Document

10-K/A 1 realtyincome10k201810ka.htm 10-K/A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A

(Amendment No. 1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended

December 31, 2018

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		(IRS Employer
Incorporation or Organization)		Identification Number)

11995 El Camino Real, San Diego, California, 92130

(Address of Principal Executive Offices)

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

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



		Name of Each Exchange
Title of Each Class		On Which Registered
Common Stock, $0.01 Par Value Class F Preferred Stock, $0.01 Par Value		New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO x

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 x 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 x NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 x

At June 30, 2018, the aggregate market value of the Registrant’s shares of common stock, $0.01 par value, held by non-affiliates of the Registrant was $15.6 billion based upon the last reported sale price of $53.79 per share on the New York Stock Exchange on June 29, 2018, the last business day of the Registrant’s most recently completed second fiscal quarter. The determination of affiliate status for purposes of this calculation is not necessarily a conclusive determination for other purposes.

At February 13, 2019, the number of shares of common stock outstanding was 303,791,717.

DOCUMENTS INCORPORATED BY REFERENCE

Part III, Items 10, 11, 12, 13, and 14 incorporate by reference certain specific portions of the definitive Proxy Statement for Realty Income Corporation’s Annual Meeting to be held on May 14, 2019, to be filed pursuant to Regulation 14A. Only those portions of the proxy statement which are specifically incorporated by reference herein shall constitute a part of this annual report.

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K (this “Amended Form 10-K”) of Realty Income Corporation amends and restates in its entirety (including exhibits) our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 22, 2019 (the “Original Form 10-K”). This Amended Form 10-K is being filed solely to correct an inadvertent immaterial error, which occurred during the EDGARization process, in Schedule III of our audited financial statements contained in the Original Form 10-K, which has been revised in the Amended Form 10-K to correct this immaterial error.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amended Form 10-K also contains new certifications as required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002. Accordingly, Item 15(b) of Part IV is amended to include the currently dated certifications as exhibits.

Except as described above, no other amendments are being made to the Original Form 10-K. For ease of reference, we have elected to file the entire contents of the Original Form 10-K, except as described above, even though the error was only contained in Schedule III of our audited financial statements. This Amended Form 10-K does not reflect events occurring after the Original Form 10-K or modify or update the disclosure contained therein in any other way other than as required to reflect the amendments discussed above.

Table of Contents

REALTY INCOME CORPORATION

Index to Form 10-K



PART I			Page
	Item 1:	Business	2
		The Company	2
		Recent Developments	3
		Dividend Policy	6
		Business Philosophy and Strategy	7
		Property Portfolio Information	14
		Forward-Looking Statements	20
	Item 1A:	Risk Factors	20
	Item 1B:	Unresolved Staff Comments	31
	Item 2:	Properties	31
	Item 3:	Legal Proceedings	31
	Item 4:	Mine Safety Disclosures	31
PART II
	Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
	Item 6:	Selected Financial Data	32
	Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
		General	34
		Liquidity and Capital Resources	34
		Results of Operations	40
		Funds from Operations Available to Common Stockholders (FFO)	46
		Adjusted Funds from Operations Available to Common Stockholders (AFFO)	47
		Impact of Inflation	49
		Impact of Recent Accounting Pronouncements	49
	Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	49
	Item 8:	Financial Statements and Supplementary Data	50
	Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	80
	Item 9A:	Controls and Procedures	80
	Item 9B:	Other Information	81
PART III
	Item 10:	Directors, Executive Officers and Corporate Governance	82
	Item 11:	Executive Compensation	82
	Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
	Item 13:	Certain Relationships, Related Transactions and Director Independence	82
	Item 14:	Principal Accounting Fees and Services	82
PART IV
	Item 15:	Exhibits and Financial Statement Schedules	82
SIGNATURES			87

Table of Contents

PART I

Item 1: Business

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 50 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 December 31, 2018, we owned a diversified portfolio:


•	Of 5,797 properties;


•	With an occupancy rate of 98.6%, or 5,717 properties leased and 80 properties available for lease;


•	Leased to 262 different commercial tenants doing business in 48 separate industries;


•	Located in 49 states and Puerto Rico;


•	With over 93.3 million square feet of leasable space; and


•	With an average leasable space per property of approximately 16,110 square feet; approximately 11,260 square feet per retail property and 229,000 square feet per industrial property.

Of the 5,797 properties in the portfolio, 5,769, or 99.5%, are single-tenant properties, and the remaining are multi-tenant properties. At December 31, 2018, of the 5,769 single-tenant properties, 5,692 were leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.2 years.

Our seven senior officers owned 0.1% of our outstanding common stock with a market value of $12.2 million at January 31, 2019. Our directors and seven senior officers, as a group, owned 0.2% of our outstanding common stock with a market value of $34.9 million at January 31, 2019.

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.

In January 2019, we had 165 employees, as compared to 152 employees in January 2018.

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.

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RECENT DEVELOPMENTS

Increases in Monthly Dividends to Common Stockholders

We have continued our 50-year policy of paying monthly dividends. In addition, we increased the dividend five times during 2018 and twice during 2019. As of February 2019, we have paid 85 consecutive quarterly dividend increases and increased the dividend 100 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
5th increase	Sep 2018	Oct 2018	$	0.2205	$	0.0005

2019 Dividend increases
1st increase	Dec 2018	Jan 2019	$	0.2210	$	0.0005
2nd increase	Jan 2019	Feb 2019	$	0.2255	$	0.0045

The dividends paid per share during 2018 totaled approximately $2.6305, as compared to approximately $2.5270 during 2017, an increase of $0.1035, or 4.1%.

The monthly dividend of $0.2255 per share represents a current annualized dividend of $2.706 per share, and an annualized dividend yield of approximately 4.3% based on the last reported sale price of our common stock on the NYSE of $63.04 on December 31, 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 2018

During 2018, we invested $1.8 billion in 764 new properties and properties under development or expansion, with an initial weighted average contractual lease rate of 6.4%. The 764 new properties and properties under development or expansion are located in 39 states, will contain approximately 5.2 million leasable square feet, and are 100% leased with a weighted average lease term of 14.8 years. The tenants occupying the new properties operate in 21 industries and the property types are 96.3% retail and 3.7% industrial, based on rental revenue. During 2018, none of our real estate investments caused any one tenant to be 10% or more of our total assets at December 31, 2018.

The initial weighted average contractual lease rate for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a 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 initial weighted average contractual lease rate is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. Of the $1.8 billion we invested during 2018, $80.3 million was invested in 14 properties under development or expansion with an initial weighted average contractual lease rate of 6.9%. We may continue to pursue development or expansion opportunities under similar arrangements in the future.

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Portfolio Discussion

Leasing Results

At December 31, 2018, we had 80 properties available for lease out of 5,797 properties in our portfolio, which represents a 98.6% 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 267 lease expirations;


•	Re-leased 228 properties; and


•	Sold 42 vacant properties.

Of the 228 properties re-leased during 2018, 215 properties were re-leased to existing tenants, three were re-leased to new tenants without vacancy, and ten were re-leased to new tenants after a period of vacancy. The annual rent on these 228 leases was $46.15 million, as compared to the previous rent on these same properties of $44.66 million, which represents a rent recapture rate of 103.3% on the properties re-leased during 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 December 31, 2018, our average annualized rental revenue was approximately $14.24 per square foot on the 5,717 leased properties in our portfolio. At December 31, 2018, we classified 17 properties, with a carrying amount of $16.6 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.

Investments in Existing Properties

In 2018, we capitalized costs of $17.9 million on existing properties in our portfolio, consisting of $3.9 million for re-leasing costs, $1.1 million for recurring capital expenditures, and $12.9 million for non-recurring building improvements. In 2017, we capitalized costs of $12.7 million on existing properties in our portfolio, consisting of $1.6 million for re-leasing costs, $912,000 for recurring capital expenditures, and $10.2 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 repetitive landlord capital expenditure obligations that have a limited useful life. We define non-recurring capital expenditures as property improvements where we invest additional capital that extend the useful life of the properties.

Sumit Roy Appointed Chief Executive Officer (CEO)

On October 16, 2018, we announced that our Board of Directors had appointed Sumit Roy to the position of our CEO and to our Board of Directors. Mr. Roy, who previously served as Chief Operating Officer, succeeds John P. Case, our previous CEO. Mr. Roy continues to serve as our President.

Tau Operating Partnership Buyout and Term Loan Payoff

In January 2019, we redeemed all of the outstanding 317,022 common units of Tau Operating Partnership, L.P., which reduced our total common units outstanding to 373,797 as of January 3, 2019. Additionally, in January 2019, we paid off the outstanding balance and interest on the $70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT. Following the redemption, we hold 100% of the ownership interests of Tau Operating Partnership, L.P., and continue to consolidate the entity.

New, Expanded Credit Facility

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option. The new revolving credit facility, or our revolving credit facility, also has a $1.0 billion expansion feature. As of December 31, 2018, we had a balance of $252.0 million on our credit facility. Under our revolving credit facility, our current investment grade credit ratings provide for financing at LIBOR plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR. Our previous $2.25 billion unsecured credit facility had all-in drawn pricing of 0.975% over LIBOR.

In conjunction with our new revolving credit facility, we entered into a new $250.0 million senior unsecured term loan, which matures in March 2024. Borrowing under this term loan bears interest at the current one-month LIBOR plus 0.85%. In conjunction with this term loan, we also entered into an interest rate swap which effectively fixes our per annum interest on this term loan at 3.89%.

S&P Upgrade to A-

In August 2018, S&P Global Ratings raised our credit rating to A- with a "stable" outlook from BBB+ with a "positive" outlook.

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 2018, we raised $1.1 billion from the sale of common stock, primarily through the use of our at-the-market (ATM) programs, at a weighted average price of $58.77 per share.

Net Income Available to Common Stockholders

Net income available to common stockholders was $363.6 million in 2018, as compared to $301.5 million in 2017, an increase of $62.1 million. On a diluted per common share basis, net income was $1.26 in 2018, as compared to $1.10 in 2017, an increase of $0.16, or 14.5%.

Net income available to common stockholders in 2018 was impacted by a severance payment made to our former CEO in October 2018. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28.3 million; however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18.7 million, equivalent to $0.06 per share.

Net income and funds from operations available to common stockholders per share in 2017 were impacted by a loss of $42.4 million, or $0.15 per share, on extinguishment of debt upon the early redemption on all $550.0 million of our outstanding 6.75% notes due August 2019 during December 2017. Net income and funds from operations available to common stockholders for 2017 were also impacted by a $13.4 million non-cash redemption charge on the shares of Class F preferred stock that were redeemed in April 2017, which represented $0.05 on a diluted per common share basis. 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 and gains from the sale of properties, which can vary from period to period based on the timing and significantly impact net income available to common stockholders.

Funds from Operations Available to Common Stockholders (FFO)

Adjusted Funds from Operations Available to Common Stockholders (AFFO)

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

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and Results of Operations,” in this annual report, which includes a reconciliation of net income available to common stockholders to FFO and AFFO.

DIVIDEND POLICY

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

Distributions are paid monthly to the limited partners holding common units of Realty Income, L.P., each on a per unit basis that is generally equal to the amount paid per share to our common stockholders. Prior to the redemption of our common units of Tau Operating Partnership, L.P. in January 2019, distributions were paid monthly to the limited partners holding common units of Tau Operating Partnership, L.P., each on a per unit basis that was 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 2018, our cash distributions to common stockholders totaled $761.6 million, or approximately 133.5% of our estimated taxable income of $570.4 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 2018 totaled $761.6 million, representing 82.4% of our adjusted funds from operations available to common stockholders of $924.6 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 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 22.9% of the distributions to our common stockholders, made or deemed to have been made in 2018, were classified as a return of capital for federal income tax purposes. We estimate that in 2019, between 15% and 25% of the distributions may be classified as a return of capital.

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BUSINESS PHILOSOPHY AND STRATEGY

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 December 31, 2018, consisted of 5,797 properties located in 49 states and Puerto Rico, leased to 262 different commercial tenants doing business in 48 industries. Each of the 48 industries represented in our property portfolio accounted for no more than 12.4% of our rental revenue during either the quarter or year ended December 31, 2018.

Investment Strategy

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 our 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 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, approximately 95% of our annualized retail rental revenue at December 31, 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 industry leaders that are primarily investment grade rated

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companies. We believe these characteristics enhance the stability of the rental revenue generated from these properties.

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. We will continue to evaluate all investments consistent with our objective of owning net lease assets.

Underwriting Strategy

In order to be considered for acquisition, properties must meet stringent underwriting requirements. We have established a four-part analysis to examine 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. At December 31, 2018, our top 20 tenants represented 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.

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

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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 December 31, 2018, we classified 17 properties with a carrying amount of $16.6 million as held for sale on our balance sheet. For 2019, we intend to continue our active disposition efforts to further enhance our real estate portfolio and anticipate $75 to $100 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 2019 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%.

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, property sales, 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 December 31, 2018, our total outstanding borrowings of senior unsecured notes and bonds, term loans, mortgages payable and credit facility borrowings were $6.5 billion, or approximately 25.4% of our total market capitalization of $25.7 billion.

We define our total market capitalization at December 31, 2018 as the sum of:


•	Shares of our common stock outstanding of 303,742,090, plus total common units outstanding of 690,819, multiplied by the last reported sales price of our common stock on the NYSE of $63.04 per share on December 31, 2018, or $19.2 billion;


•	Outstanding borrowings of $252.0 million on our credit facility;


•	Outstanding mortgages payable of $298.4 million, excluding net mortgage premiums of $4.4 million and deferred financing costs of $183,000;


•	Outstanding borrowings of $570.0 million on our term loans, excluding deferred financing costs of $1.4 million; and


•	Outstanding senior unsecured notes and bonds of $5.4 billion, excluding unamortized net original issuance premiums of $10.5 million and deferred financing costs of $33.7 million.

In January 2019, we redeemed all of our outstanding 317,022 common units of Tau Operating Partnership, L.P., which reduced our total common units outstanding to 373,797 as of January 3, 2019.

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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.

Universal Shelf Registration

In November 2018, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in November 2021. 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.

Revolving Credit Facility

In October 2018, we entered into a new $3.25 billion unsecured credit facility to replace our previous $2.25 billion unsecured credit facility, of which $2.0 billion was due to expire in June 2019. This new credit facility includes a $3.0 billion unsecured revolving credit facility and a new $250.0 million unsecured term loan due March 2024. The new revolving credit facility, or our revolving credit facility, matures in March 2023 and includes two six-month extensions that can be exercised at our option. Our revolving credit facility also has a $1.0 billion expansion feature. Under our new revolving credit facility, our current investment grade credit ratings provide for financing at LIBOR plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

The borrowing rate under our revolving credit facility 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 revolving credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At December 31, 2018, we had a borrowing capacity of $2.75 billion available on our revolving credit facility and an outstanding balance of $252.0 million. The weighted average interest rate on borrowings outstanding under our revolving credit facility, at December 31, 2018, was 3.2% per annum. We must comply with various financial and other covenants in our credit facility. At December 31, 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.

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 December 31, 2018, we had cash and cash equivalents totaling $10.4 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

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Standard & Poor’s Ratings Group has assigned a rating of A- with a “stable” outlook, and Fitch Ratings has assigned a rating of BBB+ with a “stable” outlook.

Based on our ratings as of December 31, 2018, the facility interest rate was LIBOR, plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR. Our credit facility provides that the interest rate can range between: (i) LIBOR, plus 1.45% if our credit rating is lower than BBB-/Baa3 or unrated and (ii) LIBOR, plus 0.75% if our credit rating is A/A2 or higher. In addition, our credit facility provides for a facility commitment fee based on our credit ratings, which range from: (i) 0.30% for a rating lower than BBB-/Baa3 or unrated, and (ii) 0.10% for a credit rating of A/A2 or higher.

We also issue senior debt securities from time to time and our credit ratings can impact the interest rates charged in those transactions. If our credit ratings or ratings outlook change, our cost to obtain debt financing could increase or decrease. The credit ratings assigned to us could change based upon, among other things, our results of operations and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies and we cannot assure you that our ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, a rating is not a recommendation to buy, sell or hold our debt securities, preferred stock or common stock.

Term Loans

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

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 previous 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 fixes 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, until its termination in January 2018, effectively fixed our per annum interest rate on this term loan at 2.05%. In 2018, we entered into two separate six–month extensions of this loan, during which periods the interest was born at the current one–month LIBOR, plus 0.90%. In January 2019, we paid off the outstanding principal and interest on this term loan.

Mortgage Debt

As of December 31, 2018, we had $298.4 million of mortgages payable, all of which were assumed in connection with our property acquisitions. Additionally, at December 31, 2018, we had net premiums totaling $4.4 million on these mortgages and deferred financing costs of $183,000. We expect to pay off the mortgages payable as soon as prepayment penalties have declined to a level that would make it economically feasible to do so. During 2018, we made $21.9 million of principal payments, including the repayment of two mortgages in full for $17.0 million.

Notes Outstanding

As of December 31, 2018, we had $5.4 billion of senior unsecured note and bond obligations, excluding unamortized net original issuance premiums of $10.5 million and deferred financing costs of $33.7 million. All of our outstanding notes and bonds have fixed interest rates. Interest on all of our senior note and bond obligations is paid semiannually.

No Unconsolidated Investments

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

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Corporate Responsibility

Realty Income is committed to conducting our business according to the highest ethical standards. We are dedicated to providing an engaging, diverse, and safe work environment for our employees, operating our business in an environmentally conscious manner, and upholding our corporate responsibilities as a public company for the benefit of our shareholders. 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.

Environmental Practices

Our focus on the environment 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 electronic approval systems;


•	Encouraging employees to carpool to our headquarters; and


•	Recycling paper waste.

With respect to recycling and reuse practices, we encourage the use of recycled products and the recycling of materials used in our operations. Cell phones, wireless devices and office equipment are recycled or donated whenever possible. In 2018, we sent more than 28,500 pounds of paper to our offsite partner for recycling.

In addition, our headquarters was constructed 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, and drought-tolerant landscaping with recycled materials. We continue to evaluate our current operations, strive to improve our environmental performance, and implement sustainable business practices.

The properties in our portfolio are primarily net leased to our tenants who are responsible for maintaining the buildings and are in control of their energy usage and environmental sustainability practices. We work with our tenants to promote environmental responsibility at the properties we own, with some locations achieving LEED (Leadership in Energy and Environmental Design) certification.

Our Asset Management team has engaged with a renewable energy development company 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 to conserve our world’s finite resources.

Realty Income also has an internal "Green Team" that encourages our employees to focus on environmentally-smart choices to further reduce our environmental impact as a company. The Green Team, which includes executive and officer-level employees, works to positively impact the environment through education and engagement within the company and local communities, focusing on waste, energy, and water management.

Company Culture and Employees

We put great effort into cultivating an inclusive company culture. We are one team, and together we are committed to a culture that provides an engaging work environment and encourages respect, collaboration, humility, transparency, and integrity. Regular open communication is central to how we work, and our employees take pride in our 50-year history of providing monthly dividends to our stockholders. We hire talented employees with diverse backgrounds and perspectives, and work to provide an environment where capable team members have fulfilling careers in the real estate industry.

Social Responsibility

We are committed to providing a positive and engaging work environment for our employees and taking an active role in the betterment of the communities in which our employees and shareholders live and work. Our employees are awarded compensation that is in line with those of our peers and competitors, including generous healthcare benefits (medical, dental, vision) for all employees and their families, participation in a 401(k) plan with a matching contribution from Realty Income, restricted stock awards based on company performance, competitive paid time-off

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benefits, a well-being program, continued education and development opportunities, up to 16 weeks of paid parental leave, and an infant-at-work program for new parents. We also have a long-standing commitment to being an equal opportunity employer and adhere to all Equal Employer Opportunity Policy guidelines.

We believe that giving back to our community is an extension of our mission to improve the lives of our shareholders, our employees, and their families. Realty Income and its employees have taken an active role in supporting communities through civic involvement with non-profit organizations and corporate donations. Our non-profit activities resulted in approximately 810 company-sponsored employee volunteer hours in 2018, principally through our partnership with San Diego Habitat for Humanity. We are proud of the efforts we have made to date and look forward to continuing to strengthen our impact as part of the successful operations of The Monthly Dividend Company®.

Additional information on Realty Income’s commitment to social responsibility may be found on our website.

Corporate Governance

We believe that nothing is more important than a company’s reputation for integrity and serving as a responsible fiduciary for its shareholders. 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, but are not limited to:


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


•	In accordance with our continued focus on board refreshment, in July 2018, we added two new independent, non-employee directors;


•	Our Board of Directors is elected on an annual basis with a majority vote standard;


•	Our directors conduct annual self-evaluations and participate in orientation and continuing education programs;


•	An Enterprise Risk Management evaluation is conducted annually to identify and assess company risk;


•	Each committee within our Board of Directors is comprised entirely of independent directors; and


•	We adhere to all other corporate governance principles outlined in our Corporate Governance Guidelines. These guidelines, as well as our bylaws, committee charters and other governance documents may be found on our website.

Business Ethics

We are committed to conducting our business according to the highest ethical standards and upholding our corporate responsibilities as a public company operating for the benefit of our shareholders. Our Board of Directors has adopted a Code of Business Ethics that applies to our directors, officers, and other employees. The Code of Business Ethics includes our commitment to dealing fairly with all of our customers, service providers, suppliers, and competitors. We conduct an annual training with our employees regarding ethical behavior and require all employees to acknowledge the terms of, and abide by, our Code of Business Ethics, which is also available on our website. 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. Anonymous reporting is always available through the company’s whistleblower hotline and reported to our Audit Committee quarterly.

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PROPERTY PORTFOLIO INFORMATION

At December 31, 2018, we owned a diversified portfolio:


•	Of 5,797 properties;


•	With an occupancy rate of 98.6%, or 5,717 properties leased and 80 properties available for lease;


•	Leased to 262 different commercial tenants doing business in 48 separate industries;


•	Located in 49 states and Puerto Rico;


•	With over 93.3 million square feet of leasable space; and


•	With an average leasable space per property of approximately 16,110 square feet; approximately 11,260 square feet per retail property and 229,000 square feet per industrial property.

At December 31, 2018, of our 5,797 properties, 5,717 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 December 31, 2018, our 262 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 326 additional tenants, representing approximately 5% of our annualized revenue at December 31, 2018, which brings our total tenant count to 588 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 December 31, 2018		For the Years Ended
	For the Quarter Ended December 31, 2018		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
Aerospace	0.8	%	0.8	%	0.9	%	1.0	%	1.1	%	1.2	%
Apparel stores	1.2	%	1.3	%	1.6	%	1.9	%	2.0	%	2.0	%
Automotive collision services	0.9	%	0.9	%	1.0	%	1.0	%	1.0	%	0.8	%
Automotive parts	1.7	%	1.7	%	1.3	%	1.3	%	1.4	%	1.3	%
Automotive service	2.2	%	2.2	%	2.2	%	1.9	%	1.9	%	1.8	%
Automotive tire services	2.3	%	2.4	%	2.6	%	2.7	%	2.9	%	3.2	%
Beverages	2.4	%	2.5	%	2.7	%	2.6	%	2.7	%	2.8	%
Child care	1.7	%	1.7	%	1.8	%	1.9	%	2.0	%	2.2	%
Consumer appliances	0.5	%	0.5	%	0.5	%	0.5	%	0.6	%	0.5	%
Consumer electronics	0.3	%	0.3	%	0.3	%	0.3	%	0.3	%	0.3	%
Consumer goods	0.7	%	0.7	%	0.8	%	0.9	%	0.9	%	0.9	%
Convenience stores	12.4	%	11.2	%	9.6	%	8.7	%	9.2	%	10.1	%
Crafts and novelties	0.7	%	0.7	%	0.6	%	0.6	%	0.6	%	0.6	%
Diversified industrial	0.8	%	0.8	%	0.9	%	0.9	%	0.8	%	0.5	%
Dollar stores	7.4	%	7.5	%	7.9	%	8.6	%	8.9	%	9.6	%
Drug stores	9.8	%	10.2	%	10.9	%	11.2	%	10.6	%	9.5	%
Education	0.3	%	0.3	%	0.3	%	0.3	%	0.3	%	0.4	%
Electric utilities	0.1	%	0.1	%	0.1	%	0.1	%	0.1	%	0.1	%
Entertainment	0.4	%	0.4	%	0.4	%	0.5	%	0.5	%	0.5	%
Equipment services	0.4	%	0.4	%	0.4	%	0.6	%	0.5	%	0.6	%
Financial services	2.3	%	2.3	%	2.4	%	1.8	%	1.7	%	1.8	%
Food processing	0.5	%	0.5	%	0.6	%	1.1	%	1.2	%	1.4	%
General merchandise	2.3	%	2.3	%	2.0	%	1.8	%	1.7	%	1.5	%
Government services	0.9	%	0.9	%	1.0	%	1.1	%	1.2	%	1.3	%
Grocery stores	4.9	%	5.0	%	4.4	%	3.1	%	3.0	%	3.0	%
Health and beauty	0.3	%	0.2	%	*		*		*		*
Health and fitness	7.2	%	7.4	%	7.5	%	8.1	%	7.7	%	7.0	%
Health care	1.5	%	1.5	%	1.4	%	1.5	%	1.7	%	1.8	%
Home furnishings	0.8	%	0.8	%	0.9	%	0.8	%	0.9	%	0.9	%
Home improvement	2.9	%	3.0	%	2.6	%	2.5	%	2.4	%	1.7	%
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	%	0.1	%	0.2	%
Motor vehicle dealerships	1.7	%	1.9	%	2.1	%	1.9	%	1.6	%	1.6	%
Office supplies	0.2	%	0.2	%	0.2	%	0.3	%	0.3	%	0.4	%
Other manufacturing	0.7	%	0.7	%	0.8	%	0.8	%	0.7	%	0.7	%
Packaging	1.1	%	1.1	%	1.0	%	0.8	%	0.8	%	0.8	%
Paper	0.1	%	0.1	%	0.1	%	0.1	%	0.1	%	0.1	%
Pet supplies and services	0.5	%	0.5	%	0.6	%	0.6	%	0.7	%	0.7	%
Restaurants - casual dining	3.4	%	3.2	%	3.8	%	3.9	%	3.8	%	4.3	%
Restaurants - quick service	6.2	%	5.7	%	5.1	%	4.9	%	4.2	%	3.7	%
Shoe stores	0.5	%	0.5	%	0.6	%	0.7	%	0.7	%	0.9	%
Sporting goods	1.0	%	1.1	%	1.4	%	1.6	%	1.8	%	1.6	%
Telecommunications	0.6	%	0.6	%	0.6	%	0.6	%	0.7	%	0.7	%
Theaters	5.4	%	5.5	%	5.0	%	4.9	%	5.1	%	5.3	%
Transportation services	4.8	%	5.0	%	5.4	%	5.5	%	5.4	%	5.2	%
Wholesale clubs	2.8	%	3.0	%	3.3	%	3.6	%	3.8	%	4.1	%
Other	0.1	%	0.1	%	0.1	%	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 December 31, 2018 (dollars in thousands):



Property Type	Number of Properties	Approximate Leasable Square Feet	Rental Revenue for the Quarter Ended December 31, 2018⁽¹⁾		Percentage of Rental Revenue
Retail	5,623	63,297,600	$	268,258	81.7	%
Industrial	117	26,793,100	39,922		12.1
Office	42	3,104,200	13,652		4.2
Agriculture	15	184,500	6,639		2.0
Totals	5,797	93,379,400	$	328,471	100.0	%

⁽¹⁾Includes rental revenue for all properties owned at December 31, 2018. Excludes revenue of $934 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 December 31, 2018:



Tenant	Number of Leases	% of Rental Revenue
Walgreens	219	6.3	%
7-Eleven	398	5.5	%
FedEx	42	4.8	%
Dollar General	576	3.9	%
LA Fitness	54	3.7	%
Dollar Tree / Family Dollar	468	3.4	%
AMC Theatres	32	3.3	%
Walmart / Sam's Club	51	2.8	%
Circle K (Couche-Tard)	297	2.3	%
BJ's Wholesale Clubs	15	2.0	%
Treasury Wine Estates	17	1.9	%
CVS Pharmacy	85	1.9	%
Life Time Fitness	11	1.9	%
Regal Cinemas	24	1.7	%
GPM Investments / Fas Mart	210	1.6	%
Super America (Marathon)	132	1.6	%
TBC Corporation (Sumitomo)	159	1.4	%
Kroger	17	1.4	%
Rite Aid	51	1.2	%
Home Depot	15	1.2	%
Totals	2,873	53.8	%

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Service Category Diversification for our Retail Properties

The following table sets forth certain information regarding the properties owned at December 31, 2018, classified according to the business types and the level of services they provide (dollars in thousands):



	Retail Rental Revenue for the Quarter Ended December 31, 2018⁽¹⁾		Percentage of Retail Rental Revenue
Tenants Providing Services
Automotive collision services	$	2,936	1.1	%
Automotive service	7,153		2.7
Child care	5,696		2.1
Education	868		0.3
Entertainment	1,292		0.5
Equipment services	114		*
Financial services	6,655		2.5
Health and fitness	23,729		8.9
Health care	2,009		0.8
Telecommunications	66		*
Theaters	17,714		6.6
Transportation services	250		0.1
Other	124		*
	$	68,606	25.6	%
Tenants Selling Goods and Services
Automotive parts (with installation)	1,653		0.6
Automotive tire services	7,470		2.8
Convenience stores	40,711		15.2
Health and beauty	14		*
Motor vehicle dealerships	5,710		2.1
Pet supplies and services	675		0.2
Restaurants - casual dining	10,543		3.9
Restaurants - quick service	20,317		7.6
	$	87,093	32.4	%
Tenants Selling Goods
Apparel stores	3,960		1.5
Automotive parts	3,497		1.3
Book stores	113		*
Consumer electronics	1,064		0.4
Crafts and novelties	1,999		0.8
Dollar stores	24,385		9.1
Drug stores	30,860		11.5
General merchandise	6,460		2.4
Grocery stores	16,167		6.0
Home furnishings	2,178		0.8
Home improvement	8,351		3.1
Jewelry	175		0.1
Office supplies	615		0.2
Shoe stores	185		0.1
Sporting goods	3,205		1.2
Wholesale clubs	9,345		3.5
	$	112,559	42.0	%
Totals	$	268,258	100.0	%

* Less than 0.1%

⁽¹⁾Includes rental revenue for all retail properties owned at December 31, 2018. Excludes revenue of $60,213 from non-retail properties and$934 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 December 31, 2018 (dollars in thousands):



Total Portfolio⁽¹⁾
	Expiring		Approx.			% of
	Leases		Leasable	Rental		Rental
Year	Retail	Non-Retail	Sq. Feet	Revenue		Revenue
2019	244	10	3,012,700	$	11,279	3.4	%
2020	224	13	4,192,100	12,848		3.9
2021	328	15	5,494,400	15,395		4.7
2022	396	22	10,023,900	21,563		6.6
2023	544	23	9,590,100	29,642		9.0
2024	284	13	5,194,300	15,863		4.8
2025	338	13	5,246,500	20,499		6.2
2026	313	4	4,631,100	15,664		4.8
2027	536	5	6,224,300	22,581		6.9
2028	336	13	8,825,300	21,835		6.6
2029	413	7	7,596,400	22,226		6.8
2030	164	14	3,512,900	16,909		5.2
2031	304	25	5,973,600	27,582		8.4
2032	92	4	3,113,500	11,987		3.7
2033	260	—	2,161,100	14,842		4.5
2034 - 2044	828	4	7,422,400	47,688		14.5
Totals	5,604	185	92,214,600	$	328,403	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 $68 from 99 expired leases, and $934 from sold properties at December 31, 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 December 31, 2018 (dollars in thousands):



State	Number of Properties	Percent Leased		Approximate Leasable Square Feet	Rental Revenue for the Quarter Ended December 31, 2018⁽¹⁾		Percentage of Rental Revenue
Alabama	169	98	%	1,589,700	$	5,958	1.8	%
Alaska	3	100		274,600	523		0.2
Arizona	117	100		1,821,000	6,848		2.1
Arkansas	86	100		922,300	2,288		0.7
California	193	100		6,031,800	28,977		8.8
Colorado	95	97		1,530,600	5,300		1.6
Connecticut	19	95		508,500	2,022		0.6
Delaware	18	100		93,000	750		0.2
Florida	398	98		4,196,800	18,672		5.7
Georgia	268	99		4,299,800	13,397		4.1
Idaho	12	100		87,000	418		0.1
Illinois	265	99		5,933,500	19,674		6.0
Indiana	189	98		2,220,400	9,087		2.8
Iowa	40	95		3,034,800	4,403		1.3
Kansas	110	96		1,931,800	5,042		1.5
Kentucky	80	100		1,695,300	4,689		1.4
Louisiana	115	97		1,588,000	5,144		1.6
Maine	18	100		203,700	1,225		0.4
Maryland	37	97		1,017,500	4,891		1.5
Massachusetts	58	91		656,500	2,833		0.9
Michigan	184	99		1,961,400	7,082		2.2
Minnesota	164	100		2,134,500	10,374		3.2
Mississippi	154	95		1,720,600	4,864		1.5
Missouri	176	97		2,775,500	8,719		2.7
Montana	11	100		87,000	498		0.2
Nebraska	43	98		780,100	1,981		0.6
Nevada	24	100		1,196,900	2,218		0.7
New Hampshire	13	100		296,400	1,372		0.4
New Jersey	73	97		998,400	5,731		1.7
New Mexico	34	100		366,400	1,105		0.3
New York	125	100		2,838,400	15,670		4.8
North Carolina	186	99		2,812,200	8,861		2.7
North Dakota	6	100		117,700	212		0.1
Ohio	304	100		6,962,500	17,416		5.3
Oklahoma	168	100		1,775,300	4,990		1.5
Oregon	28	96		593,300	2,291		0.7
Pennsylvania	223	99		2,295,500	10,766		3.3
Rhode Island	3	100		158,000	814		0.2
South Carolina	175	99		1,683,100	7,651		2.3
South Dakota	15	100		195,200	472		0.1
Tennessee	251	98		3,589,800	10,930		3.3
Texas	712	99		10,614,100	37,695		11.5
Utah	22	100		933,000	2,264		0.7
Vermont	2	100		88,000	365		0.1
Virginia	212	98		3,129,000	10,057		3.1
Washington	47	98		755,700	2,987		0.9
West Virginia	25	100		418,100	1,471		0.4
Wisconsin	117	99		2,383,700	7,029		2.1
Wyoming	6	100		54,700	296		0.1
Puerto Rico	4	100		28,300	149		*
Totals\Average	5,797	99	%	93,379,400	$	328,471	100.0	%

* Less than 0.1%

⁽¹⁾Includes rental revenue for all properties owned at December 31, 2018. Excludes revenue of $934 from sold properties.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, 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 annual 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.

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 this Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that this annual 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 annual report or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, the forward-looking events discussed in this annual report might not occur.

Item 1A: Risk Factors

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

In order to grow we need to continue to acquire investment properties. The acquisition of investment properties may be subject to competitive pressures.

We face competition in the acquisition and operation of our properties. We expect competition from:


•	Businesses;


•	Individuals;


•	Fiduciary accounts and plans; and

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•	Other entities engaged in real estate investment and financing.

Some of these competitors are larger than we are and have greater financial resources. This competition may result in a higher cost for properties we wish to purchase.

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

Cash flow from operations depends in part on our ability to lease space to tenants on economically favorable terms. We could be adversely affected by various facts and events over which we have limited or no control, such as:


•	Lack of demand in areas where our properties are located;


•	Inability to retain existing tenants and attract new tenants;


•	Oversupply of space and changes in market rental rates;


•	Declines in our tenants’ creditworthiness and ability to pay rent, which may be affected by their operations, economic downturns and competition within their industries from other operators;


•	Defaults by and bankruptcies of tenants, failure of tenants to pay rent on a timely basis, or failure of tenants to comply with their contractual obligations;


•	Economic or physical decline of the areas where the properties are located; and


•	Deterioration of physical condition of our properties.

At any time, any tenant may experience a downturn in its business that may weaken its operating results or overall financial condition. As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent, or declare bankruptcy. Any tenant bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in the termination of the tenant’s lease and material losses to us.

If tenants do not renew their leases as they expire, we may not be able to rent or sell the properties. Furthermore, leases that are renewed, and some new leases for properties that are re-leased, may have terms that are less economically favorable than expiring lease terms, or may require us to incur significant costs, such as renovations, tenant improvements, or lease transaction costs. Negative market conditions may cause us to sell vacant properties for less than their carrying value, which could result in impairments. Any of these events could adversely affect cash flow from operations and our ability to make distributions to stockholders and service indebtedness. A significant portion of the costs of owning property, such as real estate taxes, insurance, and maintenance, are not necessarily reduced when circumstances cause a decrease in rental revenue from the properties. In a weakened financial condition, tenants may not be able to pay these costs of ownership and we may be unable to recover these operating expenses from them.

Further, the occurrence of a tenant bankruptcy or insolvency could diminish the income we receive from the tenant’s lease or leases. In addition, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent we are owed under the leases or we may elect not to pursue claims against a tenant for terminated leases. In addition, any claim we have for unpaid past rent, if any, may not be paid in full, or at all. Moreover, in the case of a tenant’s leases that are not terminated as the result of its bankruptcy, we may be required or elect to reduce the rent payable under those leases or provide other concessions, reducing amounts we receive under those leases. As a result, tenant bankruptcies may have a material adverse effect on our results of operations. Any of these events could adversely affect our cash flow from operations and our ability to make distributions to stockholders and service our indebtedness.

As of December 31, 2018, 80 of our properties were available for lease or sale, of which 77 were single-tenant properties. At December 31, 2018, 69 of our properties under lease were unoccupied and available for sublease by the tenants, all of which were current with their rent and other obligations. During 2018, each of our tenants accounted for less than 10% of our rental revenue.

For 2018, our tenants in the “convenience store” industry accounted for approximately 11.2% of our rental revenue, while our tenants in the "drug store" industry accounted for approximately 10.2% of our rental revenue for the same period. A downturn in these industries could have a material adverse effect on our financial position, results of

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operations, our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock, including the common stock offered hereby, and preferred stock.

Individually, each of the other industries in our property portfolio accounted for less than 10% of our rental revenue for 2018. Nevertheless, downturns in these industries could also adversely affect our tenants, which in turn could also have a material adverse effect on our financial position, results of operations and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock, and preferred stock.

In addition, some of our properties are leased to tenants that may have limited financial and other resources, and therefore, they are more likely to be adversely affected by a downturn in their respective businesses or in the regional, national, or international economy.

As a property owner, we may be subject to unknown environmental liabilities.

Investments in real property can create a potential for environmental liability. An owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We can face such liability regardless of:


•	Our knowledge of the contamination;


•	The timing of the contamination;


•	The cause of the contamination; or


•	The party responsible for the contamination of the property.

There may be environmental conditions associated with our properties of which we are unaware. In that regard, a number of our properties are leased to operators of convenience stores that sell petroleum-based fuels, as well as to operators of oil change and tune-up facilities and operators that use chemicals and other waste products. These facilities, and some other of our properties, use, or may have used in the past, underground lifts or underground tanks for the storage of petroleum-based or waste products, which could create a potential for the release of hazardous substances.

The presence of hazardous substances on a property may adversely affect our ability to lease or sell that property and we may incur substantial remediation costs or third party liability claims. Although our leases generally require our tenants to operate in compliance with all applicable federal, state, and local environmental laws, ordinances and regulations, and to indemnify us against any environmental liabilities arising from the tenants’ activities on the property, we could nevertheless be subject to liability, including strict liability, by virtue of our ownership interest. There also can be no assurance that our tenants could or would satisfy their indemnification obligations under their leases. The discovery of environmental liabilities attached to our properties could have an adverse effect on our results of operations, our financial condition, or our ability to make distributions to stockholders and to pay the principal of and interest on our debt securities and other indebtedness.

In addition, several of our properties were built during the period when asbestos was commonly used in building construction and we may acquire other buildings with asbestos in the future. Environmental laws govern the presence, maintenance, and removal of asbestos-containing materials, or ACMs, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, that they adequately inform or train those who may come into contact with asbestos and that they undertake special precautions, including removal or other abatement in the event that asbestos is disturbed during renovation or demolition of a building. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.

It is possible that our insurance could be insufficient to address any particular environmental situation and/or that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all. Our tenants are generally responsible for, and indemnify us against, liabilities for environmental matters that arise during the lease terms as a result of tenants’ activities on the properties. For properties that have underground storage tanks, in addition to providing an indemnity in our favor, the tenants generally are required to meet applicable state financial assurance obligations, including maintaining certain minimum net worth requirements, obtaining environmental insurance, or relying upon the state trust funds where available in the states where these properties are located to reimburse responsible parties for costs of environmental remediation. However, it is possible that one or more of our tenants could fail to have sufficient funds to cover any such indemnification or to meet applicable

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state financial assurance obligations, and thus we may still be obligated to pay for any such environmental liabilities.

Compliance. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability, or claim relating to hazardous substances, toxic substances, or petroleum products in connection with any of our properties. In addition, we believe we are in compliance in all material respects with all present federal, state, and local laws relating to ACMs. Nevertheless, if environmental contamination should exist, we could be subject to liability, including strict liability, by virtue of our ownership interest.

Insurance and Indemnity. In March 2018, we entered into a ten-year environmental insurance policy that expires in March 2028 and replaced our previous ten-year environmental insurance policy. The limits on our current policy are $10 million per occurrence and $60 million in the aggregate. The limits on the excess policy are $5 million per occurrence and $10 million in the aggregate. Therefore, the primary and excess ten-year policies together provide a total limit of $15 million per occurrence and $70 million in the aggregate.

It is possible that our insurance could be insufficient to address any particular environmental situation and that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all. Our tenants are generally responsible for, and indemnify us against, liabilities for environmental matters that occur on our properties. For properties that have underground storage tanks, in addition to providing an indemnity in our favor, the tenants generally obtain environmental insurance or rely upon the state funds in the states where these properties are located to reimburse tenants for environmental remediation.

If we fail to qualify as a REIT, the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.

Commencing with our taxable year ended December 31, 1994, we believe that we have been organized and have operated, and we intend to continue to operate, so as to qualify as a REIT under Sections 856 through 860 of the Code. However, we cannot assure you that we have been organized or have operated in a manner that has satisfied the requirements for qualification as a REIT, or that we will continue to be organized or operate in a manner that will allow us to continue to qualify as a REIT.

Qualification as a REIT involves the satisfaction of numerous requirements under highly technical and complex Code provisions, for which there are only limited judicial and administrative interpretations, as well as the determination of various factual matters and circumstances not entirely within our control.

For example, in order to qualify as a REIT, at least 95% of our gross income in each year must be derived from qualifying sources, and we must pay distributions to stockholders aggregating annually at least 90% of our taxable income (excluding net capital gains).

If we fail to satisfy all of the requirements for qualification as a REIT, we may be subject to certain penalty taxes or, in some circumstances, we may fail to qualify as a REIT. If we were to fail to qualify as a REIT in any taxable year:


•	We would be required to pay regular U.S. federal corporate income tax on our taxable income;


•	We would not be allowed a deduction for amounts distributed to our stockholders in computing our taxable income;


•	We could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost;


•	We would no longer be required to make distributions to stockholders; and


•	This treatment would substantially reduce amounts available for investment or distribution to stockholders because of the additional tax liability for the years involved, which could have a material adverse effect on the market price of our capital stock and the value of our debt securities.

Even if we qualify for and maintain our REIT status, we may be subject to certain federal, state, and local taxes on our income and property. For example, if we have net income from a prohibited transaction, that income will be subject to a 100% tax. In addition, our taxable REIT subsidiaries, including Crest, are subject to federal and state taxes at the applicable tax rates on their income and property. Any failure to comply with legal and regulatory tax obligations could adversely affect our ability to conduct business and could adversely affect the market price of our capital stock and the value of our debt securities.

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Legislative or other actions affecting REITs could have a negative effect on us or our investors.

The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Services, or the IRS, and the U.S. Department of the Treasury, or the Treasury. Changes to the tax laws, with or without retroactive application, could adversely affect us or our investors, including holders of our common stock or debt securities. We cannot predict how changes in the tax laws might affect us or our investors. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT, the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in us. Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.

The 2017 Tax Cuts and Jobs Act, or TCJA, has significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their stockholders. We are continuing to assess the potential impact of TCJA on us as related regulations are proposed and finalized. The changes made by TCJA that could affect us and our investors include:


•	Temporarily reducing individual U.S. federal income tax rates on ordinary income, including the reduction of the highest individual U.S. federal income tax rate from 39.6% to 37% for taxable years beginning after December 31, 2017 and before January 1, 2026;


•	Permanently eliminating the progressive corporate tax rate structure, which previously imposed a maximum corporate tax rate of 35%, and replacing it with a flat corporate tax rate of 21%;

•

Permitting a deduction for certain domestic qualified business income from pass-through income entities, including dividends received by our stockholders from us that are not designated by us as capital gain dividends or qualified dividend income, which will allow individuals, trusts, and estates to deduct up to 20% of such amounts for taxable years beginning after December 31, 2017 and before January 1, 2026;


•	Reducing the highest rate of withholding with respect to our distributions to non-U.S. stockholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;


•	Limiting our deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of REIT taxable income (prior to the application of the dividends paid deduction);


•	Generally limiting the deduction for net business interest expense in excess of 30% of a business’s “adjusted taxable income,” except for taxpayers (including most equity REITs) that engage in certain real estate businesses and elect out of this rule (provided that such electing taxpayers must use an alternative depreciation system with longer depreciation periods); and


•	Eliminating the corporate alternative minimum tax.

Many of these changes were effective on January 1, 2018, without any transition periods or grandfathering for existing transactions. The legislation is still unclear in some respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and IRS, any of which could lessen or increase the impact of the legislation. In addition, state and local tax jurisdictions, which often use federal taxable income as a starting point for computing state and local tax liabilities, are continuing to evaluate the legislation to determine their respective levels of conformity to the new law. While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. We continue to work with our tax advisors and auditors to determine the full impact that the recent tax legislation as a whole will have on us.

Distribution requirements imposed by law limit our flexibility.

To maintain our status as a REIT for federal income tax purposes, we generally are required to distribute to our stockholders at least 90% of our taxable income, excluding net capital gains, each year. We also are subject to tax at regular corporate rates to the extent that we distribute less than 100% of our taxable income (including net capital gains) each year.

In addition, we are subject to a 4% nondeductible excise tax to the extent that we fail to distribute during any calendar year at least the sum of 85% of our ordinary income for that calendar year, 95% of our capital gain net income for the calendar year, and any amount of that income that was not distributed in prior years.

We intend to continue to make distributions to our stockholders to comply with the distribution requirements of the Code as well as to reduce our exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect

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of required debt amortization payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.

Future issuances of equity securities could dilute the interest of holders of our common stock.

Our future growth will depend, in large part, upon our ability to raise additional capital. If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of our common stock. The interests of our common stockholders could also be diluted by the issuance of shares of common stock pursuant to stock incentive plans. Likewise, our Board of Directors is authorized to cause us to issue preferred stock of any class or series (with dividend, voting and other rights as determined by our Board of Directors). Accordingly, our Board of Directors may authorize the issuance of preferred stock with voting, dividend and other similar rights that could dilute, or otherwise adversely affect, the interest of holders of our common stock.

We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets.

We have in the past and may in the future acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership units in an operating partnership, which could result in stockholder dilution through the issuance of operating partnership units that, under certain circumstances, may be exchanged for shares of our common stock. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to restrictions on our ability to dispose of, or refinance the debt on, the acquired properties in order to protect the contributors’ ability to defer recognition of taxable gain. Similarly, we may be required to incur or maintain debt we would otherwise not incur so we can allocate the debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell or refinance an asset at a time, or on terms, that would be favorable absent such restrictions.

We are subject to risks associated with debt and capital stock financing.

We intend to incur additional indebtedness in the future, including the use of our unsecured revolving credit facility, which has a borrowing capacity of $3.0 billion. At December 31, 2018, we had $252.0 million of outstanding borrowings under our revolving credit facility, a total of $5.4 billion of outstanding unsecured senior debt securities (excluding unamortized net original issuance premiums of $10.5 million and deferred financing costs of $33.7 million), $570.0 million of borrowings outstanding under our senior unsecured term loans (excluding deferred financing costs of $1.4 million) and approximately $298.4 million of outstanding mortgage debt (excluding net unamortized premiums totaling $4.4 million and deferred financing costs of $183,000 on this mortgage debt). To the extent that new indebtedness is added to our current debt levels, the related risks that we now face would increase. As a result, we are and will be subject to risks associated with debt financing, including the risk that our cash flow could be insufficient to make required payments on our debt. We also face variable interest rate risk as the interest rates on our revolving credit facility, our term loans and some of our mortgage debt are variable and could therefore increase over time. We also face the risk that we may be unable to refinance or repay our debt as it comes due. Given past disruptions in the financial markets and the recent global financial crisis and related uncertainties, including the impact of the United Kingdom’s advisory referendum to withdraw from the European Union (referred to as Brexit), we also face the risk that one or more of the participants in our revolving credit facility may not be able to lend us money.

In addition, our revolving credit facility, our term loan facilities and mortgage loan documents contain provisions that could limit or, in certain cases, prohibit the payment of dividends and other distributions on our common stock and preferred stock. In particular, our revolving credit facility and our two $250.0 million term loan facilities, all of which are governed by the same credit agreement, provide that, if an event of default (as defined in the credit agreement) exists, neither we nor any of our subsidiaries (other than our wholly-owned subsidiaries) may pay any dividends or other distributions on (except distributions payable in shares of a given class of our stock to the stockholders of that class), or repurchase or redeem, among other things, any shares of our common stock or preferred stock, during any period of four consecutive fiscal quarters in an aggregate amount in excess of the greater of:


•	The sum of (a) 95% of our adjusted funds from operations (as defined in the credit agreement) for that period plus (b) the aggregate amount of cash distributions on our preferred stock for that period, and


•	The minimum amount of cash distributions required to be made to our stockholders in order to maintain our status as a REIT for federal income tax purposes and to avoid the payment of any income or excise taxes that would otherwise be imposed under specified sections of the Code on income we do not distribute to our stockholders,

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except that we may repurchase or redeem shares of our preferred stock with the net proceeds from the issuance of shares of our common stock or preferred stock. The credit agreement further provides that, in the event of a failure to pay principal, interest or any other amount payable thereunder when due or upon the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to us or with respect to one or more of our subsidiaries that in the aggregate meet a significance test set forth in the credit agreement, we and our subsidiaries (other than our wholly-owned subsidiaries) may not pay any dividends or other distributions on (except for (a) distributions payable in shares of a given class of our stock to the stockholders of that class and (b) dividends and distributions described in the second bullet point above), or repurchase or redeem, among other things, any shares of our common stock or preferred stock. If any such event of default under the credit agreement were to occur, it would likely have a material adverse effect on the market price of our outstanding common and preferred stock and on the market value of our debt securities, could limit the amount of dividends or other distributions payable on our common stock and preferred stock or the amount of interest and principal we are able to pay on our indebtedness, or prevent us from paying those dividends, other distributions, interest or principal altogether, and may adversely affect our ability to qualify, or prevent us from qualifying, as a REIT.

Our indebtedness could also have other important consequences to holders of our common stock, preferred stock, and debt securities, including:


•	Increasing our vulnerability to general adverse economic and industry conditions;


•	Limiting our ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements;


•	Requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, and general corporate requirements;


•	Limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and


•	Putting us at a disadvantage compared to our competitors with less indebtedness.

If we default under a credit facility, loan agreement or other debt instrument, the lenders will generally have the right to demand immediate repayment of the principal and interest on all of their loans and, in the case of secured indebtedness, to exercise their rights to seize and sell the collateral.

Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness.

Our ability to make distributions on our common stock and preferred stock and payments on our indebtedness, and to fund planned acquisitions and capital expenditures will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock and preferred stock, to pay our indebtedness, or to fund our other liquidity needs.

The market value of our capital stock and debt securities could be substantially affected by various factors.

The market value of our capital stock and debt securities will depend on many factors, which may change from time to time and may be outside of our control, including:


•	Prevailing interest rates, increases in which may have an adverse effect on the market value of our capital stock and debt securities;


•	The market for similar securities issued by other REITs;


•	General economic, political and financial market conditions;


•	The financial condition, performance and prospects of us, our tenants and our competitors;


•	Changes in legal and regulatory taxation obligations;


•	Litigation and regulatory proceedings;


•	Changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry;


•	Changes in our credit ratings; and


•	Actual or anticipated variations in quarterly operating results of us and our competitors.

In addition, over the last several years, prices of common stock and debt securities in the United States, or U.S., trading markets have been experiencing extreme price fluctuations, and the market values of our common stock and debt securities have also fluctuated significantly during this period. As a result of these and other factors,

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investors who purchase our capital stock and debt securities may experience a decrease, which could be substantial and rapid, in the market value of our capital stock and debt securities, including decreases unrelated to our operating performance or prospects.

Real estate ownership is subject to particular conditions that may have a negative impact on our revenue.

We are subject to all of the inherent risks associated with the ownership of real estate. In particular, we face the risk that rental revenue from our properties may be insufficient to cover all corporate operating expenses, debt service payments on indebtedness we incur, and distributions on our capital stock. Additional real estate ownership risks include:


•	Adverse changes in general or local economic conditions;


•	Changes in supply of, or demand for, similar or competing properties;


•	Changes in interest rates and operating expenses;


•	Competition for tenants;


•	Changes in market rental rates;


•	Inability to lease properties upon termination of existing leases;


•	Renewal of leases at lower rental rates;


•	Inability to collect rents from tenants due to financial hardship, including bankruptcy;


•	Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate;


•	Uninsured property liability;


•	Property damage or casualty losses;


•	Unexpected expenditures for capital improvements, including requirements to bring properties into compliance with applicable federal, state and local laws;


•	The need to periodically renovate and repair our properties;


•	Development oriented activities;


•	Physical or weather-related damage to properties;


•	The potential risk of functional obsolescence of properties over time;


•	Acts of terrorism and war; and


•	Acts of God and other factors beyond the control of our management.

Real estate property investments are illiquid; therefore, the company may not be able to dispose of properties when desired or on favorable terms.

Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions will be limited. No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations.

Our acquisition of additional properties may have a significant effect on our business, liquidity, financial position and/or results of operations.

We are engaged in the process of identifying, analyzing, underwriting, and negotiating possible acquisition transactions. We cannot provide any assurances that we will be successful in consummating future acquisitions on favorable terms or that we will realize the benefits that we anticipate from such acquisitions. Our inability to consummate one or more acquisitions on such terms, our failure to adequately underwrite and identify risks and obligations when acquiring properties, or our failure to realize the intended benefits from one or more acquisitions, could have a significant adverse effect on our business, liquidity, financial position and/or results of operations, including as a result of our incurrence of additional indebtedness and related interest expense and our assumption of unforeseen contingent liabilities in connection with completed acquisitions.

Furthermore, we have made and may continue to make selected acquisitions of properties that fall outside our historical focus on freestanding, single-tenant, net lease locations. We may be exposed to a variety of new risks by expanding into new property types and properties leased to tenants engaged in non-retail businesses, including risks resulting from our limited experience in managing, underwriting and assessing risks related to such properties or understanding the market dynamics applicable to such properties, tenants or lease structures, any of which could also have a significant adverse effect on our business, liquidity, financial position and/or results of operations.

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If we acquire properties outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.

We may make selected acquisitions of properties outside of the United States, in which case we may be exposed to a variety of new risks such as:


•	The laws, rules and regulations applicable in such jurisdictions outside of the United States, including those related to property ownership by foreign entities;


•	Fluctuations in exchange rates between foreign currencies and the U.S. dollar, and exchange controls;


•	Limited experience with local business and cultural factors that differ from our usual standards and practices;


•	Challenges in establishing effective controls and procedures to regulate operations in different regions and to monitor compliance with applicable regulations, such as applicable laws related to corrupt practices, employment, licensing, construction or environmental compliance;


•	Unexpected changes in regulatory requirements, tax, tariffs, trade barriers and other laws within jurisdictions outside the United States or between the United States and such jurisdictions;


•	Potentially adverse tax consequences with respect to our properties;


•	The impact of regional or country-specific business cycles and economic instability, including deteriorations in political relations with the United States, instability in, or further withdrawals from, the European Union or other international trade alliances or agreements; and


•	Political instability, uncertainty over property rights, civil unrest, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities.

If we are unable to adequately address these risks, they could have a significant adverse effect on our operations.

An uninsured loss or a loss that exceeds the policy limits on our properties could subject us to lost capital or revenue on those properties.

Under the terms and conditions of the leases currently in force on our properties, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons, air, water, land or property, due to activities conducted on the properties, except for claims arising from the negligence or intentional misconduct of us or our agents. Additionally, tenants are generally required, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. The insurance policies our tenants are required to maintain for property damage are generally in amounts not less than the full replacement cost of the improvements less slab, foundations, supports and other customarily excluded improvements. Our tenants are generally required to maintain general liability coverage depending on the tenant and the industry in which the tenant operates.

In addition to the indemnities and required insurance policies identified above, many of our properties are also covered by flood and earthquake insurance policies (subject to substantial deductibles) obtained and paid for by the tenants as part of their risk management programs. Additionally, we have obtained blanket liability, flood and earthquake (subject to substantial deductibles) and property damage insurance policies to protect us and our properties against loss should the indemnities and insurance policies provided by the tenants fail to restore the properties to their condition prior to a loss. However, should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, we could lose all or part of our capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on our

results of operations or financial condition and on our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. We also face the risk that our insurance carriers may not be able to provide payment under any potential claims that might arise under the terms of our insurance policies, and we may not have the ability to purchase insurance policies we desire.

In addition, although we obtain title insurance policies of our properties to protect us and our properties against unknown title defects (such as claims of ownership, liens or other encumbrances), there may be certain title defects that our title insurance will not cover. If a material title defect related to any of our properties is not adequately covered by a title insurance policy, we could lose some or all of our capital invested in and our anticipated profits from such property, cause a financial misstatement or lead to reputational damage to the company.

Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unintended expenditures that could adversely impact our results of operations.

Our properties are generally required to comply with the Americans with Disabilities Act of 1990, or the ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally

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requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants. The retailers to whom we lease properties are obligated by law to comply with the ADA provisions, and we believe that these retailers may be generally obligated to cover costs associated with compliance. If required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these retailers to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could materially adversely affect our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders.

Litigation risks could affect our business.

From time to time, we are involved in legal proceedings, lawsuits, and other claims. An unfavorable resolution of litigation may have a material adverse effect on our business, results of operations and financial condition. Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management.

Property taxes may increase without notice.

The real property taxes on our properties and any other properties that we develop or acquire in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities.

We depend on key personnel.

We depend on the efforts of our executive officers and key employees. The loss of the services of our executive officers and key employees could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal and interest on our debt securities and other indebtedness and to make distributions to our stockholders. It is possible that we will not be able to recruit additional personnel with equivalent experience in the net lease industry.

Natural disasters, terrorist attacks, other acts of violence or war, or other unexpected events may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.

Natural disasters, terrorist attacks, other acts of violence or war, or other unexpected events may negatively affect our operations, the market price of our capital stock and the value of our debt securities. There can be no assurance that events like these will not occur or have a direct impact on our tenants, our business or the United States generally.

If events like these were to occur, they could materially interrupt our business operations, cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in or prolong an economic recession in the U.S. or abroad. Any of these occurrences could have a significant adverse impact on our operating results and revenues and on the market price of our capital stock and on the value of our debt securities. It could also have an adverse effect on our ability to pay principal and interest on our debt securities or other indebtedness and to make distributions to our stockholders.

We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and maintenance of records, which may include personal identifying information. Although we have taken steps to protect the security of the data maintained in our information systems, our security measures may not be able to prevent the systems’ improper functioning, or the theft of intellectual property, personal information, or personal property, such as in the event of cyber-attacks. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, result in theft of company assets, damage our reputation, subject us to liability claims and could adversely affect our business, financial condition and results of operations.

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In addition, we implemented a new enterprise resource planning system in 2018. We may experience difficulties with this system, which could potentially result in disruption to our normal accounting procedures and internal control over financial reporting, inaccuracies in the conversion of electronic data, difficulties integrating the systems and processes, additional costs to continue to refine the system’s functionality, and disruption of our financial reporting process.

Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.

Over the last several years, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks and debt securities to fluctuate substantially and the spreads on prospective debt financings to widen considerably. In addition, recent global financial crises (such as concerns that certain European countries may be unable to pay their national debt) has had a similar effect. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in certain cases have resulted in the unavailability of certain types of financing. Unrest in certain Middle Eastern countries and resultant fluctuation in petroleum prices have added to the uncertainty in the capital markets. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing at reasonable terms, which may negatively affect our ability to make acquisitions. A prolonged downturn in the stock or credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of financing or difficulties in obtaining financing. These events in the stock and credit markets may make it more difficult or costly for us to raise capital through the issuance of our common stock or preferred stock or debt securities. These disruptions in the financial markets also may have a material adverse effect on the market value of our common stock, preferred stock and debt securities, the income we receive from our properties and the lease rates we can charge for our properties, as well as other unknown adverse effects on us or the economy in general.

Inflation may adversely affect our financial condition and results of operations.

Although inflation has not materially impacted our results of operations in the recent past, increased inflation could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation. Likewise, even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue, which may adversely affect the tenants’ ability to pay rent.

Current volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements.

Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), and various receivables. Often these estimates require the use of market data values that are currently difficult to assess, as well as estimates of future performance or receivables collectability that can also be difficult to accurately predict. Although management believes it has been prudent and used reasonable judgment in making these estimates, it is possible that actual results may differ from these estimates.

Inherent limitations of internal controls over financial statements, disclosure controls and safeguarding of assets may adversely impact our financial condition and results of operations.

Our internal controls over financial reporting, disclosure controls and procedures and our operating internal controls may not prevent or detect financial misstatements or loss of assets because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to financial statement and disclosure accuracy and safeguarding of assets. Any failure of these internal controls could result in decreased investor confidence in the accuracy and completeness of our financial reports and disclosures, our REIT qualification being jeopardized, impairment in the company’s access to capital, civil litigation or investigations by the NYSE, the SEC or other regulatory authorities, which may adversely impact our financial condition and results of operations.

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Our business could be negatively affected as a result of actions of activist stockholders and shareholder advisory firms.

Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. If we become engaged in a process or proxy contest with an activist stockholder in the future, our business could be adversely affected, as such activities could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees from executing our business plan. Additionally, perceived uncertainties as to our future direction as a result of stockholder activism or actual or potential changes to the composition of our Board of Directors or management team may lead to the perception of a change in the direction of our business, instability or lack of continuity, which may be exploited by our competitors, cause concern to current or potential sellers of properties, tenants and financing sources, and make it more difficult to attract and retain qualified personnel. If potential or existing sellers of properties, tenants or financing sources choose to delay, defer or reduce transactions with us or transact with our competitors instead of us because of any such issues, then our results of operations could be adversely affected. Similarly, we may suffer damage to our reputation (for example, regarding our corporate governance or stockholder relations) or brand by way of actions taken or statements made by outside constituents, including activist investors and shareholder advisory firms, which could adversely affect the market price of our common stock and preferred stock and the value of our debt securities, including the notes, resulting in significant loss of value, which could impact our ability to access capital, increase our cost of capital, and decrease our ability to acquire properties on attractive terms.

Our charter contains restrictions upon ownership of our common stock.

Our charter contains restrictions on ownership and transfer of our common stock intended to, among other purposes, assist us in maintaining our status as a REIT for United States federal and/or state income tax purposes. For example, our charter restricts any person from acquiring actual or constructive ownership of more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding common stock. These restrictions could have anti-takeover effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of our common stock.

The value of certain of our investment in real property may be reduced as the result of the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives.

Certain of our investments have the benefit of governmental tax incentives aimed at inducing retail users to relocate to incentivize development in areas and neighborhoods which have not historically seen robust commercial development. The Tax Cuts and Jobs Act provided for such communities to be designated as Qualified Opportunity Zones, which are eligible for such tax benefits. These incentives typically have specific sunset provisions and may be subject to governmental discretion in the eligibility or award of the applicable incentives. The expiration of these incentive programs or the inability of potential tenants or users to be eligible for or to obtain governmental approval of the incentives, or the inability to remain compliant with such programs, may have an adverse effect on the value of our investment, cash flow and net income, and may result in impairment charges.

Item 1B: Unresolved Staff comments

There are no unresolved staff comments.

Item 2: Properties

Information pertaining to our properties can be found under Item 1.

Item 3: Legal Proceedings

We are subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.

Item 4: Mine Safety Disclosures

None.

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PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

A. Our common stock is traded on the NYSE under the ticker symbol “O.” The following table shows the high and low sales prices per share for our common stock as reported by the NYSE, and distributions declared per share of common stock for the periods indicated.



	Price Per Share of Common Stock				Distributions
	High		Low		Declared ⁽¹⁾
2018
First Quarter	$	57.07	$	47.26	$	0.6575
Second Quarter	54.99		48.81		0.6590
Third Quarter	59.18		52.74		0.6605
Fourth Quarter	66.85		55.56		0.6620
Total					$	2.6390
2017
First Quarter	$	63.60	$	56.92	$	0.6320
Second Quarter	62.31		52.86		0.6335
Third Quarter	60.02		53.35		0.6350
Fourth Quarter	58.22		53.02		0.6365
Total					$	2.5370

⁽¹⁾Common stock cash distributions are declared monthly by us based on financial results for the prior months. At December 31, 2018, a distribution of $0.221 per common share had been declared and was paid in January 2019.

B. There were 9,789 registered holders of record of our common stock as of December 31, 2018. We estimate that our total number of stockholders is over 525,000 when we include both registered and beneficial holders of our common stock.

C. During the fourth quarter of 2018, the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2012 Incentive Award Plan of Realty Income Corporation:


•	66,246 shares of stock, at a weighted average price of $57.56, in October 2018;


•	124,460 shares of stock, at a weighted average price of $63.90, in November 2018; and


•	278 shares of stock, at a weighted average price of $64.27, in December 2018.

Item 6: Selected Financial Data

(not covered by Report of Independent Registered Public Accounting Firm)

(dollars in thousands, except for per share data)

The following table sets forth our selected historical consolidated financial information for each of the five years in the period ended December 31, 2018. The statements of income and comprehensive income data, the statements of equity data, the statements of cash flows data and the other data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 were derived from our audited consolidated financial statements included elsewhere in this Form 10-K. The statements of income and comprehensive income data, the statements of equity data, the statements of cash flows data and the other data for the years ended December 31, 2015 and 2014, and the balance sheet data as of December 31, 2016, 2015 and 2014 were derived from our audited consolidated financial statements that are not included in this Form 10-K.

The selected financial data presented below is not necessarily indicative of results of future operations and should be read in conjunction with our consolidated financial statements and the information included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

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As of or for the years ended December 31,	2018		2017			2016			2015			2014
Total assets (book value)	$	15,260,483	$	14,058,166		$	13,152,871		$	11,845,379		$	10,989,349
Cash and cash equivalents	10,387		6,898			9,420			40,294			3,852
Total debt	6,499,976		6,111,471			5,839,605			4,820,995			4,907,673
Total liabilities	7,139,505		6,667,458			6,365,818			5,292,046			5,348,249
Total equity	8,120,978		7,390,708			6,787,053			6,553,333			5,641,099
Net cash provided by operating activities	940,742		875,850			799,863			693,567			617,768
Net change in cash, cash equivalents and restricted cash	8,929		(3,539		)	(34,652		)	4,152			20,211
Total revenue	1,327,838		1,215,768			1,103,172			1,023,285			933,505
Net income	364,598		319,318			316,477			284,855			271,940
Preferred stock dividends	—		(3,911		)	(27,080		)	(27,080		)	(37,062		)
Excess of redemption value over carrying value of preferred shares redeemed	—		(13,373		)	—			—			(6,015		)
Net income available to common stockholders	363,614		301,514			288,491			256,686			227,558
Cash distributions paid to common stockholders	761,582		689,294			610,516			533,238			479,256
Basic and diluted net income per common share	1.26		1.10			1.13			1.09			1.04
Cash distributions paid per common share	2.630500		2.527000			2.391500			2.271417			2.191625
Cash distributions declared per common share	2.639000		2.537000			2.403000			2.279000			2.192875
Basic weighted average number of common shares outstanding	289,427,430		273,465,680			255,066,500			235,767,932			218,390,885
Diluted weighted average number of common shares outstanding	289,923,984		273,936,752			255,624,250			236,208,390			218,767,885

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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

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 50 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 December 31, 2018, we owned a diversified portfolio:


•	Of 5,797 properties;


•	With an occupancy rate of 98.6%, or 5,717 properties leased and 80 properties available for lease;


•	Leased to 262 different commercial tenants doing business in 48 separate industries;


•	Located in 49 states and Puerto Rico;


•	With over 93.3 million square feet of leasable space; and


•	With an average leasable space per property of approximately 16,110 square feet; approximately 11,260 square feet per retail property and 229,000 square feet per industrial property.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

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

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We define our total market capitalization at December 31, 2018 as the sum of:


•	Shares of our common stock outstanding of 303,742,090, plus total common units outstanding of 690,819, multiplied by the last reported sales price of our common stock on the NYSE of $63.04 per share on December 31, 2018, or $19.2 billion;


•	Outstanding borrowings of $252.0 million on our credit facility;


•	Outstanding mortgages payable of $298.4 million, excluding net mortgage premiums of $4.4 million and deferred financing costs of $183,000;


•	Outstanding borrowings of $570.0 million on our term loans, excluding deferred financing costs of $1.4 million; and


•	Outstanding senior unsecured notes and bonds of $5.4 billion, excluding unamortized net original issuance premiums of $10.5 million and deferred financing costs of $33.7 million.

In January 2019, we redeemed all of our outstanding 317,022 common units of Tau Operating Partnership, L.P., which reduced our total common units outstanding to 373,797 as of January 3, 2019. Additionally, in January 2019, we paid off the outstanding balance and interest on the $70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT. Following the redemption, we hold 100% of the ownership interests of Tau Operating Partnership, L.P., and continue to consolidate the entity.

Universal Shelf Registration

At-the-Market (ATM) Programs

In November 2018, following the issuance and sale of 25,038,145 shares under our prior ATM equity distribution plans, or our prior ATM programs, we established a new ATM equity distribution plan, or our new ATM program, pursuant to which up to 28,961,855 additional shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices. During 2018, we issued 19,138,610 shares and raised gross proceeds of $1.1 billion under our new and prior ATM programs. From the inception of our new and prior ATM programs through December 31, 2018, we have issued 33,546,139 shares and raised $2.0 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 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 2018, we issued 166,268 shares and raised approximately $9.1 million under our DRSPP. We did not issue shares under the waiver approval process during 2018. From the inception of our DRSPP through December 31, 2018, we have issued 14,229,810 shares and raised approximately $670.9 million.

Revolving Credit Facility

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revolving credit facility, our current investment grade credit ratings provide for financing at LIBOR plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR.

Term Loans

In June 2015, in conjunction with entering into our previous credit facility, we entered into a $250.0 million senior unsecured term loan maturing June 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 fixes our per annum interest rate on this term loan at 2.62%.

Mortgage Debt

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Notes Outstanding

Our senior unsecured note and bond obligations consist of the following as of December 31, 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	(23		)
	$	5,377

In January 2018, we repaid our $350.0 million of outstanding 2.000% notes, plus accrued and unpaid interest upon maturity. 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 December 31, 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 December 31, 2018 are:



Note Covenants	Required	Actual
Limitation on incurrence of total debt	< 60% of adjusted assets	39.2	%
Limitation on incurrence of secured debt	< 40% of adjusted assets	1.9	%
Debt service coverage (trailing 12 months)⁽¹⁾	> 1.5 x	4.4x
Maintenance of total unencumbered assets	> 150% of unsecured debt	258.4	%

⁽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 January 1, 2018, 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 January 1, 2018, nor does it purport to reflect our debt service coverage ratio for any future period. Our fixed charge coverage ratio is calculated in 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 December 31, 2018 (in thousands, for trailing twelve months):



Net income attributable to the Company	$	363,614
Plus: interest expense, excluding the amortization of deferred financing costs	257,689
Plus: provision for taxes	5,340
Plus: depreciation and amortization	539,780
Plus: provisions for impairment	26,269
Plus: pro forma adjustments	48,766
Less: gain on sales of real estate	(24,643		)
Income available for debt service, as defined	$	1,216,815
Total pro forma debt service charge	$	275,253
Debt service and fixed charge coverage ratio	4.4

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Cash Reserves

Credit Agency Ratings

The borrowing interest rates under our credit facility are based upon our ratings assigned by credit rating agencies. As of December 31, 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 A- with a “stable” outlook, and Fitch Ratings has assigned a rating of BBB+ with a “stable” outlook.

Table of Obligations

The following table summarizes the maturity of each of our obligations as of December 31, 2018 (dollars in millions):



Year of Maturity	Credit Facility ⁽¹⁾		Notes and Bonds⁽²⁾		Term Loans⁽³⁾		Mortgages Payable ⁽⁴⁾		Interest ⁽⁵⁾		Ground Leases Paid by Realty Income⁽⁶⁾		Ground Leases Paid by Our Tenants⁽⁷⁾		Other⁽⁸⁾		Totals
2019	$	—	$	—	$	70.0	$	20.7	$	258.8	$	1.5	$	13.5	$	29.4	$	393.9
2020	—		—		250.0		82.4		253.5		1.4		13.5		—		600.8
2021	—		250.0		—		67.0		237.1		1.2		13.2		—		568.5
2022	—		950.0		—		109.7		226.5		1.2		13.1		—		1,300.5
2023	252.0		750.0		—		6.7		185.6		1.2		13.1		—		1,208.6
Thereafter	—		3,450.0		250.0		11.9		1,052.7		19.8		82.0		—		4,866.4
Totals	$	252.0	$	5,400.0	$	570.0	$	298.4	$	2,214.2	$	26.3	$	148.4	$	29.4	$	8,938.7

⁽¹⁾ The initial term of the credit facility expires in March 2023 and includes, at our option, two six–month extensions.

⁽²⁾ Excludes both non–cash original issuance discounts and premiums recorded on notes payable of $10.5 million and deferred financing costs of $33.7 million at December 31, 2018.

⁽³⁾Excludes deferred financing costs of $1.4 million. In January 2019, we repaid the outstanding principal and interest on the $70.0 million senior unsecured term loan we entered into in conjunction with our acquisition of ARCT in January 2013.

⁽⁴⁾ Excludes both non–cash net premiums recorded on the mortgages payable of $4.4 million and deferred financing costs of $183,000 at December 31, 2018.

⁽⁵⁾ Interest on the term loans, notes, bonds, mortgages payable, and credit facility has been calculated based on outstanding balances as of December 31, 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 $23.6 million of commitments under construction contracts and $5.8 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.

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No Unconsolidated Investments

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

Impact of Real Estate and Credit Markets

Acquisitions During 2018

Portfolio Discussion

Leasing Results


•	Had 267 lease expirations;


•	Re-leased 228 properties; and


•	Sold 42 vacant properties.

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strategic shift that will have a major effect on our operations and financial results and is consistent with our existing disposition strategy to further enhance our real estate portfolio and maximize portfolio returns.

Investments in Existing Properties

Increases in Monthly Dividends to Common Stockholders

We have continued our 50-year policy of paying monthly dividends. In addition, we increased the dividend five times during 2018 and twice in 2019. As of February 2019, we have paid 85 consecutive quarterly dividend increases and increased the dividend 100 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
5th increase	Sep 2018	Oct 2018	$	0.2205	$	0.0005

2019 Dividend increases
1st increase	Dec 2018	Jan 2019	$	0.2210	$	0.0005
2nd increase	Jan 2019	Feb 2019	$	0.2255	$	0.0045

The dividends paid per share during 2018 totaled approximately $2.6305, as compared to approximately $2.5270 during 2017, an increase of $0.1035, or 4.1%.

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.

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In order to prepare our consolidated financial statements according to the rules and guidelines set forth by GAAP, many subjective judgments must be made with regard to critical accounting policies. Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed. When acquiring a property for investment purposes, we typically allocate the cost of real estate acquired, inclusive of transaction costs, to: (1) land, (2) building and improvements, and (3) identified intangible assets and liabilities, based in each case on their relative estimated fair values. Intangible assets and liabilities consist of above-market or below-market lease value and the value of in-place leases, as applicable. 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 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 re-leases, 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 years ended December 31, 2018, 2017 and 2016.

Total Revenue

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



							Change in Dollars
	2018		2017		2016		2018 versus 2017		2017 versus 2016
REVENUE
Rental	$	1,274,596	$	1,166,224	$	1,057,413	$	108,372	$	108,811
Tenant reimbursements	46,950		46,082		43,104		868		2,978
Other	6,292		3,462		2,655		2,830		807
Total revenue	$	1,327,838	$	1,215,768	$	1,103,172	$	112,070	$	112,596

Rental Revenue

The increase in rental revenue in 2018 compared to 2017 is primarily attributable to:


•	The 753 properties (4.8 million square feet) we acquired in 2018, which generated $54.0 million of rent in 2018;


•	The 287 properties (7.2 million square feet) we acquired in 2017, which generated $95.7 million of rent in 2018, compared to $35.8 million in 2017, an increase of $59.9 million;


•	Same store rents generated on 4,629 properties (78.1 million square feet) during 2018 and 2017, increased by $9.5 million, or 0.9%, to $1.08 billion from $1.07 billion; and


•	A net increase in straight-line rent and other non-cash adjustments to rent of $5.7 million in 2018 as compared to 2017; partially offset by


•	A net decrease of $13.2 million relating to properties sold in 2018 and during 2017; and

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•

A net decrease of $7.5 million relating to the aggregate of (i) rental revenue from properties (123 properties comprising 2.7 million square feet) that were available for lease during part of 2018 or 2017, (ii) rental revenue for 5 properties under development, and (iii) lease termination settlements. In aggregate, the revenues for these items totaled $15.9 million in 2018, compared to $23.4 million in 2017.

The increase in rental revenue in 2017 compared to 2016 is primarily attributable to:


•	The 287 properties (7.2 million square feet) we acquired in 2017, which generated $35.8 million of rent in 2017;


•	The 475 properties (7.6 million square feet) we acquired in 2016, which generated $114.4 million of rent in 2017, compared to $39.7 million in 2016, an increase of $74.7 million;


•	Same store rents generated on 4,254 properties (71.1 million square feet) during 2017 and 2016, increased by $9.8 million, or 1.0%, to $973.1 million from $963.3 million; partially offset by


•	A net decrease in straight-line rent and other non-cash adjustments to rent of $3.0 million in 2017 as compared to 2016;


•	A net decrease of $7.2 million relating to properties sold in 2017 and during 2016; and

•

A net decrease of $1.3 million relating to the aggregate of (i) rental revenue from properties (147 properties comprising 2.9 million square feet) that were available for lease during part of 2017 or 2016, (ii) rental revenue for 9 properties under development, and (iii) lease termination settlements. In aggregate, the revenues for these items totaled $26.6 million in 2017, compared to $28.0 million in 2016.

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 5,797 properties in the portfolio at December 31, 2018, 5,769, or 99.5%, are single-tenant properties and the remaining are multi-tenant properties. Of the 5,769 single-tenant properties, 5,692, 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 9.2 years at December 31, 2018. Of our 5,692 leased single-tenant properties, 4,952 or 87.0% 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 $5.9 million in 2018, $6.1 million in 2017, and $5.3 million in 2016. Percentage rent in 2018 was less than 1% of rental revenue and we anticipate percentage rent to be less than 1% of rental revenue in 2019.

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 December 31, 2018, our portfolio of 5,797 properties was 98.6% leased with 80 properties available for lease, as compared to 98.4% leased, with 83 properties available for lease at December 31, 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. The increase in tenant reimbursements in the years presented is primarily due to our increase in acquisitions.

Other Revenue

The increase in other revenue in the years presented was primarily related to higher proceeds from property insurance claims, condemnations and interest income from our investments in United States government money market funds.

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Total Expenses

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



										Increase (Decrease)
	2018			2017			2016			2018 versus 2017			2017 versus 2016
EXPENSES
Depreciation and amortization	$	539,780		$	498,788		$	449,943		$	40,992		$	48,845
Interest	266,020			247,413			219,974			18,607			27,439
General and administrative ⁽²⁾	84,148			58,446			51,966			25,702			6,480
Property (excluding reimbursable)	19,376			23,398			19,761			(4,022		)	3,637
Property (reimbursable)	46,950			46,082			43,104			868			2,978
Income taxes	5,340			6,044			3,262			(704		)	2,782
Provisions for impairment	26,269			14,751			20,664			11,518			(5,913		)
Total expenses	$	987,883		$	894,922		$	808,674		$	92,961		$	86,248
Total revenue ⁽¹⁾	$	1,280,888		$	1,169,686		$	1,060,068
General and administrative expenses as a percentage of total revenue ⁽²⁾	5.1		%	5.0		%	4.9		%
Property expenses net of tenant reimbursements as a percentage of total revenue	1.5		%	2.0		%	1.9		%


⁽¹⁾	Excludes tenant reimbursements revenue.

⁽²⁾

General and administrative expenses for 2018 included a one–time severance payment made to our former CEO in October 2018. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28.3 million; however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18,651 and was recorded to general and administrative expense (see our discussion of Adjusted Funds from Operations Available to Common Stockholders, or AFFO, which is not a financial measure under generally accepted accounting principles, which includes a reconciliation of this amount). In order to present a normalized calculation of our general and administrative expenses as a percentage of total revenue for 2018, we have excluded this one–time executive severance charge to arrive at a normalized general and administrative amount of $65,497, which was used for our calculation.

Depreciation and Amortization

The increase in depreciation and amortization in 2018 and 2017 was primarily due to the acquisition of properties in 2017 and 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):



	2018			2017			2016
Interest on our credit facility, term loans, notes, mortgages and interest rate swaps	$	260,103		$	237,165		$	213,540
Credit facility commitment fees	2,774			2,999			3,050
Amortization of origination and deferred financing costs	8,711			7,975			7,126
Gain on interest rate swaps	(2,733		)	(3,250		)	(1,639		)
Dividend on preferred shares subject to redemption	—			2,257			—
Amortization of net mortgage premiums	(1,520		)	(466		)	(3,414		)
Amortization of net note (premiums) and discounts	(1,256		)	884			1,470
Capital lease obligation	310			310			310
Interest capitalized	(369		)	(461		)	(469		)
Interest expense	$	266,020		$	247,413		$	219,974

Credit facility, term loans, mortgages and notes
Average outstanding balances (dollars in thousands)	$	6,662,952		$	5,877,862		$	5,081,663
Average interest rates	3.90		%	3.99		%	4.11		%

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The increases in interest expense for the years presented are primarily due to the issuances of notes in each respective year. These increases were partially offset by note redemptions in each respective year and lower outstanding debt balances on mortgages payable as a result of mortgage payoffs in 2018 and 2017.

Additionally, before we implemented hedge accounting in the fourth quarter of 2018, we adjusted the carrying value of our interest rate swaps to fair value each quarter through interest expense. Following the adoption of hedge accounting, we record this change in fair value within other comprehensive income.

At December 31, 2018, the weighted average interest rate on our:


•	Credit facility outstanding borrowings of $252.0 million was 3.2%;


•	Term loans outstanding of $570.0 million (excluding deferred financing costs of $1.4 million) was 3.3%;


•	Mortgages payable of $298.4 million (excluding net premiums totaling $4.4 million and deferred financing costs of $183,000 on these mortgages) was 5.1%;


•	Notes and bonds payable of $5.4 billion (excluding unamortized net original issuance premiums of $10.5 million and deferred financing costs of $33.7 million) was 4.0%; and


•	Combined outstanding notes, bonds, mortgages, term loan and credit facility borrowings of $6.5 billion was 4.0%.

In January 2019, we paid off the outstanding balance and interest on the $70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT.

General and Administrative Expenses

General and administrative expenses increased during 2018 primarily due to a severance charge of $18.7 million for our former CEO who departed the company in October 2018, and higher corporate–level professional fees. General and administrative expenses in both 2018 and 2017 increased due to higher compensation costs related to higher headcount. In January 2019, we had 165 employees, as compared to 152 employees in January 2018, and 146 employees in January 2017.

Property Expenses (excluding reimbursable)

Property expenses (excluding reimbursable) consist of costs associated with unleased properties, non-net-leased properties and general portfolio 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 December 31, 2018, 80 properties were available for lease, as compared to 83 at December 31, 2017 and 84 at December 31, 2016.

The 2018 decrease in property expenses (excluding reimbursable) was primarily attributable to lower bad debt expense, while the 2017 increase was the result of higher property taxes and bad debt expense.

Property Expenses (reimbursable)

The increase in property expenses (reimbursable) in both 2018 and 2017 was primarily attributable to the increased portfolio size, which contributed to higher contractually obligated reimbursements from tenants for recoverable real estate taxes and operating expenses primarily due to our acquisitions in each year.

Income Taxes

Income taxes are for city and state income and franchise taxes paid by us and our subsidiaries. These taxes from operations increased from 2017 to 2018 due to acquisitions; however, the overall tax expense decreased due to a one-time charge in 2017 that increased tax expenses at the end of 2017. The Tax Cuts & Jobs Act, passed at the end of 2017, reduced the corporate tax rate, which reduced the value of the deferred tax assets in 2017 and increased our tax expense in 2017. The increase from 2016 to 2017 was primarily due to increased activity in our taxable REIT subsidiary.

Provisions for Impairment

In 2018, we recorded total provisions for impairment of $26.3 million on six properties classified as held for sale, three properties classified as held for investment, and 35 sold properties. In 2017, we recorded total provisions for impairment of $14.8 million on one property classified as held for sale, three properties classified as held for investment, and 22 sold properties. In 2016, we recorded total provisions for impairment of $20.7 million on one property classified as held for sale and 38 sold properties.

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Other Items

Gain on Sales of Real Estate

During 2018, we sold 128 properties for $142.3 million, which resulted in a gain of $24.6 million.

During 2017, we sold 59 properties for $167.0 million, which resulted in a gain of $40.9 million.

During 2016, we sold 77 properties for $90.5 million, which resulted in a gain of $22.0 million. Additionally, during 2016 we sold our former corporate headquarters building for $8.6 million.

At December 31, 2018, we classified real estate with a carrying amount of $16.6 million as held for sale on our balance sheet. In 2019, we intend to continue our active disposition efforts to further enhance our real estate portfolio and anticipate $75 to $100 million in yet to be identified property sales for all of 2019. We intend 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 next 12 months at our estimated values or be able to invest the property sale proceeds in new properties.

Loss on Extinguishment of Debt

In December 2017, we completed the early redemption on all $550.0 million of outstanding 6.75% notes due August 2019, plus accrued and unpaid interest. As a result of the early redemption, we recognized a $42.4 million loss on extinguishment of debt, which represents $0.15 on a diluted per common share basis.

Preferred Stock Dividends

We did not pay any preferred stock dividends in 2018. Preferred stock dividends totaled $3.9 million in 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. Preferred stock dividends totaled $27.1 million in 2016.

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 $363.6 million in 2018, compared to $301.5 million in 2017, an increase of $62.1 million. On a diluted per common share basis, net income was $1.26 in 2018, as compared to $1.10 in 2017, an increase of $0.16, or 14.5%. Net income available to common stockholders was $288.5 million in 2016, or $1.13 on a diluted per common share basis.

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. We have re-labeled our Adjusted EBITDA to “Adjusted EBITDAre” in order to be consistent with the NAREIT definition, other than the one-time executive severance charge described below. We define Adjusted EBITDAre, a non-GAAP financial measure, for the most recent quarter, as earnings (net income) before (i) interest expense, including non-cash gain on swaps, (ii) income and franchise taxes, (iii) real estate depreciation and amortization, (iv) impairment losses, (v) gain on sales of real estate, and (vi) executive severance charge (as described in the Adjusted Funds from Operations section). Our Adjusted EBITDAre may not be comparable to Adjusted EBITDAre reported by other companies or as defined by

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NAREIT, and other companies may interpret or define Adjusted EBITDAre differently than we do. Management believes Adjusted EBITDAre to be a meaningful measure of a REIT’s performance because it 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.



Dollars in thousands	2018			2017			2016
Net income	$	85,303		$	60,952		$	92,724
Interest ⁽¹⁾	70,635			103,903			48,935
Income taxes	1,607			3,424			449
Depreciation and amortization	137,711			127,033			117,752
Executive severance charge ⁽²⁾	18,651			—			—
Impairment loss	1,235			6,679			3,709
Gain on sales of real estate	(5,825		)	(23,208		)	(6,696		)
Quarterly Adjusted EBITDAre	$	309,317		$	278,783		$	256,873

Annualized Adjusted EBITDAre ⁽³⁾	$	1,237,268		$	1,115,132		$	1,027,492
Total Debt	$	6,499,976		$	6,111,471		$	5,839,605
Debt/Adjusted EBITDAre	5.3			5.5			5.7

⁽¹⁾ Interest expense includes a loss on extinguishment of debt of $42.4 million for the year ended December 31, 2017.

⁽²⁾ Reflects an $18.7 million severance charge for our former CEO upon his departure in October 2018.

⁽³⁾We calculate Annualized Adjusted EBITDAre by multiplying the Quarterly Adjusted EBITDAre by four.

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

In 2018, our FFO increased by $130.6 million, or 16.9%, to $903.3 million, as compared to $772.7 million in 2017. On a diluted per common share basis, FFO was $3.12 in 2018, as compared to $2.82 in 2017, an increase of $0.30, or 10.6%. In 2016, FFO was $735.4 million, or $2.88 on a diluted per common share basis. Our FFO in 2018 was impacted by a severance payment made to our former CEO in October 2018. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28.3 million; however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18.7 million, equivalent to $0.06 per share. Our FFO in 2017 was impacted by a loss of $42.4 million, or $0.15 per share, on extinguishment of debt upon the early redemption on all $550.0 million of our outstanding 6.75% notes due August 2019 during December 2017. FFO was also impacted by a non-cash redemption charge of $13.4 million, or $0.05 per share, upon the redemption of the 6.625% Monthly Income Class F Preferred Stock that was redeemed in April 2017. This charge is based on the excess of redemption value over the carrying value of the 6.625% Monthly Income Class F Preferred Stock that represents the original issuance cost that we paid in 2012. FFO for 2017 also includes the early redemption on all $550.0 million of our outstanding 6.75% notes due August 15, 2019, plus accrued and unpaid interest.

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):

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	2018			2017			2016
Net income available to common stockholders	$	363,614		$	301,514		$	288,491
Depreciation and amortization	539,780			498,788			449,943
Depreciation of furniture, fixtures and equipment	(650		)	(557		)	(747		)
Provisions for impairment on investment properties	26,269			14,751			20,664
Gain on sales of investment properties	(24,643		)	(40,898		)	(21,979		)
FFO adjustments allocable to noncontrolling interests	(1,113		)	(933		)	(977		)
FFO available to common stockholders	$	903,257		$	772,665		$	735,395
FFO allocable to dilutive noncontrolling interests	867			877			1,435
Diluted FFO	$	904,124		$	773,542		$	736,830

FFO per common share:
Basic	$	3.12		$	2.83		$	2.88
Diluted	$	3.12		$	2.82		$	2.88
Distributions paid to common stockholders	$	761,582		$	689,294		$	610,516
FFO available to common stockholders in excess of distributions paid to common stockholders	$	141,675		$	83,371		$	124,879
Weighted average number of common shares used for computation per share:
Basic	289,427,430			273,465,680			255,066,500
Diluted	289,923,984			273,936,752			255,822,679

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’s 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.

ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (AFFO)

In 2018, our AFFO increased by $86.0 million, or 10.3%, to $924.6 million, as compared to $838.6 million in 2017. On a diluted per common share basis, AFFO was $3.19 in 2018, as compared to $3.06 in 2017, an increase of $0.13, or 4.2%. In 2016, AFFO was $736.4 million, or $2.88 on a diluted per common share basis. We consider AFFO to be an appropriate supplemental measure of our performance. Most companies in our industry use a similar measurement, but they may use the term “CAD” (for Cash Available for Distribution), “FAD” (for Funds Available for Distribution) or other terms.

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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):



	2018			2017			2016
Net income available to common stockholders	$	363,614		$	301,514		$	288,491
Cumulative adjustments to calculate FFO⁽¹⁾	539,643			471,151			446,904
FFO available to common stockholders	903,257			772,665			735,395
Executive severance charge ⁽²⁾	18,651			—			—
Loss on extinguishment of debt	—			42,426			—
Excess of redemption value over carrying value of Class F preferred share redemption	—			13,373			—
Amortization of share-based compensation	15,470			13,946			12,007
Amortization of deferred financing costs⁽³⁾	3,991			5,326			5,352
Amortization of net mortgage premiums	(1,520		)	(466		)	(3,414		)
Gain on interest rate swaps	(2,733		)	(3,250		)	(1,639		)
Leasing costs and commissions	(3,907		)	(1,575		)	(797		)
Recurring capital expenditures	(1,084		)	(912		)	(679		)
Straight-line rent	(24,687		)	(17,191		)	(19,451		)
Amortization of above and below-market leases	16,852			14,013			9,297
Other adjustments⁽⁴⁾	268			283			303
Total AFFO available to common stockholders	$	924,558		$	838,638		$	736,374
AFFO allocable to dilutive noncontrolling interests	901			1,178			1,455
Diluted AFFO	$	925,459		$	839,816		$	737,829
AFFO per common share
Basic	$	3.19		$	3.07		$	2.89
Diluted	$	3.19		$	3.06		$	2.88
Distributions paid to common stockholders	$	761,582		$	689,294		$	610,516
AFFO available to common stockholders in excess of distributions paid to common stockholders	$	162,976		$	149,344		$	125,858
Weighted average number of common shares used for computation per share:
Basic	289,427,430			273,465,680			255,066,500
Diluted	289,923,984			274,024,934			255,822,679

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

⁽²⁾The executive severance charge represents the incremental costs incurred upon our former CEO's departure in October 2018 per the reconciliation below:



Cash	$	9,817
Stock compensation	17,902
Professional fees	574
Total value of severance	28,293
Amount accrued for CEO compensation prior to separation	(9,642		)
Incremental severance	$	18,651

⁽³⁾ 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.

⁽⁴⁾ Includes adjustments allocable to both non-controlling interests and capital lease obligations.

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.

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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.

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.

Item 7A: 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 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 December 31, 2018. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):

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Expected Maturity Data



Year of maturity	Fixed rate debt		Weighted average rate on fixed rate debt		Variable rate debt		Weighted average rate on variable rate debt
2019	$	4.7	5.61	%	$	86.0	3.58	%
2020	332.4		3.21		—		—
2021	317.0		5.73		—		—
2022	1,059.7		3.43		—		—
2023	756.7		4.65		252.0		3.11
Thereafter	3,711.9		4.00		—		—
Totals⁽¹⁾	$	6,182.4	4.03	%	$	338.0	3.23	%
Fair Value ⁽²⁾	$	6,219.7			$	338.0

⁽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 December 31, 2018, the unamortized balance of net premiums on mortgages payable is $4.4 million, the unamortized balance of net original issuance premiums on notes payable is $10.5 million, and the balance of deferred financing costs on mortgages payable is $183,000, on notes payable is $33.7 million, and on term loans is $1.4 million.

⁽²⁾We base the estimated fair value of the fixed rate senior notes and bonds at December 31, 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 December 31, 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 December 31, 2018.

The table incorporates only those exposures that exist as of December 31, 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 two mortgages with principal balances totaling $23.3 million at December 31, 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 $16.0 million at December 31, 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 $252.0 million at December 31, 2018, a 1% change in interest rates would change our interest rate costs by $2.5 million per year.

Item 8: Financial Statements and Supplementary Data

Table of Contents



A.	Reports of Independent Registered Public Accounting Firm

B.	Consolidated Balance Sheets, December 31, 2018 and 2017

C.	Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2018, 2017 and 2016

D.	Consolidated Statements of Equity, Years ended December 31, 2018, 2017 and 2016

E.	Consolidated Statements of Cash Flows, Years ended December 31, 2018, 2017 and 2016

F.	Notes to Consolidated Financial Statements

G.	Consolidated Quarterly Financial Data (unaudited) for 2018 and 2017

H.	Schedule III Real Estate and Accumulated Depreciation

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

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Realty Income Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Realty Income Corporation and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

(signed) KPMG LLP

We have served as the Company’s auditor since 1993.

San Diego, California

February 21, 2019

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Realty Income Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Realty Income Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 21, 2019 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(signed) KPMG LLP

San Diego, California

February 21, 2019

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2018 and 2017

(dollars in thousands, except per share data)



	2018			2017
ASSETS
Real estate, at cost:
Land	$	4,682,660		$	4,080,400
Buildings and improvements	11,858,806			10,936,069
Total real estate, at cost	16,541,466			15,016,469
Less accumulated depreciation and amortization	(2,714,534		)	(2,346,644		)
Net real estate held for investment	13,826,932			12,669,825
Real estate held for sale, net	16,585			6,674
Net real estate	13,843,517			12,676,499
Cash and cash equivalents	10,387			6,898
Accounts receivable, net	144,991			119,533
Lease intangible assets, net	1,199,597			1,194,930
Goodwill	14,630			14,970
Other assets, net	47,361			45,336
Total assets	$	15,260,483		$	14,058,166

LIABILITIES AND EQUITY
Distributions payable	$	67,789		$	60,799
Accounts payable and accrued expenses	133,765			109,523
Lease intangible liabilities, net	310,866			268,796
Other liabilities	127,109			116,869
Line of credit payable	252,000			110,000
Term loans, net	568,610			445,286
Mortgages payable, net	302,569			325,941
Notes payable, net	5,376,797			5,230,244
Total liabilities	7,139,505			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, 303,742,090 shares issued and outstanding as of December 31, 2018 and 284,213,685 shares issued and outstanding as of December 31, 2017	10,754,495			9,624,264
Distributions in excess of net income	(2,657,655		)	(2,252,763		)
Accumulated other comprehensive loss	(8,098		)	—
Total stockholders’ equity	8,088,742			7,371,501
Noncontrolling interests	32,236			19,207
Total equity	8,120,978			7,390,708
Total liabilities and equity	$	15,260,483		$	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 AND COMPREHENSIVE INCOME

Years Ended December 31, 2018, 2017 and 2016

(dollars in thousands, except per share data)



	2018			2017			2016
REVENUE
Rental	$	1,274,596		$	1,166,224		$	1,057,413
Tenant reimbursements	46,950			46,082			43,104
Other	6,292			3,462			2,655
Total revenue	1,327,838			1,215,768			1,103,172

EXPENSES
Depreciation and amortization	539,780			498,788			449,943
Interest	266,020			247,413			219,974
General and administrative	84,148			58,446			51,966
Property (including reimbursable)	66,326			69,480			62,865
Income taxes	5,340			6,044			3,262
Provisions for impairment	26,269			14,751			20,664
Total expenses	987,883			894,922			808,674
Gain on sales of real estate	24,643			40,898			21,979
Loss on extinguishment of debt	—			(42,426		)	—
Net income	364,598			319,318			316,477
Net income attributable to noncontrolling interests	(984		)	(520		)	(906		)
Net income attributable to the Company	363,614			318,798			315,571
Preferred stock dividends	—			(3,911		)	(27,080		)
Excess of redemption value over carrying value of preferred shares redeemed	—			(13,373		)	—
Net income available to common stockholders	$	363,614		$	301,514		$	288,491

Amounts available to common stockholders per common share:
Net income, basic and diluted	$	1.26		$	1.10		$	1.13

Weighted average common shares outstanding:
Basic	289,427,430			273,465,680			255,066,500
Diluted	289,923,984			273,936,752			255,624,250

Other comprehensive income:
Net income attributable to the Company	$	363,614		$	318,798		$	315,571
Change in fair value of interest rate swaps	(8,618		)	—			$	—
Amortization of interest rate swaps	520			—			—
Comprehensive income attributable to the Company	$	355,516		$	318,798		$	315,571

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

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended December 31, 2018, 2017 and 2016

(dollars in thousands)



	Shares of preferred stock		Shares of common stock	Preferred stock and paid in capital			Common stock and paid in capital			Distributions in excess of net income			Accumulated other comprehensive loss			Total stockholders’ equity			Noncontrolling interests			Total equity
Balance, December 31, 2015	16,350,000		250,416,757	$	395,378		$	7,666,428		$	(1,530,210	)	$	—		$	6,531,596		$	21,737		$	6,553,333
Net income	—		—	—			—			315,571			—			315,571			906			316,477
Distributions paid and payable	—		—	—			—			(642,529		)	—			(642,529		)	(12,682		)	(655,211		)
Share issuances, net of costs	—		9,449,167	—			557,636			—			—			557,636			—			557,636
Contributions by noncontrolling interests	—		—	—			—			—			—			—			15,906			15,906
Redemption of common units	—		103,182	—			(2,865		)	—			—			(2,865		)	(6,161		)	(9,026		)
Reallocation of equity	—		—	—			(543		)	—			—			(543		)	543			—
Share-based compensation, net	—		199,153	—			7,938			—			—			7,938			—			$	7,938
Balance, December 31, 2016	16,350,000		260,168,259	$	395,378		$	8,228,594		$	(1,857,168	)	$	—		$	6,766,804		$	20,249		$	6,787,053
Net income	—		—	—			—			318,798			—			318,798			520			319,318
Distributions paid and payable	—		—	—			—			(701,020		)	—			(701,020		)	(2,047		)	(703,067		)
Share issuances, net of costs	—		23,957,741	—			1,388,080			—			—			1,388,080			—			1,388,080
Contributions by noncontrolling interests	—		—	—			—			—			—			—			—			—
Preferred shares redeemed	(16,350,000	)	—	(395,378		)	—			(13,373		)	—			(408,751		)	—			(408,751		)
Reallocation of equity	—		—	—			(485		)	—			—			(485		)	485			—
Share-based compensation, net	—		87,685	—			8,075			—			—			8,075			—			$	8,075
Balance, December 31, 2017	—		284,213,685	$	—		$	9,624,264		$	(2,252,763	)	$	—		$	7,371,501		$	19,207		$	7,390,708
Net income	—		—	—			—			363,614			—			363,614			984			364,598
Other comprehensive loss	—		—	—			—			—			(8,098		)	(8,098		)	—			(8,098		)
Distributions paid and payable	—		—	—			—			(768,506		)	—			(768,506		)	(1,996		)	(770,502		)
Share issuances, net of costs	—		19,304,878	—			1,119,297			—						1,119,297			—			1,119,297
Contributions by noncontrolling interests	—		—	—			—			—			—			—			18,848			18,848
Redemption of common units	—		88,182	—			2,829			—			—			2,829			(5,581		)	(2,752		)
Reallocation of equity	—		—	—			(774		)	—			—			(774		)	774			—
Share-based compensation, net	—		135,345	—			8,879			—			—			8,879			—			$	8,879
Balance, December 31, 2018	—		303,742,090	$	—		$	10,754,495		$	(2,657,655	)	$	(8,098	)	$	8,088,742		$	32,236		$	8,120,978

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

Years Ended December 31, 2018, 2017 and 2016

(dollars in thousands)



	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	364,598		$	319,318		$	316,477
Adjustments to net income:
Depreciation and amortization	539,780			498,788			449,943
Loss on extinguishment of debt	—			42,426			—
Amortization of share-based compensation	27,267			13,946			12,007
Non-cash revenue adjustments	(7,835		)	(3,927		)	(10,154		)
Amortization of net premiums on mortgages payable	(1,520		)	(466		)	(3,414		)
Amortization of net (premiums) discounts on notes payable	(1,256		)	884			1,470
Amortization of deferred financing costs	9,021			8,274			7,434
Gain on interest rate swaps	(2,733		)	(3,250		)	(1,639		)
Gain on sales of real estate	(24,643		)	(40,898		)	(21,979		)
Provisions for impairment on real estate	26,269			14,751			20,664
Change in assets and liabilities
Accounts receivable and other assets	(6,901		)	(92		)	(5,414		)
Accounts payable, accrued expenses and other liabilities	18,695			26,096			34,468
Net cash provided by operating activities	940,742			875,850			799,863
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(1,769,335		)	(1,413,270		)	(1,798,892		)
Improvements to real estate, including leasing costs	(25,350		)	(15,247		)	(13,426		)
Proceeds from sales of real estate	142,286			166,976			99,096
Insurance and other proceeds received	7,648			14,411			—
Collection of loans receivable	5,267			123			12,515
Non-refundable escrow deposits for pending acquisitions	(200		)	(7,500		)	—
Net cash used in investing activities	(1,639,684		)	(1,254,507		)	(1,700,707		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(761,582		)	(689,294		)	(610,516		)
Cash dividends to preferred stockholders	—			(6,168		)	(27,080		)
Borrowings on line of credit	1,774,000			1,465,000			3,879,000
Payments on line of credit	(1,632,000		)	(2,475,000		)	(2,997,000		)
Principal payment on term loan	(125,866		)	—			—
Proceeds from notes and bonds payable issued	497,500			2,033,041			592,026
Principal payment on notes payable	(350,000		)	(725,000		)	(275,000		)
Proceeds from term loan	250,000			—			—
Proceeds from mortgages payable	—			—			9,963
Payments upon extinguishment of debt	—			(41,643		)	—
Principal payments on mortgages payable	(21,905		)	(139,725		)	(231,743		)
Redemption of preferred stock	—			(408,750		)	—
Proceeds from common stock offerings, net	—			704,938			383,572
Proceeds from dividend reinvestment and stock purchase plan	9,114			69,931			10,252
Proceeds from At-the-Market (ATM) program	1,125,364			621,697			166,781
Redemption of common units	(2,752		)	—			(9,026		)
Distributions to noncontrolling interests	(1,930		)	(2,043		)	(12,725		)
Debt issuance costs	(18,685		)	(17,510		)	(5,274		)
Other items, including shares withheld upon vesting	(33,387		)	(14,356		)	(7,038		)
Net cash provided by financing activities	707,871			375,118			866,192
Net increase (decrease) in cash, cash equivalents and restricted cash	8,929			(3,539		)	(34,652		)
Cash, cash equivalents and restricted cash, beginning of period	12,142			15,681			50,333
Cash, cash equivalents and restricted cash, end of period	$	21,071		$	12,142		$	15,681

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

December 31, 2018, 2017, and 2016

1. Organization and Operation

Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) is organized as a Maryland corporation. We invest in commercial real estate and have elected to be taxed as a real estate investment trust, or REIT.

At December 31, 2018, we owned 5,797 properties, located in 49 states and Puerto Rico, containing over 93.3 million leasable square feet.

Information with respect to number of properties, square feet, average initial lease term and weighted average contractual lease rate is unaudited.

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

Federal Income Taxes. We have elected to be taxed as a REIT, as defined above, under the Internal Revenue Code of 1986, as amended, or the Code. 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 and comprehensive income represent amounts paid by Realty Income and its subsidiaries for city and state income and franchise taxes.

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

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

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.



	2018	2017	2016
Weighted average shares used for the basic net income per share computation	289,427,430	273,465,680	255,066,500
Incremental shares from share-based compensation	179,532	154,050	240,728
Weighted average partnership common units convertible to common shares that were dilutive	317,022	317,022	317,022
Weighted average shares used for diluted net income per share computation	289,923,984	273,936,752	255,624,250
Unvested shares from share-based compensation that were anti-dilutive	13,148	32,205	475
Weighted average partnership common units convertible to common shares that were anti-dilutive	297,576	88,182	198,429

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

Other revenue, which comprises property-related revenue not included in rental revenue or tenant reimbursements, was $6.3 million in 2018, $3.5 million in 2017 and $2.7 million in 2016.

Principles of Consolidation. 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 11). We have no unconsolidated investments.

Cash Equivalents and Restricted Cash. We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Our cash equivalents are primarily investments in United States government money market funds. Restricted cash includes cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e. escrow deposits for future acquisitions).

Cash accounts maintained on behalf of Realty Income in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, Realty Income has not experienced any losses in such accounts.

Gain on Sales of Properties. When real estate is sold, the related net book value of the applicable assets is removed and a gain from the sale is recognized in our consolidated statements of income and comprehensive income. We record a gain from the sale of real estate provided that various criteria, relating to the terms of the sale and any subsequent involvement by us with the real estate, have been met.

Allocation of the Purchase Price of Real Estate Acquisitions. A majority of our acquisitions qualify as asset acquisitions and the transaction costs associated with those acquisitions are capitalized. 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 markets 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.

Our estimated fair value determinations are based on management’s judgment, utilizing various factors, including: (1) market conditions, (2) industry that the tenant operates in, (3) characteristics of the real estate, i.e.: location, size, demographics, value and comparative rental rates, (4) tenant credit profile, (5) store profitability and the importance of the location of the real estate to the operations of the tenant’s business, and/or (6) real estate valuations, prepared internally by our real estate research department or, in certain circumstances, by an independent valuation firm. Our methodologies for measuring fair value related to the allocation of the purchase price of real estate acquisitions include both observable market data (and thus should be categorized as level 2 on the Financial Accounting Standards Board, or FASB’s, three-level valuation hierarchy) and unobservable inputs that

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reflect our own internal assumptions and calculations (and thus should be categorized as level 3 on FASB’s three-level valuation hierarchy).

The fair value of the tangible assets of an acquired property with an in-place operating lease (which includes land and buildings/improvements) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and buildings/improvements based on our determination of the fair value of these assets. Our fair value determinations are based primarily on internally prepared real estate valuations for each property, and consider estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases. In allocating the fair value to identified intangibles for above-market or below-market leases, an amount is recorded based on the present value of the difference between (i) the contractual amount to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rate for the corresponding in-place lease, measured over the remaining term of the lease.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income and comprehensive income. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are recorded to revenue or expense as appropriate.

In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. Our assumed net debt premiums are amortized as a reduction to interest expense over the remaining term of the respective mortgages.

In allocating noncontrolling interests, amounts are recorded based on the proportional share of equity issued or contributions made at the date of acquisition, as determined by the terms of the applicable agreement.

Depreciation and Amortization. Land, buildings and improvements are recorded and stated at cost. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized. We cease capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in any event no later than one year from the completion of major construction activity.

Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:



Buildings	25 years or 35 years
Building improvements	4 to 20 years
Tenant improvements and lease commissions	The shorter of the term of the related lease or useful life
Acquired in-place leases	Remaining terms of the respective leases

Provision for Impairment. 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 re-leases, 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.

If a property was previously reclassified as held for sale but the applicable criteria for this classification are no longer met, the property is reclassified to real estate held for investment. A property that is reclassified to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as

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held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment, or (ii) the fair value at the date of the subsequent decision not to sell.

Seventeen properties were classified as held for sale at December 31, 2018. We do not depreciate properties that are classified as held for sale.

Goodwill. We assign a portion of our 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. Goodwill is tested for impairment during the second quarter of each year as well as when events or circumstances occur indicating that our goodwill might be impaired. Based on our analysis of goodwill during the second quarters of 2018, 2017 and 2016, we determined, that the fair values of our reporting units were not more likely than not to be less than their respective carrying amounts and no impairment was recorded on our existing goodwill during 2018, 2017 and 2016.

Equity Offering Costs. Underwriting commissions and offering costs have been reflected as a reduction of additional paid-in-capital on our consolidated balance sheets.

Noncontrolling Interests. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests acquired prior to our adoption of ASU 2017-1, were recorded initially at fair value based on the price of the applicable units issued or contributions made, and subsequently adjusted each period for distributions, additional contributions and the allocation of net income attributable to the noncontrolling interests. Noncontrolling interests issued or assumed subsequent to our adoption of ASU 2017-01 on October 1, 2017, were recorded based on the proportional share of equity in the entity.

Derivative and Hedging Activities. We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. We may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.

As of December 31, 2018 we had three interest rate swaps in place, including one on each of our $250.0 million unsecured term loans and the third on an assumed mortgage loan. Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. In October 2018, we designated these three interest rate swaps as hedges and adopted hedge accounting treatment in accordance with Topic 815, "Derivatives and Hedging." From the adoption date through the end of 2018, the effective portion of gains or losses on our interest rate swaps were recorded in accumulated other comprehensive loss on our consolidated balance sheet as of December 31, 2018, instead of through interest expense on our consolidated statements of income and comprehensive income.

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

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-9, 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

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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.

In February 2016, the FASB issued ASU 2016-2 (Topic 842, Leases), 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. We expect our right of use asset to be approximately 1% percent of our total assets upon adoption. The amendments included in this topic are effective, for interim and annual periods beginning after December 15, 2018. We adopted this standard when it becomes effective as of January 1, 2019, and we elected the practical expedients available for implementation under the standard.

In August 2017, the FASB issued ASU 2017-12, which amended Topic 815, Derivatives and Hedging. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. We early adopted this standard effective as of October 24, 2018, and it did not have a material impact on our consolidated financial statements.

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



	December 31,			December 31,
A. Lease intangible assets, net, consist of the following at:	2018			2017
In-place leases	$	1,321,979		$	1,272,897
Accumulated amortization of in-place leases	(546,573		)	(444,221		)
Above-market leases	583,109			487,933
Accumulated amortization of above-market leases	(158,918		)	(121,679		)
	$	1,199,597		$	1,194,930



	December 31,		December 31,
B. Other assets, net, consist of the following at:	2018		2017
Prepaid expenses	$	14,695	$	12,851
Credit facility origination costs	14,248		4,366
Impounds related to mortgages payable	9,555		4,565
Corporate assets, net	5,681		6,074
Restricted escrow deposits	1,129		679
Non-refundable escrow deposits for pending acquisitions	200		7,500
Notes receivable issued in connection with property sales	—		5,267
Receivable for property rebuilds	—		3,919
Other items	1,853		115
	$	47,361	$	45,336



	December 31,		December 31,
C. Distributions payable consist of the following declared distributions at:	2018		2017
Common stock distributions	$	67,636	$	60,713
Noncontrolling interests distributions	153		86
	$	67,789	$	60,799

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	December 31,		December 31,
D. Accounts payable and accrued expenses consist of the following at:	2018		2017
Notes payable - interest payable	$	73,094	$	64,058
Property taxes payable	14,511		11,718
Mortgages, term loans, credit line - interest payable and interest rate swaps	8,597		2,360
Accrued costs on properties under development	8,137		2,681
Other items	29,426		28,706
	$	133,765	$	109,523



	December 31,			December 31,
E. Lease intangible liabilities, net, consist of the following at:	2018			2017
Below-market leases	$	404,938		$	340,906
Accumulated amortization of below-market leases	(94,072		)	(72,110		)
	$	310,866		$	268,796



	December 31,		December 31,
F. Other liabilities consist of the following at:	2018		2017
Rent received in advance and other deferred revenue	$	115,380	$	105,284
Security deposits	6,093		6,259
Capital lease obligations	5,636		5,326
	$	127,109	$	116,869

4. Investments in Real Estate

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

A. Acquisitions during 2018 and 2017

During 2018, we invested $1.8 billion in 764 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.4%. The 764 new properties and properties under development or expansion are located in 39 states, will contain approximately 5.2 million leasable square feet, and are 100% leased with a weighted average lease term of 14.8 years. The tenants occupying the new properties operate in 21 industries and the property types consist of 96.3% retail and 3.7% 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 December 31, 2018.

The $1.8 billion invested during 2018 was allocated as follows: $657.9 million to land, $1.0 billion to buildings and improvements, $135.2 million to intangible assets related to leases, and $35.8 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during 2018 generated total revenues of $57.3 million and net income of $30.9 million during the year ended December 31, 2018.

In comparison, during 2017, we invested $1.52 billion in 303 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.4%. The 303 new properties and properties under development or expansion were located in 40 states, contained approximately 7.8 million leasable square feet, and were 100% leased with a weighted average lease term of 14.4 years. The tenants occupying the new properties operated in 23 industries and the property types consisted of 94.5% retail and 5.5% industrial, based on rental revenue.

The $1.52 billion invested during 2017 was allocated as follows: $365.0 million to land, $955.2 million to buildings and improvements, $246.3 million to intangible assets related to leases, and $47.0 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during 2017 generated total revenues of $37.1 million and net income of $17.9 million during the year ended December 31, 2017.

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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 initial weighted average contractual lease rate is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. Of the $1.8 billion we invested during 2018, $80.3 million was invested in 14 properties under development or expansion with an initial weighted average contractual lease rate of 6.9%. Of the $1.52 billion we invested during 2017, $21.2 million was invested in 17 properties under development or expansion with an initial weighted average contractual lease rate of 6.9%.

B. Investments in Existing Properties

During 2018, we capitalized costs of $17.9 million on existing properties in our portfolio, consisting of $3.9 million for re-leasing costs, $1.1 million for recurring capital expenditures and $12.9 million for non-recurring building improvements. In comparison, during 2017, we capitalized costs of $12.7 million on existing properties in our portfolio, consisting of $1.6 million for re-leasing costs, $912,000 for recurring capital expenditures and $10.2 million for non-recurring building improvements.

C. Properties with Existing Leases

Of the $1.8 billion we invested during 2018, approximately $425.5 million was used to acquire 205 properties with existing leases. In comparison, of the $1.52 billion we invested during 2017, approximately $1.1 billion was used to acquire 178 properties with existing leases. The value of the in-place and above-market leases is recorded to lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to lease intangible liabilities, net on our consolidated balance sheets.

The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for 2018, 2017, and 2016 were $106.6 million, $104.8 million, and $94.0 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 and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for 2018, 2017, and 2016 were $16.9 million, $14.0 million, and $9.3 million, respectively. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense as appropriate.

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2018 (in thousands):



	Net decrease to rental revenue			Increase to amortization expense
2019	$	(17,550	)	$	99,057
2020	(16,820		)	93,337
2021	(15,622		)	85,174
2022	(13,918		)	73,577
2023	(12,504		)	63,422
Thereafter	(36,911		)	360,839
Totals	$	(113,325	)	$	775,406

5. Credit Facility

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extensions. Our revolving credit facility also has a $1.0 billion expansion feature. Under our revolving credit facility, our investment grade credit ratings as of December 31, 2018 provide for financing at LIBOR plus 0.775% with a facility commitment fee of 0.125%, for all-in drawn pricing of 0.90% over LIBOR. The borrowing rate is subject to an interest rate floor and may change if our investment grade credit ratings were to change. We also have other interest rate options available to us under our revolving credit facility. Our revolving credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

At December 31, 2018, credit facility origination costs of $14.2 million are included in other assets, net on our consolidated balance sheet. This balance includes $12.9 million of new credit facility origination costs incurred during 2018 as a result of entering into our new revolving credit facility. These costs are being amortized over the remaining term of our revolving credit facility.

At December 31, 2018, we had a borrowing capacity of $2.75 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $252.0 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 revolving credit facility was 2.9% during 2018 and 2.0% during 2017. At December 31, 2018 and 2017, the weighted average interest rate on borrowings outstanding was 3.2% and 4.5%, respectively. Our credit facility is subject to various leverage and interest coverage ratio limitations, and at December 31, 2018, we were in compliance with the covenants on our credit facility.

6. Term Loans

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

In June 2015, in conjunction with entering into our previous credit facility, we entered into a $250.0 million senior unsecured term loan maturing in June 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 fixes 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, until its termination in January 2018, effectively fixed our per annum interest rate on this term loan at 2.05%. In 2018, we entered into two separate six–month extensions of this loan, during which periods the interest was born at the current one–month LIBOR, plus 0.90%. In January 2019, we paid off the outstanding principal and interest on this term loan (see note 21).

Deferred financing costs of $1.2 million incurred in conjunction with the $250.0 million term loan maturing June 2020, $1.1 million incurred in conjunction with the $250.0 million term loan maturing March 2024 and $410,000 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 $1.4 million at December 31, 2018 and $580,000 at December 31, 2017, is included within term loans, net on our consolidated balance sheets.

7. Mortgages Payable

During 2018, we made $21.9 million in principal payments, including the repayment of two mortgages in full for $17.0 million. During 2017, we made $139.7 million in principal payments, including the repayment of eight mortgages in full for $133.5 million. No mortgages were assumed during 2018 or 2017. 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

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payments, environmental liabilities, failure to pay taxes, insurance premiums, liens on the property, violations of the single purpose entity requirements, and uninsured losses.

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 December 31, 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 $183,000 at December 31, 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 December 31, 2018 and 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 Finance Costs Balance, net		Mortgage Payable Balance
12/31/2018	60	5.1	%	4.6	%	3.2	$	298,377	$	4,192	$	302,569
12/31/2017	62	5.0	%	4.4	%	4.0	$	320,283	$	5,658	$	325,941

⁽¹⁾ At December 31, 2018, there were 26 mortgages on 60 properties, while 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 two mortgages on two properties with a principal balance totaling $23.3 million at December 31, 2018, and three mortgages on three properties with a principal balance totaling $29.9 million at December 31, 2017. 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 $16.0 million at December 31, 2018 and $22.4 million at December 31, 2017.

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

⁽³⁾ Effective interest rates ranged from 1.1% to 7.7% at December 31, 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 $4.4 million and deferred financing costs of $183,000, as of December 31, 2018 (dollars in millions):



Year of Maturity	Principal
2019	$	20.7
2020	82.4
2021	67.0
2022	109.7
2023	6.7
Thereafter	11.9
Totals	$	298.4

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8. Notes Payable

A. General

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



	December 31, 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 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	(23		)	(20		)
	$	5,377		$	5,230

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2018, excluding unamortized net original issuance premiums and deferred financing costs (dollars in millions):



Year of Maturity	Principal
2021	$	250
2022	950
2023	750
Thereafter	3,450
Totals	$	5,400

As of December 31, 2018, the weighted average interest rate on our notes and bonds payable was 4.0% and the weighted average remaining years until maturity was 8.7 years.

Interest incurred on all of the notes and bonds was $213.8 million for 2018, $197.1 million for 2017 and $171.5 million for 2016. The interest rate on each of these notes and bonds is fixed.

Our outstanding notes and bonds are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations. Interest on all of the senior note and bond obligations is paid semiannually.

All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. At December 31, 2018, we were in compliance with these covenants.

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B. Note Issuances

During the three year period ended December 31, 2018 we issued the following notes and bonds (dollars in millions):



2018 Issuances	Date of Issuance	Maturity date	Principal amount issued	Public offering price		Effective yield to maturity
3.875% notes	April 2018	April 2025	$500	99.50	%	3.96%



2017 Issuances
4.125% notes	March 2017	October 2026 ⁽¹⁾	$400	102.98	%	3.75%
4.650% notes	March 2017	March 2047	$300	99.97	%	4.65%
3.250% notes	December 2017	October 2022 ⁽²⁾	$500	101.77	%	2.84%
3.650% notes	December 2017	January 2028	$550	99.78	%	3.68%
4.650% notes	December 2017	March 2047 ⁽³⁾	$250	105.43	%	4.32%



2016 Issuances
3.000% notes	October 2016	January 2027	$600	98.67	%	3.15%

⁽¹⁾ This issuance constituted a further issuance of, and formed a single series with the senior notes due 2026 issued in September 2014.

⁽²⁾ This issuance constituted a further issuance of, and formed a single series with the senior notes due 2022 issued in October 2012.

⁽³⁾ This issuance constituted a further issuance of, and formed a single series with the senior notes due 2047 issued in March 2017.

The net proceeds of approximately $493.1 million from the April 2018 note offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

The net proceeds of $1.3 billion from the December 2017 note offerings were used to redeem all $550.0 million aggregate principal amount of our outstanding 2019 notes, including accrued and unpaid interest, and to repay borrowings outstanding under our revolving credit facility and, to the extent not used for those purposes, to fund the development and acquisitions of additional properties and for other general corporate purposes. The net proceeds of $705.2 million from the March 2017 note offerings were used to repay borrowings outstanding under our credit facility, to fund investment opportunities and for other general corporate purposes.

The net proceeds of approximately $586.7 million from the October 2016 offering were used to repay borrowings outstanding under our credit facility.

C. Note Repayment

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

In September 2017, we repaid our $175.0 million of outstanding 5.375% notes, plus accrued and unpaid interest upon maturity.

In September 2016, we repaid all $275.0 million of outstanding 5.950% notes, plus accrued and unpaid interest upon maturity.

9. Issuances of Common Stock

A. Issuance of Common Stock in an Overnight Offering

We did not issue any shares in an overnight offering in 2018. In March 2017, we issued 11,850,000 shares of common stock in an overnight offering. 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.

In May 2016, we issued 6,500,000 shares of common stock in an overnight offering. After underwriting discounts and other offering costs of $12.1 million, the net proceeds of $383.6 million were used to repay borrowings under our credit facility.

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B. Dividend Reinvestment and Stock Purchase Plan

Our Dividend Reinvestment and Stock Purchase Plan, or our DRSPP, provides our common stockholders, as well as new investors, with a convenient and economical method of purchasing our common stock and reinvesting their distributions. Our DRSPP also allows our current stockholders to buy additional shares of common stock by reinvesting all or a portion of their distributions. Our DRSPP authorizes up to 26,000,000 common shares to be issued. During 2018, we issued 166,268 shares and raised approximately $9.1 million under our DRSPP. During 2017, we issued 1,193,653 shares and raised approximately $69.9 million under our DRSPP. From the inception of our DRSPP through December 31, 2018, we have issued 14,229,810 shares and raised $670.9 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 2018. During 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 2017 noted in the preceding paragraph.

C. At-the-Market (ATM) Programs

In November 2018, following the issuance and sale of 25,038,145 shares under our prior ATM equity distribution plans, or our prior ATM programs, we established a new ATM equity distribution plan, or our new ATM program, pursuant to which up to 28,961,855 additional shares of common stock may be offered and sold (1) by us to, or through, a consortium of banks acting as our sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers' transactions on the NYSE at prevailing market prices or at negotiated prices. During 2018, we issued 19,138,610 shares and raised gross proceeds of $1.1 billion under our new and prior ATM programs. During 2017, we issued 10,914,088 shares and raised gross proceeds of $621.7 million under our prior ATM programs. From the inception of our new and prior ATM programs through December 31, 2018, we have issued 33,546,139 shares authorized by our ATM programs and raised $2.0 billion. At December 31, 2018, we had 20,453,861 shares remaining for future issuance under our new ATM program.

10. Redemption of Preferred Stock

We issued an irrevocable notice of redemption with respect to our 6.625% Monthly Income Class F Preferred Stock, or the Class F preferred stock, in March 2017, and, as a result, we incurred a non–cash charge of $13.4 million for 2017, representing the Class F preferred stock original issuance costs that we paid in 2012.

11. 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. As of December 31, 2018, we and our subsidiaries hold a 99.4% interest in Tau Operating Partnership, and consolidate the entity. In January 2019, we redeemed all 317,022 remaining common units of Tau Operating Partnership, and paid off the outstanding balance and interest on the $70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT (see note 21). Following the redemption, we hold 100% of the ownership interests of Tau Operating Partnership and continue to 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 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 December 31, 2018, the remaining units from this issuance represent a 1.5% ownership in Realty Income, L.P. We hold the remaining 98.5% 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.

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In 2016, we completed the acquisition of two properties by acquiring a controlling interest in two entities. We are the managing member of these entities, and possess the ability to control the business and manage the affairs of these entities. In December 2018, we acquired all of the outstanding minority ownership interests associated with one of these entities. At December 31, 2018, we and our subsidiaries held 95% and 100% 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 December 31, 2018 (dollars in thousands):



	Tau Operating Partnership units⁽¹⁾			Realty Income, L.P. units⁽²⁾			Other Noncontrolling Interests			Total
Carrying value at December 31, 2016	$	13,405		$	2,216		$	4,628		$	20,249
Reallocation of equity	492			(26		)	19			485
Distributions	(804		)	(224		)	(1,019		)	(2,047		)
Allocation of net income	229			194			97			520
Carrying value at December 31, 2017	$	13,322		$	2,160		$	3,725		$	19,207
Reallocation of equity	572			(43		)	245			774
Redemptions	—			(2,829		)	(2,752		)	(5,581		)
Shares issued in conjunction with acquisition	—			18,848			—			18,848
Distributions	(837		)	(842		)	(317		)	(1,996		)
Allocation of net income	299			618			67			984
Carrying value at December 31, 2018	$	13,356		$	17,912		$	968		$	32,236

⁽¹⁾317,022 Tau Operating Partnership units were issued on January 22, 2013 and remained outstanding as of December 31, 2018 and December 31, 2017. In January 2019, we redeemed all 317,022 remaining Tau Operating Partnership units (see 21).

⁽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. 373,797 and 88,182 remained outstanding as of December 31, 2018 and 2017, respectively.

Both Tau Operating Partnership and Realty Income, L.P. and the entity acquired during 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 at December 31, 2018 and 2017 (in thousands):



	December 31, 2018		December 31, 2017
Net real estate	$	2,903,093	$	2,936,397
Total assets	3,259,495		3,342,443
Total debt	191,565		210,384
Total liabilities	320,800		313,295

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12. 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 2018, 2017 and 2016:



Month	2018		2017		2016
January	$	0.2125	$	0.2025	$	0.1910
February	0.2190		0.2105		0.1985
March	0.2190		0.2105		0.1985
April	0.2195		0.2110		0.1990
May	0.2195		0.2110		0.1990
June	0.2195		0.2110		0.1990
July	0.2200		0.2115		0.1995
August	0.2200		0.2115		0.1995
September	0.2200		0.2115		0.2015
October	0.2205		0.2120		0.2020
November	0.2205		0.2120		0.2020
December	0.2205		0.2120		0.2020
Total	$	2.6305	$	2.5270	$	2.3915

The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years:



	2018		2017		2016
Ordinary income	$	2.0269173	$	1.9402085	$	1.8771975
Nontaxable distributions	0.6035827		0.5478464		0.5143025
Total capital gain distribution	—		0.0389451		—
Totals	$	2.6305000	$	2.5270000	$	2.3915000

At December 31, 2018, a distribution of $0.2210 per common share was payable and was paid in January 2019. At December 31, 2017, a distribution of $0.2125 per common share was payable and was paid in January 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 three 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. For 2017, dividends per share of $0.5073368 were characterized as ordinary income and dividends per share of $0.0079412 were characterized as total capital gain distribution for federal income tax purposes. During 2016, we paid twelve monthly dividends to holders of our Class F preferred stock totaling $1.656252 per share, or $27.1 million, which were characterized as ordinary income for federal income tax purposes.

13. Operating Leases

A. At December 31, 2018, we owned 5,797 properties in 49 states and Puerto Rico. Of the 5,797 properties, 5,769, or 99.5%, are single-tenant properties, and the remaining are multi-tenant properties. At December 31, 2018, 80 properties were available for lease or sale.

Substantially all leases are net leases where the tenant pays or reimburses us for property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.

Rent based on a percentage of a tenants’ gross sales (percentage rents) was $5.9 million for 2018, $6.1 million for 2017 and $5.3 million for 2016.

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At December 31, 2018, minimum future annual rents to be received on the operating leases for the next five years and thereafter are as follows (dollars in thousands):



2019	$	1,299,039
2020	1,259,394
2021	1,209,227
2022	1,139,536
2023	1,056,323
Thereafter	6,682,393
Total	$	12,645,912

B. Major Tenants - No individual tenant’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2018, 2017 or 2016.

14. Gain on Sales of Real Estate

During 2018, we sold 128 properties for $142.3 million, which resulted in a gain of $24.6 million.

During 2017, we sold 59 properties for $167.0 million, which resulted in a gain of $40.9 million.

During 2016, we sold 77 properties for $90.5 million, which resulted in a gain of $22.0 million. Additionally, during 2016 we sold our former corporate headquarters building for $8.6 million.

These property sales do not represent a strategic shift that will have a major effect on our operations and financial results, and therefore do not require presentation as discontinued operations.

15. 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):



			Estimated fair
At December 31, 2018	Carrying value		value
Mortgages payable assumed in connection with acquisitions ⁽¹⁾	$	298.4	$	305.7
Notes and bonds payable ⁽²⁾	5,400.0		5,430.0

			Estimated fair
At December 31, 2017	Carrying value		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 $4.4 million at December 31, 2018, and $5.9 million at December 31, 2017. Also excludes deferred financing costs of $183,000 at December 31, 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 was $10.5 million at December 31, 2018, and $14.3 million at December 31, 2017. Also excludes deferred financing costs of $33.7 million at December 31, 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

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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. Prior to our adoption of hedge accounting during October 2018 (see note 2), the change in fair value of interest rate swaps was recognized through interest expense. Following adoption, changes to fair value are recorded to accumulated other comprehensive income, or AOCI. At December 31, 2018 and 2017, interest rate swaps in a liability position valued at $7.0 million and $0.5 million, respectively, were included in accounts payable and accrued expenses and interest rate swaps in an asset position valued at $3.0 million and $1.7 million, respectively, 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.

Unrealized gains and losses in AOCI are reclassified to interest expense when the related hedged items are recognized. During 2018, we reclassified $0.5 million from AOCI into interest expense. We expect to reclassify $2.8 million from AOCI into interest expense within the next twelve months.

16. Supplemental Disclosures of Cash Flow Information

Cash paid for interest was $251.5 million in 2018, $240.4 million in 2017, and $214.3 million in 2016.

Interest capitalized to properties under development was $369,000 in 2018, $461,000 in 2017, and $469,000 in 2016.

Cash paid for income taxes was $4.7 million in 2018, $3.8 million in 2017, and $3.6 million in 2016.

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

A. During 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 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 2017, we completed the acquisition of a portfolio of properties by entering into a note payable in the amount of $125.9 million with the seller, maturing in January 2018. This note was paid in full at maturity.

D. During 2016, we assumed mortgages payable to third-party lenders of $44.1 million and recorded a premium of $692,000.

E. During 2016, consolidated joint venture members made real estate contributions of $15.9 million, net of contributed mortgages payable included in the figures disclosed above in note 16.D.

F. Accrued costs on properties under development resulted in an increase in buildings and improvements and accounts payable of $5.5 million at December 31, 2018.

Per the requirements of ASU 2016-18, which amends Topic 230, Statement of Cash Flows: Restricted Cash, the following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the total of the cash, cash equivalents and restricted cash reported within the consolidated statements of cash flows (dollars in thousands):

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	December 31, 2018		December 31, 2017
Cash and cash equivalents shown in the consolidated balance sheets	$	10,387	$	6,898
Impounds related to mortgages payable ⁽¹⁾	9,555		4,565
Restricted escrow deposits ⁽¹⁾	1,129		679
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	21,071	$	12,142

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

17. Employee Benefit Plan

We have a 401(k) plan covering substantially all of our employees. Under our 401(k) plan, employees may elect to make contributions to the plan up to a maximum of 60% of their compensation, subject to limits under the Code. We match 50% of each of our employee’s salary deferrals up to the first 6% of the employee’s eligible compensation. Our aggregate matching contributions each year have been immaterial to our results of operations.

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 and comprehensive income was $27.3 million during 2018 (including $11.8 million of accelerated equity awards for our former CEO upon his departure from the company), $13.9 million during 2017, and $12.0 million during 2016.

In October 2018, John P. Case departed as our Chief Executive Officer (CEO) and resigned as a member of our Board of Directors. In connection with his departure, we entered into a severance agreement with Mr. Case. Pursuant to the terms of this severance agreement, Mr. Case received a severance payment, which included both cash and stock compensation components. The total value of cash, stock compensation and professional fees incurred as a result of this severance was $28.3 million; however, the net amount, after incorporating accruals for CEO compensation previous to this severance, was $18.7 million, which was recognized in general and administrative expense on our 2018 consolidated statement of income and comprehensive income, and which represents the incremental costs incurred per the reconciliation below (dollars in thousands):



Cash	$	9,817
Stock compensation	17,902
Professional fees	574
Total value of severance	28,293
Amount accrued for CEO compensation prior to separation	(9,642		)
Incremental severance	$	18,651

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A. Restricted Stock

The following table summarizes our common stock grant activity under our 2012 Plan.



	2018				2017				2016
	Number of shares		Weighted average price⁽¹⁾		Number of shares		Weighted average price⁽¹⁾		Number of shares		Weighted average price⁽¹⁾
Outstanding nonvested shares, beginning of year	475,768		$	52.32	513,523		$	48.33	456,282		$	30.46
Shares granted	183,952		$	52.21	149,264		$	59.21	260,171		$	54.14
Shares vested	(310,706	)	$	51.05	(183,381	)	$	46.65	(200,066	)	$	43.26
Shares forfeited	(41,193	)	$	53.06	(3,638	)	$	56.57	(2,864	)	$	48.15
Outstanding nonvested shares, end of each period	307,821		$	53.44	475,768		$	52.32	513,523		$	48.33
⁽¹⁾Grant date fair value.

The vesting schedule for shares granted to non-employee directors is as follows:


•	For directors with less than six years of service at the date of grant, shares vest in 33.33% increments on each of the first three anniversaries of the date the shares of stock are granted;


•	For directors with six years of service at the date of grant, shares vest in 50% increments on each of the first two anniversaries of the date the shares of stock are granted;


•	For directors with seven years of service at the date of grant, shares are 100% vested on the first anniversary of the date the shares of stock are granted; and


•	For directors with eight or more years of service at the date of grant, there is immediate vesting as of the date the shares of stock are granted.

During May 2018, we granted 28,000 shares of common stock to the independent members of our Board of Directors, of which 20,000 shares vested immediately, 4,000 shares vest in equal parts over a three-year service period, and 4,000 shares vest in equal parts over a two-year service period. In addition, in July 2018, we granted 8,000 shares of common stock to our two newly appointed independent directors of our Board of Directors, which vest in equal parts over a three-year service period.

Shares granted to employees typically vest annually in equal parts over a four-year service period. During 2018, 147,952 shares were granted to our employees, and vest over a four-year service period.

As of December 31, 2018, the remaining unamortized share-based compensation expense related to restricted stock totaled $12.1 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and condition of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

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B. Performance Shares

During 2018, 2017 and 2016, we granted performance share awards, as well as dividend equivalent rights, to our executive officers. The number of performance shares that vest is based on the achievement of the following performance goals:



2017 & 2018 Performance Awards Metrics	Weighting
Total shareholder return (“TSR”) relative to RMS Index	45	%
TSR relative to JP Morgan Net Lease Peers	26	%
Dividend per share growth rate	16	%
Debt-to-EBITDA ratio	13	%

2016 Performance Awards Metrics	Weighting
Total shareholder return (“TSR”) relative to MSCI US REIT Index	50	%
TSR relative to NAREIT Freestanding Index	20	%
Dividend per share growth rate	20	%
Debt-to-EBITDA ratio	10	%

The performance shares are earned based on our performance, and vest 50% on the first and second January 1 after the end of the three-year performance period, subject to continued service. The performance period for the 2016 performance awards began on January 1, 2016 and ended on December 31, 2018. The performance period for the 2017 performance awards began on January 1, 2017 and will end on December 31, 2019. The performance period for the 2018 performance awards began on January 1, 2018 and will end on December 31, 2020.

The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation model. The following table summarizes our performance share grant activity:



	2018				2017				2016
	Number of performance shares		Weighted average price⁽¹⁾		Number of performance shares		Weighted average price⁽¹⁾		Number of performance shares		Weighted average price⁽¹⁾
Outstanding nonvested shares, beginning of year	245,309		$	62.49	159,751		$	49.95	115,121		$	46.94
Shares granted	256,999		$	51.89	124,681		$	71.79	58,575		$	55.07
Shares vested	(291,785	)	$	54.88	(39,123	)	$	41.60	(10,454	)	$	44.54
Shares forfeited	—		$	—	—		$	—	(3,491	)	$	52.55
Outstanding nonvested shares, end of each period	210,523		$	59.08	245,309		$	62.49	159,751		$	49.95
⁽¹⁾Grant date fair value.

As of December 31, 2018, the remaining share-based compensation expense related to the performance shares totaled $6.4 million and is being recognized on a tranche-by-tranche basis over the service period.

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C. Restricted Stock Units

During 2018 and 2017 we also granted restricted stock units that primarily vest over a four-year service period and have the same economic rights as shares of restricted stock:



	2018				2017				2016
	Number of restricted stock units		Weighted average price⁽¹⁾		Number of restricted stock units		Weighted average price⁽¹⁾		Number of restricted stock units		Weighted average price⁽¹⁾
Outstanding nonvested shares, beginning of year	24,869		$	55.97	18,460		$	52.65	10,136		$	52.21
Shares granted	8,383		$	49.96	10,467		$	60.56	14,783		$	52.76
Shares vested	(10,118	)	$	55.01	(4,058	)	$	52.70	(6,459	)	$	52.21
Shares forfeited	(8,166	)	$	53.45	—		$	—	—		$	—
Outstanding nonvested shares, end of each period	14,968		$	54.62	24,869		$	55.97	18,460		$	52.65
⁽¹⁾ Grant date fair value.

As of December 31, 2018, the remaining share-based compensation expense related to the restricted stock units totaled $471,000 and is being recognized on a straight-line basis over the service period.

19. 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.

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



Assets, as of December 31:	2018		2017
Segment net real estate:
Apparel	$	157,167	$	164,919
Automotive service	210,668		213,156
Automotive tire services	238,939		247,557
Beverages	284,910		289,170
Convenience stores	1,756,732		997,170
Dollar stores	1,117,250		1,105,097
Drug stores	1,490,261		1,518,443
Financial services	414,613		384,867
General merchandise	317,424		313,181
Grocery stores	774,526		793,286
Health and fitness	882,515		896,430
Home improvement	424,494		407,002
Motor vehicle dealerships	198,204		204,651
Restaurants-casual dining	559,616		494,977
Restaurants-quick service	964,980		681,763
Theaters	555,990		566,585
Transportation services	758,133		776,068
Wholesale club	412,203		426,551
Other non-reportable segments	2,324,892		2,195,626
Total segment net real estate	13,843,517		12,676,499
Intangible assets:
Apparel	32,691		36,600
Automotive service	61,951		64,388
Automotive tire services	8,696		10,383
Beverages	1,765		2,022
Convenience stores	108,714		45,445
Dollar stores	48,842		47,905
Drug stores	165,558		173,893
Financial services	20,426		24,867
General merchandise	43,122		50,184
Grocery stores	144,551		140,780
Health and fitness	71,609		76,276
Home improvement	57,928		61,045
Motor vehicle dealerships	28,154		31,720
Restaurants-casual dining	18,153		20,079
Restaurants-quick service	54,448		51,711
Theaters	25,811		26,448
Transportation services	73,577		87,162
Wholesale club	26,484		29,596
Other non-reportable segments	207,117		214,426
Goodwill:
Automotive service	437		437
Automotive tire services	862		862
Convenience stores	1,983		2,004
Restaurants-casual dining	1,841		2,062
Restaurants-quick service	1,052		1,064
Other non-reportable segments	8,455		8,541
Other corporate assets	202,739		171,767
Total assets	$	15,260,483	$	14,058,166

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Revenue for the years ended December 31,	2018		2017		2016
Segment rental revenue:
Apparel	$	16,768	$	19,190	$	19,975
Automotive service	28,303		25,291		20,212
Automotive tire services	30,078		29,560		28,754
Beverages	31,488		31,174		27,587
Convenience stores	142,194		111,023		91,784
Dollar stores	94,782		91,076		90,746
Drug stores	129,565		126,555		117,758
Financial services	29,429		28,744		18,769
General merchandise	29,249		23,752		18,976
Grocery stores	63,594		50,731		32,815
Health and fitness	94,638		88,146		85,901
Home improvement	37,939		30,324		25,695
Motor vehicle dealerships	24,372		23,989		20,329
Restaurants-casual dining	46,171		43,876		42,312
Restaurants-quick service	72,465		59,638		52,674
Theaters	70,560		58,443		51,926
Transportation services	63,565		62,337		57,694
Wholesale club	37,571		37,646		37,531
Other non-reportable segments	231,865		224,729		215,975
Total rental revenue	1,274,596		1,166,224		1,057,413
Tenant reimbursements	46,950		46,082		43,104
Other revenue	6,292		3,462		2,655
Total revenue	$	1,327,838	$	1,215,768	$	1,103,172

20. 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 December 31, 2018, we had commitments of $5.8 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of December 31, 2018, we had committed $23.6 million under construction contracts, which is expected to be paid in the next twelve months.

We have certain properties that are subject to ground leases which are accounted for as operating leases. At December 31, 2018, minimum future rental payment for the next five years and thereafter are as follows (dollars in millions):



	Ground Leases Paid by Realty Income ⁽¹⁾		Ground Leases Paid by Our Tenants ⁽²⁾		Total
2019	$	1.5	$	13.5	$	15.0
2020	1.4		13.5		14.9
2021	1.2		13.2		14.4
2022	1.2		13.1		14.3
2023	1.2		13.1		14.3
Thereafter	19.8		82.0		101.8
Total	$	26.3	$	148.4	$	174.7


⁽¹⁾	Realty Income currently pays the ground lessors directly for the rent under the ground leases.


⁽²⁾	Our tenants, who are generally sub-tenants under the 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.

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Upon adoption of ASC 2016–2 (Topic 842) Leases on January 1, 2019, we will recognize lease obligations for ground leases with a corresponding right of use asset on our consolidated balance sheet.

21. Subsequent Events


•	In January and February 2019, we declared a dividend of $0.2255, which will be paid in February 2019 and March 2019, respectively.

•

In January 2019, we redeemed all 317,022 remaining common units of Tau Operating Partnership, L.P., which reduced our total common units outstanding to 373,797 as of January 3, 2019. Additionally, in January 2019, we paid off the outstanding balance and interest on the $70.0 million senior unsecured term loan entered in January 2013 in conjunction with our acquisition of ARCT. Following the redemption, we hold 100% of the ownership interests of Tau Operating Partnership, L.P., and continue to consolidate the entity.

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REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED QUARTERLY FINANCIAL DATA

(dollars in thousands, except per share data)

(not covered by Report of Independent Registered Public Accounting Firm)



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year⁽¹⁾
2018
Total revenue	$	318,295	$	328,886	$	338,081	$	342,576	$	1,327,838
Depreciation and amortization expense	131,103		133,999		136,967		137,711		539,780
Interest expense	59,415		66,628		69,342		70,635		266,020
Other expenses	47,680		39,349		40,302		54,752		182,083
Net income	83,315		96,697		99,283		85,303		364,598
Net income available to common stockholders	83,163		96,380		98,999		85,072		363,614
Net income per common share
Basic and diluted	0.29		0.34		0.34		0.29		1.26
Dividends paid per common share	0.6505		0.6585		0.6600		0.6615		2.6305

2017
Total revenue	$	298,025	$	300,170	$	306,920	$	310,654	$	1,215,768
Depreciation and amortization expense	121,097		123,089		127,569		127,033		498,788
Interest expense	59,305		63,679		62,951		61,477		247,413
Other expenses	39,120		34,982		32,646		41,974		148,721
Net income	89,035		81,259		88,073		60,952		319,318
Net income available to common stockholders	71,586		81,136		87,940		60,852		301,514
Net income per common share
Basic and diluted	0.27		0.30		0.32		0.22		1.10
Dividends paid per common share	0.6235		0.6330		0.6345		0.6360		2.5270

⁽¹⁾Amounts for each period are calculated independently. The sum of the quarters may differ from the annual amount.

Item 9: Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

We have had no disagreements with our independent registered public accounting firm on accounting matters or financial disclosure, nor have we changed accountants in the two most recent fiscal years.

Item 9A: 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.

As of and for the year ended December 31, 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.

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Management’s Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, 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, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management has used the framework set forth in the report entitled “Internal Control--Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has concluded that the Company’s internal control over financial reporting was effective as of the end of the most recent fiscal year. KPMG LLP has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.

Submitted on February 21, 2019 by,

Sumit Roy, President, Chief Executive Officer

Paul M. Meurer, Executive Vice President, Chief Financial Officer, and Treasurer

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 December 31, 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.

Item 9B: Other Information

None.

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PART III

Item 10: Directors, Executive Officers and Corporate Governance

The information required by this item is set forth under the captions “Board of Directors” and “Executive Officers of the Company” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for the 2019 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference. The Annual Meeting of Stockholders is presently scheduled to be held on May 14, 2019.

Item 11: Executive Compensation

The information required by this item is set forth under the caption “Executive Compensation” in our definitive Proxy Statement for the 2019 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive Proxy Statement for the 2019 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 13: Certain Relationships, Related Transactions and Director Independence

The information required by this item is set forth under the caption “Related Party Transactions” in our definitive Proxy Statement for the 2019 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 14: Principal Accounting Fees and Services

The information required by this item is set forth under the caption “Independent Registered Public Accounting Firm Fees and Services” in our definitive Proxy Statement for the 2019 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

PART IV

Item 15: Exhibits and Financial Statement Schedules

A. The following documents are filed as part of this report.

1. Financial Statements (see Item 8)

a. Reports of Independent Registered Public Accounting Firm

b. Consolidated Balance Sheets,

December 31, 2018 and 2017

c. Consolidated Statements of Income and Comprehensive Income,

Years ended December 31, 2018, 2017 and 2016

d. Consolidated Statements of Equity,

Years ended December 31, 2018, 2017 and 2016

e. Consolidated Statements of Cash Flows,

Years ended December 31, 2018, 2017 and 2016

f. Notes to Consolidated Financial Statements

g. Consolidated Quarterly Financial Data, (unaudited) for 2018 and 2017

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2. Financial Statement Schedule. Reference is made to page F-1 of this report for Schedule III Real Estate and Accumulated Depreciation (electronically filed with the Securities and Exchange Commission).

Schedules not Filed: All schedules, other than those indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes.

3. Exhibits

Articles of Incorporation and By-Laws



Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of September 6, 2012 (File No. 001-13374), 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 (File No. 001-13374) 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 (File No. 033-69410) and incorporated herein by reference).
3.2		Articles of Amendment dated July 29, 2011 (filed as exhibit 3.1 to the Company's Form 8-K, filed on August 2, 2011 (File No. 001-13374) and incorporated herein by reference).
3.3		Articles of Amendment dated June 21, 2012 (filed as exhibit 3.1 to the Company's Form 8-K, filed on June 21, 2012 (File No. 001-13374) and incorporated herein by reference).
3.4		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 (File No. 001-13374) and incorporated herein by reference)
3.5		Articles Supplementary dated June 30, 1998 establishing the terms of the Company's Class A Junior Participating Preferred Stock (filed as exhibit A to exhibit 1 of Form 8-A12B, filed on June 26, 1998 (File No. 001-13374) and incorporated herein by reference).
3.6		Articles Supplementary dated May 24, 1999 establishing the terms of the Company's 93/8% Class B Cumulative Redeemable Preferred Stock (filed as exhibit 4.1 on Form 8-K, filed on May 25, 1999 (File No. 001-13374) and incorporated herein by reference).
3.7		Articles Supplementary dated July 28, 1999 establishing the terms of the Company's 91/2% Class C Cumulative Redeemable Preferred Stock (filed as exhibit 4.1 on Form 8-K, filed on July 30, 1999 (File No. 001-13374) and incorporated herein by reference).
3.8		Articles Supplementary dated May 24, 2004 and the Articles Supplementary dated October 18, 2004 establishing the terms of the Company's 7.375% Monthly Income Class D Cumulative Redeemable Preferred Stock (filed as exhibit 3.8 on Form 8-A12B, filed on May 25, 2004 (File No. 001-13374) and incorporated herein by reference).
3.9		Articles Supplementary dated November 30, 2006 establishing the terms of the Company's 6.75% Monthly Income Class E Cumulative Redeemable Preferred Stock (filed as exhibit 3.5 on Form 8-A12B, filed on December 5, 2006 (File No. 001-13374) and incorporated herein by reference).
3.10		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 (File No. 001-13374) and incorporated herein by reference).
3.11		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 (File No. 001-13374) and incorporated herein by reference).
3.12		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 (File No. 001-13374) 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 (File No. 001-13374) 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 (File No. 033-69410) 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 (File No. 033-69410) 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 (File No. 001-13374) and incorporated herein by reference).

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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 (File No. 001-13374) 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, filed on October 28, 2011 (File No. 001-13374) and incorporated herein by reference).
4.7		Form of 3.250% Note due 2022 (filed as exhibit 4.3 to Company’s Form 8-K, filed on October 10, 2012 (File No. 001-13374) and incorporated herein by reference).
4.8		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 (File No. 001-13374) and incorporated herein by reference).
4.9		Form of 4.650% Note due 2023 (filed as exhibit 4.2 to Company’s Form 8-K, filed on July 16, 2013 (File No. 001-13374) 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 “4.650% Notes due 2023” (filed as exhibit 4.3 to the Company’s Form 8-K, filed on July 16, 2013 (File No. 001-13374) and incorporated herein by reference).
4.11		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).
4.12		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 “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).
4.13		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).
4.14		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 “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).
4.15		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).
4.16		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 “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).
4.17		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).
4.18		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).
4.19		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).
4.20		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).
4.21		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).
4.22		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).
4.23		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 “3.650% 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).
4.24		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).
4.25		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 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).


Material Contracts
10.1		Management Incentive Plan (filed as Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 1997, filed on March 20, 1998 (File No. 001-13374) and incorporated herein by reference).
10.2		Form of Nonqualified Stock Option Agreement for Independent Directors (filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1997, filed on March 20, 1998 (File No. 001-13374) and incorporated herein by reference).
10.3		Form of Restricted Stock Agreement between the Company and Executive Officers under the 2003 Stock Incentive Award Plan of Realty Income Corporation (filed as exhibit 10.11 to the Company’s Form 8-K, filed on January 6, 2005 and dated January 1, 2005 (File No. 001-13374) and incorporated herein by reference).

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10.4		2003 Stock Incentive Award Plan of Realty Income Corporation, as amended and restated February 21, 2006 (filed as exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2005, filed on February 23, 2006 (File No. 033-69410) and incorporated herein by reference).
10.5		Amendment dated May 15, 2007 to the Amended and Restated 2003 Stock Incentive Award Plan of Realty Income Corporation (filed as exhibit 10.1 to the Company’s Form 10-Q, for the quarter ended June 30, 2007 and incorporated herein by reference).
10.6		Form of Restricted Stock Agreement under the 2003 Stock Incentive Award Plan of Realty Income Corporation (filed as exhibit 10.2 to the Company’s Form 10-Q, for the quarter ended June 30, 2007, filed on August 2, 2007 (File No. 001-13374) and incorporated herein by reference).
10.7		Amended and Restated Form of Employment Agreement between the Company and its Executive Officers (filed as exhibit 10.1 to the Company’s Form 8-K, filed on January 7, 2010 and dated January 5, 2010 (File No. 001-13374) and incorporated herein by reference).
10.8		Form of Restricted Stock Agreement for John P. Case (filed as exhibit 10.1 to the Company’s Form 10-Q, for the quarter ended March 31, 2010, filed on April 29, 2010 (File No. 001-13374) and incorporated herein by reference).
10.9		Realty Income Corporation 2012 Incentive Award Plan (filed as Appendix B to the Company’s Proxy Statement on Schedule 14A filed on March 30, 2012 and incorporated herein by reference).
10.10		Form of Restricted Stock Agreement for Employees under the Realty Income Corporation 2012 Incentive Award Plan (filed as exhibit 10.1 to the Company’s Form 8-K, filed on January 8, 2013 (File No. 001-13374) and incorporated herein by reference).
10.11		Form of Restricted Stock Agreement for Non-Employee Directors under the Realty Income Corporation 2012 Incentive Award Plan (filed as exhibit 10.2 to the Company’s Form 8-K, filed on January 8, 2013 (File No. 001-13374) and incorporated herein by reference).
10.12		The First Amendment to Amended and Restated Credit Agreement among the Company, as Borrower, each of the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (filed as exhibit 10.1 to the Company’s Form 8-K, filed on June 3, 2013 (File No. 001-13374) and incorporated herein by reference).
10.13		Form of Amendment to Employment Agreement (filed as exhibit 10.1 to the Company’s Form 8-K, filed on June 19, 2013 (File No. 001-13374) and incorporated herein by reference).
10.14		Form of Addendum to Restricted Stock Agreement (filed as exhibit 10.2 to the Company’s Form 8-K, filed on June 19, 2013 (File No. 001-13374) and incorporated herein by reference).
10.15		The Second Amendment to Amended and Restated Credit Agreement among the Company, as Borrower, each of the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (filed as exhibit 10.1 to the Company’s Form 8-K, filed on August 28, 2013 (File No. 001-13374) and incorporated herein by reference).
10.16		Form of Time-Based Restricted Stock Agreement for John P. Case dated September 3, 2013 (filed as exhibit 10.7 to the Company’s Form 10-Q, for the quarter ended September 30, 2013 (File No. 001-13374) and incorporated herein by reference).
10.17		Form of Performance-Based Restricted Stock Agreement for John P. Case dated September 26, 2013 (filed as exhibit 10.8 to the Company’s Form 10-Q, for the quarter ended September 30, 2013 (File No. 001-13374) and incorporated herein by reference).
10.18		The Third Amendment to Amended and Restated Credit Agreement among the Company, as Borrower, each of the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (filed as exhibit 10.1 to the Company’s Form 8-K, filed on October 29, 2013 (File No. 001-13374) and incorporated herein by reference).
10.19		Severance Agreement for Gary M. Malino (filed as exhibit 10.2 to the Company’s Form 10-Q, filed on October 30, 2014 and incorporated herein by reference).
10.20		Amended and Restated Form Indemnification Agreement, between the Company and each executive officer and each director of the Board of Directors of the Company (filed as exhibit 10.1 to the Company’s Form 8-K, filed on October 30, 2014 and incorporated herein by reference).
10.21		Form of Performance Share Award Agreement (filed as exhibit 10.1 to the Company’s Form 10-Q, filed on April 30, 2015 and incorporated herein by reference).
10.22		Dividend Reinvestment and Stock Purchase Plan (filed pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended, on February 23, 2015, as a prospectus supplement to the Company’s prospectus dated February 22, 2013 (File No. 333-186788) and incorporated herein by reference).
10.23		Dividend Reinvestment and Stock Purchase Plan (filed pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended, on July 30, 2015, as a prospectus supplement to the Company’s prospectus dated February 22, 2013 (File No. 333-186788) and incorporated herein by reference).
10.24		Form of Restricted Stock Agreement (filed as exhibit 10.30 to the Company’s Form 10-K for the year ended December 31, 2015 and incorporated herein by reference).
10.25		Form of Restricted Stock Unit Award Agreement (filed as exhibit 10.31 to the Company’s Form 10-K for the year ended December 31, 2015 and incorporated herein by reference).
10.26		Form of Second Amendment to Employment Agreement (filed as exhibit 10.32 to the Company’s Form 10-K for the year ended December 31, 2015 and incorporated herein by reference).
10.27		First Amendment to Realty Income Corporation 2012 Incentive Award Plan. (filed as exhibit 10.33 to the Company’s Form 10-K, filed on February 23, 2017 and incorporated herein by reference).
10.28		Second Amendment to Realty Income Corporation 2012 Incentive Award Plan (filed as exhibit 10.1 to the Company’s Form 8-K, filed on February 17, 2017 and incorporated herein by reference).
10.29		Amended and Restated Employment Agreement dated February 14, 2017 between the Company and John P. Case (filed as exhibit 10.2 to the Company’s Form 10-Q for the period ended March 31, 2017 and incorporated herein by reference).
10.30		Form of Performance Share Award Agreement (filed as exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2017 and incorporated herein by reference).
10.31		Severance Agreement and General Release for John P. Case dated October 16, 2018 (filed as exhibit 10.1 to the Company's Form 8-K, filed on October 17, 2018 and incorporated herein by reference).

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10.32		Credit Agreement dated October 24, 2018 (filed as exhibit 10.1 to the Company’s Form 8-K, filed on October 26, 2018 and incorporated herein by reference).
10.33		Realty Income Executive Severance Plan dated January 15, 2019 (filed as exhibit 10.1 to the Company's Form 8-K, filed on January 18, 2019 and incorporated herein by reference).
10.34		Form of Participation Agreement to Realty Income Executive Severance Plan dated January 15, 2019 (filed as exhibit 10.2 to the Company's Form 8-K, filed on January 18, 2019 and incorporated herein by reference).
Subsidiaries of the Registrant
*21.1		Subsidiaries of the Company as of February 21, 2019.
Consents of Experts and Counsel
*23.1		Consent of Independent Registered Public Accounting Firm.
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 Annual Report on Form 10-K for the year ended December 31, 2018, formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, (v) Notes to Consolidated Financial Statements, and (vi) Schedule III Real Estate and Accumulated Depreciation.
* Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

REALTY INCOME CORPORATION



By:	/s/SUMIT ROY	Date: February 21, 2019
	Sumit Roy
	President, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



By:	/s/MICHAEL D. MCKEE	Date: February 21, 2019
	Michael D. McKee
	Non-Executive Chairman of the Board of Directors

By:	/s/KATHLEEN R. ALLEN, Ph.D.	Date: February 21, 2019
	Kathleen R. Allen, Ph.D.
	Director

By:	/s/SUMIT ROY	Date: February 21, 2019
	Sumit Roy
	Director, President, Chief Executive Officer
	(Principal Executive Officer)

By:	/s/A. LARRY CHAPMAN	Date: February 21, 2019
	A. Larry Chapman
	Director

By:	/s/REGINALD H. GILYARD	Date: February 21, 2019
	Reginald H. Gilyard
	Director

By:	/s/PRIYA CHERIAN HUSKINS	Date: February 21, 2019
	Priya Cherian Huskins
	Director

By:	/s/GERARDO I. LOPEZ	Date: February 21, 2019
	Gerardo I. Lopez
	Director

By:	/s/GREGORY T. MCLAUGHLIN	Date: February 21, 2019
	Gregory T. McLaughlin
	Director

By:	/s/RONALD L. MERRIMAN	Date: February 21, 2019
	Ronald L. Merriman
	Director

By:		Date: February 21, 2019
	Stephen E. Sterrett
	Director

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By:	/s/PAUL M. MEURER	Date: February 21, 2019
	Paul M. Meurer
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

By:	/s/SEAN P. NUGENT	Date: February 21, 2019
	Sean P. Nugent
	Senior Vice President, Controller
	(Principal Accounting Officer)

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REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Aerospace
Batesville	MS	2,433,855	2,160,849	17,219,291	—	—	2,160,849	17,219,291	19,380,140	4,390,919	2008	8/9/2012	300
Ellisville	MS	—	4,140,000	20,930,630	203,037	—	4,140,000	21,133,668	25,273,668	3,360,433	2013	6/27/2013	418
Columbus	OH	13,703,817	—	19,637,318	—	—	—	19,637,318	19,637,318	3,109,242	2012	6/19/2013	420
DFW Airport	TX	—	—	37,503,886	13,600	—	—	37,517,486	37,517,486	11,319,689	2001	6/20/2011	300
Lufkin	TX	—	589,925	15,492,255	—	—	589,925	15,492,255	16,082,180	2,637,372	1994	1/22/2013	420

Apparel
Mesa	AZ	—	619,035	867,013	6,484	—	619,035	873,497	1,492,532	695,754	1998	2/11/1999	300
El Cajon	CA	—	6,930,000	12,518,083	89,660	—	6,930,000	12,607,743	19,537,743	2,291,116	1992	6/19/2014	300
Elk Grove	CA	—	804,327	2,668,492	24,266	—	804,327	2,692,758	3,497,085	683,164	1993	9/18/2012	298
Elk Grove	CA	—	3,250,000	16,776,852	—	—	3,250,000	16,776,852	20,026,852	3,047,795	2007	6/2/2014	300
Folsom	CA	—	2,370,000	11,342,375	—	—	2,370,000	11,342,375	13,712,375	1,984,916	1992	8/19/2014	300
Hanford	CA	—	562,812	3,468,215	—	—	562,812	3,468,215	4,031,027	872,834	1993	9/18/2012	300
Lodi	CA	—	3,153,559	2,661,260	—	—	3,153,559	2,661,260	5,814,819	669,750	1979	9/18/2012	300
Manteca	CA	—	1,565,672	4,440,141	—	—	1,565,672	4,440,141	6,005,813	1,103,435	1992	9/18/2012	300
Moreno Valley	CA	—	1,654,486	3,305,084	197,969	—	1,654,486	3,503,053	5,157,539	938,188	1988	9/18/2012	290
Redlands	CA	—	3,006,680	2,242,430	340,021	—	3,006,680	2,582,451	5,589,131	730,839	1981	9/18/2012	275
Sacramento	CA	—	3,446,351	4,460,201	—	—	3,446,351	4,460,201	7,906,552	1,122,484	1973	9/18/2012	300
South Lake Tahoe	CA	—	3,110,000	3,176,091	9,750	—	3,110,000	3,185,841	6,295,841	1,052,567	1972	10/22/2010	300
Vacaville	CA	—	1,299,816	3,375,574	183,515	—	1,299,816	3,559,089	4,858,905	948,159	1992	9/18/2012	291
Manchester	CT	—	771,660	3,653,539	367,119	161	771,660	4,020,818	4,792,478	3,080,116	1995	3/26/1998	294
Danbury	CT	—	1,096,861	6,217,688	491,514	—	1,096,861	6,709,202	7,806,063	5,497,684	1960	9/30/1997	293
Deerfield Beach	FL	—	3,160,000	4,832,848	93,798	—	3,160,000	4,926,645	8,086,645	1,622,969	1984	10/22/2010	297
Melbourne	FL	—	994,000	4,076,554	1,063,770	183,005	994,000	5,323,328	6,317,328	2,931,075	1996	10/17/2001	269
Cumming	GA	4,675,000	2,100,000	6,472,785	—	—	2,100,000	6,472,785	8,572,785	1,219,041	2001	4/1/2014	300
Collinsville	IL	3,570,500	675,724	7,021,479	375	—	675,724	7,021,854	7,697,578	1,673,478	2010	1/22/2013	300
Georgetown	KY	5,679,500	1,922,820	10,448,325	—	—	1,922,820	10,448,325	12,371,145	2,490,184	2005	1/22/2013	300
Missoula	MT	—	163,100	362,249	28,843	16,199	163,100	407,292	570,392	394,824	1985	10/30/1987	180
Staten Island	NY	—	4,202,093	3,385,021	275,046	—	4,202,093	3,660,066	7,862,159	2,922,906	1996	3/26/1998	288
Bend	OR	—	4,060,000	13,198,790	9,498	—	4,060,000	13,208,288	17,268,288	2,618,464	2010	1/31/2014	300
Clarksville	TN	—	3,992,886	—	47,658	—	3,992,886	47,658	4,040,544	4,330	2006	7/5/2013	52
Jackson	TN	—	381,076	857,261	70,940	19,237	381,076	947,438	1,328,514	774,156	1997	9/26/1997	287
The Colony	TX	—	2,580,000	2,214,133	285,298	158	2,580,000	2,499,589	5,079,589	799,964	1997	10/22/2010	290

Automotive Collision Service
Colorado Springs	CO	—	1,085,560	2,137,425	—	—	1,085,560	2,137,425	3,222,985	591,275	2008	1/5/2012	300
Denver	CO	—	480,348	2,127,792	—	—	480,348	2,127,792	2,608,140	562,452	2012	9/30/2011	300
Highlands Ranch	CO	—	583,289	2,139,057	—	—	583,289	2,139,057	2,722,346	1,258,032	2004	8/11/2003	300
Littleton	CO	—	601,388	2,169,898	—	—	601,388	2,169,898	2,771,286	1,129,374	2006	11/12/2004	300
Parker	CO	—	868,768	2,653,745	—	—	868,768	2,653,745	3,522,513	1,384,966	2004	7/3/2003	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Thornton	CO	—	693,323	1,896,616	—	—	693,323	1,896,616	2,589,939	1,063,328	2004	10/15/2003	300
Fort Myers	FL	—	1,050,000	1,395,464	—	—	1,050,000	1,395,464	2,445,464	169,781	1986	12/29/2015	300
Fort Myers	FL	—	530,000	955,371	—	—	530,000	955,371	1,485,371	116,237	1989	12/29/2015	300
Naples	FL	—	1,590,000	918,896	—	—	1,590,000	918,896	2,508,896	111,799	1974	12/29/2015	300
Cumming	GA	—	661,624	1,822,363	25,000	—	661,624	1,847,363	2,508,987	1,111,904	2003	12/31/2002	298
Douglasville	GA	—	679,868	1,935,515	—	—	679,868	1,935,515	2,615,383	1,184,830	2003	12/30/2002	300
Lilburn	GA	—	1,150,000	1,670,724	—	—	1,150,000	1,670,724	2,820,724	353,664	2013	2/20/2013	300
Macon	GA	—	1,400,000	1,317,435	—	—	1,400,000	1,317,435	2,717,435	346,968	2012	1/10/2012	300
Morrow	GA	—	725,948	1,846,315	—	—	725,948	1,846,315	2,572,263	1,135,639	2003	8/30/2002	300
Peachtree City	GA	—	1,190,380	689,284	23,610	—	1,190,380	712,894	1,903,274	442,564	2002	9/19/2002	296
Roswell	GA	—	1,825,000	1,934,495	—	—	1,825,000	1,934,495	3,759,495	540,563	2011	8/10/2011	300
Warner Robins	GA	—	1,250,000	1,012,258	—	—	1,250,000	1,012,258	2,262,258	279,804	2012	9/1/2011	300
Chicago	IL	—	1,300,000	1,600,000	—	—	1,300,000	1,600,000	2,900,000	157,333	1928	7/20/2016	300
Crystal Lake	IL	—	250,000	1,143,500	—	—	250,000	1,143,500	1,393,500	127,691	1970	3/31/2016	300
Grayslake	IL	—	360,000	1,374,505	5,500	—	360,000	1,380,005	1,740,005	71,073	2000	9/19/2017	299
Maryville	IL	—	320,000	882,122	—	—	320,000	882,122	1,202,122	174,930	1996	1/10/2014	300
Mundelein	IL	—	478,805	821,195	400,000	—	478,805	1,221,195	1,700,000	35,407	1972	12/8/2017	257
Naperville	IL	—	1,090,000	1,596,107	—	—	1,090,000	1,596,107	2,686,107	321,882	2000	12/23/2013	300
Oak Lawn	IL	—	180,000	547,102	—	—	180,000	547,102	727,102	112,144	1952	11/13/2013	300
Oak Lawn	IL	—	370,000	1,116,743	—	—	370,000	1,116,743	1,486,743	225,199	1953	12/23/2013	300
Orland Park	IL	—	120,000	1,015,358	—	—	120,000	1,015,358	1,135,358	204,764	1976	12/23/2013	300
Schaumburg	IL	—	435,815	789,188	102,966	10,000	435,815	902,154	1,337,969	23,283	1976	4/26/2018	291
South Holland	IL	—	80,000	1,548,690	—	—	80,000	1,548,690	1,628,690	312,319	1966	12/23/2013	300
Waukegan	IL	—	710,000	782,268	—	—	710,000	782,268	1,492,268	40,417	1972	9/19/2017	300
Zion	IL	—	230,000	540,650	—	—	230,000	540,650	770,650	27,934	1982	9/19/2017	300
Cedar Lake	IN	—	300,000	1,037,278	—	—	300,000	1,037,278	1,337,278	164,236	1941	1/7/2015	300
Gary	IN	—	100,000	1,875,652	—	—	100,000	1,875,652	1,975,652	296,978	1951	1/7/2015	300
Hammond	IN	—	230,000	1,217,329	—	—	230,000	1,217,329	1,447,329	192,744	1958	1/7/2015	300
Highland	IN	—	390,000	910,537	—	—	390,000	910,537	1,300,537	144,168	1988	1/7/2015	300
Florence	KY	—	350,000	1,150,428	—	—	350,000	1,150,428	1,500,428	120,792	2001	5/26/2016	300
Ann Arbor	MI	—	680,000	1,433,382	—	—	680,000	1,433,382	2,113,382	231,730	1956	12/18/2014	300
Clawson	MI	—	220,000	517,432	—	—	220,000	517,432	737,432	83,651	1945	12/18/2014	300
Clinton Township	MI	—	480,000	3,578,405	—	—	480,000	3,578,405	4,058,405	542,725	1989	3/31/2015	300
Livonia	MI	—	317,728	1,035,971	71,852	—	317,728	1,107,822	1,425,550	167,482	1989	12/18/2014	300
Novi	MI	—	530,000	2,092,323	—	—	530,000	2,092,323	2,622,323	317,336	2014	3/31/2015	300
Rochester Hills	MI	—	280,000	1,179,451	—	—	280,000	1,179,451	1,459,451	178,883	1985	3/31/2015	300
Sterling Heights	MI	—	480,000	1,920,459	—	—	480,000	1,920,459	2,400,459	233,656	1978	12/29/2015	300
Warren	MI	—	300,000	746,229	—	—	300,000	746,229	1,046,229	113,178	1945	3/31/2015	300
Washington	MI	—	240,000	474,241	—	—	240,000	474,241	714,241	76,669	1974	12/18/2014	300
Wayne	MI	—	190,000	1,009,116	—	—	190,000	1,009,116	1,199,116	163,140	1987	12/18/2014	300
Woodhaven	MI	—	170,000	1,148,368	—	—	170,000	1,148,368	1,318,368	185,653	2000	12/18/2014	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Ham Lake	MN	—	192,610	1,930,958	—	—	192,610	1,930,958	2,123,568	1,084,767	2004	10/31/2003	300
Stillwater	MN	—	656,250	1,218,901	187,158	—	656,250	1,406,059	2,062,309	369,300	1995	11/16/2012	283
Olive Branch	MS	—	350,000	1,965,718	—	—	350,000	1,965,718	2,315,718	589,986	2011	11/2/2010	300
Cary	NC	—	610,389	1,492,235	—	—	610,389	1,492,235	2,102,624	753,578	2001	5/25/2006	300
Durham	NC	—	680,969	1,323,140	—	—	680,969	1,323,140	2,004,109	668,186	2000	5/25/2006	300
Wilmington	NC	—	378,813	1,150,679	—	—	378,813	1,150,679	1,529,492	618,496	2005	12/21/2004	300
Las Vegas	NV	—	720,000	1,660,100	1,050,000	—	720,000	2,710,100	3,430,100	431,975	1977	10/22/2013	233
Huber Heights	OH	—	160,000	799,843	—	—	160,000	799,843	959,843	81,317	1975	6/30/2016	300
Moraine	OH	—	170,000	873,745	—	—	170,000	873,745	1,043,745	88,831	1995	6/30/2016	300
Bartlett	TN	—	648,526	1,960,733	—	—	648,526	1,960,733	2,609,259	1,101,500	2004	10/27/2003	300
Nashville	TN	—	1,830,000	2,263,339	—	—	1,830,000	2,263,339	4,093,339	357,110	1993	9/3/2014	300
Riverton	UT	—	1,100,000	1,576,390	—	—	1,100,000	1,576,390	2,676,390	365,230	2012	7/26/2012	300
Salt Lake City	UT	—	2,900,000	1,598,391	—	—	2,900,000	1,598,391	4,498,391	435,260	2012	10/11/2011	300

Automotive Parts & Accessories
Birmingham	AL	—	355,823	660,814	—	—	355,823	660,814	1,016,637	159,697	2012	12/7/2012	300
Brent	AL	—	361,067	1,113,660	—	—	361,067	1,113,660	1,474,727	46,403	2016	12/28/2017	300
Flomaton	AL	—	90,000	808,163	—	—	90,000	808,163	898,163	181,837	2007	5/1/2013	300
Harvest	AL	—	744,737	1,537,832	—	—	744,737	1,537,832	2,282,569	366,517	2008	1/22/2013	300
Hoover	AL	—	863,921	1,269,964	—	—	863,921	1,269,964	2,133,885	52,915	2016	12/28/2017	300
Millbrook	AL	—	108,000	518,741	174,419	—	108,000	693,160	801,160	512,017	1998	1/21/1999	258
Montgomery	AL	—	254,465	502,350	59,819	84	254,465	562,252	816,717	427,090	1997	6/30/1998	291
Red Bay	AL	—	192,267	1,156,806	—	—	192,267	1,156,806	1,349,073	48,200	2016	12/28/2017	300
Cabot	AR	—	267,787	595,578	37,463	—	267,787	633,041	900,828	121,991	2000	2/25/2014	285
San Luis	AZ	—	287,508	694,650	—	—	287,508	694,650	982,158	147,034	1995	9/26/2013	300
Tucson	AZ	—	194,250	431,434	—	—	194,250	431,434	625,684	431,434	1987	10/30/1987	N/A
Grass Valley	CA	—	325,000	384,955	—	—	325,000	384,955	709,955	384,955	1988	5/20/1988	N/A
Sacramento	CA	—	210,000	466,419	—	—	210,000	466,419	676,419	466,419	1987	11/25/1987	N/A
Colorado Springs	CO	—	520,000	922,073	—	—	520,000	922,073	1,442,073	87,597	1999	8/30/2016	300
Denver	CO	—	141,400	314,056	—	82	141,400	314,138	455,538	314,138	1987	11/18/1987	N/A
Denver	CO	—	315,000	699,623	—	161	315,000	699,785	1,014,785	699,785	1988	5/16/1988	N/A
Littleton	CO	—	252,925	561,758	—	53	252,925	561,811	814,736	561,811	1987	2/12/1988	N/A
Smyrna	DE	—	232,273	472,855	15,774	—	232,273	488,629	720,902	395,263	1998	8/7/1998	294
Apopka	FL	—	820,000	1,115,761	—	—	820,000	1,115,761	1,935,761	247,327	2012	6/21/2013	300
Deerfield Beach	FL	—	475,000	871,738	2,420	—	475,000	874,158	1,349,158	690,978	1999	1/29/1999	300
Jacksonville	FL	—	330,000	1,196,260	—	—	330,000	1,196,260	1,526,260	121,620	2005	6/9/2016	300
Kissimmee	FL	—	1,000,000	1,169,792	—	—	1,000,000	1,169,792	2,169,792	259,304	2012	6/21/2013	300
Kissimmee	FL	—	580,290	1,290,608	—	—	580,290	1,290,608	1,870,898	225,856	2014	8/14/2014	300
Merritt Island	FL	—	309,652	482,459	44,387	21,831	309,652	548,676	858,328	470,498	1988	11/26/1996	280
Atlanta	GA	—	652,551	763,360	27,163	45,249	652,551	835,772	1,488,323	646,216	1997	12/18/1998	294
Breman	GA	—	405,663	1,251,211	—	—	405,663	1,251,211	1,656,874	52,134	2017	12/28/2017	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Bremen	GA	—	390,000	807,036	—	—	390,000	807,036	1,197,036	44,387	2004	8/30/2017	300
Byron	GA	—	359,612	868,859	—	—	359,612	868,859	1,228,471	186,805	2006	8/5/2013	300
Council Bluffs	IA	—	194,355	431,668	—	—	194,355	431,668	626,023	431,668	1988	5/19/1988	N/A
Des Moines	IA	—	441,273	981,424	—	—	441,273	981,424	1,422,697	197,921	2007	12/6/2013	300
West Branch	IA	—	969,797	19,896,576	1,850,529	612,649	969,797	22,359,754	23,329,551	5,163,315	2007	9/20/2012	281
Boise	ID	—	158,400	351,812	—	5,428	158,400	357,240	515,640	357,240	1987	5/6/1988	N/A
Moscow	ID	—	117,250	260,417	—	—	117,250	260,417	377,667	260,417	1980	9/14/1987	N/A
Quincy	IL	—	358,438	763,572	—	—	358,438	763,572	1,122,010	21,635	1998	4/30/2018	300
Chicago	IL	—	760,000	1,483,800	13,325	—	760,000	1,497,125	2,257,125	244,768	1997	12/18/2014	298
Chicago	IL	—	270,000	1,639,501	56,000	—	270,000	1,695,501	1,965,501	275,436	1998	12/18/2014	298
Chicago	IL	—	490,000	1,533,006	13,657	—	490,000	1,546,663	2,036,663	251,469	1998	12/18/2014	298
Joliet	IL	1,244,943	723,567	2,571,856	—	—	723,567	2,571,856	3,295,423	612,959	2005	1/22/2013	300
Avon	IN	—	580,000	1,232,866	—	—	580,000	1,232,866	1,812,866	76,027	2008	6/30/2017	300
Brazil	IN	—	183,952	453,831	76,216	—	183,952	530,047	713,999	380,541	1998	3/31/1999	275
Chesterton	IN	—	293,382	708,842	—	—	293,382	708,842	1,002,224	150,038	2005	9/27/2013	300
Griffith	IN	—	343,778	830,602	—	—	343,778	830,602	1,174,380	175,811	2004	9/27/2013	300
Indianapolis	IN	—	243,422	541,389	24,391	—	243,422	565,780	809,202	114,031	1999	6/6/2014	291
Lafayette	IN	—	540,000	730,133	—	—	540,000	730,133	1,270,133	59,628	1991	12/16/2016	300
Muncie	IN	—	148,901	645,660	238,611	28,327	148,901	912,599	1,061,500	765,604	1986	11/26/1996	278
Plainfield	IN	—	453,645	908,485	42,619	47,025	453,645	998,128	1,451,773	808,075	1997	1/30/1998	288
Princeton	IN	—	134,209	560,113	11,238	—	134,209	571,351	705,560	446,972	1999	3/31/1999	297
Vincennes	IN	—	185,312	489,779	30,324	—	185,312	520,103	705,415	402,246	1998	3/31/1999	290
Hutchinson	KS	—	220,297	545,701	—	—	220,297	545,701	765,998	15,462	1997	4/30/2018	300
Kansas City	KS	—	246,623	525,376	—	—	246,623	525,376	771,999	14,886	1996	4/30/2018	300
Wichita	KS	—	340,945	726,307	—	—	340,945	726,307	1,067,252	20,579	1996	4/30/2018	300
Wichita	KS	—	228,480	486,726	—	—	228,480	486,726	715,206	13,791	1996	4/30/2018	300
Kansas City	KS	—	222,000	455,881	18,738	—	222,000	474,620	696,620	474,620	1988	5/16/1988	N/A
Grayson	KY	—	483,607	1,103,972	—	—	483,607	1,103,972	1,587,579	45,999	2017	12/28/2017	300
Harrodsburg	KY	—	262,048	1,029,125	—	—	262,048	1,029,125	1,291,173	204,110	2013	1/3/2014	300
Hazard	KY	—	438,297	1,351,866	—	—	438,297	1,351,866	1,790,163	56,328	2017	12/28/2017	300
Lawrenceburg	KY	—	272,228	1,069,102	—	—	272,228	1,069,102	1,341,330	208,475	2013	2/14/2014	300
Lexington	KY	—	475,041	1,056,527	—	—	475,041	1,056,527	1,531,568	149,675	2014	6/30/2015	300
Paris	KY	—	250,000	1,158,644	—	—	250,000	1,158,644	1,408,644	106,209	2014	9/30/2016	300
Scottsville	KY	—	503,473	1,039,640	—	—	503,473	1,039,640	1,543,113	247,781	2005	1/22/2013	300
Stanford	KY	—	293,686	1,153,374	—	—	293,686	1,153,374	1,447,060	213,374	2014	5/7/2014	300
Abbeville	LA	—	243,413	724,139	—	—	243,413	724,139	967,552	20,517	2000	4/30/2018	300
Opelousas	LA	—	325,750	693,938	—	—	325,750	693,938	1,019,688	19,662	1999	4/30/2018	300
Jena	LA	—	515,608	1,110,356	—	—	515,608	1,110,356	1,625,964	46,265	2016	12/28/2017	300
Jonesboro	LA	—	377,428	1,164,124	—	—	377,428	1,164,124	1,541,552	48,505	2017	12/28/2017	300
Kaplan	LA	—	232,224	911,999	—	—	232,224	911,999	1,144,223	177,840	2013	2/14/2014	300
Lafayette	LA	—	740,444	1,528,968	—	—	740,444	1,528,968	2,269,412	364,404	2009	1/22/2013	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Lafayette	LA	—	872,043	1,027,618	—	—	872,043	1,027,618	1,899,661	196,960	2014	3/31/2014	300
Many	LA	—	404,922	1,248,926	—	—	404,922	1,248,926	1,653,848	52,039	2017	12/28/2017	300
Rayville	LA	—	545,926	1,074,026	—	—	545,926	1,074,026	1,619,952	44,751	2016	12/28/2017	300
Slidell	LA	—	629,335	1,299,536	—	—	629,335	1,299,536	1,928,871	309,723	2007	1/22/2013	300
Sulphur	LA	—	290,047	700,785	12,825	—	290,047	713,610	1,003,657	153,390	2001	8/1/2013	298
West Monroe	LA	—	462,715	1,394,603	—	—	462,715	1,394,603	1,857,318	332,380	2008	1/22/2013	300
Winnfield	LA	—	483,489	1,103,701	—	—	483,489	1,103,701	1,587,190	45,988	2016	12/28/2017	300
Alma	MI	—	155,000	600,282	15,823	—	155,000	616,104	771,104	481,929	1999	2/10/1999	295
Alma	MI	—	187,704	737,155	—	—	187,704	737,155	924,859	99,516	2007	8/21/2015	300
Detroit	MI	—	496,691	1,104,676	—	—	496,691	1,104,676	1,601,367	215,412	2006	2/6/2014	300
Flushing	MI	—	367,724	817,846	—	—	367,724	817,846	1,185,570	151,301	2006	5/14/2014	300
Lansing	MI	—	265,000	574,931	132,237	94	265,000	707,262	972,262	568,089	1999	12/3/1998	279
Rockford	MI	—	870,632	1,726,400	—	—	870,632	1,726,400	2,597,032	411,459	2007	1/22/2013	300
Roseville	MI	—	558,997	1,810,289	375	—	558,997	1,810,664	2,369,661	431,476	2007	1/22/2013	300
Saginaw	MI	—	948,826	1,959,264	—	—	948,826	1,959,264	2,908,090	466,958	2007	1/22/2013	300
Saginaw	MI	—	859,956	1,775,753	375	—	859,956	1,776,128	2,636,084	423,247	2009	1/22/2013	300
St. Johns	MI	—	201,681	792,050	41,226	—	201,681	833,276	1,034,957	111,135	2007	8/21/2015	297
Sturgis	MI	—	109,558	550,274	10,272	94	109,558	560,639	670,197	448,697	1998	12/30/1998	297
Waterford	MI	—	995,991	2,056,657	53,844	—	995,991	2,110,501	3,106,492	499,178	1996	1/22/2013	298
St. Peters	MO	—	469,776	1,044,816	—	—	469,776	1,044,816	1,514,592	193,291	2007	5/6/2014	300
Crystal Springs	MS	—	514,234	1,061,859	—	—	514,234	1,061,859	1,576,093	253,076	2007	1/22/2013	300
Horn Lake	MS	—	142,702	514,779	66,008	—	142,702	580,787	723,489	432,727	1998	6/30/1998	291
Richland	MS	—	243,565	558,645	10,302	—	243,565	568,947	812,512	433,629	1999	12/21/1999	297
Vicksburg	MS	—	631,900	1,304,832	—	—	631,900	1,304,832	1,936,732	310,985	2008	1/22/2013	300
Biscoe	NC	—	340,000	1,012,799	—	—	340,000	1,012,799	1,352,799	99,592	2006	7/29/2016	300
Harrisburg	NC	—	680,000	813,119	—	—	680,000	813,119	1,493,119	180,241	2012	6/21/2013	300
Statesville	NC	—	503,371	1,288,415	—	—	503,371	1,288,415	1,791,786	53,684	2016	12/28/2017	300
Lincoln	NE	—	345,046	735,044	—	—	345,046	735,044	1,080,090	20,826	1996	4/30/2018	300
Kearney	NE	—	236,000	784,246	—	—	236,000	784,246	1,020,246	32,677	1999	12/28/2017	300
Omaha	NE	—	196,000	435,321	—	32	196,000	435,354	631,354	435,354	1988	5/26/1988	N/A
Omaha	NE	—	199,100	412,042	—	32	199,100	412,074	611,174	412,074	1988	5/27/1988	N/A
Artesia	NM	—	400,000	807,227	—	—	400,000	807,227	1,207,227	178,935	2012	6/21/2013	300
Bloomfield	NM	—	457,743	1,143,268	—	—	457,743	1,143,268	1,601,011	47,636	2015	12/28/2017	300
Las Cruces	NM	—	370,000	1,010,676	—	—	370,000	1,010,676	1,380,676	224,033	2013	6/21/2013	300
Rio Rancho	NM	—	211,577	469,923	—	—	211,577	469,923	681,500	469,923	1987	2/26/1988	N/A
Santa Fe	NM	—	550,775	1,224,964	—	—	550,775	1,224,964	1,775,739	255,201	2013	10/11/2013	300
Fernley	NV	—	300,000	1,027,155	—	—	300,000	1,027,155	1,327,155	227,686	2005	6/21/2013	300
Las Vegas	NV	—	161,000	357,585	260,000	—	161,000	617,585	778,585	611,714	1986	10/29/1987	180
Dunkirk	NY	—	631,375	1,303,749	—	—	631,375	1,303,749	1,935,124	310,727	2010	1/22/2013	300
Akron	OH	—	264,619	588,531	—	—	264,619	588,531	853,150	83,375	1991	6/9/2015	300
Canton	OH	—	396,560	597,553	—	25,452	396,560	623,005	1,019,565	499,569	1998	8/14/1998	298

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Centerville	OH	—	601,408	758,192	9,017	38,193	601,408	805,402	1,406,810	647,907	1997	6/30/1998	294
Delaware	OH	—	240,000	705,447	43,393	—	240,000	748,840	988,840	97,115	1984	8/14/2015	288
Hamilton	OH	—	183,000	515,727	6,508	—	183,000	522,235	705,235	411,265	1999	12/3/1998	299
Middlefield	OH	—	258,980	1,017,075	—	—	258,980	1,017,075	1,276,055	184,769	2005	6/30/2014	300
Mt. Orab	OH	—	360,434	1,111,707	—	—	360,434	1,111,707	1,472,141	46,321	2016	12/28/2017	300
New Lexington	OH	—	290,000	955,997	9,544	—	290,000	965,541	1,255,541	91,317	1999	8/23/2016	298
Oberlin	OH	—	212,325	1,026,562	—	—	212,325	1,026,562	1,238,887	210,445	2007	11/7/2013	300
Toledo	OH	—	130,000	1,562,052	—	—	130,000	1,562,052	1,692,052	356,669	2008	4/12/2013	300
Toledo	OH	—	140,000	1,059,979	—	—	140,000	1,059,979	1,199,979	242,029	2008	4/12/2013	300
Waverly	OH	—	176,895	694,710	5,225	—	176,895	699,935	876,830	94,276	2003	8/19/2015	298
Tulsa	OK	—	262,685	559,592	—	—	262,685	559,592	822,277	15,855	1997	4/30/2018	300
Del City	OK	—	634,664	1,178,662	—	—	634,664	1,178,662	1,813,326	284,843	2007	12/7/2012	300
Oklahoma City	OK	—	602,052	1,118,096	—	—	602,052	1,118,096	1,720,148	259,026	2006	3/1/2013	300
Albany	OR	—	152,250	338,153	—	58	152,250	338,211	490,461	338,211	1979	8/24/1987	N/A
Beaverton	OR	—	210,000	466,419	—	58	210,000	466,476	676,476	466,476	1976	8/26/1987	N/A
Portland	OR	—	190,750	423,664	—	58	190,750	423,721	614,471	423,721	1976	8/12/1987	N/A
Portland	OR	—	147,000	326,493	—	58	147,000	326,551	473,551	326,551	1985	8/26/1987	N/A
Salem	OR	—	136,500	303,170	—	58	136,500	303,228	439,728	303,228	1977	8/20/1987	N/A
Butler	PA	—	339,929	633,078	47,758	—	339,929	680,836	1,020,765	550,389	1997	8/7/1998	290
Carnegie	PA	—	260,000	1,208,582	116,847	—	260,000	1,325,429	1,585,429	118,966	1998	8/23/2016	295
Dover	PA	—	265,112	593,341	7,926	—	265,112	601,266	866,378	488,782	1998	6/30/1998	298
Enola	PA	—	220,228	546,026	11,416	172	220,228	557,614	777,842	448,741	1997	11/10/1998	296
Hanover	PA	—	132,500	719,511	9,982	—	132,500	729,492	861,992	563,561	1999	5/13/1999	298
Harrisburg	PA	—	327,781	608,291	10,681	172	327,781	619,143	946,924	506,341	1997	6/30/1998	297
Harrisburg	PA	—	283,417	352,473	10,519	172	283,417	363,164	646,581	289,877	1998	9/30/1998	296
Lancaster	PA	—	199,899	774,838	143,397	—	199,899	918,234	1,118,133	665,074	1998	8/14/1998	289
Lebanon	PA	—	360,751	802,338	23,614	—	360,751	825,952	1,186,703	141,413	2001	11/21/2014	293
New Castle	PA	—	180,009	525,774	91,802	—	180,009	617,576	797,585	499,600	1998	6/30/1998	274
Reading	PA	—	379,000	658,722	43,750	—	379,000	702,472	1,081,472	538,190	1999	12/4/1998	292
Guayama	PR	939,579	874,937	1,806,689	—	—	874,937	1,806,689	2,681,626	430,594	2005	1/22/2013	300
Humacao	PR	1,432,858	1,161,891	2,399,229	—	—	1,161,891	2,399,229	3,561,120	571,816	2005	1/22/2013	300
Ponce	PR	1,714,732	1,321,292	2,728,382	—	—	1,321,292	2,728,382	4,049,674	650,265	2005	1/22/2013	300
San Juan	PR	1,432,858	1,158,525	2,392,278	—	—	1,158,525	2,392,278	3,550,803	570,160	2006	1/22/2013	300
Cheraw	SC	—	330,016	1,146,257	—	—	330,016	1,146,257	1,476,273	47,761	2017	12/28/2017	300
Chester	SC	—	132,006	518,420	79,252	—	132,006	597,673	729,679	100,309	2004	6/30/2014	286
Columbia	SC	—	474,027	1,427,348	—	—	474,027	1,427,348	1,901,375	340,184	2006	1/22/2013	300
Gaston	SC	—	250,000	956,334	—	—	250,000	956,334	1,206,334	97,227	2006	6/9/2016	300
Manning	SC	—	260,000	999,132	—	—	260,000	999,132	1,259,132	98,248	2006	7/29/2016	300
Winnsboro	SC	—	90,000	921,541	—	—	90,000	921,541	1,011,541	93,690	2006	6/9/2016	300
York	SC	—	198,409	779,197	—	—	198,409	779,197	977,606	141,554	2006	6/30/2014	300
Arlington	TN	—	381,083	707,726	—	—	381,083	707,726	1,088,809	171,034	2005	12/7/2012	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Columbia	TN	—	273,120	431,716	53,058	—	273,120	484,774	757,894	339,557	1999	6/30/1999	293
Decatur	TN	—	180,000	880,938	4,000	—	180,000	884,938	1,064,938	160,412	2007	6/30/2014	299
Erwin	TN	—	656,324	989,778	—	—	656,324	989,778	1,646,102	41,241	2016	12/28/2017	300
McKenzie	TN	—	234,502	1,086,828	—	—	234,502	1,086,828	1,321,330	45,285	2016	12/28/2017	300
Cleburne	TX	—	315,281	671,638	—	—	315,281	671,638	986,919	19,030	2000	4/30/2018	300
Denison	TX	—	261,794	557,694	—	—	261,794	557,694	819,488	15,801	1998	4/30/2018	300
Gainesville	TX	—	270,352	804,280	—	—	270,352	804,280	1,074,632	22,788	1999	4/30/2018	300
Grand Prairie	TX	—	373,379	795,401	—	—	373,379	795,401	1,168,780	22,536	2000	4/30/2018	300
Houston	TX	—	385,834	821,933	—	—	385,834	821,933	1,207,767	23,288	1999	4/30/2018	300
Hurst	TX	—	313,419	667,669	—	—	313,419	667,669	981,088	18,917	1995	4/30/2018	300
Marshall	TX	—	289,008	615,668	—	—	289,008	615,668	904,676	17,444	1999	4/30/2018	300
McAllen	TX	—	340,587	725,546	—	—	340,587	725,546	1,066,133	20,557	1999	4/30/2018	300
McKinney	TX	—	356,079	758,547	—	—	356,079	758,547	1,114,626	21,492	1998	4/30/2018	300
Mission	TX	—	337,741	719,482	—	—	337,741	719,482	1,057,223	20,385	2000	4/30/2018	300
Mt. Pleasant	TX	—	221,998	660,431	—	—	221,998	660,431	882,429	18,712	1999	4/30/2018	300
Palestine	TX	—	228,831	680,759	—	—	228,831	680,759	909,590	19,288	2000	4/30/2018	300
Pasadena	TX	—	378,093	805,444	—	—	378,093	805,444	1,183,537	22,821	1999	4/30/2018	300
San Antonio	TX	—	402,001	856,374	—	—	402,001	856,374	1,258,375	24,264	1999	4/30/2018	300
San Antonio	TX	—	363,530	774,421	—	—	363,530	774,421	1,137,951	21,942	2000	4/30/2018	300
Sulphur Springs	TX	—	270,623	805,086	—	—	270,623	805,086	1,075,709	22,811	1999	4/30/2018	300
Terrell	TX	—	310,622	672,072	—	—	310,622	672,072	982,694	19,042	2000	4/30/2018	300
Tyler	TX	—	277,970	592,154	—	—	277,970	592,154	870,124	16,778	2000	4/30/2018	300
Tyler	TX	—	400,906	854,042	—	—	400,906	854,042	1,254,948	24,198	2000	4/30/2018	300
Waxahachie	TX	—	334,601	712,793	—	—	334,601	712,793	1,047,394	20,196	1999	4/30/2018	300
Weatherford	TX	—	329,496	701,919	—	—	329,496	701,919	1,031,415	19,888	2000	4/30/2018	300
Wichita Falls	TX	—	295,353	629,185	—	—	295,353	629,185	924,538	17,827	1998	4/30/2018	300
Wichita Falls	TX	—	313,364	667,554	—	—	313,364	667,554	980,918	18,914	1998	4/30/2018	300
Wichita Falls	TX	—	662,512	685,201	—	—	662,512	685,201	1,347,713	19,414	1998	4/30/2018	300
Alpine	TX	—	260,251	1,081,899	—	—	260,251	1,081,899	1,342,150	45,079	2017	12/28/2017	300
Brownsville	TX	—	517,374	881,737	—	—	517,374	881,737	1,399,111	36,739	2008	12/28/2017	300
Carrizo Springs	TX	—	418,555	1,290,972	—	—	418,555	1,290,972	1,709,527	53,791	2016	12/28/2017	300
Castroville	TX	—	520,344	1,187,835	—	—	520,344	1,187,835	1,708,179	49,493	2016	12/28/2017	300
Channelview	TX	—	483,804	1,168,921	—	—	483,804	1,168,921	1,652,725	251,318	2007	8/14/2013	300
Cotulla	TX	—	379,438	978,336	—	—	379,438	978,336	1,357,774	40,764	2015	12/28/2017	300
Dallas	TX	—	562,612	1,251,290	—	—	562,612	1,251,290	1,813,902	223,147	2014	7/18/2014	300
Denton	TX	—	368,635	1,047,327	—	—	368,635	1,047,327	1,415,962	214,702	2013	11/15/2013	300
Edinburg	TX	—	320,000	963,916	—	—	320,000	963,916	1,283,916	213,668	2012	6/21/2013	300
Fabens	TX	—	496,612	1,133,658	—	—	496,612	1,133,658	1,630,270	47,236	2016	12/28/2017	300
George West	TX	—	316,261	913,885	—	—	316,261	913,885	1,230,146	38,079	2014	12/28/2017	300
Grand Prairie	TX	—	574,574	1,277,896	1,455	—	574,574	1,279,351	1,853,925	219,509	2014	9/5/2014	300
Hallettsville	TX	—	237,572	932,999	18,920	—	237,572	951,919	1,189,491	196,847	2013	10/11/2013	299

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Houston	TX	—	702,326	1,017,275	—	—	702,326	1,017,275	1,719,601	42,387	2016	12/28/2017	300
Katy	TX	—	558,684	1,242,555	—	—	558,684	1,242,555	1,801,239	225,731	2007	6/30/2014	300
Laredo	TX	—	807,044	1,498,795	—	—	807,044	1,498,795	2,305,839	362,209	2006	12/7/2012	300
Lytle	TX	—	422,184	1,302,167	—	—	422,184	1,302,167	1,724,351	54,257	2017	12/28/2017	300
Richmond	TX	—	441,254	1,253,642	—	—	441,254	1,253,642	1,694,896	261,176	2013	10/24/2013	300
Rio Grand City	TX	—	546,922	817,101	—	—	546,922	817,101	1,364,023	34,046	2012	12/28/2017	300
Roma	TX	—	200,000	1,004,538	—	—	200,000	1,004,538	1,204,538	222,673	2009	6/21/2013	300
San Benito	TX	—	449,015	998,643	—	—	449,015	998,643	1,447,658	208,051	2013	10/11/2013	300
Schulenburg	TX	—	467,001	1,026,340	—	—	467,001	1,026,340	1,493,341	42,764	2016	12/28/2017	300
Slaton	TX	—	458,868	1,047,498	—	—	458,868	1,047,498	1,506,366	43,646	2016	12/28/2017	300
Richmond	VA	—	366,287	814,648	26,950	—	366,287	841,598	1,207,885	115,733	1995	6/25/2015	297
Bellevue	WA	—	185,500	411,997	—	107	185,500	412,103	597,603	412,103	1975	8/6/1987	N/A
Bellingham	WA	—	168,000	373,133	—	107	168,000	373,239	541,239	373,239	1977	8/20/1987	N/A
East Wenatchee	WA	—	148,400	329,602	—	107	148,400	329,709	478,109	329,709	1980	8/25/1987	N/A
Kenmore	WA	—	199,500	443,098	—	107	199,500	443,204	642,704	443,204	1974	8/20/1987	N/A
Kent	WA	—	199,500	443,091	—	107	199,500	443,198	642,698	443,198	1969	8/6/1987	N/A
Moses Lake	WA	—	138,600	307,831	—	107	138,600	307,938	446,538	307,938	1978	8/12/1987	N/A
Renton	WA	—	185,500	412,003	—	107	185,500	412,110	597,610	412,110	1969	9/15/1987	N/A
Seattle	WA	—	162,400	360,697	—	107	162,400	360,804	523,204	360,804	1984	8/20/1987	N/A
Silverdale	WA	—	183,808	419,777	—	107	183,808	419,883	603,691	419,883	1984	9/16/1987	N/A
Tacoma	WA	—	191,800	425,996	—	107	191,800	426,102	617,902	426,102	1983	8/18/1987	N/A
Tacoma	WA	—	196,000	435,324	—	107	196,000	435,431	631,431	435,431	1972	10/15/1987	N/A
Vancouver	WA	—	180,250	400,343	—	58	180,250	400,400	580,650	400,400	1982	8/20/1987	N/A
Vancouver	WA	—	168,000	373,135	—	58	168,000	373,193	541,193	373,193	1988	5/23/1988	N/A
Viroqua	WI	—	130,000	751,418	—	—	130,000	751,418	881,418	169,069	2005	5/1/2013	300
Wausau	WI	—	499,159	1,138,765	6,800	—	499,159	1,145,565	1,644,724	140,644	2008	12/23/2015	300
Kenova	WV	—	407,319	1,339,866	—	—	407,319	1,339,866	1,747,185	55,828	2017	12/28/2017	300
Nutter Fort	WV	—	380,000	723,892	40,697	—	380,000	764,589	1,144,589	61,711	1996	12/21/2016	297
Oak Hill	WV	—	388,540	1,198,398	—	—	388,540	1,198,398	1,586,938	49,933	2016	12/28/2017	300

Automotive Service
Flagstaff	AZ	—	144,821	417,485	8,150	36	144,821	425,671	570,492	348,013	1999	8/29/1997	300
Mesa	AZ	—	210,620	475,072	—	—	210,620	475,072	685,692	315,919	1987	5/14/2002	300
Phoenix	AZ	—	189,341	546,984	—	—	189,341	546,984	736,325	363,745	1989	5/14/2002	300
Phoenix	AZ	—	384,608	279,824	—	—	384,608	279,824	664,432	186,081	1993	5/14/2002	300
Sierra Vista	AZ	—	175,114	345,508	—	—	175,114	345,508	520,622	229,761	1989	5/14/2002	300
Tucson	AZ	—	226,596	437,972	—	—	226,596	437,972	664,568	291,249	1987	5/14/2002	300
Bakersfield	CA	—	65,165	206,927	—	—	65,165	206,927	272,092	137,605	1991	5/14/2002	300
Bakersfield	CA	—	940,000	1,463,025	—	—	940,000	1,463,025	2,403,025	104,850	2004	3/28/2017	300
Bakersfield	CA	—	980,000	1,487,009	—	—	980,000	1,487,009	2,467,009	106,569	2006	3/28/2017	300
Bakersfield	CA	—	860,000	1,926,663	—	—	860,000	1,926,663	2,786,663	138,078	2014	3/28/2017	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Bakersfield	CA	—	890,000	1,134,618	—	—	890,000	1,134,618	2,024,618	81,314	2005	3/28/2017	300
Bakersfield	CA	—	1,330,000	2,443,052	—	—	1,330,000	2,443,052	3,773,052	134,368	2017	8/22/2017	300
Chula Vista	CA	—	313,293	409,654	26,019	177	313,293	435,850	749,143	374,260	1996	1/19/1996	295
Dublin	CA	—	415,620	1,153,928	—	—	415,620	1,153,928	1,569,548	767,360	1982	5/14/2002	300
Folsom	CA	—	471,813	325,610	—	—	471,813	325,610	797,423	216,529	1992	5/14/2002	300
Indio	CA	—	264,956	265,509	—	—	264,956	265,509	530,465	176,561	1984	5/14/2002	300
Lancaster	CA	—	730,000	1,462,400	—	—	730,000	1,462,400	2,192,400	104,805	2009	3/28/2017	300
Los Angeles	CA	—	580,446	158,876	—	—	580,446	158,876	739,322	105,651	1986	5/14/2002	300
Oxnard	CA	—	186,980	198,236	—	—	186,980	198,236	385,216	131,825	1980	5/14/2002	300
Palmdale	CA	—	1,010,000	2,313,240	—	—	1,010,000	2,313,240	3,323,240	165,782	2014	3/28/2017	300
Simi Valley	CA	—	213,920	161,012	—	—	213,920	161,012	374,932	107,071	1983	5/14/2002	300
Stockton	CA	—	1,395,822	2,882,282	—	—	1,395,822	2,882,282	4,278,104	686,944	1986	1/22/2013	300
Vacaville	CA	—	358,067	284,931	—	—	358,067	284,931	642,998	189,477	1995	5/14/2002	300
Aurora	CO	—	231,314	430,495	—	115	231,314	430,610	661,924	194,555	1977	9/4/2007	300
Broomfield	CO	—	154,930	503,626	—	2,667	154,930	506,294	661,224	453,354	1996	3/15/1996	300
Colorado Springs	CO	—	1,700,706	2,042,960	—	—	1,700,706	2,042,960	3,743,666	10,215	2016	11/16/2018	300
Denver	CO	—	79,717	369,587	—	79	79,717	369,666	449,383	369,666	1985	10/8/1985	N/A
Denver	CO	—	239,024	444,785	—	115	239,024	444,900	683,924	201,009	1961	9/4/2007	300
Lakewood	CO	—	70,422	132,296	—	—	70,422	132,296	202,718	59,754	1977	9/4/2007	300
Thornton	CO	—	276,084	415,464	—	316	276,084	415,779	691,863	365,008	1997	10/31/1996	300
Cheshire	CT	—	531,812	545,860	—	—	531,812	545,860	1,077,672	20,925	1997	1/12/2018	300
Southington	CT	—	225,882	672,910	—	172	225,882	673,082	898,964	579,885	1996	6/6/1997	300
Vernon	CT	—	81,529	300,518	—	—	81,529	300,518	382,047	198,843	1985	6/27/2002	300
Jacksonville	FL	—	76,585	355,066	28,668	178	76,585	383,912	460,497	363,889	1985	12/23/1985	225
Miami Gardens	FL	—	163,239	262,726	—	—	163,239	262,726	425,965	173,837	1983	6/27/2002	300
Orange City	FL	—	99,613	139,008	—	—	99,613	139,008	238,621	92,438	1988	5/14/2002	300
Atlanta	GA	—	309,474	574,737	—	—	309,474	574,737	884,211	202,116	1960	3/25/2010	300
Bogart	GA	—	66,807	309,733	—	—	66,807	309,733	376,540	309,733	1984	12/20/1985	N/A
Duluth	GA	—	222,275	316,925	2,288	89	222,275	319,301	541,576	267,331	1998	6/20/1997	299
Duluth	GA	—	290,842	110,056	—	—	290,842	110,056	400,898	73,185	1986	5/14/2002	300
Kennesaw	GA	—	266,865	139,425	—	—	266,865	139,425	406,290	92,716	1986	5/14/2002	300
Marietta	GA	—	69,561	346,024	—	41	69,561	346,065	415,626	346,065	1986	6/3/1986	N/A
Norcross	GA	—	244,124	151,831	—	—	244,124	151,831	395,955	100,966	1991	5/14/2002	300
Norcross	GA	—	503,773	937,121	39,032	—	503,773	976,153	1,479,926	484,583	1982	11/22/2006	294
Riverdale	GA	—	58,444	270,961	—	—	58,444	270,961	329,405	270,961	1984	1/15/1986	N/A
Snellville	GA	—	253,316	132,124	—	—	253,316	132,124	385,440	87,861	1988	5/14/2002	300
Tucker	GA	—	78,646	364,625	32,603	3,258	78,646	400,485	479,131	383,552	1985	12/18/1985	151
Marietta	GA	—	60,900	293,461	67,871	—	60,900	361,332	422,232	339,926	1985	12/26/1985	190
Arlington Hts	IL	—	441,437	215,983	—	—	441,437	215,983	657,420	143,627	1985	5/14/2002	300
Chicago	IL	—	329,076	255,294	—	—	329,076	255,294	584,370	169,768	1990	5/14/2002	300
Westchester	IL	—	421,239	184,812	—	—	421,239	184,812	606,051	122,898	1984	5/14/2002	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Anderson	IN	—	232,170	385,661	—	179	232,170	385,840	618,010	324,780	1996	12/19/1997	300
Indianapolis	IN	—	231,384	428,307	—	130	231,384	428,437	659,821	382,037	1995	9/27/1996	300
Michigan City	IN	—	389,573	297,650	—	—	389,573	297,650	687,223	197,936	1977	5/14/2002	300
Warsaw	IN	—	140,893	228,116	—	—	140,893	228,116	369,009	151,696	1992	5/14/2002	300
Topeka	KS	—	32,022	60,368	—	—	32,022	60,368	92,390	27,266	1966	9/4/2007	300
Wichita	KS	—	787,377	1,463,936	78,745	70,913	787,377	1,613,594	2,400,971	770,617	1990	11/1/2006	286
Wichita	KS	—	550,000	1,103,825	—	—	550,000	1,103,825	1,653,825	57,031	2008	9/21/2017	300
Louisville	KY	—	56,054	259,881	—	12	56,054	259,893	315,947	259,891	1985	12/17/1985	30
East Wareham	MA	—	149,680	278,669	—	—	149,680	278,669	428,349	185,312	1983	5/14/2002	300
Fairhaven	MA	—	138,957	289,294	—	—	138,957	289,294	428,251	192,378	1983	5/14/2002	300
Gardner	MA	—	138,990	289,361	—	—	138,990	289,361	428,351	192,423	1988	5/14/2002	300
Hyannis	MA	—	180,653	458,522	—	—	180,653	458,522	639,175	303,389	1976	6/27/2002	300
Lenox	MA	—	287,769	535,273	—	—	287,769	535,273	823,042	423,746	1998	3/31/1999	300
Newburyport	MA	—	274,698	466,449	—	—	274,698	466,449	741,147	308,634	1980	6/27/2002	300
North Reading	MA	—	180,546	351,161	—	—	180,546	351,161	531,707	233,520	1988	5/14/2002	300
Orleans	MA	—	138,212	394,065	—	—	138,212	394,065	532,277	262,051	1984	5/14/2002	300
Teaticket	MA	—	191,302	340,539	—	—	191,302	340,539	531,841	226,457	1980	5/14/2002	300
Aberdeen	MD	—	223,617	225,605	—	—	223,617	225,605	449,222	149,276	1986	6/27/2002	300
Bethesda	MD	—	282,717	525,928	—	—	282,717	525,928	808,645	237,544	1959	9/4/2007	300
Capitol Heights	MD	—	534,854	219,979	—	—	534,854	219,979	754,833	146,282	1985	5/14/2002	300
Clinton	MD	—	70,880	328,620	11,440	—	70,880	340,060	410,940	337,295	1984	11/15/1985	180
Lexington Park	MD	—	103,796	335,288	—	—	103,796	335,288	439,084	222,963	1987	5/14/2002	300
Kalamazoo	MI	—	389,549	296,975	—	—	389,549	296,975	686,524	197,487	1992	5/14/2002	300
Portage	MI	—	400,297	286,441	—	—	400,297	286,441	686,738	190,481	1979	5/14/2002	300
Southfield	MI	—	275,952	350,765	—	—	275,952	350,765	626,717	233,257	1991	5/14/2002	300
Troy	MI	—	214,893	199,299	—	—	214,893	199,299	414,192	132,532	1983	5/14/2002	300
Saint Cloud	MN	—	203,338	258,626	—	—	203,338	258,626	461,964	171,125	1954	6/27/2002	300
Independence	MO	—	297,641	233,152	4,467	3,958	297,641	241,577	539,218	213,988	1991	12/20/1996	300
Arden	NC	—	1,010,000	1,290,755	—	—	1,010,000	1,290,755	2,300,755	66,689	2009	9/21/2017	300
Asheville	NC	—	441,746	242,565	—	—	441,746	242,565	684,311	161,304	1985	5/14/2002	300
Asheville	NC	—	838,421	1,558,792	480	27,477	838,421	1,586,749	2,425,170	763,075	1987	11/1/2006	298
Asheville	NC	—	960,000	1,314,406	—	—	960,000	1,314,406	2,274,406	67,911	2011	9/21/2017	300
Concord	NC	—	237,688	357,976	6,863	26	237,688	364,865	602,553	294,866	1998	11/5/1997	298
Durham	NC	—	55,074	255,336	—	647	55,074	255,983	311,057	255,983	1985	11/13/1985	N/A
Durham	NC	—	354,676	364,603	64,000	12	354,676	428,615	783,291	330,635	1997	3/31/1997	281
Fayetteville	NC	—	224,326	257,733	—	131	224,326	257,865	482,191	217,040	1988	12/3/1997	300
Greensboro	NC	—	286,068	244,606	—	—	286,068	244,606	530,674	162,654	1976	5/14/2002	300
Matthews	NC	—	295,580	338,472	17,484	16,095	295,580	372,050	667,630	294,873	1998	2/27/1998	284
Pineville	NC	—	254,460	355,630	50,770	23	254,460	406,424	660,884	305,500	1997	4/16/1997	292
Raleigh	NC	—	89,145	413,301	—	—	89,145	413,301	502,446	413,301	1985	10/28/1985	N/A
Raleigh	NC	—	398,694	263,621	—	—	398,694	263,621	662,315	223,603	1989	10/1/1997	300

Table of Contents

REALTY INCOME CORPORATION AND SUBSIDIARIES

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

AS OF DECEMBER 31, 2018



			Initial Cost to Company		Cost Capitalized Subsequent to Acquisition		Gross Amount at Which Carried at Close of Period (Notes 3, 4, 6 and 7)
Description (Note 1)	State	Encumbrances (Note 2)	Land	Buildings, Improvements and Acquisition Fees	Improvements	Carrying Costs	Land	Buildings, Improvements and Acquisition Fees	Total	Accumulated Depreciation (Note 5)	Date of Construction	Date Acquired	Life on which depreciation in latest Income Statement is Computed (in Months)
Salisbury	NC	—	235,614	150,592	—	—	235,614	150,592	386,206	100,142	1989	5/14/2002	300
Weaverville	NC	—	470,000	1,595,752	—	—	470,000	1,595,752	2,065,752	82,447	2014	9/21/2017	300
Lincoln	NE	—	337,138	316,958	—	—	337,138	316,958	654,096	210,774	1985	5/14/2002	300
Cherry Hill	NJ	—	463,808	862,240	—	—	463,808	862,240	1,326,048	389,445	1960	9/4/2007	300
Edison	NJ	—	448,936	238,773	—	—	448,936	238,773	687,709	158,781	1974	5/14/2002	300
Glassboro	NJ	—	182,013	312,480	—	—	182,013	312,480	494,493	206,757	1988	6/27/2002	300
Hamilton Square	NJ	—	422,477	291,555	—	—	422,477	291,555	714,032	193,880	1995	5/14/2002	300
Randolph	NJ	—	452,629	390,163	—	—	452,629	390,163	842,792	259,456	1991	5/14/2002	300
Trenton	NJ	—	265,238	298,167	—	—	265,238	298,167	563,405	198,277	1982	5/14/2002	300
West Deptford	NJ	—	212,788	320,283	—	—	212,788	320,283	533,071	212,985	1989	5/14/2002	300
Westfield	NJ	—	705,337	288,720	—	—	705,337	288,720	994,057	191,994	1975	5/14/2002	300
Albuquerque	NM	—	231,553	430,026	—	—	231,553	430,026	661,579	151,226	1963	3/25/2010	300
Las Vegas	NV	—	326,879	359,101	—	—	326,879	359,101	685,980	238,800	1989	5/14/2002	300
Las Vegas	NV	—	316,441	369,768	—	—	316,441	369,768	686,209	245,894	1993	5/14/2002	300
Las Vegas	NV	—	252,169	562,715	—	—	252,169	562,715	814,884	374,203	1995	5/14/2002	300
Las Vegas	NV	—	1,940,015	3,624,877	—	—	1,940,015	3,624,877	5,564,892	863,929	1997	1/22/2013	300
Sparks	NV	—	326,813	306,311	—	—	326,813	306,311	633,124	203,695	1991	5/14/2002	300
Bethpage	NY	—	334,120	621,391	—	—	334,120	621,391	955,511	280,661	1966	9/4/2007	300
East Amherst	NY	—	260,708	484,788	—	—	260,708	484,788	745,496	383,782	1997	3/31/1999	300
East Syracuse	NY	—	250,609	466,264	—	—	250,609	466,264	716,873	369,114	1998	3/31/1999	300
Freeport	NY	—	134,828	251,894	—	—	134,828	251,894	386,722	113,772	1977	9/4/2007	300
Johnson City	NY	—	242,863	451,877	—	—	242,863	451,877	694,740	357,725	1998	3/31/1999	300
Queens Village	NY	—	242,775	451,749	—	—	242,775	451,749