What changed in Realty Income's 10-K — 2023 vs 2024

Item 1: Financial Statements REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, 2024 December 31, 2023 ASSETS Real estate held for investment, at cost: Land $ 17,320,520 $ 14,929,310 Buildings and improvements 40,974,535 34,657,094 Total real estate held for investment, at cost 58,295,055 49,586,404 Less accumulated depreciation and amortization (7,381,083) (6,072,118) Real estate held for investment, net 50,913,972 43,514,286 Real estate and lease intangibles held for sale, net 94,979 31,466 Cash and cash equivalents 444,962 232,923 Accounts receivable, net 877,668 710,536 Lease intangible assets, net 6,322,992 5,017,907 Goodwill 4,932,199 3,731,478 Investment in unconsolidated entities 1,229,699 1,172,118 Other assets, net 4,018,568 3,368,643 Total assets $ 68,835,039 $ 57,779,357 LIABILITIES AND EQUITY Distributions payable $ 238,045 $ 195,222 Accounts payable and accrued expenses 759,416 738,526 Lease intangible liabilities, net 1,635,770 1,406,853 Other liabilities 923,128 811,650 Line of credit payable and commercial paper 1,130,201 764,390 Term loans, net 2,358,417 1,331,841 Mortgages payable, net 80,784 821,587 Notes payable, net 22,657,592 18,602,319 Total liabilities $ 29,783,353 $ 24,672,388 Commitments and contingencies (Note 21) Stockholders’ equity: Common stock and paid in capital, par value $0.01 per share, 1,300,000 shares authorized, 891,511 and 752,460 shares issued and outstanding as of December 31, 2024 and 2023, respectively $ 47,451,068 $ 39,629,709 Distributions in excess of net income (8,648,559) (6,762,136) Accumulated other comprehensive income 38,229 73,894 Total stockholders’ equity $ 38,840,738 $ 32,941,467 Noncontrolling interests 210,948 165,502 Total equity $ 39,051,686 $ 33,106,969 Total liabilities and equity $ 68,835,039 $ 57,779,357 The accompanying notes to consolidated financial statements are an integral part of these statements. 50 Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share amounts) Years ended December 31, 2024 2023 2022 REVENUE Rental (including reimbursable) $ 5,043,748 $ 3,958,150 $ 3,299,657 Other 227,394 120,843 44,024 Total revenue 5,271,142 4,078,993 3,343,681 EXPENSES Depreciation and amortization 2,395,644 1,895,177 1,670,389 Interest 1,016,955 730,423 465,223 Property (including reimbursable) 377,675 316,964 226,330 General and administrative 176,895 144,536 138,459 Provisions for impairment 425,833 87,082 25,860 Merger, transaction, and other costs, net 96,292 14,464 13,897 Total expenses 4,489,294 3,188,646 2,540,158 Gain on sales of real estate 117,275 25,667 102,957 Foreign currency and derivative gain (loss), net 3,420 (13,414) (13,311) Gain on extinguishment of debt — — 367 Equity in earnings of unconsolidated entities 7,793 2,546 (6,448) Other income, net 23,606 23,789 30,511 Income before income taxes 933,942 928,935 917,599 Income taxes (66,601) (52,021) (45,183) Net income 867,341 876,914 872,416 Net income attributable to noncontrolling interests (6,569) (4,605) (3,008) Net income attributable to the Company 860,772 872,309 869,408 Preferred stock dividends (7,763) — — Excess of redemption value over carrying value of preferred shares redeemed (5,116) — — Net income available to common stockholders $ 847,893 $ 872,309 $ 869,408 Amounts available to common stockholders per common share: Net income, basic and diluted $ 0.98 $ 1.26 $ 1.42 Weighted average common shares outstanding: Basic 862,959 692,298 611,766 Diluted 863,792 693,024 612,181 Net income available to common stockholders $ 847,893 $ 872,309 $ 869,408 Total other comprehensive (loss) income Foreign currency translation adjustment (32,883) 64,326 (55,154) Unrealized (loss) gain on derivatives, net (2,782) (37,265) 97,054 Total other comprehensive (loss) income $ (35,665) $ 27,061 $ 41,900 Comprehensive income available to common stockholders $ 812,228 $ 899,370 $ 911,308 The accompanying notes to consolidated financial statements are an integral part of these statements. 51 Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands) Years ended December 31, 2024, 2023, and 2022 Shares of preferred stock Preferred stock and paid in capital Shares of common stock Common stock and paid in capital Distributions in excess of net income Accumulated other comprehensive income Total stockholders’ equity Non-controlling interests Total equity Balance, December 31, 2021 — — 591,262 $ 29,578,212 $ (4,530,571) $ 4,933 $ 25,052,574 $ 76,826 $ 25,129,400 Net income — — — — 869,408 — 869,408 3,008 872,416 Other comprehensive income — — — — — 41,900 41,900 — 41,900 Distributions paid and payable — — — — (1,832,030) — (1,832,030) (4,125) (1,836,155) Share issuances, net of costs — — 68,876 4,570,766 — — 4,570,766 — 4,570,766 Contributions by noncontrolling interests — — — — — — — 51,221 51,221 Reallocation of equity — — — (3,210) — — (3,210) 3,210 — Share-based compensation, net — — 162 13,741 — — 13,741 — 13,741 Balance, December 31, 2022 — — 660,300 $ 34,159,509 $ (5,493,193) $ 46,833 $ 28,713,149 $ 130,140 $ 28,843,289 Net income — — — — 872,309 — 872,309 4,605 876,914 Other comprehensive income — — — — — 27,061 27,061 — 27,061 Distributions paid and payable — — — — (2,141,252) — (2,141,252) (9,340) (2,150,592) Share issuances, net of costs — — 91,902 5,450,982 — — 5,450,982 — 5,450,982 Contributions by noncontrolling interests — — — — — — — 40,097 40,097 Share-based compensation, net — — 258 19,218 — — 19,218 — 19,218 Balance, December 31, 2023 — — 752,460 $ 39,629,709 $ (6,762,136) $ 73,894 $ 32,941,467 $ 165,502 $ 33,106,969 Net income — — — — 860,772 — 860,772 6,569 867,341 Other comprehensive loss — — — — — (35,665) (35,665) — (35,665) Distributions paid and payable — — — — (2,742,079) — (2,742,079) (10,398) (2,752,477) Share issuance, net of costs — — 30,381 1,754,895 — — 1,754,895 — 1,754,895 Shares issued with merger 6,900 167,394 108,308 6,043,641 — — 6,043,641 — 6,043,641 Contributions by noncontrolling interests — — — — — — — 2,022 2,022 Issuance of common partnership units — — — (768) — — (768) 47,253 46,485 Preferred shares redeemed (6,900) (167,394) — — (5,116) — (5,116) — (5,116) Share-based compensation, net — — 362 23,591 — — 23,591 — 23,591 Balance, December 31, 2024 — — 891,511 $ 47,451,068 $ (8,648,559) $ 38,229 $ 38,840,738 $ 210,948 $ 39,051,686 The accompanying notes to consolidated financial statements are an integral part of these statements. 52 Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 867,341 $ 876,914 $ 872,416 Adjustments to net income: Depreciation and amortization 2,395,644 1,895,177 1,670,389 Amortization of share-based compensation 57,493 26,227 21,617 Non-cash revenue adjustments (116,017) (62,029) (57,009) Gain on extinguishment of debt — — (367) Amortization of net premiums on mortgages payable 30 (12,803) (13,622) Amortization of net premiums on notes payable (3,309) (60,657) (62,989) Amortization of deferred financing costs 23,939 26,670 15,613 Foreign currency and unrealized derivative (gain) loss, net (19,394) 37,776 220,948 Non-cash interest expense (income) 11,505 (7,189) 718 Gain on sales of real estate (117,275) (25,667) (102,957) Equity in earnings of unconsolidated entities (7,793) (2,546) 6,448 Distributions on common equity from unconsolidated entities 21,038 5,807 1,605 Provisions for impairment 425,833 87,082 25,860 Deferred income taxes 3,552 — — Change in assets and liabilities Accounts receivable and other assets 28,082 (111,286) (29,524) Accounts payable, accrued expenses and other liabilities 2,607 285,293 (5,290) Net cash provided by operating activities 3,573,276 2,958,769 2,563,856 CASH FLOWS FROM INVESTING ACTIVITIES Investment in real estate (3,262,437) (8,053,595) (8,886,436) Improvements to real estate, including leasing costs (121,411) (68,692) (95,514) Investment in unconsolidated entities (70,381) (1,179,306) — Investment in loans (631,650) (201,621) — Proceeds from sales of real estate 589,450 117,354 436,115 Return of investment from unconsolidated entities — 3,927 1,401 Net proceeds from sale of unconsolidated entities — — 108,088 Proceeds from note receivable 57,300 — 5,867 Insurance proceeds received 2,788 27,279 49,070 Non-refundable escrow deposits (225) (200) (5,667) Net cash acquired in merger 93,683 — — Net cash used in investing activities (3,342,883) (9,354,854) (8,387,076) CASH FLOWS FROM FINANCING ACTIVITIES Cash distributions to common stockholders (2,691,719) (2,111,793) (1,813,431) Cash distributions to preferred stockholders (7,763) — — Borrowings on line of credit and commercial paper programs 36,887,003 77,338,040 28,539,299 Payments on line of credit and commercial paper programs (36,528,598) (79,398,193) (27,434,617) Proceeds from term loan — 1,029,383 — Principal payment on term loan (250,000) — — Proceeds from notes payable issued 2,657,925 4,239,745 2,154,662 Principal payment on notes payable (849,999) — — Principal payments on mortgages payable (740,505) (22,015) (312,234) Proceeds from common stock offerings, net 1,742,810 5,439,462 4,556,028 Proceeds from dividend reinvestment and stock purchase plan 11,812 11,519 11,654 Redemption of preferred stock (172,510) — — Distributions to noncontrolling interests (10,143) (7,725) (3,935) Net receipts on derivative settlements — 7,853 79,763 Debt issuance costs (60,615) (81,898) (34,156) Other items, including shares withheld upon vesting (8,856) (7,022) (4,790) Net cash (used in) provided by financing activities (21,158) 6,437,356 5,738,243 Effect of exchange rate changes on cash and cash equivalents (5,904) 24,023 (20,511) Net increase (decrease) in cash, cash equivalents and restricted cash 203,331 65,294 (105,488) Cash, cash equivalents and restricted cash, beginning of period 292,175 226,881 332,369 Cash, cash equivalents and restricted cash, end of period $ 495,506 $ 292,175 $ 226,881 For supplemental disclosures, see note 19 , S upplemental Disclosures of Cash Flow Information .

The accompanying notes to consolidated financial statements are an integral part of these statements. 53 Table of Contents REALTY INCOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 1.

Summary of Significant Accounting Policies Realty Income Corporation (“Realty Income,” the “Company,” “we,” “our” or “us”), a Maryland corporation, is an S&P 500 company and real estate partner to the world's leading companies. The Company was founded in 1969 and our shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol “O”.

(“Spirit”). For more details, please see note 2, Merger with Spirit Realty Capital, Inc. Information with respect to number of properties, leasable square feet, average initial lease term and initial weighted average cash yield is unaudited. Basis of Presentation .

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Intercompany accounts and transactions are eliminated in consolidation. The U.S. Dollar ("USD") is our reporting currency. Unless otherwise indicated, all dollar amounts are expressed in USD.

For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into USD at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date.

The resulting translation adjustments are included in 'Accumulated other comprehensive income' ("AOCI") on our consolidated balance sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period.

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

In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items. Principles of Consolidation.

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

Voting interest entities ("VOEs") are entities considered to have sufficient equity at risk and which the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities.

We consolidate voting interest entities in which we have a controlling financial interest, which we typically have through holding of a majority of the entity’s voting equity interests.

Variable interest entities ("VIEs") are entities that lack sufficient equity at risk or where the equity holders either do not have the obligation to absorb losses, do not have the right to receive residual returns, do not have the right to make decisions about the entity’s activities, or some combination of the above.

A controlling financial interest in a VIE is present when an entity has a variable interest, or a combination of variable interests, that provides the entity with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

An entity that meets both conditions above is deemed the primary beneficiary and consolidates the VIE. We reassess our initial evaluation of whether an entity is a VIE when certain reconsideration events occur.

We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. 54 Table of Contents At December 31, 2024, we are considered the primary beneficiary of Realty Income, L.P. and certain investments, including investments in joint ventures.

Below is a summary of selected financial data of such consolidated VIEs, included on our consolidated balance sheets at December 31, 2024 and December 31, 2023 (in thousands): December 31, 2024 December 31, 2023 Net real estate $ 2,882,135 $ 2,866,272 Total assets $ 3,461,843 $ 3,588,720 Total liabilities $ 131,096 $ 134,366 The portion of a consolidated entity not owned by us is recorded as a noncontrolling interest.

Noncontrolling interests are reflected on our consolidated balance sheets as a component of equity. Noncontrolling interests that were created or assumed as part of a business combination or asset acquisition were recognized at fair value as of the date of the transaction. For further details, see note 11, Noncontrolling Interests . Use of Estimates.

The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates. Net Income per Common Share. Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period.

Diluted net income per common share is computed by dividing net income available to common stockholders, plus income attributable to dilutive shares and convertible common units for the period, by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.

For more detail, see note 18, Net Income per Common Share. Cash Equivalents and Restricted Cash . We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Restricted cash includes cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the U.S. Internal Revenue Code, impounds related to mortgages payable and cash that is not immediately available to Realty Income (i.e. escrow deposits for future acquisitions).

Cash accounts maintained on behalf of Realty Income in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, Realty Income has not experienced any losses in such accounts. Income Taxes.

We have elected to be taxed as a real estate investment trust ("REIT"), under the Internal Revenue Code of 1986, as amended. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income.

Assuming our dividends equal or exceed our taxable net income in the U.S., we generally will not be required to pay U.S. income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for federal income taxes of our taxable REIT subsidiaries ("TRS").

A TRS is a subsidiary of a REIT that is subject to federal, state and local income taxes, as applicable. Our use of TRS entities enables us to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings.

We are liable for taxes in our applicable international territories and have made the appropriate provisions in those territories. Therefore, the income taxes recorded in our consolidated statements of income and comprehensive income represent amounts for U.S. income taxes on our TRS entities, city and state income and franchise taxes, as well as income taxes for the applicable international territories.

We recognize deferred income tax in our taxable subsidiaries, including certain international jurisdictions. Deferred income tax assets and liabilities are generally the result of temporary differences between book and tax accounting, such as timing differences caused by different useful lives used for depreciation.

We provide for a valuation allowance for deferred income tax assets if we believe some or all of the deferred income tax assets may not be realized.

As of December 31, 2024, we had $3.5 million of net deferred tax liabilities, which are reported in 'Other liabilities' on our consolidated balance sheets. 55 Table of Contents Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes primarily due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things.

We regularly analyze our various international, federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities.

Therefore, no provisions for uncertain tax positions have been recorded on our consolidated financial statements. Lease Revenue Recognition and Accounts Receivable. The majority of our leases are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term.

Any rental revenue contingent upon our client’s sales, or percentage rent, is recognized only after our client exceeds their sales breakpoint. Rental increases based upon changes in the consumer price indices are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements.

Contractually obligated rental revenue from our clients for recoverable real estate taxes and operating expenses are included in contractually obligated reimbursements by our clients, a component of rental revenue, in the period when such costs are incurred. Taxes and operating expenses paid directly by our clients are recorded on a net basis.

Other revenue includes certain property-related revenue not included in rental revenue and interest income recognized on financing receivables for certain leases with above-market terms. We assess the probability of collecting substantially all of the lease payments to which we are entitled under the original lease contract as required under ASC 842, Leases .

We assess the collectability of our future lease payments based on an analysis of creditworthiness, economic trends and other facts and circumstances related to the applicable clients.

If we conclude the collection of substantially all of lease payments under a lease is less than probable, rental revenue recognized for that lease is limited to cash received going forward, existing operating lease receivables, including those related to straight-line rental revenue, must be written off as an adjustment to rental revenue, and no further operating lease receivables are recorded for that lease until such future determination is made that substantially all lease payments under that lease are now considered probable.

If we subsequently conclude that the collection of substantially all lease payments under a lease is probable, a reversal of lease receivables previously written off is recognized. Loans Receivable . Our acquired loans are classified as held for investment and are carried at their amortized cost basis.