Record Operating Results for Fourth Quarter and 2012 Announced by Realty Income

Record Operating Results for Fourth Quarter and 2012 Announced by Realty Income

ESCONDIDO, Calif.--(BUSINESS WIRE)-- Realty Income Corporation (Realty Income), The Monthly Dividend Company^® (NYSE: O) , today announced record operating results for the fourth quarter and year ended December 31, 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 December 31, 2012 (as compared to the same quarterly period in 2011):

• Revenue increased 16.4% to $130.1 million as compared to $111.8 million

• Net income available to common stockholders per share was $0.21

• Normalized FFO available to common stockholders increased 8.7% to $74.0 million

• Normalized FFO per share increased 9.8% to $0.56

• AFFO available to common stockholders increased 6.4% to $72.9 million

• AFFO per share increased 5.8% to $0.55

• Same store rents increased 0.4% to $90.85 million

• Portfolio occupancy increased to 97.2% from 97.0%

• Invested $447 million in real estate, acquiring 189 new properties and properties under development

• The monthly dividend was increased in December, for the 69^th time and for the 61^st consecutive quarter

• Raised gross proceeds of $800 million in an offering of senior unsecured notes due 2018 and 2022

• Dividends paid per common share increased 4.1%

For the year ended December 31, 2012 (as compared to 2011):

• Revenue increased 15.9% to $475.5 million as compared to $410.3 million

• Net income available to common stockholders per share was $0.86

• Normalized FFO available to common stockholders increased 7.8% to $268.8 million

• Normalized FFO per share increased 2.0% to $2.02

• AFFO available to common stockholders increased 8.2% to $274.2 million

• AFFO per share increased 2.5% to $2.06

• Same store rents increased 0.1% to $360.4 million

• Invested $1.16 billion in real estate, acquiring 423 new properties

• Raised gross proceeds of $1.21 billion in public securities offerings to fund 2012 real estate acquisitions, repay borrowings under the credit facility, and redeem all outstanding Class D preferred shares

• Dividends paid per common share increased 2.0%

• Paid the 509^th consecutive monthly dividend in December 2012

• Total return to shareholders of 20.1% based on dividends paid and share price growth

Major events subsequent to December 31, 2012:

• On January 22, 2013, Realty Income closed on the acquisition of American Realty Capital Trust

• Increased the annualized dividend amount by $0.35 to $2.171 per share

Financial Results

Revenue

Revenue, for the quarter ended December 31, 2012, increased 16.4% to $130.1 million as compared to $111.8 million for the same quarter in 2011. Revenue for 2012 increased 15.9% to $475.5 million as compared to $410.3 million for 2011.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended December 31, 2012, was $28.5 million as compared to $34.9 million for the same quarter in 2011. Net income per share, for the quarter ended December 31, 2012, was $0.21 as compared to $0.26 for the same quarter in 2011. The decrease in net income available to common stockholders includes $2.4 million of ARCT merger-related costs.

Net income available to common stockholders, in 2012, was $114.5 million as compared to $132.8 million for 2011. Net income per share, in 2012, was $0.86 as compared to $1.05 for 2011. The decrease in net income available to common stockholders includes a $3.7 million non-cash redemption charge on the Class D preferred shares that were redeemed in March 2012 and $7.9 million of ARCT merger-related costs.

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 December 31, 2012, increased 5.1% to $71.6 million as compared to $68.1 million for the same quarter in 2011. FFO per share, for the quarter ended December 31, 2012, increased 5.9% to $0.54 as compared to $0.51 for the same quarter in 2011.

FFO in 2012 increased 4.6% to $260.9 million as compared to $249.4 million for 2011. FFO per share, in 2012, decreased 1.0% to $1.96 as compared to $1.98 for 2011. The decrease in FFO per share is due to a $3.7 million non-cash redemption charge on the Class D preferred shares that were redeemed in March 2012 and $7.9 million of ARCT merger-related costs. Excluding the $3.7 million charge, FFO per share is $1.99 for 2012, an increase of 0.5% as compared to 2011.

Normalized FFO Available to Common Stockholders

Normalized Funds from Operations, which is based on FFO adjusted to add back ARCT merger-related costs, for the quarter ended December 31, 2012, increased 8.7% to $74.0 million as compared to $68.1 million for the same quarter in 2011. Normalized FFO per share, for the quarter ended December 31, 2012, increased 9.8% to $0.56 as compared to $0.51 for the same quarter in 2011.

Normalized FFO in 2012 increased 7.8% to $268.8 million as compared to $249.4 million for 2011. Normalized FFO per share, in 2012, increased 2.0% to $2.02 as compared to $1.98 for 2011. Normalized FFO per share includes a $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 $2.05 for 2012, an increase of 3.5% as compared to 2011.

AFFO Available to Common Stockholders

Adjusted Funds from Operations (AFFO), for the quarter ended December 31, 2012, increased 6.4% to $72.9 million as compared to $68.5 million for the same quarter in 2011. AFFO per share, for the quarter ended December 31, 2012, increased 5.8% to $0.55 as compared to $0.52 for the same quarter in 2011.

AFFO in 2012 increased 8.2% to $274.2 million as compared to $253.4 million for 2011. AFFO per share, in 2012, increased 2.5% to $2.06 as compared to $2.01 for 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 ARCT merger-related costs for our acquisition of American Realty Capital Trust (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 on page seven.

Dividend Information

In December 2012, Realty Income announced the 61^st consecutive quarterly dividend increase, which is the 69^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 December 31, 2012, was $1.821 per share. The amount of the monthly dividends paid increased 2.0% to $1.771625 per share in 2012 from $1.736625 per share for 2011. In addition, through December 31, 2012, the company has paid 509 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 December 31, 2012, Realty Income's portfolio of freestanding, single-tenant properties consisted of 3,013 properties located in 49 states, leased to 150 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 December 31, 2012, portfolio occupancy was 97.2% with 84 properties available for lease out of a total of 3,013 properties in the portfolio, as compared to 97.0% portfolio occupancy as of September 30, 2012.

Rent Increases

During the quarter ended December 31, 2012, same store rents on 2,220 properties under lease increased 0.4% to $90.85 million, as compared to $90.47 million for the same quarter in 2011. During 2012, same store rents on 2,220 properties under lease increased 0.1% to $360.4 million, as compared to $360.0 million for 2011.

Property Acquisitions

During the fourth quarter of 2012, Realty Income invested $447 million in real estate, acquiring 189 new properties and properties under development. The new properties are located in 27 states and are 100% leased with an average lease term of 14.9 years and an initial average lease yield of 7.4%.

During 2012, Realty Income invested $1.16 billion in real estate, acquiring 423 new properties and properties under development. The new properties are located in 37 states and are 100% leased with an average lease term of 14.6 years and an initial average lease yield of 7.2%.

Realty Income maintains a $1.0 billion unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of December 31, 2012, outstanding borrowings on the company's acquisition credit facility were $158 million, and borrowing capacity was $842 million.

Property Dispositions

Realty Income continued to successfully execute its asset disposition program in the fourth 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, and/or decrease tenant or industry concentration.

During the quarter ended December 31, 2012, Realty Income sold 14 properties for $16.3 million, with a gain on sales of $3.9 million, as compared to five properties sold for $11.7 million, with a gain on sales of $1.2 million, during the same quarter in 2011.

During 2012, Realty Income sold 44 properties for $50.6 million, with a gain on sales of $9.9 million, as compared to 26 properties sold for $24.1 million, with a gain on sales of $5.7 million, during 2011.

Other Activities

Acquisition of American Realty Capital Trust (ARCT)

In September 2012, Realty Income entered into a definitive merger agreement to acquire all of the outstanding shares of ARCT. This transaction closed on January 22, 2013 and, at that time, Realty Income issued approximately 45.6 million shares to ARCT shareholders based on a fixed exchange ratio of 0.2874 shares of Realty Income stock for each share of ARCT common stock owned. The company also made a cash payment of $0.35 per ARCT share to each ARCT shareholder. In conjunction with the acquisition of ARCT, Realty Income assumed approximately $516.3 million of mortgages payable and repaid approximately $552.9 million of borrowings under ARCT's revolving credit facility and term loan. The total transaction value is approximately $3.1 billion. Upon closing, Realty Income became the 18^th largest real estate investment trust in the US, with an enterprise value of approximately $12.6 billion and an equity market capitalization of approximately $8.5 billion. In addition, the company's real estate portfolio, upon the closing, consisted of 3,528 properties leased to 202 tenants doing business in 48 industries. A "Supplemental Information" section has been added to the end of this press release to provide pro forma operating metrics for Realty Income after integrating the ARCT real estate into the company's core portfolio.

January 2013 Dividend Increase

On January 22, 2013, Realty Income increased the amount of the annualized dividend 19.2%. The new dividend amount represents an annualized increase of $0.35 per share, to $2.171 per share, as compared to the prior annualized dividend amount of $1.821 per share. The new monthly dividend amount of $0.1890167 per share will be paid on February 15, 2013 to shareholders of record on February 1, 2013.

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

On October 10, 2012, the company closed its offering of $350 million of 5-year 2.00% fixed rate Notes, due January 2018, and $450 million of 10-year 3.25% fixed rate Notes, due October 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 were used for general corporate purposes, which included additional property acquisitions.

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 very pleased to report increases in rental revenue, adjusted funds from operations (AFFO) and dividends during the fourth quarter of 2012. In addition, our net-leased property portfolio continued to exhibit strong performance with occupancy increasing to 97.2%.

"We also invested $447 million in real estate during the fourth quarter, acquiring 189 new properties and properties under development, bringing our total dollars invested in real estate to $1.16 billion in 2012, the highest level in a single year since the company was founded in 1969. The initial average lease yield for the fourth quarter acquisitions was 7.4% and for 2012 was 7.2%. 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. As we begin 2013, real estate transaction flow continues to offer us ample real estate investment opportunities.

"Perhaps the highlight of 2012 was the announcement of our planned acquisition of ARCT, which closed on January 22, 2013. As we commented on many times during the merger and acquisition process, the completion of the ARCT acquisition positions Realty Income as the largest public net-lease REIT, and one of the larger REITs in our industry. More importantly, the 515 properties that were added to our real estate portfolio are immediately accretive to our earnings and significantly advance our objective to increase the overall credit quality of the lease revenue supporting the payment of dividends. Upon closing of the transaction, anticipated lease revenue generated by investment grade rated tenants rises to 34%, compared to 19% prior to the ARCT acquisition."

"We were also successful in accessing the capital markets during 2012, generating gross proceeds of $1.21 billion through total preferred stock offerings of $409 million in both February and April 2012, and senior unsecured notes offerings of $800 million in October 2012. This capital raising activity allowed us to fund our acquisitions during 2012. In addition, we entered into a new and expanded $1.0 billion credit facility with our commercial banks earlier in the year, so we have ample access to funds allowing us to pursue additional real estate investment opportunities.

"Our ability to increase the amount of the monthly dividend paid to our shareholders was supported by the record operating results during the year. We were able to provide four quarterly dividend increases, as well as a special August 2012 increase of 3.4%. As a result, our shareholders enjoyed a 2.0% increase in the amount of the dividends paid per share during 2012. Since the closing of the ARCT acquisition, we announced another $0.35 per share annual increase in the amount of the dividend. The new annualized dividend amount, as of January 22, 2013, is $2.171 per share. Providing monthly dividends that increase over time is our mission, thus we remain focused on operating our business in a manner consistent with achieving that 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, integration of the acquired ARCT properties including the finalization of purchase price allocations, lease rollovers, the general real estate market, and the economy.

2013 Earnings Estimates

Normalized FFO is based on FFO adjusted to add back ARCT merger-related costs. The Normalized 2013 FFO and AFFO estimates are as follows (excluding the costs associated with the ARCT transaction):

Normalized FFO per share for 2013 should range from $2.32 to $2.38 per share, an increase of 14.9% to 17.8% over the Normalized 2012 FFO per share of $2.02. Normalized FFO per share for 2013 is based on an estimated net income per share range of $1.05 to $1.11, plus estimated real estate depreciation of $1.50 and reduced by potential estimated gains on sales of investment properties of $0.23 per share (in accordance with NAREIT's definition of FFO).

AFFO per share for 2013 should range from $2.33 to $2.39 per share, an increase of 13.1% to 16.0% over the 2012 AFFO per share of $2.06. The AFFO per share estimate for 2013 is based on adding back items to FFO, that reduce net income, totaling approximately $0.10, and deducting capitalized expenditures and straight-line rent revenue items totaling approximately $0.08, for a net increase of $0.01 to $0.02 over Normalized FFO.

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 January 15, 2013, the company had paid 510 consecutive monthly dividends throughout its 44-year operating history. The monthly income is supported by the cash flows from over 3,500 properties owned under long-term lease agreements with 202 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, integration of the ARCT acquisition, and the outcome of any legal proceedings to which the company is a party, as described in the company's filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

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