-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vnrk2/u0MJion+QRigJRl27jSsrSkHS5L4Ol19QppUcV6Rc0WiMeNibOOu4ib66O XR5uTmGhqn7SNd9s/b54iA== 0000726728-01-000004.txt : 20010329 0000726728-01-000004.hdr.sgml : 20010329 ACCESSION NUMBER: 0000726728-01-000004 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REALTY INCOME CORP CENTRAL INDEX KEY: 0000726728 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330580106 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13374 FILM NUMBER: 1581362 BUSINESS ADDRESS: STREET 1: 220 W CREST ST CITY: ESCONDIDO STATE: CA ZIP: 92025-1707 BUSINESS PHONE: 6197412111 MAIL ADDRESS: STREET 1: 220 WEST CREST ST CITY: ESCONDIDO STATE: CA ZIP: 92025-1707 10-K405 1 0001.txt 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, 2000 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 ] At March 1, 2001 the aggregate market value of the Registrant's shares of common stock, $1.00 par value, held by non-affiliates of the Registrant was $653,059,000, at the New York Stock Exchange closing price of $25.27. As of March 1, 2001, the number of common shares outstanding was 26,612,778, the number of Class B preferred shares outstanding was 2,745,700 and the number of Class C preferred shares outstanding was 1,380,000. 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 9, 2001, 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, contain 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: - Our anticipated growth strategies; - Our intention to acquire additional properties; - Anticipated trends in our business, including trends in the market for long-term net leases of freestanding, single-tenant retail properties; - Future expenditures for development projects; and - 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: - Our continued qualification as a real estate investment trust; - General business and economic conditions; - Competition; - Interest rates; Page 2 - Accessibility of debt and equity capital markets; and - Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and illiquidity of real estate investments. 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. Page 3 REALTY INCOME CORPORATION Index To Form 10-K ================== Page ---- PART I Item 1: Business......................................... 5 Item 2: Properties....................................... 29 Item 3: Legal Proceedings................................ 29 Item 4: Submission of Matters to a Vote of Security Holders......................... 29 PART II Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters........... 30 Item 6: Selected Financial Data.......................... 31 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 33 Item 7A: Quantitative and Qualitative Disclosures about Market Risk...................................... 45 Item 8: Financial Statements and Supplementary Data...... 47 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 73 PART III Item 10: Directors and Executive Officers of the Registrant................................ 73 Item 11: Executive Compensation........................... 73 Item 12: Security Ownership of Certain Beneficial Owners and Management................. 73 Item 13: Certain Relationships and Related Transactions..................................... 73 PART IV Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 74 SIGNATURES.................................................... 78 EXHIBIT INDEX................................................. 80 Schedule III: Real Estate and Accumulated Depreciation....... F-1
Page 4 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. As of December 31, 2000, we owned a diversified portfolio of 1,068 retail properties located in 46 states with over 9.0 million square feet of leasable space leased to 72 different retail chains doing business in 23 separate retail industries. Of the 1,068 properties in the portfolio, 1,063 are single-tenant retail properties with the remainder being multi-tenant properties. As of December 31, 2000, 1,038, or 97.6%, of the 1,063 single-tenant properties were leased with an average remaining lease term (excluding extension options) of approximately 7.8 years. 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: - Contractual rent increases on existing leases; - Rental increases at the termination of existing leases when market conditions permit; and - 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: - Freestanding, single-tenant, retail properties; - Properties leased to regional and national retail chains; and - Properties under long-term, net-lease agreements. 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: - Are for initial terms of 10 to 20 years; - Require the tenant to pay a minimum monthly rent and property operating expenses (taxes, insurance and maintenance); and Page 5 - 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 tenant's gross sales above a specified level. 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, who have each managed our properties and operations for between three and 15 years, owned 0.8% of the Company's outstanding common stock with a market value of $5.1 million as of March 1, 2001. The directors and five senior officers of the Company, as a group, owned 2.9% of the Company's outstanding common stock with a market value of $19.2 million as of March 1, 2001. 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 has 49 employees as of March 1, 2001. RECENT DEVELOPMENTS =================== Property Acquisitions During 2000, we acquired 13 additional properties (the "New Properties") located in nine states. During 2000, we invested $70.0 million in the New Properties and properties under development, excluding estimated unfunded development costs at December 31, 2000 of $874,000. The weighted average annual unleveraged return on the $70.0 million invested in 2000 is estimated to be 10.8%, 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 Page 6 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 not differ from the foregoing percentage. The New Properties will contain approximately 676,100 leasable square feet and are 100% leased under net leases, with an average initial lease term of 18.3 years. As of December 31, 2000, two of the New Properties were pre- leased and under construction, pursuant to contracts under which the tenants have agreed to develop the properties (with development costs funded by Realty Income) and both begin generating rent in March 2001. Formation of Crest Net Lease In January 2000, we acquired 95% of the common stock of Crest Net Lease, Inc., all of which is non-voting. Certain members of our management and Crest Net Lease management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created 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"). During 2000, we invested $8.6 million in Crest Net Lease common stock. In February 2000, we entered into a $25 million, revolving credit facility with Crest Net Lease. The financial statements of Crest Net Lease have been consolidated into Realty Income's financial statements. All material intercompany transactions have been eliminated in consolidation. During 2000, Crest Net Lease invested $28.6 million in nine retail properties. Estimated unfunded development costs on two properties under construction at December 31, 2000 totaled $1.2 million. These nine properties will contain approximately 398,100 leasable square feet and were 100% leased, with an average initial lease term of 19.0 years. During 2000, Crest Net Lease sold two properties for $6.2 million and we recognized a gain of $766,000, before income taxes. The seven properties held for sale by Crest Net Lease at December 31, 2000 are anticipated to be sold within six months. Sales of Investment Properties During 2000, we sold or exchanged 21 properties for a total of $45.2 million and recognized a gain of $6.7 million. Included in the 21 properties are two properties leased by one of our tenants that we exchanged for two other properties owned by that tenant for no gain. 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 term. As of December 31, Page 7 2000, we classified real estate with a carrying amount of $33.1 million as held for sale. Additionally, we anticipate selling properties from our portfolio, which 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. Stock and Senior Debt Repurchase 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. During 2000, we purchased 284,500 shares of our 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, for a total investment of $6.5 million. The purchases were funded from excess cash flow. Increases in Monthly Distributions to Common Stockholders In April, July and October 2000, and January 2001, the monthly distributions to common stockholders were increased $0.00125 to $0.18125, $0.1825, $0.18375 and $0.185 per common share, respectively. We are committed to our policy of paying monthly distributions to common stockholders. During 2000, we paid three distributions of $0.18 per common share, three distributions of $0.18125 per common share, three distributions of $0.1825 per common share, and three distributions of $0.18375 per common share. Common stock distributions for 2000 totaled $2.1825 per share. In December 2000, January 2001 and February 2001, we declared distributions of $0.185 per common share, which were paid on January 16, 2001, February 15, 2001 and March 15, 2001, respectively. The monthly distribution of $0.185 per common share represents a current annualized distribution of $2.22 per share, and an annualized distribution yield of approximately 8.8% based on the last reported sale price of our common stock on the NYSE of $25.27 on March 1, 2001. Although we expect to continue our policy of paying monthly distributions, there can be no assurance that the current level of distributions per share will be maintained by the Company, that we will continue our pattern of increasing distributions per share, or as to the actual distribution yield for any future period. Unsecured Revolving Credit Facilities We have a $200 million acquisition credit facility that expires in December 2002. In February 2000, we entered into a $25 million, three-year, revolving unsecured credit facility with the Bank of Montreal, which expires in February 2003. These credit facilities have been and are expected to be used for the acquisition of property and for making capital contributions to subsidiaries for the purpose of acquiring properties. Page 8 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 are those which 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 are those that 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 which we believe are attractive for investment because: - They generally have overcome many of the operational and managerial obstacles that tend to adversely affect venture retailers; - They typically require capital to fund expansion but have more limited financing options; - 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; - Their relatively large size allows them to spread corporate expenses across a greater number of stores; and - Middle market retailers typically have the critical mass to survive if a number of locations have to be closed due to underperformance. Page 9 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: - They typically are of a higher credit quality; - They are usually larger brand name, public and private retailers; - They utilize a larger building ranging in size from 10,000 to 50,000 square feet; and - 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. Many research analysts and experts in retail trends believe that bricks and mortar retail businesses will successfully co-exist with Internet retail businesses. Many brick and mortar retailers have set up Internet sale sites to compliment their businesses. We believe that the companies most vulnerable, and possibly subject to the greatest impact from the Internet, are retail chains that sell books, consumer electronics, music, office supplies, and, possibly, pharmaceuticals. Our exposure to these types of retail chains is minimal. We believe retail chains that provide services rather than goods, such as child care centers and auto service stores, as well as those that provide a service with their products, such as restaurants, convenience stores and home improvement stores, have tended to be less vulnerable to competition from the Internet than retailers that only sell goods. 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, as of January 1, 2001, over 77% 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. Page 10 Credit Strategy We principally provide sale-leaseback financing primarily to less than investment grade retail chains. From 1970 through December 31, 2000, we have acquired and leased back to regional and national retail chains 1,067 properties (including 51 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 that we provide to retailers. We believe that 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 that 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 the 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: - Industry, company, market conditions and credit profile; - Location profitability, if profitability data is available; and - Overall real estate characteristics, value, and comparative rental rates. Companies that have been approved for acquisitions are generally those with fifty or more retail stores which are located in highly visible areas, with easy access to major thoroughfares and attractive demographics. Page 11 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: - Freestanding, commercially zoned property with a single tenant; - Properties that are important retail locations for regional and national retail chains; - 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 - 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 towards 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 and two Executive Vice Presidents. 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: - The performance of various retail industries; - The operation, management, business planning, and financial condition of the tenants; and - 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. As of December 31, Page 12 2000, we classified real estate with a carrying amount of $33.1 million as held for sale. Additionally, we anticipate selling properties from our portfolio, which 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. Capital Markets Strategy We believe that we are best served by a conservative capital structure, with a majority of our capital consisting of equity. As of March 1, 2001, our total outstanding credit facility borrowings and outstanding notes were $387.3 million or approximately 33.3% of our total capitalization of $1.2 billion (defined as shares of our common stock outstanding multiplied by the last reported sales price of the common stock on the NYSE on March 1, 2001 of $25.27 per share plus the issuance value of the Class B Preferred Stock, the Class C Preferred Stock, the outstanding borrowings on the credit facilities and outstanding notes at March 1, 2001). We have a $200 million revolving, unsecured acquisition credit facility that expires in December 2002 and a $25 million revolving, unsecured credit facility that expires in February 2003. As of March 1, 2001, the outstanding balance on the $200 million credit facility was $142.9 million with an effective interest rate of approximately 7.4%. At March 1, 2001, the outstanding balance on the $25 million credit facility was $14.4 million with an effective interest rate of approximately 7.6%. 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 make capital contributions 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 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 acquired by us or our subsidiaries. Page 13 We received investment grade credit ratings from Fitch IBCA Duff & Phelps; Moody's Investor Service, Inc.; and Standard & Poor's Rating Group in December 1996. 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 unsecured debt. These ratings could change based upon, among other things, our results of operations and financial condition. We have also 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. Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and investment grade long-term unsecured debt. We believe the majority of our future securities issuances should be in the form of common stock. We will issue common stock when we believe that the share price of our common stock is at a level that allows for the proceeds of any offering to be invested on an accretive basis into additional properties or to pay down any short-term borrowings on our credit facilities. In addition, we seek to maintain a conservative debt level on our balance sheet, which should result in conservative interest and fixed charge coverage ratios. We do not anticipate issuing significant amounts of additional debt until additional equity can also be issued to offset the increase in debt. If the share price levels do not increase and we do not issue additional equity or debt, we will reduce our level of property acquisitions. Under these circumstances, we intend to achieve our growth objectives by investing excess cash flow in additional retail properties or purchases of our outstanding securities. In addition, we intend to strategically sell properties when we believe the investment of the sale proceeds will generate higher returns or enhance the credit quality of our property portfolio. Competitive Strategy We believe that, to utilize our investment philosophy and strategy most successfully, we must seek to maintain the following competitive advantages: - - Size and Type of Investment Properties: We believe that 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 that 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 Page 14 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 which 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. - - 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 that diversification will allow us to invest in retail industries that are currently 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. As of December 31, 2000, the properties in our portfolio were leased to retail tenants operating in 23 industries. - - 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. As of December 31, 2000, the properties in our portfolio were leased to 72 retail chains. These retail chains operate 957 of our properties located in 46 states. - - 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. - - 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. Page 15 PROPERTIES ========== As of December 31, 2000, we owned a diversified portfolio of 1,068 properties located in 46 states with over 9.0 million square feet of leasable space. In addition to our real estate portfolio, our subsidiary Crest Net Lease owned seven properties. Our property portfolio is leased to 72 retail chains doing business in 23 retail industries. At December 31, 2000, 1,038 or 97.2% of the 1,068 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 tenant's gross sales above a specified level. Our net-leased retail properties are primarily leased to regional and national retail chain store operators. The average leasable retail space of the 1,068 properties is approximately 8,400 square feet on approximately 60,200 square feet of land. 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. Page 16 The following table sets forth-certain information regarding our properties classified according to the business of the respective tenants: Percentage of Historical Rental Revenue for the Years Ended (1) ---------------------------------------------------- Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Industry 2000 1999 1998 1997 1996 1995 - -------------------- ------- ------- ------- ------- ------- ------- Apparel Stores 2.4% 3.8% 4.1% 0.7% --% --% Automotive Parts 8.3 8.6 7.8 9.1 10.5 11.4 Automotive Service 5.8 6.6 7.5 6.4 4.8 3.7 Book Stores 0.5 0.5 0.6 0.5 -- -- Business Services 0.1 0.1 * -- -- -- Child Care 24.7 25.3 29.2 35.9 42.0 45.6 Consumer Electronics 4.9 4.4 5.4 6.5 0.9 -- Convenience Stores 8.4 7.2 6.1 5.5 4.6 2.4 Craft and Novelty 0.4 0.4 * -- -- -- Drug Stores 0.2 0.2 0.1 -- -- -- Entertainment 2.0 1.2 -- -- -- -- General Merchandise 0.6 0.6 * -- -- -- Grocery Stores 0.6 0.5 * -- -- -- Health and Fitness 2.4 0.6 0.1 -- -- -- Home Furnishings 5.8 6.5 7.8 5.6 4.4 2.9 Home Improvement 2.0 3.6 * -- -- -- Office Supplies 2.3 2.6 3.0 1.7 -- -- Pet Supplies and Services 1.5 1.1 0.6 0.2 -- -- Private Education 1.4 1.2 0.9 -- -- -- Restaurants 12.3 13.3 16.2 19.8 24.4 24.7 Shoe Stores 0.8 1.1 0.8 0.2 -- -- Theaters 2.7 0.6 -- -- -- -- Video Rental 3.9 4.3 3.8 0.6 -- -- Other 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% ==================== ======= ======= ======= ======= ======= =======
* Less than 0.1% [FN] (1) Does not include properties owned by Crest Net Lease which are held for sale. Crest Net Lease is a subsidiary of Realty Income. Of the 1,068 properties in the portfolio at January 1, 2001, 1,063 were single-tenant properties with the remaining properties being multi-tenant properties. As of January 1, 2001, 1,038 of the 1,063 single-tenant properties, or 97.6%, were leased with an average remaining lease term (excluding extension options) of approximately 7.8 years. Page 17 The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,038 net leased, single-tenant retail properties as of January 1, 2001 (dollars in thousands). Number of Percent of Leases Annualized Annualized Year Expiring (1) Rent (1)(2) Rent - ------ ------------ -------------- ---------- 2001 77 5,780 5.1% 2002 81 6,672 5.9 2003 73 6,196 5.5 2004 117 10,005 8.9 2005 84 6,457 5.7 2006 28 2,573 2.3 2007 94 6,425 5.7 2008 66 5,766 5.1 2009 31 3,460 3.1 2010 44 3,811 3.4 2011 39 5,837 5.2 2012 49 5,714 5.1 2013 75 12,746 11.3 2014 40 6,597 5.9 2015 37 4,294 3.8 2016 13 1,260 1.1 2017 11 4,130 3.7 2018 16 1,616 1.4 2019 50 8,667 7.7 2020 9 2,920 2.6 2033 2 1,118 1.0 2034 2 570 0.5 ------- ---------- ------- Totals 1,038 $112,614 100.0% ======= ========== =======
[FN] (1) This table does not include five multi-tenant properties and 25 vacant, unleased single-tenant properties owned by the Company and seven properties owned by Crest Net Lease. The lease expirations for properties under construction are based on the estimated date of completion of such properties. (2) Annualized Rent is calculated by multiplying the monthly contractual base rent as of January 1, 2001 for each of the properties by 12 and adding the previous 12 month's historic percentage rent, which totaled $2.0 million (i.e., additional rent calculated as a percentage of the tenant's 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. Page 18 The following table sets forth certain state-by-state information regarding Realty Income's portfolio at January 1, 2001 (dollars in thousands). Approximate Percent of Number of Percent Leasable Annualized Annualized State Properties(1) Leased Square Feet Rent(1)(2) Rent - ---------- ------------- ------- ----------- ---------- ---------- Alabama 9 100% 120,100 $ 883 0.8% Alaska 1 100 70,600 285 0.2 Arizona 29 97 182,500 2,753 2.3 Arkansas 5 100 36,700 614 0.5 California 56 98 962,500 13,370 11.3 Colorado 44 100 267,600 3,978 3.4 Connecticut 10 100 223,800 2,983 2.5 Delaware 1 100 5,400 72 0.1 Florida 87 91 966,600 11,854 10.0 Georgia 60 95 428,400 5,675 4.8 Idaho 11 100 52,000 780 0.7 Illinois 35 100 259,100 3,755 3.2 Indiana 29 97 170,400 2,194 1.9 Iowa 10 100 67,900 703 0.6 Kansas 22 100 235,600 2,609 2.2 Kentucky 13 100 43,500 1,105 0.9 Louisiana 5 100 39,600 508 0.4 Maryland 8 100 48,300 747 0.6 Massachusetts 8 100 53,900 1,102 0.9 Michigan 10 100 68,100 986 0.8 Minnesota 25 96 261,500 2,551 2.2 Mississippi 16 100 152,100 1,287 1.1 Missouri 33 100 204,700 2,585 2.2 Montana 2 100 30,000 286 0.2 Nebraska 10 90 98,400 1,091 0.9 Nevada 6 86 81,300 1,253 1.1 New Hampshire 1 100 6,400 133 0.1 New Jersey 4 100 45,400 668 0.6 New Mexico 5 80 46,000 180 0.2 New York 20 100 253,300 4,850 4.1 North Carolina 32 94 171,400 2,829 2.4 North Dakota 1 100 22,000 65 0.1 Ohio 67 100 382,200 5,571 4.7 Oklahoma 17 100 102,200 1,311 1.1 Oregon 19 100 210,800 2,081 1.8 Pennsylvania 23 100 168,300 2,310 2.0 South Carolina 48 100 147,000 3,987 3.4 South Dakota 2 100 12,600 172 0.2 Tennessee 25 96 221,300 2,678 2.3 Texas 154 97 1,284,000 13,961 11.8 (table continued next page) Page 19 (table continued) Number of Percent Leasable Annualized Annualized State Properties(1) Leased Square Feet Rent(1)(2) Rent - ---------- ------------- ------- ----------- ---------- ---------- Utah 8 88 51,700 634 0.5 Virginia 30 97 268,900 4,601 3.9 Washington 43 100 284,500 3,492 3.0 West Virginia 2 100 16,800 158 0.1 Wisconsin 18 100 167,700 2,057 1.7 Wyoming 4 100 20,100 265 0.2 ------ ------ --------- ---------- ------- Totals/Average 1,068 98% 9,013,200 $118,012 100.0% ====== ====== ========= ========== =======
[FN] (1) Does not include seven properties owned by Crest Net Lease which are held for sale. Crest Net Lease is a subsidiary of Realty Income Corporation. (2) Annualized rent is calculated by multiplying the monthly contractual base rent as of January 1, 2001 for each of the properties by 12 and adding the previous 12 month's historic percentage rent, which totaled $2.0 million (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent based upon the estimated total costs of each property is used. Page 20 The following table sets forth certain information regarding the properties owned by Realty Income as of January 1, 2001, classified according to the business of the respective tenants (dollars in thousands). Percent of Number of Annualized Annualized Industry Properties (1) Rent (1)(2) Rent - -------- ------------- ------------ ---------- Tenants providing services - -------------------------- Automotive Service 100 $ 6,814 5.8% Child Care 333 28,868 24.5 Entertainment 6 1,808 1.5 Health and Fitness 7 3,940 3.4 Private Education 6 1,703 1.4 Theaters 10 5,209 4.4 Other 9 6,868 5.8 ---------- ---------- ---------- 471 55,210 46.8 ---------- ---------- ---------- Tenants selling goods and services - ---------------------------------- Automotive Parts 63 5,505 4.7 Business Services 1 124 0.1 Convenience Stores 103 9,885 8.4 Home Improvement 15 187 0.2 Pet Supplies and Services 6 1,231 1.0 Restaurants 172 14,170 12.0 Video Rental 35 4,510 3.8 ---------- ---------- ---------- 395 35,612 30.2 ---------- ---------- ---------- Tenants selling goods - --------------------- Apparel Stores 4 2,799 2.4 Automotive Parts 78 4,483 3.8 Book Stores 2 572 0.5 Consumer Electronics 37 4,982 4.2 Craft and Novelty 2 425 0.4 Drug Stores 1 235 0.2 General Merchandise 11 687 0.6 Grocery Stores 2 726 0.6 Home Furnishings 38 7,070 6.0 Home Improvement 13 1,377 1.1 Office Supplies 8 2,476 2.1 Pet Supplies 2 468 0.4 Shoe Stores 4 890 0.7 ---------- ---------- ---------- 202 27,190 23.0 ---------- ---------- ---------- TOTALS 1,068 $ 118,012 100.0% ========== ========== ==========
Page 21 [FN] (1) Does not include seven properties owned by Crest Net Lease which are held for sale. Crest Net Lease is a subsidiary of Realty Income Corporation. (2) Annualized rent is calculated by multiplying the monthly contractual base rent as of January 1, 2001 for each of the properties by 12 and adding the previous 12 month's historic percentage rent, which totaled $2.0 million (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent based upon the estimated total costs of each property is used. Description of Leasing Structure At December 31, 2000, 1,038 or 97.2% of the Company's 1,068 properties were leased pursuant to net leases. In most cases, the leases: 1. Were for initial terms of from 10 to 20 years with the tenant having an option to extend the initial term; 2. Require the tenant to pay property taxes, insurance, and expenses of maintaining the property; 3. 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 tenant's 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 tenant's 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-five of our properties were available for lease as of January 1, 2001, all of which are single-tenant properties. Two of the properties had been previously leased to an automotive service facility operator, four to a child care operator, one to an entertainment facility operator, one to a home furnishings store operator, 13 to home improvement operators, three to restaurant operators and one to a shoe store operator. As of January 1, 2001, 17 of our properties under lease were available for sublease by the tenants, all of which were current with their rent and other obligations. Page 22 Our two largest tenants are Children's World Learning Centers and La Petite Academy, which accounted for approximately 12.7% and 10.6%, respectively, of our rental revenue for the year ended December 31, 2000. No other tenant comprised 10% or more of our rental revenue. In general, a downturn in the industry represented by these tenants, 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 which 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 24.7% and 12.0%, respectively, of our rental revenue for the year ended December 31, 2000. A downturn in any 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. During the first half of 2000 we successfully resolved a situation involving the vacancy of 11 of our 34 properties leased to Econo Lube 'N Tune. This situation had nominal impact on our operating results during 2000. We believe we will complete the re-leasing of the remaining two properties during the first half of 2001 and will ultimately obtain 90% or more of the lease revenue previously derived from Econo Lube 'N Tune. During the last six months, we made progress in the re-lease of the 21 properties formerly occupied by Flooring America that became vacant during the third quarter of 2000. As of March 1, 2001, transactions were underway or completed on 11 of the 21 properties, which leaves us with just 10 properties to be re-leased or sold. The Flooring America stores are generally in excellent retail locations that lend themselves to a wide variety of retail uses. In addition, the rents previously received on these properties were mainly at prevailing market rents. We believe we will complete the re-leasing of the remaining 10 properties during the first half of 2001 and will ultimately obtain 90% or more of the lease revenue previously derived from Flooring America. Development of Certain Properties Of the 13 properties we acquired in 2000 and nine properties acquired by Crest Net Lease in 2000, all but one were occupied as of March 1, 2001. The remaining property was pre-leased and under construction pursuant to a contract under which the tenant has agreed to develop the properties (with development costs funded by Crest Net Lease) with rent commencing when the premises open for business. In the case of development properties, we Page 23 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 that 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 open for business. During 2000, we acquired two development properties, and Crest Net Lease acquired two development properties, three of which have been completed, were operating and generating rent as of March 1, 2001. Both Realty Income and Crest Net Lease will continue to seek to acquire land for development under similar arrangements. DISTRIBUTION POLICY =================== Distributions are paid to our common stockholders and Class C Preferred stockholders on a monthly basis and 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 $2.3436 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 $2.3748 per annum per share). The March 2001 distribution of $0.185 per common share represents a current annualized distribution of $2.22 per share, and an annualized distribution yield of approximately 8.8% based on the last reported sale price of $25.27 of our common stock, on the NYSE on March 1, 2001. In order to maintain our tax status as a REIT for federal income tax purposes, we are generally required to distribute dividends to our stockholders aggregating annually at least 95% (90% beginning in 2001) of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding net capital gains). In 2000, our distributions totaled approximately 119.0% of our REIT taxable income. We intend to continue to make distributions to our stockholders that are sufficient to meet this requirement. 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 Page 24 a deterioration in the results of operations or financial condition of the Company, 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. 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. 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 19.0% of the distributions made or deemed to have been made in 2000 were classified as a return of capital for federal income tax purposes. We are unable to predict the portion of 2001 or future distributions that may be classified as a return of capital since the amount depends on our taxable income for the entire year. OTHER ITEMS =========== Competition for Acquisition of Real Estate We face competition in the acquisition, operation and sale of property. We expect competition from: - Businesses; - Individuals; - Fiduciary accounts and plans; and - 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 that we wish to purchase. The tenants leasing our properties generally face significant competition from other operators. This competition may adversely impact: - That portion, if any, of the rental stream to be paid to us based on a tenant's revenues; and - 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: - Our knowledge of the contamination; - The timing of the contamination; Page 25 - The cause of the contamination; or - The party responsible for the contamination of the property. We are not aware of any material environmental problems at this time; however, 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. We believe that our properties comply in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. 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, the Company has maintained an environmental insurance policy on the property portfolio. The limit of the 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 occurrance. Taxation of the Company We believe that we have operated, and we intend to continue to operate, so as to qualify as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1994. Although we believe that we are in compliance with all REIT qualification rules and we are organized and operate as a REIT, we can not completely assure you that we will continue to be so organized or that we will be able to operate in a manner so as to qualify or remain so qualified. Page 26 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. We cannot assure you that legislation, new regulations, administrative interpretations or court decisions will leave unchanged the tax laws with respect to qualification as a REIT or the federal income tax consequences of that qualification. If we were to fail to qualify as a REIT in any taxable year: - We would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates; - We would not be allowed a deduction in computing our taxable income for amounts distributed to our stockholders; - We would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. 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; and - We would no longer be required to make distributions to stockholders. 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 Lease is subject to federal and states taxes at the applicable tax rates on its income and property. 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 95% (90% beginning in 2001) of our taxable income each year. This taxable income is determined without regard to the dividends paid deduction and by excluding net capital gains. We are also subject to tax at regular corporate rates to the extent that we distribute less than 100% of our 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 paid by us 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. Page 27 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 will be insufficient to cover all corporate operating expenses and debt service payments on indebtedness we incur. Additional real estate ownership risks include: - Adverse changes in general or local economic conditions; - Changes in supply of or demand for similar or competing properties; - Changes in interest rates and operating expenses; - Competition for tenants; - Changes in market rental rates; - Inability to lease properties upon termination of existing leases; - Renewal of leases at lower rental rates; - Inability to collect rents from tenants due to financial hardship, including bankruptcy, and sales declines due to the impact from Internet commerce; - Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate; - Uninsured property liability; - Property damage or casualty losses; - Unexpected expenditures for capital improvements or to bring properties into compliance with applicable federal, state and local laws; and - Acts of God and other factors beyond the control of our management. Page 28 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. ITEM 2: PROPERTIES - ------------------- Information pertaining to our properties can be found under Item 1. ITEM 3: LEGAL PROCEEDINGS - -------------------------- The Company is subject to certain claims and lawsuits, the outcome of which are not determinable at this time. In the opinion of management, any liability that might be incurred by the Company upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on the Company's 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. Page 29 PART II ======= ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ---------------------------------------------------------- A. The common stock of the Company 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. Price Per Share of Common Stock ------------------- Distributions 2000 High Low Declared (1) - ----------------------------------------------------------------- First quarter $22.0000 $19.2500 $0.54125 Second quarter 24.6250 19.3750 0.54500 Third quarter 24.5000 22.1250 0.54875 Fourth quarter 25.5000 22.5000 0.55250 -------- $2.18750 ========
[FN] (1) Common stock distributions currently are declared monthly by us based on financial results for the prior months. At December 31, 2000 a distribution of $0.185 per common share had been declared and was paid on January 16, 2001. Price Per Share of Common Stock ------------------- Distributions 1999 High Low Declared - ----------------------------------------------------------------- First quarter $24.8750 $20.3750 $0.5125 Second quarter 25.0000 20.8125 0.5200 Third quarter 24.3125 22.3125 0.5275 Fourth quarter 23.6250 20.0000 0.5350 ------- $2.0950 =======
B. There were approximately 12,800 holders of record of Realty Income's shares of common stock as of March 1, 2001. Page 30 ITEM 6: SELECTED FINANCIAL DATA - -------------------------------- (not covered by Independent Auditors' Report) As of or for the years ended December 31, (dollars in thousands, except per share data) -------------------------------------------------- 2000 1999 1998 1997 1996 ========== ========== ========== ========== ========== Total assets (book value) $ 934,766 $ 905,404 $ 759,234 $ 577,021 $ 454,097 Cash and cash equivalents 3,815 773 2,533 2,123 1,559 Lines of credit and notes payable 404,000 349,200 294,800 132,600 70,000 Total liabilities 419,197 370,573 309,025 143,706 79,856 Stockholders' equity 515,569 534,831 450,209 433,315 374,241 Net cash provided by operating activities 56,590 72,154 64,645 52,692 48,073 Net change in cash and cash equivalents 3,042 (1,760) 410 564 (91) Total revenue 118,310 104,510 85,132 67,897 56,957 Income from operations 48,076 45,295 41,004 33,688 30,768 Gain on sales of properties 6,712 1,301 526 1,082 1,455 Extraordinary item -- (355) -- -- -- Cumulative effect of change in accounting principle -- -- (226) -- -- Net income 54,788 46,241 41,304 34,770 32,223 Preferred stock dividends (9,712) (5,229) -- -- -- Net income available to common stockholders 45,076 41,012 41,304 34,770 32,223 Distributions paid to common stockholders 58,262 55,925 52,301 44,367 48,079 (table continued on next page) Page 31 (table continued) As of or for the years ended December 31, (dollars in thousands, except per share data) -------------------------------------------------- 2000 1999 1998 1997 1996 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges (1) 2.6x 2.7x 3.8x 5.1x 13.7x Ratio of earnings to combined fixed charges and preferred stock dividends (1) 2.0x 2.3x 3.8x 5.1x 13.7x Basic and diluted net income per common share 1.69 1.53 1.55 1.48 1.40 Distributions paid per common share (2) 2.1825 2.085 1.965 1.893 2.093 Distributions declared per common share 2.1875 2.095 1.975 1.895 1.710 Basic weighted average number of common shares outstanding 26,684,598 26,822,285 26,629,936 23,568,831 22,976,789 Diluted weighted average number of common shares outstanding 26,700,806 26,826,090 26,638,284 23,572,715 22,977,837
[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. (2) 1996 distributions paid per common share includes a special distribution of $0.23 per share. Page 32 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. As of December 31, 2000, we owned a diversified portfolio of 1,068 retail properties located in 46 states with over 9.0 million square feet of leasable space. 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. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash Reserves Realty Income is organized for the purpose of operating as an equity REIT which 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, 2000, we had cash and cash equivalents totaling $3.8 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, three-year revolving, unsecured acquisition credit facility that expires in December 2002 and a $25 million, three-year 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. As of March 1, 2001, borrowing capacity of $67.7 million was available on our credit facilities. At that time, the outstanding balance on the credit facilities was $157.3 million with an effective interest rate of 7.4%. Page 33 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. In June 1999, we filed a universal shelf registration statement with the Securities and Exchange Commission covering up to $400 million in value of common stock, preferred stock and debt securities. Through March 1, 2001, we have issued $34.5 million of common stock, preferred stock and debt securities under the universal shelf registration statement. We believe that our shareholders are best served by a conservative capital structure. As of March 1, 2001, our total outstanding credit facility borrowings and outstanding notes were $387.3 million or approximately 33.3% of our total capitalization of $1.2 billion (defined as shares of our common stock outstanding multiplied by the last reported sales price of the common stock on the NYSE on March 1, 2001 of $25.27 per share plus the liquidation value of the Class B Preferred Stock, the Class C Preferred Stock, the outstanding borrowings on the credit facilities and outstanding notes at March 1, 2001). Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and investment grade long-term unsecured debt. We believe that the Company should have the majority of its future issuances of securities be in the form of common stock. We will issue common stock when we believe that the share price of our common stock is at a level that allows for the proceeds of any offering to be invested on an accretive basis into additional properties or to pay down any short-term borrowings on our credit facilities. In addition, we seek to maintain a conservative debt level on our balance sheet, which should result in solid interest and fixed charge coverage ratios. We do not anticipate issuing significant amounts of additional debt until additional equity can also be issued to offset the increase in debt. If the share price levels do not increase and we do not issue additional equity or debt, we will reduce our level of property acquisitions. Under these circumstances, we intend to achieve our growth objectives by investing excess cash flow in additional retail properties and repurchases of our outstanding securities. In addition, we intend to strategically sell properties when we believe the investment of the sale proceeds will generate higher returns or enhance the credit quality of our property portfolio. We received investment grade corporate credit ratings on our senior unsecured debt from Fitch IBCA Duff & Phelps; Moody's Investor Service, Inc.; and Standard & Poor's Rating Group in December 1996. 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 debt. These ratings could change based upon, among other things, our results of operations and financial condition. We have also 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 & Page 34 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. Stock and Senior Debt Repurchase 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. During 2000, we purchased 284,500 shares of our common stock at an average price of $21.87 and 14,300 shares of our Class B preferred stock at an average price of $19.27, for a total investment of $6.5 million. The purchases were funded from excess cash flow. Property Acquisitions During 2000, we acquired 13 additional properties (the "New Properties") located in nine states. During 2000, we invested $70.0 million in the New Properties, which includes investments of $16.8 million for properties under development during 2000. Estimated unfunded development costs on properties under construction at December 31, 2000 totaled $874,000. During 2000, we capitalized $308,000 for re-leasing costs and $90,000 for building improvements on existing properties in our portfolio. The weighted average annual unleveraged return on the $70.1 million invested in 2000 is estimated to be 10.8%, 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 not differ from the foregoing percentage. The New Properties will contain approximately 676,100 leasable square feet and are 100% leased under net leases, with an average initial lease term of 18.3 years. As of December 31, 2000, two of the New Properties are pre- leased and under construction, pursuant to contracts under which the tenants have agreed to develop the properties (with development costs funded by Realty Income) and both began paying rent in March 2001. During 1999, we acquired 110 additional properties (the "1999 Properties") and invested $181.4 million in the 1999 Properties and properties under development. During 1999, we also paid $242,000 for lease commissions and $148,000 for building improvements on existing properties in our portfolio. The weighted average annual unleveraged return on the $181.4 million invested in 1999 is estimated to be 10.5%, computed in the same manner as 2000's estimated weighted average annual unleveraged return. These 110 properties contain approximately 948,000 leasable square feet and are 100% leased under net leases, with an average initial lease term of 17.4 years. Page 35 Formation of Crest Net Lease In January 2000, we acquired 95% of the common stock of Crest Net Lease, Inc., all of which is non-voting. Certain members of our management and Crest Net Lease management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created 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. During 2000, we invested $8.6 million in Crest Net Lease common stock. In February 2000, we entered into a $25 million, revolving credit facility with Crest Net Lease. The financial statements of Crest Net Lease have been consolidated into Realty Income's financial statements. All material intercompany transactions have been eliminated in consolidation. During 2000, Crest Net Lease invested $28.6 million in nine retail properties. Estimated unfunded development costs on two properties under construction at December 31, 2000 totaled $1.2 million. These nine properties will contain approximately 398,100 leasable square feet and were 100% leased, with an average initial lease term of 19.0 years. During 2000, Crest Net Lease sold two properties for $6.2 million and we recognized a gain of $766,000, before income taxes. The seven properties held for sale by Crest Net Lease at December 31, 2000 are anticipated to be sold within six months. The following is a summary of Crest Net Lease's balance sheet as of December 31, 2000 (dollars in thousands): Real estate held for sale $ 23,619 Other assets 284 -------- Total assets $ 23,903 ======== Liabilities $ 14,390 Stockholders' equity 9,513 -------- Total liabilities and stockholders' equity $ 23,903 ========
Page 36 The following is a summary of Crest Net Lease's statement of net income for the year ended December 31, 2000 (dollars in thousands): Year ended 12/31/00 ------- Rent & other revenue $ 1,874 Expenses 1,029 Income taxes 332 ------- Net income $ 513 =======
Distributions We pay monthly distributions to our common stockholders. We paid cash distributions to our common stockholders of $58.3 million in 2000, $55.9 million in 1999 and $52.3 million in 1998. 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 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 2000 and $1.4 million in 1999. Our Class C preferred stock was issued in July 1999. FUNDS FROM OPERATIONS ("FFO") - ----------------------------- FFO for 2000 increased by $1.3 million or 2.0% to $67.2 million versus $65.9 million during 1999. FFO during 1998 was $62.8 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 2000, 1999 and 1998 (dollars in thousands): Page 37 2000 1999 1998 -------- -------- -------- Net income available to common stockholders $ 45,076 $ 41,012 $ 41,304 Plus: Depreciation and amortization 29,003 25,952 21,935 Extraordinary item -- 355 -- Cumulative effect of change in accounting principle -- -- 226 Less: Depreciation of furniture, fixtures and equipment and amortization of organization costs (128) (101) (140) Gain on sales of investment properties (6,712) (1,301) (526) -------- -------- -------- Funds from operations $ 67,239 $ 65,917 $ 62,799 ======== ======== ======== Distributions paid to common stockholders $ 58,262 $ 55,925 $ 52,301 FFO in excess of distributions to common stockholders $ 8,977 $ 9,992 $ 10,498 Diluted weighted average number of shares outstanding 26,700,806 26,826,090 26,638,284
We consider FFO to be an appropriate measure of the performance of an equity REIT. Financial analysts use FFO in evaluating REITs and FFO can be one measure of a REIT's ability to make cash distribution payments. Presentation of this information provides the reader with an additional measure to compare the performance of different REITs, although it should be noted that not all REITs calculate FFO the same way so comparisons with other REITs may not be meaningful. We define FFO 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 (ii) extraordinary and "unusual" items. FFO is 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 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. Page 38 RESULTS OF OPERATIONS - --------------------- The Following is a Comparison of Our Results of Operations for the Year Ended December 31, 2000 to the Year Ended December 31, 1999. Revenue 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 during 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 Lease, which are held for sale. Of the 1,068 properties in the portfolio as of December 31, 2000, 1,063 are single-tenant properties with the remaining properties being multi-tenant properties. Of the 1,063 single-tenant properties, 1,038, or 97.6%, were net leased with an average remaining lease term (excluding extension options) of approximately 7.8 years. Of our 1,038 leased single-tenant properties, 1,027 or 98.9% were under leases that provide for increases in rents through: - Base rent increases tied to a consumer price index with adjustment ceilings; - Overage rent based on a percentage of the tenants' gross sales; or - Fixed increases. Some leases contain more than one of these clauses. Percentage rent, which is included in rental revenue, was $2.0 million during 2000 and $1.7 million during 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. Many of our leases call for rent increases every five years. Over the past four years we have acquired approximately $587 million in new properties that now represent approximately 54% of our portfolio, excluding Crest Net Lease properties. Many of these properties are due to generate their initial rent increases from 2002 to 2004. As such, we believe our same store rent growth is likely to accelerate with the onset of rent increases from the newer properties over the next few years. Our portfolio of quality retail real estate owned under 10-20 year net leases continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. At December 31, 2000, our property portfolio of 1,068 properties was 97.7% leased with only 25 properties available for lease. Of the 25 properties not leased at December 31, 2000, transactions to lease or sell 10 properties were underway or completed. We anticipate these transactions to be completed during the first half of 2001; although we Page 39 cannot assure you that all of these properties can be sold or leased within this period. During the first half of 2000 we successfully resolved a situation involving the vacancy of 11 of our 34 properties leased to Econo Lube 'N Tune. This situation had nominal impact on our operating results during 2000. We believe we will complete the re-leasing of the remaining two properties during the first half of 2001 and will ultimately obtain 90% or more of the lease revenue previously derived from Econo Lube 'N Tune. During the last six months, we made progress in the re-lease of 21 properties formerly occupied by Flooring America that became vacant during the third quarter. As of March 1, 2001, transactions were underway or completed on 11 of the 21 properties, which leaves us with just 10 properties to be re-leased or sold. The Flooring America stores are generally in excellent retail locations that lend themselves to a wide variety of retail uses. In addition, the rents previously received on these properties were mainly at prevailing market rents. We believe we will complete the re-tenanting of the remaining 10 properties during the first half of 2001 and will ultimately obtain 90% or more of the lease revenue previously derived from Flooring America. During 2000, Crest Net Lease sold two properties for $6.2 million and we recognized a gain on the sales of $766,000, before income taxes. As of December 31, 2000, Crest Net Lease has $23.6 million invested in seven properties held for sale. It is Crest Net Lease's intent to carry an average inventory of between $20.0 to $25.0 million in real estate on an ongoing basis. Crest generates an earnings spread on the differential 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 more than cover the ongoing operating expenses of Crest Net Lease. Expenses The following is a summary of the five components of interest expense for 2000 and 1999 (dollars in thousands): 2000 1999 Net Change ------- ------- ---------- 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 ======== ======== ======== Page 40 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%
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. During January 2001, the Federal Reserve decreased the federal funds rate twice by a total of 100 basis points. Correspondingly, LIBOR has declined which is anticipated to have a positive impact on our 2001 average borrowing rate and FFO. Our debt service coverage ratio for the year ended December 31, 2000 and 1999 was 3.5 times and 3.9 times, respectively. Debt service coverage ratio is calculated as follows: earnings (income from operations) before interest, taxes and depreciation and amortization (EBITDA) divided by interest expense. Our EBITDA for the year ended December 31, 2000 and 1999 was $109.4 million and $96.2 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. Depreciation and amortization was $29.0 million in 2000 versus $26.0 million in 1999. The increase in 2000 was primarily due to depreciation of 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 Lease. 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, 2000, 25 properties were available for lease, as compared to 17 at December 31, 1999. Page 41 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. Other expenses were $813,000 in 2000 and $430,000 in 1999. Other expenses are Crest Net Lease income taxes and Realty Income state and local income taxes. The increase in 2000 is primarily attributable to Crest Net Lease state and federal income taxes of $332,000. 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. We did not take a provision for impairment in 2000, 1999 or 1998. During 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 during 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. During 1999, we sold three properties for $9.4 million and recognized a gain of $1.3 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. As of December 31, 2000, we classified real estate with a carrying amount of $33.1 million as held for sale. Additionally, we anticipate selling properties from our portfolio, which 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. In December 1999, our $170 million credit facility was canceled simultaneously with the execution of our $200 million credit facility. Unamortized fees of $355,000 relating to the $170 million credit facility were charged in 1999 as extraordinary loss on early extinguishment of the credit facility. 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, our net income available to common stockholders increased 10.0%, to $45.1 million versus $41.0 million in 1999. The calculation to determine net income available to common stockholders includes gains and losses from the sale of investment properties. The Page 42 amount of gain 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 gain recognized from property sales during 2000 was $5.4 million greater than the gain recognized from property sales during 1999. The Following is a Comparison of Our Results of Operations for the Year Ended December 31, 1999 to the Year Ended December 31, 1998. Revenue Rental revenue was $104.3 million for 1999 versus $84.9 million for 1998, an increase of $19.4 million, or 22.9%. The increase in rental revenue was primarily due to the acquisition of 110 properties during 1999 and 149 properties during 1998. These properties generated revenue of $26.87 million in 1999 compared to $7.53 million in 1998, an increase of $19.34 million. Of the 1,076 properties in the portfolio as of December 31, 1999, 1,069 were single-tenant properties with the remaining properties being multi- tenant properties. Of the 1,069 single-tenant properties, 1,052, or 98.4%, were net leased with an average remaining lease term (excluding extension options) of approximately 8.7 years. Percentage rent, which is included in rental revenue, was $1.7 million during both 1999 and 1998. Same store rents generated on 789 leased properties owned during all of both 1999 and 1998 increased by $618,000 or 0.8%, to $74.34 million from $73.72 million. Expenses The following is a summary of the five components of interest expense for 1999 and 1998 (dollars in thousands): 1999 1998 Net Change ------- ------- ---------- Interest on outstanding loans and notes $ 24,254 $ 13,666 $ 10,588 Amortization of settlements on treasury lock agreements 756 38 718 Credit facility commitment fees 268 232 36 Amortization of credit facility origination costs and deferred bond financing costs 839 447 392 Interest capitalized (1,644) (660) (984) -------- -------- -------- Interest expense $ 24,473 $ 13,723 $ 10,750 ======== ======== ======== Page 43 Credit facilities and notes outstanding (dollars in thousands) Years ended, December 31, 1999 1998 Net Change - ---------------------------- -------- -------- ---------- Average outstanding balances $325,564 $184,728 $140,836 Average interest rates 7.45% 7.40%
Interest on outstanding loans and notes was $10.6 million higher in 1999 than in 1998 primarily due to an increase of $140.8 million in the average outstanding balances and a higher average interest rate. The higher average interest rate was due to the notes issued in October 1998 and January 1999. Our debt service coverage ratio for the year ended December 31, 1999 and 1998 was 3.9 times and 5.6 times, respectively. Our EBITDA for the year ended December 31, 2000 was $96.2 million and $77.0 million, respectively. Depreciation and amortization was $26.0 million in 1999 versus $21.9 million in 1998. The increase in 2000 was primarily due to depreciation of the properties acquired in 1998 and 1999. General and administrative expenses increased by $147,000 to $6.5 million in 1999 versus $6.4 million in 1998. The increase in general and administrative expenses was primarily due to a one-time charge taken during 1999 that was associated with the retirement of our former President. General and administrative expenses as a percentage of revenue decreased to 6.3% in 1999 as compared to 7.5% in 1998. Property expenses were $1.8 million in 1999 and 1998. Savings on our general portfolio insurance offset increases in vacant property costs in 1999. Other expenses were $430,000 in 1999 and $289,000 in 1998. Other expenses are Realty Income state and local income taxes. During 1999, we sold three properties for $9.4 million and recognized a gain of $1.3 million. During 1998, we sold five properties for $2.8 million and recognized a gain of $526,000. In October 1998, we adopted SOP 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that costs incurred during start-up activities, including organization costs, be expensed as incurred. Prior to October 1998, we amortized organization costs over 60 months. In October 1998, the unamortized balance of organization costs of $226,000 was expensed. This is reported on the statements of income as a cumulative effect of a change in accounting principle. In 1999, we paid preferred stock dividends of $5.2 million. No preferred stock was outstanding prior to 1999. Page 44 Net Income Available to Common Stockholders In 1999, our net income available to common stockholders decreased 0.7%, to $41.0 million versus $41.3 million in 1998. IMPACT OF INFLATION - ------------------- Tenant leases generally provide for limited increases in rent as a result of increases in the tenant's 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, however, rent increases may not keep up with the rate of inflation. Approximately 97.2% or 1,038 of the properties in the portfolio are leased to tenants under net leases in which the tenant is responsible for property costs and expenses. These features in the leases 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 our tenant's operating expenses exceed increases in revenue. IMPACT OF ACCOUNTING PRONOUNCEMENTS - ----------------------------------- In June 1998, the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement No. 133"). Statement No. 133 establishes accounting and reporting standards for derivative instruments. Statement No. 133, as amended, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. We anticipate that the adoption of Statement No. 133 will not have a material effect on our financial position, result 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 debt 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 flows and to lower our overall borrowing costs. To achieve our objectives we borrow our 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 are not a party to any derivative financial instruments at December 31, 2000. We do not enter into any transactions for speculative or trading purposes. Page 45 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). Expected Maturity Data ----------------------- There- Fair 2002 2003 after Total Value (2) ---- ---- ------ ------ --------- Fixed rate debt -- -- $230.0(1) $230.0 $212.2 Average interest rate -- -- 7.99% 7.99% Variable rate debt $149.9 $24.1 -- $174.0 $174.0 Average interest rate 7.82% 7.87% -- 7.83%
[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, 2000 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. The table incorporates only those exposures that exist as of December 31, 2000, 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. Page 46 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Table of Contents Page - ----------------- ---- A. Independent Auditors' Report............................. 48 B. Consolidated Balance Sheets, December 31, 2000 and 1999............................. 49 C. Consolidated Statements of Income, Years ended December 31, 2000, 1999 and 1998........... 51 D. Consolidated Statements of Stockholders' Equity, Years ended December 31, 2000, 1999 and 1998........... 53 E. Consolidated Statements of Cash Flows, Years ended December 31, 2000, 1999 and 1998........... 55 F. Notes to Consolidated Financial Statements............... 57 G. Consolidated Quarterly Financial Data, (unaudited) for 2000 and 1999.......................... 72 H. Schedule III Real Estate and Accumulated Depreciation is attached to this report. Reference is made to page F-1 of this report for Schedule III.... F-1
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. Page 47 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, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, 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 24, 2001 Page 48 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== December 31, 2000 and 1999 (dollars in thousands, except per share data) 2000 1999 ========= ========= ASSETS Real estate, at cost: Land $ 368,057 $ 338,489 Buildings and improvements 705,470 678,763 --------- --------- 1,073,527 1,017,252 Less accumulated depreciation and amortization (212,379) (179,421) --------- --------- Net real estate held for investment 861,148 837,831 Real estate held for sale, net 33,130 29,262 --------- --------- Net real estate 894,278 867,093 Cash and cash equivalents 3,815 773 Accounts receivable 5,053 3,407 Goodwill, net 18,130 19,053 Other assets 13,490 15,078 --------- --------- Total assets $ 934,766 $ 905,404 ========= ========= (table continued next page) Page 49 (table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== December 31, 2000 and 1999 (dollars in thousands, except per share data) 2000 1999 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Distributions payable $ 4,914 $ 4,828 Accounts payable and accrued expenses 5,969 12,792 Other liabilities 4,314 3,753 Lines of credit payable 174,000 119,200 Notes payable 230,000 230,000 --------- --------- Total liabilities 419,197 370,573 --------- --------- 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 and 4,140,000 shares issued and outstanding in 2000 and 1999, respectively 99,368 99,679 Common stock and paid in capital, par value $1.00 per share, 100,000,000 shares authorized, 26,563,519 and 26,822,164 shares issued and outstanding in 2000 and 1999, respectively 630,932 636,611 Distributions in excess of net income (214,731) (201,459) --------- --------- Total stockholders' equity 515,569 534,831 --------- --------- Total liabilities and stockholders' equity $ 934,766 $ 905,404 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. Page 50 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Income ================================= Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands, except per share data) 2000 1999 1998 ========== ========== ========== REVENUE Rental $ 117,190 $ 104,270 $ 84,876 Gain on sales of real estate acquired for resale 766 -- -- Interest and other 354 240 256 ---------- ---------- ---------- 118,310 104,510 85,132 ---------- ---------- ---------- EXPENSES Interest 31,547 24,473 13,723 Depreciation and amortization 29,003 25,952 21,935 General and administrative 6,839 6,538 6,391 Property 2,032 1,822 1,790 Other 813 430 289 ---------- ---------- ---------- 70,234 59,215 44,128 ---------- ---------- ---------- Income from operations 48,076 45,295 41,004 Gain on sales of investment properties 6,712 1,301 526 ---------- ---------- ---------- Income before extraordinary item and cumulative effect of change in accounting principle 54,788 46,596 41,530 Extraordinary loss on early extinguishment of credit facility -- (355) -- Cumulative effect of change in accounting principle -- -- (226) ---------- ---------- ---------- Net income 54,788 46,241 41,304 Preferred stock dividends (9,712) (5,229) -- ---------- ---------- ---------- Net income available to common stockholders $ 45,076 $ 41,012 $ 41,304 ========== ========== ========== (table continued next page) Page 51 (table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Income ================================= Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands, except per share data) 2000 1999 1998 ========== ========== ========== Basic and diluted amounts per common share: Income before extraordinary item and cumulative effect of change in accounting principle $ 1.69 $ 1.54 $ 1.56 Extraordinary item -- (0.01) -- Cumulative effect of change in accounting principle -- -- (0.01) ---------- ---------- ---------- Net income per common share $ 1.69 $ 1.53 $ 1.55 ========== ========== ========== (/TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. Page 52 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity ======================================================== Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands)
Preferred Common Distri- Shares of stock stock butions ---------------------- and and in excess Preferred Common paid in paid in of net Stock Stock capital capital income Totals ========== ========== ======== ======== ========= ======== Balance, December 31, 1997 -- 25,698,464 $ -- $608,148 $(174,833) $433,315 Net income -- -- -- -- 41,304 41,304 Distributions paid and payable -- -- -- -- (52,748) (52,748) Shares issued in stock offering, net of offering costs of $122 -- 1,123,267 -- 28,379 -- 28,379 Shares issued -- 15,933 -- 400 -- 400 Shares forfeited -- (20,561) -- (441) -- (441) ---------- ---------- -------- -------- --------- -------- 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 (table continued next page) Page 53 (continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity ======================================================== Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands) Preferred Common Distri- Shares of stock stock butions ---------------------- and and in excess Preferred Common paid in paid in of net Stock Stock capital capital income Totals ========== ========== ======== ======== ========= ======== Net income -- -- -- -- 54,788 54,788 Distributions paid and payable -- -- -- -- (68,060) (68,060) Shares repurchased (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 ========== ========== ======== ======== ========= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. Page 54 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows ===================================== Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands) 2000 1999 1998 ======== ======== ======== CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 54,788 $ 46,241 $ 41,304 Adjustments to net income: Depreciation and amortization 29,003 25,952 21,935 Acquisition of real estate acquired for resale (28,577) -- -- Proceeds from sales of real estate acquired for resale 6,215 -- -- Gain on sales of real estate acquired for resale (766) -- -- Gain on sales of investment properties (6,712) (1,301) (526) Extraordinary item -- 355 -- Cumulative effect of change in accounting principle -- -- 226 Changes in assets and liabilities: Accounts receivable and other assets 485 25 144 Accounts payable, accrued expenses and other liabilities 2,154 882 1,562 -------- -------- -------- Net cash provided by operating activities 56,590 72,154 64,645 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of investment properties 22,536 9,431 2,770 Acquisition of and additions to real estate (56,142) (174,056) (192,588) Increase in other assets (450) -- -- Payment of other liabilities -- (1,713) -- -------- -------- -------- Net cash used in investing activities (34,056) (166,338) (189,818) -------- -------- -------- (table continued next page) Page 55 (table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows ===================================== Years Ended December 31, 2000, 1999 and 1998 (dollars in thousands) 2000 1999 1998 ======== ======== ======== CASH FLOWS FROM FINANCING ACTIVITIES Borrowings from lines of credit 157,700 221,200 224,900 Payments under lines of credit (102,900) (186,800) (162,700) Distributions to common stockholders (58,262) (55,925) (52,301) Distributions to preferred stockholders (9,712) (5,229) -- Proceeds from preferred stock offerings, net of offering costs (35) 99,679 -- Proceeds from common stock offerings, net of offering costs -- -- 28,379 Proceeds from notes issued, net of costs in 1999 and 1998 of $501 and $12,764 respectively -- 19,499 87,236 Repurchase of stock (6,499) -- -- Proceeds from other stock issuances 216 -- 69 -------- -------- -------- Net cash provided by (used in) financing activities (19,492) 92,424 125,583 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 3,042 (1,760) 410 Cash and cash equivalents, beginning of year 773 2,533 2,123 -------- -------- -------- Cash and cash equivalents, end of year $ 3,815 $ 773 $ 2,533 ======== ======== ========
For supplemental disclosures, see note 15. The accompanying notes to consolidated financial statements are an integral part of these statements. Page 56 REALTY INCOME CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements ========================================== December 31, 2000, 1999 and 1998 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"). As of December 31, 2000, we owned 1,068 properties in 46 states containing over 9.0 million leasable square feet, excluding seven properties owned by our subsidiary, Crest Net Lease, Inc. 2. Summary of Significant Accounting Policies and Procedures Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Realty Income, Crest Net Lease, Inc. and entities we control (subsidiaries) 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 ended December 31, 2000, 1999 and 1998 was $924,000. Leases - All leases are accounted for as operating leases. Under this method, lease payments are recognized as revenue over the term of the lease. 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 $264,000 on Crest Net Lease's 2000 taxable net income, which are included in other expenses. Distributions Paid and Payable - Realty Income pays distributions monthly to our common stockholders. The following is a summary of monthly cash distributions paid per common share for the years ended December 31, 2000, 1999 and 1998. Page 57 2. Summary of Significant Accounting Policies (continued) Month 2000 1999 1998 - ----- -------- ------- ------ January $0.18000 $0.1700 $0.1600 February 0.18000 0.1700 0.1600 March 0.18000 0.1700 0.1600 April 0.18125 0.1725 0.1625 May 0.18125 0.1725 0.1625 June 0.18125 0.1725 0.1625 July 0.18250 0.1750 0.1650 August 0.18250 0.1750 0.1650 September 0.18250 0.1750 0.1650 October 0.18375 0.1775 0.1675 November 0.18375 0.1775 0.1675 December 0.18375 0.1775 0.1675 -------- ------- ------- Totals $2.18250 $2.0850 $1.9650 ======== ======= =======
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: 2000 1999 1998 -------- ------- ------- Ordinary income $1.76796 $1.8468 $1.8895 Return of capital 0.41454 0.1986 0.0755 Capital gain -- 0.0396 -- -------- ------- ------- Totals $2.18250 $2.0850 $1.9650 ======== ======= =======
In May 1999, we issued 2,760,000 shares of 9 3/8% Class B cumulative redeemable preferred stock (the "Class B Preferred"). Dividends on the Class B Preferred are paid quarterly in arrears. For the years ended December 31, 2000 and 1999, dividends of $6.4 million and $3.9 million, respectively, were paid on the Class B Preferred. In July 1999, we issued 1,380,000 shares of 9 1/2% Class C cumulative redeemable preferred stock (the "Class C Preferred"). Dividends on the Class C Preferred are paid monthly in arrears. For the years ended December 31, 2000 and 1999, dividends of $3.3 million and $1.4 million, respectively, were paid on the Class C Preferred. Page 58 2. Summary of Significant Accounting Policies (continued) The following presents the federal income tax characterization of dividends paid or deemed to be paid to Class B Preferred and Class C Preferred stockholders for the year ended December 31, 2000 and 1999: Class B Class C Preferred Preferred --------------------- --------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Ordinary income $ 2.3436 $ 1.3731 $ 2.3748 $ 0.9707 Capital gains -- 0.0266 -- 0.0188 -------- -------- -------- -------- Totals $ 2.3436 $ 1.3997 $ 2.3748 $ 0.9895 ======== ======== ======== ========
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. If a property is held for sale, it is carried at the lower of cost or estimated fair value, less costs to sell. No provision for impairment loss was charged in 2000, 1999 or 1998. 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. Page 59 2. Summary of Significant Accounting Policies (continued) 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, 2000, 1999 and 1998: 2000 1999 1998 ---------- ---------- ---------- Weighted average shares used for basic net income per share computation 26,684,598 26,822,285 26,629,936 Incremental shares from the assumed exercise of stock options 16,208 3,805 8,348 ---------- ---------- ---------- Adjusted weighted average shares used for diluted net income per share computation 26,700,806 26,826,090 26,638,284 ========== ========== ==========
In 2000, 1999 and 1998, 296,653, 186,181 and 25,000 stock options, respectively, that were anti-dilutive have been 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 earnings 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, 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 when interest expense related to the hedge item is recognized. Page 60 2. Summary of Significant Accounting Policies (continued) Change in Accounting Principle - In October 1998, we adopted Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98- 5"). SOP 98-5 requires that costs incurred during start-up activities, including organization costs, be expensed as incurred. Prior to October 1998, we amortized organization costs over 60 months. In October 1998, the unamortized balances of organization costs were written off as a cumulative effect of a change in accounting principle. Use of Estimates - The preparation of the consolidated financial statements in conformity with generally accepted accounting principles 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. Reclassifications - Certain of the 1999 and 1998 balances have been reclassified to conform to the 2000 presentation. 3. Investment in Subsidiary In January 2000, we formed Crest Net Lease, Inc., of which we own 95% of the common stock, all of which is non-voting, and certain members of our management and Crest Net Lease management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created to actively acquire and resell properties, primarily to buyers using tax-deferred exchanges, under Section 1031 of the IRS Code. The financial statements of Crest Net Lease have been consolidated. All intercompany transactions have been eliminated in consolidation. 4. Credit Facilities Available for Acquisitions A. In December 1999, we entered into a $200 million, three-year, revolving, unsecured acquisition credit facility, which expires in December 2002. The $200 million credit facility is from The Bank of New York, as administrative agent, and several U.S. and non-U.S. banks. As of December 31, 2000 and 1999, the outstanding balances on the credit facility were $149.9 million and $119.2 million, respectively, with an effective interest rate of approximately 7.82% and 7.35%, respectively. Our $170 million credit facility was canceled simultaneously with the execution of the $200 million credit facility in December 1999. Unamortized fees of $355,000 relating to our $170 million credit facility were charged in 1999 as an extraordinary loss on early extinguishment of the credit facility. 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. Page 61 4. Credit Facilities Available for Acquisitions (continued) 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. As of December 31, 2000, the outstanding balance on the credit facility was $24.1 million with an effective interest rate of approximately 7.87%. 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 2000 was 7.67%, or 150 basis points higher than our average borrowing rate during 1999 of 6.17%. Our credit facilities are subject to various leverage and interest coverage ratio limitations. The Company is and has been in compliance with these limitations. In 2000, 1999 and 1998, interest of $1.0 million, $1.6 million and $660,000, 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). After taking into effect the results of a treasury interest rate lock agreement (see note 6), 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%. After taking into effect results of a treasury interest rate lock agreement (see note 6), 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, 2000, 1999 and 1998 was $18.4 million, $18.3 million and $10.0 million, respectively. 6. Derivative Financial Instruments In May 1998, we entered into a treasury interest rate lock agreement associated with the 1998 Notes (see note 5). 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. Page 62 6. Derivative Financial Instruments (continued) In December 1996, we entered into a treasury interest rate lock agreement associated with the 1997 Notes (see note 5). 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. Our only involvement with derivative financial instruments was the two aforementioned treasury interest rate lock agreements and we have not used derivative financial instruments for trading purposes. 7. Property Acquisitions A. During 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%. During 1999 we invested $181.4 million in 110 new retail properties and properties under development with an average initial contractual lease rate of 10.5%. B. During 2000, Crest Net Lease invested $28.6 million in nine new retail properties. Two of these properties were sold and seven properties are held for sale. 8. Repurchases of Realty Income Securities In January 2000, our Board of Directors authorized the repurchase of up to $10 million of our outstanding common stock, preferred stock and senior debt securities. During 2000, we repurchased 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, for a total investment of $6.5 million. 9. Common Stock Offerings A. In March 1998, we issued 372,093 shares of common stock to a unit investment trust at a net price to us of $25.531 per share, based on a 5% discount to the market price at the time of issuance of $26.875 per share. The net proceeds of $9.5 million were used to repay bank borrowings of $7.9 million and to acquire additional properties. B. In February 1998, we issued 751,174 shares of common stock to a unit investment trust at a net price to us of $25.295 per share, based on a 5% discount to the market price at time of issuance of $26.625 per share. The net proceeds of $18.9 million were to be used to repay bank borrowings. Page 63 10. 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. 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. 11. Operating Leases A. General - At December 31, 2000, we owned 1,068 properties in 46 states, excluding properties owned by Crest Net Lease. Of these 1,068 properties, 1,063 are single-tenant and the remainder are multi-tenant. At December 31, 2000, 25 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 carries insurance coverage for public liability, property damage, fire, and extended coverage. Percentage rent for 2000, 1999 and 1998 was $2.0 million, $1.7 million and $1.7 million, respectively. At December 31, 2000, minimum annual rents to be received on the operating leases are as follows (dollars in thousands): Minimum annual rents for the years ending December 31, ====================================================== 2001 $ 113,128 2002 105,743 2003 97,457 2004 90,238 2005 81,388 Thereafter 628,981 ---------- TOTAL $1,116,935 ==========
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, 2000, 1999 or 1998 (dollars in thousands): Page 64 11. Operating Leases (continued) Tenants 2000 1999 1998 ========================= ======= ======= ======= Children's World Learning Centers, Inc. $14,698 $14,371 $14,111 La Petite Academy, Inc. 12,233 10,730 9,445
12. Gain on Sales of Real Estate Acquired for Resale During 2000, Crest Net Lease sold two properties for $6.2 million and we recognized a gain on sale of real estate acquired for resale of $766,000. 13. Gain on Sales of Investment Properties 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 are two properties leased by one of our tenants that we exchanged for two other properties owned by that tenant for no gain (see note 15A). In 1999, we sold three properties for $9.4 million and recognized a gain of $1.3 million. In 1998, we sold five properties for a total of $2.8 million and recognized a gain of $526,000. In November 1999, we approved a plan to sell three of our multi-tenant locations. The carrying value of the three properties at December 31, 1999 was $29.3 million. In December 2000, we canceled our plan to sell the three locations and the properties were no longer classified as held for sale. These properties are included in the other non-reportable segment in note 19. 14. Fair Value of Financial Instruments We believe that the carrying values reflected in the consolidated balance sheets at December 31, 2000 and 1999 reasonably approximate the fair values for cash and cash equivalents, accounts receivable, and all liabilities except the 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, 2000 and 1999 is estimated to be $212.2 million and $199.4 million, respectively, based upon the closing market price per note or indicative price per each note at December 31, 2000 and 1999, respectively. Page 65 15. Supplemental Disclosures of Cash Flow Information Interest paid during 2000, 1999 and 1998 was $29.8 million, $22.4 million and $12.5 million, respectively. The following non-cash investing and financing activities are included in the accompanying consolidated financial statements: A. In 2000, we exchanged two properties leased by one of our tenants for two other properties owned by that tenant. The properties relinquished resulted in the following non-cash changes (in thousands): Land $( 5,964) Building $(17,336) Accumulated depreciation $ 645 The properties received in the exchange resulted in the following non-cash changes (in thousands): Land $ 3,933 Building $ 18,722 B. In 1999 and 1998, the acquisition of properties resulted in the following non-cash changes (dollars in thousands): 1999 1998 ------ ------ Increases in: Building $9,057 $1,347 Other liabilities 9,057 1,347
C. In 1998, the former shareholders of the R.I.C. Advisor, Inc., or the Advisor, returned 20,279 shares to the Company. This fulfilled the obligation of the Advisor's shareholders to the Company under an indemnification agreement entered into by these parties. This transaction resulted in the following non-cash changes in 1998 (dollars in thousands): Decrease in: Due from affiliates $ 350 Common stock 20 Paid in capital in excess of par value 413 Increase in: Interest revenue $ 83
Page 66 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 established by the IRS Code. We match 50% of the participants' contributions up to a maximum of six percent of a participant's annual compensation. Our aggregate matching contributions each year have 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. Prior to December 31, 2000, 618,186 stock options and 45,372 restricted shares of common stock had been granted and are outstanding under the Stock Plan. The following table summarizes our stock option activity for the years ended December 31, 2000, 1999 and 1998: 2000 1999 ----------------------- ----------------------- Weighted Weighted Average Average Number Exercise Number Exercise of shares Price of Shares Price - ----------------------------------------------------------------------- Outstanding, beginning of year 647,848 $24.73 438,604 $24.77 Options granted 142,000 20.65 220,371 24.67 Options exercised (10,000) 21.63 -- -- Options canceled (161,662) 25.02 (11,127) 25.16 --------- ------- --------- ------- Outstanding, end of year 618,186 $23.77 647,848 $24.73 ========= ======= ========= ======= Page 67 17. Stock Incentive Plan (continued)
2000 1999 ------- ------- Options exercisable, end of year 438,437 380,064 Weighted average fair value of each option granted during the year $1.65 $2.23 1998 ----------------------- Weighted Average Options Number Exercise Outstanding of shares Price - ----------------------------------------------- Outstanding, Beginning of year 139,500 $23.09 Options granted 305,413 25.54 Options exercised (2,933) 23.62 Options canceled (3,376) 25.44 ------ ------ Outstanding, end of year 438,604 $24.77 ======= ====== Options exercisable, end of year 196,397 Weighted average fair value of each option granted during the year $2.58
At December 31, 2000, the options exercisable under the Stock Plan had exercise prices ranging from $20.00 to $26.06 with a weighted average price of $24.21, and expiration dates ranging from August 2004 to February 2010 with a weighted average remaining term of 7.2 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: 2000 1999 1998 ------------- -------- -------- Expected dividend yield 9.70% 7.66% 8.86% Risk-free interest rate 6.30% 5.04% 5.75% Volatility 15.00% 15.20% 17.90% Expected life of options 10 years 10 years 10 years
Page 68 17. Stock Incentive Plan (continued) We apply APB Opinion No. 25 in accounting for our 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 and diluted net income per common share would have been as follows: 2000 1999 1998 -------- -------- -------- Net income available to common stockholders (dollars in thousands) As reported $ 45,076 $ 41,012 $ 41,304 Pro forma 44,983 40,536 40,914 Diluted net income per common share As reported $ 1.69 $ 1.53 $ 1.55 Pro forma 1.68 1.51 1.54
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 (the "Preferred Stock"), 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 Lease that are grouped in a separate segment. The Crest Net Lease segment is included in "other non-reportable segments". All of the properties have been acquired separately and 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. Page 69 19. Segment Information (continued) 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, 2000 (dollars in thousands): Revenue ---------------------------------- For the years ended December 31, 2000 1999 1998 -------- -------- -------- Segment rental revenue: Automotive parts $ 9,633 $ 8,971 $ 6,686 Automotive service 6,765 6,776 6,052 Child care 28,591 26,428 24,765 Consumer electronics 5,728 5,794 5,676 Convenience stores 9,679 7,557 5,175 Health and fitness 2,806 639 126 Home furnishings 6,741 7,021 6,010 Home improvement 2,276 3,130 46 Restaurants 14,310 13,785 13,768 Theaters 3,175 582 -- Video rental 4,514 4,444 3,185 Other non-reportable segments 22,972 19,143 13,387 Reconciling items: Gain on sale of real estate acquired for resale 766 -- -- Interest and other 354 240 256 -------- -------- -------- Total revenue $118,310 $104,510 $ 85,132 ======== ======== ======== Page 70 19. Segment Information (continued) Assets --------------------- As of December 31, 2000 1999 -------- -------- Segment net real estate: Automotive parts $ 75,279 $ 75,149 Automotive service 46,811 50,499 Child care 149,838 156,617 Consumer electronics 40,820 49,966 Convenience stores 81,639 83,227 Health and fitness 34,918 26,079 Home furnishings 70,140 67,597 Home improvement 31,687 33,441 Restaurants 82,402 86,904 Theaters 48,003 22,428 Video rental 39,598 40,712 Other non-reportable segments 193,143 174,474 ------- ------- Total net real estate 894,278 867,093 Non-real estate assets 40,488 38,311 -------- -------- Total assets $934,766 $905,404 ======== ========
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. Page 71 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 ======= ======= ======= ======= ======= 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 stock- holders 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 1999 ==== Total revenue $23,986 $24,902 $26,900 $28,722 $104,510 Interest expense 5,880 6,045 6,100 6,448 24,473 Depreciation and amortization expense 6,090 6,237 6,660 6,965 25,952 Other expenses 2,087 2,192 2,232 2,279 8,790 Income from operations 9,929 10,428 11,908 13,030 45,295 Extraordinary item -- -- -- (355) (355) Net income 9,929 10,428 13,144 12,740 46,241 Net income available to common stock- holders 9,929 9,799 10,981 10,303 41,012 Basic and diluted net income per common share 0.37 0.37 0.41 0.38 1.53 Dividends paid per common share 0.5100 0.5175 0.5250 0.5325 2.0850
Page 72 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 9, 2001, 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 9, 2001, 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 9, 2001, 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 9, 2001, to be filed pursuant to Regulation 14A. Page 73 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, 2000 and 1999 c. Consolidated Statements of Income, Years ended December 31, 2000, 1999 and 1998 d. Consolidated Statements of Stockholders' Equity, Years ended December 31, 2000, 1999 and 1998 e. Consolidated Statements of Cash Flows, Years ended December 31, 2000, 1999 and 1998 f. Notes to Consolidated Financial Statements g. Consolidated Quarterly Financial Data, (unaudited) for 2000 and 1999 2. Financial Statement Schedule is attached to this report. 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). Page 74 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). 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 an exhibit 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). Page 75 10.1 $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). 10.2 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). 10.3 $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). 10.4 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). 10.5 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). 10.6 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). 10.7 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). 10.8 Management Incentive Plan, filed as Exhibit 10.10 to the Company's Form 10-K dated December 31, 1997 and incorporated herein by reference). 10.9 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). 10.10 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). 10.11 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). Page 76 10.12 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). 10.13 $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). 10.14 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, 2001, filed herein. 23.1 Consent of KPMG LLP, filed herein. B. The Registrant filed no reports on Form 8-K during the last quarter of the period covered by this report. Page 77 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 and President Date: March 28, 2001 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 28, 2001 By: /s/THOMAS A. LEWIS ------------------------------------ Thomas A. Lewis Vice Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer) Date: March 28, 2001 By: /s/DONALD R. CAMERON ------------------------------------ Donald R. Cameron Director Date: March 28, 2001 Page 78 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 28, 2001 By: /s/MICHAEL D. MCKEE ------------------------------------ Michael D. McKee Director Date: March 28, 2001 By: /s/WILLARD H. SMITH JR ------------------------------------ Willard H. Smith Jr Director Date: March 28, 2001 By: /s/Kathleen R. Allen, Ph.D. ------------------------------------ Kathleen R. Allen, Ph.D. Director Date: March 28, 2001 By: /s/GARY MALINO ------------------------------------ Gary Malino Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: March 28, 2001 Page 79 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/GREGORY J. FAHEY ------------------------------------ Gregory J. Fahey Vice President, Controller (Principal Accounting Officer) Date: March 28, 2001 EXHIBIT INDEX ============= Exhibit No. Description - ----------- ----------- 12.1 Statement re computation of ratios 21.1 Subsidiaries of the Company as of January 1, 2001 23.1 Consent of KPMG LLP Page 80 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Apparel Stores - -------------- Danbury CT 1,083,296 6,217,688 None None Manchester CT 1,250,464 5,917,037 None None Manchester CT 771,660 3,653,539 None None Staten Island NY 4,202,093 3,385,021 None None Automotive Parts - ---------------- Millbrook AL 108,000 517,941 None 65 Montgomery AL 254,465 502,350 None None Blytheville AR 137,913 509,447 None None Osceola AR 88,759 520,047 None None Wynne AR 70,000 547,576 None None Phoenix AZ 231,000 513,057 None None Phoenix AZ 71,750 159,359 None None Phoenix AZ 222,950 495,178 None None Tucson AZ 194,250 431,434 None None Tucson AZ 178,297 396,004 None None Yuma AZ 120,750 268,190 None None Grass Valley CA 325,000 384,955 None None Jackson CA 300,000 390,849 None None Sacramento CA 210,000 466,419 None None Turlock CA 222,250 493,627 None None Arvada CO 301,489 900,892 None None Aurora CO 221,691 492,382 None None Aurora CO 353,283 1,110,170 None None Canon City CO 66,500 147,699 None None Colorado Springs CO 280,193 622,317 None None Colorado Springs CO 192,988 433,542 None None Denver CO 141,400 314,056 None None Denver CO 315,000 699,623 None None Denver CO 283,500 629,666 None None Littleton CO 252,925 561,758 None None Westminster CO 526,620 811,935 None None Smyrna DE 232,273 472,855 None None Tampa FL 427,395 472,030 None None Council Bluffs IA 194,355 431,668 None None Page F-1 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Apparel Stores - -------------- Danbury CT 1,083,296 6,217,688 7,300,984 Manchester CT 1,250,464 5,917,037 7,167,501 Manchester CT 771,660 3,653,539 4,425,199 Staten Island NY 4,202,093 3,385,021 7,587,114 Automotive Parts - ---------------- Millbrook AL 108,000 518,006 626,006 Montgomery AL 254,465 502,350 756,815 Blytheville AR 137,913 509,447 647,360 Osceola AR 88,759 520,047 608,806 Wynne AR 70,000 547,576 617,576 Phoenix AZ 231,000 513,057 744,057 Phoenix AZ 71,750 159,359 231,109 Phoenix AZ 222,950 495,178 718,128 Tucson AZ 194,250 431,434 625,684 Tucson AZ 178,297 396,004 574,301 Yuma AZ 120,750 268,190 388,940 Grass Valley CA 325,000 384,955 709,955 Jackson CA 300,000 390,849 690,849 Sacramento CA 210,000 466,419 676,419 Turlock CA 222,250 493,627 715,877 Arvada CO 301,489 900,892 1,202,381 Aurora CO 221,691 492,382 714,073 Aurora CO 353,283 1,110,170 1,463,453 Canon City CO 66,500 147,699 214,199 Colorado Springs CO 280,193 622,317 902,510 Colorado Springs CO 192,988 433,542 626,530 Denver CO 141,400 314,056 455,456 Denver CO 315,000 699,623 1,014,623 Denver CO 283,500 629,666 913,166 Littleton CO 252,925 561,758 814,683 Westminster CO 526,620 811,935 1,338,555 Smyrna DE 232,273 472,855 705,128 Tampa FL 427,395 472,030 899,425 Council Bluffs IA 194,355 431,668 626,023 Page F-2 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Apparel Stores - -------------- Danbury CT 818,323 09/30/97 300 Manchester CT 660,442 03/26/98 300 Manchester CT 407,769 03/26/98 300 Staten Island NY 377,683 03/26/98 300 Automotive Parts - ---------------- Millbrook AL 40,510 12/10/98 01/21/99 300 Montgomery AL 51,071 06/30/98 300 Blytheville AR 51,792 06/30/98 300 Osceola AR 52,870 06/30/98 300 Wynne AR 40,950 11/10/98 02/24/99 300 Phoenix AZ 249,623 11/09/87 300 Phoenix AZ 77,534 11/19/87 300 Phoenix AZ 208,083 11/02/89 300 Tucson AZ 211,191 10/30/87 300 Tucson AZ 162,435 01/19/90 300 Yuma AZ 110,007 01/23/90 300 Grass Valley CA 178,871 05/20/88 300 Jackson CA 178,313 05/17/88 300 Sacramento CA 226,931 11/25/87 300 Turlock CA 238,702 12/30/87 300 Arvada CO 4,760 09/22/00 11/18/99 300 Aurora CO 201,968 01/29/90 300 Aurora CO -- 01/03/01 03/10/00 300 Canon City CO 71,862 11/12/87 300 Colorado Springs CO 255,265 01/23/90 300 Colorado Springs CO 136,280 05/20/93 300 Denver CO 152,800 11/18/87 300 Denver CO 327,954 05/16/88 300 Denver CO 295,161 05/27/88 300 Littleton CO 268,316 02/12/88 300 Westminster CO -- 01/12/01 01/18/00 300 Smyrna DE 44,922 08/07/98 300 Tampa FL 43,429 06/10/98 12/05/97 300 Council Bluffs IA 202,349 05/19/88 300 Page F-3 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Boise ID 158,400 351,812 None None Boise ID 190,080 422,172 None None Coeur D'Alene ID 165,900 368,468 None None Lewiston ID 138,950 308,612 None None Moscow ID 117,250 260,417 None None Nampa ID 183,743 408,101 None None Sioux Falls ID 332,979 498,108 None None Twin Falls ID 190,080 422,172 None None Brazil IN 183,952 453,831 None None Princeton IN 134,209 560,113 None None Vincennes IN 185,312 489,779 None None Kansas City KS 185,955 413,014 None None Kansas City KS 222,000 455,881 None None Billerica MA 399,043 462,240 None None Alma MI 155,000 600,282 None None Lansing MI 265,000 574,931 None None Sturgis MI 109,558 550,274 None None Eagan MN 902,443 845,536 None None Blue Springs MO 222,569 494,333 None None Grandview MO 347,150 711,024 None None Independence MO 210,643 467,844 None None Kansas City MO 210,070 466,571 None None Kansas City MO 168,350 373,910 None None Kansas City MO 248,500 551,927 None None Batesville MS 190,124 485,670 None None Horn Lake MS 142,702 514,779 None None Jackson MS 248,483 572,522 None None Richland MS 243,565 558,645 None None Missoula MT 163,100 362,249 None None Concord NC 237,688 357,976 None 5,517 Kearney NE 173,950 344,393 None None Omaha NE 196,000 435,321 None None Omaha NE 199,100 412,042 None None Omaha NE 253,128 810,922 None None Albuquerque NM 80,500 178,794 None None Rio Rancho NM 211,577 469,923 None None Page F-4 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Boise ID 158,400 351,812 510,212 Boise ID 190,080 422,172 612,252 Coeur D'Alene ID 165,900 368,468 534,368 Lewiston ID 138,950 308,612 447,562 Moscow ID 117,250 260,417 377,667 Nampa ID 183,743 408,101 591,844 Sioux Falls ID 332,979 498,108 831,087 Twin Falls ID 190,080 422,172 612,252 Brazil IN 183,952 453,831 637,783 Princeton IN 134,209 560,113 694,322 Vincennes IN 185,312 489,779 675,091 Kansas City KS 185,955 413,014 598,969 Kansas City KS 222,000 455,881 677,881 Billerica MA 399,043 462,240 861,283 Alma MI 155,000 600,282 755,282 Lansing MI 265,000 574,931 839,931 Sturgis MI 109,558 550,274 659,832 Eagan MN 902,443 845,536 1,747,979 Blue Springs MO 222,569 494,333 716,902 Grandview MO 347,150 711,024 1,058,174 Independence MO 210,643 467,844 678,487 Kansas City MO 210,070 466,571 676,641 Kansas City MO 168,350 373,910 542,260 Kansas City MO 248,500 551,927 800,427 Batesville MS 190,124 485,670 675,794 Horn Lake MS 142,702 514,779 657,481 Jackson MS 248,483 572,522 821,005 Richland MS 243,565 558,645 802,210 Missoula MT 163,100 362,249 525,349 Concord NC 237,688 363,493 601,181 Kearney NE 173,950 344,393 518,343 Omaha NE 196,000 435,321 631,321 Omaha NE 199,100 412,042 611,142 Omaha NE 253,128 810,922 1,064,050 Albuquerque NM 80,500 178,794 259,294 Rio Rancho NM 211,577 469,923 681,500 Page F-5 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Boise ID 164,915 05/06/88 300 Boise ID 197,896 05/06/88 300 Coeur D'Alene ID 181,465 09/21/87 300 Lewiston ID 151,987 09/16/87 300 Moscow ID 128,252 09/14/87 300 Nampa ID 191,302 05/06/88 300 Sioux Falls ID 47,334 06/01/99 02/27/98 300 Twin Falls ID 197,896 05/06/88 300 Brazil IN 32,519 03/31/99 300 Princeton IN 40,136 03/31/99 300 Vincennes IN 35,095 03/31/99 300 Kansas City KS 193,605 05/13/88 300 Kansas City KS 213,624 05/16/88 300 Billerica MA 68,468 04/02/97 300 Alma MI 38,957 04/29/99 02/10/99 300 Lansing MI 43,153 04/30/99 12/03/98 300 Sturgis MI 44,916 12/30/98 300 Eagan MN 80,352 02/20/98 300 Blue Springs MO 211,405 07/31/89 300 Grandview MO 65,210 08/20/98 02/20/98 300 Independence MO 200,076 07/31/89 300 Kansas City MO 218,709 05/13/88 300 Kansas City MO 175,274 05/26/88 300 Kansas City MO 250,270 10/25/88 300 Batesville MS 47,758 07/27/98 300 Horn Lake MS 52,334 06/30/98 300 Jackson MS 25,775 11/16/99 300 Richland MS 23,292 12/21/99 300 Missoula MT 177,325 10/30/87 300 Concord NC 35,532 05/27/98 11/05/97 300 Kearney NE 137,269 05/01/90 300 Omaha NE 204,061 05/26/88 300 Omaha NE 191,607 05/27/88 300 Omaha NE 41,946 07/22/99 03/04/99 300 Albuquerque NM 87,522 10/29/87 300 Rio Rancho NM 224,451 02/26/88 300 Page F-6 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Sante Fe NM 70,000 155,473 None None Las Vegas NV 161,000 357,585 None None Reno NV 456,000 562,344 None None Canton OH 396,560 597,553 None None Hamilton OH 183,000 515,727 None None Hubbard OH 147,043 481,217 None None Oklahoma City OK 509,370 752,691 None None Oklahoma City OK 404,815 771,625 None None Albany OR 152,250 338,153 None 3 Beaverton OR 210,000 466,419 None 3 Corvallis OR 152,250 338,153 None 3 Eugene OR 194,880 432,837 None 1,333 Oak Grove OR 180,250 400,336 None 3 Portland OR 190,750 423,664 None 3 Portland OR 147,000 326,493 None 3 Portland OR 210,000 466,412 None 3 Salem OR 136,500 303,170 None 3 Tigard OR 164,500 365,361 None 3 Butler PA 339,929 633,078 None None Dover PA 265,112 593,341 None None Enola PA 220,228 546,026 None None Hanover PA 132,500 719,511 None None Harrisburg PA 327,781 608,291 None None Harrisburg PA 283,417 352,473 None None Lancaster PA 199,899 774,838 None None New Castle PA 180,009 525,774 None None Reading PA 379,000 658,722 None None Columbia TN 273,120 431,716 None None Memphis TN 197,708 507,647 None None Amarillo TX 140,000 419,734 None None Austin TX 185,454 411,899 None None Dallas TX 191,267 424,811 None None El Paso TX 66,150 146,922 None None El Paso TX 56,350 125,156 None None Garland TX 242,887 539,461 None None Harlingen TX 134,599 298,948 None None Page F-7 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Sante Fe NM 70,000 155,473 225,473 Las Vegas NV 161,000 357,585 518,585 Reno NV 456,000 562,344 1,018,344 Canton OH 396,560 597,553 994,113 Hamilton OH 183,000 515,727 698,727 Hubbard OH 147,043 481,217 628,260 Oklahoma City OK 509,370 752,691 1,262,061 Oklahoma City OK 404,815 771,625 1,176,440 Albany OR 152,250 338,156 490,406 Beaverton OR 210,000 466,422 676,422 Corvallis OR 152,250 338,156 490,406 Eugene OR 194,880 434,170 629,050 Oak Grove OR 180,250 400,339 580,589 Portland OR 190,750 423,667 614,417 Portland OR 147,000 326,496 473,496 Portland OR 210,000 466,415 676,415 Salem OR 136,500 303,173 439,673 Tigard OR 164,500 365,364 529,864 Butler PA 339,929 633,078 973,007 Dover PA 265,112 593,341 858,453 Enola PA 220,228 546,026 766,254 Hanover PA 132,500 719,511 852,011 Harrisburg PA 327,781 608,291 936,072 Harrisburg PA 283,417 352,473 635,890 Lancaster PA 199,899 774,838 974,737 New Castle PA 180,009 525,774 705,783 Reading PA 379,000 658,722 1,037,722 Columbia TN 273,120 431,716 704,836 Memphis TN 197,708 507,647 705,355 Amarillo TX 140,000 419,734 559,734 Austin TX 185,454 411,899 597,353 Dallas TX 191,267 424,811 616,078 El Paso TX 66,150 146,922 213,072 El Paso TX 56,350 125,156 181,506 Garland TX 242,887 539,461 782,348 Harlingen TX 134,599 298,948 433,547 Page F-8 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Sante Fe NM 76,106 10/29/87 300 Las Vegas NV 175,042 10/29/87 300 Reno NV 263,503 05/26/88 300 Canton OH 56,769 08/14/98 300 Hamilton OH 35,361 04/07/99 12/03/98 300 Hubbard OH 48,923 06/30/98 300 Oklahoma City OK 46,587 04/14/99 09/24/98 300 Oklahoma City OK 47,739 04/09/99 10/16/98 300 Albany OR 167,544 08/24/87 300 Beaverton OR 231,096 08/26/87 300 Corvallis OR 167,544 08/12/87 300 Eugene OR 206,738 02/10/88 300 Oak Grove OR 198,353 08/06/87 300 Portland OR 209,912 08/12/87 300 Portland OR 161,767 08/26/87 300 Portland OR 229,703 09/01/87 300 Salem OR 150,210 08/20/87 300 Tigard OR 181,025 08/26/87 300 Butler PA 60,144 08/07/98 300 Dover PA 60,322 06/30/98 300 Enola PA 46,418 11/10/98 300 Hanover PA 39,733 07/26/99 05/13/99 300 Harrisburg PA 61,842 06/30/98 300 Harrisburg PA 32,314 09/30/98 300 Lancaster PA 73,610 08/14/98 300 New Castle PA 53,452 06/30/98 300 Reading PA 40,766 06/09/99 12/04/98 300 Columbia TN 26,621 06/30/99 300 Memphis TN 46,538 09/30/98 300 Amarillo TX 191,548 09/12/88 300 Austin TX 167,759 02/06/90 300 Dallas TX 174,251 01/26/90 300 El Paso TX 71,920 10/27/87 300 El Paso TX 61,265 10/27/87 300 Garland TX 221,279 01/19/90 300 Harlingen TX 122,624 01/17/90 300 Page F-9 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Houston TX 151,018 335,417 None None Leon Valley TX 178,221 395,834 None None Lubbock TX 42,000 93,284 None None Lubbock TX 49,000 108,831 None None Midland TX 45,500 101,058 None None Odessa TX 50,750 112,718 None None Pasadena TX 107,391 238,519 None None Plano TX 187,564 417,157 700 None San Antonio TX 245,164 544,518 None None Bountiful UT 183,750 408,115 None None Provo UT 125,395 278,507 None None Bellevue WA 185,500 411,997 None None Bellingham WA 168,000 373,133 None None Bothell WA 199,500 443,098 None None Hazel Dell WA 168,000 373,135 None None Kennewick WA 161,350 358,365 None None Kent WA 199,500 443,091 None None Lacey WA 171,150 380,125 None None Marysville WA 168,000 373,135 None None Moses Lake WA 138,600 307,831 None None Pasco WA 161,700 359,142 None None Puyallup WA 173,250 384,795 None None Redmond WA 196,000 435,317 None None Renton WA 185,500 412,003 None None Richland WA 161,700 359,142 None None Seattle WA 162,400 360,697 None None Silverdale WA 183,808 419,777 None None Spanaway WA 189,000 419,777 None None Spokane WA 66,150 146,921 None None Tacoma WA 187,111 415,579 None None Tacoma WA 191,800 425,996 None None Tacoma WA 196,000 435,324 None None Vancouver WA 180,250 400,343 None None Walla Walla WA 170,100 377,793 None None Wenatchee WA 148,400 329,602 None None Woodinville WA 171,500 380,908 None None Page F-10 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Houston TX 151,018 335,417 486,435 Leon Valley TX 178,221 395,834 574,055 Lubbock TX 42,000 93,284 135,284 Lubbock TX 49,000 108,831 157,831 Midland TX 45,500 101,058 146,558 Odessa TX 50,750 112,718 163,468 Pasadena TX 107,391 238,519 345,910 Plano TX 187,564 417,857 605,421 San Antonio TX 245,164 544,518 789,682 Bountiful UT 183,750 408,115 591,865 Provo UT 125,395 278,507 403,902 Bellevue WA 185,500 411,997 597,497 Bellingham WA 168,000 373,133 541,133 Bothell WA 199,500 443,098 642,598 Hazel Dell WA 168,000 373,135 541,135 Kennewick WA 161,350 358,365 519,715 Kent WA 199,500 443,091 642,591 Lacey WA 171,150 380,125 551,275 Marysville WA 168,000 373,135 541,135 Moses Lake WA 138,600 307,831 446,431 Pasco WA 161,700 359,142 520,842 Puyallup WA 173,250 384,795 558,045 Redmond WA 196,000 435,317 631,317 Renton WA 185,500 412,003 597,503 Richland WA 161,700 359,142 520,842 Seattle WA 162,400 360,697 523,097 Silverdale WA 183,808 419,777 603,585 Spanaway WA 189,000 419,777 608,777 Spokane WA 66,150 146,921 213,071 Tacoma WA 187,111 415,579 602,690 Tacoma WA 191,800 425,996 617,796 Tacoma WA 196,000 435,324 631,324 Vancouver WA 180,250 400,343 580,593 Walla Walla WA 170,100 377,793 547,893 Wenatchee WA 148,400 329,602 478,002 Woodinville WA 171,500 380,908 552,408 Page F-11 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Houston TX 137,583 01/25/90 300 Leon Valley TX 162,366 01/17/90 300 Lubbock TX 45,663 10/26/87 300 Lubbock TX 53,274 10/29/87 300 Midland TX 49,468 10/27/87 300 Odessa TX 55,176 10/26/87 300 Pasadena TX 97,837 01/24/90 300 Plano TX 170,947 01/18/90 300 San Antonio TX 221,771 02/14/90 300 Bountiful UT 167,402 01/30/90 300 Provo UT 114,239 01/25/90 300 Bellevue WA 204,131 08/06/87 300 Bellingham WA 184,874 08/20/87 300 Bothell WA 219,541 08/20/87 300 Hazel Dell WA 171,453 05/23/88 300 Kennewick WA 177,559 08/26/87 300 Kent WA 219,537 08/06/87 300 Lacey WA 188,339 08/13/87 300 Marysville WA 184,877 08/20/87 300 Moses Lake WA 152,520 08/12/87 300 Pasco WA 177,943 08/18/87 300 Puyallup WA 189,508 09/15/87 300 Redmond WA 214,390 09/17/87 300 Renton WA 202,906 09/15/87 300 Richland WA 177,943 08/13/87 300 Seattle WA 178,714 08/20/87 300 Silverdale WA 206,735 09/16/87 300 Spanaway WA 207,985 08/25/87 300 Spokane WA 71,482 11/18/87 300 Tacoma WA 170,464 01/25/90 300 Tacoma WA 211,067 08/18/87 300 Tacoma WA 213,096 10/15/87 300 Vancouver WA 198,356 08/20/87 300 Walla Walla WA 187,184 08/06/87 300 Wenatchee WA 163,308 08/25/87 300 Woodinville WA 188,727 08/20/87 300 Page F-12 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Brown Deer WI 257,408 802,141 None None Delafield WI 324,574 772,702 None None Madison WI 452,630 811,977 None None Oak Creek WI 420,465 852,408 None None Automotive Service - ------------------ Flagstaff AZ 144,821 417,485 None None Chula Vista CA 313,293 409,654 None 16 Arvada CO 201,565 339,038 None 245 Broomfield CO 154,930 503,626 None 245 Denver CO 79,717 369,587 None None Denver CO 341,726 433,341 None 274 Thornton CO 276,084 415,464 None None Hartford CT 248,540 482,460 None None Southington CT 225,882 672,910 None None Ft. Lauderdale FL 254,090 465,890 None 822 Jacksonville FL 76,585 355,066 None None Lakeland FL 500,000 645,402 None None Lauderdale Lakes FL 65,987 305,931 None None Seminole FL 68,000 315,266 None None Sunrise FL 80,253 372,070 None None Tampa FL 70,000 324,538 None None Tampa FL 67,000 310,629 None None Tampa FL 86,502 401,041 None None Atlanta GA 55,840 258,889 None None Atlanta GA 78,646 364,625 None None Bogart GA 66,807 309,733 None None Duluth GA 222,275 316,925 None None Gainesville GA 53,589 248,452 None None Marietta GA 60,900 293,461 None None Marietta GA 69,561 346,024 None None Riverdale GA 58,444 270,961 None None Rome GA 56,454 261,733 None None Anderson IN 232,170 385,661 None None Indianapolis IN 231,384 428,307 None None Olathe KS 217,995 367,055 None None Page F-13 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Brown Deer WI 257,408 802,141 1,059,549 Delafield WI 324,574 772,702 1,097,276 Madison WI 452,630 811,977 1,264,607 Oak Creek WI 420,465 852,408 1,272,873 Automotive Service - ------------------ Flagstaff AZ 144,821 417,485 562,306 Chula Vista CA 313,293 409,670 722,963 Arvada CO 201,565 339,283 540,848 Broomfield CO 154,930 503,871 658,801 Denver CO 79,717 369,587 449,304 Denver CO 341,726 433,615 775,341 Thornton CO 276,084 415,464 691,548 Hartford CT 248,540 482,460 731,000 Southington CT 225,882 672,910 898,792 Ft. Lauderdale FL 254,090 466,712 720,802 Jacksonville FL 76,585 355,066 431,651 Lakeland FL 500,000 645,402 1,145,402 Lauderdale Lakes FL 65,987 305,931 371,918 Seminole FL 68,000 315,266 383,266 Sunrise FL 80,253 372,070 452,323 Tampa FL 70,000 324,538 394,538 Tampa FL 67,000 310,629 377,629 Tampa FL 86,502 401,041 487,543 Atlanta GA 55,840 258,889 314,729 Atlanta GA 78,646 364,625 443,271 Bogart GA 66,807 309,733 376,540 Duluth GA 222,275 316,925 539,200 Gainesville GA 53,589 248,452 302,041 Marietta GA 60,900 293,461 354,361 Marietta GA 69,561 346,024 415,585 Riverdale GA 58,444 270,961 329,405 Rome GA 56,454 261,733 318,187 Anderson IN 232,170 385,661 617,831 Indianapolis IN 231,384 428,307 659,691 Olathe KS 217,995 367,055 585,050 Page F-14 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Brown Deer WI 65,570 12/15/98 07/16/98 300 Delafield WI 39,268 07/29/99 02/26/99 300 Madison WI 71,780 10/20/98 04/07/98 300 Oak Creek WI 75,355 08/07/98 03/20/98 300 Automotive Service - ------------------ Flagstaff AZ 39,246 09/30/98 08/29/97 300 Chula Vista CA 75,786 05/01/96 01/19/96 300 Arvada CO 59,332 08/28/96 04/09/96 300 Broomfield CO 88,135 08/22/96 03/15/96 300 Denver CO 252,181 10/08/85 300 Denver CO 55,734 09/25/97 06/12/97 300 Thornton CO 65,624 12/31/96 10/31/96 300 Hartford CT 82,822 09/30/96 300 Southington CT 95,218 06/06/97 300 Ft. Lauderdale FL 47,444 05/13/98 12/24/97 300 Jacksonville FL 238,636 12/23/85 300 Lakeland FL 59,351 06/04/98 12/31/97 300 Lauderdale Lakes FL 203,302 02/19/86 300 Seminole FL 211,886 12/23/85 300 Sunrise FL 248,276 02/14/86 300 Tampa FL 218,118 12/27/85 300 Tampa FL 208,770 12/27/85 300 Tampa FL 258,885 07/23/86 300 Atlanta GA 174,972 11/27/85 300 Atlanta GA 245,060 12/18/85 300 Bogart GA 208,168 12/20/85 300 Duluth GA 37,939 10/24/97 06/20/97 300 Gainesville GA 166,980 12/19/85 300 Marietta GA 197,230 12/26/85 300 Marietta GA 225,653 06/03/86 300 Riverdale GA 181,087 01/15/86 300 Rome GA 175,906 12/19/85 300 Anderson IN 46,925 12/19/97 300 Indianapolis IN 73,526 09/27/96 300 Olathe KS 53,220 04/22/97 11/11/96 300 Page F-15 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Service - ------------------ Louisville KY 56,054 259,881 None None Newport KY 323,511 289,017 None None Lenox MA 287,769 535,273 None None Clinton MD 70,880 328,620 None None Minneapolis MN 58,000 268,903 None 182 Independence MO 297,641 233,152 None None Durham NC 354,676 361,203 None None Durham NC 55,074 255,336 None None Fayetteville NC 224,326 257,733 None None Garner NC 218,294 319,334 None 443 Matthews NC 295,580 338,472 None 420 Pineville NC 254,460 355,630 None None Raleigh NC 89,145 413,301 None None Raleigh NC 398,694 263,621 None None Albion NY 170,589 317,424 None None Dansville NY 181,664 337,991 None None East Amherst NY 260,708 484,788 None None East Syracuse NY 250,609 466,264 None None Johnson City NY 242,863 451,877 None None Wellsville NY 161,331 300,231 None None West Amherst NY 268,692 499,619 None None Akron OH 139,126 460,334 None None Beavercreek OH 205,000 492,538 None None Centerville OH 305,000 420,448 None None Cincinnati OH 293,005 201,340 None None Columbus OH 71,098 329,627 None None Columbus OH 75,761 351,247 None None Columbus OH 245,036 470,468 None None Dayton OH 70,000 324,538 None None Eastlake OH 321,347 459,774 None None Fairfield OH 323,408 235,024 None None Findlay OH 283,515 397,004 None None Hamilton OH 252,608 413,279 None None Huber Heights OH 282,000 449,381 None None Miamisburg OH 63,996 296,701 None None Milford OH 353,324 269,997 None None Page F-16 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Service - ------------------ Louisville KY 56,054 259,881 315,935 Newport KY 323,511 289,017 612,528 Lenox MA 287,769 535,273 823,042 Clinton MD 70,880 328,620 399,500 Minneapolis MN 58,000 269,085 327,085 Independence MO 297,641 233,152 530,793 Durham NC 354,676 361,203 715,879 Durham NC 55,074 255,336 310,410 Fayetteville NC 224,326 257,733 482,059 Garner NC 218,294 319,777 538,071 Matthews NC 295,580 338,892 634,472 Pineville NC 254,460 355,630 610,090 Raleigh NC 89,145 413,301 502,446 Raleigh NC 398,694 263,621 662,315 Albion NY 170,589 317,424 488,013 Dansville NY 181,664 337,991 519,655 East Amherst NY 260,708 484,788 745,496 East Syracuse NY 250,609 466,264 716,873 Johnson City NY 242,863 451,877 694,740 Wellsville NY 161,331 300,231 461,562 West Amherst NY 268,692 499,619 768,311 Akron OH 139,126 460,334 599,460 Beavercreek OH 205,000 492,538 697,538 Centerville OH 305,000 420,448 725,448 Cincinnati OH 293,005 201,340 494,345 Columbus OH 71,098 329,627 400,725 Columbus OH 75,761 351,247 427,008 Columbus OH 245,036 470,468 715,504 Dayton OH 70,000 324,538 394,538 Eastlake OH 321,347 459,774 781,121 Fairfield OH 323,408 235,024 558,432 Findlay OH 283,515 397,004 680,519 Hamilton OH 252,608 413,279 665,887 Huber Heights OH 282,000 449,381 731,381 Miamisburg OH 63,996 296,701 360,697 Milford OH 353,324 269,997 623,321 Page F-17 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Service - ------------------ Louisville KY 174,663 12/17/85 300 Newport KY 37,998 09/17/97 300 Lenox MA 38,350 03/31/99 300 Clinton MD 222,995 11/15/85 300 Minneapolis MN 180,727 12/18/85 300 Independence MO 37,693 12/20/96 300 Durham NC 47,515 08/29/97 03/31/97 300 Durham NC 173,268 11/13/85 300 Fayetteville NC 31,340 12/03/97 300 Garner NC 38,248 01/05/98 06/20/97 300 Matthews NC 30,049 08/28/98 02/27/98 300 Pineville NC 46,783 08/28/97 04/16/97 300 Raleigh NC 280,887 10/28/85 300 Raleigh NC 33,796 10/01/97 300 Albion NY 22,741 03/31/99 300 Dansville NY 24,215 03/31/99 300 East Amherst NY 34,735 03/31/99 300 East Syracuse NY 33,404 03/31/99 300 Johnson City NY 32,373 03/31/99 300 Wellsville NY 21,508 03/31/99 300 West Amherst NY 35,798 03/31/99 300 Akron OH 60,572 09/18/97 300 Beavercreek OH 74,701 02/13/97 09/09/96 300 Centerville OH 74,980 07/24/96 06/28/96 300 Cincinnati OH 26,439 09/17/97 300 Columbus OH 224,915 10/02/85 300 Columbus OH 238,714 10/24/85 300 Columbus OH 94,878 12/22/95 300 Dayton OH 220,561 10/31/85 300 Eastlake OH 92,721 12/22/95 300 Fairfield OH 30,887 09/17/97 300 Findlay OH 48,306 12/24/97 300 Hamilton OH 58,545 03/31/97 10/04/96 300 Huber Heights OH 71,151 12/03/96 07/18/96 300 Miamisburg OH 202,449 10/08/85 300 Milford OH 35,508 09/18/97 300 Page F-18 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Service - ------------------ Mt. Vernon OH 216,115 375,357 None None Northwood OH 65,978 263,912 None None Norwalk OH 200,205 366,000 None None Sandusky OH 264,708 404,011 None None Springboro OH 191,911 522,902 None None Toledo OH 91,655 366,621 None None Toledo OH 73,408 293,632 None None Midwest City OK 106,312 333,551 None None The Village OK 143,655 295,422 None None Bethel Park PA 299,595 331,264 None None Bethlehem PA 275,328 389,067 None None Bethlehem PA 229,162 310,526 None None Philadelphia PA 858,500 877,744 None None Springfield Twp. PA 82,740 383,601 None None York PA 249,436 347,424 None None Charleston SC 217,250 294,079 None None Columbia SC 343,785 295,001 None None Columbia SC 267,622 298,594 None None Greenville SC 221,946 315,163 None None Lexington SC 241,534 342,182 None 302 North Charleston SC 174,980 341,466 None None Brentwood TN 305,546 505,728 None None Nashville TN 342,960 227,440 None None Dallas TX 234,604 325,951 None None Houston TX 233,406 411,197 None 21 Houston TX 285,000 369,697 None None Houston TX 195,000 424,651 None None Lewisville TX 199,942 324,736 None None San Antonio TX 198,828 437,422 None None Roanoke VA 349,628 322,545 None None Bremerton WA 261,172 373,080 None None Milwaukee WI 173,005 499,244 None None Milwaukee WI 152,509 475,480 None None New Berlin WI 188,491 466,268 None None Page F-19 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Service - ------------------ Mt. Vernon OH 216,115 375,357 591,472 Northwood OH 65,978 263,912 329,890 Norwalk OH 200,205 366,000 566,205 Sandusky OH 264,708 404,011 668,719 Springboro OH 191,911 522,902 714,813 Toledo OH 91,655 366,621 458,276 Toledo OH 73,408 293,632 367,040 Midwest City OK 106,312 333,551 439,863 The Village OK 143,655 295,422 439,077 Bethel Park PA 299,595 331,264 630,859 Bethlehem PA 275,328 389,067 664,395 Bethlehem PA 229,162 310,526 539,688 Philadelphia PA 858,500 877,744 1,736,244 Springfield Twp. PA 82,740 383,601 466,341 York PA 249,436 347,424 596,860 Charleston SC 217,250 294,079 511,329 Columbia SC 343,785 295,001 638,786 Columbia SC 267,622 298,594 566,216 Greenville SC 221,946 315,163 537,109 Lexington SC 241,534 342,484 584,018 North Charleston SC 174,980 341,466 516,446 Brentwood TN 305,546 505,728 811,274 Nashville TN 342,960 227,440 570,400 Dallas TX 234,604 325,951 560,555 Houston TX 233,406 411,218 644,624 Houston TX 285,000 369,697 654,697 Houston TX 195,000 424,651 619,651 Lewisville TX 199,942 324,736 524,678 San Antonio TX 198,828 437,422 636,250 Roanoke VA 349,628 322,545 672,173 Bremerton WA 261,172 373,080 634,252 Milwaukee WI 173,005 499,244 672,249 Milwaukee WI 152,509 475,480 627,989 New Berlin WI 188,491 466,268 654,759 Page F-20 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Service - ------------------ Mt. Vernon OH 45,669 12/30/97 300 Northwood OH 252,109 09/12/86 180 Norwalk OH 44,529 12/19/97 300 Sandusky OH 49,158 12/19/97 300 Springboro OH 79,148 03/07/97 300 Toledo OH 350,225 09/12/86 180 Toledo OH 280,500 09/12/86 180 Midwest City OK 31,768 08/06/98 08/08/97 300 The Village OK 32,019 03/06/98 07/29/97 300 Bethel Park PA 40,311 12/19/97 300 Bethlehem PA 47,342 12/19/97 300 Bethlehem PA 37,777 12/24/97 300 Philadelphia PA 297,062 05/19/95 12/05/94 300 Springfield Twp. PA 254,916 02/28/86 300 York PA 42,271 12/30/97 300 Charleston SC 39,651 07/14/97 03/13/97 300 Columbia SC 41,698 05/27/97 02/07/97 300 Columbia SC 32,396 03/31/98 11/05/97 300 Greenville SC 40,417 09/05/97 03/31/97 300 Lexington SC 23,544 02/03/99 09/24/98 300 North Charleston SC 32,456 08/06/98 03/12/98 300 Brentwood TN 59,837 03/13/98 05/28/97 300 Nashville TN 29,896 09/17/97 300 Dallas TX 57,041 08/09/96 02/19/96 300 Houston TX 18,750 09/07/99 03/26/98 300 Houston TX 47,405 08/08/97 08/08/97 300 Houston TX 19,343 10/01/99 06/12/98 300 Lewisville TX 56,829 08/02/96 02/14/96 300 San Antonio TX 92,588 09/15/95 300 Roanoke VA 39,248 12/19/97 300 Bremerton WA 61,166 03/19/97 07/24/96 300 Milwaukee WI 100,681 12/22/95 300 Milwaukee WI 81,624 09/27/96 300 New Berlin WI 94,031 12/22/95 300 Page F-21 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Book Stores - ----------- Tampa FL 998,250 3,696,707 None None Matthews NC 768,222 843,401 None 126 Business Services - ----------------- Jackson MI 550,162 571,590 None None Child Care - ---------- Birmingham AL 63,800 295,791 None None Huntsville AL 28,600 197,165 None 277 Mobile AL 78,400 237,671 None 277 Avondale AZ 242,723 1,129,139 None None Chandler AZ 144,083 668,079 None None Chandler AZ 291,720 647,923 None None Chandler AZ 271,695 603,446 None None Mesa AZ 297,500 660,755 None None Mesa AZ 276,770 590,417 None None Mesa AZ 308,951 1,025,612 None None Peoria AZ 281,750 625,779 None None Phoenix AZ 318,500 707,397 None None Phoenix AZ 264,504 587,471 None None Phoenix AZ 260,719 516,181 None None Phoenix AZ 115,000 285,172 None 158 Scottsdale AZ 291,993 648,529 None None Tempe AZ 292,200 648,989 None None Tempe AZ 294,000 638,977 None None Tucson AZ 304,500 676,303 None None Tucson AZ 283,500 546,878 None None Calabasas CA 156,430 725,248 None None Carmichael CA 131,035 607,507 None None Chino CA 155,000 634,071 None None Chula Vista CA 350,563 778,614 None None Corona CA 144,856 671,584 None None El Cajon CA 157,804 731,621 None None Encinitas CA 320,000 710,729 None None Escondido CA 276,286 613,638 None None Folsom CA 281,563 625,363 None None Page F-22 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Book Stores - ----------- Tampa FL 998,250 3,696,707 4,694,957 Matthews NC 768,222 843,527 1,611,749 Business Services - ----------------- Jackson MI 550,162 571,590 1,121,752 Child Care - ---------- Birmingham AL 63,800 295,791 359,591 Huntsville AL 28,600 197,442 226,042 Mobile AL 78,400 237,948 316,348 Avondale AZ 242,723 1,129,139 1,371,862 Chandler AZ 144,083 668,079 812,162 Chandler AZ 291,720 647,923 939,643 Chandler AZ 271,695 603,446 875,141 Mesa AZ 297,500 660,755 958,255 Mesa AZ 276,770 590,417 867,187 Mesa AZ 308,951 1,025,612 1,334,563 Peoria AZ 281,750 625,779 907,529 Phoenix AZ 318,500 707,397 1,025,897 Phoenix AZ 264,504 587,471 851,975 Phoenix AZ 260,719 516,181 776,900 Phoenix AZ 115,000 285,330 400,330 Scottsdale AZ 291,993 648,529 940,522 Tempe AZ 292,200 648,989 941,189 Tempe AZ 294,000 638,977 932,977 Tucson AZ 304,500 676,303 980,803 Tucson AZ 283,500 546,878 830,378 Calabasas CA 156,430 725,248 881,678 Carmichael CA 131,035 607,507 738,542 Chino CA 155,000 634,071 789,071 Chula Vista CA 350,563 778,614 1,129,177 Corona CA 144,856 671,584 816,440 El Cajon CA 157,804 731,621 889,425 Encinitas CA 320,000 710,729 1,030,729 Escondido CA 276,286 613,638 889,924 Folsom CA 281,563 625,363 906,926 Page F-23 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Book Stores - ----------- Tampa FL 560,600 03/11/97 300 Matthews NC 68,879 12/31/98 300 Business Services - ----------------- Jackson MI 42,993 01/15/99 09/25/98 300 Child Care - ---------- Birmingham AL 219,429 10/31/84 300 Huntsville AL 197,327 06/15/82 180 Mobile AL 237,833 10/15/82 180 Avondale AZ 69,717 04/20/99 07/28/98 300 Chandler AZ 418,481 12/17/86 300 Chandler AZ 313,275 12/11/87 300 Chandler AZ 291,846 12/14/87 300 Mesa AZ 301,940 09/29/88 300 Mesa AZ 269,801 09/29/88 300 Mesa AZ 53,027 07/26/99 01/13/99 300 Peoria AZ 297,041 03/30/88 300 Phoenix AZ 323,254 09/29/88 300 Phoenix AZ 232,454 06/29/90 300 Phoenix AZ 195,299 12/26/90 300 Phoenix AZ 285,253 02/08/84 180 Scottsdale AZ 313,607 12/14/87 300 Tempe AZ 308,058 03/10/88 300 Tempe AZ 253,052 09/27/90 300 Tucson AZ 309,046 09/28/88 300 Tucson AZ 249,903 09/29/88 300 Calabasas CA 495,614 09/26/85 300 Carmichael CA 389,848 08/22/86 300 Chino CA 634,071 10/06/83 180 Chula Vista CA 381,141 10/30/87 300 Corona CA 492,973 12/19/84 300 El Cajon CA 491,711 12/19/85 300 Encinitas CA 343,685 12/29/87 300 Escondido CA 296,734 12/31/87 300 Folsom CA 307,207 10/23/87 300 Page F-24 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Mission Viejo CA 353,891 744,367 None None Moreno Valley CA 304,489 676,214 None None Oceanside CA 145,568 674,889 None None Palmdale CA 249,490 554,125 None None Rancho Cordova CA 276,328 613,733 None None Rancho Cucamonga CA 471,733 1,047,739 None None Roseville CA 297,343 660,411 None None Sacramento CA 290,734 645,732 None None Santee CA 248,418 551,748 None None Simi Valley CA 208,585 967,055 None None Valencia CA 301,295 669,185 None None Walnut CA 217,365 1,007,753 None None Aurora CO 141,811 657,497 None None Aurora CO 287,000 637,440 None None Aurora CO 301,455 655,610 None None Broomfield CO 107,000 403,080 None None Broomfield CO 155,306 344,941 None None Colorado Springs CO 115,542 535,700 None None Colorado Springs CO 58,400 271,217 None None Colorado Springs CO 92,570 241,413 None None Englewood CO 131,216 608,372 None None Englewood CO 158,651 735,572 None None Fort Collins CO 117,105 542,950 None None Fort Collins CO 137,734 638,593 None None Fort Collins CO 55,200 256,356 None 3,600 Greeley CO 58,400 270,755 None 227 Littleton CO 287,000 637,435 None None Littleton CO 299,250 664,642 None None Littleton CO 161,617 358,956 None None Longmont CO 115,592 535,931 None None Louisville CO 58,089 269,313 None None Parker CO 153,551 341,042 None None Westminster CO 306,387 695,737 None None Bradenton FL 160,060 355,501 None None Clearwater FL 42,223 269,380 None None Jacksonville FL 38,500 228,481 None 226 Page F-25 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Mission Viejo CA 353,891 744,367 1,098,258 Moreno Valley CA 304,489 676,214 980,703 Oceanside CA 145,568 674,889 820,457 Palmdale CA 249,490 554,125 803,615 Rancho Cordova CA 276,328 613,733 890,061 Rancho Cucamonga CA 471,733 1,047,739 1,519,472 Roseville CA 297,343 660,411 957,754 Sacramento CA 290,734 645,732 936,466 Santee CA 248,418 551,748 800,166 Simi Valley CA 208,585 967,055 1,175,640 Valencia CA 301,295 669,185 970,480 Walnut CA 217,365 1,007,753 1,225,118 Aurora CO 141,811 657,497 799,308 Aurora CO 287,000 637,440 924,440 Aurora CO 301,455 655,610 957,065 Broomfield CO 107,000 403,080 510,080 Broomfield CO 155,306 344,941 500,247 Colorado Springs CO 115,542 535,700 651,242 Colorado Springs CO 58,400 271,217 329,617 Colorado Springs CO 92,570 241,413 333,983 Englewood CO 131,216 608,372 739,588 Englewood CO 158,651 735,572 894,223 Fort Collins CO 117,105 542,950 660,055 Fort Collins CO 137,734 638,593 776,327 Fort Collins CO 55,200 259,956 315,156 Greeley CO 58,400 270,982 329,382 Littleton CO 287,000 637,435 924,435 Littleton CO 299,250 664,642 963,892 Littleton CO 161,617 358,956 520,573 Longmont CO 115,592 535,931 651,523 Louisville CO 58,089 269,313 327,402 Parker CO 153,551 341,042 494,593 Westminster CO 306,387 695,737 1,002,124 Bradenton FL 160,060 355,501 515,561 Clearwater FL 42,223 269,380 311,603 Jacksonville FL 38,500 228,707 267,207 Page F-26 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Mission Viejo CA 244,002 06/24/93 300 Moreno Valley CA 347,178 02/11/87 300 Oceanside CA 453,582 12/23/85 300 Palmdale CA 253,214 09/14/88 300 Rancho Cordova CA 269,644 03/22/89 300 Rancho Cucamonga CA 506,653 12/30/87 300 Roseville CA 324,416 10/21/87 300 Sacramento CA 316,092 10/05/87 300 Santee CA 275,019 07/23/87 300 Simi Valley CA 649,945 12/20/85 300 Valencia CA 311,711 06/23/88 300 Walnut CA 646,694 08/22/86 300 Aurora CO 434,436 03/25/86 300 Aurora CO 308,244 12/31/87 300 Aurora CO 320,043 09/27/89 300 Broomfield CO 403,080 01/12/83 180 Broomfield CO 163,735 03/15/88 300 Colorado Springs CO 337,076 12/04/86 300 Colorado Springs CO 271,217 12/22/82 180 Colorado Springs CO 241,413 08/31/83 180 Englewood CO 382,803 12/05/86 300 Englewood CO 460,757 12/29/86 300 Fort Collins CO 358,749 03/25/86 300 Fort Collins CO 421,946 03/25/86 300 Fort Collins CO 257,436 12/22/82 180 Greeley CO 199,841 11/21/84 300 Littleton CO 291,284 09/29/88 300 Littleton CO 303,718 09/29/88 300 Littleton CO 173,577 12/10/87 300 Longmont CO 354,112 03/25/86 300 Louisville CO 203,801 06/22/84 300 Parker CO 167,531 10/19/87 300 Westminster CO 317,838 09/27/89 300 Bradenton FL 166,645 05/05/88 300 Clearwater FL 269,380 12/22/81 180 Jacksonville FL 228,481 12/22/81 180 Page F-27 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Jacksonville FL 48,000 243,060 None 226 Jacksonville FL 184,800 410,447 None None Jupiter FL 78,000 360,088 None 200 Margate FL 66,686 309,183 None None Melbourne FL 256,439 549,345 None None Niceville FL 73,696 341,688 None None Orlando FL 68,001 313,922 None None Orlando FL 159,177 353,538 None None Orlando FL 245,249 544,704 None None Orlando FL 190,050 422,107 None None Oviedo FL 166,409 369,598 None None Panama City FL 69,500 244,314 None 304 Pensacola FL 147,000 326,492 None None Royal Palm Beach FL 194,193 431,309 None None Spring Hill FL 146,939 326,356 None None St. Augustine FL 44,800 213,040 None None Sunrise FL 69,400 246,671 None 181 Sunrise FL 245,000 533,280 None None Tallahassee FL 66,000 232,010 None 565 Tampa FL 53,385 199,846 None None Douglasville GA 54,000 250,356 None 1,631 Duluth GA 310,000 1,040,008 None None Dunwoody GA 318,500 707,399 None None Ellenwood GA 119,678 275,414 None None Fayetteville GA 148,400 329,601 None 264 Lawrenceville GA 141,449 314,161 None None Lilburn GA 116,350 539,488 None 226 Lithia Springs GA 187,444 363,358 None None Lithonia GA 239,715 524,459 None None Marietta GA 231,000 513,061 None None Marietta GA 273,000 619,076 None None Marietta GA 292,250 649,095 None None Marietta GA 295,750 596,299 None None Marietta GA 301,000 668,529 None None Marietta GA 148,620 330,090 None None Martinez GA 141,153 313,504 None None Page F-28 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Jacksonville FL 48,000 243,286 291,286 Jacksonville FL 184,800 410,447 595,247 Jupiter FL 78,000 360,288 438,288 Margate FL 66,686 309,183 375,869 Melbourne FL 256,439 549,345 805,784 Niceville FL 73,696 341,688 415,384 Orlando FL 68,001 313,922 381,923 Orlando FL 159,177 353,538 512,715 Orlando FL 245,249 544,704 789,953 Orlando FL 190,050 422,107 612,157 Oviedo FL 166,409 369,598 536,007 Panama City FL 69,500 244,618 314,118 Pensacola FL 147,000 326,492 473,492 Royal Palm Beach FL 194,193 431,309 625,502 Spring Hill FL 146,939 326,356 473,295 St. Augustine FL 44,800 213,040 257,840 Sunrise FL 69,400 246,852 316,252 Sunrise FL 245,000 533,280 778,280 Tallahassee FL 66,000 232,575 298,575 Tampa FL 53,385 199,846 253,231 Douglasville GA 54,000 251,987 305,987 Duluth GA 310,000 1,040,008 1,350,008 Dunwoody GA 318,500 707,399 1,025,899 Ellenwood GA 119,678 275,414 395,092 Fayetteville GA 148,400 329,865 478,265 Lawrenceville GA 141,449 314,161 455,610 Lilburn GA 116,350 539,714 656,064 Lithia Springs GA 187,444 363,358 550,802 Lithonia GA 239,715 524,459 764,174 Marietta GA 231,000 513,061 744,061 Marietta GA 273,000 619,076 892,076 Marietta GA 292,250 649,095 941,345 Marietta GA 295,750 596,299 892,049 Marietta GA 301,000 668,529 969,529 Marietta GA 148,620 330,090 478,710 Martinez GA 141,153 313,504 454,657 Page F-29 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Jacksonville FL 243,060 12/22/81 180 Jacksonville FL 180,330 03/30/89 300 Jupiter FL 247,021 09/11/85 300 Margate FL 193,671 12/16/86 300 Melbourne FL 182,272 04/16/93 300 Niceville FL 214,993 12/03/86 300 Orlando FL 215,351 09/04/85 300 Orlando FL 176,220 07/02/87 300 Orlando FL 263,399 12/10/87 300 Orlando FL 185,453 03/30/89 300 Oviedo FL 179,818 11/20/87 300 Panama City FL 244,314 06/15/82 180 Pensacola FL 143,444 03/28/89 300 Royal Palm Beach FL 194,556 11/15/88 300 Spring Hill FL 158,779 11/24/87 300 St. Augustine FL 213,040 12/22/81 180 Sunrise FL 246,671 06/15/82 180 Sunrise FL 235,174 05/25/89 300 Tallahassee FL 232,575 06/15/82 180 Tampa FL 199,846 12/22/81 180 Douglasville GA 185,734 10/23/84 300 Duluth GA 50,316 08/25/99 06/07/99 300 Dunwoody GA 319,095 11/16/88 300 Ellenwood GA 124,234 11/16/88 300 Fayetteville GA 144,811 03/29/89 300 Lawrenceville GA 145,411 07/07/88 300 Lilburn GA 337,932 12/23/86 300 Lithia Springs GA 156,041 12/28/89 300 Lithonia GA 215,199 08/20/91 300 Marietta GA 243,537 03/18/88 300 Marietta GA 292,027 04/26/88 300 Marietta GA 290,889 12/02/88 300 Marietta GA 267,229 12/30/88 300 Marietta GA 299,597 12/30/88 300 Marietta GA 150,965 09/16/88 300 Martinez GA 151,597 12/31/87 300 Page F-30 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Smyrna GA 274,750 610,229 None None Stockbridge GA 168,700 374,688 None None Stone Mountain GA 316,750 703,512 None None Stone Mountain GA 65,000 301,357 None 226 Valdosta GA 73,561 341,059 None 226 Cedar Rapids IA 194,950 427,085 None None Iowa City IA 186,900 408,910 None None Johnston IA 186,996 347,278 None None Addison IL 125,780 583,146 None None Algonquin IL 241,500 509,629 None None Aurora IL 165,679 398,738 None None Aurora IL 468,000 1,259,926 None None Bartlett IL 120,824 560,166 None None Bolingbrook IL 60,000 409,024 None None Carol Stream IL 122,831 586,416 None None Crystal Lake IL 400,000 1,259,424 None None Elk Grove VillageIL 126,860 588,175 None None Elk Grove VillageIL 214,845 477,181 None None Glendale Heights IL 318,500 707,399 None None Hoffman Estates IL 318,500 707,399 None None Hoffman Estates IL 211,082 468,818 None 1,050 Lake in the HillsIL 375,000 1,127,678 None None Lockport IL 189,477 442,018 None None Naperville IL 425,000 1,230,654 None None O'Fallon IL 141,250 313,722 None None Orland Park IL 218,499 485,296 None None Oswego IL 380,000 1,165,818 None 1,182 Palatine IL 121,911 565,232 None None Roselle IL 297,541 561,037 None None Schaumburg IL 218,798 485,955 None None Vernon Hills IL 132,523 614,430 None None Westmont IL 124,742 578,330 None None Carmel IN 217,565 430,742 None None Fishers IN 212,118 419,958 None None Highland IN 220,460 436,476 None None Indianapolis IN 245,000 544,153 None None Page F-31 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Smyrna GA 274,750 610,229 884,979 Stockbridge GA 168,700 374,688 543,388 Stone Mountain GA 316,750 703,512 1,020,262 Stone Mountain GA 65,000 301,583 366,583 Valdosta GA 73,561 341,285 414,846 Cedar Rapids IA 194,950 427,085 622,035 Iowa City IA 186,900 408,910 595,810 Johnston IA 186,996 347,278 534,274 Addison IL 125,780 583,146 708,926 Algonquin IL 241,500 509,629 751,129 Aurora IL 165,679 398,738 564,417 Aurora IL 468,000 1,259,926 1,727,926 Bartlett IL 120,824 560,166 680,990 Bolingbrook IL 60,000 409,024 469,024 Carol Stream IL 122,831 586,416 709,247 Crystal Lake IL 400,000 1,259,424 1,659,424 Elk Grove VillageIL 126,860 588,175 715,035 Elk Grove VillageIL 214,845 477,181 692,026 Glendale Heights IL 318,500 707,399 1,025,899 Hoffman Estates IL 318,500 707,399 1,025,899 Hoffman Estates IL 211,082 469,868 680,950 Lake in the HillsIL 375,000 1,127,678 1,502,678 Lockport IL 189,477 442,018 631,495 Naperville IL 425,000 1,230,654 1,655,654 O'Fallon IL 141,250 313,722 454,972 Orland Park IL 218,499 485,296 703,795 Oswego IL 380,000 1,167,000 1,547,000 Palatine IL 121,911 565,232 687,143 Roselle IL 297,541 561,037 858,578 Schaumburg IL 218,798 485,955 704,753 Vernon Hills IL 132,523 614,430 746,953 Westmont IL 124,742 578,330 703,072 Carmel IN 217,565 430,742 648,307 Fishers IN 212,118 419,958 632,076 Highland IN 220,460 436,476 656,936 Indianapolis IN 245,000 544,153 789,153 Page F-32 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Smyrna GA 275,263 11/15/88 300 Stockbridge GA 164,619 03/28/89 300 Stone Mountain GA 317,342 11/16/88 300 Stone Mountain GA 209,321 06/19/85 300 Valdosta GA 214,595 12/03/86 300 Cedar Rapids IA 156,955 09/24/92 300 Iowa City IA 152,221 09/24/92 300 Johnston IA 123,405 08/19/91 300 Addison IL 385,310 03/25/86 300 Algonquin IL 203,044 07/10/90 300 Aurora IL 178,691 12/21/88 300 Aurora IL 52,587 10/26/99 06/14/99 300 Bartlett IL 370,125 03/25/86 300 Bolingbrook IL 409,024 10/18/82 180 Carol Stream IL 387,470 03/25/86 300 Crystal Lake IL 56,755 09/28/99 05/14/99 300 Elk Grove VillageIL 388,633 03/26/86 300 Elk Grove VillageIL 225,094 04/08/88 300 Glendale Heights IL 319,095 11/16/88 300 Hoffman Estates IL 310,795 03/31/89 300 Hoffman Estates IL 193,664 12/08/89 300 Lake in the HillsIL 50,823 09/03/99 05/14/99 300 Lockport IL 216,365 10/29/87 300 Naperville IL 51,360 10/06/99 05/19/99 300 O'Fallon IL 153,562 10/30/87 300 Orland Park IL 237,549 10/28/87 300 Oswego IL 56,401 08/18/99 06/30/99 300 Palatine IL 373,473 03/25/86 300 Roselle IL 251,427 12/30/88 300 Schaumburg IL 234,990 12/17/87 300 Vernon Hills IL 405,979 03/25/86 300 Westmont IL 382,127 03/25/86 300 Carmel IN 162,973 12/27/90 300 Fishers IN 158,893 12/27/90 300 Highland IN 165,142 12/26/90 300 Indianapolis IN 215,314 06/29/90 300 Page F-33 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Noblesville IN 60,000 278,175 None None Zionsville IN 127,568 319,770 None None Lenexa KS 318,500 707,399 None None Olathe KS 304,500 676,308 None None Overland Park KS 305,691 707,397 None None Overland Park KS 357,500 1,115,171 None None Shawnee KS 315,000 699,629 None None Shawnee KS 288,246 935,875 None None Wichita KS 209,890 415,549 None None Wichita KS 108,569 401,829 None None Lexington KY 210,427 420,883 None None Acton MA 315,533 700,813 None None Marlborough MA 352,765 776,488 None None Westborough MA 359,412 773,877 None None Ellicott City MD 219,368 630,839 None None Frederick MD 203,352 1,017,109 None None Olney MD 342,500 760,701 None None Waldorf MD 130,430 604,702 None None Waldorf MD 237,207 526,844 None None Canton MI 55,000 378,848 None None Apple Valley MN 113,523 526,319 None 165 Bloomington MN 124,113 575,416 None 165 Brooklyn Park MN 118,111 547,587 None 165 Brooklyn Park MN 112,823 523,073 None 165 Eagan MN 112,127 519,845 None 165 Eden Prairie MN 124,286 576,243 None 165 Maple Grove MN 111,691 517,822 None None Maple Grove MN 313,250 660,149 None None Minnetonka MN 146,847 680,842 None 165 Plymouth MN 134,221 622,350 None 165 W. Bloomington MN 40,000 468,484 None 165 White Bear Lake MN 260,750 579,133 None None White Bear Lake MN 242,165 537,856 None None Florissant MO 318,500 707,399 None None Florissant MO 181,300 402,672 None None Gladstone MO 294,000 652,987 None None Page F-34 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Noblesville IN 60,000 278,175 338,175 Zionsville IN 127,568 319,770 447,338 Lenexa KS 318,500 707,399 1,025,899 Olathe KS 304,500 676,308 980,808 Overland Park KS 305,691 707,397 1,013,088 Overland Park KS 357,500 1,115,171 1,472,671 Shawnee KS 315,000 699,629 1,014,629 Shawnee KS 288,246 935,875 1,224,121 Wichita KS 209,890 415,549 625,439 Wichita KS 108,569 401,829 510,398 Lexington KY 210,427 420,883 631,310 Acton MA 315,533 700,813 1,016,346 Marlborough MA 352,765 776,488 1,129,253 Westborough MA 359,412 773,877 1,133,289 Ellicott City MD 219,368 630,839 850,207 Frederick MD 203,352 1,017,109 1,220,461 Olney MD 342,500 760,701 1,103,201 Waldorf MD 130,430 604,702 735,132 Waldorf MD 237,207 526,844 764,051 Canton MI 55,000 378,848 433,848 Apple Valley MN 113,523 526,484 640,007 Bloomington MN 124,113 575,581 699,694 Brooklyn Park MN 118,111 547,752 665,863 Brooklyn Park MN 112,823 523,238 636,061 Eagan MN 112,127 520,010 632,137 Eden Prairie MN 124,286 576,408 700,694 Maple Grove MN 111,691 517,822 629,513 Maple Grove MN 313,250 660,149 973,399 Minnetonka MN 146,847 681,007 827,854 Plymouth MN 134,221 622,515 756,736 W. Bloomington MN 40,000 468,649 508,649 White Bear Lake MN 260,750 579,133 839,883 White Bear Lake MN 242,165 537,856 780,021 Florissant MO 318,500 707,399 1,025,899 Florissant MO 181,300 402,672 583,972 Gladstone MO 294,000 652,987 946,987 Page F-35 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Noblesville IN 198,580 04/30/85 300 Zionsville IN 156,522 10/28/87 300 Lenexa KS 310,795 03/31/89 300 Olathe KS 309,048 09/28/88 300 Overland Park KS 323,254 09/28/88 300 Overland Park KS 57,654 07/23/99 05/14/99 300 Shawnee KS 317,646 10/27/88 300 Shawnee KS 70,231 12/29/98 08/24/98 300 Wichita KS 157,225 12/26/90 300 Wichita KS 235,873 12/16/86 300 Lexington KY 166,081 08/20/91 300 Acton MA 320,246 09/30/88 300 Marlborough MA 350,259 11/04/88 300 Westborough MA 349,079 11/01/88 300 Ellicott City MD 282,706 12/19/88 300 Frederick MD 100,016 07/06/98 300 Olney MD 367,849 12/18/87 300 Waldorf MD 450,856 09/26/84 300 Waldorf MD 254,762 12/31/87 300 Canton MI 378,848 10/06/82 180 Apple Valley MN 347,762 03/26/86 300 Bloomington MN 380,202 03/27/86 300 Brooklyn Park MN 361,813 03/26/86 300 Brooklyn Park MN 345,617 03/27/86 300 Eagan MN 343,483 03/31/86 300 Eden Prairie MN 380,749 03/27/86 300 Maple Grove MN 342,148 03/26/86 300 Maple Grove MN 263,784 07/11/90 300 Minnetonka MN 428,403 12/12/86 300 Plymouth MN 391,596 12/12/86 300 W. Bloomington MN 468,484 06/18/82 180 White Bear Lake MN 280,049 12/23/87 300 White Bear Lake MN 209,711 08/30/90 300 Florissant MO 310,795 03/30/89 300 Florissant MO 176,914 03/29/89 300 Gladstone MO 298,391 09/29/88 300 Page F-36 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Lee's Summit MO 313,740 939,367 None None Lee's Summit MO 239,627 532,220 None None Lee's Summit MO 330,000 993,787 None None Liberty MO 65,400 303,211 None None Manchester MO 287,000 637,435 None None North Kansas CityMO 307,784 910,401 None None St. Charles MO 259,000 575,246 None None Pearl MS 121,801 270,524 None None Cary NC 75,200 262,973 None 228 Chapel Hill NC 77,000 356,992 None 236 Charlotte NC 27,551 247,000 None 228 Charlotte NC 134,582 268,222 None None Concord NC 32,441 190,859 None None Durham NC 220,728 429,380 None None Durham NC 238,000 471,201 None None Hendersonville NC 32,748 186,152 None 228 Kernersville NC 162,216 316,300 None None Morrisville NC 175,700 390,234 None None Bellevue NE 60,568 280,819 None None Omaha NE 60,500 280,491 None None Omaha NE 53,000 245,720 None None Omaha NE 142,867 317,315 None None Londonderry NH 335,467 745,082 None None Clementon NJ 279,851 554,060 None None Las Vegas NV 201,250 446,983 None None Sparks NV 244,752 543,605 None None Beavercreek OH 179,552 398,786 None None Centerville OH 174,519 387,613 None None Cincinnati OH 165,910 368,486 None 176 Dublin OH 84,000 389,446 None 176 Englewood OH 74,000 343,083 None 176 Forest Park OH 170,778 379,305 None None Gahanna OH 86,000 398,718 None 176 Huber Heights OH 245,000 544,153 None None Loveland OH 206,136 457,829 None None Maineville OH 173,105 384,468 None None Page F-37 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Lee's Summit MO 313,740 939,367 1,253,107 Lee's Summit MO 239,627 532,220 771,847 Lee's Summit MO 330,000 993,787 1,323,787 Liberty MO 65,400 303,211 368,611 Manchester MO 287,000 637,435 924,435 North Kansas CityMO 307,784 910,401 1,218,185 St. Charles MO 259,000 575,246 834,246 Pearl MS 121,801 270,524 392,325 Cary NC 75,200 263,201 338,401 Chapel Hill NC 77,000 357,228 434,228 Charlotte NC 27,551 247,228 274,779 Charlotte NC 134,582 268,222 402,804 Concord NC 32,441 190,859 223,300 Durham NC 220,728 429,380 650,108 Durham NC 238,000 471,201 709,201 Hendersonville NC 32,748 186,380 219,128 Kernersville NC 162,216 316,300 478,516 Morrisville NC 175,700 390,234 565,934 Bellevue NE 60,568 280,819 341,387 Omaha NE 60,500 280,491 340,991 Omaha NE 53,000 245,720 298,720 Omaha NE 142,867 317,315 460,182 Londonderry NH 335,467 745,082 1,080,549 Clementon NJ 279,851 554,060 833,911 Las Vegas NV 201,250 446,983 648,233 Sparks NV 244,752 543,605 788,357 Beavercreek OH 179,552 398,786 578,338 Centerville OH 174,519 387,613 562,132 Cincinnati OH 165,910 368,662 534,572 Dublin OH 84,000 389,622 473,622 Englewood OH 74,000 343,259 417,259 Forest Park OH 170,778 379,305 550,083 Gahanna OH 86,000 398,894 484,894 Huber Heights OH 245,000 544,153 789,153 Loveland OH 206,136 457,829 663,965 Maineville OH 173,105 384,468 557,573 Page F-38 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Lee's Summit MO 45,449 09/08/99 06/30/99 300 Lee's Summit MO 223,510 09/27/89 300 Lee's Summit MO 51,375 07/26/99 06/17/99 300 Liberty MO 210,607 06/18/85 300 Manchester MO 308,242 12/22/87 300 North Kansas CityMO 73,828 09/28/99 08/21/98 300 St. Charles MO 278,171 12/23/87 300 Pearl MS 122,165 11/15/88 300 Cary NC 263,053 01/25/84 180 Chapel Hill NC 254,844 04/17/85 300 Charlotte NC 247,000 12/23/81 180 Charlotte NC 120,988 11/16/88 300 Concord NC 190,859 12/23/81 180 Durham NC 187,587 12/29/89 300 Durham NC 167,442 08/20/91 300 Hendersonville NC 186,232 12/23/81 180 Kernersville NC 139,489 12/14/89 300 Morrisville NC 171,448 03/29/89 300 Bellevue NE 175,903 12/16/86 300 Omaha NE 211,219 08/01/84 300 Omaha NE 182,959 10/11/84 300 Omaha NE 153,440 12/09/87 300 Londonderry NH 316,465 08/18/89 300 Clementon NJ 195,297 09/09/91 300 Las Vegas NV 176,865 06/29/90 300 Sparks NV 261,256 01/29/88 300 Beavercreek OH 199,966 06/30/87 300 Centerville OH 193,206 07/23/87 300 Cincinnati OH 186,977 04/29/87 300 Dublin OH 265,730 10/08/85 300 Englewood OH 233,164 10/23/85 300 Forest Park OH 187,658 09/28/87 300 Gahanna OH 269,475 11/26/85 300 Huber Heights OH 210,593 09/27/90 300 Loveland OH 233,682 03/20/87 300 Maineville OH 196,238 03/06/87 300 Page F-39 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Pickerington OH 87,580 406,055 None 176 Westerville OH 294,350 646,557 None None Westerville OH 82,000 380,173 None 176 Broken Arrow OK 78,705 220,434 None 279 Midwest City OK 67,800 314,338 None 279 Oklahoma City OK 79,000 366,261 None 279 Oklahoma City OK 50,800 214,474 None 3,013 Yukon OK 61,000 282,812 None 196 Beaverton OR 135,148 626,647 None 3 Beaverton OR 115,232 534,301 None 3 Charleston SC 125,593 278,947 None None Charleston SC 140,700 312,498 None None Columbia SC 58,160 269,643 None 1,042 Elgin SC 160,831 313,600 None None Goose Creek SC 61,635 192,905 None 292 Ladson SC 31,543 177,457 None 292 Lexington SC 55,869 274,742 None 741 Mt. Pleasant SC 40,700 180,400 None None Summerville SC 44,400 174,500 None None Sumter SC 56,010 268,903 None 1,007 Memphis TN 238,263 504,897 None None Memphis TN 238,000 528,608 None None Memphis TN 221,501 491,962 None None Nashville TN 274,298 609,223 None None Allen TX 177,637 394,538 None None Arlington TX 70,000 324,538 18,424 1,215 Arlington TX 82,109 380,677 None None Arlington TX 238,000 528,604 None None Arlington TX 241,500 550,559 None None Arlington TX 195,650 387,355 None None Atascocita TX 278,915 1,034,868 None None Austin TX 134,383 623,103 None None Austin TX 236,733 528,608 None None Austin TX 238,000 528,604 None None Austin TX 103,600 230,532 None 75 Austin TX 88,872 222,684 None 75 Page F-40 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Pickerington OH 87,580 406,231 493,811 Westerville OH 294,350 646,557 940,907 Westerville OH 82,000 380,349 462,349 Broken Arrow OK 78,705 220,713 299,418 Midwest City OK 67,800 314,617 382,417 Oklahoma City OK 79,000 366,540 445,540 Oklahoma City OK 50,800 217,487 268,287 Yukon OK 61,000 283,008 344,008 Beaverton OR 135,148 626,650 761,798 Beaverton OR 115,232 534,304 649,536 Charleston SC 125,593 278,947 404,540 Charleston SC 140,700 312,498 453,198 Columbia SC 58,160 270,685 328,845 Elgin SC 160,831 313,600 474,431 Goose Creek SC 61,635 193,197 254,832 Ladson SC 31,543 177,749 209,292 Lexington SC 55,869 275,483 331,352 Mt. Pleasant SC 40,700 180,400 221,100 Summerville SC 44,400 174,500 218,900 Sumter SC 56,010 269,910 325,920 Memphis TN 238,263 504,897 743,160 Memphis TN 238,000 528,608 766,608 Memphis TN 221,501 491,962 713,463 Nashville TN 274,298 609,223 883,521 Allen TX 177,637 394,538 572,175 Arlington TX 70,000 344,177 414,177 Arlington TX 82,109 380,677 462,786 Arlington TX 238,000 528,604 766,604 Arlington TX 241,500 550,559 792,059 Arlington TX 195,650 387,355 583,005 Atascocita TX 278,915 1,034,868 1,313,783 Austin TX 134,383 623,103 757,486 Austin TX 236,733 528,608 765,341 Austin TX 238,000 528,604 766,604 Austin TX 103,600 230,607 334,207 Austin TX 88,872 222,759 311,631 Page F-41 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Pickerington OH 255,492 12/11/86 300 Westerville OH 255,413 09/26/90 300 Westerville OH 259,403 10/08/85 300 Broken Arrow OK 220,596 01/27/83 180 Midwest City OK 217,163 08/14/85 300 Oklahoma City OK 271,343 11/14/84 300 Oklahoma City OK 214,675 06/15/82 180 Yukon OK 200,808 05/02/85 300 Beaverton OR 392,527 12/17/86 300 Beaverton OR 334,682 12/22/86 300 Charleston SC 130,758 05/26/88 300 Charleston SC 137,296 03/28/89 300 Columbia SC 199,971 11/14/84 300 Elgin SC 138,298 12/14/89 300 Goose Creek SC 192,905 12/22/81 180 Ladson SC 177,628 12/22/81 180 Lexington SC 203,540 11/13/84 300 Mt. Pleasant SC 180,400 12/22/81 180 Summerville SC 174,500 12/22/81 180 Sumter SC 186,830 06/18/85 300 Memphis TN 230,718 09/29/88 300 Memphis TN 241,555 09/30/88 300 Memphis TN 191,817 08/31/90 300 Nashville TN 267,661 03/30/89 300 Allen TX 177,964 11/21/88 300 Arlington TX 230,833 05/08/85 300 Arlington TX 280,596 12/13/84 300 Arlington TX 241,552 09/26/88 300 Arlington TX 291,246 09/22/89 300 Arlington TX 144,326 02/07/91 300 Atascocita TX 53,498 07/19/99 05/14/99 300 Austin TX 390,308 12/23/86 300 Austin TX 241,555 09/27/88 300 Austin TX 230,695 04/06/89 300 Austin TX 230,576 10/29/82 180 Austin TX 222,710 01/12/83 180 Page F-42 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Austin TX 188,144 417,872 None None Austin TX 191,636 425,629 None None Austin TX 224,878 499,460 None None Austin TX 217,878 483,913 None None Bedford TX 241,500 550,559 None None Carrollton TX 277,850 617,113 None None Cedar Park TX 168,857 375,036 None None Colleyville TX 250,000 1,070,360 None None Colleyville TX 68,000 315,266 8,979 4,172 Converse TX 217,000 481,963 None None Coppell TX 139,224 645,550 None None Coppell TX 208,641 463,398 None None Corinth TX 285,000 1,041,626 None None DeSoto TX 86,000 398,715 29,103 2,027 Duncanville TX 93,000 431,172 None None Euless TX 234,111 519,962 None None Flower Mound TX 202,773 442,845 None None Flower Mound TX 281,735 1,099,726 None None Fort Worth TX 238,000 528,608 None None Fort Worth TX 85,518 396,495 None None Fort Worth TX 210,007 444,460 None None Fort Worth TX 216,160 427,962 None None Garland TX 211,050 468,749 None None Grand Prairie TX 167,164 371,276 None None Houston TX 219,100 486,631 None None Houston TX 219,100 486,628 None None Houston TX 149,109 323,314 None None Houston TX 58,000 268,901 None 1,015 Houston TX 60,000 278,175 None 155 Houston TX 102,000 472,898 None 155 Houston TX 139,125 308,997 None 1,005 Houston TX 139,125 308,997 None 155 Houston TX 141,296 313,824 None None Houston TX 294,582 919,276 None None Katy TX 309,898 983,041 None None Lewisville TX 79,000 366,264 None 1,245 Page F-43 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Austin TX 188,144 417,872 606,016 Austin TX 191,636 425,629 617,265 Austin TX 224,878 499,460 724,338 Austin TX 217,878 483,913 701,791 Bedford TX 241,500 550,559 792,059 Carrollton TX 277,850 617,113 894,963 Cedar Park TX 168,857 375,036 543,893 Colleyville TX 250,000 1,070,360 1,320,360 Colleyville TX 68,000 328,417 396,417 Converse TX 217,000 481,963 698,963 Coppell TX 139,224 645,550 784,774 Coppell TX 208,641 463,398 672,039 Corinth TX 285,000 1,041,626 1,326,626 DeSoto TX 86,000 429,845 515,845 Duncanville TX 93,000 431,172 524,172 Euless TX 234,111 519,962 754,073 Flower Mound TX 202,773 442,845 645,618 Flower Mound TX 281,735 1,099,726 1,381,461 Fort Worth TX 238,000 528,608 766,608 Fort Worth TX 85,518 396,495 482,013 Fort Worth TX 210,007 444,460 654,467 Fort Worth TX 216,160 427,962 644,122 Garland TX 211,050 468,749 679,799 Grand Prairie TX 167,164 371,276 538,440 Houston TX 219,100 486,631 705,731 Houston TX 219,100 486,628 705,728 Houston TX 149,109 323,314 472,423 Houston TX 58,000 269,916 327,916 Houston TX 60,000 278,330 338,330 Houston TX 102,000 473,053 575,053 Houston TX 139,125 310,002 449,127 Houston TX 139,125 309,152 448,277 Houston TX 141,296 313,824 455,120 Houston TX 294,582 919,276 1,213,858 Katy TX 309,898 983,041 1,292,939 Lewisville TX 79,000 367,509 446,509 Page F-44 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Austin TX 195,882 05/11/88 300 Austin TX 190,742 12/22/88 300 Austin TX 222,366 01/03/89 300 Austin TX 208,361 06/22/89 300 Bedford TX 291,246 09/22/89 300 Carrollton TX 298,416 12/11/87 300 Cedar Park TX 169,167 11/21/88 300 Colleyville TX 51,779 08/17/99 05/14/99 300 Colleyville TX 225,724 05/01/85 300 Converse TX 220,239 09/28/88 300 Coppell TX 404,368 12/17/86 300 Coppell TX 224,084 12/11/87 300 Corinth TX 57,284 06/04/99 05/19/99 300 Desoto TX 296,726 10/24/84 300 Duncanville TX 306,148 05/08/85 300 Euless TX 262,283 05/08/87 300 Flower Mound TX 224,707 04/20/87 300 Flower Mound TX 67,789 04/23/99 01/13/99 300 Fort Worth TX 241,555 09/26/88 300 Fort Worth TX 249,477 12/03/86 300 Fort Worth TX 183,715 02/01/90 300 Fort Worth TX 159,455 02/07/91 300 Garland TX 193,636 12/12/89 300 Grand Prairie TX 166,384 12/13/88 300 Houston TX 222,373 09/30/88 300 Houston TX 219,510 11/16/88 300 Houston TX 152,276 06/26/89 300 Houston TX 200,220 10/11/84 300 Houston TX 197,516 05/01/85 300 Houston TX 335,775 05/01/85 300 Houston TX 155,866 05/22/87 300 Houston TX 155,866 05/22/87 300 Houston TX 156,426 07/24/87 300 Houston TX 65,930 01/11/99 08/14/98 300 Katy TX 77,030 11/30/98 08/21/98 300 Lewisville TX 254,405 06/26/85 300 Page F-45 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Lewisville TX 192,777 428,121 None None Lewisville TX 192,218 426,922 None None Mansfield TX 181,375 402,839 None None Mesquite TX 85,000 394,079 None 113 Mesquite TX 139,466 326,525 None None Missouri City TX 221,025 437,593 None None N. Richland HillsTX 238,000 528,608 None None Pasadena TX 60,000 278,173 None 155 Plano TX 261,912 581,658 None None Plano TX 250,514 556,399 None None Plano TX 259,000 575,246 None None Round Rock TX 80,525 373,347 None None Round Rock TX 186,380 413,957 None None San Antonio TX 130,833 606,596 None None San Antonio TX 234,500 520,831 None None San Antonio TX 217,000 481,967 None None San Antonio TX 220,500 447,108 None None San Antonio TX 102,512 475,288 None None San Antonio TX 81,530 378,007 None None San Antonio TX 139,125 308,997 None None San Antonio TX 181,412 402,923 None None San Antonio TX 162,161 360,166 None None San Antonio TX 182,868 406,155 None None Southlake TX 228,279 511,750 None None Sugarland TX 193,800 430,437 None None Sugarland TX 339,310 1,000,876 None None The Woodlands TX 193,801 430,440 None None Watauga TX 165,914 368,502 None None Layton UT 136,574 269,008 None None Sandy UT 168,089 373,330 None None Centreville VA 371,000 824,003 None None Chesapeake VA 190,050 422,107 None None Glen Allen VA 74,643 346,060 None None Portsmouth VA 171,575 381,073 None None Richmond VA 269,500 598,567 None None Richmond VA 71,001 327,771 None 322 Page F-46 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Lewisville TX 192,777 428,121 620,898 Lewisville TX 192,218 426,922 619,140 Mansfield TX 181,375 402,839 584,214 Mesquite TX 85,000 394,192 479,192 Mesquite TX 139,466 326,525 465,991 Missouri City TX 221,025 437,593 658,618 N. Richland HillsTX 238,000 528,608 766,608 Pasadena TX 60,000 278,328 338,328 Plano TX 261,912 581,658 843,570 Plano TX 250,514 556,399 806,913 Plano TX 259,000 575,246 834,246 Round Rock TX 80,525 373,347 453,872 Round Rock TX 186,380 413,957 600,337 San Antonio TX 130,833 606,596 737,429 San Antonio TX 234,500 520,831 755,331 San Antonio TX 217,000 481,967 698,967 San Antonio TX 220,500 447,108 667,608 San Antonio TX 102,512 475,288 577,800 San Antonio TX 81,530 378,007 459,537 San Antonio TX 139,125 308,997 448,122 San Antonio TX 181,412 402,923 584,335 San Antonio TX 162,161 360,166 522,327 San Antonio TX 182,868 406,155 589,023 Southlake TX 228,279 511,750 740,029 Sugarland TX 193,800 430,437 624,237 Sugarland TX 339,310 1,000,876 1,340,186 The Woodlands TX 193,801 430,440 624,241 Watauga TX 165,914 368,502 534,416 Layton UT 136,574 269,008 405,582 Sandy UT 168,089 373,330 541,419 Centreville VA 371,000 824,003 1,195,003 Chesapeake VA 190,050 422,107 612,157 Glen Allen VA 74,643 346,060 420,703 Portsmouth VA 171,575 381,073 552,648 Richmond VA 269,500 598,567 868,067 Richmond VA 71,001 328,093 399,094 Page F-47 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Lewisville TX 220,561 01/07/87 300 Lewisville TX 191,323 12/29/88 300 Mansfield TX 166,410 12/20/89 300 Mesquite TX 292,342 10/24/84 300 Mesquite TX 139,104 10/08/92 300 Missouri City TX 165,566 12/13/90 300 N. Richland HillsTX 241,555 09/26/88 300 Pasadena TX 206,359 10/23/84 300 Plano TX 300,378 01/06/87 300 Plano TX 269,055 12/10/87 300 Plano TX 262,866 09/27/88 300 Round Rock TX 233,863 12/16/86 300 Round Rock TX 180,660 04/19/89 300 San Antonio TX 400,803 03/24/86 300 San Antonio TX 251,856 12/29/87 300 San Antonio TX 218,824 10/14/88 300 San Antonio TX 196,438 03/30/89 300 San Antonio TX 299,056 12/03/86 300 San Antonio TX 237,845 12/11/86 300 San Antonio TX 155,866 05/22/87 300 San Antonio TX 200,837 07/07/87 300 San Antonio TX 179,525 07/07/87 300 San Antonio TX 182,016 12/06/88 300 Southlake TX 188,271 03/10/93 300 Sugarland TX 214,552 07/31/87 300 Sugarland TX 58,382 05/30/99 01/13/99 300 The Woodlands TX 213,269 08/11/87 300 Watauga TX 183,679 07/07/87 300 Layton UT 117,899 02/01/90 300 Sandy UT 152,050 02/01/90 300 Centreville VA 347,584 09/29/89 300 Chesapeake VA 185,453 03/28/89 300 Glen Allen VA 261,878 06/20/84 300 Portsmouth VA 170,775 12/21/88 300 Richmond VA 262,979 03/28/89 300 Richmond VA 224,852 09/04/85 300 Page F-48 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Virginia Beach VA 124,988 579,496 None None Virginia Beach VA 69,080 320,270 None 656 Woodbridge VA 358,050 795,239 None None Everett WA 120,000 540,363 None None Federal Way WA 150,785 699,101 None None Federal Way WA 261,943 581,782 None None Kent WA 128,300 539,141 None None Kent WA 140,763 678,809 None None Kirkland WA 301,000 668,534 None None Puyallup WA 195,552 434,327 None None Redmond WA 279,830 621,513 None None Renton WA 111,183 515,490 None None Appleton WI 196,000 424,038 None None Waukesha WI 233,100 461,500 None None Waukesha WI 215,950 427,546 None None Cheyenne WY 59,856 277,506 None 227 Consumer Electronics - -------------------- Oxford AL 323,085 406,655 None None Tuscaloosa AL 204,790 585,115 None None Bradenton FL 174,948 240,928 None None Mary Esther FL 149,696 363,263 None None Melbourne FL 269,697 522,414 None None Merritt Island FL 309,652 482,459 None None Ocala FL 339,690 543,504 None None Pensacola FL 419,842 1,899,287 None None Tallahassee FL 319,807 502,697 None None Titusville FL 176,459 579,793 None None Rome GA 254,902 486,812 None None Smyrna GA 1,094,058 3,090,236 None None Council Bluffs IA 255,217 117,792 None None Des Moines IA 188,520 367,614 None None Peoria IL 193,868 387,737 None None Rockford IL 159,587 618,398 None None Springfield IL 219,859 630,595 None None Anderson IN 180,628 653,162 None None Page F-49 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Virginia Beach VA 124,988 579,496 704,484 Virginia Beach VA 69,080 320,926 390,006 Woodbridge VA 358,050 795,239 1,153,289 Everett WA 120,000 540,363 660,363 Federal Way WA 150,785 699,101 849,886 Federal Way WA 261,943 581,782 843,725 Kent WA 128,300 539,141 667,441 Kent WA 140,763 678,809 819,572 Kirkland WA 301,000 668,534 969,534 Puyallup WA 195,552 434,327 629,879 Redmond WA 279,830 621,513 901,343 Renton WA 111,183 515,490 626,673 Appleton WI 196,000 424,038 620,038 Waukesha WI 233,100 461,500 694,600 Waukesha WI 215,950 427,546 643,496 Cheyenne WY 59,856 277,733 337,589 Consumer Electronics - -------------------- Oxford AL 323,085 406,655 729,740 Tuscaloosa AL 204,790 585,115 789,905 Bradenton FL 174,948 240,928 415,876 Mary Esther FL 149,696 363,263 512,959 Melbourne FL 269,697 522,414 792,111 Merritt Island FL 309,652 482,459 792,111 Ocala FL 339,690 543,504 883,194 Pensacola FL 419,842 1,899,287 2,319,129 Tallahassee FL 319,807 502,697 822,504 Titusville FL 176,459 579,793 756,252 Rome GA 254,902 486,812 741,714 Smyrna GA 1,094,058 3,090,236 4,184,294 Council Bluffs IA 255,217 117,792 373,009 Des Moines IA 188,520 367,614 556,134 Peoria IL 193,868 387,737 581,605 Rockford IL 159,587 618,398 777,985 Springfield IL 219,859 630,595 850,454 Anderson IN 180,628 653,162 833,790 Page F-50 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Virginia Beach VA 382,898 03/25/86 300 Virginia Beach VA 237,271 11/15/84 300 Woodbridge VA 363,395 09/29/88 300 Everett WA 540,363 11/22/82 180 Federal Way WA 437,913 12/17/86 300 Federal Way WA 262,425 11/21/88 300 Kent WA 539,141 06/03/83 180 Kent WA 425,202 12/17/86 300 Kirkland WA 317,335 03/31/88 300 Puyallup WA 194,639 12/06/88 300 Redmond WA 309,794 07/27/87 300 Renton WA 340,606 03/24/86 300 Appleton WI 170,063 07/10/90 300 Waukesha WI 174,610 12/13/90 300 Waukesha WI 161,764 12/13/90 300 Cheyenne WY 204,823 11/20/84 300 Consumer Electronics - -------------------- Oxford AL 67,098 11/26/96 300 Tuscaloosa AL 96,544 11/26/96 300 Bradenton FL 39,753 11/26/96 300 Mary Esther FL 59,938 11/26/96 300 Melbourne FL 86,198 11/26/96 300 Merritt Island FL 79,606 11/26/96 300 Ocala FL 89,678 11/26/96 300 Pensacola FL 313,382 11/26/96 300 Tallahassee FL 82,945 11/26/96 300 Titusville FL 95,666 11/26/96 300 Rome GA 80,324 11/26/96 300 Smyrna GA 437,669 06/09/97 300 Council Bluffs IA 19,436 11/26/96 300 Des Moines IA 60,656 11/26/96 300 Peoria IL 63,977 11/26/96 300 Rockford IL 102,036 11/26/96 300 Springfield IL 104,048 11/26/96 300 Anderson IN 107,767 11/26/96 300 Page F-51 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Consumer Electronics - -------------------- Muncie IN 148,901 645,235 None None Richmond IN 93,999 193,753 None None Topeka KS 974,960 3,472,226 None None Columbus MS 144,908 463,707 None None Greenville MS 144,588 433,764 None None Gulfport MS 299,464 502,326 None None Hattiesburg MS 198,659 457,379 None None Jackson MS 405,360 656,296 None None Meridian MS 181,156 515,598 None None Tupelo MS 121,697 637,691 None None Vicksburg MS 494,532 174,541 None None Pineville NC 567,864 840,284 None 18,256 Lakewood NY 144,859 526,301 None None Westbury NY 6,333,590 3,952,773 None None Defiance OH 97,978 601,863 None None Kettering OH 229,246 488,393 None None Bristol TN 344,365 468,719 None None Clarksville TN 290,775 395,870 None None Vienna WV 324,797 526,670 None None Convenience Stores - ------------------ Manchester CT 118,262 305,510 None None Vernon CT 179,646 319,372 None None Westbrook CT 98,247 373,340 None None Archer FL 296,238 578,145 None 51 Gainesville FL 515,834 873,187 None None Gainesville FL 480,318 600,633 None None Gainesville FL 347,310 694,859 None None Gainesville FL 339,263 658,807 None None Gainesville FL 351,921 552,557 None None Gainesville FL 500,032 850,291 None None Jacksonville Bch FL 522,188 371,885 None None Orange Park FL 425,820 416,154 None None Augusta GA 320,000 382,323 None None Augusta GA 620,000 383,232 None None Augusta GA 540,000 337,853 None None Page F-52 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Consumer Electronics - -------------------- Muncie IN 148,901 645,235 794,136 Richmond IN 93,999 193,753 287,752 Topeka KS 974,960 3,472,226 4,447,186 Columbus MS 144,908 463,707 608,615 Greenville MS 144,588 433,764 578,352 Gulfport MS 299,464 502,326 801,790 Hattiesburg MS 198,659 457,379 656,038 Jackson MS 405,360 656,296 1,061,656 Meridian MS 181,156 515,598 696,754 Tupelo MS 121,697 637,691 759,388 Vicksburg MS 494,532 174,541 669,073 Pineville NC 567,864 858,540 1,426,404 Lakewood NY 144,859 526,301 671,160 Westbury NY 6,333,590 3,952,773 10,286,363 Defiance OH 97,978 601,863 699,841 Kettering OH 229,246 488,393 717,639 Bristol TN 344,365 468,719 813,084 Clarksville TN 290,775 395,870 686,645 Vienna WV 324,797 526,670 851,467 Convenience Stores - ------------------ Manchester CT 118,262 305,510 423,772 Vernon CT 179,646 319,372 499,018 Westbrook CT 98,247 373,340 471,587 Archer FL 296,238 578,196 874,434 Gainesville FL 515,834 873,187 1,389,021 Gainesville FL 480,318 600,633 1,080,951 Gainesville FL 347,310 694,859 1,042,169 Gainesville FL 339,263 658,807 998,070 Gainesville FL 351,921 552,557 904,478 Gainesville FL 500,032 850,291 1,350,323 Jacksonville Bch FL 522,188 371,885 894,073 Orange Park FL 425,820 416,154 841,974 Augusta GA 320,000 382,323 702,323 Augusta GA 620,000 383,232 1,003,232 Augusta GA 540,000 337,853 877,853 Page F-53 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Consumer Electronics - -------------------- Muncie IN 106,464 11/26/96 300 Richmond IN 31,969 11/26/96 300 Topeka KS 561,343 12/27/96 300 Columbus MS 76,512 11/26/96 300 Greenville MS 71,571 11/26/96 300 Gulfport MS 82,884 11/26/96 300 Hattiesburg MS 75,468 11/26/96 300 Jackson MS 108,289 11/26/96 300 Meridian MS 85,074 11/26/96 300 Tupelo MS 105,219 11/26/96 300 Vicksburg MS 28,799 11/26/96 300 Pineville NC 69,224 12/31/98 300 Lakewood NY 86,840 11/26/96 300 Westbury NY 520,060 09/29/97 300 Defiance OH 99,307 11/26/96 300 Kettering OH 80,585 11/26/96 300 Bristol TN 77,339 11/26/96 300 Clarksville TN 65,319 11/26/96 300 Vienna WV 86,901 11/26/96 300 Convenience Stores - ------------------ Manchester CT 70,777 03/03/95 300 Vernon CT 73,988 03/09/95 300 Westbrook CT 86,490 03/09/95 300 Archer FL 37,578 05/07/99 300 Gainesville FL 56,756 05/07/99 300 Gainesville FL 39,040 05/07/99 300 Gainesville FL 45,164 05/07/99 300 Gainesville FL 42,821 05/07/99 300 Gainesville FL 35,915 05/07/99 300 Gainesville FL 55,267 05/07/99 300 Jacksonville Bch FL 24,171 05/07/99 300 Orange Park FL 27,048 05/07/99 300 Augusta GA 22,299 07/22/99 300 Augusta GA 22,350 07/22/99 300 Augusta GA 19,704 07/22/99 300 Page F-54 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ Augusta GA 510,000 392,929 None None Augusta GA 180,000 422,020 None None Augusta GA 260,000 392,171 None None Dunwoody GA 545,462 724,254 None None Hephzibah GA 580,000 523,535 None None Lithonia GA 386,784 776,436 None None Mabelton GA 491,069 355,957 None None Martinez GA 450,000 402,777 None None Norcross GA 384,162 651,273 None None Stone Mountain GA 529,383 532,429 None None Godfrey IL 374,586 733,190 None None Granite City IL 362,287 737,255 None None Madison IL 173,812 625,030 None None New Albany IN 181,459 289,353 None None New Albany IN 262,465 331,796 None None Berea KY 252,077 360,815 None None Elizabethtown KY 286,106 286,106 None None Henderson KY 225,000 515,000 None None Lebanon KY 158,052 316,105 None None Louisville KY 216,849 605,697 None None Louisville KY 198,926 368,014 None None Mt. Washington KY 327,245 479,593 None None Owensboro KY 360,000 590,000 None None Seekonk MA 298,354 268,518 None None Flint MI 194,492 476,504 None None Cary NC 450,000 825,000 None None Greensboro NC 700,000 655,000 None None Greenville NC 330,000 515,000 None None Greenville NC 225,000 405,000 None None Jacksonville NC 150,000 530,000 None None Kinston NC 550,000 1,057,833 None None Kingston NY 257,763 456,042 None None Atwater OH 118,555 266,748 None None Columbus OH 273,085 471,693 None None Columbus OH 147,296 304,411 None None Cuyahoga Falls OH 297,982 357,579 None None Page F-55 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ Augusta GA 510,000 392,929 902,929 Augusta GA 180,000 422,020 602,020 Augusta GA 260,000 392,171 652,171 Dunwoody GA 545,462 724,254 1,269,716 Hephzibah GA 580,000 523,535 1,103,535 Lithonia GA 386,784 776,436 1,163,220 Mabelton GA 491,069 355,957 847,026 Martinez GA 450,000 402,777 852,777 Norcross GA 384,162 651,273 1,035,435 Stone Mountain GA 529,383 532,429 1,061,812 Godfrey IL 374,586 733,190 1,107,776 Granite City IL 362,287 737,255 1,099,542 Madison IL 173,812 625,030 798,842 New Albany IN 181,459 289,353 470,812 New Albany IN 262,465 331,796 594,261 Berea KY 252,077 360,815 612,892 Elizabethtown KY 286,106 286,106 572,212 Henderson KY 225,000 515,000 740,000 Lebanon KY 158,052 316,105 474,157 Louisville KY 216,849 605,697 822,546 Louisville KY 198,926 368,014 566,940 Mt. Washington KY 327,245 479,593 806,838 Owensboro KY 360,000 590,000 950,000 Seekonk MA 298,354 268,518 566,872 Flint MI 194,492 476,504 670,996 Cary NC 450,000 825,000 1,275,000 Greensboro NC 700,000 655,000 1,355,000 Greenville NC 330,000 515,000 845,000 Greenville NC 225,000 405,000 630,000 Jacksonville NC 150,000 530,000 680,000 Kinston NC 550,000 1,057,833 1,607,833 Kingston NY 257,763 456,042 713,805 Atwater OH 118,555 266,748 385,303 Columbus OH 273,085 471,693 744,778 Columbus OH 147,296 304,411 451,707 Cuyahoga Falls OH 297,982 357,579 655,561 Page F-56 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ Augusta GA 22,916 07/22/99 300 Augusta GA 24,615 07/22/99 300 Augusta GA 22,873 07/22/99 300 Dunwoody GA 102,533 06/27/97 300 Hephzibah GA 30,534 07/22/99 300 Lithonia GA 109,938 06/27/97 300 Mabelton GA 50,379 06/27/97 300 Martinez GA 23,491 07/22/99 300 Norcross GA 92,204 06/27/97 300 Stone Mountain GA 75,367 06/27/97 300 Godfrey IL 103,804 06/27/97 300 Granite City IL 104,382 06/27/97 300 Madison IL 88,502 06/27/97 300 New Albany IN 67,033 03/03/95 300 New Albany IN 76,866 03/06/95 300 Berea KY 83,589 03/08/95 300 Elizabethtown KY 66,281 03/03/95 300 Henderson KY 110,725 08/25/95 300 Lebanon KY 73,231 03/03/95 300 Louisville KY 109,901 06/18/96 11/17/95 300 Louisville KY 85,256 03/03/95 300 Mt. Washington KY 79,164 10/28/96 05/31/96 300 Owensboro KY 126,850 08/25/95 300 Seekonk MA 62,207 03/03/95 300 Flint MI 96,095 12/21/95 300 Cary NC 177,375 08/25/95 300 Greensboro NC 31,658 10/27/99 300 Greenville NC 110,725 08/25/95 300 Greenville NC 87,075 08/25/95 300 Jacksonville NC 113,950 08/25/95 300 Kinston NC 135,682 10/24/97 300 Kingston NY 104,130 04/06/95 300 Atwater OH 61,797 03/03/95 300 Columbus OH 95,125 12/21/95 300 Columbus OH 70,522 03/03/95 300 Cuyahoga Falls OH 82,839 03/03/95 300 Page F-57 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ Galion OH 138,981 327,597 None None Groveport OH 277,198 445,497 None None Perrysburg OH 211,678 390,680 None None Streetsboro OH 402,988 533,349 None None Tipp City OH 355,009 588,111 None None Triffin OH 117,017 273,040 None None Wadsworth OH 266,507 496,917 None None Tulsa OK 126,545 508,266 None None Aiken SC 320,000 432,527 None None Aiken SC 330,000 472,679 None None Aiken SC 560,000 543,588 None None Aiken SC 360,000 542,982 None None Aiken SC 540,000 388,058 None None Aiken SC 250,000 251,770 None None Belvedere SC 490,000 463,080 None None Columbia SC 150,000 450,000 None None Greenville SC 390,000 462,847 None None Greenville SC 300,000 402,392 None None Greenville SC 370,000 432,695 None None Greenville SC 620,000 483,604 None None Greenville SC 720,000 534,059 None None Greenville SC 680,000 423,604 None None Greer SC 400,000 502,879 None None Jackson SC 170,000 632,626 None None John's Isle SC 170,000 350,000 None None Lexington SC 640,000 563,891 None None Lexington SC 540,000 563,588 None None Lexington SC 360,000 843,891 None None Lexington SC 255,000 545,000 None None Mauldin SC 490,000 412,879 None None Myrtle Beach SC 140,000 590,000 None None North Augusta SC 400,000 452,777 None None North Augusta SC 350,000 352,323 None None North Charleston SC 400,000 650,000 None None Simpsonville SC 530,000 573,485 None None Spartanburg SC 470,000 432,879 None None Page F-58 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ Galion OH 138,981 327,597 466,578 Groveport OH 277,198 445,497 722,695 Perrysburg OH 211,678 390,680 602,358 Streetsboro OH 402,988 533,349 936,337 Tipp City OH 355,009 588,111 943,120 Triffin OH 117,017 273,040 390,057 Wadsworth OH 266,507 496,917 763,424 Tulsa OK 126,545 508,266 634,811 Aiken SC 320,000 432,527 752,527 Aiken SC 330,000 472,679 802,679 Aiken SC 560,000 543,588 1,103,588 Aiken SC 360,000 542,982 902,982 Aiken SC 540,000 388,058 928,058 Aiken SC 250,000 251,770 501,770 Belvedere SC 490,000 463,080 953,080 Columbia SC 150,000 450,000 600,000 Greenville SC 390,000 462,847 852,847 Greenville SC 300,000 402,392 702,392 Greenville SC 370,000 432,695 802,695 Greenville SC 620,000 483,604 1,103,604 Greenville SC 720,000 534,059 1,254,059 Greenville SC 680,000 423,604 1,103,604 Greer SC 400,000 502,879 902,879 Jackson SC 170,000 632,626 802,626 John's Isle SC 170,000 350,000 520,000 Lexington SC 640,000 563,891 1,203,891 Lexington SC 540,000 563,588 1,103,588 Lexington SC 360,000 843,891 1,203,891 Lexington SC 255,000 545,000 800,000 Mauldin SC 490,000 412,879 902,879 Myrtle Beach SC 140,000 590,000 730,000 North Augusta SC 400,000 452,777 852,777 North Augusta SC 350,000 352,323 702,323 North Charleston SC 400,000 650,000 1,050,000 Simpsonville SC 530,000 573,485 1,103,485 Spartanburg SC 470,000 432,879 902,879 Page F-59 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ Galion OH 75,893 03/06/95 300 Groveport OH 89,842 12/21/95 300 Perrysburg OH 63,511 01/10/96 09/01/95 300 Streetsboro OH 58,668 01/27/97 09/03/96 300 Tipp City OH 69,585 01/31/97 06/27/96 300 Triffin OH 63,254 03/07/95 300 Wadsworth OH 65,592 11/26/96 07/01/96 300 Tulsa OK 71,962 06/27/97 300 Aiken SC 25,227 07/22/99 300 Aiken SC 27,569 07/22/99 300 Aiken SC 31,704 07/22/99 300 Aiken SC 31,669 07/22/99 300 Aiken SC 22,632 07/22/99 300 Aiken SC 14,684 07/22/99 300 Belvedere SC 27,008 07/22/99 300 Columbia SC 96,750 08/25/95 300 Greenville SC 26,995 07/22/99 300 Greenville SC 23,469 07/22/99 300 Greenville SC 25,236 07/22/99 300 Greenville SC 28,205 07/22/99 300 Greenville SC 31,147 07/22/99 300 Greenville SC 24,705 07/22/99 300 Greer SC 29,330 07/22/99 300 Jackson SC 36,899 07/22/99 300 John's Isle SC 75,250 08/25/95 300 Lexington SC 32,888 07/22/99 300 Lexington SC 32,870 07/22/99 300 Lexington SC 49,221 07/22/99 300 Lexington SC 117,175 08/25/95 300 Mauldin SC 24,080 07/22/99 300 Myrtle Beach SC 126,850 08/25/95 300 North Augusta SC 26,408 07/22/99 300 North Augusta SC 20,549 07/22/99 300 North Charleston SC 139,750 08/25/95 300 Simpsonville SC 33,448 07/22/99 300 Spartanburg SC 25,247 07/22/99 300 Page F-60 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ Summerville SC 115,000 515,000 None None W. Columbia SC 410,000 693,574 None None West Aiken SC 400,000 402,665 None None La Vergne TN 340,000 650,000 None None Shelbyville TN 200,000 465,000 None None Hampton VA 433,985 459,108 None None Midlothian VA 325,000 302,872 None None Newport News VA 490,616 605,304 None None Richmond VA 700,000 400,740 None None Richmond VA 700,000 440,965 None None Richmond VA 400,000 250,875 None None Richmond VA 1,000,000 740 None None Richmond VA 700,000 100,695 None None Stafford VA 271,865 601,997 None None Warrenton VA 515,971 649,125 None None Yorktown VA 309,435 447,144 None None Craft and Novelty - ----------------- Cutler Ridge FL 743,498 657,485 None 4,362 Stony Brook NY 980,000 1,801,586 None None Drug Stores - ----------- Casselberry FL 1,075,020 1,664,284 None None Entertainment - ------------- Vista CA 2,300,000 22 None None Dania FL 8,272,080 1,713 None None Roswell GA 3,383,780 1,126 None None Flanders NJ 2,222,205 890 None 1,208 Brookhaven NY 1,500,000 745 None None Riverhead NY 3,800,000 744 None None General Merchandise - ------------------- Monte Vista CO 47,652 582,159 None None Groveland FL 101,782 189,258 None None Garnett KS 59,690 518,121 None None Page F-61 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ Summerville SC 115,000 515,000 630,000 W. Columbia SC 410,000 693,574 1,103,574 West Aiken SC 400,000 402,665 802,665 La Vergne TN 340,000 650,000 990,000 Shelbyville TN 200,000 465,000 665,000 Hampton VA 433,985 459,108 893,093 Midlothian VA 325,000 302,872 627,872 Newport News VA 490,616 605,304 1,095,920 Richmond VA 700,000 400,740 1,100,740 Richmond VA 700,000 440,965 1,140,965 Richmond VA 400,000 250,875 650,875 Richmond VA 1,000,000 740 1,000,740 Richmond VA 700,000 100,695 800,695 Stafford VA 271,865 601,997 873,862 Warrenton VA 515,971 649,125 1,165,096 Yorktown VA 309,435 447,144 756,579 Craft and Novelty - ----------------- Cutler Ridge FL 743,498 661,847 1,405,345 Stony Brook NY 980,000 1,801,586 2,781,586 Drug Stores - ----------- Casselberry FL 1,075,020 1,664,284 2,739,304 Entertainment - ------------- Vista CA 2,300,000 22 2,300,022 Dania FL 8,272,080 1,713 8,273,793 Roswell GA 3,383,780 1,126 3,384,906 Flanders NJ 2,222,205 2,098 2,224,303 Brookhaven NY 1,500,000 745 1,500,745 Riverhead NY 3,800,000 744 3,800,744 General Merchandise - ------------------- Monte Vista CO 47,652 582,159 629,811 Groveland FL 101,782 189,258 291,040 Garnett KS 59,690 518,121 577,811 Page F-62 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ Summerville SC 110,725 08/25/95 300 W. Columbia SC 40,453 07/22/99 300 West Aiken SC 23,485 07/22/99 300 La Vergne TN 139,750 08/25/95 300 Shelbyville TN 99,975 08/25/95 300 Hampton VA 49,726 04/17/98 300 Midlothian VA 40,841 08/21/97 300 Newport News VA 36,232 04/17/98 300 Richmond VA 43,406 04/17/98 300 Richmond VA 47,762 04/17/98 300 Richmond VA 27,169 04/17/98 300 Richmond VA 73 04/17/98 300 Richmond VA 10,902 04/17/98 300 Stafford VA 97,322 12/20/96 300 Warrenton VA 104,942 12/20/96 300 Yorktown VA 48,425 04/17/98 300 Craft and Novelty - ----------------- Cutler Ridge FL 53,709 12/31/98 300 Stony Brook NY 141,113 01/08/99 300 Drug Stores - ----------- Casselberry FL 152,587 09/30/98 300 Entertainment - ------------- Vista CA 1 03/31/99 300 Dania FL 100 03/31/99 300 Roswell GA 66 06/30/99 300 Flanders NJ 59 06/29/99 300 Brookhaven NY 43 07/23/99 300 Riverhead NY 43 07/23/99 300 General Merchandise - ------------------- Monte Vista CO 47,556 12/23/98 300 Groveland FL 13,560 03/31/99 300 Garnett KS 42,327 12/23/98 300 Page F-63 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ General Merchandise - ------------------- Caledonia MN 89,723 559,300 None None Long Prairie MN 88,892 553,997 None None Paynesville MN 49,483 525,406 None None Spring Valley MN 69,785 579,238 None None Warroad MN 70,000 580,000 None None Mayville ND 59,333 565,562 None None Bloomfield NM 59,559 616,252 None None Colorado City TX 92,535 505,276 None None Grocery - ------- Boulder CO 426,675 1,199,508 18,000 91,455 Sheboygan WI 1,513,216 4,426,578 None 279 Health and Fitness - ------------------ Diamond Bar CA 3,038,879 4,338,665 None None Norco CA 1,247,243 3,808,416 None None Paramount CA 86,400 278,827 None None Coral Springs FL 891,496 2,798,204 None None Miami FL 3,115,101 4,438,567 None None Pembroke Pines FL 1,714,388 3,649,751 None None Fort Worth TX 1,445,901 5,177,204 None None Home Furnishings - ---------------- Cathedral City CA 1,006,923 2,293,077 None 3,843 Danbury CT 630,171 3,621,163 None None Brandon FL 430,000 1,020,608 None None Jupiter FL 1,698,316 3,209,801 None None Tampa FL 685,000 885,624 None None Tampa FL 494,763 767,737 None 1,854 West Palm Beach FL 347,651 706,081 None 412 Winter Park FL 1,979,598 3,382,402 None 1,526 Davenport IA 270,000 930,689 None None Joilet IL 440,000 910,689 None None Wichita KS 430,000 740,725 None None Alexandria LA 400,000 810,608 None None Monroe LA 450,000 835,608 None None Page F-64 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- General Merchandise - ------------------- Caledonia MN 89,723 559,300 649,023 Long Prairie MN 88,892 553,997 642,889 Paynesville MN 49,483 525,406 574,889 Spring Valley MN 69,785 579,238 649,023 Warroad MN 70,000 580,000 650,000 Mayville ND 59,333 565,562 624,895 Bloomfield NM 59,559 616,252 675,811 Colorado City TX 92,535 505,276 597,811 Grocery - ------- Boulder CO 426,675 1,308,963 1,735,638 Sheboygan WI 1,513,216 4,426,857 5,940,073 Health and Fitness - ------------------ Diamond Bar CA 3,038,879 4,338,665 7,377,544 Norco CA 1,247,243 3,808,416 5,055,659 Paramount CA 86,400 278,827 365,227 Coral Springs FL 891,496 2,798,204 3,689,700 Miami FL 3,115,101 4,438,567 7,553,668 Pembroke Pines FL 1,714,388 3,649,751 5,364,139 Fort Worth TX 1,445,901 5,177,204 6,623,105 Home Furnishings - ---------------- Cathedral City CA 1,006,923 2,296,920 3,303,843 Danbury CT 630,171 3,621,163 4,251,334 Brandon FL 430,000 1,020,608 1,450,608 Jupiter FL 1,698,316 3,209,801 4,908,117 Tampa FL 685,000 885,624 1,570,624 Tampa FL 494,763 769,591 1,264,354 West Palm Beach FL 347,651 706,493 1,054,144 Winter Park FL 1,979,598 3,383,928 5,363,526 Davenport IA 270,000 930,689 1,200,689 Joilet IL 440,000 910,689 1,350,689 Wichita KS 430,000 740,725 1,170,725 Alexandria LA 400,000 810,608 1,210,608 Monroe LA 450,000 835,608 1,285,608 Page F-65 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- General Merchandise - ------------------- Caledonia MN 45,693 12/23/98 300 Long Prairie MN 45,258 12/23/98 300 Paynesville MN 42,923 12/23/98 300 Spring Valley MN 47,321 12/23/98 300 Warroad MN 47,367 12/23/98 300 Mayville ND 46,219 12/23/98 300 Bloomfield NM 50,341 12/23/98 300 Colorado City TX 41,278 12/23/98 300 Grocery - ------- Boulder CO 887,684 01/05/84 180 Sheboygan WI 243,478 06/03/99 08/24/98 300 Health and Fitness - ------------------ Diamond Bar CA 209,186 03/21/00 09/29/98 300 Norco CA 118,615 12/13/00 06/29/99 300 Paramount CA 278,827 11/22/83 180 Coral Springs FL 246,128 11/03/98 03/30/98 300 Miami FL 102,607 05/19/00 06/07/99 300 Pembroke Pines FL 31,882 12/11/00 10/01/99 300 Fort Worth TX 123,410 06/02/00 06/30/99 300 Home Furnishings - ---------------- Cathedral City CA 515,942 05/26/95 300 Danbury CT 476,544 09/30/97 300 Brandon FL 103,760 06/26/98 300 Jupiter FL 80,198 05/03/00 300 Tampa FL 90,036 06/26/98 300 Tampa FL 62,707 12/31/98 300 West Palm Beach FL 57,660 12/31/98 300 Winter Park FL 761,040 05/31/95 300 Davenport IA 94,618 06/26/98 300 Joilet IL 92,584 06/26/98 300 Wichita KS 75,305 06/26/98 300 Alexandria LA 82,410 06/26/98 300 Monroe LA 84,951 06/26/98 300 Page F-66 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Home Furnishings - ---------------- Shreveport LA 525,000 725,642 None None Battle Creek MI 485,000 895,689 None None Eden Prairie MN 500,502 1,055,244 None None Hattiesburg MS 300,000 660,608 None None Ridgeland MS 281,867 769,890 None None Omaha NE 1,956,296 3,949,402 None None Henderson NV 1,268,655 3,109,995 None None Staten Island NY 3,190,883 2,569,802 None None Lancaster OH 250,000 830,689 None None Altoona PA 455,000 745,694 None None Erie PA 510,000 900,689 None None Muncy PA 315,000 835,648 None None Whitehall PA 515,525 1,146,868 None None Columbia SC 600,000 900,725 None None Jackson TN 380,000 750,608 None None Memphis TN 804,262 1,432,520 None None Abilene TX 400,000 680,616 None None Arlington TX 475,069 1,374,167 None None Cedar Park TX 253,591 827,237 None None Houston TX 867,767 687,042 None None San Antonio TX 323,451 637,991 None 1,835 Spring TX 1,794,872 1,810,069 None None Webster TX 283,604 538,002 None None Eau Claire WI 260,000 820,689 None None La Crosse WI 372,883 877,812 None None Home Improvement - ---------------- Mesa AZ 619,035 867,013 None 374 Lawndale CA 667,007 1,238,841 None None Los Angeles CA 902,494 1,676,204 None None Los Angeles CA 163,668 304,097 None None Van Nuys CA 750,293 1,393,545 None None West Covina CA 311,040 577,733 None None Boca Raton FL 355,000 864,800 None 345 Clearwater FL 476,179 725,023 None 233 Deerfield Beach FL 475,000 869,092 None 714 Page F-67 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Home Furnishings - ---------------- Shreveport LA 525,000 725,642 1,250,642 Battle Creek MI 485,000 895,689 1,380,689 Eden Prairie MN 500,502 1,055,244 1,555,746 Hattiesburg MS 300,000 660,608 960,608 Ridgeland MS 281,867 769,890 1,051,757 Omaha NE 1,956,296 3,949,402 5,905,698 Henderson NV 1,268,655 3,109,995 4,378,650 Staten Island NY 3,190,883 2,569,802 5,760,685 Lancaster OH 250,000 830,689 1,080,689 Altoona PA 455,000 745,694 1,200,694 Erie PA 510,000 900,689 1,410,689 Muncy PA 315,000 835,648 1,150,648 Whitehall PA 515,525 1,146,868 1,662,393 Columbia SC 600,000 900,725 1,500,725 Jackson TN 380,000 750,608 1,130,608 Memphis TN 804,262 1,432,520 2,236,782 Abilene TX 400,000 680,616 1,080,616 Arlington TX 475,069 1,374,167 1,849,236 Cedar Park TX 253,591 827,237 1,080,828 Houston TX 867,767 687,042 1,554,809 San Antonio TX 323,451 639,826 963,277 Spring TX 1,794,872 1,810,069 3,604,941 Webster TX 283,604 538,002 821,606 Eau Claire WI 260,000 820,689 1,080,689 La Crosse WI 372,883 877,812 1,250,695 Home Improvement - ---------------- Mesa AZ 619,035 867,387 1,486,422 Lawndale CA 667,007 1,238,841 1,905,848 Los Angeles CA 902,494 1,676,204 2,578,698 Los Angeles CA 163,668 304,097 467,765 Van Nuys CA 750,293 1,393,545 2,143,838 West Covina CA 311,040 577,733 888,773 Boca Raton FL 355,000 865,145 1,220,145 Clearwater FL 476,179 725,256 1,201,435 Deerfield Beach FL 475,000 869,806 1,344,806 Page F-68 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Home Furnishings - ---------------- Shreveport LA 73,772 06/26/98 300 Battle Creek MI 91,059 06/26/98 300 Eden Prairie MN 79,107 02/26/99 300 Hattiesburg MS 67,160 06/26/98 300 Ridgeland MS 108,983 06/27/97 300 Omaha NE 585,603 04/04/97 300 Henderson NV 409,277 09/26/97 300 Staten Island NY 286,733 03/26/98 300 Lancaster OH 84,451 06/26/98 300 Altoona PA 75,810 06/26/98 300 Erie PA 91,568 06/26/98 300 Muncy PA 84,955 06/26/98 300 Whitehall PA 116,596 06/30/98 300 Columbia SC 91,571 06/26/98 300 Jackson TN 76,310 06/26/98 300 Memphis TN 202,805 06/30/97 300 Abilene TX 69,194 06/26/98 300 Arlington TX 208,286 03/26/97 300 Cedar Park TX 125,387 03/10/97 300 Houston TX 104,079 03/07/97 300 San Antonio TX 52,102 12/31/98 300 Spring TX 238,141 09/29/97 300 Webster TX 76,162 06/12/97 300 Eau Claire WI 83,434 06/26/98 300 La Crosse WI 89,242 06/26/98 300 Home Improvement - ---------------- Mesa AZ 65,020 02/11/99 300 Lawndale CA 101,170 12/31/98 300 Los Angeles CA 136,888 12/31/98 300 Los Angeles CA 24,832 12/31/98 300 Van Nuys CA 113,804 12/31/98 300 West Covina CA 47,181 12/31/98 300 Boca Raton FL 43,763 08/03/99 01/29/99 300 Clearwater FL 59,203 12/31/98 300 Deerfield Beach FL 61,272 02/25/99 01/29/99 300 Page F-69 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Home Improvement - ---------------- Jacksonville FL 478,314 618,348 None 266 Port Orange FL 500,000 1,212,813 None 63 Seminole FL 593,304 767,184 None 84 Tampa FL 347,794 905,248 None 501 West Palm Beach FL 698,664 1,223,504 None 2,100 Des Moines IA 225,771 682,604 None None Broadview IL 345,166 641,739 None None Indianapolis IN 350,000 671,472 None 59 Baltimore MD 171,320 318,882 None None Huntersville NC 530,000 1,016,022 None 4 Albuquerque NM 684,036 874,914 None 104 Rochester NY 158,168 294,456 None None Reading PA 201,569 375,056 None None Pasadena TX 147,535 274,521 None None Plano TX 363,851 676,249 None None San Antonio TX 432,389 816,532 None 1,841 San Antonio TX 367,890 683,750 None None Riverdale UT 346,861 694,612 None 194 Chesapeake VA 144,014 649,869 None 11,754 Office Supplies - --------------- Lakewood CA 1,398,387 3,098,607 None None Riverside CA 1,410,177 1,659,850 None None Hutchinson KS 269,964 1,704,013 None None Salina KS 240,423 1,829,837 None None Helena MT 564,241 1,503,118 None None Asheboro NC 465,557 2,176,416 None None Westbury NY 3,808,076 2,377,932 None None New Philadelphia OH 726,636 1,650,672 None None Pet Supplies and Services - ------------------------- Duluth GA 254,100 1,121,270 None None Marrietta GA 350,000 1,079,379 None None Indianapolis IN 427,000 1,296,901 None None Sudbury MA 385,000 1,759,125 None None Tyngsborough MA 312,204 1,222,522 None None Page F-70 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Home Improvement - ---------------- Jacksonville FL 478,314 618,614 1,096,928 Port Orange FL 500,000 1,212,876 1,712,876 Seminole FL 593,304 767,268 1,360,572 Tampa FL 347,794 905,749 1,253,543 West Palm Beach FL 698,664 1,225,604 1,924,268 Des Moines IA 225,771 682,604 908,375 Broadview IL 345,166 641,739 986,905 Indianapolis IN 350,000 671,531 1,021,531 Baltimore MD 171,320 318,882 490,202 Huntersville NC 530,000 1,016,026 1,546,026 Albuquerque NM 684,036 875,018 1,559,054 Rochester NY 158,168 294,456 452,624 Reading PA 201,569 375,056 576,625 Pasadena TX 147,535 274,521 422,056 Plano TX 363,851 676,249 1,040,100 San Antonio TX 432,389 818,373 1,250,762 San Antonio TX 367,890 683,750 1,051,640 Riverdale UT 346,861 694,806 1,041,667 Chesapeake VA 144,014 661,623 805,637 Office Supplies - --------------- Lakewood CA 1,398,387 3,098,607 4,496,994 Riverside CA 1,410,177 1,659,850 3,070,027 Hutchinson KS 269,964 1,704,013 1,973,977 Salina KS 240,423 1,829,837 2,070,260 Helena MT 564,241 1,503,118 2,067,359 Asheboro NC 465,557 2,176,416 2,641,973 Westbury NY 3,808,076 2,377,932 6,186,008 New Philadelphia OH 726,636 1,650,672 2,377,308 Pet Supplies and Services - ------------------------- Duluth GA 254,100 1,121,270 1,375,370 Marrietta GA 350,000 1,079,379 1,429,379 Indianapolis IN 427,000 1,296,901 1,723,901 Sudbury MA 385,000 1,759,125 2,144,125 Tyngsborough MA 312,204 1,222,522 1,534,726 Page F-71 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Home Improvement - ---------------- Jacksonville FL 50,499 12/31/98 300 Port Orange FL 74,990 05/11/99 01/29/99 300 Seminole FL 62,646 12/31/98 300 Tampa FL 73,911 12/31/98 300 West Palm Beach FL 99,913 12/31/98 300 Des Moines IA 53,463 01/29/99 300 Broadview IL 52,419 12/31/98 300 Indianapolis IN 43,616 03/29/99 01/29/99 300 Baltimore MD 26,053 12/31/98 300 Huntersville NC 59,550 12/18/98 01/29/99 300 Albuquerque NM 71,429 12/31/98 300 Rochester NY 24,058 12/31/98 300 Reading PA 30,640 12/31/98 300 Pasadena TX 22,421 12/31/98 300 Plano TX 55,229 12/31/98 300 San Antonio TX 66,667 12/31/98 300 San Antonio TX 55,842 12/31/98 300 Riverdale UT 56,710 12/31/98 300 Chesapeake VA 419,380 12/22/86 300 Office Supplies - --------------- Lakewood CA 490,537 01/29/97 300 Riverside CA 218,481 09/17/97 300 Hutchinson KS 241,322 06/25/97 300 Salina KS 259,139 06/25/97 300 Helena MT 212,808 06/09/97 300 Asheboro NC 242,901 03/27/98 300 Westbury NY 312,847 09/29/97 300 New Philadelphia OH 239,239 05/30/97 300 Pet Supplies and Services - ------------------------- Duluth GA 80,369 01/27/99 09/29/98 300 Marrietta GA 60,275 05/28/99 09/29/98 300 Indianapolis IN 33,227 03/10/00 01/19/99 300 Sudbury MA 67,240 11/12/99 09/30/98 300 Tyngsborough MA 124,283 06/12/98 300 Page F-72 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Pet Supplies and Services - ------------------------- Matthews NC 610,177 1,394,743 None None North Plainfield NJ 0 1,038,855 None None Dickson City PA 659,790 1,880,722 None None Private Education - ----------------- Coconut Creek FL 310,111 1,243,682 None None North Lauderdale FL 1,050,000 2,567,811 None None Las Vegas NV 1,080,444 3,346,772 None None Centerville VA 688,917 2,339,688 None None Springfield VA 300,000 1,191,381 None None Tacoma WA 255,000 718,614 53,612 24,142 Restaurants - ----------- Siloam Springs AR 190,000 352,808 None None Douglas AZ 75,000 347,719 None 312 Glendale AZ 624,761 895,976 None None Tucson AZ 107,393 497,904 None None Yuma AZ 236,121 541,651 None None Barstow CA 689,842 690,204 None None Diamond Bar CA 76,117 183,052 None 25,858 Hemet CA 106,164 199,179 11,922 7 Livermore CA 662,161 823,242 None None Northridge CA -- -- None None Rancho Cucamonga CA 230,733 481,225 None None Rancho Cucamonga CA 95,192 441,334 None None Red Bluff CA 136,740 633,984 None None Riverside CA 90,000 170,394 None None Sacramento CA 386,793 417,290 None None San Dimas CA 240,562 445,521 None None San Ramon CA 406,000 1,126,930 None None Tustin CA -- -- None 73 Colorado Springs CO 152,000 704,736 None None Colorado Springs CO 313,250 695,730 None None Montrose CO 217,595 483,284 None None Sterling CO 95,320 441,928 None None Westminster CO 338,940 1,571,401 20,000 13,440 Page F-73 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Pet Supplies and Services - ------------------------- Matthews NC 610,177 1,394,743 2,004,920 North Plainfield NJ 0 1,038,855 1,038,855 Dickson City PA 659,790 1,880,722 2,540,512 Private Education - ----------------- Coconut Creek FL 310,111 1,243,682 1,553,793 North Lauderdale FL 1,050,000 2,567,811 3,617,811 Las Vegas NV 1,080,444 3,346,772 4,427,216 Centerville VA 688,917 2,339,688 3,028,605 Springfield VA 300,000 1,191,381 1,491,381 Tacoma WA 255,000 796,368 1,051,368 Restaurants - ----------- Siloam Springs AR 190,000 352,808 542,808 Douglas AZ 75,000 348,031 423,031 Glendale AZ 624,761 895,976 1,520,737 Tucson AZ 107,393 497,904 605,297 Yuma AZ 236,121 541,651 777,772 Barstow CA 689,842 690,204 1,380,046 Diamond Bar CA 76,117 208,910 285,027 Hemet CA 106,164 211,108 317,272 Livermore CA 662,161 823,242 1,485,403 Northridge CA -- -- -- Rancho Cucamonga CA 230,733 481,225 711,958 Rancho Cucamonga CA 95,192 441,334 536,526 Red Bluff CA 136,740 633,984 770,724 Riverside CA 90,000 170,394 260,394 Sacramento CA 386,793 417,290 804,083 San Dimas CA 240,562 445,521 686,083 San Ramon CA 406,000 1,126,930 1,532,930 Tustin CA -- 73 73 Colorado Springs CO 152,000 704,736 856,736 Colorado Springs CO 313,250 695,730 1,008,980 Montrose CO 217,595 483,284 700,879 Sterling CO 95,320 441,928 537,248 Westminster CO 338,940 1,604,841 1,943,781 Page F-74 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Office Supplies - --------------- Matthews NC 137,150 07/17/98 300 North Plainfield NJ 95,292 09/24/98 300 Dickson City PA 266,201 06/20/97 300 Private Education - ----------------- Coconut Creek FL 68,689 08/02/99 12/01/98 300 North Lauderdale FL 286,611 03/30/98 300 Las Vegas NV 373,627 03/04/98 300 Centerville VA 144,575 05/07/99 09/30/98 300 Springfield VA 26,114 11/08/99 300 Tacoma WA 551,313 11/06/84 300 Restaurants - ----------- Siloam Springs AR 44,090 11/20/97 300 Douglas AZ 235,008 11/27/85 300 Glendale AZ 171,729 03/06/96 300 Tucson AZ 335,372 01/17/86 300 Yuma AZ 56,870 05/28/98 300 Barstow CA 63,271 09/24/98 300 Diamond Bar CA 187,128 09/25/78 300 Hemet CA 195,423 04/15/77 300 Livermore CA 75,467 09/23/98 300 Northridge CA -- 04/01/70 N/A Rancho Cucamonga CA 481,225 04/03/81 180 Rancho Cucamonga CA 296,614 12/20/85 300 Red Bluff CA 397,125 12/18/86 300 Riverside CA 167,720 12/09/76 300 Sacramento CA 41,034 07/31/98 300 San Dimas CA 445,521 03/12/81 180 San Ramon CA 1,126,930 12/08/83 180 Tustin CA -- 09/16/70 N/A Colorado Springs CO 449,546 09/30/86 300 Colorado Springs CO 355,112 03/10/87 300 Montrose CO 233,700 12/17/87 300 Sterling CO 324,521 12/27/84 300 Westminster CO 1,222,592 06/28/84 300 Page F-75 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Casselberry FL 403,900 897,075 None None Green Cove Sprgs FL 86,240 399,828 None 226 Jacksonville FL 150,210 693,445 None None Jacksonville FL 143,299 664,373 None None Orlando FL 230,000 1,066,339 None None Orlando FL 209,800 972,679 None None Orlando FL 600,000 949,489 None None Oviedo FL 204,200 911,338 None None Palm Bay FL 330,000 556,668 None None Garden City GA 197,225 438,043 None None Hinesville GA 89,220 413,644 None None Hinesville GA 172,611 383,376 None None Lithonia GA 89,220 413,647 None 226 Savannah GA 143,993 345,548 None None Savannah GA 165,409 367,380 None None Statesboro GA 201,250 446,983 None None Stone Mountain GA 215,940 1,001,188 None 226 Ankeny IA 100,000 349,218 None None Boone IA 76,000 386,170 None None Boise ID 190,894 423,981 None None Boise ID 161,352 334,041 None None Nampa ID 74,156 343,820 None None Rexburg ID 90,760 420,787 None None Alton IL 225,785 419,315 None None Dixon IL 230,090 511,036 None None Salem IL 213,815 474,892 None None Anderson IN 197,523 438,706 None None Bedford IN 311,815 692,543 None None Decatur IN 181,020 385,618 None None Goshen IN 115,000 533,165 None None Muncie IN 136,400 632,380 8,000 13,335 Muncie IN 67,156 149,157 None None New Castle IN 246,192 320,572 None None Shelbyville IN 128,820 597,263 None None South Bend IN 133,200 617,545 None 19,211 Westfield IN 213,341 477,300 None None Page F-76 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Casselberry FL 403,900 897,075 1,300,975 Green Cove Sprgs FL 86,240 400,054 486,294 Jacksonville FL 150,210 693,445 843,655 Jacksonville FL 143,299 664,373 807,672 Orlando FL 230,000 1,066,339 1,296,339 Orlando FL 209,800 972,679 1,182,479 Orlando FL 600,000 949,489 1,549,489 Oviedo FL 204,200 911,338 1,115,538 Palm Bay FL 330,000 556,668 886,668 Garden City GA 197,225 438,043 635,268 Hinesville GA 89,220 413,644 502,864 Hinesville GA 172,611 383,376 555,987 Lithonia GA 89,220 413,873 503,093 Savannah GA 143,993 345,548 489,541 Savannah GA 165,409 367,380 532,789 Statesboro GA 201,250 446,983 648,233 Stone Mountain GA 215,940 1,001,414 1,217,354 Ankeny IA 100,000 349,218 449,218 Boone IA 76,000 386,170 462,170 Boise ID 190,894 423,981 614,875 Boise ID 161,352 334,041 495,393 Nampa ID 74,156 343,820 417,976 Rexburg ID 90,760 420,787 511,547 Alton IL 225,785 419,315 645,100 Dixon IL 230,090 511,036 741,126 Salem IL 213,815 474,892 688,707 Anderson IN 197,523 438,706 636,229 Bedford IN 311,815 692,543 1,004,358 Decatur IN 181,020 385,618 566,638 Goshen IN 115,000 533,165 648,165 Muncie IN 136,400 653,715 790,115 Muncie IN 67,156 149,157 216,313 New Castle IN 246,192 320,572 566,764 Shelbyville IN 128,820 597,263 726,083 South Bend IN 133,200 636,756 769,956 Westfield IN 213,341 477,300 690,641 Page F-77 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Casselberry FL 364,223 12/29/89 300 Green Cove Sprgs FL 293,605 12/19/84 300 Jacksonville FL 475,709 09/13/85 300 Jacksonville FL 448,331 12/13/85 300 Orlando FL 720,690 11/18/85 300 Orlando FL 626,909 08/15/86 300 Orlando FL 61,938 05/27/99 12/18/98 300 Oveido FL 29,012 08/24/99 300 Palm Bay FL 40,016 02/17/99 12/29/98 300 Garden City GA 191,172 04/20/89 300 Hinesville GA 303,749 12/20/84 300 Hinesville GA 185,389 12/22/87 300 Lithonia GA 303,340 01/04/85 300 Savannah GA 167,096 12/22/87 300 Savannah GA 177,653 12/22/87 300 Statesboro GA 185,945 11/14/89 300 Stone Mountain GA 634,819 10/30/86 300 Ankeny IA 349,218 07/28/83 180 Boone IA 386,170 12/27/83 180 Boise ID 198,745 05/17/88 300 Boise ID 151,661 10/07/88 300 Nampa ID 215,367 12/31/86 300 Rexburg ID 284,392 11/25/85 300 Alton IL 190,378 10/18/88 300 Dixon IL 247,105 12/28/87 300 Salem IL 232,465 10/30/87 300 Anderson IN 204,352 03/25/88 300 Bedford IN 345,198 07/15/87 300 Decatur IN 196,824 03/31/87 300 Goshen IN 345,664 07/07/86 300 Muncie IN 422,566 03/18/86 300 Muncie IN 70,801 03/30/88 300 New Castle IN 163,133 01/07/87 300 Shelbyville IN 374,122 12/18/86 300 South Bend IN 420,263 04/28/86 300 Westfield IN 195,281 12/21/89 300 Page F-78 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Derby KS 96,060 445,359 None None El Dorado KS 87,400 405,206 None None Great Bend KS 95,800 444,154 None None Wichita KS 98,000 454,350 None None Lexington KY 122,200 490,200 None None Alexandria LA 143,000 662,985 None 15,000 Jennings LA 107,120 496,636 None None La Plata MD 120,140 557,000 None None Flint MI 827,853 -- None None Sturgis MI 210,560 467,659 None None Albert Lea MN 213,150 473,412 None 165 Red Wing MN 248,325 551,541 None 165 Roseville MN 281,600 1,305,560 None None Belton MO 89,328 418,187 None 234 Blue Springs MO 111,440 516,665 None 234 Carthage MO 85,020 394,175 None None Chillicothe MO 81,080 375,908 None 234 Fulton MO 210,199 466,861 None None Hannibal MO 266,011 590,822 None 234 Hazelwood MO 157,117 725,327 None 12,930 Jackson MO 210,199 466,860 None None Mt. Vernon MO 160,000 282,586 None None Nevada MO 222,552 494,296 None 234 Ozark MO 140,000 292,482 None None Sedalia MO 269,798 599,231 None None St. Charles MO 695,121 1,001,878 None 1,001 St. Charles MO 175,413 809,791 None 10,000 St. Joseph MO 107,648 496,958 None None Sullivan MO 85,500 396,400 None 234 Clinton MS 100,000 337,371 None None Southaven MS 263,900 582,303 None None Fayetteville NC 116,240 538,919 None None Wilkesboro NC 183,050 406,562 None None Omaha NE 629,592 1,051,244 None 2,826 Amherst NY 935,355 896,819 5,342 54,045 Fulton NY 294,009 653,006 None None Page F-79 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Derby KS 96,060 445,359 541,419 El Dorado KS 87,400 405,206 492,606 Great Bend KS 95,800 444,154 539,954 Wichita KS 98,000 454,350 552,350 Lexington KY 122,200 490,200 612,400 Alexandria LA 143,000 677,985 820,985 Jennings LA 107,120 496,636 603,756 La Plata MD 120,140 557,000 677,140 Flint MI 827,853 -- 827,853 Sturgis MI 210,560 467,659 678,219 Albert Lea MN 213,150 473,577 686,727 Red Wing MN 248,325 551,706 800,031 Roseville MN 281,600 1,305,560 1,587,160 Belton MO 89,328 418,421 507,749 Blue Springs MO 111,440 516,899 628,339 Carthage MO 85,020 394,175 479,195 Chillicothe MO 81,080 376,142 457,222 Fulton MO 210,199 466,861 677,060 Hannibal MO 266,011 591,056 857,067 Hazelwood MO 157,117 738,257 895,374 Jackson MO 210,199 466,860 677,059 Mt. Vernon MO 160,000 282,586 442,586 Nevada MO 222,552 494,530 717,082 Ozark MO 140,000 292,482 432,482 Sedalia MO 269,798 599,231 869,029 St. Charles MO 695,121 1,002,879 1,698,000 St. Charles MO 175,413 819,791 995,204 St. Joseph MO 107,648 496,958 604,606 Sullivan MO 85,500 396,634 482,134 Clinton MS 100,000 337,371 437,371 Southaven MS 263,900 582,303 846,203 Fayetteville NC 116,240 538,919 655,159 Wilkesboro NC 183,050 406,562 589,612 Omaha NE 629,592 1,054,070 1,683,662 Amherst NY 935,355 956,206 1,891,561 Fulton NY 294,009 653,006 947,015 Page F-80 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Derby KS 302,673 10/29/85 300 El Dorado KS 267,322 04/10/86 300 Great Bend KS 326,153 12/26/84 300 Wichita KS 292,836 08/08/86 300 Lexington KY 308,446 12/03/86 300 Alexandria LA 455,830 01/17/86 300 Jennings LA 337,522 10/17/85 300 La Plata MD 375,875 12/03/85 300 Flint MI -- 04/13/95 300 Sturgis MI 227,533 11/12/87 300 Albert Lea MN 228,939 12/16/87 300 Red Wing MN 266,683 12/30/87 300 Roseville MN 958,707 12/18/84 300 Belton MO 307,087 12/18/84 300 Blue Springs MO 379,401 12/28/84 300 Carthage MO 265,996 12/03/85 300 Chillicothe MO 276,040 12/26/84 300 Fulton MO 232,707 07/30/87 300 Hannibal MO 294,495 07/30/87 300 Hazelwood MO 502,536 08/28/85 300 Jackson MO 232,707 07/30/87 300 Mt. Vernon MO 35,313 11/20/97 300 Nevada MO 246,382 07/30/87 300 Ozark MO 36,550 11/20/97 300 Sedalia MO 259,740 07/31/89 300 St. Charles MO 201,375 12/22/95 03/16/95 300 St. Charles MO 562,529 08/28/85 300 St. Joseph MO 340,913 09/04/85 300 Sullivan MO 291,086 12/27/84 300 Clinton MS 337,371 07/28/83 180 Southaven MS 293,730 05/11/87 300 Fayetteville NC 395,742 12/20/84 300 Wilkesboro NC 202,652 07/24/87 300 Omaha NE 233,026 06/02/95 02/24/95 300 Amherst NY 185,191 12/21/95 05/31/95 300 Fulton NY 314,972 12/24/87 300 Page F-81 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Watertown NY 139,199 645,355 None None Akron OH 723,347 17 None None Ashland OH 120,740 559,801 None 11 Celina OH 207,060 459,841 None None Stow OH 317,546 712,455 None None Troy OH 130,540 605,238 None None Wash. Courthouse OH 123,120 570,836 None 176 Wilmington OH 119,320 553,217 None 176 Broken Arrow OK 245,000 369,002 None None Norman OK 734,335 -- None None Oklahoma City OK 759,826 -- None None Owasso OK 247,450 549,597 None None Ponca City OK 234,990 521,923 None None Corvallis OR 172,788 383,766 None 3 Hermiston OR 85,560 396,675 None None Lake Oswego OR 175,899 815,508 None 3 Milwaukie OR 179,174 830,689 None 3 Salem OR 198,540 440,964 None 3 Connellsville PA 264,670 587,843 None None Waynesburg PA 222,285 493,704 None None Pierre SD 251,790 559,232 None None Memphis TN 405,274 1,060,680 None 1,749 Nashville TN 484,975 1,192,627 20,000 31,098 Allen TX 165,000 306,771 None None Athens TX 245,245 544,700 None None Bedford TX 919,303 98,231 None None Beeville TX 250,490 556,349 None None Brownwood TX 288,225 640,160 None None Crockett TX 90,780 420,880 None None Dallas TX 742,507 -- None None Dallas TX 242,025 479,170 None None El Campo TX 98,060 454,631 None None Ennis TX 173,250 384,793 None None Fort Worth TX 223,195 492,067 None None Fort Worth TX 423,281 382,059 None None Gainesville TX 89,220 413,644 None None Page F-82 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Watertown NY 139,199 645,355 784,554 Akron OH 723,347 17 723,364 Ashland OH 120,740 559,812 680,552 Celina OH 207,060 459,841 666,901 Stow OH 317,546 712,455 1,030,001 Troy OH 130,540 605,238 735,778 Wash. Courthouse OH 123,120 571,012 694,132 Wilmington OH 119,320 553,393 672,713 Broken Arrow OK 245,000 369,002 614,002 Norman OK 734,335 -- 734,335 Oklahoma City OK 759,826 -- 759,826 Owasso OK 247,450 549,597 797,047 Ponca City OK 234,990 521,923 756,913 Corvallis OR 172,788 383,769 556,557 Hermiston OR 85,560 396,675 482,235 Lake Oswego OR 175,899 815,511 991,410 Milwaukie OR 179,174 830,692 1,009,866 Salem OR 198,540 440,967 639,507 Connellsville PA 264,670 587,843 852,513 Waynesburg PA 222,285 493,704 715,989 Pierre SD 251,790 559,232 811,022 Memphis TN 405,274 1,062,429 1,467,703 Nashville TN 484,975 1,243,725 1,728,700 Allen TX 165,000 306,771 471,771 Athens TX 245,245 544,700 789,945 Bedford TX 919,303 98,231 1,017,534 Beeville TX 250,490 556,349 806,839 Brownwood TX 288,225 640,160 928,385 Crockett TX 90,780 420,880 511,660 Dallas TX 742,507 -- 742,507 Dallas TX 242,025 479,170 721,195 El Campo TX 98,060 454,631 552,691 Ennis TX 173,250 384,793 558,043 Fort Worth TX 223,195 492,067 715,262 Fort Worth TX 423,281 382,059 805,340 Gainesville TX 89,220 413,644 502,864 Page F-83 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Watertown NY 414,136 08/18/86 300 Akron OH 2 12/22/94 300 Ashland OH 350,655 12/19/86 300 Celina OH 237,470 01/02/87 300 Stow OH 343,853 12/31/87 300 Troy OH 380,831 12/05/86 300 Wash. Courthouse OH 357,568 12/19/86 300 Wilmington OH 346,533 12/31/86 300 Broken Arrow OK 44,893 12/12/97 300 Norman OK -- 09/29/95 06/05/95 300 Oklahoma City OK -- 07/06/95 300 Owasso OK 265,768 12/28/87 300 Ponca City OK 252,385 12/30/87 300 Corvallis OR 185,577 12/22/87 300 Hermiston OR 291,288 12/18/84 300 Lake Oswego OR 620,150 05/16/84 300 Milwaukie OR 633,931 05/08/84 300 Salem OR 188,933 05/23/89 300 Connellsville PA 291,258 08/17/87 300 Waynesburg PA 244,614 08/17/87 300 Pierre SD 270,426 12/01/87 300 Memphis TN 231,582 06/30/95 03/17/95 300 Nashville TN 1,231,602 05/20/83 180 Allen TX 17,895 07/09/99 05/28/99 300 Athens TX 263,399 12/01/87 300 Bedford TX 98,231 12/27/94 300 Beeville TX 277,313 07/31/87 300 Brownwood TX 309,458 12/28/87 300 Crockett TX 282,869 12/17/85 300 Dallas TX -- 04/13/95 300 Dallas TX 173,024 06/25/91 300 El Campo TX 307,265 11/25/85 300 Ennis TX 186,074 12/28/87 300 Fort Worth TX 187,180 06/26/91 300 Fort Worth TX 89,784 02/10/95 300 Gainesville TX 303,749 12/18/84 300 Page F-84 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Hewitt TX 120,240 207,216 None None Hillsboro TX 75,992 352,316 None None Houston TX 194,994 386,056 None None Houston TX 184,175 364,636 None None Killeen TX 262,500 583,014 None 14,398 Lufkin TX 105,904 490,998 None None Mesquite TX 729,596 120,820 None None Mesquite TX 134,940 625,612 None None Mexia TX 93,620 434,046 None None New Braunfels TX 185,500 411,997 None None Orange TX 93,560 433,768 None None Plainview TX 125,000 350,767 None None Port Lavaca TX 244,759 543,619 None None Porter TX 227,067 333,031 None None Rowlett TX 126,933 585,986 None None Santa Fe TX 304,414 623,331 None None Sealy TX 197,871 391,753 None None Stafford TX 214,024 423,733 None None Temple TX 302,505 291,414 None None Vidor TX 90,618 420,124 None None Waxahachie TX 326,935 726,137 None None Cedar City UT 130,000 296,544 None None Orem UT 516,129 1,004,608 None None Sandy UT 635,945 884,792 None None Norfolk VA 251,207 575,250 None 12,983 Virginia Beach VA 314,790 699,161 None None Auburn WA 301,595 669,851 None None Marysville WA 276,273 613,612 None None Oak Harbor WA 275,940 612,874 None None Redmond WA 610,334 1,262,104 None None Spokane WA 479,531 646,719 None None Tacoma WA 198,857 921,947 None 653 Grafton WI 149,778 332,664 None None Monroe WI 193,130 428,947 None 279 Portage WI 199,605 443,328 None 279 Shawano WI 205,730 456,932 None 279 Page F-85 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Hewitt TX 120,240 207,216 327,456 Hillsboro TX 75,992 352,316 428,308 Houston TX 194,994 386,056 581,050 Houston TX 184,175 364,636 548,811 Killeen TX 262,500 597,412 859,912 Lufkin TX 105,904 490,998 596,902 Mesquite TX 729,596 120,820 850,416 Mesquite TX 134,940 625,612 760,552 Mexia TX 93,620 434,046 527,666 New Braunfels TX 185,500 411,997 597,497 Orange TX 93,560 433,768 527,328 Plainview TX 125,000 350,767 475,767 Port Lavaca TX 244,759 543,619 788,378 Porter TX 227,067 333,031 560,098 Rowlett TX 126,933 585,986 712,919 Santa Fe TX 304,414 623,331 927,745 Sealy TX 197,871 391,753 589,624 Stafford TX 214,024 423,733 637,757 Temple TX 302,505 291,414 593,919 Vidor TX 90,618 420,124 510,742 Waxahachie TX 326,935 726,137 1,053,072 Cedar City UT 130,000 296,544 426,544 Orem UT 516,129 1,004,608 1,520,737 Sandy UT 635,945 884,792 1,520,737 Norfolk VA 251,207 588,233 839,440 Virginia Beach VA 314,790 699,161 1,013,951 Auburn WA 301,595 669,851 971,446 Marysville WA 276,273 613,612 889,885 Oak Harbor WA 275,940 612,874 888,814 Redmond WA 610,334 1,262,104 1,872,438 Spokane WA 479,531 646,719 1,126,250 Tacoma WA 198,857 922,600 1,121,457 Grafton WI 149,778 332,664 482,442 Monroe WI 193,130 429,226 622,356 Portage WI 199,605 443,607 643,212 Shawano WI 205,730 457,211 662,941 Page F-86 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Hewitt TX 13,466 05/28/99 300 Hillsboro TX 265,307 08/01/84 300 Houston TX 139,401 06/25/91 300 Houston TX 131,667 06/25/91 300 Killeen TX 298,296 05/29/87 300 Lufkin TX 335,023 10/08/85 300 Mesquite TX 120,820 12/23/94 300 Mesquite TX 413,369 03/20/86 300 Mexia TX 291,718 12/18/85 300 New Braunfels TX 210,289 03/26/87 300 Orange TX 292,715 12/10/85 300 Plainview TX 350,767 01/24/84 180 Port Lavaca TX 270,968 07/30/87 300 Porter TX 78,262 02/09/95 300 Rowlett TX 401,987 09/06/85 300 Santa Fe TX 69,547 03/23/98 300 Sealy TX 141,458 06/25/91 300 Stafford TX 153,006 06/26/91 300 Temple TX 68,482 02/09/95 300 Vidor TX 316,367 08/01/84 300 Waxahachie TX 351,081 12/29/87 300 Cedar City UT 296,544 08/04/83 180 Orem UT 202,596 12/13/95 300 Sandy UT 178,433 12/22/95 300 Norfolk VA 288,804 10/15/87 300 Virginia Beach VA 344,330 09/03/87 300 Auburn WA 323,918 12/16/87 300 Marysville WA 304,026 08/27/87 300 Oak Harbor WA 305,487 07/16/87 300 Redmond WA 1,262,104 12/10/82 180 Spokane WA 72,164 03/27/98 300 Tacoma WA 701,155 05/29/84 300 Grafton WI 162,843 10/29/87 300 Monroe WI 207,424 12/17/87 300 Portage WI 214,364 12/23/87 300 Shawano WI 220,944 12/17/87 300 Page F-87 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Sturgeon Bay WI 214,865 477,221 None 279 Oak Hill WV 85,860 398,069 None None Laramie WY 210,000 466,417 None None Riverton WY 216,685 481,267 None None Sheridan WY 117,160 543,184 None None Shoe Stores - ----------- Little Rock AR 1,079,232 2,594,956 None None Maplewood MN 785,023 2,715,629 None 687 Houston TX 1,096,376 2,300,690 None None Midland TX 544,075 1,322,431 None None Theaters - -------- Fairbanks AK 2,586,879 9,575 None None Huntsville AL 2,810,868 14,308 None None Naples FL 2,618,441 8,979,199 None None Chamblee GA 4,329,404 10,222 None None Akron OH 1,511,018 1,386 None None Hillsboro OR 4,915,032 16,377 None None Portland OR 2,793,001 9,942 None None Glen Allen VA 1,314,065 9,748,457 None None Sterling VA 4,546,305 19,295 None None Marysville WA 1,988,142 -- None None Video Rental - ------------ Birmingham AL 392,795 865,115 None None Southington CT 399,562 1,009,125 None None Port St. Lucie FL 612,695 701,759 None None Tampa FL 401,874 933,768 None None Atlanta GA 652,551 763,360 None None Brunswick GA 290,369 788,880 None None Norcross GA 431,284 724,037 None None Plainfield IN 453,645 908,485 None None Topeka KS 285,802 966,286 None None Wichita KS 289,714 797,856 None None Winchester KY 355,474 929,177 None None Page F-88 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Sturgeon Bay WI 214,865 477,500 692,365 Oak Hill WV 85,860 398,069 483,929 Laramie WY 210,000 466,417 676,417 Riverton WY 216,685 481,267 697,952 Sheridan WY 117,160 543,184 660,344 Shoe Stores - ----------- Little Rock AR 1,079,232 2,594,956 3,674,188 Maplewood MN 785,023 2,716,316 3,501,339 Houston TX 1,096,376 2,300,690 3,397,066 Midland TX 544,075 1,322,431 1,866,506 Theaters - -------- Fairbanks AK 2,586,879 9,575 2,596,454 Huntsville AL 2,810,868 14,308 2,825,176 Naples FL 2,618,441 8,979,199 11,597,640 Chamblee GA 4,329,404 10,222 4,339,626 Akron OH 1,511,018 1,386 1,512,404 Hillsboro OR 4,915,032 16,377 4,931,409 Portland OR 2,793,001 9,942 2,802,943 Glen Allen VA 1,314,065 9,748,457 11,062,522 Sterling VA 4,546,305 19,295 4,565,600 Marysville WA 1,988,142 -- 1,988,142 Video Rental - ------------ Birmingham AL 392,795 865,115 1,257,910 Southington CT 399,562 1,009,125 1,408,687 Port St. Lucie FL 612,695 701,759 1,314,454 Tampa FL 401,874 933,768 1,335,642 Atlanta GA 652,551 763,360 1,415,911 Brunswick GA 290,369 788,880 1,079,249 Norcross GA 431,284 724,037 1,155,321 Plainfield IN 453,645 908,485 1,362,130 Topeka KS 285,802 966,286 1,252,088 Wichita KS 289,714 797,856 1,087,570 Winchester KY 355,474 929,177 1,284,651 Page F-89 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Sturgeon Bay WI 230,768 12/01/87 300 Oak Hill WV 292,313 12/28/84 300 Laramie WY 187,250 03/12/90 300 Riverton WY 232,725 12/01/87 300 Sheridan WY 365,068 12/31/85 300 Shoe Stores - ----------- Little Rock AR 255,171 07/21/98 300 Maplewood MN 185,562 04/02/99 300 Houston TX 302,840 09/05/97 300 Midland TX 151,967 02/02/98 300 Theaters - -------- Fairbanks AK -- 09/27/00 300 Huntsville AL -- 09/27/00 300 Naples FL 104,734 09/27/00 300 Chamblee GA -- 09/27/00 300 Akron OH -- 09/27/00 300 Hillsboro OR -- 09/27/00 300 Portland OR -- 09/27/00 300 Glen Allen VA 113,690 09/27/00 300 Sterling VA -- 09/27/00 300 Marysville WA -- 07/27/00 300 Video Rental - ------------ Birmingham AL 113,848 09/30/97 300 Southington CT 82,416 12/29/98 300 Port St. Lucie FL 55,148 12/09/98 09/08/98 300 Tampa FL 113,606 12/23/97 300 Atlanta GA 62,362 12/18/98 300 Brunswick GA 95,975 12/31/97 300 Norcross GA 92,854 10/01/97 300 Plainfield IN 107,389 01/30/98 300 Topeka KS 117,563 12/19/97 300 Wichita KS 67,833 11/23/98 300 Winchester KY 94,463 06/30/98 300 Page F-90 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Video Rental - ------------ Warren MI 356,348 903,351 None None Centerville OH 601,408 758,192 None None Dayton OH 401,723 698,872 None None Forest Park OH 328,187 921,232 None None Franklin OH 337,572 777,943 None None Springboro OH 261,916 897,489 None None Oklahoma City OK 307,658 474,096 None None Tulsa OK 318,441 1,004,663 None None Bartlett TN 420,000 674,437 None None Clarksville TN 499,885 840,869 None None Columbia TN 466,469 716,723 None None Hendersonville TN 333,677 938,592 None None Jackson TN 381,076 857,261 None None Memphis TN 381,265 900,580 None None Murfreesboro TN 406,056 886,293 None None Murfreesboro TN 385,437 782,396 None None Smyrna TN 302,372 836,214 None None Austin TX 407,910 885,113 None None Beaumont TX 293,919 832,154 None None Hurst TX 373,084 871,163 None None Lubbock TX 266,805 857,492 None None Woodway TX 372,487 835,198 None None Hampton VA 373,499 836,071 None None Virginia Beach VA 551,588 797,260 None None Other - ----- Escondido CA -- -- 13,901 None Fresno CA 428,900 3,434,562 None 624 San Diego CA 5,797,411 15,473,497 89,943 29,020 San Diego CA 2,485,160 8,697,822 46,053 20,115 San Diego CA 3,745,000 8,885,351 55,353 23,815 Venice FL 259,686 362,562 None None Cherry Hill NJ 1,074,640 1,032,304 None 64,400 Humble TX 106,000 545,518 14,289 7,336 Plano TX 565,000 6,935,000 None 174,263 Misc. Investments 18,814,107 4,314,335 None None Page F-91 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Video Rental - ------------ Warren MI 356,348 903,351 1,259,699 Centerville OH 601,408 758,192 1,359,600 Dayton OH 401,723 698,872 1,100,595 Forest Park OH 328,187 921,232 1,249,419 Franklin OH 337,572 777,943 1,115,515 Springboro OH 261,916 897,489 1,159,405 Oklahoma City OK 307,658 474,096 781,754 Tulsa OK 318,441 1,004,663 1,323,104 Bartlett TN 420,000 674,437 1,094,437 Clarksville TN 499,885 840,869 1,340,754 Columbia TN 466,469 716,723 1,183,192 Hendersonville TN 333,677 938,592 1,272,269 Jackson TN 381,076 857,261 1,238,337 Memphis TN 381,265 900,580 1,281,845 Murfreesboro TN 406,056 886,293 1,292,349 Murfreesboro TN 385,437 782,396 1,167,833 Smyrna TN 302,372 836,214 1,138,586 Austin TX 407,910 885,113 1,293,023 Beaumont TX 293,919 832,154 1,126,073 Hurst TX 373,084 871,163 1,244,247 Lubbock TX 266,805 857,492 1,124,297 Woodway TX 372,487 835,198 1,207,685 Hampton VA 373,499 836,071 1,209,570 Virginia Beach VA 551,588 797,260 1,348,848 Other - ----- Escondido CA -- 13,901 13,901 Fresno CA 428,900 3,435,186 3,864,086 San Diego CA 5,797,411 15,592,460 21,389,871 San Diego CA 2,485,160 8,763,990 11,249,150 San Diego CA 3,745,000 8,964,519 12,709,519 Venice FL 259,686 362,562 622,248 Cherry Hill NJ 1,074,640 1,096,704 2,171,344 Humble TX 106,000 567,143 673,143 Plano TX 565,000 7,109,263 7,674,263 Misc. Investments 18,814,107 4,314,335 23,128,442 Page F-92 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Video Rental - ------------ Warren MI 106,789 01/09/98 300 Centerville OH 77,080 06/30/98 300 Dayton OH 71,050 06/29/98 300 Forest Park OH 115,137 11/14/97 300 Franklin OH 94,573 12/30/97 300 Springboro OH 82,278 09/21/98 300 Oklahoma City OK 51,332 04/23/98 300 Tulsa OK 132,222 09/26/97 300 Bartlett TN 42,115 05/12/99 02/23/99 300 Clarksville TN 74,284 10/02/98 300 Columbia TN 94,313 09/26/97 300 Hendersonville TN 114,194 12/10/97 300 Jackson TN 112,827 09/26/97 300 Memphis TN 100,503 03/31/98 300 Murfreesboro TN 116,640 09/26/97 300 Murfreesboro TN 56,043 03/11/99 300 Smyrna TN 110,054 09/02/97 300 Austin TX 107,686 12/01/97 300 Beaumont TX 109,521 09/05/97 300 Hurst TX 85,664 07/29/98 300 Lubbock TX 115,695 08/29/97 300 Woodway TX 101,616 12/16/97 300 Hampton VA 101,720 12/19/97 300 Virginia Beach VA 91,587 02/23/98 300 Other - ----- Escondido CA 718 08/01/92 N/A Fresno CA 3,434,562 10/29/82 180 San Diego CA 7,388,219 01/20/89 08/05/87 300 San Diego CA 4,422,448 01/23/89 09/19/86 300 San Diego CA 5,746,262 03/08/86 03/25/86 300 Venice FL 59,823 11/26/96 300 Cherry Hill NJ 223,377 01/26/95 300 Humble TX 446,192 03/25/86 300 Plano TX 1,409,049 05/26/95 300 Misc. Investments -- Various N/A Page F-93 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Other - ----- Misc. Investments -- 398,245 None 53,227 ----------- ----------- ------- ------- 389,505,187 720,744,095 413,621 818,906 =========== =========== ======= ======= Page F-94 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Other - ----- Misc. Investments -- 451,472 451,472 ----------- ----------- ------------- 389,505,187 721,976,622 1,111,481,809 =========== =========== ============= Page F-95 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Other - ----- Misc. Investments 315,299 Various Various ----------- 217,204,145 ===========
Page F-96 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Note 1. One thousand sixty-four of the properties are single unit retail outlets. One grocery property located in Sheboygan, WI 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 $1,022,515,010. Note 3. Reconciliation of total real estate carrying value for the three years ended December 31, 2000 are as follows: 2000 1999 1998 ----------- ----------- ----------- Balance at beginning of period 1,062,479,130 889,835,701 699,797,446 Additions during period: Acquisitions 98,558,750 181,375,766 193,436,163 Equipment -- -- 14,685 Improvements, etc. 90,502 147,976 79,790 Other (leasing costs) 307,556 241,980 168,425 ------------- ----------- ----------- Total additions 98,956,808 181,765,722 193,699,063 ------------- ------------- ----------- Deductions during period: Cost of real estate sold 49,850,903 9,109,061 3,520,108 Cost of equipment sold -- -- 58,000 Other (fully amortized commissions) 103,226 13,232 82,700 Other (provision for impairment losses) -- -- -- ------------- ------------- ----------- Total deductions 49,954,129 9,122,293 3,660,808 ------------- ------------- ----------- Balance at close of period: 1,111,481,809 1,062,479,130 889,835,701 ============= ============= =========== (table continued) Page F-97 (continued) Note 4. Reconciliation of accumulated depreciation for the three years ended December 31, 2000 are as follows: 2000 1999 1998 ----------- ----------- ----------- Balance at beginning of period: 195,386,310 171,555,267 152,206,136 Additions during period - provision for depreciation 27,845,368 24,823,759 20,766,430 Deductions during period: Accumulated depreciation of real estate and equipment sold 5,924,307 979,484 1,334,599 Other (fully amortized commissions) 103,226 13,232 82,700 ----------- ----------- ----------- Balance at close of period 217,204,145 195,386,310 171,555,267 =========== =========== ===========
Note 5. No provision for impairment loss was made in 2000, 1999 or 1998. Page F-98 160 EX-12.1 2 0002.txt Exhibit 12.1 REALTY INCOME CORPORATION STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (dollars in thousands) Years ended December 31, ----------------------------------------------- 2000 1999 1998 1997 1996 ------- ------- ------- ------- ------- Net income $54,788 $46,241 $41,304 $34,770 $32,223 ------- ------- ------- ------- ------- Fixed Charges: Interest 29,967 23,367 13,044 7,800 1,987 Amortization of fees 1,580 1,106 679 426 380 Interest capitalized 1,048 1,644 660 168 150 ------- ------- ------- ------- ------- Fixed charges 32,595 26,117 14,383 8,394 2,517 ------- ------- ------- ------- ------- Net income before fixed charges 86,335 70,714 55,027 42,996 34,590 Divided by fixed charges 32,595 26,117 14,383 8,394 2,517 ------- ------- ------- ------- ------- Ratio of earnings to fixed charges 2.6 2.7 3.8 5.1 13.7 ======= ======= ======= ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividends 2.0 2.3 3.8 5.1 13.7 ======= ======= ======= ======= ======= Preferred stock dividend 9,712 5,229 -- -- --
Page 1 160 EX-21.1 3 0003.txt Exhibit 21.1 ============ Subsidiaries of the Company as of January 1, 2001 - ------------------------------------------------- Realty Income Texas Properties, L.P. a Delaware limited partnership Realty Income Texas Properties, Inc. a Delaware corporation Crest Net Lease, Inc. a Delaware corporation Page 1 160 EX-23.1 4 0004.txt EXHIBIT 23.1 Consent of Independent Auditors The Board of Directors Realty Income Corporation: We consent to incorporation by reference in Registration Statement No. 333-80821 on Form S-3 of Realty Income Corporation and to incorporation by reference in Registration Statement No. 33-95708 on Form S-8 of Realty Income Corporation, of our report dated January 24, 2001, relating to the consolidated balance sheets of Realty Income Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2000, and the related Schedule III, which report appears in the December 31, 2000, annual report on Form 10-K of Realty Income Corporation. /s/ KPMG LLP ------------ KPMG LLP San Diego, California March 20, 2001 Page 1 1 1 -----END PRIVACY-ENHANCED MESSAGE-----