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The Company

Realty Income Corporation, a Maryland corporation (“Realty Income”, the “Company”, “our” or “we”) was organized to operate as an equity real estate investment trust (“REIT”). We are a fully integrated, self-administered real estate company with in-house acquisition, leasing, legal, retail and real estate research, portfolio management and capital markets expertise. As of December 31, 1998, we owned a diversified portfolio of 970 retail properties located in 45 states with over 7.8 million square feet of leasable space. Of the 970 properties in the portfolio, 963 are single-tenant retail properties with the remainder being multi-tenant properties. As of December 31, 1998, 958, or 99.5%, of the 963 single-tenant properties were leased with an average remaining lease term (excluding extension options) of approximately 8.6 years.

Our primary business objective is to generate dependable monthly dividends from a consistent and predictable level of funds from operations (“FFO”) per share. Additionally, we generally will seek to increase dividends to stockholders and FFO per share through both active portfolio management and the acquisition of additional properties. We also seek to lower the ratio of distributions to stockholders as a percentage of FFO in order to allow internal cash flow to be used to fund additional acquisitions and for other corporate purposes while paying dividends that are sufficient to maintain our status as a REIT for federal income tax purposes.

  Our portfolio management focus includes:
• Contractual rent increases on existing leases;
• Rental increases at the termination of existing leases when market conditions permit; and
• The active management of the Company’s property portfolio, including selective sales of properties. Our acquisition of additional properties adheres to a focused strategy of acquiring primarily:
• Freestanding, single-tenant, retail properties;
• Properties leased to regional and national retail chains; and
• Properties under long-term, net lease agreements.

We typically acquire, then lease back, retail store locations from chain store operators, providing capital to the operators for continued expansion and other corporate purposes. Our acquisitions and investment activities are concentrated in well-defined target markets and focus generally on middle-market retailers providing goods and services that satisfy basic consumer needs. Our net lease agreements usually:

• Are for initial terms of 10 to 20 years;
• Require the tenant to pay a minimum monthly rent and property operating expenses (taxes, insurance and maintenance); and
• Provide for future rent increases (typically subject to ceilings) based on increases in the consumer price index, additional rent calculated as a percentage of the tenant’s gross sales above a specified level or fixed increases.

Realty Income was formed on September 9, 1993 in the State of Delaware and reincorporated in Maryland in May 1997. Realty Income commenced operations as a REIT on August 15, 1994 through the merger of 25 public and private real estate limited partnerships with and into the Company. Each of the partnerships was formed between 1970 and 1989 for the purpose of acquiring and managing long-term, net leased properties.

The five senior officers of the Company, who have each managed our properties and operations for between eight and 13 years, owned 0.9% of the Company’s outstanding common stock with a market value of $5.4 million as of March 2, 1999. The directors and five senior officers of the Company, as a group, owned 2.9% of the Company’s outstanding common stock with a market value of $17.6 million as of March 2, 1999.

Realty Income’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “O”, our central index key (“CIK”) number is 726728 and cusip number is 756109-104.

In October 1998, we issued 8.25% Monthly Income Senior Notes due 2000, which began trading on the NYSE on November 3, 1998 under the ticker symbol “OUI”. The cusip number of these notes is 756109-AA2.

Realty Income has 50 employees as of March 1, 1999.