Realty Income Reports Asset Acquisition, New Debt Obligations

TL;DR

**Realty Income just acquired assets and took on new debt, signaling active portfolio changes.**

AI Summary

Realty Income Corp. filed an 8-K on January 24, 2024, reporting several key events that occurred on January 22, 2024, including entry into a material definitive agreement, completion of an acquisition or disposition of assets, and the creation of direct financial obligations. This indicates the company is actively managing its portfolio and debt structure, which could impact future earnings and dividend stability for shareholders. Investors should note the various debt maturities ranging from 2027 to 2042, as these obligations will require ongoing financial management.

Why It Matters

This filing signals Realty Income's active portfolio management and new financial obligations, which could affect its future cash flow and ability to maintain or grow its dividend, directly impacting shareholder returns.

Risk Assessment

Risk Level: medium — The filing indicates new financial obligations and asset changes, which introduce both opportunities and potential risks depending on the specifics of the agreements and acquisitions, which are not fully detailed here.

Analyst Insight

A smart investor would monitor Realty Income's upcoming earnings reports for details on the acquired assets and the impact of the new debt on cash flow and dividend coverage, especially given the range of interest rates and maturities on the new obligations.

Key Numbers

• 2027 — Maturity Year (for Notes with 1.125% and 1.875% interest)
• 2030 — Maturity Year (for Notes with 1.625% and 4.875% interest)
• 2031 — Maturity Year (for Notes with 5.750% interest)
• 2033 — Maturity Year (for Notes with 1.750% interest)
• 2034 — Maturity Year (for Notes with 5.125% interest)
• 2039 — Maturity Year (for Notes with 6.000% interest)
• 2042 — Maturity Year (for Notes with 2.500% interest)

Key Players & Entities

• REALTY INCOME CORP (company) — the registrant filing the 8-K
• January 22, 2024 (date) — date of the earliest event reported
• January 24, 2024 (date) — date the 8-K was filed
• Maryland (company) — state of incorporation for Realty Income Corp.
• 11995 El Camino Real, San Diego, California 92130 (company) — business address of Realty Income Corp.
• 858-284-5000 (company) — telephone number of Realty Income Corp.

Forward-Looking Statements

• Realty Income's debt-to-equity ratio will increase due to the new financial obligations. (REALTY INCOME CORP) — medium confidence, target: 2024-12-31
• The company's dividend payout will remain stable or increase, supported by new asset acquisitions. (REALTY INCOME CORP) — medium confidence, target: 2025-01-01

FAQ

Key Financial Figures

• $0.01 — e On Which Registered Common Stock, $0.01 Par Value O New York Stock Exchange
• $291,706,000 — ed and subsequently cancelled: i. U.S. $291,706,000 aggregate principal amount of Spirit 20
• $292,694,000 — amount of Spirit 2026 Notes; ii. U.S. $292,694,000 aggregate principal amount of Spirit 20
• $443,774,000 — mount of Spirit 2027 Notes; iii. U.S. $443,774,000 aggregate principal amount of Spirit 20
• $391,727,000 — amount of Spirit 2028 Notes; iv. U.S. $391,727,000 aggregate principal amount of Spirit 20
• $484,540,000 — amount of Spirit 2029 Notes; v. U.S. $484,540,000 aggregate principal amount of Spirit 20
• $445,040,000 — amount of Spirit 2030 Notes; vi. U.S. $445,040,000 aggregate principal amount of Spirit 20
• $347,579,000 — t of Spirit 2031 Notes; and vii. U.S. $347,579,000 aggregate principal amount of Spirit 20
• $52,940,000 — 2 Notes. Following such cancellation, $52,940,000 aggregate principal amount of Spirit No
• $291,674,000 — Exchange Offers, the Company issued (i) $291,674,000 aggregate principal amount of 4.450% No
• $292,678,000 — ember 15, 2026 (the "2026 Notes"), (ii) $292,678,000 aggregate principal amount of 3.200% No
• $443,768,000 — uary 15, 2027 (the "2027 Notes"), (iii) $443,768,000 aggregate principal amount of 2.100% No
• $391,726,000 — March 15, 2028 (the "2028 Notes"), (iv) $391,726,000 aggregate principal amount of 4.000% No
• $445,035,000 — nuary 15, 2030 (the "2030 Notes"), (vi) $445,035,000 aggregate principal amount of 3.200% No
• $25,000,000 — aggregate principal amount in excess of $25,000,000 or under any mortgage, indenture or ins

Filing Documents

• tm243768d1_8k.htm (8-K) — 117KB
• tm243768d1_ex4-9.htm (EX-4.9) — 35KB
• tm243768d1_ex4-18.htm (EX-4.18) — 645KB
• tm243768d1_ex10-1.htm (EX-10.1) — 804KB
• tm243768d1_ex10-2.htm (EX-10.2) — 823KB
• tm243768d1_ex99-1.htm (EX-99.1) — 12KB
• tm243768d1_ex10-1img001.jpg (GRAPHIC) — 3KB
• tm243768d1_ex10-2img002.jpg (GRAPHIC) — 3KB
• tm243768d1_ex99-1img001.gif (GRAPHIC) — 3KB
• tm243768d1_ex99-1img001.jpg (GRAPHIC) — 5KB
• 0001104659-24-006077.txt ( ) — 3279KB
• o-20240122.xsd (EX-101.SCH) — 5KB
• o-20240122_def.xml (EX-101.DEF) — 29KB
• o-20240122_lab.xml (EX-101.LAB) — 43KB
• o-20240122_pre.xml (EX-101.PRE) — 28KB
• tm243768d1_8k_htm.xml (XML) — 12KB

01

Item 1.01. Entry into a Material Definitive Agreement Debt Exchange Offer On January 23, 2024, Realty Income completed its previously announced debt exchange offers (the "Exchange Offers") to exchange all validly tendered and accepted 4.450% Notes due 2026 (the "Spirit 2026 Notes"), 3.200% Notes due 2027 (the "Spirit 2027 Notes"), 2.100% Notes due 2028 (the "Spirit 2028 Notes"), 4.000% Notes due 2029 (the "Spirit 2029 Notes"), 3.400% Notes due 2030 (the "Spirit 2030 Notes"), 3.200% Notes due 2031 (the "Spirit 2031 Notes") and 2.700% Notes due 2032 (the "Spirit 2032 Notes" and, together with the Spirit 2026 Notes, Spirit 2027 Notes, Spirit 2028 Notes, Spirit 2029 Notes, Spirit 2030 Notes and Spirit 2031 Notes, the "Spirit Notes"), issued by Spirit Realty, L.P. ("Spirit OP"), a wholly owned subsidiary of the Company following the Merger, for new Notes issued by the Company (as described below). Pursuant to the Exchange Offers, the aggregate principal amounts of the Spirit Notes set forth below were tendered and subsequently cancelled: i. U.S. $291,706,000 aggregate principal amount of Spirit 2026 Notes; ii. U.S. $292,694,000 aggregate principal amount of Spirit 2027 Notes; iii. U.S. $443,774,000 aggregate principal amount of Spirit 2028 Notes; iv. U.S. $391,727,000 aggregate principal amount of Spirit 2029 Notes; v. U.S. $484,540,000 aggregate principal amount of Spirit 2030 Notes; vi. U.S. $445,040,000 aggregate principal amount of Spirit 2031 Notes; and vii. U.S. $347,579,000 aggregate principal amount of Spirit 2032 Notes. Following such cancellation, $52,940,000 aggregate principal amount of Spirit Notes remain outstanding across the seven series of Spirit Notes (the "Remaining Spirit Notes"). Concurrently with settlement of the Exchange Offers, Merger Sub and Spirit OP entered into the eighth supplemental indenture, dated as of January 23, 2024 (the "Spirit Eighth Supplemental Indenture"), by and among Spirit OP, Merger Sub, as guarantor, and

01

Item 2.01. Completion of Acquisition or Disposition of Assets On January 23, 2024, the Merger was consummated. Pursuant to the Merger Agreement, at the Effective Time, each outstanding share of Spirit common stock, par value $0.05 per share (the "Spirit Common Stock") (other than the Excluded Common Shares (as defined in the Merger Agreement)) automatically converted into 0.762 of a newly issued share of common stock (the "Exchange Ratio"), par value $0.01 per share, of Realty Income (the "Realty Income Common Stock"), subject to adjustment as set forth in the Merger Agreement, and cash in lieu of fractional shares, and (ii) each outstanding share of Spirit's 6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the "Spirit Series A Preferred Stock"), converted into the right to receive one share of newly issued Realty Income 6.000% Series A Cumulative Redeemable Preferred Stock ("Realty Income Series A Preferred Stock"), having substantially the same terms as the Spirit Series A Preferred Stock. Cash will be paid in lieu of fractional shares of Realty Income Common Stock. In addition, pursuant to the terms and subject to the conditions of the Merger Agreement, as of the Effective Time, each outstanding Spirit equity-based award was treated as follows: (I) each Spirit restricted stock award that was outstanding as of immediately prior to the Effective Time was canceled and automatically converted into the right to receive (i) a number of newly issued shares of Realty Income Common Stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (A) the number of shares of Spirit Common Stock subject to such award as of immediately prior to the Effective Time by (B) the Exchange Ratio, and (ii) cash consideration in respect of the fractional share of Realty Income Common Stock to which the holder would otherwise have been entitled; and (II) each Spirit performance share award that was outstanding

03

Item 2.03. Creation of Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

03

Item 3.03. Material Modifications to Rights of Security Holders On January 19, 2024, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary, also referred to as the Articles Supplementary, to its charter, classifying and designating 6,900,000 of its authorized capital stock as shares Realty Income Series A Preferred Stock. Holders of Realty Income Series A Preferred Stock, when and as authorized by the Company's Board of Directors and declared by it, are entitled to cumulative cash dividends at the rate of 6.000% per annum of the $25.00 liquidation preference per share, equivalent to an annual rate of $1.50 per share. Dividends are payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning on March 29, 2024. Dividends will accrue and be cumulative from and including January 1, 2024. If the Company is liquidated, dissolved or wound up, holders of shares of the Realty Income Series A Preferred Stock will be entitled to receive a liquidation preference of $25.00 per share, plus any accrued and unpaid dividends (whether or not authorized or declared) up to but excluding the date of payment, before any distribution or payment is made to holders of Common Stock and any other class or series of capital stock ranking junior to the Realty Income Series A Preferred Stock, none of which exist on the date hereof. The rights of holders of shares of the Realty Income Series A Preferred Stock to receive their liquidation preference will be subject to the proportionate rights of any other class or series of capital stock ranking on parity with the Realty Income Series A Preferred Stock as to liquidation, and junior to the rights of any class or series of capital stock expressly designated as ranking senior to the Realty Income Series A Preferred Stock. On and after January 23, 2024, the Company may, at its option, redeem the Realty Income Series A Preferred Stock, in

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