Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company is party to various legal proceedings and claims which it believes are routine in nature and incidental to the operation of its business. Although we do not expect that these legal proceedings and claims will have a material adverse effect on our financial position, liquidity or results of operations, an adverse result in one or more matters could negatively affect our results in the period in which they occur, or in future periods.

As previously disclosed, on April 29, 2021, the Company entered into the Merger Agreement with Realty Income, Merger Sub 1 and Merger Sub 2. Pursuant to the terms and conditions of the Merger Agreement, upon the closing, (i) Merger Sub 2 will be merged with and into the OP, with the OP continuing as the surviving entity and, immediately following the Partnership Merger, (ii) VEREIT, Inc. will be merged with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation.

In connection with the proposed Mergers, Realty Income filed with the SEC a registration statement on Form S-4 containing a joint proxy statement/prospectus, as amended, and the Company filed a definitive proxy statement and Realty Income filed a definitive proxy statement/prospectus with the SEC, each dated June 29, 2021 (collectively, the “joint proxy statement/prospectus”), which the Company and Realty Income first mailed to their respective shareholders and stockholders on or about July 9, 2021.

Following the announcement of the Merger Agreement, purported stockholders of the Company filed twelve lawsuits challenging disclosures related to the Merger (the “Complaints”). The Complaints are Stein v. VEREIT, Inc., et al., Case No. 1:21-cv-01409 (D. Md. June 7, 2021) (the “Stein Complaint”); Bowles v. VEREIT, Inc., et al., Case No. 1:21-cv-00845 (D. Del. June 10, 2021) (the “Bowles Complaint”); Leach v. VEREIT, Inc., et al., Case No. 1:21-cv-05270 (S.D.N.Y. June 14, 2021) (the “Leach Complaint”); Jenkins v. VEREIT, Inc., et al., Case No. 1:21-cv-05286 (S.D.N.Y. June 15, 2021) (the “Jenkins Complaint”); Tacka v. VEREIT, Inc., et al., Case No. 1:21-cv-05357 (S.D.N.Y. June 17, 2021) (the “Tacka Complaint”); Congregation Zichron Moishe v. VEREIT, Inc., et al., Case No. 1:21-cv-01729 (D. Colo. June 24, 2021) (the “Congregation Zichron Moishe Complaint”); Mishra v. VEREIT, Inc., et al., Case No. 1:21-cv-01758 (D. Colo. June 28, 2021) (the “Mishra Complaint”); Walker v. VEREIT, Inc., et al., Case No. 1:21-cv-01791 (D. Colo. July 1, 2021) (the “Walker Complaint”); Ciccotelli v. VEREIT, Inc., et al., Case No. 2:21-cv-02983 (E.D. Pa. July 2, 2021) (the “Ciccotelli Complaint”); Upton v. VEREIT, Inc., et al., Case No. 1:21-cv-06129 (S.D.N.Y. July 16, 2021) (the “Upton Complaint”); Matten v. VEREIT, Inc., et al., Case No. 1:21-cv-06212 (S.D.N.Y. July 21, 2021) (the “Matten Complaint”); and Halberstam v. VEREIT, Inc., et al., Case No. 1:21-cv-02000 (D. Colo. July 23, 2021 (the “Halberstam Complaint”).

The Stein, Leach, Tacka, Matten and Halberstam Complaints name VEREIT, Inc. and the members of the Company’s board of directors as defendants. The Congregation Zichron Moishe, Mishra, Walker and Upton Complaints name VEREIT, Inc., the OP, and the members of the Company’s board of directors as defendants. The Bowles and Ciccotelli Complaints name VEREIT, Inc., the members of the Company’s board of directors, OP, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants. The Jenkins Complaint names VEREIT, Inc., the members of the Company’s board of directors, Realty Income, Merger Sub 1 and Merger Sub 2 as defendants.

Each of the Complaints alleges that VEREIT, Inc. and the members of the Company’s board of directors violated Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-9 promulgated thereunder by preparing and disseminating a registration statement that misstates or omits certain allegedly material information. Each of the Complaints also alleges that the members of the Company’s board of directors violated Section 20(a) of the Exchange Act by causing the Company to disseminate a misleading registration statement. The Bowles and Ciccotelli Complaints further allege that Realty Income and the OP violated Section 20(a) of the Exchange Act. The Mishra, Congregation Zichron Moishe, Walker and Upton Complaints further allege that Realty Income and the OP violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Jenkins Complaint further alleges that Realty Income, Merger Sub 1 and Merger Sub 2 violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, that the members of the Company’s board of directors have violated the fiduciary duties they owe towards the Company’s stockholders by causing the Company to enter into the Merger at an unfair price and through an unfair process, and that VEREIT, Inc., Realty Income, Merger Sub 1 and Merger Sub 2 aided and abetted this alleged breach of fiduciary duty.

Each of the Complaints 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 Company and all of the individual defendants named in the Complaints believe that the claims asserted in the Complaints are entirely without merit. While the defendants believe that the disclosures set forth in the joint proxy statement/prospectus comply fully with applicable law, to moot plaintiffs’ disclosure claims and to avoid nuisance, potential expense and delay, on July 30, 2021, the Company voluntarily supplemented the joint proxy statement/prospectus with certain disclosures. In light of these additional disclosures, counsel for the plaintiffs who filed the Complaints agreed to dismiss, or seek authority from their clients to dismiss, their respective actions. Nothing in the Company’s supplemental disclosures will be deemed an admission of the legal necessity or materiality under applicable law of any of the disclosures set forth therein or of the existence of any misrepresentations or omissions in the joint proxy statement/prospectus. To the contrary, the Company denies all allegations in the Complaints that any additional disclosure was or is required. Between August 2, 2021 and October 27, 2021, plaintiffs’ counsel in all of the cases voluntarily dismissed their respective complaints.

Purchase Commitments

In the normal course of business, the Company enters into various types of commitments to purchase real estate properties. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated to purchase the properties.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-

compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.