If Numbers Could Talk...
FFO, Cash Flow, Yield, and All That Jazz

If numbers could talk, they'd tell a pretty good story about Realty Income's operating results in 2004. Revenue increased 20.9% to $175.6 million as compared to $145.3 million, during 2003, with new property additions primarily responsible for the increase. Increasing the size of Realty Income's real estate portfolio is a primary objective of the Company since revenue growth is a key determinant in the Company's ability to increase earnings and dividends.

Funds from operations available to common shareholders increased 14.3% to $118.2 million as compared to $103.4 million during 2003.

On a diluted per common share basis, FFO increased 3.4% to $1.50 per share as compared to $1.45 per share for 2003. FFO per share is a common measurement for a real estate investment trust, or REIT. FFO is an alternative non-GAAP measure that is also considered to be a good indicator of a company's ability to pay dividends. A reconciliation of net income available to common shareholders to FFO per common share is included in Management's Discussion and Analysis of Financial Condition and Results of Operations on page 55.

Net income available to common shareholders, as of December 31, 2004, was $90.2 million as compared to $76.7 million in 2003. On a diluted per common share basis, net income was $1.15 per share in 2004 as compared to $1.08 per share in 2003. (The calculation to determine net income for a real estate company includes gains from the sales of investment properties and impairments. The amount of gains from property sales and impairments vary from quarter to quarter according to the timing of property sales. This variance can significantly impact net income.)

Realty Income's subsidiary company, Crest Net Lease, also contributed to Realty Income's earnings growth during 2004. Crest was formed to capitalize on the opportunities to acquire and sell properties for a profit. This market has continued to grow in recent years and Crest continues to benefit from this trend. During 2004 Crest generated $7.8 million, or $0.10 per share, in FFO for Realty Income in comparison to $4.6 million, or $0.06 per share, in FFO for Realty Income during 2003. As of December 31, 2004, Crest held inventory of $10.1 million in eight properties being marketed for sale.

Return to shareholders was excellent in 2004. Realty Income's stock price increased to $25.29, as of the close of the market on December 31, 2004. This is an increase of $5.29, or 26.5%, in comparison to the closing stock price of $20.00 at the end of 2003. Dividends paid increased to $1.24125 per share in 2004 from $1.18125 in 2003. Based on an opening price of $20.00 and a dividend paid of $1.24125 per share, shareholders realized a 6.2% dividend yield in 2004.

The total return from share price growth and dividends paid to shareholders in 2004 was 32.7%.

Monthly dividends paid, however, are the highlight of this report. Since its founding in 1969, and through January 2005, the Company has paid 414 consecutive monthly dividends totaling $1 billion dollars! This is truly an amazing record of dedication and commitment. Since Realty Income's listing on the New York Stock Exchange in October 1994, the amount of the annualized dividend increased from $0.90 per share to $1.32, or 46.7%. During this period the price of Realty Income's common shares also rose from $8.00 to $25.29, an increase of 216%. The combination of dividend payments and share price increases has provided an excellent return to Realty Income's shareholders since 1994.

"In retrospect, if numbers could speak, I think they'd enjoy talking about The Monthly Dividend Company® in 2004!" (anonymous shareholder).