We are proud of the Company’s performance in 2001. Our efforts during the year were rewarded with positive results in all facets of the Company’s business. During this year we were able to successfully access the capital markets to continue the growth in the size and diversification of our real estate portfolio. This, coupled with the strong performance of our existing properties, led to solid increases in our revenues and funds from operations. These increases allowed us to raise the monthly dividend amount four times during 2001. We also were fortunate to see the price of our shares climb throughout the year, which led to an excellent total return on investment for all of our shareholders. Let me be more specific.

PROPERTY ACQUISITIONS A primary objective of the Company is to acquire additional properties in order to increase the size of our real estate portfolio. This creates two primary benefits for our shareholders. First, it increases our revenues and funds from operations which is a determining factor in our ability to raise the dividend. Second, it substantially reduces the risk of your investment in the Company by further diversifying the sources of our cash flow and lengthening the average term of the leases on our properties.

In 2001 our property acquisition team uncovered numerous opportunities for our investment committee to consider. During the course of the year we analyzed over 100 separate transactions involving 555 properties with an approximate market value of just under $1 billion. From these opportunities we very carefully selected 91 properties, in 13 separate transactions, totaling $131.8 million. The properties acquired are located in 25 different states, have an initial average lease term of 20.1 years and a very attractive initial average lease yield of 11.0%. As of the end of the year, Realty Income’s portfolio of retail properties consisted of 1,124 properties leased to 78 retail chains doing business in 24 retail segments. In addition, our subsidiary, Crest Net Lease, acquired 26 properties in nine separate transactions for $24.7 million.

We continue to benefit from a favorable real estate market for retail properties. Falling interest rates have had minimal impact on our acquisitions as we were able to achieve lease yields in excess of 11.0% from the retail chains with whom we do business. We believe this is exceptional in today’s low interest rate environment. We are pleased that our acquisition directors and research teams have been successful in uncovering such profitable real estate opportunities for the Company this year.

ACCESS TO CAPITAL The Company acquires its new properties by drawing upon a $200 million acquisition credit facility provided by The Bank of New York, Wells Fargo Bank, Wachovia Bank, The Bank of Montreal, United California Bank, AmSouth Bank and Bank of America. The flexibility to call upon this short-term capital to acquire properties without financing contingencies is a major competitive advantage for Realty Income.

The Company permanently finances its new property acquisitions by paying down our credit facility with funds generated by issuing additional common or preferred stock, or notes. The increasing price of the Company’s shares during 2001 made it advantageous to issue additional common stock to finance our new acquisitions. In May 2001 we issued 2.95 million common shares priced at $27.80 per share. In October 2001 we issued an additional 2.95 million common shares at $28.50 per share. The two offerings combined provided us with over $157 million in capital to repay our credit facility and pave the way for future property acquisitions.