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 Operating Results For Fourth Quarter And 2014 Announced By Realty Income
   Tuesday, February 17, 2015 4:05:00 PM ET

Realty Income Corporation (Realty Income) (O ), The Monthly Dividend Company?, today announced operating results for the fourth quarter ended December 31, 2014. Access to this document is available at www.realtyincome.com. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

http://photos.prnewswire.com/prnvar/20130507/MM09486LOGO

COMPANY HIGHLIGHTS:

For the quarter ended December 31, 2014 (as compared to the same quarterly period in 2013):

-- Revenue increased 14.5% to $247.6 million as compared to $216.2 million

-- Net income available to common stockholders per share was $0.32

-- FFO available to common stockholders increased 15.3% to $143.7 million

-- FFO per share increased 4.9% to $0.64

-- AFFO available to common stockholders increased 15.7% to $145.4 million

-- AFFO per share increased 4.8% to $0.65

-- Same store rents increased 1.7%

-- Portfolio occupancy increased to 98.4% from 98.2%

-- Invested $158.0 million in 82 new properties and properties under development or expansion

-- Increased the monthly dividend in December for the 78th time and for the 69th consecutive quarter

-- Dividends paid per common share increased 0.5%

For the year ended December 31, 2014 (as compared to 2013):

-- Revenue increased 19.6% to $933.5 million as compared to $780.2 million

-- Net income available to common stockholders per share was $1.04

-- FFO available to common stockholders increased 21.8% to $562.9 million

-- FFO per share increased 7.1% to $2.58

-- AFFO available to common stockholders increased 21.3% to $561.7 million

-- AFFO per share increased 6.6% to $2.57

-- Same store rents increased 1.5%

-- Invested $1.4 billion in 506 new properties and properties under development or expansion

-- Dividends paid per common share increased 2.1%

-- Raised gross proceeds of $1.3 billion in permanent and long-term capital to fund real estate acquisitions

Event subsequent to December 31, 2014:

-- Increased the annualized dividends paid per common share by 3.0% from $2.201 to $2.268 in January 2015

CEO Comments on Operating Results "We are pleased to report excellent operating performance for the fourth quarter and for 2014 with AFFO per share increasing by 4.8% to $0.65 during the quarter, and 6.6% to $2.57 during the year," said John P. Case, Realty Income’s Chief Executive Officer. "This earnings growth allowed us to increase dividends paid per share by 2.1% in 2014, and another 3.0% this month. Our company was recognized in January 2015 for its track record of outstanding, long-term dividend growth. Realty Income was added to the exclusive S&P High Yield Dividend Aristocrats? index for increasing our dividend every year for 20 years."

"During the year, we completed $1.4 billion in acquisitions, which makes this our second most acquisitive year in the company’s history. These properties had an attractive initial average lease yield of 7.1% and weighted average remaining lease term of 12.8 years. We continued to remain selective in our investment activity, acquiring 5.8% of the $24.3 billion of sourced acquisitions opportunities during the year. We funded the 2014 investments by issuing $1.3 billion in permanent and long-term capital, of which more than half was equity. Additionally, as of February 13, 2015, we have approximately $1.12 billion available on our credit facility to fund future acquisitions. Given the healthy volume of acquisitions opportunities we are currently seeing, we are raising our acquisitions guidance for 2015 from $500 million - $800 million to $700 million - $1 billion."

"Our existing portfolio of over 4,300 properties continues to perform well. In 2014, we experienced one of our most active years for lease rollover. We re-leased 203 properties with expiring leases to either existing or new tenants, recapturing 99.3% of expiring rent. We realized same store rent increases of 1.7% for the fourth quarter and 1.5% for 2014. We also sold 46 properties for $107 million realizing a 6.9% cap rate on the leased properties sold and an 11.6% unlevered internal rate of return on all properties sold. Our proactive approach to portfolio management resulted in occupancy increasing to 98.4% at the end of 2014, the highest it’s been since 2007."

Financial Results Revenue Revenue for the quarter ended December 31, 2014 increased 14.5% to $247.6 million, as compared to $216.2 million for the same quarter in 2013. Revenue for 2014 increased 19.6% to $933.5 million, as compared to $780.2 million for 2013.

Net Income Available to Common Stockholders Net income available to common stockholders for the quarter ended December 31, 2014 was $71.0 million, as compared to $53.9 million for the same quarter in 2013. Net income per share for the quarter ended December 31, 2014 was $0.32, as compared to $0.26 for the same quarter in 2013.

Net income available to common stockholders for 2014 was $227.6 million, as compared to $203.6 million for 2013. Net income per share in 2014 was $1.04, as compared to $1.06 for 2013.

Net income available to common stockholders per share for 2014 was impacted by a $6.0 million non-cash redemption charge on the shares of the 6.75% Monthly Income Class E Cumulative Redeemable Preferred Stock, or Class E preferred stock, that were redeemed in October 2014, which represents $0.03 net income per share. This charge is for the excess in redemption value over the carrying value of the Class E preferred stock and represents the original issuance cost that was paid in 2006. Net income available to common stockholders for 2013 was impacted by an unusually large gain on sale of real estate, which represented $0.18 per share.

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

Funds From Operations (FFO) Available to Common Stockholders FFO for the quarter ended December 31, 2014 increased 15.3% to $143.7 million, as compared to $124.6 million for the same quarter in 2013. FFO per share for the quarter ended December 31, 2014 increased 4.9% to $0.64, as compared to $0.61 for the same quarter in 2013.

FFO for 2014 increased 21.8% to $562.9 million, as compared to $462.0 million for the same period in 2013. FFO per share in 2014 increased 7.1% to $2.58, as compared to $2.41 for 2013.

FFO per share for 2014 was impacted by a $6.0 million non-cash redemption charge on the Class E preferred shares that were redeemed in October 2014, which represents $0.03 per share.

Adjusted Funds From Operations (AFFO) Available to Common Stockholders AFFO for the quarter ended December 31, 2014 increased 15.7% to $145.4 million, as compared to $125.7 million for the same quarter in 2013. AFFO per share for the quarter ended December 31, 2014 increased 4.8% to $0.65, as compared to $0.62 for the same quarter in 2013.

AFFO for 2014 increased 21.3% to $561.7 million, as compared to $463.1 million for 2013. AFFO per share for 2014 increased 6.6% to $2.57, as compared to $2.41 for 2013.

The company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust’s (REIT’s) operating performance. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT’s) definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate, reduced by gains on sales of investment properties and extraordinary items. FFO for the quarter and year ended December 31, 2013 has also been normalized to add back merger-related costs for the acquisition of ARCT. AFFO further adjusts FFO for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company’s ongoing operating performance. See the reconciliation of net income available to common stockholders to FFO and AFFO on page six.

Dividend Information In December 2014, Realty Income announced the 69th consecutive quarterly dividend increase, which is the 78th increase in the amount of the dividend since the company’s listing on the New York Stock Exchange in 1994. The annualized dividend amount, as of December 31, 2014, was approximately $2.201 per share. The amount of monthly dividends paid per share increased 2.1% to $2.192 in 2014 compared to $2.147 per share in 2013. In addition, through December 31, 2014, the company has paid 533 consecutive monthly dividends and over $3.2 billion in total dividends since 1969. Realty Income has a dividend reinvestment and stock purchase program that can be accessed at www.realtyincome.com. The program is administered by Wells Fargo Shareowner Services.

Real Estate Portfolio Update As of December 31, 2014, Realty Income’s portfolio of freestanding, single-tenant properties consisted of 4,327 properties located in 49 states and Puerto Rico, leased to 234 commercial tenants doing business in 47 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 10.2 years.

Portfolio Management Activities The company’s portfolio of commercial real estate, owned primarily under 10- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of December 31, 2014, portfolio occupancy was 98.4% with 70 properties available for lease out of a total of 4,327 properties in the portfolio, as compared to 98.2% portfolio occupancy, or 70 properties available for lease, as of December 31, 2013.

Since September 30, 2014, when we reported 74 properties available for lease, we had 54 lease expirations, re-leased 50 properties and sold eight vacant properties. Of the 50 properties re-leased during the fourth quarter of 2014, 40 properties were re-leased to existing tenants without vacancy, four were re-leased to new tenants without vacancy, and six were re-leased to a new tenant after a period of vacancy. The annual new rent on these re-leases was $5.3 million, as compared to the previous rent of $5.4 million on these same properties.

Rent Increases During the quarter ended December 31, 2014, same store rents on 2,728 properties under lease increased 1.7% to $129.9 million, as compared to $127.7 million for the same quarter in 2013. During 2014, same store rents on 2,728 properties under lease increased 1.5% to $513.4 million, as compared to $505.7 million for 2013.

Property Acquisitions During the fourth quarter of 2014, Realty Income invested $158.0 million in 82 new properties and properties under development or expansion, located in 26 states. These properties are 100% leased with a weighted average lease term of approximately 14.6 years and an initial average lease yield of 7.1%. The tenants occupying the new properties operate in 19 industries, and the property types consist of 87.3% retail and 12.7% industrial and distribution, based on rental revenue. Approximately 32% of the revenue generated from acquisitions during the fourth quarter of 2014 is from investment grade tenants.

During 2014, Realty Income invested approximately $1.4 billion in 506 new properties and properties under development or expansion. The new properties are located in 42 states and are 100% leased with a weighted average lease term of approximately 12.8 years and an initial average lease yield of 7.1%. The tenants occupying the new properties operate in 32 industries, and the property types consist of 85.7% retail, 6.6% industrial and distribution, 6.4% office, and 1.3% manufacturing, based on rental revenue. Approximately 66% of the revenue generated from the 2014 acquisitions is from investment grade tenants.

Realty Income maintains a $1.5 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of December 31, 2014, $1.28 billion was available on the credit facility to fund additional acquisitions.

Property Dispositions During the quarter ended December 31, 2014, Realty Income sold 18 properties for $53.7 million, with a gain on sales of $25.3 million, as compared to 22 properties sold for $28.0 million, with a gain on sales of $14.3 million, during the same quarter in 2013.

During 2014, Realty Income sold 46 properties for $107.2 million, with a gain on sales of $42.1 million, as compared to 75 properties sold for $134.2 million, with a gain on sales of $64.7 million, during 2013.

Other Recent Activities 2015 Dividend Increase In January 2015, Realty Income increased the amount of the annualized dividend by 3.0%. The new dividend represents an annualized dividend of $2.268 per share, as compared to the prior annualized dividend amount of $2.201 per share. The new monthly dividend amount of $0.189 was paid on February 17, 2015 to shareholders of record on February 2, 2015.

Redeemed All Outstanding Shares of 6.75% Monthly Income Class E Preferred Stock in October 2014 In October 2014, Realty Income redeemed all 8,800,000 outstanding shares of our Class E preferred stock. The shares were redeemed at $25 per share (par), plus accrued and unpaid dividends to the redemption date of October 24, 2014.

Direct Stock Purchase and Dividend Reinvestment Plan Activities During the fourth quarter of 2014, Realty Income issued 2,236,294 common shares via its Stock Plan, generating gross proceeds of approximately $101.9 million. For 2014, Realty Income issued 3,527,166 common shares via its Stock Plan, generating gross proceeds of approximately $158.5 million.

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

2015 Earnings Estimates FFO per share for 2015 should range from $2.67 to $2.72 per share, an increase of 3.5% to 5.4% over 2014 FFO per share of $2.58. FFO per share for 2015 is based on a net income per share range of $0.97 to $1.02, plus estimated real estate depreciation of $1.77 per share, and reduced by potential estimated gains on sales of investment properties of $0.07 per share (in accordance with NAREIT’s definition of FFO).

AFFO per share for 2015 should range from $2.66 to $2.71 per share, an increase of 3.5% to 5.4% over the 2014 AFFO per share of $2.57. AFFO further adjusts FFO for unique revenue and expense items, which are not as pertinent to the measurement of the company’s ongoing operating performance.

Conference Call Information In conjunction with Realty Income’s quarterly results, the company will host a conference call on February 18, 2015 at 11:30 a.m. PST to discuss the operating results. To access the conference, dial (888) 505-4375. When prompted, provide the access code: 1871553. Shareholders may also access a telephone replay of the conference call by calling (888) 203-1112 and entering the access code: 1871553. The telephone replay will be available through March 4, 2015. A live webcast will be available in listen-only mode by clicking on the webcast link at www.realtyincome.com. A replay of the conference call webcast will be available approximately two hours after the conclusion of the live broadcast. The webcast replay will be available through March 4, 2015. No access code is required for this replay.

About Realty Income Realty Income is The Monthly Dividend Company?, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of December 31, 2014, the company had paid 533 consecutive monthly dividends throughout its 46-year operating history. The monthly income is supported by the cash flows from over 4,300 properties owned under long-term lease agreements with 234 leading regional and national commercial tenants. The company is an active buyer of net-leased properties nationwide. Additional information about the company can be obtained from the corporate website at www.realtyincome.com or www.twitter.com/realtyincome.

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

CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
                                                    Three Months                 Three Months        Twelve Months       Twelve Months
                                                    Ended 12/31/14               Ended 12/31/13      Ended 12/31/14      Ended 12/31/13
REVENUE                                             (unaudited)
Rental                                              $            230,635         $       204,999     $       893,457     $       748,218
Tenant reimbursements                                            16,246                  9,324               37,118              24,944
Other                                                            692                     1,840               2,930               7,047
Total revenue                                                    247,573                 216,163             933,505             780,209
EXPENSES
Depreciation and amortization                                    96,537                  85,293              374,661             306,769
Interest                                                         59,120                  50,775              216,366             181,442
General and administrative                                       15,586                  16,525              51,085              56,881
Property (including reimbursable)                                20,397                  13,059              53,871              38,851
Income taxes                                                     1,103                   579                 3,461               2,350
Provisions for impairment                                        1,450                   -                   4,126               290
Merger-related costs                                             -                       138                 -                   13,013
Total expenses                                                   194,193                 166,369             703,570             599,596
Gain on sales of real estate                                     24,994                  -                   39,205              -
Income from continuing operations                                78,374                  49,794              269,140             180,613
Income (loss) from discontinued operations                       (297)                   14,840              2,800               65,670
Net income                                                       78,077                  64,634              271,940             246,283
Net income attributable to noncontrolling interests              (289)                   (298)               (1,305)             (719)
Net income attributable to the Company                           77,788                  64,336              270,635             245,564
Preferred stock dividends                                        (6,770)                 (10,482)            (37,062)            (41,930)
Excess of redemption value over carrying value of
preferred shares redeemed                                        -                       -                   (6,015)             -
Net income available to common stockholders         $            71,018          $       53,854      $       227,558     $       203,634
Funds from operations available to
common stockholders (FFO)                           $            143,706         $       124,630     $       562,889     $       462,030
Adjusted funds from operations available to
common stockholders (AFFO)                          $            145,394         $       125,700     $       561,661     $       463,139
Per share information for common stockholders:
Income from continuing operations,
basic and diluted                                   $            0.32            $       0.19        $       1.03        $       0.72
Net income, basic and diluted                       $            0.32            $       0.26        $       1.04        $       1.06
FFO, basic and diluted                              $            0.64            $       0.61        $       2.58        $       2.41
AFFO:
Basic                                               $            0.65            $       0.62        $       2.57        $       2.42
Diluted                                             $            0.65            $       0.62        $       2.57        $       2.41
Cash dividends paid per common share                $            0.549           $       0.546       $       2.192       $       2.147
FUNDS FROM OPERATIONS (FFO)
(dollars in thousands, except per share amounts)
We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’s definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on sales of investment properties and extraordinary items. (1)
                                                       Three Months            Three Months       Year               Year
                                                       Ended 12/31/14          Ended 12/31/13     Ended 12/31/14     Ended 12/31/13
Net income available to common stockholders            $          71,018       $       53,854     $       227,558    $       203,634
Depreciation and amortization:
                           Continuing operations                  96,537               85,293             374,661            306,769
                           Discontinued operations                -                    36                 -                  1,626
Depreciation of furniture, fixtures and equipment                 (161)                (86)               (482)              (288)
Provisions for impairment on investment properties:
                           Continuing operations                  1,450                -                  4,126              290
                           Discontinued operations                510                  -                  510                2,738
Gain on sale of investment properties:
                           Continuing operations                  (24,994)             -                  (39,205)           -
                           Discontinued operations                (276)                (14,276)           (2,883)            (64,743)
Merger-related costs (1)                                          -                    138                -                  13,013
FFO adjustments allocable to noncontrolling interests             (378)                (329)              (1,396)            (1,009)
FFO available to common stockholders                   $          143,706      $       124,630    $       562,889    $       462,030
FFO per common share, basic and diluted                $          0.64         $       0.61       $       2.58       $       2.41
Distributions paid to common stockholders              $          122,521      $       110,678    $       479,256    $       409,222
FFO in excess of distributions paid to
common stockholders                                    $          21,185       $       13,952     $       83,633     $       52,808
Weighted average number of common shares used for FFO:
                           Basic                       223,034,266             203,303,124        218,390,885        191,754,857
                           Diluted                     223,262,633             203,326,838        218,450,863        191,781,622
(1)                        FFO for the three and twelve months ended December 31, 2013, has been normalized to exclude ARCT merger-related costs.
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(dollars in thousands, except per share amounts)
We define AFFO as FFO adjusted for unique revenue and expense items, which the company believes are not as pertinent to the measurement of the company’s ongoing operating performance.  Most companies in our industry use a similar measurement to AFFO, but they may use the term "CAD" (for Cash Available for Distribution) or "FAD" (for Funds Available for Distribution).
                                                       Three Months              Three Months      Year               Year
                                                       Ended 12/31/14            Ended 12/31/13    Ended 12/31/14     Ended 12/31/13
Net income available to common stockholders            $           71,018        $       53,854    $       227,558    $       203,634
Cumulative adjustments to calculate FFO (1)                        72,688                70,776            335,331            258,396
FFO available to common stockholders                               143,706               124,630           562,889            462,030
Provisions for impairment on Crest properties                      -                     308               -                  308
Excess of redemption value over carrying value
of Class E preferred share redemption                              -                     -                 6,015              -
Amortization of share-based compensation                           4,306                 6,550             11,959             20,785
Amortization of deferred financing costs (2)                       1,328                 1,219             4,804              4,436
Amortization of net mortgage premiums                              (2,147)               (2,522)           (9,208)            (9,481)
(Gain) loss on early extinguishment of mortgage debt               99                    -                 (3,428)            -
(Gain) loss on interest rate swaps                                 940                   (188)             1,349              (878)
Capitalized leasing costs and commissions                          (167)                 (137)             (821)              (1,280)
Capitalized building improvements                                  (1,328)               (2,468)           (5,210)            (7,227)
Straight-line rent                                                 (3,108)               (3,631)           (14,872)           (13,742)
Amortization of above and below-market leases                      1,650                 1,939             8,024              8,188
Other adjustments (3)                                              115                   -                 160                -
AFFO available to common stockholders                  $           145,394       $       125,700   $       561,661    $       463,139
AFFO per common share:
                           Basic                       $           0.65          $       0.62      $       2.57       $       2.42
                           Diluted                     $           0.65          $       0.62      $       2.57       $       2.41
Distributions paid to common stockholders              $           122,521       $       110,678   $       479,256    $       409,222
AFFO in excess of distributions paid to
common stockholders                                    $           22,873        $       15,022    $       82,405     $       53,917
Weighted average number of common shares used for AFFO:
                           Basic                       223,034,266               203,303,124       218,390,885        191,754,857
                           Diluted                     223,262,633               203,326,838       218,450,863        191,781,622
(1) See FFO calculation above for reconciling items.
(2) Includes the amortization of costs incurred and capitalized when our notes were issued in March 2003, November 2003, March 2005, September 2005, September 2006, September 2007, June 2010, June 2011, October 2012, July 2013, June 2014 and September 2014. Additionally, this includes the amortization of deferred financing costs incurred and capitalized in connection with our assumption of our mortgages payable and the issuance of our term loan. The deferred financing costs are being amortized over the lives of the respective mortgages and term loan. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.
(3) Includes adjustments allocable to both non-controlling interests and capital lease obligations.
HISTORICAL FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(dollars in thousands, except per share amounts)
For the three months ended December 31,                                         2014            2013            2012           2011           2010
Net income available to common stockholders           $                         71,018    $     53,854    $     28,542   $     34,941   $     31,814
Depreciation and amortization                                                   96,376          85,243          42,428         34,314         25,045
Provisions for impairment on investment properties                              1,960           -               4,472          27             42
Gain on sales of investment properties                                          (25,270)        (14,276)        (3,863)        (1,205)        (4,392)
Merger-related costs                                                            -               138             2,404          -              -
FFO adjustments allocable to noncontrolling interests                           (378)           (329)           -              -              -
FFO                                                   $                         143,706   $     124,630   $     73,983   $     68,077   $     52,509
FFO per diluted share                                 $                         0.64      $     0.61      $     0.56     $     0.51     $     0.47
AFFO                                                  $                         145,394   $     125,700   $     72,892   $     68,524   $     53,327
AFFO per diluted share                                $                         0.65      $     0.62      $     0.55     $     0.52     $     0.48
Cash dividends paid per share                         $                         0.549     $     0.546     $     0.454    $     0.436    $     0.432
Weighted average diluted shares outstanding           223,262,633                         203,326,838     132,979,552    132,609,319    112,067,874
For the year ended December 31,                                                 2014            2013            2012           2011           2010
Net income available to common stockholders           $                         227,558   $     203,634   $     114,538  $     132,779  $     106,531
Depreciation and amortization                                                   374,179         308,107         151,058        121,941        95,858
Provisions for impairment on investment properties                              4,636           3,028           5,139          405            213
Gain on sales of investment properties                                          (42,088)        (64,743)        (9,873)        (5,733)        (8,676)
Merger-related costs                                                            -               13,013          7,899          -              -
FFO adjustments allocable to noncontrolling interests                           (1,396)         (1,009)         -              -              -
FFO                                                   $                         562,889   $     462,030   $     268,761  $     249,392  $     193,926
FFO per diluted share                                 $                         2.58      $     2.41      $     2.02     $     1.98     $     1.83
AFFO                                                  $                         561,661   $     463,139   $     274,183  $     253,372  $     197,256
AFFO per diluted share                                $                         2.57      $     2.41      $     2.06     $     2.01     $     1.86
Cash dividends paid per share                         $                         2.192     $     2.147     $     1.772    $     1.737    $     1.722
Weighted average diluted shares outstanding           218,450,863                         191,781,622     132,884,933    126,189,399    105,942,721
REALTY INCOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2014 and 2013
(dollars in thousands, except per share data)
                                                                    2014           2013
ASSETS
Real estate, at cost:
Land                                                              $ 3,046,372    $ 2,791,147
Buildings and improvements                                          8,107,199      7,108,328
Total real estate, at cost                                          11,153,571     9,899,475
Less accumulated depreciation and amortization                      (1,386,871)    (1,114,888)
Net real estate held for investment                                 9,766,700      8,784,587
Real estate held for sale, net                                      14,840         12,022
Net real estate                                                     9,781,540      8,796,609
Cash and cash equivalents                                           3,852          10,257
Accounts receivable, net                                            64,386         39,323
Acquired lease intangible assets, net                               1,039,724      935,459
Goodwill                                                            15,470         15,660
Other assets, net                                                   107,650        127,133
Total assets                                                      $ 11,012,622   $ 9,924,441
LIABILITIES AND EQUITY
Distributions payable                                             $ 43,675       $ 41,452
Accounts payable and accrued expenses                               123,287        102,511
Acquired lease intangible liabilities, net                          220,469        148,250
Other liabilities                                                   53,145         44,030
Line of credit payable                                              223,000        128,000
Term loan                                                           70,000         70,000
Mortgages payable, net                                              852,575        783,360
Notes payable, net                                                  3,785,372      3,185,480
Total liabilities                                                   5,371,523      4,503,083
Commitments and contingencies
Stockholders’ equity:
Preferred stock and paid in capital, par value $0.01 per share,
69,900,000 shares authorized, 16,350,000 shares issued and
outstanding as of December 31, 2014 and 25,150,000 shares issued
and outstanding as of December 31, 2013                             395,378        609,363
Common stock and paid in capital, par value $0.01 per share,
370,100,000 shares authorized, 224,881,192 shares issued and
outstanding as of December 31, 2014 and 207,485,073 shares issued
and outstanding at December 31, 2013                                6,464,987      5,767,878
Distributions in excess of net income                               (1,246,964)    (991,794)
Total stockholders’ equity                                          5,613,401      5,385,447
Noncontrolling interests                                            27,698         35,911
Total equity                                                        5,641,099      5,421,358
Total liabilities and equity                                      $ 11,012,622   $ 9,924,441
Realty Income Performance vs. Major Stock Indices
                                           Equity                                                            NASDAQ
                    Realty Income          REIT Index (1)        DJIA                  S&P 500               Composite
                    Dividend   Total       Dividend   Total      Dividend   Total      Dividend   Total      Dividend   Total
                    yield      return (2)  yield      return (3) yield      return (3) yield      return (3) yield      return (4)
10/18 to 12/31/1994 10.5 %     10.8   %    7.7  %     0.0     %  2.9  %     (1.6%)     2.9  %     (1.2%)     0.5  %     (1.7%)
1995                8.3  %     42.0   %    7.4  %     15.3    %  2.4  %     36.9    %  2.3  %     37.6    %  0.6  %     39.9    %
1996                7.9  %     15.4   %    6.1  %     35.3    %  2.2  %     28.9    %  2.0  %     23.0    %  0.2  %     22.7    %
1997                7.5  %     14.5   %    5.5  %     20.3    %  1.8  %     24.9    %  1.6  %     33.4    %  0.5  %     21.6    %
1998                8.2  %     5.5    %    7.5  %     (17.5%)    1.7  %     18.1    %  1.3  %     28.6    %  0.3  %     39.6    %
1999                10.5 %     (8.7%)      8.7  %     (4.6%)     1.3  %     27.2    %  1.1  %     21.0    %  0.2  %     85.6    %
2000                8.9  %     31.2   %    7.5  %     26.4    %  1.5  %     (4.7%)     1.2  %     (9.1%)     0.3  %     (39.3%)
2001                7.8  %     27.2   %    7.1  %     13.9    %  1.9  %     (5.5%)     1.4  %     (11.9%)    0.3  %     (21.1%)
2002                6.7  %     26.9   %    7.1  %     3.8     %  2.6  %     (15.0%)    1.9  %     (22.1%)    0.5  %     (31.5%)
2003                6.0  %     21.0   %    5.5  %     37.1    %  2.3  %     28.3    %  1.8  %     28.7    %  0.6  %     50.0    %
2004                5.2  %     32.7   %    4.7  %     31.6    %  2.2  %     5.6     %  1.8  %     10.9    %  0.6  %     8.6     %
2005                6.5  %     (9.2%)      4.6  %     12.2    %  2.6  %     1.7     %  1.9  %     4.9     %  0.9  %     1.4     %
2006                5.5  %     34.8   %    3.7  %     35.1    %  2.5  %     19.0    %  1.9  %     15.8    %  0.8  %     9.5     %
2007                6.1  %     3.2    %    4.9  %     (15.7%)    2.7  %     8.8     %  2.1  %     5.5     %  0.8  %     9.8     %
2008                7.3  %     (8.2%)      7.6  %     (37.7%)    3.6  %     (31.8%)    3.2  %     (37.0%)    1.3  %     (40.5%)
2009                6.6  %     19.3   %    3.7  %     28.0    %  2.6  %     22.6    %  2.0  %     26.5    %  1.0  %     43.9    %
2010                5.1  %     38.6   %    3.5  %     27.9    %  2.6  %     14.0    %  1.9  %     15.1    %  1.2  %     16.9    %
2011                5.0  %     7.3    %    3.8  %     8.3     %  2.8  %     8.3     %  2.3  %     2.1     %  1.3  %     (1.8%)
2012                4.5  %     20.1   %    3.5  %     19.7    %  3.0  %     10.2    %  2.5  %     16.0    %  2.6  %     15.9    %
2013                5.8  %     (1.8%)      3.9  %     2.9     %  2.3  %     29.6    %  2.0  %     32.4    %  1.4  %     38.3    %
2014                4.6  %     33.7   %    3.6  %     28.0    %  2.3  %     10.0    %  2.0  %     13.7    %  1.3  %     13.4    %
Compounded Average             17.1   %               11.4    %             10.3    %             9.7     %             9.4     %
Annual Total Return (5)
Note:   All of these dividend yields are calculated as annualized dividends based on the last dividend paid in applicable time period divided by the closing price as of period end.  Dividend yield sources: NAREIT website and Bloomberg, except for the 1994 NASDAQ dividend yield which was sourced from Datastream / Thomson Financial.
(1)        FTSE NAREIT US Equity REIT Index, as per NAREIT website.
(2)        Calculated as the difference between the closing stock price as of period end less the closing stock price as of previous period, plus dividends paid in period, divided by closing stock price as of end of previous period.  Does not include reinvestment of dividends for the annual percentages.
(3)        Includes reinvestment of dividends.  Source:  NAREIT website and Factset.
(4)        Price only index, does not include dividends.  Source:  Factset.
(5)        All of these Compounded Average Annual Total Return rates are calculated in the same manner: from Realty Income’s NYSE listing on October 18, 1994 through December 31, 2014, and (except for NASDAQ) assuming reinvestment of dividends. Past performance does not guarantee future performance.  Realty Income presents this data for informational purposes only and makes no representation about its future performance or how it will compare in performance to other indices in the future.
Property Type Diversification
The following table sets forth certain property type information regarding Realty Income’s property portfolio as of December 31, 2014 (dollars in thousands):
                                           Approximate   Rental Revenue for                      Percentage of
                             Number of     Leasable      the Quarter Ended                       Rental
Property Type                Properties    Square Feet   December 31, 2014         (1)           Revenue
Retail                       4,172         47,122,600    $            180,529                    78.5          %
Industrial and distribution  82            16,137,500                 23,610                     10.3
Office                       44            3,414,900                  15,081                     6.5
Manufacturing                14            3,875,200                  5,616                      2.4
Agriculture                  15            184,500                    5,267                      2.3
Totals                       4,327         70,734,700    $            230,103                    100.0         %
(1) Includes rental revenue for all properties owned by Realty Income at December 31, 2014.  Excludes revenue of $44 from properties owned by Crest and $488 from sold properties that were included in continuing operations.
Tenant Diversification
The largest tenants based on percentage of total portfolio rental revenue at December 31, 2014 include the following:
Tenant                               Number of Properties     % of Revenue
Walgreens                            120                      5.4       %
FedEx                                38                       5.1       %
Dollar General                       502                      4.9       %
LA Fitness                           46                       4.6       %
Family Dollar                        454                      4.5       %
BJ’s Wholesale Clubs                 15                       2.8       %
AMC Theatres                         20                       2.7       %
Diageo                               17                       2.6       %
Regal Cinemas                        23                       2.3       %
Northern Tier Energy/Super America   134                      2.2       %
CVS Pharmacy                         55                       2.1       %
Rite Aid                             58                       1.9       %
TBC Corporation                      149                      1.9       %
Circle K                             168                      1.8       %
The Pantry                           144                      1.6       %
Walmart/Sam’s Club                   19                       1.4       %
NPC International                    202                      1.4       %
GPM Investments/Fas Mart             136                      1.4       %
FreedomRoads/Camping World           18                       1.2       %
Smart & Final                        36                       1.2       %
Industry Diversification
The following table sets forth certain information regarding Realty Income’s property portfolio classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:
                              Percentage of  Rental Revenue(1)
                              For the
                              Quarter Ended  For the Years Ended
                              December 31,   Dec 31,      Dec 31,      Dec 31,      Dec 31,      Dec 31,      Dec 31,
                              2014           2014         2013         2012         2011         2010         2009
Retail industries
Apparel stores                2.2       %    2.0       %  1.9       %  1.7       %  1.4       %  1.2       %  1.1       %
Automotive collision services 0.8            0.8          0.8          1.1          0.9          1.0          1.1
Automotive parts              1.4            1.3          1.2          1.0          1.2          1.4          1.5
Automotive service            1.8            1.8          2.1          3.1          3.7          4.7          4.8
Automotive tire services      3.1            3.2          3.6          4.7          5.6          6.4          6.9
Book stores                   *              *            *            0.1          0.1          0.1          0.2
Child care                    2.2            2.2          2.8          4.5          5.2          6.5          7.3
Consumer electronics          0.3            0.3          0.3          0.5          0.5          0.6          0.7
Convenience stores            9.8            10.1         11.2         16.3         18.5         17.1         16.9
Crafts and novelties          0.5            0.5          0.5          0.3          0.2          0.3          0.3
Dollar stores                 9.5            9.6          6.2          2.2          -            -            -
Drug stores                   9.5            9.5          8.1          3.5          3.8          4.1          4.3
Education                     0.4            0.4          0.4          0.7          0.7          0.8          0.9
Entertainment                 0.5            0.5          0.6          0.9          1.0          1.2          1.3
Equipment services            0.1            0.1          0.1          0.1          0.2          0.2          0.2
Financial services            1.4            1.4          1.5          0.2          0.2          0.2          0.2
General merchandise           1.4            1.2          1.1          0.6          0.6          0.8          0.8
Grocery stores                3.1            3.0          2.9          3.7          1.6          0.9          0.7
Health and fitness            7.0            7.0          6.3          6.8          6.4          6.9          5.9
Health care                   1.0            1.1          1.1          -            -            -            -
Home furnishings              0.7            0.7          0.9          1.0          1.1          1.3          1.3
Home improvement              2.1            1.7          1.6          1.5          1.7          2.0          2.2
Jewelry                       0.1            0.1          0.1          -            -            -            -
Motor vehicle dealerships     1.5            1.6          1.6          2.1          2.2          2.6          2.7
Office supplies               0.4            0.4          0.5          0.8          0.9          0.9          1.0
Pet supplies and services     0.7            0.7          0.8          0.6          0.7          0.9          0.9
Restaurants - casual dining   4.2            4.3          5.1          7.3          10.9         13.4         13.7
Restaurants - quick service   3.8            3.7          4.4          5.9          6.6          7.7          8.3
Shoe stores                   0.1            0.1          0.1          0.1          0.2          0.1          -
Sporting goods                1.6            1.6          1.7          2.5          2.7          2.7          2.6
Theaters                      5.3            5.3          6.2          9.4          8.8          8.9          9.2
Transportation services       0.1            0.1          0.1          0.2          0.2          0.2          0.2
Wholesale clubs               4.1            4.1          3.9          3.2          0.7          -            -
Other                         *              *            0.1          0.1          0.1          0.3          1.1
Retail industries             80.7      %    80.4      %  79.8      %  86.7      %  88.6      %  95.4      %  98.3      %
Industry Diversification (continued)
                          Percentage of  Rental Revenue(1)
                          For the
                          Quarter Ended  For the Years Ended
                          December 31,   Dec 31,    Dec 31,    Dec 31,    Dec 31,    Dec 31,    Dec 31,
                          2014           2014       2013       2012       2011       2010       2009
  Non-retail industries
  Aerospace               1.2            1.2        1.2        0.9        0.5        -          -
  Beverages               2.7            2.8        3.3        5.1        5.6        3.0        -
  Consumer appliances     0.5            0.5        0.6        0.1        -          -          -
  Consumer goods          0.9            0.9        1.0        0.1        -          -          -
  Crafts and novelties    0.1            0.1        0.1        -          -          -          -
  Diversified industrial  0.6            0.5        0.2        0.1        -          -          -
  Electric utilities      0.1            0.1        *          -          -          -          -
  Equipment services      0.5            0.5        0.4        0.3        0.2        -          -
  Financial services      0.4            0.4        0.5        0.4        0.3        -          -
  Food processing         1.3            1.4        1.5        1.3        0.7        -          -
  General merchandise     0.3            0.3        -          -          -          -          -
  Government services     1.2            1.3        1.4        0.1        0.1        0.1        0.1
  Health care             0.7            0.7        0.8        *          *          -          -
  Home furnishings        0.2            0.2        0.2        -          -          -          -
  Insurance               0.1            0.1        0.1        *          -          -          -
  Machinery               0.2            0.2        0.2        0.1        -          -          -
  Other manufacturing     0.7            0.7        0.6        -          -          -          -
  Packaging               0.8            0.8        0.9        0.7        0.4        -          -
  Paper                   0.1            0.1        0.2        0.1        0.1        -          -
  Shoe stores             0.7            0.8        0.9        -          -          -          -
  Telecommunications      0.7            0.7        0.7        0.8        0.7        -          -
  Transportation services 5.1            5.1        5.3        2.2        1.6        -          -
  Other                   0.2            0.2        0.1        1.0        1.2        1.5        1.6
  Non-retail industries   19.3  %        19.6  %    20.2  %    13.3  %    11.4  %    4.6   %    1.7   %
  Totals                  100.0 %        100.0 %    100.0 %    100.0 %    100.0 %    100.0 %    100.0 %
* Less than 0.1%
(1) Includes rental revenue for all properties owned by Realty Income at the end of each period presented, including revenue from properties reclassified as discontinued operations. Excludes revenue from properties owned by Crest Net Lease, Inc., or Crest.
Lease Expirations
The following table sets forth certain information regarding Realty Income’s property portfolio regarding the timing of the lease term expirations (excluding rights to extend a lease at the option of the tenant) on our 4,238 net leased, single-tenant properties as of December 31, 2014 (dollars in thousands):
Total Portfolio(1)                                                                                         Initial Expirations(3)                           Subsequent Expirations(4)
                                                          Rental                                                      Rental                                           Rental
                                                          Revenue                                                     Revenue                                          Revenue
                                                          for the                                                     for the                                          for the
            Number                                        Quarter                             % of                    Quarter                  % of                    Quarter                  % of
            of Leases                          Approx.    Ended                               Total        Number     Ended                    Total        Number     Ended                    Total
            Expiring                           Leasable   Dec 31,                             Rental       of Leases  Dec 31,                  Rental       of Leases  Dec 31,                  Rental
Year                   Retail      Non-Retail  Sq. Feet   2014                    (2)         Revenue      Expiring   2014                     Revenue      Expiring   2014                     Revenue
2015                   142         -           784,600               $ 3,058                  1.4        % 68                    $ 1,554       0.7        % 74                    $ 1,504       0.7        %
2016                   203         1           1,236,800               4,719                  2.1          121                     2,823       1.3          83                      1,896       0.8
2017                   207         1           2,160,200               6,667                  2.9          49                      2,954       1.3          159                     3,713       1.6
2018                   286         10          4,024,800               11,913                 5.3          169                     8,347       3.7          127                     3,566       1.6
2019                   238         11          3,934,400               13,429                 5.9          169                     11,242      4.9          80                      2,187       1.0
2020                   133         12          3,818,800               10,473                 4.6          105                     9,256       4.1          40                      1,217       0.5
2021                   186         13          5,493,600               14,486                 6.4          188                     13,907      6.1          11                      579         0.3
2022                   225         18          7,441,700               15,136                 6.7          221                     14,480      6.4          22                      656         0.3
2023                   352         20          6,475,800               21,741                 9.6          359                     21,073      9.3          13                      668         0.3
2024                   179         10          3,280,000               9,552                  4.2          184                     9,390       4.1          5                       162         0.1
2025                   311         10          4,256,100               17,994                 7.9          300                     17,393      7.6          21                      601         0.3
2026                   234         4           3,214,500               12,354                 5.4          234                     12,252      5.4          4                       102         *
2027                   467         3           5,238,400               18,820                 8.3          468                     18,781      8.3          2                       39          *
2028                   284         5           6,037,700               16,178                 7.1          287                     16,122      7.1          2                       56          *
2029                   320         3           4,973,500               12,961                 5.7          317                     12,789      5.6          6                       172         0.1
2030 - 2043            317         33          6,795,400               37,525                 16.5         347                     37,493      16.5         3                       32          *
Totals                 4,084       154         69,166,300            $ 227,006                100.0      % 3,586                 $ 209,856     92.4       % 652                   $ 17,150      7.6        %
*   Less than 0.1%
(1) Excludes 19 multi-tenant properties and 70 vacant properties. The lease expirations for properties under construction are based on the estimated date of completion of those properties.
(2) Excludes revenue of $3,097 from 19 multi-tenant properties and from 70 vacant properties at December 31, 2014, $488 from sold properties included in continuing operations and $44 from properties owned by Crest.
(3) Represents leases to the initial tenant of the property that are expiring for the first time.
(4) Represents lease expirations on properties in the portfolio which have previously been renewed, extended or re-tenanted.
Geographic Diversification
The following table sets forth certain state-by-state information regarding Realty Income’s property portfolio as of December 31, 2014 (dollars in thousands):
                                             Approximate    Rental Revenue for                        Percentage of
               Number of     Percent         Leasable       the Quarter Ended                         Rental
State          Properties    Leased          Square Feet    December 31, 2014           (1)           Revenue
Alabama        128           98            % 1,039,500      $             3,485                       1.5           %
Alaska         3             100             275,900                      503                         0.2
Arizona        113           96              1,577,700                    6,212                       2.7
Arkansas       53            98              782,600                      1,660                       0.7
California     164           100             5,221,500                    24,029                      10.4
Colorado       72            97              1,045,400                    3,929                       1.7
Connecticut    25            96              536,900                      2,564                       1.1
Delaware       17            100             78,300                       632                         0.3
Florida        321           99              3,331,400                    13,522                      5.9
Georgia        237           98              3,362,200                    10,085                      4.4
Hawaii         --            --              --                           --                          --
Idaho          12            100             87,000                       457                         0.2
Illinois       163           99              4,590,800                    12,933                      5.6
Indiana        133           100             1,332,700                    5,491                       2.4
Iowa           35            94              2,751,700                    3,400                       1.5
Kansas         84            99              1,467,400                    3,181                       1.4
Kentucky       57            96              925,900                      3,166                       1.4
Louisiana      89            99              1,011,200                    2,940                       1.3
Maine          10            100             145,300                      894                         0.4
Maryland       34            100             791,100                      4,404                       1.9
Massachusetts  81            98              751,100                      3,486                       1.5
Michigan       114           98              1,118,000                    3,673                       1.6
Minnesota      155           100             1,209,600                    7,421                       3.2
Mississippi    122           98              1,566,100                    3,882                       1.7
Missouri       137           97              2,776,000                    8,177                       3.5
Montana        1             100             5,400                        13                          *
Nebraska       31            100             708,700                      1,758                       0.8
Nevada         22            95              413,000                      1,289                       0.6
New Hampshire  20            100             320,100                      1,511                       0.7
New Jersey     67            99              577,300                      3,604                       1.6
New Mexico     31            100             302,500                      897                         0.4
New York       86            98              2,198,700                    10,938                      4.7
North Carolina 148           99              1,524,600                    5,711                       2.5
North Dakota   7             100             66,000                       118                         *
Ohio           216           98              5,179,600                    12,327                      5.4
Oklahoma       123           99              1,450,600                    3,660                       1.6
Oregon         25            100             525,400                      1,957                       0.9
Pennsylvania   147           99              1,792,400                    7,235                       3.1
Rhode Island   4             100             157,200                      808                         0.3
South Carolina 132           99              970,100                      4,413                       1.9
South Dakota   11            100             133,500                      244                         0.1
Tennessee      197           96              2,584,600                    6,423                       2.8
Texas          439           98              8,136,900                    22,309                      9.7
Utah           15            100             760,000                      1,398                       0.6
Vermont        5             100             98,000                       480                         0.2
Virginia       141           99              2,872,700                    7,139                       3.1
Washington     38            97              415,300                      1,768                       0.8
West Virginia  12            100             261,200                      984                         0.4
Wisconsin      43            98              1,456,200                    2,781                       1.2
Wyoming        3             100             21,100                       63                          *
Puerto Rico    4             100             28,300                       149                         0.1
Totals\Average 4,327         98            % 70,734,700     $             230,103                     100.0         %
*   Less than 0.1%
(1) Includes rental revenue for all properties owned by Realty Income at December 31, 2014.  Excludes revenue of $44 from properties owned by Crest and $488 from sold properties that were included in continuing operations.

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