REALTY INCOME CORP

Current report

Item 1A: Risk Factors

Current report

You should carefully consider the risks described in "Item 1A, Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024, and the risks described in "Item 1A, Risk Factors" in Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, as our business, financial condition and results of operations could be adversely affected by any of the risks and uncertainties described therein. Except as set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

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You should consider carefully the following risk factors, together with all the other information in this report, including our financial statements and the notes thereto, and in our other public filings with the SEC. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business. This “Risk Factors” section contains references to our “capital stock” and to our “stockholders.” Unless expressly stated otherwise, the references to our “capital stock” represent our common stock and any class or series of preferred stock that may be outstanding from time to time, while the references to our “stockholders” represent holders of our common stock and any class or series of preferred stock that may be outstanding from time to time.

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Risks Related to Our Business and Industry

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In order to grow, we need to continue to acquire investment properties. The acquisition of investment properties may be subject to competitive pressures.

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We face competition in the acquisition and operation of our properties. We expect competition from businesses, individuals, fiduciary accounts and plans, and other entities engaged in real estate investment and financing. This competition may result in a higher cost for properties we wish to purchase.

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We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets.

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We have in the past and may in the future acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership units in an operating partnership that, under certain circumstances, may be exchanged for shares of our common stock, resulting in stockholder dilution. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to restrictions on our ability to dispose of, or refinance the debt on, the acquired properties in order to protect the contributors’ ability to defer recognition of taxable gain. Similarly, we may be required to incur or maintain debt we would otherwise not incur so we can allocate the debt to the contributors to maintain their tax bases. If we take any action that causes taxable gain to be allocated to these contributors, we may be required to indemnify them under tax protection agreements. These restrictions could limit our ability to manage, control, sell or refinance an asset at a time, or on terms, that would be favorable absent such restrictions.

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Real estate ownership is subject to particular conditions that may have a negative impact on our revenue.

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We are subject to all of the inherent risks associated with the ownership of real estate. We face the risk that rental revenue from our properties may be insufficient to cover all corporate operating expenses, debt service payments on indebtedness we incur, and distributions on our capital stock. Additional real estate ownership risks include:

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•Adverse changes in general or local economic conditions;

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•Changes in supply of, or demand for, similar or competing properties;

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•Changes in interest rates and operating expenses (including energy costs, shortages and rationing);

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•Competition within an industry and for our clients;

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•Market rents;

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•Inability to lease properties upon termination of existing leases;

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•Flat leases, leases with below market rental rates or renewal of leases at lower rental rates;

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•Inability to collect rental revenue from our clients due to financial hardship, including bankruptcy;

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•Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate;

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•Uninsured property liability;

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•Property damage or casualty losses, including physical or weather-related damage to properties;

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•Expenditures for capital improvements, including requirements to bring properties into compliance with applicable U.S. and non-U.S. federal, state and local laws and regulations such as the Americans with Disabilities Act of 1990, state and local fire and safety regulations, and building performance standards;

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•The need to periodically renovate and repair our properties;

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•Risks assumed as manager for development or redevelopment projects;

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•The potential risk of functional obsolescence of properties over time;

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•The impacts of extreme weather events or climate change and the varying local, state and federal regulatory landscape impacting properties to address the impacts of climate change; and

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•Acts of God, acts of terrorism and war, and other factors beyond the control of our management.

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Real estate investments are illiquid. We may not be able to acquire or dispose of properties when desired or on favorable terms.

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Real estate investments are illiquid. Our ability to quickly buy, sell or exchange any of our properties, or to contribute our properties to co-investments, including in response to changes in economic and other conditions, will be limited due to U.S. and non-U.S. tax and regulatory regimes and authorities, competition from other owners of properties that are trying to dispose of their properties and the availability of capital, economic and market conditions. Other factors beyond our control, may impose or have the effect of restricting or limiting our ability to sell or contribute properties. For example, our properties and/or properties we may seek to acquire may be subject to put or call rights, rights of first refusal or offer, and other similar agreements which may limit or hinder our ability to buy, sell or exchange a property. No assurances can be given that we will recognize full value, at a price and terms acceptable to us, for any property we sell or contribute. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. Additionally, we have engaged, and expect to continue to engage, in the disposition of properties prior to the maturity date of the related leases or following lease expiration or termination, to help manage and optimize our portfolio and liquidity. No assurances can be given that we will successfully execute these dispositions on favorable terms, or at all, and we may sell a property for less than what we paid, which could result in losses and adversely affect our financial condition and results of operations.

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Our acquisition of additional properties may have a significant effect on our business, liquidity, financial position and/or results of operations.

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Our future success will depend, in part, upon our ability to manage our mergers and acquisitions, and expansion opportunities under prevailing market conditions. We regularly engage in the process of identifying, analyzing, underwriting and negotiating possible transactions. We cannot provide any assurances that we will be successful in consummating future mergers and acquisitions on favorable terms or that we will realize expected cash yields, integration results, operating efficiencies, cost savings, revenue enhancements, synergies or other benefits. We have historically engaged in, and may again in the future engage in strategic acquisitions of operating businesses, in which case we would be subject to risks related to our ability to successfully underwrite such target's businesses effectively and to combine such target's operations with ours in a manner that permits the combined company to achieve operating efficiencies, cost savings, revenues, synergies or other benefits either in the time frame anticipated or at all. Our inability to consummate acquisitions on such terms, our failure to adequately underwrite and identify risks and obligations when acquiring properties or our failure to realize the intended benefits from acquisitions, could have a significant adverse effect on our business, liquidity, financial position and/or results of operations, including as a result of our incurrence of additional indebtedness and related interest expense and our assumption of unforeseen contingent liabilities in connection with completed acquisitions.

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We have made and may continue to make acquisitions of properties (including through the use of alternative lease and acquisition structures such as joint ventures, partnerships, funds and other structures) or engage in other revenue-generating businesses that fall outside our historical focus on wholly owned, freestanding, single-client, net lease retail locations in the U.S. We may be exposed to a variety of new risks by expanding into new investments, property types (e.g., non-retail businesses), geographies, lease and acquisition structures and clients who engage in non-retail businesses. While we have historically predominantly owned and leased commercial properties under long-term, net lease agreements, as we expand into new verticals, the composition of our lease portfolio may include a higher concentration of alternative lease structures, under which we may be primarily responsible for other expenses and liabilities with respect to the property, including property taxes, insurance and maintenance costs. These risks may be enhanced by our limited experience in managing these new investments or activities, property types, geographies, lease and acquisition structures, clients and the laws and/or culture of non-U.S. geographies.

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As a property owner, we may be subject to unknown environmental liabilities.

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Investments in real property can create a potential for environmental liability. We could be subject to liability, including strict liability, by virtue of our ownership interest, for environmental contamination. Laws and regulations governing environmental contamination change and we have been, and in the future may be, subject to liability by virtue of these changes. We can face such liability regardless of our knowledge of the contamination, the timing of the contamination, the cause of the contamination or the party responsible for the contamination of the property.

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There may be environmental conditions associated with our properties of which we are unaware. Our portfolio includes properties leased to operators of convenience stores that sell petroleum-based fuels, operators of oil change and tune-up facilities and operators that use chemicals and other waste products. These facilities and some of our other properties use, or may have used in the past, underground lifts or storage tanks for the storage of petroleum-based or waste products, which could create a potential for the release of hazardous substances. Certain

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-56- of our other properties, including those leased for industrial purposes, may also involve operations or activities that could give rise to environmental liabilities or could have been built using asbestos or other building materials that require owners or operators to undertake special precautions including removal, abatement, training or notices.

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The presence of hazardous substances on a property may adversely affect our client's ability to continue to operate that property or our ability to lease or sell that property and we may incur substantial remediation costs or third-party liability claims. Although our leases generally require our clients to operate in compliance with all applicable federal, state and local environmental laws, ordinances and regulations, and to indemnify us against any environmental liabilities arising from the clients’ activities on the properties, we could nevertheless be subject to liability, including strict liability, by virtue of our ownership interest. There also can be no assurance that our clients could or would satisfy their indemnification obligations under their leases. The discovery of environmental liabilities attached to our properties could have an adverse effect on our results of operations, our financial condition or our ability to make distributions to stockholders and to pay the principal of and interest on our debt securities and other indebtedness.

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While we maintain environmental insurance policies, our insurance could be unavailable or insufficient to address an environmental liability and/or we could be unable to obtain insurance for environmental matters at a reasonable cost or at all. Our clients are generally responsible for, and indemnify us against, liabilities for environmental matters that arise during the lease terms as a result of clients’ activities on the properties. However, we acquire properties with existing leases in place and the indemnities and other lease terms can have different indemnification requirements, including for environmental matters, than what is provided for in our leases that we negotiate directly with clients. It is also possible that one or more of our clients could fail to have sufficient funds to cover any such indemnification or to meet applicable state financial assurance obligations or such environmental contamination may predate our client's lease term, and thus we may still be obligated to pay for any such environmental liabilities.

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We are subject to risks and liabilities in connection with forming and attracting third-party investment in our fund business, investing in new or existing co-investment ventures or funds and managing properties through our fund business or other co-investment ventures.

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As previously publicly disclosed, we formed an open-end, perpetual life private capital vehicle, Realty Income U.S. Core Plus Fund, LP (the “Fund”), and may explore options to form other co-investment ventures, alongside or in addition to the Fund, in the future. Our organizational documents do not limit the amount of available funds that we may invest in the Fund or other co-investment ventures. We currently intend to develop and acquire properties through our new fund business and co-investment ventures, and we may also make investments in other entities at our discretion in the future. However, there can be no assurance that our efforts to grow the Fund will be successful, that we will be able to form other co-investment ventures on the timeline expected, or at all, that we will successfully attract third-party investments or that additional investments in the Fund or other co-investment ventures to develop or acquire properties in the future will be successful, or that the Fund or other such anticipated fund business or other co-investment ventures will improve our consolidated financial position or results of operations. Further, there can be no assurance that we are able to realize value from our existing or future investments.

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The Fund or other co-investment ventures are expected to involve additional risks that we would not otherwise face, including the risks inherent in owning, operating and managing one or more funds or co-investment ventures, risks related to our ability to negotiate third-party investments, such as valuation, operational limitations, management fee structures and other incentive fees, on terms that are beneficial to us, and the inherent conflicts that may exist in allocating investment opportunities effectively between us and the Fund or such other co-investment ventures.

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In addition, the same factors that may impact the valuation of our existing portfolio, as otherwise discussed in this Quarterly Report on Form 10-Q, may also impact the portfolios to be held by the funds or co-investment ventures and could result in other than temporary impairment of our investment and a reduction in fee revenues, if any. Our fund business and co-investment ventures may be subject to some, or all of the risks more fully described in "We may engage in development, speculative development, or expansion projects or invest in new asset classes, which would subject us to additional risks that could negatively impact our operations." Such risks may adversely impact the Fund or our other co-investment ventures' financial position or results of operation.