ESCONDIDO, CALIFORNIA, APRIL 25, 2001 — Realty Income Corporation (Realty Income), "The Monthly Dividend Company," (NYSE: O) today announced operating results for the first quarter ended March 31, 2001.

• The monthly dividend was increased for the 14th consecutive quarter
• The annualized dividend increased to $2.235 per share from $2.22 per share
• Revenue increased 11.3% to $31.6 million
• Funds from Operations (FFO) increased 6.7% to $17.6 million
• FFO per common share increased 6.5% to $0.66 per share

Revenue Increases
Realty Income's revenue for the first quarter ended March 31, 2001 increased 11.3% to $31.6 million as compared to $28.4 million for the same quarter in 2000.

Funds from Operations
FFO for the quarter ended March 31, 2001 increased 6.7% to $17.6 million as compared to $16.5 million for the same quarter in 2000. On a diluted per common share basis, FFO increased 6.5% to $0.66 per share compared to $0.62 per share for the same period in 2000.

FFO is a widely used measure of REIT performance that excludes non-cash charges for the depreciation of real estate and gain on sales of investment properties. FFO is one measure of a company's cash flow and of its ability to pay dividends.

Dividend Information
On March 15, 2001, Realty Income announced the 14th consecutive quarterly increase in the amount of the monthly dividend on its common stock. The amount of the dividend was increased to $0.18625 per share from $0.185 per share for an annualized dividend amount of $2.235 per share. The Company continues its 32-year policy of declaring and paying common stock dividends on a monthly rather than a quarterly basis.

Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended March 31, 2001 increased to $16.0 million as compared to $10.5 million for the same period in 2000. On a diluted per common share basis, net income increased to $0.60 per share as compared to $0.39 per share for the three months ended March 31, 2000. The calculation to determine net income includes gains and losses from the sale of investment properties. The amount of gains and losses varies from quarter to quarter based on the timing of property sales and can significantly impact net income. The gain recognized from property sales during the first quarter of 2001 was $5.3 million or $0.20 per common share greater than the gain recognized from property sales during the same quarter in 2000. This difference accounted for the increase in 1st quarter net income per share in 2001.

Share Repurchase Activity
On an ongoing basis, Realty Income regularly reviews its investment options to determine the best use of its capital. At certain times during the first quarter, the Company's share price justified repurchasing shares since this provided the highest return on the Company's investment capital. During the three months ended March 31, 2001, the Company invested $169,000 to repurchase 6,800 shares of its common stock at an average price of $24.82 per share and an estimated FFO yield of approximately 10.8%.

Real Estate Portfolio Update

As of March 31, 2001 Realty Income's portfolio of freestanding, single-tenant retail properties consisted of 1,061 properties located in 46 states, leased to 69 retail chains doing business in 23 retail industries.

Portfolio Management Activities
The Company's portfolio of retail real estate properties owned under long-term net leases continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of March 31, 2001, portfolio occupancy was 97.7% with only 24 properties out of 1,061 available for lease.

Same store rents on the 999 properties under lease during the three months ended March 31, 2001 and 2000 increased 1.3% to $26.30 million from $25.97 million in 2000.

Property Dispositions
During the first quarter of 2001, Realty Income sold 10 properties for $17.1 million and recorded a gain on sales of $6.0 million. The 10 properties consisted of seven restaurants, one home improvement store, one home furnishing store, and one child day care property. The properties were sold at an average cap rate of 9.3%. The proceeds from the sale of these properties were used to pay down the Company's acquisition credit facility and to invest in new properties with an initial contractual lease yield of 11.5%. The objective of the Company's disposition program is to sell assets when the Company believes the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the Company's real estate portfolio or increase the average lease term.

Property Acquisitions
During the first quarter, Realty Income invested $7.2 million in three new properties and properties under development with an initial contractual lease yield of 11.5%. The new properties are 100% leased with an initial average lease length of 20 years. The Company used the proceeds from the sale of properties and excess cash flow to acquire the additional properties.

Market Overview
Realty Income's acquisition opportunities and the market for freestanding, net-lease, retail properties remains positive and offers attractive lease yields. The Company anticipates that it will continue to generate growth in its real estate portfolio by financing the acquisition of new properties from internally generated cash flow and proceeds from property dispositions during 2001. Realty Income also maintains acquisition credit facilities with borrowing capacity of $225 million, which are used to fund its acquisitions and the operations of its subsidiary, Crest Net Lease, Inc ($200 million line of credit for Realty Income and $25 million for Crest Net Lease). The outstanding balance on the Company's acquisition credit facility at March 31, 2001 was $134.0 million. The outstanding balance on the credit facility used to fund Crest Net Lease, Inc.'s operations was $12.3 million. These continue to be important sources of capital for the Company.

Other Activities

Crest Net Lease
During the first quarter of 2001, Crest Net Lease, Inc. sold four properties from its inventory for $14.0 million and recorded a gain on sales of $1.9 million. Crest also invested $3.8 million in four new properties and properties under development. At the end of the first quarter, Crest Net Lease, Inc. carried an inventory of $14.8 million in properties held for sale. Management believes that Crest will carry an average inventory of between $20 to $25 million in properties on an ongoing basis. Crest generates an earnings spread on the differential between the lease payments it receives on the properties it holds in inventory and the cost of capital used to acquire the properties. It is management's belief that at this level of inventory these earnings will more than cover the ongoing operating expenses of Crest. The contribution to Realty Income's FFO by the subsidiary will be dependent on the timing and the number of property sales achieved, if any, in any given quarter. During the first quarter of 2001 Crest generated $0.04 per common share in FFO for Realty Income.

Commenting on Realty Income's financial results and real estate operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased with the progress we have made during the first quarter of 2001. The stable results from our core portfolio coupled with strong performance from Crest Net Lease led to solid increases in our FFO during the first quarter. Our disposition and reinvestment program is gaining momentum and we believe it will continue to increase both the quality and overall yield of our real estate portfolio during 2001. We are also pleased that lease revenues in our core portfolio continue to increase, benefiting from the substantial growth in the size of the portfolio over the past several years. This revenue growth is responsible for the solid cash flow coverage and continued dependability of the Company's monthly dividend payments."

2001 Earnings Guidance

Realty Income's funds from operations tend to be stable and fairly predictable because of the long-term leases that are the primary source of the Company's revenue. There are, however, several factors that can impact changes in FFO from levels that have been anticipated by the Company. These factors include, but are not limited to, changes in interest rates, occupancy rates, periodically accessing the capital markets, the level of property acquisitions and dispositions, and the operations of Crest Net Lease.

Management estimates that FFO per common share for 2001 should range from $2.65 to $2.67 which would equate to an increase of 5.2% to 6.0% over 2000 FFO per share of $2.52.

In prior years certain items impacting FFO per share have fluctuated from quarter to quarter. Typically the Company's funds from operations has been generated as follows: 25% in the first quarter, 24% in the second and third quarters and 29% in the fourth quarter. This fluctuation is primarily due to the receipt of percentage rents in the first and fourth quarters of the year. While the Company believes this trend may continue, FFO may fluctuate additionally in future years based upon the operations of Crest Net Lease.

Management estimates Crest Net Lease will generate between $0.06 to $0.08 per share of FFO during 2001. Crest's primary business is the purchase and sale of properties for a profit. These sales may occur at various times during the course of the year, which could cause FFO in certain quarters to increase or decrease from normal levels. The Company does not intend to provide quarterly estimates of FFO. Absent changes in annual FFO guidance, at the end of each quarter, it may be presumed that the Company's overall estimate for the year has not changed.

Realty Income is "The Monthly Dividend Company," a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. The monthly income is supported by the cash flows from 1,068 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.

Forward-Looking Statements

Statements in this press release, which are not strictly historical, are "forward-looking" statements. Forward-looking statements involve known and unknown risks, which may cause the Company's actual results in the future to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, the availability of capital to finance planned growth, and the profitability of the Company's subsidiary, Crest Net Lease, as described in the Company's filings with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded solely as reflections of the Company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release.

Realty Income is "The Monthly Dividend Company," a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. The monthly income is supported by the cash flows from 1,061 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

	2001	2000
REVENUE
Rental	$ 29,496	$ 28,330
Gain on sale of real estate acquired for resale	1,928	--
Interest and other	141	25
	31,565	28,355
EXPENSES
Interest	8,059	7,158
Depreciation and amortization	7,210	6,748
General and administrative	2,040	1,561
Property	624	515
Other	1,110	123
	19,043	16,105
Income from operations	12,522	12,250
Gain on sales of investment properties	5,951	662
Net Income	18,473	12,912
Preferred stock dividends	(2,428)	(2,428)
Net income available to common stockholders	$ 16,045	$ 10,484
Funds from operations (FFO)	17,606	16,537
Basic and diluted per share information for common stockholders:
Income from operations	$ 0.38	$ 0.37
Net income	$ 0.60	$ 0.39
FFO	$ 0.66	$ 0.62
Cash dividends paid	$ 0.555	$ 0.540

 

FUNDS FROM OPERATIONS (dollars in thousands, except per share data)

	Three months ended 3/31/01	Three months ended 3/31/00
Net income available to common stockholders	$ 16,045	$ 10,484
Plus:
Depreciation and amortization	7,210	6,748
Provision for impairment loss on a property held for sale	330	--
Less:
Depreciation of furniture, fixtures and equipment and amoritization of organization costs	(28)	(33)
Gain on sale of investment properties	(5,951)	(662)
Funds from operations	$ 17,606	$ 16,537
Divideneds paid to common stockholders	$ 14,770	$ 14,484
FFO in excess of dividends	$ 2,836	$ 2,053
Basic and diluted    FFO per common share	$ 0.66	$ 0.62
Weighted average number of common shares used for:
Basic per share computation	$ 26,612,009	$ 26,815,391
Diluted per share computation	$ 26,655,676	$ 26,816,928

 

CONSOLIDATED BALANCE SHEETS As of March 31, 2001 and December 31, 2000 (dollars in thousands, except per share data)

	2001	2000
ASSETS
Real estate, at cost:
Land	$ 370,462	$ 368,057
Buildings and improvements	705,989	705,470
	1,076,451	1,073,527
Less accumulated depreciation and amortization	(218,246)	(212,379)
Net real estate held for investment	858,205	861,148
Real estate held for sale, net	16,954	33,130
Net real estate	875,159	894,278
Cash and cash equivalents	1,992	3,815
Accounts receivable	3,696	5,053
Goodwill, net	17,899	18,130
Other assets	14,082	13,490
Total assets	$ 912,828	$ 934,766
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable	$ 6,837	$ 4,914
Accounts payable and accrued expenses	7,544	5,969
Other liabilities	4,254	4,314
Lines of credit payable	146,300	174,000
Notes payable	230,000	230,000
Total liabilities	394,935	419,197
Stockholders’ equity:
Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 4,125,700 shares issued and outstanding	99,368	99,368
Common stock and paid in capital, par value $1.00 per share, 100,000,000 shares authorized, 26,607,645 and 26,563,519 shares issued and outstanding in 2001 and 2000, respectively	632,023	630,932
Distributions in excess of net income	(213,498)	(214,731)
Total stockholders’ equity	517,893	515,569
Total liabilities and stockholders’ equity	$ 912,828	$ 934,766

 

The following table sets forth certain information regarding our properties classified according to the business of the respective tenants (dollars in thousands):

 

REALTY INCOME CORPORATION
Tenants by Industry Percentage of Historical Rental Revenue (1)
(As of March 31, 2001)
	For the Quarter Ended	For the Years Ended
Industry	Mar 31, 2001	Dec 31, 2000	Dec 31, 1999	Dec 31, 1998	Dec 31, 1997	Dec 31, 1996	Dec 31, 1995
Apparel Stores	2.4%	2.4%	3.8%	4.1%	0.7%	--%	--%
Automotive Parts	8.5	8.3	8.6	7.8	9.1	10.5	11.4
Automotive Service	6.0	5.8	6.6	7.5	6.4	4.8	3.7
Book Stores	0.5	0.5	0.5	0.6	0.5	--	--
Business Services	0.1	0.1	0.1	*	--	--	--
Child Care	23.6	24.7	25.3	29.2	35.9	42.0	45.6
Consumer Electronics	4.3	4.9	4.4	5.4	6.5	0.9	--
Convenience Stores	8.7	8.4	7.2	6.1	5.5	4.6	2.4
Craft and Novelty	0.4	0.4	0.4	*	--	--	--
Drug Stores	0.2	0.2	0.2	0.1	--	--	--
Entertainment	1.5	2.0	1.2	--	--	--	--
General Merchandise	0.6	0.6	0.6	*	--	--	--
Grocery Stores	0.6	0.6	0.5	*	--	--	--
Health and Fitness	3.4	2.4	0.6	0.1	--	--	--
Home Furnishings	6.2	5.8	6.5	7.8	5.6	4.4	2.9
Home Improvement	1.3	2.0	3.6	*	--	--	--
Office Supplies	2.2	2.3	2.6	3.0	1.7	--	--
Pet Supplies and Services	1.5	1.5	1.1	0.6	0.2	--	--
Private Education	1.5	1.4	1.2	0.9	--	--	--
Restaurants	11.9	12.3	13.3	16.2	19.8	24.4	24.7
Shoe Stores	0.8	0.8	1.1	0.8	0.2	--	--
Theaters	4.5	2.7	0.6	--	--	--	--
Video Rental	3.9	3.9	4.3	3.8	0.6	--	--
Other	5.4	6.0	5.7	6.0	7.3	8.4	9.3
Totals	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
* Less than 0.1%
(1) Does not include properties owned by Crest Net Lease which are held for sale. Crest Net Lease is a subsidiary of Realty Income Corporation.

 

The following table sets forth certain information regarding our properties as of March 31, 2001, classified according to the retail business types and the level of services they provide (dollars in thousands):

Lease Revenue by Goods and Services
(As of March 31, 2000)
Industry	Number of Properties (1)	Annualized Rent (1)(2)	Percent of Annualized Rent
TENANTS PROVIDING SERVICES
Automotive Service	101	$7,018	6.0%
Child Care	332	28,541	24.3%
Entertainment	6	1,928	1.6%
Health and Fitness	8	4,602	3.9%
Private Education	6	1,817	1.6%
Theaters	10	5,209	4.4%
Other	8	5,972	5.1%
	471	55,087	46.9%
TENANTS SELLING GOODS AND SERVICES
Automotive Parts	62	5,432	4.6%
Business Services	1	124	0.1%
Convenience Stores	105	10,111	8.6%
Home Improvement	2	187	0.2%
Pet Supplies and Services	6	1,231	1.1%
Restaurants	165	13,568	11.5%
Video Rental	35	4,443	3.8%
	376	35,096	29.9%
TENANTS SELLING GOODS
Apparel Stores	4	2,799	2.4%
Automotive Parts	78	4,509	3.8%
Book Stores	2	572	0.5%
Consumer Electronics	37	4,982	4.2%
Craft and Novelty	2	502	0.4%
Drug Stores	1	235	0.2%
General Merchandise	11	687	0.6%
Grocery Stores	2	726	0.6%
Home Furnishings	38	7,074	6.0%
Home Improvement	25	1,377	1.2%
Office Supplies	8	2,476	2.1%
Pet Supplies	2	467	0.4%
Shoe Stores	4	890	0.8%
	214	27,296	23.2%
Totals	1,061	$ 117,479	100.0%
(1) Does not include properties owned by Crest Net Lease which are held for sale. Crest Net Lease is a subsidiary of Realty Income Corporation. (2) Annualized Rent is calculated by multiplying the monthly contractual base rent as of March 31, 2001 for each of the properties by 12, and adding the previous twelve month's historic percentage rent, which totaled $1.8 million, (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent is used based upon the estimated total costs of each property.