Good day and thank you for standing by. Welcome to the Realty Income First Quarter 2021 Operating Results Conference Call. At this time all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised today's conference is being recorded. I would now hand the conference over to your speaker today, Julie Hasselwander, Investor Relations at Realty Income. Thank you. Please go ahead.

Thank you all for joining us today for Realty Income's quarter operating results conference call. Discussing our results will be Sumit Roy, President and Chief Executive Officer, and Christie Kelly, Executive Vice President, Chief Financial Officer. During this conference call, we will discuss certain statements that may be considered forward-looking statements under Federal Securities law. The company's actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail the factors that cause such differences in the Company's form 10-Q. We will be observing a two-question limit during the Q&A portion of the call in order to give everyone the opportunity to participate. If you would like to ask additional questions, you may re-enter the queue. I will now turn the call over to our CEO, Sumit Roy.

Thanks, Julie. Welcome, everyone. The continued strength of our business is made possible by the incredible partnerships we have with all stakeholders. I would like to express my gratitude and appreciation to our Realty Income team who continues to effectively execute our strategic objectives while enduring a sustained, remote work environment. As we've announced last week, we are excited to have reached a definitive merger agreement with VEREIT, which would further distance ourselves as a leader in the net lease industry, creating a company with a combined enterprise value of approximately $50 billion. We believe shareholders of both companies will enjoy meaningful value creation through immediate earnings accretion and expanded platform with enhanced size, scale, and diversification, driving further growth opportunities and strategic and financing synergies enhanced by Realty Income's A rated balance sheet and access to well-priced capital. We are very excited about the strategic transaction and look forward to continuing to drive future growth together as a combined enterprise. However, today we will focus on what was a very successful first quarter for Realty Income. Our first quarter results illustrate our ability to grow through various opportunities afforded to us by our size and scale by completing over $1 billion in acquisitions. Notably, in this quarter, we invested approximately $403 million in high-quality real estate in the UK, highlighting the continued strength of our international platform and bringing our total investment in the UK to over $2 billion since the first international acquisitions we closed in 2019. Domestically, we invested $625 million in real estate, including our first-ever acquisition in Hawaii, becoming the first and only REIT to own property in all US states. Our accomplishments during the quarter continue to demonstrate the momentum in our business, highlighting our ability to leverage our size and scale to drive our business forward in pursuit of sustainable growth. On the subject of sustainable growth, our team continues to make tremendous progress through our ESG initiative, as ESG considerations continue to permeate throughout our organization at every level. In April, we published our inaugural Sustainability Report, detailing our company's commitments, goals, and progress to-date with regard to environmental, social, and governance initiatives. I invite all Realty Income stakeholders to share in our dedication to embrace the changing world for the benefit of all those we serve. Additionally, we are excited to share an updated investor presentation to the marketplace. On the homepage of our website, you can find our new deck, which highlights our fundamental business philosophies, key competitive advantages, and plan for future growth. Turning to results for the quarter, our global investment pipeline remains a significant driver of growth for our business. Our business is simple. We seek to acquire high-quality real estate leased to leading operators in economically resilient industries in pursuit of stable and increasing cash flow generation. Our confidence in continuing to grow our platform stems from the quality of our real estate portfolio, which is designed for resiliency through various economic environments. Key to mitigating economic risk, we believe in portfolio diversification by geography, client, industry, and property type as we continue to grow our real estate portfolio. In the first quarter of 2021, we invested over $1 billion in high-quality real estate, and we remain very comfortable with our 2021 acquisition guidance of over $3.25 billion. On a total revenue basis, approximately 39% of total acquisitions during the quarter were leased to investment-grade rated clients, which brings our total investment-grade client exposure for the portfolio to approximately 50%. Aligning with our peers, the weighted average remaining lease term of the assets added to our portfolio during the quarter was 12.6 years. At the quarter's end, the weighted average lease term of our total portfolio was 8.9 years. As of quarter-end, our real estate portfolio includes over 600 clients who operate in 56 different industries. Approximately 84% of our rental revenue comes from our traditional retail properties, while industrial properties generated about 11% of rental revenue. Regarding our retail business, we seek to invest in industries with a service non-discretionary and/or low-price point component, as we believe these characteristics make for economically resilient operations that can effectively compete with e-commerce. Among our acquisitions during the quarter, the largest industry represented was grocery stores. Walgreens remains our largest client at 5.5% of rental revenue, and convenience stores remain our largest industry at 12% of rental revenue. Our investment philosophy primarily focuses on acquiring freestanding single-unit commercial properties leased to best-in-class clients under long-term net lease agreements typically exceeding 10 years. We believe the market is efficient. As such, we've seen a competitive environment for high-quality assets leased to strong operators. Cap rates, as you all know, reflect an aggregation of many factors including fundamental real estate economics, lease term, credit of the client or their sponsor, rent relative to the market, average rent coverage by the operator, and alternative use of the real estate. Accordingly, the quality of our acquisitions is reflected in our average initial cash cap rate during the first quarter of 5.3%. Our size and scale allow us to be highly selective in pursuing investment opportunities that fit our stringent criteria. This quarter, we sourced nearly $20 billion of transaction opportunities, ultimately investing in approximately 5% of the prospects sourced and reviewed. Additionally, our cost of capital allows us to invest accretively even when pursuing the highest quality assets. During the first quarter, our investment spreads relative to our weighted average cost of capital were 115 basis points. The quality of the assets we acquire flows through the entire lifecycle of our portfolio, allowing us to recapture rent on expiring leases and maintain a healthy level of occupancy. During the quarter, we re-leased 54 units, recapturing 103.5% of expiring rent. Since our listing in 1994, we have executed over 3,600 re-leases or sales on expiring leases, recapturing over 100% of rent on those re-leased contracts, and occupancy at quarter-end was 98%. Our size and scale afford us the ability to execute large-scale sale-leaseback transactions, often sourced through existing partnerships with best-in-class clients. The transaction we closed in Hawaii is an excellent example of the sale-leaseback opportunities we can execute. In this instance, we partnered with Par Petroleum to acquire 22 well-located convenience stores for approximately $116 million. All 22 properties fall under one triple net master lease agreement with an initial 15-year lease term. This quarter, about 24% of all acquisitions we closed were executed as sale-leaseback transactions. The merger between Realty Income and VEREIT will enhance our ability to execute large-scale leaseback transactions through expanded capacity to buy in bulk, improving our competitive positioning when competing for portfolio or sale leaseback transactions in the fragmented net lease industry. As we have previously articulated, the ability to buy at wholesale prices and at a discount to the one-off market is a competitive advantage. We are often one of only a handful of buyers for large-scale portfolio transactions, particularly those that would otherwise create untenable client or industry concentration issues for our competitors. Pro forma for the closing of the transaction, we will have approximately $2.5 billion of annualized rental revenue. For every $1 billion of acquisition to a single creditor industry, our exposure to that creditor industry will increase by about 2% compared to around 3.5% based on our current size. By leveraging our size and scale, we continue to effectively execute through our international platform. We have healthy acquisition volume in the UK. Fundamentally, we are replicating our U.S. business strategy, seeking to curate a high-quality real estate portfolio leased to leading operators in economically resilient industries. Our total first-quarter acquisition volume improved to approximately $403 million in international acquisitions in the UK, which brings our total investment volume to more than $2 billion since the first transaction we closed in the UK in 2019. Our international pipeline has accelerated even more quickly than originally anticipated. This quarter's international acquisition volume represents nearly 40% of our total investment volume during the quarter. A figure that is truly incremental to the U.S. business and one that we expect to grow. Now I'll pass it over to Christie to provide financial updates.

Thank you, Sumit. I'll start with some high-level background and then move into our financial results for the quarter. We're the only net lease REIT from the S&P 500, one of the top 10 largest U.S. REITs by enterprise value, and the largest company in the net lease REIT sector. Upon closing our recently announced merger with VEREIT, Realty Income is expected to be the sixth largest REIT in the RMZ in terms of equity market capitalization. Our size and scale, in conjunction with our conservative balance sheets and financial strength, have afforded us a credit rating by the major rating agencies. Our $3 billion multi-currency revolver grants us ample access to well-priced capital that allows us to opportunistically raise permanent long-term capital when the markets are most favorable. During the quarter, we raised approximately $670 million through an overnight equity offering to reduce our financing risk by pre-funding our active global investment pipeline. In January 2021, we completed the early redemption of all $950 million, 3.25% notes due in 2022 to take advantage of attractive borrowing rates in the fixed income market while reducing our near-term financing risks. This redemption was primarily funded through our December issuance of $725 million of senior unsecured notes through a dual-tranche offering of a five-year and 12-year note, which achieved record low U.S. dollar coupon rates in the REIT sector for each of those tenors. As a result, our fixed charge coverage ratio, I'm pleased to report, has hit an all-time high at 5.8 times this quarter. We believe funding our business with approximately two-thirds equity and one-third debt contributes to maintaining a conservative balance sheet. We ended the quarter with a net debt-to-adjusted EBITDA ratio of 5.3 times or 5.2 times on a pro forma basis, adjusting for the annualized impact of acquisitions and dispositions during the quarter. Our near-term debt maturities remain minimal, with only $26 million of debt maturing through year-end 2021, excluding our commercial paper program and borrowings outstanding on our revolving credit facility. At the end of the first quarter, we had full availability of our $3 billion multicurrency revolving credit facility, $675 million outstanding under our $1 billion commercial paper program, and over $184 million of cash on hand, providing approximately $2.5 billion of liquidity to capitalize on our active global investment pipeline. During the quarter, our business generated $0.86 cents of AFFO per share, and we are maintaining our 2021 AFFO per share guidance of $3.44 to $3.49 on a standalone Realty Income basis, unadjusted for the expected merger. Remember, we currently have 37 of our 79 Theater assets on cash accounting. These 37 theaters represent about $25.5 million dollars of annual rent remaining in 2021. We've reserved $33.2 million as allowance for bad debt on these assets, net of $1.9 million of straight-line rent receivables. In total, this $58.7 million translates to approximately $0.15 that is not currently included in AFFO per share guidance. We are encouraged by the recent momentum in the theater space, such as increased nationwide openings and the release of blockbuster films. Most recently, Godzilla versus Kong brought in approximately $49 million during the opening weekend, five days specifically Wednesday to Sunday, and generated more than $390 million in revenue within the first two weeks of its global release, turning a profit of more than $200 million. However, until we are confident these particular theaters can continue to pay us contractual rent, we will continue to recognize revenue for these 37 theaters on a cash basis. As the monthly dividend company, we would be remiss not to discuss the dividends when providing business results. In April, we declared our 610th consecutive monthly dividend, and we now increase the dividend 110 times since our listing on the New York Stock Exchange in 1994. Since 1994, we have increased the dividend every year, growing dividends per share at a compound average annual growth rate of approximately 4.4%. As a result of increasing the dividend every year for the past 25 consecutive years, we are proud to be a member of the exclusive S&P 500 Dividend Aristocrats Index, which consists of only three REITs and 65 companies overall. I would now like to hand our call back to Sumit.

Thank you, Christie. Our first quarter results continue to highlight the incredible opportunities afforded to us by our size and scale, which uniquely position us to be the global consolidator in a highly fragmented net leased space. We believe the merger will enhance our positioning to be just that. Our positive results, as well as our powerful business momentum and strong outlook, energize our talented team to continue expanding our existing verticals while finding new opportunities through which the business can grow. At this time, I'd like to open it up for questions. Operator?

Your first question comes from Greg McGinniss from Scotiabank.

Hey Sumit. The VEREIT acquisition has dramatically increased your exposure to casual dining tenants to 7% of ABR, which is an industry where other REITs seem to be limiting exposure. What makes you comfortable with acquiring all those tenants?

That's certainly an area that we spent a fair amount of time focusing on, Greg, when we were looking at VEREIT. The biggest contributor to that 7% is Red Lobster. Looking at where Red Lobster is today versus even where it was a year ago gave us a fair amount of confidence that Red Lobster has turned the corner from being privately equity owned to being owned by a company out of Thailand, Thai Union. The credit enhancements that it achieved, the results that it is now posting, and the fact that it paid 100% of the rent in the fourth quarter to VEREIT gave us confidence that it's turned the corner. Being vertically integrated with an organization such as Thai Union made us feel like 7% is a number that we can live with. But the goal here, Greg, will be over time to continue to reduce that, just like we did with our casual dining concept which used to be in the high single digits. Today, it represents less than 3% of our overall registry. That will be the goal with pro forma being up to 7%, continuing to reduce that back down into the low single digits.

Okay, thank you. Second question, given less concern about tenant concentration issues following the VEREIT merger, are there portfolios in the marketplace today that you now feel more comfortable pursuing? Are those types of portfolios already considered in acquisition guidance? And then how much volume do you think those types of portfolios could potentially contribute to acquisition each year?

Yeah, there's a bunch of questions you've asked there, Greg. We've talked about how pro forma for this acquisition, it allows us to pursue larger transactions. I will say that you don't have multibillion-dollar transactions coming in every week, but when they do, they can be a step growth opportunity, just like a consolidation is in our industry. Given our size today, doing a multibillion-dollar transaction, we were somewhat constrained, pursuing that even if it checked all the other boxes. You feel constrained just given how much of your portfolio concentration gets impacted by a single tenant. But once you start to increase your platform, the ability to absorb larger transactions when they present themselves certainly enhances. There have been opportunities where we were somewhat constrained to pursue transactions, even in the past 12 months, because of our portfolio concentration. But those types of constraints do get alleviated the larger your platform becomes. That enhances our position to pursue transactions that we were somewhat constrained to do so in our current size and scale.

Thanks, Sumit.

Your next question comes from Katy McConnell from Citi.

Hi there.

Hi Katy.

Could you update us on the portfolio of office assets that you plan to spin off with the merger? Now that the deal is out in the open, what have you been able to gauge in terms of buyer interest in your ability to potentially sell those off instead?

Katy, it's been three business days since we made the announcement. Thank you for asking the question. We've been pleasantly surprised by the inbound interest. We're still in the process of collecting those inquiries and trying to figure out what's real from what's not. We have been very clear that the path that we control is the spin-off path. To answer your question more directly, it's essentially all of our office assets along with the vast majority of the VEREIT office assets outside of the six assets that are constrained by a CMBS pool, which is cross-collateralized across multiple asset types. Our goal would be to essentially spin off all of the remaining assets, which is right around 97 properties, $182 million to $183 million in rent, weighted average lease term circa 4, 76% to 77% investment grade tenants. That's the makeup of the portfolio. As we expected, once we announced, we've received inbound inquiries, but it is still too early to tell what's real from what's not. We are going to continue down the path that we control. If something were to happen in the meantime, that's great, but it's too early to tell.

Okay, I appreciate that color. Can you talk a little more about the decision to just enter the Hawaii market now? Whether you want to increase the scale there more meaningfully or potentially pursue any industrial opportunities?

It's not something we intentionally pursued in this particular quarter. Two CEOs ago, Tom was from Hawaii. The inside joke was how come we don't have any properties there? Now, Jonathan Png is our resident Hawaiian, and the joke has continued. It was simply the function of the right opportunity presenting itself at the right time with a partner that we liked. We underwrote their business, their performance, and their locations. It just happened to close in the first quarter. There wasn't any grand design. We've been very opportunistic, very lucky in some ways, and we're very grateful to be able to say we are in 50 states now. But that wasn't as important as finding the right transaction. This particular transaction allowed us to enter Hawaii while checking all the boxes.

Okay, great, thank you.

Your next question comes from Ronald Kamdem from Morgan Stanley.

Hey, good afternoon, just two quick ones for me. The first is just on tenant health in general in the portfolio. Maybe if you could provide some updated thoughts on how you're feeling today versus six and 12 months ago? And then digging in a little bit deeper into some of the theaters and looking at the collection rates there, maybe some insights as the collection rate may have been a little lower than what we would have expected. Maybe what's going on there with the theaters?

Sure, Ronald, thank you for your question. Look, our watchlist is around 5%. The biggest contributor to that watchlist is the theater business, and our collection is largely a function of the collection within that part of the business. If you ask me how we feel about the theater business today versus when we first entered the pandemic, we feel a lot better today than we did then. There have been actual examples here in the U.S. as we've seen in China and Japan, which lend credence to our hypothesis that the theater business was going to bounce back once the contents started to be released and social distancing norms were relaxed. That hypothesis has largely proven true. We saw Godzilla versus Kong generate around $49 million within the first five days of release. We've been tracking its performance since, and it's close to $390 million globally. The budget was around $180 million, so they turned a solid profit. AMC is largely open in the U.S., while Regal aims to open towards mid to late May. We support their operations until we believe in their operating model as a viable business model going forward. Hence our willingness to lend grace considering our strong balance sheet.

Ronald, this is Christie. The only thing I would add to Sumit's comments is just a reminder to the team that's on the line is that, our theater portfolio is really high quality. There's over 80% of the theaters in our portfolio that are in the top two core piles of each of the operator's footprint. AMC is open, but at limited capacity right now, and Regal will be opening towards the end of May. We'll remain cautiously optimistic about improvement in collection rates. Our collection rate has stabilized from year-end, with about 10% collection throughout the quarter, gaining momentum toward 16% as we move forward.

Great, that's helpful. My second question was just going back to the VEREIT merger. Can you help us understand how the quality of your real estate, specifically the retail assets, compares to those of VEREIT?

Yeah, Ronald. We've got 3,500 properties that have been constructed over the last 11 years since we became public. Clearly, there are areas of the portfolio, including those we've touched on, that has turned the corner. But we were pleasantly surprised when we underwrote all of VEREIT's assets, that the quality was there, and that their retail and industrial portfolio was trading at a discount to our inherent value. Moreover, they complement our focus. The convenience store exposure allows us to reduce our grocery allocation and significantly lower our theater exposure. We're surprised on the upside, which stood as a key reason for moving forward with this merger. We're grateful for the partnership with Glenn and his team to achieve a win-win transaction.

Super helpful. Thank you.

Your next question comes from Haendel St. Juste from Mizuho.

Hey, good afternoon out there.

Hi Haendel.

Can you talk about the acquisition capital a bit more in the first quarter, the low 5% of all 4.9% in the UK? I believe last quarter, you suggested that cap rates this year would be similar to 2020 levels, maybe closer to 6%, depending on mix? Can you talk about how increased competition from buyers is playing on the pricing for the assets you're looking at? Is it specific to any subsector industry, and should we expect this low 5% cap rate to continue in 2021?

Quarter-over-quarter, these numbers vary largely due to the mix. If you're heavily industrial-focused, cap rates are on the lower end, and vice versa for retail. The UK cap rate was driven by two industrial transactions with a strong seller we have a good relationship with, one in Greater London and another in Birmingham. If we excluded those two, our cap rate would be closer to where the last quarter was at 5.6%-5.7%. Expecting the cap rate we posted in Q1 to be the new norm is optimistic, as trends vary quarterly. I believe we should average in the mid 5s with possibilities for higher yields, but driven by the mix and asset type. We're excited about sourcing opportunities and are ready for the challenge, showing our capacity for consistent deals quarter after quarter.

No, that's perfect. Thank you for the color. Can you also talk about whether you are more willing to consider industries that you may have put aside over the past year in the aftermath of COVID? Maybe automotive, entertainment, or experiential segments?

Haendel, one of the things that distinguish this team is our humility. If data is changing, we'll update our approaches. What we avoid is over-indexing to immediate trends. For instance, we didn't eliminate theater and fitness businesses due to short-term losses. We're interested in long-term underwriting – simple near-term trends won't sway us away, but the evolution of the market can shift our strategies. Stepping back a bit, there's value in the office sector now, despite our plan to spin off office assets because we wish to provide the best foundation for future potentials.

Any perspective on the casinos? I know it's been asked in the past, but is there any different view today?

I’m not going to talk about specifics, Haendel. I prefer to stay away from specifics.

Appreciate the time.

Your next question comes from Caitlin Burrows from Goldman Sachs.

Hi, guys, hi there. Sumit, you gave some details to explain the relatively lower cap rate in the UK this quarter. But there's also the associated tax burden in the UK which impacted numbers in the quarter. Can you go through why the UK investment activity makes sense big picture and how we should think about the associated tax expense going forward?

Yes, Caitlin, that’s a very good question. We went into the UK recognizing the associated tax liability. When underwriting transactions, we consider what is our effective tax rate? Comparing it to the cost of capital. It made a lot of sense, and by and large, I think we’re tracking to the effective rates shared two years ago. However, there’s a proposed change that would increase the statutory tax rate in the UK. We’re exploring restructuring our Realty Income Limited legal entity that could save us 400 basis points in effective tax rates. So, we do expect tax payments in the UK to trend upwards but not as rapidly as in the past three years. We continue to refine how to finance transactions to ensure we’re competitive.

Okay. Maybe switching topics, the guidance assumes same-store revenue improves through the year. Commentary on theater collections suggests an uptrend, but the AFFO guidance implies little growth from the 1Q run rate. Why is that? Is the AFFO guidance conservative?

That's an opinion. The collection from cash accounting on our 37 theater assets isn't reflected in the current guidance. We want to wait for those collections to stabilize before adjusting our guidance. The merger conditions also contribute to keeping guidance the same. When we reach the end of Q2, we will revisit earnings to provide additional insights.

Okay, thank you.

Thanks, Caitlin.

Your next question comes from Rob Stevenson from Janney.

Good afternoon. You currently have as of March 31, 131 vacant assets and presumably you'll have additional assets become vacant over the year. Given the size of the VEREIT transaction and the integration process, how do you think about your team's bandwidth versus selling a greater percentage of vacant assets rather than releasing them?

We are comfortable executing exactly the same business model that we have. If you wanted to run a business with 100% occupancy, we could do that, but it is not the value-optimizing solution. We share with the market that our real estate operations team is the largest in the company, ensuring we can execute what we want. We previously stated that 98% is an optimal occupancy level because we can relocate assets effectively by recapturing high rent on positions that make sense to pursue. We are comfortable with this approach, even if it means holding onto more vacant assets in the interim.

And then second question, how are you thinking about the development business going forward? It's been mostly non-retail as of late. Is there a chance it could grow in importance for you guys?

We hope to grow that business, as it's about $200 million today, not large compared to our balance sheet. However, repositioning allows our existing relationships to provide capital sources that can be converted into valuable outcomes, and we see potential to grow this significantly, contributing to our value creation in the long term. Our team has expanded, and we will seek to enhance our development value as we grow.

Thanks Rob.

Your next question comes from Brent Dilts from UBS.

Hey guys. Just Sumit, following up on your comment earlier about the $4 billion in acquisitions. Are you seeing anything in the market that could call for a slowdown in transaction activity in the near term?

We are very optimistic. We are not seeing anything that translates to volume sourcing. Our pipeline shows solid deals, and we’re excited about meeting and potentially exceeding our acquisition targets this year. Our optimism persists.

Could you talk about what you're seeing for troubled tenant asset classes as reopening plays out and rent collection rates there improve?

We've seen trades on health and fitness, especially with established operators, and some vacant assets in theaters selling as optimism grows. While we don't focus on that area, there is interest indicating a positive shift in sentiment.

Your next question comes from Wes Golladay from Baird.

Hi, everyone. I’ve got a few quick questions for you. Looking at the industrial same-store revenue, it was negative last year and into this year. Do you expect that to reflect positively later this year?

Yes, it is driven by one asset where we miscalculated the CPI adjustment. We're correcting that, and thus, we're expecting same-store revenues to recover as further growth occurs in our industrial leases, which have better growth built-in than retail leases.

Got it. Can you provide some insight on potential capital structure post-office spin-off?

We are focused on maintaining our A3/A- rating. We've managed to set ratings as well as outlook post-announcement last week. Pro forma for the spin-off, we will maintain leverage metrics comparable to where we are today.

Got it. Thank you.

Your next question comes from Linda Tsai from Jeffries.

Hi, Christie. Hi, Sumit. Following up on the comment regarding the $4 billion in acquisitions, do you see the current 5% executed to 20 billion sourced ratio remaining post-merger?

We hope it will enhance. VEREIT focuses differently than we do, so leveraging their platform can bring new opportunities. The past few quarters’ numbers are in the 4% to 7% or 8% range, which we can sustain, and we've expanded our UK presence to accommodate growth.

Thanks. As for the G&A at about 4.5%, how low could that go over the next few years post-merger?

We talked about G&A synergies in the $45 million to $50 million range and cash synergies in the $35 million to $40 million range. That suggests a reduction in G&A as scale increases. However, how much it declines depends on newly established swim lanes. I can't provide precise predictions, but I expect improvement as we refine our operations.

Good afternoon. Outside of office, how much of the VEREIT portfolio do you view as a target for capital recycling as you manage the portfolio?

I can't give a precise answer. The quality of VEREIT's retail and industrial assets reassured us that they will be great additions to our portfolio. Increasing our capital recycling efforts will depend more on the size of the platform than specific recycling due to the acquisition.

Your next question comes from Joshua Dennerlein from Bank of America.

Hey, Christie. I hope you're doing well. How do you think about Europe now that you are a larger entity? Are you thinking of expanding into the rest of Europe?

What we planned on doing as a standalone company hasn’t changed with the merger. Our interest in other geographies is driven by our own underwriting and market maturity. Our expanded platform will allow more capabilities and potentially lead us to explore new markets when appropriate.

Your next question comes from Harsh Hemnani from Green Street.

I'm curious about your growth in development versus acquisitions in the first quarter. Can you give insights on the spread over your cost of capital and what you aim for on development long-term?

It's contingent upon where development dollars go, primarily aimed at industrial assets, we will generally see a significant spread as projects complete. This results in a win-win situation for us, and potential gains exceeding 100 basis points. However, the output back to where the capital goes will define the sustainability of the mixed results, and we will continue to adapt to how it aligns with our strategic goals.

This concludes the question-and-answer portion of Realty Income's conference call. I will now turn the call over to Sumit Roy for concluding remarks.

Thank you all for joining us today. We look forward to speaking with each of you soon. Thank you very much, and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.