Notes Payable

12 Months Ended

Dec. 31, 2021

Notes payable

Debt

Debt

Notes Payable

A. General

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

	Principal Amount (Currency Denomination)		Carrying Value (USD) as of
			December 31, 2021		December 31, 2020
3.250% notes, $450 issued in October 2012 and $500 issued in December 2017, both due in October 2022 (1)	$	950	$	—	$	950
4.650% notes, issued in July 2013 and due in August 2023 (2)	$	750	—		750
4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (3)	$	500	500		—
3.875% notes, issued in June 2014 and due in July 2024	$	350	350		350
3.875% notes, issued in April 2018 and due in April 2025	$	500	500		500
4.625% notes, $550 issued October 2018, of which $544 was exchanged in November 2021, both due in November 2025 (3)	$	550	550		—
0.750% notes, issued December 2020 and due in March 2026	$	325	325		325
4.875% notes, $600 issued June 2016, of which $596 was exchanged in November 2021, both due in June 2026 (3)	$	600	600		—
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	$	650	650		650
3.000% notes, issued in October 2016 and due in January 2027	$	600	600		600
1.125% notes, issued in July 2021 and due in July 2027	£	400	541		—
3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (3)	$	600	600		—
3.650% notes, issued in December 2017 and due in January 2028	$	550	550		550
3.400% notes, $600 issued June 2020, of which $598 was exchanged in November 2021, both due in January 2028 (3)	$	600	600		—
2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (3)	$	500	500		—
3.250% notes, issued in June 2019 and due in June 2029	$	500	500		500
3.100% notes, $600 issued December 2019, of which $596 was exchanged in November 2021, both due in December 2029 (3) (4)	$	599	599		—
1.625% notes, issued in October 2020 and due December 2030	£	400	541		547
3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031	$	950	950		950
2.850% notes, $700 issued November 2020, of which $699 was exchanged in November 2021, both due in December 2032 (3)	$	700	700		—
1.800% notes, issued in December 2020 and due in March 2033	$	400	400		400
1.750% notes, issued in July 2021 and due in July 2033	£	350	474		—
2.730% notes, issued in May 2019 and due in May 2034	£	315	427		431
5.875% bonds, $100 issued in March 2005 and $150 issued in June 2011, both due in March 2035	$	250	250		250
4.650% notes, $300 issued in March 2017 and $250 issued in December 2017, both due in March 2047	$	550	550		550
Total principal amount			$	12,257	$	8,303
Unamortized net premiums and deferred financing costs			243		(35)
			$	12,500	$	8,268

(1)In January 2021, we completed the early redemption of all $950.0 million in principal amount.

(2) In December 2021, we completed the early redemption of all $750.0 million in principal amount.

(3) In connection with our merger with VEREIT, we completed our debt exchange offer to exchange certain outstanding notes issued by VEREIT on November 9, 2021 for new notes issued by Realty Income. Please refer to Exchange Offers Associated with our Merger with VEREIT below for more details. Prior to the completion of our merger with VEREIT on November 1, 2021, these notes were not the obligation of Realty Income.

(4) These notes were originally issued by VEREIT in December of 2019 for the principal amount of $600 million. The amount of Realty Income debt issued through the Exchange Offers was $599 million, resulting from cancellations due to late tenders that forfeited the early participation premium of $30 per $1,000 principal amount and cash paid in lieu of fractional shares.

In January 2022, we issued £250.0 million of 1.875% senior unsecured notes due January 2027 and £250.0 million of 2.500% senior unsecured notes due January 2042. See note 19, Subsequent Events.

The following table summarizes the maturity of our notes and bonds payable as of December 31, 2021, excluding unamortized net premiums of $295.5 million and deferred financing costs of $53.1 million (in millions):

Year of Maturity	Principal
2024	$	850
2025	1,050
2026	1,575
Thereafter	8,782
Totals	$	12,257

As of December 31, 2021, the weighted average interest rate on our notes and bonds payable was 3.3% and the weighted average remaining years until maturity was 7.7 years.

Interest incurred on all of the notes and bonds was $286.4 million for 2021, $252.0 million for 2020 and $233.5 million for 2019. 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. Additionally, with the exception of our £400.0 million of 1.625% senior unsecured notes issued in October 2020, our £400.0 million of 1.125% senior unsecured notes issued in July 2021, £350.0 million of 1.750% senior unsecured notes also issued in July 2021, our £250.0 million of 1.875% senior unsecured notes issued in January 2022, and £250.0 million of 2.500% senior unsecured notes also issued in January 2022, in each case where interest is paid annually, interest on our remaining senior unsecured note and bond obligations is paid semiannually.

All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. At December 31, 2021, we were in compliance with these covenants.

B. Note Repayments

We have redeemed the following principal amounts (in millions) of certain outstanding notes, prior to their maturity. As a result of these early redemptions, we have recognized the following losses on extinguishment of debt (in millions) recognized in our consolidated statements of income and comprehensive income:

			Loss on Extinguishment of Debt
2021 Repayments	Principal Amount (1)		Amount of Loss		Period Recognized
4.650% notes due August 2023 redeemed in December 2021	$	750.0	$	46.4	December 31, 2021
3.250% notes due October 2022 redeemed in January 2021	$	950.0	$	46.5	March 31, 2021
2020 Repayments
5.750% notes due January 2021 redeemed in January 2020	$	250.0	$	9.8	March 31, 2020

(1) The redeemed principal amounts presented exclude the amounts we paid in accrued and unpaid interest..

C. Note Issuances

During the three year period ended December 31, 2021 we issued the following notes and bonds (in millions):

2021 Issuances	Date of Issuance	Maturity Date	Principal amount used		Price of par value		Effective yield to maturity
1.125% notes	July 2021	July 2027	£	400	99.31	%	1.24	%
1.750% notes	July 2021	July 2033	£	350	99.84	%	1.76	%
4.600% notes (1)	November 2021	February 2024	$	485	100.00	%	4.60	%
4.625% notes (1)	November 2021	November 2025	$	544	100.00	%	4.63	%
4.875% notes (1)	November 2021	June 2026	$	596	100.00	%	4.88	%
3.950% notes (1)	November 2021	August 2027	$	594	100.00	%	3.95	%
3.400% notes (1)	November 2021	January 2028	$	598	100.00	%	3.40	%
2.200% notes (1)	November 2021	June 2028	$	497	100.00	%	2.20	%
3.100% notes (1)	November 2021	December 2029	$	596	100.00	%	3.10	%
2.850% notes (1)	November 2021	December 2032	$	699	100.00	%	2.85	%

2020 Issuances	Date of Issuance	Maturity Date	Principal amount used		Price of par value		Effective yield to maturity
3.250% notes (2)	May 2020	January 2031	$	600	98.99	%	3.36	%
3.250% notes (2)	July 2020	January 2031	$	350	108.24	%	2.34	%
1.625% notes	October 2020	December 2030	£	400	99.19	%	1.71	%
0.750% notes	December 2020	March 2026	$	325	99.19	%	0.91	%
1.800% notes	December 2020	March 2033	$	400	98.47	%	1.94	%

2019 Issuances	Date of Issuance	Maturity Date	Principal amount used		Price of par value		Effective yield to maturity
2.730% notes	May 2019	May 2034	£	315	100.00	%	2.73	%
3.250% notes	June 2019	June 2029	$	500	99.36	%	3.33	%

(1) In connection with our merger with VEREIT, we completed our debt exchange offer to exchange all outstanding notes issued by VEREIT OP on November 9, 2021 for new notes issued by Realty Income, pursuant to which approximately 99.2% of the outstanding notes issued by VEREIT OP were exchanged. We issued $1,000 principal amount of Realty Notes for each validly tendered VEREIT Notes with $1,000 principal amount. For this reason, we denote our “Price of par value” as 100%. Prior to the completion of our merger with VEREIT on November 1, 2021, these notes were not the obligation of Realty Income. With respect to the notes originally issued by VEREIT OP that remained outstanding, we amended the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants in such indenture. Additional details regarding the exchange offers are provided in the Exchange Offers Associated with our Merger with VEREIT section below.

(2) In July 2020, we issued $350.0 million of 3.250% senior unsecured notes due January 2031 (the "2031 Notes"), which constituted a further issuance of, and formed a single series with, the $600.0 million of 2031 Notes issued in May 2020.

We intend to allocate an equal amount of the net proceeds from the July 2021 Sterling-denominated offering of 1.125% notes due 2027 of £400.0 million, which approximated $546.3 million, and the July 2021 Sterling-denominated offering of 1.750% notes due 2033 of £350.0 million, which approximated $480.6 million, as converted at the applicable exchange rate on the closing of the offerings, to finance or refinance, in whole or in part, new or existing eligible green projects in the categories outlined in our Green Financing Framework, which is designed to align with the International Capital Markets Association ("ICMA") Green Bond Principles 2021. Pending the allocation of an amount equal to the net proceeds from the offering of the notes to eligible green projects, we may temporarily use all or a portion of the net proceeds to repay any outstanding indebtedness or for liability management activities, or invest such net proceeds in accordance with our cash investment policy.

The net proceeds of $391.3 million from the December 2020 offering of 1.800% notes due 2033 and the net proceeds of $320.3 million from the December 2020 offering of 0.750% notes due 2026 were used, along with available cash and additional borrowings, as necessary, to redeem in January 2021 all $950 million in aggregate principal amount of our outstanding 3.25% notes due 2022 at the applicable redemption price, plus accrued interest and, to the extent not used for those purposes, to fund investment opportunities and for other general corporate purposes.

The net proceeds from the October 2020 Sterling-denominated offering of £400.0 million approximated $508.2 million, as converted at the applicable exchange rate on the closing of the offering, and were used to repay GBP-denominated borrowings outstanding under our $3.0 billion revolving credit facility, to settle an outstanding

GBP/USD currency exchange swap arrangement and, to the extent not used for those purposes, to fund investment opportunities and for other general corporate purposes.

The net proceeds of $376.6 million from the July 2020 note offering and the net proceeds of $590.0 million from the May 2020 note offering were used to repay borrowings under our credit facility, to fund potential investment opportunities and for other general corporate purposes.

The gross proceeds from the May 2019 Sterling-denominated private placement of £315.0 million approximated $400.9 million, as converted at the applicable exchange rate on the closing of the offering, and were used to fund our initial investment in U.K. properties.

The net proceeds of $493.5 million from the June 2019 note offering were used to repay borrowings outstanding under our credit facility, to fund investment opportunities, and for other general corporate purposes.

D. Exchange Offers Associated with our Merger with VEREIT

As part of our merger with VEREIT, Realty Income exchanged the following notes issued by VEREIT OP with notes of identical terms issued by Realty Income (in millions):

Series of VEREIT Notes	Tenders and Consents Received as of the Expiration Date (1)	Percentage of Total Outstanding Principal Amount of Such Series of VEREIT Notes
4.600% Notes due 2024	$485	97.06%
4.625% Notes due 2025	$544	98.95%
4.875% Notes due 2026	$596	99.29%
3.950% Notes due 2027	$594	99.02%
3.400% Notes due January 2028	$598	99.66%
2.200% Notes due June 2028	$497	99.42%
3.100% Notes due 2029	$597	99.48%
2.850% Notes due 2032	$700	99.93%

(1) The amount of VEREIT notes exchanged are higher than the amount that Realty Income issued as a result of cancellations due to late tenders that forfeited the early participation premium of $30 per $1,000 principal amount and cash paid in lieu of fractional shares.

To induce holders of the VEREIT OP notes to participate in the exchange, Realty Income offered noteholders electing to exchange their notes a cash payment equal to 10 basis points of the note principal amount held. Across the various note classes, Realty Income had a success rate of approximately 99.2% on the exchange, resulting in a cash payment of $4.6 million to participating noteholders. The exchange was accounted for as a modification of the existing VEREIT OP notes assumed in our merger with VEREIT. The interest rate, interest payment dates, redemption terms and maturity of each series of Realty Income notes issued by Realty Income in the exchange offers were the same as those of the corresponding series of VEREIT notes exchanged. With respect to the notes originally issued by VEREIT OP that remained outstanding, we amended the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants in such indenture.