Monthly Dividend Girl: Mr. Lewis, it's great to have this opportunity to talk with you about my favorite company and to give our readers a chance to get to know you a little better. Thanks for meeting with me.

So-let's get right to it. One Billion Dollars in Dividends, Wow! And it seems like the dividends not only keep coming but they keep going up as well. Congratulations on this milestone and on another great year!

Tom Lewis: Well, thank you Monthly Dividend Girl. It's always great to get together with you. This is especially true since we have this opportunity to celebrate the milestone of $1 billion in monthly dividends paid as well as to report another very good year of operations for Realty Income. As The Monthly Dividend Company®, nothing pleases us more than a year in which we are able to increase the amount of the dividend substantially. Just as you said, we were able to do this in 2004, raising the dividend five times during the year. Our shareholders enjoyed an annualized dividend increase of 10% and were actually paid $1.24125 per share in dividends during the year, for a yield of 6.2% for 2004 (based on the December 31, 2003 closing share price). It is gratifying that we've, once again, been able to provide our shareholders with dependable monthly income. The fact that we've been doing this for 35 years now, to the tune of One Billion dollars, is something we're very pleased with.

MDG: And rightfully so, Mr. Lewis. But, I think what our readers would like to know is how exactly do you do it?

TL: You know, the truth of the matter is that we've reached this milestone, not through any secret formula or special genius, but rather by sticking to a crystal clear mission of focusing on monthly dividends and an operating philosophy that hasn't changed dramatically since our founding in 1969.

That operating philosophy is to acquire and own properties with long-term (15-20 year) net leases in place to regional and national retail chains. The lease revenue generated by owning this type of real estate is extraordinarily consistent and is well suited for paying dependable monthly dividends to our shareholders.

We begin each new year with the knowledge that our primary goal, as an organization, is to pay 12 monthly dividends and increase the dividend if our financial performance will support an increase. When you know exactly what you are trying to accomplish, and you have a time-tested methodology to get you there, it makes it a lot easier to accomplish your goals consistently.

One billion dollars in dividends paid is a big deal to us, however, we're already focused on thinking about how to get to the second billion dollars in dividends paid. We try not to spend too much time congratulating ourselves on our accomplishments because our shareholders need us to be successful more than just once or twice. They need us to be successful for many years to come so that we can keep paying the steadily rising dividends they depend upon. That's a tremendous motivator for all of us at Realty Income.

"It's all about the monthly dividend."

MDG: That's an interesting point. Could you talk a little bit more about how being The Monthly Dividend Company® impacts the decisions you make about the Company's operations?

TL: Sure. During all the time that we've been in business, many investment fads have come and gone. What's interesting is that when the Company was founded, its purpose was to provide investors with income from real estate. This was a rather odd notion at the time because back then many people invested in real estate for capital gains or substantial tax write-offs. So to create a real estate company to generate income was a bit out of the ordinary. However, our founders believed there was a sizable group of investors, many who were retirees, that needed cash to replace the income from salaries they no longer received. Fortunately, this turned out to be true. Demand for income remained strong over the years and our employees observed for themselves that thousands of people were looking for a solid source of income. Being this source of income has always been an important motivating factor for all of our operating decisions.

The good news is that the need for dividend income, by this segment of the investing public, has remained constant and has even grown over the past thirty years, despite the fact that income investments were not particularly popular in the investment business for much of that time.

At the end of the day, there are investors who need us to be The Monthly Dividend Company®, to contribute to the dream thousands of people have had of living well during retirement. Our focus, therefore, has remained steadfast and our commitment unwavering to provide dependable monthly dividends regardless of market sentiment or investment fads.

For all of us who work at Realty Income, this commitment has given us a motivation or larger purpose in addition to the pursuit of growth and profits. You might say we're inspired by the important role we play in providing the monthly income so many depend upon.

MDG: But is this commitment to paying monthly dividends good for the future of the Company? In other words, just because this has worked well for you in the past, does that mean it will work well in the future?

TL: Great question! As a matter of fact, these are the same questions we ask ourselves every year. First of all, it is the Company's mission to pay monthly dividends and as long as there are shareholders who need a monthly dividend, I believe this is who we should be. Fortunately, demographic trends are also very much on our side relative to the long-term demand for monthly dividends. These demographics play a very important part in our strategy both from an investment standpoint and relative to how we will continue to grow our real estate portfolio.

Let me first address Realty Income as an investment for the future. We've spent a significant amount of time studying demographic trends and, as almost everyone now knows, the aging of the Baby Boomer generation is going to have a huge impact on our economy and the investment world going forward.

We began researching this phenomenon several years ago in order to identify attractive new industries and retail chains for the Company to invest in and also as a function of our desire to bring more awareness to our distinction as The Monthly Dividend Company®. Our research showed that there could be a marked shift in focus from investing for growth to investing for income as Baby Boomers approached their 60's and began to address their options for retirement. While the recent focus on income would appear to indicate this shift has already begun, I'm not entirely convinced this is a sea change in investment styles, but more of a reaction to the excesses of the 90's and the pendulum swinging back to a more conservative investment approach. I don't think we've yet reached the point where the majority of the Baby Boomer generation is facing the lifestyle changes that will more than likely affect their investment preferences. According to most experts, the shift in Baby Boomer investment focus is expected to materialize sometime in the next 5 to 7 years.

What is important to know about all of this is the fact that the traditional dream of retiring at the age of 65 has been supported by generous pensions, social security and prudent savings for most of the 32 to 34 million people who are currently retired. This stands in marked contrast to the situation that 76 million Baby Boomers will be faced with as they approach their golden years.

Expectations are that the Boomer generation will have vastly different choices in their "retirement" years. Whether or not reaching retirement age proves to be a life-altering event for this generation remains to be seen. What we do know is that social security benefits may no longer be assumed "without abrupt and painful" changes to the current system and that Baby Boomers have generally under-saved for their retirement (according to Federal Reserve Chairman, Alan Greenspan).

This is why we believe that investing for income could become the preferred investment objective over the next 5 to 15 years. Just as America's "Great Generation" kept demand for monthly income steady for the past thirty-five years, an oversized aging Baby Boomer generation is expected to significantly increase the demand for companies that pay dependable monthly income into the foreseeable future.

MDG: How come there aren't more monthly dividend paying companies if this is going to be the investment of choice in the future?

"Not just any company can be a monthly dividend company."

TL: Another great question. We believe that to qualify as a provider of reliable and growing income a "Monthly Dividend Company" must have six specific characteristics. First, and most important, the company needs to operate a business that is designed to generate cash to pay dividends over a prolonged period of time. Second, the company must be conservative. By this we mean that it is committed to prudent growth and operating with a conservative balance sheet so that the income stream used to pay dividends is not at substantial risk. Third, the company must take the long view and make its operating decisions based on how they impact a company's ability to pay dividends that tend to increase over time. Fourth, a monthly dividend company must have tightly focused core principles that guide all its activities and yet be flexible and creative enough to react to opportunities in a constantly changing business environment. Fifth, those who operate a monthly dividend company should passionately and energetically pursue the business of creating and growing monthly dividends so that they can continue to provide their shareholders with the means to passionately and energetically pursue their dreams. And Sixth, a monthly dividend company must understand that dividends are a necessity, not a luxury to retired investors. This type of company also understands that it can't be all things to all people and so it must be fiercely dedicated to being a monthly dividend company to the exclusion of all else.

This is a pretty tall order, but it's what we feel is required of any company that wants to be considered as a source of dependable monthly income for retired investors. Needless to say, these six guidelines are the foundation for our activities at The Monthly Dividend Company®.

MDG: You mentioned that demographics could also play a role in growing Realty Income's real estate portfolio. Could you comment a bit more about that?

TL: Well, since our real estate investment focus is on the retail industry, our research staff spends a significant amount of time seeking out retail industries that can benefit from sale-leaseback financing. For your readers who aren't familiar with this term, sale-leaseback, or net-lease financing as it's sometimes referred to in our business, is where a retail chain sells us the building and land where they are doing business and then leases the property back from us under a long-term lease agreement. This type of transaction allows the retailer to free up capital to continue to grow its business and, at the same time, provides Realty Income with a good property leased to a solid tenant who should pay dependable lease revenue supporting dividends for the next 15-20 years. So what our research people are looking for are retail businesses that are, or will be, impacted by major demographic changes, such as the aging of America, and could benefit from the type of expansion capital offered by sale-leaseback financing.

It's no secret that Baby Boomers have had a sizable influence on the success of many different industries as they've moved from childhood, through their teens, college years and finally to adulthood, when they joined the work force, started families and became homeowners. All of these life transitions were characterized by acquiring the possessions that went along with a particular stage of life. For example, during the past several years home furnishing stores and home improvement businesses have greatly benefited from the upward mobility of the Baby Boomer generation as they've navigated their wealth and asset accumulation years.

The same can be expected when they begin to transition to their "retirement" or "lifestyle transition" years. Our goal is to try to stay one step ahead of this large demographic group by anticipating the next retail industries that may be the beneficiaries of the Boomer dollar. If we are successful in anticipating these trends, we might very well be first in line with capital to finance the growth of retail chains that will benefit the most from the Aging of America and the World.

MDG: Switching gears now for a moment, I think our readers would enjoy hearing how you spend your time as CEO of Realty Income. What is your focus and how do you spend your days?

TL: There are about four areas I've identified as being essential to focus on so that I can try to add the most value in my role. I try my best to spend roughly equal amounts of time in each of these four areas throughout the year.

First, is to spend time looking to the future to try and anticipate major events, trends and shifts in our economy that could have a meaningful impact on the Company and its operations. This means that I spend a fair amount of time researching and thinking about these trends, such as the demographic shifts we just discussed, and seeing if I can project into the future the potential impact these trends may have on Realty Income. This analysis might lead us to modify our business plans in order to remain a leader in the net-lease financing industry. This type of ongoing research and analysis is vital to the routine discussions among our senior management team and to crafting our operating strategy each year.

Second, is to invest a significant amount of time in developing the future leaders of our Company. By this I'm referring to the very important task of assembling the human resources we need to operate successfully. This includes, not only working hard to retain the talent we have now, but recruiting and developing the talent we'll need in the future to ensure strong senior management upon the retirement of any member of our current management team. This also involves regular communication with all members of our staff relative to the vision and goals of the Company.

Third, I believe the CEO needs to be an effective spokesperson to professionals working in the financial markets. Maintaining close relationships and making myself available to commercial and investment bankers, financial institutions, and the other resources we need to grow the business, is a critical part of my job and absolutely necessary for our continued access to capital.

Fourth, and perhaps most importantly, is the time I spend as a member and Chairman of our Investment Committee. Coordinating the activities of the acquisition professionals who bring us transactions, our research staff that analyzes the Company's potential investments and our senior management team that makes the final decisions on allocating our shareholders' capital is by far the most important part of my job at the Company. Maybe the job title should really be Chief Dreamer, Coach and Decisions Coordinator rather than CEO.

MDG: So what do you envision for 2005?

Answer to question above: d) None of the above. By the way, a stack of one billion dollar bills would be over 63 miles tall!

TL: I know what we have planned for the coming year, but my crystal ball won't give me a straight answer as to what we can definitely expect during the year. The wisest approach is for us to stick to the basic plan or commitment that we make at the beginning of every year. That is to strive to perform according to the standards demanded of The Monthly Dividend Company®. You may notice that the "short version" of our Business Plan, which we highlight every year, doesn't ever change. This speaks to our philosophy of staying true to certain guiding principles so that we do all we can to ensure the reliability of the monthly dividend. Beyond that, remaining nimble and flexible enough to quickly respond to opportunity, when it knocks, requires us to be open to change and willing to make small adjustments in our strategy as needed along the way. This, too, we are committed to doing.

To reiterate our business plan, our shareholders can anticipate that we will strive to continue to pay 12 monthly dividends, to increase the dividend every year to maintain a conservative balance sheet, to retain high portfolio occupancy, to acquire additional properties, to tell more people about The Monthly Dividend Company®, and to remain conservative.

As always, I want to remind our shareholders that there are absolutely no guaranteed outcomes in the investment world. For that reason, we caution all investors to remain diversified and rely on Realty Income for only a portion of their income needs. We'll do our part in remaining dedicated to our core value of placing the needs of our shareholders first and following a conservative operating strategy so that we can continue to generate dependable monthly dividends.

MDG: One final question, Mr. Lewis. Have you ever been interviewed by a cartoon character before?

TL: Er.......ah................................ No!

MDG: Thank you so much for your time Mr. Lewis. I've learned a lot today. Is there any last comment you'd like to make to our readers?

TL: Thank you, Monthly Dividend Girl. I've enjoyed talking with you too. I would just like to add that all of us at Realty Income really appreciate the support we've enjoyed, over the years, from our longstanding and loyal shareholders. Some of these shareholders have owned Realty Income since the early 70's and many thousands have been with us since we went public in 1994. We hope that all of our shareholders have benefited from their investment in Realty Income over the years. As always, we look forward to reporting to everyone on our progress in 2005. Have a great year!