Operating Results for Third Quarter and Nine Months Announced by Realty Income

Operating Results for Third Quarter and Nine Months Announced by Realty Income

ESCONDIDO, Calif.--(BUSINESS WIRE)-- Realty Income Corporation (Realty Income), The Monthly Dividend Company^® (NYS: O) , today announced operating results for the third quarter and nine months ended September 30, 2012. Access to this document is available at www.realtyincome.com. All per share amounts presented in this press release are on a diluted per common share basis unless stated otherwise.

COMPANY HIGHLIGHTS:

For the quarter ended September 30, 2012 (as compared to the same quarterly period in 2011):

• Revenue increased 13.2% to $120.2 million

• Normalized FFO available to common stockholders increased 8.3% to $68.9 million

• AFFO available to common stockholders increased 6.7% to $68.5 million

• Normalized FFO per share increased 4.0% to $0.52

• AFFO per share increased 2.0% to $0.52

• Net income available to common stockholders per share was $0.20

• Portfolio occupancy was 97.0%

• Invested $496.1 million in 87 new properties and properties under development

• The monthly dividend increased for the 67^th time in August to an annualized amount of $1.8135

• The monthly dividend was also increased in September, for the 68^th time and for the 60^th consecutive quarter, to an annualized amount of $1.81725 per share

• Dividends paid per common share increased 1.8%

• Announced the proposed acquisition of American Realty Capital Trust (NAS: ARCT)

Financial Results

Revenue

Revenue, for the quarter ended September 30, 2012, increased 13.2% to $120.2 million as compared to $106.2 million for the same quarter in 2011. Revenue, for the nine months ended September 30, 2012, increased 15.3% to $349.9 million as compared to $303.5 million for the same period in 2011.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended September 30, 2012, was $27.0 million as compared to $34.7 million for the same quarter in 2011. Net income per share, for the quarter ended September 30, 2012, was $0.20 as compared to $0.27 for the same quarter in 2011. The decrease in net income available to common stockholders includes $5.5 million of merger-related costs, including estimated accruals.

Net income available to common stockholders, for the nine months ended September 30, 2012, was $86.0 million as compared to $97.8 million for the same period in 2011. Net income per share, for the nine months ended September 30, 2012, was $0.65 as compared to $0.79 for the same period in 2011. The decrease in net income available to common stockholders includes a one-time $3.7 million non-cash redemption charge on the Class D preferred shares that were redeemed in March 2012 and $5.5 million of merger-related costs, including estimated accruals.

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

FFO Available to Common Stockholders

Funds from Operations (FFO), for the quarter ended September 30, 2012, decreased 0.3% to $63.4 million as compared to $63.6 million for the same quarter in 2011. FFO per share, for the quarter ended September 30, 2012, decreased 4.0% to $0.48 as compared to $0.50 for the same quarter in 2011.

FFO, for the nine months ended September 30, 2012, increased 4.4% to $189.3 million as compared to $181.3 million for the same period in 2011. FFO per share, for the nine months ended September 30, 2012, decreased 2.7% to $1.42 as compared to $1.46 for the same period in 2011. The decrease in FFO per share is due to a one-time, $3.7 million non-cash redemption charge on the Class D preferred shares that were redeemed in March 2012 and $5.5 million of merger-related costs, including estimated accruals. Excluding the $3.7 million charge, FFO per share is $1.45 for the first nine months of 2012.

Normalized FFO Available to Common Stockholders

Normalized Funds from Operations, which is based on FFO adjusted to add back merger-related costs, for the quarter ended September 30, 2012, increased 8.3% to $68.9 million as compared to $63.6 million for the same quarter in 2011. Normalized FFO per share, for the quarter ended September 30, 2012, increased 4.0% to $0.52 as compared to $0.50 for the same quarter in 2011.

Normalized FFO, for the nine months ended September 30, 2012, increased 7.4% to $194.8 million as compared to $181.3 million for the same period in 2011. Normalized FFO per share, for the nine months ended September 30, 2012, increased 0.7% to $1.47 as compared to $1.46 for the same period in 2011. Normalized FFO per share includes a one-time, $3.7 million non-cash, redemption charge on the Class D preferred shares that were redeemed in March 2012. Excluding this $3.7 million charge, normalized FFO per share is $1.49 for the first nine months of 2012.

AFFO Available to Common Stockholders

Adjusted Funds from Operations (AFFO), for the quarter ended September 30, 2012, increased 6.7% to $68.5 million as compared to $64.2 million for the same quarter in 2011. AFFO per share, for the quarter ended September 30, 2012, increased 2.0% to $0.52 as compared to $0.51 for the same quarter in 2011.

AFFO, for the nine months ended September 30, 2012, increased 8.9% to $201.3 million as compared to $184.8 million for the same period in 2011. AFFO per share, for the nine months ended September 30, 2012, increased 2.0% to $1.52 as compared to $1.49 for the same period in 2011.

The Company considers FFO, normalized 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. Normalized FFO adds back one-time merger-related costs for our proposed acquisition of ARCT. AFFO further adjusts Normalized FFO for unique revenue and expense items which are not pertinent to the measurement of our ongoing operating performance. See our reconciliation of net income available to common stockholders to FFO, normalized FFO and AFFO below.

Dividend Information

In August 2012, Realty Income announced a dividend increase of 3.4%. In September 2012, Realty Income announced the 60^th consecutive quarterly dividend increase, which is the 68^th increase in the amount of the dividend since the Company's listing on the New York Stock Exchange in 1994. The annualized dividend amount, as of September 30, 2012, was $1.81725 per share. The amount of the monthly dividends paid increased 1.2% to $1.317 per share for the nine months ended September 30, 2012, from $1.301 per share for the same period in 2011. In addition, through September 30, 2012, the Company has paid 506 consecutive monthly dividends and over $2.3 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 September 30, 2012, Realty Income's portfolio of freestanding, single-tenant properties consisted of 2,838 properties located in 49 states, leased to 144 commercial enterprises doing business in 44 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 11.0 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 September 30, 2012, portfolio occupancy was 97.0% with 84 properties available for lease out of a total of 2,838 properties in the portfolio, as compared to 97.3% portfolio occupancy as of June 30, 2012.

Rent Increases (Decreases)

During the quarter ended September 30, 2012, same store rents on 2,262 properties under lease decreased 1.0% to $91.65 million, as compared to $92.54 million for the same quarter in 2011. Excluding the impact of Friendly's and Buffet's reorganization rent adjustments, same store rental revenue increased 1.0%, during the third quarter of 2012, as compared to the same period in 2011.

During the nine months ended September 30, 2012, same store rents on 2,262 properties under lease decreased 0.8% to $275.1 million, as compared to $277.2 million for the same period in 2011. Excluding the impact of Friendly's and Buffet's reorganization rent adjustments, same store rental revenue increased 1.1%, during the first nine months of 2012, as compared to the same period in 2011.

Property Acquisitions

During the third quarter of 2012, Realty Income invested $496.1 million in 87 new properties and properties under development. The new properties are located in 19 states and are 100% leased with an average lease term of 13.0 years and an initial average lease yield of 7.1%.

During the nine months ended September 30, 2012, Realty Income invested $717.6 million in 234 new properties and properties under development. The new properties are located in 33 states and are 100% leased with an average lease term of 14.3 years and an initial average lease yield of 7.1%.

Realty Income maintains a $1.0 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of September 30, 2012, outstanding borrowings on the Company's acquisition credit facility were $609.0 million, and borrowing capacity was $391.0 million. Subsequent to the end of the third quarter, the credit facility borrowings were repaid, and the full $1.0 billion credit facility is available to fund additional acquisitions.

Property Dispositions

Realty Income continued to successfully execute its asset disposition program in the third quarter of 2012. The objective of this program is to sell assets when the Company believes the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the Company's real estate portfolio, increase the average lease length, or decrease tenant or industry concentration.

During the quarter ended September 30, 2012, Realty Income sold 11 properties for $15.8 million, with a gain on sales of $2.0 million, as compared to 12 properties sold for $7.4 million, with a gain on sales of $3.1 million, during the same quarter in 2011.

During the nine months ended September 30, 2012, Realty Income sold 30 properties for $34.3 million, with a gain on sales of $6.0 million, as compared to 21 properties sold for $12.5 million, with a gain on sales of $4.5 million, during the same period in 2011.

Other Activities

Acquiring American Realty Capital Trust

In September 2012, Realty Income and American Realty Capital Trust, Inc. signed a definitive agreement under which Realty Income will acquire all of the outstanding shares of American Realty Capital Trust (ARCT) in a transaction valued at approximately $2.95 billion. The board of directors of both companies have unanimously approved the agreement. Assuming shareholder approval by both companies, the transaction is expected to close during the fourth quarter of 2012 or early in the first quarter of 2013. Upon completion, it is anticipated that Realty Income will be the 18^th largest REIT in the US, based on total pro forma equity market capitalization, and twice as large as the next largest net-lease REIT.

Priced $800 Million of Senior Unsecured Notes Due 2018 and 2022

On October 2, 2012, the Company announced the pricing of $350 million of 5-year 2.00% fixed rate Notes, due January 31, 2018, and $450 million of 10-year 3.25% fixed rate Notes, due October 15, 2022. The public offering price for the 5-year notes was 99.910% of the principal amount for an effective yield to maturity of 2.017%. The public offering price for the 10-year notes was 99.382% of the principal amount for an effective yield to maturity of 3.323%. The net proceeds from the offering were used to repay borrowings outstanding on the Company's $1.0 billion acquisition credit facility, and the remaining proceeds will be used for general corporate purposes, which may include additional property acquisitions.

Direct Stock Purchase and Dividend Reinvestment Plan (the "Stock Plan")

During the third quarter of 2012, Realty Income issued 14,085 common shares via its Stock Plan at an average price of $41.69 per share, generating gross proceeds of $584,000. During the first nine months of 2012, Realty Income issued 55,598 common shares via its Stock Plan at an average price of $39.16 per share, generating gross proceeds of $2.2 million.

CEO Comments on Operating Results

Commenting on Realty Income's financial results and real estate operations, Chief Executive Officer, Tom A. Lewis said, "We are pleased to report increases in rental revenue, adjusted funds from operations (AFFO) and dividends during the third quarter of 2012. In addition, our net-leased property portfolio continued to exhibit strong performance with occupancy remaining high at 97% at the end of the third quarter."

"We also invested $496.1 million in 87 new properties and properties under development, during the third quarter. Year-to-date, we have invested $717.6 million in 234 new properties, and properties under development, with an initial average lease yield of 7.1% and an average lease term of 14.3 years. In addition, we recently disclosed that we anticipate acquiring approximately $1.0 billion in new properties during 2012, based on agreements we have entered into that have closed, or are expected to close, in the fourth quarter. Importantly, the majority of the properties acquired are leased to investment-grade tenants, consistent with our strategic focus on continuing to increase the overall credit quality of our real estate portfolio. Real estate transaction flows continue to offer us attractive net-lease properties for acquisition. All in all, we enjoyed an excellent quarter and nine months on the acquisition front."

"We also were very successful in accessing the capital markets with the pricing, on October 2, 2012, of $800 million of senior unsecured notes due in 2018 and 2022, to permanently fund both closed and pending acquisitions. The pricing of the notes was very favorable at 2.00% for $350 million of 5-year fixed rate notes and at 3.25% for $450 million of 10-year fixed rate notes."

"With respect to our recently announced pending acquisition of American Realty Capital Trust, we are in the process of finalizing the proxy statement that will be mailed to all shareholders. Subsequent to receiving shareholder approval and closing of the transaction, we anticipate immediately increasing the annualized amount of the dividend by $0.13 to $1.947 per share."

"Most important to our shareholders, during the third quarter, we also announced two dividend increases. The first was a special increase of 3.4% in August 2012, which our Board of Directors approved based on the successful operations of our business during the year. We also increased the dividend for the 60^th consecutive quarter in September 2012. As a result, the amount of the annualized dividend has increased from $1.746, at the end of 2011, to $1.81725, as of the end of the third quarter, an increase of 4.1%. Providing monthly dividends that increase over time is our mission, and so we remain focused on operating our business in a manner consistent with achieving our mission."

FFO Commentary

Realty Income's FFO 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 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.

2012 Estimates

Excluding the one-time costs associated with the closing of the ARCT transaction, the Company estimates that 2012 normalized FFO per share should range from $2.00 to $2.04 per share, an increase of 1.0% to 3.0% over the 2011 FFO per share of $1.98. Normalized FFO per share for 2012 is based on an estimated net income per share range of $0.92 to $0.96 plus estimated real estate depreciation of $1.16 and reduced by potential gains on sales of investment properties of $0.08 per share (in accordance with NAREIT's definition of FFO).

The Company estimates that 2012 Adjusted Funds from Operations (AFFO) should range from $2.06 to $2.11 per share, an increase of 2.5% to 5.0% over the 2011 AFFO per share of $2.01. The AFFO per share estimate for 2012 is based on adding back items to normalized FFO totaling $0.12 to $0.13, that reduce net income, and deducting capitalized expenditures and straight-line rent revenue items totaling approximately $0.06, for a net increase of $0.06 to $0.07 over FFO.

2013 Earnings Estimates (assuming a December 31, 2012 ARCT transaction closing date)

The Company estimates that 2013 FFO per share should range from $2.30 to $2.36 per share, an increase of 12.7% to 18.0% over the 2012 estimated FFO per share of $2.00 to $2.04. FFO per share for 2013 is based on an estimated net income per share range of $0.93 to $0.99, plus estimated real estate depreciation of $1.44 and reduced by potential gains on sales of investment properties of $0.07 per share (in accordance with NAREIT's definition of FFO).

The Company estimates that 2013 Adjusted Funds from Operations (AFFO) should range from $2.31 to $2.37 per share, an increase of 9.5% to 15.0% over the 2012 estimated AFFO per share of $2.06 to $2.11. The AFFO per share estimate for 2013 is based on adding back items to FFO, that reduce net income, totaling $0.08 to $0.10, and deducting capitalized expenditures and straight-line rent revenue items totaling approximately $0.05 to $0.07, for a net increase of $0.01 to $0.05 over FFO.

Realty Income 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, reduced by gains on sales of investment properties and extraordinary items. AFFO further adjusts FFO for unique revenue and expense items which are not pertinent to the measurement of Realty Income's ongoing operating performance.

About Realty Income

Realty Income is The Monthly Dividend Company^®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of September 30, 2012, the Company had paid 506 consecutive monthly dividends throughout its 43-year operating history. The monthly income is supported by the cash flows from over 2,800 properties owned under long-term lease agreements with 144 leading regional and national commercial enterprises. 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, the outcome of any legal proceedings to which the Company is a party, and our proposed acquisition of American Capital Realty Trust, as described in the Company's filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the Company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

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