In general we seek to acquire freestanding buildings (not attached to another structure) leased to commercial enterprises whose occupancy of these properties is critical to the production of their revenue. We uncover these types of property acquisitions through the efforts of our acquisition team who maintains relationships with individual retail chains (and other commercial enterprises), real estate developers, brokers, private equity firms and investment banks. Acquiring new properties is essential to our ability to generate the lease revenue that allows us to pay dividends that increase over time, and uncovering quality properties with acceptable tenants is the first step in this process.

Once an opportunity has been identified as viable for us to review, our due diligence, or underwriting process, begins. At this point, we are trying to determine:

1. If the tenant represents a reliable source of lease revenue for 15-20 years, or longer
2. Whether the property is in a good location that could promote and support the tenant's business
3. Whether it is an appropriate acquisition relative to the diversification of our portfolio
4. If the property has acceptable real estate attributes

There are many real estate transactions we identify that don't make it past an initial analysis, but the ones that do go through a rigorous review process by our in-house research team, which culminates in a thorough evaluation by five senior-level executives comprising our Investment Committee.

Once our investment committee approves a property for acquisition, we move quickly to purchase the property for cash. Having a significant amount of capital ready gives the seller the confidence that we will always close as promised and helps to set us apart from other "contingent" buyers.

To immediately fund acquisitions, we maintain an acquisition credit facility of $425 million provided by our key bank relationships. When the balance on the credit line gets to a certain level, we seek to permanently fund our acquisitions by issuing additional common and preferred stock or issuing investment grade-rated long-term bonds, with the help of our investment banking relationships.

Keeping our balance sheet conservative and using long-term capital generally provides us with capital at a long-term fixed cost and reduces the risk to us of fluctuating interest rates.

Once we have acquired properties, the legal team closes and files all of the lease documents. Our lease administration team then takes over to monitor the collection of rent while our property management team monitors each individual location to make sure the properties are properly maintained.

Since the leases with our tenants are net leases, the tenants generally pay all the property taxes, maintenance and insurance, so our property level responsibilities are minimal.

Because we have long-term leases with large tenants, our real estate portfolio has generally performed well, and occupancy has remained high. Here's how we've kept our lease revenue stable and consistent:

1. Manage lease expirations in advance of their expiration date.

   We enter into discussions with a tenant well in advance of the lease expiration date to determine our options. We closely monitor the economic and real estate situation in a particular market to gauge whether or not it would be better to re-lease the property to the same tenant, to a new tenant, or to sell the property when the lease expires.

2. Monitor and manage any tenant operating difficulties to minimize vacancies.

   One of the most important responsibilities in owning a portfolio of commercial real estate is staying on top of the operations of our individual tenants and the various economic factors that might impact their industries. Our in-house real estate and credit research teams are specifically trained to monitor news and economic trends for the different industries in which our tenants operate, as well as the performance of the individual firms with which we have long-term leases.

3. Determine which properties represent potential sales opportunities.

   Ascertaining whether or not to sell a particular property is not just a strategic decision, it can also represent a potential source of capital for us. Property sales occur when we believe that:

   • Sales proceeds can be reinvested at higher returns
   • The sale of a property will enhance portfolio credit quality
   • Selling the property will likely increase the
     average remaining lease term in the portfolio

The objective of all the processes mentioned above is to generate dependable monthly cash dividends for our shareholders that increase over time. As with any investment though, there is no guarantee that we will always be successful in executing every step of the dividend generating process.

We have a pretty good track record, with 43 consecutive years of monthly dividends paid, but we always recommend that investors rely on us for only a portion of the income that they need.