	(4,029		)	(1,564		)
Amortization of net premiums on mortgages payable	(813		)	(1,240		)
Amortization of deferred financing costs	3,469			4,684
Gain on interest rate swaps	(2,799		)	(859		)
Gain on sales of real estate	(11,005		)	(13,371		)
Provisions for impairment on real estate	18,172			7,706
Change in assets and liabilities
Accounts receivable and other assets	2,785			3,168
Accounts payable, accrued expenses and other liabilities	17,718			41,620
Net cash provided by operating activities	477,269			461,839
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(829,818		)	(696,116		)
Improvements to real estate, including leasing costs	(17,017		)	(9,232		)
Proceeds from sales of real estate	47,526			44,005
Insurance proceeds received	3,836			—
Collection of loans receivable	5,267			61
Net cash used in investing activities	(790,206		)	(661,282		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(373,044		)	(335,380		)
Cash dividends to preferred stockholders	—			(6,168		)
Borrowings on line of credit	1,140,000			772,000
Payments on line of credit	(716,000		)	(1,244,000		)
Principal payment on term loan	(125,866		)	—
Proceeds from notes and bonds payable issued	497,500			711,812
Principal payment on notes payable	(350,000		)	—
Principal payments on mortgages payable	(13,447		)	(86,515		)
Redemption of preferred stock	—			(408,750		)
Proceeds from common stock offerings, net	—			704,938
Proceeds from dividend reinvestment and stock purchase plan	4,806			59,649
Proceeds from At-the-Market (ATM) program	297,983			52,442
Distributions to noncontrolling interests	(758		)	(887		)
Debt issuance costs	(4,436		)	(6,663		)
Other items, including shares withheld upon vesting	(11,143		)	(6,305		)
Net cash provided by financing activities	345,595			206,173
Net increase in cash, cash equivalents and restricted cash	32,658			6,730
Cash, cash equivalents and restricted cash, beginning of period	12,142			15,681
Cash, cash equivalents and restricted cash, end of period	$	44,800		$	22,411

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

June 30, 2018

(unaudited)

1.    Management Statement

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, 2017, which are included in our 2017 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.

At June 30, 2018 we owned 5,483 properties, located in 49 states and Puerto Rico, containing over 92.0 million leasable square feet.

2.    Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements

A.  The accompanying consolidated financial statements include the accounts of Realty Income and other subsidiaries for which we make operating and financial decisions (i.e., control), after elimination of all material intercompany balances and transactions.  We consolidate entities that we control and record a noncontrolling interest for the portion that we do not own.  Noncontrolling interest that was created or assumed as part of a business combination was recognized at fair value as of the date of the transaction (see note 10).  We have no unconsolidated investments.

B.  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 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. The income taxes recorded on our consolidated statements of income represent amounts paid by Realty Income and its subsidiaries for city and state income and franchise taxes.

C.  We assign a portion of goodwill to our applicable property sales, which results in a reduction of the carrying amount of our goodwill. In order to allocate goodwill to the carrying amount of properties that we sell, we utilize a relative fair value approach based on the original methodology for assigning goodwill.  As we sell properties, our goodwill will likely continue to gradually decrease over time. Based on our analysis of goodwill during the second quarters of 2018 and 2017, we determined there was no impairment on our existing goodwill.

D.  In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers. This ASU, as amended by ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers, and will apply to transactions such as the sale of real estate. This ASU, which is effective for interim and annual periods beginning after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also to provide certain additional disclosures. We adopted this standard effective as of January 1, 2018 and utilized the cumulative effect transition method of adoption. The adoption of this guidance did not have a material impact on our financial position or results of operations.

E.  In February 2016, FASB issued ASU 2016-02 (Topic 842, Leases), as clarified and amended by ASU 2018-01, which amended Topic 840, Leases. Under this amended topic, the accounting applied by a lessor is largely unchanged from that applied under Topic 840, Leases. The large majority of operating leases should remain classified as operating leases, and lessors should continue to recognize lease income for those leases on a generally straight-line basis over the lease term. Although primarily a lessor, we are also a lessee under several ground lease arrangements. Upon adoption, we will recognize lease obligations for ground leases with a

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corresponding right of use asset, and are currently evaluating other impacts this amendment may have on our consolidated financial statements. The amendments included in this topic are effective, for interim and annual periods beginning after December 15, 2018. We plan to adopt this standard when it becomes effective beginning January 1, 2019, and we expect to elect the practical expedients available for implementation under the standard.

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

A.	Acquired lease intangible assets, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired in-place leases	$	1,301,834		$	1,272,897
	Accumulated amortization of acquired in-place leases	(495,883		)	(444,221		)
	Acquired above-market leases	562,801			487,933
	Accumulated amortization of acquired above-market leases	(140,172		)	(121,679		)
		$	1,228,580		$	1,194,930

B.	Other assets, net, consist of the following at:	June 30, 2018		December 31, 2017
	Prepaid expenses	$	15,821	$	12,851
	Restricted escrow deposits	7,054		679
	Impounds related to mortgages payable	7,029		4,565
	Corporate assets, net	5,926		6,074
	Receivable for property rebuilds	3,244		3,919
	Credit facility origination costs, net	2,911		4,366
	Non-refundable escrow deposits for pending acquisitions	—		7,500
	Notes receivable issued in connection with property sales	—		5,267
	Other items	1,722		115
		$	43,707	$	45,336

C.	Distributions payable consist of the following declared distributions at:	June 30, 2018		December 31, 2017
	Common stock distributions	$	64,241	$	60,713
	Noncontrolling interests distributions	158		86
		$	64,399	$	60,799

D.	Accounts payable and accrued expenses consist of the following at:	June 30, 2018		December 31, 2017
	Notes payable - interest payable	$	75,861	$	64,058
	Property taxes payable	18,200		11,718
	Mortgages, term loans, credit line - interest payable and interest rate swaps	3,356		2,360
	Accrued costs on properties under development	3,149		2,681
	Other items	21,813		28,706
		$	122,379	$	109,523

E.	Acquired lease intangible liabilities, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired below-market leases	$	394,253		$	340,906
	Accumulated amortization of acquired below-market leases	(83,210		)	(72,110		)
		$	311,043		$	268,796

F.	Other liabilities consist of the following at:	June 30, 2018		December 31, 2017
	Rent received in advance and other deferred revenue	$	111,814	$	105,284
	Security deposits	6,287		6,259
	Capital lease obligations	5,481		5,326
		$	123,582	$	116,869

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4.    Investments in Real Estate

We acquire land, buildings and improvements necessary for the successful operations of commercial tenants.

A.    Acquisitions During the First Six Months of 2018 and 2017

During the first six months of 2018, we invested $856.8 million in 358 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.3%. The 358 new properties and properties under development or expansion are located in 32 states, will contain approximately 2.8 million leasable square feet, and are 100% leased with a weighted average lease term of 13.8 years. The tenants occupying the new properties operate in 17 industries and the property types consist of 93.7% retail and 6.3% industrial, based on rental revenue.  None of our investments during 2018 caused any one tenant to be 10% or more of our total assets at June 30, 2018.

The $856.8 million invested during the first six months of 2018 was allocated as follows: $314.4 million to land, $476.0 million to buildings and improvements, $90.6 million to intangible assets related to leases, and $24.2 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during the first six months of 2018 generated total revenues of $10.6 million and net income of $5.3 million during the six months ended June 30, 2018.

In comparison, during the first six months of 2017, we invested $691.9 million in 126 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.3%. The 126 new properties and properties under development or expansion were located in 30 states, contained approximately 3.4 million leasable square feet, and were 100% leased with a weighted average lease term of 14.8 years. The tenants occupying the new properties operated in 20 industries and the property types consisted of 95.1% retail and 4.9% industrial, based on rental revenue.

The $691.9 million invested during the first six months of 2017 was allocated as follows: $170.1 million to land, $395.5 million to buildings and improvements, $130.0 million to intangible assets related to leases, and $3.7 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during the first six months of 2017 generated total revenues of $7.3 million and net income of $3.4 million during the six months ended June 30, 2017.

The estimated initial weighted average contractual lease rate for a property is generally computed as estimated contractual net operating income, which, in the case of a net leased property, is equal to the aggregate base rent for the first full year of each lease, divided by the total cost of the property.  Since it is possible that a tenant 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.

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 estimated initial weighted average contractual lease rate is computed as follows: estimated 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. Of the $856.8 million we invested during the first six months of 2018, $64.3 million was invested in 10 properties under development or expansion with an estimated initial weighted average contractual lease rate of 6.7%. Of the $691.9 million we invested during the first six months of 2017, $9.9 million was invested in 12 properties under development or expansion with an estimated initial weighted average contractual lease rate of 7.9%.

B.    Investments in Existing Properties

During the first six months of 2018, we capitalized costs of $5.6 million on existing properties in our portfolio, consisting of $2.5 million for re-leasing costs, $147,000 for recurring capital expenditures and $3.0 million for non-recurring building improvements. In comparison, during the first six months of 2017, we capitalized costs of $6.8 million on existing properties in our portfolio, consisting of $759,000 for re-leasing costs, $365,000 for recurring capital expenditures and $5.7 million for non-recurring building improvements.

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C.    Properties with Existing Leases

Of the $856.8 million we invested during the first six months of 2018, approximately $225.8 million was used to acquire 107 properties with existing leases.  In comparison, of the $691.9 million we invested during the first six months of 2017, approximately $536.2 million was used to acquire 60 properties with existing leases. The value of the in-place and above-market leases is recorded to acquired lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to acquired 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 first six months of 2018 and 2017 were $53.1 million and $51.2 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the first six months of 2018 and 2017 were $7.9 million and $6.5 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 acquired above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at June 30, 2018 (in thousands):

	Net decrease to rental revenue			Increase to amortization expense
2018	$	(7,856	)	$	53,176
2019	(15,108		)	97,639
2020	(14,378		)	91,887
2021	(13,208		)	83,903
2022	(13,074		)	71,978
Thereafter	(47,962		)	407,368
Totals	$	(111,586	)	$	805,951

5.    Credit Facility

We have a $2.0 billion unsecured revolving credit facility, or our credit facility, with an initial term that expires in June 2019 and includes, at our option, twosix-month extensions. Our credit facility has a $1.0 billion accordion expansion option.  Under our credit facility, our investment grade credit ratings as of June 30, 2018 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.85% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.975% 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 credit facility. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At June 30, 2018, credit facility origination costs of $2.9 million are included in other assets, net on our consolidated balance sheet. These costs are being amortized over the remaining term of our credit facility.

At June 30, 2018, we had a borrowing capacity of approximately $1.5 billion available on our credit facility (subject to customary conditions to borrowing) and an outstanding balance of $534.0 million, as compared to an outstanding balance of $110.0 million at December 31, 2017.

The weighted average interest rate on outstanding borrowings under our credit facility was 2.7% during the first six months of 2018 and 1.8% during the first six months of 2017. At June 30, 2018 and December 31, 2017, the weighted average interest rate on outstanding borrowings under our credit facility was 2.9% and 4.5%, respectively. 

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Our credit facility is subject to various leverage and interest coverage ratio limitations, and at June 30, 2018, we were in compliance with the covenants on our credit facility. We regularly review our credit facility and may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

6.    Term Loans

In December 2017, in conjunction with the acquisition of a portfolio of properties, we entered into a $125.9 million promissory note, which was paid in full at maturity in January 2018. Borrowings under this note bore interest at 1.52%.

In June 2015, in conjunction with entering into our credit facility, we entered into a $250.0 million senior unsecured term loan maturing on June 30, 2020.  Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.90%.  In conjunction with this term loan, we also entered into an interest rate swap which effectively fixed our per annum interest rate on this term loan at 2.62%.

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 effectively fixed our per annum interest rate on this term loan at 2.05%. In January 2018, we entered into a six-month extension of this loan, which included, at our option, two additional six-month extensions. In June 2018, we exercised our first six-month extension of this loan, which now matures in January 2019. Borrowing during the extension periods bears interest at the current one-month LIBOR, plus 0.90%. The interest rate swap terminated upon the initial maturity in January 2018.

Deferred financing costs of $1.2 million incurred in conjunction with the $250.0 million term loan and $368,000 incurred in conjunction with the $70.0 million term loan are being amortized over the remaining terms of each respective term loan. The net balance of these deferred financing costs, which was $469,000 at June 30, 2018, and $580,000 at December 31, 2017, is included within term loans, net on our consolidated balance sheets.

7.    Mortgages Payable

During the first six months of 2018, we made $13.4 million in principal payments, including the repayment of one mortgage in full for $11.0 million. During the first six months of 2017, we made $86.5 million in principal payments, including the repayment of five mortgages in full for $82.9 million. No mortgages were assumed during the first six months of 2018 or 2017. The assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions for items such as solvency, bankruptcy, misrepresentation, fraud, misapplication of payments, environmental liabilities, failure to pay taxes, insurance premiums, liens on the property, violations of the single purpose entity requirements, and uninsured losses.  We expect to pay off our outstanding mortgages as soon as prepayment penalties make it economically feasible to do so.

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 June 30, 2018, 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 $209,000 at June 30, 2018 and $236,000 at December 31, 2017. These costs are being amortized over the remaining term of each mortgage.

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The following is a summary of all our mortgages payable as of June 30, 2018 and December 31, 2017, 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
6/30/2018	61	5.1	%	4.5	%	3.6	$	306,836	$	4,872	$	311,708
12/31/2017	62	5.0	%	4.4	%	4.0	$	320,283	$	5,658	$	325,941

⁽¹⁾ At June 30, 2018, there were 27 mortgages on 61 properties. At December 31, 2017, there were 28 mortgages on 62 properties. The mortgages require monthly payments with principal payments due at maturity. The mortgages are at fixed interest rates, except for three mortgages on three properties totaling $29.6 million and $29.9 million at June 30, 2018 and December 31, 2017, respectively. After factoring in arrangements which limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.2 million at June 30, 2018 and $22.4 million at December 31, 2017.

⁽²⁾ Stated interest rates ranged from 3.8% to 6.9% at June 30, 2018, while stated interest rates ranged from 3.4% to 6.9% at December 31, 2017.

⁽³⁾ Effective interest rates ranged from 2.0% to 6.0% at June 30, 2018, while effective interest rates ranged from 2.6% to 5.5% at December 31, 2017.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $5.1 million and deferred financing costs of $209,000, as of June 30, 2018 (dollars in millions):

Year of Maturity	Principal
2018	$	8.5
2019	20.7
2020	82.4
2021	66.9
2022	109.7
Thereafter	18.6
Totals	$	306.8

8.    Notes Payable

A.    General

Our senior unsecured notes and bonds consist of the following, sorted by maturity date (dollars in millions):

	June 30, 2018			December 31, 2017
2.000% notes, issued in October 2012 and due in January 2018	$	—		$	350
5.750% notes, issued in June 2010 and due in January 2021	250			250
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022	950			950
4.650% notes, issued in July 2013 and due in August 2023	750			750
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			—
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	650			650
3.000% notes, issued in October 2016 and due in January 2027	600			600
3.650% notes, issued in December 2017 and due in January 2028	550			550
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	250			250
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	550			550
Total principal amount	5,400			5,250
Unamortized net original issuance premiums and deferred financing costs	(25		)	(20		)
	$	5,375		$	5,230

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The following table summarizes the maturity of our notes and bonds payable as of June 30, 2018, excluding net unamortized original issuance premiums and deferred financing costs (dollars in millions):

Year of Maturity	Principal
2021	$	250
2022	950
Thereafter	4,200
Totals	$	5,400

As of June 30, 2018, the weighted average interest rate on our notes and bonds payable was 4.0% and the weighted average remaining years until maturity was 9.2 years.

B.    Note Repayment

In January 2018, we repaid our $350.0 million of outstanding 2.000% notes, plus accrued and unpaid interest upon maturity.

C.    Note Issuances

In April 2018, we issued $500.0 million of 3.875% senior unsecured notes due 2025, or the 2025 Notes. The public offering price for the 2025 Notes was 99.50% of the principal amount, for an effective yield to maturity of 3.957%. The net proceeds of approximately $493.1 million from this offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

In March 2017, we issued $300 million of 4.650% senior unsecured notes due 2047, or the 2047 Notes, and $400 million of 4.125% senior unsecured notes due 2026, or the 2026 Notes. The public offering price for the 2047 Notes was 99.97% of the principal amount for an effective yield to maturity of 4.65%. The public offering price for the 2026 Notes was 102.98% of the principal amount for an effective yield to maturity of 3.75%. The 2026 Notes constituted a further issuance of, and formed a single series with, the $250 million aggregate principal amount of senior notes due 2026, issued in September 2014. The net proceeds of approximately $705.2 million from the offerings were used to repay borrowings outstanding under our credit facility to fund investment opportunities, and for other general corporate purposes.

9.    Equity

A.    Issuance of Common Stock

In March 2017, we issued 11,850,000 shares of common stock.  After underwriting discounts and other offering costs of $29.8 million, the net proceeds of $704.9 million were used to repay borrowings under our credit facility.

B.    Redemption of Preferred Stock

In April 2017, we redeemed all of the 16,350,000 shares of our 6.625% Monthly Income Class F Preferred Stock, or the Class F preferred stock, for $25 per share, plus accrued dividends. We issued an irrevocable notice of redemption with respect to the Class F preferred stock in March 2017, and, as a result, we incurred a non-cash charge of $13.4 million for the first six months of 2017, representing the Class F preferred stock original issuance costs that we paid in 2012.

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 common 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.  During the first six months of 2018, we issued 93,061 shares and raised approximately $4.8 million under the DRSPP.  During the first six months of 2017, we issued 1,013,412 shares and raised approximately $59.6 million under the DRSPP.  From the inception of our DRSPP through June 30, 2018, we have issued 14,156,603 shares and raised approximately $666.6 million.

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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 first six months of 2018. During the first six months of 2017, we issued 927,695 shares and raised $54.7 million under the waiver approval process. These shares are included in the total activity for the first six months of 2017 noted in the preceding paragraph.

D.    At-the-Market (ATM) Programs

In September 2015, we established an “at-the-market” equity distribution program, or our ATM program, pursuant to which we can offer and sell up to 12,000,000 shares of common stock to, or through, a consortium of banks acting as our sales agents by means of ordinary brokers’ transactions on the NYSE at prevailing market prices or at negotiated prices. In October 2017, following the issuance and sale of the remaining shares under our prior ATM program, we established a new “at-the-market” equity distribution plan, or our new ATM program, and, together with our prior ATM program, our ATM programs, pursuant to which we are permitted to offer and sell up to 17,000,000 additional shares of common stock.  During the first six months of 2018, we issued 5,575,273 shares and raised approximately $298.0 million under the ATM program. During the first six months of 2017, we issued 935,746 shares and raised approximately $52.4 million under the ATM program. From the inception of our ATM programs through June 30, 2018, we have issued 19,982,802 shares authorized by our ATM programs and raised approximately $1.1 billion.

10.    Noncontrolling Interests

In January 2013, we completed our acquisition of ARCT.  Equity issued as consideration for this transaction included common and preferred partnership units issued by Tau Operating Partnership, L.P., or Tau Operating Partnership, the consolidated subsidiary which owns properties acquired through the ARCT acquisition.  We and our subsidiaries hold a 99.4% interest in Tau Operating Partnership, and consolidate the entity.

In June 2013, we completed the acquisition of a portfolio of properties by issuing common partnership units in Realty Income, L.P. as consideration for the acquisition. Additionally, in March and April 2018, we completed the acquisition of an additional portfolio of properties, by paying both cash and by issuing additional common partnership units in Realty Income, L.P as consideration for the acquisitions. At June 30, 2018, the remaining units from these issuances represent a 1.6% ownership in Realty Income, L.P.  We hold the remaining 98.4% interests in this entity and consolidate the entity.

Neither of the common partnership units have voting rights. Both common partnership units are entitled to monthly distributions equal to the amount paid to common stockholders of Realty Income, and are redeemable in cash or Realty Income common stock, at our option, and at a conversion ratio of one to one, subject to certain exceptions.  Noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the balance sheet was appropriate.  We determined that the units meet the requirements to qualify for presentation as permanent equity.

In 2016, we completed the acquisition of two properties by acquiring a controlling interest in two separate entities. We are the managing member of each of these entities, and possess the ability to control the business and manage the affairs of these entities. At June 30, 2018, we and our subsidiaries held 95.0% and 74.0% interests, respectively, and fully consolidated these entities in our consolidated financial statements.

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The following table represents the change in the carrying value of all noncontrolling interests through June 30, 2018 (dollars in thousands):

	Tau Operating Partnership units(1)			Realty Income, L.P. units(2)			Other Noncontrolling Interests			Total
Carrying value at December 31, 2017	$	13,322		$	2,160		$	3,725		$	19,207
Reallocation of equity	572			(43		)	(37		)	492
Redemptions	—			(1,468		)	—			(1,468		)
Shares issued in conjunction with acquisition	—			18,848						18,848
Distributions	(417		)	(336		)	(76		)	(829		)
Allocation of net income	173			257			39			469
Carrying value at June 30, 2018	$	13,650		$	19,418		$	3,651		$	36,719

⁽¹⁾ 317,022 Tau Operating Partnership units were issued on January 22, 2013 and remained outstanding as of June 30, 2018 and December 31, 2017.

⁽²⁾ 534,546 Realty Income, L.P. units were issued on June 27, 2013, 242,007 units were issued on March 30, 2018 and 131,790 units were issued on April 30, 2018. 401,979 and 88,182 remained outstanding as of June 30, 2018 and December 31, 2017, respectively.

Tau Operating Partnership, Realty Income, L.P. and the two entities acquired in 2016 are considered variable interest entities, or VIEs, in which we are deemed the primary beneficiary based on our controlling financial interests. Below is a summary of selected financial data of consolidated VIEs, for which we are the primary beneficiary included in the consolidated balance sheets at June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Net real estate	$	2,961,127	$	2,936,397
Total assets	3,348,144		3,342,443
Total debt	198,332		210,384
Total liabilities	330,757		313,295

11.    Fair Value of Financial Instruments

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 disclosure for assets and liabilities measured at fair value requires allocation to a three-level valuation hierarchy. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our notes receivable issued in connection with property sales, mortgages payable and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):

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At June 30, 2018	Carrying value		Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)	$	306.8	$	314.4
Notes and bonds payable (2)	5,400.0		5,391.9

At December 31, 2017	Carrying value		Estimated fair value
Notes receivable issued in connection with property sales	$	5.3	$	5.3
Mortgages payable assumed in connection with acquisitions (1)	320.3		334.2
Notes and bonds payable (2)	5,250.0		5,475.3

⁽¹⁾   Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums is $5.1 million at June 30, 2018, and $5.9 million at December 31, 2017. Also excludes deferred financing costs of $209,000 at June 30, 2018 and $236,000 at December 31, 2017.

⁽²⁾   Excludes non-cash original issuance premiums and discounts recorded on notes payable. The unamortized balance of the net original issuance premiums is $11.1 million at June 30, 2018, and $14.3 million at December 31, 2017. Also excludes deferred financing costs of $36.2 million at June 30, 2018 and $34.1 million at December 31, 2017.

The estimated fair values of our notes receivable issued in connection with property sales and our mortgages 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 notes receivable and mortgages payable is categorized as level three on the three-level valuation hierarchy.

The estimated fair values of our senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values, related to our notes and bonds payable, is categorized as level two on the three-level valuation hierarchy.

We record interest rate swaps on the consolidated balance sheet at fair value. At June 30, 2018, interest rate swaps in a liability position valued at $214,000 were included in accounts payable and accrued expenses and interest rate swaps in an asset position valued at $4.3 million were included in other assets, net on the consolidated balance sheet.  The fair value of our interest rate swaps are based on valuation techniques including discounted cash flow analysis on the expected cash flows of each swap, using both observable and unobservable market-based inputs, including interest rate curves.  Because this methodology uses observable and unobservable inputs, and the unobservable inputs are not significant to the fair value measurement, the measurement of interest rate swaps is categorized as level two on the three-level valuation hierarchy.

12.    Gain on Sales of Real Estate

During the second quarter of 2018, we sold 26 properties for $33.7 million, which resulted in a gain of $7.8 million. During the second quarter of 2017, we sold 15 properties for $12.8 million, which resulted in a gain of $2.8 million.

During the first six months of 2018, we sold 40 properties for $47.5 million, which resulted in a gain of $11.0 million. During the first six months of 2017, we sold 29 properties for $44.0 million, which resulted in a gain of $13.4 million.

13.    Impairments

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A provision is made for impairment 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. Key factors that we utilize in this analysis include projected rental rates, estimated holding periods, historical sales and releases, capital expenditures and property sales capitalization rates. If a property is classified as held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell, and depreciation of the property ceases.

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During the second quarter of 2018, we recorded total provisions for impairment of $4.0 million on eight properties classified as held for sale, one property classified as held for investment, and nine sold properties. For the first six months of 2018, we recorded total provisions for impairment of $18.2 million on nine properties classified as held for sale, two property classified as held for investment, and 14 sold properties.

In comparison, for the second quarter of 2017, we recorded total provisions for impairment of $2.3 million on one property classified as held for investment and nine sold properties. For the first six months of 2017, we recorded total provisions for impairment of $7.7 million on four properties classified as held for investment and 14 sold properties.

14.    Distributions Paid and Payable

A.    Common Stock

We pay monthly distributions to our common stockholders.  The following is a summary of monthly distributions paid per common share for the first six months of 2018 and 2017:

Month	2018		2017
January	$	0.2125	$	0.2025
February	0.2190		0.2105
March	0.2190		0.2105
April	0.2195		0.2110
May	0.2195		0.2110
June	0.2195		0.2110
Total	$	1.3090	$	1.2565

At June 30, 2018, a distribution of $0.22 per common share was payable and was paid in July 2018.

B.    Class F Preferred Stock

In April 2017, we redeemed all 16,350,000 shares of our Class F preferred stock. During the first six months of 2017, we paid three monthly dividends to holders of our Class F preferred stock totaling $0.414063 per share, or $3.9 million. In April 2017, we paid a final monthly dividend of $0.101215 per share, or $1.7 million, which was recorded as interest expense, since these dividends accrued subsequent to the March 2017 notice of redemption.

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.

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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 June 30,		Six months ended June 30,
	2018	2017	2018	2017
Weighted average shares used for the basic net income per share computation	284,928,969	272,588,332	284,469,689	268,024,691
Incremental shares from share-based compensation	126,265	194,133	137,625	228,142
Weighted average partnership common units convertible to common shares that were dilutive	317,022	317,022	317,022	317,022
Weighted average shares used for diluted net income per share computation	285,372,256	273,099,487	284,924,336	268,569,855
Unvested shares from share-based compensation that were anti-dilutive	237,861	44,191	164,111	32,016
Weighted average partnership common units convertible to common shares that were anti-dilutive	359,980	88,182	207,948	88,182

16.    Supplemental Disclosures of Cash Flow Information

Cash paid for interest was $111.9 million in the first six months of 2018 and $107.3 million in the first six months of 2017.

Interest capitalized to properties under development was $130,000 in the first six months of 2018 and $272,000 in the first six months of 2017.

Cash paid for income taxes was $2.9 million in the first six months of 2018 and $3.3 million in the first six months of 2017.

The following non-cash activities are included in the accompanying consolidated financial statements:

A. During the first six months of 2018, we issued 373,797 common partnership units of Realty Income, L.P. as partial consideration for an acquisition of properties, totaling $18.8 million.

B. During the first six months of 2018, we completed the acquisition of a property using $7.5 million in funds that were held in a non-refundable escrow account. These funds were included in other assets, net, at December 31, 2017.

C. During the first six months of 2017, we removed the net book value of two damaged buildings from our consolidated balance sheet, and recorded net receivables of $10.7 million. During 2017, we received the insurance proceeds for these properties.

Per the requirements of ASU 2016-18 (Topic 230, Statement of Cash Flows), 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:

	June 30, 2018		June 30, 2017
Cash and cash equivalents shown in the consolidated balance sheets	$	30,717	$	10,945
Restricted escrow deposits (1)	7,054		8,550
Impounds related to mortgages payable (1)	7,029		2,916
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	44,800	$	22,411

 ⁽¹⁾  Included within other assets, net on the consolidated balance sheets (see note 3). These amounts consist of cash we are legally entitled to that is not immediately available to us. As a result, they were considered restricted as of the dates presented.

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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 tenants into 48 activity segments. All of the properties are incorporated into one of the applicable segments. Because almost all of our leases require the tenant to pay operating expenses, rental revenue is the only component of segment profit and loss we measure.

The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants (dollars in thousands):

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Assets, as of:	June 30, 2018		December 31, 2017
Segment net real estate:
Apparel	$	161,920	$	164,919
Automotive service	209,964		213,156
Automotive tire services	243,271		247,557
Beverages	287,032		289,170
Child care	60,058		61,527
Convenience stores	1,397,354		997,170
Dollar stores	1,101,066		1,105,097
Drug stores	1,511,955		1,518,443
Financial services	428,731		384,867
General merchandise	318,584		313,181
Grocery stores	773,501		793,286
Health and fitness	886,585		896,430
Home improvement	428,730		407,002
Motor vehicle dealerships	201,073		204,651
Restaurants-casual dining	475,028		494,977
Restaurants-quick service	803,886		681,763
Theaters	561,477		566,585
Transportation services	766,883		776,068
Wholesale club	420,048		426,551
Other non-reportable segments	2,192,896		2,134,099
Total segment net real estate	13,230,042		12,676,499
Intangible assets:
Apparel	34,641		36,600
Automotive service	62,664		64,388
Automotive tire services	9,520		10,383
Beverages	1,894		2,022
Convenience stores	95,392		45,445
Dollar stores	47,357		47,905
Drug stores	171,741		173,893
Financial services	22,563		24,867
General merchandise	45,893		50,184
Grocery stores	144,239		140,780
Health and fitness	74,992		76,276
Home improvement	61,666		61,045
Motor vehicle dealerships	29,937		31,720
Restaurants-casual dining	19,100		20,079
Restaurants-quick service	62,303		51,711
Theaters	25,555		26,448
Transportation services	80,111		87,162
Wholesale club	28,040		29,596
Other non-reportable segments	210,972		214,426
Goodwill:
Automotive service	437		437
Automotive tire services	862		862
Child care	4,899		4,924
Convenience stores	2,002		2,004
Restaurants-casual dining	2,047		2,062
Restaurants-quick service	1,057		1,064
Other non-reportable segments	3,598		3,617
Other corporate assets	200,550		171,767
Total assets	$	14,674,074	$	14,058,166

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	Three months ended June 30,				Six months ended June 30,
Revenue	2018		2017		2018		2017
Segment rental revenue:
Apparel	$	4,210	$	4,928	$	8,541	$	9,895
Automotive service	7,021		6,298		14,030		11,841
Automotive tire services	7,708		7,616		15,147		14,775
Beverages	7,836		7,758		15,673		15,516
Child care	5,216		4,845		10,916		10,332
Convenience stores	34,008		26,965		61,869		55,268
Dollar stores	23,237		22,757		46,487		45,508
Drug stores	32,436		31,614		64,775		63,245
Financial services	6,890		7,159		13,891		14,318
General merchandise	7,290		5,395		14,159		10,756
Grocery stores	15,673		13,597		31,338		23,759
Health and fitness	23,614		21,789		47,057		43,394
Home improvement	9,339		7,090		18,583		14,010
Motor vehicle dealerships	5,712		5,755		12,948		12,491
Restaurants-casual dining	11,029		10,716		21,989		21,606
Restaurants-quick service	17,083		14,517		33,362		28,853
Theaters	17,565		13,114		35,335		26,458
Transportation services	15,762		15,633		31,548		31,021
Wholesale club	9,341		9,413		18,873		18,827
Other non-reportable segments	52,900		51,090		103,897		101,997
Total rental revenue	313,870		288,049		620,418		573,870
Tenant reimbursements	11,395		11,756		22,695		22,985
Other revenue	3,621		365		4,068		1,340
Total revenue	$	328,886	$	300,170	$	647,181	$	598,195

18.    Common Stock Incentive Plan

In 2012, our Board of Directors adopted and stockholders approved the Realty Income Corporation 2012 Incentive Award Plan, or the 2012 Plan, to enable us to motivate, attract and retain the services of directors and employees considered essential to our long-term success. The 2012 Plan offers our directors and employees an opportunity to own our stock or rights that will reflect our growth, development and financial success. Under the terms of the 2012 plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 3,985,734 shares. The 2012 Plan has a term of ten years from the date it was adopted by our Board of Directors.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income was $5.0 million during the second quarter of 2018, $4.5 million during the second quarter of 2017, $8.7 million during the first six months of 2018 and $7.2 million during the first six months of 2017.

A.    Restricted Stock

During the first six months of 2018, we granted 137,000 shares of common stock under the 2012 Plan. This included an annual grant of 28,000 shares of common stock to the independent members of our Board of Directors in May 2018, 20,000 of which shares vested immediately, 4,000 shares of which vest in equal parts over a three-year service period, and 4,000 shares of which vest in equal parts over a two-year service period. With the exception of shares granted to our independent directors, shares granted to employees typically vest in equal parts over a four-year or five-year service period.

As of June 30, 2018, the remaining unamortized share-based compensation expense related to restricted stock totaled $18.8 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

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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.

B.    Performance Shares and Restricted Stock Units

During the first six months of 2018, we granted 190,449 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our 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 first six months of 2018, we also granted 8,383 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 June 30, 2018, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $15.8 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 restricted stock units are being recognized on a straight-line basis over the service period.

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 June 30, 2018, we had commitments of $15.9 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of June 30, 2018, we had committed $14.3 million under construction contracts, which is expected to be paid in the next twelve months.

20.    Subsequent Events

In July 2018, we declared a dividend of $0.22 per share to our common stockholders, which will be paid in August 2018.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the documents incorporated by reference, 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 discussions of strategy, plans, or intentions of management. Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation, including, among other things:

• 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-tenant properties; and

• Future expenditures for development projects.

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Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. In particular, some of the factors that could cause actual results to differ materially are:

• Our continued qualification as a real estate investment trust;

• General business and economic conditions;

• Competition;

• Fluctuating interest 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 tenant defaults, 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 the tax laws of the United States of America;

• The outcome of any legal proceedings to which we are a party or which may occur in the future; and

• Acts of terrorism and war.

Additional factors that may cause risks and uncertainties 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, 2017.

Readers are cautioned not to place undue reliance on forward-looking statements, which 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 dedicated to providing stockholders with dependable monthly dividends that increase over time.  The company is structured as a real estate investment trust, or REIT, requiring it annually to distribute at least 90% of its 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 regional and national commercial tenants.

Realty Income was founded in 1969, and listed on the New York Stock Exchange (NYSE: O) in 1994.  Over the past 49 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements.  The company is a member of the S&P High Yield Dividend Aristocrats® index for having increased its dividend every year for more than 20 consecutive years.

At June 30, 2018, we owned a diversified portfolio:

• Of 5,483 properties;

• With an occupancy rate of 98.7%, or 5,414 properties leased and 69 properties available for lease;

• Leased to 257 different commercial tenants doing business in 48 separate industries;

• Located in 49 states and Puerto Rico;

• With over 92.0 million square feet of leasable space; and

• With an average leasable space per property of approximately 16,780 square feet; approximately 11,680 square feet per retail property and 228,150 square feet per industrial property.

Of the 5,483 properties in the portfolio, 5,455, or 99.5%, are single-tenant properties, and the remaining are multi-tenant properties. At June 30, 2018, of the 5,455 single-tenant properties, 5,386 were leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.3 years.

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Investment Philosophy

We believe that owning an actively managed, diversified portfolio of primarily single-tenant commercial properties under long-term, net lease agreements produces consistent and predictable income. A net lease typically requires the tenant to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance. In addition, tenants of our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements 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.

Diversification is also a key component of our investment philosophy.  We believe that diversification of the portfolio by tenant, industry, geography, and, to a certain extent, 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 June 30, 2018, consisted of 5,483 properties located in 49 states and Puerto Rico, leased to 257 different commercial tenants doing business in 48 industries. Each of the 48 industries represented in our property portfolio individually accounted for no more than 10.8% of our rental revenue for the quarter ended June 30, 2018.

Investment Strategy

Our investment strategy is to acquire real estate leased to regional and national tenants. When identifying new properties for investment, we generally focus on acquiring high-quality real estate that tenants consider important to the successful operation of their business. We generally seek to acquire real estate that has the following characteristics: 

• Properties that are freestanding, commercially-zoned with a single tenant;

• Properties that are in significant markets or strategic locations critical to generating revenue for regional and national tenants (i.e. they need the property in which they operate in order to conduct their business);

• Properties that we deem to be profitable for the tenants and/or can generally be characterized as important to the successful operations of the company’s business;

• Properties that are located within attractive demographic areas relative to the business of our tenants, generally fungible, and have good visibility and easy access to major thoroughfares;

• Properties with real estate valuations that approximate replacement costs;

• Properties with rental or lease payments that approximate market rents; and

• 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.

We seek to invest in industries in which several, well-organized, regional and national tenants are capturing market share through the selection of prime real estate locations supported by superior service, quality control, economies of scale, consumer branding, and advertising. In addition, we frequently acquire large portfolios of single-tenant properties net leased to different tenants operating in a variety of industries.  We have an internal team dedicated to sourcing such opportunities, often using our relationships with various tenants, 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, tenants, 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 look for tenants with the following attributes:

• Tenants with reliable and sustainable cash flow;

• Tenants with revenue and cash flow from multiple sources;

• Tenants that are willing to sign a long-term lease (10 or more years); and

• Tenants that are large owners and users of real estate.

From a retail perspective, our investment strategy is to target tenants that have a service, non-discretionary, and/or low-price-point component to their business.  We believe these characteristics better position tenants to operate in a variety of economic conditions and to compete more effectively with internet retailers.  As a result of the execution of this strategy, over 92% of our annualized retail rental revenue at June 30, 2018 is derived from tenants 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 Fortune 1000, primarily 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 can achieve an attractive investment spread over our cost of capital and favorable risk-adjusted returns.

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, tenant (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 tenants’ business.

We believe the principal financial obligations for most of our tenants typically include their bank and other debt, payment obligations to suppliers, and real estate lease obligations. Because we typically own the land and building in which a tenant conducts its business or which are critical to the tenant’s ability to generate revenue, we believe the risk of default on a tenant’s lease obligation is less than the tenant’s unsecured general obligations. It has been our experience that tenants must retain their profitable and critical locations in order to survive. Therefore, in the event of reorganization, 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 tenant in the event of reorganization. If a property is rejected by the tenant during reorganization, we own the property and can either lease it to a new tenant 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 the tenants’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition.

Prior to entering into any transaction, our research department conducts a review of a tenant’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 tenant and a more comprehensive review of the business segment and industry in which the tenant operates.  We continue to monitor our tenants’ credit quality on an ongoing basis by reviewing the available information previously discussed, and providing summaries of these findings to management. Approximately 51% of our annualized rental revenue comes from properties leased to investment grade rated companies or their subsidiaries. June 30, 2018, our top 20 tenants represent approximately 54% of our annualized revenue and 12 of these tenants have investment grade credit ratings or are subsidiaries of investment grade companies.

Portfolio and Asset Management Strategy

In addition to pursuing new properties for investment, we seek to increase earnings and distributions to stockholders through active portfolio and asset management.

Generally, our portfolio and asset management efforts seek to achieve: 

• Rent increases at the expiration of existing leases, when market conditions permit;

• Optimum exposure to certain tenants, 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.

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We continually monitor our portfolio for any changes that could affect the performance of our tenants, our tenants’ 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 portfolio and asset management strategy pursues asset sales when we believe the reinvestment of the sale proceeds will: 

• Generate higher returns;

• Enhance the credit quality of our real estate portfolio;

• Extend our average remaining lease term; and/or

• Strategically decrease tenant, industry, or geographic concentration.

At June 30, 2018, we classified 74 properties with a carrying amount of $70.0 million as held for sale on our balance sheet. For the remainder of 2018, we intend to continue our active disposition efforts to further enhance our real estate portfolio and anticipate approximately $200 million in property sales.  We plan to invest these proceeds into new property acquisitions, if there are attractive opportunities available. However, we cannot guarantee that we will sell properties during the remainder of 2018 at our estimated values or be able to invest the property sale proceeds in new properties.

The active management of the portfolio is an essential component of our long-term strategy of maintaining high occupancy. Since 1970, our occupancy rate at the end of each year has never been below 96%.  However, we cannot assure you that our future occupancy levels will continue to equal or exceed 96%.

Impact of Real Estate and Credit Markets

In the commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, the U.S. 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 U.S. 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 49-year policy of paying monthly dividends. In addition, we increased the dividend four times during 2018.  As of July 2018, we have paid 83 consecutive quarterly dividend increases and increased the dividend 97 times since our listing on the NYSE in 1994.

	Month	Month	Dividend		Increase
2018 Dividend increases	Declared	Paid	per share		per share
1st increase	Dec 2017	Jan 2018	$	0.2125	$	0.0005
2nd increase	Jan 2018	Feb 2018	$	0.2190	$	0.0065
3rd increase	Mar 2018	Apr 2018	$	0.2195	$	0.0005
4th increase	Jun 2018	Jul 2018	$	0.2200	$	0.0005

The dividends paid per share during the first six months of 2018 totaled approximately $1.309, as compared to approximately $1.257 during the first six months of 2017, an increase of $0.052, or 4.1%.

The monthly dividend of $0.22 per share represents a current annualized dividend of $2.64 per share, and an annualized dividend yield of approximately 4.9% based on the last reported sale price of our common stock on the NYSE of $53.79 on June 30, 2018. 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 Second Quarter of 2018

During the second quarter of 2018, we invested $347.0 million in 190 new properties and properties under development or expansion, with an initial weighted average contractual lease rate of 6.5%. The 190 new properties and properties under development or expansion are located in 24 states, will contain approximately 1.9 million leasable square feet and are 100% leased with a weighted average lease term of 13.6 years.  The tenants occupying the new properties operate in 15 industries and the property types are 85% retail and 15% industrial, based on rental revenue.

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The estimated initial weighted average contractual lease rate for a property is generally computed as estimated contractual net operating income, which, in the case of a net leased property, is equal to the aggregate base rent for the first full year of each lease, divided by the total cost of the property.  Since it is possible that a tenant 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.

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 estimated initial weighted average contractual lease rate is computed as follows: estimated 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.

Of the $347.0 million we invested during the second quarter of 2018, $60.6 million was invested in ten properties under development or expansion with an estimated initial weighted average contractual lease rate of 6.7%. We may continue to pursue development or expansion opportunities under similar arrangements in the future.

Acquisitions During the First Six Months of 2018

During the first six months of 2018, we invested $856.8 million in 358 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.3%. The 358 new properties and properties under development or expansion are located in 32 states, will contain approximately 2.8 million leasable square feet, and are 100% leased with a weighted average lease term of 13.8 years. The tenants occupying the new properties operate in 17 industries and the property types are 93.7% retail and 6.3% industrial, based on rental revenue.  None of our investments during 2018 caused any one tenant to be 10% or more of our total assets at June 30, 2018.

Of the $856.8 million we invested during the first six months of 2018, $64.3 million was invested in ten properties under development or expansion with an estimated initial weighted average contractual lease rate of 6.7%. We may continue to pursue development or expansion opportunities under similar arrangements in the future.

Portfolio Discussion

Leasing Results

At June 30, 2018, we had 69 properties available for lease out of 5,483 properties in our portfolio, which represents a 98.7% occupancy rate based on the number of properties in our portfolio. Since December 31, 2017, when we reported 83 properties available for lease out of 5,172 and a 98.4% occupancy rate, we:

• Had 115 lease expirations;

• Re-leased 102 properties; and

• Sold 27 vacant properties.

Of the 102 properties re-leased during the first six months of 2018, 92 properties were re-leased to existing tenants, three were re-leased to new tenants without vacancy, and seven were re-leased to new tenants after a period of vacancy.  The annual rent on these 102 leases was $27.25 million, as compared to the previous rent on these same properties of $26.02 million, which represents a rent recapture rate of 104.7% on the properties re-leased during the first six months of 2018.

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 tenant rent concessions. We do not consider the collective impact of the leasing commissions or tenant rent concessions to be material to our financial position or results of operations.

At June 30, 2018, our average annualized rental revenue was approximately $13.86 per square foot on the 5,414 leased properties in our portfolio.  At June 30, 2018, we classified 74 properties with a carrying amount of $70.0 million as held for sale 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.

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Investments in Existing Properties

In the second quarter of 2018, we capitalized costs of $2.4 million on existing properties in our portfolio, consisting of $1.5 million for re-leasing costs, $135,000 for recurring capital expenditures, and $723,000 for non-recurring building improvements.  In the second quarter of 2017, we capitalized costs of $3.5 million on existing properties in our portfolio, consisting of $349,000 for re-leasing costs, $24,000 for recurring capital expenditures and $3.1 million for non-recurring building improvements.

In the first six months of 2018, we capitalized costs of $5.6 million on existing properties in our portfolio, consisting of $2.5 million for re-leasing costs, $147,000 for recurring capital expenditures, and $3.0 million for non-recurring building improvements. In the first six months of 2017, we capitalized costs of $6.8 million on existing properties in our portfolio, consisting of $759,000 for re-leasing costs, $365,000 for recurring capital expenditures, and $5.7 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, tenant credit worthiness, the lease term and the willingness of tenants 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.

Note Issuance

In April 2018, we issued $500.0 million of 3.875% senior unsecured notes due 2025, or the 2025 Notes. The public offering price for the 2025 Notes was 99.50% of the principal amount, for an effective yield to maturity of 3.957%. The net proceeds of approximately $493.1 million from this offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

Capital Raising

During the quarter ended June 30, 2018, we raised $300.4 million from the sale of common stock at a weighted average price of $53.44 per share. During the six months ended June 30, 2018, we raised $302.8 million from the sale of common stock at a weighted average price of $53.42 per share.

Net Income Available to Common Stockholders

Net income available to common stockholders was $96.4 million in the second quarter of 2018, compared to $81.1 million in the second quarter of 2017, an increase of $15.3 million. On a diluted per common share basis, net income available to common stockholders was $0.34 in the second quarter of 2018, compared to $0.30 in the second quarter of 2017, an increase of $0.04, or 13.3%.

Net income available to common stockholders was $179.5 million in the first six months of 2018, as compared to $152.7 million in the first six months of 2017, an increase of $26.8 million. On a diluted per common share basis, net income available to common stockholders was $0.63 in the first six months of 2018, as compared to $0.57 in the first six months of 2017, an increase of $0.06, or 10.5%.

Net income and funds from operations available to common stockholders for the six months ended June 30, 2017 were impacted by a $13.4 million non-cash redemption charge on the Class F preferred stock that were redeemed in April 2017, which represented $0.05 per share of Class F preferred stock. This charge was based on the excess of redemption value over the carrying value of the Class F preferred stock that represents the original issuance cost that was paid in 2012.

The calculation to determine net income available to common stockholders includes impairments, gains from the sale of properties and/or fair value adjustments on our interest rate swaps. These items vary from period to period based on the timing of property sales and the interest rate environment, and can significantly impact net income available to common stockholders.

Gains from the sale of properties during the second quarter of 2018 were $7.8 million, as compared to gains from the sale of properties of $2.8 million during the second quarter of 2017. Gains from the sale of properties during the first six months of 2018 were $11.0 million, as compared to gains from the sale of properties of $13.4 million during the first six months of 2017.

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Funds from Operations Available to Common Stockholders (FFO)

In the second quarter of 2018, FFO increased by $22.8 million, or 11.2%, to $226.1 million, compared to $203.3 million in the second quarter of 2017. On a diluted per common share basis, FFO was $0.79 in the second quarter of 2018, compared to $0.75 in the second quarter of 2017, an increase of $0.04, or 5.3%.

In the first six months of 2018, FFO increased by $60.5 million, or 15.5%, to $451.0 million, compared to $390.5 million in the first six months of 2017.  On a diluted per common share basis, FFO was $1.58 in the first six months of 2018, compared to $1.46 in the first six months of 2017, an increase of $0.12, or 8.2%.

Adjusted Funds from Operations Available to Common Stockholders (AFFO)

In the second quarter of 2018, AFFO increased by $18.6 million, or 8.9%, to $227.0 million, compared to $208.4 million in the second quarter of 2017. On a diluted per common share basis, AFFO was $0.80 in the second quarter of 2018, compared to $0.76 in the second quarter of 2017, an increase of $0.04, or 5.3%.

In the first six months of 2018, AFFO increased by $41.8 million, or 10.2%, to $451.5 million, compared to $409.7 million in the first six months of 2017. On a diluted per common share basis, AFFO was $1.59 in the first six months of 2018, compared to $1.53 in the first six months of 2017, an increase of $0.06, or 3.9%.

See our discussion of 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 AFFO.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

Historically, we have met our long-term capital needs by issuing common stock, preferred stock and long-term unsecured notes and bonds. Over the long term, we believe that common stock should be the majority of our capital structure; however, we may issue additional preferred stock or debt 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 credit facility 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 and preferred stockholders, primarily through cash provided by operating activities, borrowing on our credit facility and periodically through public securities offerings.

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 June 30, 2018, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable and credit facility borrowings were $6.56 billion, or approximately 29.6% of our total market capitalization of $22.2 billion.

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We define our total market capitalization at June 30, 2018 as the sum of:

• Shares of our common stock outstanding of 290,024,275, plus total common units outstanding of 719,001, multiplied by the last reported sales price of our common stock on the NYSE of $53.79 per share on June 30, 2018, or $15.6 billion;

• Outstanding borrowings of $534.0 million on our credit facility;

• Outstanding mortgages payable of $306.8 million, excluding net mortgage premiums of $5.1 million and deferred financing costs of $209,000;

• Outstanding borrowings of $320.0 million on our term loans, excluding deferred financing costs of $469,000; and

• Outstanding senior unsecured notes and bonds of $5.4 billion, excluding net unamortized original issuance premiums of $11.1 million and deferred financing costs of $36.2 million.

Universal Shelf Registration

In December 2015, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in December 2018. In accordance with SEC rules, the amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit. The securities covered by this registration statement include (1) common stock, (2) preferred stock, (3) debt securities, (4) depositary shares representing fractional interests in shares of preferred stock, (5) warrants to purchase debt securities, common stock, preferred stock, or depositary shares, and (6) any combination of these securities. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

At-the-Market (ATM) Programs

In September 2015, we established an “at-the-market” equity distribution program, or our ATM program, pursuant to which we can offer and sell up to 12,000,000 shares of common stock to, or through, a consortium of banks acting as our sales agents by means of ordinary brokers’ transactions on the NYSE at prevailing market prices or at negotiated prices. In October 2017, following the issuance and sale of the remaining shares under our prior ATM program, we established a new “at-the-market” equity distribution plan, or our new ATM program, and, together with our prior ATM program, our ATM programs, pursuant to which we are permitted to offer and sell up to 17,000,000 additional shares of common stock.  During the first six months of 2018, we issued 5,575,273 shares and raised approximately $298.0 million under the ATM program. From the inception of our ATM programs through June 30, 2018, we have issued 19,982,802 shares authorized by our ATM programs and raised approximately $1.1 billion.

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 common 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. During the first six months of 2018, we issued 93,061 shares and raised approximately $4.8 million under our DRSPP.  We did not issue shares under the waiver approval process during the first six months of 2018. From the inception of our DRSPP through June 30, 2018, we have issued 14,156,603 shares and raised approximately $666.6 million.

$2.0 Billion Revolving Credit Facility

We have a $2.0 billion unsecured revolving credit facility, or our credit facility, with an initial term that expires in June 2019 and includes, at our option, twosix-month extensions. Our credit facility has a $1.0 billion accordion expansion option.  Under our credit facility, our investment grade credit ratings as of June 30, 2018 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.85% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.975% 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 credit facility. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At June 30, 2018, we had a borrowing capacity of approximately $1.5 billion available on our credit facility and an outstanding balance of $534.0 million. The weighted average interest rate on borrowings under our credit facility

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during the first six months of 2018 was 2.7% per annum. We must comply with various financial and other covenants in our credit facility.  At June 30, 2018, 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.

We generally use our credit facility for the short-term financing of new property acquisitions. Thereafter, we generally seek to refinance those borrowings with the net proceeds of long-term or permanent financing, which may include the issuance of common stock, preferred stock 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 may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

Term Loans

In December 2017, in conjunction with the acquisition of a portfolio of properties, we entered into a $125.9 million promissory note, which was paid in full at maturity in January 2018. Borrowings under this note bore interest at 1.52%.

In June 2015, in conjunction with entering into our credit facility, we entered into a $250.0 million senior unsecured term loan maturing on June 30, 2020.  Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.90%.  In conjunction with this term loan, we also entered into an interest rate swap which effectively fixed our per annum interest rate on this term loan at 2.62%.

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 effectively fixed our per annum interest rate on this term loan at 2.05%. In January 2018, we entered into a six-month extension of this loan, which included, at our option, two additional six-month extensions. In June 2018, we exercised our first six-month extension of this loan, which now matures in January 2019. Borrowing during the extension periods bears interest at the current one-month LIBOR, plus 0.90%. The interest rate swap terminated upon the initial maturity in January 2018.

Mortgage Debt

As of June 30, 2018, we had $306.8 million of mortgages payable, all of which were assumed in connection with our property acquisitions.  Additionally, at June 30, 2018, we had net premiums totaling $5.1 million on these mortgages and deferred financing costs of $209,000.  We expect to pay off the outstanding mortgages payable as soon as prepayment penalties have declined to a level that would make it economically feasible to do so. During the first six months of 2018, we made $13.4 million in principal payments, including the repayment of one mortgage in full for $11.0 million.

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Notes Outstanding

Our senior unsecured note and bond obligations consist of the following as of June 30, 2018, sorted by maturity date (dollars in millions):

5.750% notes, issued in June 2010 and due in January 2021	$	250
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022	950
4.650% notes, issued in July 2013 and due in August 2023	750
3.875% notes, issued in June 2014 and due in July 2024	350
3.875% notes, issued in April 2018 and due in April 2025	500
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	650
3.000% notes, issued in October 2016 and due in January 2027	600
3.650% notes, issued in December 2017 and due in January 2028	550
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	250
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	550
Total principal amount	$	5,400
Unamortized net original issuance premiums and deferred financing costs	(25		)
	$	5,375

In April 2018, we issued $500.0 million of 3.875% senior unsecured notes due 2025, or the 2025 Notes. The public offering price for the 2025 Notes was 99.50% of the principal amount, for an effective yield to maturity of 3.957%. The net proceeds of approximately $493.1 million from this offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

All of our outstanding notes and bonds have fixed interest rates and contain various covenants, with which we remained in compliance as of June 30, 2018. Additionally, interest on all of our senior note and bond obligations is paid semiannually.

The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our senior notes and bonds. These calculations, which are not based on U.S. GAAP 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 June 30, 2018 are:

Note Covenants	Required	Actual
Limitation on incurrence of total debt	< 60% of adjusted assets	41.4	%
Limitation on incurrence of secured debt	< 40% of adjusted assets	2.0	%
Debt service coverage (trailing 12 months)(1)	> 1.5x	4.6x
Maintenance of total unencumbered assets	> 150% of unsecured debt	244.0	%

⁽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 July 1, 2017, 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 July 1, 2017, nor does it purport to reflect our debt service coverage ratio for any future period. Our fixed charge coverage ratio is calculated in exactly the same manner as our debt service coverage ratio, except that preferred stock dividends are also added to the denominator; since we redeemed our Class F preferred dividends in April 2017, our fixed charge coverage ratio is equivalent to our debt service coverage ratio. The following is our calculation of debt service and fixed charge coverage at June 30, 2018 (in thousands, for trailing twelve months):

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Net income attributable to the Company	$	328,335
Plus: interest expense	242,291
Plus: provision for taxes	6,989
Plus: depreciation and amortization	519,704
Plus: provisions for impairment	25,216
Plus: pro forma adjustments	57,887
Plus: charges for early extinguishment of debt	42,426
Less: gain on sales of real estate	(38,533		)
Income available for debt service, as defined	$	1,184,315
Total pro forma debt service charge	$	259,244
Debt service and fixed charge coverage ratio	4.6

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 June 30, 2018, we had cash and cash equivalents totaling $30.7 million.

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.

Credit Agency Ratings

The borrowing interest rates under our credit facility are based upon our ratings assigned by credit rating agencies. As of June 30, 2018, 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, Standard & Poor’s Ratings Group has assigned a rating of BBB+ with a “positive” outlook, and Fitch Ratings has assigned a rating of BBB+ with a “stable” outlook.

Based on our ratings as of June 30, 2018, the facility interest rate as of June 30, 2018 was LIBOR, plus 0.85% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.975% over LIBOR. Our credit facility provides that the interest rate can range between: (i) LIBOR, plus 1.55% if our credit rating is lower than BBB-/Baa3 or unrated and (ii) LIBOR, plus 0.85% if our credit rating is A-/A3 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) 0.125% for a credit rating of A-/A3 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.

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Table of Obligations

The following table summarizes the maturity of each of our obligations as of June 30, 2018 (dollars in millions):

Year of Maturity	Credit Facility (1)		Notes and Bonds (2)		Term Loan (3)		Mortgages Payable (4)		Interest (5)		Ground Leases Paid by Realty Income (6)		Ground Leases Paid by Our Tenants (7)		Other (8)		Totals
2018	$	—	$	—	$	—	$	8.5	$	133.1	$	0.8	$	6.8	$	15.1	$	164.3
2019	534.0		—		70.0		20.7		251.8		1.5		13.6		15.1		906.7
2020	—		—		250.0		82.4		237.5		1.4		13.4		—		584.7
2021	—		250.0		—		66.9		219.2		1.2		13.1		—		550.4
2022	—		950.0		—		109.7		208.5		1.2		13.0		—		1,282.4
Thereafter	—		4,200.0		—		18.6		1,224.2		20.9		94.9		—		5,558.6
Totals	$	534.0	$	5,400.0	$	320.0	$	306.8	$	2,274.3	$	27.0	$	154.8	$	30.2	$	9,047.1

⁽¹⁾ The initial term of the credit facility expires in June 2019 and includes, at our option, two six-month extensions.

⁽²⁾ Excludes non-cash original issuance discounts and premiums recorded on notes payable. The net unamortized balance of the original issuance premiums at June 30, 2018 is $11.1 million. Also excludes deferred financing costs of $36.2 million.

⁽³⁾ Excludes deferred financing costs of $469,000. In June 2018, we exercised our first six-month extension of this loan, which now matures in January 2019.

⁽⁴⁾ Excludes non-cash net premiums recorded on the mortgages payable.  The unamortized balance of these net premiums at June 30, 2018, is $5.1 million. Also excludes deferred financing costs of $209,000.

⁽⁵⁾ Interest on the term loans, notes, bonds, mortgages payable, and credit facility has been calculated based on outstanding balances as of June 30, 2018 through their respective maturity dates.

⁽⁶⁾ Realty Income currently pays the ground lessors directly for the rent under the ground leases.

⁽⁷⁾ Our tenants, who are generally sub-tenants under ground leases, are responsible for paying the rent under these ground leases. In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

⁽⁸⁾ “Other” consists of $14.3 million of commitments under construction contracts and $15.9 million of commitments for tenant improvements and leasing costs.

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

No Unconsolidated Investments

We have no unconsolidated investments, nor do we engage in trading activities involving energy or commodity contracts.

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 Tau Operating Partnership, L.P. and 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 2017, our cash distributions to preferred and common stockholders totaled $695.5 million, or approximately 132.9% of our estimated taxable income of $523.5 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 funds from operations are sufficient to support our current level of cash distributions to our stockholders. Our cash distributions to common stockholders in the first six months of 2018 totaled $373.0 million, representing 82.6% of our adjusted funds from operations available to common stockholders of $451.5 million. In comparison, our 2017 cash distributions to common stockholders totaled $689.3 million, representing 82.2% of our adjusted funds from operations available to common stockholders of $838.6 million.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, 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, or the

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Code, 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 the common or preferred 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 21.7% of the distributions to our common stockholders, made or deemed to have been made in 2017, were classified as a return of capital for federal income tax purposes. We estimate that in 2018, between 15% and 25% of the distributions may be classified as a return of capital.

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, 2017.

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 of in-place leases and the value of in-place leases, as applicable.  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 and is often based upon the expected future cash flows of the property and various characteristics of the market where the property is located.  In addition, any assumed mortgages receivable or payable 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, tenant 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. A provision is made for impairment if estimated future operating cash flows (undiscounted and without interest

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charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, historical sales and releases, 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.

The following is a comparison of our results of operations for the three and six months ended June 30, 2018, to the three and six months ended June 30, 2017.

Total Revenue

The following summarizes our total revenue (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Change
	2018		2017		2018		2017		Three months			Six months
REVENUE
Rental	$	313,870	$	288,049	$	620,418	$	573,870	$	25,821		$	46,548
Tenant reimbursements	11,395		11,756		22,695		22,985		(361		)	(290		)
Other	3,621		365		4,068		1,340		3,256			2,728
Total revenue	$	328,886	$	300,170	$	647,181	$	598,195	$	28,716		$	48,986

Rental Revenue

The increase in rental revenue in the second quarter of 2018 compared to the second quarter of 2017 is primarily attributable to:

• The 351 properties (2.6 million square feet) we acquired in 2018, which generated $9.5 million of rent in the second quarter of 2018;

• The 287 properties (7.2 million square feet) we acquired in 2017, which generated $23.8 million of rent in the second quarter of 2018, compared to $6.8 million in the second quarter of 2017, an increase of $17.0 million; and

• Same store rents generated on 4,731 properties (80.8 million square feet) during the second quarter of 2018 and 2017, increased by $2.6 million, or 1.0%, to $272.6 million from $270.0 million;

• A net increase in straight-line rent and other non-cash adjustments to rent of $2.4 million in the second quarter of 2018 as compared to the second quarter of 2017; partially offset by

• A net decrease of $2.7 million relating to properties sold in the second quarter of 2018 and during 2017; and

• A net decrease of $3.0 million relating to the aggregate of (i) rental revenue from properties (90 properties comprising 2.4 million square feet) that were available for lease during part of 2018 or 2017, (ii) rental revenue for five properties under development, and (iii) lease termination settlements.  In aggregate, the revenues for these items totaled $3.3 million in the second quarter of 2018, compared to $6.3 million in the second quarter of 2017.

The increase in rental revenue in the first six months of 2018 compared to the first six months of 2017 is primarily attributable to:

• The 351 properties (2.6 million square feet) we acquired in the first six months of 2018, which generated $9.9 million of rent in the first six months of 2018;

• The 287 properties (7.2 million square feet) we acquired in 2017, which generated $47.6 million of rent in the first six months of 2018, compared to $7.5 million in the first six months of 2017, an increase of $40.1 million;

• Same store rents generated on 4,731 properties (80.8 million square feet) during the first six months of 2018 and 2017, increased by $5.0 million or 0.9%, to $548.7 million from $543.7 million;

• A net increase in straight-line rent and other non-cash adjustments to rent of $1.8 million in the first six months of 2018 as compared to the first six months of 2017; partially offset by

• A net decrease of $5.6 million relating to properties sold in the first six months of 2018 and during 2017 that were reported in continuing operations; and

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• A net decrease of $4.7 million relating to the aggregate of (i) rental revenue from properties (90 properties comprising 2.4 million square feet) that were available for lease during part of 2018 or 2017, (ii) rental revenue for five properties under development, and (iii) lease termination settlements. In aggregate, the revenues for these items totaled $6.3 million in the first six months of 2018 compared to $11.0 million in the first six months of 2017.

For purposes of determining the same store rent property pool, we include all properties that were owned for the entire year-to-date period, for both the current and prior year, except for properties during the current or prior year that; (i) were vacant at any time, (ii) were under development or redevelopment, or (iii) were involved in eminent domain and rent was reduced. Each of the exclusions from the same store pool are separately addressed within the applicable sentences above, explaining the changes in rental revenue for the period.

Of the 5,483 properties in the portfolio at June 30, 2018, 5,455, or 99.5%, are single-tenant properties and the remaining are multi-tenant properties. Of the 5,455 single-tenant properties, 5,386, or 98.7%, were net leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.3 years at June 30, 2018. Of our 5,386 leased single-tenant properties, 4,676 or 86.8% were under leases that provide for increases in rents through:

• Base rent increases tied to a consumer price index (typically subject to ceilings);

• Percentage rent based on a percentage of the tenants’ 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 $449,000 in the second quarter of 2018 and $443,000 in the second quarter of 2017.  Percentage rent was $3.8 million in the first six months of 2018, and $3.9 million in the first six months of 2017. We anticipate percentage rent to be less than 1% of rental revenue for the remainder of 2018.

Our portfolio of real estate, leased primarily to regional and national tenants under net leases, continues to perform well and provides dependable lease revenue supporting the payment of monthly dividends to our stockholders.  At June 30, 2018, our portfolio of 5,483 properties was 98.7% leased with 69 properties available for lease, as compared to 98.4% leased, with 83 properties available for lease at December 31, 2017, and 98.5% leased with 76 properties available for lease at June 30, 2017. 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 could exceed these levels in the future.

Tenant Reimbursements

A number of our leases provide for contractually obligated reimbursements from tenants for recoverable real estate taxes and operating expenses.

Other Revenue

The increase in other revenue was primarily related to higher proceeds from property insurance claims, condemnations and interest income from our investments in United States government money market funds in the second quarter and first six months of 2018 as compared to the second quarter and first six months of 2017, respectively.

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Total Expenses

The following summarizes our total expenses (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Change
	2018		2017		2018		2017		Three months		Six months
EXPENSES
Depreciation and amortization	$	133,999	$	123,089	$	265,102	$	244,186	$	10,910	$	20,916
Interest	66,628		63,679		126,043		122,985		2,949		3,058
General and administrative	17,954		15,781		33,638		29,346		2,173		4,292
Property (excluding reimbursable)	4,841		4,730		10,093		12,576		111		(2,483		)
Property - reimbursable	11,395		11,756		22,695		22,985		361		290
Income taxes	1,208		441		2,431		1,488		767		943
Provisions for impairment	3,951		2,274		18,172		7,706		1,677		10,466
Total expenses	$	239,976	$	221,750	$	478,174	$	441,272	$	18,948	$	37,482

Depreciation and Amortization

The increase in depreciation and amortization in the second quarter and first six months of 2018 was primarily due to the acquisition of properties in 2017 and the first six months of 2018, which was partially offset by property sales in those same periods.  As discussed in the sections entitled “Funds from Operations Available to Common Stockholders (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 and AFFO.

Interest Expense

The following is a summary of the components of our interest expense (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest on our credit facility, term loans, notes, mortgages and interest rate swaps	$	65,310		$	60,714		$	124,961		$	116,772
Credit facility commitment fees	632			758			1,257			1,508
Amortization of credit facility origination costs and deferred financing costs	1,826			2,351			3,412			4,664
(Gain) loss on interest rate swaps	(792		)	470			(2,799		)	(859		)
Dividend on preferred shares subject to redemption	—			—			—			2,257
Amortization of net mortgage premiums	(354		)	(609		)	(813		)	(1,240		)
Capital lease obligation	78			77			155			155
Interest capitalized	(72		)	(82		)	(130		)	(272		)
Interest expense	$	66,628		$	63,679		$	126,043		$	122,985
Credit facility, term loans, mortgages and notes
Average outstanding balances (dollars in thousands)	$6,698,072			$5,883,340			$6,438,236			$5,797,800
Average interest rates	3.90		%	4.09		%	3.88		%	3.98		%

The increase in interest expense from 2017 to 2018 for the second quarter and the first six months is primarily due to the April 2018 issuance of our 3.875% notes due 2025, the December 2017 issuance of our 3.650% notes due 2028, the March 2017 issuance of our 4.650% notes due 2047, the December 2017 further issuance of our 4.650% notes due 2047 and the 2017 further issuances of our 3.250% notes due 2022 and 4.125% notes due 2026. This increase was partially offset by the December 2017 early redemption of our 6.750% notes due 2019 and the September 2017 repayment of our 5.375% notes due 2017, and lower outstanding debt balances on mortgages payable as a result of the payoff of mortgages in 2017 and 2018.

Additionally, each quarter we adjust the carrying value of our interest rate swaps to fair value. Changes in the fair value of our interest rate swaps are recorded directly to interest expense.

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At June 30, 2018, the weighted average interest rate on our:

• Term loans outstanding of $320.0 million (excluding deferred financing costs of $469,000) was 3.0%;

• Mortgages payable of $306.8 million (excluding net premiums totaling $5.1 million and deferred financing costs of $209,000 on these mortgages) was 5.1%;

• Credit facility outstanding borrowings of $534.0 million was 2.9%;

• Notes and bonds payable of $5.4 billion (excluding net unamortized original issue premiums of $11.1 million and deferred financing costs of $36.2 million) was 4.0%; and

• Combined outstanding notes, bonds, mortgages, term loans and credit facility borrowings of $6.6 billion was 3.9%.

General and Administrative Expenses

General and administrative expenses increased during the second quarter and the first six months of 2018 due to higher compensation costs and a higher employee headcount. In July 2018, we had 165 employees, as compared to 155 employees in July 2017. General and administrative expense as a percentage of total revenue (excluding tenant reimbursements revenue) increased to 5.7% for the second quarter of 2018 as compared to 5.5% for the second quarter of 2017. General and administrative expense as a percentage of total revenue (excluding tenant reimbursement revenue) increased to 5.4% for the first six months of 2018 as compared to 5.1% for the first six months of 2017.

Property Expenses

Property expenses consist of costs associated with unleased properties, non-net-leased properties and general portfolio expenses, as well as contractually obligated reimbursable costs from tenants for recoverable real estate taxes and operating expenses. Expenses related to unleased properties and non-net-leased properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections, bad debt expense and legal fees. General portfolio costs include, but are not limited to, insurance, legal, property inspections, and title search fees. At June 30, 2018, 69 properties were available for lease, as compared to 83 at December 31, 2017 and 76 at June 30, 2017.

The decrease in gross and net property expenses (excluding tenant reimbursable expenses) in the first six months of 2018 is primarily attributable to lower property taxes and bad debt expense on vacant properties, partially offset by higher insurance and utility costs. Net property expenses as a percentage of revenue (excluding tenant reimbursement revenue) decreased to 1.5% in the second quarter of 2018, as compared to 1.6% in the second quarter of 2017. Net property expenses as a percentage of revenue (excluding tenant reimbursement revenue) decreased to 1.6% in the first six months of 2018, as compared to 2.2% in the first six months of 2017.

Income Taxes

Income taxes are for city and state income and franchise taxes paid by us and our subsidiaries. The increase in income taxes for the second quarter and the first six months of 2018 is primarily due to increased activity in our taxable REIT subsidiary.

Provisions for Impairment

During the second quarter of 2018, we recorded total provisions for impairment of $4.0 million on eight properties classified as held for sale, one property classified as held for investment, and nine sold properties. For the first six months of 2018, we recorded total provisions for impairment of $18.2 million on nine properties classified as held for sale, two properties classified as held for investment, and 14 sold properties.

In comparison, for the second quarter of 2017, we recorded total provisions for impairment of $2.3 million on one property classified as held for investment and nine sold properties. For the first six months of 2017, we recorded total provisions for impairment of $7.7 million on four properties classified as held for investment and 14 sold properties.

Gain on Sales of Real Estate

During the second quarter of 2018, we sold 26 properties for $33.7 million, which resulted in a gain of $7.8 million. During the second quarter of 2017, we sold 15 properties for $12.8 million, which resulted in a gain of $2.8 million.

In comparison, during the first six months of 2018, we sold 40 properties for $47.5 million, which resulted in a gain of $11.0 million. During the first six months of 2017, we sold 29 properties for $44.0 million, which resulted in a gain of $13.4 million.

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Preferred Stock Dividends

We did not pay any preferred stock dividends in the first six months of 2018. Preferred stock dividends totaled  $3.9 million in the first six months of 2017. Additionally, in April 2017, we paid a final dividend on our Class F preferred stock of $1.7 million, which was recorded to interest expense.

Excess of Redemption Value over Carrying Value of Preferred Shares Redeemed

When we issued the irrevocable notice of redemption on our Class F preferred stock in March 2017, we incurred a non-cash charge of $13.4 million for the excess of redemption value over the carrying value. The non-cash charge represents the Class F preferred stock original issuance cost that was paid in 2012.

Net Income Available to Common Stockholders

Net income available to common stockholders was $96.4 million in the second quarter of 2018, compared to $81.1 million in the second quarter of 2017, an increase of $15.3 million. On a diluted per common share basis, net income was $0.34 in the second quarter of 2018, compared to $0.30 in the second quarter of 2017, an increase of $0.04, or 13.3%.

Net income available to common stockholders was $179.5 million in the first six months of 2018, compared to $152.7 million in the first six months of 2017, an increase of $26.8 million. On a diluted per common share basis, net income was $0.63 in the first six months of 2018, as compared to $0.57 in the first six months of 2017, an increase of $0.06, or 10.5%.

Net income available to common stockholders for the six months ended June 30, 2018 was impacted by a $13.4 million non-cash redemption charge on the Class F preferred stock that were redeemed in April 2017, which represented $0.05 per share of Class F preferred stock. This charge was based on the excess of redemption value over the carrying value of the Class F preferred stock that represents the original issuance cost that was paid in 2012.

The calculation to determine net income available to common stockholders includes impairments, gains from the sale of properties and/or fair value adjustments on our interest rate swaps. These items vary from period to period based on the timing of property sales and the interest rate environment, and can significantly impact net income available to common stockholders.

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Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (Adjusted EBITDAre)

The National Association of Real Estate Investment Trust (NAREIT) came to the conclusion that a NAREIT-defined EBITDA metric for real estate companies (i.e., EBITDA for real estate, or EBITDAre) would provide investors with a consistent measure to help make investment decisions among REITs. Although this update has not changed our calculation, we have re-labeled our Adjusted EBITDA to “Adjusted EBITDAre” in order to be consistent with the NAREIT definition. Adjusted EBITDAre, a non-GAAP financial measure, means, for the most recent quarter, earnings (net income) before (i) interest expense, including non-cash loss (gain) on swaps, (ii) income and franchise taxes, (iii) real estate depreciation and amortization, (iv) impairment losses, and (v) gain on sales of real estate. Our Adjusted EBITDAre is consistent with the National Association of Real Estate Investment Trusts’ definition, but may not be comparable to Adjusted EBITDAre reported by other companies that interpret the definitions of Adjusted EBITDAre differently than we do. Management believes Adjusted EBITDAre to be a meaningful measure of a REIT’s performance because it is widely followed by industry analysts, lenders and investors. Management also believes the use of an annualized quarterly Adjusted EBITDAre metric is meaningful because it represents the company’s current earnings run rate for the period presented. The ratio of our total debt to our annualized quarterly Adjusted EBITDAre is also used to determine vesting of performance share awards granted to our executive officers. Adjusted EBITDAre should be considered along with, but not as an alternative to net income as a measure of our operating performance. Our ratio of debt to Adjusted EBITDAre, which is used by management as a measure of leverage, is calculated by annualizing quarterly Adjusted EBITDAre and then dividing by our total debt per the consolidated balance sheet.

	Three Months Ended June 30,
Dollars in thousands	2018			2017
Net income	$	96,697		$	81,259
Interest	66,628			63,679
Income taxes	1,208			441
Depreciation and amortization	133,999			123,089
Impairment loss	3,951			2,274
Gain on sales of real estate	(7,787		)	(2,839		)
Quarterly Adjusted EBITDAre	$	294,696		$	267,903
Annualized Adjusted EBITDAre(1)	$	1,178,784		$	1,071,612
Total Debt	$	6,540,202		$	5,988,048
Debt/Adjusted EBITDAre	5.5			5.6

⁽¹⁾ We calculate Annualized Adjusted EBITDAre by multiplying the Quarterly Adjusted EBITDAre by four.

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FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

FFO for the second quarter of 2018 increased by $22.8 million, or 11.2%, to $226.1 million, compared to $203.3 million in the second quarter of 2017. On a diluted per common share basis, FFO was $0.79 in the second quarter of 2018, compared to $0.75 in the second quarter of 2017, an increase of $0.04, or 5.3%.

In the first six months of 2018, our FFO increased by $60.5 million, or 15.5%, to $451.0 million, compared to $390.5 million in the first six months of 2017.  On a diluted per common share basis, FFO was $1.58 in the first six months of 2018, compared to $1.46 in the first six months of 2017, an increase of $0.12, or 8.2%. FFO in the first six months of 2017 includes a non-cash redemption charge of $13.4 million on the Class F preferred shares that were redeemed in April 2017, which represents $0.05 on a diluted per common share basis. This charge is for the excess of redemption value over the carrying value and represents the Class F preferred stock original issuance cost that was paid in 2012.

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to 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):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income available to common stockholders	$	96,380		$	81,136		$	179,543		$	152,722
Depreciation and amortization	133,999			123,089			265,102			244,186
Depreciation of furniture, fixtures and equipment	(168		)	(150		)	(327		)	(307		)
Provisions for impairment on real estate	3,951			2,274			18,172			7,706
Gain on sales of real estate	(7,787		)	(2,839		)	(11,005		)	(13,371		)
FFO adjustments allocable to noncontrolling interests	(293		)	(238		)	(521		)	(453		)
FFO available to common stockholders	$	226,082		$	203,272		$	450,964		$	390,483
FFO allocable to dilutive noncontrolling interests	232			282			450			438
Diluted FFO	$	226,314		$	203,554		$	451,414		$	390,921
FFO per common share:
Basic	$	0.79		$	0.75		$	1.59		$	1.46
Diluted	$	0.79		$	0.75		$	1.58		$	1.46
Distributions paid to common stockholders	$	187,488		$	172,874		$	373,044		$	335,380
FFO available to common stockholders in excess of distributions paid to common stockholders	$	38,594		$	30,398		$	77,920		$	55,103
Weighted average number of common shares used for computation per share:
Basic	284,928,969			272,588,332			284,469,689			268,024,691
Diluted	285,372,256			273,187,669			284,924,336			268,569,855

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 impairments of depreciable real estate assets, and reduced by gains on property sales.

We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments for 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. The use of FFO is recommended by the REIT industry as a supplemental performance measure. In addition, FFO is used as a measure of our compliance with the financial covenants of our credit facility.

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ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)

AFFO for the second quarter of 2018 increased by $18.6 million, or 8.9%, to $227.0 million, compared to $208.4 million in the second quarter of 2017. On a diluted per common share basis, AFFO was $0.80 in the second quarter of 2018, compared to $0.76 in the second quarter of 2017, an increase of $0.04, or 5.3%.

In the first six months of 2018, our AFFO increased by $41.8 million, or 10.2%, to $451.5 million, compared to $409.7 million in the first six months of 2017. On a diluted per common share basis, AFFO was $1.59 in the first six months of 2018, compared to $1.53 in the first six months of 2017, an increase of $0.06, or 3.9%.

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.

The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to 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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income available to common stockholders	$	96,380		$	81,136		$	179,543		$	152,722
Cumulative adjustments to calculate FFO (1)	129,702			122,136			271,421			237,761
FFO available to common stockholders	226,082			203,272			450,964			390,483
Excess of redemption value over carrying value of Class F preferred share redemption	—			—			—			13,373
Amortization of share-based compensation	4,995			4,462			8,657			7,215
Amortization of deferred financing costs (2)	1,014			1,317			1,858			2,804
Amortization of net mortgage premiums	(354		)	(609		)	(813		)	(1,240		)
(Gain) loss on interest rate swaps	(792		)	470			(2,799		)	(859		)
Leasing costs and commissions	(1,536		)	(349		)	(2,452		)	(759		)
Recurring capital expenditures	(135		)	(24		)	(147		)	(365		)
Straight-line rent	(6,267		)	(4,271		)	(11,632		)	(7,554		)
Amortization of above and below-market leases	3,907			4,049			7,771			6,481
Other adjustments (3)	74			71			142			144
Total AFFO available to common stockholders	$	226,988		$	208,388		$	451,549		$	409,723
AFFO allocable to dilutive noncontrolling interests	236			292			465			586
Diluted AFFO	$	227,224		$	208,680		$	452,014		$	410,309
AFFO per common share, basic and diluted	$	0.80		0.76			$	1.59		1.53
Distributions paid to common stockholders	$	187,488		$	172,874		$	373,044		$	335,380
AFFO available to common stockholders in excess of distributions paid to common stockholders	$	39,500		$	35,514		$	78,505		$	74,343
Weighted average number of common shares used for computation per share:
Basic	284,928,969			272,588,332			284,469,689			268,024,691
Diluted	285,372,256			273,187,669			284,924,336			268,658,037

⁽¹⁾  See reconciling items for FFO presented under “Funds from Operations Available to Common Stockholders (FFO).”

⁽²⁾  Includes the amortization of costs incurred and capitalized upon issuance of our notes payable, assumption of our mortgages payable and upon issuance of our term loans. The deferred financing costs are being amortized over the lives of the respective mortgages and term loans. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

⁽³⁾  Includes adjustments allocable to both non-controlling interests and capital lease obligations.

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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 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 and AFFO in the same way, so comparisons with other REITs may not be meaningful. Furthermore, 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 and AFFO should not be considered as alternatives to reviewing our cash flows from operating, investing, and financing activities.  In addition, 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 June 30, 2018, we owned a diversified portfolio:

• Of 5,483 properties;

• With an occupancy rate of 98.7%, or 5,414 properties leased and 69 properties available for lease;

• Leased to 257 different commercial tenants doing business in 48 separate industries;

• Located in 49 states and Puerto Rico;

• With over 92.0 million square feet of leasable space; and

• With an average leasable space per property of approximately 16,780 square feet; approximately 11,680 square feet per retail property and 228,150 square feet per industrial property.

At June 30, 2018, of our 5,483 properties, 5,414 were leased under net lease agreements. A net lease typically requires the tenant to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance. In addition, our tenants are typically subject to future rent increases based on increases in the consumer price index (typically subject to ceilings), additional rent calculated as a percentage of the tenants’ gross sales above a specified level, or fixed increases.

At June 30, 2018, our 257 commercial tenants, which we define as retailers with over 50 locations and non-retailers with over $500 million in annual revenues, represented approximately 95% of our annualized revenue.  We had 337 additional tenants, representing approximately 5% of our annualized revenue at June 30, 2018, which brings our total tenant count to 594 tenants.

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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 tenants, expressed as a percentage of our total rental revenue:

Percentage of Rental Revenue by Industry
	For the Quarter Ended June 30, 2018		For the Years Ended
			Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014		Dec 31, 2013
Aerospace	0.9	%	0.9	%	1.0	%	1.1	%	1.2	%	1.2	%
Apparel stores	1.3		1.6		1.9		2.0		2.0		1.9
Automotive collision services	0.9		1.0		1.0		1.0		0.8		0.8
Automotive parts	1.8		1.3		1.3		1.4		1.3		1.2
Automotive service	2.2		2.2		1.9		1.9		1.8		2.1
Automotive tire services	2.5		2.6		2.7		2.9		3.2		3.6
Beverages	2.5		2.7		2.6		2.7		2.8		3.3
Book stores	*		*		*		*		*		*
Child care	1.7		1.8		1.9		2.0		2.2		2.8
Consumer appliances	0.5		0.5		0.5		0.6		0.5		0.6
Consumer electronics	0.3		0.3		0.3		0.3		0.3		0.3
Consumer goods	0.7		0.8		0.9		0.9		0.9		1.0
Convenience stores	10.8		9.6		8.7		9.2		10.1		11.2
Crafts and novelties	0.7		0.6		0.6		0.6		0.6		0.6
Diversified industrial	0.8		0.9		0.9		0.8		0.5		0.2
Dollar stores	7.4		7.9		8.6		8.9		9.6		6.2
Drug stores	10.3		10.9		11.2		10.6		9.5		8.1
Education	0.3		0.3		0.3		0.3		0.4		0.4
Electric utilities	0.1		0.1		0.1		0.1		0.1		*
Entertainment	0.4		0.4		0.5		0.5		0.5		0.6
Equipment services	0.4		0.4		0.6		0.5		0.6		0.5
Financial services	2.2		2.4		1.8		1.7		1.8		2.0
Food processing	0.5		0.6		1.1		1.2		1.4		1.5
General merchandise	2.2		2.0		1.8		1.7		1.5		1.1
Government services	0.9		1.0		1.1		1.2		1.3		1.4
Grocery stores	5.0		4.4		3.1		3.0		3.0		2.9
Health and beauty	0.2		*		*		*		*		*
Health and fitness	7.5		7.5		8.1		7.7		7.0		6.3
Health care	1.6		1.4		1.5		1.7		1.8		1.9
Home furnishings	0.8		0.9		0.8		0.9		0.9		1.1
Home improvement	3.0		2.6		2.5		2.4		1.7		1.6
Insurance	0.1		0.1		0.1		0.1		0.1		0.1
Jewelry	0.1		0.1		0.1		0.1		0.1		0.1
Machinery	0.1		0.1		0.1		0.1		0.2		0.2
Motor vehicle dealerships	1.8		2.1		1.9		1.6		1.6		1.6
Office supplies	0.2		0.2		0.3		0.3		0.4		0.5
Other manufacturing	0.7		0.8		0.8		0.7		0.7		0.6
Packaging	1.1		1.0		0.8		0.8		0.8		0.9
Paper	0.1		0.1		0.1		0.1		0.1		0.2
Pet supplies and services	0.5		0.6		0.6		0.7		0.7		0.8
Restaurants - casual dining	3.5		3.8		3.9		3.8		4.3		5.1
Restaurants - quick service	5.5		5.1		4.9		4.2		3.7		4.4
Shoe stores	0.5		0.6		0.7		0.7		0.9		1.0
Sporting goods	1.1		1.4		1.6		1.8		1.6		1.7
Telecommunications	0.6		0.6		0.6		0.7		0.7		0.7
Theaters	5.6		5.0		4.9		5.1		5.3		6.2
Transportation services	5.0		5.4		5.5		5.4		5.2		5.4
Wholesale clubs	3.0		3.3		3.6		3.8		4.1		3.9
Other	0.1		0.1		0.2		0.2		0.2		0.2
Totals	100.0	%	100.0		100.0	%	100.0	%	100.0	%	100.0	%

*   Less than 0.1%

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Property Type Composition

The following table sets forth certain property type information regarding our property portfolio as of June 30, 2018 (dollars in thousands):

Property Type	Number of Properties	Approximate Leasable Square Feet	Rental Revenue for the Quarter Ended June 30, 2018 (1)		Percentage of Rental Revenue
Retail	5,309	62,021,900	$	253,768	80.9	%
Industrial	117	26,694,100	39,755		12.7
Office	42	3,104,700	13,603		4.3
Agriculture	15	184,500	6,578		2.1
Totals	5,483	92,005,200	$	313,704	100.0	%

⁽¹⁾ Includes rental revenue for all properties owned at June 30, 2018.  Excludes revenue of $166 from sold properties.

Tenant Diversification

The following table sets forth the largest tenants in our property portfolio, expressed as a percentage of total rental revenue at June 30, 2018: 

Tenant	Number of Leases	% of Rental Revenue
Walgreens	220	6.6	%
FedEx	42	4.9	%
Dollar General	544	3.8	%
LA Fitness	54	3.8	%
7-Eleven	254	3.8	%
Dollar Tree / Family Dollar	468	3.5	%
AMC Theatres	32	3.4	%
Walmart / Sam’s Club	51	2.9	%
Circle K (Couche-Tard)	298	2.4	%
BJ’s Wholesale Clubs	15	2.1	%
Treasury Wine Estates	17	2.0	%
Life Time Fitness	11	1.9	%
CVS Pharmacy	82	1.9	%
Regal Cinemas	25	1.9	%
GPM Investments / Fas Mart	213	1.7	%
Super America / Western Refining	133	1.7	%
TBC Corporation (Sumitomo)	159	1.5	%
Kroger	17	1.4	%
Rite Aid	51	1.3	%
Home Depot	15	1.2	%

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Service Category Diversification for our Retail Properties

The following table sets forth certain information regarding the properties owned at June 30, 2018, classified according to the business types and the level of services they provide (dollars in thousands):

	Retail Rental Revenue for the Quarter Ended June 30, 2018 (1)		Percentage of Retail Rental Revenue
Tenants Providing Services
Automotive collision services	$	2,888	1.1	%
Automotive service	7,022		2.8
Child care	5,245		2.1
Education	845		0.3
Entertainment	1,279		0.5
Equipment services	111		*
Financial services	5,902		2.3
Health and fitness	23,519		9.3
Health care	1,934		0.8
Telecommunications	53		*
Theaters	17,545		6.9
Transportation services	250		0.1
Other	74		*
	66,667		26.2
Tenants Selling Goods and Services
Automotive parts (with installation)	1,647		0.6
Automotive tire services	7,709		3.0
Convenience stores	33,718		13.3
Health and beauty	15		*
Motor vehicle dealerships	5,710		2.3
Pet supplies and services	563		0.2
Restaurants - casual dining	10,300		4.1
Restaurants - quick service	17,159		6.8
Other	*		*
	76,821		30.3
Tenants Selling Goods
Apparel stores	3,955		1.6
Automotive parts	3,520		1.4
Book stores	112		*
Consumer electronics	969		0.4
Crafts and novelties	1,914		0.8
Dollar stores	23,233		9.2
Drug stores	30,957		12.2
General merchandise	5,877		2.3
Grocery stores	15,680		6.2
Home furnishings	2,301		0.9
Home improvement	8,011		3.1
Jewelry	175		0.1
Office supplies	615		0.2
Shoe stores	183		0.1
Sporting goods	3,433		1.3
Wholesale clubs	9,345		3.7
	110,280		43.5
Totals	$	253,768	100.0	%

* Less than 0.1%

⁽¹⁾  Includes rental revenue for all retail leases for properties owned at June 30, 2018.  Excludes revenue of $59,936 from non-retail leases and $166 from sold properties.

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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 tenant) and their contribution to rental revenue for the quarter ended June 30, 2018 (dollars in thousands):

Total Portfolio(1)
	Expiring		Approx.			% of
	Leases		Leasable	Rental		Rental
Year	Retail	Non-Retail	Sq. Feet	Revenue		Revenue
2018	118	6	704,300	$	3,148	1.0	%
2019	269	9	3,548,200	13,053		4.2
2020	221	14	4,268,600	13,029		4.2
2021	343	14	5,535,800	15,949		5.1
2022	402	21	9,921,900	21,357		6.8
2023	529	23	9,771,800	28,018		8.9
2024	230	12	4,639,100	13,392		4.3
2025	337	13	5,139,700	20,111		6.4
2026	313	3	4,638,300	15,807		5.0
2027	545	5	6,254,400	22,000		7.0
2028	330	13	8,795,500	21,148		6.8
2029	407	7	7,452,300	21,749		6.9
2030	102	14	2,906,100	16,035		5.1
2031	295	25	5,863,100	27,195		8.7
2032	84	4	3,072,600	11,878		3.8
2033-2043	777	3	8,296,300	49,604		15.8
Totals	5,302	186	90,808,000	$	313,473	100.0	%

* Less than 0.1%

⁽¹⁾  The lease expirations for leases under construction are based on the estimated date of completion of those projects. Excludes revenue of $231 from 90 expired leases, and $166 from sold properties at June 30, 2018. Leases on our multi-tenant properties are counted separately in the table above.

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Geographic Diversification

The following table sets forth certain state-by-state information regarding our property portfolio as of June 30, 2018 (dollars in thousands):

State	Number of Properties	Percent Leased		Approximate Leasable Square Feet	Rental Revenue for the Quarter Ended  June 30, 2018 (1)		Percentage of Rental Revenue
Alabama	167	98	%	1,585,200	$	6,019	1.9	%
Alaska	3	100		422,000	604		0.2
Arizona	115	100		1,801,100	6,792		2.2
Arkansas	74	100		887,700	2,213		0.7
California	186	99		6,079,900	28,253		9.0
Colorado	83	99		1,459,000	5,116		1.6
Connecticut	22	91		521,100	2,020		0.6
Delaware	18	100		93,000	736		0.2
Florida	381	99		4,140,000	17,558		5.6
Georgia	266	98		4,288,200	13,372		4.3
Idaho	12	100		87,000	391		0.1
Illinois	260	99		5,798,000	19,360		6.2
Indiana	189	98		2,260,900	8,674		2.8
Iowa	39	95		2,951,600	4,265		1.4
Kansas	99	97		1,894,000	4,916		1.6
Kentucky	72	99		1,665,600	4,413		1.4
Louisiana	108	98		1,559,500	5,042		1.6
Maine	19	100		207,900	1,167		0.4
Maryland	37	97		1,017,500	4,866		1.5
Massachusetts	77	96		725,100	3,562		1.1
Michigan	163	99		1,788,700	6,542		2.1
Minnesota	163	99		2,052,600	10,022		3.2
Mississippi	139	97		1,613,800	4,714		1.5
Missouri	156	97		2,721,000	8,472		2.7
Montana	11	100		87,000	461		0.1
Nebraska	42	100		775,100	1,930		0.6
Nevada	23	100		1,191,100	2,118		0.7
New Hampshire	19	100		315,800	1,574		0.5
New Jersey	73	100		995,800	5,798		1.8
New Mexico	34	100		366,400	1,077		0.3
New York	114	100		2,798,300	15,284		4.9
North Carolina	182	99		2,778,100	8,869		2.8
North Dakota	6	100		117,700	211		0.1
Ohio	291	99		6,876,100	15,933		5.1
Oklahoma	136	100		1,668,700	4,702		1.5
Oregon	28	100		593,300	2,285		0.7
Pennsylvania	186	98		2,138,300	8,970		2.9
Rhode Island	4	100		161,600	841		0.3
South Carolina	164	99		1,653,200	7,097		2.3
South Dakota	15	100		195,200	471		0.1
Tennessee	250	98		3,590,600	10,640		3.4
Texas	638	99		10,255,200	32,900		10.5
Utah	21	100		927,700	2,169		0.7
Vermont	5	100		98,000	489		0.2
Virginia	198	97		3,148,600	9,305		3.0
Washington	44	98		737,400	2,839		0.9
West Virginia	18	100		395,600	1,293		0.4
Wisconsin	123	100		2,437,000	6,924		2.2
Wyoming	6	100		54,700	286		0.1
Puerto Rico	4	100		28,300	149		*
Totals\Average	5,483	99	%	92,005,200	$	313,704	100.0	%

* Less than 0.1%

⁽¹⁾ Includes rental revenue for all properties owned at June 30, 2018.  Excludes revenue of $166 from sold properties.

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IMPACT OF INFLATION

Tenant leases generally provide for limited increases in rent as a result of increases in the tenants’ sales volumes, increases in the consumer price index (typically subject to ceilings), or fixed increases. 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 tenant is responsible for property expenses. Inflation and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

For information on the impact of recent accounting pronouncements 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 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 Securities and Exchange Commission, or SEC.  None of the information on our website is deemed to be part of this report.

Corporate Responsibility

We are committed to providing an engaging, diverse, and safe work environment for our employees, upholding our corporate responsibilities as a public company operating for the benefit of our stockholders, and operating our company in an environmentally conscious manner. As The Monthly Dividend Company®, our mission is to provide our stockholders with monthly dividends that increase over time. How we manage and use the physical, financial and talent resources that enable us to achieve this mission, demonstrates our commitment to corporate responsibility.

Social Responsibility and Ethics

An extension of our mission is our commitment to being socially responsible and conducting our business according to the highest ethical standards. Our employees are awarded compensation that is in line with those of our peers and competitors, including generous healthcare benefits for employees and their families, participation in a 401(k) plan with a matching contribution by Realty Income, competitive paid time-off benefits, and an infant-at-work program for new parents. We also have a long-standing commitment to equal employment opportunity and adhere to all Equal Employer Opportunity Policy guidelines. Our employees have access to members of our Board of Directors to report anonymously, if desired, any suspicion of misconduct by any member of our senior management or executive team. We apply the principles of full and fair disclosure in all of our business dealings, and we encourage all of our directors, officers, and other employees to conduct our business in accordance with the highest standards of moral and ethical behavior, in each case, as outlined in our Corporate Code of Business Ethics. We are also committed to dealing fairly with all of our customers, suppliers, and competitors.

Realty Income and its employees have taken an active role in supporting communities through civic involvement with charitable organizations and corporate donations. Focusing our impact on our social responsibility, our non-profit partnerships have resulted in approximately 725 employee volunteer hours during 2017, principally through our partnership with San Diego Habitat for Humanity. Our employees have also provided educational services to at-risk youth, funding to local foodbanks, and toys for under-served children. Our dedication to being a responsible corporate citizen has a direct and positive impact in the communities in which we operate and contributes to the strength of our reputation and our financial performance.

Corporate Governance

We believe that a company’s reputation for integrity and serving its stockholders responsibly is of utmost importance. We are committed to managing the company for the benefit of our stockholders and are focused on maintaining good corporate governance.  Practices that illustrate this commitment include:

• As we focus on board refreshment, in July 2018, we added two new independent, non-employee directors;

• Our Board of Directors is now comprised of ten directors, nine of which are independent, non-employee directors;

• Our Board of Directors is elected on an annual basis;

• We employ a majority vote standard for uncontested elections;

• Our Compensation Committee of the Board of Directors works with independent consultants in conducting annual compensation reviews for our key executives, and compensates each individual primarily based on reaching certain performance metrics that determine the success of our company; and

• We adhere to all other corporate governance principles outlined in our “Corporate Governance Guidelines” document on our website.

Environmental Practices

Our focus on conservationism is demonstrated by how we manage our day-to-day activities at our corporate headquarters.  At our headquarters, we promote energy efficiency and encourage practices such as powering down office equipment at the end of the day, implementing file-sharing technology and automatic “duplex mode” to limit paper use, adopting an electronic approval system, carpooling to our headquarters, and recycling paper waste. In 2017, we sent more than 32,700 pounds of paper to our offsite partner for recycling.

With respect to recycling and reuse practices, we encourage the use of recycled products and the recycling of materials during our operations. Cell phones, wireless devices and office equipment are recycled or donated whenever possible.

In addition, our headquarters was retrofitted according to the State of California energy efficiency standards (specifically following California Green Building Standards Code and Title 24 of the California Code of Regulations), with features such as an automatic lighting control system with light-harvesting technology, a Building Management System that monitors and controls energy use, an energy-efficient PVC roof and heating and cooling system, LED lighting, and drought-tolerant landscaping with recycled materials.

In 2017, we formed an internal “Green Team” whose mission is to encourage environmentally-friendly choices to further reduce our environmental impact as a company. To achieve this mission, the Green Team creates and executes strategies to promote sustainability internally and tracks the progress of their efforts.

The properties in our portfolio are primarily net leased to our tenants, and each tenant is ultimately responsible for maintaining the buildings including controlling their energy usage and the implementation of any environmentally sustainable practices at each location. We actively communicate and work with our tenants to promote environmental responsibility at the properties we own and to reiterate the importance of energy efficient facilities.

Our Asset Management team has engaged with renewable energy development companies to identify assets that would maximize energy efficiency initiatives throughout our property portfolio. These initiatives include solar energy arrays, battery storage, and charging stations. In addition, we continue to explore regional opportunities with our tenants in order to qualify for city and county renewable energy or energy efficiency programs.

Item 3:    Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate changes primarily as a result of our credit facility, term loans, mortgages payable, and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower our overall borrowing costs. To achieve these objectives we issue long-term notes and bonds, primarily at fixed rates.

In order to mitigate and manage the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps 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

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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 June 30, 2018. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):

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
2018	$	2.1	5.59	%	$	6.4	4.78	%
2019	4.5		5.59		620.2		3.44
2020	82.2		4.99		250.2		3.74
2021	310.1		5.72		6.8		5.21
2022	1,059.7		3.43		—		—
Thereafter	4,218.6		4.12		—		—
Totals (1)	$	5,677.2	4.09	%	$	883.6	3.55	%
Fair Value (2)	$	5,676.5			$	883.8

⁽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 term loans.  At June 30, 2018, the unamortized balance of net premiums on mortgages payable is $5.1 million, the unamortized balance of net original issuance premiums on notes payable is $11.1 million, and the balance of deferred financing costs on mortgages payable is $209,000, on notes payable is $36.2 million, and on term loans is $469,000.

⁽²⁾   We base the estimated fair value of the fixed rate senior notes and bonds at June 30, 2018 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 and variable rate mortgages at June 30, 2018 on the relevant forward interest rate curve, plus an applicable credit-adjusted spread.  We believe that the carrying value of the credit facility balance and term loans balance reasonably approximate their estimated fair values at June 30, 2018.

The table incorporates only those exposures that exist as of June 30, 2018. 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.

All of our outstanding notes and bonds have fixed interest rates. All of our mortgages payable, except three mortgages totaling $29.6 million at June 30, 2018, have fixed interest rates. After factoring in arrangements that limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.2 million at June 30, 2018. Interest on our credit facility and term loan balances is variable. However, the variable interest rate feature on our term loans has been mitigated by interest rate swap agreements. Based on our credit facility balance of $534.0 million at June 30, 2018, a 1% change in interest rates would change our interest rate costs by $5.3 million per year.

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 June 30, 2018, 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 our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

Changes in Internal Controls

In January 2018, we implemented an enterprise resource planning system and accordingly we have updated our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes and to take advantage of enhanced automated controls provided by the new system. There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2018 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 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 2010 Incentive Award Plan of Realty Income Corporation:

• 619 shares of stock, at a weighted average price of $50.25, in April 2018;

• 232 shares of stock, at a weighted average price of $52.07, in May 2018; and

• 267 shares of stock, at a weighted average price of $53.13, in June 2018.

Item 6:        Exhibits

Articles of Incorporation and By-Laws

Exhibit No.    Description

2.1 Agreement and Plan of Merger, dated as of September 6, 2012, by and among Realty Income Corporation, Tau Acquisition LLC and American Realty Capital Trust, Inc. (filed as exhibit 2.1 to the Company’s Form 8-K, filed on September 6, 2012 and incorporated herein by reference).

2.2 First Amendment to Agreement and Plan of Merger, dated as of January 6, 2013, by and among Realty Income Corporation, Tau Acquisition LLC and American Realty Capital Trust, Inc. (filed as exhibit 2.1 to the Company’s Form 8-K, filed on January 7, 2013 and incorporated herein by reference).

3.1 Articles of Incorporation of the Company, as amended by amendment No. 1 dated May 10, 2005 and amendment No. 2 dated May 10, 2005 (filed as exhibit 3.1 to the Company’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference), amendment No. 3 dated July 29, 2011 (filed as exhibit 3.1 to the Company’s Form 8-K, filed on August 2, 2011 and incorporated herein by reference); and amendment No. 4 dated June 21, 2012 (filed as exhibit 3.1 to the Company’s Form 8 - K, filed on June 21, 2012 and incorporated herein by reference).

3.2 Amended and Restated Bylaws of the Company dated March 13, 2018 (filed as exhibit 3.1 to the Company’s Form 8-K filed on March 14, 2018 and incorporated herein by reference).

3.3 Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, dated February 3, 2012 (the “First Class F Articles Supplementary”) (filed as exhibit 3.1 to the Company’s Form 8-K, filed on February 3, 2012 and incorporated herein by reference).

3.4 Certificate of Correction to the First Class F Articles Supplementary, dated April 11, 2012 (filed as exhibit 3.2 to the Company’s Form 8-K, filed on April 17, 2012 and incorporated herein by reference).

3.5 Articles Supplementary to the Articles of Incorporation of the Company classifying and designating additional shares of the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, dated April 17, 2012 (filed as exhibit 3.3 to the Company’s Form 8-K, filed on April 17, 2012 and incorporated herein by reference).

Instruments defining the rights of security holders, including indentures

4.1 Indenture dated as of October 28, 1998 between the Company and The Bank of New York (filed as exhibit 4.1 to the Company’s Form 8-K, filed on October 28, 1998 and incorporated herein by reference).

4.2 Form of 5.875% Senior Notes due 2035 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on March 11, 2005 and incorporated herein by reference).

4.3 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.875% Senior Debentures due 2035 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on March 11, 2005 and incorporated herein by reference).

4.4 Form of 5.750% Notes due 2021 (filed as exhibit 4.2 to Company’s Form 8-K, filed on June 29, 2010 and incorporated herein by reference).

4.5 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee, establishing a series of securities entitled 5.750% Notes due 2021 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on June 29, 2010 and incorporated herein by reference).

4.6 Form of Common Stock Certificate (filed as exhibit 4.16 to the Company’s Form 10-Q for the quarter ended September 30, 2011 and incorporated herein by reference).

4.7 Form of Preferred Stock Certificate representing the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock (filed as exhibit 4.1 to the Company’s Form 8-K, filed on February 3, 2012 and incorporated herein by reference).

4.8 Form of 2.000% Note due 2018 (filed as exhibit 4.2 to Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).

4.9 Form of 3.250% Note due 2022 (filed as exhibit 4.3 to Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).

4.10 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “2.000% Notes due 2018” and establishing a series of securities entitled “3.250% Notes due 2022” (filed as exhibit 4.4 to the Company’s Form 8-K, filed on October 10, 2012 and incorporated herein by reference).

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4.11 Form of 4.650% Note due 2023 (filed as exhibit 4.2 to Company’s Form 8-K, filed on July 16, 2013 and incorporated herein by reference).

4.12 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “4.650% Notes due 2023” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on July 16, 2013 and incorporated herein by reference).

4.13 Form of 3.875% Note due 2024 (filed as exhibit 4.2 to Company’s Form 8-K, filed on June 25, 2014 and incorporated herein by reference).

4.14 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “3.875% Notes due 2024” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on June 25, 2014 and incorporated herein by reference).

4.15 Form of 4.125% Note due 2026 (filed as exhibit 4.2 to Company’s Form 8-K, filed on September 23, 2014 and incorporated herein by reference).

4.16 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “4.125% Notes due 2026” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 23, 2014 and incorporated herein by reference).

4.17 Form of 3.000% Note due 2027 (filed as exhibit 4.2 to Company’s Form 8-K, filed on October 12, 2016 and incorporated herein by reference).

4.18 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, establishing a series of securities entitled “3.000% Notes due 2027” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on October 12, 2016 and incorporated herein by reference).

4.19 Form of 4.650% Note due 2047 (filed as exhibit 4.2 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).

4.20 Form of 4.125% Note due 2026 (filed as exhibit 4.3 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).

4.21 Officers’ Certificate pursuant to Sections 201, 301, and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A. as successor trustee, establishing a series of securities entitled “4.650% Notes due 2047” and re-opening a series of securities entitled “4.125% Notes due 2026” (filed as exhibit 4.4 to Company’s Form 8-K, filed on March 15, 2017 and incorporated herein by reference).

4.22 Form of 3.650% Note due 2028 (filed as exhibit 4.2 to Company’s Form 8-K, filed on December 6, 2017 and incorporated herein by reference).

4.23 Form of 3.250% Note due 2022 (filed as exhibit 4.3 to Company’s Form 8-K, filed on December 6, 2017 and incorporated herein by reference).

4.24 Form of 4.650% Note due 2047 (filed as exhibit 4.4 to Company’s Form 8-K, filed on December 6, 2017 and incorporated herein by reference).

4.25 Officers’ Certificate pursuant to Sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A., as

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successor trustee, establishing a series of securities entitled “3.650% Notes due 2028” and re-opening a series of securities entitled “3.250% Notes due 2022” and “4.650% Notes due 2047.” (filed as exhibit 4.5 to the Company’s Form 8-K, filed on December 6, 2017 and incorporated herein by reference).

4.26 Form of 3.875% Note due 2025 (filed as exhibit 4.2 to Company’s Form 8-K, filed on April 4, 2018 and incorporated herein by reference).

4.27 Officers’ Certificate pursuant to Sections 201, 301, and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Mellon Trust Company, N.A. as successor trustee, establishing a series of securities entitled “3.875% Notes due 2025” and re-opening a series of securities entitled “4.125% Notes due 2026” (filed as exhibit 4.3 to Company’s Form 8-K, filed on April 4, 2018 and incorporated herein by reference).

Certifications

*31.1 Rule 13a-14(a) Certifications as filed by the Chief Executive Officer pursuant to SEC release No. 33-8212 and 34-47551.

*31.2 Rule 13a-14(a) Certifications as filed by the Chief Financial Officer pursuant to SEC release No. 33-8212 and 34-47551.

*32 Section 1350 Certifications as furnished by the Chief Executive Officer and the Chief Financial Officer pursuant to SEC release No. 33-8212 and 34-47551.

Interactive Data Files

*101 The following materials from Realty Income Corporation’s Quarterly Report on Form 10-Q for the period ended June 30, 2018, formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.

*Filed herewith.

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: August 2, 2018	/s/ SEAN P. NUGENT
	Sean P. Nugent
	Senior Vice President, Controller
	(Principal Accounting Officer)

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EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

I, John P. Case, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Realty Income Corporation for the quarter ended June 30, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018	/s/ JOHN P. CASE
		John P. Case
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

I, Paul M. Meurer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Realty Income Corporation for the quarter ended June 30, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018	/s/ PAUL M. MEURER
		Paul M. Meurer
		Executive Vice President,
		Chief Financial Officer and Treasurer

EX-32

Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Realty Income Corporation, a Maryland corporation (the “Company”), hereby certify, to his best knowledge, that:

(i)   the accompanying quarterly report on Form 10-Q of the Company for the quarter ended June 30, 2018, (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Act”); and

(ii)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JOHN P. CASE

John P. Case

Chief Executive Officer

/s/ PAUL M. MEURER

Paul M. Meurer

Executive Vice President, Chief Financial Officer and Treasurer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Act, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 26, 2018
Document and Entity Information
Entity Registrant Name	REALTY INCOME CORP
Entity Central Index Key	0000726728
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		290,043,300
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Real estate, at cost:
Land	$ 4,355,454	$ 4,080,400
Buildings and improvements	11,313,624	10,936,069
Total real estate, at cost	15,669,078	15,016,469
Less accumulated depreciation and amortization	(2,509,065)	(2,346,644)
Net real estate held for investment	13,160,013	12,669,825
Real estate held for sale, net	70,029	6,674
Net real estate	13,230,042	12,676,499
Cash and cash equivalents	30,717	6,898
Accounts receivable, net	126,126	119,533
Acquired lease intangible assets, net	1,228,580	1,194,930
Goodwill	14,902	14,970
Other assets, net	43,707	45,336
Total assets	14,674,074	14,058,166
LIABILITIES AND EQUITY
Distributions payable	64,399	60,799
Accounts payable and accrued expenses	122,379	109,523
Acquired lease intangible liabilities, net	311,043	268,796
Other liabilities	123,582	116,869
Line of credit payable	534,000	110,000
Term loans, net	319,531	445,286
Mortgages payable, net	311,708	325,941
Notes payable, net	5,374,963	5,230,244
Total liabilities	7,161,605	6,667,458
Commitments and contingencies
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 370,100,000 shares authorized, 290,024,275 shares issued and outstanding as of June 30, 2018 and 284,213,685 shares issued and outstanding as of December 31, 2017	9,925,543	9,624,264
Distributions in excess of net income	(2,449,793)	(2,252,763)
Total stockholders’ equity	7,475,750	7,371,501
Noncontrolling interests	36,719	19,207
Total equity	7,512,469	7,390,708
Total liabilities and equity	$ 14,674,074	$ 14,058,166

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Common stock and paid in capital, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock and paid in capital, shares authorized	370,100,000	370,100,000
Common stock and paid in capital, shares issued	290,024,275	284,213,685
Common stock and paid in capital, shares outstanding	290,024,275	284,213,685

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CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
REVENUE
Total revenue	$ 328,886	$ 300,170	$ 647,181	$ 598,195
EXPENSES
Depreciation and amortization	133,999	123,089	265,102	244,186
Interest	66,628	63,679	126,043	122,985
General and administrative	17,954	15,781	33,638	29,346
Property (including reimbursable)	16,236	16,486	32,788	35,561
Income taxes	1,208	441	2,431	1,488
Provisions for impairment	3,951	2,274	18,172	7,706
Total expenses	239,976	221,750	478,174	441,272
Gain on sales of real estate	7,787	2,839	11,005	13,371
Net income	96,697	81,259	180,012	170,294
Net income attributable to noncontrolling interests	(317)	(123)	(469)	(288)
Net income attributable to the Company	96,380	81,136	179,543	170,006
Preferred stock dividends	0	0	0	(3,911)
Excess of redemption value over carrying value of preferred shares redeemed	0	0	0	(13,373)
Net income available to common stockholders	$ 96,380	$ 81,136	$ 179,543	$ 152,722
Amounts available to common stockholders per common share:
Net income, basic and diluted	$ 0.34	$ 0.30	$ 0.63	$ 0.57
Weighted average common shares outstanding:
Basic (in shares)	284,928,969	272,588,332	284,469,689	268,024,691
Diluted (in shares)	285,372,256	273,099,487	284,924,336	268,569,855
Rental revenue
REVENUE
Total revenue	$ 313,870	$ 288,049	$ 620,418	$ 573,870
Tenant reimbursements
REVENUE
Total revenue	11,395	11,756	22,695	22,985
Other revenue
REVENUE
Total revenue	$ 3,621	$ 365	$ 4,068	$ 1,340

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 180,012	$ 170,294
Adjustments to net income:
Depreciation and amortization	265,102	244,186
Amortization of share-based compensation	8,657	7,215
Non-cash revenue adjustments	(4,029)	(1,564)
Amortization of net premiums on mortgages payable	(813)	(1,240)
Amortization of deferred financing costs	3,469	4,684
Gain on interest rate swaps	(2,799)	(859)
Gain on sales of real estate	(11,005)	(13,371)
Provisions for impairment on real estate	18,172	7,706
Change in assets and liabilities
Accounts receivable and other assets	2,785	3,168
Accounts payable, accrued expenses and other liabilities	17,718	41,620
Net cash provided by operating activities	477,269	461,839
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(829,818)	(696,116)
Improvements to real estate, including leasing costs	(17,017)	(9,232)
Proceeds from sales of real estate	47,526	44,005
Insurance proceeds received	3,836	0
Collection of loans receivable	5,267	61
Net cash used in investing activities	(790,206)	(661,282)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(373,044)	(335,380)
Cash dividends to preferred stockholders	0	(6,168)
Borrowings on line of credit	1,140,000	772,000
Payments on line of credit	(716,000)	(1,244,000)
Principal payment on term loan	(125,866)	0
Proceeds from notes and bonds payable issued	497,500	711,812
Principal payment on notes payable	(350,000)	0
Principal payments on mortgages payable	(13,447)	(86,515)
Redemption of preferred stock	0	(408,750)
Proceeds from common stock offerings, net	0	704,938
Proceeds from dividend reinvestment and stock purchase plan	4,806	59,649
Proceeds from At-the-Market (ATM) program	297,983	52,442
Distributions to noncontrolling interests	(758)	(887)
Debt issuance costs	(4,436)	(6,663)
Other items, including shares withheld upon vesting	(11,143)	(6,305)
Net cash provided by financing activities	345,595	206,173
Net increase in cash, cash equivalents and restricted cash	32,658	6,730
Cash, cash equivalents and restricted cash, beginning of period	12,142	15,681
Cash, cash equivalents and restricted cash, end of period	$ 44,800	$ 22,411

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Management Statement

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Management Statement

Management Statement

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, 2017, which are included in our 2017 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.

At June 30, 2018 we owned 5,483 properties, located in 49 states and Puerto Rico, containing over 92.0 million leasable square feet.

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Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements

Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements

A.  The accompanying consolidated financial statements include the accounts of Realty Income and other subsidiaries for which we make operating and financial decisions (i.e., control), after elimination of all material intercompany balances and transactions.  We consolidate entities that we control and record a noncontrolling interest for the portion that we do not own.  Noncontrolling interest that was created or assumed as part of a business combination was recognized at fair value as of the date of the transaction (see note 10).  We have no unconsolidated investments.

B.  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 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. The income taxes recorded on our consolidated statements of income represent amounts paid by Realty Income and its subsidiaries for city and state income and franchise taxes.

C.  We assign a portion of goodwill to our applicable property sales, which results in a reduction of the carrying amount of our goodwill. In order to allocate goodwill to the carrying amount of properties that we sell, we utilize a relative fair value approach based on the original methodology for assigning goodwill.  As we sell properties, our goodwill will likely continue to gradually decrease over time. Based on our analysis of goodwill during the second quarters of 2018 and 2017, we determined there was no impairment on our existing goodwill.

D.  In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers. This ASU, as amended by ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers, and will apply to transactions such as the sale of real estate. This ASU, which is effective for interim and annual periods beginning after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also to provide certain additional disclosures. We adopted this standard effective as of January 1, 2018 and utilized the cumulative effect transition method of adoption. The adoption of this guidance did not have a material impact on our financial position or results of operations.

E.  In February 2016, FASB issued ASU 2016-02 (Topic 842, Leases), as clarified and amended by ASU 2018-01, which amended Topic 840, Leases. Under this amended topic, the accounting applied by a lessor is largely unchanged from that applied under Topic 840, Leases. The large majority of operating leases should remain classified as operating leases, and lessors should continue to recognize lease income for those leases on a generally straight-line basis over the lease term. Although primarily a lessor, we are also a lessee under several ground lease arrangements. Upon adoption, we will recognize lease obligations for ground leases with a corresponding right of use asset, and are currently evaluating other impacts this amendment may have on our consolidated financial statements. The amendments included in this topic are effective, for interim and annual periods beginning after December 15, 2018. We plan to adopt this standard when it becomes effective beginning January 1, 2019, and we expect to elect the practical expedients available for implementation under the standard.

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Supplemental Detail for Certain Components of Consolidated Balance Sheets

6 Months Ended

Jun. 30, 2018

Disclosure Text Block Supplement [Abstract]

Supplemental Detail for Certain Components of Consolidated Balance Sheets

Supplemental Detail for Certain Components of Consolidated Balance Sheets (dollars in thousands)

A.	Acquired lease intangible assets, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired in-place leases	$	1,301,834		$	1,272,897
	Accumulated amortization of acquired in-place leases	(495,883		)	(444,221		)
	Acquired above-market leases	562,801			487,933
	Accumulated amortization of acquired above-market leases	(140,172		)	(121,679		)
		$	1,228,580		$	1,194,930

B.	Other assets, net, consist of the following at:	June 30, 2018		December 31, 2017
	Prepaid expenses	$	15,821	$	12,851
	Restricted escrow deposits	7,054		679
	Impounds related to mortgages payable	7,029		4,565
	Corporate assets, net	5,926		6,074
	Receivable for property rebuilds	3,244		3,919
	Credit facility origination costs, net	2,911		4,366
	Non-refundable escrow deposits for pending acquisitions	—		7,500
	Notes receivable issued in connection with property sales	—		5,267
	Other items	1,722		115
		$	43,707	$	45,336

C.	Distributions payable consist of the following declared distributions at:	June 30, 2018		December 31, 2017
	Common stock distributions	$	64,241	$	60,713
	Noncontrolling interests distributions	158		86
		$	64,399	$	60,799

D.	Accounts payable and accrued expenses consist of the following at:	June 30, 2018		December 31, 2017
	Notes payable - interest payable	$	75,861	$	64,058
	Property taxes payable	18,200		11,718
	Mortgages, term loans, credit line - interest payable and interest rate swaps	3,356		2,360
	Accrued costs on properties under development	3,149		2,681
	Other items	21,813		28,706
		$	122,379	$	109,523

E.	Acquired lease intangible liabilities, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired below-market leases	$	394,253		$	340,906
	Accumulated amortization of acquired below-market leases	(83,210		)	(72,110		)
		$	311,043		$	268,796

F.	Other liabilities consist of the following at:	June 30, 2018		December 31, 2017
	Rent received in advance and other deferred revenue	$	111,814	$	105,284
	Security deposits	6,287		6,259
	Capital lease obligations	5,481		5,326
		$	123,582	$	116,869

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Investments in Real Estate

6 Months Ended

Jun. 30, 2018

Real Estate Investments, Net [Abstract]

Investments in Real Estate

Investments in Real Estate

We acquire land, buildings and improvements necessary for the successful operations of commercial tenants.

A.    Acquisitions During the First Six Months of 2018 and 2017

During the first six months of 2018, we invested $856.8 million in 358 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.3%. The 358 new properties and properties under development or expansion are located in 32 states, will contain approximately 2.8 million leasable square feet, and are 100% leased with a weighted average lease term of 13.8 years. The tenants occupying the new properties operate in 17 industries and the property types consist of 93.7% retail and 6.3% industrial, based on rental revenue.  None of our investments during 2018 caused any one tenant to be 10% or more of our total assets at June 30, 2018.

The $856.8 million invested during the first six months of 2018 was allocated as follows: $314.4 million to land, $476.0 million to buildings and improvements, $90.6 million to intangible assets related to leases, and $24.2 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during the first six months of 2018 generated total revenues of $10.6 million and net income of $5.3 million during the six months ended June 30, 2018.

In comparison, during the first six months of 2017, we invested $691.9 million in 126 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.3%. The 126 new properties and properties under development or expansion were located in 30 states, contained approximately 3.4 million leasable square feet, and were 100% leased with a weighted average lease term of 14.8 years. The tenants occupying the new properties operated in 20 industries and the property types consisted of 95.1% retail and 4.9% industrial, based on rental revenue.

The $691.9 million invested during the first six months of 2017 was allocated as follows: $170.1 million to land, $395.5 million to buildings and improvements, $130.0 million to intangible assets related to leases, and $3.7 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during the first six months of 2017 generated total revenues of $7.3 million and net income of $3.4 million during the six months ended June 30, 2017.

The estimated initial weighted average contractual lease rate for a property is generally computed as estimated contractual net operating income, which, in the case of a net leased property, is equal to the aggregate base rent for the first full year of each lease, divided by the total cost of the property.  Since it is possible that a tenant 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.

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 estimated initial weighted average contractual lease rate is computed as follows: estimated 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. Of the $856.8 million we invested during the first six months of 2018, $64.3 million was invested in 10 properties under development or expansion with an estimated initial weighted average contractual lease rate of 6.7%. Of the $691.9 million we invested during the first six months of 2017, $9.9 million was invested in 12 properties under development or expansion with an estimated initial weighted average contractual lease rate of 7.9%.

B.    Investments in Existing Properties

During the first six months of 2018, we capitalized costs of $5.6 million on existing properties in our portfolio, consisting of $2.5 million for re-leasing costs, $147,000 for recurring capital expenditures and $3.0 million for non-recurring building improvements. In comparison, during the first six months of 2017, we capitalized costs of $6.8 million on existing properties in our portfolio, consisting of $759,000 for re-leasing costs, $365,000 for recurring capital expenditures and $5.7 million for non-recurring building improvements.

C.    Properties with Existing Leases

Of the $856.8 million we invested during the first six months of 2018, approximately $225.8 million was used to acquire 107 properties with existing leases.  In comparison, of the $691.9 million we invested during the first six months of 2017, approximately $536.2 million was used to acquire 60 properties with existing leases. The value of the in-place and above-market leases is recorded to acquired lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to acquired 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 first six months of 2018 and 2017 were $53.1 million and $51.2 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the first six months of 2018 and 2017 were $7.9 million and $6.5 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 acquired above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at June 30, 2018 (in thousands):

	Net decrease to rental revenue			Increase to amortization expense
2018	$	(7,856	)	$	53,176
2019	(15,108		)	97,639
2020	(14,378		)	91,887
2021	(13,208		)	83,903
2022	(13,074		)	71,978
Thereafter	(47,962		)	407,368
Totals	$	(111,586	)	$	805,951

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Credit Facility

6 Months Ended

Jun. 30, 2018

Unsecured debt

Debt

Debt

Credit Facility

We have a $2.0 billion unsecured revolving credit facility, or our credit facility, with an initial term that expires in June 2019 and includes, at our option, twosix-month extensions. Our credit facility has a $1.0 billion accordion expansion option.  Under our credit facility, our investment grade credit ratings as of June 30, 2018 provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 0.85% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.975% 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 credit facility. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At June 30, 2018, credit facility origination costs of $2.9 million are included in other assets, net on our consolidated balance sheet. These costs are being amortized over the remaining term of our credit facility.

At June 30, 2018, we had a borrowing capacity of approximately $1.5 billion available on our credit facility (subject to customary conditions to borrowing) and an outstanding balance of $534.0 million, as compared to an outstanding balance of $110.0 million at December 31, 2017.

The weighted average interest rate on outstanding borrowings under our credit facility was 2.7% during the first six months of 2018 and 1.8% during the first six months of 2017. At June 30, 2018 and December 31, 2017, the weighted average interest rate on outstanding borrowings under our credit facility was 2.9% and 4.5%, respectively. 

Our credit facility is subject to various leverage and interest coverage ratio limitations, and at June 30, 2018, we were in compliance with the covenants on our credit facility. We regularly review our credit facility and may seek to extend, renew or replace our credit facility, to the extent we deem appropriate.

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Term Loans

6 Months Ended

Jun. 30, 2018

Senior Unsecured Term Loans

Debt

Debt

Term Loans

In December 2017, in conjunction with the acquisition of a portfolio of properties, we entered into a $125.9 million promissory note, which was paid in full at maturity in January 2018. Borrowings under this note bore interest at 1.52%.

In June 2015, in conjunction with entering into our credit facility, we entered into a $250.0 million senior unsecured term loan maturing on June 30, 2020.  Borrowing under this term loan bears interest at the current one-month LIBOR, plus 0.90%.  In conjunction with this term loan, we also entered into an interest rate swap which effectively fixed our per annum interest rate on this term loan at 2.62%.

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 effectively fixed our per annum interest rate on this term loan at 2.05%. In January 2018, we entered into a six-month extension of this loan, which included, at our option, two additional six-month extensions. In June 2018, we exercised our first six-month extension of this loan, which now matures in January 2019. Borrowing during the extension periods bears interest at the current one-month LIBOR, plus 0.90%. The interest rate swap terminated upon the initial maturity in January 2018.

Deferred financing costs of $1.2 million incurred in conjunction with the $250.0 million term loan and $368,000 incurred in conjunction with the $70.0 million term loan are being amortized over the remaining terms of each respective term loan. The net balance of these deferred financing costs, which was $469,000 at June 30, 2018, and $580,000 at December 31, 2017, is included within term loans, net on our consolidated balance sheets.

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Mortgages Payable

6 Months Ended

Jun. 30, 2018

Mortgages Payable

Debt

Debt

Mortgages Payable

During the first six months of 2018, we made $13.4 million in principal payments, including the repayment of one mortgage in full for $11.0 million. During the first six months of 2017, we made $86.5 million in principal payments, including the repayment of five mortgages in full for $82.9 million. No mortgages were assumed during the first six months of 2018 or 2017. The assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions for items such as solvency, bankruptcy, misrepresentation, fraud, misapplication of payments, environmental liabilities, failure to pay taxes, insurance premiums, liens on the property, violations of the single purpose entity requirements, and uninsured losses.  We expect to pay off our outstanding mortgages as soon as prepayment penalties make it economically feasible to do so.

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 June 30, 2018, 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 $209,000 at June 30, 2018 and $236,000 at December 31, 2017. These costs are being amortized over the remaining term of each mortgage.

The following is a summary of all our mortgages payable as of June 30, 2018 and December 31, 2017, 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
6/30/2018	61	5.1	%	4.5	%	3.6	$	306,836	$	4,872	$	311,708
12/31/2017	62	5.0	%	4.4	%	4.0	$	320,283	$	5,658	$	325,941

⁽¹⁾ At June 30, 2018, there were 27 mortgages on 61 properties. At December 31, 2017, there were 28 mortgages on 62 properties. The mortgages require monthly payments with principal payments due at maturity. The mortgages are at fixed interest rates, except for three mortgages on three properties totaling $29.6 million and $29.9 million at June 30, 2018 and December 31, 2017, respectively. After factoring in arrangements which limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.2 million at June 30, 2018 and $22.4 million at December 31, 2017.

⁽²⁾ Stated interest rates ranged from 3.8% to 6.9% at June 30, 2018, while stated interest rates ranged from 3.4% to 6.9% at December 31, 2017.

⁽³⁾ Effective interest rates ranged from 2.0% to 6.0% at June 30, 2018, while effective interest rates ranged from 2.6% to 5.5% at December 31, 2017.

The following table summarizes the maturity of mortgages payable, excluding net premiums of $5.1 million and deferred financing costs of $209,000, as of June 30, 2018 (dollars in millions):

Year of Maturity	Principal
2018	$	8.5
2019	20.7
2020	82.4
2021	66.9
2022	109.7
Thereafter	18.6
Totals	$	306.8

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Notes Payable

6 Months Ended

Jun. 30, 2018

Notes Payable

Debt

Debt

Notes Payable

A.    General

Our senior unsecured notes and bonds consist of the following, sorted by maturity date (dollars in millions):

	June 30, 2018			December 31, 2017
2.000% notes, issued in October 2012 and due in January 2018	$	—		$	350
5.750% notes, issued in June 2010 and due in January 2021	250			250
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022	950			950
4.650% notes, issued in July 2013 and due in August 2023	750			750
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			—
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	650			650
3.000% notes, issued in October 2016 and due in January 2027	600			600
3.650% notes, issued in December 2017 and due in January 2028	550			550
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	250			250
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	550			550
Total principal amount	5,400			5,250
Unamortized net original issuance premiums and deferred financing costs	(25		)	(20		)
	$	5,375		$	5,230

The following table summarizes the maturity of our notes and bonds payable as of June 30, 2018, excluding net unamortized original issuance premiums and deferred financing costs (dollars in millions):

Year of Maturity	Principal
2021	$	250
2022	950
Thereafter	4,200
Totals	$	5,400

As of June 30, 2018, the weighted average interest rate on our notes and bonds payable was 4.0% and the weighted average remaining years until maturity was 9.2 years.

B.    Note Repayment

In January 2018, we repaid our $350.0 million of outstanding 2.000% notes, plus accrued and unpaid interest upon maturity.

C.    Note Issuances

In April 2018, we issued $500.0 million of 3.875% senior unsecured notes due 2025, or the 2025 Notes. The public offering price for the 2025 Notes was 99.50% of the principal amount, for an effective yield to maturity of 3.957%. The net proceeds of approximately $493.1 million from this offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

In March 2017, we issued $300 million of 4.650% senior unsecured notes due 2047, or the 2047 Notes, and $400 million of 4.125% senior unsecured notes due 2026, or the 2026 Notes. The public offering price for the 2047 Notes was 99.97% of the principal amount for an effective yield to maturity of 4.65%. The public offering price for the 2026 Notes was 102.98% of the principal amount for an effective yield to maturity of 3.75%. The 2026 Notes constituted a further issuance of, and formed a single series with, the $250 million aggregate principal amount of senior notes due 2026, issued in September 2014. The net proceeds of approximately $705.2 million from the offerings were used to repay borrowings outstanding under our credit facility to fund investment opportunities, and for other general corporate purposes.

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Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Equity

Equity

A.    Issuance of Common Stock

In March 2017, we issued 11,850,000 shares of common stock.  After underwriting discounts and other offering costs of $29.8 million, the net proceeds of $704.9 million were used to repay borrowings under our credit facility.

B.    Redemption of Preferred Stock

In April 2017, we redeemed all of the 16,350,000 shares of our 6.625% Monthly Income Class F Preferred Stock, or the Class F preferred stock, for $25 per share, plus accrued dividends. We issued an irrevocable notice of redemption with respect to the Class F preferred stock in March 2017, and, as a result, we incurred a non-cash charge of $13.4 million for the first six months of 2017, representing the Class F preferred stock original issuance costs that we paid in 2012.

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 common 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.  During the first six months of 2018, we issued 93,061 shares and raised approximately $4.8 million under the DRSPP.  During the first six months of 2017, we issued 1,013,412 shares and raised approximately $59.6 million under the DRSPP.  From the inception of our DRSPP through June 30, 2018, we have issued 14,156,603 shares and raised approximately $666.6 million.

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 first six months of 2018. During the first six months of 2017, we issued 927,695 shares and raised $54.7 million under the waiver approval process. These shares are included in the total activity for the first six months of 2017 noted in the preceding paragraph.

D.    At-the-Market (ATM) Programs

In September 2015, we established an “at-the-market” equity distribution program, or our ATM program, pursuant to which we can offer and sell up to 12,000,000 shares of common stock to, or through, a consortium of banks acting as our sales agents by means of ordinary brokers’ transactions on the NYSE at prevailing market prices or at negotiated prices. In October 2017, following the issuance and sale of the remaining shares under our prior ATM program, we established a new “at-the-market” equity distribution plan, or our new ATM program, and, together with our prior ATM program, our ATM programs, pursuant to which we are permitted to offer and sell up to 17,000,000 additional shares of common stock.  During the first six months of 2018, we issued 5,575,273 shares and raised approximately $298.0 million under the ATM program. During the first six months of 2017, we issued 935,746 shares and raised approximately $52.4 million under the ATM program. From the inception of our ATM programs through June 30, 2018, we have issued 19,982,802 shares authorized by our ATM programs and raised approximately $1.1 billion.

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Noncontrolling Interests

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Noncontrolling Interests

Noncontrolling Interests

In January 2013, we completed our acquisition of ARCT.  Equity issued as consideration for this transaction included common and preferred partnership units issued by Tau Operating Partnership, L.P., or Tau Operating Partnership, the consolidated subsidiary which owns properties acquired through the ARCT acquisition.  We and our subsidiaries hold a 99.4% interest in Tau Operating Partnership, and consolidate the entity.

In June 2013, we completed the acquisition of a portfolio of properties by issuing common partnership units in Realty Income, L.P. as consideration for the acquisition. Additionally, in March and April 2018, we completed the acquisition of an additional portfolio of properties, by paying both cash and by issuing additional common partnership units in Realty Income, L.P as consideration for the acquisitions. At June 30, 2018, the remaining units from these issuances represent a 1.6% ownership in Realty Income, L.P.  We hold the remaining 98.4% interests in this entity and consolidate the entity.

Neither of the common partnership units have voting rights. Both common partnership units are entitled to monthly distributions equal to the amount paid to common stockholders of Realty Income, and are redeemable in cash or Realty Income common stock, at our option, and at a conversion ratio of one to one, subject to certain exceptions.  Noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the balance sheet was appropriate.  We determined that the units meet the requirements to qualify for presentation as permanent equity.

In 2016, we completed the acquisition of two properties by acquiring a controlling interest in two separate entities. We are the managing member of each of these entities, and possess the ability to control the business and manage the affairs of these entities. At June 30, 2018, we and our subsidiaries held 95.0% and 74.0% interests, respectively, and fully consolidated these entities in our consolidated financial statements.

The following table represents the change in the carrying value of all noncontrolling interests through June 30, 2018 (dollars in thousands):

	Tau Operating Partnership units(1)			Realty Income, L.P. units(2)			Other Noncontrolling Interests			Total
Carrying value at December 31, 2017	$	13,322		$	2,160		$	3,725		$	19,207
Reallocation of equity	572			(43		)	(37		)	492
Redemptions	—			(1,468		)	—			(1,468		)
Shares issued in conjunction with acquisition	—			18,848						18,848
Distributions	(417		)	(336		)	(76		)	(829		)
Allocation of net income	173			257			39			469
Carrying value at June 30, 2018	$	13,650		$	19,418		$	3,651		$	36,719

⁽¹⁾ 317,022 Tau Operating Partnership units were issued on January 22, 2013 and remained outstanding as of June 30, 2018 and December 31, 2017.

⁽²⁾ 534,546 Realty Income, L.P. units were issued on June 27, 2013, 242,007 units were issued on March 30, 2018 and 131,790 units were issued on April 30, 2018. 401,979 and 88,182 remained outstanding as of June 30, 2018 and December 31, 2017, respectively.

Tau Operating Partnership, Realty Income, L.P. and the two entities acquired in 2016 are considered variable interest entities, or VIEs, in which we are deemed the primary beneficiary based on our controlling financial interests. Below is a summary of selected financial data of consolidated VIEs, for which we are the primary beneficiary included in the consolidated balance sheets at June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Net real estate	$	2,961,127	$	2,936,397
Total assets	3,348,144		3,342,443
Total debt	198,332		210,384
Total liabilities	330,757		313,295

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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 disclosure for assets and liabilities measured at fair value requires allocation to a three-level valuation hierarchy. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our notes receivable issued in connection with property sales, mortgages payable and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):

At June 30, 2018	Carrying value		Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)	$	306.8	$	314.4
Notes and bonds payable (2)	5,400.0		5,391.9

At December 31, 2017	Carrying value		Estimated fair value
Notes receivable issued in connection with property sales	$	5.3	$	5.3
Mortgages payable assumed in connection with acquisitions (1)	320.3		334.2
Notes and bonds payable (2)	5,250.0		5,475.3

⁽¹⁾   Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums is $5.1 million at June 30, 2018, and $5.9 million at December 31, 2017. Also excludes deferred financing costs of $209,000 at June 30, 2018 and $236,000 at December 31, 2017.

⁽²⁾   Excludes non-cash original issuance premiums and discounts recorded on notes payable. The unamortized balance of the net original issuance premiums is $11.1 million at June 30, 2018, and $14.3 million at December 31, 2017. Also excludes deferred financing costs of $36.2 million at June 30, 2018 and $34.1 million at December 31, 2017.

The estimated fair values of our notes receivable issued in connection with property sales and our mortgages 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 notes receivable and mortgages payable is categorized as level three on the three-level valuation hierarchy.

The estimated fair values of our senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values, related to our notes and bonds payable, is categorized as level two on the three-level valuation hierarchy.

We record interest rate swaps on the consolidated balance sheet at fair value. At June 30, 2018, interest rate swaps in a liability position valued at $214,000 were included in accounts payable and accrued expenses and interest rate swaps in an asset position valued at $4.3 million were included in other assets, net on the consolidated balance sheet.  The fair value of our interest rate swaps are based on valuation techniques including discounted cash flow analysis on the expected cash flows of each swap, using both observable and unobservable market-based inputs, including interest rate curves.  Because this methodology uses observable and unobservable inputs, and the unobservable inputs are not significant to the fair value measurement, the measurement of interest rate swaps is categorized as level two on the three-level valuation hierarchy.

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Gain on Sales of Real Estate

6 Months Ended

Jun. 30, 2018

Gain (Loss) on Sale of Investments [Abstract]

Gain on Sales of Real Estate

Gain on Sales of Real Estate

During the second quarter of 2018, we sold 26 properties for $33.7 million, which resulted in a gain of $7.8 million. During the second quarter of 2017, we sold 15 properties for $12.8 million, which resulted in a gain of $2.8 million.

During the first six months of 2018, we sold 40 properties for $47.5 million, which resulted in a gain of $11.0 million. During the first six months of 2017, we sold 29 properties for $44.0 million, which resulted in a gain of $13.4 million.

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Impairments

6 Months Ended

Jun. 30, 2018

Asset Impairment Charges [Abstract]

Impairments

Impairments

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A provision is made for impairment 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. Key factors that we utilize in this analysis include projected rental rates, estimated holding periods, historical sales and releases, capital expenditures and property sales capitalization rates. If a property is classified as held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell, and depreciation of the property ceases.

During the second quarter of 2018, we recorded total provisions for impairment of $4.0 million on eight properties classified as held for sale, one property classified as held for investment, and nine sold properties. For the first six months of 2018, we recorded total provisions for impairment of $18.2 million on nine properties classified as held for sale, two property classified as held for investment, and 14 sold properties.

In comparison, for the second quarter of 2017, we recorded total provisions for impairment of $2.3 million on one property classified as held for investment and nine sold properties. For the first six months of 2017, we recorded total provisions for impairment of $7.7 million on four properties classified as held for investment and 14 sold properties.

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Distributions Paid and Payable

6 Months Ended

Jun. 30, 2018

Dividends [Abstract]

Distributions Paid and Payable

Distributions Paid and Payable

A.    Common Stock

We pay monthly distributions to our common stockholders.  The following is a summary of monthly distributions paid per common share for the first six months of 2018 and 2017:

Month	2018		2017
January	$	0.2125	$	0.2025
February	0.2190		0.2105
March	0.2190		0.2105
April	0.2195		0.2110
May	0.2195		0.2110
June	0.2195		0.2110
Total	$	1.3090	$	1.2565

At June 30, 2018, a distribution of $0.22 per common share was payable and was paid in July 2018.

B.    Class F Preferred Stock

In April 2017, we redeemed all 16,350,000 shares of our Class F preferred stock. During the first six months of 2017, we paid three monthly dividends to holders of our Class F preferred stock totaling $0.414063 per share, or $3.9 million. In April 2017, we paid a final monthly dividend of $0.101215 per share, or $1.7 million, which was recorded as interest expense, since these dividends accrued subsequent to the March 2017 notice of redemption.

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Net Income per Common Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share Reconciliation [Abstract]

Net Income per Common Share

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 June 30,		Six months ended June 30,
	2018	2017	2018	2017
Weighted average shares used for the basic net income per share computation	284,928,969	272,588,332	284,469,689	268,024,691
Incremental shares from share-based compensation	126,265	194,133	137,625	228,142
Weighted average partnership common units convertible to common shares that were dilutive	317,022	317,022	317,022	317,022
Weighted average shares used for diluted net income per share computation	285,372,256	273,099,487	284,924,336	268,569,855
Unvested shares from share-based compensation that were anti-dilutive	237,861	44,191	164,111	32,016
Weighted average partnership common units convertible to common shares that were anti-dilutive	359,980	88,182	207,948	88,182

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Supplemental Disclosures of Cash Flow Information

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Information [Abstract]

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Cash Flow Information

Cash paid for interest was $111.9 million in the first six months of 2018 and $107.3 million in the first six months of 2017.

Interest capitalized to properties under development was $130,000 in the first six months of 2018 and $272,000 in the first six months of 2017.

Cash paid for income taxes was $2.9 million in the first six months of 2018 and $3.3 million in the first six months of 2017.

The following non-cash activities are included in the accompanying consolidated financial statements:

A. During the first six months of 2018, we issued 373,797 common partnership units of Realty Income, L.P. as partial consideration for an acquisition of properties, totaling $18.8 million.

B. During the first six months of 2018, we completed the acquisition of a property using $7.5 million in funds that were held in a non-refundable escrow account. These funds were included in other assets, net, at December 31, 2017.

C. During the first six months of 2017, we removed the net book value of two damaged buildings from our consolidated balance sheet, and recorded net receivables of $10.7 million. During 2017, we received the insurance proceeds for these properties.

Per the requirements of ASU 2016-18 (Topic 230, Statement of Cash Flows), 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:

	June 30, 2018		June 30, 2017
Cash and cash equivalents shown in the consolidated balance sheets	$	30,717	$	10,945
Restricted escrow deposits (1)	7,054		8,550
Impounds related to mortgages payable (1)	7,029		2,916
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	44,800	$	22,411

 ⁽¹⁾  Included within other assets, net on the consolidated balance sheets (see note 3). These amounts consist of cash we are legally entitled to that is not immediately available to us. As a result, they were considered restricted as of the dates presented.

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Segment Information

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Information

Segment Information

We evaluate performance and make resource allocation decisions on an industry by industry basis. For financial reporting purposes, we have grouped our tenants into 48 activity segments. All of the properties are incorporated into one of the applicable segments. Because almost all of our leases require the tenant to pay operating expenses, rental revenue is the only component of segment profit and loss we measure.

The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants (dollars in thousands):

Assets, as of:	June 30, 2018		December 31, 2017
Segment net real estate:
Apparel	$	161,920	$	164,919
Automotive service	209,964		213,156
Automotive tire services	243,271		247,557
Beverages	287,032		289,170
Child care	60,058		61,527
Convenience stores	1,397,354		997,170
Dollar stores	1,101,066		1,105,097
Drug stores	1,511,955		1,518,443
Financial services	428,731		384,867
General merchandise	318,584		313,181
Grocery stores	773,501		793,286
Health and fitness	886,585		896,430
Home improvement	428,730		407,002
Motor vehicle dealerships	201,073		204,651
Restaurants-casual dining	475,028		494,977
Restaurants-quick service	803,886		681,763
Theaters	561,477		566,585
Transportation services	766,883		776,068
Wholesale club	420,048		426,551
Other non-reportable segments	2,192,896		2,134,099
Total segment net real estate	13,230,042		12,676,499
Intangible assets:
Apparel	34,641		36,600
Automotive service	62,664		64,388
Automotive tire services	9,520		10,383
Beverages	1,894		2,022
Convenience stores	95,392		45,445
Dollar stores	47,357		47,905
Drug stores	171,741		173,893
Financial services	22,563		24,867
General merchandise	45,893		50,184
Grocery stores	144,239		140,780
Health and fitness	74,992		76,276
Home improvement	61,666		61,045
Motor vehicle dealerships	29,937		31,720
Restaurants-casual dining	19,100		20,079
Restaurants-quick service	62,303		51,711
Theaters	25,555		26,448
Transportation services	80,111		87,162
Wholesale club	28,040		29,596
Other non-reportable segments	210,972		214,426
Goodwill:
Automotive service	437		437
Automotive tire services	862		862
Child care	4,899		4,924
Convenience stores	2,002		2,004
Restaurants-casual dining	2,047		2,062
Restaurants-quick service	1,057		1,064
Other non-reportable segments	3,598		3,617
Other corporate assets	200,550		171,767
Total assets	$	14,674,074	$	14,058,166

	Three months ended June 30,				Six months ended June 30,
Revenue	2018		2017		2018		2017
Segment rental revenue:
Apparel	$	4,210	$	4,928	$	8,541	$	9,895
Automotive service	7,021		6,298		14,030		11,841
Automotive tire services	7,708		7,616		15,147		14,775
Beverages	7,836		7,758		15,673		15,516
Child care	5,216		4,845		10,916		10,332
Convenience stores	34,008		26,965		61,869		55,268
Dollar stores	23,237		22,757		46,487		45,508
Drug stores	32,436		31,614		64,775		63,245
Financial services	6,890		7,159		13,891		14,318
General merchandise	7,290		5,395		14,159		10,756
Grocery stores	15,673		13,597		31,338		23,759
Health and fitness	23,614		21,789		47,057		43,394
Home improvement	9,339		7,090		18,583		14,010
Motor vehicle dealerships	5,712		5,755		12,948		12,491
Restaurants-casual dining	11,029		10,716		21,989		21,606
Restaurants-quick service	17,083		14,517		33,362		28,853
Theaters	17,565		13,114		35,335		26,458
Transportation services	15,762		15,633		31,548		31,021
Wholesale club	9,341		9,413		18,873		18,827
Other non-reportable segments	52,900		51,090		103,897		101,997
Total rental revenue	313,870		288,049		620,418		573,870
Tenant reimbursements	11,395		11,756		22,695		22,985
Other revenue	3,621		365		4,068		1,340
Total revenue	$	328,886	$	300,170	$	647,181	$	598,195

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Common Stock Incentive Plan

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Common Stock Incentive Plan

Common Stock Incentive Plan

In 2012, our Board of Directors adopted and stockholders approved the Realty Income Corporation 2012 Incentive Award Plan, or the 2012 Plan, to enable us to motivate, attract and retain the services of directors and employees considered essential to our long-term success. The 2012 Plan offers our directors and employees an opportunity to own our stock or rights that will reflect our growth, development and financial success. Under the terms of the 2012 plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 3,985,734 shares. The 2012 Plan has a term of ten years from the date it was adopted by our Board of Directors.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income was $5.0 million during the second quarter of 2018, $4.5 million during the second quarter of 2017, $8.7 million during the first six months of 2018 and $7.2 million during the first six months of 2017.

A.    Restricted Stock

During the first six months of 2018, we granted 137,000 shares of common stock under the 2012 Plan. This included an annual grant of 28,000 shares of common stock to the independent members of our Board of Directors in May 2018, 20,000 of which shares vested immediately, 4,000 shares of which vest in equal parts over a three-year service period, and 4,000 shares of which vest in equal parts over a two-year service period. With the exception of shares granted to our independent directors, shares granted to employees typically vest in equal parts over a four-year or five-year service period.

As of June 30, 2018, the remaining unamortized share-based compensation expense related to restricted stock totaled $18.8 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.

B.    Performance Shares and Restricted Stock Units

During the first six months of 2018, we granted 190,449 performance shares, as well as dividend equivalent rights, to our executive officers. The performance shares are earned based on our 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 first six months of 2018, we also granted 8,383 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 June 30, 2018, the remaining share-based compensation expense related to the performance shares and restricted stock units totaled $15.8 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 restricted stock units are being recognized on a straight-line basis over the service period.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 June 30, 2018, we had commitments of $15.9 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of June 30, 2018, we had committed $14.3 million under construction contracts, which is expected to be paid in the next twelve months.

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

In July 2018, we declared a dividend of $0.22 per share to our common stockholders, which will be paid in August 2018.

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Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Principles of Consolidation

A.  The accompanying consolidated financial statements include the accounts of Realty Income and other subsidiaries for which we make operating and financial decisions (i.e., control), after elimination of all material intercompany balances and transactions.  We consolidate entities that we control and record a noncontrolling interest for the portion that we do not own.  Noncontrolling interest that was created or assumed as part of a business combination was recognized at fair value as of the date of the transaction (see note 10).  We have no unconsolidated investments.

Federal Income Taxes

B.  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 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. The income taxes recorded on our consolidated statements of income represent amounts paid by Realty Income and its subsidiaries for city and state income and franchise taxes.

Goodwill

C.  We assign a portion of goodwill to our applicable property sales, which results in a reduction of the carrying amount of our goodwill. In order to allocate goodwill to the carrying amount of properties that we sell, we utilize a relative fair value approach based on the original methodology for assigning goodwill.  As we sell properties, our goodwill will likely continue to gradually decrease over time.

Recent Accounting Pronouncements

D.  In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers. This ASU, as amended by ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers, and will apply to transactions such as the sale of real estate. This ASU, which is effective for interim and annual periods beginning after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also to provide certain additional disclosures. We adopted this standard effective as of January 1, 2018 and utilized the cumulative effect transition method of adoption. The adoption of this guidance did not have a material impact on our financial position or results of operations.

E.  In February 2016, FASB issued ASU 2016-02 (Topic 842, Leases), as clarified and amended by ASU 2018-01, which amended Topic 840, Leases. Under this amended topic, the accounting applied by a lessor is largely unchanged from that applied under Topic 840, Leases. The large majority of operating leases should remain classified as operating leases, and lessors should continue to recognize lease income for those leases on a generally straight-line basis over the lease term. Although primarily a lessor, we are also a lessee under several ground lease arrangements. Upon adoption, we will recognize lease obligations for ground leases with a corresponding right of use asset, and are currently evaluating other impacts this amendment may have on our consolidated financial statements. The amendments included in this topic are effective, for interim and annual periods beginning after December 15, 2018. We plan to adopt this standard when it becomes effective beginning January 1, 2019, and we expect to elect the practical expedients available for implementation under the standard.

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Supplemental Detail for Certain Components of Consolidated Balance Sheets (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure Text Block Supplement [Abstract]

Schedule of acquired lease intangible assets, net

A.	Acquired lease intangible assets, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired in-place leases	$	1,301,834		$	1,272,897
	Accumulated amortization of acquired in-place leases	(495,883		)	(444,221		)
	Acquired above-market leases	562,801			487,933
	Accumulated amortization of acquired above-market leases	(140,172		)	(121,679		)
		$	1,228,580		$	1,194,930

Schedule of other assets, net

B.	Other assets, net, consist of the following at:	June 30, 2018		December 31, 2017
	Prepaid expenses	$	15,821	$	12,851
	Restricted escrow deposits	7,054		679
	Impounds related to mortgages payable	7,029		4,565
	Corporate assets, net	5,926		6,074
	Receivable for property rebuilds	3,244		3,919
	Credit facility origination costs, net	2,911		4,366
	Non-refundable escrow deposits for pending acquisitions	—		7,500
	Notes receivable issued in connection with property sales	—		5,267
	Other items	1,722		115
		$	43,707	$	45,336

Schedule of distributions payable

C.	Distributions payable consist of the following declared distributions at:	June 30, 2018		December 31, 2017
	Common stock distributions	$	64,241	$	60,713
	Noncontrolling interests distributions	158		86
		$	64,399	$	60,799

Schedule of accounts payable and accrued expenses

D.	Accounts payable and accrued expenses consist of the following at:	June 30, 2018		December 31, 2017
	Notes payable - interest payable	$	75,861	$	64,058
	Property taxes payable	18,200		11,718
	Mortgages, term loans, credit line - interest payable and interest rate swaps	3,356		2,360
	Accrued costs on properties under development	3,149		2,681
	Other items	21,813		28,706
		$	122,379	$	109,523

Schedule of acquired lease intangible liabilities, net

E.	Acquired lease intangible liabilities, net, consist of the following at:	June 30, 2018			December 31, 2017
	Acquired below-market leases	$	394,253		$	340,906
	Accumulated amortization of acquired below-market leases	(83,210		)	(72,110		)
		$	311,043		$	268,796

Schedule of other liabilities

F.	Other liabilities consist of the following at:	June 30, 2018		December 31, 2017
	Rent received in advance and other deferred revenue	$	111,814	$	105,284
	Security deposits	6,287		6,259
	Capital lease obligations	5,481		5,326
		$	123,582	$	116,869

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Investments in Real Estate (Tables)

6 Months Ended

Jun. 30, 2018

Real Estate Investments, Net [Abstract]

Schedule of future impact related to amortization of above-market, below-market and in-place lease intangibles

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the acquired above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at June 30, 2018 (in thousands):

	Net decrease to rental revenue			Increase to amortization expense
2018	$	(7,856	)	$	53,176
2019	(15,108		)	97,639
2020	(14,378		)	91,887
2021	(13,208		)	83,903
2022	(13,074		)	71,978
Thereafter	(47,962		)	407,368
Totals	$	(111,586	)	$	805,951

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Mortgages Payable (Tables) - Mortgages Payable

6 Months Ended

Jun. 30, 2018

Debt

Summary of Mortgages Payable

The following is a summary of all our mortgages payable as of June 30, 2018 and December 31, 2017, 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
6/30/2018	61	5.1	%	4.5	%	3.6	$	306,836	$	4,872	$	311,708
12/31/2017	62	5.0	%	4.4	%	4.0	$	320,283	$	5,658	$	325,941

⁽¹⁾ At June 30, 2018, there were 27 mortgages on 61 properties. At December 31, 2017, there were 28 mortgages on 62 properties. The mortgages require monthly payments with principal payments due at maturity. The mortgages are at fixed interest rates, except for three mortgages on three properties totaling $29.6 million and $29.9 million at June 30, 2018 and December 31, 2017, respectively. After factoring in arrangements which limit our exposure to interest rate risk and effectively fix our per annum interest rates, our mortgage debt subject to variable rates totals $22.2 million at June 30, 2018 and $22.4 million at December 31, 2017.

⁽²⁾ Stated interest rates ranged from 3.8% to 6.9% at June 30, 2018, while stated interest rates ranged from 3.4% to 6.9% at December 31, 2017.

⁽³⁾ Effective interest rates ranged from 2.0% to 6.0% at June 30, 2018, while effective interest rates ranged from 2.6% to 5.5% at December 31, 2017.

Schedule of maturity of mortgages payable

The following table summarizes the maturity of mortgages payable, excluding net premiums of $5.1 million and deferred financing costs of $209,000, as of June 30, 2018 (dollars in millions):

Year of Maturity	Principal
2018	$	8.5
2019	20.7
2020	82.4
2021	66.9
2022	109.7
Thereafter	18.6
Totals	$	306.8

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Notes Payable (Tables) - Notes Payable

6 Months Ended

Jun. 30, 2018

Debt

Schedule of Notes Payable

Our senior unsecured notes and bonds consist of the following, sorted by maturity date (dollars in millions):

	June 30, 2018			December 31, 2017
2.000% notes, issued in October 2012 and due in January 2018	$	—		$	350
5.750% notes, issued in June 2010 and due in January 2021	250			250
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022	950			950
4.650% notes, issued in July 2013 and due in August 2023	750			750
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			—
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	650			650
3.000% notes, issued in October 2016 and due in January 2027	600			600
3.650% notes, issued in December 2017 and due in January 2028	550			550
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	250			250
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	550			550
Total principal amount	5,400			5,250
Unamortized net original issuance premiums and deferred financing costs	(25		)	(20		)
	$	5,375		$	5,230

Schedule of maturity of debt, net

The following table summarizes the maturity of our notes and bonds payable as of June 30, 2018, excluding net unamortized original issuance premiums and deferred financing costs (dollars in millions):

Year of Maturity	Principal
2021	$	250
2022	950
Thereafter	4,200
Totals	$	5,400

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Noncontrolling Interests (Tables)

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Schedule of the change in the carrying value of all noncontrolling interests

The following table represents the change in the carrying value of all noncontrolling interests through June 30, 2018 (dollars in thousands):

	Tau Operating Partnership units(1)			Realty Income, L.P. units(2)			Other Noncontrolling Interests			Total
Carrying value at December 31, 2017	$	13,322		$	2,160		$	3,725		$	19,207
Reallocation of equity	572			(43		)	(37		)	492
Redemptions	—			(1,468		)	—			(1,468		)
Shares issued in conjunction with acquisition	—			18,848						18,848
Distributions	(417		)	(336		)	(76		)	(829		)
Allocation of net income	173			257			39			469
Carrying value at June 30, 2018	$	13,650		$	19,418		$	3,651		$	36,719

⁽¹⁾ 317,022 Tau Operating Partnership units were issued on January 22, 2013 and remained outstanding as of June 30, 2018 and December 31, 2017.

⁽²⁾ 534,546 Realty Income, L.P. units were issued on June 27, 2013, 242,007 units were issued on March 30, 2018 and 131,790 units were issued on April 30, 2018. 401,979 and 88,182 remained outstanding as of June 30, 2018 and December 31, 2017, respectively.

Summary selected financial data of consolidated VIEs

Below is a summary of selected financial data of consolidated VIEs, for which we are the primary beneficiary included in the consolidated balance sheets at June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018		December 31, 2017
Net real estate	$	2,961,127	$	2,936,397
Total assets	3,348,144		3,342,443
Total debt	198,332		210,384
Total liabilities	330,757		313,295

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of fair value by balance sheet groupings

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our notes receivable issued in connection with property sales, mortgages payable and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):

At June 30, 2018	Carrying value		Estimated fair value
Mortgages payable assumed in connection with acquisitions (1)	$	306.8	$	314.4
Notes and bonds payable (2)	5,400.0		5,391.9

At December 31, 2017	Carrying value		Estimated fair value
Notes receivable issued in connection with property sales	$	5.3	$	5.3
Mortgages payable assumed in connection with acquisitions (1)	320.3		334.2
Notes and bonds payable (2)	5,250.0		5,475.3

⁽¹⁾   Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums is $5.1 million at June 30, 2018, and $5.9 million at December 31, 2017. Also excludes deferred financing costs of $209,000 at June 30, 2018 and $236,000 at December 31, 2017.

⁽²⁾   Excludes non-cash original issuance premiums and discounts recorded on notes payable. The unamortized balance of the net original issuance premiums is $11.1 million at June 30, 2018, and $14.3 million at December 31, 2017. Also excludes deferred financing costs of $36.2 million at June 30, 2018 and $34.1 million at December 31, 2017.

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Distributions Paid and Payable (Tables)

6 Months Ended

Jun. 30, 2018

Dividends [Abstract]

Summary of monthly distributions paid

The following is a summary of monthly distributions paid per common share for the first six months of 2018 and 2017:

Month	2018		2017
January	$	0.2125	$	0.2025
February	0.2190		0.2105
March	0.2190		0.2105
April	0.2195		0.2110
May	0.2195		0.2110
June	0.2195		0.2110
Total	$	1.3090	$	1.2565

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Net Income per Common Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share Reconciliation [Abstract]

Schedule of 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

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 June 30,		Six months ended June 30,
	2018	2017	2018	2017
Weighted average shares used for the basic net income per share computation	284,928,969	272,588,332	284,469,689	268,024,691
Incremental shares from share-based compensation	126,265	194,133	137,625	228,142
Weighted average partnership common units convertible to common shares that were dilutive	317,022	317,022	317,022	317,022
Weighted average shares used for diluted net income per share computation	285,372,256	273,099,487	284,924,336	268,569,855
Unvested shares from share-based compensation that were anti-dilutive	237,861	44,191	164,111	32,016
Weighted average partnership common units convertible to common shares that were anti-dilutive	359,980	88,182	207,948	88,182

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Supplemental Disclosures of Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Information [Abstract]

Schedule of reconciliation of cash, cash equivalents and restricted cash

Per the requirements of ASU 2016-18 (Topic 230, Statement of Cash Flows), 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:

	June 30, 2018		June 30, 2017
Cash and cash equivalents shown in the consolidated balance sheets	$	30,717	$	10,945
Restricted escrow deposits (1)	7,054		8,550
Impounds related to mortgages payable (1)	7,029		2,916
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	44,800	$	22,411

 ⁽¹⁾  Included within other assets, net on the consolidated balance sheets (see note 3). These amounts consist of cash we are legally entitled to that is not immediately available to us. As a result, they were considered restricted as of the dates presented.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Schedule of reconciliation of assets from segment to consolidated

The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants (dollars in thousands):

Assets, as of:	June 30, 2018		December 31, 2017
Segment net real estate:
Apparel	$	161,920	$	164,919
Automotive service	209,964		213,156
Automotive tire services	243,271		247,557
Beverages	287,032		289,170
Child care	60,058		61,527
Convenience stores	1,397,354		997,170
Dollar stores	1,101,066		1,105,097
Drug stores	1,511,955		1,518,443
Financial services	428,731		384,867
General merchandise	318,584		313,181
Grocery stores	773,501		793,286
Health and fitness	886,585		896,430
Home improvement	428,730		407,002
Motor vehicle dealerships	201,073		204,651
Restaurants-casual dining	475,028		494,977
Restaurants-quick service	803,886		681,763
Theaters	561,477		566,585
Transportation services	766,883		776,068
Wholesale club	420,048		426,551
Other non-reportable segments	2,192,896		2,134,099
Total segment net real estate	13,230,042		12,676,499
Intangible assets:
Apparel	34,641		36,600
Automotive service	62,664		64,388
Automotive tire services	9,520		10,383
Beverages	1,894		2,022
Convenience stores	95,392		45,445
Dollar stores	47,357		47,905
Drug stores	171,741		173,893
Financial services	22,563		24,867
General merchandise	45,893		50,184
Grocery stores	144,239		140,780
Health and fitness	74,992		76,276
Home improvement	61,666		61,045
Motor vehicle dealerships	29,937		31,720
Restaurants-casual dining	19,100		20,079
Restaurants-quick service	62,303		51,711
Theaters	25,555		26,448
Transportation services	80,111		87,162
Wholesale club	28,040		29,596
Other non-reportable segments	210,972		214,426
Goodwill:
Automotive service	437		437
Automotive tire services	862		862
Child care	4,899		4,924
Convenience stores	2,002		2,004
Restaurants-casual dining	2,047		2,062
Restaurants-quick service	1,057		1,064
Other non-reportable segments	3,598		3,617
Other corporate assets	200,550		171,767
Total assets	$	14,674,074	$	14,058,166

Schedule of reconciliation of revenue from segments to consolidated

	Three months ended June 30,				Six months ended June 30,
Revenue	2018		2017		2018		2017
Segment rental revenue:
Apparel	$	4,210	$	4,928	$	8,541	$	9,895
Automotive service	7,021		6,298		14,030		11,841
Automotive tire services	7,708		7,616		15,147		14,775
Beverages	7,836		7,758		15,673		15,516
Child care	5,216		4,845		10,916		10,332
Convenience stores	34,008		26,965		61,869		55,268
Dollar stores	23,237		22,757		46,487		45,508
Drug stores	32,436		31,614		64,775		63,245
Financial services	6,890		7,159		13,891		14,318
General merchandise	7,290		5,395		14,159		10,756
Grocery stores	15,673		13,597		31,338		23,759
Health and fitness	23,614		21,789		47,057		43,394
Home improvement	9,339		7,090		18,583		14,010
Motor vehicle dealerships	5,712		5,755		12,948		12,491
Restaurants-casual dining	11,029		10,716		21,989		21,606
Restaurants-quick service	17,083		14,517		33,362		28,853
Theaters	17,565		13,114		35,335		26,458
Transportation services	15,762		15,633		31,548		31,021
Wholesale club	9,341		9,413		18,873		18,827
Other non-reportable segments	52,900		51,090		103,897		101,997
Total rental revenue	313,870		288,049		620,418		573,870
Tenant reimbursements	11,395		11,756		22,695		22,985
Other revenue	3,621		365		4,068		1,340
Total revenue	$	328,886	$	300,170	$	647,181	$	598,195

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Management Statement (Details) ft² in Millions	Jun. 30, 2018 ft² state property
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Properties owned | property	5,483
Number of U.S. states where properties are owned | state	49
Leasable square feet | ft²	92.0

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Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements Narrative (Details) - USD ($)	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Accounting Policies [Abstract]
Impairment on goodwill	$ 0	$ 0

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Supplemental Detail for Certain Components of Consolidated Balance Sheets - Acquired Lease Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Acquired lease intangible assets, net
Acquired in-place leases	$ 1,301,834	$ 1,272,897
Accumulated amortization of acquired in-place leases	(495,883)	(444,221)
Acquired above-market leases	562,801	487,933
Accumulated amortization of acquired above-market leases	(140,172)	(121,679)
Total acquired lease intangible assets, net	$ 1,228,580	$ 1,194,930

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Supplemental Detail for Certain Components of Consolidated Balance Sheets - Other Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Other assets, net
Prepaid expenses	$ 15,821	$ 12,851
Restricted escrow deposits	7,054	679	$ 8,550
Impounds related to mortgages payable	7,029	4,565	$ 2,916
Corporate assets, net	5,926	6,074
Receivable for property rebuilds	3,244	3,919
Credit facility origination costs, net	2,911	4,366
Non-refundable escrow deposits for pending acquisitions	0	7,500
Notes receivable issued in connection with property sales	0	5,267
Other items	1,722	115
Total other assets, net	$ 43,707	$ 45,336

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Supplemental Detail for Certain Components of Consolidated Balance Sheets - Distributions Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Distributions payable
Distributions payable	$ 64,399	$ 60,799
Noncontrolling interests
Distributions payable
Distributions payable	158	86
Common stock
Distributions payable
Distributions payable	$ 64,241	$ 60,713

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Supplemental Detail for Certain Components of Consolidated Balance Sheets - Accounts Payable, Acquired Lease Intangibles, and Other Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts payable and accrued expenses
Property taxes payable	$ 18,200	$ 11,718
Mortgages, term loans, credit line - interest payable and interest rate swaps	3,356	2,360
Accrued costs on properties under development	3,149	2,681
Other items	21,813	28,706
Total accounts payable and accrued expenses	122,379	109,523
Acquired lease intangible liabilities, net
Acquired below-market leases	394,253	340,906
Accumulated amortization of acquired below-market leases	(83,210)	(72,110)
Total acquired lease intangible liabilities, net	311,043	268,796
Other liabilities
Rent received in advance and other deferred revenue	111,814	105,284
Security deposits	6,287	6,259
Capital lease obligations	5,481	5,326
Total other liabilities	123,582	116,869
Notes Payable
Accounts payable and accrued expenses
Notes payable - interest payable	$ 75,861	$ 64,058

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Investments in Real Estate - Acquisitions (Details) $ in Thousands, ft² in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) ft²	Jun. 30, 2017 USD ($) ft²	Jun. 30, 2018 USD ($) ft² state item industry property	Jun. 30, 2017 USD ($) ft² state industry property
Investments in real estate properties
Leasable square feet | ft²	92.0		92.0
Total revenue	$ 328,886	$ 300,170	$ 647,181	$ 598,195
Net income (loss)	$ 96,697	$ 81,259	$ 180,012	170,294
Real Estate Investment
Investments in real estate properties
Number of investments in properties that caused any tenant to be 10% of more of total assets | item			0
Total revenue			$ 10,600	7,300
Net income (loss)			5,300	3,400
Real Estate Investment | New and under development or expansion
Investments in real estate properties
Value of properties acquired during the period			$ 856,800	$ 691,900
Number of properties acquired during the period | property			358	126
Initial weighted average contractual lease rate of properties acquired (as a percent)			6.30%	6.30%
Number of states in which properties are located | state			32	30
Leasable square feet | ft²	2.8	3.4	2.8	3.4
Leased area (as a percent)	100.00%	100.00%	100.00%	100.00%
Weighted average lease term			13 years 10 months 2 days	14 years 9 months 7 days
Allocated to Land			$ 314,400	$ 170,100
Allocated to Buildings and Improvements			476,000	395,500
Allocated to Intangible Assets related to Leases			90,600	130,000
Allocated to Intangible Liabilities related to Leases and Other Assumed Liabilities			24,200	3,700
Contingent consideration associated with acquisition	$ 0	$ 0	$ 0	$ 0
Real Estate Investment | New properties | Retail
Investments in real estate properties
Number of industries in which tenants operate | industry			17	20
Property type-percentage of properties acquired			93.70%	95.10%
Real Estate Investment | New properties | Industrial
Investments in real estate properties
Property type-percentage of properties acquired			6.30%	4.90%
Real Estate Investment | Properties under development
Investments in real estate properties
Value of properties acquired during the period			$ 64,300	$ 9,900
Number of properties acquired during the period | property			10	12
Initial weighted average contractual lease rate of properties acquired (as a percent)			6.70%	7.90%
Real Estate Investment | Maximum
Investments in real estate properties
Investments to any one tenant as a percentage of total assets			10.00%

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Investments in Real Estate - Investments in Existing Properties (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Real Estate Investments, Net [Abstract]
Capitalized costs on existing properties	$ 5,600	$ 6,800
Re-leasing costs	2,500	759
Recurring capital expenditures	147	365
Nonrecurring building improvements	$ 3,000	$ 5,700

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Investments in Real Estate - Properties with Existing Leases (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2018 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($) item property
Net decrease to rental revenue
2018		$ (7,856)
2019		(15,108)
2020		(14,378)
2021		(13,208)
2022		(13,074)
Thereafter		(47,962)
Totals		(111,586)
Increase to amortization expense
2018		53,176
2019		97,639
2020		91,887
2021		83,903
2022		71,978
Thereafter		407,368
Totals		805,951
In-Place Leases
Investments in real estate properties
Depreciation and amortization expense	$ 53,100		$ 51,200
Rental Revenue
Investments in real estate properties
Amortization of above and below Market Leases	7,900		6,500
Real Estate Investment | New and under development or expansion
Investments in real estate properties
Value of properties acquired during the period		$ 856,800	$ 691,900
Number of properties acquired during the period | property		358	126
Initial weighted average contractual lease rate of properties acquired (as a percent)		6.30%	6.30%
Real Estate Investment | New and under development or expansion | In-Place Leases
Investments in real estate properties
Value of properties acquired during the period	$ 225,800		$ 536,200
Number of properties acquired during the period	107		60
Real Estate Investment | Properties under development
Investments in real estate properties
Value of properties acquired during the period		$ 64,300	$ 9,900
Number of properties acquired during the period | property		10	12
Initial weighted average contractual lease rate of properties acquired (as a percent)		6.70%	7.90%

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Credit Facility (Details)	6 Months Ended
	Jun. 30, 2018 USD ($) extension	Jun. 30, 2017	Dec. 31, 2017 USD ($)
Credit facility
Credit facility origination costs, net	$ 2,911,000		$ 4,366,000
Outstanding balance	$ 534,000,000		$ 110,000,000
Weighted average interest rate	2.90%		4.50%
Credit Facility
Credit facility
Commitment fee (as a percent)	0.125%
Current borrowing capacity	$ 1,500,000,000
Outstanding balance	$ 534,000,000		$ 110,000,000
Weighted average borrowing rate during the period (as a percent)	2.70%	1.80%
Credit Facility | Other assets, net
Credit facility
Credit facility origination costs, net	$ 2,900,000
Credit Facility | Unsecured debt
Credit facility
Maximum borrowing capacity	$ 2,000,000,000
Number of extensions | extension	2
Term of extension option	6 months
Accordion expansion option	$ 1,000,000,000
Credit Facility | LIBOR
Credit facility
Basis spread on variable rate (as a percent)	0.85%
All-in drawn variable interest rate (as a percent)	0.975%
Variable reference rate	LIBOR

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Term Loans (Details)	1 Months Ended			6 Months Ended
	Jan. 31, 2018 item	Jun. 30, 2015 USD ($)	Jan. 31, 2013 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Promissory Note | $125.9 million promissory note
Debt
Face amount of loans					$ 125,900,000
Stated interest rate (as a percent)					1.52%
Senior Unsecured Term Loans
Debt
Deferred finance costs				$ 469,000	$ 580,000
Senior Unsecured Term Loans | $250 million senior unsecured term loan
Debt
Face amount of loans		$ 250,000,000
Variable reference rate		one-month LIBOR
Basis spread on variable rate (as a percent)		0.90%
Deferred financing costs incurred				1,200,000
Senior Unsecured Term Loans | Interest rate swaps | $250 million senior unsecured term loan
Debt
Effective yield (as a percent)		2.62%
Senior Unsecured Term Loans | ARCT | $70 million senior unsecured term loan
Debt
Face amount of loans			$ 70,000,000
Variable reference rate	one-month LIBOR		one-month LIBOR
Basis spread on variable rate (as a percent)	0.90%		1.10%
Number of additional optional extensions | item	2
Loan extension period	6 months
Deferred financing costs incurred				$ 368,000
Senior Unsecured Term Loans | ARCT | Interest rate swaps | $70 million senior unsecured term loan
Debt
Effective yield (as a percent)			2.05%

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Mortgages Payable (Details) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($) loan property	Jun. 30, 2017 USD ($) loan	Dec. 31, 2017 USD ($) loan property	Mar. 31, 2018 USD ($)
Debt
Weighted Average Stated Interest Rate	2.90%		4.50%
Mortgage Payable Balance	$ 311,708		$ 325,941
Mortgages Payable
Debt
Amount repaid	$ 13,400	$ 86,500
Number of assumed mortgages refinanced | loan	0	0
Remaining balance of deferred financing costs at period end	$ 209		$ 236	$ 209
Number of Properties | property	61		62
Weighted Average Stated Interest Rate	5.10%		5.00%
Weighted Average Effective Interest Rate (as a percent)	4.50%		4.40%
Weighted Average Remaining Years Until Maturity	3 years 7 months 6 days		4 years
Remaining Principal Balance	$ 306,836		$ 320,283
Unamortized Premium and Deferred Finance Costs Balance, net	4,872		5,658
Mortgage Payable Balance	$ 311,708		$ 325,941
Number of mortgages | loan	27		28
Number of properties with mortgages | property	61		62
Mortgages Payable | Minimum
Debt
Weighted Average Effective Interest Rate (as a percent)	2.00%		2.60%
Stated interest rate (as a percent)	3.80%		3.40%
Mortgages Payable | Maximum
Debt
Weighted Average Effective Interest Rate (as a percent)	6.00%		5.50%
Stated interest rate (as a percent)	6.90%		6.90%
Mortgages Payable | Mortgages repaid in full
Debt
Amount repaid	$ 11,000	$ 82,900
Number of mortgages repaid | loan	1	5
Mortgages Payable | Variable rate mortgages
Debt
Remaining Principal Balance	$ 29,600		$ 29,900
Number of mortgages | loan	3		3
Number of properties with mortgages | property	3		3
Mortgages Payable | Variable rate mortgages after interest rate arrangements
Debt
Remaining Principal Balance	$ 22,200		$ 22,400

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Mortgages Payable - Maturities (Details) - Mortgages Payable - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Debt
Unamortized premium balance	$ 5,100
Remaining balance of deferred financing costs at period end	209	$ 209	$ 236
Maturity of mortgages payable, excluding net premiums
2018	8,500
2019	20,700
2020	82,400
2021	66,900
2022	109,700
Thereafter	18,600
Totals	$ 306,800

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Notes Payable - General (Details) - USD ($) $ in Thousands	1 Months Ended
	Apr. 30, 2018	Dec. 31, 2017	Mar. 31, 2017	Sep. 30, 2014	Oct. 31, 2012	Jun. 30, 2011	Mar. 31, 2005	Jun. 30, 2018	Jan. 31, 2018
Debt
Notes payable, net		$ 5,230,244						$ 5,374,963
Notes Payable
Debt
Notes payable, gross		5,250,000						5,400,000
Unamortized net original issuance premiums and deferred financing costs		(20,000)						(25,000)
Notes payable, net		$ 5,230,000						5,375,000
Issuance of Debt	$ 500,000
2.000% notes, issued in October 2012 and due in January 2018 | Notes Payable
Debt
Stated interest rate (as a percent)		2.00%							2.00%
Notes payable, gross		$ 350,000						$ 0
5.750% notes, issued in June 2010 and due in January 2021 | Notes Payable
Debt
Stated interest rate (as a percent)		5.75%						5.75%
Notes payable, gross		$ 250,000						$ 250,000
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022 | Notes Payable
Debt
Stated interest rate (as a percent)		3.25%						3.25%
Notes payable, gross		$ 950,000						$ 950,000
3.250% notes, issued in October 2012 and due in October 2022 | Notes Payable
Debt
Issuance of Debt					$ 450,000
3.250% notes, issued in December 2017 and due in October 2022 | Notes Payable
Debt
Issuance of Debt		$ 500,000
4.650% notes, issued in July 2013 and due in August 2023 | Notes Payable
Debt
Stated interest rate (as a percent)		4.65%						4.65%
Notes payable, gross		$ 750,000						$ 750,000
3.875% notes, issued in June 2014 and due in July 2024 | Notes Payable
Debt
Stated interest rate (as a percent)		3.875%						3.875%
Notes payable, gross		$ 350,000						$ 350,000
3.875% notes, issued in April 2018 and due in April 2025 | Notes Payable
Debt
Stated interest rate (as a percent)		3.875%						3.875%
Notes payable, gross		$ 0						$ 500,000
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026 | Notes Payable
Debt
Stated interest rate (as a percent)		4.125%						4.125%
Notes payable, gross		$ 650,000						$ 650,000
4.125% notes, issued in September 2014 and due in October 2026 | Notes Payable
Debt
Issuance of Debt				$ 250,000
4.125% notes, issued in March 2017 and due in October 2026 | Notes Payable
Debt
Stated interest rate (as a percent)			4.125%
Issuance of Debt			$ 400,000
3.000% notes, issued in October 2016 and due in January 2027 | Notes Payable
Debt
Stated interest rate (as a percent)		3.00%						3.00%
Notes payable, gross		$ 600,000						$ 600,000
3.650% notes, issued in December 2017 and due in January 2028 | Notes Payable
Debt
Stated interest rate (as a percent)		3.65%						3.65%
Notes payable, gross		$ 550,000						$ 550,000
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035 | Notes Payable
Debt
Stated interest rate (as a percent)		5.875%						5.875%
Notes payable, gross		$ 250,000						$ 250,000
5.875% bonds, issued in March 2005 and due in March 2035 | Notes Payable
Debt
Issuance of Debt							$ 100,000
5.875% bonds, issued in June 2011 and due in March 2035 | Notes Payable
Debt
Issuance of Debt						$ 150,000
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047 | Notes Payable
Debt
Stated interest rate (as a percent)		4.65%						4.65%
Notes payable, gross		$ 550,000						$ 550,000
4.650% notes, issued in March 2017 and due in March 2047 | Notes Payable
Debt
Issuance of Debt			$ 300,000
4.650% notes, issued in December 2017 and due in March 2047 | Notes Payable
Debt
Issuance of Debt		$ 250,000

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Notes Payable - Maturities (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Maturity of notes and bonds payable
Weighted average interest rate	2.90%	4.50%
Notes and bonds payable
Maturity of notes and bonds payable
2021	$ 250
2022	950
Thereafter	4,200
Totals	$ 5,400
Weighted average interest rate	4.00%
Weighted average remaining years until maturity	9 years 2 months 12 days

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Notes Payable - Note Repayment (Details) - USD ($) $ in Thousands	1 Months Ended		6 Months Ended
	Apr. 30, 2018	Jan. 31, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Debt
Principal payments on notes payable			$ 350,000	$ 0
Notes Payable
Debt
Issuance of Debt	$ 500,000
Effective yield (as a percent)	3.875%
Notes Payable | 2.000% notes, issued in October 2012 and due in January 2018
Debt
Principal payments on notes payable		$ 350,000
Debt Instrument, Interest Rate, Stated Percentage		2.00%			2.00%

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Notes Payable - Note Issuances (Details) - USD ($) $ in Thousands	1 Months Ended			6 Months Ended
	Apr. 30, 2018	Mar. 31, 2017	Sep. 30, 2014	Jun. 30, 2018	Jun. 30, 2017
Debt
Proceeds from issuance of debt				$ 497,500	$ 711,812
Notes Payable
Debt
Issuance of Debt	$ 500,000
Effective yield (as a percent)	3.875%
Public offering price	99.50%
Notes Payable | 3.957% notes, issued in April 2018 and due in April 2045
Debt
Effective yield (as a percent)	3.957%
Notes Payable | Notes issued in April 2018
Debt
Proceeds from issuance of debt	$ 493,100
Notes Payable | 4.650% notes, issued in March 2017 and due in March 2047
Debt
Issuance of Debt		$ 300,000
Effective yield (as a percent)		4.65%
Public offering price		99.97%
Notes Payable | 4.125% notes, issued in March 2017 and due in October 2026
Debt
Stated interest rate (as a percent)		4.125%
Issuance of Debt		$ 400,000
Effective yield (as a percent)		3.75%
Public offering price		102.98%
Notes Payable | 4.125% notes, issued in September 2014 and due in October 2026
Debt
Issuance of Debt			$ 250,000
Notes Payable | Notes issued in March 2017
Debt
Proceeds from issuance of debt		$ 705,200

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Equity - Issuance of Common Stock (Details) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017
Issuance of Common Stock
Net proceeds from issuance of common shares		$ 0	$ 704,938
Common stock
Issuance of Common Stock
Shares issued	11,850,000
Underwriting discounts and offering costs	$ 29,800
Net proceeds from issuance of common shares	$ 704,900

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Equity - Redemption of Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Redemption of Preferred Stock
Excess of redemption value over carrying value of preferred shares subject to redemption		$ 0	$ 0	$ 0	$ 13,373
Class F Preferred Stock
Redemption of Preferred Stock
Preferred stock redeemed	16,350,000
Preferred stock, dividend rate (as a percent)	6.625%
Preferred stock, redemption price per share (in dollars per share)	$ 25
Excess of redemption value over carrying value of preferred shares subject to redemption					$ 13,400

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Equity - Dividend Reinvestment and Stock Purchase Plan (Details) - USD ($) $ in Thousands	6 Months Ended		18 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018
Dividend Reinvestment and Stock Purchase Plan
Proceeds from dividend reinvestment and stock purchase plan	$ 4,806	$ 59,649
Common stock
Dividend Reinvestment and Stock Purchase Plan
Authorized common shares to be issued	26,000,000
Number of common shares issued	93,061	1,013,412	14,156,603
Proceeds from dividend reinvestment and stock purchase plan	$ 4,800	$ 59,600	$ 666,600
Number of common shares issued under the waiver approval process		927,695
Amount raised from share issued under the waiver approval process		$ 54,700

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Equity - At-the-Market (ATM) Programs (Details) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended		31 Months Ended
	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Oct. 31, 2017	Sep. 30, 2015
At-the-market (ATM) Programs
Proceeds from At-the-Market (ATM) program		$ 297,983	$ 52,442
Common stock
At-the-market (ATM) Programs
Share issuances, net of costs (in shares)	11,850,000
At market program | Maximum | Common stock
At-the-market (ATM) Programs
Shares authorized					17,000,000	12,000,000
Common stock | At market program
At-the-market (ATM) Programs
Share issuances, net of costs (in shares)		5,575,273	935,746	19,982,802
Proceeds from At-the-Market (ATM) program		$ 298,000	$ 52,400	$ 1,100,000

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Noncontrolling Interests (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 USD ($)	Dec. 31, 2016 entity property	Apr. 30, 2018 shares	Mar. 30, 2018 shares	Dec. 31, 2017 shares	Jun. 27, 2013 shares	Jan. 31, 2013	Jan. 22, 2013 shares
Noncontrolling interests
Conversion ratio			1
Number of properties acquired | property					2
Number of joint ventures controlling interest acquired | entity					2
Change in the carrying value of all noncontrolling interests
Carrying value at beginning of the period			$ 19,207
Reallocation of equity			492
Redemptions			(1,468)
Shares issued in conjunction with acquisition			18,848
Distributions			(829)
Allocation of net income	$ 317	$ 123	469	$ 288
Carrying value at end of the period	$ 36,719		$ 36,719
Joint Venture One
Noncontrolling interests
Ownership interest (as a percent)	95.00%		95.00%
Joint Venture Two
Noncontrolling interests
Ownership interest (as a percent)	74.00%		74.00%
Tau Operating Partnership
Noncontrolling interests
Realty Income partnership units, ownership interest (as a percent)										99.40%
Change in the carrying value of all noncontrolling interests
Carrying value at beginning of the period			$ 13,322
Reallocation of equity			572
Redemptions			0
Shares issued in conjunction with acquisition			0
Distributions			(417)
Allocation of net income			173
Carrying value at end of the period	$ 13,650		$ 13,650
Number of partnership units outstanding | shares	317,022		317,022					317,022
Number of partnership units issued | shares											317,022
Realty Income, L.P.
Noncontrolling interests
Realty Income partnership units, ownership interest (as a percent)	98.40%		98.40%
Third party partnership units, ownership interest (as a percent)	1.60%		1.60%
Change in the carrying value of all noncontrolling interests
Carrying value at beginning of the period			$ 2,160
Reallocation of equity			(43)
Redemptions			(1,468)
Shares issued in conjunction with acquisition			18,848
Distributions			(336)
Allocation of net income			257
Carrying value at end of the period	$ 19,418		$ 19,418
Number of partnership units outstanding | shares	401,979		401,979					88,182
Number of partnership units issued | shares	373,797		373,797			131,790	242,007		534,546
Other Noncontrolling Interests
Change in the carrying value of all noncontrolling interests
Carrying value at beginning of the period			$ 3,725
Reallocation of equity			(37)
Redemptions			0
Distributions			(76)
Allocation of net income			39
Carrying value at end of the period	$ 3,651		$ 3,651

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Noncontrolling Interests - Variable interest entity (Details) - Variable Interest Entities, Primary Beneficiary, Aggregated Disclosure - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Variable interest entity
Net real estate	$ 2,961,127	$ 2,936,397
Total assets	3,348,144	3,342,443
Total debt	198,332	210,384
Total liabilities	$ 330,757	$ 313,295

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Level 2 | Accounts payable and accrued expenses | Interest rate swaps
Fair value of financial assets and liabilities
Fair value of derivative liabilities	$ 214
Level 2 | Other assets, net | Interest rate swaps
Fair value of financial assets and liabilities
Fair value of derivative assets	4,300
Mortgages Payable
Fair value of financial assets and liabilities
Unamortized balance of non-cash net premiums	5,100		$ 5,900
Deferred financing costs	209	$ 209	236
Notes and bonds payable
Fair value of financial assets and liabilities
Deferred financing costs	36,200		34,100
Unamortized balance of original issuance premiums	11,100		14,300
Carrying value
Fair value of financial assets and liabilities
Notes receivable issued in connection with property sales			5,300
Mortgages payable assumed in connection with acquisitions	306,800		320,300
Notes and bonds payable	5,400,000		5,250,000
Estimated fair value
Fair value of financial assets and liabilities
Notes receivable issued in connection with property sales			5,300
Mortgages payable assumed in connection with acquisitions	314,400		334,200
Notes and bonds payable	$ 5,391,900		$ 5,475,300

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Gain on Sales of Real Estate (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($) property
Gain (Loss) on Sale of Investments [Abstract]
Property Sales Count | property	26	15	40	29
Proceeds from sales of real estate	$ 33,700	$ 12,800	$ 47,526	$ 44,005
Gain on sales of properties	$ 7,800	$ 2,800	$ 11,000	$ 13,400

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Impairments (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($) property
Asset Impairment Charges [Abstract]
Total provisions for impairment | $	$ 4.0	$ 2.3	$ 18.2	$ 7.7
Number of impaired properties held-for-sale	8		9
Number of impaired properties held-for-investment	1	1	2	4
Number of impaired properties sold	9	9	14	14

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Distributions Paid and Payable - Common Stock (Details) - $ / shares	1 Months Ended												6 Months Ended
	Jun. 30, 2018	May 31, 2018	Apr. 30, 2018	Mar. 31, 2018	Feb. 28, 2018	Jan. 31, 2018	Jun. 30, 2017	May 31, 2017	Apr. 30, 2017	Mar. 31, 2017	Feb. 28, 2017	Jan. 31, 2017	Jun. 30, 2018	Jun. 30, 2017
Distributions Paid and Payable
Monthly distributions payable (in dollars per share)	$ 0.22												$ 0.22
Common stock
Distributions Paid and Payable
Total common stock dividends paid per share (in dollars per share)	$ 0.2195	$ 0.2195	$ 0.2195	$ 0.219	$ 0.219	$ 0.2125	$ 0.211	$ 0.211	$ 0.211	$ 0.2105	$ 0.2105	$ 0.2025	$ 1.309	$ 1.2565

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Distributions Paid and Payable - Preferred Stock and Realty Income, L.P. Units (Details) - Class F Preferred Stock $ / shares in Units, $ in Millions	1 Months Ended	6 Months Ended
	Apr. 30, 2017 USD ($) $ / shares shares	Jun. 30, 2017 USD ($) item $ / shares
Distributions Paid and Payable
Preferred stock redeemed | shares	16,350,000
Number of monthly distributions paid | item		3
Dividends paid per preferred share | $ / shares	$ 0.101215	$ 0.414063
Preferred stock dividends paid | $	$ 1.7	$ 3.9

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Net Income per Common Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net Income per Common Share
Weighted average shares used for the basic net income per share computation	284,928,969	272,588,332	284,469,689	268,024,691
Incremental shares from share-based compensation	126,265	194,133	137,625	228,142
Weighted average shares used for diluted net income per share computation	285,372,256	273,099,487	284,924,336	268,569,855
Unvested Shares
Net Income per Common Share
Unvested shares from share-based compensation that were anti-dilutive	237,861	44,191	164,111	32,016
Convertible Partnership Units
Net Income per Common Share
Weighted average partnership common units convertible to common shares that were dilutive	317,022	317,022	317,022	317,022
Unvested shares from share-based compensation that were anti-dilutive	359,980	88,182	207,948	88,182

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Supplemental Disclosures of Cash Flow Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 USD ($) building	Apr. 30, 2018 shares	Mar. 30, 2018 shares	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Jun. 27, 2013 shares
Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$ 111,900	$ 107,300
Cash paid for income taxes	2,900	$ 3,300
Non-cash activities
Non-refundable escrow deposits for pending acquisitions	0				$ 7,500
Number of buildings damaged | building		2
Damaged buildings insurance receivables		$ 10,700
Reconciliation of cash and cash equivalents
Cash and cash equivalents shown in the consolidated balance sheets	30,717	10,945			6,898
Restricted escrow deposits	7,054	8,550			679
Impounds related to mortgages payable	7,029	2,916			4,565
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	44,800	22,411			$ 12,142	$ 15,681
Properties under development
Supplemental Disclosures of Cash Flow Information
Interest capitalized to properties under development	$ 130	$ 272
Realty Income, L.P.
Non-cash activities
Number of partnership units issued | shares	373,797		131,790	242,007			534,546
Value of partnership units issued	$ 18,800

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Segment Information - Assets (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) segment	Dec. 31, 2017 USD ($)
Reconciliation of assets from segment to consolidated
Number of activity segments | segment	48
Net real estate	$ 13,230,042	$ 12,676,499
Goodwill	14,902	14,970
Other corporate assets	200,550	171,767
Total assets	14,674,074	14,058,166
Apparel
Reconciliation of assets from segment to consolidated
Net real estate	161,920	164,919
Intangible assets	34,641	36,600
Automotive service
Reconciliation of assets from segment to consolidated
Net real estate	209,964	213,156
Intangible assets	62,664	64,388
Goodwill	437	437
Automotive tire services
Reconciliation of assets from segment to consolidated
Net real estate	243,271	247,557
Intangible assets	9,520	10,383
Goodwill	862	862
Beverages
Reconciliation of assets from segment to consolidated
Net real estate	287,032	289,170
Intangible assets	1,894	2,022
Child care
Reconciliation of assets from segment to consolidated
Net real estate	60,058	61,527
Goodwill	4,899	4,924
Convenience stores
Reconciliation of assets from segment to consolidated
Net real estate	1,397,354	997,170
Intangible assets	95,392	45,445
Goodwill	2,002	2,004
Dollar stores
Reconciliation of assets from segment to consolidated
Net real estate	1,101,066	1,105,097
Intangible assets	47,357	47,905
Drug stores
Reconciliation of assets from segment to consolidated
Net real estate	1,511,955	1,518,443
Intangible assets	171,741	173,893
Financial services
Reconciliation of assets from segment to consolidated
Net real estate	428,731	384,867
Intangible assets	22,563	24,867
General merchandise
Reconciliation of assets from segment to consolidated
Net real estate	318,584	313,181
Intangible assets	45,893	50,184
Grocery stores
Reconciliation of assets from segment to consolidated
Net real estate	773,501	793,286
Intangible assets	144,239	140,780
Health and fitness
Reconciliation of assets from segment to consolidated
Net real estate	886,585	896,430
Intangible assets	74,992	76,276
Home improvement
Reconciliation of assets from segment to consolidated
Net real estate	428,730	407,002
Intangible assets	61,666	61,045
Motor vehicle dealerships
Reconciliation of assets from segment to consolidated
Net real estate	201,073	204,651
Intangible assets	29,937	31,720
Restaurants-casual dining
Reconciliation of assets from segment to consolidated
Net real estate	475,028	494,977
Intangible assets	19,100	20,079
Goodwill	2,047	2,062
Restaurants-quick service
Reconciliation of assets from segment to consolidated
Net real estate	803,886	681,763
Intangible assets	62,303	51,711
Goodwill	1,057	1,064
Theaters
Reconciliation of assets from segment to consolidated
Net real estate	561,477	566,585
Intangible assets	25,555	26,448
Transportation services
Reconciliation of assets from segment to consolidated
Net real estate	766,883	776,068
Intangible assets	80,111	87,162
Wholesale club
Reconciliation of assets from segment to consolidated
Net real estate	420,048	426,551
Intangible assets	28,040	29,596
Other non-reportable segments
Reconciliation of assets from segment to consolidated
Net real estate	2,192,896	2,134,099
Intangible assets	210,972	214,426
Goodwill	$ 3,598	$ 3,617

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Segment Information - Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment revenue information
Total revenue	$ 328,886	$ 300,170	$ 647,181	$ 598,195
Rental revenue
Segment revenue information
Total revenue	313,870	288,049	620,418	573,870
Tenant reimbursements
Segment revenue information
Total revenue	11,395	11,756	22,695	22,985
Other revenue
Segment revenue information
Total revenue	3,621	365	4,068	1,340
Apparel | Rental revenue
Segment revenue information
Total revenue	4,210	4,928	8,541	9,895
Automotive service | Rental revenue
Segment revenue information
Total revenue	7,021	6,298	14,030	11,841
Automotive tire services | Rental revenue
Segment revenue information
Total revenue	7,708	7,616	15,147	14,775
Beverages | Rental revenue
Segment revenue information
Total revenue	7,836	7,758	15,673	15,516
Child care | Rental revenue
Segment revenue information
Total revenue	5,216	4,845	10,916	10,332
Convenience stores | Rental revenue
Segment revenue information
Total revenue	34,008	26,965	61,869	55,268
Dollar stores | Rental revenue
Segment revenue information
Total revenue	23,237	22,757	46,487	45,508
Drug stores | Rental revenue
Segment revenue information
Total revenue	32,436	31,614	64,775	63,245
Financial services | Rental revenue
Segment revenue information
Total revenue	6,890	7,159	13,891	14,318
General merchandise | Rental revenue
Segment revenue information
Total revenue	7,290	5,395	14,159	10,756
Grocery stores | Rental revenue
Segment revenue information
Total revenue	15,673	13,597	31,338	23,759
Health and fitness | Rental revenue
Segment revenue information
Total revenue	23,614	21,789	47,057	43,394
Home improvement | Rental revenue
Segment revenue information
Total revenue	9,339	7,090	18,583	14,010
Motor vehicle dealerships | Rental revenue
Segment revenue information
Total revenue	5,712	5,755	12,948	12,491
Restaurants-casual dining | Rental revenue
Segment revenue information
Total revenue	11,029	10,716	21,989	21,606
Restaurants-quick service | Rental revenue
Segment revenue information
Total revenue	17,083	14,517	33,362	28,853
Theaters | Rental revenue
Segment revenue information
Total revenue	17,565	13,114	35,335	26,458
Transportation services | Rental revenue
Segment revenue information
Total revenue	15,762	15,633	31,548	31,021
Wholesale club | Rental revenue
Segment revenue information
Total revenue	9,341	9,413	18,873	18,827
Other non-reportable segments | Rental revenue
Segment revenue information
Total revenue	$ 52,900	$ 51,090	$ 103,897	$ 101,997

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Common Stock Incentive Plan (Details) - 2012 Plan - USD ($) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	May 31, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Common Stock Incentive Plan
Plan term from the date of adoption				10 years
General and administrative expense
Common Stock Incentive Plan
Share-based compensation costs recognized			$ 4.5	$ 18.8
Maximum
Common Stock Incentive Plan
Authorized shares		3,985,734		3,985,734
Restricted Stock
Common Stock Incentive Plan
Share-based compensation costs recognized		$ 5.0		$ 8.7	$ 7.2
Shares granted	28,000			137,000
Shares vested	20,000
Restricted Stock | Two year vesting period
Common Stock Incentive Plan
Shares vested	4,000
Vesting period	2 years
Restricted Stock | Three year vesting period
Common Stock Incentive Plan
Shares vested	4,000
Vesting period	3 years
Restricted Stock | Minimum
Common Stock Incentive Plan
Vesting period				4 years
Restricted Stock | Maximum
Common Stock Incentive Plan
Vesting period				5 years
Performance Shares and Restricted Stock Units
Common Stock Incentive Plan
Remaining unamortized share-based compensation expense		$ 15.8		$ 15.8
Performance Shares | Executive officers
Common Stock Incentive Plan
Shares granted				190,449
Performance Shares | Executive officers | Three year vesting period
Common Stock Incentive Plan
Vesting period				3 years
Awards vesting on the first and second January 1 after the end of the three year performance period (as a percent)				50.00%
Restricted Stock Units
Common Stock Incentive Plan
Shares granted				8,383
Restricted Stock Units | Four year vesting period
Common Stock Incentive Plan
Vesting period				4 years

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Commitments and Contingencies (Details) $ in Millions	Jun. 30, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Amount of commitments for re-leasing costs, recurring capital expenditures and non-recurring building improvements	$ 15.9
Amount of commitments for construction contracts, which is expected to be paid in next twelve months	$ 14.3

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Subsequent Events (Details)	1 Months Ended
	Jul. 31, 2018 $ / shares
Subsequent events | Common stock
Subsequent events
Common stock, dividends declared (in dollars per share)	$ 0.22