DEFM14A 1 tm2120273-1_defm14a.htm DEFM14A tm2120273-1_defm14a - none - 29.9064195s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant   ☒
Filed by a Party other than the Registrant   ☐
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Preliminary Proxy Statement

Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12
VEREIT, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)
Title of each class of securities to which transaction applies:
   
(2)
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(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
   
(4)
Proposed maximum aggregate value of transaction:
   
(5)
Total fee paid:
   

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
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 Filed Pursuant to Rule 424(b)(3)
 Registration No. 333-256772
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
The boards of directors of Realty Income Corporation, a Maryland corporation (which we refer to as “Realty Income”), and VEREIT, Inc., a Maryland corporation (which we refer to as “VEREIT”), have each approved an Agreement and Plan of Merger, dated as of April 29, 2021 (which we refer to, as amended from time to time, as the “Merger Agreement”), by and among VEREIT, VEREIT Operating Partnership, L.P., a Delaware limited partnership (which we refer to as “VEREIT OP”), Realty Income, Rams MD Subsidiary I, Inc., a Maryland corporation and wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 1”), and Rams Acquisition Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 2”). Following the Mergers (defined below) and assuming the consummation of the Spin-Off (defined below), Realty Income’s portfolio is expected to encompass approximately 10,300 primarily single-tenant, net lease commercial real estate properties located in all U.S. states, Puerto Rico and the U.K., with an estimated total portfolio annualized contractual rent of approximately $2.5 billion, based on a combined portfolio as of December 31, 2020.
The combination of Realty Income and VEREIT will be accomplished through (i) a merger of Merger Sub 2 with and into VEREIT OP, with VEREIT OP continuing as the surviving entity (which we refer to as the “Partnership Merger”) and (ii) immediately thereafter, a merger of VEREIT with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation (which we refer to as the “Merger” and, together with the Partnership Merger, the “Mergers”). In connection with the Merger, each VEREIT common stockholder will have the right to receive 0.705 newly issued shares of Realty Income common stock, par value $0.01 per share (which we refer to as “Realty Income common stock”), for each share of VEREIT common stock, par value $0.01 per share (which we refer to as “VEREIT common stock”), that they own immediately prior to the effective time of the Merger (which such ratio we refer to as the “Exchange Ratio” and such effective time of the Merger as the “Merger Effective Time”). The Exchange Ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Merger. Realty Income common stock and VEREIT common stock are each traded on the New York Stock Exchange (which we refer to as the “NYSE”) under the ticker symbols “O” and “VER,” respectively. Based on the closing price of Realty Income common stock on the NYSE of $68.60 on April 28, 2021, the last trading day before public announcement of the proposed transactions, the Exchange Ratio represented approximately $48.36 in Realty Income common stock for each share of VEREIT common stock, which represented a premium of approximately 17% to the closing price per share of VEREIT common stock as of April 28, 2021. Based on the closing price of Realty Income common stock on the NYSE of $67.48 on June 22, 2021, the latest practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio represented approximately $47.57 in Realty Income common stock for each share of VEREIT common stock. The value of the consideration will fluctuate with changes in the market price of Realty Income common stock. We urge you to obtain current market quotations of Realty Income common stock and VEREIT common stock.
In addition, pursuant to the terms and subject to the conditions of the Merger Agreement, at the date and time the Partnership Merger becomes effective (the “Partnership Merger Effective Time”), (i) each outstanding common partnership unit of VEREIT OP owned by a partner of VEREIT OP (the “VEREIT OP common units”) other than VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions set forth in the Merger Agreement, will be converted into the number of newly issued shares of Realty Income common stock equal to the Exchange Ratio, (ii) each outstanding VEREIT OP Series F Preferred Unit that is issued and outstanding immediately prior to the Partnership Merger Effective Time (other than VEREIT OP Series F Preferred Units owned by VEREIT), subject to the terms and conditions of the Merger Agreement, will be converted into the right to receive $25.00 plus all accumulated and unpaid distributions to and including the day that is set forth in the Series F Preferred Stock Redemption Notice (defined below) and (iii) each VEREIT OP Series F Preferred Unit owned by VEREIT and each common partnership unit of VEREIT OP owned by VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions of the Merger Agreement, will remain outstanding as partnership interests in the surviving entity.
Immediately prior to the Mergers, VEREIT will also issue a notice of redemption (the “Series F Preferred Stock Redemption Notice”) with respect to all of the outstanding shares of VEREIT’s 6.70% Series F Cumulative Redeemable Preferred Stock (the “VEREIT Series F Preferred Stock”) with a redemption date as set forth in the Series F Preferred Stock Redemption Notice, and Realty Income will cause funds to be deposited in escrow to pay the redemption price for each share of VEREIT Series F Preferred Stock at the liquidation preference of $25.00 plus all accrued and unpaid dividends up to and including the redemption date set forth in the Series F Preferred Stock Redemption Notice.
Based upon the number of outstanding shares on June 25, 2021, we anticipate that Realty Income will issue approximately 161.74 million shares of common stock in connection with the Mergers, and will reserve approximately 1.49 million shares of common stock for issuance in respect of VEREIT equity awards that Realty Income will assume in connection with the Mergers.
Upon completion of the Mergers, based on the shares of Realty Income common stock and VEREIT common stock outstanding as of June 25, 2021, we estimate that legacy Realty Income common stockholders will own approximately 70% of the common stock of Realty Income, and legacy VEREIT common stockholders will own approximately 30% of the common stock of Realty Income.
Following the effective time of the Merger, Realty Income and VEREIT intend to contribute certain of their office properties (the “OfficeCo Properties”) to a newly formed direct or indirect wholly owned subsidiary of Realty Income (“OfficeCo,” and such contributions, the “Separation”), and for Realty Income to distribute all of the outstanding voting shares of common stock in OfficeCo to Realty Income’s stockholders (which, at that time, would also include the VEREIT stockholders as a result of the Merger) on a pro rata basis (the “OfficeCo Distribution” and, together with the Separation, the “Spin-Off”). If the Spin-Off is consummated, VEREIT and Realty Income intend for OfficeCo to operate as a separate, publicly traded REIT. Pursuant to the terms and conditions of the Merger Agreement, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is, in all respects, ready to be consummated contemporaneously with the closing of the Merger, including the U.S. Securities and Exchange Commission (“SEC”) declaring effective the Form 10 registration statement related to the Spin-Off (the “Spin-Off Condition”). However, Realty Income may, in its sole discretion, waive the Spin-Off Condition at any time, and the Spin-Off Condition shall be deemed to be automatically waived on January 29, 2022. In addition, the parties may amend the scope and terms of

the Spin-Off, and, subject to the terms and conditions of the Merger Agreement, Realty Income may elect, in its sole discretion, to retain or sell to third parties some or all of the OfficeCo Properties, and Realty Income may elect not to continue to pursue to the Spin-Off at all. Accordingly, stockholders of Realty Income and VEREIT should not rely on the consummation of the Spin-Off or any other transactions related to the OfficeCo Properties as described in this joint proxy statement/prospectus in determining whether or not to approve the proposals contemplated in this joint proxy statement/prospectus. Holders of voting stock of Realty Income and VEREIT do not need to take any action at the Realty Income or VEREIT special meeting relating to the Spin-Off.
In addition, OfficeCo intends to file a registration statement on Form 10 with the U.S. Securities and Exchange Commission registering shares of common stock of OfficeCo contemplated by the Spin-Off. The Form 10 is not incorporated by reference into this joint proxy statement/prospectus.
Realty Income and VEREIT have each scheduled special meetings of their respective stockholders to be held on August 12, 2021 in connection with the Mergers and related transactions. The Realty Income special meeting will be held virtually via live audio webcast at www.virtualshareholdermeeting.com/realty2021sm, on August 12, 2021, at 12:00 p.m. Eastern Time. The VEREIT special meeting will be held virtually via live audio webcast at www.virtualshareholdermeeting.com/VER2021SM, on August 12, 2021, at 12:00 p.m., Eastern Time.
At the special meeting of Realty Income, Realty Income stockholders will be asked to consider and vote on (i) a proposal to approve the issuance of Realty Income common stock in the Mergers pursuant to the Merger Agreement (which we refer to as the “Realty Income Issuance Proposal”), and (ii) a proposal to approve the adjournment of the Realty Income special meeting, if necessary or appropriate, to solicit additional proxies in favor of the Realty Income Issuance Proposal if there are insufficient votes at the time of such adjournment to approve such proposals (which we refer to as the “Realty Income Adjournment Proposal”).
At the special meeting of VEREIT stockholders, VEREIT stockholders will be asked to consider and vote on (i) a proposal to approve the Merger, on the terms and subject to the conditions of the Merger Agreement (which we refer to as the “VEREIT Merger Proposal”), (ii) a proposal to approve, by advisory (non-binding) vote, the compensation that may be paid or become payable to the named executive officers of VEREIT in connection with the Merger (which we refer to as the “VEREIT Compensation Proposal”) and (iii) a proposal to approve the adjournment of the VEREIT special meeting, if necessary or appropriate, to solicit additional proxies in favor of the VEREIT Merger Proposal, if there are insufficient votes at the time of such adjournment to approve the VEREIT Merger Proposal (which we refer to as the “VEREIT Adjournment Proposal”).
Your vote is very important, regardless of the number of shares you own. The record dates for determining the stockholders entitled to receive notice of, and to vote at, the special meetings are July 8, 2021, with respect to the Realty Income special meeting, and July 8, 2021, with respect to the VEREIT special meeting. The Merger cannot be completed without the approval of both Realty Income stockholders and VEREIT stockholders. We urge you to read this joint proxy statement/prospectus carefully. The obligations of Realty Income and VEREIT to complete the Merger are subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement. More information about Realty Income, VEREIT, the special meetings, the Merger Agreement and the transactions contemplated thereby, including the Mergers, is included in this joint proxy statement/prospectus. You should also consider carefully the risks that are described in theRisk Factorssection, beginning on page 26.
Whether or not you plan to attend the Realty Income special meeting or the VEREIT special meeting, please submit your proxy as soon as possible to make sure that your shares of Realty Income common stock or VEREIT common stock are represented at the applicable meeting.
The Realty Income board of directors recommends that Realty Income stockholders voteFORthe Realty Income Issuance Proposal, which approval is necessary to complete the Merger, and “FOR” the Realty Income Adjournment Proposal.
The VEREIT board of directors recommends that VEREIT stockholders voteFORthe VEREIT Merger Proposal, which approval is necessary to complete the Merger,FORthe VEREIT Compensation Proposal and “FOR” the VEREIT Adjournment Proposal.
We join our respective boards in their recommendation and look forward to the successful combination of Realty Income and VEREIT.
Sincerely,
Sincerely,
Sumit Roy
President, Chief Executive Officer
Realty Income Corporation
Glenn J. Rufrano
Chief Executive Officer
VEREIT, Inc.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined that this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated June 29, 2021 and is first being mailed to the stockholders of Realty Income and stockholders of VEREIT on or about July 9, 2021.

 
Realty Income Corporation
11995 El Camino Real,
San Diego, California 92130
(858) 284-5000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On August 12, 2021
Dear Stockholders of Realty Income Corporation:
We are pleased to invite you to attend a special meeting of stockholders of Realty Income Corporation, a Maryland corporation (which we refer to as “Realty Income”). Due to the ongoing coronavirus (COVID-19) pandemic and in order to protect the health and safety of Realty Income’s employees, stockholders and the greater community, the special meeting will be held virtually on August 12, 2021, at 12:00 p.m., Eastern Time (which we refer to as the “Realty Income special meeting”). To access the Realty Income special meeting, visit www.virtualshareholdermeeting.com/realty2021sm, and enter the unique 16-digit control number included on your voting instruction form or proxy card. Realty Income stockholders will be able to vote electronically during the Realty Income special meeting until the polls are closed. At the Realty Income special meeting, you will be asked to consider and vote upon the following matters:

a proposal to approve the issuance of Realty Income common stock, par value $0.01 per share (which we refer to as “Realty Income common stock”), in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 29, 2021, as amended (which we refer to, as amended from time to time, as the “Merger Agreement”), by and among Realty Income, VEREIT, Inc. (which we refer to as “VEREIT”), VEREIT Operating Partnership, L.P. (which we refer to as “VEREIT OP”), Rams MD Subsidiary I, Inc., a wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 1”), and Rams Acquisition Sub II, LLC, a wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 2”), pursuant to which, among other things, (i) Merger Sub 2 will merge with and into VEREIT OP (which we refer to as the “Partnership Merger”), with VEREIT OP continuing as the surviving entity, and (ii) immediately thereafter, VEREIT will merge with and into Merger Sub 1 (which we refer to as the “Merger” and, together with the Partnership Merger, the “Mergers”), with Merger Sub 1 continuing as the surviving corporation as a wholly owned subsidiary of Realty Income (which we refer to as the “Realty Income Issuance Proposal”); and

a proposal to approve the adjournment of the Realty Income special meeting, if necessary or appropriate, to solicit additional proxies in favor of the Realty Income Issuance Proposal if there are insufficient votes at the time of such adjournment to approve such proposals (which we refer to as the “Realty Income Adjournment Proposal”).
The approval by Realty Income stockholders of the Realty Income Issuance Proposal is a condition to the completion of the Merger and the other transactions contemplated by the Merger Agreement.
Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Realty Income special meeting.
Holders of record of shares of Realty Income common stock at the close of business on July 8, 2021 are entitled to notice of, and to vote at, the Realty Income special meeting and any adjournments or postponements of the Realty Income special meeting.
The Realty Income Issuance Proposal requires the affirmative vote of the majority of the votes cast by Realty Income common stockholders at the Realty Income special meeting, assuming a quorum is present. The Realty Income Adjournment Proposal requires the affirmative vote of a majority of the votes cast by Realty Income common stockholders at the Realty Income special meeting, assuming a quorum is present.
Your vote is important. Whether or not you expect to attend the Realty Income special meeting, we urge you to authorize a proxy to vote your shares as promptly as possible by: (1) accessing the Internet at
 

 
www.proxyvote.com; (2) calling (800) 690-6903 for those who hold shares in their own name or (800) 454-8683 for shares held in “street name”; or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the Realty Income special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the record holder. In lieu of receiving a proxy card, participants in certain benefit plans of Realty Income have been furnished with voting instruction cards, which are described in greater detail in the accompanying joint proxy statement/prospectus.
By Order of the Board of Directors,
Michelle Bushore
Executive Vice President, Chief Legal Officer, General Counsel & Secretary
June 29, 2021
San Diego, California
 

 
VEREIT, Inc.
2325 E. Camelback Road, 9th Floor
Phoenix, Arizona 85016
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On August 12, 2021
Dear Stockholders of VEREIT, Inc.:
We are pleased to invite you to attend a special meeting of stockholders of VEREIT, Inc., a Maryland corporation (which we refer to as “VEREIT”). Due to the ongoing coronavirus (COVID-19) pandemic and in order to protect the health and safety of VEREIT’s employees, stockholders and the greater community, the special meeting will be held virtually on August 12, 2021, at 12:00 p.m., Eastern Time (which we refer to as the “VEREIT special meeting”). To access the VEREIT special meeting, visit www.virtualshareholdermeeting.com/VER2021SM and enter the unique 16-digit control number included on your voting instruction form or proxy card. VEREIT stockholders will be able to vote electronically during the VEREIT special meeting. At the VEREIT special meeting, you will be asked to consider and vote upon the following matters:

a proposal to approve the merger of VEREIT with and into Rams MD Subsidiary I, Inc. (which we refer to as the “Merger Sub 1”), with Merger Sub 1 continuing its existence as a wholly owned subsidiary of Realty Income Corporation (which we refer to as “Realty Income”), on the terms and subject to the conditions of the Agreement and Plan of Merger, dated as of April 29, 2021, as amended (which we refer to, as amended from time to time, as the “Merger Agreement”), by and among VEREIT, VEREIT Operating Partnership, L.P., Realty Income, Merger Sub 1 and Rams Acquisition Sub II, LLC, as more fully described in the enclosed proxy statement (which we refer to as the “VEREIT Merger Proposal”);

a proposal to approve, by advisory (non-binding) vote, the compensation that may be paid or become payable to the named executive officers of VEREIT in connection with the Merger (which we refer to as the “VEREIT Compensation Proposal”); and

a proposal to approve the adjournment of the VEREIT special meeting, if necessary or appropriate, to solicit additional proxies in favor of the VEREIT Merger Proposal, if there are insufficient votes at the time of such adjournment to approve such proposal (which we refer to as the “VEREIT Adjournment Proposal”).
The approval by VEREIT stockholders of the VEREIT Merger Proposal is a condition to the completion of the Merger and the other transactions contemplated by the Merger Agreement.
Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the VEREIT special meeting.
Holders of record of VEREIT common stock, par value $0.01 per share (which we refer to as “VEREIT common stock”), at the close of business on July 8, 2021 are entitled to notice of, and to vote on, all proposals at the VEREIT special meeting and any adjournments or postponements of the VEREIT special meeting.
The VEREIT Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of VEREIT common stock. The VEREIT Compensation Proposal requires the affirmative vote of the majority of the votes cast by holders of VEREIT common stock, assuming a quorum is present. The VEREIT Adjournment Proposal requires the affirmative vote of the majority of the votes cast by holders of VEREIT common stock at the VEREIT special meeting, assuming a quorum is present.
Your vote is important. Whether or not you expect to attend the VEREIT special meeting, we urge you to authorize a proxy to vote your shares as promptly as possible by: (1) accessing the Internet at www.proxyvote.com; (2) calling (800) 690-6903 for those who hold shares in their own name or (800) 454-8683 for shares held in “street
 

 
name”; or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the VEREIT special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the record holder.
By Order of the Board of Directors,
Lauren Goldberg
Executive Vice President, General Counsel and Secretary
June 29, 2021
Phoenix, Arizona
 

 
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates by reference important business and financial information about Realty Income and VEREIT from other documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:
Realty Income Corporation
11995 El Camino Real
San Diego, California 92130
(858) 284-5000
Attn.: Investor Relations
VEREIT, Inc.
2325 E. Camelback Road, 9th Floor
Phoenix, Arizona 85016
(800) 606-3610
Attn.: Investor Relations
or
or
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Call Toll-Free: (866) 785-7395
Email: realtyincome@georgeson.com
Okapi Partners LLC
1212 Avenue of the Americas, 24th Floor
New York, New York 10036
Call Toll-Free: (855) 305-0856
Email: info@okapipartners.com
Investors may also consult the websites of Realty Income or VEREIT for more information concerning the Mergers and the other transactions described in this joint proxy statement/prospectus. The website of Realty Income is www.realtyincome.com and the website of VEREIT is www.vereit.com. Information included on these websites is not incorporated by reference into this joint proxy statement/prospectus.
OfficeCo intends to file a registration statement on Form 10 with the U.S. Securities and Exchange Commission registering shares of common stock of OfficeCo in connection with the Spin-Off. The Form 10 is not incorporated by reference into this joint proxy statement/prospectus.
If you would like to request any documents, please do so by August 5, 2021, in order to receive them before the special meetings.
For more information, see “Where You Can Find More Information.”
 

 
ABOUT THIS DOCUMENT
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission by Realty Income Corporation (File No. 333-256772), constitutes a prospectus of Realty Income under Section 5 of the Securities Act of 1933, as amended (which we refer to as the “Securities Act”), with respect to the Realty Income common stock, par value $0.01 per share (which we refer to as “Realty Income common stock”), to be issued in connection with the Mergers. This document also constitutes a joint proxy statement of Realty Income and VEREIT under Section 14(a) of the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of Realty Income stockholders and a notice of meeting with respect to the special meeting of VEREIT stockholders, at which Realty Income stockholders and VEREIT stockholders, respectively, will be asked to vote upon certain proposals to approve the Merger and/or other related matters.
You should rely only on the information contained or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated June 29, 2021. You should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than the date on the front cover of those documents. Neither our mailing of this joint proxy statement/prospectus to Realty Income stockholders or VEREIT stockholders nor the issuance of Realty Income common stock in connection with the Merger will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Realty Income has been provided by Realty Income and information contained in this joint proxy statement/prospectus regarding VEREIT has been provided by VEREIT.
 

 
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QUESTIONS AND ANSWERS
The following are answers to some questions that you, as a stockholder of Realty Income Corporation, a Maryland corporation (which we refer to as “Realty Income”), or a stockholder of VEREIT, Inc., a Maryland corporation (which we refer to as “VEREIT”), may have regarding the proposed transactions between Realty Income and VEREIT and their respective subsidiaries, and the other matters being considered at the special meeting of Realty Income and at the special meeting of VEREIT. Realty Income and VEREIT urge you to carefully read this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Mergers and the other matters being considered at the special meetings. Additional important information is also contained in the annexes to and the documents incorporated by reference into this joint proxy statement/prospectus.
Q:
What are the Mergers?
A:
Realty Income and VEREIT have agreed to a series of transactions, pursuant to the terms of an agreement and plan of merger, dated as of April 29, 2021 (which we refer to, as amended from time to time, as the “Merger Agreement”), by and among Realty Income, VEREIT, VEREIT Operating Partnership, L.P. (which we refer to as “VEREIT OP”), Rams MD Subsidiary I, Inc., a wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 1”), and Rams Acquisition Sub II, LLC, a wholly owned subsidiary of Realty Income (which we refer to as “Merger Sub 2”). A copy of the Merger Agreement is attached as Annex A to this joint proxy statement/prospectus.
Pursuant to the Merger Agreement, (i) Merger Sub 2 will merge with and into VEREIT OP (which we refer to as the “Partnership Merger”), with VEREIT OP continuing as the surviving entity, and (ii) immediately thereafter, VEREIT will merge with and into Merger Sub 1 (which we refer to as the “Merger” and, together with the Partnership Merger, the “Mergers”), with Merger Sub 1 continuing as the surviving corporation as a wholly owned subsidiary of Realty Income.
In connection with the Merger, each VEREIT common stockholder will have the right to receive 0.705 newly issued shares of Realty Income common stock, par value $0.01 per share (which we refer to as “Realty Income common stock”), for each share of VEREIT common stock, par value $0.01 per share (which we refer to as “VEREIT common stock”), that they own immediately prior to the effective time of the Merger (which we refer to as the “Exchange Ratio”). The Exchange Ratio is generally fixed and will not be adjusted to reflect stock price changes prior to the closing of the Merger. The Exchange Ratio may be adjusted in certain limited circumstances, including a recapitalization, stock or unit split, stock or unit dividend or distribution, reclassification, combination or exchange offer of shares or other similar transaction involving Realty Income or VEREIT.
In addition, pursuant to the terms and subject to the conditions of the Merger Agreement, at the date and time the Partnership Merger becomes effective, (i) each outstanding common partnership unit of VEREIT OP (the "VEREIT OP common units") owned by a partner of VEREIT OP other than VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions set forth in the Merger Agreement, will be converted into the number of newly issued shares of Realty Income common stock equal to the Exchange Ratio, (ii) each outstanding VEREIT OP Series F Preferred Unit that is issued and outstanding immediately prior to the Partnership Merger Effective Time (other than VEREIT OP Series F Preferred Units owned by VEREIT), subject to the terms and conditions of the Merger Agreement, will be converted into the right to receive $25.00 plus all accumulated and unpaid distributions to and including the day that is set forth in the Series F Preferred Stock Redemption Notice (defined below) and (iii) each VEREIT OP Series F Preferred Unit owned by VEREIT and each VEREIT OP common unit owned by VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions of the Merger Agreement, will remain outstanding as partnership interests in the surviving entity.
Immediately prior to the Mergers, VEREIT will also issue a notice of redemption (the “Series F Preferred Stock Redemption Notice”) with respect to all of the outstanding shares of VEREIT’s 6.70% Series F Cumulative Redeemable Preferred Stock (the “VEREIT Series F Preferred Stock”) with a redemption
 

 
date as set forth in the Series F Preferred Stock Redemption Notice, and Realty Income will cause funds to be deposited in escrow to pay the redemption price for each share of VEREIT Series F Preferred Stock at the liquidation preference of $25.00 plus all accrued and unpaid dividends up to and including the redemption date set forth in the Series F Preferred Stock Redemption Notice.
Upon completion of the Mergers, based on the shares of Realty Income common stock and VEREIT common stock outstanding as of June 25, 2021, we estimate that legacy Realty Income common stockholders will own approximately 70% of the common stock of Realty Income, and legacy VEREIT common stockholders will own approximately 30% of the common stock of Realty Income.
Q:
What happens if the market price of shares of Realty Income common stock or VEREIT common stock changes before the closing of the Merger?
A:
No change will be made to the Exchange Ratio of 0.705 if the market price of shares of Realty Income common stock or VEREIT common stock changes before the Merger. Because the Exchange Ratio is fixed, the value of the consideration to be received by VEREIT stockholders in the Merger will depend on the market price of shares of Realty Income common stock at the time of the Merger.
Q:
Why am I receiving this joint proxy statement/prospectus?
A:
The Mergers cannot be completed, unless:

the holders of Realty Income common stock vote to approve the issuance of Realty Income common stock in connection with the Mergers (which we refer to as the “Realty Income Issuance Proposal”); and

the holders of VEREIT common stock vote to approve the Merger, on the terms and subject to the conditions of the Merger Agreement (which we refer to as the “VEREIT Merger Proposal”).
Each of Realty Income and VEREIT will hold separate special meetings of their stockholders to obtain these approvals and approvals for other related proposals as described herein.
This joint proxy statement/prospectus contains important information about the Mergers and the other proposals being voted on at the special meetings, and you should read it carefully. It is a joint proxy statement because the Realty Income board of directors is soliciting proxies from its stockholders and the VEREIT board of directors is soliciting proxies from its stockholders. It is a prospectus because Realty Income will issue shares of its common stock. The enclosed voting materials allow you to vote your shares without attending your respective meeting.
Your vote is important. We encourage you to vote as soon as possible.
Q:
Why is Realty Income proposing the Mergers?
A:
Among other reasons, the Realty Income board of directors approved the Merger Agreement and recommended the approval of the Realty Income Issuance Proposal based on a number of strategic and financial benefits to Realty Income, including the potential for Realty Income, following the Mergers, to immediately increase, and be accretive to, Realty Income’s funds from operations and adjusted funds from operations, to continue to increase its monthly dividend, while maintaining a conservative payout ratio and to become one of the six largest REITs in the MSCI US REIT Index by equity capitalization. For more information, see “The Mergers — Realty Income’s Reasons for the Mergers; Recommendations of the Realty Income Board of Directors.”
Q:
Why is VEREIT proposing the Mergers?
A:
Among other reasons, the VEREIT board of directors approved the Merger Agreement and recommended its approval by VEREIT stockholders based on a number of strategic and financial benefits, including the potential for Realty Income to create additional value for VEREIT stockholders due to its larger size and stronger balance sheet and the premium VEREIT stockholders will receive in the Merger. For more information, see “The Mergers — VEREIT’s Reasons for the Mergers; Recommendations of the VEREIT Board of Directors.”
 
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Q:
When and where will the special meetings be held?
A:
The Realty Income special meeting will be held virtually at www.virtualshareholdermeeting.com/realty2021sm, on August 12, 2021, at 12:00 p.m., Eastern Time. Participants will be able to log in 15 minutes prior to the start of the Realty Income special meeting. Realty Income encourages you to access the Realty Income special meeting in advance of the designated start time to ensure that you do not experience any technical difficulties. Realty Income stockholders will be able to vote electronically during the Realty Income special meeting. Attendees will not be permitted to record the Realty Income special meeting and may be subject to security precautions.
The VEREIT special meeting will be held virtually at www.virtualshareholdermeeting.com/VER2021SM, on August 12, 2021, at 12:00 p.m, Eastern Time. Participants will be able to log in 15 minutes prior to the start of the VEREIT special meeting. VEREIT encourages you to access the VEREIT special meeting in advance of the designated start time to ensure that you do not experience any technical difficulties. VEREIT stockholders will be able to vote electronically during the VEREIT special meeting. Attendees will not be permitted to record the VEREIT special meeting and may be subject to security precautions.
Q:
How do I vote?
A:
Realty Income.   Whether you hold shares of Realty Income common stock directly in your name as the holder of record or in the name of a broker, bank or nominee, you may virtually vote your shares at the Realty income special meeting via the Realty Income special meeting website at www.virtualshareholdermeeting.com/realty2021sm. You will need the 16-digit control number included on your proxy card or voting instruction form in order to access and vote at the Realty income special meeting.
In addition, if you are a holder of record of Realty Income common stock as of the record date for the Realty Income special meeting, you may authorize a proxy to vote your shares on the applicable proposals without virtually attending the Realty Income special meeting by:

accessing the Internet at www.proxyvote.com as specified on your proxy card;

calling Broadridge Financial Solutions, Inc. For those who hold shares in their own name, by calling (800) 690-6903 and for shares held in "street name," by calling (800) 454-8683; or

signing and returning the enclosed proxy card in the postage-paid envelope provided.
If you hold Realty Income common stock in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at your special meeting. If you received voting instruction cards from a trustee of any retirement plan of Realty Income or its subsidiaries in which you are a participant, please follow the instructions on those cards to ensure that shares of stock or beneficial interest allocated to your plan account are represented at your special meeting.
VEREIT.   Whether you hold shares of VEREIT common stock directly in your name as the holder of record or in the name of a broker, bank or nominee, you may virtually vote your shares at the VEREIT special meeting via the VEREIT special meeting website at www.virtualshareholdermeeting.com/VER2021SM. You will need the 16-digit control number included on your proxy card or voting instruction form in order to access and vote at the VEREIT special meeting.
In addition, if you are a holder of record of VEREIT common stock as of the record date for the VEREIT special meeting, you may authorize a proxy to vote your shares on the applicable proposals without virtually attending the VEREIT special meeting by:

accessing the Internet at www.proxyvote.com as specified on your proxy card;

calling Broadridge Financial Solutions, Inc. For those who hold shares in their own name, by calling (800) 690-6903 and for shares held in "street name," by calling (800) 454-8683; or

signing and returning the enclosed proxy card in the postage-paid envelope provided.
 
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If you hold shares of VEREIT common stock in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at your special meeting.
Q:
What am I being asked to vote upon?
A:
Realty Income.   Realty Income stockholders are being asked to vote to approve the Realty Income Issuance Proposal and to approve a proposal to adjourn the Realty Income special meeting, if necessary or appropriate, to solicit additional proxies in favor of the Realty Income Issuance Proposal, if there are insufficient votes at the time of such adjournment to approve such proposals (which we refer to as the “Realty Income Adjournment Proposal”).
VEREIT.   VEREIT stockholders are being asked to vote to approve the VEREIT Merger Proposal. Holders of VEREIT common stock are also being asked to approve, by advisory (non-binding) vote, the compensation that may be paid or become payable to the named executive officers of VEREIT in connection with the Merger (which we refer to as the “VEREIT Compensation Proposal”) and to approve a proposal to adjourn the VEREIT special meeting, if necessary or appropriate, to solicit additional proxies in favor of the VEREIT Merger Proposal, if there are insufficient votes at the time of such adjournment to approve such proposal (which we refer to as the “VEREIT Adjournment Proposal”).
The Mergers cannot be completed without the approval by Realty Income stockholders of the Realty Income Issuance Proposal and the approval by VEREIT common stockholders of the VEREIT Merger Proposal.
Q:
What vote is required to approve each proposal?
A:
Realty Income.

The Realty Income Issuance Proposal requires the affirmative vote of the majority of the votes cast by Realty Income common stockholders, assuming a quorum is present.

The Realty Income Adjournment Proposal requires approval by the affirmative vote of a majority of the votes cast on the proposal, assuming a quorum is present.
VEREIT.

The VEREIT Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of VEREIT common stock.

The VEREIT Compensation Proposal requires the affirmative vote of a majority of the votes cast by holders of VEREIT common stock, assuming a quorum is present; however, such vote is advisory (non-binding) only, assuming a quorum is present.

The VEREIT Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of VEREIT common stock at the VEREIT special meeting, assuming a quorum is present.
Q:
How do the boards of directors of Realty Income and VEREIT recommend that I vote?
A:
Realty Income.   The Realty Income board of directors unanimously recommends that holders of Realty Income common stock vote “FOR” the Realty Income Issuance Proposal, and “FOR” the Realty Income Adjournment Proposal.
VEREIT.   The VEREIT board of directors unanimously recommends that holders of VEREIT common stock vote “FOR” the VEREIT Merger Proposal, “FOR” the VEREIT Compensation Proposal and “FOR” the VEREIT Adjournment Proposal.
Q:
How many votes do I have?
A:
Realty Income.   You are entitled to one vote for each share of Realty Income common stock that you owned as of the close of business on the record date, July 8, 2021. As of the close of business on June 25, 2021 there were 379,807,775 outstanding shares of Realty Income common stock, less than 1% of which were beneficially owned by Realty Income directors and executive officers and their affiliates.
 
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VEREIT.   You are entitled to one vote for each share of VEREIT common stock that you owned as of the close of business on the record date, July 8, 2021. As of the close of business on June 25, 2021, there were 229,149,616 outstanding shares of VEREIT common stock, less than 1% of which were beneficially owned by VEREIT directors and executive officers and their affiliates.
Q:
What constitutes a quorum?
A:
Realty Income.   Stockholders who hold a majority of the Realty Income common stock outstanding on the record date and who are entitled to vote must be present (virtually) or represented by proxy to constitute a quorum at the Realty Income special meeting.
VEREIT.   Stockholders who hold a majority of the total number of shares of VEREIT common stock issued and outstanding on the record date and who are entitled to vote must be present in person (virtually) or represented by proxy to constitute a quorum at the VEREIT special meeting.
Q:
If my shares of common stock are held in “street name” by my broker, will my broker vote my shares for me?
A:
If you hold your shares of common stock in a stock brokerage account or if your shares of common stock are held by a bank or nominee (that is, in “street name”), you must provide the record holder of your shares with instructions on how to vote your shares of common stock. Please follow the voting instructions provided by your broker, bank or nominee. Please note that you may not vote shares of common stock held in street name by returning a proxy card directly to Realty Income or VEREIT unless you provide a “legal proxy,” which you must obtain from your broker, bank or nominee. If you are a Realty Income stockholder, you may vote shares of Realty Income common stock held in street name by voting virtually at the Realty Income special meeting by using the 16-digit control number included on your proxy card or voting instruction form. If you are a VEREIT stockholder, you may vote shares of VEREIT common stock held in street name by voting virtually at the VEREIT special meeting by using the 16-digit control number included on your proxy card or voting instruction form. Further, brokers who hold shares of Realty Income common stock or VEREIT common stock on behalf of their customers may not give a proxy to Realty Income or VEREIT to vote those shares without specific instructions from their customers.
Q:
What will happen if I fail to instruct my broker, bank or nominee how to vote?
A:
Realty Income.   If you are a Realty Income stockholder and you do not instruct your broker, bank or nominee on how to vote your shares of common stock, your broker will not be permitted to vote your shares on the Realty Income Issuance Proposal or the Realty Income Adjournment Proposal. Broker non-votes will have no effect on the Realty Income Issuance Proposal, assuming a quorum is present, or the Realty Income Adjournment Proposal.
VEREIT.   If you are a VEREIT stockholder and you fail to instruct your broker, bank or nominee to vote your shares of VEREIT common stock, your broker will not be permitted to vote your shares on the VEREIT Merger Proposal, the VEREIT Compensation Proposal, or the VEREIT Adjournment Proposal. Broker non-votes will have the same effect as a vote against the VEREIT Merger Proposal, but will have no effect on the VEREIT Compensation Proposal or the VEREIT Adjournment Proposal, in each case, assuming a quorum is present.
Q:
What will happen if I fail to vote or I abstain from voting?
A:
Realty Income.   If you are a Realty Income stockholder and fail to vote, it will have no effect on the Realty Income Issuance Proposal or the Realty Income Adjournment Proposal, assuming a quorum is present. If you are a Realty Income stockholder and abstain from voting, it will have the same effect as a vote against the Realty Income Issuance Proposal, assuming a quorum is present, and it will have no effect on the Realty Income Adjournment Proposal, assuming a quorum is present.
VEREIT.   If you are a VEREIT stockholder and fail to vote or abstain from voting, it will have the same effect as a vote against the VEREIT Merger Proposal, but it will have no effect on the VEREIT Compensation Proposal or the VEREIT Adjournment Proposal, assuming a quorum is present.
 
5

 
Q:
What if I return my proxy card without indicating how to vote?
A:
If you sign and return your proxy card without indicating how to vote on any particular proposal, your shares of Realty Income common stock or VEREIT common stock will be voted in accordance with the recommendation of the Realty Income board of directors or the VEREIT board of directors, as applicable, with respect to such proposal.
Q:
Can I change my vote after I have returned a proxy or voting instruction card?
A:
Yes. You can change your vote at any time before your proxy is exercised at your special meeting. You can do this in one of three ways:

you can send a signed notice of revocation;

you can grant a new, valid proxy bearing a later date; or

if you are a holder of record, you can attend your special meeting and vote in person or virtually, as applicable, which will automatically cancel any proxy previously given.
Attending the Realty Income special meeting or the VEREIT special meeting without voting will not, by itself, revoke your proxy. If your shares of Realty Income common stock or VEREIT common stock are held by a bank, broker or nominee, you should follow the instructions provided by the bank, broker or nominee.
If you choose either of the first two methods, you must submit your notice of revocation or your new proxy to be received by the secretary of Realty Income or the secretary of VEREIT, as appropriate, no later than the beginning of the Realty Income special meeting or no later than one day prior to the VEREIT special meeting, as applicable. If your shares of Realty Income common stock or VEREIT common stock are held in street name by your broker, bank or nominee, you should contact your broker, bank or nominee to change your vote. If your shares of Realty Income common stock or VEREIT common stock are held in street name by your broker, bank or nominee, you can also change your vote by voting virtually at the Realty Income special meeting or the VEREIT special meeting by using the 16-digit control number included on your proxy card or voting instruction form. If your shares of Realty Income common stock are held through a Realty Income retirement plan, you should contact the trustee for the plan to change your vote.
Q:
What if I have technical difficulties or trouble accessing the virtual meeting website?
A:
If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website log-in page at www.virtualshareholdermeeting.com/realty2021sm for the Realty Income special meeting or at www.virtualshareholdermeeting.com/VER2021SM for the VEREIT special meeting.
Q:
Are there any conditions to closing of the Merger that must be satisfied for the Merger to be completed?
A:
Yes. In addition to the approvals of the stockholders of each of Realty Income and VEREIT described herein, there are a number of conditions that must be satisfied or waived for the Merger to be consummated. For more information, see “The Mergers — The Merger Agreement — Conditions to Completion of the Mergers.”
Q:
What is the Spin-Off?
A:
Following the effective time of the Merger, Realty Income and VEREIT intend to contribute certain of their office properties (the “OfficeCo Properties”) to a newly formed direct or indirect wholly owned subsidiary of Realty Income (“OfficeCo,” and such contributions collectively, the “Separation”), and for Realty Income to distribute all of the outstanding voting shares of common stock in OfficeCo to Realty Income’s stockholders (which, at that time, would also include the VEREIT stockholders as a result of the Merger) on a pro rata basis (the “OfficeCo Distribution” and, together with the Separation, the “Spin-Off”). Following the consummation of the Spin-Off, VEREIT and Realty Income intend for OfficeCo to operate as a separate, publicly traded REIT.
 
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After giving pro forma effect to the Mergers, and based on the properties contemplated to be contributed to OfficeCo in connection with the Spin-Off as of the date of this joint proxy statement/prospectus, the OfficeCo Properties, in total, would have represented approximately 6% of the combined company total assets at March 31, 2021 and approximately 7% and approximately 8% of total revenues for the three months ended March 31, 2021 and year ended December 31, 2020, respectively.
Pursuant to the terms and conditions of the Merger Agreement, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is, in all respects, ready to be consummated contemporaneously with the closing of the Merger, including the U.S. Securities and Exchange Commission (“SEC”) declaring effective the Form 10 registration statement related to the Spin-Off (the “Spin-Off Condition”). However, Realty Income may, in its sole discretion, waive the Spin-Off Condition at any time, and the Spin-Off Condition shall be deemed to be automatically waived on January 29, 2022. In addition, subject to the terms and conditions of the Merger Agreement, Realty Income may, after consultation with and good faith consideration of any comments from VEREIT, determine or, in certain cases, amend, the scope and terms of the Spin-Off, including, among other things, the properties to be included as part of the OfficeCo Properties (including adding or removing properties), the scope and nature of the reorganization plan, the terms of the separation and distribution agreement, and the scope of transition services, if any, to be provided by Realty Income following the Spin-Off. Subject to the terms and conditions of the Merger Agreement, Realty Income also may, after consultation with and good faith consideration of any comments from VEREIT, alternatively seek to sell some or all of the OfficeCo Properties to third parties in connection with the closing of the Merger, and the parties may otherwise sell certain properties that would have otherwise been included in the OfficeCo Properties during the pendency of the Merger. Accordingly, the specific size and composition of the OfficeCo Properties, the nature of the Spin-Off, and the occurrence of the Spin-Off promptly following the Mergers, if at all, are all subject to change, and there can be no assurances that the Spin-Off will be consummated on the terms contemplated in this joint proxy statement/prospectus, or at all. For more information regarding the terms of the contemplated Spin-Off, see “Risk Factors — Risks Relating to the Spin-Off,” “The Mergers — The Merger Agreement —  The Spin-Off,” and “The Spin-Off.”
Accordingly, stockholders of Realty Income and VEREIT should not rely on the consummation of the Spin-Off or any other transactions related to the OfficeCo Properties as described in this joint proxy statement/prospectus in determining whether or not to approve the proposals contemplated in this joint proxy statement/prospectus. You are not being asked to take any action relating to the Spin-Off at the Special Meetings
If the Spin-Off is consummated, continuing holders of shares of Realty Income common stock will be entitled to receive a number of shares of OfficeCo common stock based on a distribution ratio determined by the Realty Income board of directors for each share of Realty Income common stock held by such stockholder as of the close of business on the record date of the OfficeCo Distribution.
Q:
Is the consummation of the Spin-Off a condition to closing the Merger?
A:
Pursuant to the terms and conditions of the Merger Agreement, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is, in all respects, ready to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off. However, if this condition is not satisfied or waived by January 29, 2022, Realty Income will be automatically deemed to have waived this condition (and at that time, assuming all other conditions to closing have been satisfied, the parties will be obligated to close the Mergers, regardless of whether the Spin-Off is ready to be consummated). In addition, Realty Income may elect to waive this condition in its sole discretion, including if it elects to retain or sell some or all of the OfficeCo Properties, which Realty Income may do in its discretion. Accordingly, the Mergers may be consummated without the Spin-Off occurring thereafter. For more information, see “The Mergers — The Merger Agreement — Conditions to Completion of the Mergers” and “The Mergers — The Merger Agreement — The Spin-Off.”
 
7

 
Q:
Do the parties intend to consummate the Spin-Off immediately following the consummation of the Mergers?
A:
Realty Income and VEREIT intend to effectuate the separation of the OfficeCo Properties from the combined company following the consummation of the Mergers in a manner that they believe will create optimal value for the combined company and its stockholders. Realty Income and VEREIT currently believe that the Spin-Off is the most effective strategy to achieve that goal. However, in the process of effectuating the steps necessary to consummate the Spin-Off, certain issues may arise that may impact the feasibility of the Spin-Off or the benefits of the Spin-Off to the combined company and its stockholders, including significant unanticipated costs or expenses (including consent fees), failure to obtain required consents or approvals, adverse tax implications, or other adverse impacts. Accordingly, Realty Income and VEREIT may determine that it is in the best interest of the combined company and its stockholders to withhold and retain certain assets otherwise contemplated to be contributed to OfficeCo in connection with the Spin-Off, to add certain additional assets to OfficeCo, or to retain the OfficeCo Properties as part of the combined company following the Mergers. In addition, in accordance with the Merger Agreement, Realty Income and VEREIT intend to engage with third parties to potentially sell some or all of the assets contemplated to be contributed to OfficeCo, which the parties may determine will create greater value for the combined company and its stockholders than the Spin-Off. Realty Income may elect, after consultation with and good faith consideration of any comments from VEREIT, to pursue these transactions, and subject to the consummation of the Mergers, sell some or all of the OfficeCo Properties, or abandon the Spin-Off entirely. Accordingly, stockholders of Realty Income and VEREIT should not rely on the consummation of the Spin-Off as described in this joint proxy statement/prospectus in determining whether or not to approve the proposals contemplated in this joint proxy statement/prospectus. For more information, see “The Spin-Off” and “Risk Factors —  Risks Relating to the Spin-Off.”
Q:
When do you expect the Mergers to be completed?
A:
Realty Income and VEREIT are working to complete the Mergers in the fourth quarter of 2021. However, the Mergers are subject to various conditions, and it is possible that factors outside the control of Realty Income and VEREIT could result in the Mergers being completed at a later time, or not at all. There may be a substantial amount of time between the respective Realty Income special meeting and the VEREIT special meeting and the completion of the Mergers. Realty Income and VEREIT hope to complete the Mergers as soon as reasonably practicable following the satisfaction of all applicable conditions.
As noted above, until January 29, 2022, Realty Income will not be obligated to consummate the Mergers unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off, unless Realty Income elects (in its sole discretion) to abandon the Spin-Off and waive the Spin-Off Condition. The Spin-Off, like the Mergers, will be subject to various conditions, including factors outside of the control of Realty Income and VEREIT, which could delay the Spin-Off and thus may delay the consummation of the Mergers.
You are not being asked to take any action relating to the Spin-Off at the Special Meetings and you should not rely on the consummation of the Spin-Off as described in this joint proxy statement/prospectus in determining whether or not to approve the proposals contemplated in this joint proxy statement/prospectus.
Q:
What are the material U.S. federal income tax consequences of the Merger to U.S. holders?
A:
It is intended that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). The closing of the Merger is conditioned on the receipt by each of Realty Income and VEREIT of an opinion from its respective counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the Merger qualifies as a reorganization, U.S. holders (as defined in “Material U.S. Federal Income Tax Consequences”) of shares of VEREIT common stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of Realty Income common stock in exchange for VEREIT common stock in connection with the Merger, except with respect to cash received in lieu of fractional shares of Realty Income common stock. Holders of VEREIT common stock should read the discussion under the heading “Material U.S. Federal Income Tax Consequences — Material U.S. Federal
 
8

 
Income Tax Consequences of the Merger” and consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws) of the Merger.
Q.
What are the material U.S. federal income tax consequences of the OfficeCo Distribution to U.S. holders of Realty Income common stock?
A:
While the Merger generally is not expected to result in the recognition of gain or loss for stockholders of either VEREIT or Realty Income for U.S. federal income tax purposes, the distribution of shares of OfficeCo common stock in the OfficeCo Distribution, if consummated, is expected to be treated as a taxable distribution to Realty Income common stockholders (which would include the former VEREIT stockholders that received Realty Income common stock in the Merger and continue to hold such stock as of the close of business on the record date of the OfficeCo Distribution) for U.S. federal income tax purposes. An amount equal to the fair market value of the shares of OfficeCo common stock received by a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences”) of Realty Income common stock in the OfficeCo Distribution will generally be treated as a taxable dividend to the extent of the U.S. holder’s ratable share of any current or accumulated earnings and profits of Realty Income allocable to the OfficeCo Distribution, with the excess treated first as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in Realty Income common stock and any remaining excess treated as capital gain.
The particular consequences of the OfficeCo Distribution to each Realty Income stockholder (including stockholders who received shares of Realty Income stock in exchange for shares of VEREIT stock pursuant to the Merger) depend on such holder’s particular facts and circumstances, and thus holders of Realty Income common stock and VEREIT common stock are urged to consult their tax advisor regarding the consequences to them of the OfficeCo Distribution in their specific circumstances. For more information, see “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the OfficeCo Distribution.”
Q:
How will the OfficeCo Distribution affect a Realty Income stockholder’s tax basis and holding period in its shares of Realty Income stock for U.S. federal income tax purposes?
A:
If the OfficeCo Distribution is consummated, the tax basis of Realty Income common stock held by a Realty Income stockholder (which would include a former VEREIT stockholder that received Realty Income common stock in the Merger and continues to hold such stock as of the close of business on the record date of the OfficeCo Distribution) at the time of the OfficeCo Distribution is expected to be reduced (but not below zero) to the extent the fair market value of the OfficeCo common stock distributed to such Realty Income stockholder exceeds Realty Income’s current and accumulated earnings and profits allocable to such holder’s shares. The holding period of Realty Income stockholders in their Realty Income shares will not be affected by the OfficeCo Distribution. See “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the OfficeCo Distribution.”
Q:
What will a Realty Income stockholder’s tax basis and holding period be for shares of OfficeCo common stock received by them in the OfficeCo Distribution for U.S. federal income tax purposes?
A:
If the OfficeCo Distribution is consummated, the tax basis of a Realty Income stockholder (which would include a former VEREIT stockholder that received Realty Income common stock in the Merger and continues to hold such stock as of the close of business on the record date of the OfficeCo Distribution) in shares of OfficeCo common stock received by such holder in the OfficeCo Distribution is expected to equal the fair market value of such shares on the distribution date. The holding period for such shares is expected to begin the day after the distribution date. See “Material U.S. Federal Income Tax Consequences —  Material U.S. Federal Income Tax Consequences of the OfficeCo Distribution.”
Q:
Are VEREIT and Realty Income stockholders entitled to appraisal rights or dissenters’ rights in connection with the Merger?
A:
No. Holders of VEREIT common stock and Realty Income common stock will not be entitled to appraisal rights or dissenters’ rights in the Mergers under Section 3-202 of the Maryland General Corporation Law (which we refer to as the “MGCL”) because, in the case of VEREIT, its common stock is listed on a national securities exchange and its charter expressly excludes these rights unless the
 
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VEREIT board of directors determines otherwise, and in the case of Realty Income, because the issuance of Realty Income common stock in the Merger is not a transaction for which these rights may be had, and because its common stock is listed on a national securities exchange. For more information, see “The Mergers — No Appraisal or Dissenters’ Rights.”
Q:
What do I need to do now?
A:
Carefully read and consider the information contained in and incorporated by reference into this joint proxy statement/prospectus, including its annexes.
In order for your shares to be voted at the Realty Income special meeting or the VEREIT special meeting:

you can attend the Realty Income special meeting or the VEREIT special meeting virtually;

you can vote through the Internet or by telephone by following the instructions included on your proxy card; or

you can indicate on the enclosed proxy or voting instruction card how you would like to vote and return the card in the accompanying postage-paid envelope.
Q:
Do I need to do anything with my Realty Income share certificates now?
A:
No. If the Merger and related transactions are approved by Realty Income stockholders and VEREIT stockholders, and if you are a Realty Income stockholder, you are not required to take any action with respect to your Realty Income stock certificates. Such certificates will continue to represent shares of Realty Income after the Mergers.
Holders of shares of VEREIT common stock, which are all in book-entry form, immediately prior to the effective time of the Merger will not need to take any action to receive the Merger consideration of 0.705 newly issued shares of Realty Income common stock.
Q:
Will I receive any fractional shares of Realty Income common stock in connection with the Mergers?
A:
No. All holders of VEREIT common stock or limited partnership units entitled to receive Realty Income common stock in connection with the Mergers will receive cash in lieu of fractional shares.
Q:
Who can help answer my questions?
A:
Realty Income stockholders or VEREIT stockholders who have questions about the Mergers or the other matters to be voted on at the special meetings or who desire additional copies of this joint proxy statement/prospectus or additional proxy or voting instruction cards should contact:
if you are a Realty Income stockholder:
if you are a VEREIT stockholder:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Call Toll-Free: (866) 785-7395
Email: realtyincome@georgeson.com
Okapi Partners LLC
1212 Avenue of the Americas, 24th Floor
New York, New York 10036
Call Toll-Free: (855) 305-0856
Email: info@okapipartners.com
 
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SUMMARY
This summary highlights information contained elsewhere in this joint proxy statement/prospectus and may not contain all of the information that is important to you. Realty Income and VEREIT urge you to read carefully this joint proxy statement/prospectus, including the attached annexes, and the other documents to which we have referred you because this section does not provide all of the information that might be important to you with respect to the Mergers and the related matters being considered at the applicable special meeting. See also “Where You Can Find More Information.” We have included page references to direct you to a more complete description of the topics presented in this summary.
Information about the Companies
Realty Income Corporation (See page 43)
Realty Income, a Maryland corporation, is an S&P 500 company dedicated to providing stockholders with dependable monthly dividends that increase over time. Realty Income is structured as a real estate investment trust, or REIT, requiring it annually to distribute at least 90% of its taxable income (excluding net capital gains) in the form of dividends to its stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term lease agreements with Realty Income’s commercial clients.
Realty Income was founded in 1969, and listed on the New York Stock Exchange in 1994. For over 52 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term lease agreements with Realty Income’s commercial clients. Realty Income is a member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for over 25 consecutive years.
At March 31, 2021, Realty Income owned a diversified portfolio:

Of 6,662 properties;

With an occupancy rate of 98.0%, or 6,531 properties leased and 131 properties available for lease or sale;

Doing business in 56 separate industries;

Located in all U.S. states, Puerto Rico and the United Kingdom (U.K.);

With approximately 114.2 million square feet of leasable space;

With a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 8.9 years; and

With an average leasable space per property of approximately 17,150 square feet; approximately 12,420 square feet per retail property and 250,670 square feet per industrial property.
Of the 6,662 properties in the portfolio at March 31, 2021, 6,621, or 99.4%, are single-client properties, of which 6,494 were leased, and the remaining are multi-client properties.
Following the Mergers and assuming the consummation of the Spin-Off, Realty Income’s portfolio is expected to encompass approximately 10,300 primarily single-tenant, net lease commercial real estate properties located in all U.S. states, Puerto Rico and the U.K., with an estimated total portfolio annualized contractual rent of approximately $2.5 billion, based on a combined portfolio as of December 31, 2020.
The principal offices of Realty Income are located at 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
Realty Income common stock is listed on the New York Stock Exchange (which we refer to as the “NYSE”), trading under the symbol “O.”
Additional information about Realty Income and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
 
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Rams MD Subsidiary I, Inc. (See page 43)
Rams MD Subsidiary I, Inc., a Maryland corporation, is a direct, wholly owned subsidiary of Realty Income. Rams MD Subsidiary I, Inc. was formed by Realty Income solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Rams MD Subsidiary I, Inc., has not conducted any business activities, has no assets, liabilities or obligations and has conducted its operations solely as contemplated by the Merger Agreement. Its principal executive offices are located at c/o Realty Income Corporation, 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
Rams Acquisition Sub II, LLC. (See page 43)
Rams Acquisition Sub II, LLC, a Delaware limited liability company, is a direct, wholly owned subsidiary of Realty Income. Rams Acquisition Sub II, LLC was formed by Realty Income solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Rams Acquisition Sub II, LLC, has not conducted any business activities, has no assets, liabilities or obligations and has conducted its operations solely as contemplated by the Merger Agreement. Its principal executive offices are located at c/o Realty Income Corporation, 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
VEREIT, Inc. and VEREIT Operating Partnership, L.P. (See page 44)
VEREIT, a Maryland corporation, is a full-service real estate operating company which owns and actively manages one of the largest portfolios of single-tenant commercial properties in the U.S. and has a business model of providing equity capital to creditworthy organizations in return for long-term leases on their properties. VEREIT’s full-service real estate operations include portfolio management through strategic acquisitions and dispositions, property management, asset management and leasing. As of March 31, 2021, VEREIT’s portfolio was comprised of 3,855 retail, restaurant, office and industrial real estate properties. Omitting the square feet of one redevelopment property and including the pro rata share of square feet and annualized rental income from VEREIT’s unconsolidated joint ventures, VEREIT owned an aggregate of 88.7 million square feet, of which 98.0% was leased, with a weighted-average remaining lease term of 8.4 years as of March 31, 2021. Of VEREIT’s 3,855 properties, annualized rental income as of March 31, 2021 as a percentage of the total portfolio was approximately 46.6% retail, 20.5% restaurant, 17.9% industrial, 14.9% office and 0.1% other. VEREIT’s properties are located throughout the U.S. (including Puerto Rico) with the two highest concentrations in the Southeast and Midwest regions.
VEREIT was incorporated in the State of Maryland on December 2, 2010 and has elected to be treated as a REIT for U.S. federal income tax purposes. Substantially all of VEREIT’s real estate operations are conducted through VEREIT OP, of which VEREIT is the sole general partner. VEREIT is the holder of 99.9% of the common partnership interests in VEREIT OP as of March 31, 2021. VEREIT OP was formed in the State of Delaware on January 13, 2011.
The principal offices of VEREIT are located at 2325 E. Camelback Road, 9th Floor, Phoenix, Arizona 85016, and its telephone number is (800) 606-3610.
VEREIT common stock and VEREIT Series F Preferred Stock trade on the NYSE under the trading symbols “VER” and “VER PRF,” respectively.
Additional information about VEREIT and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
OfficeCo (See page 44)
In connection with the Spin-Off, Realty Income intends to form a new direct or indirect wholly owned subsidiary (“OfficeCo”). Subject to the terms and conditions of the Merger Agreement, Realty Income and VEREIT intend to contribute certain of their office properties to OfficeCo, and for Realty Income to distribute all of the outstanding voting shares of common stock in OfficeCo to Realty Income’s stockholders (which, at that time, would also include the VEREIT stockholders that received Realty Income common stock in the Merger and continue to hold such stock as of the close of business on the record date of the OfficeCo
 
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Distribution) on a pro rata basis. After giving pro forma effect to the Mergers, and based on the properties contemplated to be contributed to OfficeCo in connection with the Spin-Off as of the date of this joint proxy statement/prospectus, the OfficeCo Properties, in total, would have represented approximately 6% of the combined company total assets at March 31, 2021 and approximately 7% and approximately 8% of total revenues for the three months ended March 31, 2021 and year ended December 31, 2020, respectively.
Assuming the Spin-Off is consummated, VEREIT and Realty Income intend for OfficeCo to operate as a self-managed, publicly traded office REIT, engaged in the ownership, acquisition, development and leasing of office assets throughout the United States.
Risk Factors (See page 26)
Before voting at the Realty Income special meeting or the VEREIT special meeting, you should carefully consider all of the information contained in or incorporated by reference into this joint proxy statement/prospectus, as well as the specific factors under the heading “Risk Factors” beginning on page 26, including the risks that:

the Mergers are subject to a number of conditions, including the readiness of the Spin-Off and the effectiveness of the OfficeCo Form 10, and may not be completed on the terms or timeline currently contemplated, or at all;

the Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Realty Income or VEREIT;

Realty Income and VEREIT stockholders will be significantly diluted by the Mergers;

provisions in the Merger Agreement could discourage a potential competing acquiror of either Realty Income or VEREIT;

the pendency of the Mergers could adversely affect the business and operations of Realty Income and VEREIT;

certain directors and executive officers of Realty Income or VEREIT may have different interests in seeing the Mergers completed than stockholders of Realty Income or VEREIT;

the Mergers are not consummated by April 29, 2022, resulting in either Realty Income or VEREIT terminating the Merger Agreement;

the Merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

the Merger and related transactions are not approved by either Realty Income stockholders or VEREIT stockholders;

an adverse litigation outcome relating to the Merger Agreement, or the transactions contemplated thereby, has a material adverse impact on Realty Income’s or VEREIT’s businesses or their ability to consummate the Mergers;

the Spin-Off of OfficeCo may not occur in the form or on the timing contemplated in this joint proxy statement/prospectus, or at all;

there are significant costs and expenses in effectuating the Spin-Off or the sales of OfficeCo Properties;

the Spin-Off may not deliver its intended results;

If the Spin-Off is consummated, the distribution of shares of OfficeCo common stock in the OfficeCo Distribution is expected to be treated as a taxable transaction for Realty Income and its stockholders following the Mergers;

OfficeCo may need to incur substantial indebtedness following or in connection with the Spin-Off;

Realty Income expects to incur substantial costs in connection with the Mergers and the transactions contemplated by the Merger Agreement;

Realty Income and VEREIT may be unable to successfully integrate their businesses in order to realize the anticipated benefits of the Mergers;
 
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Realty Income or OfficeCo may be unable to retain key employees following the Mergers and the Spin-Off;

Realty Income may be unable to attract and retain key personnel;

Realty Income may not effectively manage its expanded operations following the Mergers;

the trading prices of shares of Realty Income common stock and OfficeCo common stock following the Mergers and the Spin-Off are affected by factors different from those affecting the price of shares of Realty Income common stock and VEREIT common stock before the Mergers and the Spin-Off;

counterparties to certain significant agreements with Realty Income or VEREIT may exercise contractual rights under such agreements in connection with the Mergers, the Spin-Off or the sale of some or all of the OfficeCo Properties;

Realty Income’s anticipated levels of indebtedness may increase upon completion of the Mergers;

Realty Income may incur adverse tax consequences if Realty Income or VEREIT has failed or fails to qualify as a REIT for U.S. federal income tax purposes;

the market price of Realty Income common stock declines as a result of the Mergers and the transactions contemplated by the Merger Agreement;

VEREIT stockholders who receive shares of Realty Income common stock in the Merger and shares of OfficeCo common stock in the Spin-Off may have less favorable rights than their current rights as VEREIT stockholders;

Realty Income will have a substantial amount of indebtedness after the Mergers and may need to incur more in the future;

the historical and unaudited pro forma condensed combined financial statements may not be representative of Realty Income’s results after the Mergers and the transactions contemplated by the Merger Agreement;

the market price and trading volume of Realty Income common stock may be volatile; and

are not contemplated in the list above but will be disclosed in reports filed by Realty Income, VEREIT and OfficeCo with the SEC.
The Mergers
The Merger Agreement (See page 88)
Realty Income and VEREIT have entered into the Merger Agreement attached as Annex A to this joint proxy statement/prospectus. The Realty Income board of directors and the VEREIT board of directors have both unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Spin-Off. Realty Income and VEREIT encourage you to read the entire Merger Agreement carefully because it is the principal legal document governing the Mergers.
Form of the Mergers (See page 88)
Pursuant to the Merger Agreement, the combination of the businesses of Realty Income and VEREIT will be accomplished through (i) a merger of Merger Sub 2 with and into VEREIT OP, with VEREIT OP continuing as the surviving entity, and (ii) immediately thereafter, a merger of VEREIT with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation.
Upon the consummation of the Mergers, we expect that the legacy stockholders of Realty Income and the legacy common stockholders of VEREIT will own approximately 70% and 30%, respectively, of the outstanding shares of Realty Income common stock.
Consideration to Common Stockholders in the Mergers (See page 88)
Upon the terms of the Merger Agreement, upon consummation of the Merger, holders of VEREIT common stock will have the right to receive 0.705 newly issued shares of Realty Income common stock for
 
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each share of VEREIT common stock they own immediately prior to the effective time of the Merger, with cash paid in lieu of fractional shares. The Exchange Ratio in the Merger is fixed and will not be adjusted for changes in the market value of VEREIT common stock or Realty Income common stock. Because of this, the implied value of the consideration to VEREIT stockholders in the Merger will fluctuate between now and the completion of the Merger. Based on the closing price of Realty Income common stock on the NYSE of $68.60 on April 28, 2021, the last trading day before public announcement of the Merger, the Exchange Ratio represented approximately $48.36 in Realty Income common stock for each share of VEREIT common stock. Based on the closing price of Realty Income common stock on the NYSE of $67.48 on June 22, 2021, the latest practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio represented approximately $47.57 in Realty Income common stock for each share of VEREIT common stock. For more information, see “Comparative Stock Prices and Dividends.”
The following table presents trading information for Realty Income common stock and VEREIT common stock on April 28, 2021, the last trading day before public announcement of the Mergers, and June 22, 2021, the latest practicable date before the date of this joint proxy statement/prospectus. Trading information for VEREIT common stock adjusted by the Exchange Ratio of 0.705 is also provided for each of these dates.
Realty Income Common
Stock (Close)
VEREIT Common
Stock (Close)
VEREIT Common
Stock (adjusted by
Exchange Ratio)
(Close)
April 28, 2021
$ 68.60 $ 41.26 $ 48.36
June 22, 2021
$ 67.48 $ 46.71 $ 47.57
The market prices of Realty Income common stock and VEREIT common stock fluctuate. As a result, we urge you to obtain current market quotations of Realty Income common stock and VEREIT common stock.
Treatment of VEREIT Series F Preferred Stock (See page 84)
Immediately prior to the Mergers, VEREIT will issue a notice of redemption (the “Series F Preferred Stock Redemption Notice”) with respect to all of the outstanding shares of VEREIT Series F Preferred Stock with a redemption date as set forth in the Series F Preferred Stock Redemption Notice, and Realty Income will cause funds to be deposited in escrow to pay the redemption price for each share of VEREIT Series F Preferred Stock at the liquidation preference of $25.00 plus all accrued and unpaid dividends up to and including the redemption date set forth in the Series F Preferred Stock Redemption Notice.
Treatment of Outstanding Equity Awards (See page 79)
VEREIT Stock Options
The Merger Agreement provides that, at the Merger Effective Time, each stock option to purchase shares of VEREIT common stock under any VEREIT equity plan (a “VEREIT Stock Option”) that is outstanding and unexercised as of immediately prior to the Merger Effective Time, whether or not vested, will be converted into a stock option (a “Realty Income Stock Option”) to purchase a number of shares of Realty Income common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying the number of shares of VEREIT common stock subject to such VEREIT Stock Option by the Exchange Ratio, at an exercise price per share of Realty Income common stock (rounded up to the nearest whole cent) equal to the quotient obtained by dividing the exercise price per share of VEREIT common stock of such VEREIT Stock Option by the Exchange Ratio.
Each Realty Income Stock Option will continue to have, and will be subject to, the same terms and conditions as applied to the corresponding VEREIT Stock Option immediately prior to the Merger Effective Time.
VEREIT Restricted Stock Unit Awards
The Merger Agreement provides that, at the Merger Effective Time, each restricted stock unit award covering shares of VEREIT common stock (a “VEREIT RSU Award”) that is outstanding as of immediately
 
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prior to the Merger Effective Time will be converted into a restricted stock unit award covering shares of Realty Income common stock (a “Realty Income RSU Award”) with respect to a number of whole shares of Realty Income common stock (rounded to the nearest whole number of shares) equal to the product obtained by multiplying (A)(1) for each time-based VEREIT RSU Award, the number of shares of VEREIT common stock subject to such restricted stock unit as of immediately prior to the Merger Effective Time, or (2) for each performance-based VEREIT RSU Award, the number of shares of VEREIT common stock subject to such performance-based VEREIT RSU Award determined based on the actual level of achievement of the applicable performance goals as of immediately prior to the Merger Effective Time and otherwise in accordance with the applicable award agreement, by (B) the Exchange Ratio. For this purpose, the actual level of achievement of performance goals based on relative total shareholder return shall be determined prior to the Merger Effective Time by the Compensation Committee of the VEREIT board of directors and shall be calculated by measuring the total shareholder return of each applicable peer company through the second to last trading day prior to the Merger Effective Time and, in the case of VEREIT, by computing such total shareholder return using a per share price of VEREIT common stock equal to the product, rounded to two decimal places, of (x) the Exchange Ratio, multiplied by (y) the volume-weighted average trading price of Realty Income common stock over the five consecutive trading days ending on the second to last trading day prior to the Merger Effective Time. In addition, the Merger Agreement provides that the resulting Realty Income RSU Award will be credited with a dividend equivalent balance that is equal to the dividend equivalent balance credited on the corresponding VEREIT RSU Award as of immediately prior to the Merger Effective Time.
Each Realty Income RSU Award will continue to have, and will be subject to, the same terms and conditions as applied to the corresponding VEREIT RSU Award immediately prior to the Merger Effective Time (including dividend equivalent rights and including all time and service vesting conditions, but excluding performance-based vesting conditions).
VEREIT Deferred Stock Unit Awards
The Merger Agreement provides that, at the Merger Effective Time, each deferred stock unit award covering shares of VEREIT common stock (a “VEREIT DSU Award”) that is outstanding as of immediately prior to the Merger Effective Time, will become fully vested and will generally be converted into the right to receive a number of shares of Realty Income common stock equal to the product obtained by multiplying the Exchange Ratio by the number of shares underlying such VEREIT DSU Award as of immediately prior to the Merger Effective Time (rounded down to the nearest whole number of shares, with any fractional shares paid out in accordance with the Merger Agreement), with any dividend credits with respect to such VEREIT DSU Award that have not been converted into additional units prior to the Merger Effective Time paid in cash. All VEREIT DSU Awards were fully vested at the time they were granted to VEREIT's non-employee directors.
Treatment of VEREIT OP Units in the Partnership Merger (See page 84)
Pursuant to the terms and subject to the conditions of the Merger Agreement, at the date and time the Partnership Merger becomes effective, (i) each outstanding VEREIT OP common unit owned by a partner of VEREIT OP other than VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions set forth in the Merger Agreement, will be converted into the number of newly issued shares of Realty Income common stock equal to the Exchange Ratio, (ii) each outstanding VEREIT OP Series F Preferred Unit that is issued and outstanding immediately prior to the Partnership Merger Effective Time (other than VEREIT OP Series F Preferred Units owned by VEREIT), subject to the terms and conditions of the Merger Agreement, will be converted into the right to receive $25.00 plus all accumulated and unpaid distributions to and including the day that is set forth in the Series F Preferred Stock Redemption Notice (defined below) and (iii) each VEREIT OP Series F Preferred Unit owned by VEREIT and each VEREIT OP common unit owned by VEREIT, Realty Income or their respective affiliates, that is issued and outstanding immediately prior to the Partnership Merger Effective Time, subject to the terms and conditions of the Merger Agreement, will remain outstanding as partnership interests in the surviving entity.
 
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Recommendations of the Realty Income Board of Directors (See page 52)
After careful consideration, the Realty Income board of directors, on April 28, 2021, unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and declared the Merger Agreement and such transactions (including the Realty Income Issuance Proposal) to be advisable and in the best interest of Realty Income and the stockholders of Realty Income.
The Realty Income board of directors unanimously recommends that holders of Realty Income common stock vote “FOR” the Realty Income Issuance Proposal and “FOR” the Realty Income Adjournment Proposal.
For the factors considered by the Realty Income board of directors in reaching its decision to approve the Merger Agreement and the recommendations of the Realty Income board of directors, see “The Mergers — Realty Income’s Reasons for the Mergers; Recommendations of the Realty Income Board of Directors.”
Recommendation of the VEREIT Board of Directors (See page 55)
After careful consideration, the VEREIT board of directors, on April 28, 2021, unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and declared the Merger Agreement and such transactions to be advisable and in the best interests of VEREIT and the stockholders of VEREIT.
The VEREIT board of directors unanimously recommends that the VEREIT stockholders vote “FOR” the VEREIT Merger Proposal, “FOR” the VEREIT Compensation Proposal and “FOR” the VEREIT Adjournment Proposal.
For the factors considered by the VEREIT board of directors in reaching its decision to approve the Merger Agreement and the recommendations of the VEREIT board of directors, see “The Mergers — VEREIT’s Reasons for the Mergers; Recommendations of the VEREIT Board of Directors.”
Opinion of Realty Income’s Financial Advisor (See page 59)
Opinion of Moelis & Company LLC
At the meeting of Realty Income’s board of directors on April 28, 2021 to evaluate and approve the Merger Agreement and the transactions contemplated thereby, including the Mergers, Moelis & Company LLC (“Moelis”) delivered an oral opinion, which was confirmed by delivery of a written opinion, dated April 28, 2021, addressed to Realty Income’s board of directors to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the Exchange Ratio was fair, from a financial point of view, to Realty Income.
The full text of Moelis’ written opinion dated April 28, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of Realty Income’s board of directors (solely in its capacity as such) in its evaluation of the Mergers. Moelis’ opinion was limited solely to the fairness, from a financial point of view, to Realty Income of the Exchange Ratio. Moelis’ opinion does not address Realty Income’s underlying business decision to effect the Mergers, or the relative merits of the Mergers as compared to any alternative business strategies or transactions that might be available with respect to Realty Income. Moelis’ opinion does not constitute a recommendation to any holder of securities as to how such holder should vote or act with respect to the Mergers or any other matter, including the Realty Income Share Issuance Proposal.
Opinion of VEREIT’s Financial Advisor (See page 65)
Opinion of J.P. Morgan Securities LLC
Pursuant to an engagement letter, VEREIT retained J.P. Morgan as its financial advisor in connection with the Mergers.
 
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At the meeting of the VEREIT board of directors on April 28, 2021, J.P. Morgan rendered its oral opinion to the VEREIT board of directors that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the Exchange Ratio in the Merger was fair, from a financial point of view, to VEREIT’s common stockholders. J.P. Morgan has confirmed its April 28, 2021 oral opinion by delivering its written opinion, dated as of April 28, 2021, to the VEREIT board of directors that, as of such date, the Exchange Ratio in the Merger was fair, from a financial point of view, to VEREIT’s common stockholders.
The full text of the written opinion of J.P. Morgan, dated as of April 28, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. VEREIT’s common stockholders are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the VEREIT board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the Mergers, was directed only to the Exchange Ratio in the Merger and did not address any other aspect of the Mergers. J.P. Morgan expressed no opinion as to the fairness of any consideration to be paid in connection with the Mergers to the holders of any other class of securities, creditors or other constituencies of VEREIT or the VEREIT OP, including the consideration to be paid to certain minority partners of VEREIT OP, or as to the underlying decision by VEREIT to engage in the Mergers. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of VEREIT as to how such stockholder should vote with respect to the VEREIT Merger Proposal or any other matter.
For more information, see “The Mergers — Opinion of VEREIT’s Financial Advisor — Opinion of J.P. Morgan Securities LLC” and Annex C.
Interests of Realty Income Directors and Executive Officers in the Merger (See page 78)
Pursuant to the Merger Agreement, at the effective time of the Merger, two members of the VEREIT board of directors will be appointed to the Realty Income board of directors. Following the consummation of the Mergers, the Realty Income board of directors is expected to have twelve members, including two members from the existing VEREIT board of directors, with Mr. Michael D. McKee continuing as the non-executive chairman of the Realty Income board of directors.
The current senior leadership team of Realty Income is not expected to change as a result of the Merger. Accordingly, at the effective time of the Merger, the senior leadership team of Realty Income is expected to include Mr. Sumit Roy as president and chief executive officer, Ms. Christie B. Kelly as executive vice president, chief financial officer and treasurer, Mr. Neil M. Abraham as executive vice president and chief strategy officer, Mr. Mark E. Hagan as executive vice president and chief investment officer, Ms. Michelle Bushore as executive vice president, chief legal officer, general counsel and secretary, and Mr. Sean P. Nugent as senior vice president and controller.
Interests of VEREIT Directors and Executive Officers in the Merger (See page 79)
In considering the recommendation of the VEREIT board of directors to approve the VEREIT Merger Proposal, VEREIT stockholders should be aware that VEREIT’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of VEREIT stockholders generally, including potential severance benefits, treatment of outstanding VEREIT equity awards in connection with the Merger, potential appointment to the Realty Income board of directors, and rights to ongoing indemnification and insurance coverage. The VEREIT board of directors was aware of those interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve and declare advisable the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger), and in recommending to VEREIT stockholders that the VEREIT Merger Proposal be approved.
Accounting Treatment (See page 84)
Realty Income and VEREIT prepare their financial statements, respectively, in accordance with accounting principles generally accepted in the United States (which we refer to as “GAAP”). The Mergers
 
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will be accounted for by applying the purchase method of accounting, with Realty Income treated as the acquiror. For more information, see “The Mergers — Accounting Treatment.”
Regulatory Approvals (See page 84)
In connection with the issuance of Realty Income common stock in the Mergers, pursuant to the Merger Agreement, as a condition to the closing of the Merger, Realty Income must file a registration statement with the SEC under the Securities Act, of which this joint proxy statement/prospectus forms a part, that is declared effective by the SEC.
Pursuant to the terms and conditions of the Merger Agreement, until January 29, 2022, Realty Income will not be obligated to consummate the Mergers unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off, unless Realty Income elects (in its sole discretion) to abandon the Spin-Off and waive the Spin-Off Condition.
Closing; Effective Time of the Mergers (See page 90)
Realty Income and VEREIT expect to complete the Mergers in the fourth quarter of 2021. However, the Mergers are subject to various conditions, and it is possible that factors outside the control of Realty Income and VEREIT could result in the Mergers being completed at a later time, or not at all. There may be a substantial amount of time between the respective Realty Income special meeting and VEREIT special meeting and the completion of the Mergers. Realty Income and VEREIT expect to complete the Mergers as soon as reasonably practicable following the satisfaction of all applicable conditions.
Pursuant to the terms of the Merger Agreement, until January 29, 2022, Realty Income will not be obligated to consummate the Mergers unless the Spin-Off is, in all respects, ready to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off, unless that condition is otherwise waived. The Spin-Off, like the Mergers, will be subject to various conditions, including factors outside of the control of Realty Income and VEREIT, which could delay the Spin-Off and thus may delay the consummation of the Mergers.
Conditions to Completion of the Mergers (See pages 104)
As more fully described in this joint proxy statement/prospectus and in the Merger Agreement, the completion of the Mergers depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include:

receipt of the requisite approvals of Realty Income stockholders and VEREIT stockholders;

the approval for listing on the NYSE of shares of Realty Income common stock to be issued or reserved for issuance in connection with the Mergers;

the SEC having declared effective the registration statement of which this joint proxy statement/prospectus forms a part;

the absence of an injunction or law prohibiting the Mergers;

the correctness of all representations and warranties made by the parties in the Merger Agreement and performance by the parties of their obligations under the Merger Agreement (subject in most cases to materiality or material adverse effect qualifications), and receipt of an officer’s certificate from each party attesting thereto;

compliance by all parties with their respective obligations under the Merger Agreement (subject to customary materiality qualifiers);

receipt by each of Realty Income and VEREIT of an opinion to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code; and

the receipt by each of Realty Income and VEREIT of an opinion regarding such other party’s qualification as a REIT.
 
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In addition, pursuant to the terms and conditions of the Merger Agreement, until January 29, 2022, Realty Income will not be obligated to consummate the Mergers unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off, unless that condition is otherwise waived.
We cannot be certain when, or if, the conditions to the Mergers will be satisfied or waived, or that the Mergers will be completed.
No Solicitation (See page 105)
Realty Income and VEREIT are subject to a customary “no-shop” provision that requires them to, subject to certain exceptions, refrain from, and to cease discussions or solicitations with respect to, alternate transactions and subjects them to certain restrictions in considering and negotiating alternate transactions. If either of the parties receives an unsolicited written bona fide acquisition proposal with respect to such party and if such party’s board of directors determines in good faith, after consultation with outside legal counsel, that such acquisition proposal is reasonably likely to result in a Superior Proposal (as hereinafter defined), the receiving party may provide nonpublic information to the proposing party and engage in discussions or negotiations with the party making such a proposal. Each party shall promptly notify the other party of any proposal for an alternative transaction within 24 hours and provide the other party with a copy of such proposal.
Permitted Change in Recommendation (See page 106)
In response to a Superior Proposal, the board of directors of the party receiving such a proposal may change its recommendation with respect to such party’s stockholder vote, and such party may terminate the Merger Agreement in order to accept such proposal (subject to payment of a specified termination fee). Prior to effecting such change or termination, the board of directors of the party receiving the Superior Proposal must provide the other party with notice, reasons for such action and four business days of good faith negotiations to counter such proposal.
Termination of the Merger Agreement (See page 107)
The Merger Agreement may be terminated prior to the effective time of the Merger, whether before or after the required approvals of the Realty Income stockholders and VEREIT stockholders are obtained:

by mutual written consent of Realty Income and VEREIT;

by either Realty Income or VEREIT, if the Mergers are not consummated on or before April 29, 2022, provided that such right to terminate will not be available to any party whose material breach of any provision of the Merger Agreement has been the primary cause of such delay;

by either Realty Income or VEREIT, if any governmental entity of competent jurisdiction issues a final and nonappealable order, decree or ruling or takes any other action that permanently enjoins or otherwise prohibits the Mergers, provided that such right to terminate will not be available to any party whose material breach of any provision of the Merger Agreement has been the primary cause of such action;

by either Realty Income or VEREIT, if the required approvals of either the Realty Income stockholders or the VEREIT stockholders are not obtained upon a vote thereon at the duly convened Realty Income special meeting or VEREIT special meeting, provided that such right to terminate will not be available to any party whose material breach of its obligations under the Merger Agreement to seek stockholder approval has been the primary cause of such failure;

by either Realty Income or VEREIT, if there is a breach of the representations or covenants of the other party that would result in the failure of the related closing condition to be satisfied, subject to a cure period, provided that such right to terminate will not be available to any party that has itself materially breached its representations or covenants and such breach would result in the failure of the related closing condition to be satisfied;
 
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by Realty Income, if the VEREIT board of directors changes its recommendation in favor of the Mergers, fails to reaffirm its recommendation, or recommends a competing Acquisition Proposal (or fails to recommend against a competing proposal);

by VEREIT, if Realty Income’s board of directors changes its recommendation in favor of the Mergers, fails to reaffirm its recommendation, or recommends a competing Acquisition Proposal (or fails to recommend against a competing proposal); or

by VEREIT, to enter into a Superior Proposal (subject to compliance with the provisions of the Merger Agreement regarding non-solicitation of acquisition proposals), provided that the Merger Agreement may not be so terminated unless the termination fee discussed below has been paid in full substantially concurrently with such termination.
Expenses and Termination Fee (See page 108)
Generally, all fees and expenses incurred in connection with the Mergers and the transactions contemplated by the Merger Agreement will be paid by the party incurring those expenses, subject to certain exceptions. For more information, see “The Mergers — The Merger Agreement — Fees and Expenses.” The Merger Agreement further provides that, upon termination of the Merger Agreement under certain circumstances:

VEREIT may be obligated to pay a termination fee to Realty Income of $365.0 million, except that in certain circumstances the termination fee will be $195.0 million if (1) a third party submits a Qualified Proposal (as defined in the Merger Agreement) prior to May 29, 2021 and (2) prior to June 13, 2021, (i) VEREIT terminates the Merger Agreement to enter into an agreement with respect to a Superior Proposal, or (ii) Realty Income terminates the Merger Agreement following a change of recommendation by the VEREIT board of directors;

Realty Income may be obligated to pay a termination fee to VEREIT of $838.0 million; and

each party may be obligated to pay the other party $25.0 million as expense reimbursement.
The amount payable above may be reduced to the extent necessary to maintain the recipient’s qualification as a REIT under the Code. For more information, see “The Mergers — The Merger Agreement — Termination of the Merger Agreement.”
No Appraisal or Dissenters’ Rights (See page 86)
Under Maryland law, the holders of VEREIT common stock and Realty Income common stock, respectively, are not entitled to appraisal or dissenters’ rights in connection with the Merger. For more information, see “The Mergers — No Appraisal or Dissenters’ Rights.”
Material U.S. Federal Income Tax Consequences of the Merger (See page 112)
Realty Income and VEREIT intend that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The closing of the Merger is conditioned on the receipt by each of Realty Income and VEREIT of an opinion from its respective counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the Merger qualifies as a reorganization, U.S. holders (as defined in “Material U.S. Federal Income Tax Consequences”) of shares of VEREIT common stock are not expected to recognize gain or loss as a result of the Merger (except with respect to the receipt of cash in lieu of fractional shares of Realty Income common stock).
For further discussion of certain U.S. federal income tax consequences of the Merger and the ownership and disposition of Realty Income common stock, see “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the Merger” and “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Considerations Regarding Realty Income’s Taxation as a REIT.”
Material U.S. Federal Income Tax Consequences of the OfficeCo Distribution (See page 115)
While the Merger generally is not expected to result in the recognition of gain or loss for stockholders of either VEREIT or Realty Income for U.S. federal income tax purposes, the distribution of shares of OfficeCo
 
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common stock in the OfficeCo Distribution, if consummated, is expected to be treated as a taxable distribution to Realty Income stockholders (which would include the former VEREIT stockholders that received Realty Income common stock in the Merger and continue to hold such stock as of the close of business on the record date of the OfficeCo Distribution) for U.S. federal income tax purposes. An amount equal to the fair market value of the shares of OfficeCo common stock received by a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences”) of Realty Income common stock in the OfficeCo Distribution is expected to generally be treated as a taxable dividend to the extent of the U.S. holder’s ratable share of any current or accumulated earnings and profits of Realty Income allocable to the OfficeCo Distribution, with the excess treated first as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in Realty Income common stock and any remaining excess treated as capital gain.
The particular consequences of the OfficeCo Distribution to each Realty Income stockholder will depend on such holder’s particular facts and circumstances, and thus you are urged to consult your tax advisor regarding the consequences to you of the OfficeCo Distribution in your specific circumstances. For more information, see “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the OfficeCo Distribution.”
The Realty Income Special Meeting (See page 137)
The Realty Income special meeting will be held virtually at www.virtualshareholdermeeting.com/realty2021sm, at 12:00 p.m., Eastern Time, on August 12, 2021. You may vote at the Realty Income special meeting if you owned shares of Realty Income common stock at the close of business on July 8, 2021, the record date for the Realty Income special meeting. On June 25, 2021, there were 379,807,775 shares of Realty Income common stock outstanding and entitled to vote. You may cast one vote for each share of Realty Income common stock that you owned on that date.
At the Realty Income special meeting, Realty Income stockholders will be asked to consider and vote upon:

the Realty Income Issuance Proposal; and

the Realty Income Adjournment Proposal.
The approval of the Realty Income Issuance Proposal is a condition to the completion of the Mergers.
The Realty Income Issuance Proposal requires approval by the affirmative vote of the majority of the votes cast by Realty Income common stockholders, in person (virtually) or by proxy, at the Realty Income special meeting, assuming a quorum is present. The Realty Income Adjournment Proposal requires approval by the affirmative vote of the majority of the votes cast by Realty Income common stockholders, in person (virtually) or by proxy, at the Realty Income special meeting, assuming a quorum is present.
On June 25, 2021, less than 1% of the outstanding shares of Realty Income common stock was held by Realty Income directors and executive officers and their affiliates. Realty Income currently expects that the Realty Income directors and executive officers will vote their shares in favor of the Realty Income Issuance Proposal and the Realty Income Adjournment Proposal, although none has entered into any agreements obligating them to do so.
The Realty Income board of directors unanimously recommends that Realty Income stockholders vote “FOR” all of the proposals set forth above. For more information, see “The Realty Income Special Meeting.”
The VEREIT Special Meeting (See page 143)
The VEREIT special meeting will be held virtually at www.virtualshareholdermeeting.com/VER2021SM, at 12:00 p.m., Eastern Time, on August 12, 2021. You may vote at the VEREIT special meeting if you owned VEREIT common stock at the close of business on July 8, 2021, the record date for the VEREIT special meeting. On June 25, 2021, there were 229,149,616 shares of VEREIT common stock outstanding and entitled to vote. Each share of VEREIT common stock is entitled to cast one vote on all matters that come before the VEREIT special meeting.
At the VEREIT special meeting, common stockholders of VEREIT will be asked to consider and vote upon:
 
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the VEREIT Merger Proposal;

the VEREIT Compensation Proposal; and

the VEREIT Adjournment Proposal.
The approval of the VEREIT Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of VEREIT common stock. The approval of the VEREIT Compensation Proposal requires the affirmative vote of a majority of the votes cast by holders of VEREIT common stock, in person (virtually) or by proxy, at the VEREIT special meeting, assuming a quorum is present. The VEREIT Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of VEREIT common stock, in person (virtually) or by proxy, at the VEREIT special meeting, assuming a quorum is present.
On June 25, 2021, less than 1% of the outstanding shares of VEREIT common stock was held by VEREIT directors and executive officers and their affiliates. VEREIT currently expects that the directors and executive officers of VEREIT will vote their shares in favor of the VEREIT Merger Proposal, the VEREIT Compensation Proposal and the VEREIT Adjournment Proposal, although none has entered into any agreements obligating them to do so.
The VEREIT board of directors unanimously recommends that VEREIT stockholders vote “FOR” all of the proposals set forth above. For more information, see “The VEREIT Special Meeting.”
The Spin-Off (See page 170)
In the event the Spin-Off is consummated, Realty Income will distribute pro rata to its common stockholders, including legacy Realty Income common stockholders and legacy VEREIT common stockholders that received Realty Income common stock in the Merger and continue to hold such stock as of the close of business on the record date of the OfficeCo Distribution, all of the outstanding shares of common stock of OfficeCo. The Spin-Off, if consummated, is expected to occur on the first business day following the closing of the Merger.
In connection with the Spin-Off, Realty Income and VEREIT intend to enter into all agreements necessary to effectuate the Spin Off, including the Separation and Distribution Agreement (as defined in this joint proxy statement/prospectus), in each case, on the terms and subject to the conditions of the Merger Agreement.
Pursuant to the terms and conditions of the Merger Agreement, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off. However, if this condition is not satisfied or waived by January 29, 2022, Realty Income will be automatically deemed to have waived this condition (and at that point, assuming all other conditions to closing have been satisfied, the parties will be obligated to close the Mergers, regardless of whether the Spin-Off is ready to be consummated). In addition, Realty Income may, in its sole discretion, waive this condition, and thus consummate the Mergers without completing the Spin-Off.
Pursuant to the terms and conditions of the Merger Agreement, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is, in all respects, ready to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off (the “Spin-Off Condition”). However, Realty Income may, in its sole discretion, waive the Spin-Off Condition at any time, and the Spin-Off Condition shall be deemed to be automatically waived on January 29, 2022. In addition, subject to the terms and conditions of the Merger Agreement, Realty Income may, after consultation with and good faith consideration of any comments from VEREIT, determine or, in certain cases, amend, the scope and terms of the Spin-Off, including, among other things, the properties to be included as part of the OfficeCo Properties (including adding or removing properties), the scope and nature of the reorganization plan, the terms of the separation and distribution agreement, and the scope of transition services, if any, to be provided by Realty Income following the Spin-Off. Subject to the terms and conditions of the Merger Agreement, Realty Income also may, after consultation with and good faith consideration of any comments from VEREIT, alternatively seek to sell some or all of the OfficeCo Properties to third parties
 
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in connection with the closing of the Merger, and the parties may otherwise sell certain properties that would have otherwise been included in the OfficeCo Properties during the pendency of the Merger. Accordingly, the specific size and composition of the OfficeCo Properties, the nature of the Spin-Off, and the occurrence of the Spin-Off promptly following the Mergers, if at all, are all subject to change, and there can be no assurances that the Spin-Off will be consummated on the terms contemplated in this joint proxy statement/prospectus, or at all.
Rights of VEREIT Stockholders Will Change as a Result of the Mergers (See page 182)
VEREIT stockholders will have different rights once they become stockholders of Realty Income, due to differences between the governing documents of Realty Income and VEREIT. These differences are described in detail under “Comparison of Rights of Realty Income Stockholders and VEREIT Stockholders.”
Litigation Relating to the Mergers
Following the filing of this joint proxy statement/prospectus, purported stockholders of VEREIT filed six lawsuits challenging disclosures related to the Merger (Stein v. VEREIT, Inc., et. al., Case No. 1:21-cv-01409 (D. Ct. Md., June 7, 2021) (the “Stein Complaint”); Bowles v. VEREIT, Inc., et. al., Case No. 1:21-cv-00845 (D. Ct. Del., June 10, 2021) (the “Bowles Complaint”); Leach v. VEREIT, Inc., et. al., Case No. 1:21-cv-05270 (D. Ct. S.D.N.Y., June 14, 2021) (the “Leach Complaint”); Jenkins v. VEREIT, Inc., et. al., Case No. 1:21-cv-05286 (D. Ct. S.D.N.Y., June 15, 2021) (the “Jenkins Complaint”); Tacka v. VEREIT, Inc., et. al., Case No. 1:21-cv-05357 (D. Ct. S.D.N.Y., June 17, 2021) (the “Tacka Complaint”); and Congregation Zichron Moishe v. VEREIT, Inc., et. al., Case No. 1:21-cv-01729 (D. Ct. Colo., June 24, 2021) (the “Congregation Zichron Moishe Complaint”); and purported stockholders of Realty Income filed one lawsuit challenging the disclosures related to the Merger (Boyko v. Realty Income Corp., et. al., Case No. 1:21-cv-01653 (D. Ct. Colo., June 16, 2021) (the “Boyko Complaint,” and collectively, the “Complaints”)).
The Stein, Leach and Tacka Complaints name VEREIT and the members of the VEREIT board of directors as defendants. The Congregation Zichron Moishe Complaint names VEREIT, VEREIT OP, and the members of the VEREIT board of directors as defendants. The Bowles Complaint names VEREIT, the members of the VEREIT board of directors, VEREIT OP, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants. The Jenkins Complaint names VEREIT, the members of the VEREIT board of directors, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants. The Boyko Complaint names Realty Income and the members of the Realty Income board of directors as defendants.
The Complaints each allege generally that the entities and individual defendants named in such Complaint violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and that the individual defendants violated Section 20(a) of the Exchange Act by preparing and disseminating a registration statement that misstates or omits certain allegedly material information. Furthermore, the Jenkins Complaint also alleges that: (1) members of the VEREIT board of directors breached their fiduciary duties by entering into the transactions contemplated by the Merger Agreement through a flawed and unfair process and by failing to disclose all material information to VEREIT’s stockholders; and (2) VEREIT, Realty Income, Merger Sub 1 and Merger Sub 2 each aided and abetted such breach of fiduciary duty by the VEREIT board of directors.
Each Complaint seeks, among other things, injunctive relief enjoining the consummation of the Merger, if the Merger is consummated, rescission or rescissory damages and an award of the plaintiff’s costs, including attorneys’ and experts’ fees. The defendants believe that all of the claims asserted in the Complaints are without merit and intend to defend against them vigorously. However, litigation is inherently uncertain and there can be no assurance regarding the likelihood that the defendants’ defense of the actions will be successful. Additional lawsuits arising out of the Mergers may also be filed in the future.
 
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EQUIVALENT AND COMPARATIVE PER SHARE INFORMATION
The following table sets forth, for the three months ended March 31, 2021 and the year ended December 31, 2020, selected per share information for Realty Income common stock on a historical and pro forma combined basis and for VEREIT common stock on a historical and pro forma equivalent basis. You should read the table below together with the historical consolidated financial statements and related notes of Realty Income and VEREIT contained in their respective Quarterly Reports on Form 10-Q for the period ended March 31, 2021 and Annual Reports on Form 10-K for the year ended December 31, 2020, all of which are incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
The Realty Income pro forma combined earnings per share were calculated using the methodology as described above under the heading “Unaudited Pro Forma Condensed Combined Financial Statements Giving Effect to the Mergers,” and are subject to all the assumptions, adjustments and limitations described thereunder. The unaudited pro forma combined condensed balance sheet data gives effect to the Mergers, as indicated, as if they had occurred on March 31, 2021. The unaudited pro forma combined statements of operations data gives effect to the Mergers, as if they had become effective at January 1, 2020, based on the most recent valuation data available. The unaudited pro forma combined statements of operations data does not give effect to the Spin-Off because, pursuant to the terms of the Merger Agreement, Realty Income and VEREIT have broad discretion to amend the scope and terms of the Spin-Off, including, among other things, the properties to be included as part of the OfficeCo Properties (including adding or removing properties), Realty Income and VEREIT may alternatively seek to sell some or all of the OfficeCo Properties, and Realty Income may elect not to pursue the Spin-Off at all. Please refer to Note 6 of the unaudited pro forma condensed combined financial statements for information related to the OfficeCo Properties and the potential Spin-Off or sale of some or all of the OfficeCo Properties. The VEREIT pro forma equivalent per common share amounts were calculated by multiplying the Realty Income pro forma combined per share amounts by the exchange ratio of 0.705. You should not rely on the pro forma amounts as being indicative of the financial position or results of operations of Realty Income that actually would have occurred had the Mergers been completed as of the date indicated above, nor is it necessarily indicative of the future operating results or financial position of the Realty Income.
Realty Income
VEREIT
Historical
Pro Forma
for Merger
Historical
Pro Forma
for Merger
Three
Months
Ended
March
31,
2021
Year Ended
December
31,
2020
Three
Months
Ended
March
31,
2021
Year Ended
December
31,
2020
Three
Months
Ended
March
31,
2021
Year Ended
December
31,
2020
Three
Months
Ended
March
31,
2021
Year Ended
December
31,
2020
Book earnings per share
$ 0.26 $ 1.15 $ 0.28 $ 0.42 $ 0.50 $ 0.72 $ 0.20 $ 0.30
Diluted earnings per share
$ 0.26 $ 1.14 $ 0.28 $ 0.42 $ 0.50 $ 0.72 $ 0.20 $ 0.30
Cash dividends declared per share
$ 0.70 $ 2.80 $ 0.70(1) $ 2.80(1) $ 0.46 $ 1.84 $ 0.50(2) $ 1.97
Book value per share (period end)
$ 30.88 $ 41.87 $ 29.43 $ 29.52
(1)
Dividends are declared and paid at the discretion of the Realty Income board of directors. The Realty Income board of directors may change Realty Income’s dividend policy at any time and there can be no assurance as to amount or timing of dividends in the future.
(2)
Dividends are declared and paid at the discretion of the VEREIT board of directors. The VEREIT board of directors may change VEREIT’s dividend policy at any time and there can be no assurance as to amount or timing of dividends in the future.
 
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RISK FACTORS
In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risks associated with each of the businesses of Realty Income and VEREIT because these risks will also affect Realty Income following completion of the transactions. These risks can be found in the respective Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021 of Realty Income and VEREIT, each of which is filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
Risks Relating to the Mergers
The Mergers may not be completed on the terms or timeline currently contemplated, or at all. Completion of the Mergers is subject to many conditions and if these conditions are not satisfied or waived, the Mergers will not be completed, which could adversely affect the businesses of Realty Income or VEREIT, and, in certain circumstances, result in the requirement that Realty Income or VEREIT pays a certain termination fee.
The completion of the Mergers is subject to certain conditions, including: (1) approval by Realty Income’s common stockholders of the Realty Income Issuance Proposal, and VEREIT’s common stockholders of the VEREIT Merger Proposal; (2) approval for listing on the NYSE of Realty Income common stock to be issued in the Mergers or reserved for issuance in connection therewith; (3) no injunction or law prohibiting the Mergers; (4) accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications; (5) material compliance with each party’s covenants; (6) receipt by each of Realty Income and VEREIT of an opinion to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code; (7) receipt by VEREIT of an opinion that Realty Income qualifies as a REIT under the Code and receipt by Realty Income of an opinion that VEREIT qualifies as a REIT under the Code; and (8) effectiveness of the registration statement of which this joint proxy statement/prospectus is a part.
In addition, Realty Income will not be obligated to consummate the Mergers before January 29, 2022 unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger. If this condition is not satisfied or waived by Realty Income by January 29, 2022, and all other conditions to closing have been satisfied, the parties will be obligated to close the Mergers, regardless of whether the Spin-Off is ready to be consummated. In addition, Realty Income or VEREIT may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Mergers are not completed by April 29, 2022.
Neither Realty Income nor VEREIT can provide assurance that these conditions to completing the Mergers will be satisfied or waived, and accordingly, that the Mergers will be completed on the terms or timeline that the parties anticipate or at all.
Failure to consummate the Mergers may adversely affect Realty Income’s and/or VEREIT’s results of operations, financial condition and business prospects for many reasons, including, among others: (i) Realty Income and VEREIT will have incurred substantial costs relating to the Mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration costs that have already been incurred or will continue to be incurred until the closing of the Mergers, which could adversely affect their respective financial conditions, results of operations and ability to make distributions to their respective stockholders and to pay the principal of and interest on its debt securities and other indebtedness; (ii) the Mergers, whether or not they close, will divert the attention of the management of each of Realty Income and VEREIT instead of enabling them to more fully pursue other opportunities that could be beneficial to the companies, in each case, without realizing any of the benefits of having completed the Mergers or the other transactions contemplated by the Merger Agreement; and (iii) any reputational harm due to the adverse perception of any failure to successfully complete the Mergers. In addition, if the Merger Agreement is terminated under certain circumstances specified therein, Realty Income or VEREIT may be required to pay the other party a termination fee and/or an expense reimbursement fee, as more fully described in “The Mergers — The Merger Agreement.”
 
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The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Realty Income or VEREIT.
At the effective time of the Merger, each share of VEREIT common stock issued and outstanding will be converted into the right to receive 0.705 newly issued shares of Realty Income common stock, with cash paid in lieu of fractional shares. The Exchange Ratio is fixed in the Merger Agreement and, while it will be adjusted in certain limited circumstances, including a recapitalization, stock or unit split, stock or unit dividend or distribution, reclassification, combination or exchange offer of shares or other similar transaction involving Realty Income or VEREIT, the Exchange Ratio will not be adjusted for changes in the market price of either Realty Income common stock or VEREIT common stock. Changes in the price of Realty Income common stock prior to the Merger will affect the market value of the Merger consideration that VEREIT stockholders will receive at the closing of the Merger. Stock price changes may result from a variety of factors (many of which are beyond the control of Realty Income and VEREIT), including the following factors:

changes in the respective businesses, operations, assets, liabilities and prospects of either company;

changes in market assessments of the business, operations, financial position and prospects of either company;

market assessments of the likelihood that the Mergers will be completed;

interest rates, general market and economic conditions and other factors generally affecting the price of Realty Income common stock and VEREIT common stock;

federal, state and local legislation, governmental regulation and legal developments in the businesses in which Realty Income and VEREIT operate; and

other factors beyond the control of Realty Income or VEREIT, including those described under this heading “Risk Factors.”
The price of Realty Income common stock at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of this joint proxy statement/prospectus and on the date of the special meetings of Realty Income and VEREIT. As a result, the market value of the Merger consideration represented by the Exchange Ratio will also vary. For example, based on the range of closing prices of Realty Income common stock during the period from April 28, 2021, the last trading day before public announcement of the Merger, through June 22, 2021, the latest practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio of 0.705 represented a market value per share of VEREIT common stock ranging from a low of $45.62 to a high of $50.11.
Because the Merger will be completed after the date of the special meetings, at the time of your special meeting, you will not know the exact market value of the Realty Income common stock that VEREIT stockholders will receive upon completion of the Merger, which may itself involve certain risks, including:

if the price of Realty Income common stock increases between the date the Merger Agreement was signed or the date of the VEREIT special meeting and the closing of the Merger, VEREIT stockholders will receive shares of Realty Income common stock that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the VEREIT special meeting, respectively; and

if the price of Realty Income common stock declines between the date the Merger Agreement was signed or the date of the VEREIT special meeting and the closing of the Merger, including for any of the reasons described above, VEREIT stockholders will receive shares of Realty Income common stock that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the VEREIT special meeting, respectively.
Therefore, while the number of shares of Realty Income common stock to be issued per share of VEREIT common stock is fixed, VEREIT stockholders cannot be sure of the market value of the consideration they will receive upon completion of the Merger.
 
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Realty Income and VEREIT stockholders will be significantly diluted by the Mergers.
The Mergers will significantly dilute the ownership position of Realty Income stockholders and result in VEREIT stockholders having an ownership stake in Realty Income that is smaller than their current stake in VEREIT. Upon completion of the Mergers, based on the shares of Realty Income common stock and VEREIT common stock outstanding as of June 25, 2021, we estimate that legacy Realty Income stockholders will own approximately 70% of the issued and outstanding shares of Realty Income common stock, and legacy VEREIT stockholders will own approximately 30% of the issued and outstanding shares of Realty Income common stock. Additionally, because Realty Income is issuing shares of Realty Income common stock to certain holders of VEREIT OP common units in the Partnership Merger, each outstanding share of Realty Income common stock after the completion of the Mergers will represent a smaller percentage of the voting power of Realty Income than if such shares of common stock had not been issued in the Partnership Merger. Realty Income may also issue additional shares of common stock or preferred stock in the future, which would create further dilution. Consequently, Realty Income stockholders and VEREIT stockholders, as a general matter, will have less influence over the management and policies of Realty Income after the effective time of the Merger than they currently exercise over the management and policies of Realty Income and VEREIT, respectively.
The Merger Agreement contains provisions that could discourage a potential competing acquiror of either Realty Income or VEREIT or could result in any competing proposal being at a lower price than it might otherwise be.
The Merger Agreement contains provisions that, subject to limited exceptions, restrict the ability of each of Realty Income and VEREIT to initiate, solicit, knowingly encourage or facilitate competing third-party proposals to effect, among other things, a merger, reorganization, share sale, share exchange, asset sale, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving any purchase or sale of 20% or more of the consolidated assets of Realty Income or VEREIT. In addition, either Realty Income or VEREIT generally has an opportunity to offer to modify the terms of the Merger Agreement in response to any competing “acquisition proposal” that may be made to the other party before the board of directors of such other party may withdraw or modify its recommendation in response to such competing acquisition proposal or may terminate the Merger Agreement to enter into such a competing acquisition proposal. In some circumstances, on termination of the Merger Agreement, one of the parties may be required to pay a substantial termination fee and/or expense reimbursement fee to the other party. For more information, see “The Mergers — The Merger Agreement —  Termination of the Merger Agreement — Termination Fee and Expense Reimbursement.”
These provisions could discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Realty Income or VEREIT from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Mergers, or might result in a potential competing acquiror proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee and/or expense reimbursement fee that may become payable in certain circumstances under the Merger Agreement.
The pendency of the Mergers could adversely affect the business and operations of Realty Income and VEREIT.
In connection with the pending Mergers, some clients of each of Realty Income and VEREIT may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of Realty Income and VEREIT, regardless of whether the Mergers are completed. Similarly, current and prospective employees of Realty Income and VEREIT may experience uncertainty about their future roles with Realty Income following the Mergers, which may materially adversely affect the ability of each of Realty Income and VEREIT to attract and retain key personnel during the pendency of the Mergers. In addition, due to operating covenants in the Merger Agreement, each of Realty Income and VEREIT may be unable (without the other party’s prior written consent), during the pendency of the Mergers, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.
 
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Some of the directors and executive officers of Realty Income and directors and executive officers of VEREIT have interests in the Mergers that are different from, or in addition to, those of the other Realty Income stockholders and VEREIT stockholders.
Certain of the directors and executive officers of Realty Income and directors and executive officers of VEREIT have interests in the Mergers that may be different from, or in addition to, other Realty Income stockholders and VEREIT stockholders, respectively. For more information, see “The Mergers — Interests of Realty Income Directors and Executive Officers in the Mergers” and “The Mergers — Interests of Realty Income Directors and Executive Officers in the Mergers.”
If the Mergers are not consummated by April 29, 2022 (unless extended under certain circumstances), either Realty Income or VEREIT may terminate the Merger Agreement.
Either Realty Income or VEREIT may terminate the Merger Agreement if the Mergers have not been consummated by April 29, 2022. However, this termination right will not be available to a party if that party failed to comply with any provision under the Merger Agreement and that failure was the primary cause of, or resulted in, the failure to consummate the Mergers. For more information, see “The Mergers — The Merger Agreement — Termination of the Merger Agreement — Termination Fee and Expense Reimbursement.” Any termination of the Merger Agreement may adversely affect Realty Income's or VEREIT's results of operations, financial condition and business.
If the Merger does not qualify as a reorganization, there may be adverse tax consequences.
The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. The closing of the Merger is conditioned on the receipt by each of Realty Income and VEREIT of an opinion of its respective counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. However, such opinions are not binding on the Internal Revenue Service. If the Merger were to fail to qualify as a reorganization, then each VEREIT stockholder generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the shares of Realty Income common stock and cash in lieu of any fractional share of Realty Income common stock received by the VEREIT stockholder in the Merger; and (ii) the VEREIT stockholder’s adjusted tax basis in its VEREIT common stock. In addition, failure of the Merger to qualify as a reorganization may damage Realty Income's reputation and have other adverse impacts on Realty Income.
The Merger and related transactions are subject to approval by stockholders of both Realty Income and VEREIT.
In order for the Merger to be completed, VEREIT common stockholders must approve the VEREIT Merger Proposal, which requires the affirmative vote of the holders of at least a majority of the outstanding shares of VEREIT common stock entitled to vote on such proposal. In addition, Realty Income common stockholders must approve the issuance of Realty Income common stock in the Mergers by an affirmative vote of at least a majority of the votes cast by the holders of Realty Income common stock, in person (virtually) or by proxy, at the Realty Income special meeting. This approval is required under applicable NYSE rules in order for Realty Income to be authorized to issue the shares of Realty Income common stock to VEREIT stockholders as part of the Merger consideration.
An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement, or the transactions contemplated thereby, could have a material adverse impact on the businesses of Realty Income and VEREIT and their ability to consummate the transactions contemplated by the Merger Agreement.
Transactions like the Mergers are frequently the subject of litigation or other legal proceedings, including actions alleging that either parties’ board of directors breached their respective duties to their stockholders or other equity holders by entering into the Merger Agreement, by failing to obtain a greater value in the transaction for their stockholders or other equity holders or otherwise or any other claims (contractual or otherwise) arising out of the Mergers, Spin-Off, the potential sale of OfficeCo Properties, or the transactions related thereto including such proceedings described in this joint proxy statement/prospectus. With respect to these proceedings, and any other litigation or other legal proceedings that are brought against Realty Income, VEREIT or their respective boards of directors or subsidiaries in connection with the Merger Agreement, or the transactions contemplated thereby, the respective parties to the proceeding intend to defend against any
 
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such claims made therein but they might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on Realty Income’s or VEREIT’s ability to consummate the Mergers in a timely manner, or at all, or their respective business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.
Risks Relating to Realty Income after Completion of the Mergers and the Transactions Contemplated by the Merger Agreement
Realty Income expects to incur substantial expenses related to the Mergers and the transactions contemplated by the Merger Agreement.
Realty Income expects to incur substantial expenses in completing the Mergers and integrating the business, operations, networks, systems, technologies, policies and procedures of Realty Income and VEREIT, as well as in the Spin-Off and the potential sale of some or all of the OfficeCo Properties. There are a large number of systems that must be integrated or separated in connection with the Mergers, the Spin-Off or sale of OfficeCo Properties, and the other transactions contemplated by the Merger Agreement, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While Realty Income and VEREIT have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. The expenses in connection with the Mergers and the transactions contemplated by the Merger Agreement are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
Following the Mergers, Realty Income may be unable to integrate the business of VEREIT successfully, consummate the Spin-Off, or sell the OfficeCo Properties successfully or realize the anticipated synergies and related benefits of the Mergers and the transactions contemplated by the Merger Agreement or do so within the anticipated time frame.
The Mergers involve the combination of two companies which currently operate as independent public companies. The Spin-Off or the potential sale of some or all of the OfficeCo Properties would involve the separation, reorganization and distribution of combined assets of two companies that currently operate as independent public companies. Realty Income will be required to devote significant management attention and resources to integrating the business practices and operations of VEREIT, and each of Realty Income and VEREIT will be required to devote significant management attention and resources to the Spin-Off and/or the potential sale of OfficeCo Properties. Potential difficulties Realty Income, VEREIT and OfficeCo may encounter in the integration process or in the Spin-Off or sale of OfficeCo Properties include the following:

the inability to successfully combine the businesses of Realty Income and VEREIT and separate the OfficeCo Properties in a manner that permits the combined company to achieve the cost savings anticipated to result from the Mergers, which would result in some anticipated benefits of the Mergers not being realized in the time frame currently anticipated or at all;

lost sales and clients as a result of certain clients of either of Realty Income or VEREIT deciding not to do business with the combined company;

the complexities associated with managing the combined company out of multiple locations and integrating personnel from the two companies, as well as the potential complexities associated with the separation of personnel at OfficeCo and integrating personnel from Realty Income and VEREIT in OfficeCo;

the additional complexities of combining two companies with different histories, regulatory restrictions, markets and customer bases;

the failure to retain key employees of either of the two companies;

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Mergers and the transactions contemplated by the Merger Agreement; and
 
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performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Mergers and integrating Realty Income’s and VEREIT’s operations.
For all these reasons, you should be aware that it is possible that the integration process or the Spin-Off or sales of OfficeCo Properties could result in the distraction of Realty Income’s, VEREIT’s or OfficeCo’s management, the disruption of the combined company’s or OfficeCo’s ongoing business or inconsistencies in the combined company’s or OfficeCo’s services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company or OfficeCo to maintain relationships with clients, customers, vendors, joint venture partners and employees or to achieve the anticipated benefits of the Mergers, or could otherwise adversely affect the business and financial results of the combined company or OfficeCo.
Following the Mergers and the transactions contemplated by the Merger Agreement, Realty Income or OfficeCo may be unable to retain key employees.
The success of Realty Income after the Mergers will depend in part upon its ability to retain key Realty Income and VEREIT employees. The success of OfficeCo after the Spin-Off will depend in part upon its ability to retain key Realty Income and VEREIT employees. Key employees may depart either before or after the Mergers or Spin-Off because of issues relating to the uncertainty and difficulty of integration or separation or a desire not to remain with Realty Income or OfficeCo following the Mergers or Spin-Off. Accordingly, no assurance can be given that Realty Income, VEREIT or, following the Mergers and the transactions contemplated by the Merger Agreement, Realty Income or OfficeCo will be able to retain key employees to the same extent as in the past.
Realty Income depends on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm Realty Income’s business.
The members of the Realty Income board of directors and Realty Income’s executive officers will continue as the members of the board of directors and executive management of Realty Income. The future success of Realty Income depends in large part on its ability to hire and retain a sufficient number of qualified personnel. The future success of Realty Income also depends upon the service of Realty Income’s executive officers, who have extensive market knowledge and relationships and will exercise substantial influence over Realty Income’s operational, financing, acquisition and disposition activity. Among the reasons that they are important to Realty Income’s success is that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist Realty Income in negotiations with lenders, existing and potential clients and industry personnel.
Many of Realty Income’s other key executive personnel, particularly its senior managers, also have extensive experience and strong reputations in the industry. In particular, the extent and nature of the relationships that these individuals have developed with financial institutions and existing and prospective customers are critically important to the success of Realty Income’s business. The loss of services of one or more members of Realty Income’s senior management team, or Realty Income’s inability to attract and retain highly qualified personnel, could adversely affect Realty Income’s business, diminish Realty Income’s investment opportunities and weaken its relationships with lenders, business partners, existing and prospective customers and industry personnel, which could materially and adversely affect Realty Income.
The future results of Realty Income will suffer if Realty Income does not effectively manage its operations following the Mergers and the transactions contemplated by the Merger Agreement.
Following the Mergers, Realty Income may continue to expand its operations through additional acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges. The future success of Realty Income will depend, in part, upon the ability of Realty Income to manage its expansion opportunities, which poses substantial challenges for Realty Income to integrate new operations into its existing business in an efficient and timely manner, to successfully monitor its operations, costs, regulatory compliance and service quality and to maintain other necessary internal controls. Realty Income cannot assure you that its expansion or acquisition opportunities will be successful, or that it will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
 
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The trading prices of shares of the Realty Income common stock and OfficeCo common stock following the Mergers and the Spin-Off may be affected by factors different from those affecting the price of shares of Realty Income common stock or VEREIT common stock before the Mergers and the Spin-Off.
If the Mergers are completed, based on the shares of Realty Income common stock and VEREIT common stock outstanding as of June 25, 2021, legacy Realty Income stockholders will become holders of approximately 70% of the outstanding shares of Realty Income common stock and legacy VEREIT stockholders will become holders of approximately 30% of the outstanding shares of Realty Income common stock immediately after the Mergers. Based on the respective numbers of shares of common stock of Realty Income and VEREIT outstanding as of that date, and assuming that the Spin-Off is completed on the first business day following the closing of the Merger, legacy Realty Income stockholders would become holders of approximately 70% of the outstanding shares of the common stock of OfficeCo, and legacy VEREIT stockholders that receive Realty Income common stock in the Merger would become holders of approximately 30% of the outstanding shares of common stock of OfficeCo. The results of operations of Realty Income and OfficeCo, as well as the trading price of Realty Income common stock and OfficeCo common stock, after the Mergers and the Spin-Off may be affected by factors different from those currently affecting Realty Income’s or VEREIT’s results of operations or the trading prices of Realty Income common stock and VEREIT common stock. These different factors include:

with respect to Realty Income, a greater number of shares of Realty Income common stock outstanding, as compared to the number of shares of Realty Income common stock currently outstanding;

different stockholders in both Realty Income and OfficeCo; and

Realty Income and OfficeCo owning different assets and maintaining different capitalizations.
Accordingly, the historical trading prices and financial results of Realty Income and VEREIT may not be indicative of these matters for Realty Income and OfficeCo after the Mergers and the Spin-Off. For more information, see “Where You Can Find More Information.”
Counterparties to certain significant agreements with Realty Income or VEREIT may exercise contractual rights under such agreements in connection with the Mergers, the Spin-Off or the sale of some or all of the OfficeCo Properties.
Realty Income and VEREIT are each party to certain agreements that give the counterparty certain rights following a change of control or similar event, including in some cases the right to terminate the agreement. Under some such agreements, the Mergers, the Spin-Off or the sale of some or all of the OfficeCo Properties will constitute a change of control or cause certain other triggering events and therefore the counterparty may exercise certain rights under the agreement upon the closing of the Mergers, the Spin-Off or such sales. Certain Realty Income and VEREIT funds, joint ventures, management and servicing contracts, leases and debt obligations have agreements subject to such provisions. Any such counterparty may request modifications of its agreement as a condition to granting a waiver or consent under its agreement or it may terminate or seek to terminate its agreement with Realty Income or VEREIT, as the case may be, as a result of such change of control (if permitted to do so by the applicable agreement). In addition, certain indebtedness of Realty Income or VEREIT may give the holders of that indebtedness the right to demand immediate repayment upon a change of control or similar event. There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available, that the exercise of any such rights will not result in a material adverse effect or that any modifications of such agreements will not result in a material adverse effect.
Realty Income’s anticipated level of indebtedness will increase upon completion of the Mergers and may increase the related risks Realty Income now faces.
Upon completion of the Mergers, Realty Income intends to assume and/or refinance certain indebtedness of VEREIT and VEREIT OP and, assuming that occurs, Realty Income's consolidated indebtedness will increase substantially and it will be subject to increased risks associated with debt financing, including an increased risk that Realty Income’s cash flow could be insufficient to meet required payments on its debt securities or other indebtedness or to pay dividends on its common stock or any preferred stock it may issue.
 
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On March 31, 2021, Realty Income had indebtedness of approximately $8.6 billion, excluding unamortized deferred financing costs and net premiums. Taking into account Realty Income’s existing indebtedness and the assumption of VEREIT’s consolidated indebtedness in the Mergers, the total principal indebtedness of the combined company, including joint venture indebtedness, as of March 31, 2021 would have been approximately $14.4 billion.
Realty Income’s increased indebtedness could have important consequences to holders of its common stock, including VEREIT stockholders who receive Realty Income common stock in the Merger, and its debt securities including:

increasing Realty Income’s vulnerability to general adverse economic and industry conditions;

limiting Realty Income’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

requiring the use of a substantial portion of Realty Income’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

limiting Realty Income’s flexibility in planning for, or reacting to, changes in its business and its industry; and

putting Realty Income at a disadvantage compared to its competitors with less indebtedness.
If Realty Income defaults under a debt instrument, it will automatically be in default under any other debt instrument that has cross-default provisions, the holders of all such indebtedness may be entitled to demand its immediate repayment and, in the case of secured indebtedness, Realty Income may lose any property securing that indebtedness.
Risks Relating to the Spin-Off
There can be no assurance that the Spin-Off of OfficeCo will occur in the form contemplated in this joint proxy statement/prospectus, on the anticipated terms or timing, or at all.
While Realty Income and VEREIT intend to cause the Spin-Off to be completed the business day following the closing of the Merger, during the process of effectuating the steps necessary to consummate the Spin-Off, certain issues may arise that may adversely impact the feasibility or desireability of the Spin-Off on the anticipated terms or timeline, or at all, or adversely impact the anticipated benefits of the Spin-Off to the combined company and its stockholders, including significant unanticipated costs or expenses (including consent fees), failure to obtain required consents or approvals, adverse tax implications, or other adverse impacts, all of which could significantly delay or prevent the Spin-Off.
In addition, pursuant to the terms of the Merger Agreement, the parties have broad discretion to amend the scope and terms of the Spin-Off, including, among other things, the properties to be included as part of the OfficeCo Properties (including adding or removing properties), the scope and nature of the reorganization plan, the terms of the separation and distribution agreement, and the scope of transition services, if any, to be provided to OfficeCo by Realty Income following the Spin-Off, if any. Realty Income also may, after consultation with and good faith consideration of any comments from VEREIT, alternatively seek to sell some or all of the OfficeCo Properties to third parties in connection with the closing of the Merger, and the parties may otherwise sell certain properties that would have otherwise been included in the OfficeCo Properties during the pendency of the Mergers. These changes may adversely impact the timing of the Spin-Off, the viability of OfficeCo as a stand-alone business or benefits of the Spin-Off. In addition, there can be no assurance that Realty Income would be able to sell any such OfficeCo Properties should it elect to do so on terms Realty Income considers acceptable, or at all.
In addition, while Realty Income will not be obligated to consummate the Mergers until January 29, 2022 unless the Spin-Off is in all respects, ready to be consummated contemporaneously with the closing of the Merger, Realty Income may decide, in its sole discretion, to abandon the Spin-Off and waive that condition, and proceed with consummating the Mergers without completing the Spin-Off at all.
 
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Accordingly, there can be no assurance that the Spin-Off will occur on the anticipated terms or within the anticipated time frame, or at all, and stockholders of Realty Income and VEREIT should not place undue reliance on the consummation of the Spin-Off as described in this joint proxy statement/prospectus in determining whether or not to approve the proposals contemplated in this joint proxy statement/prospectus.
There may be significant costs and expenses in effectuating the Spin-Off or the sales of OfficeCo Properties.
Realty Income and VEREIT expect to incur significant costs and expenses in connection with the Spin-Off, including third-party consent costs, refinancing costs, transfer costs, expenses related to the Form 10 that must be filed with the SEC in order to complete the Spin-Off and the preparation of separate financial information related thereto, negotiations and creation of OfficeCo’s business and operational relationships, and diversion of management resources, many of which may become payable whether or not the Spin-Off is consummated, and which may adversely impact the business, results of operation or financial position of Realty Income and/or VEREIT. In addition, the pursuit of any sales of some or all of the OfficeCo Properties may result in similar costs and expenses, and/or increase such costs or expenses, both with respect to the unique costs or expenses related to those sales, such as the marketing, negotiations and finalization of the operative agreements, additional tax or consent costs, and any indemnification obligations between the parties required pursuant to the Merger Agreement, as well as the costs of any additional changes those sales may have on the Spin-Off.
The Spin-Off or the sales of some or all of the OfficeCo Properties, if completed, may not deliver its intended results.
There are risks and uncertainties related to the Spin-Off and the potential sales of OfficeCo Properties, including but not limited to:

whether Realty Income will be able to effect the Spin-Off or potential sales of OfficeCo Properties within an acceptable time frame and on acceptable terms, if at all, which may be impacted by many factors, including consent rights, legal restrictions, tax impacts, and financing costs, among others;

whether OfficeCo will qualify as a REIT following the Spin-Off, which involves the application of highly technical and complex provisions of the Code, as well as various factual determinations not entirely within the control of the parties;

whether changes in legislation, treasury regulations or Internal Revenue Service, or IRS, interpretations may adversely affect Realty Income’s ability to engage in the Spin-Off or sales of OfficeCo Properties, or whether stockholders of OfficeCo will benefit from OfficeCo qualifying as a REIT;

whether OfficeCo is able to complete financings and/or refinancing related to the Spin-Off within an acceptable time frame and on acceptable terms, if at all;

whether the parties elect to change the nature or scope of the OfficeCo Properties prior to the consummation of the Spin-Off (including the properties to be contributed thereto);

whether the parties elect to sell certain properties that would have otherwise been contributed to the OfficeCo Properties, and when those elections are made;

whether any potential purchasers of OfficeCo Properties with whom the parties enter into purchase agreements (if any) terminate their agreements after signing, which could adversely impact the timing for the Spin-Off, or the ability to consummate the Spin-Off or the sale of OfficeCo Properties shortly following the closing of the Mergers, or at all,

whether OfficeCo may be able to conduct and expand its business following the Spin-Off;

whether there could be legal or other challenges to the Spin-Off, including changes in legal, regulatory, market and other circumstances that could lead to the Spin-Off not being pursued; and

whether OfficeCo and/or its clients experience financial difficulties from interest rates, general market and economic conditions and other factors.
Any one or more of these risks and uncertainties, or any other complexity or aspect of the Spin-Off, the sale of some or all of the OfficeCo Properties, or the respective implementation thereof, may prevent the
 
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Spin-Off or sales of some or all of the OfficeCo Properties from being completed on acceptable terms, or at all or adversely effect OfficeCo following the Spin-Off.
If the OfficeCo Distribution is consummated, the distribution of shares of OfficeCo common stock in the OfficeCo Distribution is expected to be treated as a taxable distribution to Realty Income common stockholders for U.S. federal income tax purposes.
If the OfficeCo Distribution is consummated, the distribution of shares of OfficeCo common stock in the OfficeCo Distribution is expected to be treated as a taxable distribution to Realty Income common stockholders (which would include the former VEREIT stockholders that received Realty Income common stock in the Merger and continue to hold such stock as of the close of business on the record date of the OfficeCo Distribution) for U.S. federal income tax purposes. Accordingly, an amount equal to the fair market value of the shares of OfficeCo common stock received by a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences”) of Realty Income common stock in the OfficeCo Distribution is expected to generally be treated as a taxable dividend to the extent of the U.S. holder’s ratable share of any current or accumulated earnings and profits of Realty Income allocable to the OfficeCo Distribution, with the excess treated first as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in Realty Income common stock and any remaining excess treated as capital gain. A U.S. holder’s tax basis in shares of Realty Income common stock held at the time of the OfficeCo Distribution is expected to be reduced (but not below zero) to the extent the fair market value of shares of OfficeCo common stock distributed by Realty Income to such holder in the OfficeCo Distribution exceeds such holder’s ratable share of Realty Income’s current and accumulated earnings and profits allocable to the OfficeCo Distribution. The U.S. holder’s holding period for such Realty Income shares for U.S. federal income tax purposes will not be affected by the distribution. Realty Income will not be able to advise you of the amount of earnings and profits of Realty Income until after the end of the calendar year in which the Spin-Off occurs. Realty Income or other applicable withholding agents may be required or permitted to withhold at the applicable rate on all or a portion of the distribution payable to non-U.S. holders (as defined in “Material U.S. Federal Income Tax Consequences”) of Realty Income common stock, and any such withholding would be satisfied by Realty Income or such agent by withholding and selling a portion of the shares of OfficeCo common stock that otherwise would be distributable to non-U.S. holders or by withholding from other property held in the non-U.S. holder’s account with the withholding agent.
Although Realty Income will be ascribing a value to the shares of OfficeCo common stock in the OfficeCo Distribution for tax purposes, this valuation is not binding on the IRS or any other tax authority. These taxing authorities could ascribe a higher valuation to those shares, particularly if shares of OfficeCo common stock trade at prices significantly above the value ascribed to those shares by Realty Income in the period following the OfficeCo Distribution. Such a higher valuation may cause a larger reduction in the tax basis of Realty Income common stock held by its common stockholders or may cause such stockholders to recognize additional dividend or capital gain income. Realty Income stockholders should consult their tax advisors as to the particular tax consequences of the OfficeCo Distribution to them.
Following or in connection with the Spin-Off, OfficeCo may need to incur substantial indebtedness and/or raise substantial capital.
If the Spin-Off is consummated, OfficeCo may need to incur a substantial amount of indebtedness to execute its business strategy. If incurred, the amount of such indebtedness could have material adverse consequences for OfficeCo, including:

increasing OfficeCo’s vulnerability to general adverse economic and industry conditions;

limiting OfficeCo’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

requiring the use of a substantial portion of OfficeCo’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

limiting OfficeCo’s flexibility in planning for, or reacting to, changes in its business and its industry; and
 
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putting OfficeCo at a disadvantage compared to its competitors with less indebtedness.
Moreover, to respond to competitive challenges, OfficeCo may be required to raise substantial additional capital to execute its business strategy, and there can be no assurance that it will be able to do so on terms it considers acceptable, or at all. OfficeCo’s ability to arrange financing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond its control. If OfficeCo incurs additional indebtedness, its credit ratings could be adversely affected, which could raise borrowing costs and limit future access to capital and its ability to satisfy its obligations under any credit facilities or other debt instruments into which it may enter.
Risks Relating to the Status of Realty Income and VEREIT as REITs
Realty Income may incur adverse tax consequences if Realty Income or VEREIT has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
Each of Realty Income and VEREIT has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to do so through the time of the Merger. Realty Income intends to continue operating in such a manner following the Merger. Neither Realty Income nor VEREIT has requested or plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within the control of Realty Income or VEREIT may affect each company’s ability to qualify as a REIT. In order to qualify as a REIT, each of Realty Income and VEREIT must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.
The closing of the Merger is conditioned on receipt by Realty Income of an opinion from Goodwin Procter LLP to the effect that, for all taxable years commencing with VEREIT’s taxable year ended December 31, 2011 and through the Merger Effective Time, VEREIT has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and receipt by VEREIT of an opinion from Latham & Watkins LLP to the effect that, for all taxable years commencing with Realty Income’s taxable year ended December 31, 1994, Realty Income has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year that includes the Merger Effective Time and future taxable years. The foregoing REIT opinions, however, will be based on the factual representations provided by Realty Income and VEREIT to counsel and limited by the assumptions set forth therein, and are not a guarantee that Realty Income or VEREIT, in fact, has qualified, or, in the case of Realty Income, will continue to qualify as a REIT, nor are such opinions binding on the IRS. Moreover, as noted above, neither Realty Income nor VEREIT has requested or plans to request a ruling from the IRS that it qualifies as a REIT.
If Realty Income loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:

it would be subject to U.S. federal income tax on its net income at regular corporate rates for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income);

it could be subject to increased state and local taxes for such periods;

unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and

for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.
 
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Even if Realty Income retains its REIT status, if VEREIT is determined to have lost its REIT status for a taxable year ending on or before the Merger, VEREIT would be subject to adverse tax consequences similar to those described above. This could substantially reduce Realty Income’s cash available for distribution, including cash available to pay dividends to its stockholders, because, assuming that Realty Income otherwise maintains its REIT qualification:

Realty Income generally would be subject to corporate level tax with respect to the built-in gain on each asset of VEREIT existing at the time of the Merger if Realty Income were to dispose of the VEREIT asset during the five-year period following the Merger;

Realty Income would succeed to any earnings and profits accumulated by VEREIT for taxable periods that it did not qualify as a REIT, and Realty Income would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits (or if Realty Income does not timely distribute those earnings and profits, Realty Income could fail to qualify as a REIT); and

if VEREIT incurred any unpaid tax liabilities prior to the Merger, those tax liabilities would be transferred to Realty Income as a result of the Merger.
If there is an adjustment to VEREIT’s taxable income or dividends paid deductions, Realty Income could elect to use the deficiency dividend procedure in order to maintain VEREIT’s REIT status. That deficiency dividend procedure could require Realty Income to make significant distributions to its stockholders and to pay significant interest to the IRS.
As a result of all these factors, Realty Income’s or VEREIT’s failure to qualify as a REIT could impair Realty Income’s ability to expand its business and raise capital, and would materially adversely affect the market value of its common stock. In addition, for years in which Realty Income does not qualify as a REIT, it would not otherwise be required to make distributions to stockholders.
Risks Relating to an Investment in Realty Income Common Stock following the Mergers and the Transactions Contemplated by the Merger Agreement
The market price of Realty Income common stock may decline as a result of the Mergers and the transactions contemplated by the Merger Agreement.
The market price of Realty Income common stock may decline as a result of the Merger and the transactions contemplated by the Merger Agreement if, among other things, Realty Income does not achieve the perceived benefits of the Mergers and the transactions contemplated by the Merger Agreement or the effect of the Mergers and the transactions contemplated by the Merger Agreement on Realty Income’s results of operations or financial condition is not consistent with the expectations of financial or industry analysts.
In addition, upon consummation of the Mergers and the transactions contemplated by the Merger Agreement, Realty Income stockholders and VEREIT stockholders will own interests in Realty Income, which will operate an expanded business with a different mix of properties, risks and liabilities. Current stockholders of Realty Income and VEREIT may not wish to continue to invest in Realty Income, or may wish to dispose of some or all of their shares of Realty Income common stock. If, following the effective time of the Merger or while the Merger is pending, large amounts of Realty Income common stock are sold, the market price of Realty Income common stock could decline, perhaps substantially.
After the Mergers and the transactions contemplated by the Merger Agreement are completed, VEREIT stockholders who receive shares of Realty Income common stock in the Merger and shares of OfficeCo common stock in the Spin-Off will have different rights that may be less favorable than their current rights as VEREIT stockholders.
After the effective time of the Merger, VEREIT stockholders who receive shares of Realty Income common stock in the Merger will have different rights, which may be less favorable than their current rights as VEREIT stockholders. For more information, see “Comparison of Rights of Realty Income Stockholders and VEREIT Stockholders.”
 
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The rights of OfficeCo stockholders will be provided for in OfficeCo’s articles of incorporation and bylaws, which also may be different from those of VEREIT stockholders or Realty Income stockholders.
Following the Mergers and the transactions contemplated by the Merger Agreement, Realty Income may not continue to pay dividends at or above the rate currently paid by Realty Income or VEREIT.
Following the Mergers and the transactions contemplated by the Merger Agreement, the stockholders of Realty Income may not receive dividends in the same respective amounts per share of common stock that they did as stockholders of Realty Income or VEREIT prior to the Mergers for various reasons, including those discussed elsewhere under this caption "Risk Factors" and the following:

Realty Income may not have enough cash to pay such dividends due to changes in Realty Income’s cash requirements, capital spending plans, cash flow or financial position;

decisions on whether, when and in what amounts to pay any future dividends will remain at all times entirely at the discretion of the Realty Income board of directors, which reserves the right to change Realty Income’s dividend practices at any time and for any reason; and

the amount of dividends that Realty Income’s subsidiaries may distribute to Realty Income may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.
Stockholders of Realty Income will have no contractual or other legal right to dividends that have not been declared by the Realty Income board of directors.
Other Risks
The historical and unaudited pro forma condensed combined financial statements included elsewhere in this joint proxy statement/prospectus do not purport to be representative of Realty Income’s results after the Mergers and the transactions contemplated by the Merger Agreement, and accordingly, you have limited financial information on which to evaluate Realty Income.
The unaudited pro forma condensed combined financial statements included elsewhere in this joint proxy statement/prospectus has been presented for informational purposes only and do not purport to be indicative of the financial position or results of operations that actually would have occurred had the Mergers and the transactions contemplated by the Merger Agreement been completed as of the dates indicated, nor does it purport to be indicative of the future operating results or financial position of Realty Income after the Mergers and the transactions contemplated by the Merger Agreement. The unaudited pro forma condensed combined financial statements reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to VEREIT’s assets and liabilities. The unaudited pro forma condensed combined financial statements do not give effect to the proposed Spin-Off of certain office properties owned by Realty Income and VEREIT, or to the possible sale of some or all of such office properties, because, pursuant to the terms of the Merger Agreement, Realty Income and VEREIT have broad discretion to amend the scope and terms of the Spin-Off, including, among other things, the office properties to be contributed to OfficeCo and the fact that they may instead seek to sell some or all of such office properties, and also because Realty Income may elect not to pursue the Spin-Off or sale of office properties at all. For further information concerning the Spin-Off, please see Note 6 to the unaudited pro forma condensed combined financial statements included in this joint proxy statement/prospectus.
In addition, the unaudited pro forma condensed combined financial statements do not reflect other future events that may occur after the Mergers and the transactions contemplated by the Merger Agreement, including the costs related to the planned integration of the two companies and any future nonrecurring charges resulting from the Mergers and the transactions contemplated by the Merger Agreement, and do not consider potential impacts of current market conditions on revenues or expense efficiencies. The unaudited pro forma condensed combined financial statements presented elsewhere in this joint proxy statement/prospectus are based in part on certain estimates and assumptions (including the estimated purchase price allocation described above) regarding the Mergers and the transactions contemplated by the Merger Agreement that Realty Income and VEREIT believe are reasonable under the circumstances. Realty Income and VEREIT cannot assure you that the estimates and assumptions will prove to be accurate.
 
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The market price and trading volume of the Realty Income common stock may be volatile.
The United States stock markets, including the NYSE, on which the Realty Income common stock is and, after the Mergers, will continue to be listed under the symbol “O,” have experienced significant price and volume fluctuations. As a result, the market price of shares of the Realty Income common stock is likely to be similarly volatile, and investors in shares of the Realty Income common stock may experience a decrease, which could be substantial, in the value of their shares, including decreases unrelated to Realty Income’s operating performance or prospects. Realty Income and VEREIT cannot assure you that the market price of Realty Income’s common stock will not fluctuate or decline significantly in the future.
In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect Realty Income’s share price or result in fluctuations in the price or trading volume of Realty Income’s common stock, including:

the annual yield from distributions on Realty Income common stock as compared to yields on other financial instruments;

equity issuances by Realty Income (including issuances of Realty Income common stock in the Mergers), or future sales of substantial amounts of Realty Income common stock by its existing or future stockholders, or the perception that such issuances or future sales may occur;

increases in market interest rates or a decrease in Realty Income’s distributions to stockholders that lead purchasers of Realty Income common stock to demand a higher yield;

changes in market valuations of similar companies;

fluctuations in stock market prices and volumes;

additions or departures of key management personnel;

Realty Income’s operating performance and the performance of other similar companies;

actual or anticipated differences in Realty Income’s quarterly operating results;

changes in expectations of future financial performance or changes in estimates of securities analysts;

publication of research reports about Realty Income or its industry by securities analysts;

failure to qualify as a REIT for federal income tax purposes;

adverse market reaction to any indebtedness Realty Income incurs in the future, including indebtedness to be assumed or incurred in connection with the Mergers;

strategic decisions by Realty Income or its competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;

the passage of legislation or other regulatory developments that adversely affect Realty Income or its industry or any failure by Realty Income to comply with regulatory requirements;

the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives;

the imposition of a penalty tax as a result of certain property transfers that may generate prohibited transaction income;

the inability of Realty Income to sell properties if and when it would be appropriate to do so;

risks and liabilities in connection with Realty Income’s co-investment ventures and investment in new or existing co-investment ventures, including that Realty Income’s property ownership through joint ventures may limit its ability to act exclusively in its interests and may depend on the financial performance of its co-venturers;

speculation in the press or investment community;

changes in Realty Income’s results of operations, financial condition or prospects;

failure to satisfy the listing requirements of the NYSE;

failure to comply with the requirements of the Sarbanes-Oxley Act;
 
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actions by institutional stockholders of Realty Income;

changes in accounting principles;

changes in environmental conditions or the potential impact of climate change;

terrorist attacks or other acts of violence or war in areas in which Realty Income’s properties are located or markets on which Realty Income’s securities are traded; and

general economic and/or market conditions, including factors unrelated to Realty Income’s performance.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert Realty Income’s management’s attention and resources, which could have a material adverse effect on Realty Income’s cash flows, its ability to execute its business strategy and Realty Income’s ability to make distributions to its stockholders.
Realty Income, VEREIT and OfficeCo face other risks.
The risks listed above are not exhaustive, and you should be aware that, prior to and following the Mergers and the transactions contemplated by the Merger Agreement, Realty Income will face various other risks, including those discussed in reports filed by Realty Income and VEREIT with the SEC. For more information, see “Where You Can Find More Information.”
You should be aware that, following the Spin-Off, if consummated, OfficeCo will face various other risks that OfficeCo will discuss in its reports and filings with the SEC, which are not incorporated by reference into this joint proxy statement/prospectus.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus contain “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which Realty Income, VEREIT and their respective subsidiaries operate and beliefs of and assumptions made by Realty Income’s management and VEREIT’s management, involve uncertainties that could significantly affect the financial or operating results of Realty Income, VEREIT, the combined company or OfficeCo. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed transactions involving Realty Income and VEREIT, including future financial and operating results, plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to creating value for stockholders, benefits of the proposed transactions to clients, employees, stockholders and other constituents of the combined company, integrating our companies, cost savings and the expected timetable for completing the proposed transactions — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and, therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to, those set forth under “Risk Factors” beginning on page 26 as well as the following:

risks associated with the ability or failure to complete the Mergers;

risks associated with the fixed Exchange Ratio;

risks associated with the dilution of Realty Income and VEREIT stockholders in the Mergers;

risks associated with provisions in the Merger Agreement that could discourage a potential competing acquiror of either Realty Income or VEREIT;
 
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risks associated with the pendency of the Mergers adversely affecting the business of Realty Income and VEREIT;

risks associated with the different interests in the Mergers of certain directors and executive officers of Realty Income and VEREIT;

risks associated with the ability of Realty Income and VEREIT to terminate the Mergers if the Mergers are not consummated by April 29, 2022;

risks associated with the failure of the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

risks relating to approval of the Merger and related transactions by Realty Income and VEREIT stockholders;

risks relating to the adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement, or the transactions contemplated thereby;

risks relating to the consummation and scope of the Spin-Off;

risks relating to costs of the Spin-Off or sale of OfficeCo Properties;

risks relating to the results of the Spin-Off;

risks relating to the taxable nature of the OfficeCo Distribution for Realty Income’s stockholders;

risks relating to the incurrence of substantial expenses in the Mergers and the transactions contemplated by the Merger Agreement;

risks relating to the failure to integrate the businesses of Realty Income and VEREIT or the failure to successfully execute the Spin-Off;

risks relating to the inability of Realty Income or OfficeCo to retain key employees after the Mergers and the Spin-Off;

risks relating to the inability of Realty Income to attract and retain key personnel;

risks relating to the ability of Realty Income to effectively manage its expanded operations following the Mergers;

risks relating to the trading prices of Realty Income common stock and OfficeCo common stock following the Mergers and the Spin-Off;

risks relating to certain contractual rights of counterparties to agreements with Realty Income or VEREIT;

risks relating to an increase in Realty Income’s anticipated level of indebtedness upon completion of the Mergers;

risks relating to the failure of Realty Income or VEREIT to qualify as a REIT;

risks relating to a decline in the market price of Realty Income common stock as a result of the Mergers and the transactions contemplated by the Merger Agreement;

risks relating to a difference in rights of stockholders at Realty Income and VEREIT;

risks relating to the use of pro forma financial information;

risks relating to the volatility of Realty Income’s common stock; and

those additional risks and factors discussed in reports filed with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”) by Realty Income and VEREIT from time to time, including those discussed under the heading “Risk Factors” in their respective most recently filed reports on Forms 10-K and 10-Q.
Neither Realty Income nor VEREIT undertakes any duty to update any forward-looking statements appearing in this document, except as may be required by applicable securities laws.
 
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INFORMATION ABOUT THE COMPANIES
Realty Income Corporation
Realty Income, a Maryland corporation, is an S&P 500 company dedicated to providing stockholders with dependable monthly dividends that increase over time. Realty Income is structured as a real estate investment trust, or REIT, requiring it annually to distribute at least 90% of its taxable income (excluding net capital gains) in the form of dividends to its stockholders. The monthly dividends are supported by the cash flow generated from real estate owned under long-term lease agreements with Realty Income’s commercial clients.
Realty Income was founded in 1969, and listed on the New York Stock Exchange in 1994. For over 52 years, Realty Income has been acquiring and managing freestanding commercial properties that generate rental revenue under long-term lease agreements with Realty Income’s commercial clients. Realty Income is a member of the S&P 500 Dividend Aristocrats® index for having increased its dividend every year for over 25 consecutive years.
At March 31, 2021, Realty Income owned a diversified portfolio:

Of 6,662 properties;

With an occupancy rate of 98.0%, or 6,531 properties leased and 131 properties available for lease or sale;

Doing business in 56 separate industries;

Located in all U.S. states, Puerto Rico and the United Kingdom (U.K.);

With approximately 114.2 million square feet of leasable space;

With a weighted average remaining lease term (excluding rights to extend a lease at the option of the client) of approximately 8.9 years; and
With an average leasable space per property of approximately 17,150 square feet; approximately 12,420 square feet per retail property and 250,670 square feet per industrial property.
Of the 6,662 properties in the portfolio at March 31, 2021, 6,621, or 99.4%, are single-client properties, of which 6,494 were leased, and the remaining are multi — client properties.
Following the Merger and assuming the consummation of the Spin-Off, Realty Income’s portfolio is expected to encompass approximately 10,300 primarily single-tenant, net lease commercial real estate properties located in all U.S. states, Puerto Rico and the U.K., with an estimated total portfolio annualized contractual rent of approximately $2.5 billion, based on a combined portfolio as of December 31, 2020.
The principal offices of Realty Income are located at 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
Realty Income common stock is listed on the New York Stock Exchange (which we refer to as the “NYSE”), trading under the symbol “O.”
Additional information about Realty Income and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
Rams MD Subsidiary I, Inc.
Rams MD Subsidiary I, Inc., a Maryland corporation, is a direct, wholly owned subsidiary of Realty Income. Rams MD Subsidiary I, Inc. was formed by Realty Income solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Rams MD Subsidiary I, Inc., has not conducted any business activities, has no assets, liabilities or obligations and has conducted its operations solely as contemplated by the Merger Agreement. Its principal executive offices are located at c/o Realty Income Corporation, 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
Rams Acquisition Sub II, LLC.
Rams Acquisition Sub II, LLC, a Delaware limited liability company, is a direct, wholly owned subsidiary of Realty Income. Rams Acquisition Sub II, LLC was formed by Realty Income solely for the purpose of
 
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engaging in the transactions contemplated by the Merger Agreement. Rams Acquisition Sub II, LLC., has not conducted any business activities, has no assets, liabilities or obligations and has conducted its operations solely as contemplated by the Merger Agreement. Its principal executive offices are located at c/o Realty Income Corporation, 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
VEREIT, Inc. and VEREIT Operating Partnership, L.P.
VEREIT, a Maryland corporation, is a full-service real estate operating company which owns and actively manages one of the largest portfolios of single-tenant commercial properties in the U.S. and has a business model of providing equity capital to creditworthy organizations in return for long-term leases on their properties. VEREIT’s full-service real estate operations include portfolio management through strategic acquisitions and dispositions, property management, asset management and leasing. As of March 31, 2021, VEREIT’s portfolio was comprised of 3,855 retail, restaurant, office and industrial real estate properties. Omitting the square feet of one redevelopment property and including the pro rata share of square feet and annualized rental income from VEREIT’s unconsolidated joint ventures, VEREIT owned an aggregate of 88.7 million square feet, of which 98.0% was leased, with a weighted-average remaining lease term of 8.4 years as of March 31, 2021. Of VEREIT’s 3,855 properties, annualized rental income as of March 31, 2021 as a percentage of the total portfolio was approximately 46.6% retail, 20.5% restaurant, 17.9% industrial, 14.9% office and 0.1% other. VEREIT’s properties are located throughout the U.S. (including Puerto Rico) with the two highest concentrations in the Southeast and Midwest regions.
VEREIT was incorporated in the State of Maryland on December 2, 2010 and has elected to be treated as a REIT for U.S. federal income tax purposes. Substantially all of VEREIT’s real estate operations are conducted through VEREIT OP, of which VEREIT is the sole general partner. VEREIT is the holder of 99.9% of the common partnership interests in VEREIT OP as of March 31, 2021. VEREIT OP was formed in the State of Delaware on January 13, 2011.
The principal offices of VEREIT are located at 2325 E. Camelback Road, 9th Floor, Phoenix, Arizona 85016, and its telephone number is (800) 606-3610.
VEREIT common stock and VEREIT Series F Preferred Stock trade on the NYSE under the trading symbols “VER” and “VER PRF,” respectively.
Additional information about VEREIT and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. For more information, see “Where You Can Find More Information.”
OfficeCo
In connection with the Spin-Off, Realty Income intends to form a new direct or indirect wholly owned subsidiary (“OfficeCo”). Subject to the terms and conditions of the Merger Agreement, Realty Income and VEREIT intend to contribute certain of their office properties to OfficeCo, and for Realty Income to distribute all of the outstanding voting shares of common stock in OfficeCo to Realty Income’s stockholders (which, at that time, would also include the VEREIT stockholders as a result of the Merger) on a pro rata basis.
After giving pro forma effect to the Mergers, and based on the properties contemplated to be contributed to OfficeCo in connection with the Spin-Off as of the date of this joint proxy statement/prospectus, the OfficeCo Properties, in total, would have represented approximately 6% of the combined company total assets at March 31, 2021 and approximately 7% and approximately 8% of total revenues for the three months ended March 31, 2021 and year ended December 31, 2020, respectively.
Assuming the Spin-Off is consummated, VEREIT and Realty Income intend for OfficeCo to operate as a self-managed, publicly traded office REIT, engaged in the ownership, acquisition, development and leasing of office assets throughout the United States.
Prior to the Mergers, OfficeCo’s principal executive offices are located at: c/o Realty Income Corporation, 11995 El Camino Real, San Diego, California 92130, and its telephone number is (858) 284-5000.
 
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THE MERGERS
The following is a discussion of the Merger and the material terms of the Merger Agreement by and between Realty Income and VEREIT. You are urged to read the Merger Agreement carefully and in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference into this joint proxy statement/prospectus.
Background of the Mergers
Over the years, in the ordinary course of business, and from time to time, the VEREIT board of directors, the Realty Income board of directors, and the respective management teams of both VEREIT and Realty Income have evaluated and considered a variety of financial and strategic opportunities as part of their respective long-term strategies to enhance value for their respective stockholders, including potential acquisitions, divestitures, joint ventures, business combinations and other transactions. These evaluations have focused on, among other things, the business environment facing net lease real estate investments generally and VEREIT and Realty Income, as applicable, in particular, as well as conditions and trends in the net lease industry, including assessments of potential consolidation in the net lease industry and the benefits and risks to VEREIT and Realty Income, as applicable, and their respective stockholders of strategic combinations compared to the benefits and risks of continued operation as stand-alone companies. Factors assessed in connection with these reviews have included the risks and opportunities associated with operating in existing and new markets, competition, potential positive and negative expense and revenue synergies, interest rate environment, size, scale, diversification, credit risk and access to capital, market risk, including in connection with the COVID-19 pandemic, and rapid changes in technology. These evaluations have also included discussions with respect to potential transactions that would further VEREIT’s and Realty Income’s respective strategic objectives and the potential benefits and risks of any such transactions.
Glenn Rufrano, the Chief Executive Officer of VEREIT, and Sumit Roy, the Chief Executive Officer of Realty Income, have periodically discussed with each other trends in the commercial net lease industry and their respective companies generally. These discussions, which began following Mr. Roy’s appointment as Chief Executive Officer of Realty Income in 2018, occurred during meetings at investor and industry conferences. Neither Mr. Rufrano nor Mr. Roy discussed the possibility of a potential business combination between Realty Income and VEREIT at those times, except that in January 2020, in the course of similar discussions, Mr. Rufrano and Mr. Roy discussed the possibility of a potential business combination of Realty Income and VEREIT, but that possibility was not explored further at that time.
On January 6, 2021, Mr. Roy contacted Mr. Rufrano by telephone and informed him that, based on Realty Income’s review of publicly available information, Realty Income was interested in exploring a potential business combination of Realty Income and VEREIT, which would also potentially involve a spin-off of VEREIT’s and Realty Income’s office properties, and that Mr. Roy believed that such a combination could be compelling for both parties and their respective stockholders. Mr. Roy did not propose any material terms for any such combination during the conversation, but suggested that it would be helpful for Realty Income to have access to certain limited, nonpublic information about VEREIT in order to further evaluate a potential business combination with VEREIT and to prepare a potential proposal with respect thereto. Mr. Rufrano responded that he would consider Mr. Roy’s suggestion.
Following that conversation, Mr. Rufrano consulted with Hugh R. Frater, Chairman of the VEREIT board of directors, regarding a potential business combination of VEREIT and Realty Income, and the various factors to be considered by the VEREIT board of directors if VEREIT were to explore such a business combination. Mr. Rufrano and Mr. Frater were supportive of engaging in preliminary exploration of such a business combination with Realty Income, and agreed that Mr. Rufrano should continue discussions with Mr. Roy and that VEREIT provide certain non-public information for Realty Income’s review consistent with Mr. Roy’s request.
On January 14, 2021, the Realty Income board of directors held a regularly scheduled telephonic meeting, in which Mr. Roy provided an update to the Realty Income board of directors with respect to his initial discussions with Mr. Rufrano. The Realty Income board of directors expressed their support for Realty Income management to continue its evaluation of a potential strategic transaction involving VEREIT, including the entry into a confidentiality agreement for those purposes, and instructed management to seek to propose an
 
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exchange ratio based on management’s due diligence, and to keep the Realty Income board of directors apprised of any material developments. Following this meeting, and throughout the negotiations with VEREIT, Mr. Roy and members of Realty Income’s management regularly communicated and consulted with the members of the Realty Income board of directors regarding the negotiations.
On January 20, 2021, VEREIT and Realty Income entered into a customary confidentiality and standstill agreement, and in the days that followed VEREIT made available certain limited nonpublic information to Realty Income. From January 20, 2021 through April 29, 2021, members of Realty Income’s management and VEREIT’s management team held meetings to discuss due diligence matters.
On January 21, 2021, during an executive session that occurred following a telephonic meeting of VEREIT’s Nominating and Corporate Governance Committee, Mr. Rufrano provided a verbal update to the VEREIT directors regarding his conversations with Mr. Roy and VEREIT’s execution of a confidentiality agreement.
On February 16, 2021, Mr. Roy informed Mr. Rufrano that Realty Income planned to communicate a non-binding proposal with respect to a potential business combination of VEREIT and Realty Income following the release of both companies’ earnings reports for the fourth fiscal quarter and full fiscal year of 2020.
On February 18, 2021, the Realty Income board of directors held a regularly scheduled telephonic meeting, with representatives of Moelis, Realty Income’s financial advisor, and Latham & Watkins LLP (“Latham & Watkins”), Realty Income’s legal advisor, in attendance. Members of Realty Income management reviewed with the Realty Income board of directors the discussions between Mr. Roy and Mr. Rufrano to date, the status of Realty Income management’s evaluation of VEREIT and the potential business combination with VEREIT. The Realty Income board of directors, together with Realty Income management and its external advisors, conducted an extensive discussion of the strategic rationale of a potential business combination with VEREIT, as well as the potential risks. Representatives of Realty Income management and Moelis reviewed with the Realty Income board of directors an overview of the business combination. Following these discussions, the Realty Income board of directors authorized Mr. Roy, following the respective earnings releases of Realty Income and VEREIT, to communicate to VEREIT a non-binding proposal to acquire all outstanding shares of VEREIT common stock in a stock-for-stock transaction at a fixed exchange ratio of 0.649 shares of Realty Income common stock per share of VEREIT common stock, subject to further due diligence, and, as necessary, to negotiate the exchange ratio within the parameters discussed in the meeting.
On February 22, 2021, Realty Income released its earnings reports for the fourth fiscal quarter and full fiscal year of 2020.
On February 23, 2021, during a regularly scheduled meeting of the VEREIT board of directors, Mr. Rufrano provided the VEREIT board of directors an overview regarding capital markets and potential M&A activity generally, based on information provided by J.P. Morgan that was not tailored to address a potential combination between VEREIT and Realty Income.
On February 24, 2021, VEREIT released its earnings reports for the fourth fiscal quarter and full fiscal year of 2020.
On February 25, 2021, Mr. Roy called Mr. Rufrano and presented to him a verbal non-binding proposal (the “February 25 proposal”), pursuant to which, subject to further due diligence, Realty Income would acquire VEREIT in a stock-for-stock transaction with a fixed exchange ratio of 0.649 shares of Realty Income common stock per share of VEREIT common stock. As part of his proposal, Mr. Roy proposed that Realty Income and VEREIT would, substantially concurrently with the closing of the acquisition, divest their respective office properties, either through a potential sale to third parties or distribution to an independent, newly formed, publicly traded REIT.
During a telephonic meeting of the VEREIT board of directors on February 26, 2021, Mr. Rufrano updated the VEREIT board of directors regarding the February 25 proposal. In light of the fact that VEREIT’s stock price had risen following its announcement of results for the 2020 fiscal year and its projected guidance for 2021, and following discussion by the VEREIT board of directors of VEREIT’s plans and prospects as a standalone company, the VEREIT board of directors rejected the February 25 proposal and
 
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instructed Mr. Rufrano to tell Mr. Roy that Realty Income would need to increase the proposed exchange ratio in order for the VEREIT board of directors to consider continuing to engage in negotiations with respect to a proposed business combination.
On February 27, 2021, Mr. Rufrano informed Mr. Roy of the VEREIT board of directors’ position, including the need for Realty Income to increase its proposed exchange ratio in order for VEREIT management to continue to engage in discussions regarding a potential business combination.
On March 10, 2021, Mr. Roy presented to Mr. Rufrano an updated verbal non-binding proposal (the “March 10 proposal”) pursuant to which, subject to further due diligence, Realty Income proposed to increase the fixed exchange ratio to 0.695 shares of Realty Income common stock per share of VEREIT common stock, representing an implied price per share of VEREIT common stock of $42.69 based on the closing price of Realty Income common stock on March 10, 2021. Mr. Roy informed Mr. Rufrano that the March 10 proposal was conditioned upon the ability of the parties to, substantially concurrently with the closing of the acquisition, divest their respective office properties, either through a potential sale to third parties or distribution to an independent, newly formed, publicly traded REIT. On March 10, 2021, the closing price of VEREIT common stock was $38.71 per share, and the closing price of Realty Income common stock was $61.42 per share.
Following this conversation, Mr. Rufrano provided an update to Mr. Frater on the discussions with Mr. Roy. During his discussion with Mr. Frater, Mr. Frater agreed that Mr. Rufrano should contact J.P. Morgan to potentially serve as a financial advisor to assist the VEREIT board of directors in its consideration of Realty Income’s proposal, and Mr. Rufrano accordingly contacted representatives of J.P. Morgan on March 12, 2021.
From March 10, 2021 to March 24, 2021, Mr. Rufrano discussed the March 10 proposal and the opportunity for exploring a potential transaction with members of the VEREIT board of directors, and received their views and opinions related to the same.
On March 12, 2021, Realty Income and VEREIT executed an amended and restated confidentiality and standstill agreement on substantially similar terms to the existing confidentiality and standstill agreement, other than to make the obligations under the agreement mutual to facilitate Realty Income making certain limited nonpublic information available to VEREIT in connection with VEREIT’s due diligence of Realty Income.
On March 16, 2021, at the direction of Realty Income, representatives of Moelis met with representatives of J.P. Morgan, acting at the direction of VEREIT management, to discuss Realty Income’s March 10 proposal and underlying assumptions.
On March 24, 2021, the VEREIT board of directors held a meeting to discuss the potential transaction with Realty Income, with representatives of J.P. Morgan and Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), legal counsel to VEREIT, participating. A representative of Wachtell Lipton reviewed with the VEREIT board of directors the process for evaluating and responding to the March 10 proposal and the information that would be provided by its advisors to enable the VEREIT board of directors to fulfill its duties in connection with such evaluation. Also during this meeting, representatives of J.P. Morgan advised the VEREIT board of directors of the nature of the financial analyses it would perform, which would include a review of strategic alternatives. The VEREIT board of directors determined to reconvene to continue their evaluation of the March 10 proposal once J.P. Morgan had completed its review of the financial terms of the March 10 proposal.
On April 1, 2021, the VEREIT board of directors held a meeting to continue its discussions with respect to the potential transaction with Realty Income, with representatives of J.P. Morgan and Wachtell Lipton participating. Mr. Rufrano reported to the VEREIT board of directors on the various discussions he had with Mr. Roy regarding the potential transaction, including the proposed exchange ratio reflected in the March 10 proposal and the proposed spin-off of VEREIT’s and Realty Income’s office properties. A representative of J.P. Morgan provided the VEREIT board of directors with, among other information, an overview of market conditions for REITs and the net lease sector, VEREIT’s position as compared to its peers in the net lease industry, an overview of the financial terms of the March 10 proposal, and an overview of other strategic alternatives that VEREIT could pursue, including remaining as a standalone company or pursuing an
 
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alternative transaction. A representative of Wachtell Lipton reviewed with the VEREIT board of directors the directors’ duties under Maryland law as well as the terms for the potential transaction proposed by Realty Income. The VEREIT board of directors, together with VEREIT management and its external advisors, conducted an extensive discussion of the strategic rationale of a potential business combination with Realty Income and potential benefits to VEREIT’s stockholders, as well as potential risks, including conditionality relating to the spin-off of the office properties. In addition, the VEREIT board of directors considered the possibility of soliciting alternative transaction proposals from other third parties, and the potential benefits and risks that could entail. Following discussion, the VEREIT board of directors directed Mr. Rufrano to contact Mr. Roy and inform him that the VEREIT board of directors was not prepared to proceed with the proposed transactions on the terms contemplated by the March 10 proposal, and to work with representatives of J.P. Morgan to prepare a counterproposal based on the discussions at the meeting and to negotiate with Realty Income to increase the proposed exchange ratio in the March 10 proposal for the benefit of VEREIT’s stockholders.
Between April 1, 2021 and April 6, 2021, Mr. Rufrano worked with representatives of J.P. Morgan to determine a counterproposal to the March 10 proposal.
On April 6, 2021, representatives of J.P. Morgan and Moelis met and, at the direction of VEREIT management, representatives of J.P. Morgan presented VEREIT’s non-binding counterproposal (the “April 6 proposal”), pursuant to which VEREIT proposed to increase the fixed exchange ratio to 0.730 shares of Realty Income common stock per share of VEREIT common stock. Additionally, representatives of J.P. Morgan, at the direction of VEREIT management, proposed to include a “market check” provision in the form of a “go-shop” in the definitive agreement related to the proposed transaction that would permit VEREIT and its representatives to solicit alternative acquisition proposals after the announcement of a transaction with Realty Income, with a reduced termination fee payable if such a proposal was accepted within a certain period of time. J.P. Morgan, acting at the direction of VEREIT management, and Moelis also discussed an alternative market check mechanism in the form of a “window shop.” In addition, at the direction of VEREIT management, J.P. Morgan communicated VEREIT’s position that the proposed transaction should not be conditioned upon the consummation of the proposed spin-off of the office properties. Representatives from Moelis agreed to communicate the terms of the April 6 proposal to Realty Income.
On April 7, 2021, Mr. Roy and Mr. Rufrano discussed the April 6 proposal, and Mr. Roy confirmed to Mr. Rufrano that Realty Income would not agree to a transaction on those proposed terms. Thereafter, following ongoing discussions in a series of calls between Mr. Roy and Mr. Rufrano, Mr. Rufrano ultimately proposed a fixed exchange ratio of 0.715 shares of Realty Income common stock per share of VEREIT common stock.
On April 8, 2021, Mr. Roy, following discussions with certain other members of the Realty Income board of directors and management, presented to Mr. Rufrano a verbal non-binding proposal (the “April 8 proposal”), indicating a proposed increase to the exchange ratio from 0.695 to 0.705 shares of Realty Income common stock per share of VEREIT common stock, as well as certain other proposed terms, including the addition of two members of the VEREIT board of directors to the Realty Income board of directors following the closing of the transaction, no “market-check” provision with the terms that had been suggested by J.P. Morgan, and the readiness to effect the spin-off of the office properties as a condition to the consummation of the transaction. Later on April 8, 2021, at the instruction of VEREIT management, representatives of J.P. Morgan contacted representatives of Moelis to negotiate for a higher exchange ratio, and were informed by Moelis, based on guidance from Realty Income, that Realty Income would not be willing to increase its proposed exchange ratio.
Later on April 8, 2021, after a discussion with Mr. Frater, Mr. Rufrano contacted Mr. Roy and requested that Mr. Roy provide a written term sheet reflecting the key terms of Realty Income’s proposal so that the VEREIT board of directors could evaluate the proposal.
On April 9, 2021, Mr. Roy delivered a written non-binding term sheet reflecting the substantive terms of the April 8 proposal (the “April 9 proposal”), including, among other terms, the proposed fixed exchange ratio of 0.705.
From April 9, 2021 to the announcement of the execution of the Merger Agreement, VEREIT and Realty Income, with the assistance of their respective advisors, continued to engage in mutual due diligence,
 
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including attending virtual and telephonic due diligence meetings across the functional areas of their respective business, reviewing publicly available information and information provided in their respective virtual data rooms, and participating in additional discussions regarding overall transaction structure and the proposed separation of the office properties.
On April 13, 2021, the VEREIT board of directors held a meeting to discuss the April 9 proposal, with representatives of J.P. Morgan and Wachtell Lipton participating. Mr. Rufrano reported to the VEREIT board of directors on his recent discussions with Mr. Roy as well as the discussions between J.P. Morgan and Moelis, and the status of the negotiations between the parties. Representatives of J.P. Morgan provided the VEREIT board of directors with an overview of the financial terms of the April 9 proposal, as well as an overview of precedent transaction terms, including with respect to the prevalence and form of post-signing market checks in similar transactions. A representative of Wachtell Lipton also discussed various terms of the April 9 proposal. In addition, VEREIT management updated the VEREIT board of directors on the status of the ongoing diligence review. Following extensive discussions, the VEREIT board of directors instructed members of VEREIT management to pursue further negotiations of a possible transaction at the proposed exchange ratio of 0.705, including continuing to negotiate for a “market check” provision and to seek to limit the conditionality relating to the spin-off of the office properties.
Also on April 13, 2021, the Realty Income board of directors held a meeting to discuss the April 9 proposal, with representatives of Moelis and Latham & Watkins participating. Mr. Roy provided the Realty Income board of directors with an overview on the latest developments and discussions regarding the potential strategic transaction, including the terms of the April 9 proposal, the remaining open negotiating points, the potential debt and financing implications of the possible transaction, and the status of its due diligence to date, including with respect to VEREIT generally and the proposed spin-off of the office properties. Representatives of Moelis also reviewed with the Realty Income board of directors certain market trading information, a review of VEREIT’s fourth quarter earnings performance and public guidance for 2021, and preliminary accretion analysis based on Realty Income management’s financial cases available as of April 8 at the proposed exchange ratio. Moelis also provided Latham with a letter reviewing relationships with Realty Income and VEREIT, which Latham discussed with the Realty Income board of directors. Following these discussions, the Realty Income board of directors instructed Realty Income management and its advisors to continue to negotiate the outstanding terms of the potential transaction, to continue its due diligence, and to provide an update to the Realty Income board of directors once the remaining terms had been negotiated and Realty Income management’s due diligence was complete.
On April 14, 2021, Latham & Watkins provided an initial draft of the proposed merger agreement to Wachtell Lipton, which did not provide for a post-signing market check for the benefit of VEREIT, and proposed that the readiness to effect the spin-off of the office properties, including the effectiveness of a Form 10 Registration Statement required to complete the spin-off, would be a condition to Realty Income’s obligation to consummate the Mergers. Between April 14, 2021 and April 29, 2021, Mr. Roy and Mr. Rufrano, as well as VEREIT and Realty Income’s respective management teams and legal and financial advisors, engaged in extensive negotiations regarding the terms of the proposed merger agreement, including the terms of a “market check” provision, the structure of the transactions, the size of the termination fees and expense reimbursement fees, whether readiness to effectuate the spin-off would be a condition to the parties’ obligations to consummate the Mergers, and the terms and conditions thereof. During the course of these negotiations, Mr. Rufrano and Mr. Roy agreed that VEREIT would be provided with a “window-shop” period with a reduced termination fee payable by VEREIT if the merger agreement was terminated in certain circumstances within forty-five (45) days after the execution of the merger agreement. In addition, they agreed that Realty Income would not be obligated to consummate the Mergers until the spin-off was ready, in all respects, to be consummated contemporaneously with the consummation of the Mergers, but that if this condition is not satisfied or waived by nine months after the execution of the merger agreement, Realty Income would be automatically deemed to have waived this condition (and at that point, assuming all other conditions to closing have been satisfied, the parties would be obligated to close the Mergers, regardless of whether the spin-off is ready to be consummated).
On April 20, 2021, Mr. Roy, upon invitation by the VEREIT board of directors, met with the VEREIT board of directors to discuss and respond to questions regarding, among other things, the evolution of Realty Income’s business and its views on the future, including the potential benefits of the proposed business
 
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combination, an overview of Realty Income’s plans to develop its non-U.S. business and other opportunities for growth and the anticipated integration process. Following the discussion with Mr. Roy, the independent directors of the VEREIT board of directors discussed, without Mr. Roy participating, their views on the information provided by Mr. Roy, including the strategic rationale and potential risks and benefits of the proposed business combination.
On April 25, 2021, the VEREIT board of directors held a meeting, with representatives of J.P. Morgan and Wachtell Lipton participating, to discuss recent developments and updates regarding the ongoing discussions with respect to a potential transaction with Realty Income, including regarding the status of negotiations with respect to the proposed terms of the merger agreement, the mutual due diligence review and the timing for a potential transaction announcement.
On April 26, 2021, the Realty Income board of directors held a meeting to discuss the status of the potential transaction with VEREIT, with representatives of Moelis, Latham & Watkins and Ballard Spahr LLP (“Ballard Spahr”), Realty Income’s Maryland counsel, participating. Mr. Roy provided an update regarding the status of discussions and negotiations of a potential transaction with VEREIT since the prior meeting of the Realty Income board of directors. Moelis reviewed certain preliminary financial information and other data related to the proposed transaction based on the proposed exchange ratio. Representatives from Latham & Watkins and Ballard Spahr also provided an overview of the directors’ duties under Maryland law with respect to the proposed transaction. Representatives from Latham & Watkins also summarized the key terms of the merger agreement and the status of remaining open terms. Following discussions, the Realty Income board of directors authorized Realty Income’s management and its advisors to finalize negotiations of the merger agreement and the related transaction documents for final evaluation.
On April 27, 2021, the VEREIT board of directors held a meeting to discuss, among other matters, the potential transaction with Realty Income, with representatives of J.P. Morgan and Wachtell Lipton participating. Mr. Rufrano provided an update regarding the status of discussions and negotiations of a potential transaction with Realty Income since the April 25, 2021 VEREIT board of directors meeting. J.P. Morgan reviewed and discussed with the VEREIT board of directors, among other matters, the financial aspects of the proposed transaction and its preliminary financial analyses of the proposed 0.705 exchange ratio to be provided in the proposed Merger. At the direction of the VEREIT board of directors, J.P. Morgan also provided Wachtell Lipton with a letter reviewing relationships with Realty Income and VEREIT, which Wachtell Lipton discussed with the VEREIT board of directors. Members of VEREIT management reviewed with the VEREIT board of directors the status and process of the mutual due diligence review by VEREIT and Realty Income, including the key findings of VEREIT’s due diligence review of Realty Income. Representatives of Wachtell Lipton reviewed with the VEREIT board of directors certain legal considerations, including the directors’ duties in connection with their consideration of the potential transaction and the principal terms of the draft merger agreement. Following these discussions, the VEREIT board of directors instructed VEREIT management and its advisors to continue to negotiate the terms of the potential transaction, with a further update to be provided to the VEREIT board of directors at its next meeting.
From April 27, 2021 and through April 28, 2021, VEREIT’s and Realty Income’s respective management teams, with the assistance of their respective legal advisors, finalized the remaining open issues related to the merger agreement and related transaction documents.
On April 28, 2021, the Realty Income board of directors held a meeting to discuss the potential transaction with VEREIT, with representatives of Moelis, Latham & Watkins and Ballard Spahr participating. At the meeting, Realty Income management and representatives of Latham & Watkins provided the Realty Income board of directors with an update on the recent negotiations and discussions with VEREIT, including with respect to the resolution of the remaining open issues, and representatives of Latham & Watkins and Ballard Spahr reviewed the directors’ duties under Maryland law. In addition, representatives of Moelis reviewed and discussed its financial analyses with respect to Realty Income, VEREIT and the proposed Mergers provided for in the Merger Agreement. At the request of the Realty Income board of directors, Moelis rendered its oral opinion on April 28, 2021 to the Realty Income board of directors (which was subsequently confirmed in writing by delivery of Moelis’ written opinion addressed to the Realty Income board of directors dated the same date) as to, as of April 28, 2021 and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the fairness, from a
 
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financial point of view, to Realty Income of the Exchange Ratio in the Merger pursuant to the Merger Agreement. See “— Opinion of Realty Income’s Financial Advisor — Opinion of Moelis & Company LLC” beginning on page 59.
Following further discussion, during which the directors considered the matters reviewed and discussed at that meeting and prior meetings, including factors described under the section of this joint proxy statement/prospectus entitled “— Realty Income’s Reasons for the Merger; Recommendation of the Realty Income Board of Directors,” the Realty Income board of directors unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement were advisable and fair to and in the best interests of Realty Income and its stockholders, and unanimously approved the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement and recommended that Realty Income common stockholders approve the Realty Income Issuance Proposal.
On April 28, 2021, the VEREIT board of directors held a meeting to discuss the potential transaction with Realty Income, with representatives of J.P. Morgan and Wachtell Lipton participating. Mr. Rufrano updated the VEREIT board of directors on the final negotiations with Realty Income relating to the potential transaction. A representative of Wachtell Lipton updated the directors on the terms of the proposed Merger Agreement. J.P. Morgan then discussed the financial aspects of the potential transaction and certain updates to the preliminary financial analyses it had reviewed with the VEREIT board of directors at the April 27, 2021 meeting.
Following the discussion, at the request of the VEREIT board of directors, J.P. Morgan rendered to the VEREIT board of directors its opinion, which was initially rendered orally and subsequently confirmed by delivery of a written opinion, dated April 28, 2021, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the exchange ratio in the proposed Merger was fair, from a financial point of view, to the holders of VEREIT common stock. See “— Opinion of VEREIT’s Financial Advisor — Opinion of J.P. Morgan Securities LLC” beginning on page 65.
Following further discussion, during which the directors considered the matters reviewed and discussed at that meeting and prior meetings, including factors described under the section of this joint proxy statement/prospectus entitled “— VEREIT’s Reasons for the Merger; Recommendation of the VEREIT Board of Directors,” the VEREIT board of directors unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement were advisable and fair to and in the best interests of VEREIT and its stockholders, and approved the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement and recommended that VEREIT common stockholders approve the Merger.
Early in the morning of April 29, 2021, Realty Income and VEREIT executed the Merger Agreement. The transaction was promptly announced before the opening of the financial markets in New York on April 29, 2021, in a press release jointly issued by Realty Income and VEREIT.
Following the execution of the Merger Agreement, Realty Income determined that it may wish to offer holders of partnership units in VEREIT OP other than VEREIT (the “VEREIT OP Minority Partners”) the opportunity to exchange such VEREIT OP Units for partnership units in one of Realty Income’s subsidiary partnerships rather than continue to hold such VEREIT OP Units and have such VEREIT OP Units converted into the right to receive the number of newly issued shares of Realty Income common stock equal to the Exchange Ratio, pursuant to the Merger Agreement. In order to avoid issuing shares of Realty Income to an affiliate of Realty Income and cancelling the VEREIT OP Units held by any affiliate of Realty Income if any VEREIT OP Minority Partner exchanges were to occur, the boards of directors of each of Realty Income and VEREIT determined that it would be advisable and in the best interests of their respective companies to amend the Merger Agreement to provide that, in the event that VEREIT, Realty Income or any of their respective affiliates hold, immediately prior to the Partnership Merger Effective Time, VEREIT OP Units, each such VEREIT OP Unit held by VEREIT, Realty Income or any of their respective affiliates will be treated the same as OP Units held by VEREIT and remain outstanding as partnership interests in the surviving entity, and shall not be converted into the right to receive shares of Realty Income common stock.
On June 25, 2021, Realty Income and VEREIT executed Amendment No. 1 to the Merger Agreement (included herein as part of Annex A, the "Merger Agreement Amendment") to facilitate the foregoing. The
 
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Merger Agreement Amendment does not change the Merger consideration to be received by holders of shares of VEREIT common stock or the Merger consideration to be received by holders of VEREIT OP Units (other than VEREIT, Realty Income or their respective affiliates) that hold VEREIT OP Units immediately prior to the Partnership Merger Effective Time.
Realty Income’s Reasons for the Mergers; Recommendations of the Realty Income Board of Directors
After careful consideration, the Realty Income board of directors, at a meeting held on April 28, 2021, unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers. In the course of evaluating the Merger Agreement and the transactions contemplated thereby, the Realty Income board of directors consulted with Realty Income’s management and Realty Income’s legal and financial advisors and considered a number of factors that the Realty Income board of directors believed supported its decision to approve the Merger Agreement and to recommend adoption and approval by Realty Income stockholders of the Realty Income Issuance Proposal, including the following material factors:

the belief that the transaction will provide an opportunity for Realty Income to drive additional growth in its business due to increasing size and scale, enabling it to pursue larger transactions and potentially resulting in lower cost of capital;

the belief that the transaction will provide further opportunities to increase engagement with core clients, as well as provide a complementary investment pipeline and operational capabilities, including through new verticals;

the expectation that, following the Mergers, Realty Income’s real estate portfolio will be more diversified by client, industry, geography and asset class;

the belief that the Mergers will immediately increase, and be accretive to, Realty Income’s adjusted funds from operations, and that, following the Mergers, Realty Income will be able to continue to increase its monthly dividend, while maintaining a conservative payout ratio;

the expectation that, following the Mergers, Realty Income is expected to become one of the six largest REITs in the MSCI US REIT Index by equity market capitalization and among the top half of constituents in the S&P 500, resulting in increased weighting in major benchmark equity indices and further growing its trading liquidity;

the expectation that Realty Income’s enhanced scale and diversification following the Mergers will be viewed as credit positives, and Realty Income’s plan to maintain desirable target leverage as a result of the Mergers in order to continue to benefit from a compelling cost of capital for future acquisitions;

the belief that there would be attractive opportunities to refinance VEREIT’s existing debt at lower interest rates over the next decade, and the ability to redeem VEREIT’s preferred stock in connection with the Mergers;

the expectation that, because a substantial portion of the rental revenue added by the Mergers will be generated by investment-grade tenants, the Mergers will help Realty Income maintain its strategic objective of preserving favorable credit quality of its clients within its real estate portfolio;

the belief that the businesses of Realty Income and VEREIT are highly complementary and that the integration of the two companies will be completed in a timely and efficient manner with minimal disruption to tenants and employees;

the expectation that Realty Income will achieve corporate cost synergies both inclusive of stock-based compensation and on a cash basis, with a significant portion of savings expected to be achieved in the first 12 months post-closing;

the fact that the Exchange Ratio is fixed and will not fluctuate as a result of changes in the price of Realty Income common stock or VEREIT common stock, which also limits the impact of external factors on the transaction;

the Realty Income board of directors’ and management’s strong understanding of the business, operations, financial condition, earnings and prospects of Realty Income and VEREIT, taking into account the results of Realty Income’s due diligence review of VEREIT, as well as of the current and
 
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prospective environment in which Realty Income and VEREIT operate, including economic and market conditions, and its belief that this information supported its expectations as to the value of the Mergers and the other transactions contemplated by the Merger Agreement to Realty Income;

the belief that the Mergers will better allow Realty Income to compete given macroeconomic and industry trends, including a potential trend towards consolidation within the REIT industry to develop larger and more diverse companies with expanded portfolios, greater client and geographic diversity and enhanced access to capital markets;

the flexibility and control afforded to Realty Income pursuant to the terms of the Merger Agreement, subject to consultation with VEREIT, to finalize the terms of the Spin-Off or to pursue potential sales of some or all of the OfficeCo Properties, or to retain some or all of the OfficeCo Properties, to determine the most desirable outcome to maximize stockholder value for Realty Income’s stockholders;

the fact that until January 29, 2022, Realty Income will not be obligated to consummate the Mergers unless the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the SEC declaring effective the Form 10 registration statement related to the Spin-Off, unless that condition is otherwise waived;

the belief that the Spin-Off, if consummated, will provide Realty Income stockholders with the ability to control their asset allocation decision, including the opportunity to invest in OfficeCo;

the expectation that upon completion of the Mergers, legacy Realty Income common stockholders will own approximately 70% of the common stock of Realty Income, and, if the Spin-Off is consummated, a similar proportion of the common stock of OfficeCo;

the knowledge that, following the Mergers, Realty Income will continue to be led by Realty Income’s president and chief executive officer, Mr. Sumit Roy, and the existing Realty Income senior management team;

the knowledge that, following the Mergers, the Realty Income board of directors is anticipated to be composed of twelve members, ten of whom currently serve on the Realty Income board of directors, with Mr. Michael K. McKee continuing as the chairman of the Realty Income board of directors;

the Merger Agreement’s provisions requiring VEREIT to pay Realty Income a termination fee of up to $365.0 million (or $195.0 million in certain circumstances) and an expense reimbursement payment of $25.0 million, in each case, if the Merger Agreement is terminated under certain circumstances, as further described in “— The Merger Agreement — Termination of the Merger Agreement” and “—The Merger Agreement — No Solicitation”;

the historical and then-current trading prices and volumes of each of Realty Income common stock and VEREIT common stock;

the financial analyses reviewed and discussed with the Realty Income board on April 28, 2021 by representatives of Moelis in connection with the consideration by the Realty Income board of the proposed Merger provided for in the Merger Agreement, as well as the oral opinion of Moelis rendered to the Realty Income board on April 28, 2021 (which was subsequently confirmed in writing by delivery of Moelis’ written opinion addressed to the Realty Income board dated the same date) as to, as of April 28, 2021 and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the fairness, from a financial point of view, to Realty Income of the Exchange Ratio in the Merger pursuant to the Merger Agreement. For more information, see “— Opinion of Realty Income’s Financial Advisor — Opinion of Moelis & Company LLC”; and

the other terms and conditions of the Merger Agreement.
The Realty Income board of directors also considered a number of risks and other potentially negative factors identified in its deliberations on the Mergers, including the following:

the risk of not capturing all of the anticipated estimated annual savings and operational and leasing synergies, and the risk that other anticipated benefits of the Mergers might not be realized on the expected timeframe or at all;
 
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the restrictions on the conduct of Realty Income’s business during the period between execution of the Merger Agreement and the consummation of the Mergers, and the costs and distractions to Realty Income’s management in connection with the consummation of the Mergers and the transactions contemplated thereby, as further described in “— The Merger Agreement — Conduct of Business Pending the Merger,” “— The Merger Agreement — The Spin-Off” and “The Spin-Off”;

the fact that projections of future results of operations are necessarily estimates based on assumptions, as further described in “— Realty Income Unaudited Prospective Financial Information”;

the possibility that the Mergers or the Spin-Off may not be completed, or that completion may be unduly delayed, including for reasons beyond the control of Realty Income or VEREIT;

the risk that the Realty Income stockholders may fail to approve the Realty Income Issuance Proposal or that VEREIT stockholders may fail to approve the VEREIT Merger Proposal;

the challenges of combining Realty Income with VEREIT and separating the OfficeCo Properties following the Mergers, including technical, operational, accounting and other challenges;

the knowledge that the Spin-Off, if consummated, is expected to be taxable to Realty Income stockholders;

the substantial costs to be incurred in connection with the Mergers and the Spin-Off and/or the sale of some or all of the OfficeCo Properties, including the costs of integrating the businesses of Realty Income and VEREIT, establishing OfficeCo as a standalone public company and/or selling OfficeCo Properties;

the risk that Realty Income or VEREIT may be unable to retain key employees;

the ownership dilution to legacy Realty Income stockholders as a result of the issuance of Realty Income common stock pursuant to the Merger Agreement;

the Merger Agreement’s provisions imposing restrictions on Realty Income from soliciting acquisition proposals and requiring Realty Income to pay VEREIT a termination fee of up to $838.0 million and/or an expense reimbursement payment of $25.0 million if the Merger Agreement is terminated under certain circumstances, as further described in “— The Merger Agreement — Termination of the Merger Agreement” and “— The Merger Agreement — No Solicitation”;

the Merger Agreement’s provisions permitting VEREIT to terminate the Merger Agreement in order to enter into a Superior Proposal (subject to compliance with the provisions of the Merger Agreement regarding non-solicitation of acquisition proposals), upon payment by VEREIT to Realty Income of a termination fee of $365.0 million, or a reduced fee of $195.0 million under certain circumstances, in each case, as further described in “— The Merger Agreement — Termination of the Merger Agreement”;

the risk that the agreed termination fee and/or expense reimbursement amount payable by VEREIT to Realty Income if the Merger Agreement is terminated under certain circumstances may not be sufficient to fully compensate Realty Income for its losses in such circumstances;

the risk that failure to complete the Mergers or the Spin-Off could negatively affect the price of Realty Income common stock and future business and financial results of Realty Income;

the potential risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the Mergers; and

other matters described under the caption “Risk Factors.”
In addition to considering the factors described above, the Realty Income board of directors considered the fact that some of Realty Income’s directors and executive officers have other interests in the Mergers that are different from, or in addition to, the interests of Realty Income’s stockholders generally, as discussed herein under “— Interests of Realty Income Directors and Executive Officers in the Mergers.”
The Realty Income board of directors concluded that the potentially negative factors associated with the Mergers were outweighed by the potential benefits that it expected the Realty Income stockholders would
 
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achieve as a result of the Mergers. Accordingly, the Realty Income board of directors determined that the Merger Agreement and the transactions contemplated thereby, including the Mergers, are advisable, fair to, and in the best interests of, Realty Income and its stockholders. The foregoing discussion of the factors considered by the Realty Income board of directors is not intended to be exhaustive, but, rather, includes certain material factors considered by the Realty Income board of directors. In reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, the Realty Income board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Realty Income board of directors considered all these factors as a whole, including discussions with, and questioning of, Realty Income’s management and Realty Income’s financial and legal advisors, and overall considered the factors to be favorable to, and supportive of, its determination.
This explanation of Realty Income’s reasons for the Mergers and other information presented in this section is forward-looking in nature and should be read in light of the sections herein entitled “Risk Factors,” beginning on page 26 and “Cautionary Statement Concerning Forward-Looking Statements.”
For the reasons set forth above, the Realty Income board of directors unanimously declared that the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are advisable and fair to, and in the best interests of, Realty Income and its stockholders and unanimously approved the Merger Agreement. The Realty Income board of directors unanimously recommends to Realty Income’s stockholders that they vote “FOR” the Realty Income Issuance Proposal.
VEREIT’s Reasons for the Mergers; Recommendations of the VEREIT Board of Directors
With the assistance of its financial and legal advisors, the VEREIT board of directors evaluated the Merger Agreement and the transactions contemplated thereby, including the Mergers, and after careful consideration, at a special meeting of the VEREIT board of directors held on April 28, 2021, unanimously determined that the Merger Agreement and the transactions contemplated thereby are advisable and fair to, and in the best interests of, VEREIT and the holders of VEREIT common stock. The VEREIT board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and has unanimously approved the Merger Agreement, and recommends that the holders of VEREIT common stock vote to approve the Merger on the terms and conditions set forth in the Merger Agreement.
In the course of evaluating the Merger Agreement and the transactions contemplated thereby, the VEREIT board of directors consulted with VEREIT’s management and VEREIT’s legal and financial advisors and considered a number of factors that the VEREIT board of directors believed supported its decision to approve the Merger Agreement and to recommend adoption and approval by VEREIT stockholders of the Merger Agreement, including the following material factors:

Ownership Stake in the Combined Company.   The receipt of Realty Income common stock as Merger consideration provides VEREIT stockholders with the opportunity to have an ownership stake in the combined company, which is expected to provide a number of significant potential strategic opportunities and benefits to create additional value for VEREIT stockholders, including the following:

The combined company is expected to be among the six largest REITs in the MSCI US REIT Index (RMZ) by equity market capitalization and among the top half of constituents in the S&P 500, and its enhanced scale and diversification, as well as its investment grade ratings, are expected to facilitate more efficient access to less expensive capital;

The Mergers will combine two complementary portfolios with similar business strategies in top U.S. markets, which is expected to allow the combined company to capture immediate and substantial cost synergies in the form of corporate general and administrative cost savings, operating cost savings and reductions in interest, as well as long-term revenue synergies from operating performance and development value creation, all of which is expected to ultimately drive increases to net operating income;

The combined company is expected to be a highly diversified net lease industry leader in terms of client credit, industry and geography, providing runway for further growth;
 
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The combined company will be positioned to leverage its size, scale and credit profile to refinance debt maturities at lower rates than VEREIT’s current indebtedness, particularly in light of Realty Income’s investment grade credit rating and lower cost of capital;

VEREIT stockholders are expected to benefit from an increased dividend rate; and

The combined company is expected to have the scale to effectively pursue a spin-off or sale of the combined office portfolio of Realty Income and VEREIT;

Premium Over Share Trading Price.   The value of shares of Realty Income common stock that VEREIT stockholders will receive in the Merger represents a premium of approximately 17% to the closing prices per share of VEREIT common stock and Realty Income common stock, a premium of approximately 20% to the 30-day volume weighted average price and a premium of approximately 14% to the 52-week high, respectively, in each case as of April 28, 2021 (the last trading day before the Merger was announced);

Participation in Future Appreciation.   The Merger consideration will be paid in shares of Realty Income common stock, which will provide VEREIT stockholders with the opportunity to participate in any potential appreciation of Realty Income common stock following the Merger;

NYSE Listing.   The Merger consideration, consisting of Realty Income common stock, which will be listed for trading on the NYSE, continues to provide liquidity for VEREIT stockholders desiring to liquidate their investment after the Merger;

Best Available Strategic Alternative.   The VEREIT board of directors reviewed possible alternatives to the Mergers and other transactions contemplated by the Merger Agreement and consulted with VEREIT’s financial advisors regarding possible alternatives, including continuing to operate VEREIT as an independent company or seeking a business combination with another party. After considering the alternatives, the VEREIT board of directors determined that the Mergers and the other transactions contemplated by the Merger Agreement are the best available option for VEREIT and its stockholders;

Superior Proposals.   The VEREIT board of directors has the ability, under certain circumstances and subject to certain conditions specified in the Merger Agreement, to consider and respond to unsolicited bona fide written acquisition proposals with respect to VEREIT and to engage in negotiations with any third party making any such acquisition proposal and to terminate the Merger Agreement in order to enter into a Superior Proposal, subject to, among other things, certain notice requirements and payment of expense reimbursement and/or a termination fee by VEREIT to Realty Income, as further described in “— The Merger Agreement — Termination of the Merger Agreement.” The VEREIT board of directors evaluated, in consultation with VEREIT’s legal and financial advisors, the amounts of potential termination fees and expense reimbursement payable by VEREIT in such circumstances, and determined that such amounts are reasonable and will not unduly impede the ability of a third party to make a Superior Proposal;

Opinion of Financial Advisor.   The VEREIT board of directors considered the April 28, 2021 oral opinion of J.P. Morgan, which was confirmed by delivery of a written opinion, dated April 28, 2021, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the exchange ratio provided in the Merger was fair, from a financial point of view, to the holders of VEREIT common stock, as more fully described in the section entitled “— Opinion of VEREIT’s Financial Advisor — Opinion of J.P. Morgan Securities LLC”. The full text of the written opinion of J.P. Morgan, dated April 28, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference;

Familiarity with Businesses.   The VEREIT board of directors considered its knowledge of the business, operations, financial condition, earnings and prospects of both VEREIT and Realty Income, taking into account the results of VEREIT’s due diligence review of Realty Income, as well as its knowledge of the current and prospective environment in which VEREIT and Realty Income operate, including economic and market conditions;
 
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Management Experience at Realizing Value Opportunities.   The VEREIT board of directors considered that the existing Realty Income management team has significant experience in all areas of real estate operations, financing and investment, as well as extensive relationships with real estate industry entrepreneurs, investors, owners and financiers and a track record of success built on identifying opportunities, assessing risk, structuring transactions with investment partners, and optimizing returns, including realizing the intrinsic value in undervalued real estate;

High Likelihood of Consummation.   The VEREIT board of directors determined it is highly likely that the Mergers will be completed in a timely manner given the commitment of both parties to complete the business combination pursuant to their respective obligations under the Merger Agreement and the absence of any significant closing conditions under the Merger Agreement, other than the stockholder approvals of VEREIT and Realty Income and the full readiness for consummation of the Spin-Off (which condition will be automatically deemed to have been waived if not satisfied by January 29, 2022);

Continuous Dividends.   The VEREIT board of directors considered that VEREIT and VEREIT OP are permitted to continue to pay regular quarterly cash dividends or distributions, as applicable, in accordance with past practice until consummation of the Mergers;

Representation on Combined Company Board.   The VEREIT board of directors considered that two VEREIT directors will join the Realty Income board of directors, helping to oversee the ongoing equity investment of VEREIT stockholders and providing an opportunity for the combined company to benefit from the insights and experience of these incoming directors;

Current Market Trends.   The VEREIT board of directors considered current market and industry trends, VEREIT’s future prospects as an independent company and the challenges and risks that could affect VEREIT’s future performance;

Tax-Free Merger.   The VEREIT board of directors considered that the Merger is intended to qualify as a reorganization for U.S. federal income tax purposes, and if the Merger so qualifies, then U.S. holders of VEREIT common stock are not expected to recognize any gain or loss for U.S. federal income tax purposes upon the receipt of the Merger consideration (except with respect to any cash in lieu of fractional shares of Realty Income common stock);

OfficeCo Spin-Off.   The VEREIT board of directors considered that, the Spin-Off or the sale of some or all of the OfficeCo Properties, if completed, will potentially unlock further value of certain office assets for VEREIT’s stockholders; and

Flexibility to Operate the Business.   The VEREIT board of directors considered that the Merger Agreement provides VEREIT with sufficient operating flexibility between the signing of the Merger Agreement and the closing of the Merger for VEREIT to use commercially reasonable efforts to conduct its business in the ordinary course of business consistent with past practice.
The VEREIT board of directors also considered various risks and other potentially negative factors concerning the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement, including the following:

the Merger consideration is a fixed exchange ratio that will not fluctuate as a result of changes in the price of VEREIT common stock or Realty Income common stock prior to the effective time of the Merger, which means that the market value of the Merger consideration could decrease prior to the effective time of the Merger if the trading price of Realty Income common stock decreases;

under certain circumstances, the Realty Income board of directors can modify or withdraw its recommendation that Realty Income stockholders vote in favor of the Realty Income Issuance Proposal;

the obligation to pay Realty Income a termination fee of $195.0 million or $365.0 million, depending on, among other factors, when the termination occurs and whether a person making a Superior Proposal is a qualified bidder, and expense reimbursement of $25.0 million if the Merger Agreement is terminated under certain circumstances, as further described in “— The Merger Agreement —  Termination of the Merger Agreement” and “— The Merger Agreement — No Solicitation”;
 
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the risk that the agreed termination fee and/or expense reimbursement amount payable by Realty Income to VEREIT if the Merger Agreement is terminated under certain circumstances may not be sufficient to fully compensate VEREIT for its losses in such circumstances;

the risk that a different strategic alternative potentially could be more beneficial to VEREIT stockholders than the Mergers;

the risk that VEREIT and Realty Income may be obligated to complete the Mergers without having obtained appropriate consents, approvals or waivers from the counterparties under certain of VEREIT’s contracts that require consent or approval to consummate the Mergers, and the risk that such consummation could trigger the termination of, or default under, such contracts or the exercise of rights by the counterparties under such contracts;

the possibility that the Mergers or the other transactions contemplated by the Merger Agreement may not be completed, or that completion may be delayed for reasons that are beyond the control of VEREIT or Realty Income, including the failure of VEREIT stockholders to approve the VEREIT Merger Proposal or the failure of Realty Income stockholders to approve the Realty Income Issuance Proposal, or the failure of VEREIT or Realty Income to satisfy other requirements that are conditions to closing the Mergers;

the risk that failure to complete the Mergers could negatively affect the price of VEREIT common stock and/or the future business and financial results of VEREIT;

the potential diversion of management focus and resources from operational matters and other strategic opportunities while working to implement the Mergers;

the risk of not realizing all of the anticipated operating efficiencies, cost savings or other anticipated benefits of the Mergers within the expected time frame or at all;

the substantial costs to be incurred in connection with the transaction, including the costs of integrating the businesses of VEREIT and Realty Income, and the transaction expenses arising from the Mergers and the other transactions contemplated by the Merger Agreement, including the Spin-Off;

the terms of the Merger Agreement placing certain limitations on the ability of VEREIT to initiate, solicit or knowingly encourage or facilitate any inquiries or the making of any proposal or offer by or with a third party with respect to an acquisition proposal and to furnish nonpublic information or data to, or engage in discussions or negotiations with, a third party interested in pursuing an alternative business combination transaction (unless such third party has made an unsolicited bona fide written acquisition proposal (as hereinafter defined) that constitutes or is reasonably likely to result in a Superior Proposal and such third party enters into a confidentiality agreement with VEREIT having provisions that are no less favorable to such party than those contained in the confidentiality agreement between Realty Income and VEREIT);

that provisions in the Merger Agreement placing certain restrictions on the operation of VEREIT’s business during the period between the signing of the Merger Agreement and closing of the Merger may delay or prevent VEREIT from undertaking business opportunities that may arise or other actions it would otherwise take with respect to its operations absent the pending completion of the Mergers;

the absence of appraisal rights for VEREIT stockholders under Maryland law;

while the Merger is generally not expected to result in the recognition of gain or loss to VEREIT stockholders for U.S. federal income tax purposes, the Spin-Off is expected to be a taxable transaction for stockholders of Realty Income following the Merger, including the former VEREIT stockholders;

the flexibility and control afforded to Realty Income pursuant to the terms of the Merger Agreement, subject to consultation with VEREIT, to finalize the terms of the Spin-Off, including electing to pursue potential sales of some or all of the OfficeCo Properties, or to retain some or all of the OfficeCo Properties;

prior to January 29, 2022, Realty Income will not be obligated to consummate the Mergers until the Spin-Off is ready, in all respects, to be consummated contemporaneously with the closing of the Merger, including the effectiveness of the New Realty Income Form 10; and
 
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the other factors described herein under “Risk Factors.”
In addition to the factors described above, the VEREIT board of directors considered the fact that some of VEREIT’s directors and executive officers have other interests in the Mergers that are different from, or in addition to, the interests of VEREIT stockholders generally, as discussed herein under “— Interests of VEREIT Directors and Executive Officers in the Mergers.”
The above discussion of the factors considered by the VEREIT board of directors is not intended to be exhaustive, but does set forth material factors considered by the VEREIT board of directors. In view of the wide variety of factors considered in connection with its evaluation of the Mergers and the other transactions contemplated by the Merger Agreement and the complexity of these matters, the VEREIT board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors, and individual directors may have held varied views of the relative importance of the factors considered. The VEREIT board of directors viewed its position and recommendation as being based on an overall review of the totality of the information available to it and overall considered these factors to be favorable to, and to support, its determination regarding the Mergers.
This explanation of VEREIT’s reasons for approving and recommending the Mergers and other information presented in this section is forward-looking in nature and should be read in light of the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
For the reasons set forth above, the VEREIT board of directors unanimously declared that the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are advisable to, and in the best interests of, VEREIT and its stockholders and unanimously approved the Merger Agreement. The VEREIT board of directors recommends to VEREIT stockholders that they vote “FOR” the VEREIT Merger Proposal.
Opinion of Realty Income’s Financial Advisor
Opinion of Moelis & Company LLC
At the meeting of Realty Income’s board of directors on April 28, 2021 to evaluate and approve the Merger Agreement and the transactions contemplated thereby, including the Mergers, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated April 28, 2021, addressed to Realty Income’s board of directors to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the Exchange Ratio was fair, from a financial point of view, to Realty Income.
The full text of Moelis’ written opinion dated April 28, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of Realty Income’s board of directors (solely in its capacity as such) in its evaluation of the Mergers. Moelis’ opinion was limited solely to the fairness, from a financial point of view, to Realty Income of the Exchange Ratio. Moelis’ opinion does not address Realty Income’s underlying business decision to effect the Mergers, or the relative merits of the Mergers as compared to any alternative business strategies or transactions that might be available with respect to Realty Income. Moelis’ opinion does not constitute a recommendation to any holder of securities as to how such holder should vote or act with respect to the Mergers or any other matter, including the Realty Income Share Issuance Proposal.
In arriving at its opinion, Moelis, among other things:

reviewed certain publicly available business and financial information relating to VEREIT and Realty Income;

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of VEREIT furnished to Moelis by VEREIT and Realty Income, including financial forecasts provided to or discussed with Moelis by the management of Realty Income (referred to in this section as the “Realty Income Projections for VEREIT”);
 
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reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of Realty Income furnished to Moelis by Realty Income, including financial forecasts provided to or discussed with Moelis by the management of Realty Income (referred to in this section as the “Realty Income Projections”);

reviewed certain information relating to the capitalization (including incentive equity) of Realty Income and VEREIT provided to Moelis by Realty Income and VEREIT, and discussed with Moelis by the management of Realty Income;

participated in discussions with members of the senior managements and representatives of Realty Income and VEREIT concerning the information described in the first four items of this list, as well as the businesses and prospects of Realty Income and VEREIT, generally;

reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;

reviewed a draft, dated April 28, 2021, of the merger agreement;

participated in certain discussions and negotiations among representatives of Realty Income and VEREIT and their advisors; and

conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.
In connection with its review, with Realty Income’s consent, Moelis relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. Moelis did not assume any responsibility for independent verification of, and Moelis did not independently verify, any of such information. With Realty Income’s consent, Moelis relied upon, without independent verification, the assessment of Realty Income and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the financial forecasts referred to above in this section, including Realty Income Projections for VEREIT and the Realty Income Projections, Moelis assumed, at Realty Income’s direction, that they had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Realty Income as to the future performance of Realty Income and VEREIT, respectively. At Realty Income’s direction, Moelis assumed that the financial forecasts referred to above, including Realty Income Projections for VEREIT and the Realty Income Projections, were a reasonable basis upon which to evaluate VEREIT, Realty Income and the Mergers and at Realty Income’s direction Moelis relied upon such financial forecasts for purposes of its analyses and opinion. Moelis did not express any views as to the reasonableness of any financial forecasts or the assumptions on which they were based. With Realty Income’s consent, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of VEREIT or Realty Income, nor was it furnished with any such evaluation or appraisal.
Moelis’ opinion did not address Realty Income’s underlying business decision to effect the Mergers, or the relative merits of the Mergers as compared to any alternative business strategies or transactions that might be available to Realty Income and did not address any legal, regulatory, tax or accounting matters. Moelis was not asked to, and Moelis did not, offer any opinion as to any terms of the Merger Agreement or any aspect or implication of the Mergers, except for the fairness to Realty Income from a financial point of view of the Exchange Ratio pursuant to the Merger Agreement. In that regard, Moelis’ opinion did not address the Spin-Off or any aspect or implication thereof. Moelis did not express any opinion as to what the value of Realty Income shares actually would be when issued in the Mergers or the prices at which Realty Income common shares or VEREIT shares may trade at any time. Moelis assumed, with Realty Income’s consent, that the final executed form of the Merger Agreement would not differ in any material respect from the draft that it reviewed, that the Mergers would be consummated in accordance with their terms without any waiver or modification that would be material to its analysis, and that the parties to the Merger Agreement would comply with all the material terms of the Merger Agreement. Moelis assumed, with Realty Income’s consent, that all governmental, regulatory or other consents or approvals necessary for the completion of the Mergers would be obtained, except to the extent that would not be material to Moelis’ analyses. In addition, Realty Income advised Moelis, and Moelis assumed, with the consent of Realty Income, that the Mergers would qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
 
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Moelis’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date thereof, and Moelis assumed no responsibility to update its opinion for developments occurring or coming to its attention after such date.
Moelis’ opinion did not address the fairness of the Mergers or any aspect or implication thereof to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of Realty Income or VEREIT. Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Mergers, or any class of such persons, relative to the exchange ratio or otherwise. Moelis’ opinion was approved by a Moelis fairness opinion committee.
This summary of the analyses is not a complete description of Moelis’ opinion or the analyses underlying, and factors considered in connection with, Moelis’ opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth below, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moelis’ opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses.
No company used in the analyses described below is identical to VEREIT or Realty Income. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses described below (including much of the information used therein) are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither Realty Income nor Moelis or any other person assumes responsibility if future results are materially different from those forecasts.
The Exchange Ratio was determined through arms’ length negotiations between Realty Income and VEREIT and was approved by the Realty Income board of directors. Moelis did not recommend any specific consideration to Realty Income or its board of directors, or that any specific amount or type of consideration constituted the only appropriate consideration in the Mergers.
Summary of Financial Analyses
The following is a summary of the material financial analyses presented by Moelis in connection with its opinion to the Realty Income board of directors at a meeting held on April 28, 2021. This summary describes the material analysis underlying Moelis’ opinion but does not purport to be a complete description of the analyses performed by Moelis in connection with its opinion.
Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’ analyses.
For purposes of its analyses, Moelis reviewed a number of financial metrics, including the following:

EBITDA — generally the amount of the relevant company’s earnings before interest, taxes, depreciation, and amortization for a specified time period.

Funds From Operations — generally the amount of the relevant company’s funds from operations for a specified time period.

Adjusted Funds From Operations — generally the amount of the relevant company’s funds from operations, adjusted to account for, among other things, debt extinguishment costs, stock-based compensation, the straight-lining of rents, amortization of above and below-market leases and amortization of deferred financing costs, for a specified time period.
 
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Enterprise Value — generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account outstanding options and other securities convertible, exercisable or exchangeable into or for equity securities of the company) plus the value of its net debt (the face amount of total debt and preferred stock and the book value of non-controlling interests, less the amount of cash and cash equivalents, as reflected on then most recently available balance sheet).
Dividend Discount Model Analysis
Moelis performed separate dividend discount analyses for each of Realty Income and VEREIT to calculate the implied present values of the estimated dividends per share that Realty Income and VEREIT were forecasted to distribute during the six months ending December 31, 2021 and the fiscal years ending December 31, 2022 and December 31, 2023, respectively, and the present value of estimated terminal values based on a multiple of terminal year Adjusted Funds from Operations per share as described below for Realty Income and VEREIT projected by the management of Realty Income. The financial data for Realty Income and VEREIT was based on financial forecasts and other information and data provided by Realty Income and VEREIT, including Realty Income Projections and the Realty Income Projections for VEREIT.
For Realty Income, Moelis utilized a range of discount rates (based on an estimated range of the cost of equity for Realty Income) of 6.25% to 8.75% to calculate estimated present values as of June 30, 2021 of (i) estimated dividends per share that Realty Income was forecasted to distribute during the six months ending December 31, 2021 and the fiscal years ending December 31, 2022 and December 31, 2023 and (ii) estimated terminal values derived by applying a range of multiples of 16.50x to 21.00x to a terminal year one-year forward estimate of Adjusted Funds from Operations per share for Realty Income, which reflects an assumed 4.0% growth, as projected by the management of Realty Income, from the Adjusted Funds from Operations per share for Realty Income for the fiscal year ending December 31, 2023 based on the Realty Income Projections. For VEREIT, Moelis utilized a range of discount rates (based on an estimated range of the cost of equity for VEREIT) of 7.00% to 10.00% to calculate estimated present values as of June 30, 2021 of (i) estimated dividends per share that VEREIT was forecasted to distribute during the six months ending December 31, 2021 and the fiscal years ending December 31, 2022 and December 31, 2023 and (ii) estimated terminal values derived by applying a range of multiples of 12.50x to 15.50x to a terminal year one-year forward estimate of Adjusted Funds from Operations per share for VEREIT, which reflects an assumed 4.0% growth, as projected by the management of Realty Income, from the Adjusted Funds from Operations per share for VEREIT for the fiscal year ending December 31, 2023 based on the Realty Income Projections for VEREIT.
The ranges of cost of equity referred to above reflected a derived cost of equity for each of Realty Income and VEREIT using (i) selected ranges of betas informed by selected publicly traded companies as of April 27, 2021, (ii) selected ranges of debt to total capitalization ratios informed by the selected publicly traded companies, and (iii) size premiums based on publicly traded companies with equity values similar to Realty Income and VEREIT.
This analysis indicated an implied per share equity value range for VEREIT of approximately $40.37 to $52.31, and an implied per share equity value range for Realty Income of approximately $59.57 to $78.28.
Based on the implied per share equity value ranges for Realty Income and VEREIT derived from the discounted dividend model analysis performed, the following implied exchange ratio range (representing the range determined by using (x) as the bottom end of the range, the amount calculated by dividing the lowest implied per share equity value range for VEREIT by the highest implied per share equity value range for Realty Income and (y) as the top end of the range, the amount calculated by dividing the highest implied per share equity value range for VEREIT by the lowest implied per share equity value range for Realty Income), as compared to the Exchange Ratio, were indicated:
Implied Exchange Ratio Range:
Merger Exchange Ratio
0.516x – 0.878x
0.705x
 
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Selected Publicly Traded Companies Analysis
Moelis performed a selected publicly traded companies analysis of each of Realty Income and VEREIT. Moelis reviewed financial and stock market information of the selected publicly traded companies that it deemed similar in one or more respects, including REITs that are internally-managed, focus primarily on the net lease asset class and have market capitalizations in excess of $1 billion.
Moelis reviewed, among other things, (a) Enterprise Values of the selected publicly traded companies as a multiple of estimated EBITDA for the years ending December 31, 2021 and December 31, 2022, (b) share prices for the selected publicly traded companies as a multiple of estimated per share Funds From Operations (“FFO”) for the years ending December 31, 2021 and December 31, 2022, estimated per share Adjusted Funds From Operations (“AFFO”) for the years ending December 31, 2021 and December 31, 2022, and (c) the premium or discount implied by the share price for the selected publicly traded companies to estimated per share net asset value (“NAV”).
Enterprise Values and share prices used in the selected publicly traded companies analyses described below were based upon market prices of the common stock of the selected publicly traded companies listed below as of April 27, 2021. Financial and certain other data (including NAV estimates) for the selected publicly traded companies, including Realty Income and VEREIT, were based on publicly available consensus research analysts’ estimates, public filings and other publicly available information. The selected publicly traded companies and their respective metrics are summarized below:
Selected Publicly Traded Company
Enterprise
Value /
2021E EBITDA
Enterprise
Value /
2022E EBITDA
Price /
2021E FFO
Price /
2022E FFO
Price /
2021E AFFO
Price /
2022E AFFO
Premium or
Discount to
Consensus NAV
Realty Income Corp.
20.4x 18.2x 20.4x 18.8x 19.7x 18.7x 31.9%
W.P. Carey Inc.
18.3x 17.3x 15.9x 15.4x 15.0x 14.6x 10.1%
STORE Capital Corporation
19.2x 16.9x 19.1x 17.8x 18.5x 17.4x 39.2%
VEREIT, Inc.
15.4x 14.5x 12.9x 12.4x 12.8x 12.3x 1.5%
National Realty Properties, Inc.
19.2x 17.9x 18.0x 17.0x 16.7x 16.3x 12.9%
Spirit Realty Capital, Inc.
16.8x 15.1x 15.5x 14.7x 15.1x 14.5x 14.3%
Agree Realty Corporation
20.5x 16.7x 20.4x 19.1x 20.8x 19.5x 20.8%
Broadstone Net Lease, Inc.
15.1x 13.8x 13.6x 13.1x 15.0x 14.1x (0.6)%
Essential Properties Realty Trust, Inc.
20.6x 16.2x 21.0x 19.1x 21.1x 19.0x 45.7%
Four Corners Property Trust, Inc.
19.7x 17.8x 19.1x 18.1x 19.1x 18.3x 16.9%
For purposes of its analysis, for Realty Income, Moelis applied the following ranges of selected multiples (or premia as the case may be) informed by its review of the following selected publicly traded companies: Realty Income, STORE Capital Corporation, National Retail Properties, Agree Realty Corporation and Essential Properties Realty Trust, which Moelis selected because of similar historical growth performance and / or asset mix to Realty Income. This analysis indicated the following ranges of implied per share equity value.
Metric
Selected Range: Realty Income
Implied Equity Value Range Per Share:
Realty Income
Enterprise Value / 2021E EBITDA
19.00x – 21.00x
$62.81 – $71.49
Enterprise Value / 2022E EBITDA
16.00x – 18.50x
$57.53 – $69.59
Share price / 2021E FFO
18.00x – 21.00x
$59.19 – $69.05
Share Price / 2022E FFO
17.00x – 19.50x
$59.89 – $68.69
Share price / 2021E AFFO
16.50x – 21.00x
$56.93 – $72.45
Share Price / 2022E AFFO
16.00x – 20.00x
$56.77 – $70.96
Premium (Discount) to NAV
10.0% – 45.0%
$57.44 – $75.72
For purposes of its analysis, for VEREIT, Moelis applied the following ranges of selected multiples (or premia as the case may be) informed by its review of the following selected publicly traded companies: W.P.
 
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Carey, Spirit Realty Capital, VEREIT and Broadstone Net Lease which Moelis selected because of similar historical growth performance and / or asset mix to VEREIT. This analysis indicated the following ranges of implied per share equity value.
Metric
Selected Range: VEREIT
Implied Equity Value Range Per Share:
VEREIT
Enterprise Value / 2021E EBITDA
15.00x – 19.00x
$39.50 – $56.95
Enterprise Value / 2022E EBITDA
13.50x – 17.50x
$34.36 – $52.25
Share price / 2021E FFO
12.50x – 16.50x
$40.51 – $53.48
Share Price / 2022E FFO
12.00x – 16.00x
$40.34 – $53.78
Share price / 2021E AFFO
12.50x – 15.50x
$40.75 – $50.53
Share Price / 2022E AFFO
12.00x – 15.00x
$40.66 – $50.82
Premium (Discount) to NAV
(5.0)% – 15.0%
$38.67 – $46.81
Based on the implied per share equity value ranges for Realty Income and VEREIT derived from the selected publicly traded companies analysis performed, the following implied exchange ratio ranges (representing the range determined by using (x) as the bottom end, the amount calculated by dividing the lowest implied per share equity value range for VEREIT by the highest implied per share equity value range for Realty Income and (y) as the top end, the amount calculated by dividing the highest implied per share equity value range for VEREIT by the lowest implied per share equity value range for Realty Income), as compared to the Exchange Ratio, were indicated:
Metric
Implied Exchange Ratio Range
Enterprise Value / 2021E EBITDA
0.552x – 0.907x
Enterprise Value / 2022E EBITDA
0.494x – 0.908x
Share price / 2021E FFO
0.587x – 0.904x
Share Price / 2022E FFO
0.587x – 0.898x
Share price / 2021E AFFO
0.562x – 0.888x
Share Price / 2022E AFFO
0.573x – 0.895x
Premium (Discount) to NAV
0.511x – 0.815x
Other Information
For reference only, Moelis reviewed a precedent premia paid analysis in which Moelis reviewed premia paid in selected REIT transactions announced since 2015 with transaction values over $1 billion. Moelis did not utilize a precedent premia paid analysis for purposes of its analysis or opinion but included the data for informational purposes. These transactions reflected mean, median, 25th percentile, and 75th percentile (a) one-day premiums of 17.4%, 15.5%, 9.8% and 20.9%, respectively and (b) one-week premiums of 18.8%, 15.7%, 11.3% and 20.8%, respectively. Moelis noted that the (i) one-day premium implied by the Exchange Ratio and the $41.32 closing share price for VEREIT on April 27, 2021 was 17.5% and (ii) one-week premium implied by the Exchange Ratio and the $41.31 closing share price for VEREIT on April 20, 2021 was 17.5%.
In addition, for reference only, Moelis reviewed the financial terms of certain transactions in the net lease sector with transaction values over $1 billion that were completed since 2015. Moelis did not utilize a precedent transactions analysis for purposes of its analysis or opinion because of the limited number of recent transactions, the fact that all of the reviewed transactions had announced before the onset of COVID-19 (limiting the comparability of the multiples reflected in those transactions to the Mergers) and the lack of retail property exposure in the reviewed transactions.
Miscellaneous
Moelis acted as financial advisor to Realty Income in connection with the Mergers and will receive a transaction fee of $19.0 million for its services, contingent upon the consummation of the Mergers. Moelis also became entitled to receive a fee of approximately $5.0 million upon having substantially completed its
 
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work necessary to deliver its opinion, without regard to the conclusion reached therein, which is creditable against the transaction fee. In addition, Realty Income agreed to indemnify Moelis for certain liabilities and other items, including liabilities under the federal securities laws, arising out of its engagement. Moelis’ affiliates, employees, officers and partners may at any time own securities (long or short) of Realty Income and VEREIT. Moelis is providing investment banking services to Realty Income in connection with the Spin-Off and potential alternatives thereto, and may receive compensation for such services. Moelis has provided investment banking and other services to Realty Income unrelated to the Mergers and in the future may provide such services to Realty Income, and has received and may receive compensation for such services. Moelis may, in the future, provide investment banking or other services unrelated to the Mergers to VEREIT, and may receive compensation for such services. In the past two years prior to the date of its opinion, Moelis (i) acted among other things as a co-manager in various equity and debt offerings undertaken by Realty Income, for which Moelis received approximately $200,000 in aggregate compensation and (ii) had not received any fees for financial advisory services from VEREIT.
The Realty Income board of directors selected Moelis as its financial advisor in connection with Mergers because Moelis has substantial experience in similar transactions and familiarity with Realty Income. Moelis is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings, and valuations for corporate and other purposes.
Opinion of VEREIT’s Financial Advisor
Opinion of J.P. Morgan Securities LLC
Pursuant to an engagement letter, VEREIT retained J.P. Morgan as its financial advisor in connection with the Mergers.
At the meeting of the VEREIT board of directors on April 28, 2021, J.P. Morgan rendered its oral opinion to the VEREIT board of directors that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the Exchange Ratio in the Merger was fair, from a financial point of view, to VEREIT’s common stockholders. J.P. Morgan confirmed its April 28, 2021 oral opinion by delivering its written opinion, dated as of April 28, 2021, to the VEREIT board of directors that, as of such date, the Exchange Ratio in the Merger was fair, from a financial point of view, to VEREIT’s common stockholders.
The full text of the written opinion of J.P. Morgan, dated as of April 28, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. VEREIT’s common stockholders are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the VEREIT board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the Mergers, was directed only to the Exchange Ratio in the Merger and did not address any other aspect of the Mergers. J.P. Morgan expressed no opinion as to the fairness of any consideration to be paid in connection with the Mergers to the holders of any other class of securities, creditors or other constituencies of VEREIT or VEREIT OP, including the consideration to be paid to certain minority partners of VEREIT OP, or as to the underlying decision by VEREIT to engage in the Mergers. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of VEREIT as to how such stockholder should vote with respect to the VEREIT Merger Proposal or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:

reviewed a draft, dated April 28, 2021, of the Merger Agreement;

reviewed certain publicly available business and financial information concerning VEREIT and Realty Income and the industries in which they operate;

compared the financial and operating performance of VEREIT and Realty Income with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed
 
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the current and historical market prices of each of VEREIT’s common stock and Realty Income’s common stock and certain publicly traded securities of such other companies;

reviewed certain internal financial analyses and forecasts prepared by the management of VEREIT, for itself and for Realty Income, relating to the respective businesses, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Mergers (the “Synergies”); and

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of VEREIT and Realty Income with respect to certain aspects of the Mergers, and the past and current business operations of VEREIT and Realty Income, the financial condition and future prospects and operations of VEREIT and Realty Income, the effects of the Mergers on the financial condition and future prospects of VEREIT and Realty Income, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by VEREIT or Realty Income or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to J.P. Morgan’s engagement letter with VEREIT, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of VEREIT or Realty Income under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by VEREIT’s management as to the expected future results of operations and financial condition of VEREIT and Realty Income to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the Merger will qualify as a tax-free reorganization for United States federal income tax purposes and will be consummated as described in the Merger Agreement, and that the definitive Merger Agreement would not differ in any material respects from the draft thereof furnished to J.P. Morgan. In addition, J.P. Morgan’s opinion did not address or reflect the Separation of OfficeCo from Realty Income, or any sale of all or any portion of the OfficeCo Properties. J.P. Morgan also assumed that the representations and warranties made by VEREIT, Realty Income and their respective subsidiaries in the Merger Agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to VEREIT with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Mergers will be obtained without any adverse effect on VEREIT or Realty Income or on the contemplated benefits of the Mergers.
The projections furnished to J.P. Morgan were prepared by VEREIT’s management, as discussed more fully under “— VEREIT Unaudited Prospective Financial Information”, beginning on page 75 of this joint proxy statement/prospectus. VEREIT does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the Mergers, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of VEREIT’s management or Realty Income’s management, as applicable, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. For more information regarding the use of projections and other forward-looking statements, please refer to the sections entitled “— VEREIT Unaudited Prospective Financial Information”, beginning on page 75 of this joint proxy statement/prospectus.
J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion and that J.P. Morgan does not have any obligation to update, revise or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a
 
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financial point of view, of the Exchange Ratio in the Merger to VEREIT’s common stockholders, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to be paid in connection with the Mergers to the holders of any other class of securities, creditors or other constituencies of VEREIT or VEREIT OP, including the consideration to be paid to certain minority partners of VEREIT OP, or as to the underlying decision by VEREIT to engage in the Mergers. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the Mergers, or any class of such persons relative to the Exchange Ratio applicable to VEREIT’s common stockholders in the Merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the VEREIT common stock or the Realty Income common stock will trade at any future time.
J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of VEREIT or any other alternative transaction.
The terms of the Merger Agreement, including the Exchange Ratio, were determined through arm’s length negotiations between VEREIT and Realty Income, and the decision to enter into the Merger Agreement was solely that of the VEREIT board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the VEREIT board of directors in its evaluation of the Mergers and should not be viewed as determinative of the views of the VEREIT board of directors or VEREIT’s management with respect to the Mergers or the Exchange Ratio.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the VEREIT board of directors on April 28, 2021 and in the financial analysis presented to the VEREIT board of directors on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion to the VEREIT board of directors and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.
Public Trading Multiples.
Using publicly available information, J.P. Morgan compared selected financial data of VEREIT and Realty Income with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to those engaged in by VEREIT and Realty Income, as applicable.
The companies selected by J.P. Morgan with respect to VEREIT were as follows:

VEREIT, Inc.

W.P. Carey Inc.

Spirit Realty Capital, Inc.

Broadstone Net Lease, Inc.
The companies selected by J.P. Morgan with respect to Realty Income were as follows:

Realty Income Corporation

STORE Capital Corporation

National Realty Properties, Inc.

Spirit Realty Capital, Inc.

Agree Realty Corporation
These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for the purposes of J.P. Morgan’s analysis, may be considered similar to those
 
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of VEREIT and Realty Income, as applicable. However, certain of these companies may have characteristics that are materially different from those of VEREIT and Realty Income, as applicable. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect VEREIT and Realty Income, as applicable.
Using publicly available information, J.P. Morgan calculated, for each selected company, the ratios of (i) the company’s price per share of common stock to the consensus equity research analyst estimates for the company’s AFFO per share of common stock for the years ending December 31, 2021 (the “P/2021E AFFO”) and December 31, 2022 (the “P/2022E AFFO”) and (ii) a third party research analyst estimate for the company’s cash net operating income for the next twelve months to a third party research analyst estimate for the company’s implied value of real estate (the “Implied Capitalization Rate”).
For VEREIT, based on the results of this analysis, J.P. Morgan selected multiple reference ranges of 13.0x – 15.0x, 12.25x – 14.75x and 6.5% – 5.8% for P/2021E AFFO, P/2022E AFFO and the Implied Capitalization Rate, respectively. After applying such ranges to the projected AFFO for VEREIT for the year ending December 31, 2021, the projected AFFO for VEREIT for the year ending December 31, 2022, and the projected cash net operating income for VEREIT for the next twelve months, respectively, the analysis indicated the following ranges of implied per share equity value (rounded to the nearest $0.25) for shares of VEREIT common stock:
Implied Per Share Equity Value
Low
High
VEREIT P/2021E AFFO
$ 42.50 $ 49.00
VEREIT P/2022E AFFO
$ 41.50 $ 50.00
VEREIT Implied Capitalization Rate
$ 44.25 $ 52.75
The ranges of implied per share equity value for VEREIT common stock were compared to (i) the closing share price of VEREIT common stock of $41.32 on April 27, 2021, the trading day immediately preceding the date of the written opinion, dated April 28, 2021, and (ii) the implied per share consideration (based on the closing price of Realty Income common stock on April 27, 2021) of $48.55.
For Realty Income, based on the results of the analysis described above, J.P. Morgan selected multiple reference ranges of 15.00x – 20.75x, 14.50x – 19.50x and 5.8% – 5.0% for P/2021E AFFO, P/2022E AFFO and the Implied Capitalization Rate, respectively. After applying such ranges to the projected AFFO for Realty Income for the year ending December 31, 2021, the projected AFFO for Realty Income for the year ending December 31, 2022, and the projected cash net operating income for Realty Income for the year ending December 31, 2021, respectively, the analysis indicated the following ranges of implied per share equity value (rounded to the nearest $0.25) for shares of Realty Income common stock:
Implied Per Share Equity Value
Low
High
Realty Income P/2021E AFFO
$ 51.75 $ 71.50
Realty Income P/2022E AFFO
$ 51.50 $ 69.25
Realty Income Implied Capitalization Rate
$ 59.25 $ 71.75
The ranges of implied per share equity value for Realty Income common stock were compared to the closing share price of Realty Income common stock of $68.86 on April 27, 2021, the trading day immediately preceding the date of the written opinion, dated April 28, 2021.
Discounted Cash Flow Analysis.
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share for both VEREIT common stock and Realty Income common stock. J.P. Morgan calculated the unlevered free cash flows that VEREIT and Realty Income are expected to generate during fiscal years 2021 through 2023 (as set forth in the section entitled “— VEREIT Unaudited Prospective Financial Information”, which was discussed with, and approved by, the VEREIT board of directors for use
 
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by J.P. Morgan in connection with its financial analyses). J.P. Morgan also calculated a range of terminal values for VEREIT and Realty Income at the end of this period by applying perpetual growth rates ranging from 0.25% to 0.75%, in the case of VEREIT, and 0.75% to 1.25%, in the case of Realty Income, based on guidance provided by VEREIT’s management, to estimates of the unlevered terminal free cash flows for each of VEREIT and Realty Income at the end of fiscal-year 2023, as provided in the VEREIT management projections. J.P. Morgan then discounted the unlevered free cash flow estimates and the range of terminal values to present value as of December 31, 2020 using discount rates ranging from 6.5% to 7.0% for VEREIT, and 5.875% to 6.375% for Realty Income, which ranges were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of VEREIT and Realty Income, respectively. For each of VEREIT and Realty Income, the present value of the unlevered free cash flow estimates and the range of terminal values were then adjusted by subtracting net debt for each company as of December 31, 2020.
Based on the foregoing, this analysis indicated the following ranges of implied per share equity value (rounded to the nearest $0.25) for VEREIT common stock and Realty Income common stock:
Implied Per Share Equity Value
Low
High
VEREIT Discounted Cash Flow
$ 32.50 $ 44.25
Realty Income Discounted Cash Flow
$ 50.25 $ 70.00
The range of implied per share equity values for VEREIT common stock was compared to (i) the closing share price of VEREIT common stock of $41.32 on April 27, 2021, the trading day immediately preceding the date of the written opinion, dated April 28, 2021 and (ii) the implied per share consideration (based on the closing price of Realty Income common stock on April 27, 2021) of $48.55. The range of implied per share equity values for Realty Income common stock was compared to the closing share price of Realty Income common stock of $68.86 on April 27, 2021, the trading day immediately preceding the date of the written opinion, dated April 28, 2021.
Implied Relative Value Analysis.
J.P. Morgan compared the results for VEREIT to the results for Realty Income with respect to the public trading multiples and discounted cash flow analyses described above. J.P. Morgan compared the lowest equity value per share for VEREIT to the highest equity value per share for Realty Income to derive the lowest exchange ratio implied by each pair of results. J.P. Morgan also compared the highest equity value per share for VEREIT to the lowest equity value per share for Realty Income to derive the highest exchange ratio implied by each pair of results. The ranges of implied exchange ratios resulting from this analysis were:
Implied Exchange Ratios
Low
High
P/2021E AFFO
0.594x 0.947x
P/2022E AFFO
0.599x 0.971x
Implied Capitalization Rate
0.617x 0.890x
Discounted Cash Flow
0.464x 0.881x
The ranges of implied exchange ratios resulting from the foregoing analysis were compared to (i) the implied exchange ratio of 0.600x on April 27, 2021, the trading day immediately preceding the date of the written opinion, dated April 28, 2021 and (ii) the Exchange Ratio of 0.705x, as contemplated in the Merger Agreement.
Discounted Cash Flow-Based Value Creation Analysis.
J.P. Morgan conducted an analysis of the theoretical value creation to the existing holders of VEREIT common stock that compared the estimated implied equity value of VEREIT common stock on a standalone basis, based on the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above, to the estimated implied equity value of former VEREIT common stockholders’ ownership in the combined company, pro forma for the Merger.
 
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J.P. Morgan calculated the pro forma implied equity value of VEREIT common stock by (1) adding the sum of (a) the implied equity value of VEREIT on a stand-alone basis of approximately $8,701 million, using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis of VEREIT described above, (b) the implied equity value of Realty Income on a stand-alone basis of approximately $22,151 million, using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis of Realty Income described above and (c) the estimated value of Synergies, as reflected in estimates VEREIT’s management provided to J.P. Morgan for use in connection with its analysis, in the aggregate amount of $749 million, (2) subtracting the transaction expenses of $288 million and (3) multiplying such result by the pro forma equity ownership of the combined company by the existing holders of VEREIT common stock of 30.3%. This analysis indicated that the Merger implied pro forma equity value for such holders of $9,476 million, which represents accretion in value of $775 million, or 8.9% compared to the standalone equity value of VEREIT. There can be no assurance, however, that the Synergies, transaction-related expenses and other impacts referred to above will not be substantially greater or less than those estimated by VEREIT’s management and described above.
Miscellaneous.
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of either VEREIT or Realty Income. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary are identical to VEREIT or Realty Income, as applicable. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of VEREIT or Realty Income, as applicable. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to VEREIT and Realty Income, as applicable.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise VEREIT with respect to the Mergers and deliver an opinion to the VEREIT board of directors with respect to the Mergers on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with VEREIT, Realty Income and the industries in which they operate.
VEREIT has agreed to pay J.P. Morgan a fee of up to $38.0 million, $5.0 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder of which is contingent and payable upon the consummation of the Mergers. In addition, VEREIT has agreed to reimburse J.P.
 
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Morgan for certain of its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.
During the two years preceding the date of its opinion, J.P. Morgan and its affiliates have had, and continue to have, commercial or investment banking relationships with each of VEREIT and Realty Income, for which J.P. Morgan and such affiliates have received, or will receive, customary compensation.
Such services during such period have included acting as joint bookrunning manager on VEREIT’s bond offerings in November 2019, June 2020 and November 2020, joint lead arranger and joint bookrunner on Realty Income’s revolving credit facility in August 2019, and joint bookrunning manager on Realty Income’s bond offerings in July 2019, May 2020, October 2020 and December 2020. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 2% of the outstanding common stock of each of VEREIT and Realty Income, and on a fiduciary and proprietary basis, approximately 12.5% of VEREIT’s outstanding preferred stock. During the two years preceding the delivery of J.P. Morgan’s opinion, the aggregate fees received by J.P. Morgan from VEREIT were approximately $2.0 million and the aggregate fees received by J.P. Morgan from Realty Income were approximately $4.0 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of VEREIT or Realty Income for their own accounts or for the accounts of customers and, accordingly, may at any time hold long or short positions in such securities or other financial instruments.
Realty Income Unaudited Prospective Financial Information
Realty Income does not as a matter of course make public long-term projections as to future revenues, earnings or other results, due to, among other reasons, the uncertainty of the underlying assumptions and estimates. Realty Income’s management prepared and provided to the Realty Income board of directors in connection with its evaluation of the Mergers, and to Moelis, its financial advisor, for its use and reliance in connection with its financial analyses and opinion described above under the sections entitled “— Opinion of Realty Income’s Financial Advisor — Opinion of Moelis & Company LLC,” certain nonpublic, internal financial projections regarding Realty Income’s future operations for fiscal years 2021 through 2023 (the “Realty Income Standalone Projections”). As described below, certain of these projections were also provided to VEREIT and to its financial advisor, J.P. Morgan, for its use and reliance in connection with its financial analyses and opinion. For more information, see “— Background of the Mergers,” and “— Opinion of VEREIT’s Financial Advisor — Opinion of J.P. Morgan Securities LLC.” In addition, Realty Income’s management prepared and provided to the Realty Income board of directors in connection with its evaluation of the Mergers and to Moelis, its financial advisor, for use and reliance in connection with its financial analyses and opinion described above under the sections entitled “— Opinion of Realty Income’s Financial Advisor — Opinion of Moelis & Company LLC,” certain nonpublic, internal financial projections regarding VEREIT’s projected future operations for fiscal years 2021 through 2023 for purposes of evaluating VEREIT and the Mergers, which were prepared, in part, based on the VEREIT Management Projections (as hereinafter defined), as adjusted by Realty Income’s management (the “VEREIT Adjusted Standalone Projections,” and together with the Realty Income Standalone Projections, the “Realty Income Management Projections”). In addition. VEREIT provided Realty Income and its advisors the VEREIT Management Projections. For more information, see “— VEREIT Unaudited Prospective Financial Information.” Realty Income has included below a summary of the Realty Income Management Projections for the purpose of providing stockholders and investors access to certain nonpublic information that was furnished to certain parties in connection with the Mergers, and such information may not be appropriate for other purposes, and is not included to influence your decision, if you are a Realty Income stockholder, to vote for the Realty Income Issuance Proposal, or, if you are a VEREIT stockholder, to vote for the VEREIT Merger Proposal or the VEREIT Compensation Proposal.
The Realty Income Management Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines established by the American Institute of Certified Public Accountants for preparation and presentations of financial projections. This information is not fact and should not be relied upon as being indicative of future results, and readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the Realty Income Management
 
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Projections. The Realty Income Management Projections in this section of the joint proxy statement/prospectus have been prepared by, and are the responsibility of, Realty Income’s management. Neither the independent registered public accounting firm of Realty Income, nor any independent accountants, have examined, compiled or performed any procedures with respect to the accompanying prospective financial information and, accordingly, the independent registered accounting firm of Realty Income does not express an opinion or any other form of assurance on such information or its achievability, and assumes no responsibility for, and disclaims any association with, the prospective financial information. The independent registered public accounting firm’s report, contained in the Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference into this joint proxy statement/prospectus, relates to Realty Income’s historical financial information. It does not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared.
While presented with numeric specificity, the Realty Income Management Projections were based on numerous variables and assumptions (including, but not limited to, the assumption that each of Realty Income and VEREIT would make certain property acquisitions in connection with their respective acquisition plans, and other assumptions related to industry performance and general business, economic, market and financial conditions and additional matters specific to Realty Income’s and VEREIT’s businesses, as applicable) that are inherently subjective and uncertain and are beyond the control of Realty Income’s and VEREIT’s management. Important factors that may affect actual results and cause the Realty Income Management Projections to not be achieved include, but are not limited to, risks and uncertainties relating to Realty Income’s and VEREIT’s businesses (including their ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions and other factors described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors,” beginning on pages 41 and 26, respectively. The Realty Income Management Projections also reflect numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Realty Income Management Projections. Accordingly, there can be no assurance that the projected results summarized below will be realized. Realty Income stockholders and VEREIT stockholders are urged to review the most recent SEC filings of Realty Income and VEREIT for a description of the reported and anticipated results of operations and financial condition and capital resources during 2021, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Realty Income’s Annual Report on Form 10-K for the year ended December 31, 2020, and subsequent quarterly reports on Form 10-Q, which are incorporated by reference into this joint proxy statement/prospectus.
The inclusion of a summary of the Realty Income Management Projections in this joint proxy statement/prospectus should not be regarded as an indication that any of Realty Income, VEREIT or their respective officers, directors, affiliates, advisors or other representatives considered the Realty Income Management Projections to necessarily be predictive of actual future events, and the Realty Income Management Projections should not be relied upon as such nor should the information contained in the Realty Income Management Projections be considered appropriate for other purposes. None of Realty Income, VEREIT or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from the Realty Income Management Projections. Realty Income undertakes no obligation to update or otherwise revise or reconcile the Realty Income Management Projections to reflect circumstances existing after the date the Realty Income Management Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Realty Income Management Projections are shown to be in error. Since the Realty Income Management Projections cover multiple years, such information by its nature becomes less predictive with each successive year.
Realty Income and VEREIT may calculate certain non-GAAP financial metrics, including NOI, EBITDA, FFO and AFFO, using different methodologies. Consequently, the financial metrics presented in each company’s prospective financial information disclosures and in the sections of this joint proxy statement/prospectus relating to the opinions of the financial advisors to Realty Income and VEREIT may not be directly comparable to one another.
Realty Income has not made, and does not make, any representation to VEREIT or any stockholder in the Merger Agreement or otherwise, concerning the Realty Income Management Projections or regarding
 
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Realty Income’s ultimate performance compared to the information contained in the Realty Income Management Projections or that the projected results will be achieved. Realty Income urges all stockholders to review Realty Income’s most recent SEC filings for a description of Realty Income’s reported financial results.
Realty Income Standalone Projections
The following is a summary of the unaudited Realty Income Standalone Projections. The Realty Income Standalone Projections were prepared by Realty Income’s management beginning on February 4, 2021, and are based solely on the information available to Realty Income’s management at that time. The Realty Income Standalone Projections were finalized on April 27, 2021.
The Realty Income Standalone Projections were based on numerous variables and assumptions, including the variables and assumptions discussed above, as well as the following material assumptions: (1) rental net operating income as a percentage of total non-reimbursement revenue would equal approximately 98% over the projected periods; (2) Realty Income would make property acquisitions over each projected period at volumes consistent with the run-rate of its current acquisition guidance; and (3) Realty Income would maintain a leverage ratio of approximately 5.5x net debt to EBITDA. The Realty Income Standalone Projections do not give effect to the Mergers or the Spin-Off.
The Realty Income Standalone Projections were provided to the Realty Income board of directors and its financial advisor, Moelis, and to VEREIT and its financial advisor, J.P. Morgan. For more information, see “— Background of the Merger.” The following table presents a summary of the Realty Income Standalone Projections, as prepared by Realty Income’s management, with all figures rounded to the nearest million (other than per share data). VEREIT management directed J.P. Morgan to use and rely upon such prospective financial information for purposes of J.P. Morgan’s opinion and related financial analyses and such use was approved for J.P. Morgan’s use by the VEREIT board of directors.
Year Ended December 31,
2021E
2022E
2023E
(in millions, other than per share data)
Total Revenue
$ 1,823 $ 2,013 $ 2,310
Total Net Operating Income (NOI)(1)
$ 1,714 $ 1,900 $ 2,181
EBITDA(2)
$ 1,624 $ 1,805 $ 2,072
Funds from Operations (FFO)(3)
$ 1,253 $ 1,452 $ 1,689
Adjusted Funds from Operations (AFFO)(4)
$ 1,314 $ 1,462 $ 1,696
FFO / Share(3)(5)
$ 3.29 $ 3.52 $ 3.80
AFFO / Share(4)(6)
$ 3.45 $ 3.55 $ 3.81
Dividends / Share(7)
$ 2.82 $ 2.85 $ 2.95
(1)
Realty Income defines net operating income (“NOI”) as total revenue, excluding any fees from joint ventures, less total property expenses. NOI is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.
(2)
Realty Income defines EBITDA as total NOI less general and administrative expenses, less acquisition-related expenses plus joint-venture related income and fees. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity.
(3)
Realty Income defines Funds from Operations (“FFO”) as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gains on property sales. FFO, which is consistent with the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition, is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.
(4)
Realty Income defines Adjusted Funds from Operations (“AFFO”) as FFO, adjusted to account for,
 
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among other things, debt extinguishment costs, stock-based compensation, the straight-lining of rents, amortization of above and below-market leases and amortization of deferred financing costs.
(5)
Realty Income defines FFO per share (“FFO / Share”) as FFO divided by the weighted average share count of common stock outstanding for the relevant period.
(6)
Realty Income defines AFFO per share (“AFFO / Share”) as AFFO divided by the weighted average share count of common stock outstanding for the relevant period.
(7)
Realty Income defines dividends per share (“Dividends / Share”) as the amount of dividends distributable per share of common stock outstanding for the relevant period. For the six months ended December 31, 2021, Dividends / Share was projected by Realty Income management to be $1.41.
VEREIT Adjusted Standalone Projections
The following is a summary of the VEREIT Adjusted Standalone Projections. For more information regarding the VEREIT Management Projections, see “— VEREIT Unaudited Prospective Financial Information.” The VEREIT Adjusted Standalone Projections were prepared by Realty Income’s management beginning on February 4, 2021, and are based solely on the information available to Realty Income’s management at that time. The VEREIT Adjusted Standalone Projections were finalized on April 27, 2021.
The VEREIT Adjusted Standalone Projections were based on numerous variables and assumptions, including the variables and assumptions discussed above, as well as the following material assumptions: (1) VEREIT would make property acquisitions over the projected periods at volumes consistent with its historical acquisition volumes; (2) VEREIT’s pro rata share of net operating income after debt service related to its joint ventures would be reflected in EBITDA but not in consolidated net operating income; (3) VEREIT’s remaining outstanding preferred stock would be redeemed in the fourth quarter of 2022; and (4) existing mortgages would be refinanced upon maturity with its revolver and issuance in bonds. The VEREIT Adjusted Standalone Projections do not give effect to the Mergers or the Spin-Off.
The VEREIT Adjusted Standalone Projections were provided to the Realty Income board of directors and its financial advisor, Moelis, and to VEREIT and its financial advisor, J.P. Morgan. For more information, see “— Background of the Merger.” The following table presents a summary of the VEREIT Adjusted Standalone Projections, as prepared by Realty Income’s management, with all figures rounded to the nearest million, other than per share data. VEREIT management directed J.P. Morgan to use and rely upon such prospective financial information for purposes of J.P. Morgan’s opinion and related financial analyses and such use was approved for J.P. Morgan’s use by the VEREIT board of directors.
Year Ended December 31,
2021E
2022E
2023E
(in millions, other than per share data)
Total Revenue
$ 1,206 $ 1,238 $ 1,292
Total Net Operating Income (NOI)(1)
$ 1,069 $ 1,098 $ 1,147
EBITDA(2)
$ 1,009 $ 1,033 $ 1,080
Funds from Operations (FFO)(3)
$ 744 $ 781 $ 845
Adjusted Funds from Operations (AFFO)(4)
$ 748 $ 787 $ 851
FFO / Share(3)(5)
$ 3.24 $ 3.36 $ 3.48
AFFO / Share(4)(6)
$ 3.26 $ 3.39 $ 3.50
Dividends / Share(7)
$ 1.93 $ 2.03 $ 2.10(8)
(1)
Realty Income defines net operating income (“NOI”) as total revenue, excluding any fees from joint ventures, less total property expenses. NOI is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.
(2)
Realty Income defines EBITDA as total NOI less general and administrative expenses, less acquisition-related expenses plus joint-venture related income and fees. EBITDA is a non-GAAP financial measure
 
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and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity.
(3)
Realty Income defines Funds from Operations (“FFO”) as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus provisions for impairments of depreciable real estate assets, and reduced by gains on property sales. FFO, which is consistent with NAREIT’s definition, is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.
(4)
Realty Income defines Adjusted Funds from Operations (“AFFO”) as FFO, adjusted to account for, among other things, debt extinguishment costs, stock-based compensation, the straight-lining of rents, amortization of above and below-market leases and amortization of deferred financing costs.
(5)
Realty Income defines FFO per share (“FFO / Share”) as FFO divided by the weighted average share count outstanding of common stock for the relevant period.
(6)
Realty Income defines AFFO per share (“AFFO / Share”) as AFFO divided by the weighted average share count of common stock outstanding for the relevant period.
(7)
Realty Income defines dividends per share (“Dividends / Share”) as the amount of dividends distributable per share of common stock outstanding for the relevant period. For the six months ended December 31, 2021, Dividends / Shares to be paid by VEREIT was projected by Realty Income to be $0.97.
(8)
For purposes of its analyses and opinion, Moelis used an estimate of $2.08 representing Dividends / Shares projected by Realty Income to be paid by VEREIT in the year ending December 31, 2023.
VEREIT Unaudited Prospective Financial Information
While VEREIT has from time to time provided limited financial guidance to investors, VEREIT has not, as a matter of course, otherwise publicly disclosed internal projections as to future performance, earnings or other results beyond the then current annual period due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, in connection with the Mergers, prior to the execution of the Merger Agreement, VEREIT management prepared and provided to the VEREIT board of directors in connection with its evaluation of the Mergers and VEREIT’s financial advisor, J.P. Morgan, for its use and reliance in connection with its financial analyses and opinion, certain nonpublic, internal financial projections regarding VEREIT’s future operations for fiscal years ending December 31, 2021, December 31, 2022 and December 31, 2023 (the “VEREIT Standalone Projections”). As described below, these financial projections were also provided to Realty Income and its financial advisor, Moelis. For more information, see “— Background of the Mergers” and “— Opinion of VEREIT’s Financial Advisor — Opinion of J.P. Morgan Securities LLC.” In addition, VEREIT management prepared and provided to the VEREIT board of directors in connection with its evaluation of the Mergers and VEREIT’s financial advisor, J.P. Morgan, for its use and reliance in connection with its financial analyses and opinion, certain nonpublic, internal financial projections regarding Realty Income’s future operations for fiscal years ending December 31, 2021, December 31, 2022 and December 31, 2023 for purposes of evaluating Realty Income and the Mergers, which were prepared, in part, based on the Realty Income Management Projections, as adjusted by VEREIT management (the “Realty Income Adjusted Standalone Projections,” and together with the VEREIT Standalone Projections, the “VEREIT Management Projections”). Furthermore, Realty Income provided VEREIT and its advisors the Realty Income Management Projections. For more information, see “— Realty Income Unaudited Prospective Financial Information.” VEREIT has included below a summary of the VEREIT Management Projections for the purpose of providing stockholders and investors access to certain nonpublic information that was furnished to J.P. Morgan, Realty Income and Moelis in connection with the Mergers, and such information may not be appropriate for other purposes, and is not included to influence your decision, if you are a VEREIT stockholder, to vote for the VEREIT Merger Proposal or the VEREIT Compensation Proposal, or, if you are a Realty Income stockholder, to vote for the Realty Income Issuance Proposal. The inclusion of this summary should not be regarded as an indication that VEREIT management or anyone who received the VEREIT Management Projections then considered, or now considers, them to be a reliable prediction of future events, and the VEREIT Management Projections should not be relied upon as such. This information is not fact and readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the VEREIT Management Projections.
 
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