Merger with Spirit Realty Capital, Inc.

3 Months Ended

Mar. 31, 2025

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

On January 23, 2024, we completed our previously announced merger (the "Merger") with Spirit Realty Capital, Inc. (“Spirit”). For further details, please see note 2, Merger with Spirit Realty Capital, Inc., to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2024.

The Merger 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 Spirit common stock exchanged (1)	142,136,567
Exchange Ratio	0.762
Shares of Realty Income common stock issued	108,308,064
Opening price of Realty Income common stock on January 23, 2024	$	55.80
Fair value of Realty Income common stock issued to the former holders of Spirit common stock	$	6,043,590
Shares of Realty Income Series A Preferred Stock issued in exchange for Spirit Series A Preferred Stock (2)	6,900,000
Opening price of Realty Income Series A Preferred Stock on January 23, 2024	$	24.26
Fair value of Realty Income Series A Preferred Stock issued to the former holders of Spirit Series A Preferred Stock	$	167,394
Cash paid for fractional shares	$	51
Less: Fair value of Spirit restricted stock and performance awards attributable to post-combination costs (3)	$	(24,751)
Consideration transferred	$	6,186,284

(1) Includes 142.1 million shares of Spirit common stock outstanding as of January 23, 2024, which were converted into Realty Income common stock at the effective time of the Merger (the “Effective Time”) at an Exchange Ratio of 0.762 per share of Spirit common stock. The portion of the converted unvested Spirit restricted stock awards related to post-combination expense is removed in footnote (3) below.

(2) In September 2024, we redeemed all 6.9 million shares of Realty Income Series A Preferred Stock outstanding.

(3) Represents the fair value of fully vested Spirit restricted stock and performance share awards that were accelerated and converted into Realty Income common stock at the Effective Time, reflecting the value attributable to post-combination services. Spirit restricted stock and performance share awards are included in Spirit's outstanding common stock as of the date of the Merger. The fair value attributable to pre-combination services was $41.7 million and is included in the consideration transferred above.

A. Merger-related Transaction Costs
In conjunction with the Merger, we incurred $0.7 million and $94.1 million of merger-related transaction costs during the three months ended March 31, 2025 and 2024, respectively, primarily consisting of employee severance, post-combination share-based compensation, transfer taxes, and various professional fees directly attributable to the Merger.

B. Unaudited Pro Forma Financial Information

The following unaudited pro forma information presents a summary of our combined results of operations for the three months ended March 31, 2024, as if the Merger had occurred on January 1, 2023 (in millions, except per share data). The 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.


	Three months ended March 31,
	2024
Total revenues	$	1,307.7
Net income	$	234.4
Basic and diluted earnings per share	$	0.27

Our consolidated results of operations for the three months ended March 31, 2024 include $155.0 million of revenues and $6.9 million of net income, respectively, associated with the results of operations of Spirit from the closing of the Merger on January 23, 2024 to March 31, 2024