Realty Income - Press Release

REALTY INCOME ANNOUNCES INCREASES IN FIRST QUARTER OPERATING RESULTS

ESCONDIDO, CALIFORNIA, April 25, 2002—Realty Income Corporation (Realty Income), "The Monthly Dividend Company," (NYSE: O) today announced operating results for the first quarter ended March 31, 2002.

COMPANY HIGHLIGHTS:
(For the quarter ended March 31, 2002)

Revenue increased 7.3% to $33.7 million
Funds from Operations (FFO) increased 27.3% to $22.4 million
FFO per common share increased 3.0% to $0.68 per share
Portfolio occupancy was 98%
Same store rents increased 2.1% to $28.4 million
The Company invested $7.8 million in additional properties at an 11.1% lease rate
The common stock monthly dividend was increased for the 18th consecutive quarter
The annualized common stock dividend was increased to $2.295 per share
Realty Income paid its 380th consecutive monthly dividend

Financial Results

Revenue Increases
Realty Income's revenue for the first quarter ended March 31, 2002 increased 7.3% to $33.7 million as compared to $31.4 million for the same quarter in 2001.

Funds from Operations
FFO for the quarter ended March 31, 2002 increased 27.3% to $22.4 million as compared to $17.6 million for the same quarter in 2001. On a diluted per common share basis, FFO increased 3.0% to $0.68 per share compared to $0.66 per share for the same period in 2001.

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

Net Income Available to Common Stockholders
Net income available to common stockholders for the quarter ended March 31, 2002 decreased to $15.9 million as compared to $16.0 million for the same period in 2001. On a diluted per common share basis, net income decreased to $0.48 per share as compared to $0.60 per share for the three months ended March 31, 2001.

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.

Excluding the gain on sales of investment properties and discontinued operations, on a diluted per common share basis, income from continuing operations increased by $0.08 to $0.45 per share during the first quarter of 2002 as compared to $0.37 per share for the same quarter in 2001.

Dividend Information
In March 2002, Realty Income announced the 18th consecutive quarterly increase in the amount of the monthly dividend on its common stock. This marked the 20th increase in the amount of the dividend since 1995. The amount of the monthly dividend was increased to $0.19125 per share from $0.19 per share for an annualized dividend amount of $2.295 per share. The Company continues its 33-year policy of declaring and paying common stock dividends on a monthly rather than a quarterly basis.

Real Estate Portfolio Update

As of March 31, 2002 Realty Income's portfolio of freestanding, single-tenant retail properties consisted of 1,121 properties located in 48 states, leased to 79 retail chains doing business in 24 retail industries. The properties are leased under long-term triple-net lease agreements with a weighted average remaining term of approximately 10.2 years.

Portfolio Management Activities
The Company's portfolio of retail real estate properties owned under 15- to 20-year net leases continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of March 31, 2002, portfolio occupancy was 98.0% with only 22 properties available for lease out of 1,121 properties in the portfolio.

Same store rents on 990 properties under lease during the three months ended March 31, 2002 and 2001 increased 2.1% to $28.37 million from $27.78 million in 2001.

Property Acquisitions
During the first quarter, Realty Income acquired three retail properties for $5.8 million. The Company also funded $2.0 million for properties under development, for total acquisitions during the quarter of $7.8 million at an initial contractual lease yield of 11.1%. The three properties acquired are located in three states, are 100% leased under triple-net leases and have an initial average lease length of 16.1 years.

The Company also announced it has signed an agreement with Midas (NYSE:MDS) to acquire approximately 80 automotive service properties, under a long-term lease agreement, for between $45 million to $50 million. The final acquisition price will be determined by real estate appraisals currently underway on each of the properties. Realty Income expects the acquisition to close during the second quarter of 2002.

Management believes the acquisition market for freestanding, net-lease retail properties remains attractive. During the quarter, the Company analyzed over 24 separate transactions involving 210 properties with an approximate market value of $344 million. From these opportunities the Company and its subsidiary carefully selected the properties that comprise the first quarter acquisitions, investing in approximately 2% of the opportunities it reviewed.

During 2002, the Company anticipates it will acquire additional properties utilizing its acquisition credit facility, the proceeds from property dispositions, internally generated cash flow and the proceeds from the potential offering of additional securities. Realty Income maintains credit facilities with borrowing capacity of $225 million, which are used to fund acquisitions and the operations of the Company and its subsidiary, Crest Net Lease, Inc. The outstanding balance on the Company's credit facility used to acquire retail properties at March 31, 2002 was $50.4 million. The outstanding credit facility balance used to fund Crest's operations was $23.2 million.

Property Dispositions
Realty Income continued to successfully execute its asset disposition program. The objective of the 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. During the first quarter of 2002, Realty Income sold six properties for $3.4 million and recorded a gain on sales of $1.1 million. The six properties consisted of five restaurants and one child day care property. The proceeds from the sale of these properties were used to pay down the Company's acquisition credit facility and invested in new properties with an initial contractual lease yield of 11.1%.

Other Activities

Crest Net Lease
Crest Net Lease, Inc., a subsidiary formed by Realty Income, is focused on acquiring and subsequently marketing net-leased properties for sale. During the quarter ended March 31, 2002, Crest sold three properties from its inventory for $2.7 million and reported a gain on sales of $365,000. During the quarter Crest also invested $2.9 million in two new properties and properties under development. At the end of the first quarter, Crest carried an inventory of $22.8 million, which consists of 23 properties held for sale.

Management believes that Crest will carry an average inventory of between $20 to $25 million in properties. The subsidiary generates an earnings spread on the difference between the lease payments it receives on the properties held in inventory and the cost of capital used to acquire 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 Crest depends on the timing and the number of property sales achieved, if any, in any given quarter. During the first quarter ended March 31, 2002, Crest generated FFO of $363,000, or $0.01 in FFO per diluted common share for Realty Income.

CEO Comments on First Quarter 2002 Operating Results

Commenting on Realty Income's financial results and real estate operations, Tom A. Lewis, Chief Executive Officer stated, "We are pleased with the Company's steady progress during the first quarter towards achieving another year of record revenues, FFO growth and increasing dividends. The performance of our portfolio remains extremely strong with property occupancy at 98% and same store rents increasing by over 2% during the first quarter. We believe our focus on acquiring the properties of retail chains that sell basic human needs goods and services, at relatively low price points, has allowed us to continue to see positive operating results in a less than ebullient economic environment. In addition, the market for acquiring additional net-leased properties remains very attractive. We are seeing a high volume of potential transactions for the Company to consider and continue to believe we will invest between $125 to $150 million in additional properties during 2002. With a very conservative balance sheet and significant availability on our acquisition credit lines, the Company continues to be well capitalized to take advantage of acquisition opportunities."

2002 Earnings Commentary

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 per share 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 2002 should range from $2.80 to $2.82 which would equate to an increase of 5.3% to 6.0% over 2001 FFO per share of $2.66.

Management estimates Crest Net Lease will generate between $0.06 to $0.08 per share of FFO during 2002. 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 fluctuate 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.

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. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Realty Income is "The Monthly Dividend Company," a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of March 31, 2002, the Company had paid 380 consecutive monthly dividend payments throughout its 33-year operation history. The monthly income is supported by the cash flows from 1,121 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

CONSOLIDATED STATEMENTS OF INCOME

For the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)

	2002	2001

REVENUE
Rental	$ 33,263	$ 29,346
Gain on sales of real estate aquired for resale	365	1,928
Interest and other	31	127

	33,659	31,401

EXPENSES
Interest	5,605	8,059
Depreciation and amortization	7,474	7,173
General and administrative	2,389	2,041
Property	663	623
Other	288	779
Provision for impairment loss	--	330

	16,419	19,005

Income from continuing operations	17,240	12,396
Income from discontinued operations	714	126
Gain on sales of investment properties	340	5,951

Net Income	18,294	18,473
Preferred stock dividends	(2,428)	(2,428)

Net income available to common stockholders	$ 15,866	$ 16,045

Funds from operations (FFO)	$ 22,383	$ 17,606
Per share information for common stockholders:
FFO
Basic	$ 0.68	$ 0.66
Diluted	0.68	0.66
Income from continuing operations
Basic	0.45	0.37
Diluted	0.45	0.37
Net Income
Basic	0.48	0.60
Diluted	0.48	0.60
Cash dividends paid	0.570	0.555

Segmentation by Category

FUNDS FROM OPERATIONS
For the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)

2002

2001

Net income available to
   common stockholders $ 15,866 $ 16,045

   Depreciation and amortization:
       Continuing Operations 7,474 7,173

       Discontinued Operations 30 37

   Depreciation of furniture,
       fixtures and equipment (33) (28)

   Provision for impairment loss:
       Continuing operations -- 330

       Discontinued Operations 160 --

   Gain on sales of
       investment properties:

       Continuing operations (340) (5,951)

       Discontinued operations (774) --

Funds from operations $ 22,383 $ 17,606

Dividends paid to
   common stockholders $ 18,820 $ 14,770

FFO in excess of dividends $ 3,563 $ 2,836

Basic and diluted
   FFO per common share $ 0.68 $ 0.66

Weighted average number of
   common shares used for:

   Basic per share
       computation 33,044,470 26,612,009

   Diluted per share
       computation 33,091,747 26,655,676

Funds from operations generated by Crest Net
For the three months ended March 31, 2002 and 2001
(dollars in thousands, except per share amounts)

   Gains from the sales of real
       estate acquired for resale $ 365 $ 1,928

   Rent and other revenue 475 432

   Interest expense (75) (283)

   General and
       administrative expense (196) (205)

   Property expense (42) --

   State and federal
       income taxes (164) (656)

   Minority interest -- (53)

   Funds from operations
       contributed by Crest Net $ 363 $ 1,163

   Basic and diluted
       FFO per common share $ 0.01 $ 0.04

CONSOLIDATED BALANCE SHEETS
As of March 31, 2002 and December 31, 2001
(dollars in thousands, except per share amounts)

2002
2001

ASSETS

Real estate, at cost:

    Land $ 412,864 $ 412,455

    Buildings and improvements 767,836 765,707

1,180,700 1,178,162

    Less accumulated depreciation and
       amortization (238,754) (233,848)

    Net real estate held for investment 941,946 944,314

    Real estate held for sale, net 24,336 23,356

    Net real estate 966,282 967,670

Cash and cash equivalents 3,730 2,467

Accounts receivable 3,294 4,857

Goodwill, net 17,206 17,206

Other assets 11,069 11,508

     Total assets $ 1,001,581 $ 1,003,708

LIABILITIES AND STOCKHOLDERS' EQUITY

Distributions payable $    7,977 $    6,238

Accounts payable and accrued expenses 6,228 5,834

Other liabilities 4,345 4,543

Lines of credit payable 73,600 85,300

Notes payable 230,000 230,000

    Total liabilities 322,150 331,915

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, 33,298,234 and
    32,829,111 shares issued and
    outstanding in 2002 and 2001,
    respectively 806,227 795,505

Distributions in excess of net income (226,164) (223,080)

    Total stockholders’ equity 679,431 671,793

    Total liabilities and stockholders’ equity $ 1,001,581 $ 1,003,708

Industry Diversifcation

The following table sets forth certain information regarding our properties classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

REALTY INCOME CORPORATION

Annualized Rent as of March 31, 2002⁽²⁾ Percentage of Rental Revenue⁽¹⁾
For the Years Ended

Industry
Dec 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% 2.4% 3.8% 4.1% 0.7% --% --%

Automotive Parts 7.7 8.3 8.3 8.6 7.8 9.1 10.5 11.4

Automotive Service 5.4 5.7 5.8 6.6 7.5 6.4 4.8 3.7

Book Stores 0.5 0.4 0.5 0.5 0.6 0.5 -- --

Business Services 0.1 0.1 0.1 0.1 * -- -- --

Child Care 21.9 23.9 24.7 25.3 29.2 35.9 42.0 45.6

Consumer Electronics 3.5 4.0 4.9 4.4 5.4 6.5 0.9 --

Convenience Stores 7.8 8.4 8.4 7.2 6.1 5.5 4.6 2.4

Crafts and Novelties 0.4 0.4 0.4 0.4 * -- -- --

Drug Stores 0.2 0.2 0.2 0.2 0.1 -- -- --

Entertainment 1.9 1.8 2.0 1.2 -- -- -- --

General Merchandise 0.5 0.6 0.6 0.6 * -- -- --

Grocery Stores 0.6 0.6 0.6 0.5 * -- -- --

Health and Fitness 4.1 3.6 2.4 0.6 0.1 -- -- --

Home Furnishings 5.5 6.0 5.8 6.5 7.8 5.6 4.4 2.9

Home Improvement 1.2 1.3 2.0 3.6 * -- -- --

Office Supplies 2.1 2.2 2.3 2.6 3.0 1.7 -- --

Pet Supplies and Services 1.7 1.6 1.5 1.1 0.6 0.2 -- --

Private Education 1.3 1.5 1.4 1.2 0.9 -- -- --

Restaurants 14.2 12.2 12.3 13.3 16.2 19.8 24.4 24.7

Shoe Stores 0.9 0.7 0.8 1.1 0.8 0.2 -- --

Sporting Goods 4.2 0.9 -- -- -- -- -- --

Theaters 3.9 4.3 2.7 0.6 -- -- -- --

Video Rental 3.4 3.7 3.9 4.3 3.8 0.6 -- --

Other 4.6 5.2 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% 100.0%

* Less than 0.1%
(1) The table does not include properties owned by our subsidiary, Crest Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual base rent as of March 31, 2002 for each of the properties by 12, and adding the previous 12 month's historic percentage rent on properties owned at March 31, 2002, which totaled $1.7 million (i.e., percentage rent is calculated as a percentage of the tenants' 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.

Segmentation by Category

The following table sets forth certain information regarding properties owned by Realty Income at March 31, 2002, classified according to the retail business types and the level of services they provide (dollars in thousands):

REALTY INCOME CORPORATION

(As of March 31, 2002)

Industry
Number of Properties (1) Annualized
Rent (1)(2) Percentage of Annualized Rent

TENANTS PROVIDING SERVICES

Automotive Service 99 $ 7,101 5.4%

Child Care 327 28,909 21.9

Entertainment 8 2,564 1.9

Health and Fitness 9 5,479 4.2

Private Education 5 1,738 1.3

Theaters 10 5,209 3.9

Other 8 6,097 4.6

466 57,097 43.2

TENANTS SELLING GOODS AND SERVICES

Automotive Parts (with
installation) 64 5,850 4.4

Business Services 1 124 0.1

Convenience Stores 105 10,305 7.8

Home Improvement 2 187 0.1

Pet Supplies and Services 6 1,561 1.2

Restaurants 225 18,743 14.2

Video Rental 34 4,501 3.4

437 41,271 31.2

TENANTS SELLING GOODS

Apparel Stores 5 3,103 2.4

Automotive Parts 75 4,346 3.3

Book Stores 2 606 0.5

Consumer Electronics 36 4,639 3.5

Crafts and Novelties 2 517 0.4

Drug Stores 1 235 0.2

General Merchandise 11 687 0.5

Grocery Stores 2 726 0.6

Home Furnishings 38 7,284 5.5

Home Improvement 18 1,377 1.0

Office Supplies 9 2,820 2.1

Pet Supplies 3 671 0.5

Shoe Stores 5 1,221 0.9

Sporting Goods 11 5,584 4.2

218 33,816 25.6

Totals 1,121 $ 132,184 100.0%

(1) The table does not include properties owned by our subsidiary, Crest Net Lease.
(2) Annualized Rent is calculated by multiplying the monthly contractual base rent as of March 31, 2002 for each of the properties by 12, and adding the previous 12 month's historic percentage rent on properties owned at March 31, 2002, which totaled $1.7 million (i.e., percentage rent is calculated as a percentage of the tenants' 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.

The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,094 net leased, single-tenant retail properties as of March 31, 2002 (dollars in thousands):

Year
Number of Leases Expiring(1) Annualized Rent(1)(2) Percentage of Annualized Rent

2002 79 $ 6,518 5.1%

2003 79 6,684 5.3

2004 118 10,176 8.0

2005 84 6,605 5.2

2006 75 6,739 5.3

2007 92 6,331 5.0

2008 63 5,669 4.5

2009 28 2,502 2.0

2010 44 3,858 3.0

2011 35 5,302 4.2

2012 49 5,803 4.6

2013 70 12,348 9.8

2014 35 6,287 5.0

2015 35 4,186 3.3

2016 14 1,496 1.2

2017 13 4,609 3.6

2018 16 1,988 1.6

2019 49 8,246 6.5

2020 10 3,664 2.9

2021 96 14,746 11.6

2022 1 123 0.1

2023 2 341 0.3

2026 2 372 0.3

2033 2 1,118 0.9

2034 3 879 0.7

Totals 1,094 $126,590 100.0%

(1) This table does not include five multi-tenant properties and 22 vacant, unleased single-tenant properties owned by the Company and properties owned by our subsidiary, Crest Net Lease. The lease expirations for properties under construction are based on the estimated date of completion of such properties.
(2) Annualized rent is calculated by multiplying the monthly contractual base rent as of March 31, 2002 for each of the properties by 12 and adding the previous 12 month's historic percentage rent on properties owned at March 31, 2002, which totaled $1.7 million (i.e., percentage rent is calculated as a percentage of the tenants' 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.

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