Operating Results For Second Quarter And First Six Months Of 2014 Announced By Realty Income

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Jul 24, 2014, 09:15 ET

ESCONDIDO, Calif., July 24, 2014 /PRNewswire/ -- Realty Income Corporation (Realty Income), The Monthly Dividend Company^® (NYSE: O), today announced operating results for the second quarter ended June 30, 2014. Access to this document is available at www.realtyincome.com. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

COMPANY HIGHLIGHTS:

For the quarter ended June 30, 2014 (as compared to the same quarterly period in 2013):

Revenue increased 22.6% to $228.6 million as compared to $186.4 million
Net income available to common stockholders per share was $0.23
FFO available to common stockholders increased 21.1% to $142.4 million
FFO per share increased 6.7% to $0.64
AFFO available to common stockholders increased 22.1% to $141.2 million
AFFO per share increased 8.5% to $0.64
Same store rents increased 1.4% to $130.5 million
Portfolio occupancy increased to 98.3% from 98.2%
Invested $405.1 million in 73 new properties and properties under development or expansion
Increased the monthly dividend in June for the 76^th time and for the 67^th consecutive quarter
Dividends paid per common share increased 0.6%
Generated net proceeds of $528.6 million in a 13.8 million share common stock offering in April
Generated net proceeds of $346.6 million in a 3.875% senior unsecured notes offering in June

Financial Results

Revenue
Revenue, for the quarter ended June 30, 2014, increased 22.6% to $228.6 million as compared to $186.4 million, for the same quarter in 2013. Revenue, for the six months ended June 30, 2014, increased 24.4% to $450.2 million as compared to $362.0 million, for the same period in 2013.

Net Income Available to Common Stockholders
Net income available to common stockholders, for the quarter ended June 30, 2014, was $51.4 million as compared to $46.0 million, for the same quarter in 2013. Net income per share, for the quarter ended June 30, 2014, was $0.23, which is unchanged from the same quarter in 2013.

Net income available to common stockholders, for the six months ended June 30, 2014, was $98.6 million as compared to $108.7 million, for the same period in 2013. Net income per share, for the six months ended June 30, 2014, was $0.46 as compared to $0.59, for the same period in 2013. Net income available to common stockholders in the first six months of 2013 was impacted by an unusually large gain on sale of real estate, which represents $0.19 per share.

The calculation to determine net income for a real estate company includes impairments and/or gains from property sales. Impairments and/or gains on property sales vary from quarter to quarter. This variance can significantly impact net income and period to period comparisons.

Funds From Operations Available to Common Stockholders (FFO)
FFO, for the quarter ended June 30, 2014, increased 21.1% to $142.4 million as compared to $117.6 million, for the same quarter in 2013. FFO per share, for the quarter ended June 30, 2014, increased 6.7% to $0.64 as compared to $0.60, for the same quarter in 2013.

FFO, for the six months ended June 30, 2014, increased 25.1% to $276.9 million as compared to $221.3 million, for the same period in 2013. FFO per share, for the six months ended June 30, 2014, increased 7.5% to $1.29 as compared to $1.20, for the same period in 2013.

Adjusted Funds From Operations Available to Common Stockholders (AFFO)
AFFO, for the quarter ended June 30, 2014, increased 22.1% to $141.2 million as compared to $115.6 million, for the same quarter in 2013. AFFO per share, for the quarter ended June 30, 2014, increased 8.5% to $0.64 as compared to $0.59, for the same quarter in 2013.

AFFO, for the six months ended June 30, 2014, increased 24.7% to $273.8 million as compared to $219.5 million, for the same period in 2013. AFFO per share, for the six months ended June 30, 2014, increased 7.6% to $1.28 as compared to $1.19, for the same period in 2013.

The company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust's (REIT's) operating performance. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust's (NAREIT's) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate, reduced by gains on sales of investment properties and extraordinary items. FFO, for the first six months of 2013, has also been normalized to add back merger-related costs for the acquisition of ARCT. AFFO further adjusts FFO for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company's ongoing operating performance. See the reconciliations of net income available to common stockholders to FFO and AFFO on page six.

Dividend Information
In June 2014, Realty Income announced the 67^th consecutive quarterly dividend increase, which is the 76^th increase in the amount of the dividend since the company's listing on the New York Stock Exchange in 1994. The annualized dividend amount, as of June 30, 2014, was approximately $2.194 per share. The amount of monthly dividends paid per share increased 0.6% to $0.547 in the second quarter of 2014 compared to $0.544 for the same period in 2013. In addition, through June 30, 2014, the company has paid 527 consecutive monthly dividends and over $3.0 billion in total dividends since 1969. Realty Income has a dividend reinvestment and stock purchase program that can be accessed at www.realtyincome.com. The program is administered by Wells Fargo Shareowner Services.

Real Estate Portfolio Update

As of June 30, 2014, Realty Income's portfolio of freestanding, single-tenant properties consisted of 4,263 properties located in 49 states and Puerto Rico, leased to 228 commercial tenants doing business in 47 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 10.6 years.

Portfolio Management Activities
The company's portfolio of commercial real estate, owned primarily under 10- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of June 30, 2014, portfolio occupancy was 98.3% with 74 properties available for lease out of a total of 4,263 properties in the portfolio, as compared to 98.2% portfolio occupancy, or 68 properties available for lease, as of June 30, 2013.

Since March 31, 2014, when we reported 73 properties available for lease, we had 40 lease expirations, re-leased 37 properties and sold two properties. Of the 37 properties re-leased during the second quarter of 2014, 36 properties were re-leased to either existing or new tenants without vacancy, and one was re-leased to a new tenant after a period of vacancy. The annual new rent on these leases was $5.2 million, as compared to the previous rent on these same properties of $5.0 million.

Rent Increases
During the quarter ended June 30, 2014, same store rents, on 2,774 properties under lease, increased 1.4% to $130.5 million, as compared to $128.7 million, for the same quarter in 2013. For the six months ended June 30, 2014, same store rents, on 2,774 properties under lease, increased 1.4% to $261.5 million, as compared to $257.8 million, for the same period in 2013.

Property Acquisitions
During the second quarter of 2014, Realty Income invested $405.1 million in 73 new properties and properties under development or expansion, located in 27 states. These properties are 100% leased with a weighted average lease term of approximately 10.6 years and an initial average lease yield of 7.3%. The tenants occupying the new properties operate in 22 industries, and the property types consist of 75.9% retail, 14.6% office, 5.2% industrial and distribution, and 4.3% manufacturing, based on rental revenue. Approximately 55% of the revenue generated for acquisitions during the second quarter of 2014 is from investment grade tenants.

During the six months ended June 30, 2014, Realty Income invested approximately $1.06 billion in 402 new properties and properties under development or expansion. The new properties are located in 39 states and are 100% leased with a weighted average lease term of approximately 12.8 years and an initial average lease yield of 7.1%. The tenants occupying the new properties operate in 24 industries, and the property types consist of 83.0% retail, 8.5% office, 6.8% industrial and distribution, and 1.7% manufacturing, based on rental revenue. Approximately 73% of the revenue generated from the year-to-date 2014 acquisitions is from investment grade tenants.

Realty Income maintains a $1.5 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of June 30, 2014, approximately $1.43 billion was available on the credit facility to fund additional acquisitions.

Property Dispositions
During the quarter ended June 30, 2014, Realty Income sold six properties for $7.0 million, with a gain on sales of $2.0 million, as compared to 17 properties sold for $23.7 million, with a gain on sales of $5.7 million, during the same quarter in 2013.

During the six months ended June 30, 2014, Realty Income sold 17 properties for $19.7 million, with a gain on sales of $5.8 million, as compared to 34 properties sold for $83.7 million, with a gain on sales of $44.3 million, during the same period in 2013.

Other Activities

Issued 13.8 Million Shares in an Upsized Common Share Offering
On April 1, 2014, Realty Income issued 13.8 million common shares, raising net proceeds of approximately $528.6 million, which were used to repay a portion of the borrowings under the company's acquisition credit facility.

Direct Stock Purchase and Dividend Reinvestment Plan
During the second quarter of 2014, Realty Income issued 1,174,837 common shares via its Plan, generating gross proceeds of approximately $52.1 million. During the first six months of 2014, Realty Income issued 1,240,305 common shares via its Plan, generating gross proceeds of approximately $54.4 million.

Issued $350 Million of 3.875% Senior Unsecured Notes Due 2024
On June 25, 2014, Realty Income issued $350 million of 3.875% senior unsecured notes due 2024. The public offering price for the notes was 99.956% of the principal amount for an effective yield to maturity of 3.88%. The net proceeds of approximately $346.6 million from the offering were used to repay a portion of the borrowings outstanding under the company's acquisition credit facility.

CEO Comments on Operating Results

Commenting on Realty Income's results and real estate operations, Chief Executive Officer, John P. Case, said, "We are pleased with our second quarter operating results as we continued to see healthy acquisition volumes and consistently positive performance in our portfolio. Our disciplined and selective investment strategy continued to drive earnings and dividend growth. FFO per share increased by 6.7% to $0.64 and AFFO per share increased 8.5% to $0.64. With the payment of our June 2014 dividend, we achieved a company milestone, surpassing $3 billion in dividends paid to our shareholders over the company's 45-year operating history."

"During the quarter, we completed $405.1 million in acquisitions at an initial average lease yield of 7.3% and a weighted average lease term of 10.6 years. Our investment activity this quarter was balanced between our two principal investment segments: non-investment grade retail properties which accounted for more than 40% of acquisitions and investment grade retail/non-retail properties. Of the total acquisitions this quarter, $228.6 million represented the remaining balance of the previously announced transaction with Inland Diversified Real Estate Trust, Inc. The $503 million Inland transaction is now closed in its entirety. This year we have completed $1.06 billion in property level acquisitions, which is a record amount for the first half of any year in the company's history. Our investment spreads remain well above their historical averages."

"Our occupancy at the end of the second quarter was 98.3%, and our year-to-date same store rent increased by 1.4% from the same period a year ago. Our portfolio remains quite diversified with no tenant, industry, or state accounting for more than 5.2%, 10.2% or 10.3% of rental revenue, respectively."

"To support our growth activities, we raised just under $1 billion in permanent and long-term capital during the quarter. At the end of the quarter, we had a $70 million balance on the credit facility giving the company more than $1.4 billion available to fund future investment activity."

"Given our robust level of acquisitions during the first half of the year, we now estimate our 2014 acquisitions will be approximately $1.4 billion versus our previous estimate of $1.2 billion. With this year-to-date acquisition activity and the improved visibility we have on our operations, we are raising our 2014 FFO per share guidance from $2.53 - $2.58 to $2.59 - $2.62. We are also tightening and raising the midpoint of our 2014 AFFO per share guidance from $2.53 - $2.58 to $2.55 - $2.57."

FFO and AFFO Commentary
Realty Income's FFO and AFFO per share has historically tended to be stable and fairly predictable because of the long-term leases that are the primary source of the company's revenue. There are, however, several factors that can cause FFO and AFFO per share to vary from levels that have been anticipated by the company. These factors include, but are not limited to, changes in interest rates and occupancy rates, periodically accessing the capital markets, the level and timing of property and entity acquisitions and dispositions, lease rollovers, the general real estate market, and the economy.

2014 Earnings Estimates
FFO per share for 2014 should range from $2.59 to $2.62, an increase of 7.5% to 8.7% over 2013 FFO (normalized to exclude 2013 ARCT merger-related costs) per share of $2.41. FFO per share for 2014 is based on a net income per share range of $0.90 to $0.93, plus estimated real estate depreciation of $1.74 per share, and reduced by potential estimated gains on sales of investment properties of $0.05 per share (in accordance with NAREIT's definition of FFO).

AFFO per share for 2014 should range from $2.55 to $2.57, an increase of 5.8% to 6.6% over the 2013 AFFO per share of $2.41. AFFO further adjusts FFO for unique revenue and expense items, which are not as pertinent to the measurement of the company's ongoing operating performance.

About Realty Income
Realty Income is The Monthly Dividend Company^®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of June 30, 2014, the company had paid 527 consecutive monthly dividends throughout its 45-year operating history. The monthly income is supported by the cash flows from over 4,200 properties owned under long-term lease agreements with 228 leading regional and national commercial tenants. The company is an active buyer of net-leased properties nationwide. Additional information about the company can be obtained from the corporate website at www.realtyincome.com or www.twitter.com/realtyincome.

Forward-Looking Statements
Statements in this press release that are not strictly historical are "forward-looking" statements. Forward-looking statements involve known and unknown risks, which may cause the company's actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, tenant financial health, the availability of capital to finance planned growth, continued volatility and uncertainty in the credit markets and broader financial markets, property acquisitions and the timing of these acquisitions, charges for property impairments, and the outcome of any legal proceedings to which the company is a party, as described in the company's filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Note to Editors: Realty Income press releases are available via the internet at http://www.realtyincome.com/invest/newsroom-library/press-releases.shtml.

CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts - unaudited)

	Three Months		Three Months			Six Months		Six Months
	Ended 6/30/14		Ended 6/30/13			Ended 6/30/14		Ended 6/30/13
REVENUE
Rental	$	221,868	$	180,089		$	435,989	$	347,887
Tenant reimbursements		6,169		4,485			12,597		10,512
Other		609		1,869			1,632		3,566

Total revenue		228,646		186,443			450,218		361,965

EXPENSES
Depreciation and amortization		92,894		73,906			182,864		140,655
Interest		52,712		39,232			104,432		80,831
General and administrative		11,587		12,088			24,473		23,716
Property (including reimbursable)		10,127		7,754			20,704		17,326
Income taxes		570		624			1,661		1,201
Provisions for impairment		499		290			2,182		290
Merger-related costs		-		605			-		12,635

Total expenses		168,389		134,499			336,316		276,654

Gain on sales of real estate		1,964		-			3,236		-
Income from continuing operations		62,221		51,944			117,138		85,311
Income from discontinued operations		20		4,572			3,097		44,432

Net income		62,241		56,516			120,235		129,743
Net income attributable to noncontrolling interests		(339)		(77)			(671)		(86)

Net income attributable to the Company		61,902		56,439			119,564		129,657
Preferred stock dividends		(10,482)		(10,482)			(20,965)		(20,965)

Net income available to common stockholders	$	51,420	$	45,957		$	98,599	$	108,692

Funds from operations available to
common stockholders (FFO)	$	142,409	$	117,565	⁽¹⁾	$	276,910	$	221,253	⁽¹⁾
Adjusted funds from operations available to
common stockholders (AFFO)	$	141,178	$	115,584		$	273,822	$	219,547

Per share information for common stockholders:
Income from continuing operations,
basic and diluted	$	0.23	$	0.21		$	0.45	$	0.35

Net income, basic and diluted	$	0.23	$	0.23		$	0.46	$	0.59

FFO, basic and diluted	$	0.64	$	0.60	⁽¹⁾	$	1.29	$	1.20	⁽¹⁾

AFFO:
Basic	$	0.64	$	0.59		$	1.28	$	1.20
Diluted	$	0.64	$	0.59		$	1.28	$	1.19

Cash dividends paid per common share	$	0.547	$	0.544		$	1.094	$	1.057

⁽¹⁾ Normalized to exclude ARCT merger-related costs

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

		Three Months		Three Months		Six Months		Six Months
		Ended 6/30/14		Ended 6/30/13		Ended 6/30/14		Ended 6/30/13

Net income available to common stockholders		$	51,420	$	45,957	$	98,599	$	108,692
Depreciation and amortization:
	Continuing operations		92,894		73,906		182,864		140,655
	Discontinued operations		-		632		-		1,146
Depreciation of furniture, fixtures and equipment			(104)		(67)		(196)		(128)
Provisions for impairment on investment properties:
	Continuing operations		499		290		2,182		290
	Discontinued operations		-		2,206		-		2,662
Gain on sale of investment properties:
	Continuing operations		(1,964)		-		(3,236)		-
	Discontinued operations		-		(5,744)		(2,607)		(44,304)
Merger-related costs ⁽¹⁾			-		605		-		12,635
FFO adjustments allocable to noncontrolling interests			(336)		(220)		(696)		(395)

FFO available to common stockholders		$	142,409	$	117,565	$	276,910	$	221,253

FFO per common share		$	0.64	$	0.60	$	1.29	$	1.20
Distributions paid to common stockholders		$	121,229	$	106,692	$	234,643	$	191,669
FFO in excess of distributions paid to
common stockholders		$	21,180	$	10,873	$	42,267	$	29,584

Weighted average number of common shares used for FFO:
	Basic	220,979,955		195,574,014		214,039,692		183,714,191
	Diluted	221,043,619		195,759,091		214,089,629		183,873,647

⁽¹⁾	FFO for the three and six months ended June 30, 2013, has been normalized to exclude ARCT merger-related costs.

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust's definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on sales of investment properties and extraordinary items.

ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(dollars in thousands, except per share amounts)

We define AFFO as FFO adjusted for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company's ongoing operating performance. Most companies in our industry use a similar measurement to AFFO, but they may use the term "CAD" (for Cash Available for Distribution) or "FAD" (for Funds Available for Distribution).

		Three Months		Three Months		Six Months		Six Months
		Ended 6/30/14		Ended 6/30/13		Ended 6/30/14		Ended 6/30/13

Net income available to common stockholders		$	51,420	$	45,957	$	98,599	$	108,692
Cumulative adjustments to calculate FFO ⁽¹⁾			90,989		71,608		178,311		112,561
FFO available to common stockholders			142,409		117,565		276,910		221,253
Amortization of share-based compensation			2,752		3,653		5,449		7,498
Amortization of deferred financing costs ⁽²⁾			1,165		1,015		2,241		2,021
Amortization of net mortgage premiums			(3,009)		(2,494)		(5,394)		(4,441)
(Gain) loss on interest rate swaps			984		(1,738)		1,042		(1,286)
Capitalized leasing costs and commissions			(275)		(361)		(467)		(774)
Capitalized building improvements			(1,090)		(1,255)		(2,267)		(2,520)
Straight-line rent			(3,977)		(3,250)		(7,913)		(6,454)
Amortization of above and below-market leases			2,213		2,429		4,207		4,223
AFFO adjustments allocable to noncontrolling interests			6		20		14		27
AFFO available to common stockholders		$	141,178	$	115,584	$	273,822	$	219,547

AFFO per common share:
	Basic	$	0.64	$	0.59	$	1.28	$	1.20
	Diluted	$	0.64	$	0.59	$	1.28	$	1.19
Distributions paid to common stockholders		$	121,229	$	106,692	$	234,643	$	191,669
AFFO in excess of distributions paid to
common stockholders		$	19,949	$	8,892	$	39,179	$	27,878

Weighted average number of common shares used for AFFO:
	Basic	220,979,955		195,574,014		214,039,692		183,714,191
	Diluted	221,043,619		195,759,091		214,089,629		183,873,647

⁽¹⁾	See FFO calculation above for reconciling items.

⁽²⁾	Includes the amortization of costs incurred and capitalized when our notes were issued in March 2003, November 2003, March 2005, September 2005, September 2006, September 2007, June 2010, June 2011, October 2012, July 2013 and June 2014. Additionally, this includes the amortization of deferred financing costs incurred and capitalized in connection with our assumption of our mortgages payable and the issuance of our term loan. The deferred financing costs are being amortized over the lives of the respective mortgages and term loan. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.


HISTORICAL FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)

For the three months ended June 30,		2014		2013		2012		2011		2010

Net income available to common stockholders	$	51,420	$	45,957	$	32,950	$	33,185	$	24,985
Depreciation and amortization		92,790		74,471		35,571		29,000		23,469
Provisions for impairment on investment properties		499		2,496		-		10		53
Gain on sales of investment properties		(1,964)		(5,744)		(3,354)		(1,251)		(1,663)
Merger-related costs		-		605		-		-		-
FFO adjustments allocable to noncontrolling interests		(336)		(220)		-		-		-

FFO ⁽¹⁾	$	142,409	$	117,565	$	65,167	$	60,944	$	46,844

FFO per diluted share ⁽¹⁾	$	0.64	$	0.60	$	0.49	$	0.48	$	0.45

AFFO	$	141,178	$	115,584	$	66,499	$	62,370	$	47,730

AFFO per diluted share	$	0.64	$	0.59	$	0.50	$	0.49	$	0.46

Cash dividends paid per share	$	0.547	$	0.544	$	0.437	$	0.434	$	0.430
Weighted average diluted shares outstanding	221,043,619		195,759,091		132,828,540		126,202,047		103,765,828

For the six months ended June 30,		2014		2013		2012		2011		2010

Net income available to common stockholders	$	98,599	$	108,692	$	59,022	$	63,120	$	49,127
Depreciation and amortization		182,668		141,673		70,806		55,791		46,682
Provisions for impairment on investment properties		2,182		2,952		-		210		87
Gain on sales of investment properties		(5,843)		(44,304)		(3,965)		(1,379)		(2,366)
Merger-related costs		-		12,635		-		-		-
AFFO adjustments allocable to noncontrolling interests		(696)		(395)		-		-		-

FFO ⁽¹⁾	$	276,910	$	221,253	$	125,863	$	117,742	$	93,530

FFO per diluted share ⁽¹⁾	$	1.29	$	1.20	$	0.95	$	0.96	$	0.90

AFFO	$	273,822	$	219,547	$	132,793	$	120,610	$	95,344

AFFO per diluted share	$	1.28	$	1.19	$	1.00	$	0.98	$	0.92

Cash dividends paid per share	$	1.094	$	1.057	$	0.874	$	0.866	$	0.859
Weighted average diluted shares outstanding	214,089,629		183,873,647		132,785,213		122,691,418		103,778,609

⁽¹⁾	FFO for the three and six months ended June 30, 2013, has been normalized to exclude ARCT merger-related costs.


REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2014 and December 31, 2013
(dollars in thousands, except per share data)

		2014		2013
ASSETS		(unaudited)
Real estate, at cost:
Land	$	2,991,946	$	2,791,147
Buildings and improvements		7,869,046		7,108,328
Total real estate, at cost		10,860,992		9,899,475
Less accumulated depreciation and amortization		(1,249,461)		(1,114,888)
Net real estate held for investment		9,611,531		8,784,587
Real estate held for sale, net		9,598		12,022
Net real estate		9,621,129		8,796,609
Cash and cash equivalents		8,908		10,257
Accounts receivable, net		43,751		39,323
Acquired lease intangible assets, net		1,048,139		935,459
Goodwill		15,556		15,660
Other assets, net		74,919		127,133
Total assets	$	10,812,402	$	9,924,441

LIABILITIES AND EQUITY
Distributions payable	$	44,353	$	41,452
Accounts payable and accrued expenses		98,973		102,511
Acquired lease intangible liabilities, net		174,769		148,250
Other liabilities		36,682		44,030
Line of credit payable		70,800		128,000
Term loan		70,000		70,000
Mortgages payable, net		916,454		783,360
Notes payable, net		3,535,957		3,185,480
Total liabilities		4,947,988		4,503,083

Commitments and contingencies

Stockholders' equity:
Preferred stock and paid in capital, par value $0.01 per share,
69,900,000 shares authorized and 25,150,000 shares issued and
outstanding as of June 30, 2014 and December 31, 2013		609,363		609,363
Common stock and paid in capital, par value $0.01 per share,
370,100,000 shares authorized, 222,623,256 shares issued and
outstanding as of June 30, 2014 and 207,485,073 shares issued
and outstanding at December 31, 2013		6,357,084		5,767,878
Distributions in excess of net income		(1,130,746)		(991,794)
Total stockholders' equity		5,835,701		5,385,447
Noncontrolling interests		28,713		35,911
Total equity		5,864,414		5,421,358
Total liabilities and equity	$	10,812,402	$	9,924,441

Realty Income Performance vs. Major Stock Indices

						Equity												NASDAQ
		Realty Income				REIT Index ⁽¹⁾				DJIA				S&P 500				Composite
		Dividend		Total		Dividend		Total		Dividend		Total		Dividend		Total		Dividend		Total
		yield		return ⁽²⁾		yield		return ⁽³⁾		yield		return ⁽³⁾		yield		return ⁽³⁾		yield		return ⁽⁴⁾

10/18 to 12/31/1994		10.5	%	10.8	%	7.7	%	0.0	%	2.9	%	(1.6%)		2.9	%	(1.2%)		0.5	%	(1.7%)
1995		8.3	%	42.0	%	7.4	%	15.3	%	2.4	%	36.9	%	2.3	%	37.6	%	0.6	%	39.9	%
1996		7.9	%	15.4	%	6.1	%	35.3	%	2.2	%	28.9	%	2.0	%	23.0	%	0.2	%	22.7	%
1997		7.5	%	14.5	%	5.5	%	20.3	%	1.8	%	24.9	%	1.6	%	33.4	%	0.5	%	21.6	%
1998		8.2	%	5.5	%	7.5	%	(17.5%)		1.7	%	18.1	%	1.3	%	28.6	%	0.3	%	39.6	%
1999		10.5	%	(8.7%)		8.7	%	(4.6%)		1.3	%	27.2	%	1.1	%	21.0	%	0.2	%	85.6	%
2000		8.9	%	31.2	%	7.5	%	26.4	%	1.5	%	(4.7%)		1.2	%	(9.1%)		0.3	%	(39.3%)
2001		7.8	%	27.2	%	7.1	%	13.9	%	1.9	%	(5.5%)		1.4	%	(11.9%)		0.3	%	(21.1%)
2002		6.7	%	26.9	%	7.1	%	3.8	%	2.6	%	(15.0%)		1.9	%	(22.1%)		0.5	%	(31.5%)
2003		6.0	%	21.0	%	5.5	%	37.1	%	2.3	%	28.3	%	1.8	%	28.7	%	0.6	%	50.0	%
2004		5.2	%	32.7	%	4.7	%	31.6	%	2.2	%	5.6	%	1.8	%	10.9	%	0.6	%	8.6	%
2005		6.5	%	(9.2%)		4.6	%	12.2	%	2.6	%	1.7	%	1.9	%	4.9	%	0.9	%	1.4	%
2006		5.5	%	34.8	%	3.7	%	35.1	%	2.5	%	19.0	%	1.9	%	15.8	%	0.8	%	9.5	%
2007		6.1	%	3.2	%	4.9	%	(15.7%)		2.7	%	8.8	%	2.1	%	5.5	%	0.8	%	9.8	%
2008		7.3	%	(8.2%)		7.6	%	(37.7%)		3.6	%	(31.8%)		3.2	%	(37.0%)		1.3	%	(40.5%)
2009		6.6	%	19.3	%	3.7	%	28.0	%	2.6	%	22.6	%	2.0	%	26.5	%	1.0	%	43.9	%
2010		5.1	%	38.6	%	3.5	%	27.9	%	2.6	%	14.0	%	1.9	%	15.1	%	1.2	%	16.9	%
2011		5.0	%	7.3	%	3.8	%	8.3	%	2.8	%	8.3	%	2.3	%	2.1	%	1.3	%	(1.8%)
2012		4.5	%	20.1	%	3.5	%	19.7	%	3.0	%	10.2	%	2.5	%	16.0	%	2.6	%	15.9	%
2013		5.8	%	(1.8%)		3.9	%	2.9	%	2.3	%	29.6	%	2.0	%	32.4	%	1.4	%	38.3	%
Q2 YTD 2014		4.9	%	21.9	%	3.5	%	16.2	%	2.3	%	2.7	%	2.0	%	7.1	%	1.2	%	5.5	%

Compounded Average Annual Total Return ⁽⁵⁾				17.0	%			11.1	%			10.2	%			9.6	%			9.3	%

Note: All of these dividend yields are calculated as annualized dividends based on the last dividend paid in applicable time period divided by the closing price as of period end. Dividend yield sources: NAREIT website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream / Thomson Financial.

⁽¹⁾	FTSE NAREIT US Equity REIT Index, as per NAREIT website.
⁽²⁾	Calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period. Does not include reinvestment of dividends for the annual percentages.
⁽³⁾	Includes reinvestment of dividends. Source: NAREIT website and Factset.
⁽⁴⁾	Price only index, does not include dividends. Source: Factset.

⁽⁵⁾	All of these Compounded Average Annual Total Return rates are calculated in the same manner: from Realty Income's NYSE listing on October 18, 1994 through June 30, 2014, and (except for NASDAQ) assuming reinvestment of dividends. Past Performance does not guarantee future performance. Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future.

Property Type Diversification
The following table sets forth certain property type information regarding Realty Income's property portfolio as of June 30, 2014 (dollars in thousands):

			Approximate	Rental Revenue for			Percentage of
		Number of	Leasable	the Quarter Ended			Rental
Property Type		Properties	Square Feet	June 30, 2014		⁽¹⁾	Revenue
Retail		4,102	45,327,100	$	172,153		77.7	%
Industrial and distribution		86	16,278,800		23,463		10.6
Office		46	3,519,900		15,004		6.8
Manufacturing		14	3,875,200		5,607		2.5
Agriculture		15	184,500		5,209		2.4
Totals		4,263	69,185,500	$	221,436		100.0	%

⁽¹⁾	Includes rental revenue for all properties owned by Realty Income at June 30, 2014, including revenue from properties reclassified as discontinued operations of $18. Excludes revenue of $44 from properties owned by Crest and $406 from sold properties that were included in continuing operations.

Tenant Diversification
The largest tenants based on percentage of total portfolio rental revenue at June 30, 2014 include the following:

Tenant	Number of Properties	% of Revenue

Walgreens	111	5.2	%
FedEx	38	5.0	%
Dollar General	502	5.0	%
LA Fitness	45	4.6	%
Family Dollar	450	4.5	%
BJ's Wholesale Clubs	15	2.9	%
AMC Theatres	20	2.8	%
Diageo	17	2.7	%
Northern Tier Energy/Super America	134	2.3	%
Regal Cinemas	20	2.1	%
Rite Aid	58	2.0	%
CVS Pharmacy	49	1.9	%
The Pantry	145	1.7	%
Circle K	150	1.6	%
Walmart/Sam's Club	19	1.5	%
GPM Investments/Fas Mart	141	1.4	%
NPC International	202	1.4	%
TBC Corporation	70	1.3	%
Smart & Final	36	1.2	%
FreedomRoads/Camping World	18	1.2	%

Industry Diversification
The following table sets forth certain information regarding Realty Income's property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

	Percentage of Rental Revenue⁽¹⁾
	For the
	Quarter Ended		For the Years Ended
	June 30,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
	2014		2013		2012		2011		2010		2009		2008
Retail industries
Apparel stores	1.9	%	1.9	%	1.7	%	1.4	%	1.2	%	1.1	%	1.1	%
Automotive collision services	0.8		0.8		1.1		0.9		1.0		1.1		1.0
Automotive parts	1.2		1.2		1.0		1.2		1.4		1.5		1.6
Automotive service	1.8		2.1		3.1		3.7		4.7		4.8		4.8
Automotive tire services	3.2		3.6		4.7		5.6		6.4		6.9		6.7
Book stores	*		*		0.1		0.1		0.1		0.2		0.2
Child care	2.3		2.8		4.5		5.2		6.5		7.3		7.6
Consumer electronics	0.3		0.3		0.5		0.5		0.6		0.7		0.8
Convenience stores	10.2		11.2		16.3		18.5		17.1		16.9		15.8
Crafts and novelties	0.5		0.5		0.3		0.2		0.3		0.3		0.3
Dollar stores	9.8		6.2		2.2		-		-		-		-
Drug stores	9.5		8.1		3.5		3.8		4.1		4.3		4.1
Education	0.4		0.4		0.7		0.7		0.8		0.9		0.8
Entertainment	0.6		0.6		0.9		1.0		1.2		1.3		1.2
Equipment services	0.1		0.1		0.1		0.2		0.2		0.2		0.2
Financial services	1.4		1.5		0.2		0.2		0.2		0.2		0.2
General merchandise	1.2		1.1		0.6		0.6		0.8		0.8		0.8
Grocery stores	3.0		2.9		3.7		1.6		0.9		0.7		0.7
Health and fitness	7.0		6.3		6.8		6.4		6.9		5.9		5.6
Health care	1.1		1.1		-		-		-		-		-
Home furnishings	0.7		0.9		1.0		1.1		1.3		1.3		2.4
Home improvement	1.3		1.6		1.5		1.7		2.0		2.2		2.1
Jewelry	0.1		0.1		-		-		-		-		-
Motor vehicle dealerships	1.5		1.6		2.1		2.2		2.6		2.7		3.2
Office supplies	0.4		0.5		0.8		0.9		0.9		1.0		1.0
Pet supplies and services	0.7		0.8		0.6		0.7		0.9		0.9		0.8
Restaurants - casual dining	4.3		5.1		7.3		10.9		13.4		13.7		14.3
Restaurants - quick service	3.5		4.4		5.9		6.6		7.7		8.3		8.2
Shoe stores	0.1		0.1		0.1		0.2		0.1		-		-
Sporting goods	1.7		1.7		2.5		2.7		2.7		2.6		2.3
Theaters	5.2		6.2		9.4		8.8		8.9		9.2		9.0
Transportation services	0.1		0.1		0.2		0.2		0.2		0.2		0.2
Wholesale clubs	4.2		3.9		3.2		0.7		-		-		-
Other	0.1		0.1		0.1		0.1		0.3		1.1		1.2
Retail industries	80.2	%	79.8	%	86.7	%	88.6	%	95.4	%	98.3	%	98.2	%

Industry Diversification (continued)

		Percentage of Rental Revenue⁽¹⁾
		For the
		Quarter Ended		For the Years Ended
		June 30,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
		2014		2013		2012		2011		2010		2009		2008
	Non-retail industries
	Aerospace	1.2		1.2		0.9		0.5		-		-		-
	Beverages	2.8		3.3		5.1		5.6		3.0		-		-
	Consumer appliances	0.5		0.6		0.1		-		-		-		-
	Consumer goods	0.9		1.0		0.1		-		-		-		-
	Crafts and novelties	0.1		0.1		-		-		-		-		-
	Diversified industrial	0.5		0.2		0.1		-		-		-		-
	Electric utilities	0.1		*		-		-		-		-		-
	Equipment services	0.5		0.4		0.3		0.2		-		-		-
	Financial services	0.4		0.5		0.4		0.3		-		-		-
	Food processing	1.4		1.5		1.3		0.7		-		-		-
	General merchandise	0.4		-		-		-		-		-		-
	Government services	1.3		1.4		0.1		0.1		0.1		0.1		-
	Health care	0.7		0.8		*		*		-		-		-
	Home furnishings	0.2		0.2		-		-		-		-		-
	Home improvement	0.1		-		-		-		-		-		-
	Insurance	0.1		0.1		*		-		-		-		-
	Machinery	0.1		0.2		0.1		-		-		-		-
	Other manufacturing	0.7		0.6		-		-		-		-		-
	Packaging	0.8		0.9		0.7		0.4		-		-		-
	Paper	0.1		0.2		0.1		0.1		-		-		-
	Shoe stores	0.8		0.9		-		-		-		-		-
	Telecommunications	0.7		0.7		0.8		0.7		-		-		-
	Transportation services	5.1		5.3		2.2		1.6		-		-		-
	Other	0.3		0.1		1.0		1.2		1.5		1.6		1.8
	Non-retail industries	19.8	%	20.2	%	13.3	%	11.4	%	4.6	%	1.7	%	1.8	%
	Totals	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

*	Less than 0.1%

⁽¹⁾	Includes rental revenue for all properties owned by Realty Income at the end of each period presented, including revenue from properties reclassified as discontinued operations. Excludes revenue from properties owned by Crest Net Lease, Inc., or Crest.

Lease Expirations
The following table sets forth certain information regarding Realty Income's property portfolio regarding the timing of the lease term expirations (excluding rights to extend a lease at the option of the tenant) on our 4,169 net leased, single-tenant properties as of June 30, 2014 (dollars in thousands):

Total Portfolio⁽¹⁾												Initial Expirations⁽³⁾						Subsequent Expirations⁽⁴⁾
						Rental							Rental						Rental
						Revenue							Revenue						Revenue
						for the							for the						for the
		Number				Quarter				% of			Quarter			% of			Quarter			% of
		of Leases			Approx.	Ended				Total		Number	Ended			Total		Number	Ended			Total
		Expiring			Leasable	Jun 30,				Rental		of Leases	Jun 30,			Rental		of Leases	Jun 30,			Rental
Year			Retail	Non-Retail	Sq. Feet	2014			⁽²⁾	Revenue		Expiring	2014			Revenue		Expiring	2014			Revenue

2014			85	-	634,100		$	2,045		1.0	%	22		$	795	0.4	%	63		$	1,250	0.6	%
2015			172	-	866,600			3,693		1.7		67			1,520	0.7		105			2,173	1.0
2016			201	1	1,220,100			4,629		2.1		121			2,835	1.3		81			1,794	0.8
2017			187	2	2,116,500			6,031		2.8		49			3,050	1.4		140			2,981	1.4
2018			273	10	3,480,500			10,881		5.0		165			7,658	3.5		118			3,223	1.5
2019			214	11	3,599,800			11,619		5.3		167			10,001	4.6		58			1,618	0.7
2020			108	12	3,706,300			9,616		4.4		105			8,875	4.1		15			741	0.3
2021			184	13	5,487,900			14,332		6.6		187			13,780	6.3		10			552	0.3
2022			220	19	7,529,200			15,391		7.0		223			14,978	6.8		16			413	0.2
2023			344	22	6,561,600			20,875		9.5		353			20,203	9.2		13			672	0.3
2024			154	11	2,816,200			8,606		3.9		164			8,570	3.9		1			36	*
2025			296	10	4,201,900			18,124		8.3		299			17,873	8.2		7			251	0.1
2026			233	5	3,514,700			12,651		5.7		235			12,568	5.7		3			83	*
2027			462	2	4,901,800			16,080		7.4		462			16,040	7.4		2			40	*
2028			282	5	5,989,800			16,082		7.3		285			16,027	7.3		2			55	*
2029 - 2043			596	35	10,966,500			48,241		22.0		623			48,034	21.9		8			207	0.1
Totals			4,011	158	67,593,500		$	218,896		100.0	%	3,527		$	202,807	92.7	%	642		$	16,089	7.3	%

*	Less than 0.1%

⁽¹⁾	Excludes 20 multi-tenant properties and 74 vacant properties, one of which is a multi-tenant property. The lease expirations for properties under construction are based on the estimated date of completion of those properties.

⁽²⁾	Includes rental revenue of $18 from properties reclassified as discontinued operations and excludes revenue of $2,540 from 20 multi-tenant properties and from 74 vacant properties at June 30, 2014, $406 from sold properties included in continuing operations and $44 from properties owned by Crest.

⁽³⁾	Represents leases to the initial tenant of the property that are expiring for the first time.

⁽⁴⁾	Represents lease expirations on properties in the portfolio, which have previously been renewed, extended or re-tenanted.

Geographic Diversification
The following table sets forth certain state-by-state information regarding Realty Income's property portfolio as of June 30, 2014 (dollars in thousands):

					Approximate	Rental Revenue for			Percentage of
		Number of	Percent		Leasable	the Quarter Ended			Rental
State		Properties	Leased		Square Feet	June 30, 2014		⁽¹⁾	Revenue
Alabama		127	98	%	1,029,300	$	3,428		1.5	%
Alaska		2	100		128,500		307		0.1
Arizona		114	96		1,409,800		5,741		2.6
Arkansas		53	98		782,600		1,655		0.7
California		165	99		5,112,300		22,717		10.3
Colorado		72	99		1,045,400		2,951		1.3
Connecticut		25	96		536,900		2,281		1.0
Delaware		17	100		78,300		541		0.2
Florida		320	99		3,363,700		13,555		6.1
Georgia		233	98		3,029,200		9,428		4.3
Hawaii		--	--		--		--		--
Idaho		12	100		87,000		433		0.2
Illinois		160	99		4,406,500		12,681		5.7
Indiana		106	99		1,172,800		5,271		2.4
Iowa		35	94		2,751,700		3,326		1.5
Kansas		82	99		1,638,200		3,443		1.6
Kentucky		56	98		902,200		3,131		1.4
Louisiana		87	98		944,300		2,786		1.3
Maine		9	100		126,400		837		0.4
Maryland		33	100		772,000		4,203		1.9
Massachusetts		83	96		758,000		3,425		1.5
Michigan		106	98		1,009,400		3,285		1.5
Minnesota		155	100		1,153,200		7,350		3.3
Mississippi		121	98		1,551,500		3,800		1.7
Missouri		133	98		2,568,400		8,047		3.6
Montana		1	100		5,400		13		*
Nebraska		31	100		708,700		1,750		0.8
Nevada		22	95		413,000		1,289		0.6
New Hampshire		20	100		320,100		1,467		0.7
New Jersey		66	98		562,900		3,350		1.5
New Mexico		29	100		277,400		638		0.3
New York		87	95		2,203,500		10,587		4.8
North Carolina		149	99		1,508,100		5,689		2.6
North Dakota		7	100		66,000		118		0.1
Ohio		213	98		5,058,200		12,118		5.5
Oklahoma		124	99		1,583,700		3,814		1.7
Oregon		25	100		525,400		1,844		0.8
Pennsylvania		147	99		1,800,600		7,071		3.2
Rhode Island		4	100		157,200		929		0.4
South Carolina		134	99		1,011,100		4,389		2.0
South Dakota		11	100		133,500		244		0.1
Tennessee		194	96		3,005,500		5,946		2.7
Texas		434	98		7,801,800		21,387		9.7
Utah		13	100		749,000		1,337		0.6
Vermont		6	100		100,700		492		0.2
Virginia		140	97		2,628,600		6,979		3.2
Washington		38	100		415,300		1,575		0.7
West Virginia		12	100		261,200		883		0.4
Wisconsin		43	95		1,481,600		2,693		1.2
Wyoming		3	100		21,100		63		*
Puerto Rico		4	100		28,300		149		0.1
Totals\Average		4,263	98	%	69,185,500	$	221,436		100.0	%

*	Less than 0.1%

⁽¹⁾	Includes rental revenue for all properties owned by Realty Income at June 30, 2014, including revenue from properties reclassified as discontinued operations of $18. Excludes revenue of $44 from properties owned by Crest and $406 from sold properties that were included in continuing operations.