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MarketScreener Homepage  >  Equities  >  Nyse  >  Realty Income Corporation    O

REALTY INCOME CORPORATION

(O)
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REALTY INCOME : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/03/2020 | 04:23pm EST
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 quarterly 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 access to capital and other sources of funding;
•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;
•Future expenditures for development projects; and
•The impact of the COVID-19 pandemic, or future pandemics, on us, our business,
our tenants, or the economy generally.
Future events and actual results, financial and otherwise, may differ materially
from the results discussed in the forward-looking statements. In particular,
forward-looking statements regarding estimated or future results of operations
are based upon numerous assumptions and estimates and are inherently subject to
substantial uncertainties and actual results of operations may differ materially
from those expressed or implied in the forward-looking statements, particularly
if actual events differ from those reflected in the estimates and assumptions
upon which such forward-looking statements are based. Some of the factors that
could cause actual results to differ materially are:
•Our continued qualification as a real estate investment trust;
•General domestic and foreign business and economic conditions;
•Competition;
•Fluctuating interest and currency 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 income tax laws and rates;
•The continued evolution of the COVID-19 pandemic and the measures taken to
limit its spread, and its impacts on us, our business, our tenants, or the
economy generally;
•The timing and pace of reopening efforts at the local, state and national level
in response to the COVID-19 pandemic;
•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 our
Annual Report on   Form 10-K  , for the fiscal year ended December 31, 2019,
those discussed in this section and in "Item 1.A.- Risk Factors" in Part II of
this report.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date that this quarterly 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 quarterly report or to reflect the
occurrence of unanticipated events. In light of these risks and uncertainties,
the forward-looking events discussed in this quarterly report might not occur.
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                                  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 lease agreements with commercial tenants.
Realty Income was founded in 1969, and listed on the New York Stock Exchange
(NYSE: O) in 1994. Over the past 51 years, Realty Income has been acquiring and
managing freestanding commercial properties that generate rental revenue under
long-term lease agreements with commercial tenants. The Company is a member of
the S&P 500 Dividend Aristocrats® index for having increased its dividend every
year for the last 25 consecutive years or more.
At September 30, 2020, we owned a diversified portfolio:
•Of 6,588 properties;
•With an occupancy rate of 98.6%, or 6,496 properties leased and 92 properties
available for lease or sale;
•Doing business in 51 separate industries;
•Located in 49 U.S. states, Puerto Rico and the United Kingdom (U.K.);
•With approximately 108.5 million square feet of leasable space;
•With a weighted average remaining lease term (excluding rights to extend a
lease at the option of the tenant) of approximately 9.0 years; and
•With an average leasable space per property of approximately 16,470 square
feet; approximately 12,220 square feet per retail property and 223,320 square
feet per industrial property.
Of the 6,588 properties in the portfolio at September 30, 2020, 6,554, or 99.5%,
are single-tenant properties, of which 6,465 were leased, and the remaining are
multi-tenant properties.
Unless otherwise specified, references to rental revenue in the Management's
Discussion and Analysis of Financial Condition and Results of Operations are
exclusive of reimbursements from tenants for recoverable real estate taxes and
operating expenses totaling $18.0 million and $15.5 million for the third
quarters of 2020 and 2019, respectively, and $59.4 million and $49.3 million for
the first nine months of 2020 and 2019, respectively.
Investment Philosophy
We believe that owning an actively managed, diversified portfolio of commercial
properties under long-term, net lease agreements produces consistent and
predictable income over time. 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) fixed increases, (2)
increases in the consumer price index (typically subject to ceilings), 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
lease agreements with commercial tenants 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
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 September 30, 2020, consisted of 6,588 properties located
in 49 U.S. states, Puerto Rico and the U.K., and doing business in 51
industries. None of the 51 industries represented in our property portfolio
accounted for more than 12.1% of our annualized contractual rental revenue as of
September 30, 2020.
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);
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•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;
•Properties with real estate valuations that approximate replacement costs;
•Properties with rental or lease payments that approximate market rents for
similar properties; and
•Properties that can be purchased with the simultaneous execution or assumption
of long-term lease agreements with commercial tenants, offering both current
income and the potential for future rent increases.

We seek to invest in properties owned by tenants that are already or could
become leaders in their respective businesses supported by mechanisms including
(but not limited to) occupancy of prime real estate locations, pricing,
merchandise assortment, service, quality, 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 contractual rental revenue at September 30, 2020 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
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
believe we can achieve an attractive investment spread over our cost of capital
and favorable risk-adjusted returns. We will continue to evaluate all
investments for consistency 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 that
examines 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, we believe 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
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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. At September 30, 2020,
approximately 49% of our total annualized contractual rental revenue comes from
properties leased to investment grade rated companies, their subsidiaries or
affiliated companies. At September 30, 2020, our top 20 tenants (based on
percentage of total portfolio annualized contractual rental revenue) represented
approximately 53% of our annualized revenue and 12 of these tenants have
investment grade credit ratings or are subsidiaries or affiliates of investment
grade companies.
Asset Management Strategy
In addition to pursuing new properties for investment, we seek to increase
earnings and distributions to stockholders through active asset management.
Generally, our 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 view towards optimizing its returns and enhancing its overall credit
quality. Our active 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.
The active management of the portfolio is an essential component of our
long-term strategy of maintaining high occupancy.
Impact of Real Estate and Credit Markets
In the commercial real estate market, property prices generally continue to
fluctuate. Likewise, during certain periods, including the current market, the
global 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 global credit
markets carefully and, if required, will make decisions to adjust our business
strategy accordingly.

                              RECENT DEVELOPMENTS
Theater Industry Update
As of September 30, 2020, the theater industry represented 5.7% of annualized
contractual rental revenue. Given the ongoing disruption to the industry due to
the COVID-19 pandemic, we performed a property-level analysis on the
collectability of rent for our 78 theater properties, including the gross
receivables outstanding as of September 30, 2020, totaling $44.9 million. Our
analysis involved the assignment of quartile rankings for each asset's
pre-pandemic EBITDAR relative to each operator's overall footprint. Other
criteria utilized included an analysis of the property's pre-pandemic annual
EBITDA generation before corporate overhead, and real estate fundamentals.
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As a result of this analysis, we determined that for 31 of the 78 theater
properties it was no longer probable that we would collect substantially all of
contractual rents due. As a conservative measure, we fully reserved for six
additional theater properties for which we do not possess unit level financial
information. Consequently, we reserved for 100% of the outstanding receivables
for 37 theater properties and will account prospectively for these leases on a
cash accounting basis. The aggregate reserve associated with outstanding
receivables for these properties totaled $17.2 million, approximately $1.6
million of which was a reserve for straight-line rent receivables. The dilution
for the third quarter of 2020 as a result of establishing these reserves for our
theater portfolio is $0.05 per share to our net income and FFO and $0.04 per
share to our AFFO. The monthly contractual rent associated with these properties
totals approximately $2.8 million.

Additionally, during the third quarter, we recorded provisions for impairment on
12 of the 37 theater properties for $79.0 million. Impairment charges are not
included in Nareit-defined FFO or in our calculation of AFFO.

See "Item 1A--Risk Factors" in Part II of this Quarterly Report on Form 10-Q for
more information regarding the actual and potential future impacts of the
COVID-19 pandemic and the measures taken to limit its spread on our tenants and
our business, results of operations, financial condition and liquidity.
Increases in Monthly Dividends to Common Stockholders
We have continued our 51-year policy of paying monthly dividends. In addition,
we increased the dividend five times during 2020. As of October 2020, we have
paid 92 consecutive quarterly dividend increases and increased the dividend 108
times since our listing on the NYSE in 1994.

The following table summarizes our dividend increases in 2020:

                                 Month      Month    Dividend    Increase
2020 Dividend increases       Declared       Paid   per share   per share
1st increase                  Dec 2019   Jan 2020 $  0.2275$  0.0005
2nd increase                  Jan 2020   Feb 2020 $  0.2325$  0.0050
3rd increase                  Mar 2020   Apr 2020 $  0.2330$  0.0005
4th increase                  Jun 2020   Jul 2020 $  0.2335$  0.0005
5th increase                  Sep 2020   Oct 2020 $  0.2340$  0.0005


The dividends paid per share during the first nine months of 2020 totaled
approximately $2.092, as compared to approximately $2.030 during the first nine
months of 2019, an increase of $0.062, or 3.1%.
The monthly dividend of $0.234 per share represents a current annualized
dividend of $2.808 per share, and an annualized dividend yield of approximately
4.6% based on the last reported sale price of our common stock on the NYSE of
$60.75 on September 30, 2020. Although we expect to continue our policy of
paying monthly dividends, we cannot guarantee that we will maintain our current
level of dividends, that we will continue our pattern of increasing dividends
per share, or what our actual dividend yield will be in any future period.
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Acquisitions During the Third Quarter and First Nine Months of 2020
Below is a listing of our acquisitions in the U.S. and U.K. for the periods
indicated below:
                                                                                                                  Weighted                    Initial
                                                                       Leasable          Investment                Average                    Average
                                            Number of               Square Feet               ($ in             Lease Term                 Cash Lease
                                           Properties             (in millions)           millions)                (Years)                      Yield
Three months ended September 30,
2020 (1)
Acquisitions - U.S. (in 21 states)           74                      1.2              $    409.2                15.2                           5.9  %
Acquisitions - U.K. (2)                       7                      0.7                   230.0                 8.9                           7.5  %
Total acquisitions                           81                      1.9                   639.2                12.6                           6.4  %
Properties under development - U.S.           8                      0.7                    19.4                18.0                           5.9  %
Total (3)                                    89                      2.6              $    658.6                12.7                           6.4  %

Nine months ended September 30, 2020
(1)
Acquisitions - U.S. (in 28 states)          154                      3.0              $    821.9                14.8                           6.2  %
Acquisitions - U.K. (2)                      13                      1.2                   453.7                10.0                           6.4  %
Total acquisitions                          167                      4.2                 1,275.6                13.1                           6.3  %
Properties under development - U.S.          13                      0.9                    23.3                16.3                           6.4  %
Total (4)                                   180                      5.1              $  1,298.9                13.1                           6.3  %


(1)None of our investments during the three and nine months ended September 30,
2020 caused any one tenant to be 10% or more of our total assets at September
30, 2020. All of our investments in acquired properties during the three and
nine months ended September 30, 2020 are 100% leased at the acquisition date.
(2)Represents investments of £176.6 million Sterling during the three months
ended September 30, 2020 and £356.7 million Sterling during the nine months
ended September 30, 2020 converted at the applicable exchange rate on the date
of acquisition.
(3)The tenants occupying the new properties operate in 15 industries, and are
97.2% retail and 2.8% industrial, based on rental revenue. Approximately 73% of
the rental revenue generated from acquisitions during the third quarter of 2020
is from investment grade rated tenants, their subsidiaries or affiliated
companies.
(4)The tenants occupying the new properties operate in 23 industries, and are
96.9% retail and 3.1% industrial, based on rental revenue. Approximately 56% of
the rental revenue generated from acquisitions during the first nine months of
2020 is from investment grade rated tenants, their subsidiaries or affiliated
companies.

The initial 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 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 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. We may continue to pursue
development or expansion opportunities under similar arrangements in the future.
Portfolio Discussion
 Leasing Results
At September 30, 2020, we had 92 properties available for lease or sale out of
6,588 properties in our portfolio, which represents a 98.6% occupancy rate based
on the number of properties in our portfolio.
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The following tables summarizes our leasing results for the periods indicated
below:
            Properties available for lease at June 30, 2020         101
            Lease expirations                                        98
            Re-leases to same tenant (1)                            (75)
            Re-leases to new tenant (1)(2)                           (5)
            Vacant dispositions                                     (27)
            Properties available for lease at September 30, 2020     92


(1)The annual new rent on these re-leases was $12.3 million, as compared to the
previous annual rent of $12.4 million on the same properties, representing a
rent recapture rate of 99.2% on the properties re-leased during the quarter
ended September 30, 2020.
(2)Re-leased two properties to new tenants without a period of vacancy, and
three properties to new tenants after a period of vacancy.
           Properties available for lease at December 31, 2019       94
           Lease expirations                                        288
           Re-leases to same tenant (1)                            (225)
           Re-leases to new tenant (1)(2)                           (13)
           Vacant dispositions                                      (52)
           Properties available for lease at September 30, 2020      92


(1)The annual new rent on these re-leases was $45.5 million, as compared to the
previous annual rent of $45.6 million on the same properties, representing a
rent recapture rate of 99.8% on the properties re-leased during the first nine
months of 2020.
(2)Re-leased five properties to new tenants without a period of vacancy, and
eight properties to new tenants after a period of vacancy.
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 September 30, 2020, our average annualized rental revenue was approximately
$15.26 per square foot on the 6,496 leased properties in our portfolio. At
September 30, 2020, we classified 32 properties, with a carrying amount of
$41.1 million, as real estate and lease intangibles held for sale, net 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 the third quarter of 2020, we capitalized costs of $727,000 on existing
properties in our portfolio, which primarily relates to non-recurring building
improvements. In the first nine months of 2020, we capitalized costs of
$5.1 million on existing properties in our portfolio, consisting of $1.0 million
for re-leasing costs, $126,000 for recurring capital expenditures, and $4.0
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 recurring landlord
capital expenditure obligations that have a limited useful life. We define
non-recurring capital expenditures as property improvements in which we invest
additional capital that extend the useful life of the properties.
Equity Capital Raising
During the third quarter of 2020, we raised $348.6 million from the sale of
common stock at a weighted average price of $62.57, primarily through our
At-The-Market ("ATM") Program.

During the first nine months of 2020, we raised $1.2 billion from the sale of
common stock at a weighted average price of $71.16, primarily from 9,690,500
shares issued in an overnight underwritten public offering during the first
quarter of 2020, including 690,500 shares purchased by the underwriters upon the
exercise of their option to purchase additional shares, and 7,047,768 shares
from the sale of common stock under our ATM Program.
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Chief Financial Officer (CFO) and Treasurer Transition
In March 2020 and as previously announced, Paul Meurer, our former EVP, Chief
Financial Officer, departed from the Company. As a result of Mr. Meurer's
departure, we recognized an executive severance charge of $3.5 million during
the first quarter of 2020, consisting of $1.6 million of cash, $1.8 million
related to share-based compensation expense and $58,000 of professional fees.
In October 2020, our Board of Directors appointed Christie Kelly as Executive
Vice President, Chief Financial Officer and Treasurer, effective January 19,
2021. Ms. Kelly joined our Board of Directors in November 2019 and currently
serves as a member of the Audit Committee. Effective upon the appointment of Ms.
Kelly to Chief Financial Officer on January 19, 2021, she will resign from our
Board of Directors.
Commercial Paper Program
In August 2020, we established a U.S. dollar-denominated unsecured commercial
paper program. Under the terms of the program, we may issue from time to time
unsecured commercial paper notes up to a maximum aggregate amount outstanding of
$1.0 billion. Proceeds from commercial paper borrowings will be used for general
corporate purposes. As of September 30, 2020, the balance of borrowings
outstanding under our commercial paper program was $300.0 million. We expect to
use our $3.0 billion revolving credit facility as a liquidity backstop for the
repayment of the notes issued under the commercial paper program.
Note Issuances
In October 2020, we issued £400 million of 1.625% senior unsecured notes due
December 2030. The public offering price for these notes was 99.191% of the
principal amount, for an effective annual yield to maturity of 1.712% and gross
proceeds of £396.8 million. The proceeds from this offering 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 potential investment
opportunities and for other general corporate purposes.
In July 2020, we issued $350 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. The public offering price was 108.241% of the principal amount, for an
effective yield to maturity of 2.341% and gross proceeds of $378.8 million.

In May 2020, we issued $600.0 million of 2031 Notes. The public offering price
for the notes was 98.987% of the principal amount, for an effective yield to
maturity of 3.364% and gross proceeds of approximately $593.9 million.

The proceeds from each of the offerings of 2031 Notes were used to repay
borrowings outstanding under our credit facility, and, to the extent not used
for these purposes, to fund potential investment opportunities, and for other
general corporate purposes.
Term Loan Redemption
In June 2020, we repaid the $250.0 million term loan in full upon maturity.
Early Redemption of 5.75% Notes Due January 2021
In January 2020, we completed the early redemption on all $250.0 million in
principal amount of our outstanding 5.750% notes due January 2021, plus accrued
and unpaid interest. As a result of the early redemption, we recognized a $9.8
million loss on extinguishment of debt during the first quarter of 2020.
Impact of COVID-19
The COVID-19 pandemic and the measures taken to limit its spread are negatively
impacting global, national and regional economies across many industries,
including the industries in which some of our tenants operate, and have
disrupted the businesses and operations of some of our tenants, each of which
has had and may continue to have an adverse impact on our business, results of
operations, financial condition, and liquidity. These impacts may increase in
severity as the duration of the pandemic lengthens. See "Item 1A--Risk Factors"
in Part II of this report for more information regarding the actual and
potential future impacts of the COVID-19 pandemic and the measures taken to
limit its spread on our tenants and our business, results of operations,
financial condition and liquidity.

As a result of this challenging environment, we continue to work diligently with our tenants most affected by the pandemic to understand their business operations and financial liquidity and their ability to satisfy their contractual

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obligations to us. As we carefully navigate this difficult economic period with
our tenants, our focus is on finding resolutions that preserve the long-term
relationships we have built with many of our tenants.

The majority of lease concessions granted to our tenants during the first nine
months of 2020 as a result of the COVID-19 pandemic have been rent deferrals
with the original lease term unchanged. In these cases, we have determined that
the collection of deferred rent is probable (within the meaning applicable under
GAAP), although we cannot assure you that this determination will not change in
the future. In addition, as we believe to be the case with many retail
landlords, we have received many short-term rent relief requests, most often in
the form of rent deferral requests, or requests for further discussion from
tenants. We believe that not all tenant requests will ultimately result in lease
modification agreements, nor have we relinquished our contractual rights under
our lease agreements where rent concessions have not yet been granted. Our rent
collections for the periods below and rent relief requests to-date may not be
indicative of collections, concessions or requests in any future period.

Percentages of Contractual Rent Collected as of October 31, 2020

                                   Month Ended                 Month Ended                  Month Ended                  Quarter Ended                  

Month Ended

                                  July 31, 2020              August 31, 2020            September 30, 2020            September 30, 2020            

October 31, 2020

Contractual rent collected(1)

    across total portfolio            91.8%                       93.3%                        94.1%                         93.1%                      

92.9%

Contractual rent collected(1)

    from top 20 tenants(2)            90.0%                       91.6%                        91.8%                         91.1%                      

89.9%

Contractual rent collected(1)

    from investment grade
    tenants(3)                       100.0%                      100.0%                       100.0%                        100.0%                        100.0%


(1) Collection rates are calculated as the aggregate cash rent collected for the
applicable period from the beginning of that applicable period through October
31, 2020, divided by the contractual cash rent charged for the applicable
period. Cash rent collected is defined as amounts received including amounts in
transit, where the tenant has confirmed payment is in process. Rent collection
percentages are calculated based on contractual base rents (excluding percentage
rents and tenant reimbursements). Charged amounts have not been adjusted for any
COVID-19 related rent relief granted and include contractual base rents from any
tenants in bankruptcy. Due to differences in applicable foreign currency
conversion rates and rent conventions, the percentages above may differ from
percentages calculated utilizing total portfolio annualized contractual revenue.
(2) We define top 20 tenants as our 20 largest tenants based on percentage of
total portfolio annualized contractual rental revenue as of the most recent
reported period.
(3) We define investment grade tenants as tenants with a credit rating, and
tenants that are subsidiaries or affiliates of companies with a credit rating,
of Baa3/BBB- or higher from one of the three major rating agencies
(Moody's/S&P/Fitch).

                                      -33-

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Table of Contents The following table provides information relating to percentage of total contractual rent due and collected for the indicated periods:

                                                    Percentage of Total Contractual Rent Due By Month(1)                                           

Percentage of Total Contractual Rent Collected By Month(1)

                                     October                  September                  August                    July              October                   September                    August                     July
                                      2020                      2020                      2020                     2020                2020                       2020                       2020                      2020
U.S.
Aerospace                             0.6%                      0.7%                      0.7%                     0.7%                0.6%                       0.7%                       0.7%                      0.7%
Apparel stores                         1.3                       1.3                       1.3                      1.4                1.3                        1.3                        1.3                       1.4
Automotive collision services          1.1                       1.2                       1.2                      1.1                1.1                        1.2                        1.2                       1.1
Automotive parts                       1.6                       1.6                       1.6                      1.6                1.6                        1.6                        1.6                       1.6
Automotive service                     2.5                       2.5                       2.5                      2.5                2.5                        2.5                        2.5                       2.5
Automotive tire services               2.0                       2.0                       2.0                      2.0                2.0                        2.0                        2.0                       2.0
Beverages                              2.0                       2.0                       2.0                      2.0                2.0                        2.0                        2.0                       2.0
Child care                             2.1                       2.1                       2.1                      2.2                2.1                        2.1                        2.1                       1.9
Consumer electronics                   0.3                       0.3                       0.3                      0.3                0.3                        0.3                        0.3                       0.3
Consumer goods                         0.6                       0.6                       0.6                      0.6                0.6                        0.6                        0.6                       0.6
Convenience stores                    12.1                      12.3                      12.4                     12.2                12.0                       12.2                       12.3                      12.2
Crafts and novelties                   0.9                       0.9                       0.8                      0.8                0.9                        0.9                        0.8                       0.8
Diversified industrial                 0.7                       0.7                       0.7                      0.7                0.7                        0.7                        0.7                       0.7
Dollar stores                          7.8                       7.8                       7.9                      7.9                7.8                        7.8                        7.8                       7.9
Drug stores                            8.4                       8.5                       8.6                      8.6                8.4                        8.5                        8.6                       8.6
Education                              0.2                       0.2                       0.2                      0.2                0.2                        0.2                        0.2                       0.1
Electric utilities                     0.1                       0.1                       0.1                      0.1                0.1                        0.1                        0.1                       0.1
Entertainment                          0.3                       0.3                       0.3                      0.3                0.3                        0.3                        0.3                       0.1
Equipment services                     0.4                       0.4                       0.4                      0.4                0.4                        0.4                        0.4                       0.4
Financial services                     1.9                       1.9                       1.9                      1.9                1.9                        1.9                        1.9                       1.9
Food processing                        0.7                       0.7                       0.7                      0.7                0.7                        0.7                        0.7                       0.7
General merchandise                    3.0                       2.9                       2.9                      2.8                3.0                        2.9                        2.9                       2.8
Government services                    0.6                       0.7                       0.7                      0.7                0.6                        0.6                        0.7                       0.7
Grocery stores                         5.0                       5.1                       5.0                      5.1                5.0                        5.1                        5.0                       5.1
Health and beauty                      0.2                       0.2                       0.2                      0.2                0.2                        0.2                        0.2                       0.2
Health and fitness                     7.0                       7.2                       7.2                      7.2                5.8                        5.4                        6.0                       6.1
Health care                            1.6                       1.6                       1.6                      1.6                1.6                        1.6                        1.6                       1.6
Home furnishings                       0.7                       0.8                       0.8                      0.8                0.6                        0.7                        0.7                       0.7
Home improvement                       3.0                       2.9                       2.9                      2.9                3.0                        2.9                        2.9                       2.9
Machinery                              0.1                       0.1                       0.1                      0.1                0.1                        0.1                        0.1                       0.1
Motor vehicle dealerships              1.6                       1.6                       1.6                      1.6                1.6                        1.6                        1.6                       1.6
Office supplies                        0.2                       0.2                       0.2                      0.2                0.1                        0.2                        0.1                       0.1
Other manufacturing                    0.6                       0.6                       0.6                      0.6                0.6                        0.6                        0.6                       0.6
Packaging                              0.9                       0.9                       0.9                      0.9                0.9                        0.9                        0.9                       0.9
Paper                                  0.1                       0.1                       0.1                      0.1                0.1                        0.1                        0.1                       0.1
Pet supplies and services              0.7                       0.7                       0.7                      0.7                0.7                        0.7                        0.7                       0.7
Restaurants - casual dining            3.0                       3.0                       3.0                      3.1                2.7                        2.8                        2.8                       2.8
Restaurants - quick service            5.6                       5.7                       5.7                      5.8                5.6                        5.6                        5.0                       5.0
Shoe stores                            0.2                       0.2                       0.2                      0.2                0.2                        0.2                        0.2                        *
Sporting goods                         0.7                       0.8                       0.8                      0.8                0.7                        0.8                        0.8                       0.8
Telecommunications                     0.5                       0.5                       0.5                      0.5                0.5                        0.5                        0.5                       0.5
Theaters                               5.6                       5.8                       5.8                      5.8                0.4                        2.3                        1.6                       0.9
Transportation services                4.1                       4.2                       4.2                      4.2                4.1                        4.2                        4.2                       4.2
Wholesale clubs                        2.5                       2.4                       2.4                      2.4                2.5                        2.4                        2.4                       2.4
Other                                  0.2                       0.1                       0.1                      0.2                0.1                        0.1                        0.1                       0.1
Total U.S.                            95.3%                     96.4%                     96.5%                    96.7%              88.2%                      90.5%                      89.8%                     88.5%
U.K.
Grocery stores                         3.7                       3.2                       3.3                      3.2                3.7                        3.2                        3.3                       3.2
Health care                            0.1                       0.1                       0.1                      0.1                0.1                        0.1                        0.1                       0.1
Home improvement                       0.9                       0.3                       0.1                       -                 0.9                        0.3                        0.1                        -
Theaters                                *                         *                         *                        *                  -                          -                          -                         -
Total U.K.                            4.7%                      3.6%                      3.5%                     3.3%                4.7%                       3.6%                       3.5%                      3.3%
Totals                               100.0%                    100.0%                    100.0%                   100.0%              92.9%                      94.1%                      93.3%                     91.8%


* Less than 0.1%
(1) Collection rates are calculated as the aggregate cash rent collected for the
applicable period from the beginning of that applicable period through October
31, 2020, divided by the contractual cash rent charged for the applicable
period. Cash rent collected is defined as amounts received including amounts in
transit, where the tenant has confirmed payment is in process. Rent collection
percentages are calculated based on contractual base rents (excluding percentage
rents and tenant reimbursements). Charged amounts have not been adjusted for any
COVID-19 related rent relief granted and include contractual base rents from any
tenants in bankruptcy. Due to differences in applicable foreign currency
conversion rates and rent conventions, the industry percentages above may differ
from industry percentages calculated utilizing total portfolio annualized
contractual revenue.

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As the adverse impacts of the COVID-19 pandemic and the measures taken to limit
its spread continue to evolve, the ability of our tenants to continue to pay
rent to us may further diminish, and therefore we cannot assure you that our
historical rental collections are indicative of our rental collections in
November or in the future. As a result of the impacts of the COVID-19 pandemic
and the measures taken to limit its spread, our revenues in the foreseeable
future may decline relative to the first nine months of 2020, and that decline
may continue or increase in subsequent periods as long as such impacts continue
to exist.
Summarized Financial Results
The following summarizes our select financial results (dollars in millions,
except per share data):
                                                                                                                                       % Increase (Decrease)
                                         Three months ended September 30,               Nine months ended September 30,
                                              2020                   2019                  2020                    2019        Three months            Nine months
Total revenue                      $         404.6       $          374.2       $       1,233.5       $         1,094.1                8.1  %                 12.7  %
Net income available to common
stockholders (1)                   $          22.9       $          101.0       $         277.6       $           307.2              (77.3) %                 (9.6) %
Net income per share (2)           $          0.07       $           0.32       $          0.81       $            0.98              (78.1) %                (17.3) %
Funds from operations (FFO)
available to common stockholders   $         283.0       $          262.0       $         848.4       $           759.2                8.0  %                 11.7  %
FFO per share (2)                  $          0.82       $           0.82       $          2.48       $            2.43                  -  %                  2.1  %
Adjusted funds from operations
(AFFO) available to common
stockholders                       $         282.5       $          265.4       $         875.0       $           768.0                6.4  %                 13.9  %
AFFO per share (2)                 $          0.81       $           0.83       $          2.55       $            2.46               (2.4) %                  3.7  %


(1) The calculation to determine net income available to common stockholders
includes provisions for impairment, gains from the sale of real estate, and
foreign currency gains and losses. These items can vary from quarter to quarter
and can significantly impact net income available to common stockholders and
period to period comparisons.
(2) All per share amounts are presented on a diluted per common share basis.
Our financial results in the first nine months of 2020 were impacted by the
following transactions:(i) $123.4 million of provisions for impairment in first
nine months of 2020, of which $105.1 million related to the third quarter, (ii)
$34.4 million in reserves recorded as a reduction of rental revenue in the first
nine months of 2020, of which $24.1 million related to the third quarter, (iii)
a $9.8 million loss on extinguishment of debt due to the January 2020 early
redemption of the 5.750% notes due 2021 recorded in the first quarter of 2020,
and (iv) a $3.5 million executive severance charge for our former CFO also
recorded in the first quarter of 2020.
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 and
Results of Operations," in this quarterly report, which includes a
reconciliation of net income available to common stockholders to FFO and AFFO.
                        LIQUIDITY AND CAPITAL RESOURCES
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 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 revolving 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 stockholders, primarily
through cash provided by operating activities, borrowings on our credit facility
and under our commercial paper program and through public securities offerings.
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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 September
30, 2020, our total outstanding borrowings of senior unsecured notes and bonds,
term loans, mortgages payable, credit facility borrowings and commercial paper
were $8.45 billion, or approximately 28.4% of our total market capitalization of
$29.77 billion.
We define our total market capitalization at September 30, 2020 as the sum of:
•Shares of our common stock outstanding of 350,595,869, plus total common units
outstanding of 463,119, multiplied by the last reported sales price of our
common stock on the NYSE of $60.75 per share on September 30, 2020, or $21.33
billion;
•Outstanding borrowings of $556.1 million on our revolving credit facility,
consisting entirely of Sterling-denominated borrowings of £430.5 million, and
$300.0 million on our commercial paper program;
•Outstanding mortgages payable of $334.7 million, excluding net mortgage
premiums of $1.9 million and deferred financing costs of $1.1 million;
•Outstanding borrowings of $250.0 million on our term loan, excluding deferred
financing costs of $692,000; and
•Outstanding senior unsecured notes and bonds of $7.01 billion, including a
Sterling-denominated private placement of £315.0 million, and excluding
unamortized net original issuance premiums of $28.2 million and deferred
financing costs of $40.3 million.
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.
At-the-Market (ATM) Program
Under our "at-the-market" equity distribution plan, or our ATM program, up to
33,402,405 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 the
third quarter of 2020, we issued 5,536,619 shares and raised approximately
$346.5 million of gross proceeds under the ATM program. During the first nine
months of 2020, we issued 7,047,768 shares and raised approximately
$442.2 million of gross proceeds under the ATM program. At September 30, 2020,
we had 26,354,637 shares remaining for future issuance under our ATM program. We
anticipate maintaining the availability of our ATM program in the future,
including the replenishment of authorized shares issuable thereunder.
Issuance of Common Stock
In March 2020, we issued 9,690,500 shares of common stock in an overnight
underwritten public offering, including 690,500 shares purchased by the
underwriters upon the exercise of their option to purchase additional
shares. After deducting underwriting discounts and other offering costs of $21.2
million, the net proceeds of $728.9 million were primarily used to repay
borrowings under our revolving credit facility.
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. We
did not issue shares under the waiver approval process during the first nine
months of 2020. At September 30, 2020, we had 11,539,247 shares remaining for
future issuance under our DRSPP program. During the third quarter of 2020, we
issued 34,604 shares
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and raised approximately $2.1 million under our DRSPP. During the first nine
months of 2020, we issued 113,421 shares and raised approximately $6.9 million
under our DRSPP.
Revolving Credit Facility and Commercial Paper Program
We have a $3.0 billion unsecured revolving credit facility with an initial term
that expires in March 2023 and includes, at our option, two six-month
extensions. The multicurrency revolving facility allows us to borrow in up to 14
currencies, including U.S. dollars. Our revolving credit facility has a $1.0
billion expansion option, which is subject to obtaining lender
commitments. Under our revolving credit facility, our investment grade credit
ratings as of September 30, 2020 provide for financing at the London Interbank
Offered Rate, commonly referred to as 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 change. We also have other interest rate options
available to us under our credit facility. Our credit facility is unsecured and,
accordingly, we have not pledged any assets as collateral for this obligation.
At September 30, 2020, we had a borrowing capacity of $2.4 billion available on
our revolving credit facility and an outstanding balance of $556.1 million,
consisting entirely of £430.5 million Sterling. The weighted average interest
rate on borrowings under our revolving credit facility during the first nine
months of 2020 was 1.5% per annum. We must comply with various financial and
other covenants in our credit facility. At September 30, 2020, 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.
In August 2020, we established a U.S. dollar-denominated unsecured commercial
paper program. Under the terms of the program, we may issue from time to time
unsecured commercial paper notes up to a maximum aggregate amount outstanding of
$1.0 billion. Borrowings under this program generally mature in one year or
less. At September 30, 2020, we had an outstanding balance of $300.0 million.
The weighted average interest rate on borrowings under our commercial paper
program was 0.3% from inception of the plan through September 30, 2020. We
expect to use our $3.0 billion revolving credit facility as a liquidity backstop
for the repayment of the notes issued under the commercial paper program.
We generally use our credit facility and commercial paper borrowings 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. We regularly review our credit facility and commercial paper program and
may seek to extend, renew or replace our credit facility, to the extent we deem
appropriate.
Term Loans
In October 2018, in conjunction with entering into our revolving credit
facility, we entered into a $250.0 million senior unsecured term loan, which
matures in March 2024, and is governed by the credit agreement that governs our
revolving credit facility. 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 revolving credit
facility, we entered into a $250.0 million senior unsecured term loan which
matured in June 2020. Borrowing under this term loan bore 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 fixed our per annum
interest rate on this term loan at 2.62%. In June 2020, we repaid the term loan
in full upon maturity.
Mortgage Debt
As of September 30, 2020, we had $334.7 million of mortgages payable, all of
which were assumed in connection with our property acquisitions. Additionally,
at September 30, 2020, we had net premiums totaling $1.9 million on these
mortgages and deferred financing costs of $1.1 million. 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 the first nine months of
2020, we made $73.7 million in principal payments, including the repayment of
five mortgages in full for $69.2 million.
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Notes Outstanding
Our senior unsecured note and bond obligations consist of the following as of
September 30, 2020, sorted by maturity date (dollars in millions):
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
3.250% notes, issued in June 2019 and due in June 2029                                 500

3.250% notes, $600 issued in May 2020 and $350 issued in July 2020, both due in January 2031

                                                                           950
2.730% notes, issued in May 2019 and due in May 2034 (1)                               407

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                                                          $    7,007
Unamortized net original issuance premiums and deferred financing costs                (12)
                                                                                $    6,995


(1) Represents the principal balance (in U.S. dollars) of the
Sterling-denominated private placement of £315.0 million converted at the
applicable exchange rate on September 30, 2020.
In October 2020, we issued £400 million of 1.625% senior unsecured notes due in
December 2030. The public offering price for these notes was 99.191% of the
principal amount, for an effective yield to maturity of 1.712%. The gross
proceeds of approximately £396.8 million from this offering 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 potential 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 September 30,
2020. Additionally, with the exception of interest on our 1.625% senior
unsecured notes due in December 2030, which is paid annually, interest on all of
our senior note and bond obligations outstanding 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 September 30, 2020 are:
Note Covenants                                    Required                  

Actual

Limitation on incurrence of total debt            < 60% of adjusted assets     39.6  %
Limitation on incurrence of secured debt          < 40% of adjusted assets      1.6  %
Debt service coverage (trailing 12 months) (1)    > 1.5x                    

5.2x

Maintenance of total unencumbered assets > 150% of unsecured debt

257.0 %



(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
October 1, 2019 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 October 1, 2019,
nor does it purport to reflect our debt service coverage ratio for any future
period. The following is our calculation of debt service and fixed charge
coverage at September 30, 2020 (in thousands, for trailing twelve months):
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Net income available to common stockholders                                 

$ 406,852 Plus: interest expense, excluding the amortization of deferred financing costs

                                                                                    295,625
Plus: loss on extinguishment of debt                                                       9,819
Plus: provision for taxes                                                                 11,929
Plus: depreciation and amortization                                                      658,591
Plus: provisions for impairment                                                          132,392
Plus: pro forma adjustments                                                               64,837
Less: gain on sales of real estate                                          

(67,733)


Income available for debt service, as defined                               

$ 1,512,312


Total pro forma debt service charge                                         

$ 288,566


Debt service and fixed charge coverage ratio                                                 5.2


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 September 30, 2020, we had cash and cash equivalents totaling $724.8
million, inclusive of £172.9 million Sterling.
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 and commercial paper program.
Credit Agency Ratings
The borrowing interest rates under our revolving credit facility are based upon
our ratings assigned by credit rating agencies. As of September 30, 2020, 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 and Standard & Poor's Ratings Group has
assigned a rating of A- with a "stable" outlook. In addition, we were assigned
the following ratings on our commercial paper at September 30, 2020: Moody's
Investors Service has assigned a rating of P-2 and Standard & Poor's Ratings
Group has assigned a rating of A-2.

Based on our ratings as of September 30, 2020, 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.
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Table of Obligations
The following table summarizes the maturity of each of our obligations as of
September 30, 2020 (dollars in millions):
                                                                                                       Ground
                 Credit Facility and                                                           Leases Paid by              Ground
    Year of         Commercial Paper    Notes and        Term       Mortgages                   Realty Income      Leases Paid by
   Maturity              Program (1)    Bonds (2)    Loan (3)     Payable (4)     Interest (5)            (6)     Our Tenants (7)     Other (8)        Totals
     2020       $           300.0    $       -    $      -    $       10.5$        60.1$       0.4    $            3.4    $     46.5$    420.9
     2021                       -            -           -            68.8            290.4            1.5                13.6          59.9         434.2
     2022                       -        950.0           -           111.8            286.6            1.6                13.4             -       1,363.4
     2023                   556.1        750.0           -            20.6            248.4            1.6                13.5             -       1,590.2
     2024                       -        350.0       250.0           112.2            204.1            1.6                13.6             -         931.5
  Thereafter                    -      4,957.0           -            10.8          1,290.9           20.2                69.1             -       6,348.0
    Totals      $           856.1    $ 7,007.0$  250.0$      334.7$     2,380.5$      26.9    $          126.6    $    106.4$ 11,088.2


(1)The initial term of the credit facility, representing $556.1 million of the
outstanding borrowings at September 30, 2020, expires in March 2023 and
includes, at our option, two six-month extensions. The commercial paper
borrowings outstanding at September 30, 2020 totaled $300.0 million and matured
on October 1, 2020. Upon settlement of a GBP/ USD currency exchange swap
arrangement on October 1, 2020, we received $300.1 million upon our payment of
£224.9 million, which was used to repay the outstanding borrowings under our
commercial paper program.
(2)Excludes non-cash original issuance discounts and premiums recorded on notes
payable of $28.2 million and deferred financing costs of $40.3 million. The
table of obligations also excludes the October 2020 issuance of £400 million of
senior unsecured notes due December 2030.
(3)Excludes deferred financing costs of $692,000.
(4)Excludes both non-cash net premiums recorded on the mortgages payable of $1.9
million and deferred financing costs of $1.1 million.
(5)Interest on the term loans, notes, bonds, mortgages payable, and credit
facility has been calculated based on outstanding balances at period end 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 $96.1 million of commitments under construction contracts
and $10.3 million for re-leasing costs, recurring capital expenditures, and
non-recurring building improvements.
Our revolving credit facility, commercial paper program, term loans, and notes
payable obligations are unsecured. Accordingly, we have not pledged any assets
as collateral for these obligations.
No Unconsolidated Investments
We have no unconsolidated investments, nor do we engage in trading activities
involving energy or commodity contracts.
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. on a per unit basis that is 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 2019, our cash distributions to
common stockholders totaled $852.1 million, or approximately 128.9% of our
taxable income of $661.0 million. Our taxable income reflects non-cash
deductions for depreciation and amortization. Our 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 and cash on hand are sufficient to support our
current level of cash distributions to our stockholders. Our cash distributions
to common stockholders in the first nine months of 2020 totaled $716.5 million,
representing 81.9% of our adjusted funds from operations available to common
stockholders of $875.0 million. In comparison, our 2019 cash distributions to
common stockholders totaled $852.1 million, representing 81.2% of our adjusted
funds from operations available to common stockholders of $1.05 billion.

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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.
                             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 in our Annual Report
on   Form 10-K   for the year ended December 31, 2019.

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. Additionally,
above-market rents on certain leases under which we are a lessor are accounted
for as financing receivables amortizing over the lease term, while below-market
rents on certain leases under which we are a lessor are accounted for as prepaid
rent. 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 of the land, building and
improvements, and identified intangible assets and liabilities and is often
based upon the various characteristics of the market where the property is
located. In addition, any assumed mortgages 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.

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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. 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, a fair value analysis is performed and, to
the extent the estimated fair value is less than the current book value, a
provision for impairment is recorded to reduce the book value to estimated fair
value. Key inputs that we utilize in this analysis include projected rental
rates, estimated holding periods, 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.

When assessing the collectability of future lease payments, one of the key
factors we have considered during 2020 has been the COVID-19 pandemic. We
generally assess collectability based on an analysis of creditworthiness,
economic trends, and other facts and circumstances related to the applicable
tenants. If the collection of substantially all of the future lease payments is
less than probable, we will write-off the receivable balances associated with
the lease and cease to recognize lease income, including straight-line rent,
unless cash is received when due. As of September 30, 2020, other than the
information related to the reserves we have recorded to date, we do not have any
further tenant specific information that would change our assessment that
collection of substantially all of the future lease payments under our existing
leases is probable. However, there may be impacts in future periods that could
change this assessment as the situation continues to evolve and as more
information becomes available.
The COVID-19 pandemic and the measures taken to limit its spread are negatively
impacting the economy across many industries, including the industries in which
some of our tenants operate. These impacts may continue and increase in severity
as the duration of the pandemic lengthens, which may, in turn, adversely impact
the fair value estimates of our real estate and require the recording of
impairments on our properties. As a result, we evaluated certain key assumptions
involving fair value estimates of our real estate, recording of impairments on
our properties and collectability of our accounts receivable. We continue to
evaluate the potential impacts of the COVID-19 pandemic and the measures taken
to limit its spread on our business and industry segments, as the situation
continues to evolve and more information becomes available.
The following is a comparison of our results of operations for the three and
nine months ended September 30, 2020, to the three and nine months ended
September 30, 2019.
Total Revenue
The following summarizes our total revenue (dollars in thousands):
                                 Three months ended September 30,                 Nine months ended September 30,                      Increase
                                          2020               2019                       2020                 2019         Three months           Nine months
REVENUE
Rental (excluding
reimbursable)                $         383,845       $ 356,789$       1,164,873$ 1,041,327$      27,056$    123,546
Rental (reimbursable)                   18,024          15,523                     59,354               49,274                  2,501                10,080
Other                                    2,703           1,935                      9,322                3,461                    768                 5,861
Total revenue                $         404,572       $ 374,247$       1,233,549$ 1,094,062$      30,325$    139,487


Rental Revenue (excluding reimbursable)
The increase in rental revenue (excluding reimbursable) in the third quarter of
2020 compared to the third quarter of 2019 is primarily attributable to:

•The 171 properties (5.0 million square feet) we acquired in 2020, which generated $12.6 million of rent in the third quarter of 2020; •The 779 properties (13.4 million square feet) we acquired in 2019, which generated $57.1 million of rent in the third quarter of 2020, compared to $26.1 million in the third quarter of 2019, an increase of $31.0 million;

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•A net increase in straight-line rent and other non-cash adjustments to rent of
$1.9 million in the third quarter of 2020 as compared to the third quarter of
2019; partially offset by
•Same store rents generated on 5,511 properties (86.2 million square feet)
during the third quarter of 2020 and 2019, decreased by $13.9 million, or
(4.4)%, to $303.0 million from $316.9 million;
•A net decrease of $2.8 million relating to properties sold in the third quarter
of 2020 and throughout 2019 that were reported in continuing operations; and
•A net decrease of $1.7 million relating to the aggregate of (i) rental revenue
from properties (124 properties comprising 2.9 million square feet) that were
available for lease during part of 2020 or 2019, (ii) rental revenue for eight
properties under development, and (iii) lease termination settlements. In
aggregate, the revenues for these items totaled $5.9 million in the third
quarter of 2020, compared to $7.6 million in the third quarter of 2019.

The increase in rental revenue (excluding reimbursable) in the first nine months of 2020 compared to the first nine months of 2019 is primarily attributable to:


•The 171 properties (5.0 million square feet) we acquired in the first nine
months of 2020, which generated $24.5 million of rent in the first nine months
of 2020;
•The 779 properties (13.4 million square feet) we acquired in 2019, which
generated $174.5 million of rent in the first nine months of 2020, compared to
$44.9 million in the first nine months of 2019, an increase of $129.6 million;
partially offset by
•Same store rents generated on 5,511 properties (86.2 million square feet)
during the first nine months of 2020 and 2019, decreased by $14.6 million or
(1.5)%, to $937.2 million from $951.8 million;
•A net decrease in straight-line rent and other non-cash adjustments to rent of
$3.0 million in the first nine months of 2020 as compared to the first nine
months of 2019;
•A net decrease of $9.6 million relating to properties sold in the first nine
months of 2020 and during 2019 that were reported in continuing operations; and
•A net decrease of $3.4 million relating to the aggregate of (i) rental revenue
from properties (124 properties comprising 2.9 million square feet) that were
available for lease during part of 2020 or 2019, (ii) rental revenue for eight
properties under development, and (iii) lease termination settlements. In
aggregate, the revenues for these items totaled $18.4 million in the first nine
months of 2020 compared to $21.8 million in the first nine months of 2019.
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.

Our calculation of same store rental revenue includes rent deferred for future
payment as a result of lease concessions we granted in response to the COVID-19
pandemic and recognized under the practical expedient provided by the Financial
Accounting Standards Board (FASB). Same store rental income was negatively
impacted by reserves recorded as reductions of rental revenue of $19.9 million
for the three months ended September 30, 2020 compared to $241,000 for the three
months ended September 30, 2019, and $26.5 million for the nine months ended
September 30, 2020 compared to $1.2 million for the nine months ended September
30, 2019. Our calculation of same store rental revenue also includes uncollected
rent for which we have not granted a lease concession. If these applicable
amounts of rent deferrals and uncollected rent were excluded from our
calculation of same store rental revenue, the decreases for the three and nine
months ended September 30, 2020 relative to the comparable periods for 2019
would have been (4.6)% and (5.9)%, respectively.

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Rental revenue was negatively impacted by rent reserves throughout 2020,
primarily due to the COVID-19 pandemic, particularly with respect to the ongoing
disruption to the theater industry. The following table summarizes reserves
recorded as a reduction of rental revenue (dollars in millions):
                                                   Three months ended September 30,           Nine months ended September 30,
                                                           2020                2019                  2020                2019
Rental revenue reserves                   $             21.8          $      0.3$       29.3$      1.2
Straight-line rent reserves                              2.3                 0.1                   5.1                 1.5
Total rental revenue reserves             $             24.1          $     

0.4 $ 34.4$ 2.7



Of the 6,588 properties in the portfolio at September 30, 2020, 6,554, or 99.5%,
are single-tenant properties and the remaining are multi-tenant properties. Of
the 6,554 single-tenant properties, 6,465, or 98.6%, were net leased at
September 30, 2020. Of our 6,465 leased single-tenant properties, 5,527 or 85.5%
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 $532,000 in the third
quarter of 2020, $407,000 in the third quarter of 2019, $2.3 million in the
first nine months of 2020, and $4.5 million in the first nine months of 2019. We
anticipate percentage rent to be less than 1% of rental revenue for 2020.
At September 30, 2020, our portfolio of 6,588 properties was 98.6% leased with
92 properties available for lease, as compared to 98.6% leased, with 94
properties available for lease at December 31, 2019, and 98.3% leased with 102
properties available for lease at September 30, 2019. 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 or sale could increase in the future, given the nature of economic cycles
and other unforeseen global events, such as the ongoing COVID-19 pandemic and
the measures taken to limit its spread.
Rental Revenue (reimbursable)
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 for the periods presented is primarily due to the
growth of our portfolio due to acquisitions.
Other Revenue
The increase in other revenue in the third quarter of 2020 and first nine months
of 2020 compared to the same periods of 2019 was primarily related to interest
income recognized on financing receivables for certain leases with above-market
terms as compared to the first nine months of 2019. In addition, interest income
from our money market accounts was higher during the first nine months of 2020
than the comparative period in 2019, which is primarily due to higher average
investment balances.
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Total Expenses
The following summarizes our total expenses (dollars in thousands):
                                      Three months ended September 30,                Nine months ended September 30,            $ Increase
                                               2020               2019                      2020                 2019   Three months     Nine months
EXPENSES
Depreciation and amortization   $       169,084$ 149,424$       501,997$   437,367$      19,660$     64,630
Interest                                 76,806              73,410                  230,572               215,918            3,396          14,654
Property (excluding
reimbursable)                             7,386               4,831                   18,114                14,058            2,555           4,056
Property (reimbursable)                  18,024              15,523                   59,354                49,274            2,501          10,080
General and administrative (1)           16,514              16,460                   56,541                50,153               54           6,388
Income taxes                              4,592               1,822                   10,193                 4,422            2,770           5,771
Provisions for impairment               105,095              13,503                  123,442                31,236           91,592          92,206
Total expenses                  $       397,501$ 274,973$     1,000,213$   802,428$     122,528$    197,785
Total revenue (2)               $       386,548$ 358,724$     1,174,195$ 1,044,788
General and administrative
expenses as a percentage of
total revenue (1)(2)                        4.3   %             4.6  %                   4.5   %               4.8  %
Property expenses (excluding
reimbursable) as a percentage
of total revenue (2)                        1.9   %             1.3  %                   1.5   %               1.3  %


(1) General and administrative expenses for the first nine months of 2020
included an executive severance charge related to the departure of our former
CFO in March 2020. The total value of cash, stock compensation and professional
fees incurred as a result of this severance was $3,463 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). In order to present a
normalized calculation of our general and administrative expenses as a
percentage of total revenue for the first nine months of 2020, we have excluded
this executive severance charge to arrive at a normalized general and
administrative amount of $53,078, which was used for our calculation.
(2) Excludes rental revenue (reimbursable).
Depreciation and Amortization
The increase in depreciation and amortization in the third quarter and first
nine months of 2020 was primarily due to the acquisition of properties during
the fourth quarter of 2019 and the first nine months of 2020, 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.
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Interest Expense
The following is a summary of the components of our interest expense (dollars in
thousands):
                                                       Three months ended September 30,                Nine months ended September 30,
                                                              2020                 2019                      2020                 2019
Interest on our credit facility, commercial
paper, term loans, notes, mortgages and
interest rate swaps                           $         73,174           $    69,889$       218,991$   206,247
Credit facility commitment fees                            958                   958                    2,854                 2,844
Amortization of debt origination and deferred
financing costs                                          2,584                 2,552                    7,752                 6,930
Loss on interest rate swaps                              1,123                   694                    3,116                 2,058
Amortization of net mortgage premiums                     (311)                 (354)                  (1,021)               (1,061)
Amortization of net note premiums                         (690)                 (211)                  (1,096)                 (784)
Other items                                                (32)                 (118)                     (24)                 (316)
Interest expense                              $         76,806           $    73,410$       230,572$   215,918

Credit facility, term loans, mortgages and
notes
Average outstanding balances (dollars in
thousands)                                    $      8,098,923$ 7,171,012$     8,179,307$ 6,991,532
Average interest rates                                    3.51   %              3.88  %                  3.48   %              3.93  %


The increase in interest expense from 2019 to 2020 for the third quarter and
first nine months is primarily due to the May and July 2020 issuances of our
2031 Notes, the May 2019 issuance of our 2.730% notes due 2034, the June 2019
issuance of our 3.250% notes due 2029, higher interest related to mortgages
assumed during December 2019 and interest rate swaps, partially offset by the
January 2020 repayment of our 5.750% notes due 2021, the June 2020 repayment of
one of our $250.0 million term loans, and lower average interest rates.
During the first nine months of 2020, the weighted average interest rate on our:
•Revolving credit facility outstanding borrowings of $556.1 million was 1.5%;
•Commercial paper outstanding borrowings of $300.0 million was 0.3%;
•Term loan outstanding of $250.0 million (excluding deferred financing costs of
$692,000 and considering that one of our $250.0 million term loans was paid off
in June 2020) was 1.8%;
•Mortgages payable of $334.7 million (excluding net premiums totaling $1.9
million and deferred financing costs of $1.1 million on these mortgages) was
4.9%;
•Notes and bonds payable of $7.01 billion (excluding net unamortized original
issue premiums of $28.2 million and deferred financing costs of $40.3 million)
was 3.8%; and
•Combined outstanding notes, bonds, mortgages, term loan and $3.0 billion
revolving credit facility and commercial paper borrowings of $8.45 billion
(excluding all net premiums and deferred financing costs) was 3.5%.
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 and legal fees. General portfolio costs include, but are
not limited to, insurance, legal, property inspections, and title search fees.
At September 30, 2020, 92 properties were available for lease or sale, as
compared to 94 at December 31, 2019, and 102 at September 30, 2019.

The increase in property expenses (excluding reimbursable) for the third quarter
and first nine months of 2020 is primarily due to reserves for tenant
reimbursements and an increase in repairs and maintenance expense.
Property Expenses (reimbursable)
The increase in property expenses (reimbursable) in the third quarter and first
nine months of 2020 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 period.
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General and Administrative Expenses
General and administrative expenses are expenditures related to the operations
of our Company, including employee-related costs, professional fees, and other
general overhead costs associated with running our business.

General and administrative expenses increased during the first nine months of
2020 primarily due to a severance charge of $3.5 million for our former CFO, who
departed the Company in March 2020, higher payroll-related costs, and higher
corporate-level professional fees, partially offset by lower costs for
terminated acquisitions and travel.
Income Taxes
Income taxes are for city and state income and franchise taxes, and for U.K.
income taxes accrued or paid by us and our subsidiaries. The increase in income
taxes in the third quarter and first nine months of 2020 was primarily
attributable to our U.K. investments, which contributed to higher U.K. income
taxes as compared to the third quarter and first nine months of 2019.
Provisions for Impairment
The following table summarizes provisions for impairment during the periods
indicated below (dollars in millions):
                                        Three months ended September 30,                   Nine months ended September 30,
                                              2020                  2019                        2020                  2019
Total provisions for
impairment                   $            105.1          $       13.5          $            123.4          $       31.2
Number of properties:
Classified as held for sale                   8                     1                           9                     1
Classified as held for
investment                                   18                     2                          28                     4
Sold                                         17                    24                          31                    36


During 2020, we identified the impact of the COVID-19 pandemic as an impairment
triggering event for properties occupied by certain tenants experiencing
difficulties meeting their lease obligations to us. After considering the
impacts of the COVID-19 pandemic on the key assumptions noted above, we
determined that the carrying values of 17 properties classified as held for
investment for the three months ended September 30, 2020, and 25 properties
classified as held for investment for the nine months ended September 30, 2020
were not recoverable. As a result, we recorded provisions for impairment of
$81.6 million for the three months ended September 30, 2020, and $89.8 million
for the nine months ended September 30, 2020, on the applicable properties
impacted by the COVID-19 pandemic. Of the provisions for impairment recorded
during the third quarter of 2020 for properties impacted by the COVID-19
pandemic, a total of 12 assets occupied by certain of our tenants in the theater
industry were impaired for $79.0 million. Impairments recorded on other
properties during the three and nine months ended September 30, 2020 totaled
$23.5 million and $33.6 million respectively.
Gain on Sales of Real Estate
The following table summarizes our properties sold during the periods indicated
below (dollars in millions):
                                            Three months ended September 30,                   Nine months ended September 30,
                                                  2020                  2019                        2020                  2019
Number of properties sold                        37                    27                          66                    64
Net sales proceeds                $            51.3          $       21.5          $            184.9          $       72.6
Gain on sales of real estate      $            13.7          $        1.7          $             53.6          $       15.8


Foreign Currency and Derivative Losses/Gains, Net
We borrow in the functional currencies of the countries in which we invest.
Foreign currency gains and losses are primarily a result of intercompany debt
and certain remeasurement transactions.

Loss on Extinguishment of Debt
In January 2020, we completed the early redemption on all $250.0 million in
principal amount of outstanding 5.75% notes due January 2021, plus accrued and
unpaid interest. As a result of the early redemption, we recognized a $9.8
million loss on extinguishment of debt during the first nine months of 2020.
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Net Income Available to Common Stockholders
The following summarizes our net income available to common stockholders
(dollars in millions, except per share data):
                                                                                                                                     % Decrease
                                Three months ended September 30,              Nine months ended September 30,                                         

Nine

                                     2020                   2019                  2020                   2019           Three months                 

months

Net income available to
common stockholders       $          22.9       $          101.0       $         277.6       $          307.2                    (77.3) %                (9.6) %
Net income per share (1)  $          0.07       $           0.32       $          0.81       $           0.98                    (78.1) %              

(17.3) %



(1) All per share amounts are presented on a diluted per common share basis.
The calculation to determine net income available to common stockholders
includes provisions for impairment, gains from the sale of properties, and
foreign currency gains and losses, which can vary from period to period based on
timing and significantly impact net income available to the Company and
available to common stockholders.
Net income available to common stockholders was impacted by the following
transactions: (i) $123.4 million of provisions for impairment in first nine
months of 2020, of which $105.1 million related to the third quarter, (ii) $34.4
million in reserves recorded as a reduction of rental revenue in the first nine
months of 2020, of which $24.1 million related to the third quarter, (iii) a
$9.8 million loss on extinguishment of debt due to the January 2020 early
redemption of the 5.750% notes due 2021 recorded in the first quarter of 2020,
and (iv) a $3.5 million executive severance charge for our former CFO also
recorded in the first quarter of 2020.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for Real
Estate (Adjusted EBITDAre)
The National Association of Real Estate Investment Trusts (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. Our definition of
"Adjusted EBITDAre" is generally consistent with the Nareit definition, other
than our adjustments to remove foreign currency and derivative gains and losses
(which is consistent with our previous calculations of "Adjusted EBITDA"). 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
loss (gain) on swaps, (ii) income and franchise taxes, (iii) real estate
depreciation and amortization, (iv) provisions for impairment, (v) gain on sales
of real estate, and (vi) foreign currency and derivative gains and losses, net
(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 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 ratios
of net debt-to-Adjusted EBITDAre and net debt-to-Pro Forma Adjusted EBITDAre,
which are used by management as a measure of leverage, are calculated as net
debt (which we define as total debt per the consolidated balance sheet, less
cash and cash equivalents), divided by annualized quarterly Adjusted EBITDAre
and annualized Pro Forma Adjusted EBITDAre, respectively.

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Table of Contents The following table summarizes our Adjusted EBITDAre and Pro Forma Adjusted EBITDAre calculation for the periods indicated below (dollars in thousands):

Three months ended September 30,

                                                                                    2020           2019
Net income (1)                                                      $          23,143    $   101,275
Interest                                                                       76,806         73,410
Income taxes                                                                    4,592          1,822
Depreciation and amortization                                                 169,084        149,424
Provisions for impairment                                                     105,095         13,503
Gain on sales of real estate                                                  (13,736)        (1,674)
Foreign currency and derivative gains, net                                     (2,336)          (327)
Quarterly Adjusted EBITDAre                                         $         362,648    $   337,433
Annualized Adjusted EBITDAre (2)                                    $       1,450,592$ 1,349,732
Annualized Pro forma Adjustments                                               24,586         16,223
Annualized Pro forma Adjusted EBITDAre                                      

1,475,178 1,365,955


Net Debt                                                            $       7,711,111$ 6,801,325
Net Debt/Adjusted EBITDAre                                                        5.3            5.0
Net Debt/Pro forma Adjusted EBITDAre                                              5.2            5.0


(1) Net income for the three months ended September 30, 2020 was negatively
impacted by $24.1 million of rent reserves recorded as reductions of rental
revenue, of which $2.3 million relates to straight-line rent receivables.
(2) We calculate Annualized Adjusted EBITDAre by multiplying the Quarterly
Adjusted EBITDAre by four.
The Annualized Pro forma Adjustments for the three months ended September 30,
2020 consists of $25.2 million from properties we acquired or stabilized during
the quarter and removes $614,000 of operating income from properties we disposed
of during the quarter, assuming all transactions occurred at the beginning of
the quarter. The Annualized Pro forma Adjustments for the three months ended
September 30, 2019 consists of $15.6 million from properties we acquired or
stabilized during the quarter and removes $552,000 of operating losses from
properties we disposed of during the quarter, assuming all transactions occurred
at the beginning of the quarter. The pro forma adjustments are consistent with
the debt service coverage ratio calculated under financial covenants for our
senior unsecured notes and bonds. We believe Pro Forma Adjusted EBITDAre is a
useful non-GAAP supplemental measure, as it excludes properties that were no
longer owned at the balance sheet date and includes the annualized rent from
properties acquired during the quarter.

FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO) The following summarizes our funds from operations available to common stockholders (dollars in millions, except per share data):

                                                                                                                                    % Increase
                                Three months ended September 30,              Nine months ended September 30,                                        Nine
                                     2020                   2019                  2020                   2019           Three months                months
FFO available to common
stockholders              $         283.0       $          262.0       $         848.4       $          759.2                      8.0  %               11.7  %
FFO per share (1)         $          0.82       $           0.82       $          2.48       $           2.43                        -  %                2.1  %


(1) All per share amounts are presented on a diluted per common share basis.
FFO in the first nine months of 2020 was impacted by reserves recorded as a
reduction of rental revenue related to the COVID-19 pandemic, a loss on
extinguishment of debt due to the early redemption of the 5.750% Notes due 2021
in January 2020 and an executive severance charge for our former CFO in March
2020.
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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. 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):
                                                        Three months ended September 30,                  Nine months ended September 30,
                                                             2020                   2019                      2020                   2019

Net income available to common stockholders $ 22,904 $

101,049 $ 277,555$ 307,185 Depreciation and amortization

                          169,084                149,424                   501,997                437,367
Depreciation of furniture, fixtures and
equipment                                                 (157)                  (136)                     (435)                  (438)
Provisions for impairment                              105,095                 13,503                   123,442                 31,236
Gain on sales of real estate                           (13,736)                (1,674)                  (53,565)               (15,828)
FFO adjustments allocable to noncontrolling
interests                                                 (212)                  (135)                     (575)                  (327)

FFO available to common stockholders $ 282,978 $

   262,031          $        848,419$     759,195
FFO allocable to dilutive noncontrolling
interests                                                  345                    362                     1,063                  1,032
Diluted FFO                                  $         283,323          $     262,393$        849,482$     760,227

FFO per common share:
Basic                                        $            0.82          $        0.82          $           2.48          $        2.44
Diluted                                      $            0.82          $        0.82          $           2.48          $        2.43

Distributions paid to common stockholders $ 242,241 $

   216,248          $        716,535$     629,658
FFO available to common stockholders in
excess of distributions paid to common
stockholders                                 $          40,737          $      45,783$        131,884$     129,537
Weighted average number of common shares
used for computation per share:
Basic                                              346,476,217            319,945,932               342,214,164            311,556,279
Diluted                                            347,212,593            320,726,136               342,946,337            312,300,391


We define FFO, a non-GAAP measure, consistent with the National Association of
Real Estate Investment Trusts' definition, as net income available to common
stockholders, plus depreciation and amortization of real estate assets, plus
provisions for 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) The following summarizes our adjusted funds from operations available to common stockholders (dollars in millions, except per share data):

                                                                                                                            % Increase (Decrease)
                               Three months ended September 30,              Nine months ended September 30,                                     Nine
                                    2020                   2019                  2020                   2019          Three months              months
AFFO available to common
stockholders             $         282.5       $          265.4       $         875.0       $          768.0                   6.4  %               13.9  %
AFFO per share (1)       $          0.81       $           0.83       $          2.55       $           2.46                  (2.4) %                3.7  %

(1) All per share amounts are presented on a diluted per common share basis.

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AFFO in the first nine months of 2020 was impacted by reserves recorded as a
reduction of rental revenue related to the COVID-19 pandemic.
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.
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):
                                                       Three months ended 

September 30, Nine months ended September 30,

                                                                  2020             2019                2020             2019

Net income available to common stockholders(1) $ 22,904 $

  101,049    $        277,555$     307,185
Cumulative adjustments to calculate FFO (2)                 260,074          160,982             570,864          452,010
FFO available to common stockholders                        282,978          262,031             848,419          759,195
Executive severance charge (3)                                    -                -               3,463                -
Loss on extinguishment of debt                                    -                -               9,819                -
Amortization of share-based compensation                      3,020            3,187              11,644           10,478
Amortization of deferred financing costs (4)                    956            1,299               3,792            3,471
Amortization of net mortgage premiums                          (310)            (354)             (1,020)          (1,061)
Loss on interest rate swaps                                   1,123              694               3,115            2,058
Straight-line payments from cross-currency swaps
(5)                                                             614            1,754               1,960            2,553
Leasing costs and commissions                                    98             (851)             (1,013)          (1,880)
Recurring capital expenditures                                 (105)            (406)               (126)            (577)
Straight-line rent                                           (6,445)          (7,642)            (20,469)         (19,735)
Amortization of above and below-market leases,
net                                                           2,408            5,486              14,925           13,227
Other adjustments (6)                                        (1,828)             157                 463              297
AFFO available to common stockholders             $         282,509    $     265,355$        874,972$     768,026
AFFO allocable to dilutive noncontrolling
interests                                                       347              368               1,079            1,064
Diluted AFFO                                      $         282,856    $     265,723$        876,051$     769,090

AFFO per common share:
Basic                                             $            0.82    $        0.83    $           2.56    $        2.47
Diluted                                           $            0.81    $        0.83    $           2.55    $        2.46

Distributions paid to common stockholders $ 242,241 $

216,248 $ 716,535$ 629,658


AFFO available to common stockholders in excess
of distributions paid to common stockholders      $          40,268    $      49,107$        158,437$     138,368
Weighted average number of common shares used for
computation per share:
Basic                                                   346,476,217      319,945,932         342,214,164      311,556,279
Diluted                                                 347,212,593      320,726,136         342,946,337      312,300,391


(1)As of September 30, 2020, there was $26.5 million of uncollected rent
deferred as a result of lease concessions we granted in response to the COVID-19
pandemic and recognized under the practical expedient provided by the FASB and
$36.4 million of uncollected rent for which we have not granted a lease
concession. The collection of the $62.9 million of unpaid rent is probable.
Deferrals accounted for as modifications totaling $63,000 and $224,000 for the
three and nine months ended September 30, 2020, respectively, have not been
added back to AFFO.
(2)See reconciling items for FFO presented under "Funds from Operations
Available to Common Stockholders (FFO).
(3)The executive severance charge represents the incremental costs incurred upon
our former CFO's departure in March 2020, consisting of $1.6 million of cash,
$1.8 million of share-based compensation expense and $58,000 of professional
fees.
(4) 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 notes payable, mortgages and term loans. No costs associated with
our credit facility agreements or annual fees paid to credit rating agencies
have been included.
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(5) Straight-line payments from cross-currency swaps represent quarterly
payments in U.S. dollars received by us from counterparties in exchange for
associated foreign currency payments. These USD payments are fixed and
determinable for the duration of the associated hedging transaction.
(6) Includes adjustments allocable to noncontrolling interests, obligations
related to financing lease liabilities, and foreign currency gains and losses as
a result of intercompany debt and remeasurement transactions.
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.
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.
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                         PROPERTY PORTFOLIO INFORMATION
At September 30, 2020, we owned a diversified portfolio:
•Of 6,588 properties;
•With an occupancy rate of 98.6%, or 6,496 properties leased and 92 properties
available for lease or sale;
•Doing business in 51 separate industries;
•Located in 49 U.S. states, Puerto Rico and the U.K.;
•With approximately 108.5 million square feet of leasable space;
•With a weighted average remaining lease term (excluding rights to extend a
lease at the option of the tenant) of approximately 9.0 years; and
•With an average leasable space per property of approximately 16,470 square
feet; approximately 12,220 square feet per retail property and 223,320 square
feet per industrial property.
At September 30, 2020, 6,496 properties 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.
We define total portfolio annualized contractual rental revenue as the monthly
aggregate cash amount charged to tenants, inclusive of monthly base rent
receivables, as of the balance sheet date, multiplied by 12, excluding
percentage rent. We believe total portfolio annualized contractual revenue is a
useful supplemental operating measure, as it excludes properties that were no
longer owned at the balance sheet date and includes the annualized rent from
properties acquired during the quarter. Total portfolio annualized contractual
rental revenue has not been reduced to reflect reserves recorded as reductions
to GAAP rental revenue in the periods presented.
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 portfolio annualized contractual rental
revenue:
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                                                                    Percentage of Total Portfolio Annualized Contractual Rental Revenue by Industry
                                                                                                                                               As of
                                            As of                               Dec 31,                         Dec 31,                       Dec 31,                         Dec 31,                   Dec 31,
                                     September 30, 2020                           2019                           2018                          2017                            2016                      2015
U.S.
Aerospace                                   0.6%                                  0.8%                           0.9%                          1.0%                            1.1%                      1.2%
Apparel stores                               1.3                                  1.1                             1.2                           1.4                             1.7                       1.9
Automotive collision services                1.1                                  1.0                             0.9                           1.0                             1.0                       1.1
Automotive parts                             1.6                                  1.6                             1.7                           1.5                             1.3                       1.3
Automotive service                           2.5                                  2.6                             2.3                           2.5                             2.0                       2.0
Automotive tire services                     2.0                                  2.1                             2.3                           2.5                             2.6                       2.9
Beverages                                    2.0                                  2.0                             2.4                           2.6                             2.8                       2.6
Child care                                   2.1                                  2.1                             2.2                           1.7                             1.7                       1.9
Consumer electronics                         0.3                                  0.3                             0.3                           0.3                             0.3                       0.3
Consumer goods                               0.6                                  0.6                             0.7                           0.7                             0.9                       1.0
Convenience stores                          12.1                                  12.3                           12.6                           9.3                            10.0                       8.9
Crafts and novelties                         0.9                                  0.6                             0.6                           0.6                             0.5                       0.5
Diversified industrial                       0.7                                  0.7                             0.8                           0.8                             0.9                       0.9
Dollar stores                                7.8                                  7.9                             7.3                           7.5                             8.0                       8.8
Drug stores                                  8.4                                  8.8                             9.4                          10.2                            10.8                      10.8
Education                                    0.2                                  0.2                             0.3                           0.3                             0.3                       0.3
Electric utilities                           0.1                                  0.1                             0.1                           0.1                             0.1                       0.1
Entertainment                                0.3                                  0.3                             0.3                           0.4                             0.4                       0.5
Equipment services                           0.4                                  0.4                             0.4                           0.4                             0.5                       0.5
Financial services                           1.9                                  2.0                             2.4                           2.3                             2.6                       1.8
Food processing                              0.7                                  0.7                             0.5                           0.6                             1.0                       1.2
General merchandise                          3.0                                  2.5                             2.1                           2.3                             1.9                       1.6
Government services                          0.6                                  0.7                             0.9                           0.9                              1                        1.1
Grocery stores                               5.0                                  5.2                             5.0                           5.3                             3.5                       2.9
Health and beauty                            0.2                                  0.2                             0.2                            *                               *                         *
Health and fitness                           7.1                                  7.0                             7.1                           7.7                             7.6                       8.3
Health care                                  1.6                                  1.6                             1.6                           1.4                             1.5                       1.6
Home furnishings                             0.8                                  0.8                             0.8                           0.9                             0.9                       0.8
Home improvement                             3.0                                  2.9                             2.8                           2.9                             2.5                       2.4
Machinery                                    0.1                                  0.1                             0.1                           0.1                             0.1                       0.1
Motor vehicle dealerships                    1.6                                  1.6                             1.8                           2.0                             2.0                       1.6
Office supplies                              0.2                                  0.2                             0.2                           0.2                             0.3                       0.3
Other manufacturing                          0.6                                  0.6                             0.7                           0.8                             0.8                       0.8
Packaging                                    0.9                                  0.8                             1.0                           1.1                             0.9                       0.7
Paper                                        0.1                                  0.1                             0.1                           0.1                             0.1                       0.1
Pet supplies and services                    0.7                                  0.7                             0.5                           0.6                             0.6                       0.7
Restaurants - casual dining                  3.0                                  3.2                             3.3                           3.6                             3.7                       3.8
Restaurants - quick service                  5.6                                  5.8                             6.3                           5.2                             4.8                       4.5
Shoe stores                                  0.2                                  0.2                             0.5                           0.6                             0.6                       0.7
Sporting goods                               0.7                                  0.8                             0.9                           1.0                             1.5                       1.8
Telecommunications                           0.5                                  0.5                             0.6                           0.6                             0.7                       0.7
Theaters                                     5.7                                  6.1                             5.3                           5.7                             4.6                       5.0
Transportation services                      4.1                                  4.3                             5.0                           5.4                             5.7                       5.4
Wholesale clubs                              2.5                                  2.5                             2.9                           3.1                             3.4                       3.7
Other                                        0.2                                  0.7                             0.7                           0.8                             0.8                       0.9
Total U.S.                                  95.6%                                97.3%                          100.0%                        100.0%                          100.0%                    100.0%
U.K.
Grocery stores                               3.4                                  2.7                              -                             -                               -                         -
Health care                                  0.1                                   -                               -                             -                               -                         -
Home improvement                             0.9                                   -                               -                             -                               -                         -
Theaters                                      *                                    *                               -                             -                               -                         -
Total U.K.                                  4.4%                                  2.7%                             -                             -                               -                         -
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 September 30, 2020 (dollars in thousands):
                                                                                            Total Portfolio     Percentage of Total
                                                                      Approximate    Annualized Contractual    Portfolio Annualized
                                                 Number of               Leasable      Rental Revenue as of             Contractual
Property Type                                   Properties        Square Feet (1)        September 30, 2020          Rental Revenue
Retail                                               6,410             78,349,200 $            1,374,093                    84.6  %
Industrial                                             120             26,798,900                169,418                    10.4
Office                                                  43              3,175,700                 53,877                     3.3
Agriculture                                             15                184,500                 27,113                     1.7
Totals                                               6,588            108,508,300 $            1,624,501                   100.0  %

(1)Includes leasable building square footage. Excludes 3,300 acres of leased land categorized as agriculture at September 30, 2020.


Tenant Diversification
The following table sets forth the 20 largest tenants in our property portfolio,
expressed as a percentage of total portfolio annualized contractual rental
revenue, which does not give effect to deferred rent, at September 30, 2020:
                                                                                            Percentage of Total
                                                                                           Portfolio Annualized
                                                                           Number of                Contractual
Tenant                                                                        Leases          Rental Revenue(1)
Walgreens                                                                        248                     5.8  %
7-Eleven                                                                         432                     4.9  %
Dollar General                                                                   784                     4.4  %
FedEx                                                                             41                     3.8  %
Dollar Tree / Family Dollar                                                      550                     3.3  %
LA Fitness                                                                        57                     3.3  %
Regal Cinemas (Cineworld)                                                         42                     2.8  %
AMC Theaters                                                                      32                     2.7  %
Sainsbury's                                                                       17                     2.6  %
Walmart / Sam's Club                                                              56                     2.6  %
Lifetime Fitness                                                                  16                     2.5  %
Circle K (Couche-Tard)                                                           278                     1.8  %
BJ's Wholesale Clubs                                                              15                     1.7  %
Treasury Wine Estates                                                             17                     1.6  %
CVS Pharmacy                                                                      88                     1.6  %
Super America (Marathon)                                                         161                     1.6  %
Kroger                                                                            22                     1.5  %
Home Depot                                                                        22                     1.4  %
GPM Investments / Fas Mart                                                       203                     1.4  %
TBC Corp                                                                         159                     1.2  %
Total                                                                          3,240                    52.6  %

(1) Amounts for each tenant are calculated independently; therefore, the individual percentages may not sum to the total.

                                      -55-
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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 total portfolio annualized
contractual rental revenue as of September 30, 2020 (dollars in thousands):
                                                         Total Portfolio (1)
                                                                                             Total Portfolio      Percentage of Total
                                    Expiring                             

Approximate Annualized Contractual Portfolio Annualized

                                     Leases                                  Leasable   Rental Revenue as of              Contractual
        Year                   Retail             Non-Retail              Square Feet     September 30, 2020           Rental Revenue
        2020                       15                      3            440,900       $             6,200                      0.4  %
        2021                      285                     14          2,737,300                    47,996                      3.0
        2022                      385                     20          8,538,500                    82,274                      5.1
        2023                      552                     24          9,806,500                   122,373                      7.5
        2024                      424                     17          7,788,800                    98,617                      6.1
        2025                      507                     21          7,918,300                   121,433                      7.5
        2026                      331                      6          5,812,700                    75,290                      4.6
        2027                      425                      4          6,318,700                    84,571                      5.2
        2028                      594                     14         11,538,600                   125,652                      7.7
        2029                      540                      6          9,269,000                   130,432                      8.0
        2030                      225                      9          5,606,800                    73,336                      4.5
        2031                      237                     27          6,979,300                   112,474                      6.9
        2032                      299                     11          4,648,200                    96,679                      6.0
        2033                      286                      4          3,769,200                    66,748                      4.1
        2034                      304                      1          4,729,100                   117,588                      7.2
    2035 - 2045                   980                      5         10,541,400                   262,838                     16.2
       Totals                   6,389                    186        106,443,300       $         1,624,501                    100.0  %


(1)The table sets forth the timing of remaining lease terms expirations in our
portfolio and their contributions to contractual rental revenue as of September
30, 2020. Leases on our multi-tenant properties are counted separately in the
table above. This table excludes 114 vacant units.
                                      -56-
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Geographic Diversification
The following table sets forth certain state-by-state information regarding our
property portfolio as of September 30, 2020 (dollars in thousands):
                                                                                                    Total Portfolio     Percentage of Total
                                                                                 Approximate Annualized Contractual    Portfolio Annualized
                                     Number of                                      Leasable           Rental as of             Contractual
Location                            Properties           Percent Leased          Square Feet     September 30, 2020          Rental Revenue
Alabama                                    228                    98  %            2,203,400 $            31,777                     2.0  %
Alaska                                       3                   100                 274,600               2,100                     0.1
Arizona                                    152                    99               2,082,200              34,023                     2.1
Arkansas                                   102                    99               1,183,200              14,714                     0.9
California                                 236                   100               7,026,700             142,799                     8.8
Colorado                                    99                    97               1,578,100              23,698                     1.5
Connecticut                                 21                    90               1,378,200              13,688                     0.8
Delaware                                    19                   100                 101,400               3,091                     0.2
Florida                                    430                    99               4,692,500              84,811                     5.2
Georgia                                    297                    99               4,601,800              59,124                     3.6
Idaho                                       14                    93                 103,200               1,746                     0.1
Illinois                                   299                    98               6,507,400              92,463                     5.7
Indiana                                    199                    99               2,571,000              39,546                     2.4
Iowa                                        46                   100               2,527,800              18,304                     1.1
Kansas                                     119                    98               2,208,700              24,817                     1.5
Kentucky                                    94                   100               1,845,200              22,112                     1.4
Louisiana                                  136                    98               1,953,200              25,548                     1.6
Maine                                       27                   100                 277,800               5,721                     0.4
Maryland                                    38                   100               1,494,000              25,570                     1.6
Massachusetts                               58                    95                 881,400              17,062                     1.1
Michigan                                   234                   100               2,706,200              39,411                     2.4
Minnesota                                  172                    99               2,326,800              44,106                     2.7
Mississippi                                188                    98               2,031,000              23,131                     1.4
Missouri                                   182                    97               2,944,700              38,205                     2.4
Montana                                     12                   100                  89,100               2,237                     0.1
Nebraska                                    61                    98                 862,300               8,842                     0.5
Nevada                                      25                    96               1,220,100               8,748                     0.5
New Hampshire                               14                   100                 321,500               6,031                     0.4
New Jersey                                  79                    99               1,252,000              29,601                     1.8
New Mexico                                  60                    98                 504,200               8,695                     0.5
New York                                   140                    97               3,167,300              69,084                     4.3
North Carolina                             204                    99               3,644,100              49,258                     3.0
North Dakota                                 8                   100                 126,900               1,403                     0.1
Ohio                                       342                    98               6,845,100              69,740                     4.3
Oklahoma                                   190                    99               2,368,500              32,196                     2.0
Oregon                                      31                   100                 665,100              12,187                     0.8
Pennsylvania                               223                    99               2,265,900              45,653                     2.8
Rhode Island                                 3                   100                 158,000               2,582                     0.2
South Carolina                             181                    97               1,820,700              35,452                     2.2
South Dakota                                23                    96                 258,500               2,772                     0.2
Tennessee                                  262                    99               3,851,200              50,035                     3.1
Texas                                      834                    99              11,772,800             177,533                    11.0
Utah                                        23                   100                 949,700               9,974                     0.6
Vermont                                      1                   100                  65,500               1,212                     0.1
Virginia                                   219                    99               3,357,000              44,126                     2.7
Washington                                  50                    98                 913,400              15,204                     0.9
West Virginia                               37                   100                 537,500               7,242                     0.4
Wisconsin                                  129                    96               3,115,900              32,523                     2.0
Wyoming                                      9                   100                  63,900               1,515                     0.1
Puerto Rico                                  4                   100                  28,300                 859                          *
U.K.                                        31                   100               2,783,300              72,230                     4.4
TotalsAverage                           6,588                    99  %          108,508,300 $         1,624,501                   100.0  %


*Less than 0.1%

                                      -57-

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                              IMPACT OF INFLATION
Tenant leases generally provide for limited increases in rent as a result of
fixed increases, increases in the consumer price index (typically subject to
ceilings), or increases in the tenants' sales volumes. 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 the period ended September 30, 2020 there were no recently adopted accounting pronouncements that had a material impact on our business.

                               OTHER INFORMATION
Our common stock is listed on the NYSE under the ticker symbol "O" with a CUSIP
number of 756109-104. Our 1.625% Notes due December 2030 are listed on the NYSE
under the ticker symbol "O30" with a CUSIP number of 756109-AY0. Our central
index key number is 726728.
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.
Item 3:  Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate changes primarily as a result of our credit
facility and commercial paper program, 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, interest rate locks 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 September 30, 2020. 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
                                                      Fixed rate    Weighted average rate     Variable rate    Weighted average rate
Year of Maturity                                            debt       on fixed rate debt              debt    on variable rate debt
2020                                     $                  10.5                  5.07  % $        300.0                     0.23  %
2021                                                        68.8                  5.61                 -                        -
2022                                                     1,061.8                  3.43                 -                        -
2023                                                       770.6                  4.64             556.1                     0.84
2024                                                       712.2                  3.97                 -                        -
Thereafter                                               4,967.8                  3.69                 -                        -
Totals (1)                               $               7,591.7                  3.80  % $        856.1                     0.62  %
Fair Value (2)                           $               8,494.8                          $        856.1


(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 September 30, 2020, the unamortized
balance of net premiums on mortgages payable is $1.9 million, the unamortized
balance of net original issuance premiums on notes payable is $28.2 million, and
the balance of deferred financing costs on mortgages payable is $1.1 million, on
notes payable is $40.3 million, and on term loans is $692,000.
(2)We base the estimated fair value of the publicly-traded fixed rate senior
notes and bonds at September 30, 2020 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 and private senior
notes payable at September 30, 2020 on the relevant forward interest rate curve,
plus an applicable credit-adjusted spread. We believe that the carrying value of
the credit facility balance, commercial paper borrowings and term loans balance
reasonably approximate their estimated fair values at September 30, 2020.
The table above incorporates only those exposures that exist as of September 30,
2020. 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. At September
30, 2020, all of our mortgages payable had fixed interest rates, except one
variable rate mortgage on one property totaling $6.9 million, which has been
swapped to a fixed interest rate. Interest on our revolving credit facility and
term loan balance is variable. However, the variable interest rate feature on
our term loans has been mitigated by interest rate swap agreements. Based on our
revolving credit facility balance of $556.1 million at September 30, 2020, a 1%
change in interest rates would change our interest rate costs by $5.6 million
per year.

During 2019, we commenced foreign operations and acquired real property in the
U.K. and have continued to acquire U.K. properties in 2020. As a result, we are
subject to currency fluctuations that may, from time to time, affect our
financial condition and results of operations. Increases or decreases in the
value of Sterling relative to the U.S. dollar impact the amount of net income we
earn from our investments in the U.K. We mitigate these foreign currency
exposures with non-U.S. denominated borrowings and cross-currency swaps. If we
increase our international presence through investments in properties outside
the U.S., we may also decide to transact additional business or borrow funds in
currencies other than U.S. dollars.
Item 4:  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 Interim Principal
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 quarter ended September 30, 2020, 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 Interim Principal Financial Officer.
                                      -59-

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Based on the foregoing, our Chief Executive Officer and Interim Principal
Financial Officer concluded that our disclosure controls and procedures were
effective and were operating at a reasonable assurance level.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting that
occurred during the quarter ended September 30, 2020 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.

© Edgar Online, source Glimpses

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