ESCONDIDO, CALIFORNIA, November 18, 2003—Realty Income Corporation (Realty Income), The Monthly Dividend Company®, (NYSE:O) today announced that Standard & Poor's upgraded the Company's senior unsecured debt rating to BBB from BBB- and its preferred stock ratings to BBB- from BB+ with a stable outlook. Realty Income's Chief Executive Officer, Tom A. Lewis, stated, "We are very pleased with Standard & Poor's rating action, and believe the upgrade reflects the Company's solid financial position, the increased diversification of our portfolio of retail properties and the consistent growth of the Company in recent years."

Standard & Poor's issued the following press release on November 18, 2003:

"On Nov. 18, 2003, Standard & Poor's Ratings Services raised its corporate credit rating on Realty Income Corp. to 'BBB' from 'BBB-'. In addition, ratings are raised on the company's senior unsecured debt and preferred stock, which total approximately $430 million (see list). The outlook is revised to stable from positive.

The upgrade acknowledges the company's consistent track record of stable operating performance, good underwriting standards, and above-average financial profile. Mitigating these strengths is the lower credit quality of the tenant base, and less fungible nature of single tenant retail properties.

Realty Income's business strategy focuses on investing in net-leased retail properties tenanted primarily by middle-market retailers that generally require capital to expand but have limited access to capital. Recent acquisitions reflect a shift toward larger sale/leaseback transactions that provide tenant operators with a portion of their financing for larger acquisition/consolidation transactions versus historical smaller one-off transactions. The recent acquisition of 114 Golden Gallon convenience stores operated by The Pantry ('B+'/Stable) reflects this type of investment.

Realty Income's focus on the often unrated middle-market retailer exposes the company's portfolio to weaker credit tenants and potentially greater default frequency. Supporting this riskier investment strategy, however, is the company's strong underwriting, which has produced a consistent history of rent collections and strong occupancy. Added portfolio stability is derived through size (1,254 assets), industry (28 retail segments), tenant (84 retail chains), and geographic (48 states) diversification. Portfolio occupancy was more than 98.9% at Sept. 30, 2003, and has averaged more than 98% during the past 10 years. Acquisition activity from 1995 to present has resulted in a larger, more diversified portfolio, in part by reducing its concentration in child care and restaurants from more than 70% of rents in 1994 to less than 30%. The recent Golden Gallon transaction increases exposure to The Pantry and the convenience store segment to more than 7% and 17%, respectively.

Realty Income's underwriting standards have been tested from 1996 to the present with a handful of tenant bankruptcies and normal lease rollovers to manage through. The company has generally fared well in its tenant bankruptcies, recovering 99% of the original rent, and 92% of in-place rent at lease rollover during that time period, which speaks to good up-front underwriting. Scheduled lease rollover appears manageable during the next five years, with 4% to 8% of annual rents expiring in each year; 2004 represents the high end of that range, led by La Petite Academy Inc. ('CCC'/Negative), Children's World Learning Centers, and Golden Corral.

Realty Income has consistently maintained a conservative capital structure to support its somewhat riskier investment niche. Leverage is modest, at just 37% of total book capitalization, and 46% on a debt plus preferred-to-book capitalization basis. Coverage measures are strong for the rating category at 5.1x debt service and 3.7x fixed-charge coverage (FCC). Standard & Poor's believes it is appropriate to maintain above-average FCC measures (more than 3.0x) to compensate for the company's riskier tenant base. Stressing coverage for the weaker tenant credit quality and greater risk of default, the loss of all rent from any one of its top three tenants (7% to 9% of rent) would negatively impact FCC; however, Standard & Poor's estimates that coverage would still remain above 3.0x. Total coverage of dividends of 1.1x, could dip close to 1.0x under the above stress scenario, but should not materially impact Realty Income's credit profile.

Liquidity:
Realty Income has had good access to capital, tapping both the debt and equity markets in 2003, and accessing a range of capital sources since going public in 1994. Realty Income also has no secured debt encumbering any of its properties. Refinancing risk is minimal with the credit facility maturing in October 2005, and no senior unsecured debt maturing until 2007. Beyond its access to the capital markets, the company has more than $150 million available under its $250 million unsecured line of credit (with a $50 million accordion feature) to help fund acquisitions. Additional liquidity is derived from modest asset sales and internal cash flow (after dividends and modest cap-ex) of approximately, roughly $25 million to $30 million.

OUTLOOK: Stable
Above-average financial measures provide support for the company's somewhat riskier, but improved business profile. Portfolio operating stability provides additional support for the current rating. Standard & Poor's expects the company to continue to pursue its acquisition activity in a prudent manner, by maintaining its conservative underwriting standards as it shifts toward investing in larger transactions.

Ratings List
Realty Income Corp.

Corporate credit	BBB/Stable	BBB-/Positive
Senior unsecured	BBB	BBB-
Preferred stock	BBB-	BB+"

 
Realty Income is The Monthly Dividend Company®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. To date the Company has paid 400 consecutive monthly dividend payments throughout its 33-year operating history. The monthly income is supported by the cash flow from over 1,300 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net-leased retail properties nationwide.

Note to Editors

Realty Income press releases are available at no charge by calling our toll-free investor hotline number: 888-811-2001, or through the Internet at http://www.realtyincome.com/Investing/News.html.