On April 29, 2021, we entered into an Agreement and Plan of Merger, as amended, (the "Merger Agreement"), with VEREIT, its operating partnership, VEREIT Operating Partnership, L.P., ("VEREIT OP"), and two newly formed subsidiaries. Pursuant to the terms of the Merger Agreement, (i) one of the newly formed subsidiaries of us agreed to merge with and into VEREIT OP, with VEREIT OP as the surviving entity, which we refer to as the Partnership Merger, and (ii) immediately thereafter, VEREIT agreed to merge with and into the other newly formed subsidiary of us, with our subsidiary as the surviving corporation, which we refer to collectively as the merger.

On November 1, 2021, we completed our acquisition of VEREIT, and the merger was consummated. Pursuant to the terms of the Merger Agreement and subject to the terms thereof, upon the consummation of the merger, (i) each outstanding share of VEREIT common stock, and each outstanding common partnership unit of VEREIT OP owned by any of its partners other than VEREIT, Realty Income or their respective affiliates, was automatically converted into 0.705 of newly issued shares of our common stock, or in certain instances, Realty Income L.P. units, and (ii) each VEREIT OP outstanding common unit owned by VEREIT, Realty Income or their respective affiliates remained outstanding as partnership interests in the surviving entity. Each outstanding VEREIT stock option and restricted stock unit that were unvested as of November 1, 2021 were converted into equivalent options and restricted stock units, in each case with respect to the share of the Company's common stock, using the equity award exchange ratio in accordance with the Merger Agreement. For more details, see note 17, Common Stock Incentive Plan.

Our merger with VEREIT has been accounted for using the acquisition method of accounting in accordance with ASC, 805, Business Combinations, with Realty Income as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair value. The fair value of the consideration transferred on the date of the acquisition is as follows (in thousands, except share and per share data):


Shares of VEREIT common stock and VEREIT OP common units exchanged (1)	229,304,035
Exchange Ratio	0.705
	161,659,345
Less: Fractional shares settled in cash	(1,545)
Shares of Realty Income common stock and Realty Income L.P. units issued	161,657,800
Adjusted opening price of Realty common stock on November 1, 2021 (2)	$	71.236
Fair value of Realty common stock issued to former holders of VEREIT common stock and VEREIT OP common units	$	11,515,855
Fair value of VEREIT's equity-based compensation awards attributable to pre-combination services (3)	44,020
Total non-cash consideration	$	11,559,875
Cash paid for fractional shares	110
VEREIT indebtedness paid off in connection with the merger (4)	500,414
Consideration transferred	$	12,060,399

(1) Includes 229,152,001 shares of VEREIT common stock and 152,034 VEREIT OP common units outstanding as of November 1, 2021. Under the Merger Agreement, these shares and units were converted to Realty Income common stock, or in certain instances, Realty Income L.P. units, at an Exchange Ratio of 0.705 per share of VEREIT common stock or VEREIT OP common unit, as applicable.

(2) The fair value of Realty Income common stock issued to former holders of VEREIT common stock and VEREIT OP common units is based on the per share opening price of Realty Income common stock of $71.00 on November 1, 2021, adjusted for the monthly dividend of $0.236 per share that former holders of VEREIT common stock and VEREIT OP common units were eligible to receive when such dividend was paid on November 15, 2021.

(3) Represents the fair value of fully vested deferred stock unit awards of VEREIT common stock (“VEREIT DSU Awards”) which were converted into Realty Income common stock upon our merger with VEREIT, as well as the estimated fair value of the Realty Income replacement employee and executive stock options and restricted stock units that were granted at the closing date of our merger with VEREIT and which were attributable to pre-combination services.

(4) Represents the outstanding balance of the VEREIT revolving credit facility repaid by Realty Income in connection with the closing of the merger. The amount shown in the table above was based upon the balance outstanding immediately prior to November 1, 2021.


	As of November 1, 2021
ASSETS
Land	$	3,021,906
Buildings	8,677,467
Total real estate held for investment	11,699,373
Cash and cash equivalents	128,411
Accounts receivable	53,355
Lease intangible assets (1)	3,204,773
Goodwill	3,717,620
Investment in unconsolidated entities	175,379
Other assets	308,910
Total assets acquired	$	19,287,821

LIABILITIES
Accounts payable and accrued expenses	$	139,836
Lease intangible liabilities (2)	949,349
Other liabilities	320,893
Mortgages payable	869,027
Notes payable	4,946,965
Total liabilities assumed	$	7,226,070
Net assets acquired, at fair value	$	12,061,751

Noncontrolling interests	$	1,352
Total purchase price	$	12,060,399

The initial assessment of fair value provided in our Annual Report on Form 10-K for the year ended December 31, 2021 was preliminary and was based on information that was available to management at the time the consolidated financial statements were prepared. Measurement period adjustments were recorded during the year ended December 31, 2022 in the period in which they were determined, as if they had been completed at the acquisition date. Before the first anniversary of the merger date, final measurement period adjustments, as reflected in the table above, resulted in a net increase of $54.8 million to goodwill from the initial valuation, reflecting a decrease of $15.8 million in land, $7.6 million in building, $22.6 million in lease intangible assets, $19.5 million in investment in unconsolidated entities, $9.9 million in other assets, offset by decrease of $4.4 million in lease intangible liabilities, $16.1 million in other liabilities and $0.1 million in mortgages payable.

Approximately $3.72 billion was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill was attributable to expected synergies and benefits arising from the merger transaction, including anticipated financing and overhead cost savings, potential economies of scale benefits in both customer and vendor relationships and the

B. Merger and Integration-Related Costs
In conjunction with our merger with VEREIT, we incurred merger-related transaction costs of $13.9 million and $167.4 million for the years ended December 31, 2022 and 2021, respectively. Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, SEC filing fees and additional incremental and non-recurring costs necessary to convert data and systems, retain employees and otherwise enable us to operate the acquired business or assets efficiently.

Our consolidated results of operations for the years ended December 31, 2022 and 2021, include $1.02 billion and $176.3 million of revenues, respectively, and $62.4 million and $36.7 million of net income associated with the results of operations of VEREIT OP, respectively.

The following unaudited pro forma information presents a summary of our combined results of operations for the years ended December 31, 2021 and 2020, as if our merger with VEREIT had occurred on January 1, 2020 (in millions, except per share data). There are no pro forma adjustments for the year ended December 31, 2022, as the merger was completed November 1, 2021. The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. In accordance with ASC 805, Business Combinations, the following information excludes the impact of the spin-off of office assets to Orion Office REIT Inc. ("Orion").

The unaudited pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if our merger with VEREIT had been completed on January 1, 2020: merger and integration-related costs of $167.4 million were excluded within the pro forma financial information for 2021, but included for 2020.

Following of the closing of our merger with VEREIT, we contributed 92 office real estate assets, a consolidated real estate venture holding one office asset, and an unconsolidated real estate venture holding five office assets to a wholly owned subsidiary named Orion. On November 12, 2021, we distributed the outstanding shares of Orion common stock to our shareholders (including legacy VEREIT stockholders who received shares of our common stock in our merger with VEREIT) on a pro rata basis at a rate of one share of Orion common stock for every ten shares of Realty Income common stock held on November 12, 2021, the applicable record date, which we refer to as the Orion Divestiture. The fair market value of these shares for tax distribution was determined to be $20.6272 per share, which was calculated using the five-day volume weighted average share price after issuance. For more detail, see note 14, Distributions Paid and Payable. Following the Orion Divestiture, Orion began operating as a separate, independent public company.

In conjunction with the Orion Divestiture, we incurred approximately $6.0 million of transaction costs during the year ended December 31, 2021, which were included in the $167.4 million of merger and integration-related costs within our consolidated statements of income and comprehensive income. We incurred $1.9 million of transaction costs relating to the Orion Divestiture during the year ended December 31, 2022.

As part of the Orion Divestiture, Orion paid us a dividend of $425.0 million and reimbursed $170.2 million to us for the early redemption of mortgage loans underlying the contributed assets prior to the effectuation of the Orion Divestiture. The distribution of Orion resulted in the derecognition of net assets of $1.74 billion, which net of the aforementioned cash payments of $595.2 million, resulted in a reduction to additional paid in capital of $1.14 billion.