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What changed in Realty Income's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Realty Income's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+331 added−447 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Realty Income's 2023 10-K

331 paragraphs added · 447 removed · 204 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

37 edited+43 added−132 removed17 unchanged
Biggest changeThis table excludes 181 vacant units. 19 Tabl e of Contents Geographic Diversification The following table sets forth certain geographic information regarding our property portfolio as of December 31, 2022 (dollars in thousands): Location Number of Properties Percent Leased Approximate Leasable Square Feet Percentage of Total Portfolio Annualized Contractual Rent Alabama 397 98 % 4,294,800 1.9 % Alaska 6 100 299,700 0.1 Arizona 245 100 3,701,300 2.0 Arkansas 234 100 2,567,000 1.0 California 333 99 11,421,200 5.8 Colorado 166 99 2,651,100 1.4 Connecticut 25 96 1,237,300 0.4 Delaware 25 96 189,900 0.1 Florida 782 99 10,018,900 5.1 Georgia 547 99 8,473,900 3.5 Hawaii 22 100 47,800 0.2 Idaho 27 100 189,100 0.1 Illinois 528 99 12,489,600 5.2 Indiana 406 99 7,584,500 2.6 Iowa 102 100 2,995,700 0.9 Kansas 183 100 4,565,000 1.1 Kentucky 357 99 5,823,500 1.7 Louisiana 336 100 5,053,500 2.0 Maine 54 100 1,004,900 0.5 Maryland 78 96 2,857,200 1.2 Massachusetts 91 100 6,201,200 4.2 Michigan 467 99 5,734,500 2.7 Minnesota 243 99 3,630,600 1.8 Mississippi 281 100 4,251,500 1.3 Missouri 376 98 5,018,000 1.9 Montana 22 100 210,500 0.1 Nebraska 77 97 1,021,100 0.4 Nevada 74 100 2,665,700 1.0 New Hampshire 31 100 568,200 0.3 New Jersey 142 97 2,225,900 1.6 New Mexico 101 100 1,290,700 0.6 New York 244 98 4,334,700 2.9 North Carolina 393 98 8,106,000 3.0 North Dakota 22 91 347,500 0.2 Ohio 683 99 14,602,000 4.2 Oklahoma 301 99 4,035,300 1.6 Oregon 41 100 650,400 0.4 Pennsylvania 339 99 5,925,200 2.5 Rhode Island 6 100 99,800 0.1 South Carolina 307 99 4,195,700 1.9 South Dakota 31 100 453,000 0.2 Tennessee 446 98 7,209,400 2.5 Texas 1,534 99 25,415,800 10.4 Utah 36 100 1,529,500 0.5 Vermont 7 100 134,900 0.1 Virginia 356 99 7,197,700 2.5 Washington 79 100 1,783,500 0.9 West Virginia 76 100 736,600 0.4 Wisconsin 278 100 5,483,100 1.9 Wyoming 23 100 157,700 0.1 Puerto Rico 6 100 59,400 0.1 United Kingdom 212 100 19,069,200 9.5 Spain 52 100 3,960,100 1.0 Italy 7 100 1,075,100 0.4 Totals/average 12,237 99 % 236,845,400 100.0 % 20 Tabl e of Contents FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K, including the documents incorporated by reference, contain 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.
Biggest changeGeographic Diversification The following table sets forth certain geographic information regarding our property portfolio as of December 31, 2023 (dollars in thousands): Location Number of Properties Percent Leased Approximate Leasable Square Feet Percentage of Total Portfolio Annualized Contractual Rent Alabama 408 98 % 4,438,600 1.7 % Alaska 7 100 304,100 0.1 Arizona 255 99 4,011,100 1.8 Arkansas 266 99 2,851,200 1.0 California 352 99 12,448,900 5.2 Colorado 170 98 2,707,600 1.3 Connecticut 52 98 1,754,700 0.6 Delaware 24 100 141,100 0.1 Florida 891 99 10,597,400 5.0 Georgia 576 98 9,194,300 3.3 Hawaii 22 100 47,800 0.2 Idaho 28 96 189,100 0.1 Illinois 559 97 13,332,200 4.8 Indiana 432 98 8,255,200 2.4 Iowa 114 99 3,529,200 0.8 Kansas 198 97 4,716,700 1.0 Kentucky 378 99 6,356,500 1.5 Louisiana 357 100 5,332,700 1.9 Maine 85 99 1,208,700 0.6 Maryland 79 97 3,070,300 1.1 Massachusetts 207 100 6,664,300 4.4 Michigan 476 99 5,923,200 2.4 Minnesota 261 99 4,340,300 1.7 Mississippi 310 98 4,582,500 1.2 Missouri 396 98 5,495,500 1.8 Montana 25 100 227,800 0.1 Nebraska 81 99 1,131,600 0.3 Nevada 75 99 4,622,400 2.3 New Hampshire 54 94 667,300 0.4 New Jersey 146 96 2,277,000 1.4 New Mexico 111 100 1,354,200 0.6 New York 339 98 4,973,000 3.0 North Carolina 421 99 8,404,400 2.7 North Dakota 21 95 427,800 0.1 Ohio 714 99 16,015,900 3.8 Oklahoma 342 100 4,479,700 1.5 Oregon 43 100 660,900 0.3 Pennsylvania 343 97 6,232,000 2.2 Rhode Island 31 100 214,600 0.2 South Carolina 328 99 5,211,100 1.8 South Dakota 36 100 504,700 0.2 Tennessee 461 97 7,355,400 2.3 Texas 1,607 99 27,773,500 9.6 Utah 39 100 1,585,500 0.4 Vermont 18 100 173,500 0.1 Virginia 368 99 7,378,500 2.2 Washington 82 98 1,863,600 0.8 West Virginia 93 100 879,600 0.4 Wisconsin 297 100 6,693,400 1.9 Wyoming 23 100 157,700 0.1 Puerto Rico 6 100 59,400 * France 28 100 1,475,900 0.4 Germany 4 100 189,900 0.1 Ireland 4 100 311,500 0.1 Italy 30 100 2,592,700 0.7 Portugal 4 100 142,300 * Spain 90 100 6,772,600 1.4 United Kingdom 291 100 27,780,500 12.6 Totals/average 13,458 100 % 272,083,100 100.0 % • *Less than 0.1% FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K, including the documents incorporated by reference, contain 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.
In addition, clients of our properties typically pay rent increases based on: (1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients' gross sales above a specified level.
In addition, clients of our properties typically pay rent increases based on: (1) fixed increases, (2) increases tied to inflation (typically subject to ceilings), or (3) additional rent calculated as a percentage of the clients' gross sales above a specified level.
Forward-looking statements are not guarantees of future plans and performance and speak only as of the date of this annual report was filed with the SEC. Actual plans and operating results may differ materially from what is expressed or forecasted in this annual report and forecasts made in the forward-looking statements discussed in this annual report might not materialize.
Forward-looking statements are not guarantees of future plans and performance and speak only as of the date this annual report was filed with the SEC. Actual plans and operating results may differ materially from what is expressed or forecasted in this annual report and forecasts made in the forward-looking statements discussed in this annual report might not materialize.
Generally, our asset management efforts seek to achieve: • Rent increases at the expiration of existing leases, when market conditions permit; • Optimum exposure to certain clients, industries, and markets through re-leasing vacant properties and selectively selling properties; • Maximum asset-level returns on properties that are re-leased or sold; and • Additional value creation opportunities from the existing portfolio by leveraging internal capabilities to enhance individual properties, pursue alternative uses, and derive ancillary revenue.
Generally, our asset management efforts seek to achieve: • Rent increases during and at the expiration of existing leases, when market conditions permit; • Optimum exposure to certain clients, industries, and markets through re-leasing vacant properties and selectively selling properties; • Maximum asset-level returns on properties that are renewed, re-leased or sold; and • Additional value creation opportunities from the existing portfolio by leveraging internal capabilities to enhance individual properties, pursue alternative uses, and derive ancillary revenue.
As part of our ongoing credit research, we continually monitor our portfolio for any changes that could affect the performance of our clients, our clients’ 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.
As part of our ongoing credit and predictive analytics research, we continually monitor our portfolio for any changes that could affect the performance of our clients, our clients’ 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.
In addition, prior to entering any transaction, our research department conducts a review of a client’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.
In addition, prior to entering any transaction, our credit research team conducts a review of a client’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 generally seek to own or hold interests in commercial real estate that has some or all of the following characteristics: 9 Tabl e of Contents • Properties in markets or locations important to our clients; • Properties with strong demographic attributes or that we deem to be profitable for our clients; • Properties with real estate valuations that approximate replacement costs; • Properties with rental or lease payments that approximate market rents for similar properties; • Properties that can be purchased with the simultaneous execution or assumption of long-term net lease agreements, offering both current income and the potential for future rent increases; • Properties that leverage relationships with clients, sellers, investors, or developers as part of a long-term strategy; and • Properties that leverage our proprietary insights, including those in locations and geographic markets we expect to remain strong or strengthen in the future.
We generally seek to own or hold interests in commercial real estate that has some or all of the following characteristics: • Properties in markets or locations important to our clients; • Properties with strong demographic attributes or that we deem to be profitable for our clients; • Properties with real estate valuations that approximate replacement costs; • Properties with rental or lease payments that approximate market rents for similar properties; 2 Table of Contents • Properties that can be purchased with the simultaneous execution or assumption of long-term net lease agreements, offering both current income and the potential for future rent increases; • Properties that leverage relationships with clients, sellers, investors, or developers as part of a long-term strategy; and • Properties that leverage our proprietary insights, including those in locations and geographic markets we expect to remain strong or strengthen in the future.
We target investments with clients who have demonstrated resiliency to e-commerce or have a strong omni channel retail strategy, uniting brick-and-mortar and mobile browsing, both of which reflect the continued importance of last mile retail, the movement of goods to their final destination, real estate as part of a customer experience and supply chain strategy.
We target investments with clients who have demonstrated resiliency to e-commerce or have a strong omnichannel retail strategy, uniting brick-and-mortar and mobile browsing, both of which reflect the continued importance of last mile retail, the movement of goods to their final destination, real estate as part of a customer experience and supply chain strategy.
In addition, we believe that the risk of default on real estate leases can be further mitigated by monitoring the performance of our clients’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition. We conduct comprehensive reviews of the business segments and industries in which our clients operate.
In addition, we believe that the risk of default on real estate leases 3 Table of Contents can be further mitigated by monitoring the performance of our clients’ individual locations and considering whether to proactively sell locations that meet our criteria for disposition. We conduct comprehensive reviews of the business segments and industries in which our clients operate.
Even though we have a single segment, we believe our investors continue to view diversification as a key component of our investment philosophy and so we believe it remains important to present certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent: 16 Tabl e of Contents Percentage of Total Portfolio Annualized Contractual Rent by Industry (1) As of Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Grocery stores 10.0% 10.2% 9.8% 7.9% 5.0% Convenience stores 8.6 9.1 11.9 12.3 12.6 Dollar stores 7.4 7.5 7.6 7.9 7.3 Restaurants - quick service 6.0 6.6 5.3 5.8 6.3 Drug stores 5.7 6.6 8.2 8.8 9.4 Home improvement 5.6 5.1 4.3 2.9 2.8 Restaurants - casual dining 5.1 5.9 2.8 3.2 3.3 Health and fitness 4.4 4.7 6.7 7.0 7.1 Automotive service 4.0 3.2 2.7 2.6 2.2 General merchandise 3.7 3.7 3.4 2.5 2.1 (1) The presentation of Top 10 Industry Concentrations combines total portfolio contractual rent from the U.S. and Europe.
Even though we have a single segment, we believe our investors continue to view diversification as a key component of our investment philosophy and so we believe it remains important to present certain information regarding our property portfolio classified according to the business of the respective clients, expressed as a percentage of our total portfolio annualized contractual rent: Percentage of Total Portfolio Annualized Contractual Rent by Industry (1) As of Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Grocery 11.4% 10.0% 10.2% 9.8% 7.9% Convenience Stores 10.2 8.6 9.1 11.9 12.3 Dollar Stores 7.1 7.4 7.5 7.6 7.9 Home Improvement 5.9 5.6 5.1 4.3 2.9 Drug Stores 5.5 5.7 6.6 8.2 8.8 Restaurants-Quick Service 5.2 6.0 6.6 5.3 5.8 Restaurants-Casual 4.4 5.1 5.9 2.8 3.2 Automotive Service 4.3 4.0 3.2 2.7 2.6 Health and Fitness 3.9 4.4 4.7 6.7 7.0 Gaming 3.9 2.9 — — — (1) The presentation of Top 10 Industry Concentrations combines total portfolio contractual rent from the U.S. and Europe.
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 this Annual Report on Form 10-K, for the fiscal year ended December 31, 2022. Readers are cautioned not to place undue reliance on forward-looking statements.
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 this annual report on Form 10-K, for the year ended December 31, 2023. Readers are cautioned not to place undue reliance on forward-looking statements.
This research expertise is instrumental to uncovering net lease opportunities in markets where we believe we can add value.
This research expertise is instrumental to uncovering investment opportunities in markets where we believe we can add value.
Some of the factors that could cause actual results to differ materially are, among others our continued qualification as a real estate investment trust; general domestic and foreign business, economic, or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact on our clients and us; access to debt and equity capital markets and other sources of funding; continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including our clients' defaults under leases, increased client bankruptcies, 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 domestic and foreign income tax laws and rates; our clients' solvency; property ownership through joint ventures and partnerships which may limit control of the underlying investments; the continued evolution of the COVID-19 pandemic or future epidemics or pandemics, measures taken to limit their spread, the impacts on us, our business, our clients (including those in the theater and fitness industries), and the economy generally; the loss of key personnel; the outcome of any legal proceedings to which we are a party or which may occur in the future; acts of terrorism and war; and any effects of uncertainties regarding whether the anticipated benefits or results of our merger with VEREIT, Inc. will be achieved.
Some of the factors that could cause actual results to differ materially are, among others, our continued qualification as a real estate investment trust; general domestic and foreign business, economic, or financial conditions; competition; fluctuating interest and currency rates; inflation and its impact on our clients and us; access to debt and equity capital markets and other sources of funding (including the terms and partners of such funding); continued volatility and uncertainty in the credit markets and broader financial markets; other risks inherent in the real estate business including our clients' solvency, client defaults under leases, increased client bankruptcies, 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 domestic and foreign income tax laws and rates; property ownership through joint ventures, partnerships and other arrangements which may limit control of the underlying investments; epidemics or pandemics including measures taken to limit their spread, the impacts on us, our business, our clients, and the economy generally; the loss of key personnel; the outcome of any legal proceedings to which we are a party or which may occur in the future; acts of terrorism and war; and the anticipated benefits from mergers and acquisitions including from the merger with Spirit (the "Merger").
At December 31, 2022, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented 40.9% of our annualized rent and 12 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.
At December 31, 2023, our top 20 clients (based on percentage of total portfolio annualized contractual rent) represented 40.2% of our annualized rent and 10 of these clients have investment grade credit ratings or are subsidiaries or affiliates of investment grade companies.
Forward-looking statements include discussions of our business and portfolio (including our growth strategies and our intention to acquire or dispose of additional properties and the timing of these acquisitions and dispositions), re-lease, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, and the intentions of management; and trends in our business, including trends in the market for long-term net leases of freestanding, single-client properties.
Forward-looking statements include discussions of our business and portfolio; growth strategies and intentions to acquire or dispose of properties (including timing, partners, clients and terms); re-leases, re-development and speculative development of properties and expenditures related thereto; future operations and results; the announcement of operating results, strategy, plans, and the intentions of management; and trends in our business, including trends in the market for long-term leases of freestanding, single-client properties.
We conduct due diligence, including financial reviews of the client, and monitor our clients’ credit quality on an ongoing basis and provide summaries of these findings to management. At December 31, 2022, 40.9% of our total portfolio annualized contractual rent comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.
We conduct due diligence, including financial reviews of the client, monitor our clients’ credit quality on an ongoing basis, and provide summaries of these findings to management. At December 31, 2023, 39.6% of our total portfolio annualized contractual rent (as defined in "Property Portfolio Information" below) comes from properties leased to our investment grade clients, their subsidiaries or affiliated companies.
Item 1: Business In this Annual Report on Form 10-K, unless the context otherwise requires, references to “Realty Income,” the “Company,” “we,” “our” or “us” refer to Realty Income Corporation and our subsidiaries. Our financial results for the periods presented reflect our merger with VEREIT, Inc.
Item 1: Business In this Annual Report on Form 10-K, unless the context otherwise requires, references to “Realty Income,” the “Company,” “we,” “our” or “us” refer to Realty Income Corporation and our subsidiaries.
We do not undertake any 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 these statements were made.
We do not undertake any obligation to update forward-looking statements that may be made to reflect events or circumstances after the date these statements were made. 7 Table of Contents
Europe consists of properties in the U.K., starting in May 2019, in Spain, starting in September 2021, and in Italy, starting in October 2022.
Europe consists of properties in the U.K., starting in May 2019, in Spain, starting in September 2021, in Italy, starting in October 2022, in Ireland, starting in June 2023, and in France, Germany, and Portugal, starting in December 2023.
Our investment activities have led to a diversified property portfolio that, as of December 31, 2022, we owned or held interests in 12,237 properties located in all 50 U.S. states, Puerto Rico, the U.K., Spain, and Italy, and doing business in 84 industries.
Our investment activities have led to a diversified property portfolio and as of December 31, 2023, we owned or held interests in 13,458 properties located in all 50 U.S. states, Puerto Rico, the United Kingdom ("U.K."), France, Germany, Ireland, Italy, Portugal, and Spain and doing business in 86 industries.
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 rent has not been reduced to reflect reserves and reserve reversals recorded as adjustments to U.S.
We believe total portfolio annualized contractual rent 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.
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.
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 To be considered for acquisition, investments must meet stringent underwriting requirements.
Benefits include medical, dental, and vision healthcare benefits for all employees and their families; participation in a 401(k) or equivalent plan with a matching contribution from us; paid time-off or equivalent; disability and life insurance; and, in years that the Company's performance meets certain goals, the ability to earn equity in the Company that vests over four years.
Benefits include medical, dental, and vision coverage for employees and their families, 401(k) or equivalent plans with Company matching opportunity; paid time-off or equivalent vacation; disability and life insurance; and, in years that the Company's performance meets certain goals, the ability to earn equity in the Company subject to applicable vesting periods.
Thus, as the property owner, we believe that we will fare better than unsecured creditors of the same client in the event of reorganization. If a property is rejected by our client during reorganization, we own the property and can either lease it to a new client or sell the property.
If a property is rejected by our client during reorganization, we own the property and can either lease it to a new client or sell the property.
As a result of the execution of this strategy, approximately 93% of our annualized retail contractual rent on December 31, 2022, is derived from our clients 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, the majority of which are investment grade rated companies.
As a result of the execution of this strategy, approximately 91% of our annualized retail contractual rent on December 31, 2023, is derived from our clients with a service, non-discretionary, and/or low price point component to their business. We believe these characteristics enhance the stability of the rental revenue generated from these properties.
We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, but excluding percentage rent and reimbursements from clients, as of the balance sheet date, multiplied by 12, excluding percentage rent.
We define total portfolio annualized contractual rent as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables, as of the balance sheet date, multiplied by 12, excluding percentage rent, interest income on loans and preferred equity investments, and including our pro rata share of such revenues from properties owned by unconsolidated joint ventures.
Over the past 54 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients.
Over the past 55 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with our commercial clients. As of December 31, 2023, we owned or held interests in 13,458 properties located in the United States ("U.S.") and Europe.
It has been our experience that clients must retain their profitable and critical locations to survive. Therefore, in the 10 Tabl e of Contents 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.
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 should fare better than unsecured creditors of the same client in the event of reorganization.
As such, we hire talented employees with diverse backgrounds and perspectives and work to provide an environment with regular, open communication where capable team members have fulfilling careers and are encouraged to engage with and make a positive impact on business partners and the communities in which we operate.
We seek to hire talented employees with diverse backgrounds and perspectives and look to foster an environment that allows for regular, open communication where capable team members have fulfilling careers and are encouraged to engage with and make a positive impact on our Company, its operations, its business partners, and the communities in which we operate. 4 Table of Contents Employees operate as "One Team" and, together, we are committed to providing an engaging work environment centered on our values of: • Do the Right Thing, • Take Ownership, • Empower Each Other, • Celebrate Differences, and • Give More than We Take.
None of the 84 industries represented in our property portfolio accounted for more than 8.6% of our annualized contractual rent as of December 31, 2022. As we look to continue to expand geographically across Europe, we focus upon building relationships with new multinational clients that seek a real estate partner with an expanding geographic footprint.
As we look to continue to expand geographically across Europe, we focus upon building relationships with new multinational clients that seek a real estate partner with an expanding geographic footprint. Investment Strategy We seek to acquire, invest in and develop high-quality real estate that our clients consider important to the successful operation of their businesses.
At December 31, 2022, 12,111 properties were leased under net lease agreements. A net lease typically requires the client to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance.
BUSINESS PHILOSOPHY AND STRATEGY We believe that actively managing a diversified portfolio of commercial properties under long-term, net lease agreements produces consistent and predictable income. A net lease typically requires the client to be responsible for monthly rent and certain property operating expenses including property taxes, insurance, and maintenance.
GAAP rental revenue in the periods presented and excludes unconsolidated entities. Top 10 Industry Concentrations We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis. That business activity spans various geographic boundaries and includes property types and clients engaged in various industries.
Total portfolio annualized contractual rent has not been reduced to reflect reserves recorded as adjustments to generally accepted accounting principles in the United States, ("U.S. GAAP") rental revenue in the periods presented. Top 10 Industry Concentrations We are engaged in a single business activity, which is the leasing of property to clients, generally on a net basis.
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, client (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 clients’ business.
We analyze investments based on one or more of the following criteria: • Industry, client (including credit), and market conditions; • Expected financial returns under various scenarios (including default); • The value of real estate (based on replacement cost, comparative rental rates and alternative uses), or other collateral backing the client’s contractual obligations; and • Store profitability for retail locations if profitability data is available or the importance of the real estate location to the operations of the clients’ business.
We support a healthy work-life balance, by offering flexible work schedules, access to discounted fitness programs, on-site dry-cleaning pickup, car wash services, paid family leave, generous parental leave, lactation rooms, and an infant at work program for new parents. Employees also have access to a robust employee assistance program. The COVID-19 pandemic prompted additional support needed to our One Team.
In fostering a healthy work environment, we promote work-life balance by offering flexible schedules and providing discounted fitness programs, paid family leave, parental leave, onsite lactation rooms, an infant-at-work program, employee health fairs, and an employee assistance program, among other programs and services.
Property Type Composition The following table sets forth certain property type information regarding our property portfolio as of December 31, 2022 (dollars in thousands): Property Type Number of Properties Approximate Leasable Square Feet (1) Total Portfolio Annualized Contractual Rent Percentage of Total Portfolio Annualized Contractual Rent Retail 11,872 154,779,800 $ 2,794,814 81.9 % Industrial 327 76,546,800 453,571 13.3 Gaming 1 3,096,700 100,000 2.9 Other (2) 37 2,422,100 64,673 1.9 Totals 12,237 236,845,400 $ 3,413,058 100.0 % (1) Includes leasable building square footage.
Property Type Composition The following table sets forth certain property type information regarding our property portfolio as of December 31, 2023 (dollars in thousands): Property Type Number of Properties Approximate Leasable Square Feet (1) Total Portfolio Annualized Contractual Rent Percentage of Total Portfolio Annualized Contractual Rent Retail 13,053 179,880,600 $ 3,304,177 81.8 % Industrial 365 84,737,900 514,306 12.7 Gaming (2) 2 5,053,400 157,945 3.9 Other (3) 38 2,411,200 65,443 1.6 Totals 13,458 272,083,100 $ 4,041,871 100.0 % (1) Excludes 2,962 acres of leased land categorized as agriculture at December 31, 2023.
Because we typically own the land and building in which a client conducts its business or which are critical to the client’s ability to generate revenue, we believe the risk of default on a client’s lease obligation is less than the client’s unsecured general obligations.
With regard to real estate investments, we typically own the land and building in which a client conducts its business or which are critical to the client’s ability to generate revenue. It has been our experience that clients must retain their profitable and critical locations to survive.
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.
The active management of the portfolio is an essential component of our long-term strategy of maintaining high occupancy. Capital Philosophy Our goal is to deliver dependable monthly dividends to our stockholders that increase over time.
Removed
("VEREIT") from the merger date of November 1, 2021; therefore, periods prior to that date do not reflect the impact of the VEREIT merger.
Added
On January 23, 2024, we closed on our previously announced merger with Spirit Realty Capital, Inc. ("Spirit", formerly NYSE: SRC), which is further described in note 21, Subsequent Events, to the consolidated financial statements. The Spirit portfolio consisted of 2,018 U.S. retail, industrial, and other properties across 49 states.
Removed
At December 31, 2022, our diversified portfolio consisted of: • Owned or held interests in 12,237 properties; • An occupancy rate of 99.0%, or 12,111 properties leased and 126 properties available for lease or sale; • Clients doing business in 84 separate industries; • Locations in all 50 United States ("U.S."), Puerto Rico, the United Kingdom ("U.K."), Spain, and Italy; • Approximately 236.8 million square feet of leasable space; • A weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.5 years; and • An average leasable space per property of approximately 19,350 square feet, approximately 13,000 square feet per retail property and approximately 234,100 square feet per industrial property.
Added
With assets that are highly complementary to our existing portfolio, this transaction enhances the diversification and depth our real estate portfolio and will allow us to strengthen our longstanding relationships with existing clients and curate new ones.
Removed
Of the 12,237 properties in the portfolio at December 31, 2022, 12,018, or 98.2%, are single-client properties, of which 11,894 were leased, and the remaining are multi-client properties. Our common stock is listed on the NYSE under the ticker symbol “O” with a CUSIP number of 756109-104. Our central index key number is 726728.
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Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate acquisitions, property development, and capital expenditures, by issuing common stock, preferred stock, long-term unsecured notes and term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital structure.
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Our notes are listed on the NYSE as follows: Notes Ticker Symbol CUISP 1.125% Notes due July 2027 O27A 756109-BB9 1.875% Notes due January 2027 O27B 756109-BM5 1.625% Notes due December 2030 O30 756109-AY0 1.750% Notes due July 2033 O33A 756109-BC7 2.500% Notes due January 2042 O42 756109-BN3 In January 2023, we had 395 employees, inclusive of four part-time employees, as compared to 371 employees, inclusive of four part-time employees, in January 2022.
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We may issue common stock when we believe our share price is at a level that allows for the proceeds of an offering to be accretively invested into additional properties or to permanently finance properties that were initially financed by our revolving credit facility, commercial paper programs, or shorter-term debt securities.
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None of the information on our website is deemed to be part of this report. 3 Tabl e of Contents RECENT DEVELOPMENTS Increases in Monthly Dividends to Common Stockholders We have continued our 54-year policy of paying monthly dividends. In addition, we increased the dividend four times during 2022 and twice during 2023.
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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. Human Capital We put great effort into cultivating an inclusive company culture.
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As of February 2023, we have paid 101 consecutive quarterly dividend increases and increased the dividend 119 times since our listing on the NYSE in 1994.
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Recruitment, Development and Retention At the heart of our corporate culture lie our dedicated employees, who form the foundation of our organization, representing our most valuable assets. As of December 31, 2023, our workforce comprises 418 professionals.
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Month Month Monthly Dividend Increase 2022 Dividend increases Declared Paid per share per share 1st increase Dec 2021 Jan 2022 $ 0.2465 $ 0.0005 2nd increase Mar 2022 Apr 2022 $ 0.2470 $ 0.0005 3rd increase Jun 2022 Jul 2022 $ 0.2475 $ 0.0005 4th increase Sep 2022 Oct 2022 $ 0.2480 $ 0.0005 2023 Dividend increases 1st increase Dec 2022 Jan 2023 $ 0.2485 $ 0.0005 2nd increase Feb 2023 Mar 2023 $ 0.2545 $ 0.0060 The dividends paid per share during 2022 totaled $2.967, as compared to $2.833 during 2021, an increase of $0.134, or 4.7%.
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The majority of our talented team members are recruited and hired from the communities in which we operate, embodying our commitment to local engagement. To extend the scope of our talent acquisition efforts, we have implemented various initiatives, including college and high school internship programs.
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The monthly dividend of $0.2545 per share represents a current annualized dividend of $3.0540 per share, and an annualized dividend yield of 4.8% based on the last reported sale price of our common stock on the NYSE of $63.43 on December 31, 2022.
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Our comprehensive approach encompasses a wide range of strategies, such as engaging with affinity associations, utilizing targeted job advertisements, employing sourcing software that emphasizes diversity criteria, and fostering employee referrals. These measures ensure that we continually attract and embrace a diverse pool of candidates. Furthermore, we recognize that internal mobility within our organization unlocks yet another great source of talent.
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Although we expect to continue our policy of paying monthly dividends, we cannot guarantee that we will maintain our current level of dividends, that we will continue our pattern of increasing dividends per share, or what our actual dividend yield will be in any future period.
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By encouraging our current employees to expand their skills and take on new challenges, we tap into a rich reservoir of potential that enhances our workforce's capabilities and reinforces our corporate culture. We offer leadership development programs and train on critical topics such as ethics, insider trading, anti-discrimination and harassment, cybersecurity, diversity, equality and inclusion, safety, and other Company policies.
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Acquisitions During 2022 Below is a listing of our acquisitions in the U.S. and Europe for the year ended December 31, 2022: Number of Properties Leasable Square Feet (in thousands, unaudited) Investment ($ in millions) Weighted Average Lease Term (Years) Initial Weighted Average Cash Lease Yield (1) Year ended December 31, 2022 (2) Acquisitions - U.S. 990 15,774 $ 5,746.4 19.3 6.0 % Acquisitions - Europe 94 11,179 2,441.3 8.9 6.0 % Total acquisitions 1,084 26,953 $ 8,187.7 16.3 6.0 % Properties under development (3) 217 5,500 807.6 15.0 5.3 % Total (4) 1,301 32,453 $ 8,995.3 16.2 5.9 % (1) The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property.
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We provide professional development opportunities for One Team members and provide assistance and support to employees who are pursuing job-related licenses, certifications, and continuing education. Employee retention is essential for supporting a positive culture and productive workforce. Accordingly, we believe we offer competitive compensation and benefits packages.
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Since it is possible that a client 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.
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Additional information regarding our human capital programs and initiatives is available in our annual Proxy Statement and Sustainability Report, both of which can be found on our website. Information on our website, including our Sustainability Report, is not incorporated by reference into this Annual Report.
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Contractual net operating income used in the calculation of initial weighted average cash yield includes approximately $10.5 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2022.
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Diversity, Equality and Inclusion (DE&I) We believe that the diversity of our One Team and our dedication to inclusion are foundational to our success. We continue DE&I training and learning sessions to build employee awareness and action while also encouraging open discussion amongst colleagues.
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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.
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Our DE&I initiatives are designed to enhance knowledge, deepen understanding, facilitate conversations on critical DE&I topics, encourage inclusive interactions, and cultivate a sense of belonging. In addition, we conduct pay equity analyses to help ensure equitable pay for employees who perform similar work under similar circumstances, regardless of gender, race, or ethnicity.
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When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.
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Employee Health, Safety and Wellbeing We prioritize the health, safety, and wellbeing of our team members. Our wellbeing program is designed to empower employees through a range of activities and educational initiatives that contribute to both their personal and professional development.
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(2) None of our investments during the year ended December 31, 2022, caused any one client to be 10% or more of our total assets at December 31, 2022. (3) Includes five U.K. development properties that represent an investment of £40.9 million during the year ended December 31, 2022, converted at the applicable exchange rate on the funding date.
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Government Regulation General Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material.
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(4) Our clients occupying the new properties are 71.4% retail, 19.1% gaming, 6.5% industrial and 3.0% other property types (including 2.7% agricultural and 0.3% office) based on rental revenue.
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We incur costs to monitor and take actions to comply with governmental regulations that are applicable to our business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property and the Americans with Disabilities Act of 1990, or ADA.
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Approximately 23% of the rental revenue generated from acquisitions during the year ended December 31, 2022 is from our investment grade rated clients, their subsidiaries or affiliated companies. 4 Tabl e of Contents Appointment of New Chief Operating Officer ("COO") Effective January 2023, Gregory J. Whyte assumed his new role as our Executive Vice President and COO. Mr.
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We believe that our properties generally have the necessary permits and approvals needed and are in compliance with applicable laws and regulations. 5 Table of Contents Environmental Matters Investments in real property can create a potential for environmental liability. Federal, state and local environmental laws and regulations regulate releases of hazardous or toxic substances into the environment.
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Whyte has a background in investment banking and he has served in both advisory roles and as director for several publicly traded companies.
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While our tenants are generally primarily responsible for compliance with environmental laws and regulations, we as owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property.
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Portfolio Discussion Leasing Results At December 31, 2022, we had 126 properties available for lease or sale out of 12,237 properties in our portfolio, which represents a 99.0% occupancy rate based on the number of properties in our portfolio. Our property-level occupancy rates exclude properties with ancillary leases only, such as cell towers and billboards .
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We can face such liability regardless of our knowledge of the contamination; the timing of the contamination; the cause of the contamination; or the party responsible for the contamination of the property.
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Below is a summary of our portfolio activity for the periods indicated below: Three months ended December 31, 2022 Properties available for lease at September 30, 2022 131 Lease expirations (1) 185 Re-leases to same client (151) Re-leases to new client (9) Vacant dispositions (30) Properties available for lease at December 31, 2022 126 Year ended December 31, 2022 Properties available for lease at December 31, 2021 164 Lease expirations (1) 719 Re-leases to same client (571) Re-leases to new client (34) Vacant dispositions (152) Properties available for lease at December 31, 2022 126 (1) Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.
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We have no knowledge of any hazardous substances existing on our properties in violation of any applicable laws; however, no assurance can be given that such substances are not currently located on any of our properties.
Removed
During the three months ended December 31, 2022, the new annualized contractual rent on re-leases was $39.16 million, as compared to the previous annual contractual rent of $37.71 million on the same units, representing a rent recapture rate of 103.8% on the units re-leased.
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Some of our properties contain, have contained, or are adjacent to or near properties that contain or have contained storage tanks for petroleum products or that involve or involved the use of hazardous or toxic substances.
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We re-leased six units to new clients without a period of vacancy, and seven units to new clients after a period of vacancy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

67 edited+22 added−17 removed133 unchanged
Biggest changeOur international investments are subject to additional risks, including: • The laws, rules and regulations applicable in such jurisdictions outside of the U.S., including those related to property ownership and control by foreign entities; • Complying with a wide variety of foreign laws, including corruption, employment, data protection, energy usage, health and safety and environmental regulations which may require capital expenditures to maintain or bring our foreign properties into compliance with applicable regulations; 29 Tabl e of Contents • Fluctuations in exchange rates between foreign currencies and the U.S. dollar (including risks related to their impact on our results of operations, hedging and other derivative arrangements used to mitigate our exposure to fluctuations in foreign currency rates, translational reporting risks, and exchange controls); • As we may not have or have only a limited number of properties within a jurisdiction, our experience in that market and with local business may be limited; • Cultural factors and business practices that differ from our U.S. standards and practices including as they relate to rent adjustments, ground leases and property ownership requirements and limitations; • Challenges in establishing effective controls and procedures to manage and regulate operations in different regions and to monitor and ensure compliance with applicable regulations, such as applicable laws related to corrupt practices, employment, licensing, construction, energy usage, climate change or environmental compliance; • Unexpected or other changes in regulatory requirements, tax, tariffs, trade barriers and other laws within jurisdictions outside the U.S. or between the U.S. and such jurisdictions; • Potentially adverse tax consequences with respect to our properties and/or investment vehicles; • Initial limited investments within certain regions or countries resulting in industry or client concentration risks; • The impact of regional or country-specific business cycles, inflation and economic instability, including deterioration in political relations with the U.S., instability in, or further withdrawals from, the European Union or other international trade alliances or agreements; and • Political instability, uncertainty over property rights, civil unrest, acts of war, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities.
Biggest changeOur international investments are subject to additional risks, including: • The laws, rules and regulations applicable in such jurisdictions outside of the U.S., including those related to property ownership and control by foreign entities; • Complying with a wide variety of foreign laws, including corruption, employment, data protection, energy usage, health and safety and environmental regulations which may require capital expenditures to maintain or bring our 14 Table of Contents foreign properties into compliance with applicable regulations and/or may require disclosure of various environmental, social and governance matters; • Fluctuations in exchange rates between foreign currencies and the U.S. dollar (including risks related to their impact on our results of operations, hedging and other derivative arrangements used to mitigate our exposure to fluctuations in foreign currency rates, translational reporting risks, and exchange controls); • As we may not have or have only a limited number of properties within a jurisdiction, our experience in that market and with local business may be limited, and our operating costs may be disproportionately higher until the number of properties within a jurisdiction grows; • We may face challenges with expanding into current or new jurisdictions, such as identifying and securing investment opportunities, hiring and retaining employees, extended time periods for acquiring or disposing of investments, which may increase the cost of funding an investment, and potentially experiencing different cultural and business practices related to employees, rent adjustments, ground leases, and property ownership requirements and limitations; • Challenges in establishing effective controls and procedures to manage and regulate operations in different regions and to monitor and ensure compliance with applicable regulations, such as applicable laws related to corrupt practices, employment, licensing, construction, energy usage, climate change or environmental compliance; • Unexpected or other changes in regulatory requirements (including disclosure requirements), tax, tariffs, trade barriers and other laws within jurisdictions outside the U.S. or between the U.S. and such jurisdictions; • Potentially adverse tax consequences with respect to our properties and/or investment vehicles; • Initial limited investments within certain regions or countries may result in industry or client concentration risks; • The impact of regional or country-specific business cycles, inflation and economic instability, including deterioration in political relations with the U.S., instability in, or further withdrawals from, the European Union or other international trade alliances or agreements; and • Political instability, uncertainty over property rights, civil unrest, acts of war, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities.
Item 1A: Risk Factors This “Risk Factors” section contains references to our “capital stock” and to our “stockholders.” Unless expressly stated otherwise, the references to our “capital stock” represent our common stock and any class or series of preferred stock which may be outstanding from time to time, while the references to our “stockholders” represent holders of our common stock.
Item 1A: Risk Factors This “Risk Factors” section contains references to our “capital stock” and to our “stockholders.” Unless expressly stated otherwise, the references to our “capital stock” represent our common stock and any class or series of preferred stock which may be outstanding from time to time, while the references to our “stockholders” represent holders of our common stock and any class or series of preferred stock which may be outstanding from time to time.
While we may enter into hedging and other derivatives instruments to mitigate our exposure to fluctuations in foreign exchange rates, we may not realize the anticipated benefits from these arrangements or these arrangements may be insufficient to mitigate our exposure.
While we may enter into hedging and other derivatives instruments to mitigate our exposure to fluctuations in foreign exchange rates, we may not realize the anticipated benefits from these arrangements or these arrangements may be insufficient to mitigate our exposure.
Our financial results may be negatively impacted by such attacks and incidents or any resulting negative media attention. Further, while we carry cyber liability insurance, such insurance may not be adequate to cover all losses related to such events.
Our financial results may be negatively impacted by any such attacks and incidents or any resulting negative media attention. Further, while we carry cyber liability insurance, such insurance may not be adequate to cover all losses related to such events.
Volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements. Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), and various receivables.
Volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements. Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), and receivables.
While we maintain some of our own critical IT networks and related systems, we also depend on third-parties to provide important software, technologies, tools and a broad array of services and functions, such as payroll, human resources, electronic communications, data storage, and certain finance and treasury functions, among others.
While we maintain some of our own critical IT networks and related systems, we depend on third-parties to provide important software, technologies, tools and a broad array of services and functions, such as payroll, human resources, electronic communications, data storage, and certain finance and treasury functions, among others.
Additional real estate ownership risks include: • Adverse changes in general or local economic conditions; • Changes in supply of, or demand for, similar or competing properties; • Changes in interest rates and operating expenses (including energy costs, shortages and rationing); • Competition within an industry and for our clients; • Changes in market rents; • Inability to lease properties upon termination of existing leases; • Renewal of leases at lower rental rates; • Inability to collect rental revenue from our clients due to financial hardship, including bankruptcy; • Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate; • Uninsured property liability; • Property damage or casualty losses; • Unexpected expenditures for capital improvements, including requirements to bring properties into compliance with applicable federal, state and local laws; • The need to periodically renovate and repair our properties; • Risks assumed as manager for development or redevelopment projects; • Physical or weather-related damage to properties; • The potential risk of functional obsolescence of properties over time; • Acts of terrorism and war; • Changes in consumer behaviors, preferences or demographics; • The impacts of climate change; and • Acts of God and other factors beyond the control of our management.
Additional real estate ownership risks include: • Adverse changes in general or local economic conditions; • Changes in supply of, or demand for, similar or competing properties; • Changes in interest rates and operating expenses (including energy costs, shortages and rationing); • Competition within an industry and for our clients; • Changes in market rents; • Inability to lease properties upon termination of existing leases; • Renewal of leases at lower rental rates; • Inability to collect rental revenue from our clients due to financial hardship, including bankruptcy; 13 Table of Contents • Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate; • Uninsured property liability; • Property damage or casualty losses; • Unexpected expenditures for capital improvements, including requirements to bring properties into compliance with applicable federal, state and local laws; • The need to periodically renovate and repair our properties; • Risks assumed as manager for development or redevelopment projects; • Physical or weather-related damage to properties; • The potential risk of functional obsolescence of properties over time; • Acts of terrorism and war; • Changes in consumer behaviors, preferences or demographics; • The impacts of climate change; and • Acts of God and other factors beyond the control of our management.
We have made and may continue to make selected acquisitions of properties that fall outside our historical focus on freestanding, single-client, net lease retail locations in the U.S.
Furthermore, we have made and may continue to make selected acquisitions of properties that fall outside our historical focus on freestanding, single-client, net-lease retail locations in the U.S.
Natural disasters, terrorist attacks, other acts of violence or war, or other unexpected events (e.g., pandemics or epidemics) may negatively affect our operations, the market price of our capital stock and the value of our debt securities.
Natural disasters, terrorist attacks, cyber attacks, other acts of violence or war, or other unexpected events (e.g., pandemics or epidemics) may negatively affect our operations, the market price of our capital stock and the value of our debt securities.
Natural disasters, terrorist attacks, other acts of violence or war, or other unexpected events may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.
Natural disasters, terrorist attacks, cyber attacks, other acts of violence or war, or other unexpected events may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.
If required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these retailers to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could materially adversely affect our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders.
If required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these clients to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could materially adversely affect our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders.
This difficulty may be exacerbated to the extent the gaming property is located in a geography that does not have an expansive gaming footprint, such as the property in which we are invested. A transfer of interest, including a new lease, will likely require approval of regulators and the licensing of a new gaming operator tenant.
This difficulty may be exacerbated to the extent the gaming property is located in a geography that does not have an expansive gaming footprint, such as one of the properties, in which we are invested. A transfer of interest, including a new lease, will likely require approval of regulators and the licensing of a new gaming operator tenant.
We could be adversely affected by various facts and events over which we have limited or no control, such as: 21 Tabl e of Contents • Lack of demand in areas where our properties are located; • Inability to retain existing clients and attract new clients; • Oversupply of space and changes in market rental rates; • Declines in our clients’ creditworthiness and ability to pay rent, which may be affected by their operations (including as a result from changes in consumer behaviors or preferences impacting our clients operations), economic downturns and competition within their industries from other operators; • Defaults by and bankruptcies of clients, failure of clients to pay rent on a timely basis, or failure of our clients to comply with their contractual obligations; • Changes in laws, rules or regulations that negatively impact clients or our properties; • The COVID-19 pandemic or other epidemics or pandemics or outbreaks of illness, disease or virus that affect countries or regions in which our clients and their parent companies operate or in which our properties or corporate headquarters are located; • Changes in consumer behaviors (e.g., decrease in discretionary consumer spending), preferences or demographics impacting our clients' operations; • Supply chain disruptions; • Economic or physical decline of the areas where the properties are located; and • Deterioration of physical condition of our properties.
We could be adversely affected by various facts and events over which we have limited or no control, such as: • Lack of demand in areas where our properties are located; • Inability to retain existing clients and attract new clients; • Oversupply of space and changes in market rental rates; • Declines in our clients’ creditworthiness and ability to pay rent, which may be affected by their operations (including as a result from changes in consumer behaviors or preferences impacting our clients operations), economic downturns and competition within their industries from other operators; • Defaults by and bankruptcies of clients, failure of clients to pay rent on a timely basis, or failure of our clients to comply with their contractual obligations; • Changes in laws, rules or regulations that negatively impact clients or our properties; • Epidemics, pandemics or outbreaks of illness, disease or virus that affect countries or regions in which our clients and their parent companies operate or in which our properties or corporate headquarters are located; • Changes in consumer behaviors (e.g., decrease in discretionary consumer spending), preferences or demographics impacting our clients' operations; • Supply chain disruptions; • Economic or physical decline of the areas where the properties are located; and • Deterioration of physical condition of our properties.
These restrictions could limit our ability to sell or refinance an asset at a time, or on terms, that would be favorable absent such restrictions. We are subject to risks associated with debt and preferred stock financing.
These restrictions could limit our ability to manage, control, sell or refinance an asset at a time, or on terms, that would be favorable absent such restrictions. We are subject to risks associated with debt and preferred stock financing.
We are subject to additional risks from our international investments and debt. We have acquired and may continue to acquire properties outside of the U.S. These investments may expose us to a variety of risks that are different from and in addition to those commonly found in the U.S.
We are subject to additional risks from our international investments and debt. We have acquired and may continue to invest in properties outside of the U.S. These investments may expose us to a variety of risks that are different from and in addition to those commonly found in the U.S.
Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unintended expenditures that could adversely impact our results of operations. Our properties are generally required to comply with the Americans with Disabilities Act of 1990, or the ADA.
Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unanticipated expenditures that could adversely impact our results of operations. Our properties are generally required to comply with the Americans with Disabilities Act of 1990, or the ADA.
Moreover, there can be no assurance that any of our sustainability strategies will result in reduced operating costs, higher occupancy or higher rental rates or deter our existing clients from relocating to properties owned by our competitors. In addition, tenants of net-leased properties are responsible for maintenance and other day-to-day management of the properties.
Moreover, there can be no assurance that any of our sustainability strategies 17 Table of Contents will result in reduced operating costs, higher occupancy or higher rental rates or deter our existing clients from relocating to properties owned by our competitors. In addition, tenants of net-leased properties are responsible for maintenance and other day-to-day management of the properties.
Inflationary periods may cause us to experience increased costs of financing, make it difficult to refinance debt at attractive rates or at all, and may adversely affect the properties we can acquire if the cost of financing an acquisition is in excess of our anticipated earnings from such property thereby limiting the properties that can be acquired.
Inflationary periods may cause us to experience increased costs of financing, making it difficult to incur or refinance debt at attractive rates or at all, and may adversely affect the properties we can acquire if the cost of financing an acquisition is in excess of our anticipated earnings from such property thereby limiting the properties that can be acquired.
The retailers to whom we lease properties are obligated by law to comply with the ADA provisions and, in many cases, the retailers are generally obligated to cover costs associated with compliance pursuant to the terms of their applicable leases.
The clients to whom we lease properties are obligated by law to comply with the ADA provisions and, in many cases, the clients are generally obligated to cover costs associated with compliance pursuant to the terms of their applicable leases.
Our indebtedness could also have other important consequences to holders of our common stock, any outstanding preferred stock, and our debt securities, including: • Increasing our vulnerability to general adverse economic and industry conditions; 27 Tabl e of Contents • Limiting our ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; • Requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, and general corporate requirements; • Limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and • Putting us at a disadvantage compared to our competitors with less indebtedness.
Our indebtedness could also have other important consequences to holders of our common stock, outstanding preferred stock, and our debt securities, including: increasing our vulnerability to general adverse economic and industry conditions; limiting our ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, and general corporate requirements; limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and putting us at a disadvantage compared to our competitors with less indebtedness.
As a result of these and other factors, investors who purchase our capital stock and debt securities may experience a decrease, which could be substantial and rapid, in the market value of our capital stock and debt securities, including decreases unrelated to our operating performance or prospects. Litigation risks could affect our business.
As a result of these and other factors, investors who purchase our capital stock and debt securities may experience a decrease, which could be substantial and rapid, in the market value of our capital stock and debt securities, including decreases unrelated to our operating performance or prospects. 19 Table of Contents Litigation risks could affect our business.
The credit agreement governing our revolving credit facility also governs our $250.0 million unsecured term loan facility due March 2024 and, on January 6, 2023 we entered into the Term Loan Agreement governing our term loan, pursuant to which we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings.
The credit agreement governing our revolving credit facility also governs our $250.0 million unsecured term loan facility due March 2024 and, on January 6, 2023, we entered into the term loan agreement (the “2023 term loan agreement”) governing our 2023 term loans, pursuant to which we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings.
Our business is subject to risks associated with the effects of climate change, and a resulting shift to a lower carbon economy, and may be subject to further risks in the future.
Our business is subject to risks associated with climate change and our sustainability strategies. Our business is subject to risks associated with the effects of climate change, and a resulting shift to a lower carbon economy, and may be subject to further risks in the future.
If that happens, our claim against the bankrupt client for unpaid future rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent we are owed under the leases (it is also possible that we may not receive any unpaid future rent under terminated leases) or we may elect not to pursue claims against a client for terminated leases.
If that happens, our claim against the bankrupt client for unpaid future 8 Table of Contents rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent we are owed under the leases (it is also possible that we may not receive any unpaid future rent under terminated leases) or we may elect not to pursue claims against a client for terminated leases.
We depend on the efforts of our executive officers and key employees The loss of the services of our executive officers and key employees could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal and interest on our debt securities and other indebtedness and to make distributions to our stockholders.
The loss of the services of our executive officers and key employees could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal and interest on our debt securities and other indebtedness and to make distributions to our stockholders.
In addition, these factors may make it more difficult for us to buy or sell properties, may adversely affect the price we purchase or receive for properties, as we and prospective buyers may experience increased costs of financing or difficulties in obtaining financing.
In addition, these factors may make it more difficult for us to buy or sell properties, may adversely affect the price we purchase or receive for properties, as we and prospective buyers may 21 Table of Contents experience increased costs of financing or difficulties in obtaining financing.
Our revolving credit facility, our term loan facilities, and our mortgage loan documents contain provisions that could limit or, in certain cases, prohibit the payment of dividends and other distributions to holders of our common stock and any outstanding preferred stock.
Our revolving credit facility, our term loan facilities, and our mortgage loan documents contain provisions that could limit or, in certain cases, prohibit the payment of dividends and other distributions to holders of our common stock 12 Table of Contents and any outstanding preferred stock.
We may engage in development, speculative development, or expansion projects or invest in new assets, which would subject us to additional risks that could negatively impact our operations. We may engage in development, speculative development, or other expansion projects, which could require us to raise additional capital and obtain additional state and local permits.
We may engage in development, speculative development, or expansion projects or invest in new asset classes, which would subject us to additional risks that could negatively impact our operations. We may engage in development, speculative development, or other expansion projects, which could require us to raise additional capital and obtain additional state and local permits.
Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of 25 Tabl e of Contents required debt amortization payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
From time to time, we are involved in legal proceedings, lawsuits, and other claims including those that may arise out of acquisitions, development opportunities and other strategic transactions. An unfavorable resolution of litigation may have a material adverse effect on our business, results of operations and financial condition.
From time to time, we are involved in legal proceedings, lawsuits, and other claims including those that may arise out of mergers and acquisitions, acquisitions, development opportunities, dispositions, joint ventures, and other strategic transactions. An unfavorable resolution of litigation may have a material adverse effect on our business, results of operations and financial condition.
We cannot provide any assurances that we will be successful in consummating future acquisitions on favorable terms or that we will realize expected cash lease yields, operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits.
We cannot provide any assurances that we will be successful in consummating future mergers and acquisitions or acquisitions on favorable terms or that we will realize expected cash yields, operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits.
Additionally, we have obtained blanket liability, flood and earthquake (subject to substantial deductibles) and property damage insurance policies to protect us and our properties against loss should the indemnities and insurance policies provided by the clients fail to restore the properties to their condition prior to a loss.
Additionally, we have obtained blanket liability, flood and earthquake (subject to substantial deductibles) and property damage insurance policies to protect us and our properties against loss should the indemnities and insurance policies provided by the 16 Table of Contents clients fail to restore the properties to their condition prior to a loss.
In addition, several of our properties were built during the period when asbestos was commonly used in building construction and we may acquire other buildings that contain asbestos in the future.
Some of our properties were built during the period when asbestos was commonly used in building construction and we may acquire other buildings that contain asbestos in the future.
If a property manager fails to meet its obligations or terminates its services, we may need to find a replacement but these services may be on less favorable terms and conditions or we may not be able to find a suitable replacement in a timely manner or at all.
If a property manager or third party fails to meet its obligations or terminates its services, we may need to find a replacement; however, these services may be on less favorable terms and conditions, or we may not be able to find a suitable replacement in a timely manner or at all.
If events like these were to occur, they could materially interrupt our business operations, cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in or prolong an economic recession in 33 Tabl e of Contents the U.S. or abroad.
If events like these were to occur, they could materially interrupt our business operations, cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in or prolong an economic recession in the U.S. or abroad.
This lack of control over our net-leased properties makes it difficult for us to collect property-level environmental metrics and to enforce sustainability initiatives, which may impact our ability to comply with certain regulatory disclosure requirements to which we are subject (such as the anticipated changes to the SEC’s climate-related disclosure rules) or comply effectively with established ESG frameworks and standards, such as the Global Real Estate Sustainability Benchmarks, the TCFD and the Sustainability Accounting Standards Board.
This lack of control over our net-leased properties makes it difficult for us to collect property-level environmental metrics and to enforce sustainability initiatives, which may impact our ability to comply with certain regulatory disclosure requirements to which we are subject (such as the anticipated changes to the SEC’s climate-related disclosure rules) or comply effectively with established Environmental, Social and Governance ("ESG") frameworks and standards, such as the Global Real Estate Sustainability Benchmarks, Task Force for Climate-Related Financial Disclosures (“TCFD”) and the Sustainability Accounting Standards Board.
The U.K. government plans to migrate away from the Retail Price Index (RPI), which has been widely used in lease adjustments, to alternatives such as the Consumer Price Index including owner occupiers' housing costs (CPIH), that may result in a lower measure of inflation and, in turn, have a negative impact on our lease revenue currently tied to RPI in the U.K.
The U.K. government plans to migrate away from the Retail Price Index ("RPI"), to alternatives such as the Consumer Price Index including owner occupiers' housing costs, that may result in a lower measure of inflation and, in turn, have a negative impact on our lease revenue currently tied to RPI in the U.K.
Inflation (including prolonged inflationary periods) may adversely affect our financial condition and results of operations. Increased inflation or anticipated inflationary periods could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations.
Inflation (including prolonged inflationary periods) may adversely affect our results of operations, financial condition and liquidity. Increased inflation or anticipated inflationary periods, such as the period in which we are currently in, could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations.
Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management. We depend on key personnel.
Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management. We depend on key personnel. We depend on the efforts of our executive officers and key employees.
We also engage external property managers who assist with managing our international properties.
We also engage external property managers and other third parties, who assist with managing our international properties.
Likewise, our Board of Directors is authorized to cause us to issue preferred stock of any class or series with dividend, voting and other rights as determined by our Board of Directors, which could dilute, or otherwise adversely affect, the interest of holders of our common stock.
Our Board of Directors is authorized to cause us to issue preferred stock of any class or series with dividend, voting and other rights as determined by our Board of Directors (such as the shares of preferred stock that were issued in connection with the closing of the Merger with Spirit) which could dilute, or otherwise adversely affect, the interest of holders of our common stock.
As a landlord of a gaming facility or future gaming facilities, we may be impacted by the risks associated with the gaming industry. The ownership, operation, and management of gaming facilities are subject to pervasive regulation.
We may face extensive regulations from gaming and other regulatory authorities regarding current and future gaming properties. As a landlord of a gaming facility or future gaming facilities, we may be impacted by the risks associated with the gaming industry. The ownership, operation, and management of gaming facilities are subject to pervasive regulation.
A number of our properties are leased to operators of convenience stores that sell petroleum-based fuels, to operators of oil change and tune-up facilities, and operators that use chemicals and other waste products.
There may be environmental conditions associated with our properties of which we are unaware. A number of our properties are leased to operators of convenience stores that sell petroleum-based fuels, to operators of oil change and tune-up facilities, and operators that use chemicals and other waste products.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. Distribution requirements imposed by law limit our flexibility.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other 10 Table of Contents entities more attractive relative to an investment in a REIT.
The expiration of these incentive programs or the inability of potential clients or users to be eligible for or to obtain governmental approval of the incentives, or the inability to remain compliant with such programs, may have an adverse effect on the value of our investment, cash flow and net income, and may result in impairment charges. 32 Tabl e of Contents We may not be able to realize the anticipated synergies and related benefits of the merger with VEREIT and the transactions contemplated by the Merger Agreement.
The expiration of these incentive programs or the inability of potential clients or users to be eligible for or to obtain governmental approval of the incentives, or the inability to remain compliant with such programs, may have an adverse effect on the value of our investment, cash flow and net income, and may result in impairment charges.
During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses).
During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation and other costs (including increases in employment and other fees and expenses). Government regulations may limit the indices we can utilize in lease adjustments thereby limiting our ability to increase rent.
Our future success will depend, in part, upon our ability to manage our acquisitions and expansion opportunities under prevailing market conditions. We are regularly engaged in the process of identifying, analyzing, underwriting, and negotiating possible acquisition transactions.
Our acquisition of additional properties may have a significant effect on our business, liquidity, financial position and/or results of operations. Our future success will depend, in part, upon our ability to manage our mergers and acquisitions, acquisitions, and expansion opportunities under prevailing market conditions. We are regularly engaged in the process of identifying, analyzing, underwriting, and negotiating possible acquisition transactions.
In addition, commercial paper borrowings are short-term obligations and the interest rate on newly issued commercial paper varies according to market conditions at the time of issuance.
In addition, commercial paper borrowings are short-term obligations and the interest rate on newly issued commercial paper varies according to market conditions at the time of issuance. Similarly, some of the indebtedness to which we have become subject to subsequent to the Merger may also bear interest at variable rates.
Given past disruptions in the financial markets and ongoing global financial uncertainties, including the impact of COVID-19, the United Kingdom’s withdrawal from the European Union (referred to as Brexit), and the ongoing Russia-Ukraine conflict, we also face the risk that one or more of the participants in our revolving credit facility may be unwilling or unable to lend us money.
We also face the risk that we may be unable to refinance or repay our debt as it comes due. Given past disruptions in the financial markets and ongoing global financial uncertainties, we also face the risk that one or more of the participants in our revolving credit facility may be unwilling or unable to lend us money.
No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to sell for liquidity reasons.
No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations.
We may be exposed to a variety of new risks by expanding into new property types and/or new jurisdictions outside the U.S. and from properties leased to our clients who engage in non-retail businesses.
We may be exposed to a variety of new risks by expanding into new property types (e.g., non-retail businesses), geographies, lease and acquisition structures, and clients who engage in non-retail businesses. These risks may be enhanced by our limited experience in managing new property types, geographies, lease and acquisition structures, clients. and the laws and/or culture of non-U.S. geographies.
However, it is possible that one or more of our clients could fail to have sufficient funds to cover any such indemnification or to meet applicable state financial assurance obligations or such environmental contamination may predate our client's lease term, and thus we may still be obligated to pay for any such environmental liabilities. 24 Tabl e of Contents If we fail to qualify as a REIT, it could adversely impact us, and the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.
However, it is possible that one or more of our clients could fail to have sufficient funds to cover any such indemnification or to meet applicable state financial assurance obligations or such environmental contamination may predate our client's lease term, and thus we may still be obligated to pay for any such environmental liabilities.
These risks may include limited experience in managing certain types of new properties, new types of real estate locations and lease structures, and the laws and culture of non-U.S. jurisdictions.
These risks may include limited experience in managing certain types of new properties, new types of real estate locations and lease structures, and the laws and culture of non-U.S. jurisdictions. As a property owner, we may be subject to unknown environmental liabilities. Investments in real property can create a potential for environmental liability.
Furthermore, we have made and may continue to make selected acquisitions of 22 Tabl e of Contents properties that fall outside our historical focus on freestanding, single-client, net-lease retail locations in the U.S.
We have made and may continue to make acquisitions of properties (including through the use of alternative acquisition structures such as joint ventures, partnerships, fund and other structures) that fall outside our historical focus on freestanding, single-client, net lease retail locations in the U.S.
All of these may have an adverse effect on our results of operations, financial condition and liquidity. To the extent periods of high inflation are prolonged, these results may be exacerbated. 35 Tabl e of Contents Item 1B: Unresolved Staff Comments There are no unresolved staff comments.
To the extent periods of high inflation are prolonged, these results may be exacerbated. Item 1B: Unresolved Staff Comments There are no unresolved staff comments.
While we have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to environmental contamination, if environmental contamination should exist on any of our properties, we could be subject to liability, including strict liability, by virtue of our ownership interest.
These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. 9 Table of Contents While we have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to environmental contamination, if environmental contamination should exist on any of our properties, we could be subject to liability, including strict liability, by virtue of our ownership interest.
As a result of the merger, all outstanding secured indebtedness and all outstanding liabilities and other indebtedness of VEREIT and its subsidiaries (including $4.65 billion of additional senior unsecured notes that were originally issued by VEREIT OP, substantially all of which were exchanged for senior unsecured notes issued by us) became indebtedness and liabilities of ours or our subsidiaries, as the case may be, which substantially increased the total secured indebtedness and the total liabilities and other indebtedness of us and our subsidiaries. 26 Tabl e of Contents To the extent that new indebtedness is added to our current debt levels, the related risks that we now face would increase.
In addition, as a result of the Merger, all outstanding secured indebtedness, liabilities, and other indebtedness of Spirit and its subsidiaries, including $2.75 billion of additional senior unsecured notes that were originally issued by Spirit Realty Capital, L.P., substantially all of which were exchanged for senior unsecured notes issued by us, became indebtedness and liabilities of ours or our subsidiaries, as the case may be, which substantially increased the total secured indebtedness and the total liabilities and other indebtedness of us and our subsidiaries.
In addition, in the ordinary course of our business, we collect, process, transmit and store sensitive data, within our own systems and utilizing those of third-party providers, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information.
In the ordinary course of our business, we collect, process, transmit and store sensitive data, within our own systems and utilize those of third-party providers, including intellectual property, our proprietary business information and that of our clients, suppliers and business partners, as well as personally identifiable information. 20 Table of Contents Our measures to prevent, detect and mitigate these threats may not be successful in preventing a security incident or data breach or limiting the effects of such a breach.
If 30 Tabl e of Contents we are not able to successfully manage the risks associated with such new assets, it could have an adverse effect on our business, results of operations and financial condition. An uninsured loss or a loss that exceeds the policy limits on our properties could subject us to lost capital or revenue on those properties.
If we are not able to successfully manage the risks associated with such new assets, it could have an adverse effect on our business, results of operations and financial condition. Property taxes may increase without notice.
Additionally, any such new development, speculative development, or expansion project may not operate at designed capacity or may cost more to operate than we expect. The inability to successfully complete development, speculative development, or expansion projects or to complete them on a timely basis could adversely affect our business and results of operations.
Additionally, any such new development, speculative development, or expansion project may not operate at designed capacity or may cost more to operate than we expect.
Our A3/A- credit ratings provide for a borrowing rate of 80 basis points over the applicable benchmark rate, which includes adjusted SOFR for US Dollar-denominated loans, adjusted SONIA for Sterling-denominated loans, and EURIBOR for Euro-denominated loans. In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps which fix our per annum interest rate at 5.0% over the initial term.
In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps which fix our per annum interest rate at 5.0% over the initial term.
We can face such liability regardless of our knowledge of the contamination; the timing of the contamination; the cause of the contamination; or the party responsible for the contamination of the property. There may be environmental conditions associated with our properties of which we are unaware.
An owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We can face such liability regardless of our knowledge of the contamination; the timing of the contamination; the cause of the contamination; or the party responsible for the contamination of the property.
Property taxes may increase without notice. The real property taxes on our properties and any other properties that we develop or acquire in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities.
Real estate property taxes on our properties (including properties we develop or acquire) may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. While the majority of our leases are under a net lease structure, some or all of such property taxes may not be collectible from our clients.
Although management believes it has been prudent and 34 Tabl e of Contents used reasonable judgment in making these estimates, it is possible that actual results may differ from these estimates. Inherent limitations of internal controls over financial statements, disclosure controls and safeguarding of assets may adversely impact our financial condition and results of operations.
Inherent limitations of internal controls over financial statements, disclosure controls and safeguarding of assets may adversely impact our financial condition and results of operations.
The merger involved the combination of two companies which operated as independent public companies. While we devoted significant management attention and resources to integrating the business practices and operations of VEREIT, it is possible that we may be unable to realize expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
The Merger involves the combination of two companies which operated as independent public companies. We will be required to devote significant management attention and resources to integrating the operations of Spirit.
The Term Loan Agreement also permits us to incur additional term loans, up to an aggregate of $1.5 billion in total borrowings. The Term Loans initially mature in January 2024 and include two 12-month maturity extensions that can be exercised at the company's option.
The 2023 term loan agreement also permits us to incur additional term loans, up to an aggregate of $1.5 billion in total borrowings, pursuant to an accordion expansion feature, which is subject to obtaining lender commitments and other customary conditions.
Often these estimates require the use of market data values that are currently difficult to assess, as well as estimates of future performance or receivables collectability that can also be difficult to accurately predict.
Often these estimates require the use of market data values and involve estimates of future performance or receivables collectability all of which can be difficult to accurately predict. Although management believes it has been prudent and used reasonable judgment in making these estimates, it is possible actual results may differ from these estimates.
Removed
The COVID-19 pandemic has disrupted our operations and the effects of the pandemic are expected to continue to have an adverse effect on our business, results of operations, financial condition and liquidity.
Added
If we fail to qualify as a REIT, it could adversely impact us, and the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.
Removed
The COVID-19 pandemic, including the continued spread of new variants and the measures taken to limit its spread, has had, and other pandemics in the future could have, adverse repercussions across global economies and financial markets, as well as on us and our clients.
Added
In addition, the tax treatment of certain of our sale-leaseback transactions could change, which could make such sale-leaseback transactions less attractive to potential sellers and lessees and negatively impact our operations. Distribution requirements imposed by law limit our flexibility.
Removed
Factors that have contributed or may contribute in the future to the adverse impact of the COVID-19 pandemic and the measures taken to limit its spread on the business, results of operations, financial condition and liquidity of us and our clients include, without limitation, the following: • Operational limitations or issues at properties operated by our clients resulting from government action (including travel bans, border closings, business closures, quarantine, vaccine and testing requirements, shelter-in-place or similar orders requiring that people remain in their homes); • Reduced economic activity, customer traffic, consumer confidence or discretionary spending, the deterioration in our or our clients’ ability to operate in affected areas, and any delays in the supply of products or services to our clients may impact certain of our clients’ businesses, results of operations, financial condition and liquidity and may cause certain of our clients to be unable to meet their obligations to us in full, or at all, and to seek, whether through negotiation, restructuring or bankruptcy, reductions or deferrals in their rent payments and other obligations to us or early termination of their leases; • Difficulties with supply chain disruptions and in leasing, selling or redeveloping properties or renewing expiring or terminated leases on terms we consider acceptable, or at all; • Difficulties accessing bank lending, capital markets and other financial markets on attractive terms, or at all, may adversely affect our cost of capital, our access to capital to grow our business (including through acquisitions, development opportunities and other strategic transactions) and to fund our business operations, our ability to pay dividends on our common stock, our ability to pay the principal of and interest on our indebtedness, and our other liabilities on a timely basis, and may adversely affect our clients’ ability to fund their business operations and meet their obligations to us and others; • Potential negative impacts on our credit ratings, the interest rates on our borrowings, and our future compliance with financial covenants under our credit facility and other debt instruments, which could result in a default and potentially an acceleration of indebtedness, any of which could negatively impact our ability to make additional borrowings under our revolving credit facility, sell commercial paper notes under our commercial paper programs, incur other indebtedness, pay dividends on our common stock and pay the principal of and interest on our indebtedness and our other obligations when due; • The impact of the COVID-19 pandemic on the market value of certain of our properties has led to impairment charges and may require that we incur further impairment charges, asset write-downs or similar charges; • The impact on the ability of our employees, including members of our management team or board of directors, to fulfill their duties to us; and • A general decline in business activity and demand for real estate transactions could adversely affect our ability to grow our portfolio of properties.
Added
The term loans pursuant to our 2023 term loan agreement mature in January 2025 with one remaining 12-month maturity extension available at our option.
Removed
Most of our clients operate retail businesses, many of which have been disproportionately impacted by certain of the issues described above, and may continue to be disproportionately impacted in the future.
Added
At December 31, 2023, we also had a total of $18.6 billion of outstanding unsecured senior debt securities (excluding unamortized net original issuance premiums, deferred financing costs and basis adjustments on interest rate swaps designated as fair value hedges), including approximately $4.2 billion denominated in Sterling (of which $1.2 billion is related to our privately placed Sterling notes), $1.2 billion denominated in Euro thereunder, and approximately $822.4 million of outstanding mortgage debt (excluding unamortized net discounts and deferred financing costs). 11 Table of Contents In connection with the consummation of the closing of the Merger on January 23, 2024, we effectively assumed Spirit’s existing term loans with various lenders.
Removed
The extent to which the COVID-19 pandemic continues to impact our operations and those of our clients will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or limit its impact, and the direct and indirect economic effects of the pandemic and containment measures.
Added
Specifically, on January 22, 2024, we entered into an amended and restated term loan agreement, pursuant to which we borrowed $800 million in aggregate total borrowings, $300 million of which matures on August 22, 2025 and $500 million of which matures on August 20, 2027 (the “$800 million term loan agreement”), and an amended and restated term loan agreement pursuant to which we borrowed $500 million in aggregate total borrowings which matures on June 16, 2025.
Removed
Likewise, the deterioration of global economic conditions as a result of the pandemic may ultimately lead to a further decrease in occupancy levels and rental rates across our portfolio as our clients (including those in the theater 23 Tabl e of Contents industry) reduce or defer their spending, institute restructuring plans or file for bankruptcy.
Added
The $800 million term loan agreement and the $500 million term loan agreement became effective upon the closing of the Merger on January 23, 2024.
Removed
Some of our clients have experienced temporary closures of some or all of their properties or have substantially altered or reduced their operations in response to the COVID-19 pandemic, and additional clients may do so in the future.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−5 removed0 unchanged
Biggest changeDuring the three months ended December 31, 2022, the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plans of Realty Income Corporation: Period Total Number of Shares Purchased (1) Average Price Paid per Share October 1, 2022 — October 31, 2022 9,514 $ 55.58 November 1, 2022 — November 31, 2022 1,464 $ 64.52 December 1, 2022 — December 31, 2022 1,547 $ 63.39 Total 12,525 $ 57.59 (1) All 12,525 shares of common stock purchased during the three months ended December 31, 2022 were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the 2021 Incentive Award Plan of Realty Income Corporation.
Biggest changeThis figure does not reflect the beneficial ownership of shares of our common stock. 23 Table of Contents Repurchases of Equity Securities During the three months ended December 31, 2023, the following shares of stock were withheld for state and federal payroll taxes on the vesting of employee stock awards, as permitted under the Realty Income 2021 Incentive Award Plan, (the "2021 Plan"): Period Total Number of Shares Purchased Average Price Paid per Share October 1, 2023 — October 31, 2023 2,242 $ 49.06 November 1, 2023 — November 30, 2023 1,283 $ 51.92 December 1, 2023 — December 31, 2023 11,735 $ 57.22 Total 15,260 $ 55.58 Item 6: Reserved 24 Table of Contents
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities A.
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the NYSE under the ticker symbol “O.” Holders There were approximately 13,800 registered holders of record of our common stock as of January 31, 2024.
Removed
Our common stock is traded on the NYSE under the ticker symbol “O.” The following table shows the high and low sales prices per share for our common stock as reported by the NYSE, and distributions declared per share of common stock for the periods indicated.
Removed
Price Per Share of Common Stock High Low Distributions Declared (1) 2022 First Quarter $ 72.55 $ 63.90 $ 0.7400 Second Quarter 75.40 62.29 0.7415 Third Quarter 75.11 57.61 0.7430 Fourth Quarter 66.44 55.50 0.7445 Total $ 2.9690 2021 First Quarter $ 64.60 $ 57.00 $ 0.7040 Second Quarter 71.84 63.64 0.7055 Third Quarter 72.75 64.86 0.7070 Fourth Quarter 74.60 64.98 0.7285 Total $ 2.8450 (1) Common stock cash distributions are declared monthly by us based on financial results for the prior months.
Removed
At December 31, 2022, a distribution of $0.2485 per common share had been declared and was paid in January 2023. B. There were approximately 12,300 registered holders of record of our common stock as of December 31, 2022.
Removed
We estimate that our total number of stockholders is approximately 1.5 million when we include both registered and beneficial holders of our common stock. 36 Tabl e of Contents C.
Removed
The withholding of common stock by us could be deemed a purchase of such common stock. Item 6: Reserved

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

86 edited+59 added−86 removed37 unchanged
Biggest changeAs discussed in the sections entitled “Funds from Operations Available to Common Stockholders (FFO) and Normalized Funds from Operations Available to Common Stockholders (Normalized 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, Normalized FFO, and AFFO. 47 Tabl e of Contents Interest Expense The following is a summary of the components of our interest expense (dollars in thousands): Years ended December 31, 2022 2021 2020 Interest on our credit facility, commercial paper, $250.0 million term loan, notes, mortgages and interest rate swaps $ 523,384 $ 320,370 $ 293,879 Credit facility commitment fees 4,908 3,801 3,812 Amortization of debt origination and deferred financing costs 14,149 11,695 10,694 Loss on interest rate swaps 718 2,905 4,132 Amortization of net mortgage premiums (13,622) (3,498) (1,258) Amortization of net note premiums (62,989) (10,349) (1,754) Interest capitalized (2,789) (1,926) (480) Capital lease obligation 1,464 646 311 Interest expense $ 465,223 $ 323,644 $ 309,336 Credit facility, commercial paper, $250.0 million term loan, mortgages and notes Average outstanding balances (dollars in thousands) $ 16,460,928 $ 10,024,343 $ 8,240,829 Average interest rates 3.15 % 3.11 % 3.48 % The increase in interest expense for the year ended December 31, 2022 is primarily due to the following: (i) the October 2022 issuance of $750.0 million in principal of notes, (ii) the June 2022 issuance of £600 million in principal of Sterling-denominated notes, (iii) the January 2022 issuance of £500 million in principal of Sterling-denominated notes, (iv) the issuance of $4.65 billion in principal of notes associated with the exchange offer and assumption of $839.1 million in principal of mortgage debt, both associated with our merger with VEREIT in November 2021, and (v) the July 2021 issuance of £750 million in principal of Sterling-denominated notes, as well as higher average balances and interest rates on the credit facility and commercial paper borrowings, partially offset by the December 2021 early redemption on all $750.0 million in principal of the 4.650% notes due August 2023, and the January 2021 early redemption on all $950.0 million in principal of the 3.250% notes due October 2022.
Biggest changeInterest Expense The following is a summary of the components of our interest expense (in thousands): Years ended December 31, 2023 2022 Interest on our credit facility, commercial paper, term loans, mortgages, senior unsecured notes and bonds, and interest rate swaps $ 788,344 $ 523,384 Credit facility commitment fees 5,357 4,908 Amortization of debt origination and deferred financing costs 26,670 14,149 (Gain) loss on interest rate swaps (7,189) 718 Amortization of net mortgage premiums (12,803) (13,622) Amortization of net note premiums (60,657) (62,989) Capital lease obligation 1,509 1,464 Interest capitalized (10,808) (2,789) Interest expense $ 730,423 $ 465,223 Credit facility, commercial paper, term loans, mortgages and senior unsecured notes and bonds Average outstanding balances $ 20,537,222 $ 16,460,928 Weighted average interest rates 3.83 % 3.15 % 34 Table of Contents The increase in interest expense for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher average debt and weighted average interest.
In addition, our new credit facility provides that the interest rates can range between: (i) SOFR/SONIA/EURIBOR, plus 1.40% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) SOFR/SONIA/EURIBOR, plus 0.70% if our credit rating is A/A2 or higher.
In addition, our credit facility provides that the interest rates can range between: (i) SOFR/SONIA/EURIBOR, plus 1.40% if our credit rating is lower than BBB-/Baa3 or our senior unsecured debt is unrated and (ii) SOFR/SONIA/EURIBOR, plus 0.70% if our credit rating is A/A2 or higher.
Our Adjusted EBITDA re may not be comparable to Adjusted EBITDA re reported by other companies or as defined by Nareit, and other companies may interpret or define Adjusted EBITDA re differently than we do.
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 EBITDA re differently than we do.
As of December 31, 2022, 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.
As of December 31, 2023, 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.
We define Annualized Pro Forma Adjusted EBITDA re as Annualized Adjusted EBITDA re , subject to certain adjustments to incorporate Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDA re from properties we disposed of during the applicable quarter, and includes transaction accounting adjustments in accordance with U.S.
We define Annualized Pro Forma Adjusted EBITDA re as Annualized Adjusted EBITDA re , subject to certain adjustments to incorporate Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and to remove Adjusted EBITDA re from properties we disposed of during the applicable quarter, and include transaction accounting adjustments in accordance with U.S.
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 .
In addition, our credit facility provides for a facility commitment fee based on our credit ratings, which ranges 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.
In addition, we were assigned the following ratings on our commercial paper at December 31, 2022: Moody's Investors Service has assigned a rating of P-2 and Standard & Poor's Ratings Group has assigned a rating of A-2.
In addition, we were assigned the following ratings on our commercial paper at December 31, 2023: Moody's Investors Service has assigned a rating of P-2 and Standard & Poor's Ratings Group has assigned a rating of A-2.
No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included. (4) Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps, over the term of the $750.0 million of 5.625% senior unsecured notes due October 13, 2032.
No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included. (3) Represents the straight-line amortization of $72.0 million gain realized upon the termination of $500.0 million in notional interest rate swaps in October 2022, over the term of the $750.0 million of 5.625% senior unsecured notes due October 2032.
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. 55 Tabl e of Contents ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS We define AFFO, a non-GAAP measure, as FFO adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance.
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. 41 Table of Contents ADJUSTED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("AFFO") We define AFFO, a non-GAAP measure, as FFO adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance.
Management also uses our ratios of net debt-to-Annualized Adjusted EBITDA re and net debt-to Annualized Pro Forma Adjusted EBITDA re as measures of leverage in assessing our financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDA re and annualized Pro Forma Adjusted EBITDA re , respectively. 52 Tabl e of Contents The following is a reconciliation of net income (which we believe is the most comparable U.S.
Management also uses our ratios of net debt-to-Annualized Adjusted EBITDA re and net debt-to Annualized Pro Forma Adjusted EBITDA re as measures of leverage in assessing our financial performance, which is calculated as net debt (which we define as total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share of debt from unconsolidated entities, less cash and cash equivalents), divided by annualized quarterly Adjusted EBITDA re and annualized Pro Forma Adjusted EBITDA re , respectively. 38 Table of Contents The following is a reconciliation of net income (which we believe is the most comparable U.S.
Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, SEC filing fees and additional incremental and non-recurring costs necessary to convert data and systems, retain employees and otherwise enable us to operate the acquired business or assets efficiently.
Merger and Integration-Related Costs Merger and integration-related costs consist of advisory fees, attorney fees, accountant fees, and incremental and non-recurring costs necessary to convert data and systems, retain employees, and otherwise enable us to operate the acquired business or assets efficiently.
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 January 1, 2022, nor does it purport to reflect our debt service coverage ratio for any 41 Tabl e of Contents future period.
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 January 1, 2023, nor does it purport to reflect our debt service coverage ratio for any future period.
As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from accumulated other comprehensive income ("AOCI"), to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022.
As the hedge relationship was terminated and the future principal and interest associated with the prepaid intercompany loan will not occur, $20.0 million gain was reclassified from AOCI to 'Foreign currency and derivative (loss) gain, net' during the year ended December 31, 2022.
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 and other costs (including increases in employment and other fees and expenses).
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 and other costs.
Even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our clients' ability to pay rent.
Even though the utilization of net leases reduces our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue, which may adversely affect our clients' ability to pay rent.
(3) Includes the amortization of premiums and discounts on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt.
(2) Includes the amortization of net premiums on notes payable and assumption of our mortgages payable, which are being amortized over the life of the applicable debt, and costs incurred and capitalized upon issuance and exchange of our notes payable, assumption of our mortgages payable and issuance of our term loans, which are also being amortized over the lives of the applicable debt.
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 clients for recoverable real estate taxes and operating expenses totaling $184.7 million, $104.9 million and $79.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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 clients for recoverable real estate taxes and operating expenses totaling $274.2 million, $184.7 million and $104.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.
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.
Provisions for Impairment - Real Estate Assets 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.
(5) Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination settlements.
(4) Primarily consists of reimbursements for tenant improvements and rental revenue that is not contractual base rent such as lease termination.
Based on our credit agency ratings as of December 31, 2022, interest rates under our new credit facility for U.S. borrowings would have been at the SOFR, plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.95% over SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in pricing of 0.8826% over SONIA, and for Euro Borrowings at one-month Euro Interbank Offered Rate (“EURIBOR”), plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in pricing of 0.85% over one-month EURIBOR.
Based on our credit agency ratings as of December 31, 2023, interest rates under our credit facility for U.S. borrowings would have been at the SOFR, plus 0.725% with a SOFR adjustment charge of 0.10% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.95% over SOFR, for British Pound Sterling borrowings, at the SONIA, plus 0.725% with a SONIA adjustment charge of 0.0326% and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.8826% over SONIA, and for Euro Borrowings at one-month EURIBOR, plus 0.725%, and a revolving credit facility fee of 0.125%, for all-in drawn pricing of 0.85% over one-month EURIBOR.
The actual amounts as of December 31, 2022, are: Note Covenants Required Actual Limitation on incurrence of total debt 60% of adjusted assets 40.3 % Limitation on incurrence of secured debt 40% of adjusted assets 2.0 % Debt service coverage (trailing 12 months) (1) > 1.5x 5.2x Maintenance of total unencumbered assets > 150% of unsecured debt 255.4 % (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 January 1, 2022 and subject to certain additional adjustments.
The actual amounts as of December 31, 2023, are: Note Covenants Required Actual Limitation on incurrence of total debt 60% of adjusted assets 39.7 % Limitation on incurrence of secured debt 40% of adjusted assets 1.6 % Debt service coverage (trailing 12 months) (1) > 1.5x 4.7x Maintenance of total unencumbered assets > 150% of unsecured debt 257.9 % (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 January 1, 2023 and subject to certain additional adjustments.
We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if 38 Tabl e of Contents these securities are offered.
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.
Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate 37 Tabl e of Contents acquisitions, property development, and capital expenditures, by issuing common stock, preferred stock, long-term unsecured notes and term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital structure.
Historically, we have met our principal short-term and long-term capital needs, including the funding of high-quality real estate acquisitions, investments in loans, property development, and capital expenditures by issuing common stock, preferred stock, long-term unsecured notes, and term loan borrowings. Over the long term, we believe that common stock should be the majority of our capital structure.
(6) We currently pay the ground lessors directly for the rent under the ground leases. (7) Our clients, who are generally sub-clients under ground leases, are responsible for paying the rent under these ground leases. In the event our client fails to pay the ground lease rent, we are primarily responsible.
(6) Our clients, who are generally sub-tenants clients under ground leases, are responsible for paying the rent under these ground leases. In the event our client fails to pay the ground lease rent, we are primarily responsible.
We define Adjusted EBITDA re , 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) gain (loss) on extinguishment of debt, (iv) real estate depreciation and amortization, (v) provisions for impairment, (vi) merger and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gain, net (as described in the Adjusted Funds from Operations section), (ix) gain on settlement of foreign currency forwards, and (x) equity in income of investment in unconsolidated entities.
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) gain on extinguishment of debt, (iv) real estate depreciation and amortization, (v) provisions for impairment, (vi) merger and integration-related costs, (vii) gain on sales of real estate, (viii) foreign currency and derivative gain and loss, net, (ix) gain on settlement of foreign currency forwards, and (x) our proportionate share of adjustments from unconsolidated entities.
Rent based on a percentage of our client's gross sales, or percentage rent, was $14.9 million, $6.5 million and $5.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Percentage rent represents less than 1% of rental revenue.
Rent based on a percentage of our client's gross sales, or percentage rent, was $14.8 million and $14.9 million for the years ended December 31, 2023 and 2022, respectively, which represents less than 1% of rental revenue.
Equity Capital Raising Under our ATM program, up to 120,000,000 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, at prices related to prevailing market prices or at negotiated prices or by any other methods permitted by applicable law.
Equity Capital Raising We have an At-The-Market ("ATM") program, pursuant to which we may offer and sell up to 120.0 million shares of common stock (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 or by any other methods permitted by applicable law.
Moreover, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses.
Moreover, our strategic focus on the use of net lease agreements reduces our exposure to rising property expenses due to inflation because the client is responsible for property expenses.
Presentation of the information regarding FFO, Normalized 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, Normalized FFO, and AFFO in the same way, so comparisons with other REITs may not be meaningful.
GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders. 43 Table of Contents Presentation of the information regarding FFO, Normalized 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, Normalized FFO, and AFFO in the same way, so comparisons with other REITs may not be meaningful.
Other Revenue Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms.
Other Revenue Other revenue primarily relates to interest income recognized on financing receivables for certain leases with above-market terms and interest income recognized on client loans and preferred equity investments.
Net foreign currency gain and loss are primarily related to the remeasurement of intercompany debt from foreign subsidiaries. Gain and loss on foreign currency are largely offset by derivative gain and loss. Derivative gain and loss relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting.
Net foreign currency gain and loss are primarily related to the remeasurement of intercompany debt from foreign subsidiaries. Derivative gain and loss primarily relates to mark-to-market adjustments on derivatives that do not qualify for hedge accounting and settlement of designated derivatives reclassified from Accumulated Other Comprehensive Income ("AOCI").
The following table summarizes our Annualized Pro Forma Adjusted EBITDA re calculation for the periods indicated below: Three months ended December 31, Dollars in thousands 2022 2021 2020 Annualized pro forma adjustments from properties acquired or stabilized $ 120,408 $ 400,575 $ 27,431 Annualized pro forma adjustments from properties disposed (532) (42,015) (1,521) Annualized Pro forma Adjustments $ 119,876 $ 358,560 $ 25,910 53 Tabl e of Contents FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS 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 gain on property sales.
The following table summarizes our Annualized Pro Forma Adjusted EBITDAre calculation for the period indicated below (dollars in thousands): Three months ended December 31, 2023 2022 Annualized pro forma adjustments from properties acquired or stabilized $ 77,012 $ 120,408 Annualized pro forma adjustments from properties disposed (2,093) (532) Annualized Pro forma Adjustments $ 74,919 $ 119,876 39 Table of Contents FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("FFO") AND NORMALIZED FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS ("Normalized FFO") 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 gain on property sales.
Interest on our remaining senior unsecured note and bond obligations 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.
Covenants 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 accounting principles generally accepted in U.S.
Of the 12,797 in-place leases in the portfolio, which excludes 181 vacant units, 10,835, or 84.7%, were under leases that provide for increases in rents through: • Base rent increases tied to inflation (typically subject to ceilings); • Percentage rent based on a percentage of the clients’ gross sales; • Fixed increases; or • A combination of two or more of the above rent provisions.
Of the 14,262 in-place leases in the portfolio, which excludes 270 vacant units, 11,717, or 82.2%, were under leases that provide for increases in rents through: base rent increases tied to inflation (typically subject to ceilings), percentage rent based on a percentage of the clients’ gross sales, fixed increases, or a combination of two or more of the aforementioned rent provisions.
As described above, the Annualized Pro Forma Adjustments, which includes transaction accounting adjustments in accordance with GAAP, consists of adjustments to incorporate the Adjusted EBITDA re from properties we acquired or stabilized during the applicable quarter and removes Adjusted EBITDA re from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the period, consistent with the requirements of Article 11 of Regulation S-X.
GAAP, consist of adjustments to incorporate the Adjusted EBITDAre from properties we acquired or stabilized during the applicable quarter and remove Adjusted EBITDAre from properties we disposed of during the applicable quarter, giving pro forma effect to all transactions as if they occurred at the beginning of the period, consistent with the requirements of Article 11 of Regulation S-X.
The following summarizes our AFFO (dollars in millions, except per share data): Years ended December 31, % Increase 2022 2021 2020 2022 versus 2021 2021 versus 2020 AFFO available to common stockholders $ 2,401.4 $ 1,488.8 $ 1,172.6 61.3 % 27.0 % AFFO per share (1) $ 3.92 $ 3.59 $ 3.39 9.2 % 5.9 % (1) All per share amounts are presented on a diluted per common share basis.
The following summarizes our AFFO (dollars in millions, except per share data): Years ended December 31, 2023 2022 % Change AFFO available to common stockholders $ 2,774.9 $ 2,401.4 15.6 % AFFO per common share (1) $ 4.00 $ 3.92 2.0 % (1) All per share amounts are presented on a diluted per common share basis.
(5) Relates to the aggregate of (i) rental revenue from properties (292 properties comprising 6,552,442 square feet) that were available for lease during part of 2022 or 2021, and (ii) rental revenue for properties (16 properties comprising 705,541 square feet) under development or completed developments that do not meet our same store pool definition for the periods presented.
(3) Relates to the aggregate of (i) rental revenue from 325 properties that were available for lease during part of 2023 or 2022, and (ii) rental revenue for 27 properties under development or completed developments that do not meet our same store pool definition for the periods presented.
At December 31, 2022, our portfolio of 12,237 properties was 99.0% leased with 126 properties available for lease, as compared to 98.5% leased with 164 properties available for lease at December 31, 2021.
At December 31, 2023, our portfolio of 13,458 properties was 98.6% leased with 193 properties available for lease, as compared to 99.0% leased with 126 properties available for lease at December 31, 2022.
As of December 31, 2022, there were 6,744,884 shares of common stock subject to forward sale agreements through our ATM program, with a weighted average initial price of $63.31 per share, representing approximately $0.4 billion in estimated net proceeds (assuming full physical settlement of all outstanding shares of common stock subject to such forward sale agreements and certain assumptions made with respect to settlement dates), which have been executed but not settled.
ATM Program As of December 31, 2023, there were approximately 6.2 million shares of unsettled common stock subject to forward sale confirmations through our ATM program, representing approximately $337.8 million in expected net proceeds, which have been executed at a weighted average price of $54.70 per share (assuming full physical settlement of all outstanding shares of common stock, subject to such forward sale agreements and certain assumptions made with respect to settlement dates).
(4) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2022, of 1.20 British Pound Sterling ("GBP")/USD. None of the properties in Spain or Italy met our same store pool definition for the periods presented.
(2) For purposes of comparability, same store rental revenue is presented on a constant currency basis using the exchange rate as of December 31, 2023. None of the properties in France, Germany, Ireland, Italy, or Portugal met our same store pool definition for the periods presented.
As of December 31, 2022, there are approximately $2.0 billion of obligations becoming due during 2023, which we expect to fund through a combination of the following: • Cash and cash equivalents; • Future cash flows from operations; • Issuances of common stock or debt; and • Additional borrowings under our revolving credit facility (after deducting outstanding borrowings under our commercial paper programs).
We expect to fund the next twelve months of obligations through a combination of the following: • Cash and cash equivalents; • Future cash flows from operations; • Issuances of common stock or debt; and • Additional borrowings under our revolving credit facility and our term loan (after deducting outstanding borrowings under our commercial paper programs).
It has been our experience that approximately 1% to 4% of our property portfolio will be available for lease 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 COVID-19 pandemic.
It has been our experience that approximately 1% to 4% of our property portfolio will be available for lease 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. 33 Table of Contents Rental Revenue (reimbursable) A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses.
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.
The increase in property expenses (reimbursable) for the year ended December 31, 2023 is proportional to overall portfolio growth. 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.
If the property was owned by VEREIT for the full comparative period and each of the other criteria were met, the property was included in our same store property pool. 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.
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.
(2) Net Debt is total debt per our consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share on debt from unconsolidated entities, less cash and cash equivalents.
(2) Net Debt is total debt per our consolidated balance sheets, excluding deferred financing costs and net premiums and discounts, but including our proportionate share of debt from unconsolidated entities, less cash and cash equivalents. As described above, the Annualized Pro Forma Adjustments, which include transaction accounting adjustments in accordance with U.S.
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.
In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S. GAAP, many subjective judgments must be made with regard to critical accounting policies. Allocation of the Purchase Price of Real Estate Acquisitions Management must make significant assumptions in determining the fair value of assets acquired and liabilities assumed.
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. Our AFFO calculations may not be comparable to AFFO, CAD or FAD reported by other companies, and other companies may interpret or define such terms differently than we do.
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.
Term Loans On January 6, 2023 we entered into the Term Loan Agreement governing our term loan, pursuant to which we borrowed an aggregate of approximately $1.0 billion in multicurrency borrowings, including $90.0 million, £705.0 million and €85.0 million in outstanding borrowings.
Term Loans In January 2023, we entered into a term loan agreement, permitting us to incur multicurrency term loans, up to an aggregate of $1.5 billion in total borrowings. As of December 31, 2023, we had $1.1 billion in multicurrency borrowings, including $90.0 million, £705.0 million, and €85.0 million in outstanding borrowings.
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 programs.
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.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations GENERAL Realty Income, The Monthly Dividend Company ® , is an S&P 500 company and member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for over 25 consecutive years.
GENERAL Realty Income, The Monthly Dividend Company ® , is an S&P 500 company and member of the S&P 500 Dividend Aristocrats ® index for having increased its dividend every year for over 25 consecutive years. We invest in people and places to deliver dependable monthly dividends that increase over time.
This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in note 2, Summary of Significant Accounting Policies and Procedures and New Accounting Standards , to our consolidated financial statements in this Annual Report on Form 10-K for the year ended December 31, 2022. 43 Tabl e of Contents In order to prepare our consolidated financial statements according to the rules and guidelines set forth by U.S.
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 1, Summary of Significant Accounting Policies , to our consolidated financial statements in this annual report on Form 10-K for the year ended December 31, 2023.
Expenses related to properties available for lease 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.
See notes to the accompanying consolidated financial statements for additional information regarding our indebtedness. Property Expenses (excluding reimbursable) Property expenses (excluding reimbursable) consist of costs associated with properties available for lease, non-net-leased properties and general portfolio expenses and include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections and legal fees.
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): 54 Tabl e of Contents Years ended December 31, 2022 2021 2020 Net income available to common stockholders $ 869,408 $ 359,456 $ 395,486 Depreciation and amortization 1,670,389 897,835 677,038 Depreciation of furniture, fixtures and equipment (2,014) (1,026) (588) Provisions for impairment 25,860 38,967 147,232 Gain on sales of real estate (102,957) (55,798) (76,232) Proportionate share of adjustments for unconsolidated entities (1) 12,812 1,931 — FFO adjustments allocable to noncontrolling interests (1,605) (785) (817) FFO available to common stockholders $ 2,471,893 $ 1,240,580 $ 1,142,119 FFO allocable to dilutive noncontrolling interests 3,979 — 1,418 Diluted FFO $ 2,475,872 $ 1,240,580 $ 1,143,537 FFO available to common stockholders $ 2,471,893 $ 1,240,580 $ 1,142,119 Merger and integration-related costs 13,897 167,413 — Normalized FFO available to common stockholders $ 2,485,790 $ 1,407,993 $ 1,142,119 Normalized FFO allocable to dilutive noncontrolling interests 3,979 1,642 1,418 Diluted Normalized FFO $ 2,489,769 $ 1,409,635 $ 1,143,537 FFO per common share, basic and diluted $ 4.04 $ 2.99 $ 3.31 Normalized FFO per common share: Basic $ 4.06 $ 3.40 $ 3.31 Diluted $ 4.06 $ 3.39 $ 3.31 Distributions paid to common stockholders $ 1,813,432 $ 1,169,026 $ 964,167 FFO available to common stockholders in excess of distributions paid to common stockholders $ 658,461 $ 71,554 $ 177,952 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 672,358 $ 238,967 $ 177,952 Weighted average number of common shares used for FFO: Basic 611,765,815 414,535,283 345,280,126 Diluted 613,472,663 414,769,846 345,878,377 Weighted average number of common shares used for Normalized FFO: Basic 611,765,815 414,535,283 345,280,126 Diluted 613,472,663 415,270,063 345,878,377 (1) Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022.
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): Years ended December 31, 2023 2022 Net income available to common stockholders $ 872,309 $ 869,408 Depreciation and amortization 1,895,177 1,670,389 Depreciation of furniture, fixtures and equipment (2,239) (2,014) Provisions for impairment of real estate 82,208 25,860 Gain on sales of real estate (25,667) (102,957) Proportionate share of adjustments for unconsolidated entities (1) 4,205 12,812 FFO adjustments allocable to noncontrolling interests (3,855) (1,605) FFO available to common stockholders $ 2,822,138 $ 2,471,893 FFO allocable to dilutive noncontrolling interests 5,552 3,979 Diluted FFO $ 2,827,690 $ 2,475,872 FFO available to common stockholders $ 2,822,138 $ 2,471,893 Merger and integration-related costs 14,464 13,897 Normalized FFO available to common stockholders $ 2,836,602 $ 2,485,790 Normalized FFO allocable to dilutive noncontrolling interests 5,552 3,979 Diluted Normalized FFO $ 2,842,154 $ 2,489,769 FFO per common share: Basic $ 4.08 $ 4.04 Diluted $ 4.07 $ 4.04 Normalized FFO per common share: Basic $ 4.10 $ 4.06 Diluted $ 4.09 $ 4.06 Distributions paid to common stockholders $ 2,111,793 $ 1,813,432 FFO available to common stockholders in excess of distributions paid to common stockholders $ 710,345 $ 658,461 Normalized FFO available to common stockholders in excess of distributions paid to common stockholders $ 724,809 $ 672,358 Weighted average number of common shares used for FFO and Normalized FFO: Basic 692,298 611,766 Diluted 694,819 613,473 (1) Includes an other than temporary impairment of $8.5 million recognized during the year ended December 31, 2022 on our investment in unconsolidated entities, all of which were sold as of December 31, 2022.
GAAP measure) to Adjusted EBITDA re and Annualized Pro Forma EBITDA re calculations for the periods indicated below (dollars in thousands): Three months ended December 31, 2022 2021 2020 Net income $ 228,336 $ 4,467 $ 118,150 Interest 131,290 100,739 78,764 Loss on extinguishment of debt — 46,722 — Income taxes 9,381 10,128 4,500 Depreciation and amortization 438,174 333,229 175,041 Provisions for impairment 9,481 7,990 23,790 Merger and integration-related costs 903 137,332 — Gain on sales of real estate (9,346) (20,402) (22,667) Foreign currency and derivative gains, net (2,692) (1,880) (3,311) Gain on settlement of foreign currency forwards 2,139 — — Proportionate share of adjustments for unconsolidated entities 113 1,581 — Quarterly Adjusted EBITDA re $ 807,779 $ 619,906 $ 374,267 Annualized Adjusted EBITDA re (1) $ 3,231,116 $ 2,479,624 $ 1,497,068 Annualized Pro Forma Adjustments $ 119,876 $ 358,560 $ 25,910 Annualized Pro Forma Adjusted EBITDA re $ 3,350,992 $ 2,838,184 $ 1,522,978 Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 17,935,539 $ 15,172,849 $ 8,852,036 Proportionate share for unconsolidated entities debt, excluding deferred financing costs — 86,006 — Less: Cash and cash equivalents (171,102) (258,579) (824,476) Net Debt (2) $ 17,764,437 $ 15,000,276 $ 8,027,560 Net Debt/Annualized Adjusted EBITDAre 5.5 x 6.0 x 5.4 x Net Debt/Annualized Pro Forma Adjusted EBITDA re 5.3 x 5.3 x 5.3 x (1) We calculate Annualized Adjusted EBITDA re by multiplying the Quarterly Adjusted EBITDA re by four.
GAAP measure) to Adjusted EBITDA re and Annualized Pro Forma EBITDA re calculations for the periods indicated below (dollars in thousands): Three months ended December 31, 2023 2022 Net income $ 219,762 $ 228,336 Interest 208,313 131,290 Loss on extinguishment of debt — — Income taxes 15,803 9,381 Depreciation and amortization 475,856 438,174 Provisions for impairment 27,281 9,481 Merger and integration-related costs 9,932 903 Gain on sales of real estate (5,992) (9,346) Foreign currency and derivative loss (gain), net 18,371 (2,692) Gain on settlement of foreign currency forwards — 2,139 Proportionate share of adjustments from unconsolidated entities 14,983 113 Quarterly Adjusted EBITDA re $ 984,309 $ 807,779 Annualized Adjusted EBITDA re (1) $ 3,937,236 $ 3,231,116 Annualized Pro Forma Adjustments $ 74,919 $ 119,876 Annualized Pro Forma Adjusted EBITDA re $ 4,012,155 $ 3,350,992 Total debt per the consolidated balance sheets, excluding deferred financing costs and net premiums and discounts $ 21,480,869 $ 17,935,539 Proportionate share of unconsolidated entities debt, excluding deferred financing costs 659,190 — Less: Cash and cash equivalents (232,923) (171,102) Net Debt (2) $ 21,907,136 $ 17,764,437 Net Debt/Annualized Adjusted EBITDA re 5.6 x 5.5 x Net Debt/Annualized Pro Forma Adjusted EBITDA re 5.5 x 5.3 x (1) We calculate Annualized Adjusted EBITDA re by multiplying the Quarterly Adjusted EBITDA re by four.
Universal Shelf Registration In June 2021, we filed a shelf registration statement with the SEC, which is effective for a term of three years and will expire in June 2024.
Our total debt to market capitalization was 33.8% at December 31, 2023. Universal Shelf Registration On February 16, 2024, we filed a new shelf registration statement with the SEC, which is effective for a term of three years and will expire in February 2027.
The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. GAAP measure) to Normalized FFO and AFFO.
Our AFFO calculations may not be comparable to AFFO, CAD or FAD reported by other companies, and other companies may interpret or define such terms differently than we do. 42 Table of Contents The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S. GAAP measure) to Normalized FFO and AFFO.
The following summarizes our FFO and Normalized FFO (dollars in millions, except per share data): Years ended December 31, % Increase/(Decrease) 2022 2021 2020 2022 versus 2021 2021 versus 2020 FFO available to common stockholders $ 2,471.9 $ 1,240.6 $ 1,142.1 99.3 % 8.6 % FFO per share (1) $ 4.04 $ 2.99 $ 3.31 35.1 % (9.7) % Normalized FFO available to common stockholders $ 2,485.8 $ 1,408.0 $ 1,142.1 76.5 % 23.3 % Normalized FFO per share (1) $ 4.06 $ 3.39 $ 3.31 19.8 % 2.4 % (1) All per share amounts are presented on a diluted per common share basis.
The following summarizes our FFO and Normalized FFO (dollars in millions, except per share data): Years ended December 31, 2023 2022 % Change FFO available to common stockholders $ 2,822.1 $ 2,471.9 14.2 % FFO per common share (1) $ 4.07 $ 4.04 0.7 % Normalized FFO available to common stockholders $ 2,836.6 $ 2,485.8 14.1 % Normalized FFO per common share (1) $ 4.09 $ 4.06 0.7 % (1) All per share amounts are presented on a diluted per common share basis. 40 Table of Contents The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable U.S.
(5) Interest on the term loan, notes, bonds, mortgages payable, credit facility and commercial paper programs has been calculated based on outstanding balances at period end through their respective maturity dates.
(3) Excludes our January 2024 issuance of $450.0 million of 4.750% senior unsecured notes due February 2029 and $800.0 million of 5.125% senior unsecured notes due February 2034. (4) Interest on the commercial paper programs, term loans, mortgages payable, and senior unsecured notes and bonds has been calculated based on outstanding balances at period end through their respective maturity dates.
We invest in people and places to deliver dependable monthly dividends that increase over time. We are structured as a REIT requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders.
We are structured as a REIT requiring us annually to distribute at least 90% of our taxable income (excluding net capital gains) in the form of dividends to our stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term net lease agreements with our commercial clients.
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): 56 Tabl e of Contents Years ended December 31, 2022 2021 2020 Net income available to common stockholders $ 869,408 $ 359,456 $ 395,486 Cumulative adjustments to calculate Normalized FFO (1) 1,616,382 1,048,537 746,633 Normalized FFO available to common stockholders 2,485,790 1,407,993 1,142,119 Executive severance charge (2) — — 3,463 (Gain) loss on extinguishment of debt (367) 97,178 9,819 Amortization of share-based compensation 21,617 16,234 14,727 Amortization of net debt premiums and deferred financing costs (3) (67,150) (6,182) 3,710 Non-cash loss on interest rate swaps 718 2,905 4,353 Straight-line impact of cash settlement on interest rate swaps (4) 1,558 — — Leasing costs and commissions (5,236) (6,201) (1,859) Recurring capital expenditures (587) (1,202) (198) Straight-line rent and expenses, net (120,252) (61,350) (26,502) Amortization of above and below-market leases, net 63,243 37,970 22,940 Proportionate share of adjustments for unconsolidated entities (4,239) (1,948) — Other adjustments (5) 26,264 3,356 54 AFFO available to common stockholders $ 2,401,359 $ 1,488,753 $ 1,172,626 AFFO allocable to dilutive noncontrolling interests 4,033 1,619 1,438 Diluted AFFO $ 2,405,392 $ 1,490,372 $ 1,174,064 AFFO per common share: Basic $ 3.93 $ 3.59 $ 3.40 Diluted $ 3.92 $ 3.59 $ 3.39 Distributions paid to common stockholders $ 1,813,432 $ 1,169,026 $ 964,167 AFFO available to common stockholders in excess of distributions paid to common stockholders $ 587,927 $ 319,727 $ 208,459 Weighted average number of common shares used for computation per share: Basic 611,765,815 414,535,283 345,280,126 Diluted 613,472,663 415,270,063 345,878,377 (1) See reconciling items for Normalized FFO presented under “Funds from Operations Available to Common Stockholders (FFO) and Normalized Funds from Operations Available to Common Stockholders (Normalized FFO)." (2) 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.
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): Years ended December 31, 2023 2022 Net income available to common stockholders $ 872,309 $ 869,408 Cumulative adjustments to calculate Normalized FFO (1) 1,964,293 1,616,382 Normalized FFO available to common stockholders 2,836,602 2,485,790 Gain on extinguishment of debt — (367) Amortization of share-based compensation 26,227 21,617 Amortization of net debt premiums and deferred financing costs (2) (44,568) (67,150) Non-cash (gain) loss on interest rate swaps (7,189) 718 Non-cash change in allowance for credit losses 4,874 — Straight-line impact of cash settlement on interest rate swaps (3) 7,190 1,558 Leasing costs and commissions (9,878) (5,236) Recurring capital expenditures (331) (587) Straight-line rent and expenses, net (141,130) (120,252) Amortization of above and below-market leases, net 79,101 63,243 Proportionate share of adjustments for unconsolidated entities 932 (4,239) Other adjustments (4) 23,040 26,264 AFFO available to common stockholders $ 2,774,870 $ 2,401,359 AFFO allocable to dilutive noncontrolling interests 5,540 4,033 Diluted AFFO $ 2,780,410 $ 2,405,392 AFFO per common share: Basic $ 4.01 $ 3.93 Diluted $ 4.00 $ 3.92 Distributions paid to common stockholders $ 2,111,793 $ 1,813,432 AFFO available to common stockholders in excess of distributions paid to common stockholders $ 663,077 $ 587,927 Weighted average number of common shares used for computation per share: Basic 692,298 611,766 Diluted 694,819 613,473 (1) See reconciling items for Normalized FFO presented under “Funds from Operations Available to Common Stockholders ("FFO") and Normalized Funds from Operations Available to Common Stockholders ("Normalized FFO")".
Merger and Integration-Related Costs In conjunction with our merger with VEREIT, we incurred approximately $13.9 million and $167.4 million of merger and integration-related transaction costs during the years ended December 31, 2022 and 2021, respectively. There were no such costs incurred during the year ended December 31, 2020.
For the year ended December 31, 2023, we incurred $14.5 million of merger and integration-related costs, the majority of which was related to the Spirit merger that closed in January 2024. For the year ended December 31, 2022, we incurred $13.9 million of merger and integration-related transaction costs in conjunction with our VEREIT merger.
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.
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.
The increase in general and administrative expenses for the year ended December 31, 2022 is primarily due to higher payroll-related costs, corporate-level professional fees, corporate occupancy costs, and information technology costs associated with the growth of the company, including the merger with VEREIT.
The increase in general and administrative expenses for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher payroll-related compensation costs associated with the growth of the company. Provisions for Impairment Provisions for impairment consist of impairment on long-lived assets and allowances for credit losses on financing receivables and loans.
Gain on Sales of Real Estate The following summarizes our property dispositions, excluding our proportionate share of net proceeds from the disposition of properties by our consolidated industrial partnerships in 2022 (dollars in millions): 49 Tabl e of Contents Years ended December 31, 2022 2021 2020 Number of properties sold 168 154 126 Net sales proceeds $ 434.9 $ 250.3 $ 262.5 Gain on sales of real estate $ 102.7 $ 55.8 $ 76.2 Foreign Currency and Derivative Gains (Losses), Net We borrow in the functional currencies of the countries in which we invest.
Gain on Sales of Real Estate The following summarizes our property dispositions (dollars in millions): Years ended December 31, 2023 2022 Number of properties sold 121 170 Net sales proceeds $ 117.4 $ 436.1 Gain on sales of real estate $ 25.7 $ 103.0 35 Table of Contents Foreign Currency and Derivative (Loss) Gain, Net We borrow in the functional currencies of the countries in which we invest.
At December 31, 2022, our total outstanding borrowings of senior unsecured notes and bonds, $250.0 million term loan, mortgages payable, revolving credit facility and commercial paper were $17.9 billion, or approximately 29.9% of our total market capitalization of $59.9 billion.
Debt and Financing Activities At December 31, 2023, our total outstanding borrowings of revolving credit facility, commercial paper, term loans, mortgages payable, and senior unsecured notes and bonds were $21.5 billion, with a weighted average maturity of 5.9 years and a weighted average interest rate of 3.9%.
(5) Includes adjustments allocable to noncontrolling interests, obligations related to financing lease liabilities, mark-to-market adjustments on investments and derivatives that do not qualify for hedge accounting, foreign currency gain and loss as a result of intercompany debt and remeasurement transactions and straight-line payments from cross-currency swaps. 57 Tabl e of Contents 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.
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.
Moreover, a rating is not a recommendation to buy, sell or hold our debt securities, preferred stock or common stock. 42 Tabl e of Contents Table of Obligations The following table summarizes the maturity of each of our obligations as of December 31, 2022 (dollars in millions): Year due Credit Facility and Commercial Paper Programs (1) Senior Unsecured Notes and Bonds (2) $250.0 million Term Loan (3) Mortgages Payable (4) Interest (5) Ground Leases Paid by Realty Income (6) Ground Leases Paid by Our Clients (7) Other (8) Totals 2023 $ 701.8 $ — $ — $ 22.0 $ 591.5 $ 10.6 $ 31.2 $ 607.4 $ 1,964.5 2024 — 850.0 250.0 740.5 571.1 13.3 30.7 19.8 2,475.4 2025 — 1,050.0 — 42.0 505.9 11.5 30.0 — 1,639.4 2026 2,027.2 1,575.0 — 12.0 416.6 17.2 29.2 0.8 4,078.0 2027 — 1,983.1 — 22.3 327.7 8.9 26.3 — 2,368.3 Thereafter — 8,656.1 — 3.5 1,520.3 287.6 264.5 — 10,732.0 Totals $ 2,729.0 $ 14,114.2 $ 250.0 $ 842.3 $ 3,933.1 $ 349.1 $ 411.9 $ 628.0 $ 23,257.6 (1) The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions.
Material Cash Requirements The following table summarizes the maturity of each of our obligations as of December 31, 2023 (dollars in millions): Credit Facility and Commercial Paper (1) Unsecured Term Loans (2) Mortgages Payable Senior Unsecured Notes and Bonds (3) Interest (4) Ground Leases Paid by the Company (5) Ground Leases Paid by Our Clients (6) Other (7) Totals 2024 $ 764.4 $ 250.0 $ 740.5 $ 850.0 $ 773.8 $ 14.3 $ 30.4 $ 728.5 $ 4,151.9 2025 — — 44.0 1,050.0 700.4 12.6 29.8 29.1 1,865.9 2026 — 1,082.0 12.0 2,075.0 587.5 18.3 28.9 11.0 3,814.7 2027 — — 22.3 2,027.8 525.9 10.1 26.9 0.3 2,613.3 2028 — — 1.3 2,049.8 443.0 9.9 23.5 — 2,527.5 Thereafter — — 2.3 10,509.5 2,173.6 303.8 242.6 3.8 13,235.6 Totals $ 764.4 $ 1,332.0 $ 822.4 $ 18,562.1 $ 5,204.2 $ 369.0 $ 382.1 $ 772.7 $ 28,208.9 (1) The initial term of the credit facility expires in June 2026 and includes, at our option, two six-month extensions.
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.
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. Capitalization As of December 31, 2023, our total market capitalization was $65.4 billion.
Equity in Income and Impairment of Investment in Unconsolidated Entities Equity in income and impairment of investment in unconsolidated entities for the years ended December 31, 2022 and 2021 relate to three equity method investments that were acquired in our merger with VEREIT.
See note 5, Investments in Unconsolidated Entities , to the consolidated financial statements for further details. The loss for the year ended December 31, 2022 was primarily driven by an other than temporary impairment related to the sale of three equity method investments acquired in our merger with VEREIT in November 2021.
(2) The same store rental revenue percentage increase for the year ended December 31, 2022 as compared with the same period in the prior year is 1.8%.
Depreciation and Amortization The increase in depreciation and amortization for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to overall portfolio growth from acquisitions.
Rental Revenue (reimbursable) A number of our leases provide for contractually obligated reimbursements from clients for recoverable real estate taxes and operating expenses. The increase in contractually obligated reimbursements by our clients in the periods presented is primarily due to the growth of our portfolio due to acquisitions.
The increase in contractually obligated reimbursements by our clients for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to higher recoverable real estate tax taxes from overall portfolio growth.
We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder. Our Dividend Reinvestment and Stock Purchase Plan, (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.
We anticipate maintaining the availability of our ATM program in the future, including the replenishment of authorized shares issuable thereunder.
Property Expenses (reimbursable) The increase in property expenses (reimbursable) for the years ended December 31, 2022 and 2021, is primarily attributable to our increased portfolio size, which contributed to higher operating expenses as a result of our acquisitions during the years ended December 31, 2022 and 2021, and an increase in ground lease rent, insurance, and property taxes paid on behalf of our clients.
The increase in property expenses (excluding reimbursable) for the year ended December 31, 2023 as compared with the same period in 2022 is primarily impacted by property tax and property management expenses. Property Expenses (reimbursable) Property expenses (reimbursable) consist of reimbursable property taxes and operating costs paid on behalf of our clients.
The increase in net income available to common stockholders for the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily related to the increase in the size of our portfolio due to the merger with VEREIT, which closed on November 1, 2021, gain on insurance proceeds from recoveries on property losses exceeding our carrying value, and $13.9 million of merger and integration-related costs related to our merger with VEREIT.
Other Income, Net Certain miscellaneous non-recurring revenue is included in 'other income, net'. The decrease of $6.7 million for the year ended December 31, 2023 as compared with the same period in 2022 is primarily due to lower gains on insurance proceeds from recoveries on property losses exceeding our carrying value.
The following is our calculation of debt service and fixed charge coverage at December 31, 2022 (in thousands, for trailing twelve months): Net income available to common stockholders $ 869,408 Plus: interest expense, excluding the amortization of deferred financing costs 451,629 Less: gain on extinguishment of debt (367) Plus: provision for taxes 45,183 Plus: depreciation and amortization 1,670,389 Plus: provisions for impairment 25,860 Plus: pro forma adjustments 318,394 Less: gain on sales of real estate (102,957) Income available for debt service, as defined $ 3,277,539 Total pro forma debt service charge $ 624,301 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.
The following is our calculation of debt service and fixed charge coverage at December 31, 2023 (in thousands, for trailing twelve months): Net income available to common stockholders $ 872,309 Plus: interest expense, excluding the amortization of deferred financing costs 703,883 Plus: provision for taxes 52,021 Plus: depreciation and amortization 1,895,177 Plus: provisions for impairment 82,208 Plus: pro forma adjustments 360,009 Less: gain on sales of real estate (25,667) Income available for debt service, as defined $ 3,939,940 Total pro forma debt service charge $ 837,945 Debt service and fixed charge coverage ratio 4.7x 30 Table of Contents Credit Agency Ratings The borrowing interest rates under our revolving credit facility are based upon our ratings assigned by credit rating agencies.
During the year ended December 31, 2022, we issued 68,608,176 shares and raised approximately $4.6 billion of net proceeds under the ATM programs. With respect to forward sales pursuant to our ATM program, we do not initially receive any proceeds from any sale of shares of our common stock borrowed by a forward purchaser and sold through a forward seller.
During the year ended December 31, 2023, we settled approximately 91.7 million shares of common stock previously sold pursuant to forward sale agreements through our ATM program for approximately $5.4 billion of net proceeds. As of December 31, 2023, we had 81.3 million shares remaining for future issuance under our ATM program.
(8) “Other” consists of $606.3 million of commitments under construction contracts, and $21.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. Our credit facility, commercial paper programs, term loans, and notes payable obligations are unsecured. Accordingly, we have not pledged any assets as collateral for these obligations.
(7) “Other” consists of $740.0 million of commitments under construction contracts, and $32.7 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements.
The following is a comparison of our results of operations for the years ended December 31, 2022, 2021 and 2020.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis reflect our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
At December 31, 2022, our diversified portfolio consisted of: • Owned or held interests in 12,237 properties; • An occupancy rate of 99.0%, or 12,111 properties leased and 126 properties available for lease or sale; • Clients doing business in 84 separate industries; • Locations in all 50 U.S. states, Puerto Rico, the U.K., Spain, and Italy; • Approximately 236.8 million square feet of leasable space; • A weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.5 years; and • An average leasable space per property of approximately 19,350 square feet, approximately 13,000 square feet per retail property and approximately 234,100 square feet per industrial property.
As of December 31, 2023, we owned or held interests in a diversified portfolio of 13,458 properties located in all 50 U.S. states, Puerto Rico, the U.K., France, Germany, Ireland, Italy, Portugal, and Spain, with approximately 272.1 million square feet of leasable space to clients doing business in 86 separate industries.
Of the 12,237 properties in the portfolio at December 31, 2022, 12,018, or 98.2%, are single-client properties, of which 11,894 were leased, and the remaining are multi-client properties.
Of the 13,458 properties in the portfolio at December 31, 2023, 13,197, or 98.1%, are single-client properties, of which 13,007 were leased, and the remaining are multi-client properties. Our total portfolio has a weighted average remaining lease term (excluding rights to extend a lease at the option of our client) of approximately 9.8 years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThis information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions): Expected Maturity Data Year of Principal Due Fixed rate debt Weighted average rate on fixed rate debt Variable rate debt Weighted average rate on variable rate debt 2023 $ 22.0 4.44 % $ 701.8 3.41 % 2024 1,840.5 4.48 — — 2025 1,092.0 4.23 — — 2026 1,587.0 3.72 2,027.2 3.65 2027 2,005.4 2.68 — — Thereafter 8,659.6 3.27 — — Totals (1) $ 15,206.5 3.46 % $ 2,729.0 3.59 % Fair Value (2) $ 13,583.2 $ 2,729.0 (1) Excludes net premiums recorded on mortgages payable, net premiums recorded on notes payable and deferred financing costs on mortgages payable, notes payable, and our $250.0 million term loan.
Biggest changeThis information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions): Expected Maturity Data The following table summarizes the maturity of our debt as of December 31, 2023 (dollars in millions): Year of Principal Due Fixed rate debt Weighted average rate on fixed rate debt Variable rate debt Weighted average rate on variable rate debt 2024 $ 1,840.5 (1) 4.48 % $ 764.4 4.37 % 2025 1,094.0 4.23 % — — 2026 2,669.0 (2) 4.18 % 500.0 (3) 3.05 % 2027 2,050.1 2.66 % — — 2028 2,051.1 3.43 % — — Thereafter 10,511.8 3.91 % — — Totals (4) $ 20,216.5 3.84 % $ 1,264.4 3.85 % Fair Value (5) $ 19,250.2 $ 1,264.3 (1) In conjunction with our $250.0 million senior unsecured term loan, which matures in March 2024, we entered into an interest rate swap, and as of December 31, 2023, the effective interest rate on this term loan, after giving effect to the interest rate swap, was 3.8%.
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.
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 swaptions, interest rate locks and caps.
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. At December 31, 2022, our outstanding notes, bonds and mortgages payable had fixed interest rates.
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. At December 31, 2023, our outstanding mortgages payable, notes, and bonds had fixed interest rates.
(2) We base the estimated fair value of the publicly-traded fixed rate senior notes and bonds at December 31, 2022, on the indicative market prices and recent trading activity of our senior notes and bonds payable.
We base the estimated fair value of the publicly traded fixed rate senior notes and bonds at December 31, 2023, on the indicative market prices and recent trading activity of our senior notes and bonds payable.
We believe that the carrying values of the line of credit and commercial paper borrowings and $250.0 million term loan balance reasonably approximate their estimated fair values at December 31, 2022. The table above incorporates only those exposures that exist as of December 31, 2022. It does not consider those exposures or positions that could arise after that date.
We believe that the carrying values of the line of credit, commercial paper borrowings, and term loan balances reasonably approximate their estimated fair values at December 31, 2023. The table above incorporates only those exposures that exist as of December 31, 2023. It does not consider those exposures or positions that could arise after that date.
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 December 31, 2022.
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 December 31, 2023.
There can be no assurance that we will be 58 Tabl e of Contents 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.
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.
Foreign currency market risk is the possibility that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates. We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge.
Foreign Currency Exchange Rates We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments. Foreign currency market risk is the possibility that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates.
We base the estimated fair value of our fixed rate mortgages and private senior notes payable at December 31, 2022, on the relevant forward interest rate curve, plus an applicable credit-adjusted spread.
(4) Excludes net premiums and discounts recorded on mortgages payable, net premiums recorded on notes payable, deferred financing costs on term loans, mortgages payable, notes payable, and the basis adjustment on interest rate swaps designated as fair value hedges on notes payable. 44 Table of Contents (5) We base the estimated fair value of our fixed rate mortgages and private senior notes payable at December 31, 2023, on the relevant forward interest rate curve, plus an applicable credit-adjusted spread.
Additionally, our inability to redeploy rent receipts from our international operations on a timely basis subjects us to foreign exchange risk. 59 Tabl e of Contents
Such derivative instruments are viewed as risk management tools and are not used for speculative or trading purposes. Additionally, our inability to redeploy rent receipts from our international operations on a timely basis subjects us to foreign exchange risk. 45 Table of Contents
We continuously evaluate and manage our foreign currency risk through the use of derivative financial instruments, including currency exchange swaps, foreign currency collars, and foreign currency forward contracts with financial counterparties where practicable. Such derivative instruments are viewed as risk management tools and are not used for speculative or trading purposes.
We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge. We continuously evaluate and manage our foreign currency risk through the use of derivative financial instruments, including currency exchange swaps, and foreign currency forward contracts with financial counterparties where practicable.
Interest on our credit facility and commercial paper borrowings and $250.0 million term loan balance is variable. However, the variable interest rate feature on our $250.0 million term loan has been mitigated by an interest rate swap agreement.
Interest on our credit facility and commercial paper borrowings and term loans is variable. However, the variable interest rate feature on our term loans have been mitigated by interest rate swap agreements. At December 31, 2023, a 1% change in interest rates on our variable-rate debt would change our interest costs by $12.6 million.
Removed
To limit counterparty credit risk, we will seek to enter into such agreements with major financial institutions with favorable credit ratings.
Added
(2) The maturity date for our 2023 term loans reflects the closing of our previous twelve-month extension option and assumes the additional twelve-month extension available at the company's option is exercised. In conjunction with closing, we executed one-year variable-to-fixed interest rate swaps, which fix our per annum interest rate at 5.0% over the initial term.
Removed
At December 31, 2022, the unamortized balance of net premiums on mortgages payable is $12.4 million, the unamortized balance of net premiums on notes payable is $224.6 million, and the balance of deferred financing costs on mortgages payable is $0.8 million, on notes payable is $60.7 million, and on the $250.0 million term loan is $0.2 million.
Added
Accordingly, the 2023 term loans have been presented as fixed rate debt as of December 31, 2023 in the table above. (3) In January 2023, we issued $500.0 million of 5.05% senior unsecured notes due January 13, 2026, which were callable at par beginning on January 13, 2024.
Removed
Based on our revolving credit facility balance of $2.0 billion at December 31, 2022, a 1% change in interest rates would change our interest rate costs by $20.3 million per year. Foreign Currency Exchange Rates We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments.
Added
In conjunction with the pricing of these senior unsecured notes due January 2026, we executed three-year, fixed-to-variable interest rate swaps totaling $500.0 million, which are subject to the counterparties' right to terminate the swaps at any time following the 2026 notes par call date.

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