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<TYPE>10-K405
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<FILENAME>annual10k.txt
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
Commission File Number 1-13318
REALTY INCOME CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 33-0580106
----------------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
220 West Crest Street, Escondido, California 92025
(Address of principal executive offices)
Registrant's telephone number, including area code: (760)741-2111
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
--------------------------------------------- -----------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Preferred Stock Purchase Rights
Class B Preferred Stock, $1.00 Par Value New York Stock Exchange
Class C Preferred Stock, $1.00 Par Value New York Stock Exchange
8.25% Monthly Income Senior Notes, due 2008 New York Stock Exchange
--------------------------------------------- -----------------------------
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
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At March 1, 2002, the aggregate market value of the Registrant's shares of
common stock, $1.00 par value, held by non-affiliates of the Registrant was
$1,016,101,000, at the New York Stock Exchange closing price of $31.40.
At March 1, 2002, the number of common shares outstanding was 33,222,867, the
number of Class B preferred shares outstanding was 2,745,700, the number of
Class C preferred shares outstanding was 1,380,000 and the number of Monthly
Income Senior Notes, due 2008 outstanding was 4,000,000.
Documents incorporated by reference: Part III, Item 10, 11 and 12 incorporate by
reference certain specific portions of the definitive proxy statement for Realty
Income Corporation's Annual Meeting to be held on May 7, 2002, to be filed
pursuant to Regulation 14A. Only those portions of the proxy statement which are
specifically incorporated by reference herein shall constitute a part of this
Annual Report.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K, including documents incorporated by reference,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. When used in this annual
report, the words estimated, anticipated and similar expressions are intended to
identify forward-looking statements. Forward-looking statements are subject to
risks, uncertainties, and assumptions about Realty Income Corporation,
including, among other things:
o Our anticipated growth strategies;
o Our intention to acquire additional properties;
o Our intention to sell properties;
o Our intention to release vacant properties;
o Anticipated trends in our business, including trends in the market for
long-term net leases of freestanding, single-tenant retail properties;
o Future expenditures for development projects; and o Profitability of our
subsidiary, Crest Net Lease, Inc.
Future events and actual results, financial and otherwise, may differ materially
from the results discussed in the forward-looking statements. In particular,
some of the factors that could cause actual results to differ materially are:
o Our continued qualification as a real estate investment trust;
o General business and economic conditions;
o Competition;
o Interest rates;
o Accessibility of debt and equity capital markets;
o Other risks inherent in the real estate business including tenant defaults,
potential liability relating to environmental matters and illiquidity of real
estate investments; and
o Acts of terrorism and war.
Additional factors that may cause risks and uncertainties include those
discussed in the sections entitled "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this annual
report.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date that this annual report was filed with the
Securities and Exchange Commission. We undertake 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 of this annual
report or to reflect the occurrence of unanticipated events. In light of these
risks and uncertainties, the forward-looking events discussed in this annual
report might not occur.
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REALTY INCOME CORPORATION
Index to Form 10-K
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PAGE
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PART I
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Item 1: Business.............................................................................................. 4
Item 2: Properties........................................................................................... 21
Item 3: Legal Proceedings.................................................................................... 21
Item 4: Submission of Matters to a Vote of Security Holders.................................................. 21
PART II
Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters............................ 21
Item 6: Selected Financial Data.............................................................................. 22
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations................ 23
Item 7a: Quantitative and Qualitative Disclosures about Market Risk............................................ 35
Item 8: Financial Statements and Supplementary Data.......................................................... 36
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................. 55
PART III
Item 10: Directors and Executive Officers of the Registrant................................................... 55
Item 11: Executive Compensation............................................................................... 55
Item 12: Security Ownership of Certain Beneficial Owners and Management....................................... 55
Item 13: Certain Relationships and Related Transactions....................................................... 55
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................... 56
SIGNATURES........................................................................................................... 59
EXHIBIT INDEX........................................................................................................ 61
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PART I
ITEM 1: BUSINESS
THE COMPANY
Realty Income Corporation, "The Monthly Dividend Company," a Maryland
corporation ("Realty Income," the "Company," "us," "our" or "we") is organized
to operate as an equity real estate investment trust ("REIT"). We are a fully
integrated, self-administered real estate company with in-house acquisition,
leasing, legal, retail and real estate research, portfolio management and
capital markets expertise.
Our primary business objective is to generate dependable monthly dividends from
a consistent and predictable level of funds from operations ("FFO") per share.
Additionally, we seek to increase distributions to stockholders and FFO per
share through both active portfolio management and the acquisition of additional
properties.
Our portfolio management focus includes:
o Contractual rent increases on existing leases;
o Rent increases at the termination of existing leases when market conditions
permit; and
o The active management of our property portfolio, including selective sales of
properties.
Our acquisition of additional properties adheres to a focused strategy of
acquiring primarily:
o Freestanding, single-tenant, retail properties;
o Properties leased to regional and national retail chains; and
o Properties under long-term, net-lease agreements.
At December 31, 2001, we owned a diversified portfolio:
o Of 1,124 retail properties;
o With an occupancy rate of 98.2%, or 1,104 of the 1,124 properties;
o Leased to 78 different retail chains;
o Doing business in 24 separate retail industries;
o Located in 48 states; and
o With over 9.6 million square feet of leasable space.
Of the 1,124 properties in the portfolio, 1,119, or 99.6%, are single-tenant
retail properties with the remaining five being multi-tenant properties. As of
December 31, 2001, 1,099, or 98.2%, of the 1,119 single-tenant properties were
leased with an weighted average remaining lease term (excluding extension
options) of approximately 10.4 years.
We typically acquire, then lease back, retail store locations from chain store
operators, providing capital to the operators for continued expansion and other
corporate purposes. Our acquisitions and investment activities are concentrated
in well-defined target markets and focus generally on middle-market retailers
providing goods and services that satisfy basic consumer needs.
Our net-lease agreements generally:
o Are for initial terms of 15 to 20 years;
o Require the tenant to pay a minimum monthly rent and property operating
expenses (taxes, insurance and maintenance); and
o Provide for future rent increases (typically subject to ceilings) based on
increases in the consumer price index, fixed increases, or additional rent
calculated as a percentage of the tenants' gross sales above a specified
level.
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Realty Income commenced operations as a REIT on August 15, 1994 through the
merger of 25 public and private real estate limited partnerships with and into
the Company. Each of the partnerships was formed between 1970 and 1989 for the
purpose of acquiring and managing long-term, net-leased properties.
The five senior officers of the Company owned 0.8% of the Company's outstanding
common stock with a market value of $8.6 million at March 1, 2002. The directors
and five senior officers of the Company, as a group, owned 2.5% of the Company's
outstanding common stock with a market value of $26.5 million at March 1, 2002.
Realty Income's common stock is listed on The New York Stock Exchange ("NYSE")
under the ticker symbol "O." Our central index key ("CIK") number is 726728 and
cusip number is 756109-104.
Realty Income's Class B cumulative redeemable preferred stock is listed on the
NYSE under the ticker symbol "OprB" and its cusip number is 756109-302.
Realty Income's Class C cumulative redeemable preferred stock is listed on the
NYSE under the ticker symbol "OprC" and its cusip number is 756109-500.
Realty Income's 8.25% Monthly Income Senior Notes, due 2008 are listed on the
NYSE under the ticker symbol "OUI." The cusip number of these notes is
756109-203.
Realty Income had 53 employees as of March 1, 2002.
RECENT DEVELOPMENTS
ISSUANCE OF COMMON STOCK. In May 2001, we issued 2,850,000 shares of common
stock at a price of $27.80 per share. We issued an additional 100,000 shares in
May 2001 when the underwriters exercised their over-allotment option. The net
proceeds of $77.5 million were used to repay borrowings under our $200 million
acquisition credit facility and for other general corporate purposes.
In October 2001, we issued 2,600,000 shares of common stock at a price of $28.50
per share. We issued an additional 350,000 shares in November 2001 when the
underwriters exercised their over-allotment option. The net proceeds of $79.5
million were used to repay borrowings under our $200 million acquisition credit
facility.
In February 2002, we issued 273,150 shares of common stock to a unit investment
trust at a net price to us of $30.26 per share, based on a 5% discount to the
market price at the time of issuance of $31.85 per share. The net proceeds of
$8.2 million were used to repay bank borrowings.
PROPERTY ACQUISITIONS. In 2001, we acquired 91 properties (the "New Properties")
located in 25 states. In 2001, we invested $131.8 million in the New Properties
and properties under development, excluding estimated unfunded development costs
at December 31, 2001 of $3.1 million.
The initial weighted average annual unleveraged return on the $131.8 million
invested in 2001 is estimated to be 11.0%, computed as estimated contractual net
operating income (which in the case of a net-leased property is equal to the
base rent or, in the case of properties under construction, the estimated base
rent under the lease) for the first year of each lease, divided by the estimated
total costs. Since it is possible that a tenant could default on the payment of
contractual rent, we cannot assure you that the actual return on the funds
invested will remain at the percentage listed above.
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The New Properties will contain approximately 877,200 leasable square feet and
are 100% leased under net leases, with an average initial lease term of 20.1
years. As of December 31, 2001, two of the New Properties were leased and under
construction, pursuant to contracts under which the tenants agreed to develop
the properties (with development costs funded by Realty Income) and with rent
scheduled to begin in the first half of 2002.
CREST NET LEASE. We created Crest Net Lease, Inc. ("Crest Net") in January 2000
to buy, own and sell properties, primarily to buyers using tax-deferred
exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended
(the "Code"). In order to comply with the REIT qualification requirements in
force when we created Crest Net, 5% of the common stock of Crest Net, which
represented 100% of the voting stock, was not owned by the Company. Effective
for 2001, the Code was modified to allow a REIT to own up to 100% of the voting
stock and/or value of a corporation that elects with the REIT and qualifies to
be treated as a taxable REIT subsidiary. Following the change in the Code,
Realty Income and Crest Net jointly elected to treat Crest Net as a taxable REIT
subsidiary, effective January 1, 2001, and in May 2001 we acquired the 5% of
Crest Net's common stock owned by certain members of our management and the
management of Crest Net for $507,000. The acquisition of the 5% of common stock
was accounted for under the purchase method of accounting. The disinterested
members of our Board of Directors approved this transaction. Crest Net
originally issued this stock for $450,000. Realty Income also received rights to
the undistributed earnings on the stock, which totaled $81,200. After this
transaction, Realty Income owns 100% of Crest Net's stock.
The financial statements of Crest Net are consolidated into Realty Income's
financial statements. All material intercompany transactions have been
eliminated in consolidation.
In 2001, Crest Net invested $24.7 million in 26 retail properties. Estimated
unfunded development costs on two properties under construction at December 31,
2001 totaled $2.8 million. These 26 properties will contain approximately
102,300 of leasable square feet, are 100% leased and have initial lease terms
averaging 20.1 years. Three of these properties were sold in 2001.
In 2001, Crest Net sold nine properties for $28.9 million and we recorded a gain
of $3.4 million before income taxes. At the end of 2001, Crest Net carried an
inventory of $22.3 million, which is included in real estate held for sale on
our consolidated balance sheet. In addition to our real estate portfolio, at
December 31, 2001, Crest Net's portfolio consisted of 24 retail properties:
o Located in 14 states;
o That will contain approximately 92,300 square feet of leasable space; and
o That are 100% leased and are held for sale.
FUNDS FROM OPERATIONS (FFO). In 2001, our FFO increased by $10.6 million, or
15.8%, to $77.8 million versus $67.2 million in 2000. See our discussion of FFO
in the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this annual report.
In 2001, Crest Net generated $2.4 million in FFO for Realty Income. The future
contribution, if any, to our FFO by Crest Net will depend on the timing and the
number of property sales it achieves, if any, in any given year.
SALES OF INVESTMENT PROPERTIES. In 2001, we sold 35 properties for a total of
$39.5 million and recognized a gain of $10.5 million.
We have an active portfolio management program that incorporates the sale of
assets when we believe the reinvestment of the sale proceeds will generate
higher returns, enhance the credit quality of our real estate portfolio or
extend our average remaining lease term. At December 31, 2001, we classified
real estate with a carrying amount of $23.4 million as held for sale, which
includes $22.3 million in properties owned by Crest Net. Additionally, we
anticipate selling properties from our portfolio that have not yet been
specifically identified. We anticipate we will receive up to $50 million in
proceeds from the sale of properties during the next 12 months. We intend to
invest these proceeds into new property acquisitions.
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INCREASES IN MONTHLY DISTRIBUTIONS TO COMMON STOCKHOLDERS. We continue our
33-year policy of paying distributions monthly. In the past 12 months, we
increased monthly distributions per share by $0.00125 on four separate
occasions. In April 2001 the increase per share was to $0.18625, in July 2001 to
$0.1875, in October 2001 to $0.18875 and in January 2002 to $0.19. The increase
in January was our 17th consecutive quarterly increase and 19th increase since
1995. In 2001, we paid three monthly distributions per share of each of the
following amounts; $0.185; $0.18625; $0.1875 and $0.18875, totaling $2.2425. In
December 2001, January 2002 and February 2002, we declared distributions of
$0.19 per share, which were paid on January 15, 2002, February 15, 2002 and
March 15, 2002, respectively. The monthly distribution of $0.19 per share
represents a current annualized distribution of $2.28 per share, and an
annualized distribution yield of approximately 7.3% based on the last reported
sale price of the Company's Common Stock on the NYSE of $31.40 on March 1, 2002.
Although we expect to continue our policy of paying monthly distributions, we
cannot guarantee that we will maintain the current level of distributions, that
we will continue our pattern of increasing distributions per share, or what the
actual distribution yield will be for any future period.
UNSECURED REVOLVING CREDIT FACILITIES. We have a $200 million revolving,
unsecured acquisition credit facility that expires in December 2003. We also
have a $25 million, three-year, revolving unsecured credit facility, which
expires in February 2003. These credit facilities have been and are expected to
be used for the acquisition of properties and to provide capital to subsidiaries
for the purpose of acquiring properties.
STOCK AND SENIOR DEBT PURCHASE PROGRAM. In January 2000, our Board of Directors
authorized the purchase of up to $10 million of our outstanding common and
preferred shares and senior debt securities. In 2001, we purchased 6,800 shares
of our common stock at an average price of $24.82 per share, for a total
investment of $169,000. The purchases were funded from operating cash flow. From
January 2000 through December 2001, we purchased an aggregate of $6.7 million of
our securities.
DISTRIBUTION POLICY
Distributions are paid to our common stockholders and Class C Preferred
stockholders on a monthly basis and are paid to our Class B Preferred
stockholders on a quarterly basis if, as and when declared by our Board of
Directors. The Class B Preferred stockholders receive cumulative distributions
at a rate of 9.375% per annum on the $25 per share liquidation preference
(equivalent to $2.34375 per annum per share). The Class C Preferred stockholders
receive cumulative distributions at a rate of 9.5% per annum on the $25 per
share liquidation preference (equivalent to $2.3750 per annum per share).
In order to maintain our tax status as a REIT for federal income tax purposes,
we generally are required to distribute dividends to our stockholders
aggregating annually at least 90% of our REIT taxable income (determined without
regard to the dividends paid deduction and by excluding net capital gains) and
we are subject to income test to the extent we distribute less than 100% of our
REIT taxable income (including net capital gains). In 2001, our total
distributions totaled approximately 114.5% of our estimated REIT taxable income.
We intend to continue to make distributions to our stockholders that are
sufficient to meet this distribution requirement and that will reduce our
exposure to income taxes.
Future distributions by us will be at the discretion of our Board of Directors
and will depend on, among other things, our results of operations, financial
condition and capital requirements, the annual distribution requirements under
the REIT provisions of the Code, our debt service requirements and other factors
as the Board of Directors may deem relevant. In addition, our credit facilities
contain financial covenants which could limit the amount of distributions
payable by us in the event of a deterioration in our results of operations or
financial condition, and which prohibit the payment of distributions on the
common or preferred stock in the event that we fail to pay when due (subject to
any applicable grace period) any principal or interest on borrowings under our
credit facilities.
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Distributions by us, to the extent of our current and accumulated earnings and
profits for federal income tax purposes, generally will be taxable to
stockholders as ordinary income, except to the extent we recognize capital gains
and declare a capital gains dividend. Distributions in excess of earnings and
profits generally will be treated as a non-taxable reduction in the
stockholders' basis in its stock to the extent of that basis, and thereafter as
a capital gain. Approximately 13.1% of the distributions made or deemed to have
been made in 2001 to our common stockholders were classified as a return of
capital for federal income tax purposes. We are unable to predict the portion of
2002 or future distributions that may be classified as a return of capital since
the amount depends on our taxable income for the entire year.
BUSINESS PHILOSOPHY AND STRATEGY
INVESTMENT PHILOSOPHY. We believe that the long-term ownership of an actively
managed, diversified portfolio of retail properties under long-term, net-lease
agreements produces consistent, predictable income. Under a net-lease agreement,
the tenant agrees to pay a minimum monthly rent and property operating expenses
(taxes, maintenance and insurance) plus, typically, future rent increases
(generally subject to ceilings) based on increases in the consumer price index,
fixed increases or additional rent calculated as a percentage of the tenant's
gross sales above a specified level. We believe that long-term leases, coupled
with the tenant's responsibility for property expenses, generally produce a more
predictable income stream than many other types of real estate portfolios, while
continuing to offer the potential for growth in rental income.
INVESTMENT STRATEGY. In identifying new properties for acquisition, we focus on
providing expansion capital to retail chains by acquiring, then leasing back,
their retail store locations. We classify retail tenants into three categories:
venture, middle market and upper market. Venture companies typically offer a new
retail concept in one geographic region of the country and operate between five
and 50 retail outlets. Middle market retail chains typically have 50 to 500
retail outlets, operations in more than one geographic region, have been
successful through one or more economic cycles, and have a proven, replicable
concept. The upper market retail chains typically consist of companies with 500
or more stores, operating nationally in a proven, mature retail concept. Upper
market retail chains generally have strong operating histories and access to
several sources of capital.
Realty Income primarily focuses on acquiring properties leased to middle market
retail chains that we believe are attractive for investment because:
o They generally have overcome many of the operational and managerial obstacles
that tend to adversely affect venture retailers;
o They typically require capital to fund expansion but have more limited
financing options;
o They generally have provided us with attractive risk-adjusted returns over
time since their financial strength has, in many cases, tended to improve as
their businesses have matured;
o Their relatively large size allows them to spread corporate expenses across a
greater number of stores; and
o Middle market retailers typically have the critical mass to survive if a
number of locations are closed due to underperformance.
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We also focus on and have selectively made investments in properties of upper
market retail chains. We believe upper market retail chains can be attractive
for investment because:
o They typically are of a higher credit quality;
o They are usually larger brand name, public and private retailers;
o They utilize a larger building ranging in size from 10,000 to 50,000 square
feet; and
o They are able to grow because access to capital facilitates larger
transaction sizes.
While our investment strategy focuses primarily on acquiring properties leased
to middle and upper market retail chains, we also selectively seek incremental
investment opportunities with venture market retail chains. Periodically,
venture market opportunities arise where we feel that the real estate used by
the tenant is of high quality and can be purchased at prices that are favorable
in the marketplace. To meet our stringent investment standards, however, venture
retail companies must have a well-defined retailing concept and strong financial
prospects. These opportunities are examined on a case by case basis, and we are
highly selective in making investments in this area.
The Internet has become an important delivery channel for many retail
businesses, and our investment strategy has positioned us to compete in such an
environment. Historically, our investment focus has been on retail industries
that have a service component because we believe the lease revenue from these
types of businesses is more stable. Because of this investment focus, at
December 31, 2001, approximately 75% of our annualized revenue is derived from
retailers with a service component in their business. We believe these
service-oriented businesses would be difficult to duplicate over the Internet
and, as a result, our property portfolio should be fairly well positioned for
competition from Internet businesses.
CREDIT STRATEGY. We principally provide sale-leaseback financing primarily to
less than investment grade retail chains. From 1970 through December 31, 2001,
we have acquired and leased back to regional and national retail chains 1,158
properties (including 83 properties that have been sold) and have collected
approximately 98% of the original contractual rent obligations on those
properties. We believe that within this market we can achieve an attractive
risk-adjusted return on the financing we provide to retailers.
We believe the primary financial obligations of most retailers typically include
their bank and other debt, payment obligations to suppliers and real estate
lease obligations. Because we own the land and buildings on which the tenant
conducts its retail business, we believe the risk of default on the retailers'
lease obligations is less than the retailers' unsecured general obligations. It
has been our experience that since retailers must retain their profitable retail
locations in order to survive in the event of reorganization, they are less
likely to reject a lease for a profitable location, which would terminate their
right to use the property. Thus, as the property owner, we believe we will fare
better than unsecured creditors of the same retailer in the event of
reorganization. If a property is rejected by the tenant during a reorganization,
we own the property and can either lease it to a new tenant or sell the
property. In addition, we believe that the risk of default on the real estate
leases can be further mitigated by monitoring the performance of the retailers'
individual unit locations and selling those units that are weaker performers.
In order to qualify for inclusion in our portfolio, new property acquisitions
must meet stringent investment and credit requirements. The properties must
generate attractive current yields, and the tenant must meet our credit
standards. We have established a three-part analysis that examines each
potential investment based on:
o Industry, company, market conditions and credit profile;
o Location profitability, if profitability data is available; and
o Overall real estate characteristics, including value and comparative rental
rates.
Companies whose properties have been approved for acquisition are generally
those with 50 or more retail stores that are located in highly visible areas,
with easy access to major thoroughfares and attractive demographics.
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ACQUISITION STRATEGY. We seek to invest in industries in which several,
well-organized, regional and national chains are capturing market share through
service, quality control, economies of scale, mass media advertising and the
selection of prime retail locations. We execute our acquisition strategy by
acting as a source of capital to regional and national retail chain stores in a
variety of industries by acquiring, then leasing back their retail store
locations. We undertake thorough research and analysis to identify appropriate
industries, tenants and property locations for investment. Our research
expertise is applied to uncover net-lease opportunities in markets where our
real estate financing program adds value. In selecting real estate for potential
investment, we generally seek to acquire properties that have the following
characteristics:
o Freestanding, commercially zoned property with a single tenant;
o Properties that are important retail locations for regional and national
retail chains;
o Properties that are located within attractive demographic areas relative to
the business of their tenants, with high visibility and easy access to major
thoroughfares; and
o Properties that can be purchased with the simultaneous execution or
assumption of long-term, net-lease agreements, providing the opportunity for
both current income and future rent increases.
PORTFOLIO MANAGEMENT STRATEGY. The active management of the property portfolio
is an essential component of our long-term strategy. We continually monitor our
portfolio for changes that could affect the performance of the industries,
tenants and locations in which we have invested. The portfolio is analyzed on an
ongoing basis with a view toward optimizing returns and enhancing the credit
quality of the portfolio. Realty Income's investment committee meets frequently
and is made up of our Chief Executive Officer, President and Executive Vice
President. Our investment committee reviews industry research, tenant research,
property due diligence and significant portfolio management activities. This
monitoring typically includes ongoing review and analysis of:
o The performance of various retail industries;
o The operation, management, business planning and financial condition of the
tenants; and
o The health of the individual markets in which we own properties, from both an
economic and real estate standpoint.
We have an active portfolio management program that incorporates the sale of
assets when we believe the reinvestment of the sales proceeds will generate
higher returns, enhance the credit quality of our real estate portfolio or
extend our average remaining lease terms. At December 31, 2001, we classified
real estate with a carrying amount of $23.4 million as held for sale. Of this
amount, investments owned by our taxable REIT subsidiary Crest Net totaled $22.3
million. Additionally, we anticipate selling properties from our portfolio,
which have not yet been specifically identified. We anticipate receiving up to
$50 million in proceeds from the sale of properties during the next 12 months.
We intend to invest these proceeds into new retail properties.
CAPITAL MARKETS STRATEGY. We believe our stockholders are best served by a
conservative capital structure. At March 1, 2002, our total outstanding credit
facility borrowings and outstanding notes were $303.5 million or approximately
20.9% of our total market capitalization of $1.45 billion. We define our total
market capitalization as the sum of:
o The shares of our common stock outstanding multiplied by the last reported
sales price of the common stock on the NYSE on March 1, 2002 of $31.40 per
share;
o The liquidation value of the Class B Preferred Stock;
o The liquidation value of the Class C Preferred Stock; and
o Outstanding borrowings on the credit facilities and outstanding notes at
March 1, 2002.
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We have a $200 million revolving, unsecured acquisition credit facility that
expires in December 2003. We also have a $25 million revolving, unsecured credit
facility that expires in February 2003. At March 1, 2002, the outstanding
balance on the $200 million acquisition credit facility was $50.7 million with
an effective interest rate of approximately 3.1%. At March 1, 2002, the
outstanding balance on the $25 million credit facility was $22.8 million with an
effective interest rate of approximately 3.1%. A commitment fee of 0.225% per
annum accrues on the total credit commitment of each credit facility. The credit
facilities have been and are expected to be used to acquire additional retail
properties leased to regional and national retail chains under long term net
lease agreements. The credit facilities have also been used to provide capital
to subsidiaries for the purpose of funding the acquisition of properties.
We use our credit facilities as a vehicle for the short-term financing of the
acquisition of new properties. When outstanding borrowings under the $200
million acquisition credit facility reach a certain level (generally in the
range of $75 to $175 million) and capital is available on acceptable terms, we
generally seek to refinance those borrowings with the net proceeds of long-term
or permanent financing, which may include the issuance of common stock,
preferred stock, convertible preferred stock, debt securities or convertible
debt securities. We cannot assure you, however, that we will be able to obtain
any such refinancing or that market conditions prevailing at the time of
refinancing will enable us to issue equity or debt securities upon acceptable
terms. We intend to pay off borrowings on our $25 million credit facility with
proceeds from the sale of properties owned by us or our subsidiaries.
Historically, we have met our long-term capital needs through the issuance of
common stock, preferred stock and investment grade, long-term, unsecured notes.
We believe the majority of our future issuances of securities should be in the
form of common stock. However, we may issue additional preferred stock or debt
securities from time to time. We may issue common stock when we believe that our
share price is at a level that allows for the proceeds of any offering to be
invested on an accretive basis into additional properties. In addition, we may
issue common stock to permanently finance properties that were financed using
our credit facilities or debt securities. We seek to maintain a conservative
debt level on our balance sheet and solid interest and fixed charge coverage
ratios.
We currently are assigned investment grade corporate credit ratings on our
senior unsecured notes from Fitch IBCA Duff & Phelps, Moody's Investor Service,
Inc. and Standard & Poor's Rating Group. Currently, Fitch IBCA Duff & Phelps has
assigned a rating of BBB, Moody's has assigned a rating of Baa3 and Standard &
Poor's has assigned a rating of BBB- to our senior notes. These ratings could
change based upon, among other things, our results of operations and financial
condition.
We also have received credit ratings from the same rating agencies on our
preferred stock. Fitch IBCA Duff & Phelps has assigned a rating of BBB-, Moody's
Investor Service, Inc. has assigned a rating of Ba1 and Standard & Poor's Rating
Group has assigned a rating of BB+. These ratings could change based upon, among
other things, our results of operations and financial condition.
Realty Income and its subsidiaries have no unconsolidated investments in
"special purpose entities" or off balance sheet financing, nor do we engage in
trading activities involving energy or commodity contracts or other derivative
instruments.
COMPETITIVE STRATEGY. We believe to pursue our investment philosophy and
strategy most successfully, we must seek to maintain the following competitive
advantages:
o Size and Type of Investment Properties: We believe smaller ($500,000 to
$10,000,000) retail net-leased properties represent an attractive investment
opportunity in today's real estate environment. Due to the complexities of
acquiring and managing a large portfolio of relatively small assets, we
believe these types of properties have not experienced significant
institutional participation or the corresponding yield reduction experienced
by larger income producing properties. We believe the less intensive
day-to-day property management required by net-lease agreements, coupled with
the active management of a large portfolio of smaller properties, is an
effective investment strategy. The tenants of our freestanding retail
properties generally provide goods and services that satisfy basic consumer
needs. In order to grow and expand, they generally need capital. Since the
acquisition of real estate is typically the single largest capital
expenditure of many of these retailers, our method of purchasing the property
and then leasing it back under a net-lease arrangement allows the retail
chain to free up capital.
11
<PAGE>
o Investment in New Retail Industries: Though we specialize in single-tenant
properties, we will seek to further diversify our portfolio among a variety
of retail industries. We believe diversification will allow us to invest in
retail industries that currently are growing and have characteristics we find
attractive. These characteristics include, but are not limited to, retail
industries dominated by local operators where regional and national chain
operators can gain market share and dominance through more efficient
operations, as well as industries taking advantage of major demographic
shifts in the population base.
o Diversification: Diversification of the portfolio by retail industry type,
tenant and geographic location is key to our objective of providing
predictable investment results for our stockholders. We continuously seek to
further diversify our portfolio. At December 31, 2001, our retail property
portfolio consisted of 1,124 properties located in 48 states, leased to 78
retail chains doing business in 24 industry segments.
o Management Specialization: We believe that our management's specialization in
single-tenant retail properties operated under net-lease agreements is
important to meeting our objectives. We plan to maintain this specialization
and will seek to employ and train high-quality professionals in this
specialized area of real estate ownership, finance and management.
o Technology: We intend to stay at the forefront of technology in our efforts
to efficiently and economically carry out our operations. We maintain a
sophisticated information system that allows us to analyze our portfolio's
performance and actively manage our investments. We believe that technology
and information-based systems will play an increasingly important role in our
competitiveness as an investment manager and source of capital to a variety
of industries and tenants.
PROPERTIES
At December 31, 2001, we owned a diversified portfolio:
o Of 1,124 properties;
o With an occupancy rate of 98.2%, or 1,104 of the 1,124 properties;
o Leased to 78 retail chains doing business in 24 retail industries;
o Located in 48 states;
o With over 9.6 million square feet of leasable space; and
o With an average leasable retail space of 8,600 square feet on approximately
62,300 square feet of land.
In addition to our real estate portfolio at December 31, 2001, our subsidiary,
Crest Net, owned 24 properties.
At December 31, 2001, 1,099, or 97.8%, of our 1,124 retail properties were under
net-lease agreements. Net leases typically require the tenant to be responsible
for minimum monthly rent and property operating expenses including property
taxes, insurance and maintenance plus, typically, future rent increases
(generally subject to ceilings) based on increases in the consumer price index,
fixed increases or additional rent calculated as a percentage of the tenants'
gross sales above a specified level.
12
<PAGE>
Our net-leased retail properties primarily are leased to regional and national
retail chain store operators. Generally, buildings are single-story properties
with adequate parking on site to accommodate peak retail traffic periods. The
properties tend to be on major thoroughfares with relatively high traffic counts
and adequate access, egress and proximity to a sufficient population base to
constitute a suitable market or trade area for the retailer's business.
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:
<TABLE>
<CAPTION>
Percentage of Rental Revenue(1)
--------------------------------------------------------------------------------------------------------
Annualized(2)
Rent as of For the Years Ended (1)
---------------------------------------------------------------------------------------
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
Industry 2001 2001 2000 1999 1998 1997 1996 1995
------------------------------------------- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Apparel Stores 2.4% 2.4% 2.4% 3.8% 4.1% 0.7% --% --%
Automotive Parts 7.8 8.3 8.3 8.6 7.8 9.1 10.5 11.4
Automotive Service 5.2 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 7.7 8.4 8.4 7.2 6.1 5.5 4.6 2.4
Craft and Novelty 0.4 0.4 0.4 0.4 * -- -- --
Drug Stores 0.2 0.2 0.2 0.2 0.1 -- -- --
Entertainment 2.0 1.8 2.0 1.2 -- -- -- --
General Merchandise 0.5 0.6 0.6 0.6 * -- -- --
Grocery Stores 0.5 0.6 0.6 0.5 * -- -- --
Health and Fitness 4.2 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 1.9 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 14.5 12.2 12.3 13.3 16.2 19.8 24.4 24.7
Shoe Stores 0.7 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 4.8 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%
<FN>
(1) Does not include properties owned by our subsidiary, Crest Net.
(2) Annualized Rent is calculated by multiplying the monthly contractual base
rent as of December 31, 2001 for each of the properties by 12 and adding the
previous 12 month's historic percentage rent, which totaled $1.7 million (i.e.,
additional rent calculated as a percentage of the tenants' gross sales above a
specified level). For properties under construction, an estimated contractual
base rent based upon the estimated total costs of each property is used.
</FN>
</TABLE>
13
<PAGE>
Of the 1,124 properties in the portfolio at December 31, 2001, 1,119 were
single-tenant properties with the remaining properties being multi-tenant
properties. At December 31, 2001, 1,099 of the 1,119 single-tenant properties,
or 98.2%, were leased with a weighted average remaining lease term (excluding
extension options) of approximately 10.4 years.
The following table sets forth certain information regarding the timing of the
initial lease term expirations (excluding extension options) on our 1,099 net
leased, single-tenant retail properties at December 31, 2001 (dollars in
thousands):
<TABLE>
<CAPTION>
Number of Annualized Percentage of
Year Leases Expiring(1) Rent(1)(2) Annualized Rent
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2002 88 $ 7,115 5.6%
2003 78 6,596 5.2
2004 118 10,161 8.1
2005 84 6,574 5.2
2006 75 6,723 5.3
2007 92 6,348 5.0
2008 63 5,670 4.5
2009 28 2,488 2.0
2010 44 3,798 3.0
2011 35 5,302 4.2
2012 48 5,690 4.5
2013 70 12,348 9.8
2014 35 6,287 5.0
2015 36 4,291 3.4
2016 14 1,497 1.2
2017 13 4,592 3.6
2018 16 1,702 1.3
2019 49 8,241 6.5
2020 10 3,664 2.9
2021 95 14,487 11.5
2023 2 341 0.3
2026 2 372 0.3
2033 2 1,118 0.9
2034 2 834 0.7
----------------------------------------------------------------------------------------------------------------
Totals 1,099 $ 126,239 100.0%
================================================================================================================
<FN>
(1) This table does not include five multi-tenant properties and 20 vacant,
unleased single-tenant properties owned by the Company and properties owned by
our subsidiary, Crest Net. 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 December 31, 2001 for each of the properties by 12 and adding the
previous 12 month's historic percentage rent, which totaled $1.7 million (i.e.,
additional rent calculated as a percentage of the tenants' gross sales above a
specified level). For properties under construction, an estimated contractual
base rent based upon the estimated total costs of each property is used.
</FN>
</TABLE>
14
<PAGE>
The following table sets forth certain state-by-state information regarding
Realty Income's property portfolio at December 31, 2001 (dollars in thousands):
<TABLE>
<CAPTION>
Approximate
Number of Percent Leasable Annualized Percentage of
State Properties(1) Leased Square Feet Rent(1)(2) Annualized Rent
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alabama 15 100% 142,600 $ 1,412 1.1%
Alaska 2 100 128,500 1,003 0.8
Arizona 30 100 225,500 3,684 2.8
Arkansas 8 100 48,800 916 0.7
California 53 100 992,800 14,285 10.8
Colorado 43 98 265,600 3,949 3.0
Connecticut 15 100 241,500 3,652 2.8
Delaware 1 100 5,400 72 0.1
Florida 91 92 1,164,700 14,741 11.2
Georgia 63 98 450,700 6,426 4.9
Idaho 11 100 52,000 741 0.6
Illinois 37 100 306,200 4,275 3.2
Indiana 29 97 170,700 2,226 1.7
Iowa 10 100 67,600 702 0.5
Kansas 21 100 190,000 2,210 1.7
Kentucky 13 100 43,600 1,128 0.8
Louisiana 7 100 47,100 708 0.5
Maryland 9 100 91,100 1,327 1.0
Massachusetts 22 100 100,200 2,444 1.8
Michigan 10 100 68,100 989 0.7
Minnesota 23 87 248,200 2,186 1.6
Mississippi 21 100 171,000 1,737 1.3
Missouri 34 100 206,900 2,736 2.1
Montana 2 100 30,000 286 0.2
Nebraska 9 100 87,100 1,152 0.9
Nevada 6 100 81,300 1,295 1.0
New Hampshire 6 100 23,900 593 0.4
New Jersey 10 100 47,400 1,189 0.9
New Mexico 5 100 46,000 363 0.3
New York 24 96 265,600 5,501 4.2
North Carolina 33 100 170,200 3,243 2.4
North Dakota 1 100 22,000 65 0.1
Ohio 66 99 377,000 5,613 4.2
Oklahoma 19 100 107,600 1,535 1.2
Oregon 16 100 198,100 1,826 1.4
Pennsylvania 29 100 239,500 3,355 2.5
Rhode Island 1 100 3,500 116 0.1
South Carolina 47 100 142,000 4,032 3.0
South Dakota 2 100 12,600 175 0.1
Tennessee 29 97 237,900 3,134 2.4
Texas 150 97 1,323,000 13,594 10.3
Utah 7 100 45,400 642 0.5
Vermont 1 100 2,500 87 0.1
Virginia 29 100 301,900 5,063 3.8
Washington 40 100 261,800 3,219 2.4
West Virginia 2 100 16,800 160 0.1
Wisconsin 18 100 171,000 2,080 1.6
Wyoming 4 100 20,100 267 0.2
------------------------------------------------------------------------------------------------------------------
Totals/Average 1,124 98% 9,663,000 $ 132,134 100.0%
==================================================================================================================
15
<PAGE>
<FN>
(1) Does not include properties owned by our subsidiary, Crest Net.
(2) Annualized rent is calculated by multiplying the monthly contractual base
rent as of December 31, 2001 for each of the properties by 12 and adding the
previous 12 month's historic percentage rent, which totaled $1.7 million (i.e.,
additional rent calculated as a percentage of the tenants' gross sales above a
specified level). For the properties under construction, an estimated
contractual base rent based upon the estimated total costs of each property is
used.
</FN>
</TABLE>
The following table sets forth certain information regarding the properties
owned by Realty Income at December 31, 2001, classified according to the retail
business types and the level of services they provide (dollars in thousands):
<TABLE>
<CAPTION>
Number of Annualized Percentage of
Industry Properties(1) Rent(1)(2) Annualized Rent
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TENANTS PROVIDING SERVICES
Automotive Service 98 $ 6,972 5.3%
Child Care 327 28,899 21.9
Entertainment 8 2,594 2.0
Health and Fitness 9 5,479 4.2
Private Education 5 1,738 1.3
Theaters 10 5,209 3.9
Other 8 6,397 4.8
---------------------------------------------------------------
465 57,288 43.4
---------------------------------------------------------------
TENANTS SELLING GOODS AND SERVICES
Automotive Parts (with installation) 64 5,816 4.4
Business Services 1 124 0.1
Convenience Stores 105 10,231 7.7
Home Improvement 2 187 0.1
Pet Supplies and Services 6 1,561 1.2
Restaurants 231 19,224 14.6
Video Rental 34 4,501 3.4
---------------------------------------------------------------
443 41,644 31.5
---------------------------------------------------------------
TENANTS SELLING GOODS
Apparel Stores 5 3,103 2.3
Automotive Parts 75 4,390 3.3
Book Stores 2 606 0.5
Consumer Electronics 36 4,639 3.5
Craft and Novelty 2 502 0.4
Drug Stores 1 235 0.2
General Merchandise 11 687 0.5
Grocery Stores 2 726 0.6
Home Furnishings 38 7,279 5.5
Home Improvement 18 1,377 1.0
Office Supplies 8 2,540 1.9
Pet Supplies 3 644 0.5
Shoe Stores 4 890 0.7
Sporting Goods 11 5,584 4.2
---------------------------------------------------------------
216 33,202 25.1
---------------------------------------------------------------
---------------------------------------------------------------
TOTALS 1,124 $ 132,134 100.0%
===============================================================
<FN>
(1) This table does not include properties owned by our subsidiary, Crest Net.
(2) Annualized rent is calculated by multiplying the monthly contractual base
rent as of December 31, 2001 for each of the properties by 12 and adding the
previous 12 month's historic percentage rent, which totaled $1.7 million (i.e.,
additional rent calculated as a percentage of the tenants' gross sales above a
specified level). For the properties under construction, an estimated
contractual base rent based upon the estimated total costs of each property is
used.
</FN>
</TABLE>
16
<PAGE>
DESCRIPTION OF LEASING STRUCTURE. At December 31, 2001, 1,099 or 97.8% of the
Company's 1,124 properties were leased pursuant to net leases. In most cases,
the leases:
o Were for initial terms of from 15 to 20 years with the tenants having one or
more options to extend the initial term;
o Require the tenants to pay property taxes, insurance and expenses of
maintaining the property;
o Provide for a minimum base rent plus future increases (typically subject to
ceilings) based on increases in the consumer price index, additional rent
based upon the tenants' gross sales above a specified level (i.e., percentage
rent) or fixed increases. Where leases provide for rent increases based on
increases in the consumer price index, generally these increases permanently
become part of the base rent. Where leases provide for percentage rent, this
additional rent is typically payable only if the tenants' gross sales for a
given period (usually one year) exceed a specified level, and then is
typically calculated as a percentage of only the amount of gross sales in
excess of that level.
MATTERS PERTAINING TO CERTAIN PROPERTIES AND TENANTS. Twenty of our properties
were available for sale or lease at December 31, 2001, all of which are
single-tenant properties. Ten of the properties had been previously leased to
child care operators, one to a home furnishings store operator, five to home
improvement operators, three to restaurant operators and one to a shoe store
operator. At December 31, 2001, 22 of our properties under lease were available
for sublease by the tenants, all of which were current with their rent and other
obligations.
Our largest tenant, Children's World Learning Centers, accounted for
approximately 12.1% of our rental revenue in 2001. No other tenant comprised 10%
or more of our rental revenue. At December 31, 2001, Children's World Learning
Centers accounted for approximately 11.3% of our annualized rent. Annualized
rent is calculated by multiplying the monthly contractual base rent for each of
the properties by 12 and adding the previous 12 month's historic percentage
rent, excluding properties owned by Crest Net. In general, a downturn in the
industry represented by this tenant, whether nationwide or limited to specific
sectors of the United States, could adversely affect tenants in this industry,
which in turn could materially adversely affect our financial position and
results of operations and our ability to make distributions to stockholders and
debt service payments. In addition, a substantial number of our properties are
leased to middle market retail chains that generally have more limited financial
and other resources than certain upper market retail chains, and therefore are
more likely to be adversely affected by a downturn in their respective business
or in the regional or national economy generally.
Our tenants in the child care and restaurant industries accounted for
approximately 23.6% and 12.1%, respectively, of our rental revenue for the year
ended December 31, 2001. A downturn in either of these industries generally,
whether nationwide or limited to specific sectors of the United States, could
adversely affect tenants in those industries, which in turn could materially
adversely affect our financial position and results of operations and our
ability to make distributions to stockholders and debt service payments.
DEVELOPMENT OF CERTAIN PROPERTIES. Of the 91 properties we acquired in 2001 and
26 properties acquired by Crest Net in 2001, all but six were occupied at March
1, 2002. The six properties were leased and under construction pursuant to a
contract under which the tenant has agreed to develop the properties (with
development costs funded by us or Crest Net) with rent commencing when the
premises open for business. In the case of development properties, we either
enter into an agreement with a retail chain where the retailer retains a
contractor to construct the improvements and we fund the costs of that
development, or we fund a developer who constructs the improvements. In either
case, there is an executed lease and there is a requirement to complete the
construction on a timely basis, generally within eight months after we purchase
the land. Generally, the tenant or developer is required to pay construction
cost overruns to the extent they exceed the construction budget by more than a
predetermined amount. We also enter into a lease with the tenant at the time we
purchase the land, which generally requires the tenant begin paying base rent,
calculated as a percentage of our acquisition cost for the property, including
construction costs and capitalized interest, when the premises opens for
business. In 2001, we acquired four development properties, and Crest Net
acquired eight development properties, six of which have been completed, were
operating and generating rent as of March 1, 2002. Both Realty Income and Crest
Net will continue to seek to acquire land for development under similar
arrangements.
17
<PAGE>
OTHER ITEMS
COMPETITION FOR ACQUISITION OF REAL ESTATE. We face competition in the
acquisition, operation and sale of property. We expect competition from:
o Businesses;
o Individuals;
o Fiduciary accounts and plans; and o Other entities engaged in real estate
investment.
Some of these competitors are larger than we are and have greater financial
resources. This competition may result in a higher cost for properties we wish
to purchase.
The tenants leasing our properties generally face significant competition from
other operators. This competition may adversely impact:
o That portion, if any, of the rental stream to be paid to us based on a
tenant's revenues; and
o The tenants' results of operations or financial condition.
ENVIRONMENTAL LIABILITIES. Investments in real property can create a potential
for environmental liability. An owner of property can face liability for
environmental contamination created by the presence or discharge of hazardous
substances on the property. We face such liability regardless of:
o Our knowledge of the contamination;
o The timing of the contamination;
o The cause of the contamination; or
o The party responsible for the contamination of the property.
There may be environmental problems associated with our properties of which we
are unaware. In that regard, a number of our properties are leased to operators
of oil change and tune-up facilities, and convenience stores that sell
petroleum-based fuels. These facilities, or other of our properties, use, or may
have used in the past, underground tanks for the storage of petroleum-based or
waste products which could create a potential for release of hazardous
substances.
The presence of hazardous substances on a property may adversely affect our
ability to sell that property and we may incur substantial remediation costs.
Although our leases generally require our tenants to operate in compliance with
all applicable federal, state and local laws, ordinances and regulations and to
indemnify us against any environmental liabilities arising from the tenants'
activities on the property, we could nevertheless be subject to strict liability
by virtue of our ownership interest, and there can be no assurance that our
tenants would satisfy their indemnification obligations under the leases. The
discovery of environmental liabilities attached to our properties could have a
material adverse effect on our results of operations or financial condition or
our ability to make distributions to stockholders.
18
<PAGE>
We have not been notified by any governmental authority, and are not otherwise
aware, of any material noncompliance, liability or claim relating to hazardous
or toxic substances or petroleum products in connection with any of our present
properties. Nevertheless, if environmental contamination should exist, we could
be subject to strict liability by virtue of our ownership interest.
Since December 1996, we have maintained an environmental insurance policy on our
property portfolio. The limit on our current policy is $5 million per occurrence
and $25 million in the aggregate, subject to a $100,000 self-insured retention
per occurrence. There is a sublimit on properties with underground storage tanks
of $1 million per occurrence and $5 million in the aggregate, subject to a
$25,000 self-insured retention per occurrence. It is possible that our insurance
will be insufficient to address any particular environmental situation and that
we will be unable to continue to obtain insurance for environmental matters, at
a reasonable cost or at all, in the future.
TAXATION OF THE COMPANY. We believe that we are organized and have operated,
commencing with our taxable year ended December 31, 1994, and we intend to
continue to operate, so as to qualify as a "real estate investment trust" under
Sections 856 through 860 of the Code. However, we cannot assure you that we have
satisfied the requirements for qualification as a REIT, or that we will continue
to be organized or that we have been or will continue to be able to operate in a
manner so as to qualify or remain so qualified.
Qualification as a REIT involves the satisfaction of numerous requirements under
highly technical and complex Code provisions for which there are only limited
judicial and administrative interpretations, and the determination of various
factual matters and circumstances not entirely within our control.
For example, in order to qualify as a REIT, at least 95% of our gross income in
any year must be derived from qualifying sources and we must pay distributions
to stockholders aggregating annually at least 90% (95% prior to 2001) of our
REIT taxable income (as defined in the Code and determined without regard to the
dividends paid deduction and by excluding net capital gains).
In the future, it is possible that legislation, new regulations, administrative
interpretations or court decisions will change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of those
qualifications.
If we were to fail to qualify as a REIT in any taxable year:
o We would be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates;
o We would not be allowed a deduction in computing our taxable income for
amounts distributed to our stockholders;
o We could be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost;
o We would no longer be required to make distributions to stockholders; and
o This treatment would substantially reduce our net earnings available for
investment or distribution to stockholders because of the additional tax
liability for the years involved.
Even if we qualify for and maintain our REIT status, we are subject to certain
federal, state and local taxes on our income and property. For example, if we
have net income from a prohibited transaction, that income will be subject to a
100% tax. Our subsidiary Crest Net is subject to federal and state taxes at the
applicable tax rates on its income and property.
19
<PAGE>
EFFECT OF DISTRIBUTION REQUIREMENTS. To maintain our status as a REIT for
federal income tax purposes, we generally are required to distribute to our
stockholders at least 90% of our REIT taxable income determined without regard
to the dividends paid deduction and by excluding net capital gains each year.
We also are subject to tax at regular corporate rates to the extent that we
distribute less than 100% of our REIT taxable income (including net capital
gains) each year.
In addition, we are subject to a 4% nondeductible excise tax on the amount, if
any, by which certain distributions we pay, with respect to any calendar year,
are less than the sum of 85% of our ordinary income for that calendar year, 95%
of our capital gain net income for the calendar year, and any amount of that
income that was not distributed in prior years.
We intend to continue to make distributions to our stockholders to comply with
the distribution requirements of the Code and to reduce exposure to federal
income taxes and the nondeductible excise tax. Differences in timing between the
receipt of income and the payment of expenses in arriving at taxable income and
the effect of required debt amortization payments could require us to borrow
funds on a short-term basis to meet the distribution requirements that are
necessary to achieve the tax benefits associated with qualifying as a REIT.
DILUTION OF COMMON STOCK. Our future growth will depend in large part upon our
ability to raise additional capital. If we were to raise additional capital
through the issuance of equity securities, we could dilute the interests of
holders of common stock. Likewise, our Board of Directors is authorized to cause
us to issue preferred stock of any class or series (with dividend, voting and
other rights as determined by the Board of Directors). Accordingly, the Board of
Directors may authorize the issuance of preferred stock with voting, dividend
and other similar rights that could dilute, or otherwise adversely affect, the
interests of holders of common stock.
REAL ESTATE OWNERSHIP RISKS. We are subject to all of the general risks
associated with the ownership of real estate. In particular, we face the risk
that rental revenue from the properties may be insufficient to cover all
corporate operating expenses, debt service payments on indebtedness we incur and
distributions on our stock. Additional real estate ownership risks include:
o Adverse changes in general or local economic conditions;
o Changes in supply of or demand for similar or competing properties;
o Changes in interest rates and operating expenses;
o Competition for tenants;
o Changes in market rental rates;
o Inability to lease properties upon termination of existing leases;
o Renewal of leases at lower rental rates;
o Inability to collect rents from tenants due to financial hardship, including
bankruptcy;
o Changes in tax, real estate, zoning and environmental laws that may have an
adverse impact upon the value of real estate;
o Uninsured property liability;
o Property damage or casualty losses;
o Unexpected expenditures for capital improvements or to bring properties into
compliance with applicable federal, state and local laws; o Acts of terrorism
and war; and
o Acts of God and other factors beyond the control of our management.
DEPENDENCE ON KEY PERSONNEL. We depend on the efforts of our executive officers
and key employees. The loss of the services of our executive officers and key
employees could have a material adverse effect on our operations.
20
<PAGE>
ITEM 2: PROPERTIES
----------
Information pertaining to our properties can be found under Item 1.
ITEM 3: LEGAL PROCEEDINGS
-----------------
We are subject to certain claims and lawsuits, the outcome of which cannot be
determined at this time. In the opinion of management, any liability we might
incur upon the resolution of these claims and lawsuits will not, in the
aggregate, have a material adverse effect on our consolidated financial
statements taken as a whole.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to stockholders during the fourth quarter of the
fiscal year.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
A. Our common stock is traded on the New York Stock Exchange under the ticker
symbol "O." The following table shows the high and low sales prices per share
for our common stock as reported by the New York Stock Exchange composite tape,
and distributions declared per share of common stock by us for the periods
indicated.
<TABLE>
<CAPTION>
Price Per Share
of Common Stock Distributions
---------------------------------------------------------
High Low Declared(1)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2001
First quarter $26.75 $24.30 $0.55625
Second quarter 29.56 26.10 0.56000
Third quarter 29.95 26.45 0.56375
Fourth quarter 30.16 27.90 0.56750
----------------------------------------------------------------------------------------------------------------------
Total $2.2475
======================================================================================================================
2000
First quarter $22.000 $19.250 $0.54125
Second quarter 24.625 19.375 0.54500
Third quarter 24.500 22.125 0.54875
Fourth quarter 25.500 22.500 0.55250
----------------------------------------------------------------------------------------------------------------------
Total $2.18750
======================================================================================================================
<FN>
(1) Common stock distributions currently are declared monthly by us based on
financial results for the prior months. At December 31, 2001 a distribution of
$0.19 per common share had been declared and was paid on January 15, 2002.
</FN>
</TABLE>
B. There were approximately 12,300 holders of record of Realty Income's shares
of common stock as of March 1, 2002.
21
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
-----------------------
(not covered by Independent Auditors' Report)
<TABLE>
<CAPTION>
As of or for the years ended December 31,
(dollars in thousands, except per share 2001 2000 1999 1998 1997
data)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets (book value) $1,003,708 $934,766 $905,404 $759,234 $577,021
Cash and cash equivalents 2,467 3,815 773 2,533 2,123
Lines of credit and notes payable 315,300 404,000 349,200 294,800 132,600
Total liabilities 331,915 419,197 370,573 309,025 143,706
Total stockholders' equity 671,793 515,569 534,831 450,209 433,315
Net cash provided by operating
activities 90,035 56,590 72,154 64,645 52,692
Net change in cash and cash
equivalents (1,348) 3,042 (1,760) 410 564
Total revenue 126,271 118,310 104,510 85,132 67,897
Income from operations 57,080 48,076 45,295 41,004 33,688
Gain on sales of properties 10,478 6,712 1,301 526 1,082
Extraordinary item -- -- (355) -- --
Cumulative effect of change in
accounting principle -- -- -- (226) --
Net income 67,558 54,788 46,241 41,304 34,770
Preferred stock dividends (9,712) (9,712) (5,229) -- --
Net income available to common
stockholders 57,846 45,076 41,012 41,304 34,770
Distributions paid to common
stockholders 64,871 58,262 55,925 52,301 44,367
Ratio of earnings to fixed
charges(1) 3.5x 2.6x 2.7x 3.8x 5.1x
Ratio of earnings to combined
fixed charges and preferred
stock dividends(1) 2.6x 2.0x 2.3x 3.8x 5.1x
Basic and diluted net income per
common share 1.98 1.69 1.53 1.55 1.48
Distributions paid per common
share 2.2425 2.1825 2.085 1.965 1.893
Distributions declared per common
share 2.2475 2.1875 2.095 1.975 1.895
Basic weighted average number of
common shares outstanding 29,225,359 26,684,598 26,822,285 26,629,936 23,568,831
Diluted weighted average number
of common shares outstanding 29,281,120 26,700,806 26,826,090 26,638,284 23,572,715
<FN>
(1) Ratio of Earnings to Fixed Charges is calculated by dividing earnings by
fixed charges. For this purpose, earnings consist of net income before interest
expense. Fixed charges are comprised of interest costs (including capitalized
interest) and the amortization of debt issuance costs.
</FN>
</TABLE>
22
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
------------------------------------------------------------------------
GENERAL
Realty Income Corporation, "The Monthly Dividend Company," a Maryland
corporation ("Realty Income," the "Company," "us," "we" or "our") is organized
to operate as an equity real estate investment trust ("REIT"). We are a fully
integrated self-administered real estate company with in-house acquisition,
leasing, legal, retail research, real estate research, portfolio management and
capital markets expertise.
Our primary business objective is to generate dependable monthly dividends from
a consistent and predictable level of funds from operations ("FFO") per share.
Additionally, we generally will seek to increase distributions to stockholders
and FFO per share through both active portfolio management and the acquisition
of additional properties.
At December 31, 2001, we owned a diversified portfolio:
o Of 1,124 properties;
o With an occupancy rate of 98.2%, or 1,104 of the 1,124 properties;
o Leased to 78 retail chains doing business in 24 retail industries;
o Located in 48 states;
o With over 9.6 million square feet of leasable space; and
o With an average leasable retail space of approximately 8,600 square feet on
approximately 62,300 square feet of land.
In addition to our real estate portfolio, at December 31, 2001, our subsidiary
Crest Net Lease, Inc. ("Crest Net") owned a portfolio:
o Of 24 retail properties;
o Located in 14 states;
o That will contain approximately 92,300 square feet of leasable space; o That
are 100% leased and are held for sale; and o For a total investment of $22.3
million.
LIQUIDITY AND CAPITAL RESOURCES
CASH RESERVES. Realty Income is organized to operate as an equity REIT that
acquires and leases properties and distributes to stockholders, in the form of
monthly cash distributions, a substantial portion of its net cash flow generated
from leases on its retail properties. We intend to retain an appropriate amount
of cash as working capital. At December 31, 2001, we had cash and cash
equivalents totaling $2.5 million.
We believe that our cash and cash equivalents on hand, cash provided from
operating activities and borrowing capacity are sufficient to meet our liquidity
needs for the foreseeable future. We intend, however, to use additional sources
of capital to fund property acquisitions and to repay our credit facilities.
CAPITAL FUNDING. We have a $200 million revolving, unsecured acquisition credit
facility that expires in December 2003. We also have a $25 million revolving,
unsecured credit facility that expires in February 2003. The credit facilities
currently bear interest at 1.225% over the London Interbank Offered Rate, or
LIBOR, and offer us other interest rate options. At March 1, 2002, we had
borrowing capacity of $151.5 million available on our credit facilities and an
outstanding balance of $73.5 million with an effective interest rate of 3.1%.
23
<PAGE>
These credit facilities have been and are expected to be used to acquire
additional retail properties leased to national and regional retail chains under
long-term lease agreements. Any additional borrowings will increase our exposure
to interest rate risk. We have no mortgage debt on any of our properties.
In June 1999, we filed a universal shelf registration statement with the
Securities and Exchange Commission covering up to $409.2 million in value of
common stock, preferred stock and debt securities. Through March 1, 2002, we
have issued $209.3 million of common stock, preferred stock and debt securities
under the universal shelf registration statement. At March 1, 2002, a balance of
$199.9 million was available under our universal shelf registration statement.
In May 2001, we issued 2,850,000 shares of common stock at a price of $27.80 per
share. We issued an additional 100,000 shares in May 2001 when the underwriters
exercised their over-allotment option. The net proceeds of $77.5 million were
used to repay borrowings under our $200 million acquisition credit facility and
for other general corporate purposes.
In October 2001, we issued 2,600,000 shares of common stock at a price of $28.50
per share. We issued an additional 350,000 shares in November 2001 when the
underwriters exercised their over-allotment option. The net proceeds of $79.5
million were used to repay borrowings under our $200 million acquisition credit
facility and for other general corporate purposes.
In February 2002, we issued 273,150 shares of common stock to a unit investment
trust at a net price to us of $30.26 per share, based on a 5% discount to the
market price at the time of issuance of $31.85 per share. The net proceeds of
$8.2 million were used to repay bank borrowings.
We believe that our stockholders are best served by a conservative capital
structure. At March 1, 2002, our total outstanding credit facility borrowings
and outstanding notes were $303.5 million or approximately 20.9% of our total
market capitalization of $1.45 billion. We define our total market
capitalization as the sum of the:
o Shares of our common stock outstanding multiplied by the last reported sales
price of the common stock on the NYSE on March 1, 2002 of $31.40 per share;
o Liquidation value of the Class B Preferred Stock;
o Liquidation value of the Class C Preferred Stock; and
o Outstanding borrowings on the credit facilities and outstanding notes at
March 1, 2002.
Historically, we have met our long-term capital needs through the issuance of
common stock, preferred stock and investment grade, long-term, unsecured notes.
We believe that the majority of our future issuances of securities should be in
the form of common stock. However, we may issue additional preferred stock or
debt securities from time to time. We may issue common stock when we believe
that our share price is at a level that allows for the proceeds of any offering
to be invested on an accretive basis into additional properties. In addition, we
may issue common stock to permanently finance properties that were financed by
our credit facilities or debt securities. However, we cannot assure you that we
will have access to the capital markets at terms that are acceptable to us. We
seek to maintain a conservative debt level on our balance sheet and solid
interest and fixed charge coverage ratios.
We currently are assigned investment grade corporate credit ratings on our
senior unsecured notes from Fitch IBCA Duff & Phelps, Moody's Investor Service,
Inc. and Standard & Poor's Rating Group. Currently, Fitch IBCA Duff & Phelps has
assigned a rating of BBB, Moody's has assigned a rating of Baa3 and Standard &
Poor's has assigned a rating of BBB- to our senior notes. These ratings could
change based upon, among other things, our results of operations and financial
condition.
24
<PAGE>
We also have received credit ratings from the same rating agencies on our
preferred stock. Fitch IBCA Duff & Phelps has assigned a rating of BBB-, Moody's
Investor Service, Inc. has assigned a rating of Ba1 and Standard & Poor's Rating
Group has assigned a rating of BB+. These ratings could change based upon, among
other things, our results of operations and financial condition.
Realty Income and its subsidiaries have no unconsolidated investments in
"special purpose entities" or off balance sheet financing, nor do we engage in
trading activities involving energy or commodity contracts or other derivative
instruments.
PROPERTY ACQUISITIONS. In 2001, we acquired 91 properties (the "New Properties")
located in 25 states. In 2001, we invested $131.8 million in the New Properties
and properties under development, which includes investments of $7.1 million for
properties acquired before 2001. Estimated unfunded development costs on
properties under construction at December 31, 2001 totaled $3.1 million. In
2001, we capitalized $401,000 for re-leasing costs and $547,000 for building
improvements on existing properties in our portfolio.
The initial weighted average annual unleveraged return on the $131.8 million
invested in 2001 is estimated to be 11.0%, computed as estimated contractual net
operating income (which in the case of a net-leased property is equal to the
base rent or, in the case of properties under construction, the estimated base
rent under the lease) for the first year of each lease, divided by the estimated
total costs. Since it is possible that a tenant could default on the payment of
contractual rent, we cannot assure you that the actual return on the funds
invested will remain at the percentage listed above.
The New Properties will contain approximately 877,200 leasable square feet and
are 100% leased under net leases, with an average initial lease term of 20.1
years. At December 31, 2001, two of the New Properties were leased and under
construction, pursuant to contracts under which the tenants agreed to develop
the properties (with development costs funded by Realty Income) with rent
scheduled to begin in the first half of 2002.
In 2000, we acquired 13 properties (the "2000 Properties") and invested $70.0
million in the 2000 Properties and properties under development. In 2000, we
also paid $308,000 for re-leasing costs and $90,000 for building improvements on
existing properties in our portfolio. The initial weighted average annual
unleveraged return on the $70.0 million invested in 2000 is estimated to be
10.8%, computed in the same manner as 2001's estimated initial weighted average
annual unleveraged return and subject to the same uncertainty described above.
These 13 properties contain approximately 676,100 leasable square feet and are
100% leased under net leases, with an average initial lease term of 18.3 years.
DISTRIBUTIONS. We pay monthly distributions to our common stockholders. We paid
cash distributions to our common stockholders of $64.9 million in 2001, $58.3
million in 2000 and $55.9 million in 1999.
We pay quarterly distributions to our Class B preferred stockholders. We paid
cash distributions to our Class B preferred stockholders of $6.4 million in both
2001 and 2000 and $3.9 million in 1999. Our Class B preferred stock was issued
in May 1999.
We pay monthly distributions to our Class C preferred stockholders. We paid cash
distributions to our Class C preferred stockholders of $3.3 million in both 2001
and 2000 and $1.4 million in 1999. Our Class C preferred stock was issued in
July 1999.
25
<PAGE>
CREST NET LEASE. We created Crest Net in January 2000 to buy, own and sell
properties, primarily to buyers using tax-deferred exchanges under Section 1031
of the Internal Revenue Code of 1986, as amended. (the "Code"). In order to
comply with the REIT qualification requirements in force when we created Crest
Net, 5% of the common stock of Crest Net, which represented 100% of the voting
stock, was not owned by the Company. Effective for 2001, the Code was modified
to allow a REIT to own up to 100% of the voting stock and/or value of a
corporation that elects with the REIT and qualifies to be treated as a taxable
REIT subsidiary. Following the change in the Code, Realty Income and Crest Net
jointly elected to treat Crest Net as a taxable REIT subsidiary, effective
January 1, 2001, and in May 2001 we acquired the 5% of Crest Net's common stock
owned by certain members of our management and the management of Crest Net for
$507,000. The acquisition of the 5% of common stock was accounted for under the
purchase method of accounting. The disinterested members of our Board of
Directors unanimously approved this transaction. Crest Net originally issued
this stock for $450,000. Realty Income also received rights to the undistributed
earnings on the stock, which totaled $81,200. After this transaction, Realty
Income owns 100% of Crest Net's stock.
In 2000, we invested $8.6 million in Crest Net common stock. In February 2000,
we entered into a $25 million, revolving credit facility with Crest Net. The
financial statements of Crest Net are consolidated into Realty Income's
financial statements. All material intercompany transactions have been
eliminated in consolidation.
In 2001, Crest Net invested $24.7 million in 26 retail properties. Estimated
unfunded development costs on properties under construction at December 31, 2001
totaled $2.8 million. These 26 properties will contain approximately 102,300 of
leasable square feet, are 100% leased and have initial lease terms averaging
20.1 years. Three of these properties were sold in 2001.
In 2000, Crest Net invested $28.6 million in nine retail properties. These nine
properties contain approximately 398,100 leasable square feet, are 100% leased
and have initial lease terms averaging 19.0 years. Eight of these properties
were sold during 2000 and 2001.
In 2001, Crest Net sold nine properties from its inventory for $28.9 million and
we recorded a gain of $3.4 million, before income taxes. At the end of 2001,
Crest Net carried an inventory of $22.3 million, which is included in real
estate held for sale on our consolidated balance sheet.
In 2001, Crest Net generated $2.4 million in funds from operations for Realty
Income. The contribution, if any, to our FFO by Crest Net will depend on the
timing and the number of property sales achieved by Crest Net, if any, in any
given year.
In 2000, Crest Net sold two properties for $6.2 million and we recorded a gain
of $766,000, before income taxes. In 2000, Crest Net generated $422,000 in funds
from operations for Realty Income.
STOCK AND SENIOR DEBT PURCHASE PROGRAM. We regularly review our investment
options to determine the best use of our capital. In January 2000, our Board of
Directors authorized the purchase of up to $10 million of our outstanding common
stock, preferred stock and senior debt securities. From time to time since
January 2000, we concluded our share price justified purchasing shares since
this provided an attractive return on our investment capital. We purchased an
aggregate of $6.7 million of our securities from January 2000 through December
2001. In 2001, we invested $169,000 to purchase 6,800 shares of our common
stock.
26
<PAGE>
FUNDS FROM OPERATIONS ("FFO")
Our FFO for 2001 increased by $10.6 million, or 15.8%, to $77.8 million versus
$67.2 million in 2000. FFO in 1999 was $65.9 million. The following is a
reconciliation of net income available to common stockholders to FFO and
information regarding distributions paid and the diluted weighted average number
of shares outstanding for 2001, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income available to common stockholders $ 57,846 $ 45,076 $ 41,012
Plus:
Depreciation and amortization 29,125 29,003 25,952
Extraordinary item -- -- 355
Provision for impairment losses 1,450 -- --
Less:
Depreciation of furniture, fixtures and equipment (115) (128) (101)
Gain on sales of investment properties (10,478) (6,712) (1,301)
-----------------------------------------------------------------------------------------------------------------------
Total funds from operations $ 77,828 $ 67,239 $ 65,917
=======================================================================================================================
Distributions paid to common stockholders $ 64,871 $ 58,262 $ 55,925
FFO in excess of distributions to common
stockholders $ 12,957 $ 8,977 $ 9,992
Diluted weighted average number of shares
outstanding 29,281,120 26,700,806 26,826,090
</TABLE>
We define FFO, consistent with the National Association of Real Estate
Investment Trust's definition, as net income available to common stockholders,
plus depreciation and amortization of assets uniquely significant to the real
estate industry, reduced by gains and increased by losses on (i) sales of
investment property and provisions for impairment and (ii) extraordinary items.
The following is a reconciliation of FFO to adjusted FFO for the years ended
December 31, 2001, 2000 and 1999. The adjustments are for non-cash items and
capitalized expenditures on existing properties in our portfolio (dollars in
thousands):
<TABLE>
2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Funds from operations $ 77,828 $ 67,239 $ 65,917
Plus:
Amortization of settlements on treasury lock agreements 756 756 756
Amortization of deferred financing costs 958 990 774
Amortization of stock compensation 301 194 216
Less:
Capitalized leasing costs and commissions (401) (308) (242)
Capitalized building improvements (547) (90) (148)
Straight line rent (12) (534) (747)
-----------------------------------------------------------------------------------------------------------------------
Total adjusted funds from operations $ 78,883 $ 68,247 $ 66,526
=======================================================================================================================
</TABLE>
27
<PAGE>
We consider FFO and adjusted FFO to be appropriate measures of the performance
of equity REITs. Financial analysts use FFO and adjusted FFO in evaluating
REITs. FFO and adjusted FFO can be a way to measure a REIT's ability to make
cash distribution payments. Presentation of this information is intended to
assist the reader in comparing the performance of different REITs, although it
should be noted that not all REITs calculate FFO and adjusted FFO the same way;
therefore, comparisons with other REITs may not be meaningful.
FFO and adjusted FFO are not necessarily indicative of cash flow available to
fund cash needs and should not be considered as an alternative to net income as
an indication of Realty Income's performance. In addition, FFO and adjusted FFO
should not be considered as an alternative to reviewing our cash flows from
operating, investing and financing activities as a measure of liquidity, of our
ability to make cash distributions or our ability to pay interest payments.
In 2001 and 2000, Crest Net generated $2.4 million and $422,000, respectively,
in FFO for Realty Income. The following is a calculation of Crest Net's FFO
contribution to Realty Income for 2001 and 2000 (dollars in thousands):
<TABLE>
<CAPTION>
2001 2000
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Gains from the sales of real estate acquired for
resale $ 3,374 $ 766
Rent and other revenue 1,816 1,234
Interest expense (869) (913)
General and administrative expenses (496) (333)
State and federal income taxes (1,400) (332)
---------------------------------------------------------------------------------------------------
Funds from operations contributed by Crest Net $ 2,425 $ 422
===================================================================================================
</TABLE>
RESULTS OF OPERATIONS
Management is required to make a number of assumptions and estimates that
directly impact the consolidated financial statements and related disclosures.
Those assumptions and estimates are the basis for certain of our accounting
policies described in note 2 to the consolidated financial statements. The
accounting policies that are most important to the portrayal of the Company's
financial condition and results of operations, and require management's most
difficult, subjective or complex judgments, are considered to be critical
accounting policies. Because of the uncertainties inherent in making assumptions
and estimates regarding unknown future outcomes, events may result in
significant differences between our estimates and actual results. Management
believes that each of our assumptions and estimates are appropriate under the
circumstances, and represent the most likely outcome. We believe our critical
accounting policies relate to depreciable lives of our real estate assets and
recoverability (impairment) of our real estate assets.
28
<PAGE>
THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2001 TO THE YEAR ENDED DECEMBER 31, 2000.
Rental revenue was $122.1 million for 2001 versus $117.2 million for 2000, an
increase of $4.9 million, or 4.2%. The increase in rental revenue is
attributable to:
o The 91 properties acquired in 2001, which generated revenue of $2.9 million;
o The 13 properties acquired in 2000, which generated revenue of $6.0 million
in 2001 compared to $1.7 million in 2000, an increase of $4.3 million;
o Properties owned by Crest Net, which generated revenue of $1.8 million in
2001 compared to $1.2 million in 2000, an increase of $588,000;
o Properties sold during 2000 and 2001, which generated revenue of $1.4 million
in 2001 as compared to $7.0 million in 2000, a decrease of $5.6 million;
o Net rental increase of $900,000 on development properties acquired before
2000 that started paying rent in 2000 and properties that were vacant during
part of 2000 or 2001; and
o Same store rents generated on 977 leased properties owned in all of both 2001
and 2000 increased by $1.8 million, or 1.8%, to $105.24 million from $103.41
million.
Of the 1,124 properties in the portfolio at December 31, 2001, 1,119, or 99.6%,
are single-tenant properties with the remaining properties being multi-tenant
properties. Of the 1,119 single-tenant properties, 1,099, or 98.2%, were net
leased with a weighted average remaining lease term (excluding extension
options) of approximately 10.4 years. Of our 1,099 leased single-tenant
properties, 1,087, or 98.9%, were under leases that provide for increases in
rents through:
o Base rent increases tied to a consumer price index with adjustment ceilings;
o Percentage rent based on a percentage of the tenants' gross sales;
o Fixed increases; or
o A combination of two or more of the above rent provisions.
Percentage rent, which is included in rental revenue, was $1.7 million in 2001
and $2.0 million in 2000.
Our portfolio of quality retail real estate owned under net leases continues to
perform well and provide dependable lease revenue supporting the payment of
monthly dividends. At December 31, 2001, our property portfolio of 1,124 retail
properties was 98.2% leased with only 20 properties available for lease or sale.
Of the 20 properties not leased at December 31, 2001, transactions to lease or
sell eight properties were underway or completed as of March 1, 2002. We
anticipate these transactions to be completed during the first half of 2002;
although we cannot assure you that all of these properties will be sold or
leased within this period.
GAIN ON SALES OF REAL ESTATE ACQUIRED FOR RESALE. In 2001, Crest Net sold nine
properties for $28.9 million and we recognized a gain of $3.4 million, before
income taxes. In 2000, Crest Net sold two properties for $6.2 million and we
recognized a gain of $766,000, before income taxes.
At December 31, 2001, Crest Net had $22.3 million invested in 24 properties,
which are held for sale. It is Crest Net's intent to carry an average inventory
of between $20 to $25 million in real estate on an ongoing basis. Crest Net
generates an earnings spread on the difference between the lease payments it
receives and the cost of capital used to acquire the properties. It is our
belief that at this level of inventory, these earnings will cover the ongoing
operating expenses of Crest Net.
29
<PAGE>
INTEREST EXPENSE. The following is a summary of the five components of interest
expense for 2001 and 2000 (dollars in thousands):
<TABLE>
<CAPTION>
2001 2000 Net Change
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on outstanding loans and notes $ 24,479 $ 30,259 $ (5,780)
Amortization of settlements on treasury lock
agreements 756 756 --
Credit facility commitment fees 513 508 5
Amortization of credit facility origination costs
and deferred bond financing costs 1,103 1,072 31
Interest capitalized (385) (1,048) 663
----------------------------------------------------------------------------------------------------------------------
Interest expense $ 26,466 $ 31,547 $ (5,081)
======================================================================================================================
Credit facilities and notes outstanding (dollars in thousands):
Years ended December 31, 2001 2000 Net Change
----------------------------------------------------------------------------------------------------------------------
Average outstanding balances $326,050 $384,921 $(58,871)
Average interest rates 7.51% 7.86% (0.35%)
</TABLE>
Interest on outstanding loans and notes was $5.8 million lower in 2001 than in
2000 primarily due to a decrease of $58.9 million in the average outstanding
balances and a decrease of 35 basis points in our average interest rate. In
2001, the Federal Reserve decreased the federal funds rate 11 times by an
aggregate total of 475 basis points. Correspondingly, the average borrowing rate
on our credit facilities has declined during the same period. The average
interest rate on our credit facilities decreased to 6.36% in 2001 from 7.67% in
2000. The majority of our credit facilities interest rate reductions in 2001
occurred during the second half of the year.
At December 31, 2001, the weighted average interest rate on our:
o Credit facility borrowings of $85.3 million was 3.13%;
o Notes payable of $230 million was 7.99%; and
o Combined outstanding credit facilities and notes of $315.3 million was 6.68%.
Our debt service coverage ratio for 2001 was 4.4 times and for 2000 was 3.5
times. Debt service coverage ratio is calculated as follows: earnings (income
from operations) before interest, taxes, depreciation, amortization and
impairment losses ("EBITDA") divided by interest expense. Our EBITDA for the
year ended December 31, 2001 and 2000 was $115.9 million and $109.4 million,
respectively. This information should not be considered as an alternative to any
measure of performance as promulgated under GAAP. Our calculation of EBITDA may
be different from the calculation used by other companies and, therefore,
comparability may be limited.
Our fixed coverage ratio for 2001 was 3.2 times and for 2000 was 2.7 times.
Fixed coverage ratio is calculated as follows: EBITDA divided by the sum of
interest expense and preferred stock dividends. This information should not be
considered as an alternative to any measure of performance as promulgated under
GAAP.
DEPRECIATION AND AMORTIZATION was $29.1 million in 2001 versus $29.0 million in
2000. The increase in depreciation and amortization was due to the acquisition
of properties in 2001, which was offset by property sales in 2001. The majority
of our 2001 acquisitions occurred during the fourth quarter. Depreciation of
buildings and improvements is computed using the straight-line method over an
estimated useful life of 25 years. If we used a shorter or longer estimated
useful life it could have a material impact on our results of operations and
financial position. We believe that 25 years is an appropriate estimate of
useful life.
30
<PAGE>
Amortization of goodwill for each of the years 2001, 2000 and 1999 was $924,000.
In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," effective January 2002, our goodwill
will no longer be amortized, but instead will be tested for impairment at least
annually. If goodwill is determined to be impaired, a provision for impairment
will be recorded to reduce the carrying value to its fair value.
GENERAL AND ADMINISTRATIVE EXPENSES increased by $997,000 to $7.8 million in
2001 versus $6.8 million in 2000. General and administrative expenses as a
percentage of revenue increased to 6.2% in 2001 as compared to 5.8% in 2000.
Included in general and administrative expenses are $496,000 and $333,000 of
expenses attributable to Crest Net in 2001 and 2000, respectively. General and
administrative expenses, excluding expenses attributable to Crest Net, increased
primarily due to increases in the cost of living, which includes increases in
payroll costs.
We had 53 employees at March 1, 2002 compared to 49 employees at March 1, 2001.
PROPERTY EXPENSES are broken down into costs associated with non-net leased
multi-tenant properties, unleased single-tenant properties and general portfolio
expenses. Expenses related to the multi-tenant and unleased single-tenant
properties include, but are not limited to, property taxes, maintenance,
insurance, utilities, property inspections, bad debt expense and legal fees.
General portfolio costs include, but are not limited to, insurance, legal,
property inspections and title search fees. At December 31, 2001, 20 properties
were available for lease or sale, as compared to 25 at December 31, 2000.
Property expenses were $2.5 million in 2001 and $2.0 million in 2000. The
$500,000 increase in property expenses is primarily attributable to an increase
in portfolio property insurance and costs associated with properties available
for lease.
OTHER EXPENSES were $1.8 million in 2001 and $813,000 in 2000. The increase in
2001 is primarily attributable to an increase in Crest Net income taxes. The
following is a summary of our other expenses in 2001 and 2000 (dollars in
thousands):
<TABLE>
<CAPTION>
2001 2000 Net Change
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realty Income state and local income taxes $ 396 $ 481 $ (85)
Crest Net income taxes 1,400 332 1,068
----------------------------------------------------------------------------------------------------------------------
Other expenses $ 1,796 $ 813 $ 983
======================================================================================================================
</TABLE>
PROVISION FOR IMPAIRMENT LOSSES of $1.45 million was recorded in 2001. No
provision for impairment loss was recorded in 2000 or 1999. We review long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. Generally, a provision
is made for impairment loss if estimated future operating cash flows
(undiscounted and without interest charges) plus estimated disposition proceeds
(undiscounted) are less than the current book value. Impairment losses are
measured as the amount by which the current book value of the asset exceeds the
fair value of the asset. The carrying value of our real estate is the largest
component of our consolidated balance sheet. If we were required to reduce the
carrying value of our real estate by recording provisions for impairment losses,
it could have a material impact on our results of operations and financial
position.
31
<PAGE>
GAIN ON SALES OF INVESTMENT PROPERTIES. In 2001, we sold 35 properties for a
total of $39.5 million and recognized a gain of $10.5 million. In 2000, we sold
21 properties for a total of $45.2 million and recognized a gain of $6.7
million. Included in the 21 properties sold in 2000, are two properties leased
by one of our tenants that we exchanged, valued at $22.7 million, for two other
properties owned by that tenant. The gain recognized from property sales in 2001
was $10.5 million, or $3.8 million greater than the gain recognized from
property sales in 2000 of $6.7 million.
We have an active portfolio management program that incorporates the sale of
assets when we believe the reinvestment of the sales proceeds will generate
higher returns, enhance the credit quality of our real estate portfolio or
extend our average remaining lease terms. At December 31, 2001, we classified
real estate with a carrying amount of $23.4 million as held for sale, of which
$22.3 million is owned by Crest Net. Additionally, we anticipate selling
investment properties from our portfolio that have not yet been specifically
identified. We anticipate we will receive up to $50 million in proceeds from the
sale of investment properties during the next 12 months. We intend to invest
these proceeds into new retail property acquisitions.
PREFERRED STOCK DIVIDENDS. We paid preferred stock dividends of $9.7 million in
both 2001 and 2000.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS in 2001 increased by $12.7 million
to $57.8 million versus $45.1 million in 2000.
The calculation to determine net income available to common stockholders
includes gains and losses from the sale of investment properties. The amount of
gains and losses varies from year to year based on the timing of property sales
and can significantly impact net income available to common stockholders.
THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31, 1999.
RENTAL REVENUE was $117.2 million for 2000 versus $104.3 million for 1999, an
increase of $12.9 million, or 12.4%. The increase in rental revenue was
primarily due to the acquisition of 110 properties in 1999. These properties
generated revenue of $15.4 million in 2000 compared to $6.9 million in 1999, an
increase of $8.5 million. Included in rental revenue for 2000 is $1.2 million
from properties owned by Crest Net.
Percentage rent, which is included in rental revenue, was $2.0 million in 2000
and $1.7 million in 1999. Same store rents generated on 894 leased properties
owned during all of both 2000 and 1999 increased by $1.5 million or 1.7%, to
$91.0 million from $89.5 million.
GAIN ON SALES OF REAL ESTATE ACQUIRED FOR RESALE. In 2000, Crest Net sold two
properties for $6.2 million and we recognized a gain on the sales of $766,000,
before income taxes. Crest Net was formed in 2000.
32
<PAGE>
INTEREST EXPENSE. The following is a summary of the five components of interest
expense for 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999 Net Change
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on outstanding loans and notes $ 30,259 $ 24,254 $6,005
Amortization of settlements on treasury lock
agreements 756 756 --
Credit facility commitment fees 508 268 240
Amortization of credit facility origination costs
and deferred bond financing costs 1,072 839 233
Interest capitalized (1,048) (1,644) 596
----------------------------------------------------------------------------------------------------------------------
Interest expense $ 31,547 $ 24,473 $7,074
======================================================================================================================
Credit facilities and notes outstanding (dollars in thousands):
Years ended December 31, 2000 1999 Net Change
----------------------------------------------------------------------------------------------------------------------
Average outstanding balances $384,921 $325,564 $59,357
Average interest rates 7.86% 7.45% 0.41%
</TABLE>
Interest on outstanding loans and notes was $6.0 million higher in 2000 than in
1999 primarily due to an increase of $59.4 million in the average outstanding
balances and an increase of 41 basis points in our average interest rate. The
average borrowing rate on our credit facilities during 2000 was 7.67%, or 150
basis points higher than our average borrowing rate during 1999. During 2000,
LIBOR increased, which increased the average borrowing rate on our credit
facilities.
Our debt service coverage ratio for the years ended December 31, 2000 and 1999
was 3.5 times and 3.9 times, respectively. Our EBITDA (as defined above) for the
years ended December 31, 2000 and 1999 was $109.4 million and $96.2 million,
respectively. Our fixed coverage ratio for 2000 was 2.7 times and for 1999 was
3.2 times.
DEPRECIATION AND AMORTIZATION was $29.0 million in 2000 versus $26.0 million in
1999. The increase in 2000 was primarily due to the full-year effect of
depreciation on the properties acquired in 1999.
GENERAL AND ADMINISTRATIVE EXPENSES increased by $301,000 to $6.8 million in
2000 versus $6.5 million in 1999. General and administrative expenses as a
percentage of revenue decreased to 5.8% in 2000 as compared to 6.3% in 1999.
Included in general and administrative expenses for 2000 are $305,000 of
expenses attributable to Crest Net.
PROPERTY EXPENSES were $2.0 million in 2000 and $1.8 million in 1999. The
$210,000 increase in property expenses is primarily attributable to costs
associated with properties available for lease.
33
<PAGE>
OTHER EXPENSES were $813,000 in 2000 and $430,000 in 1999. The increase in 2000
is primarily attributable to Crest Net state and federal income taxes of
$332,000. The following is a summary of our other expenses for the years ended
December 31, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999 Net Change
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realty Income state and local income taxes $ 481 $ 430 $ 51
Crest Net income taxes 332 -- 332
----------------------------------------------------------------------------------------------------------------------
Other expenses $ 813 $ 430 $ 383
======================================================================================================================
</TABLE>
NO PROVISION FOR IMPAIRMENT LOSS was recorded in 2000 or 1999.
GAIN ON SALES OF INVESTMENT PROPERTIES. In 2000, we sold 21 properties for a
total of $45.2 million and recognized a gain of $6.7 million. Included in the 21
properties sold in 2000, are two properties leased by one of our tenants that we
exchanged, valued at $22.7 million, for two other properties owned by that
tenant. In 1999, we sold three properties for $9.4 million and recognized a gain
of $1.3 million.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF CREDIT FACILITY. In December 1999,
our $170 million credit facility was canceled simultaneously with the execution
of our $200 million credit facility and unamortized fees of $355,000 relating to
the $170 million credit facility were recorded as an extraordinary loss on the
early extinguishment of the credit facility in 1999.
PREFERRED STOCK DIVIDENDS. We paid preferred stock dividends of $9.7 million in
2000 and $5.2 million in 1999. Our outstanding preferred stock was issued during
the second and third quarters of 1999.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS in 2000 increased 10.0%, to $45.1
million versus $41.0 million in 1999.
IMPACT OF INFLATION
Tenant leases generally provide for limited increases in rent as a result of
increases in the tenants' sales volumes, increases in the consumer price index,
and/or fixed increases. We expect that inflation will cause these lease
provisions to result in increases in rent over time. During times when inflation
is greater than increases in rent as provided for in the leases, rent increases
may not keep up with the rate of inflation.
Approximately 97.8% or 1,099 of the 1,124 properties in the portfolio are leased
to tenants under net leases whereby the tenant is responsible for property costs
and expenses. These lease features reduce our exposure to rising property
expenses due to inflation. Inflation and increased costs may have an adverse
impact on our tenants if increases in their operating expenses exceed increases
in revenue.
34
<PAGE>
IMPACT OF ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
No. 141, Business Combinations. Statement No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. The Company adopted the provisions of Statement No. 141 in 2001. The
adoption of Statement No. 141 has not had a material effect on our financial
position, results of operations or liquidity.
In June 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible
Assets. Statement No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement No.
142. Statement No. 142 also requires that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of.
The Company adopted Statement No. 142 effective January 1, 2002. At the date of
adoption, the Company had unamortized goodwill in the amount of $17.2 million.
The Company does not have any intangible assets or unamortized negative
goodwill. Amortization expense related to goodwill was $924,000 for each of the
years 2001, 2000 and 1999. We have not yet determined the impact of Statement
No. 142 on our financial position, results of operations or liquidity.
In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. Effective January 1, 2002, Statement No. 144
superseded Statement No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. Statement No. 144 requires
long-lived assets to be disposed of to be measured at the lower of carrying
amount or fair value less cost to sell. We anticipate our adoption of Statement
No. 144 will not have a material effect on our financial position, results of
operations or liquidity.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
We are exposed to interest rate changes primarily as a result of our credit
facilities and long-term notes used to maintain liquidity and expand our real
estate investment portfolio and operations. Our interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flow and to lower our overall borrowing costs. To achieve our objectives we
borrow long-term debt primarily at fixed rates and may selectively enter into
derivative financial instruments such as interest rate lock agreements, interest
rate swaps and caps in order to mitigate our interest rate risk on a related
financial instrument. We were not a party to any derivative financial
instruments at December 31, 2001. We do not enter, and have not entered, into
any transactions for speculative or trading purposes.
35
<PAGE>
Our interest rate risk is monitored using a variety of techniques. The table
below presents the principal amounts, weighted average interest rates, fair
values and other terms required by year of expected maturity to evaluate the
expected cash flows and sensitivity to interest rate changes (dollars in table
in millions):
<TABLE>
<CAPTION>
Expected Maturity Data
2003 Thereafter Total Fair Value(2)
---- ---------- ----- -------------
<S> <C> <C> <C> <C>
Fixed rate debt -- $230.0(1) $230.0 $230.1
Average interest rate -- 7.99% 7.99%
Variable rate debt $85.3 -- $85.3 $85.3
Average interest rate 3.13% -- 3.13%
<FN>
(1) $110 million matures in 2007, $100 million matures in 2008 and $20 million
matures in 2009.
(2) We base the fair value of the fixed rate debt at December 31, 2001 on the
closing market price or indicative price per each note. The fair value of the
variable rate debt approximates its carrying value because its terms are similar
to those available in the market place.
</FN>
</TABLE>
The table incorporates only those exposures that exist at December 31, 2001; it
does not consider those exposures or positions that could arise after that date.
As a result, our ultimate realized gain or loss with respect to interest rate
fluctuations would depend on the exposures that arise during the period, our
hedging strategies at the time and interest rates.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
<TABLE>
TABLE OF CONTENTS PAGE
<S> <C>
A. Independent Auditors' Report......................................................... 37
B. Consolidated Balance Sheets,
December 31, 2001 and 2000........................................................... 38
C. Consolidated Statements of Income,
Years ended December 31, 2001, 2000 and 1999......................................... 39
D. Consolidated Statements of Stockholders' Equity,
Years ended December 31, 2001, 2000 and 1999......................................... 40
E. Consolidated Statements of Cash Flows,
Years ended December 31, 2001, 2000 and 1999......................................... 41
F. Notes to Consolidated Financial Statements........................................... 42
G. Consolidated Quarterly Financial Data
(unaudited) for 2001 and 2000........................................................ 54
H. Schedule III Real Estate and Accumulated Depreciation
</TABLE>
Schedules not filed: All schedules, other than that indicated in the Table of
Contents, have been omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Realty Income Corporation:
We have audited the consolidated financial statements of Realty Income
Corporation and subsidiaries as listed in the accompanying table of contents. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule III listed in the accompanying
table of contents. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Realty Income
Corporation and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule III, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/KPMG LLP
San Diego, California
January 18, 2002,
except as to Note 21, which is
as of February 28, 2002
37
<PAGE>
<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-----------------------------------------
December 31, 2001 and 2000
(dollars in thousands, except per share data)
2001 2000
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Real estate, at cost:
Land $ 412,455 $ 368,057
Buildings and improvements 765,707 705,470
------------------------------------------------------------------------------------------------------------------
1,178,162 1,073,527
Less accumulated depreciation and amortization (233,848) (212,379)
------------------------------------------------------------------------------------------------------------------
Net real estate held for investment 944,314 861,148
Real estate held for sale, net 23,356 33,130
------------------------------------------------------------------------------------------------------------------
Net real estate 967,670 894,278
Cash and cash equivalents 2,467 3,815
Accounts receivable 4,857 5,053
Goodwill, net 17,206 18,130
Other assets 11,508 13,490
------------------------------------------------------------------------------------------------------------------
Total assets $ 1,003,708 $934,766
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable $ 6,238 $ 4,914
Accounts payable and accrued expenses 5,834 5,969
Other liabilities 4,543 4,314
Lines of credit payable 85,300 174,000
Notes payable 230,000 230,000
------------------------------------------------------------------------------------------------------------------
Total liabilities 331,915 419,197
------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
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, 32,829,111 and 26,563,519
shares issued and outstanding in 2001 and 2000, respectively 795,505 630,932
Distributions in excess of net income (223,080) (214,731)
------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 671,793 515,569
------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,003,708 $ 934,766
==================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
38
<PAGE>
<TABLE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands, except per share data)
2001 2000 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Rental $ 122,061 $ 117,190 $ 104,270
Gain on sales of real estate acquired for resale 3,374 766 --
Interest and other 836 354 240
---------------------------------------------------------------------------------------------------------------------
126,271 118,310 104,510
---------------------------------------------------------------------------------------------------------------------
EXPENSES
Interest 26,466 31,547 24,473
Depreciation and amortization 29,125 29,003 25,952
General and administrative 7,836 6,839 6,538
Property 2,518 2,032 1,822
Other 1,796 813 430
Provision for impairment losses 1,450 -- --
---------------------------------------------------------------------------------------------------------------------
69,191 70,234 59,215
---------------------------------------------------------------------------------------------------------------------
Income from operations 57,080 48,076 45,295
Gain on sales of investment properties 10,478 6,712 1,301
---------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 67,558 54,788 46,596
Extraordinary loss on early extinguishment
of credit facility -- -- (355)
---------------------------------------------------------------------------------------------------------------------
Net income 67,558 54,788 46,241
Preferred stock dividends (9,712) (9,712) (5,229)
---------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders $ 57,846 $ 45,076 $ 41,012
=====================================================================================================================
Basic and diluted amounts per common share:
Income before extraordinary item $ 1.98 $ 1.69 $ 1.54
Extraordinary item -- -- (0.01)
---------------------------------------------------------------------------------------------------------------------
Net income per common share $ 1.98 $ 1.69 $ 1.53
=====================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
39
<PAGE>
<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands)
Preferred Common
Shares of stock and stock and Distributions
-------------------------
Preferred Common paid in paid in in excess of
Stock Stock capital capital net income Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 -- 26,817,103 $ -- 636,486 $ (186,277) $ 450,209
Net income -- -- -- -- 46,241 46,241
Distributions paid and payable -- -- -- -- (61,423) (61,423)
Shares issued in stock offering, net
of offering costs of $3,821 4,140,000 -- 99,679 -- -- 99,679
Shares issued -- 5,600 -- 139 -- 139
Shares forfeited -- (539) -- (14) -- (14)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,140,000 26,822,164 99,679 636,611 (201,459) 534,831
Net income -- -- -- -- 54,788 54,788
Distributions paid and payable -- -- -- -- (68,060) (68,060)
Shares purchased (14,300) (284,500) (276) (6,223) -- (6,499)
Shares issued -- 27,800 -- 593 -- 593
Shares forfeited -- (1,945) -- (49) -- (49)
Stock offering costs -- -- (35) -- -- (35)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 4,125,700 26,563,519 99,368 630,932 (214,731) 515,569
Net income -- -- -- -- 67,558 67,558
Distributions paid and payable -- -- -- -- (75,907) (75,907)
Shares issued in stock offerings, net
of offering costs of $9,044 -- 5,900,000 -- 157,041 -- 157,041
Shares purchased -- (6,800) -- (169) -- (169)
Shares issued -- 380,527 -- 9,340 -- 9,340
Shares forfeited -- (8,135) -- (202) -- (202)
Deferred stock compensation, net of
forfeitures and amortization -- -- -- (1,437) -- (1,437)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 4,125,700 32,829,111 $ 99,368 $ 795,505 $ (223,080) $ 671,793
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
40
<PAGE>
<TABLE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands)
<CAPTION>
2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 67,558 $ 54,788 $ 46,241
Adjustments to net income:
Depreciation and amortization 29,125 29,003 25,952
Provision for impairment losses 1,450 -- --
Investments in real estate acquired for resale (24,535) (28,577) --
Proceeds from sales of real estate acquired for resale 28,912 6,215 --
Gain on sales of real estate acquired for resale (3,374) (766) --
Gain on sales of investment properties (10,478) (6,712) (1,301)
Extraordinary item -- -- 355
Amortization of deferred stock compensation 301 -- --
Changes in assets and liabilities:
Accounts receivable and other assets 1,125 485 25
Accounts payable, accrued expenses and other liabilities (49) 2,154 882
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 90,035 56,590 72,154
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment properties 39,543 22,536 9,431
Acquisition of and additions to investment properties (132,291) (56,142) (174,056)
Increase in other assets -- (450) --
Payment of other liabilities -- -- (1,713)
----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (92,748) (34,056) (166,338)
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from lines of credit 196,300 157,700 221,200
Payments under lines of credit (285,000) (102,900) (186,800)
Distributions to common stockholders (64,871) (58,262) (55,925)
Distributions to preferred stockholders (9,712) (9,712) (5,229)
Proceeds from common stock offerings,
net of offering costs 157,041 -- --
Proceeds from preferred stock offerings,
net of offering costs -- (35) 99,679
Proceeds from other stock issuances 7,776 216 --
Proceeds from notes issued, net of costs of $501 -- -- 19,499
Shares purchased (169) (6,499) --
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,365 (19,492) 92,424
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,348) 3,042 (1,760)
Cash and cash equivalents, beginning of year 3,815 773 2,533
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 2,467 $ 3,815 $ 773
============================================================================================================================
For supplemental disclosures, see note 15.
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
41
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31, 2001, 2000 and 1999
1. ORGANIZATION AND OPERATION
Realty Income Corporation ("Realty Income," the "Company," "we" or "our") is
organized as a Maryland corporation. We invest in commercial retail real estate
and have elected to be taxed as a real estate investment trust ("REIT"). At
December 31, 2001, we owned 1,124 properties in 48 states containing over 9.6
million leasable square feet, excluding 24 properties owned by our subsidiary,
Crest Net Lease, Inc. ("Crest Net").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of Realty Income, Crest Net and other entities for which we
make operational and financial decisions (control), after elimination of all
material intercompany balances and transactions.
Cash Equivalents - We consider all short-term, highly liquid investments that
are readily convertible to cash and have an original maturity of three months or
less at the time of purchase to be cash equivalents.
Depreciation and Amortization - Depreciation of buildings and improvements and
amortization of goodwill are computed using the straight-line method over an
estimated useful life of 25 years. Amortization of goodwill for each of the
years 2001, 2000 and 1999 was $924,000. In accordance with the Financial
Accounting Standards Board Statement No. 142, "Goodwill and Other Intangible
Assets," effective January 2002, our goodwill will no longer be amortized, but
instead will be tested for impairment at least annually.
Leases - All leases are accounted for as operating leases. Under this method,
lease payments are recognized as revenue on a straight-line basis over the lease
term regardless of when the payments are due. We recognize contingent rent
revenue from tenants only after the tenants exceed their sales breakpoint.
Rental increases based upon changes in the consumer price indexes are recognized
only after the changes in the indexes have occurred, and then applied according
to the lease agreements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 reflects the basic principles of revenue recognition in existing accounting
principles generally accepted in the United States of America ("U.S."). The
Company adopted SAB 101 in the first quarter of 2000, which had no effect on the
Company's consolidated financial statements.
Federal Income Taxes - We have elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended ("IRS Code"). We believe Realty Income has
qualified and continues to qualify as a REIT and therefore will be permitted to
deduct distributions paid to its stockholders, eliminating the federal taxation
of income represented by those distributions at the Company's level.
Accordingly, no provision has been made for federal income taxes in the
accompanying consolidated financial statements, except for federal income taxes
of Crest Net, which totaled $1.2 million and $264,000 in 2001 and 2000,
respectively, and are included in other expenses.
42
<PAGE>
Earnings and profits, which determine the taxability of distributions to
stockholders, differ from net income reported for financial reporting purposes
due to differences for IRS Code purposes in the estimated useful lives and
methods used to compute depreciation and the carrying value (basis) on the
investments in properties, among other things.
The following reconciles our net income available to common stockholders to
taxable income for the year ended December 31, 2001 (dollars in thousands)
(unaudited):
Net income available to common stockholders $ 57,846
Tax gain on sale of real estate less than book gain (12,734)
Dividends received from Crest Net 2,500
Elimination of net revenue and expenses from Crest Net (3,314)
Preferred dividends not deductible for tax 9,712
Depreciation and amortization timing differences 9,951
Impairment losses 1,450
Other adjustments (617)
--------------------------------------------------------------------------------
Estimated taxable net income $ 64,794
================================================================================
Maintenance and Repairs - Expenditures for maintenance and repairs are expensed
as incurred. Replacements and betterments are capitalized.
Provision for Impairment Losses - We review long-lived assets, including
goodwill, for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Generally, a
provision is made for impairment loss if estimated future operating cash flows
(undiscounted and without interest charges) plus estimated disposition proceeds
(undiscounted) are less than the current book value. Impairment loss is measured
as the amount by which the current book value of the asset exceeds the fair
value of the asset. If a property is held for sale, it is carried at the lower
of cost or estimated fair value, less costs to sell. A provision for impairment
losses of $1.45 million was recorded in 2001. No provision for impairment loss
was recorded in 2000 or 1999.
Net Income Per Common Share - Basic net income per common share is computed by
dividing net income available to common stockholders by the weighted average
number of common shares outstanding during each period. Diluted net income per
common share is computed by dividing the amount of net income available to
common stockholders for the period by the number of common shares that would
have been outstanding assuming the issuance of common shares for all potentially
dilutive common shares outstanding during the reporting period.
The following is a reconciliation of the denominator of the basic net income per
common share computation to the denominator of the diluted net income per common
share computation, for the years ended December 31:
<TABLE>
<CAPTION>
2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares used for
basic net income per share computation 29,225,359 26,684,598 26,822,285
Incremental shares from the assumed
exercise of stock options 55,761 16,208 3,805
-----------------------------------------------------------------------------------------------------------------------
Adjusted weighted average shares used for
diluted net income per share computation 29,281,120 26,700,806 26,826,090
=======================================================================================================================
</TABLE>
43
<PAGE>
In 2001, no stock options were anti-dilutive. In 2000 and 1999, 296,653 and
186,181 stock options, respectively, were anti-dilutive and therefore excluded
from the incremental shares from the assumed exercise of stock options.
Stock Option Plan - We account for our stock option plan in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), permits entities to recognize as expense over
the vesting period, the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
income per share disclosures for employee stock option grants made after 1994,
as if the fair-value based method defined in SFAS No. 123 had been applied. We
have elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
Derivative Financial Instruments - In two instances, in 1996 and 1998, we used
interest rate treasury lock agreements to protect against the possibility of
rising interest rates. These instruments each met the requirement for hedge
accounting, including a high correlation to a specific transaction. Accordingly,
the amount received and paid under the terms of the agreements is recognized in
income as a yield adjustment to interest expense.
Use of Estimates - The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Management believes that the estimates and assumptions that are most important
to the portrayal of the Company's financial condition and results of operations,
in that they require management's most difficult, subjective or complex
judgments, form the basis for the accounting policies deemed to be most critical
to the Company. These critical accounting policies relate to depreciable lives
of our real estate assets and recoverability (impairment) of our real estate
assets. We believe our estimates and assumptions related to these critical
accounting policies are appropriate under the circumstances; however, should
future events or occurrences result in unanticipated consequences, there could
be a material impact on our future financial condition or results of operations.
3. INVESTMENT IN SUBSIDIARY
In January 2000, we acquired 95% of the common stock of Crest Net, all of which
is non-voting, and certain members of our management and Crest Net management
acquired 5% of the common stock, all of which is voting stock. In May 2001, we
acquired the 5% of common stock of Crest Net owned by certain members of our
management and management of Crest Net for $507,000. The acquisition of the 5%
of common stock was accounted for under the purchase method of accounting. After
this transaction, Realty Income owns 100% of the stock of Crest Net. Crest Net
was created to buy, own and sell properties, primarily to buyers using
tax-deferred exchanges, under Section 1031 of the IRS Code.
At December 31, 2001 and 2000, investments in properties owned by Crest Net
totaled $22.3 million and $23.1 million, respectively, and are included in real
estate held for sale, net in our consolidated balance sheets.
44
<PAGE>
4. CREDIT FACILITIES
A. In December 1999, we entered into a $200 million, revolving, unsecured
acquisition credit facility that expires in December 2003. The $200 million
credit facility is with The Bank of New York, as administrative agent, and
several U.S. and non-U.S. banks. At December 31, 2001 and 2000, the outstanding
balances on the acquisition credit facility were $63.7 million and $149.9
million, respectively, with an effective interest rate of approximately 3.1% and
7.8%, respectively. The $200 million credit facility currently bears interest at
1.225% over the London Interbank Offered Rate ("LIBOR") and offers us other
interest rate options. A facility fee of 0.225% per annum accrues on the total
commitment of the credit facility.
In December 1999, our previous $170 million credit facility was canceled
simultaneously with the execution of the $200 million credit facility, and
unamortized fees of $355,000 relating to our $170 million credit facility were
recorded as an extraordinary loss on early extinguishment of the credit
facility.
B. In February 2000, we entered into a $25 million, three-year, revolving,
unsecured credit agreement with the Bank of Montreal, which expires in February
2003. At December 31, 2001 and 2000, the outstanding balances on the credit
facility were $21.6 million and $24.1 million, respectively, with an effective
interest rate of approximately 3.2% and 7.9%, respectively. The $25 million
credit facility bears interest at 1.225% over LIBOR. A facility fee of 0.225%
per annum accrues on the total commitment of the credit facility.
C. The average borrowing rate on our credit facilities during 2001 was 6.4% or
130 basis points lower than our average borrowing rate during 2000 of 7.7%. Our
credit facilities are subject to various leverage and interest coverage ratio
limitations. The Company is and has been in compliance with these covenants.
D. In 2001, 2000 and 1999, interest of $385,000, $1.0 million and $1.6 million,
respectively, was capitalized with respect to properties under development.
5. NOTES PAYABLE
In January 1999, we issued $20 million of 8.0% senior notes due 2009 (the "1999
Notes"). The 1999 Notes are unsecured and were sold at 98.757% of par to yield
8.1%. Interest on the 1999 Notes is payable semiannually.
In October 1998, we issued $100 million of 8.25% Monthly Income Senior Notes due
2008 (the "1998 Notes"). The 1998 Notes are unsecured and were sold at par
($25.00). In May 1998, we entered into a treasury interest rate lock agreement
associated with the 1998 Notes. In settlement of the agreement, we made a
payment of $8.7 million in October 1998. The payment on the agreement is being
amortized over 10 years (the life of the 1998 Notes) as a yield adjustment to
interest expense. After taking into effect the results of a treasury interest
rate lock agreement, the effective rate to us on the 1998 Notes is 9.12%.
Interest on the 1998 Notes is payable monthly.
In May 1997, we issued $110 million of 7.75% senior notes due 2007 (the "1997
Notes"). The 1997 Notes are unsecured and were sold at 99.929% of par to yield
7.76%. In December 1996, we entered into a treasury interest rate lock agreement
associated with the 1997 Notes. In settlement of the agreement, we received $1.1
million in June 1997. The payment received on the agreement is being amortized
over 10 years (the life of the 1997 Notes) as a yield adjustment to interest
expense. After taking into effect the results of a treasury interest rate lock
agreement, the effective interest rate to us on the 1997 Notes is 7.62%.
Interest on the 1997 Notes is payable semiannually.
Interest incurred on the 1999 Notes, 1998 Notes and 1997 Notes collectively for
the years ended December 31, 2001, 2000 and 1999 was $18.4 million, $18.4
million and $18.3 million, respectively.
45
<PAGE>
6. PROPERTY ACQUISITIONS
A. In 2001, we invested $131.8 million in 91 new retail properties and
properties under development with an average initial contractual lease rate of
11.0%. In 2000, we invested $70.0 million in 13 new retail properties and
properties under development with an average initial contractual lease rate of
10.8%.
B. In 2001, Crest Net invested $24.7 million in 26 new retail properties. In
2000, Crest Net invested $28.6 million in nine new retail properties. At
December 31, 2001, Crest Net owned 24 properties that are held for sale.
7. DISTRIBUTIONS PAID AND PAYABLE
A. We pay monthly distributions to our common stockholders. The following is a
summary of monthly cash distributions paid per common share for the years ended
December 31:
<TABLE>
<CAPTION>
Month 2001 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
January $0.18500 $0.18000 $0.17000
February 0.18500 0.18000 0.17000
March 0.18500 0.18000 0.17000
April 0.18625 0.18125 0.17250
May 0.18625 0.18125 0.17250
June 0.18625 0.18125 0.17250
July 0.18750 0.18250 0.17500
August 0.18750 0.18250 0.17500
September 0.18750 0.18250 0.17500
October 0.18875 0.18375 0.17750
November 0.18875 0.18375 0.17750
December 0.18875 0.18375 0.17750
----------------------------------------------------------------------------------------------------------
Total $2.24250 $2.18250 $2.08500
==========================================================================================================
</TABLE>
The following presents the federal income tax characterization of distributions
paid or deemed to be paid to common stockholders for the years ended
December 31:
<TABLE>
<CAPTION>
2001 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ordinary income $1.94838 $1.76796 $1.84680
Return of capital 0.29412 0.41454 0.19860
Capital gain -- -- 0.03960
----------------------------------------------------------------------------------------------------------
Totals $2.24250 $2.18250 $2.08500
==========================================================================================================
</TABLE>
At December 31, 2001, a distribution of $0.19 per common share was declared (and
was paid in January 2002). At December 31, 2000, a distribution of $0.185 per
common share was declared (and was paid in January 2001).
B. In May 1999, we issued 2,760,000 shares of 9 3/8% Class B cumulative
redeemable preferred stock (the "Class B Preferred"). Beginning May 25, 2004,
the Class B Preferred shares are redeemable at our option at $25.00 per share.
Dividends on the Class B Preferred are paid quarterly in arrears. For the years
ended December 31, 2001, 2000 and 1999, dividends of $6.4 million, $6.4 million
and $3.9 million, respectively, were paid on our Class B Preferred.
46
<PAGE>
The following presents the federal income tax characterization of dividends paid
or deemed to be paid to Class B Preferred stockholders for the years ended
December 31:
<TABLE>
<CAPTION>
2001 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ordinary income $2.34360 $2.34360 $1.37310
Capital gain -- -- 0.02660
----------------------------------------------------------------------------------------------------------
Totals $2.34360 $2.34360 $1.39970
==========================================================================================================
</TABLE>
C. In July 1999, we issued 1,380,000 shares of 9 1/2% Class C cumulative
redeemable preferred stock (the "Class C Preferred"). Beginning July 30, 2004,
the Class C Preferred shares are redeemable at our option at $25.00 per share.
Dividends on the Class C Preferred are paid monthly in arrears. For the years
ended December 31, 2001, 2000 and 1999, dividends of $3.3 million, $3.3 million
and $1.4 million, respectively, were paid on our Class C Preferred.
The following presents the federal income tax characterization of dividends paid
or deemed to be paid to Class C Preferred stockholders for the years ended
December 31:
<TABLE>
<CAPTION>
2001 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ordinary income $2.37480 $2.37480 $0.97070
Capital gain -- -- 0.01880
----------------------------------------------------------------------------------------------------------
Totals $2.37480 $2.37480 $0.98950
==========================================================================================================
</TABLE>
8. COMMON STOCK OFFERINGS
A. In May 2001, we issued 2,850,000 shares of common stock at a price of $27.80
per share. We issued an additional 100,000 shares in May 2001 when the
underwriters exercised their over-allotment option. The net proceeds of $77.5
million were used to repay borrowings under our $200 million acquisition credit
facility and for other general corporate purposes.
B. In October 2001, we issued 2,600,000 shares of common stock at a price of
$28.50 per share. In November 2001, 350,000 additional shares were issued when
the underwriters exercised their over-allotment option. The net proceeds of
$79.5 million were used to repay borrowings under our $200 million acquisition
credit facility and for other general corporate purposes.
9. PREFERRED STOCK OFFERINGS
A. In May 1999, we issued 2,760,000 shares of Class B Preferred stock at a price
of $25.00 per share. The net proceeds of $66.5 million were used to repay bank
borrowings. At December 31, 2001 and 2000, 2,745,700 of these shares were
outstanding.
B. In July 1999, we issued 1,380,000 shares of Class C Preferred stock at a
price of $25.00 per share. The net proceeds of $33.2 million were used to repay
bank borrowings. At December 31, 2001 and 2000, all of these shares were
outstanding.
47
<PAGE>
10. PURCHASES OF REALTY INCOME SECURITIES
In January 2000, our Board of Directors authorized the purchase of up to $10
million of our outstanding common stock, preferred stock and senior debt
securities. We purchased an aggregate of $6.7 million of our securities from
January 2000 through December 2001.
In 2001, we invested $169,000 to purchase 6,800 shares of our common stock at an
average price of $24.82 per share. In 2000, we invested $6.5 million to purchase
284,500 shares of common stock at an average price of $21.87 per share and
14,300 shares of our Class B preferred stock at an average price of $19.27 per
share.
11. OPERATING LEASES
A. General - At December 31, 2001, we owned 1,124 properties in 48 states,
excluding properties owned by Crest Net. Of these 1,124 properties, 1,119 are
single-tenant and the remainder are multi-tenant. At December 31, 2001, 20
properties were vacant and available for lease or sale.
Substantially all leases are net leases whereby the tenant pays property taxes
and assessments, maintains the interior and exterior of the building and leased
premises, and carries insurance coverage for public liability, property damage,
fire and extended coverage.
Percentage rent for 2001, 2000 and 1999 was $1.7 million, $2.0 million and $1.7
million, respectively.
At December 31, 2001, minimum annual rents to be received on the operating
leases are as follows (dollars in thousands):
<TABLE>
FOR THE YEARS ENDING DECEMBER 31,
------------------------------------------------------------------------
<S> <C>
2002 $ 127,981
2003 119,882
2004 112,221
2005 102,963
2006 96,383
Thereafter 816,032
------------------------------------------------------------------------
TOTAL $ 1,375,462
========================================================================
</TABLE>
B. Major Tenants - The following schedule presents rental revenue, including
percentage rents, from tenants representing more than 10% of our total revenue
for the years ended December 31, 2001, 2000 or 1999 (dollars in thousands):
Tenants 2001 2000 1999
--------------------------------------------------------------------------------
Children's World Learning Centers, Inc. $14,830 $14,698 $14,371
La Petite Academy, Inc. -- (1) 12,233 10,730
(1) Rental revenue from La Petite Academy, Inc. represented less than 10% of our
total revenue for 2001.
12. GAIN ON SALES OF REAL ESTATE ACQUIRED FOR RESALE
In 2001, Crest Net sold nine properties for $28.9 million. We recognized a gain
of $3.4 million on the sales of these properties.
In 2000, Crest Net sold two properties for $6.2 million. We recognized a gain of
$766,000 on the sales of these properties.
48
<PAGE>
13. GAIN ON SALES OF INVESTMENT PROPERTIES
In 2001, we sold 35 properties for $39.5 million and recognized a gain of $10.5
million.
In 2000, we sold or exchanged 21 properties for $45.2 million and recognized a
gain of $6.7 million. Included in the 21 properties were two properties leased
by one of our tenants that we exchanged for two other properties owned by that
tenant for no gain (see note 15B).
In 1999, we sold three properties for $9.4 million and recognized a gain of $1.3
million.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the carrying values reflected in the consolidated balance sheets
at December 31, 2001 and 2000 reasonably approximate the fair values for cash
and cash equivalents, accounts receivable, and all liabilities, due to their
short-term nature, except for lines of credit payable and notes payable. In
making these assessments, we used estimates. The fair value of the lines of
credit payable approximates its carrying value because its terms are similar to
those available in the market place. The fair value of the notes payable at
December 31, 2001 and 2000 is estimated to be $230.1 million and $212.2 million,
respectively, based upon the closing market price per note or indicative price
per each note at December 31, 2001 and 2000, respectively.
15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid in 2001, 2000 and 1999 was $25.3 million, $29.8 million and $22.4
million, respectively.
The following non-cash investing and financing activities are included in the
accompanying consolidated financial statements (dollars in thousands):
A. Additions to properties resulted in the following:
2001 1999
---- ----
Buildings $421 $9,057
Real estate held for sale, net 183 --
Other liabilities 604 9,057
B. In 2000, we exchanged two properties leased by one of our tenants for two
other properties owned by that tenant, which resulted in the following:
Land $(2,031)
Buildings 1,386
Accumulated depreciation 645
C. In 2001, the acquisition of the 5% of Crest Net common stock not previously
owned by Realty Income resulted in the following:
Accounts receivable $ (450)
Accounts payable and accrued expenses (450)
49
<PAGE>
D. In 2001, we reclassified unamortized amounts of restricted stock grants
included in other assets to deferred stock compensation (reported as a component
of common stock and paid in capital), which resulted in the following:
Other assets $ (376)
Deferred stock compensation 376
E. Restricted stock grants resulted in the following:
<TABLE>
<CAPTION>
2001 2000 1999
---- ---- ----
<S> <C> <C> <C>
Other assets $ -- $ 377 $ 139
Common stock and paid in capital 1,564 377 139
Deferred stock compensation 1,564 -- --
</TABLE>
F. Restricted stock forfeitures resulted in the following:
<TABLE>
<CAPTION>
2001 2000 1999
---- ---- ----
<S> <C> <C> <C>
Other assets $ -- $ (49) $ (14)
Common stock and paid in capital (202) (49) (14)
Deferred stock compensation (202) -- --
</TABLE>
16. EMPLOYEE BENEFIT PLAN
We have a 401(k) plan covering substantially all of our employees. Under our
401(k) plan, employees may elect to make contributions to the plan up to a
maximum of 15% of their compensation, subject to limits under the IRS Code. We
match 50% of our employee's contributions, up to 3% of the employee's
compensation. Our aggregate matching contributions each year has been immaterial
to our results of operations.
17. STOCK INCENTIVE PLAN
In 1993, our Board of Directors approved a stock incentive plan (the "Stock
Plan") designed to attract and retain directors, officers and employees of the
Company by enabling those individuals to participate in the ownership of the
Company. The Stock Plan authorizes the issuance in each calendar year of up to
3% of the total shares outstanding at the end of such year. The Stock Plan
provides for grants of up to 1,950,308 shares. The Stock Plan provides for the
award (subject to ownership limitations) of a broad variety of stock-based
compensation alternatives such as nonqualified stock options, incentive stock
options, restricted stock and performance awards.
Stock options are granted with an exercise price equal to the underlying stock's
fair market value at the date of grant. Stock options expire 10 years from the
date they are granted and vest over service periods of one, three, four and five
years.
In 2001, 2000 and 1999, the Company issued 61,500, 17,800 and 5,600 shares of
restricted stock, respectively, which vest over periods ranging from three years
to ten years. The weighted average fair market values of the restricted stock
issued in 2001, 2000 and 1999 were $25.43, $21.15 and $24.85, respectively.
50
<PAGE>
The following table summarizes our stock option activity for the years 2001,
2000 and 1999:
<TABLE>
<CAPTION>
2001 2000 1999
-------------------------- -------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 618,186 $23.77 647,848 $24.73 438,604 $24.77
Options granted -- -- 142,000 20.65 220,371 24.67
Options exercised (319,027) 24.38 (10,000) 21.63 -- --
Options canceled (24,096) 22.50 (161,662) 25.02 (11,127) 25.16
---------------------------------------------- ---------------- ----------------
Outstanding,
end of year 275,063 23.16 618,186 23.77 647,848 24.73
============================================== ================ ================
Options exercisable,
end of year 229,875 438,437 380,064
Weighted average fair
value of each option
granted during the year -- $1.65 $2.23
</TABLE>
At December 31, 2001, the options exercisable under the Stock Plan had exercise
prices ranging from $20.00 to $26.06 with a weighted average price of $23.29,
and expiration dates ranging from August 2004 to February 2010 with a weighted
average remaining term of 6.4 years.
The fair value of each stock option grant was estimated at the date of grant
using the binomial option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expected dividend yield 9.70% 7.66%
Risk-free interest rate 6.30% 5.04%
Volatility 15.00% 15.20%
Expected life of options 10 years 10 years
</TABLE>
We apply APB Opinion No. 25 in accounting for the Stock Plan and, accordingly,
no compensation cost has been recognized for our stock options in the
consolidated financial statements. Had we determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, our
net income available to common stockholders and diluted net income per common
share would have been as follows:
<TABLE>
<CAPTION>
2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders (dollars in thousands):
<S> <C> <C> <C>
As reported $ 57,846 $ 45,076 $ 41,012
Pro forma 57,630 44,983 40,536
Diluted net income per common share:
As reported $ 1.98 $ 1.69 $ 1.53
Pro forma 1.97 1.68 1.51
</TABLE>
51
<PAGE>
18. STOCKHOLDER RIGHTS PLAN
In 1998, our Board of Directors adopted a Stockholder Rights Plan (the "Rights
Plan") that will expire in July 2008. The Rights Plan assigns one right (a
"Right") to purchase one one-hundredth (1/100th) of a share of our Class A
Junior Participating Preferred Stock, par value $1.00 per share, for each share
of common stock owned on or issued after July 1, 1998. Currently, the Rights are
not exercisable and do not trade separately from our common stock.
Under specified circumstances, stockholders will be able to exercise their
Rights if a person or group acquires 15% of our common stock or makes a tender
offer to acquire 15% or more of our common stock. In these circumstances,
stockholders other than the acquirer would be able to exercise the Rights to
purchase our common stock or, in some situations, the acquirer's stock at a 50%
discount.
19. SEGMENT INFORMATION
We evaluate performance and make resource allocation decisions on a property by
property basis. For financial reporting purposes, we have grouped our tenants
into 11 reportable segments based upon the business the tenants are in, except
for properties owned by Crest Net that are grouped in a separate segment. The
Crest Net segment is included in "other non-reportable segments." All of the
properties are incorporated into one of the applicable segments. Revenue is the
only component of segment profit and loss we measure. The accounting policies of
the segments are the same as those described in note 2.
The following tables set forth certain information regarding the properties
owned by us, classified according to the business of the respective tenants as
of December 31, 2001 (dollars in thousands):
<TABLE>
<CAPTION>
REVENUE
--------------------------------------------------------
For the years ended December 31, 2001 2000 1999
--------------------------------------------------------
<S> <C> <C> <C>
Segment rental revenue:
Automotive parts $ 9,937 $ 9,534 $ 8,878
Automotive service 6,893 6,864 6,869
Child care 28,773 28,591 26,428
Consumer electronics 4,734 5,728 5,794
Convenience stores 10,137 9,679 7,557
Health and fitness 4,305 2,806 639
Home furnishings 7,224 6,741 7,021
Restaurants 14,719 14,310 13,785
Sporting goods 1,116 -- --
Theaters 5,209 3,175 582
Video rental 4,465 4,514 4,444
Other non-reportable segments(1) 24,549 25,248 22,273
Reconciling items:
Gain on sales of real estate acquired for resale 3,374 766 --
Interest and other 836 354 240
----------------------------------------------------------------------------------------------------------------------
Total revenue $126,271 $118,310 $104,510
======================================================================================================================
<FN>
(1) Consolidates 13 retail industry segments and Crest Net.
</FN>
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
ASSETS
----------------------------------------
As of December 31, 2001 2000
----------------------------------------
<S> <C> <C>
Segment net real estate:
Automotive parts $ 73,240 $ 74,487
Automotive service 44,438 47,603
Child care 142,163 149,838
Consumer electronics 35,950 40,820
Convenience stores 81,701 81,639
Health and fitness 43,549 34,918
Home furnishings 68,384 70,140
Restaurants 130,393 82,402
Sporting goods 50,506 --
Theaters 47,273 48,003
Video rental 37,719 39,598
Other non-reportable segments(1) 212,354 224,830
----------------------------------------------------------------------------------------------------------------------
Total net real estate 967,670 894,278
Non-real estate assets 36,038 40,488
----------------------------------------------------------------------------------------------------------------------
Total assets $1,003,708 $934,766
======================================================================================================================
<FN>
(1) Consolidates 13 retail industry segments and Crest Net.
</FN>
</TABLE>
20. COMMITMENTS AND CONTINGENCIES
In the ordinary course of our business, we are party to various legal actions
which we believe are routine in nature and incidental to the operation of our
business. We believe that the outcome of the proceedings will not have a
material adverse effect upon our consolidated statements taken as a whole.
21. SUBSEQUENT EVENT
In February 2002, we issued 273,150 shares of common stock to a unit investment
trust at a net price to us of $30.26 per share, based on a 5% discount to the
market price at the time of issuance of $31.85 per share. The net proceeds of
$8.2 million were used to repay bank borrowings.
53
<PAGE>
<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
--------------------------------------------------------------------
(dollars in thousands, except per share data)
(not covered by Independent Auditors' Report)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2001
Total revenue $ 31,565 $ 29,926 $ 31,007 $ 33,773 $ 126,271
Interest expense 8,059 6,587 6,080 5,740 26,466
Depreciation and
amortization expense 7,210 7,158 7,234 7,523 29,125
Other expenses 3,774 2,869 3,313 3,644 13,600
Income from operations 12,522 13,312 14,380 16,866 57,080
Net income 18,473 13,476 17,186 18,423 67,558
Net income available to
common stockholders 16,045 11,048 14,758 15,995 57,846
Basic and diluted net
income per common share(1) 0.60 0.39 0.50 0.50 1.98
Dividends paid per
common share 0.55500 0.55875 0.56250 0.56625 2.24250
2000
Total revenue $ 28,355 $ 28,441 $ 29,885 $ 31,629 $ 118,310
Interest expense 7,158 7,471 8,184 8,734 31,547
Depreciation and
amortization expense 6,748 6,844 6,913 8,498 29,003
Other expenses 2,199 2,201 2,668 2,616 9,684
Income from operations 12,250 11,925 12,120 11,781 48,076
Net income 12,912 12,863 12,351 16,662 54,788
Net income available to
common stockholders 10,484 10,435 9,923 14,234 45,076
Basic and diluted net
income per common share 0.39 0.39 0.37 0.54 1.69
Dividends paid per
common share 0.54000 0.54375 0.54750 0.55125 2.18250
<FN>
(1) Net income per share is computed independently for each quarter and the full
year based on the respective weighted average shares outstanding. Therefore, the
sum of the quarterly net income per common share amounts may not equal the
annual amount reported.
</FN>
</TABLE>
54
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
---------------------------------------------------------------
We have had no disagreements with our independent auditors' on accountancy or
financial disclosure.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Director Nominees" and "Officers
of the Company" and "Compliance With Federal Securities Laws" in the definitive
proxy statement for the Annual Meeting of Stockholders presently scheduled to be
held on May 7, 2002, to be filed pursuant to Regulation 14A.
ITEM 11: EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
definitive proxy statement for the Annual Meeting of Stockholders presently
scheduled to be held on May 7, 2002, to be filed pursuant to Regulation 14A.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the definitive proxy statement for the
Annual Meeting of Stockholders presently scheduled to be held on May 7, 2002, to
be filed pursuant to Regulation 14A.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in the
definitive proxy statement for the Annual Meeting of Stockholders presently
scheduled to be held on May 7, 2002, to be filed pursuant to Regulation 14A.
55
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
A. The following documents are filed as part of this report.
1. Financial Statements (see Item 8)
a. Independent Auditors' Report
b. Consolidated Balance Sheets,
December 31, 2001 and 2000
c. Consolidated Statements of Income,
Years ended December 31, 2001, 2000 and 1999
d. Consolidated Statements of Stockholders' Equity,
Years ended December 31, 2001, 2000 and 1999
e. Consolidated Statements of Cash Flows,
Years ended December 31, 2001, 2000 and 1999
f. Notes to Consolidated Financial Statements
g. Consolidated Quarterly Financial Data,
(unaudited) for 2001 and 2000
2. Financial Statement Schedule. Reference is made to page F-1 of
this report for Schedule III Real Estate and Accumulated
Depreciation.
Schedules not Filed: All schedules, other than those indicated in the Table of
Contents, have been omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
3. Exhibits
2.1 Agreement and Plan of Merger dated as of May 15, 1997
between Realty Income Corporation, a Delaware corporation,
and Realty Income Maryland, Inc., a Maryland corporation
(incorporated by reference to the Company's Form 8-B12B
dated July 29, 1997 ("Form 8-B") and incorporated herein by
reference).
3.1 Articles of Incorporation of the Company (filed as Appendix
B to the Company's Proxy Statement dated March 28, 1997
("1997 Proxy Statement") and incorporated herein by
reference).
3.2 Bylaws of the Company (filed as Appendix C to the
Company's 1997 Proxy Statement and incorporated herein by
reference).
3.3 Articles Supplementary of the Class A Junior Participating
Preferred Stock of Realty Income Corporation (filed as an
exhibit to Realty Income's registration statement on Form
8-A, dated June 26, 1998, and incorporated herein by
reference).
56
<PAGE>
3. Exhibits (continued)
3.4 Articles Supplementary to the Articles of Incorporation of
Realty Income Corporation classifying and designating the
Class B Preferred Stock (filed as exhibit 4.1 to the
Company's Form 8-K dated May 24, 1999 and incorporated
herein by reference).
3.5 Articles Supplementary to the Articles of Incorporation of
Realty Income Corporation classifying and designating the
Class C Preferred Stock (filed as exhibit 4.1 to the
Company's Form 8-K dated July 29, 1999 and incorporated
herein by reference).
4.1 Pricing Committee Resolutions and Form of 7.75% Notes due
2007 (filed as Exhibit 4.2 to the Company's Form 8-K
dated May 5, 1997 and incorporated herein by reference).
4.2 Indenture dated as of May 6, 1997 between the Company and
The Bank of New York (filed as Exhibit 4.1 to the Company's
Form 8-K dated May 5, 1997 and incorporated herein by
reference).
4.3 First Supplemental Indenture dated as of May 28, 1997,
between the Company and The Bank of New York (filed as
Exhibit 4.3 to the Company's Form 8-B and incorporated
herein by reference).
4.4 Rights Agreement, dated as of June 25, 1998, between Realty
Income Corporation and The Bank of New York (filed as an
exhibit to the Company's registration statement on Form
8-A, dated June 26, 1998, and incorporated herein by
reference).
4.5 Pricing Committee Resolutions (filed as an exhibit to
Realty Income's Form 8-K, dated October 27, 1998 and
incorporated herein by reference).
4.6 Form of 8.25% Notes due 2008 (filed as exhibit 4.3 to
Realty Income's Form 8-K, dated October 27, 1998 and
incorporated herein by reference).
4.7 Indenture dated as of October 28, 1998 between Realty
Income and The Bank of New York (filed) as an exhibit to
Realty Income's Form 8-K, dated October 27, 1998 and
incorporated herein by reference).
4.8 Pricing Committee Resolutions and Form of 8% Notes due 2009
(filed as exhibit 4.2 to Realty Income's Form 8-K, dated
January 21, 1999 and incorporated herein by reference).
10.1 Form of assignment and assumption agreement dated March 15,
2002 regarding a $20 million commitment of the $200 million
Revolving Credit Agreement, filed herein.
10.2 $200 million Revolving Credit Agreement dated December 14,
1999 (filed as exhibit 10.1 to the Company's Form 10-K
dated December 31, 1999 and incorporated herein by
reference).
10.3 First Amendment dated January 21, 2000 to the $200 million
Revolving Credit Agreement dated December 14, 1999 (filed
as exhibit 10.2 to the Company's Form 10-K dated
December 31, 1999 and incorporated herein by reference).
10.4 Form of extension agreement dated April 25, 2001 to the
$200 million credit facility, extending for one year $180
million of the $200 million commitment to December 2003
(filed as exhibit 10.1 to the Company's Form 10-Q dated
March 31, 2001 and incorporated herein by reference).
57
<PAGE>
3. Exhibits (continued)
10.5 $25 million Revolving Credit Agreement dated February 1,
2000 (filed as exhibit 10.3 to the Company's Form 10-K
dated December 31, 1999 and incorporated herein by
reference).
10.6 First Amendment dated March 24, 2000 to the $25 million
Revolving Credit Agreement dated February 1, 2000
(filed as exhibit 10.3 to the Company's Form 10-Q dated
March 31, 2000 and incorporated herein by reference).
10.7 1994 Stock Option and Incentive Plan (filed as Exhibit 4.1
to the Company's Registration Statement on Form S-8
(registration number 33-95708) and incorporated herein by
reference).
10.8 First Amendment to the 1994 Stock Option and Incentive
Plan, dated June 12, 1997 (filed as Exhibit 10.9 to the
Company's Form 8-B and incorporated herein by reference).
10.9 Second Amendment to the 1994 Stock Option and Incentive
Plan, dated December 16, 1997, (filed as Exhibit 10.9
to the Company's Form 10-K dated December 31, 1997 and
incorporated herein by reference).
10.10 Management Incentive Plan, filed as Exhibit 10.10 to the
Company's Form 10-K dated December 31, 1997 and
incorporated herein by reference).
10.11 Form of Nonqualified Stock Option Agreement for Independent
Directors, (filed as Exhibit 10.11 to the Company's Form
10-K dated December 31, 1997 and incorporated herein by
reference).
10.12 Form of Indemnification Agreement entered into between the
Company and the executive officers of the Company (filed as
Exhibit 10.1 to the Company's Form 8-K dated November 21,
1997 and incorporated herein by reference).
10.13 Form of Indemnification Agreement entered into between the
Company and each director on the Board of Directors of the
Company (filed as Exhibit 10.2 to the Company's Form 8-K
dated November 21, 1997 and incorporated herein by
reference).
10.14 Form of Employment Agreement between the Company and its
Executive Officers (incorporated by reference to the
Company's Form 8-B12B dated July 29, 1997 and incorporated
herein by reference).
10.15 $25 million Demand Promissory Note dated February 1, 2000
between Realty Income Corporation and Crest Net Lease, Inc.
(filed as exhibit 10.1 to the Company's Form 10-Q dated
March 31, 2000 and incorporated herein by reference).
10.16 Master Management Agreement dated January 1, 2000 between
Realty Income Corporation and Crest Net Lease, Inc.(filed
as exhibit 10.2 to the Company's Form 10-Q dated March 31,
2000 and incorporated herein by reference).
12.1 Statement re computation of ratios, filed herein.
21.1 Subsidiaries of the Company as of January 1, 2002, filed
herein.
23.1 Independent Auditors' Consent, filed herein.
B. The Registrant filed no reports on Form 8-K during the last quarter of the
period covered by this report.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALTY INCOME CORPORATION
By: /s/THOMAS A. LEWIS
-----------------------------------
Thomas A. Lewis
Vice Chairman of the Board of Directors,
Chief Executive Officer
Date: March 19, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/WILLIAM E. CLARK
-----------------------------------
William E. Clark
Chairman of the Board of Directors
Date: March 19, 2002
By: /s/THOMAS A. LEWIS
-----------------------------------
Thomas A. Lewis
Vice Chairman of the Board of Directors,
Chief Executive Officer
(Principal Executive Officer)
Date: March 19, 2002
By: /s/DONALD R. CAMERON
----------------------------
Donald R. Cameron
Director
Date: March 19, 2002
59
<PAGE>
SIGNATURES (continued)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ROGER P. KUPPINGER
Roger P. Kuppinger
Director
Date: March 19, 2002
By: /s/MICHAEL D. MCKEE
---------------------
Michael D. McKee
Director
Date: March 19, 2002
By: /s/WILLARD H. SMITH JR
----------------------------
Willard H. Smith Jr
Director
Date: March 19, 2002
By: /s/KATHLEEN R. ALLEN, Ph.D.
----------------------------
Kathleen R. Allen, Ph.D.
Director
Date: March 19, 2002
By: /s/PAUL M. MEURER
----------------------------
Paul M. Meurer
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: March 19, 2002
By: /s/GREGORY J. FAHEY
----------------------------
Gregory J. Fahey
Vice President, Controller
(Principal Accounting Officer)
Date: March 19, 2002
60
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.1 Form of assignment and assumption agreement dated March 15, 2002
regarding a $20 million commitment of the $200 million Revolving
Credit Agreement, filed herein
12.1 Statement re computation of ratios
21.1 Subsidiaries of the Company as of January 1, 2002
23.1 Independent Auditors' Consent
61
<PAGE>
<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Apparel Stores
--------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mesa AZ $ 619,035 $ 867,013 $None $21,947 $ 619,035 $ 888,960 $1,507,995 $ 100,397 02/11/99 300
Danbury CT 1,083,296 6,217,688 None None 1,083,296 6,217,688 7,300,984 1,067,030 09/30/97 300
Manchester CT 1,250,464 5,917,037 None None 1,250,464 5,917,037 7,167,501 897,124 03/26/98 300
Manchester CT 771,660 3,653,539 None None 771,660 3,653,539 4,425,199 553,911 03/26/98 300
Staten Island NY 4,202,093 3,385,021 None 855 4,202,093 3,385,876 7,587,969 513,083 03/26/98 300
Automotive Parts
----------------
Millbrook AL 108,000 518,741 None 65 108,000 518,806 626,806 61,229 12/10/98 01/21/99 300
Montgomery AL 254,465 502,350 None None 254,465 502,350 756,815 71,165 06/30/98 300
Blytheville AR 137,913 509,447 6,000 None 137,913 515,447 653,360 72,420 06/30/98 300
Osceola AR 88,759 520,047 None None 88,759 520,047 608,806 73,672 06/30/98 300
Wynne AR 70,000 547,576 None None 70,000 547,576 617,576 62,852 11/10/98 02/24/99 300
Phoenix AZ 231,000 513,057 None None 231,000 513,057 744,057 271,885 11/09/87 300
Phoenix AZ 71,750 159,359 None None 71,750 159,359 231,109 84,449 11/19/87 300
Phoenix AZ 222,950 495,178 None None 222,950 495,178 718,128 229,021 11/02/89 300
Tucson AZ 194,250 431,434 None None 194,250 431,434 625,684 229,935 10/30/87 300
Tucson AZ 178,297 396,004 None 150 178,297 396,154 574,451 179,119 01/19/90 300
Yuma AZ 120,750 268,190 None None 120,750 268,190 388,940 121,306 01/23/90 300
Grass
Valley CA 325,000 384,955 None None 325,000 384,955 709,955 195,581 05/20/88 300
Jackson CA 300,000 390,849 None None 300,000 390,849 690,849 195,546 05/17/88 300
Sacramento CA 210,000 466,419 None None 210,000 466,419 676,419 247,169 11/25/87 300
Turlock CA 222,250 493,627 None None 222,250 493,627 715,877 260,095 12/30/87 300
Arvada CO 301,489 931,092 None None 301,489 931,092 1,232,581 41,917 09/22/00 11/18/99 300
Aurora CO 221,691 492,382 None None 221,691 492,382 714,073 222,712 01/29/90 300
Aurora CO 353,283 1,135,051 None None 353,283 1,135,051 1,488,334 35,796 01/03/01 03/10/00 300
Canon City CO 66,500 147,699 None None 66,500 147,699 214,199 78,270 11/12/87 300
Colorado
Springs CO 280,193 622,317 None None 280,193 622,317 902,510 281,483 01/23/90 300
Colorado
Springs CO 192,988 433,542 None None 192,988 433,542 626,530 154,007 05/20/93 300
Denver CO 141,400 314,056 None None 141,400 314,056 455,456 166,427 11/18/87 300
Denver CO 315,000 699,623 None None 315,000 699,623 1,014,623 358,090 05/16/88 300
Denver CO 283,500 629,666 None None 283,500 629,666 913,166 322,283 05/27/88 300
Littleton CO 252,925 561,758 None None 252,925 561,758 814,683 292,601 02/12/88 300
Westminster CO 526,620 1,099,523 None None 526,620 1,099,523 1,626,143 34,654 01/12/01 01/18/00 300
Smyrna DE 232,273 472,855 None None 232,273 472,855 705,128 63,836 08/07/98 300
Lakeland FL 500,000 645,402 None None 500,000 645,402 1,145,402 85,167 06/04/98 12/31/97 300
Tampa FL 427,395 472,030 None None 427,395 472,030 899,425 62,310 06/10/98 12/05/97 300
Conyers GA 531,935 284,731 None None 531,935 284,731 816,666 19 InProcess11/13/01 300
F-1
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Parts
----------------
Council
Bluffs IA 194,355 431,668 None 6 194,355 431,674 626,029 220,942 05/19/88 300
Boise ID 158,400 351,812 None None 158,400 351,812 510,212 180,069 05/06/88 300
Boise ID 190,080 422,172 None None 190,080 422,172 612,252 216,081 05/06/88 300
Coeur
D'Alene ID 165,900 368,468 None None 165,900 368,468 534,368 197,494 09/21/87 300
Lewiston ID 138,950 308,612 None None 138,950 308,612 447,562 165,412 09/16/87 300
Moscow ID 117,250 260,417 None None 117,250 260,417 377,667 139,580 09/14/87 300
Nampa ID 183,743 408,101 None 119 183,743 408,220 591,963 208,880 05/06/88 300
Sioux Falls ID 332,979 498,108 None None 332,979 498,108 831,087 67,258 06/01/99 02/27/98 300
Twin Falls ID 190,080 422,172 None None 190,080 422,172 612,252 216,081 05/06/88 300
Brazil IN 183,952 453,831 None None 183,952 453,831 637,783 50,672 03/31/99 300
Princeton IN 134,209 560,113 None None 134,209 560,113 694,322 62,540 03/31/99 300
Vincennes IN 185,312 489,779 None None 185,312 489,779 675,091 54,687 03/31/99 300
Kansas City KS 185,955 413,014 None None 185,955 413,014 598,969 211,395 05/13/88 300
Kansas City KS 222,000 455,881 None None 222,000 455,881 677,881 233,266 05/16/88 300
Billerica MA 399,043 462,240 None None 399,043 462,240 861,283 86,957 04/02/97 300
Alma MI 155,000 600,282 None None 155,000 600,282 755,282 62,969 04/29/99 02/10/99 300
Lansing MI 265,000 574,931 None None 265,000 574,931 839,931 66,150 04/30/99 12/03/98 300
Sturgis MI 109,558 550,274 None None 109,558 550,274 659,832 66,927 12/30/98 300
Eagan MN 902,443 845,536 None None 902,443 845,536 1,747,979 114,173 02/20/98 300
Blue Springs MO 222,569 494,333 None None 222,569 494,333 716,902 232,363 07/31/89 300
Grandview MO 347,150 711,024 None None 347,150 711,024 1,058,174 93,652 08/20/98 02/20/98 300
Independence MO 210,643 467,844 None None 210,643 467,844 678,487 219,911 07/31/89 300
Kansas City MO 210,070 466,571 None None 210,070 466,571 676,641 238,806 05/13/88 300
Kansas City MO 168,350 373,910 None None 168,350 373,910 542,260 191,379 05/26/88 300
Springfield MO 199,100 412,042 None 6 199,100 412,048 611,148 209,480 05/27/88 300
Batesville MS 190,124 485,670 None None 190,124 485,670 675,794 67,184 07/27/98 300
Horn Lake MS 142,702 514,779 None None 142,702 514,779 657,481 72,926 06/30/98 300
Jackson MS 248,483 572,522 None None 248,483 572,522 821,005 48,674 11/16/99 300
Richland MS 243,565 558,645 None None 243,565 558,645 802,210 45,636 12/21/99 300
Missoula MT 163,100 362,249 None None 163,100 362,249 525,349 193,064 10/30/87 300
Kearney NE 173,950 344,393 None None 173,950 344,393 518,343 151,719 05/01/90 300
Omaha NE 196,000 435,321 None None 196,000 435,321 631,321 222,812 05/26/88 300
Omaha NE 253,128 810,922 None None 253,128 810,922 1,064,050 74,379 07/22/99 03/04/99 300
Albuquerque NM 80,500 178,794 None None 80,500 178,794 259,294 95,290 10/29/87 300
Rio Rancho NM 211,577 469,923 None None 211,577 469,923 681,500 244,766 02/26/88 300
Sante Fe NM 70,000 155,473 None None 70,000 155,473 225,473 82,861 10/29/87 300
F-2
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Parts
----------------
Las Vegas NV 161,000 357,585 None None 161,000 357,585 518,585 190,578 10/29/87 300
Reno NV 456,000 562,344 None None 456,000 562,344 1,018,344 287,733 05/26/88 300
Canton OH 396,560 597,553 None None 396,560 597,553 994,113 80,671 08/14/98 300
Hamilton OH 183,000 515,727 None None 183,000 515,727 698,727 55,990 04/07/99 12/03/98 300
Hubbard OH 147,043 481,217 None None 147,043 481,217 628,260 68,171 06/30/98 300
Oklahoma City OK 509,370 752,691 None None 509,370 752,691 1,262,061 76,694 04/14/99 09/24/98 300
Oklahoma City OK 404,815 771,625 None None 404,815 771,625 1,176,440 78,604 04/09/99 10/16/98 300
Albany OR 152,250 338,153 None 3 152,250 338,156 490,406 182,273 08/24/87 300
Beaverton OR 210,000 466,419 None 3 210,000 466,422 676,422 251,411 08/26/87 300
Corvallis OR 152,250 338,153 None 3 152,250 338,156 490,406 182,273 08/12/87 300
Oak Grove OR 180,250 400,336 None 3 180,250 400,339 580,589 215,791 08/06/87 300
Portland OR 190,750 423,664 None 3 190,750 423,667 614,417 228,366 08/12/87 300
Portland OR 147,000 326,493 None 3 147,000 326,496 473,496 175,988 08/26/87 300
Portland OR 210,000 466,412 None 3 210,000 466,415 676,415 249,992 09/01/87 300
Salem OR 136,500 303,170 None 3 136,500 303,173 439,673 163,415 08/20/87 300
Butler PA 339,929 633,078 5,684 None 339,929 638,762 978,691 86,177 08/07/98 300
Dover PA 265,112 593,341 None None 265,112 593,341 858,453 84,056 06/30/98 300
Enola PA 220,228 546,026 None None 220,228 546,026 766,254 68,259 11/10/98 300
Hanover PA 132,500 719,511 None None 132,500 719,511 852,011 68,508 07/26/99 05/13/99 300
Harrisburg PA 327,781 608,291 None None 327,781 608,291 936,072 86,173 06/30/98 300
Harrisburg PA 283,417 352,473 None None 283,417 352,473 635,890 46,413 09/30/98 300
Lancaster PA 199,899 774,838 10,913 None 199,899 785,751 985,650 104,664 08/14/98 300
New Castle PA 180,009 525,774 3,860 None 180,009 529,634 709,643 74,966 06/30/98 300
Reading PA 379,000 658,722 None None 379,000 658,722 1,037,722 67,114 06/09/99 12/04/98 300
Columbia TN 273,120 431,716 None None 273,120 431,716 704,836 43,890 06/30/99 300
Hermitage TN 560,443 871,376 None None 560,443 871,376 1,431,819 6 10/15/01 05/09/01 300
Memphis TN 197,708 507,647 None None 197,708 507,647 705,355 66,844 09/30/98 300
Amarillo TX 140,000 419,734 None None 140,000 419,734 559,734 209,563 09/12/88 300
Austin TX 185,454 411,899 None None 185,454 411,899 597,353 185,094 02/06/90 300
Dallas TX 191,267 424,811 None None 191,267 424,811 616,078 192,148 01/26/90 300
El Paso TX 66,150 146,922 None None 66,150 146,922 213,072 78,303 10/27/87 300
El Paso TX 56,350 125,156 None None 56,350 125,156 181,506 66,702 10/27/87 300
Garland TX 242,887 539,461 None None 242,887 539,461 782,348 244,006 01/19/90 300
Harlingen TX 134,599 298,948 None None 134,599 298,948 433,547 135,219 01/17/90 300
Houston TX 151,018 335,417 None None 151,018 335,417 486,435 151,714 01/25/90 300
Leon Valley TX 178,221 395,834 None None 178,221 395,834 574,055 179,042 01/17/90 300
F-3
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Parts
----------------
Lubbock TX 42,000 93,284 None None 42,000 93,284 135,284 49,716 10/26/87 300
Lubbock TX 49,000 108,831 None None 49,000 108,831 157,831 58,003 10/29/87 300
Midland TX 45,500 101,058 None None 45,500 101,058 146,558 53,859 10/27/87 300
Odessa TX 50,750 112,718 None None 50,750 112,718 163,468 60,073 10/26/87 300
Pasadena TX 107,391 238,519 None None 107,391 238,519 345,910 107,886 01/24/90 300
Plano TX 187,564 417,157 700 None 187,564 417,857 605,421 188,520 01/18/90 300
San Antonio TX 245,164 544,518 None None 245,164 544,518 789,682 244,688 02/14/90 300
Bountiful UT 183,750 408,115 None None 183,750 408,115 591,865 184,596 01/30/90 300
Provo UT 125,395 278,507 None None 125,395 278,507 403,902 125,973 01/25/90 300
Bellevue WA 185,500 411,997 None 108 185,500 412,105 597,605 222,076 08/06/87 300
Bellingham WA 168,000 373,133 None None 168,000 373,133 541,133 201,126 08/20/87 300
Bothell WA 199,500 443,098 None 108 199,500 443,206 642,706 238,841 08/20/87 300
Hazel Dell WA 168,000 373,135 None None 168,000 373,135 541,135 187,806 05/23/88 300
Kennewick WA 161,350 358,365 None None 161,350 358,365 519,715 193,168 08/26/87 300
Kent WA 199,500 443,091 None None 199,500 443,091 642,591 238,836 08/06/87 300
Lacey WA 171,150 380,125 None None 171,150 380,125 551,275 204,896 08/13/87 300
Marysville WA 168,000 373,135 None None 168,000 373,135 541,135 201,129 08/20/87 300
Moses Lake WA 138,600 307,831 None None 138,600 307,831 446,431 165,928 08/12/87 300
Pasco WA 161,700 359,142 None None 161,700 359,142 520,842 193,586 08/18/87 300
Puyallup WA 173,250 384,795 None 108 173,250 384,903 558,153 206,247 09/15/87 300
Redmond WA 196,000 435,317 None 108 196,000 435,425 631,425 233,326 09/17/87 300
Renton WA 185,500 412,003 None 108 185,500 412,111 597,611 220,828 09/15/87 300
Richland WA 161,700 359,142 None None 161,700 359,142 520,842 193,586 08/13/87 300
Seattle WA 162,400 360,697 None 108 162,400 360,805 523,205 194,425 08/20/87 300
Silverdale WA 183,808 419,777 None None 183,808 419,777 603,585 224,995 09/16/87 300
Spanaway WA 189,000 419,777 None None 189,000 419,777 608,777 226,269 08/25/87 300
Spokane WA 66,150 146,921 None None 66,150 146,921 213,071 77,857 11/18/87 300
Tacoma WA 191,800 425,996 None 108 191,800 426,104 617,904 229,622 08/18/87 300
Tacoma WA 196,000 435,324 None None 196,000 435,324 631,324 232,009 10/15/87 300
Tacoma WA 187,111 415,579 None 108 187,111 415,687 602,798 187,972 01/25/90 300
Vancouver WA 180,250 400,343 None None 180,250 400,343 580,593 215,794 08/20/87 300
Walla Walla WA 170,100 377,793 None None 170,100 377,793 547,893 203,639 08/06/87 300
Wenatchee WA 148,400 329,602 None None 148,400 329,602 478,002 177,665 08/25/87 300
Woodinville WA 171,500 380,908 None 108 171,500 381,016 552,516 205,319 08/20/87 300
Brown Deer WI 257,408 802,141 None None 257,408 802,141 1,059,549 97,656 12/15/98 07/16/98 300
Delafield WI 324,574 772,702 None None 324,574 772,702 1,097,276 70,165 07/29/99 02/26/99 300
F-4
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Parts
----------------
Madison WI 452,630 811,977 None None 452,630 811,977 1,264,607 104,259 10/20/98 04/07/98 300
Oak Creek WI 420,465 852,408 None None 420,465 852,408 1,272,873 109,451 08/07/98 03/20/98 300
Automotive Service
-------------------
Flagstaff AZ 144,821 417,485 None None 144,821 417,485 562,306 55,945 09/30/98 08/29/97 300
Chula Vista CA 313,293 409,654 None 16 313,293 409,670 722,963 92,172 05/01/96 01/19/96 300
Broomfield CO 154,930 503,626 None 450 154,930 504,076 659,006 108,280 08/22/96 03/15/96 300
Denver CO 341,726 433,341 None 274 341,726 433,615 775,341 73,178 09/25/97 06/12/97 300
Denver CO 79,717 369,587 None None 79,717 369,587 449,304 264,222 10/08/85 300
Thornton CO 276,084 415,464 None 205 276,084 415,669 691,753 82,243 12/31/96 10/31/96 300
Hartford CT 248,540 482,460 None None 248,540 482,460 731,000 102,121 09/30/96 300
Southington CT 225,882 672,910 None None 225,882 672,910 898,792 122,134 06/06/97 300
Jacksonville FL 76,585 355,066 None None 76,585 355,066 431,651 250,377 12/23/85 300
Lauderdale
Lakes FL 65,987 305,931 None None 65,987 305,931 371,918 213,480 02/19/86 300
Seminole FL 68,000 315,266 None None 68,000 315,266 383,266 222,311 12/23/85 300
Sunrise FL 80,253 372,070 None None 80,253 372,070 452,323 260,553 02/14/86 300
Tampa FL 70,000 324,538 None None 70,000 324,538 394,538 228,849 12/27/85 300
Tampa FL 67,000 310,629 None None 67,000 310,629 377,629 219,041 12/27/85 300
Tampa FL 86,502 401,041 None None 86,502 401,041 487,543 272,424 07/23/86 300
Atlanta GA 55,840 258,889 None None 55,840 258,889 314,729 183,506 11/27/85 300
Atlanta GA 78,646 364,625 None None 78,646 364,625 443,271 257,117 12/18/85 300
Bogart GA 66,807 309,733 None None 66,807 309,733 376,540 218,410 12/20/85 300
Duluth GA 222,275 316,925 None None 222,275 316,925 539,200 50,616 10/24/97 06/20/97 300
Gainesville GA 53,589 248,452 None None 53,589 248,452 302,041 175,196 12/19/85 300
Marietta GA 60,900 293,461 None None 60,900 293,461 354,361 206,934 12/26/85 300
Marietta GA 69,561 346,024 None None 69,561 346,024 415,585 237,209 06/03/86 300
Riverdale GA 58,444 270,961 None None 58,444 270,961 329,405 190,074 01/15/86 300
Rome GA 56,454 261,733 None None 56,454 261,733 318,187 184,561 12/19/85 300
Anderson IN 232,170 385,661 None None 232,170 385,661 617,831 62,351 12/19/97 300
Indianapolis IN 231,384 428,307 None None 231,384 428,307 659,691 90,658 09/27/96 300
Olathe KS 217,995 367,055 None None 217,995 367,055 585,050 67,902 04/22/97 11/11/96 300
Louisville KY 56,054 259,881 None None 56,054 259,881 315,935 183,256 12/17/85 300
Newport KY 323,511 289,017 None None 323,511 289,017 612,528 49,559 09/17/97 300
Lenox MA 287,769 535,273 None None 287,769 535,273 823,042 59,761 03/31/99 300
Clinton MD 70,880 328,620 None None 70,880 328,620 399,500 233,736 11/15/85 300
Minneapolis MN 58,000 268,903 None 182 58,000 269,085 327,085 189,618 12/18/85 300
F-5
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Service
-------------------
Independence MO 297,641 233,152 None None 297,641 233,152 530,793 47,019 12/20/96 300
Concord NC 237,688 357,976 None 5,517 237,688 363,493 601,181 50,219 11/05/97 300
Durham NC 354,676 361,203 None None 354,676 361,203 715,879 61,964 08/29/97 03/31/97 300
Durham NC 55,074 255,336 None None 55,074 255,336 310,410 181,614 11/13/85 300
Fayetteville NC 224,326 257,733 None None 224,326 257,733 482,059 41,650 12/03/97 300
Garner NC 218,294 319,334 None 472 218,294 319,806 538,100 51,061 03/15/01 06/20/97 300
Matthews NC 295,580 338,472 None 420 295,580 338,892 634,472 43,727 08/28/98 02/27/98 300
Pineville NC 254,460 355,630 None None 254,460 355,630 610,090 61,008 08/28/97 04/16/97 300
Raleigh NC 398,694 263,621 None None 398,694 263,621 662,315 44,341 10/01/97 300
Raleigh NC 89,145 413,301 None None 89,145 413,301 502,446 294,468 10/28/85 300
Albion NY 170,589 317,424 None None 170,589 317,424 488,013 35,437 03/31/99 300
Dansville NY 181,664 337,991 None None 181,664 337,991 519,655 37,734 03/31/99 300
East Amherst NY 260,708 484,788 None None 260,708 484,788 745,496 54,126 03/31/99 300
East Syracuse NY 250,609 466,264 None None 250,609 466,264 716,873 52,055 03/31/99 300
Johnson City NY 242,863 451,877 None None 242,863 451,877 694,740 50,448 03/31/99 300
Wellsville NY 161,331 300,231 None None 161,331 300,231 461,562 33,518 03/31/99 300
West Amherst NY 268,692 499,619 None None 268,692 499,619 768,311 55,783 03/31/99 300
Akron OH 139,126 460,334 None None 139,126 460,334 599,460 78,986 09/18/97 300
Beavercreek OH 205,000 492,538 None None 205,000 492,538 697,538 94,402 02/13/97 09/09/96 300
Centerville OH 305,000 420,448 None None 305,000 420,448 725,448 91,798 07/24/96 06/28/96 300
Cinncinati OH 293,005 201,340 None None 293,005 201,340 494,345 34,493 09/17/97 300
Columbus OH 71,098 329,627 None None 71,098 329,627 400,725 235,655 10/02/85 300
Columbus OH 75,761 351,247 None None 75,761 351,247 427,008 250,256 10/24/85 300
Columbus OH 245,036 470,468 None None 245,036 470,468 715,504 113,697 12/22/95 300
Dayton OH 70,000 324,538 None None 70,000 324,538 394,538 231,226 10/31/85 300
Eastlake OH 321,347 459,774 None None 321,347 459,774 781,121 111,112 12/22/95 300
Fairfield OH 323,408 235,024 None None 323,408 235,024 558,432 40,288 09/17/97 300
Findlay OH 283,515 397,004 None None 283,515 397,004 680,519 64,186 12/24/97 300
Hamilton OH 252,608 413,279 None None 252,608 413,279 665,887 75,076 03/31/97 10/04/96 300
Huber Heights OH 282,000 449,381 None None 282,000 449,381 731,381 89,127 12/03/96 07/18/96 300
Miamisburg OH 63,996 296,701 None None 63,996 296,701 360,697 212,116 10/08/85 300
Milford OH 353,324 269,997 None None 353,324 269,997 623,321 46,308 09/18/97 300
Mt. Vernon OH 216,115 375,357 None None 216,115 375,357 591,472 60,683 12/30/97 300
Northwood OH 65,978 263,912 None None 65,978 263,912 329,890 263,912 09/12/86 180
Norwalk OH 200,205 366,000 None None 200,205 366,000 566,205 59,169 12/19/97 300
Sandusky OH 264,708 404,011 None None 264,708 404,011 668,719 65,319 12/19/97 300
F-6
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Automotive Service
-------------------
Springboro OH 191,911 522,902 None None 191,911 522,902 714,813 100,064 03/07/97 300
Toledo OH 91,655 366,621 None None 91,655 366,621 458,276 366,621 09/12/86 180
Toledo OH 73,408 293,632 None None 73,408 293,632 367,040 293,632 09/12/86 180
Midwest City OK 106,312 333,551 None None 106,312 333,551 439,863 45,110 08/06/98 08/08/97 300
The Village OK 143,655 295,422 None None 143,655 295,422 439,077 43,836 03/06/98 07/29/97 300
Bethel Park PA 299,595 331,264 None None 299,595 331,264 630,859 53,561 12/19/97 300
Bethlehem PA 275,328 389,067 None None 275,328 389,067 664,395 62,905 12/19/97 300
Bethlehem PA 229,162 310,526 None None 229,162 310,526 539,688 50,198 12/24/97 300
Philadelphia PA 858,500 877,744 None None 858,500 877,744 1,736,244 327,033 05/19/95 12/05/94 300
Springfield Twp. PA 82,740 383,601 None None 82,740 383,601 466,341 267,678 02/28/86 300
York PA 249,436 347,424 None None 249,436 347,424 596,860 56,168 12/30/97 300
Charleston SC 217,250 294,079 None None 217,250 294,079 511,329 51,414 07/14/97 03/13/97 300
Columbia SC 343,785 295,001 None None 343,785 295,001 638,786 53,498 05/27/97 02/07/97 300
Columbia SC 267,622 298,594 None None 267,622 298,594 566,216 44,339 03/31/98 11/05/97 300
Greenville SC 221,946 315,163 None None 221,946 315,163 537,109 53,024 09/05/97 03/31/97 300
Lexington SC 241,534 342,182 None 302 241,534 342,484 584,018 37,252 09/24/98 300
North
Charleston SC 174,980 341,466 None None 174,980 341,466 516,446 46,114 08/06/98 03/12/98 300
Brentwood TN 305,546 505,728 None None 305,546 505,728 811,274 80,066 03/13/98 05/28/97 300
Nashville TN 342,960 227,440 None None 342,960 227,440 570,400 38,993 09/17/97 300
Dallas TX 234,604 325,951 None None 234,604 325,951 560,555 70,079 08/09/96 02/19/96 300
Houston TX 285,000 369,697 None None 285,000 369,697 654,697 62,193 08/08/97 08/08/97 300
Houston TX 195,000 424,651 686 1,046 195,000 426,383 621,383 36,330 02/01/02 06/12/98 300
Lewisville TX 199,942 324,736 None None 199,942 324,736 524,678 69,818 08/02/96 02/14/96 300
San Antonio TX 198,828 437,422 None None 198,828 437,422 636,250 110,084 09/15/95 300
Roanoke VA 349,628 322,545 None None 349,628 322,545 672,173 52,150 12/19/97 300
Bremerton WA 261,172 373,080 None None 261,172 373,080 634,252 76,089 03/19/97 07/24/96 300
Milwaukee WI 173,005 499,244 None None 173,005 499,244 672,249 120,651 12/22/95 300
Milwaukee WI 152,509 475,480 None None 152,509 475,480 627,989 100,643 09/27/96 300
New Berlin WI 188,491 466,268 None None 188,491 466,268 654,759 112,682 12/22/95 300
Book Stores
-----------
Tampa FL 998,250 3,696,707 None None 998,250 3,696,707 4,694,957 708,469 03/11/97 300
Matthews NC 768,222 843,401 None 126 768,222 843,527 1,611,749 102,640 12/31/98 300
Business Services
-----------------
Jackson MI 550,162 571,590 None None 550,162 571,590 1,121,752 65,857 01/15/99 09/25/98 300
F-7
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Birmingham AL 63,800 295,791 None None 63,800 295,791 359,591 228,156 10/31/84 300
Huntsville AL 28,600 197,165 None 277 28,600 197,442 226,042 197,419 06/15/82 180
Mobile AL 78,400 237,671 None 277 78,400 237,948 316,348 237,925 10/15/82 180
Avondale AZ 242,723 1,129,139 None None 242,723 1,129,139 1,371,862 114,881 04/20/99 07/28/98 300
Chandler AZ 144,083 668,079 None None 144,083 668,079 812,162 441,345 12/17/86 300
Chandler AZ 291,720 647,923 None None 291,720 647,923 939,643 341,357 12/11/87 300
Chandler AZ 271,695 603,446 None None 271,695 603,446 875,141 317,994 12/14/87 300
Mesa AZ 297,500 660,755 None None 297,500 660,755 958,255 330,268 09/29/88 300
Mesa AZ 276,770 590,417 None None 276,770 590,417 867,187 295,113 09/29/88 300
Mesa AZ 308,951 1,025,612 None None 308,951 1,025,612 1,334,563 94,049 07/26/99 01/13/99 300
Peoria AZ 281,750 625,779 None None 281,750 625,779 907,529 324,060 03/30/88 300
Phoenix AZ 318,500 707,397 None None 318,500 707,397 1,025,897 353,581 09/29/88 300
Phoenix AZ 264,504 587,471 None None 264,504 587,471 851,975 257,080 06/29/90 300
Phoenix AZ 260,719 516,181 None None 260,719 516,181 776,900 216,811 12/26/90 300
Phoenix AZ 115,000 285,172 None 158 115,000 285,330 400,330 285,315 02/08/84 180
Scottsdale AZ 291,993 648,529 None None 291,993 648,529 940,522 341,713 12/14/87 300
Tempe AZ 292,200 648,989 None None 292,200 648,989 941,189 336,080 03/10/88 300
Tempe AZ 294,000 638,977 None None 294,000 638,977 932,977 279,365 09/27/90 300
Tucson AZ 304,500 676,303 None 133 304,500 676,436 980,936 338,040 09/28/88 300
Tucson AZ 283,500 546,878 None 133 283,500 547,011 830,511 273,348 09/29/88 300
Calabasas CA 156,430 725,248 None None 156,430 725,248 881,678 519,369 09/26/85 300
Carmichael CA 131,035 607,507 None None 131,035 607,507 738,542 410,414 08/22/86 300
Chino CA 155,000 634,071 None 5 155,000 634,076 789,076 634,071 10/06/83 180
Chula Vista CA 350,563 778,614 None None 350,563 778,614 1,129,177 414,968 10/30/87 300
Corona CA 144,856 671,584 None None 144,856 671,584 816,440 513,004 12/19/84 300
El Cajon CA 157,804 731,621 None None 157,804 731,621 889,425 515,904 12/19/85 300
Encinitas CA 320,000 710,729 None None 320,000 710,729 1,030,729 374,486 12/29/87 300
Escondido CA 276,286 613,638 None None 276,286 613,638 889,924 323,327 12/31/87 300
Folsom CA 281,563 625,363 None None 281,563 625,363 906,926 334,284 10/23/87 300
Mission Viejo CA 353,891 744,367 None None 353,891 744,367 1,098,258 273,883 06/24/93 300
Moreno Valley CA 304,489 676,214 None None 304,489 676,214 980,703 376,866 02/11/87 300
Oceanside CA 145,568 674,889 None None 145,568 674,889 820,457 475,898 12/23/85 300
Palmdale CA 249,490 554,125 None None 249,490 554,125 803,615 276,970 09/14/88 300
Rancho Cordova CA 276,328 613,733 None None 276,328 613,733 890,061 295,777 03/22/89 300
F-8
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Rancho Cucamonga CA 471,733 1,047,739 None None 471,733 1,047,739 1,519,472 552,059 12/30/87 300
Roseville CA 297,343 660,411 None None 297,343 660,411 957,754 353,011 10/21/87 300
Sacramento CA 290,734 645,732 None None 290,734 645,732 936,466 344,147 10/05/87 300
Santee CA 248,418 551,748 None None 248,418 551,748 800,166 299,083 07/23/87 300
Simi Valley CA 208,585 967,055 None None 208,585 967,055 1,175,640 681,923 12/20/85 300
Valencia CA 301,295 669,185 None None 301,295 669,185 970,480 340,501 06/23/88 300
Walnut CA 217,365 1,007,753 None None 217,365 1,007,753 1,225,118 680,810 08/22/86 300
Aurora CO 141,811 657,497 None None 141,811 657,497 799,308 456,376 03/25/86 300
Aurora CO 287,000 637,440 None None 287,000 637,440 924,440 335,869 12/31/87 300
Aurora CO 301,455 655,610 None None 301,455 655,610 957,065 345,139 09/27/89 300
Broomfield CO 107,000 403,080 None None 107,000 403,080 510,080 403,080 01/12/83 180
Broomfield CO 155,306 344,941 None None 155,306 344,941 500,247 178,629 03/15/88 300
Colorado Springs CO 115,542 535,700 None None 115,542 535,700 651,242 355,270 12/04/86 300
Colorado Springs CO 58,400 271,217 None None 58,400 271,217 329,617 271,217 12/22/82 180
Colorado Springs CO 92,570 241,413 None None 92,570 241,413 333,983 241,413 08/31/83 180
Englewood CO 131,216 608,372 None None 131,216 608,372 739,588 403,466 12/05/86 300
Englewood CO 158,651 735,572 None None 158,651 735,572 894,223 485,931 12/29/86 300
Fort Collins CO 117,105 542,950 None None 117,105 542,950 660,055 376,867 03/25/86 300
Fort Collins CO 137,734 638,593 None None 137,734 638,593 776,327 443,255 03/25/86 300
Fort Collins CO 55,200 256,356 None 3,600 55,200 259,956 315,156 257,796 12/22/82 180
Greeley CO 58,400 270,755 None 227 58,400 270,982 329,382 207,954 11/21/84 300
Littleton CO 287,000 637,435 None None 287,000 637,435 924,435 318,612 09/29/88 300
Littleton CO 299,250 664,642 None None 299,250 664,642 963,892 332,212 09/29/88 300
Littleton CO 161,617 358,956 None None 161,617 358,956 520,573 189,133 12/10/87 300
Longmont CO 115,592 535,931 None None 115,592 535,931 651,523 371,996 03/25/86 300
Louisville CO 58,089 269,313 None None 58,089 269,313 327,402 211,585 06/22/84 300
Parker CO 153,551 341,042 None None 153,551 341,042 494,593 182,298 10/19/87 300
Westminster CO 306,387 695,737 None None 306,387 695,737 1,002,124 346,333 09/27/89 300
Bradenton FL 160,060 355,501 None None 160,060 355,501 515,561 181,957 05/05/88 300
Clearwater FL 42,223 269,380 None None 42,223 269,380 311,603 269,380 12/22/81 180
Jacksonville FL 38,500 228,481 None 242 38,500 228,723 267,223 228,481 12/22/81 180
Jacksonville FL 48,000 243,060 None 226 48,000 243,286 291,286 243,060 12/22/81 180
Jacksonville FL 184,800 410,447 None None 184,800 410,447 595,247 197,807 03/30/89 300
Jupiter FL 78,000 360,088 7,840 1,881 78,000 369,809 447,809 258,718 09/11/85 300
Margate FL 66,686 309,183 None None 66,686 309,183 375,869 204,252 12/16/86 300
Melbourne FL 256,439 549,345 None None 256,439 549,345 805,784 204,498 04/16/93 300
F-9
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Niceville FL 73,696 341,688 None None 73,696 341,688 415,384 226,598 12/03/86 300
Orlando FL 68,001 313,922 None None 68,001 313,922 381,923 225,548 09/04/85 300
Orlando FL 159,177 353,538 None None 159,177 353,538 512,715 191,639 07/02/87 300
Orlando FL 245,249 544,704 None None 245,249 544,704 789,953 287,005 12/10/87 300
Orlando FL 190,050 422,107 None None 190,050 422,107 612,157 203,427 03/30/89 300
Oviedo FL 166,409 369,598 None None 166,409 369,598 536,007 195,855 11/20/87 300
Panama City FL 69,500 244,314 None 304 69,500 244,618 314,118 244,390 06/15/82 180
Pensacola FL 147,000 326,492 None None 147,000 326,492 473,492 157,347 03/28/89 300
Royal Palm Beach FL 194,193 431,309 None None 194,193 431,309 625,502 213,005 11/15/88 300
Spring Hill FL 146,939 326,356 None None 146,939 326,356 473,295 172,940 11/24/87 300
St. Augustine FL 44,800 213,040 None None 44,800 213,040 257,840 213,040 12/22/81 180
Sunrise FL 69,400 246,671 None 181 69,400 246,852 316,252 246,671 06/15/82 180
Sunrise FL 245,000 533,280 None None 245,000 533,280 778,280 257,532 05/25/89 300
Tallahassee FL 66,000 232,010 None 1,465 66,000 233,475 299,475 232,575 06/15/82 180
Tampa FL 53,385 199,846 None None 53,385 199,846 253,231 199,846 12/22/81 180
Duluth GA 310,000 1,040,008 None None 310,000 1,040,008 1,350,008 91,915 08/25/99 06/07/99 300
Dunwoody GA 318,500 707,399 None None 318,500 707,399 1,025,899 349,353 11/16/88 300
Ellenwood GA 119,678 275,414 None None 119,678 275,414 395,092 136,014 11/16/88 300
Fayetteville GA 148,400 329,601 None 264 148,400 329,865 478,265 158,846 03/29/89 300
Lawrenceville GA 141,449 314,161 None None 141,449 314,161 455,610 158,911 07/07/88 300
Lilburn GA 116,350 539,488 None 285 116,350 539,773 656,123 356,395 12/23/86 300
Lithia Springs GA 187,444 363,358 None None 187,444 363,358 550,802 171,324 12/28/89 300
Lithonia GA 239,715 524,459 None None 239,715 524,459 764,174 235,980 08/20/91 300
Marietta GA 231,000 513,061 None 237 231,000 513,298 744,298 265,690 03/18/88 300
Marietta GA 273,000 619,076 None 237 273,000 619,313 892,313 318,725 04/26/88 300
Marietta GA 292,250 649,095 None 177 292,250 649,272 941,522 318,621 12/02/88 300
Marietta GA 295,750 596,299 None 177 295,750 596,476 892,226 292,705 12/30/88 300
Marietta GA 301,000 668,529 None 177 301,000 668,706 969,706 328,160 12/30/88 300
Marietta GA 148,620 330,090 None None 148,620 330,090 478,710 165,137 09/16/88 300
Martinez GA 141,153 243,504 None 79 141,153 243,583 384,736 165,184 12/31/87 300
Smyrna GA 274,750 610,229 None None 274,750 610,229 884,979 301,365 11/15/88 300
Stockbridge GA 168,700 374,688 None None 168,700 374,688 543,388 180,574 03/28/89 300
Stone Mountain GA 316,750 703,512 None None 316,750 703,512 1,020,262 347,433 11/16/88 300
Stone Mountain GA 65,000 301,357 None 422 65,000 301,779 366,779 219,094 06/19/85 300
Valdosta GA 73,561 341,059 None 337 73,561 341,396 414,957 226,179 12/03/86 300
Cedar Rapids IA 194,950 427,085 None None 194,950 427,085 622,035 173,966 09/24/92 300
F-10
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Iowa City IA 186,900 408,910 None None 186,900 408,910 595,810 168,458 09/24/92 300
Johnston IA 186,996 347,278 None None 186,996 347,278 534,274 137,771 08/19/91 300
Addison IL 125,780 583,146 None None 125,780 583,146 708,926 404,769 03/25/86 300
Algonquin IL 241,500 509,629 None None 241,500 509,629 751,129 224,188 07/10/90 300
Aurora IL 165,679 398,738 None 207 165,679 398,945 564,624 195,727 12/21/88 300
Aurora IL 468,000 1,259,926 None None 468,000 1,259,926 1,727,926 102,983 10/26/99 06/14/99 300
Bartlett IL 120,824 560,166 None None 120,824 560,166 680,990 388,818 03/25/86 300
Bolingbrook IL 60,000 409,024 None None 60,000 409,024 469,024 409,024 10/18/82 180
Carol Stream IL 122,831 586,416 None None 122,831 586,416 709,247 407,039 03/25/86 300
Crystal Lake IL 400,000 1,259,424 None None 400,000 1,259,424 1,659,424 107,130 09/28/99 05/14/99 300
Elk Grove Villag IL 126,860 588,175 None None 126,860 588,175 715,035 408,260 03/26/86 300
Elk Grove Villag IL 214,845 477,181 None 207 214,845 477,388 692,233 245,672 04/08/88 300
Glendale Heights IL 318,500 707,399 None None 318,500 707,399 1,025,899 349,353 11/16/88 300
Hoffman Estates IL 318,500 707,399 None None 318,500 707,399 1,025,899 340,917 03/31/89 300
Hoffman Estates IL 211,082 468,818 None 1,050 211,082 469,868 680,950 213,435 12/08/89 300
Lake in the Hill IL 375,000 1,127,678 None None 375,000 1,127,678 1,502,678 95,928 09/03/99 05/14/99 300
Lockport IL 189,477 442,018 None 207 189,477 442,225 631,702 235,569 10/29/87 300
Naperville IL 425,000 1,230,654 None None 425,000 1,230,654 1,655,654 100,583 10/06/99 05/19/99 300
O'Fallon IL 141,250 313,722 None 207 141,250 313,929 455,179 167,192 10/30/87 300
Orland Park IL 218,499 485,296 None 207 218,499 485,503 704,002 258,634 10/28/87 300
Oswego IL 380,000 1,165,818 None 1,182 380,000 1,167,000 1,547,000 103,032 08/18/99 06/30/99 300
Palatine IL 121,911 565,232 None None 121,911 565,232 687,143 392,334 03/25/86 300
Roselle IL 297,541 561,037 None None 297,541 561,037 858,578 275,396 12/30/88 300
Schaumburg IL 218,798 485,955 None 207 218,798 486,162 704,960 256,050 12/17/87 300
Vernon Hills IL 132,523 614,430 None None 132,523 614,430 746,953 426,483 03/25/86 300
Westmont IL 124,742 578,330 None None 124,742 578,330 703,072 401,426 03/25/86 300
Carmel IN 217,565 430,742 None None 217,565 430,742 648,307 180,925 12/27/90 300
Fishers IN 212,118 419,958 None None 212,118 419,958 632,076 176,395 12/27/90 300
Highland IN 220,460 436,476 None None 220,460 436,476 656,936 183,332 12/26/90 300
Indianapolis IN 245,000 544,153 None None 245,000 544,153 789,153 238,124 06/29/90 300
Noblesville IN 60,000 278,175 None None 60,000 278,175 338,175 207,185 04/30/85 300
Zionsville IN 127,568 319,770 None None 127,568 319,770 447,338 170,416 10/28/87 300
Lenexa KS 318,500 707,399 None None 318,500 707,399 1,025,899 340,917 03/31/89 300
Olathe KS 304,500 676,308 None None 304,500 676,308 980,808 338,042 09/28/88 300
Overland Park KS 305,691 707,397 None None 305,691 707,397 1,013,088 353,581 09/28/88 300
Overland Park KS 357,500 1,115,171 None None 357,500 1,115,171 1,472,671 102,259 07/23/99 05/14/99 300
Shawnee KS 315,000 699,629 None None 315,000 699,629 1,014,629 347,605 10/27/88 300
Shawnee KS 288,246 935,875 None None 288,246 935,875 1,224,121 107,664 12/29/98 08/24/98 300
F-11
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Wichita KS 209,890 415,549 None None 209,890 415,549 625,439 174,543 12/26/90 300
Wichita KS 108,569 401,829 None None 108,569 401,829 510,398 250,380 12/16/86 300
Lexington KY 210,427 420,883 None None 210,427 420,883 631,310 182,567 08/20/91 300
Acton MA 315,533 700,813 None None 315,533 700,813 1,016,346 350,291 09/30/88 300
Marlborough MA 352,765 776,488 None None 352,765 776,488 1,129,253 383,471 11/04/88 300
Westborough MA 359,412 773,877 None None 359,412 773,877 1,133,289 382,180 11/01/88 300
Ellicott City MD 219,368 630,839 None None 219,368 630,839 850,207 309,658 12/19/88 300
Frederick MD 203,352 1,017,109 None None 203,352 1,017,109 1,220,461 140,700 07/06/98 300
Olney MD 342,500 760,701 None None 342,500 760,701 1,103,201 400,816 12/18/87 300
Waldorf MD 130,430 604,702 None None 130,430 604,702 735,132 468,607 09/26/84 300
Waldorf MD 237,207 526,844 None None 237,207 526,844 764,051 277,594 12/31/87 300
Canton MI 55,000 378,848 None None 55,000 378,848 433,848 378,848 10/06/82 180
Apple Valley MN 113,523 526,319 None 165 113,523 526,484 640,007 365,325 03/26/86 300
Brooklyn Park MN 118,111 547,587 None 165 118,111 547,752 665,863 380,086 03/26/86 300
Brooklyn Park MN 112,823 523,073 None 1,457 112,823 524,530 637,353 363,072 03/27/86 300
Eagan MN 112,127 519,845 None 165 112,127 520,010 632,137 360,830 03/31/86 300
Eden Prairie MN 124,286 576,243 None 165 124,286 576,408 700,694 399,978 03/27/86 300
Maple Grove MN 313,250 660,149 None None 313,250 660,149 973,399 291,120 07/11/90 300
Maple Grove MN 111,691 517,822 None 1,167 111,691 518,989 630,680 359,427 03/26/86 300
Minnetonka MN 146,847 680,842 None 165 146,847 681,007 827,854 451,527 12/12/86 300
Plymouth MN 134,221 622,350 None 165 134,221 622,515 756,736 412,734 12/12/86 300
W. Bloomington MN 40,000 468,484 None 165 40,000 468,649 508,649 468,484 06/18/82 180
White Bear Lake MN 260,750 579,133 None None 260,750 579,133 839,883 305,147 12/23/87 300
White Bear Lake MN 242,165 537,856 None None 242,165 537,856 780,021 232,212 08/30/90 300
Florissant MO 318,500 707,399 None None 318,500 707,399 1,025,899 340,917 03/30/89 300
Florissant MO 181,300 402,672 None None 181,300 402,672 583,972 194,060 03/29/89 300
Gladstone MO 294,000 652,987 None None 294,000 652,987 946,987 326,386 09/29/88 300
Lee's Sumit MO 313,740 939,367 None None 313,740 939,367 1,253,107 83,023 09/08/99 06/30/99 300
Lee's Summit MO 239,627 532,220 None None 239,627 532,220 771,847 246,099 09/27/89 300
Lee's Summit MO 330,000 993,787 None None 330,000 993,787 1,323,787 91,125 07/26/99 06/17/99 300
Liberty MO 65,400 303,211 None None 65,400 303,211 368,611 220,442 06/18/85 300
Manchester MO 287,000 637,435 None None 287,000 637,435 924,435 335,867 12/22/87 300
North Kansas Cit MO 307,784 910,401 None None 307,784 910,401 1,218,185 110,238 09/28/99 08/21/98 300
St. Charles MO 259,000 575,246 None None 259,000 575,246 834,246 303,100 12/23/87 300
Pearl MS 121,801 270,524 None 282 121,801 270,806 392,607 133,726 11/15/88 300
Cary NC 75,200 262,973 None 228 75,200 263,201 338,401 263,099 01/25/84 180
Charlotte NC 27,551 247,000 None 228 27,551 247,228 274,779 247,023 12/23/81 180
F-12
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Charlotte NC 134,582 268,222 None None 134,582 268,222 402,804 132,461 11/16/88 300
Concord NC 32,441 190,859 None None 32,441 190,859 223,300 190,859 12/23/81 180
Durham NC 220,728 429,380 None None 220,728 429,380 650,108 205,196 12/29/89 300
Durham NC 238,000 471,201 None None 238,000 471,201 709,201 186,934 08/20/91 300
Hendersonville NC 32,748 186,152 None 228 32,748 186,380 219,128 186,277 12/23/81 180
Kernersville NC 162,216 316,300 None None 162,216 316,300 478,516 152,194 12/14/89 300
Morrisville NC 175,700 390,234 None None 175,700 390,234 565,934 188,065 03/29/89 300
Bellevue NE 60,568 280,819 None None 60,568 280,819 341,387 185,514 12/16/86 300
Omaha NE 60,500 280,491 None None 60,500 280,491 340,991 219,369 08/01/84 300
Omaha NE 53,000 245,720 None None 53,000 245,720 298,720 190,131 10/11/84 300
Omaha NE 142,867 317,315 None None 142,867 317,315 460,182 167,192 12/09/87 300
Londonderry NH 335,467 745,082 None None 335,467 745,082 1,080,549 348,019 08/18/89 300
Clementon NJ 279,851 554,060 None None 279,851 554,060 833,911 218,197 09/09/91 300
Las Vegas NV 201,250 446,983 None None 201,250 446,983 648,233 195,601 06/29/90 300
Sparks NV 244,752 543,605 None None 244,752 543,605 788,357 284,785 01/29/88 300
Beavercreek OH 179,552 398,786 None None 179,552 398,786 578,338 217,381 06/30/87 300
Centerville OH 174,519 387,613 None None 174,519 387,613 562,132 210,111 07/23/87 300
Cincinnati OH 165,910 368,486 None 189 165,910 368,675 534,585 203,111 04/29/87 300
Dublin OH 84,000 389,446 None 176 84,000 389,622 473,622 278,419 10/08/85 300
Englewood OH 74,000 343,083 None 176 74,000 343,259 417,259 244,438 10/23/85 300
Forest Park OH 170,778 379,305 None None 170,778 379,305 550,083 204,085 09/28/87 300
Gahanna OH 86,000 398,718 None 2,079 86,000 400,797 486,797 282,618 11/26/85 300
Huber Heights OH 245,000 544,153 None None 245,000 544,153 789,153 233,336 09/27/90 300
Loveland OH 206,136 457,829 None None 206,136 457,829 663,965 253,755 03/20/87 300
Maineville OH 173,105 384,468 None None 173,105 384,468 557,573 213,095 03/06/87 300
Pickerington OH 87,580 406,055 None 176 87,580 406,231 493,811 269,284 12/11/86 300
Westerville OH 294,350 646,557 None None 294,350 646,557 940,907 282,082 09/26/90 300
Westerville OH 82,000 380,173 None 176 82,000 380,349 462,349 271,790 10/08/85 300
Broken Arrow OK 78,705 220,434 None 561 78,705 220,995 299,700 220,689 01/27/83 180
Midwest City OK 67,800 314,338 None 279 67,800 314,617 382,417 227,420 08/14/85 300
Oklahoma City OK 79,000 366,261 None 279 79,000 366,540 445,540 282,193 11/14/84 300
Oklahoma City OK 50,800 214,474 None 3,013 50,800 217,487 268,287 215,277 06/15/82 180
Yukon OK 61,000 282,812 None 196 61,000 283,008 344,008 209,594 05/02/85 300
Beaverton OR 135,148 626,647 None 3 135,148 626,650 761,798 413,973 12/17/86 300
Beaverton OR 115,232 534,301 None 3 115,232 534,304 649,536 352,968 12/22/86 300
Charleston SC 125,593 278,947 None None 125,593 278,947 404,540 142,774 05/26/88 300
F-13
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Charleston SC 140,700 312,498 None None 140,700 312,498 453,198 150,603 03/28/89 300
Columbia SC 58,160 269,643 None 1,042 58,160 270,685 328,845 208,090 11/14/84 300
Elgin SC 160,831 313,600 None None 160,831 313,600 474,431 150,895 12/14/89 300
Goose Creek SC 61,635 192,905 None 292 61,635 193,197 254,832 192,934 12/22/81 180
Ladson SC 31,543 177,457 None 292 31,543 177,749 209,292 177,725 12/22/81 180
Mt. Pleasant SC 40,700 180,400 None None 40,700 180,400 221,100 180,400 12/22/81 180
Summerville SC 44,400 174,500 None None 44,400 174,500 218,900 174,500 12/22/81 180
Sumter SC 56,010 268,903 None 1,007 56,010 269,910 325,920 195,651 06/18/85 300
Memphis TN 238,263 504,897 None None 238,263 504,897 743,160 252,364 09/29/88 300
Memphis TN 238,000 528,608 None None 238,000 528,608 766,608 264,217 09/30/88 300
Memphis TN 221,501 491,962 None None 221,501 491,962 713,463 212,398 08/31/90 300
Nashville TN 274,298 609,223 None None 274,298 609,223 883,521 293,603 03/30/89 300
Allen TX 177,637 394,538 None 167 177,637 394,705 572,342 194,840 11/21/88 300
Arlington TX 82,109 380,677 None None 82,109 380,677 462,786 291,820 12/13/84 300
Arlington TX 238,000 528,604 None None 238,000 528,604 766,604 264,214 09/26/88 300
Arlington TX 241,500 550,559 None None 241,500 550,559 792,059 310,220 09/22/89 300
Arlington TX 195,650 387,355 None None 195,650 387,355 583,005 160,438 02/07/91 300
Arlington TX 70,000 324,538 18,424 1,215 70,000 344,177 414,177 241,774 05/08/85 300
Atascocita TX 278,915 1,034,868 None None 278,915 1,034,868 1,313,783 94,890 07/19/99 05/14/99 300
Austin TX 134,383 623,103 None 357 134,383 623,460 757,843 411,633 12/23/86 300
Austin TX 236,733 528,608 None 10 236,733 528,618 765,351 264,217 09/27/88 300
Austin TX 238,000 528,604 None None 238,000 528,604 766,604 253,179 04/06/89 300
Austin TX 103,600 230,532 None 432 103,600 230,964 334,564 230,601 10/29/82 180
Austin TX 88,872 222,684 None 75 88,872 222,759 311,631 222,725 01/12/83 180
Austin TX 188,144 417,872 None 10 188,144 417,882 606,026 213,881 05/11/88 300
Austin TX 191,636 425,629 None 10 191,636 425,639 617,275 208,927 12/22/88 300
Austin TX 224,878 499,460 None None 224,878 499,460 724,338 243,681 01/03/89 300
Austin TX 217,878 483,913 None None 217,878 483,913 701,791 228,899 06/22/89 300
Bedford TX 241,500 550,559 None None 241,500 550,559 792,059 310,220 09/22/89 300
Carrollton TX 277,850 617,113 None None 277,850 617,113 894,963 325,159 12/11/87 300
Cedar Park TX 168,857 375,036 None None 168,857 375,036 543,893 185,209 11/21/88 300
Colleyville TX 250,000 1,070,360 None None 250,000 1,070,360 1,320,360 94,591 08/17/99 05/14/99 300
Colleyville TX 68,000 315,266 8,979 4,182 68,000 328,427 396,427 238,312 05/01/85 300
Converse TX 217,000 481,963 None 10 217,000 481,973 698,973 240,902 09/28/88 300
Coppell TX 139,224 645,550 None 156 139,224 645,706 784,930 426,461 12/17/86 300
Coppell TX 208,641 463,398 None None 208,641 463,398 672,039 244,166 12/11/87 300
F-14
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Corinth TX 285,000 1,041,626 None None 285,000 1,041,626 1,326,626 98,946 06/04/99 05/19/99 300
DeSoto TX 86,000 398,715 29,103 2,047 86,000 429,865 515,865 310,177 10/24/84 300
Duncanville TX 93,000 431,172 None 944 93,000 432,116 525,116 319,544 05/08/85 300
Euless TX 234,111 519,962 None None 234,111 519,962 754,073 285,020 05/08/87 300
Flower Mound TX 202,773 442,845 None None 202,773 442,845 645,618 244,097 04/20/87 300
Flower Mound TX 281,735 1,099,726 None None 281,735 1,099,726 1,381,461 111,772 04/23/99 01/13/99 300
Fort Worth TX 238,000 528,608 None None 238,000 528,608 766,608 264,217 09/26/88 300
Fort Worth TX 85,518 396,495 None None 85,518 396,495 482,013 262,945 12/03/86 300
Fort Worth TX 210,007 444,460 None None 210,007 444,460 654,467 202,436 02/01/90 300
Fort Worth TX 216,160 427,962 None None 216,160 427,962 644,122 177,257 02/07/91 300
Garland TX 211,050 468,749 None None 211,050 468,749 679,799 213,405 12/12/89 300
Grand Prairie TX 167,164 371,276 None None 167,164 371,276 538,440 182,246 12/13/88 300
Houston TX 219,100 486,631 None None 219,100 486,631 705,731 243,236 09/30/88 300
Houston TX 219,100 486,628 None None 219,100 486,628 705,728 240,324 11/16/88 300
Houston TX 149,109 323,314 None None 149,109 323,314 472,423 165,024 06/26/89 300
Houston TX 60,000 278,175 None 155 60,000 278,330 338,330 206,158 05/01/85 300
Houston TX 102,000 472,898 None 155 102,000 473,053 575,053 350,483 05/01/85 300
Houston TX 139,125 308,997 None 155 139,125 309,152 448,277 169,377 05/22/87 300
Houston TX 141,296 313,824 None None 141,296 313,824 455,120 170,113 07/24/87 300
Houston TX 294,582 919,276 None None 294,582 919,276 1,213,858 102,700 01/11/99 08/14/98 300
Houston TX 58,000 268,901 16,181 1,015 58,000 286,097 344,097 208,204 10/11/84 300
Katy TX 309,898 983,041 None None 309,898 983,041 1,292,939 116,350 11/30/98 08/21/98 300
Lewisville TX 192,777 428,121 None None 192,777 428,121 620,898 239,294 01/07/87 300
Lewisville TX 192,218 426,922 None None 192,218 426,922 619,140 209,563 12/29/88 300
Lewisville TX 79,000 366,264 None 1,245 79,000 367,509 446,509 266,284 06/26/85 300
Mansfield TX 181,375 402,839 None None 181,375 402,839 584,214 183,399 12/20/89 300
Mesquite TX 85,000 394,079 None 124 85,000 394,203 479,203 303,969 10/24/84 300
Mesquite TX 139,466 326,525 None None 139,466 326,525 465,991 150,644 10/08/92 300
Missouri City TX 221,025 437,593 None None 221,025 437,593 658,618 183,802 12/13/90 300
N. Richland Hill TX 238,000 528,608 None None 238,000 528,608 766,608 264,217 09/26/88 300
Pasadena TX 60,000 278,173 None 155 60,000 278,328 338,328 214,605 10/23/84 300
Plano TX 261,912 581,658 None None 261,912 581,658 843,570 325,949 01/06/87 300
Plano TX 250,514 556,399 None None 250,514 556,399 806,913 293,168 12/10/87 300
Plano TX 259,000 575,246 None None 259,000 575,246 834,246 287,528 09/27/88 300
Round Rock TX 80,525 373,347 None 156 80,525 373,503 454,028 246,640 12/16/86 300
Round Rock TX 186,380 413,957 None None 186,380 413,957 600,337 198,267 04/19/89 300
F-15
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
San Antonio TX 130,833 606,596 None 139 130,833 606,735 737,568 421,045 03/24/86 300
San Antonio TX 234,500 520,831 None 340 234,500 521,171 755,671 274,427 12/29/87 300
San Antonio TX 217,000 481,967 None None 217,000 481,967 698,967 239,463 10/14/88 300
San Antonio TX 220,500 447,108 None None 220,500 447,108 667,608 215,476 03/30/89 300
San Antonio TX 102,512 475,288 None 139 102,512 475,427 577,939 315,200 12/03/86 300
San Antonio TX 81,530 378,007 None 139 81,530 378,146 459,676 250,684 12/11/86 300
San Antonio TX 139,125 308,997 None 239 139,125 309,236 448,361 169,377 05/22/87 300
San Antonio TX 181,412 402,923 None 340 181,412 403,263 584,675 218,409 07/07/87 300
San Antonio TX 162,161 360,166 None 340 162,161 360,506 522,667 195,233 07/07/87 300
San Antonio TX 182,868 406,155 None 10 182,868 406,165 589,033 199,368 12/06/88 300
Southlake TX 228,279 511,750 None None 228,279 511,750 740,029 208,337 03/10/93 300
Sugarland TX 193,800 430,437 None 82 193,800 430,519 624,319 233,325 07/31/87 300
Sugarland TX 339,310 1,000,876 None None 339,310 1,000,876 1,340,186 98,416 05/30/99 01/13/99 300
The Woodlands TX 193,801 430,440 None 191 193,801 430,631 624,432 232,018 08/11/87 300
Watauga TX 165,914 368,502 None 256 165,914 368,758 534,672 199,751 07/07/87 300
Layton UT 136,574 269,008 None None 136,574 269,008 405,582 128,780 02/01/90 300
Sandy UT 168,089 373,330 None None 168,089 373,330 541,419 167,762 02/01/90 300
Centreville VA 371,000 824,003 None None 371,000 824,003 1,195,003 382,444 09/29/89 300
Chesapeake VA 190,050 422,107 None None 190,050 422,107 612,157 203,427 03/28/89 300
Glen Allen VA 74,643 346,060 None None 74,643 346,060 420,703 271,880 06/20/84 300
Portsmouth VA 171,575 381,073 None None 171,575 381,073 552,648 187,056 12/21/88 300
Richmond VA 269,500 598,567 None None 269,500 598,567 868,067 288,467 03/28/89 300
Richmond VA 71,001 327,771 None 7,651 71,001 335,422 406,423 235,499 09/04/85 300
Virginia Beach VA 69,080 320,270 None 656 69,080 320,926 390,006 246,667 11/15/84 300
Woodbridge VA 358,050 795,239 None None 358,050 795,239 1,153,289 397,488 09/29/88 300
Everett WA 120,000 540,363 None None 120,000 540,363 660,363 540,363 11/22/82 180
Federal Way WA 150,785 699,101 None 108 150,785 699,209 849,994 461,838 12/17/86 300
Federal Way WA 261,943 581,782 None None 261,943 581,782 843,725 287,310 11/21/88 300
Kent WA 128,300 539,141 None None 128,300 539,141 667,441 539,141 06/03/83 180
Kent WA 140,763 678,809 None 108 140,763 678,917 819,680 448,433 12/17/86 300
Kirkland WA 301,000 668,534 None 108 301,000 668,642 969,642 346,201 03/31/88 300
Puyallup WA 195,552 434,327 None None 195,552 434,327 629,879 213,196 12/06/88 300
Redmond WA 279,830 621,513 None 108 279,830 621,621 901,451 336,900 07/27/87 300
Renton WA 111,183 515,490 None 108 111,183 515,598 626,781 357,807 03/24/86 300
Appleton WI 196,000 424,038 None None 196,000 424,038 620,038 187,578 07/10/90 300
Waukesha WI 233,100 461,500 None None 233,100 461,500 694,600 193,843 12/13/90 300
F-16
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Child Care
----------
Waukesha WI 215,950 427,546 None None 215,950 427,546 643,496 179,582 12/13/90 300
Cheyenne WY 59,856 277,506 None 227 59,856 277,733 337,589 213,137 11/20/84 300
Consumer Electronics
--------------------
Oxford AL 323,085 406,655 None None 323,085 406,655 729,740 83,364 11/26/96 300
Tuscaloosa AL 204,790 585,115 None None 204,790 585,115 789,905 119,948 11/26/96 300
Bradenton FL 174,948 240,928 None None 174,948 240,928 415,876 49,390 11/26/96 300
Mary Esther FL 149,696 363,263 None None 149,696 363,263 512,959 74,469 11/26/96 300
Melbourne FL 269,697 522,414 None None 269,697 522,414 792,111 107,095 11/26/96 300
Merritt Island FL 309,652 482,459 None None 309,652 482,459 792,111 98,904 11/26/96 300
Ocala FL 339,690 543,504 None None 339,690 543,504 883,194 111,418 11/26/96 300
Pensacola FL 419,842 1,899,287 None None 419,842 1,899,287 2,319,129 389,354 11/26/96 300
Tallahassee FL 319,807 502,697 None None 319,807 502,697 822,504 103,053 11/26/96 300
Titusville FL 176,459 579,793 None None 176,459 579,793 756,252 118,858 11/26/96 300
Rome GA 254,902 486,812 None None 254,902 486,812 741,714 99,797 11/26/96 300
Smyrna GA 1,094,058 3,090,236 None 233 1,094,058 3,090,469 4,184,527 561,278 06/09/97 300
Council Bluffs IA 255,217 117,792 None None 255,217 117,792 373,009 24,147 11/26/96 300
Des Moines IA 188,520 367,614 None None 188,520 367,614 556,134 75,361 11/26/96 300
Peoria IL 193,868 387,737 None None 193,868 387,737 581,605 79,486 11/26/96 300
Rockford IL 159,587 618,398 None None 159,587 618,398 777,985 126,772 11/26/96 300
Springfield IL 219,859 630,595 None None 219,859 630,595 850,454 129,272 11/26/96 300
Anderson IN 180,628 653,162 None None 180,628 653,162 833,790 133,893 11/26/96 300
Muncie IN 148,901 645,235 None None 148,901 645,235 794,136 132,273 11/26/96 300
Richmond IN 93,999 193,753 None None 93,999 193,753 287,752 39,719 11/26/96 300
Columbus MS 144,908 463,707 None None 144,908 463,707 608,615 95,060 11/26/96 300
Greenville MS 144,588 433,764 None None 144,588 433,764 578,352 88,922 11/26/96 300
Gulfport MS 299,464 502,326 None None 299,464 502,326 801,790 102,977 11/26/96 300
Hattiesburg MS 198,659 457,379 None None 198,659 457,379 656,038 93,763 11/26/96 300
Jackson MS 405,360 656,296 None None 405,360 656,296 1,061,656 134,541 11/26/96 300
Meridian MS 181,156 515,598 None None 181,156 515,598 696,754 105,698 11/26/96 300
Tupelo MS 121,697 637,691 None None 121,697 637,691 759,388 130,727 11/26/96 300
Vicksburg MS 494,532 174,541 None None 494,532 174,541 669,073 35,781 11/26/96 300
Pineville NC 567,864 840,284 None 36,071 567,864 876,355 1,444,219 106,443 12/31/98 300
Lakewood NY 144,859 526,301 None None 144,859 526,301 671,160 107,892 11/26/96 300
Westbury NY 6,333,590 3,952,773 None None 6,333,590 3,952,773 10,286,363 678,171 09/29/97 300
Defiance OH 97,978 601,863 None None 97,978 601,863 699,841 123,382 11/26/96 300
F-17
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Consumer Electronics
--------------------
Kettering OH 229,246 488,393 None None 229,246 488,393 717,639 100,121 11/26/96 300
Bristol TN 344,365 468,719 None None 344,365 468,719 813,084 96,088 11/26/96 300
Clarksville TN 290,775 395,870 None None 290,775 395,870 686,645 81,153 11/26/96 300
Vienna WV 324,797 526,670 None None 324,797 526,670 851,467 107,967 11/26/96 300
Convenience Stores
------------------
Manchester CT 118,262 305,510 None None 118,262 305,510 423,772 82,997 03/03/95 300
Vernon CT 179,646 319,372 None None 179,646 319,372 499,018 86,763 03/09/95 300
Westbrook CT 98,247 373,340 None None 98,247 373,340 471,587 101,424 03/09/95 300
Archer FL 296,238 578,145 None 51 296,238 578,196 874,434 60,704 05/07/99 300
Gainesville FL 515,834 873,187 None None 515,834 873,187 1,389,021 91,683 05/07/99 300
Gainesville FL 480,318 600,633 None None 480,318 600,633 1,080,951 63,065 05/07/99 300
Gainesville FL 347,310 694,859 None None 347,310 694,859 1,042,169 72,959 05/07/99 300
Gainesville FL 339,263 658,807 None None 339,263 658,807 998,070 69,173 05/07/99 300
Gainesville FL 351,921 552,557 None None 351,921 552,557 904,478 58,017 05/07/99 300
Gainesville FL 500,032 850,291 None None 500,032 850,291 1,350,323 89,279 05/07/99 300
Jacksonville Bch FL 522,188 371,885 None None 522,188 371,885 894,073 39,046 05/07/99 300
Orange Park FL 425,820 416,154 None None 425,820 416,154 841,974 43,695 05/07/99 300
Augusta GA 320,000 382,323 None None 320,000 382,323 702,323 37,592 07/22/99 300
Augusta GA 620,000 383,232 None None 620,000 383,232 1,003,232 37,679 07/22/99 300
Augusta GA 540,000 337,853 None None 540,000 337,853 877,853 33,218 07/22/99 300
Augusta GA 510,000 392,929 None None 510,000 392,929 902,929 38,633 07/22/99 300
Augusta GA 180,000 422,020 None None 180,000 422,020 602,020 41,496 07/22/99 300
Augusta GA 260,000 392,171 None None 260,000 392,171 652,171 38,560 07/22/99 300
Dunwoody GA 545,462 724,254 None None 545,462 724,254 1,269,716 131,503 06/27/97 300
Hephzibah GA 580,000 523,535 None None 580,000 523,535 1,103,535 51,475 07/22/99 300
Lithonia GA 386,784 776,436 None None 386,784 776,436 1,163,220 140,995 06/27/97 300
Mableton GA 491,069 355,957 None None 491,069 355,957 847,026 64,617 06/27/97 300
Martinez GA 450,000 402,777 None None 450,000 402,777 852,777 39,602 07/22/99 300
Norcross GA 384,162 651,273 None None 384,162 651,273 1,035,435 118,255 06/27/97 300
Stone Mountain GA 529,383 532,429 None None 529,383 532,429 1,061,812 96,664 06/27/97 300
Godfrey IL 374,586 733,190 None None 374,586 733,190 1,107,776 133,132 06/27/97 300
Granite City IL 362,287 737,255 None None 362,287 737,255 1,099,542 133,872 06/27/97 300
Madison IL 173,812 625,030 None None 173,812 625,030 798,842 113,503 06/27/97 300
New Albany IN 181,459 289,353 None None 181,459 289,353 470,812 78,608 03/03/95 300
New Albany IN 262,465 331,796 None None 262,465 331,796 594,261 90,138 03/06/95 300
F-18
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Convenience Stores
------------------
Berea KY 252,077 360,815 None None 252,077 360,815 612,892 98,022 03/08/95 300
Elizabethtown KY 286,106 286,106 None None 286,106 286,106 572,212 77,725 03/03/95 300
Henderson KY 225,000 515,000 None None 225,000 515,000 740,000 131,325 08/25/95 300
Lebanon KY 158,052 316,105 None None 158,052 316,105 474,157 85,875 03/03/95 300
Louisville KY 198,926 368,014 None None 198,926 368,014 566,940 99,977 03/03/95 300
Louisville KY 216,849 605,697 None None 216,849 605,697 822,546 134,129 06/18/96 11/17/95 300
Mt. Washington KY 327,245 479,593 None None 327,245 479,593 806,838 98,348 12/06/96 05/31/96 300
Owensboro KY 360,000 590,000 None None 360,000 590,000 950,000 150,450 08/25/95 300
Seekonk MA 298,354 268,518 None None 298,354 268,518 566,872 72,947 03/03/95 300
Flint MI 194,492 476,504 None None 194,492 476,504 670,996 115,155 12/21/95 300
Aberdeen NC 600,000 300,625 None None 600,000 300,625 900,625 11,501 01/25/01 300
Cary NC 450,000 825,000 None None 450,000 825,000 1,275,000 210,375 08/25/95 300
Goldsboro NC 460,000 740,625 None None 460,000 740,625 1,200,625 28,368 01/25/01 300
Greensboro NC 700,000 655,000 None None 700,000 655,000 1,355,000 57,858 10/27/99 300
Greenville NC 330,000 515,000 None None 330,000 515,000 845,000 131,325 08/25/95 300
Greenville NC 225,000 405,000 None None 225,000 405,000 630,000 103,275 08/25/95 300
Jacksonville NC 150,000 530,000 None None 150,000 530,000 680,000 135,150 08/25/95 300
Kinston NC 550,000 1,057,833 None None 550,000 1,057,833 1,607,833 177,995 10/24/97 300
Kingston NY 257,763 456,042 None None 257,763 456,042 713,805 122,371 04/06/95 300
Atwater OH 118,555 266,748 None None 118,555 266,748 385,303 72,467 03/03/95 300
Columbus OH 147,296 304,411 None None 147,296 304,411 451,707 82,699 03/03/95 300
Columbus OH 273,085 471,693 None None 273,085 471,693 744,778 113,992 12/21/95 300
Cuyahoga Falls OH 297,982 357,579 None None 297,982 357,579 655,561 97,142 03/03/95 300
Galion OH 138,981 327,597 None None 138,981 327,597 466,578 88,997 03/06/95 300
Groveport OH 277,198 445,497 None None 277,198 445,497 722,695 107,662 12/21/95 300
Perrysburg OH 211,678 390,680 None None 211,678 390,680 602,358 79,139 01/10/96 09/01/95 300
Streetsboro OH 402,988 533,349 None None 402,988 533,349 936,337 79,998 01/27/97 09/03/96 300
Tipp City OH 355,009 588,111 None None 355,009 588,111 943,120 93,109 01/31/97 06/27/96 300
Triffin OH 117,017 273,040 None None 117,017 273,040 390,057 74,176 03/07/95 300
Wadsworth OH 266,507 496,917 None None 266,507 496,917 763,424 85,469 11/26/96 07/01/96 300
Tulsa OK 126,545 508,266 None None 126,545 508,266 634,811 92,293 06/27/97 300
Aiken SC 320,000 432,527 None None 320,000 432,527 752,527 42,528 07/22/99 300
Aiken SC 330,000 472,679 None None 330,000 472,679 802,679 46,476 07/22/99 300
Aiken SC 560,000 543,588 None None 560,000 543,588 1,103,588 53,447 07/22/99 300
Aiken SC 360,000 542,982 None None 360,000 542,982 902,982 53,389 07/22/99 300
Aiken SC 540,000 388,058 None None 540,000 388,058 928,058 38,154 07/22/99 300
F-19
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Convenience Stores
------------------
Aiken SC 250,000 251,770 None None 250,000 251,770 501,770 24,755 07/22/99 300
Belvedere SC 490,000 463,080 None None 490,000 463,080 953,080 45,531 07/22/99 300
Columbia SC 150,000 450,000 None None 150,000 450,000 600,000 114,750 08/25/95 300
Greenville SC 390,000 462,847 None None 390,000 462,847 852,847 45,509 07/22/99 300
Greenville SC 300,000 402,392 None None 300,000 402,392 702,392 39,565 07/22/99 300
Greenville SC 370,000 432,695 None None 370,000 432,695 802,695 42,544 07/22/99 300
Greenville SC 620,000 483,604 None None 620,000 483,604 1,103,604 47,549 07/22/99 300
Greenville SC 720,000 534,059 None None 720,000 534,059 1,254,059 52,509 07/22/99 300
Greenville SC 680,000 423,604 None None 680,000 423,604 1,103,604 41,649 07/22/99 300
Greer SC 400,000 502,879 None None 400,000 502,879 902,879 49,445 07/22/99 300
Jackson SC 170,000 632,626 None None 170,000 632,626 802,626 62,204 07/22/99 300
John's Isle SC 170,000 350,000 None None 170,000 350,000 520,000 89,250 08/25/95 300
Lexington SC 255,000 545,000 None None 255,000 545,000 800,000 138,975 08/25/95 300
Lexington SC 640,000 563,891 None None 640,000 563,891 1,203,891 55,443 07/22/99 300
Lexington SC 540,000 563,588 None None 540,000 563,588 1,103,588 55,414 07/22/99 300
Lexington SC 360,000 843,891 None None 360,000 843,891 1,203,891 82,977 07/22/99 300
Mauldin SC 490,000 412,879 None None 490,000 412,879 902,879 40,595 07/22/99 300
Myrtle Beach SC 140,000 590,000 None None 140,000 590,000 730,000 150,450 08/25/95 300
N. Augusta SC 400,000 452,777 None None 400,000 452,777 852,777 44,519 07/22/99 300
N. Charleston SC 400,000 650,000 None None 400,000 650,000 1,050,000 165,750 08/25/95 300
North Augusta SC 350,000 352,323 None None 350,000 352,323 702,323 34,642 07/22/99 300
Simpsonville SC 530,000 573,485 None None 530,000 573,485 1,103,485 56,387 07/22/99 300
Spartanburg SC 470,000 432,879 None None 470,000 432,879 902,879 42,562 07/22/99 300
Summerville SC 115,000 515,000 None None 115,000 515,000 630,000 131,325 08/25/95 300
W. Columbia SC 410,000 693,574 None None 410,000 693,574 1,103,574 68,196 07/22/99 300
West Aiken SC 400,000 402,665 None None 400,000 402,665 802,665 39,591 07/22/99 300
La Vergne TN 340,000 650,000 None None 340,000 650,000 990,000 165,750 08/25/95 300
Shelbyville TN 200,000 465,000 None None 200,000 465,000 665,000 118,575 08/25/95 300
Hampton VA 433,985 459,108 None None 433,985 459,108 893,093 68,090 04/17/98 300
Midlothian VA 325,000 302,872 None None 325,000 302,872 627,872 52,956 08/21/97 300
Newport News VA 490,616 605,304 None None 490,616 605,304 1,095,920 60,444 04/17/98 300
Richmond VA 700,000 400,740 None None 700,000 400,740 1,100,740 59,435 04/17/98 300
Richmond VA 700,000 440,965 None None 700,000 440,965 1,140,965 65,400 04/17/98 300
Richmond VA 400,000 250,875 None None 400,000 250,875 650,875 37,204 04/17/98 300
Richmond VA 1,000,000 740 None None 1,000,000 740 1,000,740 102 04/17/98 300
Richmond VA 700,000 100,695 None None 700,000 100,695 800,695 14,929 04/17/98 300
F-20
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Convenience Stores
------------------
Stafford VA 271,865 601,997 None None 271,865 601,997 873,862 121,402 12/20/96 300
Warrenton VA 515,971 649,125 None None 515,971 649,125 1,165,096 130,907 12/20/96 300
Yorktown VA 309,435 447,144 None None 309,435 447,144 756,579 66,311 04/17/98 300
Craft and Novelty
-----------------
Cutler Ridge FL 743,498 657,485 42,145 35,162 743,498 734,792 1,478,290 85,374 12/31/98 300
Stony Brook NY 980,000 1,801,586 None None 980,000 1,801,586 2,781,586 213,177 01/08/99 300
Drug Stores
-----------
Casselberry FL 1,075,020 1,664,284 None None 1,075,020 1,664,284 2,739,304 219,158 09/30/98 300
Entertainment
-------------
Vista CA 2,300,000 22 None None 2,300,000 22 2,300,022 2 03/31/99 300
Dania FL 8,272,080 1,713 None None 8,272,080 1,713 8,273,793 168 03/31/99 300
Marietta GA 1,500,000 768 None None 1,500,000 768 1,500,768 1 01/01/00 300
Norcross GA 1,600,000 768 None None 1,600,000 768 1,600,768 1 01/01/00 300
Roswell GA 3,383,780 1,126 28,826 6,685 3,383,780 36,637 3,420,417 11,596 06/30/99 300
Flanders NJ 2,222,205 890 37,500 1,208 2,222,205 39,598 2,261,803 4,342 06/29/99 300
Brookhaven NY 1,500,000 745 None None 1,500,000 745 1,500,745 73 07/23/99 300
Riverhead NY 6,200,000 744 None None 6,200,000 744 6,200,744 73 07/23/99 300
General Merchandise
-------------------
Monte Vista CO 47,652 582,159 None None 47,652 582,159 629,811 70,843 12/23/98 300
Groveland FL 101,782 189,258 None None 101,782 189,258 291,040 21,131 03/31/99 300
Garnett KS 59,690 518,121 None None 59,690 518,121 577,811 63,052 12/23/98 300
Caledonia MN 89,723 559,300 None None 89,723 559,300 649,023 68,065 12/23/98 300
Long Prarie MN 88,892 553,997 None None 88,892 553,997 642,889 67,418 12/23/98 300
Paynesvile MN 49,483 525,406 None None 49,483 525,406 574,889 63,939 12/23/98 300
Spring Valley MN 69,785 579,238 None None 69,785 579,238 649,023 70,491 12/23/98 300
Warroad MN 70,000 580,000 None None 70,000 580,000 650,000 70,567 12/23/98 300
Mayville ND 59,333 565,562 None None 59,333 565,562 624,895 68,841 12/23/98 300
Bloomfield NM 59,559 616,252 None None 59,559 616,252 675,811 74,991 12/23/98 300
General Merchandise
-------------------
Colorado City TX 92,535 505,276 None None 92,535 505,276 597,811 61,489 12/23/98 300
F-21
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Grocery Stores
--------------
Boulder CO 426,675 1,199,508 None 91,660 426,675 1,291,168 1,717,843 890,854 01/05/84 180
Sheboygan WI 1,513,216 4,427,968 None 1,040 1,513,216 4,429,008 5,942,224 420,457 06/03/99 08/24/98 300
Health and Fitness
------------------
Paradise Valley AZ 2,608,389 1,346,517 None None 2,608,389 1,346,517 3,954,906 19InProcess 06/26/01 300
Diamond Bar CA 3,038,879 4,338,722 None None 3,038,879 4,338,722 7,377,601 382,723 03/21/00 09/29/98 300
Norco CA 1,247,243 3,807,569 None None 1,247,243 3,807,569 5,054,812 270,819 12/13/00 06/29/99 300
Paramount CA 86,400 278,827 None 83 86,400 278,910 365,310 278,827 11/22/83 180
Coral Springs FL 891,496 2,798,204 None 25 891,496 2,798,229 3,689,725 358,056 11/03/98 03/30/98 300
Miami FL 3,115,101 4,439,526 None 25 3,115,101 4,439,551 7,554,652 279,919 05/19/00 06/07/99 300
Oakland Park FL 2,800,000 2,195,888 None None 2,800,000 2,195,888 4,995,888 20 07/13/01 03/27/01 300
Pembroke Pines FL 1,714,388 4,387,824 None 25 1,714,388 4,387,849 6,102,237 191,066 12/11/00 10/01/99 300
Fort Worth TX 1,445,901 5,277,886 None None 1,445,901 5,277,886 6,723,787 331,284 06/30/99 300
Home Furnishings
----------------
Cathedral City CA 1,006,923 2,293,077 None 4,040 1,006,923 2,297,117 3,304,040 607,665 05/26/95 300
Danbury CT 630,171 3,621,163 None None 630,171 3,621,163 4,251,334 621,390 09/30/97 300
Brandon FL 430,000 1,020,608 None None 430,000 1,020,608 1,450,608 144,584 06/26/98 300
Jupiter FL 1,698,316 3,209,801 None None 1,698,316 3,209,801 4,908,117 208,515 05/03/00 300
Tampa FL 494,763 767,737 71,880 1,870 494,763 841,487 1,336,250 106,181 12/31/98 300
Tampa FL 685,000 885,624 None None 685,000 885,624 1,570,624 125,461 06/26/98 300
West Palm Beach FL 347,651 706,081 69,111 32,435 347,651 807,627 1,155,278 90,775 12/31/98 300
Winter Park FL 1,979,598 3,382,402 1,354 1,756 1,979,598 3,385,512 5,365,110 896,359 05/31/95 300
Davenport IA 270,000 930,689 None None 270,000 930,689 1,200,689 131,845 06/26/98 300
Joilet IL 440,000 910,689 None None 440,000 910,689 1,350,689 129,012 06/26/98 300
Wichita KS 430,000 740,725 None None 430,000 740,725 1,170,725 104,934 06/26/98 300
Alexandria LA 400,000 810,608 None None 400,000 810,608 1,210,608 114,834 06/26/98 300
Monroe LA 450,000 835,608 None None 450,000 835,608 1,285,608 118,376 06/26/98 300
Shreveport LA 525,000 725,642 None None 525,000 725,642 1,250,642 102,797 06/26/98 300
Battle Creek MI 485,000 895,689 None None 485,000 895,689 1,380,689 126,887 06/26/98 300
Eden Prairie MN 500,502 1,055,244 None None 500,502 1,055,244 1,555,746 121,317 02/26/99 300
Hattiesburg MS 300,000 660,608 None None 300,000 660,608 960,608 93,584 06/26/98 300
Ridgeland MS 281,867 769,890 None None 281,867 769,890 1,051,757 139,778 06/27/97 300
Omaha NE 1,956,296 3,949,402 None None 1,956,296 3,949,402 5,905,698 743,579 04/04/97 300
Henderson NV 1,268,655 3,109,995 None None 1,268,655 3,109,995 4,378,650 533,676 09/26/97 300
Staten Island NY 3,190,883 2,569,802 None 855 3,190,883 2,570,657 5,761,540 389,525 03/26/98 300
F-22
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Home Furnishings
----------------
Lancaster OH 250,000 830,689 None None 250,000 830,689 1,080,689 117,679 06/26/98 300
Altoona PA 455,000 745,694 None None 455,000 745,694 1,200,694 105,638 06/26/98 300
Erie PA 510,000 900,689 None None 510,000 900,689 1,410,689 127,595 06/26/98 300
Muncy PA 315,000 835,648 None None 315,000 835,648 1,150,648 118,381 06/26/98 300
Whitehall PA 515,525 1,146,868 None None 515,525 1,146,868 1,662,393 162,471 06/30/98 300
Columbia SC 600,000 900,725 None None 600,000 900,725 1,500,725 127,600 06/26/98 300
Jackson TN 380,000 750,608 None None 380,000 750,608 1,130,608 106,334 06/26/98 300
Memphis TN 804,262 1,432,520 None None 804,262 1,432,520 2,236,782 260,106 06/30/97 300
Abilene TX 400,000 680,616 None None 400,000 680,616 1,080,616 96,419 06/26/98 300
Arlington TX 475,069 1,374,167 None None 475,069 1,374,167 1,849,236 263,253 03/26/97 300
Cedar Park TX 253,591 827,237 None None 253,591 827,237 1,080,828 158,477 03/10/97 300
Houston TX 867,767 687,042 None None 867,767 687,042 1,554,809 131,561 03/07/97 300
San Antonio TX 323,451 637,991 47,914 34,151 323,451 720,056 1,043,507 88,353 12/31/98 300
Spring TX 1,794,872 1,810,069 None None 1,794,872 1,810,069 3,604,941 310,544 09/29/97 300
Webster TX 283,604 538,002 2,470 None 283,604 540,472 824,076 97,771 06/12/97 300
Eau Claire WI 260,000 820,689 None None 260,000 820,689 1,080,689 116,262 06/26/98 300
La Crosse WI 372,883 877,812 None None 372,883 877,812 1,250,695 124,354 06/26/98 300
Home Improvement
----------------
Lawndale CA 667,007 1,238,841 None None 667,007 1,238,841 1,905,848 150,724 12/31/98 300
Los Angeles CA 902,494 1,676,204 None None 902,494 1,676,204 2,578,698 203,936 12/31/98 300
Los Angeles CA 163,668 304,097 None None 163,668 304,097 467,765 36,996 12/31/98 300
Van Nuys CA 750,293 1,393,545 None None 750,293 1,393,545 2,143,838 169,546 12/31/98 300
West Covina CA 311,040 577,733 None None 311,040 577,733 888,773 70,290 12/31/98 300
Clearwater FL 476,179 725,023 None 1,984 476,179 727,007 1,203,186 88,204 12/31/98 300
Jacksonville FL 478,314 618,348 None 280 478,314 618,628 1,096,942 75,274 12/31/98 300
Port Orange FL 500,000 1,212,813 None 153 500,000 1,212,966 1,712,966 123,494 05/11/99 01/29/99 300
Seminole FL 593,304 767,184 None 345 593,304 767,529 1,360,833 93,334 12/31/98 300
Tampa FL 347,794 905,248 46,000 855 347,794 952,103 1,299,897 111,726 12/31/98 300
Des Moines IA 225,771 682,604 None None 225,771 682,604 908,375 80,767 01/29/99 300
Broadview IL 345,166 641,739 None None 345,166 641,739 986,905 78,089 12/31/98 300
Indianapolis IN 350,000 671,472 None 367 350,000 671,839 1,021,839 70,471 03/29/99 01/29/99 300
Baltimore MD 171,320 318,882 None None 171,320 318,882 490,202 38,808 12/31/98 300
Rochester NY 158,168 294,456 None None 158,168 294,456 452,624 35,836 12/31/98 300
Reading PA 201,569 375,056 None None 201,569 375,056 576,625 45,642 12/31/98 300
Pasadena TX 147,535 274,521 None None 147,535 274,521 422,056 33,402 12/31/98 300
Plano TX 363,851 676,249 None None 363,851 676,249 1,040,100 82,279 12/31/98 300
San Antonio TX 367,890 683,750 None None 367,890 683,750 1,051,640 83,192 12/31/98 300
F-23
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Home Improvement
----------------
Chesapeake VA 144,014 649,869 None 11,754 144,014 661,623 805,637 441,269 12/22/86 300
Office Supplies
---------------
Lakewood CA 1,398,387 3,098,607 None None 1,398,387 3,098,607 4,496,994 614,481 01/29/97 300
Riverside CA 1,410,177 1,659,850 None None 1,410,177 1,659,850 3,070,027 284,875 09/17/97 300
Hutchinson KS 269,964 1,704,013 None None 269,964 1,704,013 1,973,977 309,483 06/25/97 300
Salina KS 240,423 1,829,837 None None 240,423 1,829,837 2,070,260 332,332 06/25/97 300
Helena MT 564,241 1,503,118 None None 564,241 1,503,118 2,067,359 272,933 06/09/97 300
Asheboro NC 465,557 2,176,416 None None 465,557 2,176,416 2,641,973 329,958 03/27/98 300
Westbury NY 3,808,076 2,377,932 None None 3,808,076 2,377,932 6,186,008 407,964 09/29/97 300
New Philiadelphi OH 726,636 1,650,672 None None 726,636 1,650,672 2,377,308 305,266 05/30/97 300
Pet Supplies and Services
-------------------------
Duluth GA 361,058 1,591,629 None None 361,058 1,591,629 1,952,687 129,101 01/27/99 09/29/98 300
Marrietta GA 495,412 1,526,370 None None 495,412 1,526,370 2,021,782 106,722 05/28/99 09/29/98 300
Indianapolis IN 427,000 1,296,901 None None 427,000 1,296,901 1,723,901 85,047 03/10/00 01/19/99 300
Sudbury MA 543,038 2,477,213 None None 543,038 2,477,213 3,020,251 142,809 11/12/99 09/30/98 300
Tyngsborough MA 312,204 1,222,522 None None 312,204 1,222,522 1,534,726 173,184 06/12/98 300
Matthews NC 610,177 1,394,743 None None 610,177 1,394,743 2,004,920 192,939 07/17/98 300
North Plainfield NJ 0 1,590,447 None None 0 1,590,447 1,590,447 141,401 09/24/98 300
Albuquerque NM 684,036 874,914 None 21,290 684,036 896,204 1,580,240 106,958 12/31/98 300
Dickson City PA 659,790 1,880,722 None None 659,790 1,880,722 2,540,512 341,430 06/20/97 300
Private Education
-----------------
Coconut Creek FL 310,111 1,243,682 None None 310,111 1,243,682 1,553,793 118,436 08/02/99 12/01/98 300
North Lauderdale FL 1,050,000 2,567,811 None None 1,050,000 2,567,811 3,617,811 389,324 03/30/98 300
Las Vegas NV 1,080,444 3,346,772 None None 1,080,444 3,346,772 4,427,216 507,497 03/04/98 300
Chantilly VA 688,917 3,208,607 None None 688,917 3,208,607 3,897,524 268,533 05/07/99 09/30/98 300
Kingstowne VA 300,000 1,191,396 None None 300,000 1,191,396 1,491,396 73,732 08/22/00 11/08/99 300
Restaurants
-----------
Atmore AL 272,044 505,636 None None 272,044 505,636 777,680 7,579 08/31/01 300
Clanton AL 230,036 427,391 None None 230,036 427,391 657,427 6,408 08/31/01 300
Demopolis AL 251,349 466,972 None None 251,349 466,972 718,321 7,002 08/31/01 300
Fort Payne AL 303,056 563,001 None None 303,056 563,001 866,057 8,443 08/31/01 300
Gardendale AL 398,669 740,568 None None 398,669 740,568 1,139,237 11,106 08/31/01 300
Hoover AL 251,434 467,185 None None 251,434 467,185 718,619 7,005 08/31/01 300
Bentonville AR 377,086 700,582 None None 377,086 700,582 1,077,668 10,505 01/01/00 300
F-24
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Hope AR 288,643 536,715 None None 288,643 536,715 825,358 8,042 01/01/00 300
Little Rock AR 317,000 589,377 None None 317,000 589,377 906,377 8,832 01/01/00 300
Siloam Springs AR 190,000 352,808 None None 190,000 352,808 542,808 58,203 11/20/97 300
Douglas AZ 75,000 347,719 None 1,446 75,000 349,165 424,165 246,470 11/27/85 300
Glendale AZ 624,761 895,976 None None 624,761 895,976 1,520,737 207,568 03/06/96 300
Tucson AZ 107,393 497,904 None 133 107,393 498,037 605,430 352,323 01/17/86 300
Yuma AZ 236,121 541,651 None None 236,121 541,651 777,772 78,536 05/28/98 300
Barstow CA 689,842 690,204 None None 689,842 690,204 1,380,046 90,880 09/24/98 300
Livermore CA 662,161 823,242 None None 662,161 823,242 1,485,403 108,397 09/23/98 300
Northridge CA 0 0 None None 0 0 0 0 04/01/70 N/A
Rancho Cucamonga CA 95,192 441,334 None None 95,192 441,334 536,526 311,207 12/20/85 300
Red Bluff CA 136,740 633,984 None 1,121 136,740 635,105 771,845 418,822 12/18/86 300
Riverside CA 90,000 170,394 None 47 90,000 170,441 260,441 170,325 12/09/76 300
Sacramento CA 386,793 417,290 None None 386,793 417,290 804,083 57,725 07/31/98 300
San Dimas CA 240,562 445,521 None None 240,562 445,521 686,083 445,521 03/12/81 180
San Ramon CA 406,000 1,126,930 None None 406,000 1,126,930 1,532,930 1,126,930 12/08/83 180
Colorado Springs CO 152,000 704,736 None 262 152,000 704,998 856,998 473,470 09/30/86 300
Colorado Springs CO 313,250 695,730 None 1,365 313,250 697,095 1,010,345 385,615 03/10/87 300
Montrose CO 217,595 483,284 None 224 217,595 483,508 701,103 254,644 12/17/87 300
Sterling CO 95,320 441,928 None None 95,320 441,928 537,248 337,688 12/27/84 300
Westminster CO 338,940 1,571,401 20,000 13,645 338,940 1,605,046 1,943,986 1,268,008 06/28/84 300
Danbury CT 548,459 284,559 None None 548,459 284,559 833,018 474 12/19/01 300
Glastonbury CT 452,291 293,134 None None 452,291 293,134 745,425 489 12/19/01 300
Manchester CT 458,386 458,559 None None 458,386 458,559 916,945 764 12/19/01 300
Unionville CT 167,740 316,592 None None 167,740 316,592 484,332 528 12/19/01 300
Waterbury CT 521,021 705,083 None None 521,021 705,083 1,226,104 1,175 12/19/01 300
Casselberry FL 403,900 897,075 None None 403,900 897,075 1,300,975 402,512 12/29/89 300
Chipley FL 270,439 502,655 None None 270,439 502,655 773,094 7,534 08/31/01 300
DeFuniak FL 269,554 501,010 None None 269,554 501,010 770,564 7,510 08/31/01 300
Green Cove Sprgs FL 86,240 399,828 None 226 86,240 400,054 486,294 305,518 12/19/84 300
Jacksonville FL 150,210 693,445 None None 150,210 693,445 843,655 498,233 09/13/85 300
Jacksonville FL 143,299 664,373 None None 143,299 664,373 807,672 470,117 12/13/85 300
Orlando FL 230,000 1,066,339 None None 230,000 1,066,339 1,296,339 755,840 11/18/85 300
Orlando FL 209,800 972,679 None None 209,800 972,679 1,182,479 659,580 08/15/86 300
Orlando FL 600,000 949,489 None None 600,000 949,489 1,549,489 99,918 05/27/99 12/18/98 300
F-25
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Oviedo FL 204,200 911,338 None None 204,200 911,338 1,115,538 65,428 08/24/99 300
Palm Bay FL 330,000 556,668 None None 330,000 556,668 886,668 62,283 02/17/99 12/29/98 300
Garden City GA 197,225 438,043 None 233 197,225 438,276 635,501 209,804 04/20/89 300
Hinesville GA 89,220 413,644 None 233 89,220 413,877 503,097 316,073 12/20/84 300
Hinesville GA 172,611 383,376 None 233 172,611 383,609 556,220 202,003 12/22/87 300
Lithonia GA 89,220 413,647 None 987 89,220 414,634 503,854 315,596 01/04/85 300
Savannah GA 143,993 345,548 None 233 143,993 345,781 489,774 182,071 12/22/87 300
Savannah GA 165,409 367,380 None 233 165,409 367,613 533,022 193,574 12/22/87 300
Statesboro GA 201,250 446,983 None None 201,250 446,983 648,233 204,815 11/14/89 300
Stone Mountain GA 215,940 1,001,188 None 1,533 215,940 1,002,721 1,218,661 668,900 10/30/86 300
Washington GA 292,628 543,862 None None 292,628 543,862 836,490 8,152 08/31/01 300
Ankeny IA 100,000 349,218 None 289 100,000 349,507 449,507 349,218 07/28/83 180
Boone IA 76,000 386,170 None 289 76,000 386,459 462,459 386,170 12/27/83 180
Boise ID 190,894 423,981 None 119 190,894 424,100 614,994 217,008 05/17/88 300
Boise ID 161,352 334,041 None 119 161,352 334,160 495,512 165,965 10/07/88 300
Nampa ID 74,156 343,820 None 119 74,156 343,939 418,095 227,134 12/31/86 300
Rexburg ID 90,760 420,787 None None 90,760 420,787 511,547 298,262 11/25/85 300
Alton IL 225,785 419,315 None 207 225,785 419,522 645,307 208,334 10/18/88 300
Dixon IL 230,090 511,036 None 207 230,090 511,243 741,333 269,253 12/28/87 300
Lincoln IL 206,532 383,970 None None 206,532 383,970 590,502 5,754 01/01/00 300
Salem IL 213,815 474,892 None 1,459 213,815 476,351 690,166 253,097 10/30/87 300
Anderson IN 197,523 438,706 None None 197,523 438,706 636,229 223,226 03/25/88 300
Bedford IN 311,815 692,543 None None 311,815 692,543 1,004,358 375,402 07/15/87 300
Decatur IN 181,020 385,618 None 1,191 181,020 386,809 567,829 213,731 03/31/87 300
Goshen IN 115,000 533,165 None 289 115,000 533,454 648,454 363,521 07/07/86 300
Muncie IN 136,400 632,380 8,000 13,335 136,400 653,715 790,115 445,019 03/18/86 300
Muncie IN 67,156 149,157 None None 67,156 149,157 216,313 77,241 03/30/88 300
New Castle IN 246,192 320,572 None None 246,192 320,572 566,764 176,824 01/07/87 300
Shelbyville IN 128,820 597,263 None 1,310 128,820 598,573 727,393 394,563 12/18/86 300
South Bend IN 133,200 617,545 None 19,211 133,200 636,756 769,956 442,853 04/28/86 300
Westfield IN 213,341 477,300 None None 213,341 477,300 690,641 215,546 12/21/89 300
Derby KS 96,060 445,359 None None 96,060 445,359 541,419 317,308 10/29/85 300
El Dorado KS 87,400 405,206 None None 87,400 405,206 492,606 280,774 04/10/86 300
Great Bend KS 95,800 444,154 None None 95,800 444,154 539,954 339,387 12/26/84 300
Wichita KS 98,000 454,350 None None 98,000 454,350 552,350 308,097 08/08/86 300
Lexington KY 122,200 490,200 None None 122,200 490,200 612,400 325,095 12/03/86 300
F-26
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Alexandria LA 143,000 662,985 None 15,000 143,000 677,985 820,985 477,904 01/17/86 300
Jennings LA 107,120 496,636 None None 107,120 496,636 603,756 353,842 10/17/85 300
Natchitoches LA 291,675 541,890 None None 291,675 541,890 833,565 8,126 08/31/01 300
Shreveport LA 359,268 667,417 None None 359,268 667,417 1,026,685 10,009 08/31/01 300
Attleboro MA 369,815 693,575 None None 369,815 693,575 1,063,390 1,156 12/19/01 300
Brockton MA 298,359 272,217 None None 298,359 272,217 570,576 454 12/19/01 300
Hanover MA 397,203 281,122 None None 397,203 281,122 678,325 469 12/19/01 300
Palmer MA 141,524 598,400 None None 141,524 598,400 739,924 997 12/19/01 300
Peabody MA 529,555 222,510 None None 529,555 222,510 752,065 371 12/19/01 300
Pittsfield MA 286,241 949,942 None None 286,241 949,942 1,236,183 1,583 12/19/01 300
South Weymouth MA 351,472 296,204 None None 351,472 296,204 647,676 494 12/19/01 300
Springfield MA 280,920 337,245 None None 280,920 337,245 618,165 562 12/19/01 300
Springfield MA 230,030 865,492 None None 230,030 865,492 1,095,522 1,442 12/19/01 300
Springfield MA 227,207 958,364 None None 227,207 958,364 1,185,571 1,597 12/19/01 300
Stoneham MA 397,544 191,637 None None 397,544 191,637 589,181 319 12/19/01 300
Swansea MA 173,853 488,619 None None 173,853 488,619 662,472 814 12/19/01 300
Westboro MA 335,191 424,454 None None 335,191 424,454 759,645 707 12/19/01 300
Weymouth MA 360,727 194,476 None None 360,727 194,476 555,203 324 12/19/01 300
La Plata MD 120,140 557,000 None None 120,140 557,000 677,140 394,139 12/03/85 300
Flint MI 827,853 0 None None 827,853 0 827,853 0 04/13/95 300
Sturgis MI 210,560 467,659 None None 210,560 467,659 678,219 247,826 11/12/87 300
Albert Lea MN 213,150 473,412 None 165 213,150 473,577 686,727 249,454 12/16/87 300
Roseville MN 281,600 1,305,560 None None 281,600 1,305,560 1,587,160 997,606 12/18/84 300
Belton MO 89,328 418,187 None 234 89,328 418,421 507,749 319,546 12/18/84 300
Blue Springs MO 111,440 516,665 None 234 111,440 516,899 628,339 394,795 12/28/84 300
Bolivar MO 237,094 440,596 None None 237,094 440,596 677,690 6,605 08/31/01 300
Carthage MO 85,020 394,175 None None 85,020 394,175 479,195 278,922 12/03/85 300
Chillicothe MO 81,080 375,908 None 234 81,080 376,142 457,222 287,240 12/26/84 300
Fulton MO 210,199 466,861 None None 210,199 466,861 677,060 253,068 07/30/87 300
Hannibal MO 266,011 590,822 None 1,566 266,011 592,388 858,399 320,263 07/30/87 300
Hazelwood MO 157,117 725,327 None 12,930 157,117 738,257 895,374 527,515 08/28/85 300
Jackson MO 210,199 466,860 None None 210,199 466,860 677,059 253,068 07/30/87 300
Mt. Vernon MO 160,000 282,586 None None 160,000 282,586 442,586 46,617 11/20/97 300
Nevada MO 222,552 494,296 None 1,574 222,552 495,870 718,422 267,992 07/30/87 300
Ozark MO 140,000 292,482 None None 140,000 292,482 432,482 48,250 11/20/97 300
Sedalia MO 269,798 599,231 None None 269,798 599,231 869,029 284,887 07/31/89 300
F-27
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
St. Charles MO 175,413 809,791 None 10,000 175,413 819,791 995,204 590,974 08/28/85 300
St. Charles MO 695,121 1,001,878 None 1,001 695,121 1,002,879 1,698,000 241,517 12/22/95 03/16/95 300
St. Joseph MO 107,648 496,958 None None 107,648 496,958 604,606 357,055 09/04/85 300
St. Robert MO 329,242 611,728 None None 329,242 611,728 940,970 9,172 08/31/01 300
Sullivan MO 85,500 396,400 None 234 85,500 396,634 482,134 302,897 12/27/84 300
Clinton MS 100,000 337,371 None 282 100,000 337,653 437,653 337,371 07/28/83 180
Fulton MS 239,686 445,337 None None 239,686 445,337 685,023 6,677 08/31/01 300
Greenville MS 311,324 578,378 None None 311,324 578,378 889,702 8,673 08/31/01 300
Indianola MS 270,639 502,822 None None 270,639 502,822 773,461 7,540 08/31/01 300
Newton MS 284,350 528,311 None None 284,350 528,311 812,661 7,922 08/31/01 300
Pearl MS 334,822 621,994 None None 334,822 621,994 956,816 9,327 08/31/01 300
Southaven MS 263,900 582,303 None 1,221 263,900 583,524 847,424 319,192 05/11/87 300
Fayetteville NC 116,240 538,919 None None 116,240 538,919 655,159 411,800 12/20/84 300
Wilkesboro NC 183,050 406,562 None None 183,050 406,562 589,612 220,383 07/24/87 300
Winston-Salem NC 353,239 656,427 None None 353,239 656,427 1,009,666 9,841 08/31/01 300
Keene NH 253,769 310,390 None None 253,769 310,390 564,159 517 12/19/01 300
Laconia NH 330,520 467,514 None None 330,520 467,514 798,034 779 12/19/01 300
Manchester NH 266,337 486,596 None None 266,337 486,596 752,933 811 12/19/01 300
North Conway NH 473,031 606,940 None None 473,031 606,940 1,079,971 1,012 12/19/01 300
Rochester NH 262,059 695,691 None None 262,059 695,691 957,750 1,159 12/19/01 300
Bloomfield NJ 556,520 260,418 None None 556,520 260,418 816,938 434 12/19/01 300
Bricktown NJ 297,264 243,501 None None 297,264 243,501 540,765 406 12/19/01 300
Fairlawn NJ 341,922 198,240 None None 341,922 198,240 540,162 330 12/19/01 300
Hackettstown NJ 307,186 525,062 None None 307,186 525,062 832,248 875 12/19/01 300
Hillsdale NJ 398,221 204,026 None None 398,221 204,026 602,247 340 12/19/01 300
Midland Park NJ 476,002 254,514 None None 476,002 254,514 730,516 424 12/19/01 300
Morris Plains NJ 366,982 188,043 None None 366,982 188,043 555,025 313 12/19/01 300
Amherst NY 935,355 896,819 5,342 54,195 935,355 956,356 1,891,711 226,682 05/31/95 300
Carmel NY 266,619 707,739 None None 266,619 707,739 974,358 1,180 12/19/01 300
Fulton NY 294,009 653,006 None 250 294,009 653,256 947,265 343,339 12/24/87 300
Glenville NY 156,724 246,422 None None 156,724 246,422 403,146 411 12/19/01 300
Middletown NY 242,459 796,825 None None 242,459 796,825 1,039,284 1,328 12/19/01 300
Mt. Kisco NY 164,973 385,109 None None 164,973 385,109 550,082 642 12/19/01 300
Watertown NY 139,199 645,355 None None 139,199 645,355 784,554 435,983 08/18/86 300
Akron OH 723,347 17 None None 723,347 17 723,364 3 12/22/94 300
Celina OH 207,060 459,841 None 291 207,060 460,132 667,192 257,685 01/02/87 300
F-28
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Stow OH 317,546 712,455 None None 317,546 712,455 1,030,001 374,785 12/31/87 300
Troy OH 130,540 605,238 None 1,026 130,540 606,264 736,804 401,387 12/05/86 300
Wash. Courthouse OH 123,120 570,836 None 1,122 123,120 571,958 695,078 377,104 12/19/86 300
Wilmington OH 119,320 553,217 None 1,163 119,320 554,380 673,700 365,466 12/31/86 300
Broken Arrow OK 245,000 369,002 None None 245,000 369,002 614,002 59,653 12/12/97 300
Idabel OK 214,244 398,545 None None 214,244 398,545 612,789 5,969 08/31/01 300
Norman OK 734,335 0 None None 734,335 0 734,335 0 09/29/95 06/05/95 300
Oklahoma City OK 759,826 0 None None 759,826 0 759,826 0 07/06/95 300
Owasso OK 247,450 549,597 None 282 247,450 549,879 797,329 289,586 12/28/87 300
Owasso OK 327,043 607,645 None None 327,043 607,645 934,688 9,111 01/01/00 300
Ponca City OK 234,990 521,923 None 282 234,990 522,205 757,195 275,003 12/30/87 300
Tulsa OK 295,993 549,981 None None 295,993 549,981 845,974 8,246 08/31/01 300
Hermiston OR 85,560 396,675 None None 85,560 396,675 482,235 303,107 12/18/84 300
Lake Oswego OR 175,899 815,508 None 3 175,899 815,511 991,410 643,593 05/16/84 300
Milwaukie OR 179,174 830,689 None 3 179,174 830,692 1,009,866 657,542 05/08/84 300
Salem OR 198,540 440,964 None 3 198,540 440,967 639,507 207,836 05/23/89 300
Connellsville PA 264,670 587,843 None None 264,670 587,843 852,513 316,862 08/17/87 300
Gettysburg PA 289,040 809,596 None None 289,040 809,596 1,098,636 1,349 12/19/01 300
Lancaster PA 170,304 413,880 None None 170,304 413,880 584,184 690 12/19/01 300
Lancaster PA 276,251 460,704 None None 276,251 460,704 736,955 768 12/19/01 300
Lansdale PA 255,864 256,149 None None 255,864 256,149 512,013 427 12/19/01 300
Warminster PA 294,111 343,414 None None 294,111 343,414 637,525 572 12/19/01 300
Waynesburg PA 222,285 493,704 None None 222,285 493,704 715,989 266,118 08/17/87 300
Westerly RI 485,230 569,810 None None 485,230 569,810 1,055,040 950 12/19/01 300
Pierre SD 251,790 559,232 None 1,500 251,790 560,732 812,522 294,661 12/01/87 300
Brownsville TN 289,379 538,081 None None 289,379 538,081 827,460 8,062 08/31/01 300
Memphis TN 405,274 1,060,680 None 1,813 405,274 1,062,493 1,467,767 274,009 06/30/95 03/17/95 300
Millington TN 285,613 530,630 None None 285,613 530,630 816,243 7,957 08/31/01 300
Nashville TN 484,975 1,192,627 20,000 31,098 484,975 1,243,725 1,728,700 1,234,764 05/20/83 180
Ripley TN 231,552 430,232 None None 231,552 430,232 661,784 6,451 08/31/01 300
Allen TX 165,000 306,771 None None 165,000 306,771 471,771 30,166 07/09/99 05/28/99 300
Athens TX 245,245 544,700 None 169 245,245 544,869 790,114 287,005 12/01/87 300
Bedford TX 919,303 98,231 None None 919,303 98,231 1,017,534 98,231 12/27/94 300
Beeville TX 250,490 226,349 None 1,264 250,490 227,613 478,103 301,577 07/31/87 300
Brownwood TX 288,225 640,160 None 156 288,225 640,316 928,541 337,210 12/28/87 300
Crockett TX 90,780 420,880 None None 90,780 420,880 511,660 296,786 12/17/85 300
F-29
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Dallas TX 742,507 0 None None 742,507 0 742,507 0 04/13/95 300
Dallas TX 242,025 479,170 None None 242,025 479,170 721,195 192,882 06/25/91 300
El Campo TX 98,060 454,631 None None 98,060 454,631 552,691 322,251 11/25/85 300
Ennis TX 173,250 384,793 None None 173,250 384,793 558,043 202,750 12/28/87 300
Fort Worth TX 223,195 492,067 None None 223,195 492,067 715,262 207,719 06/26/91 300
Ft. Worth TX 423,281 382,059 None None 423,281 382,059 805,340 105,066 02/10/95 300
Gainesville TX 89,220 413,644 None None 89,220 413,644 502,864 316,073 12/18/84 300
Hillsboro TX 75,992 352,316 None 156 75,992 352,472 428,464 275,543 08/01/84 300
Houston TX 194,994 386,056 None None 194,994 386,056 581,050 155,400 06/25/91 300
Houston TX 184,175 364,636 None None 184,175 364,636 548,811 146,778 06/25/91 300
Killeen TX 262,500 583,014 None 14,398 262,500 597,412 859,912 324,522 05/29/87 300
Lufkin TX 105,904 490,998 None None 105,904 490,998 596,902 351,020 10/08/85 300
Mesquite TX 729,596 120,820 None None 729,596 120,820 850,416 120,820 12/23/94 300
Mesquite TX 134,940 625,612 None None 134,940 625,612 760,552 434,245 03/20/86 300
Mexia TX 93,620 434,046 None None 93,620 434,046 527,666 306,070 12/18/85 300
New Braunfels TX 185,500 411,997 None 191 185,500 412,188 597,688 228,352 03/26/87 300
Orange TX 93,560 433,768 None None 93,560 433,768 527,328 306,939 12/10/85 300
Plainview TX 125,000 350,767 None None 125,000 350,767 475,767 350,767 01/24/84 180
Porter TX 227,067 333,031 None None 227,067 333,031 560,098 91,584 02/09/95 300
Rowlett TX 126,933 585,986 None None 126,933 585,986 712,919 421,022 09/06/85 300
Santa Fe TX 304,414 623,331 None None 304,414 623,331 927,745 94,480 03/23/98 300
Sealy TX 197,871 391,753 None None 197,871 391,753 589,624 157,694 06/25/91 300
Stafford TX 214,024 423,733 None None 214,024 423,733 637,757 170,567 06/26/91 300
Temple TX 302,505 291,414 None None 302,505 291,414 593,919 80,139 02/09/95 300
Texarkana TX 311,263 578,266 None None 311,263 578,266 889,529 8,671 08/31/01 300
Vidor TX 90,618 420,124 None None 90,618 420,124 510,742 328,573 08/01/84 300
Waxahachie TX 326,935 726,137 None 156 326,935 726,293 1,053,228 382,554 12/29/87 300
Cedar City UT 130,000 296,544 None None 130,000 296,544 426,544 296,544 08/04/83 180
Orem UT 516,129 1,004,608 None None 516,129 1,004,608 1,520,737 242,780 12/13/95 300
Sandy UT 635,945 884,792 None None 635,945 884,792 1,520,737 213,825 12/22/95 300
Norfolk VA 251,207 575,250 None 12,983 251,207 588,233 839,440 314,662 10/15/87 300
Bennington VT 118,823 673,471 None None 118,823 673,471 792,294 1,122 12/19/01 300
Auburn WA 301,595 669,851 None 108 301,595 669,959 971,554 352,947 12/16/87 300
Oak Harbor WA 275,940 612,874 None 1,868 275,940 614,742 890,682 332,216 07/16/87 300
Spokane WA 479,531 646,719 None None 479,531 646,719 1,126,250 98,033 03/27/98 300
Tacoma WA 198,857 921,947 None 1,860 198,857 923,807 1,122,664 727,723 05/29/84 300
F-30
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Restaurants
-----------
Grafton WI 149,778 332,664 None None 149,778 332,664 482,442 177,296 10/29/87 300
Monroe WI 193,130 428,947 None 1,529 193,130 430,476 623,606 226,013 12/17/87 300
Portage WI 199,605 443,328 None 279 199,605 443,607 643,212 233,578 12/23/87 300
Shawano WI 205,730 456,932 None 279 205,730 457,211 662,941 240,747 12/17/87 300
Sturgeon Bay WI 214,865 477,221 None 1,535 214,865 478,756 693,621 251,450 12/01/87 300
Oak Hill WV 85,860 398,069 None None 85,860 398,069 483,929 304,174 12/28/84 300
Laramie WY 210,000 466,417 None None 210,000 466,417 676,417 206,956 03/12/90 300
Riverton WY 216,685 481,267 None None 216,685 481,267 697,952 253,581 12/01/87 300
Sheridan WY 117,160 543,184 None None 117,160 543,184 660,344 383,029 12/31/85 300
Shoe Stores
-----------
Little Rock AR 1,079,232 2,594,956 None None 1,079,232 2,594,956 3,674,188 358,969 07/21/98 300
Maplewood MN 785,023 2,715,629 None 687 785,023 2,716,316 3,501,339 294,187 04/02/99 300
Houston TX 1,096,376 2,300,690 None None 1,096,376 2,300,690 3,397,066 394,868 09/05/97 300
Midland TX 544,075 1,322,431 None None 544,075 1,322,431 1,866,506 204,864 02/02/98 300
Sporting Goods
--------------
Anchorage AK 1,486,000 5,045,244 None None 1,486,000 5,045,244 6,531,244 42,035 10/29/82 300
Fresno CA 1,650,000 3,321,244 None None 1,650,000 3,321,244 4,971,244 27,669 10/29/82 300
Fort Meyers FL 1,695,000 2,025,554 None None 1,695,000 2,025,554 3,720,554 16,876 10/29/82 300
Gainesville FL 1,296,000 2,234,554 None None 1,296,000 2,234,554 3,530,554 18,618 10/29/82 300
Melbourne FL 994,000 4,076,554 None None 994,000 4,076,554 5,070,554 33,968 10/29/82 300
Orlando FL 1,197,000 2,573,554 None None 1,197,000 2,573,554 3,770,554 21,443 10/29/82 300
Geneva IL 2,082,000 1,838,888 None None 2,082,000 1,838,888 3,920,888 15,318 10/29/82 300
Bowie MD 2,084,000 3,046,888 None None 2,084,000 3,046,888 5,130,888 25,385 10/29/82 300
Mechanicsburg PA 2,101,415 3,902,912 None None 2,101,415 3,902,912 6,004,327 19,514 11/08/01 300
El Paso TX 700,000 2,501,244 None None 700,000 2,501,244 3,201,244 20,835 10/29/82 300
Fredericksburg VA 1,941,000 2,979,888 None None 1,941,000 2,979,888 4,920,888 24,826 10/29/82 300
Theaters
--------
Fairbanks AK 2,586,879 9,575 None None 2,586,879 9,575 2,596,454 0 09/27/00 300
Huntsville AL 2,810,868 14,308 None None 2,810,868 14,308 2,825,176 0 09/27/00 300
Naples FL 2,618,441 8,979,199 None None 2,618,441 8,979,199 11,597,640 463,821 09/27/00 300
Chamblee GA 4,329,404 14,942 None None 4,329,404 14,942 4,344,346 8 09/27/00 300
Akron OH 1,511,018 1,386 None None 1,511,018 1,386 1,512,404 0 09/27/00 300
Hillsboro OR 4,915,032 16,377 None None 4,915,032 16,377 4,931,409 0 09/27/00 300
Portland OR 2,793,001 9,942 None None 2,793,001 9,942 2,802,943 0 09/27/00 300
Glen Allen VA 1,314,065 9,748,457 None None 1,314,065 9,748,457 11,062,522 503,483 09/27/00 300
F-31
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Theaters
--------
Sterling VA 4,546,305 33,325 None None 4,546,305 33,325 4,579,630 20 09/27/00 300
Marysville WA 1,988,142 0 None None 1,988,142 0 1,988,142 0 07/27/00 300
Video Rental
------------
Birmingham AL 392,795 865,115 None None 392,795 865,115 1,257,910 148,452 09/30/97 300
Southington CT 399,562 1,009,125 None None 399,562 1,009,125 1,408,687 122,780 12/29/98 300
Port St. Lucie FL 612,695 701,759 None None 612,695 701,759 1,314,454 83,218 12/09/98 09/08/98 300
Tampa FL 401,874 933,768 None None 401,874 933,768 1,335,642 150,957 12/23/97 300
Atlanta GA 652,551 763,360 None None 652,551 763,360 1,415,911 92,896 12/18/98 300
Brunswick GA 290,369 788,880 None None 290,369 788,880 1,079,249 127,530 12/31/97 300
Norcross GA 431,284 724,037 None None 431,284 724,037 1,155,321 121,815 10/01/97 300
Plainfield IN 453,645 908,485 None None 453,645 908,485 1,362,130 143,729 01/30/98 300
Topeka KS 285,802 966,286 None None 285,802 966,286 1,252,088 156,214 12/19/97 300
Wichita KS 289,714 797,856 None None 289,714 797,856 1,087,570 99,747 11/23/98 300
Winchester KY 355,474 929,177 None None 355,474 929,177 1,284,651 131,630 06/30/98 300
Warren MI 356,348 903,351 None None 356,348 903,351 1,259,699 142,923 01/09/98 300
Centerville OH 601,408 758,192 None None 601,408 758,192 1,359,600 107,407 06/30/98 300
Dayton OH 401,723 698,872 None None 401,723 698,872 1,100,595 99,005 06/29/98 300
Forest Park OH 328,187 921,232 None None 328,187 921,232 1,249,419 151,986 11/14/97 300
Franklin OH 337,572 777,943 None None 337,572 777,943 1,115,515 125,691 12/30/97 300
Springboro OH 261,916 897,489 None None 261,916 897,489 1,159,405 118,178 09/21/98 300
Tulsa OK 318,441 1,004,663 None None 318,441 1,004,663 1,323,104 172,409 09/26/97 300
Bartlett TN 420,000 674,437 None None 420,000 674,437 1,094,437 69,079 05/12/99 02/23/99 300
Clarksville TN 499,885 840,869 None None 499,885 840,869 1,340,754 107,919 10/02/98 300
Columbia TN 466,469 716,723 None None 466,469 716,723 1,183,192 122,982 09/26/97 300
Hendersonville TN 333,677 938,592 None None 333,677 938,592 1,272,269 151,737 12/10/97 300
Jackson TN 381,076 857,261 None None 381,076 857,261 1,238,337 147,117 09/26/97 300
Memphis TN 381,265 900,580 None None 381,265 900,580 1,281,845 136,527 03/31/98 300
Murfreesboro TN 406,056 886,293 None None 406,056 886,293 1,292,349 152,091 09/26/97 300
Murfreesboro TN 385,437 782,396 None None 385,437 782,396 1,167,833 87,339 03/11/99 300
Smyrna TN 302,372 836,214 None None 302,372 836,214 1,138,586 143,502 09/02/97 300
Austin TX 407,910 885,113 None None 407,910 885,113 1,293,023 143,091 12/01/97 300
Beaumont TX 293,919 832,154 None None 293,919 832,154 1,126,073 142,807 09/05/97 300
Hurst TX 373,084 871,163 None None 373,084 871,163 1,244,247 120,511 07/29/98 300
Lubbock TX 266,805 857,492 None None 266,805 857,492 1,124,297 149,994 08/29/97 300
Woodway TX 372,487 835,198 None None 372,487 835,198 1,207,685 135,024 12/16/97 300
F-32
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at
Cost Capitalized Which Carried
Subsequent at Close of Period
Initital Cost to Company to Acquisition (Notes 2, 3 and 5)
-------------------------- ------------------- -----------------------------
Life on
which
depreciation
in latest
Buildings, Buildings, Accumul- Income
Improvements Improvements lated Statement is
and and Deprecia- Date of Computed
Description Acquisition Improv- Carrying Acquisition tion Const- Date (in
(Note 1) Land Fees ements Costs Land Fees Total (Note 4) ruction Acquired Months)
------------------------------------------------------------------------------------------------------------------------------------
Video Rental
------------
Hampton VA 373,499 836,071 None None 373,499 836,071 1,209,570 135,162 12/19/97 300
Virginia Beach VA 551,588 797,260 None None 551,588 797,260 1,348,848 123,478 02/23/98 300
Other
-----
Escondido CA 0 0 13,900 None 0 13,900 13,900 1,274 08/01/92 N/A
Fresno CA 428,900 3,434,562 None 1,754 428,900 3,436,316 3,865,216 3,434,562 10/29/82 180
San Diego CA 3,745,000 8,885,351 62,147 25,608 3,745,000 8,973,106 12,718,106 6,073,891 03/08/86 03/25/86 300
San Diego CA 2,485,160 8,697,822 58,417 25,948 2,485,160 8,782,187 11,267,347 4,844,789 01/23/89 09/19/86 300
San Diego CA 5,797,411 15,473,497 106,387 40,313 5,797,411 15,620,197 21,417,608 8,118,601 01/20/89 08/05/87 300
Deerfield Beach FL 475,000 869,092 None 20,982 475,000 890,074 1,365,074 97,938 01/29/99 300
Venice FL 259,686 362,562 4,535 None 259,686 367,097 626,783 74,363 11/26/96 300
Humble TX 106,000 545,518 14,289 8,631 106,000 568,438 674,438 459,154 03/25/86 300
Crest Net Lease 9,833,145 12,475,569 None None 9,833,145 12,475,569 22,308,714 0 N/A
Miscellaneous 398,245 None 76,384 0 474,629 474,629 330,875 Various
Investment
------------------------------------------------------------------------------------------------------------------------------------
422,931,397 778,249,610 768,587 806,522 422,931,397 779,824,719 1,202,756,116 235,086,623
====================================================================================================================================
F-33
</TABLE>
<PAGE>
<TABLE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
Note 1. One thousand one hundred nineteen of the properties are single unit retail outlets. One property located in
Sheboygan, WI, one property located in Humble, TX and three other properties located in San Diego, CA are
multi-tenant commercial properties. All properties were acquired on an all cash basis except one; no
encumbrances were outstanding for the periods presented.
Note 2. The aggregate cost for federal income tax purposes is $1,108,990,000.
Note 3. The following is a reconciliation of total real estate carrying value for the years ended December 31:
2001 2000 1999
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $1,111,481,809 $1,111,481,809 $889,835,701
Additions during year:
Acquisitions 156,471,835 98,558,750 181,375,766
Equipment 0 0 0
Improvements, etc. 547,000 90,502 147,976
Other (leasing costs) 401,000 307,556 241,980
-------------- -------------- ------------
Total additions 157,419,835 98,956,808 181,765,722
-------------- -------------- ------------
Deductions during year:
Cost of real estate sold 64,305,657 49,850,903 9,109,061
Cost of equipment sold 18,000 0 0
Other (fully amortized commissions) 371,871 103,226 13,232
Other (provision for impairment losses) 1,450,000 0 0
-------------- -------------- ------------
Total deductions 66,145,528 49,954,129 9,122,293
-------------- -------------- ------------
Balance at close of year $1,202,756,116 $1,111,481,809 $1,062,479,130
============== ============== ==============
Note 4. The following is a reconciliation of accumulated depreciation for the years ended December 31:
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 217,204,145 $ 195,386,310 $ 171,555,267
Additions during period - provision for depreciation 27,974,195 27,845,368 24,823,759
Deductions during year:
Accumulated depreciation of real estate and
equipment sold 9,719,846 5,924,307 979,484
Other (fully amortized commissions) 371,871 103,226 13,232
-------------- -------------- --------------
Balance at close of year $ 235,086,623 $ 217,204,145 $ 195,386,310
Note 5. A provision for impairment loss was recorded on six properties which became held for sale. No provision for
impairment loss was recorded in 2000 or 1999.
See accompanying indepent auditors' report
</TABLE>
F-34
<PAGE>
</TEXT>
</DOCUMENT>