Superior Stability and Dividend Growth

ACQUISITION CAP RATE TO ACHIEVE 150 BPS SPREAD REALTY INCOME Philosophical Capital Allocation Mindset: Utilizing Low Cost of Capital to Assemble Highest-Quality Portfolio in Marketplace 8.0% 7.5% 7.0% "HIGH YIELD" INVESTMENT CHARACTERISTICS (HIGHER CAP RATES): Above-market rents / financially-engineered cap rates Poor credit or limited credit availability and track record Thin industry-specific rent coverage Poor real estate (low residual value) Short lease terms Volatile industries Lower long-term IRR 6.5% 6.0% 5.5% Lower cost of capital allows Realty Income to invest in higher quality opportunities to derive the same spread 5.0% 3.50% 3.75% 4.00% Note: Cost of capital information uses illustrative assumptions only. 4.25% 4.50% 4.75% "HIGH QUALITY" INVESTMENT CHARACTERISTICS (LOWER CAP RATES): • • . • At- or below-market rents Strong credit / proven sponsors & clients Above-average rent coverage Flexible alternative use • Long lease terms Stable industries Higher long-term IRR 5.00% NOMINAL 1ST-YEAR WACC Net lease peers with higher cost of capital than Realty Income cannot "afford" to pursue higher-quality opportunities Higher cost of capital forces companies to invest in riskier investment opportunities to derive 150 bps of spread 5.25% 5.50% 5.75% 6.00% 6.25% 28

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