Record Operating Results For Second Quarter And Six Months Announced By Realty Income

CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2013 and 2012
(dollars in thousands, except per share amounts - unaudited)

Three months
Ended 6/30/13

Three months
Ended 6/30/12

Six months
Ended 6/30/13

Six months
Ended 6/30/12

REVENUE

Rental

$     182,354

$     112,528

$     352,104

$    224,020

Other

1,965

605

3,356

858

     Total revenue

184,319

113,133

355,460

224,878

EXPENSES

Depreciation and amortization

77,698

34,742

147,280

69,093

Interest

39,100

28,806

80,567

57,758

General and administrative

12,075

9,273

23,688

18,440

Property

3,283

1,746

6,899

3,668

Income taxes

722

405

1,393

810

Merger-related costs

605

--

12,635

--

Total expenses

133,483

74,972

272,462

149,769

Income from continuing operations

50,836

38,161

82,998

75,109

Income from discontinued operations

3,911

5,246

43,562

7,562

Net income

54,747

43,407

126,560

82,671

Net income attributable to noncontrolling interests

(77)

--

(86)

--

Net income attributable to the Company

54,670

43,407

126,474

82,671

Preferred stock dividends

(10,482)

(10,457)

(20,965)

(19,953)

Excess of redemption value over carrying value of preferred shares redeemed

--

--

--

(3,696)

Net income available to common stockholders

$      44,188

$      32,950

$     105,509

$       59,022

Funds from operations available to common stockholders (FFO)

$    118,547

$      65,167

$     211,435

$     125,863

Normalized funds from operations available to common stockholders (normalized FFO)

$    119,152

$      65,167

$     224,070

$     125,863

Adjusted funds from operations available to common stockholders (AFFO)

$    115,564

$      66,499

$     219,521

$     132,793

Per share information for common stockholders:

Income from continuing operations, basic and diluted

$          0.21

$          0.21

$          0.34

$          0.39

Net income, basic and diluted

$          0.23

$          0.25

$          0.57

$          0.44

FFO:

           Basic

$          0.61

$          0.49

$          1.15

$ 0.95

           Diluted

$          0.60

$          0.49

$          1.15

$ 0.95

Normalized FFO, basic and diluted

$          0.61

$          0.49

$          1.22

$          0.95

AFFO, basic and diluted

$          0.59

$          0.50

$          1.19

$          1.00

Cash dividends paid per common share

$        0.544

$        0.437

$        1.057

$        0.874

FUNDS FROM OPERATIONS (FFO)
(dollars in thousands, except per share amounts)

Three Months

Ended 6/30/13

Three Months

Ended 6/30/12

Six Months

Ended 6/30/13

Six Months

Ended 6/30/12

Net income available to common stockholders

$        44,188

$        32,950

$      105,509

$       59,022

Depreciation and amortization:

Continuing operations

77,698

34,742

147,280

69,093

Discontinued operations

196

896

520

1,848

Depreciation allocated to noncontrolling interest

(220)

--

(395)

--

Depreciation of furniture, fixtures & equipment

(67)

(67)

(127)

(135)

Provisions for impairment on investment properties

2,496

--

2,952

--

Gain on sales of investment properties, discontinued operations

(5,744)

(3,354)

(44,304)

(3,965)

FFO available to common stockholders

118,547

65,167

211,435

125,863

Merger-related costs

605

--

12,635

--

Normalized FFO available to common stockholders

$      119,152

$        65,167

$     224,070

$     125,863

FFO per common share:

    Basic

$           0.61

$           0.49

$          1.15

$          0.95

    Diluted

$           0.60

$           0.49

$          1.15

$          0.95

Normalized FFO per common share, basic and diluted

$           0.61

$           0.49

$          1.22

$          0.95

Dividends paid to common stockholders

$      106,692

$       58,360

$     191,669

$     116,552

Normalized FFO in excess of dividends paid to common stockholders

$        12,460

$         6,807

$       32,401

$        9,311

Weighted average number of common shares used for computation per share:

Basic

195,574,014

132,592,939

183,714,191

132,643,698

Diluted

196,099,610

132,828,540

184,165,700

132,785,213

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust's definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on sales of investment properties and extraordinary items. We define normalized FFO, a non-GAAP measure, as FFO excluding the ARCT merger-related costs.

ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(dollars in thousands, except per share amounts)

Most companies in our industry use a similar measurement to AFFO, but they may use the term "CAD" (for Cash Available for Distribution) or "FAD" (for Funds Available for Distribution).

Three Months

Ended 6/30/13

Three Months

Ended 6/30/12

Six Months

Ended 6/30/13

Six Months

Ended 6/30/12

Net income available to common stockholders

$       44,188

$       32,950

$      105,509

$       59,022

Cumulative adjustments to calculate normalized FFO⁽¹⁾

74,964

32,217

118,561

66,841

Normalized FFO available to common stockholders

119,152

65,167

224,070

125,863

Excess of redemption value over carrying value of preferred share redemption

--

--

--

3,696

Amortization of share-based compensation

3,653

2,593

7,498

5,550

Amortization of deferred financing costs⁽²⁾

1,015

609

2,021

1,226

Amortization of net mortgage premiums

(2,494)

(71)

(4,441)

(168)

(Gain) loss on interest rate swaps

(1,738)

40

(1,286)

53

Capitalized leasing costs and commissions

(361)

(431)

(774)

(698)

Capitalized building improvements

(1,255)

(914)

(2,520)

(1,707)

Other adjustments⁽³⁾

(2,408)

(494)

(5,047)

(1,022)

Total AFFO available to common stockholders

$     115,564

$       66,499

$      219,521

$     132,793

AFFO per common share, basic and diluted

$           0.59

$           0.50

$            1.19

$           1.00

Dividends paid to common stockholders

$     106,692

$       58,360

$      191,669

$     116,552

AFFO in excess of dividends paid to common stockholders

$         8,872

$         8,139

$        27,852

$       16,241

⁽¹⁾

See FFO and normalized FFO calculation above for reconciling items.

⁽²⁾

Includes the amortization of costs incurred and capitalized when our notes were issued in March 2003, November 2003, March 2005, September 2005, September 2006, September 2007, June 2010, June 2011 and October 2012. Additionally, this includes the amortization of deferred financing costs incurred and capitalized in connection with our assumption of the mortgages payable and the issuance of our term loan. The deferred financing costs are being amortized over the lives of the respective mortgages and term loan. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

⁽³⁾

Includes straight-line rent revenue, and the amortization of above and below-market leases.

HISTORICAL FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)

For the three months ended June 30,

2013

2012

2011

2010

2009

Net income available to common stockholders

$        44,188

$        32,950

$        33,185

$        24,985

$         26,497

Depreciation and amortization

77,607

35,571

29,000

23,469

22,922

Provisions for impairment on Realty Income investment properties

2,496

--

10

53

--

Gain on sales of investment properties

(5,744)

(3,354)

(1,251)

(1,663)

(2,239)

FFO

118,547

65,167

60,944

46,844

47,180

Merger-related costs

605

--

--

--

--

Normalized FFO

$      119,152

$        65,167

$       60,944

$        46,844

$        47,180

Normalized FFO per diluted share

$            0.61

$            0.49

$            0.48

$            0.45

$             0.46

AFFO

$      115,564

$        66,499

$        62,370

$        47,730

$         47,943

AFFO per diluted share

$            0.59

$            0.50

$            0.49

$            0.46

$             0.46

Cash dividends paid per share

$          0.544

$          0.437

$          0.434

$          0.430

$           0.426

Weighted average diluted shares outstanding

196,099,610

132,828,540

126,202,047

103,765,828

103,450,457

For the six months ended June 30,

2013

2012

2011

2010

2009

Net income available to common stockholders

$      105,509

$        59,022

$        63,120

$        49,127

$         50,518

Depreciation and amortization

147,278

70,806

55,791

46,682

45,833

Provisions for impairment on Realty Income investment properties

2,952

--

210

87

--

Gain on sales of investment properties

(44,304)

(3,965)

(1,379)

(2,366)

(2,436)

FFO

211,435

125,863

117,742

93,530

93,915

Merger-related costs

12,635

--

--

--

--

Normalized FFO

$      224,070

$      125,863

$      117,742

$        93,530

$         93,915

Normalized FFO per diluted share

$            1.22

$            0.95

$            0.96

$            0.90

$             0.91

AFFO

$      219,521

$      132,793

$      120,610

$        95,344

$         95,619

AFFO per diluted share

$            1.19

$            1.00

$            0.98

$            0.92

$             0.92

Cash dividends paid per share

$          1.057

$          0.874

$          0.866

$          0.859

$           0.851

Weighted average diluted shares outstanding

184,165,700

132,785,213

122,691,418

103,778,609

103,479,897

CONSOLIDATED BALANCE SHEETS
As of June 30, 2013 and December 31, 2012
(dollars in thousands)

2013

2012

(unaudited)

ASSETS

Real estate, at cost:

      Land

$  2,539,628

$   1,999,820

      Buildings and improvements

6,672,354

3,920,865

      Total real estate, at cost

9,211,982

5,920,685

      Less accumulated depreciation and amortization

(998,079)

(897,767)

      Net real estate held for investment

8,213,903

5,022,918

      Real estate held for sale, net

16,808

19,219

            Net real estate

8,230,711

5,042,137

Cash and cash equivalents

22,575

5,248

Accounts receivable, net

27,507

21,659

Acquired lease intangible assets, net

972,049

242,125

Goodwill

15,834

16,945

Other assets, net

146,857

115,249

      Total assets

$  9,415,533

$  5,443,363

LIABILITIES AND EQUITY

Distributions payable

$       39,280

$       23,745

Accounts payable and accrued expenses

77,411

70,426

Acquired lease intangible liabilities, net

116,381

26,471

Other liabilities

29,266

26,059

Lines of credit payable

701,000

158,000

Mortgages payable, net

827,109

175,868

Term loan

70,000

--

Notes payable

2,450,000

2,550,000

      Total liabilities

4,310,447

3,030,569

Stockholders' equity:

Preferred stock and paid in capital

609,363

609,363

Common stock and paid in capital

5,329,715

2,572,092

Distributions in excess of net income

(870,199)

(768,661)

      Total stockholders' equity

5,068,879

2,412,794

Noncontrolling interests

36,207

--

      Total equity

5,105,086

2,412,794

      Total liabilities and equity

$ 9,415,533

$  5,443,363

Realty Income Performance vs. Major Stock Indices

Equity

Dow Jones

NASDAQ

       Realty Income      

         REIT Index(1)       

  Industrial Average 

            S&P 500        

           Composite        

Dividend

Total

Dividend

Total

Dividend

Total

Dividend

Total

Dividend

Total

Yield

Return⁽²⁾

Yield

Return⁽³⁾

Yield

Return⁽³⁾

Yield

Return⁽³⁾

Yield

Return⁽⁴⁾

10/18 to 12/31/94

10.5%

10.8%

7.7%

0.0%

2.9%

(1.6%)

2.9%

(1.2%)

0.5%

(1.7%)

1995

8.3%

42.0%

7.4%

15.3%

2.4%

36.9%

2.3%

37.6%

0.6%

39.9%

1996

7.9%

15.4%

6.1%

35.3%

2.2%

28.9%

2.0%

23.0%

0.2%

22.7%

1997

7.5%

14.5%

5.5%

20.3%

1.8%

24.9%

1.6%

33.4%

0.5%

21.6%

1998

8.2%

5.5%

7.5%

(17.5%)

1.7%

18.1%

1.3%

28.6%

0.3%

39.6%

1999

10.5%

(8.7%)

8.7%

(4.6%)

1.3%

27.2%

1.1%

21.0%

0.2%

85.6%

2000

8.9%

31.2%

7.5%

26.4%

1.5%

(4.7%)

1.2%

(9.1%)

0.3%

(39.3%)

2001

7.8%

27.2%

7.1%

13.9%

1.9%

(5.5%)

1.4%

(11.9%)

0.3%

(21.1%)

2002

6.7%

26.9%

7.1%

3.8%

2.6%

(15.0%)

1.9%

(22.1%)

0.5%

(31.5%)

2003

6.0%

21.0%

5.5%

37.1%

2.3%

28.3%

1.8%

28.7%

0.6%

50.0%

2004

5.2%

32.7%

4.7%

31.6%

2.2%

5.6%

1.8%

10.9%

0.6%

8.6%

2005

6.5%

(9.2%)

4.6%

12.2%

2.6%

1.7%

1.9%

4.9%

0.9%

1.4%

2006

5.5%

34.8%

3.7%

35.1%

2.5%

19.0%

1.9%

15.8%

0.8%

9.5%

2007

6.1%

3.2%

4.9%

(15.7%)

2.7%

8.8%

2.1%

5.5%

0.8%

9.8%

2008

7.3%

(8.2%)

7.6%

(37.7%)

3.6%

(31.8%)

3.2%

(37.0%)

1.3%

(40.5%)

2009

6.6%

19.3%

3.7%

28.0%

2.6%

22.6%

2.0%

26.5%

1.0%

43.9%

2010

5.1%

38.6%

3.5%

27.9%

2.6%

14.0%

1.9%

15.1%

1.2%

16.9%

2011

5.0%

7.3%

3.8%

8.3%

2.8%

8.3%

2.3%

2.1%

1.3%

(1.8%)

2012

4.5%

20.1%

3.5%

19.7%

3.0%

10.2%

2.5%

16.0%

2.6%

15.9%

YTD Q2 2013

5.2%

6.9%

3.5%

5.8%

2.5%

15.2%

2.2%

13.8%

1.4%

12.7%

Compounded Average Annual Total Return⁽⁵⁾

17.3%

11.1%

9.9%

8.9%

8.3%

Note: All of these dividend yields are calculated as annualized dividends based on last dividend paid in applicable time period divided by the closing price as of period end. Dividend yield sources: NAREIT website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream/Thomson Financial.

⁽¹⁾

FTSE NAREIT US Equity REIT Index, as per NAREIT website.

⁽²⁾

Calculated as the difference between the closing stock price as of period end, less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period. Does not include reinvestment of dividends.

⁽³⁾

Includes reinvestment of dividends. Sources: NAREIT website and Factset.

⁽⁴⁾

Price only index, does not include dividends. Source: Factset.

⁽⁵⁾

 All of these Compounded Average Annual Total Return rates are calculated in the same manner: from Realty Income's NYSE listing on October 18, 1994 through June 30, 2013, and (except for NASDAQ) assuming reinvestment of dividends. Past performance does not guarantee future performance. Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future.

Property Type Diversification

The following table sets forth certain property type information regarding Realty Income's property portfolio as of June 30, 2013 (dollars in thousands):

Approximate

Rental Revenue for

Percentage of

Number of

Leasable

the Quarter Ended

Rental

Property Type

Properties

Square Feet

June 30, 2013⁽¹⁾

Revenue

Retail

3,543

36,740,700

$ 141,914

77.7%

Distribution

64

15,302,300

21,350

11.7

Office

36

2,277,800

9,691

5.3

Agriculture

15

184,500

5,145

2.8

Manufacturing

11

3,457,500

4,267

2.3

Industrial

12

383,200

355

0.2

Totals

3,681

58,346,000

$ 182,722

100.0%

Includes rental revenue for all properties owned by Realty Income at June 30, 2013, including revenue from properties reclassified as discontinued operations of $392. Excludes revenue of $24 from properties owned by Crest.

Tenant Diversification

The largest tenants based on percentage of total portfolio rental revenue at June 30, 2013 include the following:

FedEx

5.3%

2.3%

LA Fitness

4.5%

Regal Cinemas

2.2%

Walgreens

4.1%

Dollar General

2.1%

Family Dollar

3.5%

CVS Pharmacy

2.0%

AMC Theatres

3.3%

The Pantry

1.9%

Diageo

3.1%

Circle K

1.8%

BJ's Wholesale Clubs

3.0%

Walmart/Sam's Club

1.7%

Northern Tier Energy/Super America

2.7%

Industry Diversification

The following table sets forth certain information regarding Realty Income's property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

Percentage of  Rental Revenue⁽¹⁾

For the Quarter Ended

For the Years Ended

June 30,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

Dec 31,

2013

2012

2011

2010

2009

2008

2007

Retail industries

Apparel stores

1.9

%

1.7

%

1.4

%

1.2

%

1.1

%

1.1

%

1.2

%

Automotive collision services

0.8

1.1

0.9

1.0

1.1

1.0

1.1

Automotive parts

1.1

1.0

1.2

1.4

1.5

1.6

2.1

Automotive service

2.2

3.1

3.7

4.7

4.8

4.8

5.2

Automotive tire services

3.9

4.7

5.6

6.4

6.9

6.7

7.3

Book stores

0.1

0.1

0.1

0.1

0.2

0.2

0.2

Child care

3.0

4.5

5.2

6.5

7.3

7.6

8.4

Consumer electronics

0.3

0.5

0.5

0.6

0.7

0.8

0.9

Convenience stores

11.4

16.3

18.5

17.1

16.9

15.8

14.0

Crafts and novelties

0.5

0.3

0.2

0.3

0.3

0.3

0.3

Dollar stores

5.6

2.2

-

-

-

-

-

Drug stores

6.9

3.5

3.8

4.1

4.3

4.1

2.7

Education

0.5

0.7

0.7

0.8

0.9

0.8

0.8

Entertainment

0.7

0.9

1.0

1.2

1.3

1.2

1.4

Equipment services

0.1

0.1

0.2

0.2

0.2

0.2

0.2

Financial services

1.7

0.2

0.2

0.2

0.2

0.2

0.2

General merchandise

1.1

0.6

0.6

0.8

0.8

0.8

0.7

Grocery stores

3.2

3.7

1.6

0.9

0.7

0.7

0.7

Health and fitness

5.9

6.8

6.4

6.9

5.9

5.6

5.1

Health care

*

-

-

-

-

-

-

Home furnishings

0.9

1.0

1.1

1.3

1.3

2.4

2.6

Home improvement

1.3

1.5

1.7

2.0

2.2

2.1

2.4

Jewelry

0.1

-

-

-

-

-

-

Motor vehicle dealerships

1.6

2.1

2.2

2.6

2.7

3.2

3.1

Office supplies

0.5

0.8

0.9

0.9

1.0

1.0

1.1

Pet supplies and services

0.9

0.6

0.7

0.9

0.9

0.8

0.9

Restaurants - casual dining

5.5

7.3

10.9

13.4

13.7

14.3

14.9

Restaurants - quick service

4.4

5.9

6.6

7.7

8.3

8.2

6.6

Shoe stores

0.1

0.1

0.2

0.1

-

-

-

Sporting goods

1.8

2.5

2.7

2.7

2.6

2.3

2.6

Theaters

6.3

9.4

8.8

8.9

9.2

9.0

9.0

Transportation services

0.1

0.2

0.2

0.2

0.2

0.2

0.2

Wholesale clubs

3.3

3.2

0.7

-

-

-

-

Other

*

0.1

0.1

0.3

1.1

1.2

1.9

Retail industries

77.7

%

86.7

%

88.6

%

95.4

%

98.3

%

98.2

%

97.8

%

Industry Diversification (continued)

Percentage of  Rental Revenue⁽¹⁾

For the Quarter Ended

For the Years Ended

June 30,

   Dec 31,

   Dec 31,

   Dec 31,

   Dec 31,

   Dec 31,

   Dec 31,

2013

2012

2011

2010

2009

2008

2007

Non-retail industries

Aerospace

0.9

0.9

0.5

-

-

-

-

Beverages

3.4

5.1

5.6

3.0

-

-

-

Consumer appliances

0.6

0.1

-

-

-

-

-

Consumer goods

1.1

0.1

-

-

-

-

-

Crafts and novelties

0.1

-

-

-

-

-

-

Diversified industrial

0.1

0.1

-

-

-

-

-

Equipment services

0.3

0.3

0.2

-

-

-

-

Financial services

0.5

0.4

0.3

-

-

-

-

Food processing

1.6

1.3

0.7

-

-

-

-

Government services

1.5

0.1

0.1

0.1

0.1

-

-

Health care

2.2

*

*

-

-

-

-

Home furnishings

0.2

-

-

-

-

-

-

Home improvement

0.3

-

-

-

-

-

-

Insurance

0.1

*

-

-

-

-

-

Machinery

0.2

0.1

-

-

-

-

-

Other manufacturing

0.6

-

-

-

-

-

-

Packaging

1.0

0.7

0.4

-

-

-

-

Paper

0.2

0.1

0.1

-

-

-

-

Shoe stores

0.9

-

-

-

-

-

-

Telecommunications

0.7

0.8

0.7

-

-

-

-

Transportation services

5.8

2.2

1.6

-

-

-

-

Other

*

1.0

1.2

1.5

1.6

1.8

2.2

Non-retail industries

22.3

%

13.3

%

11.4

%

4.6

%

1.7

%

1.8

%

2.2

%

     Totals

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

*

Less than 0.1%

⁽¹⁾

Includes rental revenue for all properties owned by Realty Income at the end of each period presented, including revenue from properties reclassified as discontinued operations. Excludes revenue from properties owned by Crest.

Lease Expirations

The following table sets forth certain information regarding Realty Income's property portfolio regarding the timing of the lease term expirations (excluding rights to extend a lease at the option of the tenant) on our 3,597 net leased, single-tenant properties as of June 30, 2013 (dollars in thousands):

Total Portfolio

Initial Expirations⁽³⁾

Subsequent Expirations⁽⁴⁾

Rental

Rental

Rental

Revenue

Revenue

Revenue

for the

for the

for the

Quarter

 % of

Quarter

 % of

Quarter

 % of

Number

Approx.

Ended

Total

Number

Ended

Total

Number

Ended

Total

of Leases

Leasable

June 30,

Rental

 of Leases

June 30,

Rental

 of Leases

June 30,

Rental

Year

Expiring ⁽¹⁾

Sq. Feet

2013⁽²⁾

Revenue

Expiring

2013

Revenue

Expiring

2013

Revenue

2013

107

828,000

$

2,642

1.5

%

31

$

977

0.6

%

76

$

1,665

0.9

%

2014

155

1,074,200

3,834

2.1

53

1,753

1.0

102

2,081

1.1

2015

169