Realty Income
Annual Report 2020

Plain-text annual report

R E A L T Y I N C O M E B U I L D I N G G R O W T H B Y D E S I G N 2 0 2 0 A N N U A L R E P O R T A B O U T R E A L T Y I N C O M E Realty Income, The Monthly Dividend Company®, is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial clients. T A B L E O F C O N T E N T S 2 COMPANY PERFORMANCE 4 LETTER TO SHAREHOLDERS 10 HISTORICAL FINANCIAL PERFORMANCE 12 REAL ESTATE PORTFOLIO 16 DISCIPLINED INVESTMENT PROCESS 18 CONSERVATIVE CAPITAL STRUCTURE 20 DEPENDABLE MONTHLY DIVIDENDS 22 SELECT FINANCIAL DATA 29 COMPANY INFORMATION A B O U T T H E C O V E R The cubes on the cover, none of which are the same, symbolize our commitment to diversity, equality and inclusion (DE&I), a dynamic corporate culture that encourages team members to think outside the box, and a systemic approach to building company growth by design. 15.3% TOTAL 4.8% COMPOUND 4.4% COMPOUND SHAREHOLDER AVERAGE ANNUAL AVERAGE ANNUAL RETURN AFFO PER SHARE GROWTH DIVIDEND PER SHARE GROWTH P E R F O R M A N C E H I G H L I G H T S S I N C E 1 9 9 4 N Y S E L I S T I N G ( 1 ) 109 DIVIDEND INCREASES 0 DIVIDEND REDUCTIONS 93 CONSECUTIVE QUARTERLY DIVIDEND INCREASES (1)AS OF 12/31/20 1 $2.31 BILLION INVESTMENT VOLUME C O M P A N Y P E R F O R M A N C E C O M P O U N D AV E R A G E A N N U A L T O T A L S H A R E H O L D E R R E T U R N S I N C E 1 9 9 4 N Y S E L I S T I N G ( 1 ) ( A S O F D E C E M B E R 3 1 , 2 0 2 0 ) REALTY INCOME 15.3% NASDAQ COMPOSITE 11.4% DOW JONES INDUSTRIAL AVERAGE S&P 500 10.7% 10.4% EQUITY REIT INDEX 10.1% (1)Reference page 27 for additional information on total shareholder return C O M P A R I S O N O F $ 1 0 0 I N V E S T E D I N R E A L T Y I N C O M E V S . M A J O R S T O C K I N D I C E S ( 1 9 9 4 - 2 0 2 0 ) REALTY INCOME EQUITY REIT INDEX DOW JONES INDUSTRIAL AVERAGE S &P 500 NASDAQ COMPOSITE $3,331 $1,711 $1,454 $1,350 $1,261 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 E A R N I N G S A N D D I V I D E N D S COMPOUND AVERAGE ANNUAL GROWTH SINCE 1994 NYSE LISTING 4.8% AFFO PER SHARE GROWTH 4.4% DIVIDEND PER SHARE GROWTH $3.39 2020 AFFO PER SHARE $2.81(1) 2020 ANNUALIZED DIVIDEND PER SHARE 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 (1)Annualized dividend amount reflects the December declared dividend rate per share multiplied by 12. Information as of 12/31/2020. 2 15.3% $2.31 BILLION INVESTMENT VOLUME 2020 PERFORMANCE HIGHLIGHTS 2.1% AFFO PER SHARE GROWTH 3.1% DIVIDEND PER SHARE GROWTH $1.57 BILLION REVENUE $2.31 BILLION INVESTMENT VOLUME 97.9% PORTFOLIO OCCUPANCY 100.0% RECAPTURE RATE ON RE-LEASING ACTIVITY $4.1 BILLION CAPITAL RAISED 33 SUMIT ROY, PRESIDENT & CHIEF EXECUTIVE OFFICER “As I reflect on 2020, it is clear our success would not have been possible without our many partnerships. We Are One Team.” 4 D E A R F E L L O W S H A R E H O L D E R S , I want to share how deeply I appreciate our We remain focused on addressing the team’s continued commitment to delivering hardships faced by many and are proud, and advancing our company’s objectives. committed and inspired by our resiliency My colleagues truly represent and embody and determination to building growth the great values that have driven our by design together with our people, company’s success. The depth and breadth clients, shareholders, and the communities of our talented team members remain key we serve. competitive advantages which were further demonstrated during the past year. Our company, communities, country, and world faced a challenging and unprecedented environment over the last year. Now, as in the past and future, we embrace adversity for the opportunities it presents and the lessons we learn. I am proud of the resiliency of our team, whose dedication to our shared purpose, mission, vision, and values continue to drive our business forward through the persistent remote-work environment. I am committed to the resiliency of our overall real estate portfolio, which ended the year with portfolio occupancy of 97.9%, demonstrating the stability of our operations amid macroeconomic volatility. I am inspired by the resiliency of our business, which maintained a strong financial position and delivered AFFO per share growth of 2.1% since last year, reflecting the strength of our clients and partnerships. As I reflect on 2020, it is clear our success would not have been possible without our many partnerships. We Are One Team. We seek to partner with our stakeholders to create shared value through diligent execution of our company’s strategy, constant focus on improving our company’s risk profile, and dedication to being a responsible corporate citizen. We are committed to promoting the following values: Do the right thing, because how we act is as important as what we accomplish. Take ownership, because our clients’ success is our success. Empower each other, so everyone will be inspired to give their best every day. Celebrate differences, because diversity, equality, and inclusion make us stronger. Give more than we take, in our community and the environment. 5 We remain committed to corporate Earlier this year, it was my pleasure to responsibility today and for our future. welcome Christie Kelly to our management During 2020, we continued to advance our team as Executive Vice President, Chief environmental, social, and governance (ESG) Financial Officer and Treasurer. Christie initiatives. Notably, we expanded our Diversity, joined our Board of Directors in 2019, served Equality and Inclusion (DE&I) program to as a member of our Audit Committee, and include a formal DE&I Policy Statement, has been a valuable contributor. Christie which has been woven into the fabric of brings significant finance, real estate, and our culture through ongoing training and international business experience, and I look development, leader-led conversations, and forward to continuing to partner with active listening. We continued our annual Christie to advance our company’s financial contribution to San Diego Habitat strategies and objectives. for Humanity, shared our organizational statement supporting racial and social equality, and implemented a prompt response to COVID-19 to benefit and protect our many stakeholders. Additionally, in February 2021 we welcomed Michelle Bushore as Executive Vice President, Chief Legal Officer, General Counsel and Secretary. Michelle joins our leadership team with extensive legal, corporate governance, Our commitment to environmental transactional and risk management experience. responsibility remains steadfast. Alongside this report, we are proud to issue our inaugural Sustainability Report which details our team’s dedicated efforts and progress on this important journey. Our Sustainability Report can be found in our Mike Pfeiffer will remain serving and leading our company through June 2021 as Chief Administrative Officer while assisting Christie and Michelle through their transition until his retirement. website’s corporate responsibility section, Mike first joined Realty Income in 1990, played and I encourage all stakeholders to read the Sustainability Report to understand a pivotal role during the company’s public listing in 1994, and his contributions have the significant emphasis we place on these been instrumental to our growth and success. initiatives. While our dedicated Sustainability As the company’s longest tenured executive, Department drives many of these efforts, we believe ESG considerations permeate Mike has been an invaluable leader within our Realty Income community for all stakeholders throughout the organization at every level, and a trusted partner to me. Words cannot including through active oversight by our fully reflect on Mike’s positive impact on all Board of Directors, and I remain focused, of us, as his impact on our company is part dedicated and driven to continue integrating of who we are. Please join me in wishing these values throughout our One Team in Mike only the best during his well-deserved Realty Income and all those we serve. retirement. 6 OUR 2020 RESULTS Our disciplined approach to managing the business continued throughout 2020. During the year, we grew AFFO per share, or the cash earnings available to pay dividends to our shareholders, by 2.1% to $3.39. This growth allowed us to increase the dividend by 3.1% as compared to 2019. The continued strength of our operations enabled us to increase the dividend while achieving an AFFO payout ratio of 82.4%, which we believe provided a comfortable margin of safety for our shareholders. While our total shareholder return during 2020 was negative 11.6% assuming reinvestment of dividends, we like to remind our shareholders that the company’s stock price does not always move commensurate with our operating or financial performance, as external, macroeconomic, and other factors can impact the company’s stock price. We seek to deliver favorable estate transactions sourced and reviewed. Total investments in the U.K. during 2020 were approximately $921 million, which continues to validate our view that the international platform significantly expands our addressable market for growth. Our investment strategy continues to focus on partnering with clients that are high-quality operators in resilient industries, and we are pleased that the majority of our investment volume during 2020 included properties leased to operators in the grocery, home improvement, and general merchandise industries. In addition to our high occupancy levels of 97.9%, we achieved a 100% rent recapture rate on re-leasing activity during the year. Since our public listing in 1994, year-end occupancy has never been below 96% and, since 1996, we have achieved a rent recapture rate of over 100% on re-leasing activity involving over 3,500 leases. long-term risk-adjusted returns for our Through turbulent market conditions in shareholders and, as of year-end, we had 2020, we maintained a strong financial delivered a compound average annual total position and remain committed to being shareholder return since our public listing in one of only a handful of REITs with at least 1994 of 15.3%. At Realty Income, the dividend two credit ratings of A3/A- or better by the remains our strategic and operational lodestar, major rating agencies. We established a $1.0 and in January of 2020, we were proud to be billion commercial paper program during the added to the S&P 500 Dividend Aristocrats® year, which further strengthens our financial index for having increased the dividend every position by providing additional access to year for the past 25 consecutive years. As of low-cost debt financing, and we completed this writing, we are one of only three REITs our debut public issuance of Sterling- and 65 companies in this exclusive index. denominated unsecured notes. In 2020, During 2020, we invested over $2.3 billion in high-quality real estate, acquiring less than 4% of the $63.6 billion in potential real we raised approximately $1.9 billion of equity capital and $2.2 billion of long-term fixed-rate debt, achieving record-low coupon rates for the respective tenors in the REIT 7 sector for the 5-year and 12-year unsecured partnering with high-quality operators notes we issued in December 2020. We who are leaders in their respective industry. believe we remain well-positioned for 2021 with a conservative capital structure and strong liquidity, ending the year with Net Debt-to-Adjusted EBITDAre of 5.3x, full availability on our $3.0 billion multi-currency revolving credit facility, and no outstanding balance under our $1.0 billion commercial paper program. COVID-19 We have prioritized the health and safety of our team members and community through numerous efforts during the COVID-19 pandemic, including implementing a remote- The COVID-19 pandemic created an unprecedented shock to consumer demand that impacted industries across the globe. As a result, certain industries and operators within our portfolio have been negatively impacted. Specifically, government-mandated closures and social-distancing requirements have affected the theater industry and, to a lesser extent, the health and fitness industry. Although these industries are experiencing challenges, we are pleased to partner with top operators as we face these challenges together. work environment, utilizing technology LOOKING AHEAD for communication and collaboration, and allocating resources to support the wellbeing of our team. While our focus remains forward- looking as we seek to leverage our position of strength for continued growth, it is important to reflect on and learn from challenging circumstances like the COVID-19 pandemic. We are pleased that our top industries of convenience stores, grocery stores, drug stores, and dollar stores, which comprise As I contemplate our company’s current position and outlook, I am committed, inspired and optimistic. I believe the quality of our real estate portfolio is unparalleled in our company’s history, our global investment pipeline has never been more active, and a low interest rate environment has historically been supportive of our business. As the largest company within the public net over 37% of our annualized rental revenue, lease REIT sector, we are uniquely positioned sell non-discretionary essential goods and to leverage our size and scale to pursue maintained financial strength throughout growth opportunities. the pandemic. In fact, we are proud to partner with many of our clients who play an important role in addressing the public health crisis. Our real estate portfolio is deliberately designed to be resilient through a variety of economic environments, and we believe the performance of the portfolio throughout the challenging economic environment driven by COVID-19 validates our investment strategy of Our size and scale contribute to our financial strength and flexibility – our two credit ratings of A3/A- allow us access to low-cost debt capital, our $3.0 billion multicurrency revolving credit facility and $1.0 billion commercial paper program provide significant liquidity, and our conservative capital structure, of which approximately 72% is equity, positions us favorably to pursue opportunities. 8 Our size and scale afford us the ability to expand into new markets – since our international expansion in 2019, we have directed our prior successes remain pillars upon which we will build Realty Income’s future. We will seek to continue building acquired over $1.7 billion of high-quality growth by design through leveraging our real estate in the United Kingdom, and we business platform, fostering an innovative continue to expand our platform as we environment, and relying upon our proven review new opportunities and grow our values of resiliency and growth. international presence. Our size and scale allow us to pursue large- scale portfolio acquisitions – robust access to capital and the ability to complete large- Our purpose, which is centered around building enduring relationships and brighter financial futures, remains the galvanizing principle for us. We remain focused on scale transactions without creating client or ensuring the stability and growth in earnings industry diversification issues position us for and dividends, and we are guided by our unique opportunities. mission, vision, and values that culminate in Our size and scale provide access to data and resources – leveraging both information from within our real estate portfolio of over 6,500 properties, as well as alternative and external data sources, allows us to make key decisions using best-in-class, and often seeking to create benefits for all stakeholders. Across all we do, we take the long view every day, in every relationship, to provide stability to the clients we serve, the team we nurture, the communities we support, and the people who invest in us. proprietary, information. Thank you for your continued support, and for We believe investments in technology and a data-driven approach to managing the business will be pivotal to our future joining us on our continued journey to being a reliable partner while working together on creating a better world. successes, and we are prioritizing these Sincerely, initiatives as we look toward our next chapter. Our investment appetite remains robust, and we have the people, processes, and systems in place to continue evolving and delivering upon our strategy. We are proud of the platform our company has built throughout our 52-year history, and the values which have Sumit Roy President & Chief Executive Officer 9 HISTORICAL FINANCIAL PERFORMANCE (UNAUDITED; DOLLARS IN MILLIONS, except per share data) (1) Total revenue excludes gains on sales and contractually obligated reimbursements from clients. Prior to 2016, total revenue excluded revenue from Crest Net Lease, a subsidiary of Realty Income. Consistent with Realty Income’s financial reporting methodology changes, total revenue for 2016 and later includes revenue from Crest Net Lease. In addition, total revenue prior to 2015 included amounts reclassified to income from discontinued operations. (2) FFO and AFFO are non-GAAP financial measures. Refer to Management’s Discussion and Analysis in the Company’s 2020 Form 10-K for the definitions of FFO and AFFO and a reconciliation of each to net income available to common stockholders. For 2012 and 2013, FFO has been adjusted to add back American Realty Capital Trust merger-related costs (3) Does not include properties held for sale (4) Includes new properties acquired by Realty Income and Crest Net Lease and properties under development, redevelopment, or expansion (5) All share and per share amounts reflect the 2-for-1 stock split that occurred on December 31, 2004 (6) Annualized dividend amount reflects the December declared dividend rate per share multiplied by 12 10 For the Years Ended December 31,2020201920182017201620152014201320122011Total revenue(1)$1,572$1,423$1,281 $1,170$1,060$980$895$760$484$422Net income available to common stockholders$395$436$364$302$288$257$228$204$115$133FFO available to common stockholders(2)$1,142$1,040$903$773$735$652$563$462$269$249AFFO available to common stockholders(2)$1,173$1,050$925$839$736$647$562$463$274$253Dividends paid to common stockholders$964$852$762$689$611$533$479$409$236$219AT YEAR ENDReal estate at cost, before accumulated depreciation and amortization(3) $21,016$19,518 $16,541 $15,016$13,864$12,297$11,154$9,899$5,921$4,972Number of properties 6,592 6,483 5,797 5,172 4,9444,5384,3273,8963,0132,634Gross leasable square feet (millions)1111069390837671633827Properties acquired(4)244789764303505286506974423164Cost of properties acquired(4)$2,307$3,715$1,797 $1,519$1,859$1,259$1,402$4,670$1,165$1,016Property dispositions1269312859773846754426Net proceeds from property dispositions$262$109$142$167$91$66$107$134$51$24Number of industries51504847474747474438Portfolio occupancy rate97.9%98.6%98.6%98.4%98.3%98.4%98.4%98.2%97.2%96.7%Remaining weighted average lease term (years)9.09.29.29.59.810.010.210.811.011.3PER COMMON SHARE DATA(5)Net income (diluted)$1.14$1.38$1.26$1.10$1.13$1.09$1.04$1.06$0.86$1.05Funds from operations (“FFO”)(2)$3.31$3.29$3.12$2.82$2.88$2.77$2.58$2.41$2.02$1.98Adjusted funds from operations (“AFFO”)(2)$3.39$3.32$3.19$3.06$2.88$2.74$2.57$2.41$2.06$2.01Dividends paid$2.794$2.711$2.631$2.527$2.392$2.271$2.192$2.147$1.772$1.737Annualized dividend amount(6)$2.814$2.73$2.65$2.55$2.43$2.29$2.20$2.19$1.82$1.75Common shares outstanding (millions)361334304284260250225207133133INVESTMENT RESULTSClosing price on December 31,$62.17 $73.63 $63.04 $57.02$57.48$51.63$47.71$37.33$40.21$34.96Dividend yield(7)(8)4.5%3.7%4.2%4.5%4.6%4.4%5.9%5.3%5.1%5.1%Total return to stockholders(9)(11.8%)21.1%15.2%3.6%16.0%13.0%33.7%(1.8%)20.1%7.3% 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 $346 $329 $331 $296 $241 $198 $178 $150 $138 $121 $116 $105 $107 $107 $108 $116 $99 $90 $90 $77 $194 $191 $186 $190 $156 $130 $121 $105 $197 $193 $192 $193 $159 $131 $126 $107 $183 $178 $170 $158 $130 $109 $97 $84 $69 $95 $96 $78 $58 $78 $79 $65 $45 $67 $68 $58 $41 $66 $66 $56 $85 $41 $63 $62 $52 $68 $35 $52 $52 $44 $57 $32 $48 $47 $43 $52 $26 $40 $40 $37 $49 $15 $39 $39 $39 $4,113 $3,439 $3,409 $3,239 $2,744 $2,096 $1,691 $1,533 $1,286 $1,178 $1,074 $1,017 $890 $700 $565 $515 $451 2,496 2,339 2,348 2,270 1,955 1,646 1,533 1,404 1,197 1,124 1,068 1,076 970 826 740 685 630 21 186 19 16 19 19 17 13 12 11 10 10 108 357 378 156 194 302 111 117 9 22 9 8 110 149 6 96 5 62 5 58 $714 $58 $190 $534 $770 $487 $215 $372 $139 $156 $99 $181 $193 $142 $56 $65 28 25 29 $27 $20 $28 32 30 30 10 $7 30 13 23 43 35 35 35 21 $11 $23 $35 $23 $20 $40 $45 29 29 30 28 26 25 24 3 $9 24 5 $3 22 10 $4 14 7 $4 8 3 $1 7 4 4 $3 5 $4 5 96.6% 96.8% 97.0% 97.9% 98.7% 98.5% 97.9% 98.1% 97.7% 98.2% 97.7% 98.4% 99.5% 99.2% 99.1% 99.3% 99.4% 11.4 11.2 11.9 13.0 12.9 12.4 12.0 11.8 10.9 10.4 9.8 10.7 10.2 9.8 9.5 9.2 9.5 $1.01 $1.03 $1.06 $1.16 $1.11 $1.12 $1.15 $1.08 $1.01 $0.99 $0.84 $0.76 $0.78 $0.74 $0.70 $0.63 $0.39 $1.83 $1.84 $1.83 $1.89 $1.73 $1.62 $1.53 $1.47 $1.40 $1.33 $1.26 $1.23 $1.18 $1.11 $1.04 $1.00 $0.98 $1.86 $1.86 $1.90 $1.92 $1.77 $1.63 $1.61 $1.50 $1.41 $1.34 $1.27 $1.24 $1.17 $1.10 $1.03 $0.98 $0.98 $1.722 $1.707 $1.662 $1.560 $1.437 $1.346 $1.241 $1.181 $1.151 $1.121 $1.091 $1.043 $0.983 $0.946 $0.931 $0.913 $0.300 $1.73 $1.72 $1.70 $1.64 $1.52 $1.40 $1.32 $1.20 $1.17 $1.14 $1.11 $1.08 $1.02 $0.96 $0.95 $0.93 $0.90 118 104 104 101 101 84 79 76 70 66 53 54 54 51 46 46 39 $34.20 $25.91 $23.15 $27.02 $27.70 $21.62 $25.29 $20.00 $17.50 $14.70 $12.44 $10.31 $12.44 $12.72 $11.94 $11.25 $8.56 6.6% 7.4% 6.1% 5.6% 6.7% 5.3% 6.2% 6.7% 7.8% 9.0% 10.6% 8.4% 7.7% 7.9% 8.3% 10.7% 9.9% 38.6% 19.3% (8.2%) 3.2% 34.8% (9.2%) 32.7% 21.0% 26.9% 27.2% 31.2% (8.7%) 5.5% 14.5% 15.4% 42.0% 28.5% (7) Dividend yield was calculated by dividing the dividend paid per share, during the year, by the closing share price on December 31 or the last trading day of the preceding year. Dividend yield excludes special dividends (8) The 1994 dividend yield is based on the annualized dividends for the period from August 15, 1994 (the date of the consolidation of the predecessors to the Company) to December 31, 1994. The 1994 total return is based on the price change from the opening on October 18, 1994 (the Company’s first day of trading) to December 31, 1994 plus the annualized dividend yield (9) Total return calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period. Does not include reinvestment of dividends 11 For the Years Ended December 31,2020201920182017201620152014201320122011Total revenue(1)$1,572$1,423$1,281 $1,170$1,060$980$895$760$484$422Net income available to common stockholders$395$436$364$302$288$257$228$204$115$133FFO available to common stockholders(2)$1,142$1,040$903$773$735$652$563$462$269$249AFFO available to common stockholders(2)$1,173$1,050$925$839$736$647$562$463$274$253Dividends paid to common stockholders$964$852$762$689$611$533$479$409$236$219AT YEAR ENDReal estate at cost, before accumulated depreciation and amortization(3) $21,016$19,518 $16,541 $15,016$13,864$12,297$11,154$9,899$5,921$4,972Number of properties 6,592 6,483 5,797 5,172 4,9444,5384,3273,8963,0132,634Gross leasable square feet (millions)1111069390837671633827Properties acquired(4)244789764303505286506974423164Cost of properties acquired(4)$2,307$3,715$1,797 $1,519$1,859$1,259$1,402$4,670$1,165$1,016Property dispositions1269312859773846754426Net proceeds from property dispositions$262$109$142$167$91$66$107$134$51$24Number of industries51504847474747474438Portfolio occupancy rate97.9%98.6%98.6%98.4%98.3%98.4%98.4%98.2%97.2%96.7%Remaining weighted average lease term (years)9.09.29.29.59.810.010.210.811.011.3PER COMMON SHARE DATA(5)Net income (diluted)$1.14$1.38$1.26$1.10$1.13$1.09$1.04$1.06$0.86$1.05Funds from operations (“FFO”)(2)$3.31$3.29$3.12$2.82$2.88$2.77$2.58$2.41$2.02$1.98Adjusted funds from operations (“AFFO”)(2)$3.39$3.32$3.19$3.06$2.88$2.74$2.57$2.41$2.06$2.01Dividends paid$2.794$2.711$2.631$2.527$2.392$2.271$2.192$2.147$1.772$1.737Annualized dividend amount(6)$2.814$2.73$2.65$2.55$2.43$2.29$2.20$2.19$1.82$1.75Common shares outstanding (millions)361334304284260250225207133133INVESTMENT RESULTSClosing price on December 31,$62.17 $73.63 $63.04 $57.02$57.48$51.63$47.71$37.33$40.21$34.96Dividend yield(7)(8)4.5%3.7%4.2%4.5%4.6%4.4%5.9%5.3%5.1%5.1%Total return to stockholders(9)(11.8%)21.1%15.2%3.6%16.0%13.0%33.7%(1.8%)20.1%7.3% R E A L E S T A T E P O R T F O L I O 12 Our confidence in continuing to provide monthly dividends that increase over time stems from the quality of our real estate portfolio, which is designed to embody fortress-like strength and resiliency. These characteristics were tested during 2020 as the global COVID-19 pandemic resulted in the temporary closure of properties with clients in certain industries. Despite these challenges, the cash flow generating capacity of our portfolio persevered, resulting in another year of dividend growth. As of December 31, 2020, our real estate portfolio consisted of 6,592 properties, which are primarily freestanding, net leased, single-client commercial properties well diversified by: • CLIENT – Approximately 600 clients where over half of annualized contractual rental revenue is generated from investment- grade rated operators or their subsidiaries • INDUSTRY – Our clients operate across 51 different industries • GEOGRAPHY – 49 states, Puerto Rico, and the United Kingdom • PROPERTY TYPE – Primarily retail and industrial “We have built up our Development team which has allowed us to expand our efforts in acquiring new assets for within our existing portfolio. While remaining consistent with its mission, vision, and values, Realty Income is broadening its investment possibilities to drive additional earnings growth.” Janeen Drakulich Senior Vice President, Development PROPERTY TYPE DIVERSIFICATION N U M B E R % O F O F P R O P E R T I E S R E V E N U E ( 1 ) R E T A I L 6,419 84.4% I N D U S T R I A L O F F I C E A G R I C U L T U R E 115 43 15 10.9% 3.1% 1.6% ( 1 ) B A S ED O N T O T A L P O R T F O L I O A N N U A L I Z E D C O N T R A C T U A L R E N T A S O F D E C E M B E R 3 1 , 2 0 2 0 TOP 10 INDUSTRIES % O F R E V E N U E ( 1 ) C O N V E N IE N C E S T O R E S G R O C E R Y S T O R E S D R U G S T O R E S D O L L A R S T O R E S H E A L T H A N D F I T N E S S T H E A T E R S H O M E I M P R O V E M E N T T R A N S P O R T A T I O N S E R V I C E S G E N E R A L M E R C H A N D I S E 11.9% 9.8% 8.2% 7.6% 6.7% 5.6% 5.3% 4.3% 3.9% 3.4% ( 1 )B A S E D O N T O T A L P O R T F O L I O A N N U A L I Z E D C O N T R A C T U A L R E N T A S O F D E C E M B E R 3 1 , 2 0 2 0 . T H E P R E S E N T A T I O N O F T O P 1 0 I N D U S T R I E S C O M B I N E S T O T A L P O R T F O L I O A N N U A L I Z E D C O N T R A C T U A L R E N T C O N T R I B U T I O N F R O M U . S . A N D U . K . P R O P E R T I E S . 13 construction as well as pursuing value-creation opportunities R E S T A U R A N T S - Q U I C K S E R V I C E R E A L E S T A T E P O R T F O L I O ( C O N T I N U E D ) GEOGR APHIC DIVERSIFIC ATION As a % of Revenue(1) <1% 1–2% 2–3% 3–4% 4–5% 5–6% 6–11% (1)Based on total portfolio annualized rent as of December 31, 2020 SITE AND % REVENUE TEXAS 10.5% CALIFORNIA 8.8% UNITED KINGDOM 6.2% ILLINOIS 5.8% FLORIDA 5.3% NEW YORK 4.2% % 4 . 9 9 PORTFOLIO OCCUPANCY (1 ) % 9 . 7 9 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 ( 1 )B Y N U M B E R O F P R O P E R T I E S 14 while innovating judiciously to pursue adjacent D O L L A R G E N E R A L * growth verticals that support the generation of favorable long-term risk adjusted returns. F E D E X * D O L L A R T R E E / FA M I LY D O L L A R * 5 5 0 3 . 3 % activity. Our sustained occupancy levels and W A L M A R T / S A M ’ S C L U B * Since our company’s founding in 1969, we have continued to refine our investment philosophy to build a real estate portfolio that can perform throughout any economic cycle. As we look to the future, we expect our portfolio strategy to remain anchored to well-located assets leased to industry-leading operators with strong credit profiles. 2020 reaffirmed our desire to center our portfolio around clients that operate in industries that are “essential” to the consumer, Throughout our history as a public company, year-end occupancy has never been below 96% and, since 1996, we’ve achieved a rent recapture rate of over 100% on re-leasing favorable re-leasing results reflect the expertise, talent and experience exhibited by our Asset Management and Real Estate Operations teams, who we believe excel at maximizing the value of our existing real estate portfolio. Going forward, we will continue to utilize our size and scale to provide holistic, world-class service to our clients. Our comprehensive programs and solutions will seek to not only strengthen the existing alliances with our clients, but also increase our profitability. “Our Asset Management and Real Estate Operations teams generate sustained portfolio value through a combination of active asset management and an integrated client-centric approach. This strategy allows us to leverage our resources to create mutually beneficial outcomes, ultimately driving internal growth while strengthening our portfolio.” Ben Fox Executive Vice President, Asset Management & Real Estate Operations CLIEN T DIVERSIFICATION W A L G R E EN S * 7 - E L E V E N* L A F I T N E S S S A I N S B U R Y ’ S N U M B E R O F L E A S E S % O F R E V E N U E ( 1 ) 2 4 8 5 . 7 % 4 3 2 7 8 7 4 1 4 . 8 % 4 . 3 % 3 . 7 % 5 6 1 8 5 8 4 1 3 2 1 6 3 . 1 % 3 . 0 % 2 . 9 % 2 . 7 % 2 . 7 % 2 . 4 % R E G A L C I N E M A S ( C I N E W O R L D ) A M C T H E A T R E S L I F E T I M E F I T N E S S C I R C L E K ( C O U C H E -T A R D ) * 2 7 7 1 . 8 % B J ’ S W H O L E S A L E C L U B S T R E A S U R Y W I N E E S T A T E S C V S P H A R M A C Y * S P E E D W AY ( M A R A T H O N ) * K R O G E R * T E S C O * H O M E D E P O T * 1 5 1 7 8 8 1 6 1 2 2 1 0 2 2 1 . 7 % 1 . 6 % 1 . 5 % 1 . 5 % 1 . 5 % 1 . 4 % 1 . 3 % G P M I N V E S T M E N T S / F A S M A R T 2 0 2 1 . 3 % ( 1 )B A S E D O N T O T A L P O R T F O L I O A N N U A L I Z E D C O N T R A C T U A L R E N T A S O F D E C E M B E R 3 1 , 2 0 2 0 * D E N O T E S I N V E S T M E N T G R A D E R A T E D C L I E N T S , W H O A R E O U R C L I E N T S W I T H A C R E D I T R A T I N G , A N D O U R C L I E N T S T H A T A R E S U B S I D I A R I E S O R A F F I L I A T E S O F C O M PA N I E S W I T H A C R E D I T R A T I N G , A S O F 1 2 / 3 1 / 2 0 , O F B A A 3 / B B B - O R H I G H E R F R O M O N E O F T H E T H R E E M A J O R R A T I N G A G E N C I E S ( M O O D Y ’ S / S & P / F I T C H ) 15 D I S C I P L I N E D I N V E S T M E N T P R O C E S S “Despite the tumult of the past year and our physical “During 2020, our business benefitted from the strength of separation, we worked closely together as One Team. This our partnerships, the diligence of our investment approach, was especially true in our international business, in which and the experience of our team as we executed on our robust we invested almost $1.0 billion in high-quality assets in the investment pipeline to complete over $2.3 billion of acquisitions UK during 2020. We are grateful to our clients, colleagues during the year. We will seek to continue leveraging our and partners for their support in achieving this result. competitive advantages of size and scale to pursue large Looking forward, we hope to extend and replicate this transactions to drive growth in earnings and dividends.” success in other international markets.” Neil Abraham Executive Vice President, Chief Strategy Officer Mark Hagan Executive Vice President, Chief Investment Officer 16 TOTA L REVEN UE (1 ) (DO LLA RS IN MI LLI ON S) $1,572 We focus on acquiring freestanding, single- client commercial properties leased to high quality clients under long-term, net lease agreements, typically in excess of 10 years. In 2020, we reviewed approximately $63.6 billion of investment opportunities that satisfied one or more of these criteria, resulting in the selection of $2.3 billion of real estate investments. Of these acquisitions, approximately $921 million was invested internationally across 24 properties $49 in the UK. Since our first international acquisition in 2019, we’ve added more than $1.7 billion of international real estate to our portfolio. We expect international markets to remain a focus of our acquisition strategy, as new geographies 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 ( 1 )S E E PA G E 1 0 , F O O T N O T E 1 , F O R T H E D E F I N I T I O N O F T O TA L R E V E N U E . significantly expand our addressable market and, demographic trends relative to the property’s therefore, growth opportunities. All our acquisition opportunities undergo a rigorous, multi-step internal underwriting and legal diligence process. The process begins with a review of the real estate fundamentals. We intended use, potential alternative uses, and overall viability of the market. Next, we carefully review the characteristics, credit, and overall financial strength of the client and their industry. Our Research team conducts target properties located in significant markets or a thorough financial review and analysis of the strategic locations critical to generating revenue client, including an assessment of the store for the client. We examine the property- level attributes such as access and signage, ACQUISITIONS SEL ECTIVITY (D O LLARS IN BI LLIO NS ) A M O U N T S O U R C E D A M O U N T A C Q U I R E D S E L E C T I V I T Y ( 1 ) 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 $ 5 . 7 $ 1 3 . 3 $ 1 7. 0 $ 3 9 . 4 $ 2 4 . 3 $ 3 1 . 7 $ 2 8 . 5 $ 3 0 . 4 $ 3 2 . 1 $ 5 7. 4 $ 6 3 . 6 $ 0 . 7 1 $ 1 . 0 2 $ 1 . 1 6 $ 4 . 6 7 $ 1 . 4 0 $ 1 . 2 6 $ 1 . 8 6 $ 1 . 5 2 $ 1 . 8 0 $ 3 . 7 2 $ 2 . 3 1 1 2 % 8 % 7 % 1 2 % 6 % 4 % 7 % 5 % 6 % 7 % 4 % ( 1 )S E L E C T I V I T Y I S C A L C U L A T E D A S T H E A M O U N T O F A C Q U I S I T I O N S A C Q U I R E D D I V I D E D B Y T H E A M O U N T O F A C Q U I S I T I O N S S O U R C E D level performance and retail operations, when available, to try to identify the client’s highest performing locations. Our team stays abreast of industry trends and frequently meets with industry management representatives to better understand our clients’ operations. The information gathered on the real estate, lease characteristics, client, and industry informs the suitable price for an investment. Our goal is to ensure the real estate that we acquire is appropriately priced relative to replacement cost and leased at rental rates that are generally in line with market rent in order to support strong long- term investment returns generated by each asset. Our Investment Committee collectively reviews these characteristics and metrics when making investment decisions. In addition, investment opportunities above a certain threshold require approval by our Board of Directors. We believe this rigorous selection process maintains the quality of our investment portfolio and supports the stability of our cash flow over time. 17 C O N S E R VA T I V E C A P I T A L S T R U C T U R E 18 Our commitment to the dividend is “Our commitment to maintaining low financial leverage, high demonstrated by the way we manage our balance sheet. We believe it is important to maintain a conservative capital structure primarily comprised of equity. At the end of 2020, our total market capitalization was $31.3 billion, of which $22.5 billion, or approximately 71.8%, was common equity. When we use debt to fund our growth, we coverage ratios and strong liquidity positioned us well during the depths of market volatility experienced in 2020. We believe our size, scale, and access to capital are competitive advantages that, by design, contribute to our resiliency during even the most challenging of circumstances. Thank you to our clients, stockholders and Realty Income team for their dedication during strive to structure it in a conservative manner. these unprecedented times.” Currently, 100% of our outstanding bonds are fixed rate and unsecured with a weighted average remaining term to maturity of 8.2 years, which closely aligns with the weighted average lease term for our portfolio of 9.0 years. As of December 31, 2020, our Net Debt-to-Adjusted EBITDAre(1) ratio was a healthy 5.3x, our fixed charge coverage ratio was 5.1x, and 100% of our debt was fixed rate. As one of only a handful of REITs with at least two ‘A’ credit ratings, our A3/A- credit ratings provide us with a low cost of public unsecured debt. In December 2020, we achieved record- low coupons in the REIT sector for 5-year and 12-year USD-denominated senior unsecured notes. Additionally, we completed our debut public offering of Sterling-denominated senior unsecured notes, achieving an effective annual yield to maturity of 1.71% due 2030. Christie Kelly Executive Vice President, Chief Financial Officer and Treasurer Ample liquidity is key for financial stability and growth. We maintain a $3.0 billion multi-currency unsecured revolving line of credit, which provides us flexibility to close on acquisitions quickly and opportunistically raise equity and/or long-term debt when capital market dynamics are most favorable to us. In 2020, we established a $1.0 billion commercial paper program, which further enhances our financial agility by providing additional access to low-cost short-term liquidity. (1)Adjusted EBITDAre is a non-GAAP financial measure. Refer to Management’s Discussion and Analysis in the Company’s 2020 Form 10-K for a definition and reconciliation to net income. “Our business model is well-situated to appeal to a diverse array of investor mandates. During 2020, the resiliency of our cash flow stream allowed us to continue increasing the dividend during the pandemic, complete another year of positive earnings growth, and quickly pivot back towards growth in the second half of the year.” Jonathan Pong Senior Vice President, Head of Corporate Finance CONS ERVATIVE CA PITA L STRUCTURE 71.8% COMMON EQUITY AT 1 2/3 1/2 071.8+28.2 28.2% DEBT 19 D E P E N D A B L E M O N T H LY D I V I D E N D S 20 As The Monthly Dividend Company®, we Since our company’s listing on the NYSE in remain committed to operating our company 1994, we have increased the dividend every year in a manner that provides our shareholders at a compound average annual growth rate of with dependable monthly dividends that increase over time. Every business decision we make is focused on positioning and preparing approximately 4.4% and have never reduced the dividend. As of year-end, we are proud to be one of only three REITs and 65 total companies our portfolio and balance sheet to continue in the S&P 500 Dividend Aristocrats® index, generating predictable cash flow. The dividend which includes S&P 500 constituents that have is sacrosanct. Our commitment is evidenced increased their dividend every year for the last by our track record of dividend performance. 25 consecutive years. “As I reflect on my 30+ year tenure at the company, I continue to be “We’re extremely proud of our team members. At a time of great impressed by the unparalleled dedication, commitment and mission uncertainty, we came together and made Realty Income a better shared by my fellow team members that has resulted in the company’s place to work. We transitioned our normal day-to-day, and started impressive growth and success over the many years. More recently I have to approach our roles and responsibilities in a new way with a fresh been excited to see the growth of the company’s ESG initiatives as perspective. We took the opportunity to invent new processes, these values continue to touch every part of the organization, and strengthen our client relationships, and build more meaningful I am inspired by the strategic direction taken in this regard.” teams – that are united and resilient.” Michael R. Pfeiffer Executive Vice President, Chief Administrative Officer Shannon Kehle Senior Vice President, Human Resources CONSISTEN T DIVIDEND GROWTH AN NUALI ZED DIV IDE NDS PE R S HA RE AN D D IVI DEN D I N CR EASES (1) 4.4% COMPOUND AVERAGE ANNUAL GROWTH RATE 93 CONSECUTIVE QUARTERLY INCREASES 109 DIVIDEND INCREASES SINCE 1994 NYSE LISTING $2.81 $0.90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 ( 1 )A N N U A L I Z E D D I V I D E N D A M O U N T R E F L E C T S T H E D E C E M B E R D E C L A R E D D I V D I E N D R AT E P E R S H A R E M U LT I P L I E D B Y 1 2 21 S E L E C T F I N A N C I A L D A T A ( 1 ) 23 CONSOLIDATED BALANCE SHEETS 24 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 25 CONSOLIDATED STATEMENTS OF EQUITY 26 CONSOLIDATED STATEMENTS OF CASH FLOWS 27 REALTY INCOME PERFORMANCE VS. MAJOR STOCK INDICES (1) This financial data is derived from our audited financial statements found in the company’s 2020 Form 10-K 22 REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS At December 31, 2020 and 2019 (Dollars in thousands, except share data) ASSETS Real estate held for investment, at cost: Land Buildings and improvements Total real estate held for investment, at cost Less accumulated depreciation and amortization Real estate held for investment, net Real estate and lease intangibles held for sale, net Cash and cash equivalents Accounts receivable, net Lease intangible assets, net Other assets, net Total assets LIABILITIES AND EQUITY Distributions payable Accounts payable and accrued expenses Lease intangible liabilities, net Other liabilities Line of credit payable and commercial paper Term loans, net Mortgages payable, net Notes payable, net Total liabilities Commitments and contingencies Stockholders’ equity: 2020 2019 $ 6,318,926 $ 5,684,034 14,696,712 21,015,638 13,833,882 19,517,916 (3,549,486) (3,117,919) 17,466,152 16,399,997 19,004 824,476 285,701 1,710,655 434,297 96,775 54,011 181,969 1,493,383 328,661 $ 20,740,285 $ 18,554,796 $ 85,691 $ 76,728 241,336 321,198 256,863 - 249,358 300,360 8,267,749 9,722,555 177,039 333,103 262,221 704,335 499,044 410,119 6,288,049 8,750,638 Common stock and paid in capital, par value $0.01 per share, 740,200,000 shares authorized, 361,303,445 and 333,619,106 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively Distributions in excess of net income Accumulated other comprehensive loss Total stockholders’ equity Noncontrolling interests Total equity Total liabilities and equity 14,700,050 12,873,849 (3,659,933) (3,082,291) (54,634) (17,102) 10,985,483 9,774,456 32,247 29,702 11,017,730 9,804,158 $ 20,740,285 $ 18,554,796 The accompanying notes to consolidated financial statements are an integral part of these statements and may be found in the company’s 2020 Form 10-K. 23 REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Years ended December 31, 2020, 2019 and 2018 (Dollars in thousands, except per share data) REVENUE Rental (including reimbursable) $ 1,639,533 $ 1,484,818 $ 1,321,546 2020 2019 2018 Other Total revenue EXPENSES Depreciation and amortization Interest Property (including reimbursable) General and administrative Income taxes Provisions for impairment Total expenses Gain on sales of real estate Foreign currency and derivative gains, net Loss on extinguishment of debt Net income Net income attributable to noncontrolling interests 12,092 6,773 6,292 1,651,625 1,491,591 1,327,838 677,038 309,336 104,603 73,215 14,693 147,232 593,961 290,991 88,585 66,483 6,158 40,186 1,326,117 1,086,364 76,232 4,585 (9,819) 396,506 (1,020) 29,996 2,255 — 437,478 (996) 539,780 266,020 66,326 84,148 5,340 26,269 987,883 24,643 — — 364,598 (984) Net income available to common stockholders $ 395,486 $ 436,482 $ 363,614 Amounts available to common stockholders per common share: Net income Basic Diluted Weighted average common shares outstanding: Basic Diluted Other comprehensive income: $ $ 1.15 1.14 $ $ 1.38 1.38 $ $ 1.26 1.26 345,280,126 315,837,012 289,427,430 345,415,258 316,159,277 289,923,984 Net income available to common stockholders $ 395,486 $ 436,482 $ 363,614 Foreign currency translation adjustment Unrealized loss on derivatives, net (2,606) (34,926) 186 (9,190) — (8,098) Comprehensive income attributable to the Company $ 357,954 $ 427,478 $ 355,516 The accompanying notes to consolidated financial statements are an integral part of these statements and may be found in the company’s 2020 Form 10-K. 24 REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY Years ended December 31, 2020, 2019 and 2018 (Dollars in thousands) Shares of common stock Common stock and paid in capital Distributions in excess of net income Accumulated other comprehensive loss Balance, December 31, 2017 284,213,685 $ 9,624,264 $ (2,253,763) $ Net income Other comprehensive loss Distributions paid and payable — — — — - — Share issuances, net of costs 19,304,878 1,119,297 Contributions by noncontrolling interests Redemption of common units Reallocation of equity - 88,182 — Share-based compensation, net 135,345 - 2,829 (774) 8,879 Total stockholders’ equity Noncontrolling interests Total equity $ 7,371,501 $ 19,207 $ 7,390,708 — — 363,614 363,614 - (8,098) (8,098) 984 — 364,598 (8,098) (768,506) — — — — — — — — — — — (768,506) (1,996) (770,502) 1,119,297 — 1,119,297 - 18,848 18,848 2,829 (5,581) (2,752) (774) 8,879 774 — — 8,879 Balance, December 31, 2018 303,742,090 $ 10,754,495 $ (2,657,655) $ (8,098) $ 8,088,742 $ 32,236 $ 8,120.978 Net income Other comprehensive loss Distributions paid and payable — — — — — — Share issuances, net of costs 29,818,978 2,117,983 Contributions to noncontrolling interests Redemption of common units Reallocation of equity — - — Share-based compensation, net 58,038 — (6,866) (653) 8,890 436,482 — 436,482 — (9,004)) (9,004) 996 — 437,478 (9,004) (861,118) — — — — — — — — — — — (861,118) (1,296) (862,414) 2,117,983 — 2,117,983 — 11,370 11.370 (6,866) (14,257) (21,123) (653) 8,890 653 — — 8,890 Balance, December 31, 2019 333,619,106 $ 12,873,849 $ (3,082,291) $ (17,102) $ 9,774,456 $ 29,702 $ 9,804,158 Net income Other comprehensive loss Distributions paid and payable — — — — — — Share issuances, net of costs 27,564,163 1,817,978 Contributions by noncontrolling interests Reallocation of equity — — — 47 Share-based compensation, net 120,176 8,176 395,486 — 395,486 1,020 396,506 — (37,532) (37,532) — (37,532) (973,128) — — — — — — — — — (973,128) (1,596) (974,724) 1,817,978 — 1,817,978 — 47 8,176 3,168 3,168 (47) — — 8,176 Balance, December 31, 2020 361,303,445 $ 14,700,050 $ (3,659,933) $ (54,634) $ 10,985,483 $ 32,247 $ 11,017,730 The accompanying notes to consolidated financial statements are an integral part of these statements and may be found in the company’s 2020 Form 10-K. 25 REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Years ended December 31, 2020, 2019 and 2018 (Dollars in thousands) CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to net income: Depreciation and amortization Loss on extinguishment of debt Amortization of share-based compensation Non-cash revenue adjustments Amortization of net premiums on mortgages payable Amortization of net premiums on notes payable Amortization of deferred financing costs Loss (gain) on interest rate swaps Foreign currency and derivative gains, net Gain on sales of real estate Provisions for impairment on real estate Change in assets and liabilities Accounts receivable and other assets Accounts payable, accrued expenses and other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Investment in real estate Improvements to real estate, including leasing costs Proceeds from sales of real estate Insurance and other proceeds received Collection of loans receivable Non-refundable escrow deposits Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash distributions to common stockholders Borrowings on line of credit and commercial paper program Payments on line of credit and commercial paper program Principal payment on term loan Proceeds from notes and bonds payable issued Principal payment on notes payable Proceeds from term loan Payments upon extinguishment of debt Principal payments on mortgages payable Proceeds from common stock offerings, net Proceeds from dividend reinvestment and stock purchase plan Proceeds from At-the-Market (ATM) program, net Redemption of common units Distributions to noncontrolling interests Net receipts on derivative settlements Debt issuance costs Other items, including shares withheld upon vesting Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, beginning of year Cash, cash equivalents and restricted cash, end of year 2020 2019 2018 $ 396,506 $ 437,478 $ 364,598 677,038 9,819 16,503 (3,562) (1,258) (1,754) 11,003 4,353 (4,585) (76,232) 147,232 (79,240) 19,720 1,115,543 (2,283,130) (8,708) 259,459 — — — (2,032,379) (964,167) 3,528,042 (4,246,755) (250,000) 2,200,488 (250,000) — (9,445) (108,789) 728,883 9,109 1,094,938 — (1,596) 4,106 (19,456) (23,279) 1,692,079 4,431 779,674 71,005 $ 850,679 593,961 — 13,662 (9,338) (1,415) (995) 9,795 2,752 (2,255) (29,996) 40,186 (8,954) 24,056 1,068,937 (3,572,581) (23,536) 108,911 — — (14,603) (3,501,809) (852,134) 2,816,632 (2,365,368) (70,000) 897,664 — — — (20,723) 845,061 8,437 1,264,518 (21,123) (1,342) 4,881 (9,129) (4,772) 2,492,602 (9,796) 49,934 21,071 $ 71,005 539,780 — 27,267 (7,835) (1,520) (1,256) 9,021 (2,733) — (24,643) 26,269 (6,901) 18,695 940,742 (1,769,335) (25,350) 142,286 7,648 5,267 (200) (1,639,684) (761,582) 1,774,000 (1,632,000) (125,866) 497,500 (350,000) 250,000 — (21,905) — 9,114 1,125,364 (2,752) (1,930) - (18,685) (33,387) 707,871 — 8,929 12,142 $ 21,071 The accompanying notes to consolidated financial statements are an integral part of these statements and may be found in the company’s 2020 Form 10-K. 26 REALTY INCOME PERFORMANCE VS. MAJOR STOCK INDICES Realty Income Equity REIT Index(1) Dow Jones Industrial Average S&P 500 NASDAQ Composite DIVIDEND YIELD TOTAL RETURN (2) DIVIDE ND YIELD TOTAL RETURN ( 3) D I VI D EN D YI E LD TOTA L RE TU RN ( 3) D I VI D EN D YI E LD TOTA L RE TU RN ( 3) D I VI D EN D YI E LD TOTAL RET URN (4) 10.5% 8.3% 10.8% 42.0% 7.7% 7.4% 0.0% 15.3% 2.9% 2.4% (1.6%) 36.9% 2.9% 2.3% (1.2%) 37.6% 0.5% 0.6% (1.7%) 39.9% 7.9% 15.4% 6.1% 35.3% 2.2% 28.9% 2.0% 23.0% 0.2% 22.7% 7.5% 14.5% 5.5% 20.3% 1.8% 24.9% 1.6% 33.4% 0.5% 21.6% 8.2% 5.5% 7.5% (17.5%) 1.7% 18.1% 1.3% 28.6% 0.3% 39.6% 10.5% (8.7%) 8.7% (4.6%) 1.3% 27.2% 1.1% 21.0% 0.2% 85.6% 8.9% 31.2% 7.5% 26.4% 1.5% (4.7%) 1.2% (9.1%) 0.3% (39.3%) 7.8% 27.2% 7.1% 13.9% 1.9% (5.5%) 1.4% (11.9%) 0.3% (21.1%) 6.7% 26.9% 7.1% 3.8% 2.6% (15.0%) 1.9% (22.1%) 0.5% (31.5%) 6.0% 21.0% 5.5% 37.1% 2.3% 28.3% 1.8% 28.7% 0.6% 50.0% 5.2% 32.7% 4.7% 31.6% 2.2% 5.6% 1.8% 10.9% 0.6% 8.6% 6.5% (9.2%) 4.6% 12.2% 2.6% 1.7% 1.9% 4.9% 0.9% 1.4% 5.5% 34.8% 3.7% 35.1% 2.5% 19.0% 1.9% 15.8% 0.8% 9.5% 6.1% 3.2% 4.9% (15.7%) 2.7% 8.8% 2.1% 5.5% 0.8% 9.8% 7.3% (8.2%) 7.6% (37.7%) 3.6% (31.8%) 3.2% (37.0%) 1.3% (40.5%) 6.6% 19.3% 3.7% 28.0% 2.6% 22.6% 2.0% 26.5% 1.0% 43.9% 5.1% 38.6% 3.5% 27.9% 2.6% 14.0% 1.9% 15.1% 1.2% 16.9% 5.0% 7.3% 3.8% 8.3% 2.8% 8.3% 2.3% 2.1% 1.3% (1.8%) 4.5% 20.1% 3.5% 19.7% 3.0% 10.2% 2.5% 16.0% 2.6% 15.9% 5.8% (1.8%) 3.9% 2.9% 2.3% 29.6% 2.0% 32.4% 1.4% 38.3% 4.6% 33.7% 3.6% 28.0% 2.3% 10.0% 2.0% 13.7% 1.3% 13.4% 4.4% 13.0% 3.9% 2.8% 2.6% 0.2% 2.2% 1.4% 1.4% 5.7% 4.2% 16.0% 4.0% 8.6% 2.5% 16.5% 2.1% 12.0% 1.4% 7.5% 4.5% 3.6% 3.9% 8.7% 2.2% 28.1% 1.9% 21.8% 1.1% 28.2% 4.2% 15.2% 4.4% (4.0%) 2.5% (3.5%) 2.2% (4.4%) 1.4% (3.9%) 3.7% 21.1% 3.7% 28.7 2.4% 25.3 1.9% 31.5 1.1% 35.2% 4.5% (11.8%) 3.6% (5.1%) 1.9% 9.7% 1.5% 18.4% 0.9% 43.6% 10/18–12/31 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 COMPOUND AVERAGE ANNUAL TOTAL RETURN(5) 15.3% 10.1% 10.7% 10.4% 11.4% Note: All of these dividend yields are calculated as annualized dividends based on the last dividend paid in applicable time period divided by the closing price as of period end. Dividend yield sources: Nareit website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream / Thomson Financial. (1) FTSE Nareit US Equity REIT Index, as per Nareit website. (2) Calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period. Does not include reinvestment of dividends for the annual percentages. (3) Includes reinvestment of dividends. Source: Nareit website and Factset. (4) Price only index, does not include dividends as NASDAQ did not report total return metrics for the entirety of the measurement period. Source: Factset. (5) All of these Compound Average Annual Total Return rates are calculated in the same manner: from Realty Income’s NYSE listing on October 18, 1994 through December 31, 2020, and (except for NASDAQ) assuming reinvestment of dividends. Past performance does not guarantee future performance. Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future. 27 TOTAL RETURN PERFORMAN CE REALTY INCOME CORPORATION RUSSELL 2000 S&P 500 REALTY INCOME PEER GROUP INDEX* E U L A V X E D N I 220 200 180 160 140 120 100 80 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 P E R I O D E N D I N G I N D E X 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 Realty Income Corporation 100.00 115.78 120.04 139.16 168.74 149.23 Russell 2000 S&P 500 100.00 121.31 139.08 123.77 155.35 186.36 100.00 111.96 136.40 130.40 171.50 203.05 Realty Income Peer Group Index* 100.00 101.82 103.88 104.07 121.83 104.98 * R E A LT Y I N C O M E P E E R G R O U P I N D E X C O N S I S T S O F 1 8 C O M PA N I E S W I T H A N I M P L I E D M A R K E T C A P I TA L I Z AT I O N B E T W E E N $ 7.1 B I L L I O N A N D $ 4 0 . 3 B I L L I O N A S O F D E C E M B E R 3 1 , 2 0 2 0 . 28 C O M P A N Y I N F O R M A T I O N B O A R D O F D I R E C T O R S Kathleen R. Allen, Ph.D. Founding Director, Center for Technology Commercialization, University of Southern California A. Larry Chapman Retired, Executive Vice President, Head of Commercial Real Estate, Wells Fargo Bank Reginald H. Gilyard Senior Advisor, Boston Consulting Group, Inc Priya Cherian Huskins Senior Vice President and Partner, Woodruff-Sawyer & Co. Gregory T. McLaughlin Chief Executive Officer, PGA TOUR First Tee Foundation Gerardo I. Lopez Operating Partner and Head of the Operating Group, SoftBank Investment Advisers Michael D. McKee Non-Executive Chairman Principal, The Contrarian Group Ronald L. Merriman Retired Vice Chair and Partner, KPMG LLP Sumit Roy President & Chief Executive Officer E X E C U T I V E & S E N I O R O F F I C E R S Neil Abraham Executive Vice President, Chief Strategy Officer Michelle Bushore Executive Vice President, Chief Legal Officer, General Counsel and Secretary TJ Chun Senior Vice President, Investments & Head of Asset Management Janeen S. Drakulich Senior Vice President, Development Ross Edwards Senior Vice President, Leasing & Real Estate Operations Benjamin N. Fox Executive Vice President, Asset Management & Real Estate Operations Mark Hagan Executive Vice President, Chief Investment Officer Shannon Jensen Senior Vice President, Associate General Counsel and Assistant Secretary Christie Kelly Executive Vice President, Chief Financial Officer and Treasurer Shannon Kehle Senior Vice President, Human Resources Scott Kohnen Senior Vice President, Research Ed Noguera Managing Director, Head of Europe A D D I T I O N A L O F F I C E R S Greg Azar Vice President, Head of Property Management Goran Bistric Vice President, Strategy Steve Burchett Vice President, Senior Legal Counsel Kyle Campbell Vice President, Senior Legal Counsel, Risk Management Elizabeth Cate Vice President, Asset Management Jill Cossasboom Vice President, Assistant Controller, Systems John R. Couvillion Vice President, Development Austin DeLana Vice President, International Investments Kristin Ferrell Vice President, Head of Lease Administration Jonathan Kresser Vice President, Finance Operations Michael Lee Vice President, Tax Director April Little Vice President, Acquisitions Sean P. Nugent Senior Vice President, Controller Michael R. Pfeiffer Executive Vice President, Chief Administrative Officer Jonathan Pong Senior Vice President, Head of Corporate Finance Sumit Roy President & Chief Executive Officer Lori Satterfield Senior Vice President, Associate General Counsel, Asset Management & Real Estate Operations Cary Wenthur Senior Vice President, Managing Director - Acquisitions Garret Pavelko Vice President, Asset Management, Office & Industrial Matt Renner Vice President, Assistant Controller, Corporate Accounting Joe Stewart Vice President, Information Technology Ann Zhang Vice President, Assistant Controller, Property Accounting T R A N S F E R A G E N T For shareholder administration and account information, please visit Computershare’s website at www.computershare.com or call toll-free at 1-877-218-2434. I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M KPMG LLP San Diego, CA F O R A D D I T I O N A L C O R P O R A T E I N F O R M A T I O N Visit the Realty Income corporate website at www.realtyincome.com Contact your financial advisor, or Realty Income at: 877-924-6266 ir@realtyincome.com Copies of Realty Income’s Annual Report are available upon written request to: REALTY INCOME CORPORATION Attention: Investor Relations 11995 El Camino Real San Diego, CA 92130 Re R E A L T Y I N C O M E 1 1 9 9 5 E L C A M I N O R E A L S A N D I E G O , C A 9 2 1 3 0 W W W . R E A L T Y I N C O M E . C O M 

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