UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023, or

☐ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-13374

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)

Maryland	33-0580106
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification Number)

11995 El Camino Real, San Diego, California 92130

(Address of Principal Executive Offices)

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

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, $0.01 Par Value	O	New York Stock Exchange
1.125% Notes due 2027	O27A	New York Stock Exchange
1.875% Notes due 2027	O27B	New York Stock Exchange
1.625% Notes due 2030	O30	New York Stock Exchange
1.750% Notes due 2033	O33A	New York Stock Exchange
2.500% Notes due 2042	O42	New York Stock Exchange

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  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes  ☒    No  ☐

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

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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  ☐    No  ☒

There were 673,222,491 shares of common stock outstanding as of April 28, 2023.

REALTY INCOME CORPORATION

Index to Form 10-Q

March 31, 2023

PART I.	FINANCIAL INFORMATION	Page
Item 1:	Financial Statements (Unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Income and Comprehensive Income	3
	Consolidated Statements of Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Forward-Looking Statements	25
	Overview	25
	Recent Developments	26
	Liquidity and Capital Resources	28
	Results of Operations	34
	Funds from Operations Available to Common Stockholders ("FFO") and Normalized Funds from Operations Available to Common Stockholders ("Normalized FFO")	41
	Adjusted Funds from Operations Available to Common Stockholders ("AFFO")	43
	Property Portfolio Information	44
	Impact of Inflation	49
	Impact of Recent Accounting Pronouncements	49
	Critical Accounting Policies	49
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4:	Controls and Procedures	50
PART II.	OTHER INFORMATION
Item 1A:	Risk Factors	51
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6:	Exhibits	52
SIGNATURE		54

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

REALTY INCOME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

	March 31, 2023		December 31, 2022
ASSETS
Real estate held for investment, at cost:
Land	$	13,324,929	$	12,948,835
Buildings and improvements	30,803,410		29,707,751
Total real estate held for investment, at cost	44,128,339		42,656,586
Less accumulated depreciation and amortization	(5,188,105)		(4,904,165)
Real estate held for investment, net	38,940,234		37,752,421
Real estate and lease intangibles held for sale, net	24,445		29,535
Cash and cash equivalents	164,576		171,102
Accounts receivable, net	617,359		567,963
Lease intangible assets, net	5,256,795		5,168,366
Goodwill	3,731,478		3,731,478
Other assets, net	2,366,551		2,252,227
Total assets	$	51,101,438	$	49,673,092
LIABILITIES AND EQUITY
Distributions payable	$	173,223	$	165,710
Accounts payable and accrued expenses	422,365		399,137
Lease intangible liabilities, net	1,445,133		1,379,436
Other liabilities	789,903		774,787
Line of credit payable and commercial paper	1,304,858		2,729,040
Term loan, net	1,297,966		249,755
Mortgages payable, net	850,580		853,925
Notes payable, net	15,430,072		14,278,013
Total liabilities	21,714,100		20,829,803
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock and paid in capital, par value $0.01 per share, 1,300,000,000 shares authorized, 673,206,775 and 660,300,195 shares issued and outstanding as of March 31, 2023, and December 31, 2022, respectively	34,958,608		34,159,509
Distributions in excess of net income	(5,772,923)		(5,493,193)
Accumulated other comprehensive income	73,421		46,833
Total stockholders’ equity	29,259,106		28,713,149
Noncontrolling interests	128,232		130,140
Total equity	29,387,338		28,843,289
Total liabilities and equity	$	51,101,438	$	49,673,092

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

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

	Three months ended March 31,
	2023		2022
REVENUE
Rental (including reimbursable)	$	925,289	$	799,565
Other	19,110		7,778
Total revenue	944,399		807,343
EXPENSES
Depreciation and amortization	451,477		403,762
Interest	154,132		106,403
Property (including reimbursable)	69,397		52,342
General and administrative	34,167		32,699
Provisions for impairment	13,178		7,038
Merger and integration-related costs	1,307		6,519
Total expenses	723,658		608,763
Gain on sales of real estate	4,279		10,156
Foreign currency and derivative gain (loss), net	10,322		(590)
Equity in income of unconsolidated entities	—		954
Other income, net	2,730		1,852
Income before income taxes	238,072		210,952
Income taxes	(11,950)		(10,981)
Net income	226,122		199,971
Net income attributable to noncontrolling interests	(1,106)		(602)
Net income available to common stockholders	$	225,016	$	199,369
Amounts available to common stockholders per common share:
Net Income, basic and diluted	$	0.34	$	0.34
Weighted average common shares outstanding:
Basic	660,462,399		593,827,299
Diluted	661,238,844		594,041,839
Net income available to common stockholders	$	225,016	$	199,369
Total other comprehensive income:
Foreign currency translation adjustment	28,750		(10,706)
Unrealized (loss) gain on derivatives, net	(2,162)		43,690
Total other comprehensive income	$	26,588	$	32,984
Comprehensive income available to common stockholders	$	251,604	$	232,353

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 

(dollars in thousands) (unaudited)

Three months ended March 31, 2023, and 2022

	Shares of common stock	Common stock and paid in capital		Distributions in excess of net income		Accumulated other comprehensive income		Total stockholders’ equity		Noncontrolling interests		Total equity
Balance, December 31, 2021	591,261,991	$	29,578,212	$	(4,530,571)	$	4,933	$	25,052,574	$	76,826	$	25,129,400
Net income	—	—		199,369		—		199,369		602		199,971
Other comprehensive income	—	—		—		32,984		32,984		—		32,984
Distributions paid and payable	—	—		(440,910)		—		(440,910)		(882)		(441,792)
Share issuances, net of costs	10,171,808	660,044		—		—		660,044		—		660,044
Share-based compensation, net	132,782	(1,882)		—		—		(1,882)		—		(1,882)
Balance, March 31, 2022	601,566,581	$	30,236,374	$	(4,772,112)	$	37,917	$	25,502,179	$	76,546	$	25,578,725
Balance, December 31, 2022	660,300,195	$	34,159,509	$	(5,493,193)	$	46,833	$	28,713,149	$	130,140	$	28,843,289
Net income	—	—		225,016		—		225,016		1,106		226,122
Other comprehensive income	—	—		—		26,588		26,588		—		26,588
Distributions paid and payable	—	—		(504,746)		—		(504,746)		(3,014)		(507,760)
Share issuances, net of costs	12,706,141	798,901		—		—		798,901		—		798,901
Share-based compensation, net	200,439	198		—		—		198		—		198
Balance, March 31, 2023	673,206,775	$	34,958,608	$	(5,772,923)	$	73,421	$	29,259,106	$	128,232	$	29,387,338

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

(dollars in thousands) (unaudited)

	Three months ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	226,122	$	199,971
Adjustments to net income:
Depreciation and amortization	451,477		403,762
Amortization of share-based compensation	6,300		5,002
Non-cash revenue adjustments	(19,127)		(14,180)
Amortization of net premiums on mortgages payable	(3,200)		(3,561)
Amortization of net premiums on notes payable	(15,532)		(15,740)
Amortization of deferred financing costs	6,474		3,445
(Loss) gain on interest rate swaps	(1,801)		722
Foreign currency and unrealized derivative (gain) loss, net	(8,942)		590
Gain on sales of real estate	(4,279)		(10,156)
Equity in income of unconsolidated entities	—		(954)
Distributions from unconsolidated entities	—		729
Provisions for impairment on real estate	13,178		7,038
Change in assets and liabilities
Accounts receivable and other assets	42,081		(17,698)
Accounts payable, accrued expenses and other liabilities	38,483		(45,491)
Net cash provided by operating activities	731,234		513,479
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate	(1,675,136)		(1,525,836)
Improvements to real estate, including leasing costs	(13,860)		(13,471)
Proceeds from sales of real estate	28,594		122,235
Insurance proceeds received	6,282		15,892
Non-refundable escrow deposits	(23,599)		(16,828)
Net cash used in investing activities	(1,677,719)		(1,418,008)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders	(497,245)		(438,280)
Borrowings on line of credit and commercial paper programs	4,249,746		2,311,812
Payments on line of credit and commercial paper programs	(5,690,060)		(2,328,990)
Proceeds from term loan	1,029,383		—
Proceeds from notes payable issued	1,090,968		676,631
Principal payments on mortgages payable	(1,233)		(43,589)
Proceeds from common stock offerings, net	796,190		656,094
Proceeds from dividend reinvestment and stock purchase plan	2,711		2,799
Distributions to noncontrolling interests	(1,479)		(882)
Net (payments) receipts on derivative settlements	(6,452)		903
Debt issuance costs	(16,603)		(9,692)
Other items, including shares withheld upon vesting	(6,102)		(5,733)
Net cash provided by financing activities	949,824		821,073
Effect of exchange rate changes on cash and cash equivalents	13,545		(6,063)
Net increase (decrease) in cash, cash equivalents and restricted cash	16,884		(89,519)
Cash, cash equivalents and restricted cash, beginning of period	226,881		332,369
Cash, cash equivalents and restricted cash, end of period	$	243,765	$	242,850

For supplemental disclosures, see note 14, Supplemental Disclosures of Cash Flow Information.

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

March 31, 2023

(unaudited)

1.    Basis of Presentation

Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”) was founded in 1969 and is organized as a Maryland corporation. We invest in commercial real estate and have elected to be taxed as a real estate investment trust ("REIT"). We are listed on the New York Stock Exchange ("NYSE") under the symbol “O”.

Our accompanying unaudited consolidated financial statements were prepared from our books and records in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented have been included. Operating results for the three months ended March 31, 2023 are not necessarily an indication of the results that may be expected for the entire year. Readers of this quarterly report should refer to our audited consolidated financial statements for the year ended December 31, 2022, which are included in our 2022 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report. The U.S. Dollar (“USD”) is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD. We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and assesses our performance.

For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustments are included in 'Accumulated other comprehensive income', ("AOCI"), in the consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period.

We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in our functional currency. When the debt is remeasured to the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in 'Foreign currency and derivative (loss) gain, net' in the consolidated statements of income and comprehensive income. Intercompany accounts and transactions are eliminated in consolidation.

Principles of Consolidation. These consolidated financial statements include the accounts of Realty Income and all other entities in which we have a controlling financial interest. We evaluate whether we have a controlling financial interest in an entity in accordance with Accounting Standards Codification ("ASC") 810, Consolidation.

Voting interest entities are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests.

Variable interest entities ("VIEs") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above. A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances.

The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest. Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that were created or assumed as part of a business combination or asset acquisition were recognized at fair value as of the date of the transaction (see note 9, Noncontrolling Interests).

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At March 31, 2023, Realty Income, L.P. and certain investments, including investments in joint ventures, are considered VIEs in which we were deemed the primary beneficiary based on our controlling financial interests. Below is a summary of selected financial data of consolidated VIEs included in the consolidated balance sheets at March 31, 2023, and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Net real estate	$	926,907	$	920,032
Total assets	$	1,075,099	$	1,082,346
Total liabilities	$	56,905	$	60,127

Income Taxes. We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S. 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 ("TRS"). A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of TRS entities enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. For our international territories, we are liable for taxes in the United Kingdom and Spain. Accordingly, provisions have been made for U.K. and Spain income taxes. Therefore, the income taxes recorded on our consolidated statements of income and comprehensive income represent amounts accrued or paid by Realty Income and its subsidiaries for U.S. income taxes on our TRS entities, city and state income and franchise taxes, and income taxes for the U.K. and Spain.

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes primarily 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 international, 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 tax positions have been recorded on our consolidated financial statements.

Lease 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 our client’s sales, or percentage rent, is recognized only after our client 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 rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis.

Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms.

The COVID-19 pandemic and the measures taken to limit its spread have negatively impacted the economy across many industries, including the industries in which some of our clients operate. We continue to assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under Topic 842, Leases. We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends (including trends arising from the COVID-19 pandemic) and other facts and circumstances related to the applicable clients. If we conclude the collection of substantially all lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered

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probable. If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized.

The majority of concessions granted to our clients as a result of the COVID-19 pandemic have been rent deferrals with the original lease term unchanged. In accordance with the guidance provided by the Financial Accounting Standards Board ("FASB") staff, we have elected to account for these leases as if the right of deferral existed in the lease contract and therefore continue to recognize lease revenue in accordance with the lease contract in effect. In limited circumstances, the undiscounted cash flows resulting from deferrals granted increased significantly from original lease terms, which required us to account for these as lease modifications and resulted in an insignificant impact to consolidated rental revenue. Similarly, rent abatements granted, which are also accounted for as lease modifications, have impacted our rental revenue by an insignificant amount.

As of March 31, 2023, other than the information related to the reserves recorded to date, we do not have any further client specific information that would change our assessment that collection of substantially all of the future lease payments under our existing leases is probable. However, since the impact to rent collections for our clients affected by the COVID-19 pandemic is ongoing, we do not know the types of future concessions, if any, that will ultimately be granted, there may be impacts in future periods that could change this assessment as the situation continues to evolve and as more information becomes available.

Recent Accounting Pronouncements. The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

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

A.	Accounts receivable, net, consist of the following at:	March 31, 2023		December 31, 2022
	Straight-line rent receivables, net	$	403,702	$	363,993
	Client receivables, net	213,657		203,970
		$	617,359	$	567,963

B.	Lease intangible assets, net, consist of the following at:	March 31, 2023		December 31, 2022
	In-place leases	$	5,518,701	$	5,324,565
	Accumulated amortization of in-place leases	(1,561,739)		(1,409,878)
	Above-market leases	1,778,381		1,697,367
	Accumulated amortization of above-market leases	(478,548)		(443,688)
		$	5,256,795	$	5,168,366

C.	Other assets, net, consist of the following at:	March 31, 2023		December 31, 2022
	Financing receivables	$	997,684	$	933,116
	Right of use asset - operating leases, net	596,597		603,097
	Right of use asset - financing leases	531,326		467,920
	Restricted escrow deposits	50,009		37,627
	Prepaid expenses	47,177		28,128
	Impounds related to mortgages payable	29,180		18,152
	Derivative assets and receivables – at fair value	27,180		83,100
	Credit facility origination costs, net	15,963		17,196
	Corporate assets, net	12,919		12,334
	Investment in sales type lease	5,977		5,951
	Non-refundable escrow deposits	23,599		5,667
	Other items	28,940		39,939
		$	2,366,551	$	2,252,227

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D.	Accounts payable and accrued expenses consist of the following at:	March 31, 2023		December 31, 2022
	Notes payable - interest payable	$	147,510	$	129,202
	Derivative liabilities and payables – at fair value	66,349		64,724
	Property taxes payable	42,333		45,572
	Accrued income taxes	30,470		22,626
	Accrued property expenses	30,176		25,290
	Value-added tax payable	24,500		23,375
	Accrued costs on properties under development	23,776		26,559
	Mortgages, term loans, and credit line - interest payable	7,498		4,404
	Merger and integration-related costs	6,464		1,464
	Other items	43,289		55,921
		$	422,365	$	399,137

E.	Lease intangible liabilities, net, consist of the following at:	March 31, 2023		December 31, 2022
	Below-market leases	$	1,708,146	$	1,617,870
	Accumulated amortization of below-market leases	(263,013)		(238,434)
		$	1,445,133	$	1,379,436

F.	Other liabilities consist of the following at:	March 31, 2023		December 31, 2022
	Lease liability - operating leases, net	$	433,666	$	440,096
	Rent received in advance and other deferred revenue	286,322		269,645
	Lease liability - financing leases	49,342		49,469
	Security deposits	20,573		15,577
		$	789,903	$	774,787

3.    Investments in Real Estate

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

A.    Acquisitions of Real Estate

Below is a summary of our acquisitions for the period indicated below:

	Number of Properties	Leasable Square Feet (in thousands)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)
Three months ended March 31, 2023 (2)
Acquisitions - U.S.	197	5,926	$	1,048.9	10.0	7.0	%
Acquisitions - Europe	20	2,437	389.7		12.6	7.6	%
Total acquisitions	217	8,363	$	1,438.6	10.7	7.2	%
Properties under development (3)	122	2,319	235.6		14.8	6.0	%
Total (4)	339	10,682	$	1,674.2	11.2	7.0	%

(1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $0.7 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 2023.

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 cash lease yield 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.

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(2)None of our investments during the three months ended March 31, 2023 caused any one client to be 10% or more of our total assets at March 31, 2023.

(3)Includes three U.K. development properties that represent an investment of £3.8 million during the three months ended March 31, 2023, converted at the applicable exchange rate on the funding dates.

(4)Our clients occupying the new properties are 85.5% retail and 14.5% industrial based on annualized contractual rent. Approximately 42% of the annualized contractual rent generated from acquisitions during the three months ended March 31, 2023 is from our investment grade rated clients, their subsidiaries or affiliated companies.

The acquisitions during the three months ended March 31, 2023 had no contingent consideration. The aggregate purchase price of the assets acquired during the three months ended March 31, 2023 has been allocated as follows (in millions):

	Acquisitions - USD		Acquisitions - Sterling
Land (1)	$	243.9	£	74.2
Buildings and improvements	794.6		153.0
Lease intangible assets (2)	231.9		38.1
Other assets (3)	59.8		54.5
Lease intangible liabilities (4)	(84.7)		(3.8)
Other liabilities (5)	(0.6)		—
	$	1,244.9	£	316.0

(1)Sterling-denominated land includes £1.7 million of right of use assets under long-term ground leases.

(2)The weighted average amortization period for acquired lease intangible assets is 11.3 years.

(3)USD-denominated other assets consist entirely of $59.8 million of financing receivables with above-market terms. Sterling-denominated other assets consist of £8.6 million of financing receivables with above-market terms and £45.8 million of right-of-use assets accounted for as finance leases.

(4)The weighted average amortization period for acquired lease intangible liabilities is 18.8 years.

(5)USD-denominated other liabilities consist entirely of $0.6 million of deferred rent on certain below-market leases.

The properties acquired during the three months ended March 31, 2023 generated total revenues of $7.3 million and net income of $2.8 million during the three months ended March 31, 2023.

B.    Investments in Existing Properties

During the three months ended March 31, 2023, we capitalized costs of $13.8 million on existing properties in our portfolio, consisting of $13.3 million for non-recurring building improvements, $0.4 million for re-leasing costs, and $0.1 million for recurring capital expenditures. In comparison, during the three months ended March 31, 2022, we capitalized costs of $12.0 million on existing properties in our portfolio, consisting of $9.6 million for non-recurring building improvements, $2.4 million for re-leasing costs and less than $0.1 million for recurring capital expenditures.

C.    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 assets, net' on our consolidated balance sheets.

The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2023, and 2022 were $157.4 million and $160.1 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 in the 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 the three months ended March 31, 2023, and 2022 were $39.8 million, and $21.9 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.

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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 March 31, 2023 (dollars in thousands):

	Net increase (decrease) to rental revenue		Increase to amortization expense
2023	$	(45,162)	$	459,375
2024	(54,192)		552,774
2025	(47,292)		477,383
2026	(39,501)		425,893
2027	(30,827)		369,300
Thereafter	362,274		1,672,237
Totals	$	145,300	$	3,956,962

D.    Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):

	Three months ended March 31,
	2023		2022
Number of properties	26		34
Net sales proceeds	$	28.6	$	122.2
Gain on sales of real estate	$	4.3	$	10.2

4.    Revolving Credit Facility and Commercial Paper Programs

A.    Credit Facility

We have a $4.25 billion unsecured revolving multicurrency credit facility that matures in June 2026, includes two six-month extensions that can be exercised at our option, and allows us to borrow in up to 14 currencies, including USD. Our revolving credit facility also has a $1.0 billion expansion option, which is subject to obtaining lender commitments. Under our revolving credit facility, our current investment grade credit ratings provide for USD borrowings at the Secured Overnight Financing Rate ("SOFR"), plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, British Pound Sterling at the Sterling Overnight Indexed Average (“SONIA”), plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.

As of March 31, 2023, credit facility origination costs of $16.0 million are included in other assets, net, as compared to $17.2 million at December 31, 2022, on our consolidated balance sheets. These costs are being amortized over the remaining term of our revolving credit facility.

As of March 31, 2023, we had a borrowing capacity of $3.1 billion available on our revolving credit facility (subject to customary conditions to borrowing) and an outstanding balance of $1.1 billion, comprised of $770.0 million USD and £305.0 million Sterling borrowings, as compared to an outstanding balance at December 31, 2022 of $2.0 billion, comprised of €1.8 billion Euro and £70.0 million Sterling borrowings.

The weighted average interest rate on outstanding borrowings under our revolving credit facility was 3.7% and 1.1% during the three months ended March 31, 2023, and 2022, respectively. At March 31, 2023, our weighted average interest rate on borrowings outstanding under our revolving credit facility was 5.4%. Our revolving credit facility is subject to various leverage and interest coverage ratio limitations, and at March 31, 2023, we were in compliance with the covenants under our revolving credit facility.

B.    Commercial Paper Programs

We have a USD-denominated unsecured commercial paper program, under which we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $1.5 billion, as well as a Euro-denominated unsecured commercial paper program, which permits us to issue additional unsecured commercial notes up to a maximum aggregate amount of $1.5 billion (or foreign currency equivalent). Our Euro-denominated

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unsecured commercial paper program may be issued in USD or various foreign currencies, including but not limited to, Euros, Sterling, Swiss Francs, Yen, Canadian Dollars, and Australian Dollars, in each case, pursuant to customary terms in the European commercial paper market.

The commercial paper ranks on a parity in right of payment with all of our other unsecured senior indebtedness outstanding from time to time, including borrowings under our revolving credit facility, our term loans and our outstanding senior unsecured notes. Proceeds from commercial paper borrowings are used for general corporate purposes.

As of March 31, 2023, the balance of borrowings outstanding under our commercial paper programs was $157.5 million, consisting entirely of €145.0 million of Euro-denominated borrowings, as compared to $701.8 million outstanding commercial paper borrowings, including €361.0 million of Euro-denominated borrowings, at December 31, 2022. The weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.5% and 0.5% for the three months ended March 31, 2023, and 2022, respectively. As of March 31, 2023, our weighted average interest rate on outstanding borrowings under our commercial paper programs was 3.1%. We use our $4.25 billion revolving credit facility as a liquidity backstop for the repayment of the notes issued under the commercial paper programs. The commercial paper borrowings generally carry a term of less than a year.

5.    Term Loans

In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings. As of March 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings. The 2023 term loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at our option. Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for USD-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans. In conjunction with our 2023 term loans, we entered into interest rate swaps which fix our per annum interest rate. As of March 31, 2023, the effective interest rate, after giving effect to the interest rate swaps, was 5.0%.

We also have a $250.0 million senior unsecured term loan, which matures in March 2024. In conjunction with this term loan, we also entered into an interest rate swap. As of March 31, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8%.

At March 31, 2023, deferred financing costs of $6.5 million are included net of the term loans principal balance, as compared to $0.2 million related to our $250.0 million term loan at December 31, 2022, on our consolidated balance sheets. These costs are being amortized over the remaining term of the term loans. As of March 31, 2023, we were in compliance with the covenants contained in the term loans.

6.    Mortgages Payable

During the three months ended March 31, 2023, we made $1.2 million in principal payments. During the three months ended March 31, 2022, we made $43.6 million in principal payments, including the full repayment of one mortgage for $42.5 million. No mortgages were assumed during the three months ended March 31, 2023, or 2022. Assumed mortgages are secured by the properties on which the debt was placed and are considered non-recourse debt with limited customary exceptions which vary from loan to loan.

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 March 31, 2023, 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 $0.7 million at March 31, 2023 and $0.8 million at December 31, 2022. These costs are being amortized over the remaining term of each mortgage.

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The following table summarizes our mortgages payable as of March 31, 2023 and December 31, 2022 (dollars in millions):

As Of	Number of Properties (1)	Weighted Average Stated Interest Rate (2)		Weighted Average Effective Interest Rate (3)		Weighted Average Remaining Years Until Maturity	Remaining Principal Balance		Unamortized Premium and Deferred Financing Costs Balance, net		Mortgage Payable Balance
March 31, 2023	136	4.8	%	3.4	%	1.1	$	842.1	$	8.5	$	850.6
December 31, 2022	136	4.8	%	3.3	%	1.4	$	842.3	$	11.6	$	853.9

(1)At March 31, 2023 and at December 31, 2022, there were 18 mortgages on 136 properties. With the exception of one Sterling-denominated mortgage which is paid quarterly, the mortgages require monthly payments with principal payments due at maturity. At March 31, 2023 and December 31, 2022, all mortgages were at fixed interest rates.

(2) Stated interest rates ranged from 3.0% to 6.9% March 31, 2023 and December 31, 2022, respectively.

(3) Effective interest rates ranged from 2.5% to 6.6% and 2.7% to 6.6% at March 31, 2023 and December 31, 2022, respectively.

The following table summarizes the maturity of mortgages payable as of March 31, 2023, excluding net premiums of $9.2 million and deferred financing costs of $0.7 million (dollars in millions):

Year of Maturity	Principal
2023	$	20.9
2024	740.5
2025	42.9
2026	12.0
2027	22.3
Thereafter	3.5
Totals	$	842.1

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7.    Notes Payable

A.    General

Our senior unsecured notes and bonds are USD-denominated and Sterling-denominated. Foreign denominated notes are converted at the applicable exchange rate on the balance sheet date. The following are sorted by maturity date (in millions):

	Principal Amount (Currency Denomination)		Carrying Value (USD) as of
			March 31, 2023		December 31, 2022
4.600% notes, $500 issued February 2014, of which $485 was exchanged in November 2021, both due in February 2024 (1)	$	500	$	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 (1)	$	550	550		550
5.050% notes, issued in January 2023 and due in January 2026	$	500	500		—
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 (1)	$	600	600		600
4.125% notes, $250 issued in September 2014 and $400 issued in March 2017, both due in October 2026	$	650	650		650
1.875% notes, issued in January 2022 and due in January 2027	£	250	309		301
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	495		482
3.950% notes, $600 issued August 2017, of which $594 was exchanged in November 2021, both due in August 2027 (1)	$	600	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 (1)	$	600	600		600
2.200% notes, $500 issued November 2020, of which $497 was exchanged in November 2021, both due in June 2028 (1)	$	500	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 (1)(2)	$	599	599		599
4.850% notes, issued in January 2023 and due in March 2030	$	600	600		—
3.160% notes, issued in June 2022 and due in June 2030	£	140	173		169
1.625% notes, issued in October 2020 and due December 2030	£	400	495		482
3.250% notes, $600 issued in May 2020 and $