UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ========= ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1999 Commission File Number 1-13318 REALTY INCOME CORPORATION ------------------------- (Exact name of registrant as specified in its charter) Maryland 33-0580106 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 220 West Crest Street, Escondido, California 92025 --------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (760)741-2111 ------------- Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class On Which Registered ---------------------------------------- ----------------------- Common Stock, $1.00 Par Value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange 8.25% Monthly Income Senior Notes, due 2008 New York Stock Exchange Class B Preferred Stock, $1.00 Par Value New York Stock Exchange Class C Preferred Stock, $1.00 Par Value New York Stock Exchange ---------------------------------------- ----------------------- Securities registered pursuant to Section 12 (g) of the Act: None ---- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] At March 1, 2000 the aggregate market value of the Registrant's shares of common stock, $1.00 par value, held by non-affiliates of the Registrant was $541,780,000, at the New York Stock Exchange closing price of $20.75. As of March 1, 2000, the number of common shares outstanding was 26,808,370, the number of Class B preferred shares outstanding was 2,745,700 and the number of Class C preferred shares outstanding was 1,380,000. Documents incorporated by reference: Part III, Item 10, 11 and 12 incorporate by reference certain specific portions of the definitive proxy statement for Realty Income Corporation's Annual Meeting to be held on May 3, 2000, to be filed pursuant to Regulation 14A. Only those portions of the proxy statement which are specifically incorporated by reference herein shall constitute a part of this Annual Report. FORWARD-LOOKING STATEMENTS - -------------------------- This annual report on Form 10-K, including documents incorporated by reference, contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this annual report, the words estimated, anticipated and similar expressions are intended to identify forward-looking statements. Forward- looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation, including, among other things: - Our anticipated growth strategies; - Our intention to acquire additional properties; - Anticipated trends in our business, including trends in the market for long-term net leases of freestanding, single-tenant retail properties; - Future expenditures for development projects; and - Availability of capital to finance our business. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. In particular, some of the factors that could cause actual results to differ materially are: - Our continued qualification as a real estate investment trust; - General business and economic conditions; - Competition; - Interest rates; Page 2
- Accessibility of debt and equity capital markets; and - Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and illiquidity of real estate investments. Additional factors that may cause risks and uncertainties include those discussed in the sections entitled "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this annual report. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that this annual report was filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, the forward-looking events discussed in this annual report might not occur. Page 3
<TABLE> REALTY INCOME CORPORATION Index To Form 10-K ================== Page ---- <S> <C> PART I Item 1: Business......................................... 5 Item 2: Properties....................................... 27 Item 3: Legal Proceedings................................ 27 Item 4: Submission of Matters to a Vote of Security Holders......................... 27 PART II Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters........... 28 Item 6: Selected Financial Data.......................... 29 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 31 Item 7A: Quantitative and Qualitative Disclosures about Market Risk...................................... 42 Item 8: Financial Statements and Supplementary Data...... 43 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 69 PART III Item 10: Directors and Executive Officers of the Registrant................................ 69 Item 11: Executive Compensation........................... 69 Item 12: Security Ownership of Certain Beneficial Owners and Management................. 69 Item 13: Certain Relationships and Related Transactions..................................... 69 PART IV Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 70 SIGNATURES.................................................... 74 EXHIBIT INDEX................................................. 76 Schedule III: Real Estate and Accumulated Depreciation....... F-1 </TABLE> Page 4
PART I ====== ITEM 1: BUSINESS - ----------------- THE COMPANY =========== Realty Income Corporation, "The Monthly Dividend Company", a Maryland corporation ("Realty Income", the "Company", "us", "our" or "we") is organized to operate as an equity real estate investment trust ("REIT"). We are a fully integrated, self-administered real estate company with in- house acquisition, leasing, legal, retail and real estate research, portfolio management and capital markets expertise. As of December 31, 1999, we owned a diversified portfolio of 1,076 retail properties located in 45 states with over 8.6 million square feet of leasable space leased to 72 separate retail chains doing business in 23 separate retail industries. Of the 1,076 properties in the portfolio, 1,069 are single-tenant retail properties with the remainder being multi-tenant properties. As of December 31, 1999, 1,052, or 98.4%, of the 1,069 single-tenant properties were leased with an average remaining lease term (excluding extension options) of approximately 8.7 years. Our primary business objective is to generate dependable monthly dividends from a consistent and predictable level of funds from operations ("FFO") per share. Additionally, we seek to increase distributions to stockholders and FFO per share through both active portfolio management and the acquisition of additional properties. Our portfolio management focus includes: - Contractual rent increases on existing leases; - Rental increases at the termination of existing leases when market conditions permit; and - The active management of our property portfolio, including selective sales of properties. Our acquisition of additional properties adheres to a focused strategy of acquiring primarily: - Freestanding, single-tenant, retail properties; - Properties leased to regional and national retail chains; and - Properties under long-term, net-lease agreements. We typically acquire, then lease back, retail store locations from chain store operators, providing capital to the operators for continued expansion and other corporate purposes. Our acquisitions and investment activities are concentrated in well-defined target markets and focus generally on middle-market retailers providing goods and services that satisfy basic consumer needs. Our net-lease agreements generally: - Are for initial terms of 10 to 20 years; - Require the tenant to pay a minimum monthly rent and property operating expenses (taxes, insurance and maintenance); and Page 5 - Provide for future rent increases (typically subject to ceilings) based on increases in the consumer price index, fixed increases, or additional rent calculated as a percentage of the tenant's gross sales above a specified level. Realty Income was formed on September 9, 1993 in the State of Delaware and reincorporated in Maryland in May 1997. Realty Income commenced operations as a REIT on August 15, 1994 through the merger of 25 public and private real estate limited partnerships with and into the Company. Each of the partnerships was formed between 1970 and 1989 for the purpose of acquiring and managing long-term, net-leased properties. The five senior officers of the Company, who have each managed our properties and operations for between 2 and 14 years, owned 0.6% of the Company's outstanding common stock with a market value of $3.3 million as of March 1, 2000. The directors and five senior officers of the Company, as a group, owned 2.6% of the Company's outstanding common stock with a market value of $14.4 million as of March 1, 2000. Realty Income's common stock is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "O", our central index key ("CIK") number is 726728 and cusip number is 756109-104. Realty Income's 8.25% Monthly Income Senior Notes due 2008, are listed on the NYSE under the ticker symbol "OUI". The cusip number of these notes is 756109-203. Realty Income has 44 employees as of March 1, 2000. RECENT DEVELOPMENTS =================== ACQUISITION OF 110 PROPERTIES DURING 1999. During 1999, we acquired 110 additional properties (the "New Properties"), and selectively sold three properties, increasing the number of properties in the portfolio by 10.9% to 1,076 properties at December 31, 1999 from 970 properties at December 31, 1998. During 1999, we diversified our portfolio with the addition of two new retail industries, Entertainment and Theaters, and eight new retail chains. During 1999, we invested $181.4 million in New Properties and properties under development (excluding estimated unfunded development costs on properties under construction at December 31, 1999 of $15.4 million). The weighted average annual unleveraged return on the $181.4 million invested in 1999 is estimated to be 10.5%, computed as estimated contractual net operating income (which in the case of a net-leased property is equal to the base rent or, in the case of properties under construction, the estimated base rent under the lease) for the first year of each lease, divided by the estimated total costs of each property. Since it is Page 6
possible that a tenant could default on the payment of contractual rent, no assurance can be given that the actual return on the funds invested will not differ from the foregoing percentage. The New Properties are leased to 21 separate retail chains operating in 16 different retail industries, are located in 26 states, will contain approximately 948,000 leasable square feet and are 100% leased under net leases, with an average initial lease term of 17.4 years. Of the New Properties, 102 were occupied as of March 1, 2000 and the remaining properties were pre-leased and under construction pursuant to contracts under which the tenants have agreed to develop the properties (with development costs funded by the Company) and to begin paying rent when the premises open for business. INCREASES IN MONTHLY DISTRIBUTIONS TO COMMON STOCKHOLDERS. In April, July and October 1999, and January 2000, the monthly distributions to common stockholders were increased $0.0025 to $0.1725, $0.1750, $0.1775 and $0.1800 per share, respectively. We are committed to our policy of paying monthly distributions to common stockholders. During 1999, we paid three distributions of $0.1700 per common share, three distributions of $0.1725 per common share, three distributions of $0.1750 per common share, and three distributions of $0.1775 per common share. Common stock distributions for 1999 totaled $2.085 per share. In December 1999, January 2000 and February 2000, we declared distributions of $0.18 per common share, which were paid on January 18, 2000, February 15, 2000 and March 15, 2000, respectively. The monthly distribution of $0.18 per common share represents a current annualized distribution of $2.16 per share, and an annualized distribution yield of approximately 10.4% based on the last reported sale price of our common stock on the NYSE of $20.75 on March 1, 2000. Although we expect to continue our policy of paying monthly distributions, there can be no assurance that the current level of distributions per share will be maintained by the Company, that we will continue our pattern of increasing distributions per share, or as to the actual distribution yield for any future period. UNSECURED REVOLVING CREDIT FACILITIES. In December 1999, we entered into a $200 million, three-year, revolving unsecured acquisition credit facility, which expires in December 2002. Simultaneously with the execution of the $200 million credit facility our $170 million credit facility was cancelled. As of March 1, 2000, we had $70.7 million available for borrowing under the $200 million credit facility. At that time, the outstanding balance was $129.3 million with an effective interest rate of 7.3%. In February 2000, we entered into a $25 million, three-year, revolving credit facility, which expires in February 2003. This credit facility can be used for the acquisition of property and for making capital contributions to subsidiaries for the purpose of acquiring properties. Page 7
STOCK AND SENIOR DEBT REPURCHASE PROGRAM. In January 2000, our Board of Directors authorized the purchase of up to $10 million of our outstanding common and preferred shares and senior debt securities during the next 12 months. We may make periodic purchases on the open market at prevailing prices or in privately negotiated transactions. The purchases will be funded using available working capital which consists primarily of cash flow from operations. FORMATION OF SUBSIDIARY. In January 2000, we formed Crest Net Lease, Inc., of which we own 95% of the common stock, all of which is non-voting, and certain members of management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created to actively buy and sell certain select properties, primarily to buyers using tax-deferred exchanges, under Section 1031 of the Internal Revenue Service Code. PREFERRED STOCK OFFERINGS. In May 1999, we issued 2,760,000 shares of 9 3/8% Class B cumulative redeemable preferred stock (the "Class B Preferred") at a price of $25.00 per share. The Class B Preferred trades on the New York Stock Exchange ("NYSE") under the symbol "OprB" and its cusip number is 756109-302. Dividends on the Class B Preferred are payable quarterly. The net proceeds of $66.5 million were used to pay down bank borrowings. In July 1999, we issued 1,380,000 shares of 9 1/2% Class C cumulative redeemable preferred stock (the "Class C Preferred") at a price of $25.00 per share. The Class C Preferred trades on the NYSE under the symbol "OprC" and its cusip number is 756109-500. Dividends on the Class C Preferred are payable monthly. The net proceeds of $33.2 million were used to pay down bank borrowings. NOTES OFFERING. In January 1999, we issued $20 million of 8.0% unsecured senior notes due 2009 (the "1999 Notes"). The 1999 Notes were sold at 98.757% of par to yield 8.1%. The proceeds from the offering were used to pay down bank borrowings and for other corporate purposes. Currently, there is no formal trading market for the 1999 Notes and we have not listed and do not intend to list the 1999 Notes on any securities exchange. BUSINESS PHILOSOPHY AND STRATEGY ================================ INVESTMENT PHILOSOPHY. We believe that the long-term ownership of an actively managed, diversified portfolio of retail properties under long- term, net-lease agreements produces consistent, predictable income. Under a net-lease agreement, the tenant agrees to pay a minimum monthly rent and property operating expenses (taxes, maintenance, and insurance) plus, typically, future rent increases (generally subject to ceilings) based on increases in the consumer price index, fixed increases or additional rent calculated as a percentage of the tenant's gross sales above a specified level. We believe that long-term leases, coupled with the tenant's Page 8
responsibility for property expenses, generally produce a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income. INVESTMENT STRATEGY. In identifying new properties for acquisition, we focus on providing expansion capital to retail chains by acquiring, then leasing back, their retail store locations. We classify retail tenants into three categories: venture, middle market, and upper market. Venture companies are those which typically offer a new retail concept in one geographic region of the country and operate between five and 50 retail outlets. Middle market retail chains are those which typically have 50 to 500 retail outlets, operations in more than one geographic region, have been successful through one or more economic cycles, and have a proven, replicable concept. The upper market retail chains typically consist of companies with 500 or more stores, operating nationally in a proven mature retail concept. Upper market retail chains generally have strong operating histories and access to several sources of capital. Realty Income primarily focuses on acquiring properties leased to middle market retail chains which we believe are attractive for investment because: - They generally have overcome many of the operational and managerial obstacles that tend to adversely affect venture retailers; - They typically require capital to fund expansion but have more limited financing options; - They generally have provided us with attractive risk- adjusted returns over time since their financial strength has in many cases tended to improve as their businesses have matured; - Their relatively large size allows them to spread corporate expenses across a greater number of stores; and - Middle market retailers typically have the critical mass to survive if a number of locations have to be closed due to underperformance. In 1998, we expanded our investment focus to include upper market retail chains and have made some acquisitions on a selective basis. We believe upper market retail chains can be attractive for investment because: - They typically are of a higher credit quality; - They are usually larger brand name, public and private retailers; - They utilize a larger building ranging in size from 10,000 to 50,000 square feet; and - Their ability to grow because of access to capital facilitates larger transaction sizes. While our investment strategy focuses primarily on acquiring properties leased to middle and upper market retail chains, we also selectively seek incremental investment opportunities with venture market retail chains. Periodically, venture market opportunities arise where we feel that the real estate used by the tenant is of high quality and can be purchased at prices that are favorable in the marketplace. To meet our stringent Page 9
investment standards, however, venture retail companies must have a well- defined retailing concept and strong financial prospects. These opportunities are examined on a case by case basis and we are highly selective in making investments in this area. The Internet has become an important delivery channel for many retail businesses and our investment strategy has positioned us to compete in such an environment. Many research analysts and experts in retail trends believe that bricks and mortar retail businesses will successfully co-exist with Internet retail businesses. We believe that the companies most vulnerable, and possibly subject to the greatest impact from the Internet, are retail chains that sell books, consumer electronics, music, office supplies, and, possibly, pharmaceuticals. Our exposure to these types of retail chains is minimal. We believe retail chains that provide services rather than goods, such as child care centers and auto service stores, as well as those that provide a service with their products, such as restaurants, convenience stores and home improvement stores, have tended to be more stable operators than retailers that only sell goods. Historically, our investment focus has been on retail industries that have a service component because we believe the lease revenue from these types of businesses is more stable. Because of this investment focus, as of January 1, 2000, over 76% of our annualized revenue is derived from retailers with a service component in their business. We believe these service-oriented businesses would be difficult to duplicate over the Internet and, as a result, our property portfolio should be fairly well positioned for competition from Internet businesses. CREDIT STRATEGY. Realty Income principally provides sale leaseback financing primarily to less than investment grade retail chains. Since 1970 and through December 31, 1999, Realty Income has acquired and leased back to regional and national retail chains 1,054 properties (including 36 properties that have been sold) and has collected in excess of 98% of the original contractual rent obligations on those properties. We believe that within this market we can achieve an attractive risk-adjusted return on the financing that we provide to retailers. We believe that the primary financial obligations of most retailers typically include their bank and other debt, payment obligations to suppliers and real estate lease obligations. Because we own the land and buildings on which the tenant conducts its retail business, we believe that the risk of default on the retailers' lease obligations is less than the retailers' unsecured general obligations. It has been our experience that since retailers must retain their profitable retail locations in order to survive in the event of reorganization they are less likely to reject a lease for a profitable location, which would terminate their right to use the property. Thus, as the property owner, we believe we will fare better than unsecured creditors of the same retailer in the event of reorgani- zation. If a property is rejected by the tenant during the reorganization, we still own the property and can either lease it to a new tenant or sell the property. In addition, we believe that the risk of default on the real Page 10
estate leases can be further mitigated by monitoring the performance of the retailers' individual unit locations and selling those units that are weaker performers. In order to qualify for inclusion in our portfolio, new property acquisitions must meet stringent investment and credit requirements. The properties must generate attractive current yields, and the tenant must meet our credit standards. We have established a three-part analysis that examines each potential investment based on: - Industry, company, market conditions and credit profile; - Location profitability, if profitability data is available; and - Overall real estate characteristics, value, and comparative rental rates. Companies that have been approved for acquisitions are generally those with fifty or more retail stores which are located in highly visible areas, with easy access to major thoroughfares and attractive demographics. ACQUISITION STRATEGY. We seek to invest in industries in which several, well-organized, regional and national chains are capturing market share through service, quality control, economies of scale, mass media advertising, and the selection of prime retail locations. We execute our acquisition strategy by acting as a source of capital to regional and national retail chain stores in a variety of industries by acquiring, then leasing back, their retail store locations. We undertake thorough research and analysis to identify appropriate industries, tenants, and property locations for investment. The abundance of information on the Internet adds to our research capabilities and allows us to uncover net-lease opportunities in markets where our real estate financing program adds value. In selecting real estate for potential investment, we generally seek to acquire properties that have the following characteristics: - Freestanding, commercially zoned property with a single tenant; - Properties that are important retail locations for regional and national retail chains; - Properties that are located within attractive demographic areas relative to the business of their tenants, with high visibility and easy access to major thoroughfares; and - Properties that can be purchased with the simultaneous execution or assumption of long-term, net-lease agreements, providing the opportunity for both current income and future rent increases. PORTFOLIO MANAGEMENT STRATEGY. The active management of the property portfolio is an essential component of our long-term strategy. We continually monitor our portfolio for changes that could affect the performance of the industries, tenants, and locations in which we have invested. The portfolio is analyzed on an ongoing basis with a view towards optimizing performance and returns. Realty Income's investment committee meets frequently and is made up of our Chief Executive Officer and two Executive Vice Presidents. Our investment committee reviews Page 11
industry research, tenant research, property due diligence, and significant portfolio management activities. This monitoring typically includes ongoing review and analysis of: - The performance of various retail industries; - The operation, management, business planning, and financial condition of the tenants; and - The health of the individual markets in which we own properties, from both an economic and real estate standpoint. In November 1999, we implemented a plan to sell three of our multi-tenant locations. We anticipate these properties will be sold in 2000. At December 31, 1999, they had a combined carrying value of $29 million. CAPITAL MARKETS STRATEGY. We have a $200 million revolving, unsecured acquisition credit facility that expires in December 2002 and a $25 million revolving, unsecured credit facility that expires in February 2003. As of March 1, 2000, the outstanding balance on the $200 million credit facility was $129.3 million with an effective interest rate of approximately 7.3%. At March 1, 2000, no balance was outstanding on the $25 million credit facility. A commitment fee of 0.225% per annum accrues on the total credit commitment of each credit facility. The $200 million credit facility has been and is expected to be used to acquire additional retail properties leased to regional and national retail chains under long term net lease agreements. The $25 million credit facility can be used for the acquisition of property and for making capital contributions to subsidiaries for the purpose of funding the acquisition of properties. We use our credit facilities as a vehicle for the short-term financing of the acquisition of new properties. When outstanding borrowings under the $200 million credit facility reach a certain level (generally in the range of $75 to $175 million) and capital is available on acceptable terms, we generally seek to refinance those borrowings with the net proceeds of long- term or permanent financing, which may include the issuance of common stock, preferred stock, convertible preferred stock, debt securities or convertible debt securities. We cannot assure you, however, that we will be able to obtain any such refinancing or that market conditions prevailing at the time of refinancing will enable us to issue equity or debt securities upon acceptable terms. We intend to pay off borrowings on our $25 million credit facility with proceeds from the sale of properties acquired by us or our subsidiaries. We believe that we are best served by a conservative capital structure, with a majority of our capital consisting of equity. As of March 1, 2000, our total outstanding credit facility borrowings and outstanding notes were $359.3 million or approximately 35.3% of our total capitalization of $1.0 billion (defined as shares of our common stock outstanding multiplied by the last reported sales price of the common stock on the NYSE on March 1, 2000 of $20.75 per share plus the liquidation value of the Class B Preferred Stock, the Class C Preferred Stock, the outstanding borrowings on the credit facilities and outstanding notes at March 1, 2000). Page 12
We received investment grade credit ratings from Duff & Phelps Credit Rating Company, Moody's Investor Service, Inc., and Standard & Poor's Rating Group in December 1996. Currently, Duff & Phelps has assigned a rating of BBB, Moody's has assigned a rating of Baa3, and Standard & Poor's has assigned a rating of BBB- to our senior debt. These ratings could change based upon, among other things, our results of operations and financial condition. We have also received credit ratings from the same rating agencies on our preferred stock. Duff & Phelps Rating Company has assigned a rating of BBB-, Moody's Investor Service, Inc. has assigned a rating of Ba1, and Standard & Poor's Rating Group has assigned a rating of BB+. These ratings could change based upon, among other things, our results of operations and financial condition. Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and investment grade long-term unsecured debt. We believe that the Company is best served by having the majority of our future issuances of securities be in the form of common stock. The Company will issue common stock when we believe that the share price of our common stock is at a level that allows for the proceeds of any offering to be invested on an accretive basis into additional properties or to pay down any short-term borrowings on our credit facilities. We do not presently view our price per common share as attractive for additional issuances of common stock. We do not anticipate issuing additional shares of common stock until we determine the common stock price has risen to acceptable levels. In addition, we seek to maintain a conservative debt level on our balance sheet, which should result in conservative interest and fixed charge coverage ratios. We do not anticipate issuing significant amounts of additional debt until additional equity can be issued to offset the increase in debt. If the share price levels do not increase and we do not issue additional equity or debt, we will reduce our level of property acquisitions. In these circumstances, we intend to achieve our growth objectives by investing cash flow in excess of distributions and stock repurchases, and by strategically selling properties that have appreciated in value and investing the proceeds in new properties that will generate rental revenue in excess of those generated by the properties that were sold. COMPETITIVE STRATEGY. We believe that, to utilize our investment philosophy and strategy most successfully, we must seek to maintain the following competitive advantages: - - Size and Type of Investment Properties: We believe that smaller ($500,000 to $10,000,000) retail net-leased properties represent an attractive investment opportunity in today's real estate environment. Due to the complexities of acquiring and managing a large portfolio of relatively small assets, we believe that these types of properties have not experienced significant institutional participation or the corresponding yield reduction experienced by larger income producing properties. We believe the less intensive day to day property management required by net-lease agreements, coupled with the active Page 13
management of a large portfolio of smaller properties by us, is an effective investment strategy. The tenants of our freestanding retail properties generally provide goods and services which satisfy basic consumer needs. In order to grow and expand, they generally need capital. Since the acquisition of real estate is typically the single largest capital expenditure of many of these retailers, our method of purchasing the property and then leasing it back under a net-lease arrangement allows the retail chain to free up capital. - - Investment in New Retail Industries: Though we specialize in single- tenant properties, we will seek to further diversify our portfolio among a variety of retail industries. We believe that diversification will allow us to invest in retail industries that are currently growing and have characteristics we find attractive. These characteristics include, but are not limited to, retail industries dominated by local operators where regional and national chain operators can gain market share and dominance through more efficient operations, as well as industries taking advantage of major demographic shifts in the population base. During 1999, we added two new retail industries to our portfolio, Entertainment and Theaters, bringing the total number of retail industries in our portfolio to 23. - - Diversification: Diversification of the portfolio by retail industry type, tenant and geographic location is key to our objective of providing predictable investment results for our stockholders. As we expand we will seek to further diversify our portfolio. During 1999, eight new retail chains were added to our portfolio, bringing the total number of retail chains in our portfolio to 72. These retail chains operate 1,015 of our properties located in 45 states. - - Management Specialization: We believe that our management's specialization in single-tenant retail properties operated under net- lease agreements is important to meeting our objectives. We plan to maintain this specialization and will seek to employ and train high quality professionals in this specialized area of real estate ownership, finance and management. - - Technology: We intend to stay at the forefront of technology in our efforts to efficiently and economically carry out our operations. We maintain a sophisticated information system that allows us to analyze our portfolio's performance and actively manage our investments. We believe that technology and information based systems will play an increasingly important role in our competitiveness as an investment manager and source of capital to a variety of industries and tenants. Page 14 PROPERTIES ========== As of December 31, 1999, we owned a diversified portfolio of 1,076 properties located in 45 states with over 8.6 million square feet of leasable space. At December 31, 1999, 1,052 or 97.8% of the 1,076 properties were under net-lease agreements. Net leases typically require the tenant to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance and maintenance. Our net-leased retail properties are primarily leased to regional and national retail chain store operators. The average leasable retail space of the 1,076 properties is approximately 8,000 square feet on approximately 56,000 square feet of land. Generally, buildings are single-story properties with adequate parking on site to accommodate peak retail traffic periods. The properties tend to be on major thoroughfares with relatively high traffic counts and adequate access, egress and proximity to a sufficient population base to constitute a suitable market or trade area for the retailer's business. The table on the next page sets forth certain information regarding our 1,076 properties classified according to the business of the respective tenants (dollars in thousands): Page 15
<TABLE> Annualized Percentage of Total Rent as of Rental Revenue for Number Jan. 1, 2000(1) the Year of ------------------- ------------------- Prop- Rental Percentage Industry erties Revenue of Total 1999 1998 1997 - -------------------- ------ -------- ---------- ------ ------ ------ <S> <C> <C> <C> <C> <C> <C> Apparel Stores 5 $ 3,927 3.4% 3.8% 4.1% 0.7% Automotive Parts 141 9,707 8.3 8.6 7.8 9.1 Automotive Service 105 6,723 5.7 6.6 7.5 6.4 Book Stores 1 450 0.4 0.5 0.6 0.5 Business Services 1 124 0.1 0.1 * -- Child Care 336 28,275 24.2 25.3 29.2 35.9 Consumer Electronics 37 4,659 4.0 4.4 5.4 6.5 Convenience Stores 104 9,759 8.3 7.2 6.1 5.5 Craft and Novelty 2 425 0.4 0.4 * -- Drug Stores 1 235 0.2 0.2 0.1 -- Entertainment 6 2,293 2.0 1.2 -- -- General Merchandise 11 687 0.6 0.6 * -- Grocery Stores 2 719 0.6 0.5 * -- Health and Fitness 7 3,930 3.4 0.6 0.1 -- Home Furnishings 34 6,107 5.2 6.5 7.8 5.6 Home Improvement 34 4,281 3.7 3.6 * -- Office Supplies 8 2,476 2.1 2.6 3.0 1.7 Pet Supplies and Services 8 1,612 1.4 1.1 0.6 0.2 Private Education 6 1,695 1.4 1.2 0.9 -- Restaurants 177 14,355 12.3 13.3 16.2 19.8 Shoe Stores 4 1,234 1.0 1.1 0.8 0.2 Theaters 2 2,406 2.1 0.6 -- -- Video Rental 35 4,510 3.8 4.3 3.8 0.6 Other 9 6,331 5.4 5.7 6.0 7.3 - -------------------- ------ -------- ------ ------ ------ ------ Totals 1,076 $116,920 100.0% 100.0% 100.0% 100.0% ==================== ====== ======== ====== ====== ====== ====== </TABLE> * Less than 0.1% [FN] (1) Annualized rent is calculated by multiplying the monthly contractual base rent as of January 1, 2000 for each of the properties by 12 and adding the previous twelve month's historic percentage rent, which totaled $1.7 million (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent is used based upon the estimated total costs of each property. </FN> Page 16
Of the 1,076 properties in the portfolio at January 1, 2000, 1,069 were single-tenant properties with the remaining properties being multi-tenant properties. As of January 1, 2000, 1,052 of the 1,069 single-tenant properties, or 98.4%, were leased with an average remaining lease term (excluding extension options) of approximately 8.7 years. During 1999, 31 of our leases expired. Of these leases, 26 were released to the same tenant, four were leased to different tenants in the same industry and one location is being marketed for lease or sale. The following table sets forth certain information regarding the timing of the initial lease term expirations (excluding extension options) on our 1,052 net leased, single-tenant retail properties as of January 1, 2000 (dollars in thousands). <TABLE> Number of Percent of Leases Annualized Annualized Year Expiring (2) Rent (1) (2) Rent - ------ ------------ -------------- ---------- <S> <C> <C> <C> 2000 38 $ 2,017 1.8% 2001 48 3,958 3.6 2002 84 6,728 6.0 2003 72 5,888 5.3 2004 119 9,926 8.9 2005 82 6,098 5.5 2006 28 2,546 2.3 2007 94 6,494 5.8 2008 67 5,812 5.2 2009 29 3,270 3.0 2010 42 3,371 3.0 2011 35 5,315 4.8 2012 50 5,738 5.1 2013 96 15,580 13.9 2014 40 6,859 6.1 2015 30 3,326 3.0 2016 13 2,011 1.8 2017 11 4,130 3.7 2018 16 1,614 1.4 2019 52 8,755 7.8 2024 2 605 0.5 2033 2 1,118 1.0 2034 2 570 0.5 ------- ---------- ------- Totals 1,052 $111,729 100.0% ======= ========== ======= </TABLE> [FN] (1) Annualized Rent is calculated by multiplying the monthly contractual base rent as of January 1, 2000 for each of the properties by 12 and adding the previous twelve month's historic percentage rent, which totaled $1.7 million (i.e., additional rent calculated as a percentage of the tenant's Page 17
gross sales above a specified level.) For properties under construction, an estimated contractual base rent is used based upon the estimated total costs of each property. (2) This table does not include seven multi-tenant properties and 17 vacant unleased single-tenant properties owned by the Company. The lease expirations for properties under construction are based on the estimated date of completion of these properties. </FN> The following table sets forth certain state-by-state information regarding Realty Income's portfolio at January 1, 2000 (dollars in thousands). <TABLE> Approximate Percent of Number of Percent Leasable Annualized Annualized State Properties Leased Square Feet Rent (1) Rent - ------------ ---------- ------- ----------- ---------- ---------- <S> <C> <C> <C> <C> <C> Alabama 9 100% 63,300 $ 628 0.5% Arizona 31 99 211,700 3,060 2.6 Arkansas 5 100 36,700 614 0.5 California 61 95 1,031,300 13,741 11.8 Colorado 44 96 280,500 3,809 3.3 Connecticut 10 100 223,800 2,979 2.6 Delaware 1 100 5,400 72 0.1 Florida 87 99 947,800 12,676 10.8 Georgia 59 97 331,000 5,515 4.7 Idaho 11 100 52,000 752 0.6 Illinois 35 100 258,300 3,639 3.1 Indiana 29 100 170,400 2,213 1.9 Iowa 10 100 67,900 692 0.6 Kansas 23 100 240,500 2,629 2.3 Kentucky 13 100 43,500 1,114 1.0 Louisiana 5 100 39,600 501 0.4 Maryland 8 100 48,300 727 0.6 Massachusetts 8 100 57,500 1,069 0.9 Michigan 10 100 68,100 973 0.8 Minnesota 25 100 261,500 2,849 2.4 Mississippi 16 100 152,100 1,282 1.1 Missouri 33 100 204,500 2,600 2.2 Montana 2 100 30,000 289 0.3 Nebraska 10 100 98,700 1,240 1.1 Nevada 7 100 86,400 1,323 1.1 New Hampshire 1 100 6,400 130 0.1 New Jersey 4 75 45,400 586 0.5 New Mexico 5 100 46,000 339 0.3 New York 20 95 253,300 4,723 4.0 North Carolina 33 91 174,200 2,936 2.4 North Dakota 1 100 22,000 65 0.1 Ohio 67 100 341,200 5,400 4.6 (table continued next page) Page 18 (table continued) Approximate Percent of Number of Percent Leasable Annualized Annualized State Properties Leased Square Feet Rent (1) Rent - ------------ ---------- ------- ----------- ---------- ---------- Oklahoma 17 100 102,200 1,284 1.1 Oregon 17 100 92,400 1,225 1.1 Pennsylvania 23 100 168,600 2,296 2.0 South Carolina 48 98 147,000 3,924 3.4 South Dakota 2 100 12,600 170 0.2 Tennessee 25 96 221,300 2,652 2.3 Texas 155 100 1,290,700 13,958 11.9 Utah 8 100 51,700 701 0.6 Virginia 30 93 140,800 2,843 2.4 Washington 43 100 252,600 3,326 2.9 West Virginia 2 100 16,800 156 0.1 Wisconsin 19 100 231,900 2,954 2.5 Wyoming 4 100 20,100 266 0.2 ------ ------ --------- ---------- ------- Totals/Average 1,076 98% 8,648,000 $116,920 100.0% ====== ====== ========= ========== ======= </TABLE> [FN] (1) Annualized rent is calculated by multiplying the monthly contractual base rent as of January 1, 2000 for each of the properties by 12 and adding the previous twelve month's historic percentage rent, which totaled $1.7 million (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent is used based upon the estimated total costs of each property. </FN> Page 19
The following table sets forth certain information regarding the properties owned by Realty Income as of January 1, 2000, classified according to the business of the respective tenants (dollars in thousands). <TABLE> Percent of Number of Annualized Annualized Industry Properties Rent (1) Rent - -------- ---------- ---------- ---------- <S> <C> <C> <C> Tenants providing services - -------------------------- Automotive Service 105 $ 6,723 5.7% Child Care 336 28,275 24.2 Entertainment 6 2,293 2.0 Health and Fitness 7 3,930 3.4 Private Education 6 1,695 1.4 Theaters 2 2,406 2.1 Other 9 6,331 5.4 ---------- ---------- ---------- 471 51,653 44.2 ---------- ---------- ---------- Tenants selling goods and services - ---------------------------------- Automotive Parts 60 5,100 4.4 Business Services 1 124 0.1 Convenience Stores 104 9,759 8.3 Home Improvement 21 2,903 2.5 Pet Supplies and Services 6 1,146 1.0 Restaurants 177 14,355 12.3 Video Rental 35 4,510 3.8 ---------- ---------- ---------- 404 37,897 32.4 ---------- ---------- ---------- Tenants selling goods - --------------------- Apparel Stores 5 3,927 3.4 Automotive Parts 81 4,606 3.9 Book Stores 1 450 0.4 Consumer Electronics 37 4,659 4.0 Craft and Novelty 2 425 0.4 Drug Stores 1 235 0.2 General Merchandise 11 687 0.6 Grocery Stores 2 719 0.6 Home Furnishings 34 6,107 5.2 Home Improvement 13 1,378 1.2 Office Supplies 8 2,476 2.1 Pet Supplies 2 467 0.4 Shoe Stores 4 1,234 1.0 ---------- ---------- ---------- 201 27,370 23.4 ---------- ---------- ---------- TOTALS 1,076 $ 116,920 100.0% ========== ========== ========== </TABLE> Page 20 [FN] (1) Annualized rent is calculated by multiplying the monthly contractual base rent as of January 1, 2000 for each of the properties by 12 and adding the previous twelve month's historic percentage rent, which totaled $1.7 million (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level). For the properties under construction, an estimated contractual base rent is used based upon the estimated total costs of each property. </FN> DESCRIPTION OF LEASING STRUCTURE. At December 31, 1999, 1,052 or 97.8% of the Company's 1,076 properties were leased pursuant to net leases. In most cases, the leases: - Were for initial terms of from 10 to 20 years and the tenant has an option to extend the initial term; - In general, the leases require the tenant to pay property taxes, insurance, and expenses of maintaining the property; - Generally provide for a minimum base rent plus future increases (typically subject to ceilings) based on increases in the consumer price index, additional rent based upon the tenant's gross sales above a specified level (i.e., percentage rent) or fixed increases. Where leases provide for rent increases based on increases in the consumer price index, generally these increases permanently become part of the base rent. Where leases provide for percentage rent, this additional rent is typically payable only if the tenant's gross sales for a given period (usually one year) exceed a specified level, and then is typically calculated as a percentage of only the amount of gross sales in excess of that level. Matters Pertaining to Certain Properties and Tenants - ---------------------------------------------------- Seventeen of our properties were vacant as of January 1, 2000 (all of which are single-tenant properties) and available for lease. Eight of the vacant properties were previously leased to automotive service facility operators, three to restaurant operators, two to automotive parts store operators, two to child care operators, one to a home furnishings store operator and one to a convenience store operator. As of January 1, 2000, 19 of our properties under lease were vacant and available for sublease by the tenants, all of which were current with their rent and other obligations. Our two largest tenants are Children's World Learning Centers and La Petite Academy, which accounted for approximately 13.8% and 10.3%, respectively, of our rental revenue for the year ended December 31, 1999. No other tenant comprised 10% or more of our rental revenue. In general, a downturn in the industry represented by these tenants, whether nationwide or limited to specific sectors of the United States, could adversely affect tenants in this industry, which in turn could materially adversely affect our financial position and results of operations and our ability to make distributions to stockholders and debt service payments. In addition, a Page 21
substantial number of our properties are leased to middle market retail chains which generally have more limited financial and other resources than certain upper market retail chains, and therefore are more likely to be adversely affected by a downturn in their respective business or in the regional or national economy generally. Our tenants in the child care and restaurant industries accounted for approximately 25.3% and 13.3%, respectively, of our rental revenue for the year ended December 31, 1999. A downturn in any of these industries generally, whether nationwide or limited to specific sectors of the United States, could adversely affect tenants in those industries, which in turn could materially adversely affect our financial position and results of operations and our ability to make distributions to stockholders and debt service payments. In November 1999, Econo Lube N' Tune filed for reorganization under Chapter 11 of the Federal Bankruptcy Code, and rejected nine of our 34 leases with them. One of the rejected locations was leased to another tenant in December 1999, and we anticipate the remaining eight locations to be leased or sold during the second or third quarter of 2000. Econo Lube N' Tune is currently operating the remaining 25 locations, and we anticipate that they will accept these locations, although we cannot assure you that they will continue to pay rent for the remaining terms of the leases. Development of Certain Properties - --------------------------------- Of the 110 New Properties we acquired in 1999, 102 were occupied as of March 1, 2000 and the remaining 8 were pre-leased and under construction pursuant to contracts under which tenants or developers have agreed to develop the properties (with development costs funded by us) with rent commencing when the premises open for business. In the case of development properties, we either enter into an agreement with a tenant where the tenant retains a contractor to construct the improvements and we fund the costs of that development, or we fund a developer who constructs the improvements. In either case, there is an executed lease and there is a requirement to complete the construction on a timely basis, generally within eight months after we purchase the land. Generally, the tenant or developer is required to pay construction cost overruns to the extent they exceed the construction budget by more than a predetermined amount. We also enter into a lease with the tenant at the time we purchase the land, which generally requires that the tenant begin paying base rent, calculated as a percentage of our acquisition cost for the property, including construction costs and capitalized interest, when the premises open for business. During 1999, we acquired 37 development properties, 29 of which have been completed, were operating and paying rent as of March 1, 2000. We will continue to seek to acquire land for development under similar arrangements. Page 22
DISTRIBUTION POLICY =================== Distributions are paid to our common stockholders and Class C Preferred stockholders on a monthly basis and paid to our Class B Preferred stockholders on a quarterly basis if, as and when declared by our Board of Directors. The Class B Preferred receive cumulative distributions at a rate of 9.375% per annum of the $25 per share liquidation preference (equivalent to $2.344 per annum per share). The Class C Preferred receive cumulative distributions at a rate of 9.5% per annum of the $25 per share liquidation preference (equivalent to $2.375 per annum per share). The March 2000 distribution of $0.18 per common share represents a current annualized distribution of $2.16 per share, and an annualized distribution yield of approximately 10.4% based on the last reported sale price of $20.75 of our common stock, on the NYSE on March 1, 2000. In order to maintain our tax status as a REIT for federal income tax purposes, we are generally required to distribute dividends to our stockholders aggregating annually at least 95% of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding net capital gains). In 1999, our distributions totaled approximately 109.5% of our REIT taxable income. We intend to continue to make distributions to our stockholders that are sufficient to meet this requirement. Future distributions by us will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"), our debt service requirements and other factors as the Board of Directors may deem relevant. In addition, our credit facilities contain financial covenants which could limit the amount of distributions payable by us in the event of a deterioration in the results of operations or financial condition of the Company, and which prohibit the payment of distributions on the common or preferred stock in the event that we fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facilities. Distributions by us to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to stockholders as ordinary income. Distributions in excess of earnings and profits generally will be treated as a non-taxable reduction in the stockholders' basis in its stock to the extent of that basis, and thereafter as a gain from the sale of the stock. Approximately 9.5% of the distributions made or deemed to have been made in 1999 were classified as a return of capital for federal income tax purposes. We are unable to predict the portion of 2000 or future distributions which may be classified as a return of capital since the amount depends on our taxable income for the entire year. Page 23
OTHER ITEMS =========== COMPETITION FOR ACQUISITION OF REAL ESTATE. We face competition in the acquisition, operation and sale of property. We expect competition from: - Businesses; - Individuals; - Fiduciary accounts and plans; and - Other entities engaged in real estate investment. Some of these competitors are larger than we are and have greater financial resources. This competition may result in a higher cost for properties that we wish to purchase. The tenants leasing our properties generally face significant competition from other operators. This competition may adversely impact: - That portion, if any, of the rental stream to be paid to us based on a tenant's revenues; and - The tenants' results of operations or financial condition. ENVIRONMENTAL LIABILITIES. Investments in real property can create a potential for environmental liability. An owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We face such liability regardless of: - Our knowledge of the contamination; - The timing of the contamination; - The cause of the contamination; or - The party responsible for the contamination of the property. We are not aware of any material environmental problems at this time; however, there may be environmental problems associated with our properties that we are unaware of. In that regard, a number of our properties are leased to operators of oil change and tune-up facilities, and convenience stores that sell petroleum-based fuels. These facilities, or other of our properties, use, or may have used in the past, underground tanks for the storage of petroleum-based or waste products which could create a potential for release of hazardous substances. The presence of hazardous substances on a property may adversely affect our ability to sell that property and we may incur substantial remediation costs. Although our leases generally require our tenants to operate in compliance with all applicable federal, state and local laws, ordinances and regulations and to indemnify us against any environmental liabilities arising from the tenant's activities on the property, we could nevertheless be subject to strict liability by virtue of our ownership interest, and there can be no assurance that our tenants would satisfy their indemnification obligations under the leases. Page 24
We believe that our properties comply in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our present properties. Nevertheless, if environmental contamination should exist, we could be subject to strict liability by virtue of our ownership interest. Since December 1996, the Company has maintained an environmental insurance policy on the property portfolio. The limit of the policy is $10 million for each loss and $25 million in the aggregate, with a $100,000 deductible. There is a sublimit on properties with underground storage tanks of $1 million per occurrence and $5 million in the aggregate, with a deductible of $25,000. TAXATION OF THE COMPANY. We believe that we have operated, and we intend to continue to operate, so as to qualify as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1994. Although we believe that we are in compliance with all REIT qualification rules and we are organized and operate as a REIT, we can not completely assure you that we will continue to be so organized or that we will be able to operate in a manner so as to qualify or remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements under highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations, and the determination of various factual matters and circumstances not entirely within our control. We cannot assure you that legislation, new regulations, administrative interpretations or court decisions will leave unchanged the tax laws with respect to qualification as a REIT or the federal income tax consequences of those qualifications. If we were to fail to qualify as a REIT in any taxable year: - We would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates; - We would not be allowed a deduction in computing our taxable income for amounts distributed to our stockholders; - We would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would substantially reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability for the years involved; and - We would no longer be required to make distributions to stockholders. Page 25
Even if we qualify for and maintain our REIT status, we are subject to certain federal, state and local taxes on our income and property. For example, if we have net income from a prohibited transaction, that income will be subject to a 100% tax. EFFECT OF DISTRIBUTION REQUIREMENTS. To maintain our status as a REIT for federal income tax purposes, we generally are required to distribute to our stockholders at least 95% of our taxable income each year. This taxable income is determined without regard to the dividends paid deduction and by excluding net capital gains. We are also subject to tax at regular corporate rates to the extent that we distribute less than 100% of our taxable income (including net capital gains) each year. In addition, we are subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us with respect to any calendar year are less than the sum of 85% of our ordinary income for that calendar year, 95% of our capital gain net income for the calendar year, and any amount of that income that was not distributed in prior years. We intend to continue to make distributions to our stockholders to comply with the distribution requirements of the Code and to reduce exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of income and the payment of expenses in arriving at taxable income and the effect of required debt amortization payments could require us to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. DILUTION OF COMMON STOCK. Our future growth will depend in large part upon our ability to raise additional capital. If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of common stock. Likewise, our Board of Directors is authorized to cause us to issue preferred stock of any class or series (with dividend, voting and other rights as determined by the Board of Directors). Accordingly, the Board of Directors may authorize the issuance of preferred stock with voting, dividend and other similar rights that could dilute, or otherwise adversely affect, the interests of holders of Common Stock. REAL ESTATE OWNERSHIP RISKS. We are subject to all of the general risks associated with the ownership of real estate. In particular we face the risk that rental revenue from the properties will be insufficient to cover all corporate operating expenses and debt service payments on indebtedness we incur. Additional real estate ownership risks include: - Adverse changes in general or local economic conditions; - Changes in supply of or demand for similar or competing properties; - Changes in interest rates and operating expenses; - Competition for tenants; Page 26
- Changes in market rental rates; - Inability to lease properties upon termination of existing leases; - Renewal of leases at lower rental rates; - Inability to collect rents from tenants due to financial hardship, including bankruptcy, and sales declines due to the impact from Internet commerce; - Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate; - Uninsured property liability; - Property damage or casualty losses; - Unexpected expenditures for capital improvements or to bring properties into compliance with applicable federal, state and local laws; and - Acts of God and other factors beyond the control of our management. DEPENDENCE ON KEY PERSONNEL. We depend on the efforts of our executive officers and key employees. The loss of the services of our executive officers and key employees could have a material adverse effect on our operations. ITEM 2: PROPERTIES - ------------------- Information pertaining to our properties can be found under Item 1. ITEM 3: LEGAL PROCEEDINGS - -------------------------- The Company is subject to certain claims and lawsuits, the outcome of which are not determinable at this time. In the opinion of management, any liability that might be incurred by the Company upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on the Company's consolidated financial statements taken as a whole. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ No matters were submitted to stockholders during the fourth quarter of the fiscal year. Page 27
PART II ======= ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ---------------------------------------------------------- A. The common stock of the Company is traded on the New York Stock Exchange under the ticker symbol "O." The following table shows the high and low sales prices per share for our common stock as reported by the New York Stock Exchange composite tape, and distributions declared per share of common stock by us for the periods indicated. <TABLE> Price Per Share of Common Stock ------------------- Distributions 1999 High Low Declared (1) <S> <C> <C> <C> - ----------------------------------------------------------------- First quarter $24.8750 $20.3750 $0.5125 Second quarter 25.0000 20.8125 0.5200 Third quarter 24.3125 22.3125 0.5275 Fourth quarter 23.6250 20.0000 0.5350 ------- $2.0950 ======= </TABLE> [FN] (1) Common stock distributions currently are declared monthly by us based on financial results for the prior months. At December 31, 1999 a distribution of $0.18 per common share had been declared and was paid on January 18, 2000. </FN> <TABLE> Price Per Share of Common Stock ------------------- Distributions 1998 High Low Declared - ----------------------------------------------------------------- <S> <C> <C> <C> First quarter $27.1875 $25.2500 $0.4825 Second quarter 27.2500 25.4375 0.4900 Third quarter 27.3750 23.4375 0.4975 Fourth quarter 25.6875 23.9375 0.5050 ------- $1.9750 ======= B. There were approximately 13,600 holders of record of Realty Income's shares of common stock as of March 1, 2000. Page 28 ITEM 6: SELECTED FINANCIAL DATA - -------------------------------- (not covered by Independent Auditors' Report) </TABLE> <TABLE> As of or for the years ended December 31, (dollars in thousands, except per share data) -------------------------------------------------- 1999 1998 1997 1996 1995 ========== ========== ========== ========== ========== <S> <C> <C> <C> <C> <C> Total assets (book value) $ 905,404 $ 759,234 $ 577,021 $ 454,097 $ 417,639 Cash and cash equivalents 773 2,533 2,123 1,559 1,650 Lines of credit and notes payable 349,200 294,800 132,600 70,000 18,597 Total liabilities 370,573 309,025 143,706 79,856 36,218 Stockholders' equity 534,831 450,209 433,315 374,241 381,421 Net cash provided by operating activities 72,154 64,645 52,692 48,073 40,312 Net change in cash and cash equivalents (1,760) 410 564 (91) (10,023) Total revenue 104,510 85,132 67,897 56,957 51,555 Income from operations 45,295 41,004 33,688 30,768 25,582 Gain on sales of properties 1,301 526 1,082 1,455 18 Extraordinary item (355) -- -- -- -- Cumulative effect of change in accounting principle -- (226) -- -- -- Net income 46,241 41,304 34,770 32,223 25,600 Preferred stock dividends (5,229) -- -- -- -- Net income available to common stock- holders 41,012 41,304 34,770 32,223 25,600 Distributions paid to common stockholders 55,925 52,301 44,367 48,079 36,710 (table continued on next page) Page 29
(table continued) As of or for the years ended December 31, (dollars in thousands, except per share data) -------------------------------------------------- 1999 1998 1997 1996 1995 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges (1) 2.7x 3.8x 5.1x 13.7x 9.9x Ratio of earnings to combined fixed charges and pre- ferred stock dividends (1) 2.3x 3.8x 5.1x 13.7x 9.9x Basic and diluted net income per common share 1.53 1.55 1.48 1.40 1.27 Distributions paid per common share (2) 2.085 1.965 1.893 2.093 1.825 Distributions declared per common share (2) 2.095 1.975 1.895 1.710 2.215 Basic weighted average number of common shares outstanding 26,822,285 26,629,936 23,568,831 22,976,789 20,230,886 Diluted weighted average number of common shares outstanding 26,826,090 26,638,284 23,572,715 22,977,837 20,230,963 </TABLE> [FN] (1) Ratio of Earnings to Fixed Charges is calculated by dividing earnings by fixed charges. For this purpose, earnings consist of net income before interest expense. Fixed charges are comprised of interest costs (including capitalized interest) and the amortization of debt issuance costs. (2) 1996 distributions paid per common share and 1995 distributions declared per common share include a special distribution of $0.23 per share. </FN> Page 30
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ---------------------------------------------------------- GENERAL - ------- Realty Income Corporation, "The Monthly Dividend Company", a Maryland corporation ("Realty Income", the "Company", "us", "we" or "our") is organized to operate as an equity real estate investment trust ("REIT"). We are a fully integrated self-administered real estate company with in- house acquisition, leasing, legal, retail research, real estate research, portfolio management and capital markets expertise. As of December 31, 1999, we owned a diversified portfolio of 1,076 retail properties located in 45 states with over 8.6 million square feet of leasable space. Our primary business objective is to generate dependable monthly dividends from a consistent and predictable level of funds from operations ("FFO") per share. Additionally, we generally will seek to increase distributions to stockholders and FFO per share through both active portfolio management and the acquisition of additional properties. LIQUIDITY AND CAPITAL RESOURCES =============================== Cash Reserves Realty Income is organized for the purpose of operating as an equity REIT which acquires and leases properties and distributes to stockholders, in the form of monthly cash distributions, a substantial portion of its net cash flow generated from leases on its retail properties. We intend to retain an appropriate amount of cash as a working capital reserve. At December 31, 1999, Realty Income had cash and cash equivalents totaling $773,000. We believe that our cash and cash equivalents on hand, cash provided from operating activities and borrowing capacity are sufficient to meet our liquidity needs for the foreseeable future. We intend, however, to use additional sources of capital to fund property acquisitions and to repay our acquisition credit facility. Capital Funding We have a $200 million, three-year revolving, unsecured acquisition credit facility that expires in December 2002 and a $25 million, three-year revolving, unsecured credit facility that expires in 2003. The credit facilities currently bear interest at 1.225% over the London Interbank Offered Rate, or LIBOR, and offers us other interest rate options. As of March 1, 2000, borrowing capacity of $70.7 million was available to us under the $200 million credit facility and $25 million was available under the $25 million credit facility. At that time, the outstanding Page 31
balances on the $200 million credit facility was $129.3 million with an effective interest rate of 7.33%. These credit facilities have been and are expected to be used to acquire additional retail properties leased to national and regional retail chains under long-term lease agreements. The $25 million credit facility can also be used for making capital contributions to subsidiaries for the purpose of acquiring properties. Any additional borrowings will increase our exposure to interest rate risk. We expect to meet our long-term capital needs for the acquisition of properties through the issuance of public or private debt or equity. In June 1999, we filed a universal shelf registration statement with the Securities and Exchange Commission covering up to $400 million in value of common stock, preferred stock and debt securities. Through March 1, 2000, $34.5 million in value of common stock, preferred stock and debt securities has been issued under the universal shelf registration statement. Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and investment grade long-term unsecured debt. We believe that the Company is best served by having the majority of our future issuances of securities be in the form of common stock. We will issue common stock when we believe that the share price of our common stock is at a level that allows for the proceeds of any offering to be invested on an accretive basis into additional properties or to pay down any short- term borrowings on our credit facilities. We do not presently view our price per share as attractive for additional issuances of common stock. We do not anticipate issuing additional shares of common stock until we determine the common stock price has risen to acceptable levels. In addition, we seek to maintain a conservative debt level on our balance sheet, which should result in conservative interest and fixed charge coverage ratios. We do not anticipate issuing significant amounts of additional debt until additional equity can also be issued to offset the increase in debt. If the share price levels do not increase and we do not issue additional equity or debt, we will reduce our level of property acquisitions. In these circumstances, we intend to achieve our growth objectives by investing cash flow in excess of distributions in additional retail properties and purchases of our outstanding securities, and by strategically selling properties that have appreciated in value and investing the proceeds in new properties that will generate rental revenue in excess of those generated by the properties that were sold. In January 1999, we issued $20 million of 8.0% unsecured senior notes due 2009. The 1999 notes were sold at 98.757% of par to yield 8.1%. The proceeds from the offering were used to pay down bank borrowings. Currently, there is no formal trading market for the 1999 notes and we have not listed and do not intend to list the 1999 notes on any securities exchange. In May 1999, we issued 2,760,000 shares of 9 3/8% Class B cumulative redeemable preferred stock (the "Class B Preferred") at a price of $25.00 per share. The Class B Preferred trades on the New York Stock Exchange, or NYSE, under the symbol "OprB" and its cusip number is 756109-302. Page 32
Dividends on the Class B Preferred are payable quarterly. The net proceeds of $66.5 million were used to repay bank borrowings. In July 1999, we issued 1,380,000 shares of 9 1/2% Class C cumulative redeemable preferred stock (the "Class C Preferred") at a price of $25.00 per share. The Class C Preferred trades on the NYSE under the symbol "OprC" and its cusip number is 756109-500. Dividends on the Class C Preferred are payable monthly. The net proceeds of $33.2 million were used to repay bank borrowings. We received investment grade corporate credit ratings on our senior unsecured debt from Duff & Phelps Rating Company, Moody's Investor Service, Inc., and Standard & Poor's Rating Group in December 1996. Currently, Duff & Phelps has assigned a rating of BBB, Moody's has assigned a rating of Baa3, and Standard & Poor's has assigned a rating of BBB- to our senior debt. These ratings could change based upon, among other things, our results of operations and financial condition. We have also received credit ratings from the same rating agencies on our preferred stock. Duff & Phelps Rating Company has assigned a rating of BBB-, Moody's Investor Service, Inc. has assigned a rating of Ba1, and Standard & Poor's Rating Group has assigned a rating of BB+. These ratings could change based upon, among other things, our results of operations and financial condition. Property Acquisitions During 1999, we acquired 110 additional properties (the "New Properties"), and selectively sold three properties, increasing the number of properties in the portfolio by 10.9% to 1,076 properties at December 31, 1999 from 970 properties at December 31, 1998. During 1999, we diversified our portfolio with the addition of two new industry segments, Entertainment and Theaters, and eight new retail chains. As of December 31, 1999, our portfolio of 1,076 properties consists of 72 separate retail chains doing business in 23 separate retail segments. During 1999, we invested $181.4 million in New Properties and properties under development (including accrued development costs of $9.1 million and excluding estimated unfunded development costs on properties under construction at December 31, 1999 of $15.4 million). During 1999, we also paid $242,000 for lease commissions and $148,000 for building improvements on existing properties in our portfolio. The weighted average annual unleveraged return on the $181.4 million invested in 1999 is estimated to be 10.5%, computed as estimated contractual net operating income (which in the case of a net leased property is equal to the base rent or, in the case of properties under construction, the estimated base rent under the lease) for the first year of each lease, divided by the estimated total costs. Since it is possible that a tenant could default on the payment of contractual rent, we cannot assure you that the actual return on the funds invested will not differ from the foregoing percentage. Page 33
The New Properties are leased to 21 separate tenants operating in 16 different retail industries, are located in 26 states, will contain approximately 948,000 leasable square feet and are 100% leased under net leases, with an average initial lease term of 17.4 years. Of the New Properties, 102 were occupied as of March 1, 2000 and the remaining properties were pre-leased and under construction pursuant to contracts under which the tenants or developers have agreed to develop the properties (with development costs funded by the Company) and with the tenant to begin paying rent when the premises open for business. During 1998, we invested $193.4 million in 149 properties and properties under development (including accrued development costs of $1.3 million and excluding estimated unfunded development costs on properties under construction at December 31, 1998 of $19.7 million). The weighted average annual unleveraged return on the $193.4 million invested in 1998 is estimated to be 10.4%, computed in the same manner as 1999's estimated weighted average annual unleveraged return. These 149 properties are located in 38 states, contain approximately 1.6 million leasable square feet and are 100% leased with an average initial lease term of 14.9 years. Distributions We pay monthly distributions to our common stockholders. We paid cash distributions to our common stockholders of $55.9 million in 1999, $52.3 million in 1998 and $44.4 million in 1997. During 1999, we paid cash distributions of $3.9 million to our Class B Preferred stockholders and $1.4 million to our Class C Preferred stockholders. We pay distributions quarterly on our Class B Preferred and monthly on our Class C Preferred. We paid distributions to our common stockholders of $2.085 in 1999, $1.965 in 1998 and $1.893 in 1997. In 1999, we paid dividends per share of $1.40 to our Class B Preferred stockholders and $0.99 to our Class C Preferred stockholders. In December 1999, January and February 2000, we declared distributions of $0.18 per common share, which were paid on January 18, 2000, February 15, 2000 and March 15, 2000, respectively. The monthly distribution of $0.18 per share represents a current annualized distribution of $2.16 per share, and an annualized distribution yield of approximately 10.4% based on the last reported sale price of the Company's Common Stock on the NYSE of $20.75 on March 1, 2000. Although the Company expects to continue its policy of paying monthly distributions, we cannot assure you that we will maintain the current level of distributions per share, that we will continue our pattern of increasing distributions per share, or as to the actual distribution yield for any future period. Stock and Senior Debt Repurchase Program In January 2000, our Board of Directors authorized the purchase of up to $10 million of our common and preferred shares and senior debt securities during the next 12 months. We may make periodic purchases on the open Page 34
market at prevailing prices or in privately negotiated transactions. The purchases will be funded using available working capital which consists primarily of cash flow from operations. Formation of Subsidiary In January 2000, we formed Crest Net Lease, Inc., of which we own 95% of the common stock, all of which is non-voting, and certain members of management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created to actively buy and sell certain select properties, primarily to buyers using tax-deferred exchanges, under Section 1031 of the Internal Revenue Service Code. FUNDS FROM OPERATIONS ("FFO") ============================= FFO for 1999 increased by $3.12 million or 5% to $65.92 million versus $62.80 million during 1998. FFO during 1997 was $52.35 million. We define FFO as net income available to common stockholders, plus depreciation and amortization, plus provision for impairment losses, plus extraordinary items, less gain on sales of properties. In accordance with the recommendations of the National Association of Real Estate Investment Trusts, or NAREIT, we do not add back amortization of deferred financing costs to net income to calculate FFO. We include amortization of financing costs in interest expense in the consolidated statements of income. The following is a reconciliation of net income to FFO and information regarding distributions paid and the diluted weighted average number of shares outstanding for 1999, 1998 and 1997 (dollars in thousands): <TABLE> 1999 1998 1997 -------- -------- -------- <S> <C> <C> <C> Net income available to common stockholders $ 41,012 $ 41,304 $ 34,770 Plus: Depreciation and amortization 25,952 21,935 18,596 Provision for impairment losses -- -- 165 Extraordinary item 355 -- -- Cumulative effect of change in accounting principle -- 226 -- Less: Depreciation of furniture, fixtures and equipment and amortization of organization costs (101) (140) (96) Gain on sales of properties (1,301) (526) (1,082) -------- -------- -------- Funds From Operations $ 65,917 $ 62,799 $ 52,353 ======== ======== ======== (table continued next page) Page 35
(table continued) 1999 1998 1997 -------- -------- -------- Distributions paid to common stockholders $ 55,925 $ 52,301 $ 44,367 FFO in excess of distributions to common stockholders $ 9,992 $ 10,498 $ 7,986 Diluted weighted average number of shares outstanding 26,826,090 26,638,284 23,572,715 </TABLE> We consider FFO to be an appropriate measure of the performance of an equity REIT. Financial analysts use FFO in evaluating REITs and FFO can be one measure of a REIT's ability to make cash distribution payments. Presentation of this information provides the reader with an additional measure to compare the performance of different REITs, although it should be noted that not all REITs calculate FFO the same way so comparisons with other REITs may not be meaningful. FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of Realty Income's performance or to cash flows from operating, investing, and financing activities as a measure of our liquidity or ability to make cash distributions or to pay debt service. RESULTS OF OPERATIONS ===================== THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31, 1998. Rental revenue was $104.3 million for 1999 versus $84.9 million for 1998, an increase of $19.4 million, or 18.6%. The increase in rental revenue was primarily due to the acquisition of 110 properties during 1999 and 149 properties during 1998. These properties generated revenue of $26.87 million in 1999 compared to $7.53 million in 1998, an increase of $19.3 million. At January 1, 2000, annualized contractual lease payments on the funds invested in properties acquired in 1999 and 1998 are approximately $37.2 million (excluding estimated rent from eight properties under development and any percentage rents). Of the 1,076 properties in the portfolio as of December 31, 1999, 1,069 are single-tenant properties with the remaining properties being multi-tenant properties. Of the 1,069 single-tenant properties, 1,052, or 98.4%, were net leased with an average remaining lease term (excluding extension options) of approximately 8.7 years. All of our 1,052 leased single-tenant properties were under leases that provide for increases in rents through: - Base rent increases tied to a consumer price index with adjustment ceilings; - Overage rent based on a percentage of the tenants' gross sales; or - Fixed increases. Page 36 Some leases contain more than one of these clauses. Percentage rent, which is included in rental revenue, was $1.7 million during both 1999 and 1998. Same store rents generated on 789 leased properties owned during all of both 1999 and 1998 increased by $618,000 or 0.8%, to $74.34 million from $73.72 million. At December 31, 1999, the Company had 17 properties that were not under lease as compared to five at December 31, 1998 and eight at December 31, 1997. At December 31, 1999, 1,059, or 98.4%, of the 1,076 properties in the portfolio were under lease agreements with third party tenants. In February 2000, we issued letters of intent to lease five vacant locations and letters of intent to sell five other vacant locations. We anticipate these ten locations to be leased or sold during the second or third quarter of 2000. Depreciation and amortization was $26.0 million in 1999 versus $21.9 million in 1998. The increase in 1999 was primarily due to depreciation of the properties acquired in 1998 and 1999. Interest expense in 1999 increased by $10.8 million to $24.5 million, as compared to $13.7 million in 1998. The following is a summary of the five components of interest expense for 1999 and 1998 (dollars in thousands): <TABLE> 1999 1998 Net Change ------- ------- ---------- <S> <C> <C> <C> Interest on outstanding loans and notes $ 24,254 $ 13,666 $ 10,588 Amortization of settlements on treasury lock agreements 756 38 718 Credit facility commitment fees 268 232 36 Amortization of credit facility origination costs and deferred bond financing costs 839 447 392 Interest capitalized (1,644) (660) (984) -------- -------- -------- Interest Expense $ 24,473 $ 13,723 $ 10,750 ======== ======== ======== Credit facility and notes outstanding (dollars in thousands) Years ended, December 31, 1999 1998 Net Change - ---------------------------- -------- -------- ---------- Average outstanding balances $325,564 $184,728 $140,836 Average interest rates 7.45% 7.40% </TABLE> Interest on outstanding loans and notes was $10.6 million higher in 1999 than in 1998 primarily due to an increase of $140.8 million in the average Page 37
outstanding balances and a higher average interest rate. The higher average interest rate was due to the notes issued in October 1998 and January 1999. General and administrative expenses increased by $288,000 to $7.0 million in 1999 versus $6.7 million in 1998. The increase in general and administrative expenses was primarily due to a one-time charge taken during the fourth quarter that was associated with the retirement of our former President. General and administrative expenses as a percentage of revenue decreased to 6.7% in 1999 as compared to 7.8% in 1998. Property expenses are broken down into costs associated with non-net leased multi-tenant properties, unleased single-tenant properties and general portfolio expenses. Expenses related to the multi-tenant and unleased single-tenant properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections, bad debt expense and legal fees. General portfolio costs include, but are not limited to, insurance, legal, property inspections and title search fees. At December 31, 1999, 17 properties were available for lease as compared to five at December 31, 1998. Property expenses were $1.8 million in 1999 and 1998. Increases in vacant property costs in 1999 were offset by savings on our general portfolio insurance. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We did not take a provision for impairment in 1999 or 1998. During 1999, we sold three properties (a home furnishings store, a home improvement store and a restaurant) for $9.4 million and recognized a gain of $1.3 million. During 1998, we sold five properties (two child care centers, two restaurants and one multi-tenant location) for $2.8 million and recognized a gain of $526,000. In December 1999, our $170 million credit facility was cancelled simultaneously with the execution of our $200 million credit facility. Unamortized fees of $355,000 relating to the $170 million credit facility were charged in 1999 as extraordinary loss on early extinguishment of credit facility. In October 1998, we adopted SOP 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that costs incurred during start-up activities, including organization costs, be expensed as incurred. Prior to October 1998, organization costs were amortized over 60 months. In October 1998, the unamortized balance of organization costs of $226,000 was expensed. This is reported on the statements of income as a cumulative effect of a change in accounting principle. In 1999, our net income increased 11.9%, to $46.2 million versus $41.3 million in 1998. Rental revenue represented $19.4 million of the increase and gain on sale of properties represented $775,000. The increase in rental revenue was due to an increase in rental revenue from properties Page 38 acquired in 1999 and 1998 of $19.3 million. These increases were substantially offset by an increase of $14.8 million in the following expenses: - Depreciation and amortization of $4.0 million; and - Interest expense of $10.8 million. In 1999, we paid preferred stock dividends of $5.2 million. No preferred stock was outstanding prior to 1999. THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED DECEMBER 31, 1997. Rental revenue was $84.9 million for 1998 versus $67.6 million for 1997, an increase of $17.3 million, or 25.6%. The increase in rental revenue was primarily due to the acquisition of 149 properties during 1998 and 96 properties during 1997. These properties generated revenue of $22.3 million in 1998 compared to $5.3 million in 1997, an increase of $17.0 million. At January 1, 1999, annualized contractual lease payments on the funds invested in properties acquired in 1998 and 1997 were approximately $33.1 million (excluding estimated rent from 19 properties under development and any percentage rents). Of the 970 properties in the portfolio as of December 31, 1998, 963 were single-tenant properties with the remaining properties being multi-tenant properties. Of the 963 single-tenant properties, 958, or 99.5%, were net leased with an average remaining lease term (excluding extension options) of approximately 8.6 years at December 31, 1998. Percentage rent, which is included in rental revenue, was $1.7 million during 1998 and $1.8 million in 1997. Same store rents generated on 707 leased properties owned during all of both 1998 and 1997 increased by $672,000 or 1.1%, to $60.48 million from $59.81 million. At December 31, 1998, the Company had five properties that were not under lease as compared to eight at December 31, 1997. At December 31, 1998, 965, or 99.5%, of the 970 properties in the portfolio were under lease agreements with third party tenants. Depreciation and amortization was $21.9 million in 1998 versus $18.6 million in 1997. The increase in 1998 was due to depreciation of the properties acquired in 1998 and 1997. Interest expense in 1998 increased by $5.5 million to $13.7 million, as compared to $8.2 million in 1997. The following is a summary of the five components of interest expense for 1998 and 1997 (dollars in thousands): Page 39
<TABLE> 1998 1997 Net Change ------- ------- ---------- <S> <C> <C> <C> Interest on outstanding loans and notes $ 13,666 $ 8,043 $ 5,623 Amortization of settlements on treasury lock agreements 38 (75) 113 Credit facility commitment fees 232 145 87 Amortization of credit facility origination costs and deferred bond financing costs 447 281 166 Interest capitalized (660) (168) (492) -------- -------- -------- Interest Expense $ 13,723 $ 8,226 $ 5,497 ======== ======== ======== Credit facility and notes outstanding (dollars in thousands) Years ended, December 31, 1998 1997 Net Change - ---------------------------- -------- -------- ---------- Average outstanding balances $184,728 $108,431 $ 76,297 Average interest rates 7.40% 7.42% </TABLE> Interest on outstanding loans and notes was $5.6 million higher in 1998 than in 1997 due to an increase of $76.3 million in the average outstanding balances. General and administrative expenses increased by $1.2 million to $6.68 million in 1998 versus $5.44 million in 1997. The increase in general and administrative expenses was primarily due to an increase in property acquisition expenses and employee costs. General and administrative expenses as a percentage of revenue decreased to 7.8% in 1998 as compared to 8.0% in 1997. During 1997, we increased our number of employees to 47 from 35. The majority of the new employees were hired in the third quarter of 1997 and work primarily on new property acquisitions. Property expenses were $1.8 million in 1998 and 1997. At December 31, 1998, five properties were available for lease as compared to eight at December 31, 1997. In 1997, we took a $165,000 charge for impairment losses to reduce the net carrying value on three properties because they became held for sale. All of these properties have been sold. We took no provision for impairment in 1998. During 1998, we sold five properties for $2.8 million and recognized a gain of $526,000. During 1997, we sold 10 properties (six restaurants, two child care centers, one automotive parts store and a multi-tenant location) for a total of $4.4 million and recognized a gain of $1.1 million. Page 40 In 1998, Realty Income had net income of $41.3 million versus $34.8 million in 1997. The $6.5 million increase in net income is primarily due to the increase in rental revenue from properties acquired in 1998 and 1997 of $17.0 million, which was partially offset by an increase of $10.1 million in the following expenses: - Depreciation and amortization of $3.34 million; - Interest expense of $5.50 million; and - General and administrative expense of $1.24 million. THE YEAR 2000 ISSUE =================== In connection with the Year 2000 issue, we completed the remediation of our internal computer systems in October 1999. The total cost of remediation associated with our corporate level computer systems was less than $30,000. Through March 1, 2000, we have not experienced any Year 2000 erroneous results or problems. We are not aware of any Year 2000 problems that have affected the operations of our tenants or vendors. Through March 1, 2000, any Year 2000 issues that may have impacted our tenants or vendors has not impacted us. IMPACT OF INFLATION =================== Tenant leases generally provide for limited increases in rent as a result of increases in the tenant's sales volumes, increases in the consumer price index, and/or fixed increases. We expect that inflation will cause these lease provisions to result in increases in rent over time. During times when inflation is greater than increases in rent as provided for in the leases, however, rent increases may not keep up with the rate of inflation. Approximately 97.8% or 1,052 of the properties in the portfolio are leased to tenants under net leases in which the tenant is responsible for property costs and expenses. These features in the leases reduce our exposure to rising property expenses due to inflation. Inflation and increased costs may have an adverse impact on our tenants if increases in our tenant's operating expenses exceed increases in revenue. Page 41 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ==================================================================== We are exposed to interest rate changes primarily as a result of our credit facilities and long-term debt used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives we borrow primarily at fixed rates and may selectively enter into derivative financial instruments such as interest rate lock agreements, interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We are not a party to any derivative financial instruments at December 31, 1999. We do not enter into any transactions for speculative or trading purposes. Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts, weighted average interest rates, fair values and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in table in millions). <TABLE> Expected Maturity Data ---------------------- There- Fair 2002 after Total Value (2) ---- ------ ------ --------- <S> <C> <C> <C> <C> Fixed rate debt -- $230.0(1) $230.0 $199.4 Average interest rate 7.99% 7.99% Variable rate debt $119.2 -- $119.2 $119.2 Average interest rate 7.35% -- 7.35% (/TABLE> <FN> (1) $110 million matures in 2007, $100 million matures in 2008 and $20 million matures in 2009. (2) We base the fair value of the fixed rate debt at December 31, 1999 on the closing market price or indicative price per each note. The fair value of the variable rate debt approximates its carrying value because its terms are similar to those available in the market place. </FN> The table incorporates only those exposures that exist as of December 31, 1999, it does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates. Page 42 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- </TABLE> <TABLE> Table of Contents Page - ----------------- ---- <S> <C> A. Independent Auditors' Report............................. 44 B. Consolidated Balance Sheets, December 31, 1999 and 1998............................. 45 C. Consolidated Statements of Income, Years ended December 31, 1999, 1998 and 1997........... 47 D. Consolidated Statements of Stockholders' Equity, Years ended December 31, 1999, 1998 and 1997........... 49 E. Consolidated Statements of Cash Flows, Years ended December 31, 1999, 1998 and 1997........... 51 F. Notes to Consolidated Financial Statements............... 53 G. Consolidated Quarterly Financial Data, (unaudited) for 1999 and 1998.......................... 68 H. Schedule III Real Estate and Accumulated Depreciation is attached to this report. Reference is made to page F-1 of this report for Schedule III.... F-1 </TABLE> Schedules not Filed: All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes. Page 43 Independent Auditors' Report ---------------------------- The Board of Directors and Stockholders Realty Income Corporation: We have audited the consolidated financial statements of Realty Income Corporation and subsidiaries as listed in the accompanying table of contents. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule III listed in the accompanying table of contents. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Realty Income Corporation and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/KPMG LLP San Diego, California January 25, 2000, except as to note 18A, which is as of February 1, 2000 Page 44 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== December 31, 1999 and 1998 (dollars in thousands, except per share data) <TABLE> 1999 1998 ========= ========= <S> <C> <C> ASSETS Real estate, at cost: Land $ 350,517 $ 283,043 Buildings and improvements 711,962 606,792 --------- --------- 1,062,479 889,835 Less accumulated depreciation and amortization (195,386) (171,555) --------- --------- Net real estate 867,093 718,280 Cash and cash equivalents 773 2,533 Accounts receivable 3,407 2,973 Goodwill, net 19,053 19,977 Other assets 15,078 15,471 --------- --------- Total assets $ 905,404 $ 759,234 ========= ========= (table continued next page) Page 45 (table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== December 31, 1999 and 1998 (dollars in thousands, except per share data) 1999 1998 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Distributions payable $ 4,828 $ 4,559 Accounts payable and accrued expenses 12,792 4,036 Other liabilities 3,753 5,630 Lines of credit payable 119,200 84,800 Notes payable 230,000 210,000 --------- --------- Total liabilities 370,573 309,025 --------- --------- Commitments and contingencies Stockholders' equity: Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 4,140,000 shares issued and outstanding 99,679 -- Common stock and paid in capital, par value $1.00 per share, 100,000,000 shares authorized, 26,822,164 and 26,817,103 shares issued and outstanding in 1999 and 1998, respectively 636,611 636,486 Distributions in excess of net income (201,459) (186,277) --------- --------- Total stockholders' equity 534,831 450,209 --------- --------- Total liabilities and stockholders' equity $ 905,404 $ 759,234 ========= ========= </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. Page 46 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Income ================================= Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands, except per share data) <TABLE> 1999 1998 1997 ========== ========== ========== <S> <C> <C> <C> REVENUE Rental $ 104,270 $ 84,876 $ 67,613 Interest and other 240 256 284 ---------- ---------- ---------- 104,510 85,132 67,897 ---------- ---------- ---------- EXPENSES Depreciation and amortization 25,952 21,935 18,596 Interest 24,473 13,723 8,226 General and administrative 6,968 6,680 5,437 Property 1,822 1,790 1,785 Provision for impairment losses -- -- 165 ---------- ---------- ---------- 59,215 44,128 34,209 ---------- ---------- ---------- Income from operations 45,295 41,004 33,688 Gain on sales of properties 1,301 526 1,082 ---------- ---------- ---------- Income before extraordinary item and cumulative effect of change in accounting principle 46,596 41,530 34,770 Extraordinary loss on early extinguishment of credit facility (355) -- -- Cumulative effect of change in accounting principle -- (226) -- ---------- ---------- ---------- Net income 46,241 41,304 34,770 Preferred stock dividends (5,229) -- -- ---------- ---------- ---------- Net income available to common stockholders $ 41,012 $ 41,304 $ 34,770 ========== ========== ========== (table continued next page) Page 47 (table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Income ================================= Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands, except per share data) 1999 1998 1997 ========== ========== ========== Basic and diluted amounts per common share: Income before extraordinary item and cumulative effect of change in accounting principle $ 1.54 $ 1.56 $ 1.48 Extraordinary item (0.01) -- -- Cumulative effect of change in accounting principle -- (0.01) -- ---------- ---------- ---------- Net income per common share $ 1.53 $ 1.55 $ 1.48 ========== ========== ========== (/TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. Page 48 REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity ======================================================== Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands) </TABLE> <TABLE> Preferred Common Distri- Shares of stock stock butions ---------------------- and and in excess Preferred Common paid in paid in of net Stock Stock capital capital income Totals ========== ========== ======== ======== ========= ======== <S> <C> <C> <C> <C> <C> <C> Balance, December 31, 1996 -- 22,979,537 $ -- $538,984 $(164,743) $374,241 Net income -- -- -- -- 34,770 34,770 Distributions paid and payable -- -- -- -- (44,860) (44,860) Shares issued in stock offering, net of offering costs of $4,193 -- 2,700,000 -- 68,707 -- 68,707 Shares issued -- 22,989 -- 554 -- 554 Shares forfeited -- (4,062) -- (97) -- (97) ---------- ---------- -------- -------- --------- -------- Balance, December 31, 1997 -- 25,698,464 -- 608,148 (174,833) 433,315 Net income -- -- -- -- 41,304 41,304 Distributions paid and payable -- -- -- -- (52,748) (52,748) Shares issued in stock offering, net of offering costs of $122 -- 1,123,267 -- 28,379 -- 28,379 Shares issued -- 15,933 -- 400 -- 400 Shares forfeited -- (20,561) -- (441) -- (441) ---------- ---------- -------- -------- --------- -------- Balance, December 31, 1998 -- 26,817,103 -- 636,486 (186,277) 450,209 (table continued) Page 49 (continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity ======================================================== Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands) Preferred Common Distri- Shares of stock stock butions ---------------------- and and in excess Preferred Common paid in paid in of net Stock Stock capital capital income Totals ========== ========== ======== ======== ========= ======== Net income -- -- -- -- 46,241 46,241 Distributions paid and payable -- -- -- -- (61,423) (61,423) Shares issued in stock offering, net of offering costs of $3,821 4,140,000 -- 99,679 -- -- 99,679 Shares issued -- 5,600 -- 139 -- 139 Shares forfeited -- (539) -- (14) -- (14) ---------- ---------- -------- -------- --------- -------- Balance, December 31, 1999 4,140,000 26,822,164 $ 99,679 $636,611 $(201,459) $534,831 ========== ========== ======== ======== ========= ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. Page 50
REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows ===================================== Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands) <TABLE> 1999 1998 1997 ======== ======== ======== <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 46,241 $ 41,304 $ 34,770 Adjustments to net income: Depreciation and amortization 25,952 21,935 18,596 Provision for impairment losses -- -- 165 Gain on sales of properties (1,301) (526) (1,082) Extraordinary item 355 -- -- Cumulative effect of change in accounting principle -- 226 -- Changes in assets and liabilities: Accounts receivable and other assets 25 144 (844) Accounts payable, accrued expenses and other liabilities 882 1,562 1,087 -------- -------- -------- Net cash provided by operating activities 72,154 64,645 52,692 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of properties 9,431 2,770 4,432 Acquisition of and additions to properties (174,056) (192,588) (140,389) Payment of other liabilities (1,713) -- -- -------- -------- -------- Net cash used in investing activities (166,338) (189,818) (135,957) -------- -------- -------- (table continued next page) Page 51
(table continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows ===================================== Years Ended December 31, 1999, 1998 and 1997 (dollars in thousands) 1999 1998 1997 ======== ======== ======== CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from lines of credit 221,200 224,900 117,000 Payments of lines of credit (186,800) (162,700) (164,400) Distributions to common stockholders (55,925) (52,301) (44,367) Distributions to preferred stockholders (5,229) -- -- Proceeds from notes issued, net of costs in 1999, 1998 and 1997 of $501, $12,764 and $848, respectively 19,499 87,236 109,152 Proceeds from preferred stock offerings, net of offering costs 99,679 -- -- Proceeds from common stock offerings, net of offering costs -- 28,379 68,707 Proceeds from other stock issuances -- 69 246 Payments to the defined benefit pension plan -- -- (2,223) Increase in other assets -- -- (286) -------- -------- -------- Net cash provided by financing activities 92,424 125,583 83,829 -------- -------- -------- Net increase (decrease) in cash and cash equivalents (1,760) 410 564 Cash and cash equivalents, beginning of year 2,533 2,123 1,559 -------- -------- -------- Cash and cash equivalents, end of year $ 773 $ 2,533 $ 2,123 ======== ======== ======== </TABLE> For supplemental disclosures, see note 12. The accompanying notes to consolidated financial statements are an integral part of these statements. Page 52
REALTY INCOME CORPORATION AND SUBSIDIARIES Notes To Consolidated Financial Statements ========================================== December 31, 1999, 1998 and 1997 1. Organization and Operation Realty Income Corporation ("Realty Income", the "Company", "we" or "our") is organized as a Maryland corporation. We invest in commercial retail real estate and have elected to be taxed as a real estate investment trust ("REIT"). As of December 31, 1999, we owned 1,076 properties in 45 states containing over 8.6 million leasable square feet. 2. Summary of Significant Accounting Policies and Procedures Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Realty Income and entities we control (subsidiaries) after elimination of all material intercompany balances and transactions. Cash Equivalents - We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Depreciation and Amortization - Depreciation of buildings and improvements, and amortization of goodwill are computed using the straight-line method over an estimated useful life of 25 years. Amortization of goodwill for each of the years ended December 31, 1999, 1998 and 1997 was $924,000. Leases - All leases are accounted for as operating leases. Under this method, lease payments are recognized as revenue over the term of the lease. Federal Income Taxes - We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended ("IRS Code"). We believe Realty Income has qualified and continues to qualify as a REIT and therefore will be permitted to deduct distributions paid to its stockholders, eliminating the federal taxation of income represented by those distributions at the Company's level. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. Distributions Paid and Payable - Realty Income pays distributions monthly to our common stockholders. The following is a summary of monthly cash distributions paid per common share for the years ended December 31, 1999, 1998 and 1997. Page 53 2. Summary of Significant Accounting Policies (continued) <TABLE> Month 1999 1998 1997 - ----- ------- ------- ------ <S> <C> <C> <C> January $0.1700 $0.1600 $0.1575 February 0.1700 0.1600 0.1575 March 0.1700 0.1600 0.1575 April 0.1725 0.1625 0.1575 May 0.1725 0.1625 0.1575 June 0.1725 0.1625 0.1575 July 0.1750 0.1650 0.1575 August 0.1750 0.1650 0.1575 September 0.1750 0.1650 0.1575 October 0.1775 0.1675 0.1575 November 0.1775 0.1675 0.1575 December 0.1775 0.1675 0.1600 ------- ------- ------- Totals $2.0850 $1.9650 $1.8925 ======= ======= ======= </TABLE> The following presents the federal income tax characterization of distributions paid or deemed to be paid to common stockholders for the years ended December 31: <TABLE> 1999 1998 1997 ------- ------- ------- <S> <C> <C> <C> Ordinary income $1.8468 $1.8895 $1.7937 Return of capital 0.1986 0.0755 0.0988 Capital gain 0.0396 -- -- ------- ------- ------- Totals $2.0850 $1.9650 $1.8925 ======= ======= ======= </TABLE> In May 1999, we issued 2,760,000 shares of 9 3/8% Class B cumulative redeemable preferred stock (the "Class B Preferred"). Dividends on the Class B Preferred are paid quarterly in arrears. For the year ended December 31, 1999, dividends of $3.86 million were paid on the Class B Preferred. In July 1999, we issued 1,380,000 shares of 9 1/2% Class C cumulative redeemable preferred stock (the "Class C Preferred"). Dividends on the Class C Preferred are paid monthly in arrears. For the year ended December 31, 1999, dividends of $1.37 million were paid on the Class C Preferred. Page 54
2. Summary of Significant Accounting Policies (continued) The following presents the federal income tax characterization of dividends paid or deemed to be paid to Class B Preferred and Class C Preferred stockholders for the year ended December 31, 1999: <TABLE> Class B Class C Preferred Preferred --------- --------- <S> <C> <C> Ordinary income $ 1.3731 $ 0.9707 Capital gain 0.0266 0.0188 --------- --------- Totals $ 1.3997 $ 0.9895 ========= ========= </TABLE> Provision for Impairment Losses - We review long-lived assets, including goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Generally, a provision is made for impairment loss if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value. If a property is held for sale, it is carried at the lower of cost or estimated fair value, less costs to sell. For the year ended December 31, 1997, a provision for impairment losses of $165,000 was charged to operations to reduce the net carrying value of three properties held for sale in 1997. All of these properties have been sold. No provision for impairment loss was charged in 1998 or 1999. Net Income Per Common Share - Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing the amount of net income available to common stockholders for the period by the number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation, for the years ended December 31, 1999, 1998 and 1997: Page 55 2. Summary of Significant Accounting Policies (continued) <TABLE> 1999 1998 1997 ---------- ---------- ---------- <S> <C> <C> <C> Weighted average shares used for basic net income per share computation 26,822,285 26,629,936 23,568,831 Incremental shares from the assumed conversion of stock options 3,805 8,348 3,884 ---------- ---------- ---------- Adjusted weighted average shares used for diluted net income per share computation 26,826,090 26,638,284 23,572,715 ========== ========== ========== </TABLE> In 1999 and 1998, 186,181 and 25,000 stock options, respectively, that were anti-dilutive have been excluded in calculating the incremental shares from the assumed conversion of stock options. No stock options were anti- dilutive in 1997. Stock Option Plan - We account for our stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), permits entities to recognize as expense over the vesting period the fair value of all stock- based awards on the date of grant. Alternatively, SFAS No. 123 allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value based method defined in SFAS No. 123 had been applied. We have elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Derivative Financial Instrument - In two instances, we used interest rate treasury lock agreements to hedge the effect of interest rate fluctuations. These instruments each met the requirement for hedge accounting, including a high correlation to a specific transaction. Accordingly, the amount received and paid under the terms of the agreements is recognized in income when interest expense related to the hedge item is recognized. Change in Accounting Principle - In October 1998, we adopted Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98- 5"). SOP 98-5 requires that costs incurred during start-up activities, Page 56
2. Summary of Significant Accounting Policies (continued) including organization costs, be expensed as incurred. Prior to October 1998, organization costs were amortized over 60 months. In October 1998, the unamortized balances of organization costs were written off. Pro forma amounts assuming the adoption of SOP 98-5 was applied as of January 1, 1997: <TABLE> 1998 1997 ------- ------- <S> <C> <C> Net income available to common stockholders (in thousands) $41,569 $34,505 Basic and diluted net income per common share 1.56 1.46 </TABLE> Use of Estimates - The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications - Certain of the 1998 and 1997 balances have been reclassified to conform to the 1999 presentation. 3. Credit Facility Available for Acquisitions In December 1999, we entered into a $200 million, three-year, revolving, unsecured acquisition credit facility, which expires in December 2002. The $200 million credit facility is from The Bank of New York, as administrative agent, and several U.S. and non-U.S. banks. As of December 31, 1999 and 1998, the outstanding balances on the credit facilities were $119.2 million and $84.8 million, respectively, with an effective interest rate of approximately 7.35% and 6.27%, respectively. Our $170 million credit facility was cancelled simultaneously with the execution of the $200 million credit facility. Unamortized fees of $355,000 relating to the $170 million credit facility were charged in 1999 as an extraordinary loss on early extinguishment of the credit facility. The $200 million credit facility currently bears interest at 1.225% over the London Interbank Offered Rate ("LIBOR") and offers us other interest rate options. A facility fee of 0.225%, per annum, accrues on the total commitment of the credit facility. The $200 million credit facility is and the $170 million credit facility was subject to various leverage and interest coverage ratio limitations. The Company is and has been in compliance with these limitations. Page 57 3. Credit Facility Available for Acquisitions (continued) In 1999, 1998 and 1997, interest of $1.6 million, $660,000 and $168,000, respectively, was capitalized on properties under development. 4. Notes Payable In January 1999, we issued $20 million of 8.0% senior notes due 2009 (the "1999 Notes"). The 1999 Notes are unsecured and were sold at 98.757% of par to yield 8.1%. The proceeds from 1999 Notes were used to pay down bank borrowings. Interest on the 1999 Notes is payable semiannually. In October 1998, we issued $100 million of 8.25% Monthly Income Senior Notes due 2008 (the "1998 Notes"). The 1998 Notes are unsecured and were sold at par ($25.00). After taking into effect the results of a treasury interest rate lock agreement (see note 5), the effective rate to us on the 1998 Notes is 9.12%. Interest on the 1998 Notes is payable monthly. In May 1997, we issued $110 million of 7.75% senior notes due 2007 (the "1997 Notes"). The 1997 Notes are unsecured and were sold at 99.929% of par to yield 7.76%. After taking into effect results of a treasury interest rate lock agreement (see note 5), the effective interest rate to us on the 1997 Notes is 7.62%. Interest on the 1997 Notes is payable semiannually. Interest incurred on the 1999 Notes, 1998 Notes and 1997 Notes collectively for the years ended December 31, 1999, 1998 and 1997 were $18.3 million, $10.0 million and $5.6 million, respectively. 5. Derivative Financial Instruments In May 1998, we entered into a treasury interest rate lock agreement to protect against the possibility of rising interest rates applicable to the 1998 Notes (see note 4). Under the interest rate lock agreement, we were to receive or make a payment based on the differential between a specified interest rate, (5.726%), and the actual 10-year treasury interest rate on a notional principal amount of $100 million, at the end of six months. Based on the 10-year treasury interest rate at October 23, 1998 (the interest rate pricing date), we made a payment of $8.7 million in settlement of the agreement in October 1998. The payment on the agreement is being amortized over 10 years (the life of the 1998 Notes) as a yield adjustment to interest expense. In December 1996, we entered into a treasury interest rate lock agreement to hedge against rising interest rates applicable to the 1997 Notes (see note 4). Under the terms of the interest rate lock agreement, we were to receive or make a payment based on the differential between a specified interest rate (6.537%) and the actual 10-year treasury interest rate on a notional principal amount of $90 million, at the end of six months. Based on the 10-year treasury interest rate at May 1, 1997 (the interest rate Page 58
5. Derivative Financial Instruments (continued) pricing date), we received $1.1 million in settlement of the agreement in June 1997. The payment received on the agreement is being amortized over 10 years (the life of the 1997 Notes) as a yield adjustment to interest expense. Our only involvement with derivative financial instruments was the two aforementioned treasury interest rate lock agreements and we have not used derivative financial instruments for trading purposes. 6. Common Stock Offerings A. In March 1998, we issued 372,093 shares of common stock to a unit investment trust at a net price to us of $25.531 per share, based on a 5% discount to the then market price of $26.875 per share. The net proceeds of $9.5 million were used to repay bank borrowings of $7.9 million and to acquire additional properties. B. In February 1998, we issued 751,174 shares of common stock to a unit investment trust at a net price to us of $25.295 per share, based on a 5% discount to the then market price of $26.625 per share. The net proceeds of $18.9 million were to be used to repay bank borrowings. C. In October 1997, we issued 2.7 million shares of common stock at a price of $27.00 per share. The net proceeds of $68.7 million were used to repay bank borrowings of $62.6 million and to acquire properties. 7. Preferred Stock Offerings A. In May 1999, we issued 2,760,000 shares of Class B Preferred at a price of $25.00 per share. The net proceeds of $66.5 million were used to repay bank borrowings. B. In July 1999, we issued 1,380,000 shares of Class C Preferred stock at a price of $25.00 per share. The net proceeds of $33.2 million were used to repay bank borrowings. 8. Operating Leases A. General - At December 31, 1999, we owned 1,076 properties in 45 states. Of these 1,076 properties, 1,069 are single-tenant and the remainder are multi-tenant. At December 31, 1999, 17 properties were vacant and available for lease or sale. Substantially all leases are net leases whereby the tenant pays property taxes and assessments, maintains the interior and exterior of the building, and carries insurance coverage for public liability, property damage, fire, and extended coverage. Percentage rent for 1999, 1998 and 1997 was $1.7 million, $1.7 million and $1.8 million, respectively. Page 59
8. Operating Leases (continued) At December 31, 1999, minimum annual rents to be received on the operating leases are as follows (dollars in thousands): <TABLE> Minimum annual rents for the years ending December 31, ====================================================== <S> <C> <C> 2000 $ 111,546 2001 109,133 2002 104,429 2003 97,865 2004 90,959 Thereafter 700,245 ---------- TOTAL $1,214,177 ========== </TABLE> B. Major Tenants - The following schedule presents rental revenue, including percentage rents, from tenants representing more than 10% of our total revenue for the years ended December 31, 1999, 1998 or 1997 (dollars in thousands): <TABLE> Tenants 1999 1998 1997 ========================= ======= ======= ======= <S> <C> <C> <C> Children's World Learning Centers, Inc. $14,371 $14,111 $13,809 La Petite Academy, Inc. 10,730 9,445 9,311 Golden Corral Corporation N/A(1) N/A(1) 6,899 </TABLE> [FN] (1) Rental revenue from Golden Corral Corporation represents less than 10% of our total revenue for 1999 and 1998. </FN> 9. Property Acquisitions During 1999 we invested $181.4 million in 110 new retail properties and properties under development with an average initial contractual lease rate of 10.5%. During 1998 we invested $193.4 million in 149 new retail properties and properties under development with an average initial contractual lease rate of 10.4%. Page 60
10. Gain on Sales of Properties In 1999, we sold three properties (a home furnishings store, home improvement store and restaurant) for $9.4 million and recognized a gain of $1.3 million. In 1998, we sold five properties (two child care centers, two restaurants and a multi-tenant location) for a total of $2.8 million and recognized a gain of $526,000. In 1997, we sold ten properties (six restaurants, two child care centers, one automotive parts store and a multi-tenant location) for a total of $4.4 million and recognized a gain of $1.1 million. In November 1999, we approved a plan to sell three of our multi-tenant locations. The carrying value of the three properties at December 31, 1999 was approximately $29.0 million and contributed $2.1 million, $1.7 million and $1.4 million to income from operations in 1999, 1998 and 1997, respectively. We anticipate the properties will be sold during 2000. These properties are included in the other non-reportable segment in note 16. 11. Fair Value of Financial Instruments We believe that the carrying values reflected in the consolidated balance sheets at December 31, 1999 and 1998 reasonably approximate the fair values for cash and cash equivalents, accounts receivable, and all liabilities except the lines of credit payable and notes payable. In making these assessments, we used estimates. The fair value of the lines of credit payable approximates its carrying value because its terms are similar to those available in the market place. The fair value of the notes payable at December 31, 1999 and 1998 is estimated to be $199.4 million and $203.9 million, respectively, based upon the closing market price per note or indicative price per each note at December 31, 1999 and 1998, respectively. 12. Supplemental Disclosures of Cash Flow Information Interest paid during 1999, 1998 and 1997 was $22.4 million, $12.5 million and $6.9 million, respectively. The following non-cash investing and financing activities are included in the accompanying consolidated financial statements: A. In 1999 and 1998, the acquisition of properties resulted in the following non-cash changes (dollars in thousands): <TABLE> 1999 1998 ------ ------ <S> <C> <C> Increases in: Building $9,057 $1,347 Other liabilities 9,057 1,347 </TABLE> Page 61
12. Supplemental Disclosure of Cash Flow Information (continued) B. In 1998, the former shareholders of the R.I.C. Advisor, Inc., or the Advisor, returned 20,279 shares to the Company. This fulfilled the obligation of the Advisor's shareholders to the Company under an indemnification agreement entered into by these parties. This transaction resulted in the following non-cash changes in 1998 (dollars in thousands): <TABLE> <S> <C> Decrease in: Due from affiliates $ 350 Common stock 20 Paid in capital in excess of par value 413 Increase in: Interest revenue $ 83 </TABLE> 13. Employee Benefit Plan A. We have a 401(k) plan covering substantially all of our employees. Under our 401(k) plan, employees may elect to make contributions to the plan up to a maximum of 15% of their compensation, subject to limits established by the IRS Code. We match 50% of the participants' contributions up to a maximum of six percent of a participant's annual compensation. Our aggregate matching contributions each year have been immaterial to our results of operations. B. As a result of the merger with the Advisor in 1995, the Company assumed a defined benefit pension plan (the "Plan") covering substantially all of its employees. The Plan was terminated on January 2, 1996 and final disbursement of the Plan's assets occurred on February 24, 1997. 14. Stock Incentive Plan In September 1993, our board of directors approved a stock incentive plan (the "Stock Plan") designed to attract and retain directors, officers and employees of the Company by enabling those individuals to participate in the ownership of the Company. The Stock Plan authorizes the issuance in each calendar year of up to 3% of the total shares outstanding at the end of such year. At no time may the total number of shares granted under the Stock Plan exceed 1,950,308. The Stock Plan provides for the award (subject to ownership limitations) of a broad variety of stock-based compensation alternatives such as nonqualified stock options, incentive stock options, restricted stock and performance awards. Stock options are granted with an exercise price equal to the underlying stock's fair market value at the date of grant. Stock options expire 10 years from the date they are granted and vest over service periods of one, three, four and five years. Prior to December 31, 1999, 661,270 stock options and 29,517 restricted shares of common stock had been granted and not cancelled under the Stock Plan. Page 62
14. Stock Incentive Plan (continued) The following table summarizes our stock option activity for the years ended December 31, 1999, 1998 and 1997: <TABLE> 1999 1998 ----------------------- ----------------------- Weighted Weighted Average Average Number Exercise Number Exercise of shares Price of Shares Price - ----------------------------------------------------------------------- <S> <C> <C> <C> <C> Outstanding, beginning of year 438,604 $24.77 139,500 $23.09 Options granted 220,371 24.67 305,413 25.54 Options exercised -- -- (2,933) 23.62 Options canceled (11,127) 25.16 (3,376) 25.44 --------- ------- --------- ------- Outstanding, end of year 647,848 $24.73 438,604 $24.77 ========= ======= ========= ======= Options exercisable, end of year 380,064 196,397 Weighted average fair value of each option granted during the year $2.23 $2.58 (table continued on next page) Page 63 14. Stock Incentive Plan (continued) (table continued) 1997 ----------------------- Weighted Average Options Number Exercise Outstanding of shares Price - ----------------------------------------- <S> <C> <C> Outstanding, beginning of year 73,000 $21.64 Options granted 116,700 24.29 Options exercised (10,489) 23.47 Options canceled (39,711) 23.85 ------ ------ Outstanding, end of year 139,500 $23.09 ======= ====== Options exercisable, end of year 56,300 Weighted average fair value of each option granted during the year $2.29 </TABLE> At December 31, 1999, the options exercisable under the Stock Plan had exercise prices ranging from $20.00 to $26.06 with a weighted average price of $24.57, and expiration dates ranging from August 2004 to December 2008 with a weighted average remaining term of 7.6 years. The fair value of each stock option grant was estimated at the date of grant using the binomial option-pricing model with the following assumptions: <TABLE> 1999 1998 1997 ------------- -------- -------- <S> <C> <C> <C> Expected dividend yield 7.66% 8.86% 9.71% Risk-free interest rate 5.04% 5.75% 6.70% Volatility 15.20% 17.90% 17.40% Expected life of options 10 years 10 years 10 years </TABLE> Page 64 14. Stock Incentive Plan (continued) We apply APB Opinion No. 25 in accounting for our Stock Plan and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had we determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, our net income and diluted net income per common share would have been as follows: <TABLE> 1999 1998 1997 -------- -------- -------- <S> <C> <C> <C> Net income available to common stockholders (dollars in thousands) As reported $ 41,012 $ 41,304 $ 34,770 Pro forma 40,536 40,914 34,722 Diluted net income per common share As reported $ 1.53 $ 1.55 $ 1.48 Pro forma 1.51 1.54 1.47 </TABLE> 15. Stockholder Rights Plan In June 1998, our board of directors adopted a Stockholder Rights Plan (the "Rights Plan") that will expire in July 2008. The Rights Plan assigns one right (a "Right") to purchase one one-hundredth (1/100th) of a share of our Class A Junior Participating Preferred Stock, par value $1.00 per share (the "Preferred Stock"), for each share of common stock owned on or issued after July 1, 1998. Initially, the Rights will not be exercisable and will not trade separately from our common stock. Under certain circumstances, stockholders will be able to exercise their Rights if a person or group initiates an unsolicited takeover of the Company by acquiring 15% of our common stock or by making a tender offer to acquire 15% or more of our common stock. If an unsolicited acquirer gains control of the Company, stockholders other than the acquirer would be able to purchase either our common stock or the acquirer's stock at a 50% discount. The dividend, liquidation, and voting rights, and the non-redemption feature of the Preferred Stock are designed so that the value of the one one-hundredth interest in a share of the new Preferred Stock that can be purchased with each Right will approximate what our board of directors believes to be the long-term value of one share of our common stock. Page 65 16. Segment Information We evaluate performance and make resource allocation decisions on a property by property basis. For financial reporting purposes, we have grouped our operating segments into eight reportable segments. Our segments combine properties into groups based upon the business of our tenants. All of the properties have been acquired separately and are incorporated into one of the applicable segments. Revenue is the only component of segment profit and loss we measure. Since our revenue is primarily from net leases, expenditures for additions to long-lived assets were to acquire additional properties. The accounting policies of the segments are the same as those described in note 2. The following tables set forth certain information regarding the properties owned by us as of December 31, 1999 classified according the business of the respective tenants (dollars in thousands): <TABLE> Revenue ---------------------------------- For the years ended December 31, 1999 1998 1997 -------- -------- -------- <S> <C> <C> <C> Segment rental revenue: Automotive parts $ 8,944 $ 6,593 $ 6,384 Automotive service 6,869 6,333 4,090 Child care 26,428 24,765 24,284 Consumer electronics 4,594 4,616 4,388 Convenience stores 7,557 5,175 3,738 Home furnishings 6,737 6,008 3,108 Restaurants 13,834 13,768 13,414 Video rental 4,444 3,185 373 Other non-reportable segments 24,863 14,433 7,834 Reconciling items -interest and other 240 256 284 -------- -------- -------- Total revenue $104,510 $ 85,132 $ 67,897 ======== ======== ======== Page 66 16. Segment Information (continued) Assets --------------------- As of December 31, 1999 1998 -------- -------- Segment net real estate: Automotive parts $ 77,075 $ 65,847 Automotive service 50,499 46,731 Child care 156,617 138,875 Consumer electronics 39,243 40,447 Convenience stores 83,228 43,986 Home furnishings 64,408 71,366 Restaurants 86,903 87,682 Video rental 40,712 39,650 Other non-reportable segments 268,408 183,696 ------- ------- Total segment net real estate 867,093 718,280 Reconciling items 38,311 40,954 -------- -------- Total assets $905,404 $759,234 ======== ======== </TABLE> 17. Commitments and Contingencies In the ordinary course of our business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated statements taken as a whole. 18. Subsequent Event A. In February 2000, we entered into a $25 million, three-year, revolving credit agreement with the Bank of Montreal, which expires in February 2003. The credit facility currently bears interest at 1.225% over LIBOR and offers us other interest rate options. A facility fee of 0.225%, per annum, accrues on the total commitment of the credit facility. This credit facility can be used for the acquisition of property and for making capital contributions to subsidiaries for the purpose of acquiring properties. B. In January 2000, we formed Crest Net Lease, Inc., of which we own 95% of the common stock, all of which is non-voting, and certain members of management own 5% of the common stock, all of which is voting stock. Crest Net Lease was created to actively buy and sell certain select properties, primarily to buyers using tax-deferred exchanges, under Section 1031 of the IRS Code. Page 67
REALTY INCOME CORPORATION AND SUBSIDIARIES CONSOLIDATED QUARTERLY FINANCIAL DATA (dollars in thousands, except per share data) (not covered by Independent Auditors' Report) <TABLE> First Second Third Fourth Quarter Quarter Quarter Quarter Year ======= ======= ======= ======= ======= <S> <C> <C> <C> <C> <C> 1999 ==== Total revenue $23,986 $24,902 $26,900 $28,722 $104,510 Depreciation and amortization expense 6,090 6,237 6,660 6,965 25,952 Interest expense 5,880 6,045 6,100 6,448 24,473 Other expenses 2,087 2,192 2,232 2,279 8,790 Income from operations 9,929 10,428 11,908 13,030 45,295 Extraordinary item -- -- -- (355) (355) Net income 9,929 10,428 13,144 12,740 46,241 Net income available to common stock- holders 9,929 9,799 10,981 10,303 41,012 Basic and diluted net income per common share 0.37 0.37 0.41 0.38 1.53 Dividends paid per common share 0.5100 0.5175 0.5250 0.5325 2.0850 1998 ==== Total revenue $19,222 $20,367 $21,969 $23,574 $ 85,132 Depreciation and amortization expense 5,084 5,369 5,630 5,852 21,935 Interest expense 2,491 2,864 3,682 4,686 13,723 Other expenses 1,938 2,137 2,164 2,231 8,470 Income from operations 9,709 9,997 10,493 10,805 41,004 Cumulative effect of change in accounting principle -- -- -- (226) (226) Net income 9,924 10,308 10,493 10,579 41,304 Basic and diluted net income per common share 0.38 0.38 0.39 0.40 1.55 Dividends paid per common share 0.4800 0.4875 0.4950 0.5025 1.9650 </TABLE> Page 68
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - --------------------------------------------------------- We have had no disagreements with our independent auditors' on accountancy or financial disclosure. PART III ======== ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The information set forth under the captions "Director Nominees" and "Officers Of The Company" and "Compliance With Federal Securities Laws" in the definitive proxy statement for the Annual Meeting of Stockholders presently scheduled to be held on May 3, 2000, to be filed pursuant to Regulation 14A. ITEM 11: EXECUTIVE COMPENSATION - -------------------------------- The information set forth under the caption "Executive Compensation" in the definitive proxy statement for the Annual Meeting of Stockholders presently scheduled to be held on May 3, 2000, to be filed pursuant to Regulation 14A. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------- The information set forth under the caption "Security Ownership of Certain Beneficial Owners And Management" in the definitive proxy statement for the Annual Meeting of Stockholders presently scheduled to be held on May 3, 2000, to be filed pursuant to Regulation 14A. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The information set forth under the caption "Certain Transactions" in the definitive proxy statement for the Annual Meeting of Stockholders presently scheduled to be held on May 3, 2000, to be filed pursuant to Regulation 14A. Page 69
PART IV ======= ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ---------------------------------------------------------------- A. The following documents are filed as part of this report. 1. Financial Statements (see Item 8) a. Independent Auditors' Report b. Consolidated Balance Sheets, December 31, 1999 and 1998 c. Consolidated Statements of Income, Years ended December 31, 1999, 1998 and 1997 d. Consolidated Statements of Stockholders' Equity, Years ended December 31, 1999, 1998 and 1997 e. Consolidated Statements of Cash Flows, Years ended December 31, 1999, 1998 and 1997 f. Notes to Consolidated Financial Statements g. Consolidated Quarterly Financial Data, (unaudited) for 1999 and 1998 2. Financial Statement Schedule is attached to this report. Reference is made to page F-1 of this report for Schedule III Real Estate and Accumulated Depreciation. Schedules not Filed: All schedules, other than those indicated in the Table of Contents, have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes. 3. Exhibits 2.1 Agreement and Plan of Merger dated as of May 15, 1997 between Realty Income Corporation, a Delaware corporation, and Realty Income Maryland, Inc., a Maryland corporation (incorporated by reference to the Company's Form 8-B12B dated July 29, 1997 ("Form 8-B") and incorporated herein by reference). 3.1 Articles of Incorporation of the Company (filed as Appendix B to the Company's Proxy Statement dated March 28, 1997 ("1997 Proxy Statement") and incorporated herein by reference). 3.2 Bylaws of the Company (filed as Appendix C to the Company's 1997 Proxy Statement and incorporated herein by reference). Page 70
3.3 Articles Supplementary of the Class A Junior Participating Preferred Stock of Realty Income Corporation (filed as an exhibit to Realty Income's registration statement on Form 8-A, dated June 26, 1998, and incorporated herein by reference). 3.4 Articles Supplementary to the Articles of Incorporation of Realty Income Corporation classifying and designating the Class B Preferred Stock (filed as exhibit 4.1 to the Company's Form 8-K dated May 24, 1999 and incorporated herein by reference). 3.5 Articles Supplementary to the Articles of Incorporation of Realty Income Corporation classifying and designating the Class C Preferred Stock (filed as exhibit 4.1 to the Company's Form 8-K dated July 29, 1999 and incorporated herein by reference). 4.1 Pricing Committee Resolutions and Form of 7.75% Notes due 2007 (filed as Exhibit 4.2 to the Company's Form 8-K dated May 5, 1997 and incorporated herein by reference). 4.2 Indenture dated as of May 6, 1997 between the Company and The Bank of New York (filed as Exhibit 4.1 to the Company's Form 8-K dated May 5, 1997 and incorporated herein by reference). 4.3 First Supplemental Indenture dated as of May 28, 1997, between the Company and The Bank of New York (filed as Exhibit 4.3 to the Company's Form 8-B and incorporated herein by reference). 4.4 Rights Agreement, dated as of June 25, 1998, between Realty Income Corporation and The Bank of New York (filed as an exhibit to the Company's registration statement on Form 8-A, dated June 26, 1998, and incorporated herein by reference). 4.5 Pricing Committee Resolutions (filed as an exhibit to Realty Income's Form 8-K, dated October 27, 1998 and incorporated herein by reference). 4.6 Form of 8.25% Notes due 2008 (filed as an exhibit to Realty Income's Form 8-K, dated October 27, 1998 and incorporated herein by reference). 4.7 Indenture dated as of October 28, 1998 between Realty Income and The Bank of New York (filed) as an exhibit to Realty Income's Form 8-K, dated October 27, 1998 and incorporated herein by reference). Page 71 4.8 Pricing Committee Resolutions and Form of 8% Notes due 2009 (filed as exhibit 4.2 to Realty Income's Form 8-K, dated January 21, 1999 and incorporated herein by reference). 10.1 $200 million Revolving Credit Agreement dated December 14, 1999 (filed herein). 10.2 First Amendment dated January 21, 2000 to the $200 million Revolving Credit Agreement dated December 14, 1999 (filed herein). 10.3 $25 million Revolving Credit Agreement dated February 1, 2000 (filed herein). 10.4 1994 Stock Option and Incentive Plan (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (registration number 33-95708) and incorporated herein by reference). 10.5 First Amendment to the 1994 Stock Option and Incentive Plan, dated June 12, 1997 (filed as Exhibit 10.9 to the Company's Form 8-B and incorporated herein by reference). 10.6 Second Amendment to the 1994 Stock Option and Incentive Plan, dated December 16, 1997, (filed as Exhibit 10.9 to the Company's Form 10-K dated December 31, 1997 and incorporated herein by reference). 10.7 Management Incentive Plan, filed as Exhibit 10.10 to the Company's Form 10-K dated December 31, 1997 and incorporated herein by reference). 10.8 Form of Nonqualified Stock Option Agreement for Independent Directors, (filed as Exhibit 10.11 to the Company's Form 10-K dated December 31, 1997 and incorporated herein by reference). 10.9 Form of Indemnification Agreement entered into between the Company and the executive officers of the Company (filed as Exhibit 10.1 to the Company's Form 8-K dated November 21, 1997 and incorporated herein by reference). 10.10 Form of Indemnification Agreement entered into between the Company and each director on the board of directors of the Company (filed as Exhibit 10.2 to the Company's Form 8-K dated November 21, 1997 and incorporated herein by reference). Page 72 10.11 Form of Employment Agreement between the Company and its Executive Officers (incorporated by reference to the Company's Form 8-B12B dated July 29, 1997 and incorporated herein by reference). 12.1 Statement re computation of ratios, filed herein. 21.1 Subsidiaries of the Company as of January 1, 2000, filed herein. 23.1 Consent of KPMG LLP, filed herein. 27 Financial Data Schedule, filed herein. B. The Registrant filed no reports on Form 8-K during the last quarter of the period covered by this report. Page 73 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REALTY INCOME CORPORATION By: /s/THOMAS A. LEWIS ------------------------------------ Thomas A. Lewis Vice Chairman of the Board of Directors, Chief Executive Officer and President Date: March 22, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/WILLIAM E. CLARK ------------------------------------ William E. Clark Chairman of the Board of Directors Date: March 22, 2000 By: /s/THOMAS A. LEWIS ------------------------------------ Thomas A. Lewis Vice Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer) Date: March 22, 2000 By: /s/DONALD R. CAMERON ------------------------------------ Donald R. Cameron Director Date: March 22, 2000 Page 74
SIGNATURES (continued) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ROGER P. KUPPINGER ------------------------------------ Roger P. Kuppinger Director Date: March 22, 2000 By: /s/MICHAEL D. MCKEE ------------------------------------ Michael D. McKee Director Date: March 22, 2000 By: /s/WILLARD H. SMITH JR ------------------------------------ Willard H. Smith Jr Director Date: March 22, 2000 By: /s/KATHLEEN R. ALLEN, PH.D. ------------------------------------ Kathleen R. Allen, Ph.D. Director Date: March 22, 2000 By: /s/GARY MALINO ------------------------------------ Gary Malino Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: March 22, 2000 Page 75 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/GREGORY J. FAHEY ------------------------------------ Gregory J. Fahey Vice President, Controller Date: March 22, 2000 EXHIBIT INDEX ============= Exhibit No. Description - ----------- ----------- 10.1 $200 million Revolving Credit Agreement dated December 14, 1999 10.2 First Amendment, dated January 21, 2000, to the $200 million Revolving Credit Agreement dated December 14, 1999 10.3 $25 million Revolving Credit Agreement dated February 1, 2000 12.1 Statement re computation of ratios 21.1 Subsidiaries of the Company as of January 1, 2000 23.1 Consent of KPMG LLP 27 Financial Data Schedule Page 76
REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION <TABLE> Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Apparel Stores - -------------- <S> <C> <C> <C> <C> Danbury CT 1,083,296 6,217,688 None None Manchester CT 771,660 3,653,539 None None Manchester CT 1,250,464 5,917,037 None None Staten Island NY 4,202,093 3,385,021 None None Westbury NY 6,333,590 3,952,773 None None Automotive Parts - ---------------- Millbrook AL 108,000 517,941 None None Montgomery AL 254,465 502,350 None None Wynne AR 70,000 547,547 None None Blytheville AR 137,913 509,447 None None Osceola AR 88,759 520,047 None None Phoenix AZ 231,000 513,057 None None Phoenix AZ 71,750 159,359 None None Phoenix AZ 222,950 495,178 None None Tucson AZ 194,250 431,434 None None Tucson AZ 178,297 396,004 None None Yuma AZ 120,750 268,190 None None Fullerton CA 47,325 66,522 3,591 -- Grass Valley CA 325,000 384,955 None None Jackson CA 300,000 390,849 None None Sacramento CA 210,000 466,419 None None Turlock CA 222,250 493,627 None None Arvada CO 301,489 8,104 None None Aurora CO 221,691 492,382 None None Canon City CO 66,500 147,699 None None Colorado Springs CO 280,193 622,317 None None Colorado Springs CO 192,988 433,542 None None Denver CO 141,400 314,056 None None Denver CO 315,000 699,623 None None Denver CO 283,500 629,666 None None Littleton CO 252,925 561,758 None None Smyrna DE 232,273 472,855 None None Lakeland FL 500,000 645,402 None None Tampa FL 427,395 472,030 None None Council Bluffs IA 194,355 431,668 None None Page F-1 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Apparel Stores - -------------- Danbury CT 1,083,296 6,217,688 7,300,984 Manchester CT 771,660 3,653,539 4,425,199 Manchester CT 1,250,464 5,917,037 7,167,501 Staten Island NY 4,202,093 3,385,021 7,587,114 Westbury NY 6,333,590 3,952,773 10,286,363 Automotive Parts - ---------------- Millbrook AL 108,000 517,941 625,941 Montgomery AL 254,465 502,350 756,815 Wynne AR 70,000 547,547 617,547 Blytheville AR 137,913 509,447 647,360 Osceola AR 88,759 520,047 608,806 Phoenix AZ 231,000 513,057 744,057 Phoenix AZ 71,750 159,359 231,109 Phoenix AZ 222,950 495,178 718,128 Tucson AZ 194,250 431,434 625,684 Tucson AZ 178,297 396,004 574,301 Yuma AZ 120,750 268,190 388,940 Fullerton CA 47,325 70,113 117,438 Grass Valley CA 325,000 384,955 709,955 Jackson CA 300,000 390,849 690,849 Sacramento CA 210,000 466,419 676,419 Turlock CA 222,250 493,627 715,877 Arvada CO 301,489 8,104 309,593 Aurora CO 221,691 492,382 714,073 Canon City CO 66,500 147,699 214,199 Colorado Springs CO 280,193 622,317 902,510 Colorado Springs CO 192,988 433,542 626,530 Denver CO 141,400 314,056 455,456 Denver CO 315,000 699,623 1,014,623 Denver CO 283,500 629,666 913,166 Littleton CO 252,925 561,758 814,683 Smyrna DE 232,273 472,855 705,128 Lakeland FL 500,000 645,402 1,145,402 Tampa FL 427,395 472,030 899,425 Council Bluffs IA 194,355 431,668 626,023 Page F-2 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Apparel Stores - -------------- Danbury CT 567,365 09/29/97 300 Manchester CT 260,711 03/26/98 300 Manchester CT 422,478 03/26/98 300 Staten Island NY 240,920 03/26/98 300 Westbury NY 359,421 09/29/97 300 Automotive Parts - ---------------- Millbrook AL 19,735 12/10/98 01/29/99 300 Montgomery AL 30,946 06/30/98 300 Wynne AR 18,921 11/10/98 02/26/99 300 Blytheville AR 31,388 06/30/98 300 Osceola AR 32,041 06/30/98 300 Phoenix AZ 227,361 11/09/87 300 Phoenix AZ 70,619 11/19/87 300 Phoenix AZ 187,144 11/02/89 300 Tucson AZ 192,447 10/30/87 300 Tucson AZ 145,752 01/19/90 300 Yuma AZ 98,709 01/23/90 300 Fullerton CA 66,522 08/21/72 234 Grass Valley CA 162,162 05/20/88 300 Jackson CA 161,081 05/17/88 300 Sacramento CA 206,692 11/25/87 300 Turlock CA 217,310 12/30/87 300 Arvada CO -- Aurora CO 181,224 01/29/90 300 Canon City CO 65,453 11/12/87 300 Colorado Springs CO 229,047 01/23/90 300 Colorado Springs CO 118,553 05/20/93 300 Denver CO 139,172 11/18/87 300 Denver CO 297,819 05/16/88 300 Denver CO 268,039 05/27/88 300 Littleton CO 244,031 02/12/88 300 Smyrna DE 25,994 07/31/98 300 Lakeland FL 32,937 06/04/98 12/30/97 300 Tampa FL 24,025 06/10/98 12/03/97 300 Council Bluffs IA 183,755 05/19/88 300 Page F-3 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Boise ID 158,400 351,812 None None Boise ID 190,080 422,172 None None Coeur D'Alene ID 165,900 368,468 None None Lewiston ID 138,950 308,612 None None Moscow ID 117,250 260,417 None None Nampa ID 183,743 408,101 None None Twin Falls ID 190,080 422,172 None None Brazil IN 183,952 453,831 None None Princeton IN 134,209 560,113 None None Vincennes IN 185,312 489,779 None None Kansas City KS 185,955 413,014 None None Kansas City KS 222,000 455,881 None None Alma MI 155,000 600,282 None None Lansing MI 265,000 574,931 None None Sturgis MI 109,558 550,274 None None Eagan MN 902,443 845,536 None None Blue Springs MO 222,569 494,333 None None Grandview MO 347,150 711,024 None None Independence MO 210,643 467,844 None None Kansas City MO 210,070 466,571 None None Kansas City MO 168,350 373,910 None None Kansas City MO 248,500 551,927 None None Jackson MS 248,483 572,485 None None Richland MS 243,565 558,608 None None Batesville MS 190,124 485,670 None None Horn Lakes MS 142,702 514,779 None None Missoula MT 163,100 362,249 None None Kearney NE 173,950 344,393 None None Omaha NE 196,000 435,321 None None Omaha NE 199,100 412,042 None None Omaha NE 253,128 812,403 None None Cherry Hill NJ 1,074,640 1,032,304 None None Albuquerque NM 80,500 178,794 None None Rio Rancho NM 211,577 469,923 None None Sante Fe NM 70,000 155,473 None None Las Vegas NV 161,000 357,585 None None Page F-4 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Boise ID 158,400 351,812 510,212 Boise ID 190,080 422,172 612,252 Coeur D'Alene ID 165,900 368,468 534,368 Lewiston ID 138,950 308,612 447,562 Moscow ID 117,250 260,417 377,667 Nampa ID 183,743 408,101 591,844 Twin Falls ID 190,080 422,172 612,252 Brazil IN 183,952 453,831 637,783 Princeton IN 134,209 560,113 694,322 Vincennes IN 185,312 489,779 675,091 Kansas City KS 185,955 413,014 598,969 Kansas City KS 222,000 455,881 677,881 Alma MI 155,000 600,282 755,282 Lansing MI 265,000 547,931 839,931 Sturgis MI 109,558 550,274 659,832 Eagan MN 902,443 845,536 1,747,979 Blue Springs MO 222,569 494,333 716,902 Grandview MO 347,150 711,024 1,058,174 Independence MO 210,643 467,844 678,487 Kansas City MO 210,070 466,571 676,641 Kansas City MO 168,350 373,910 542,260 Kansas City MO 248,500 551,927 800,427 Jackson MS 248,483 572,485 820,968 Richland MS 243,565 558,608 802,173 Batesville MS 190,124 485,670 675,794 Horn Lakes MS 142,702 514,779 657,481 Missoula MT 163,100 362,249 525,349 Kearney NE 173,950 344,393 518,343 Omaha NE 196,000 435,321 631,321 Omaha NE 199,100 412,042 611,142 Omaha NE 253,128 812,403 1,065,531 Cherry Hill NJ 1,074,640 1,032,304 2,106,944 Albuquerque NM 80,500 178,794 259,294 Rio Rancho NM 211,577 469,923 681,500 Sante Fe NM 70,000 155,473 225,473 Las Vegas NV 161,000 357,585 518,585 Page F-5 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Boise ID 149,762 05/06/88 300 Boise ID 179,712 05/06/88 300 Coeur D'Alene ID 165,437 09/21/87 300 Lewiston ID 138,562 09/16/87 300 Moscow ID 116,923 09/14/87 300 Nampa ID 173,723 05/06/88 300 Twin Falls ID 179,712 05/06/88 300 Brazil IN 14,358 03/31/99 300 Princeton IN 17,724 03/31/99 300 Vincennes IN 15,497 03/31/99 300 Kansas City KS 175,815 05/13/88 300 Kansas City KS 193,981 05/16/88 300 Alma MI 14,778 04/29/99 02/23/99 300 Lansing MI 19,787 04/30/99 12/03/98 300 Sturgis MI 22,825 12/29/98 300 Eagan MN 46,081 02/02/98 300 Blue Springs MO 190,447 07/31/89 300 Grandview MO 36,480 08/20/98 02/20/98 300 Independence MO 180,241 07/31/89 300 Kansas City MO 198,613 05/13/88 300 Kansas City MO 159,168 05/26/88 300 Kansas City MO 226,611 10/25/88 300 Jackson MS 2,858 12/21/99 300 Richland MS 929 Batesville MS 28,304 07/21/98 300 Horn Lakes MS 31,716 06/30/98 300 Missoula MT 161,587 10/30/87 300 Kearney NE 122,818 05/01/90 300 Omaha NE 185,310 05/26/88 300 Omaha NE 173,733 05/27/88 300 Omaha NE 9,421 07/22/99 03/31/99 300 Cherry Hill NJ 180,653 01/26/95 300 Albuquerque NM 79,754 10/29/87 300 Rio Rancho NM 204,136 02/26/88 300 Sante Fe NM 69,352 10/29/87 300 Las Vegas NV 159,507 10/29/87 300 Page F-6 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Reno NV 456,000 562,344 None None Canton OH 396,560 597,553 None None Hamilton OH 183,000 519,321 None None Hubbard OH 147,043 481,217 None None Oklahoma City OK 509,370 752,691 None None Oklahoma City OK 404,815 771,625 None None Albany OR 152,250 338,153 None None Beaverton OR 210,000 466,419 None None Corvallis OR 152,250 338,153 None None Eugene OR 194,880 432,837 None None Oak Grove OR 180,250 400,336 None None Portland OR 190,750 423,664 None None Portland OR 147,000 326,493 None None Portland OR 210,000 466,412 None None Salem OR 136,500 303,170 None None Tigard OR 164,500 365,361 None None Hanover PA 132,500 725,463 None None Butler PA 339,929 633,078 None None Dover PA 265,112 593,341 None None Enola PA 220,228 546,026 None None Harrisburg PA 327,781 608,291 None None Harrisburg PA 283,417 352,473 None None Lancaster PA 199,899 774,838 None None New Castle PA 180,009 525,774 None None Reading PA 379,000 658,693 None None Sioux Falls SD 332,979 498,108 None None Columbia TN 273,120 431,716 None None Memphis TN 197,708 507,647 None None Amarillo TX 140,000 419,734 None None Austin TX 185,454 411,899 None None Dallas TX 191,267 424,811 None None El Paso TX 66,150 146,922 None None El Paso TX 56,350 125,156 None None Garland TX 242,887 539,461 None None Harlingen TX 134,599 298,948 None None Houston TX 151,018 335,417 None None Page F-7 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Reno NV 456,000 562,344 1,018,344 Canton OH 396,560 597,553 994,113 Hamilton OH 183,000 519,321 702,321 Hubbard OH 147,043 481,217 628,260 Oklahoma City OK 509,370 752,691 1,262,061 Oklahoma City OK 404,815 771,625 1,176,440 Albany OR 152,250 338,153 490,403 Beaverton OR 210,000 466,419 676,419 Corvallis OR 152,250 338,153 490,403 Eugene OR 194,880 432,837 627,717 Oak Grove OR 180,250 400,336 580,586 Portland OR 190,750 423,664 614,414 Portland OR 147,000 326,493 473,493 Portland OR 210,000 466,412 676,412 Salem OR 136,500 303,170 439,670 Tigard OR 164,500 365,361 529,861 Hanover PA 132,500 725,463 857,963 Butler PA 339,929 633,078 973,007 Dover PA 265,112 593,341 858,453 Enola PA 220,228 546,026 766,254 Harrisburg PA 327,781 608,291 936,072 Harrisburg PA 283,417 352,473 635,890 Lancaster PA 199,899 774,838 974,737 New Castle PA 180,009 525,774 705,783 Reading PA 379,000 658,693 1,037,693 Sioux Falls SD 332,979 498,108 831,087 Columbia TN 273,120 431,716 704,836 Memphis TN 197,708 507,647 705,355 Amarillo TX 140,000 419,734 559,734 Austin TX 185,454 411,899 597,353 Dallas TX 191,267 424,811 616,078 El Paso TX 66,150 146,922 213,072 El Paso TX 56,350 125,156 181,506 Garland TX 242,887 539,461 782,348 Harlingen TX 134,599 298,948 433,547 Houston TX 151,018 335,417 486,435 Page F-8 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Reno NV 239,273 05/26/88 300 Canton OH 32,848 08/14/98 300 Hamilton OH 14,447 04/07/99 12/01/98 300 Hubbard OH 29,654 06/30/98 300 Oklahoma City OK 16,189 04/14/99 09/24/98 300 Oklahoma City OK 16,613 04/09/99 10/02/98 300 Albany OR 152,815 08/24/87 300 Beaverton OR 210,780 08/26/87 300 Corvallis OR 152,815 08/12/87 300 Eugene OR 188,027 02/10/88 300 Oak Grove OR 180,916 08/06/87 300 Portland OR 191,459 08/12/87 300 Portland OR 147,546 08/26/87 300 Portland OR 209,414 09/01/87 300 Salem OR 137,005 08/20/87 300 Tigard OR 165,111 08/26/87 300 Hanover PA 10,661 08/06/99 05/14/99 300 Butler PA 34,800 08/07/98 300 Dover PA 36,575 06/30/98 300 Enola PA 24,550 10/16/98 300 Harrisburg PA 37,486 06/30/98 300 Harrisburg PA 18,178 09/30/98 300 Lancaster PA 42,603 08/07/98 300 New Castle PA 32,401 06/30/98 300 Reading PA 14,006 06/09/99 12/03/98 300 Sioux Falls SD 27,161 06/01/99 02/23/98 300 Columbia TN 9,346 07/19/99 300 Memphis TN 26,201 09/30/98 300 Amarillo TX 173,534 09/12/88 300 Austin TX 150,424 02/06/90 300 Dallas TX 156,354 01/26/90 300 El Paso TX 65,537 10/27/87 300 El Paso TX 55,827 10/27/87 300 Garland TX 198,551 01/19/90 300 Harlingen TX 110,030 01/17/90 300 Houston TX 123,452 01/25/90 300 Page F-9 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Leon Valley TX 178,221 395,834 None None Lubbock TX 42,000 93,284 None None Lubbock TX 49,000 108,831 None None Midland TX 45,500 101,058 None None Odessa TX 50,750 112,718 None None Pasadena TX 107,391 238,519 None None Plano TX 187,564 417,157 700 None San Antonio TX 245,164 544,518 None None Bountiful UT 183,750 408,115 None None Provo UT 125,395 278,507 None None Bellevue WA 185,500 411,997 None None Bellingham WA 168,000 373,133 None None Bothell WA 199,500 443,098 None None Everett WA 367,500 816,227 None None Hazel Dell WA 168,000 373,135 None None Kennewick WA 161,350 358,365 None None Kent WA 199,500 443,091 None None Lacey WA 171,150 380,125 None None Marysville WA 168,000 373,135 None None Moses Lake WA 138,600 307,831 None None Pasco WA 161,700 359,142 None None Puyallup WA 173,250 384,795 None None Redmond WA 196,000 435,317 None None Renton WA 185,500 412,003 None None Richland WA 161,700 359,142 None None Seattle WA 162,400 360,697 None None Silverdale WA 183,808 419,777 None None Spanaway WA 189,000 419,777 None None Spokane WA 66,150 146,921 None None Tacoma WA 191,800 425,996 None None Tacoma WA 196,000 435,324 None None Tacoma WA 187,111 415,579 None None Vancouver WA 180,250 400,343 None None Walla Walla WA 170,100 377,793 None None Wenatchee WA 148,400 329,602 None None Woodinville WA 171,500 380,908 None None Page F-10 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Leon Valley TX 178,221 395,834 574,055 Lubbock TX 42,000 93,284 135,284 Lubbock TX 49,000 108,831 157,831 Midland TX 45,500 101,058 146,558 Odessa TX 50,750 112,718 163,468 Pasadena TX 107,391 238,519 345,910 Plano TX 187,564 417,857 605,421 San Antonio TX 245,164 544,518 789,682 Bountiful UT 183,750 408,115 591,865 Provo UT 125,395 278,507 403,902 Bellevue WA 185,500 411,997 597,497 Bellingham WA 168,000 373,133 541,133 Bothell WA 199,500 443,098 642,598 Everett WA 367,500 816,227 1,183,727 Hazel Dell WA 168,000 373,135 541,135 Kennewick WA 161,350 358,365 519,715 Kent WA 199,500 443,091 642,591 Lacey WA 171,150 380,125 551,275 Marysville WA 168,000 373,135 541,135 Moses Lake WA 138,600 307,831 446,431 Pasco WA 161,700 359,142 520,842 Puyallup WA 173,250 384,795 558,045 Redmond WA 196,000 435,317 631,317 Renton WA 185,500 412,003 597,503 Richland WA 161,700 359,142 520,842 Seattle WA 162,400 360,697 523,097 Silverdale WA 183,808 419,777 603,585 Spanaway WA 189,000 419,777 608,777 Spokane WA 66,150 146,921 213,071 Tacoma WA 191,800 425,996 617,796 Tacoma WA 196,000 435,324 631,324 Tacoma WA 187,111 415,579 602,690 Vancouver WA 180,250 400,343 580,593 Walla Walla WA 170,100 377,793 547,893 Wenatchee WA 148,400 329,602 478,002 Woodinville WA 171,500 380,908 552,408 Page F-11 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Leon Valley TX 145,689 01/17/90 300 Lubbock TX 41,610 10/26/87 300 Lubbock TX 48,546 10/29/87 300 Midland TX 45,078 10/27/87 300 Odessa TX 50,278 10/26/87 300 Pasadena TX 87,788 01/24/90 300 Plano TX 153,327 01/18/90 300 San Antonio TX 198,855 02/14/90 300 Bountiful UT 150,209 01/30/90 300 Provo UT 102,506 01/25/90 300 Bellevue WA 186,185 08/06/87 300 Bellingham WA 168,621 08/20/87 300 Bothell WA 200,242 08/20/87 300 Everett WA 361,708 11/17/87 300 Hazel Dell WA 155,100 05/23/88 300 Kennewick WA 161,950 08/26/87 300 Kent WA 200,237 08/06/87 300 Lacey WA 171,781 08/13/87 300 Marysville WA 168,625 08/20/87 300 Moses Lake WA 139,112 08/12/87 300 Pasco WA 162,300 08/18/87 300 Puyallup WA 172,769 09/15/87 300 Redmond WA 195,453 09/17/87 300 Renton WA 184,983 09/15/87 300 Richland WA 162,300 08/13/87 300 Seattle WA 163,004 08/20/87 300 Silverdale WA 188,474 09/16/87 300 Spanaway WA 189,701 08/25/87 300 Spokane WA 65,107 11/18/87 300 Tacoma WA 192,512 08/18/87 300 Tacoma WA 194,183 10/15/87 300 Tacoma WA 152,956 01/25/90 300 Vancouver WA 180,919 08/20/87 300 Walla Walla WA 170,728 08/06/87 300 Wenatchee WA 148,952 08/25/87 300 Woodinville WA 172,136 08/20/87 300 Page F-12 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Parts - ---------------- Brown Deer WI 257,408 802,141 None None Delafield WI 324,574 758,921 None None Madison WI 452,630 811,977 None None Oak Creek WI 420,465 852,408 None None Automotive Service - ------------------ Flagstaff AZ 144,821 417,485 None None Chula Vista CA 313,293 409,654 None None Arvada CO 201,565 339,038 None None Arvada CO 241,044 344,753 None 57 Broomfield CO 154,930 503,626 None None Denver CO 79,717 369,587 None None Denver CO 341,726 433,341 None 22 Thornton CO 276,084 415,464 None None Hartford CT 248,540 482,460 None None Southington CT 225,882 672,910 None None Ft. Lauderdale FL 254,090 465,890 None 775 Jacksonville FL 76,585 355,066 None None Lauderdale Lakes FL 65,987 305,931 None None Seminole FL 68,000 315,266 None None Sunrise FL 80,253 372,070 None None Tampa FL 70,000 324,538 None None Tampa FL 67,000 310,629 None None Tampa FL 86,502 401,041 None None Atlanta GA 55,840 258,889 None None Atlanta GA 78,646 364,625 None None Bogart GA 66,807 309,733 None None Duluth GA 222,275 316,925 None None Gainesville GA 53,589 248,452 None None Marietta GA 60,900 293,461 None None Marietta GA 69,561 346,024 None None Riverdale GA 58,444 270,961 None None Rome GA 56,454 261,733 None None Anderson IN 232,170 385,661 None None Indianapolis IN 231,384 428,307 None None Olathe KS 217,995 367,055 None None Page F-13 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Parts - ---------------- Brown Deer WI 257,408 802,141 1,059,549 Delafield WI 324,574 758,921 1,083,495 Madison WI 452,630 811,977 1,264,607 Oak Creek WI 420,465 852,408 1,272,873 Automotive Service - ------------------ Flagstaff AZ 144,821 417,485 526,306 Chula Vista CA 313,293 409,654 722,947 Arvada CO 201,565 339,038 540,603 Arvada CO 241,044 344,810 585,854 Broomfield CO 154,930 503,626 658,556 Denver CO 79,717 369,587 449,304 Denver CO 341,726 433,363 775,089 Thornton CO 276,084 415,464 691,548 Hartford CT 248,540 482,460 731,000 Southington CT 225,882 672,910 898,792 Ft. Lauderdale FL 254,090 466,665 720,755 Jacksonville FL 76,585 355,066 431,651 Lauderdale Lakes FL 65,987 305,931 371,918 Seminole FL 68,000 315,266 383,266 Sunrise FL 80,253 372,070 452,323 Tampa FL 70,000 324,538 394,538 Tampa FL 67,000 310,629 377,629 Tampa FL 86,502 401,041 487,543 Atlanta GA 55,840 258,889 314,729 Atlanta GA 78,646 364,625 443,271 Bogart GA 66,807 309,733 376,540 Duluth GA 222,275 316,925 539,200 Gainesville GA 53,589 248,452 302,041 Marietta GA 60,900 293,461 354,361 Marietta GA 69,561 346,024 415,585 Riverdale GA 58,444 270,961 329,405 Rome GA 56,454 261,733 318,187 Anderson IN 232,170 385,661 617,831 Indianapolis IN 231,384 428,307 659,691 Olathe KS 217,995 367,055 585,050 Page F-14 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Parts - ---------------- Brown Deer WI 33,258 12/15/98 07/06/98 300 Delafield WI 8,297 03/11/99 300 Madison WI 38,972 10/20/98 03/31/98 300 Oak Creek WI 40,912 08/07/98 03/12/98 300 Automotive Service - ------------------ Flagstaff AZ 22,202 09/30/98 08/29/97 300 Chula Vista CA 59,400 05/01/96 12/22/95 300 Arvada CO 45,770 08/28/96 03/15/96 300 Arvada CO 40,407 01/03/97 07/01/96 300 Broomfield CO 67,990 08/22/96 03/06/96 300 Denver CO 240,139 10/08/85 300 Denver CO 37,829 09/25/97 06/09/97 300 Thornton CO 49,004 12/31/96 10/04/96 300 Hartford CT 63,524 09/27/96 300 Southington CT 67,895 05/30/97 300 Ft. Lauderdale FL 28,432 05/13/98 12/24/97 300 Jacksonville FL 226,895 12/23/85 300 Lauderdale Lakes FL 193,123 02/19/86 300 Seminole FL 201,461 12/23/85 300 Sunrise FL 235,999 02/14/86 300 Tampa FL 207,386 12/27/85 300 Tampa FL 198,498 12/27/85 300 Tampa FL 245,346 07/23/86 300 Atlanta GA 166,438 11/27/85 300 Atlanta GA 233,003 12/18/85 300 Bogart GA 197,926 12/20/85 300 Duluth GA 24,943 10/24/97 06/20/97 300 Gainesville GA 158,764 12/19/85 300 Marietta GA 187,526 12/26/85 300 Marietta GA 214,098 06/03/86 300 Riverdale GA 172,099 01/15/86 300 Rome GA 167,251 12/19/85 300 Anderson IN 31,326 12/19/97 300 Indianapolis IN 56,394 09/27/96 300 Olathe KS 38,525 04/22/97 10/31/96 300 Page F-15 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Service - ------------------ Louisville KY 56,054 259,881 None None Newport KY 323,511 289,017 None None Lenox MA 287,769 535,273 None None Billerica MA 399,043 462,240 None None Clinton MD 70,880 328,620 None None Minneapolis MN 58,000 268,903 None None Independence MO 297,641 233,152 None None Concord NC 237,688 357,976 None 414 Durham NC 55,074 255,336 None None Durham NC 354,676 361,203 None None Fayetteville NC 224,326 257,733 None None Garner NC 218,294 319,334 None 414 Greensboro NC 287,474 316,108 None None Matthews NC 295,580 338,472 None 414 Pineville NC 254,460 355,630 None None Raleigh NC 89,145 413,301 None None Raleigh NC 398,694 263,621 None None Albion NY 170,589 317,424 None None Dansville NY 181,664 337,991 None None East Amherst NY 260,708 484,788 None None East Syracuse NY 250,609 466,264 None None Johnson City NY 242,863 451,877 None None Wellsville NY 161,331 300,231 None None West Amherst NY 268,692 499,619 None None Akron OH 139,126 460,334 None None Beaver Creek OH 205,000 492,538 None None Centerville OH 305,000 420,448 None None Cincinnati OH 293,005 201,340 None None Columbus OH 71,098 329,627 None None Columbus OH 75,761 351,247 None None Columbus OH 245,036 470,468 None None Dayton OH 70,000 324,538 None None Eastlake OH 321,347 459,774 None None Fairfield OH 323,408 235,024 None None Findlay OH 283,515 397,004 None None Hamilton OH 252,608 413,279 None None Page F-16 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Service - ------------------ Louisville KY 56,054 259,881 315,935 Newport KY 323,511 289,017 612,528 Lenox MA 287,769 535,273 823,042 Billerica MA 399,043 462,240 861,283 Clinton MD 70,880 328,620 399,500 Minneapolis MN 58,000 268,903 326,903 Independence MO 297,641 233,152 530,793 Concord NC 237,688 358,390 596,078 Durham NC 55,074 255,336 310,410 Durham NC 354,676 361,203 715,879 Fayetteville NC 224,326 257,733 482,059 Garner NC 218,294 319,748 538,042 Greensboro NC 287,474 316,108 603,582 Matthews NC 295,580 338,886 634,466 Pineville NC 254,460 355,630 610,090 Raleigh NC 89,145 413,301 502,446 Raleigh NC 398,694 263,621 662,315 Albion NY 170,589 317,424 488,013 Dansville NY 181,664 337,991 519,655 East Amherst NY 260,708 484,788 745,496 East Syracuse NY 250,609 466,264 716,873 Johnson City NY 242,863 451,877 694,740 Wellsville NY 161,331 300,231 461,562 West Amherst NY 268,692 499,619 768,311 Akron OH 139,126 460,334 599,460 Beaver Creek OH 205,000 492,538 697,538 Centerville OH 305,000 420,448 725,448 Cincinnati OH 293,005 201,340 494,345 Columbus OH 71,098 329,627 400,725 Columbus OH 75,761 351,247 427,008 Columbus OH 245,036 470,468 715,504 Dayton OH 70,000 324,538 394,538 Eastlake OH 321,347 459,774 781,121 Fairfield OH 323,408 235,024 558,432 Findlay OH 283,515 397,004 680,519 Hamilton OH 252,608 413,279 665,887 Page F-17 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Service - ------------------ Louisville KY 166,069 12/17/85 300 Newport KY 26,166 09/17/97 300 Lenox MA 16,923 03/31/99 300 Billerica MA 49,714 03/31/97 300 Clinton MD 212,254 11/15/85 300 Minneapolis MN 171,835 12/18/85 300 Independence MO 28,367 12/20/96 300 Concord NC 20,625 05/27/98 11/05/97 300 Durham NC 164,922 11/13/85 300 Durham NC 32,786 08/29/97 03/26/97 300 Fayetteville NC 20,710 12/01/97 300 Garner NC 25,163 01/05/98 06/20/97 300 Greensboro NC 31,861 06/09/97 01/29/97 300 Matthews NC 16,140 08/28/98 02/27/98 300 Pineville NC 32,297 08/28/97 04/04/97 300 Raleigh NC 267,306 10/28/85 300 Raleigh NC 22,892 10/01/97 300 Albion NY 10,032 03/31/99 300 Dansville NY 10,684 03/31/99 300 East Amherst NY 15,332 03/31/99 300 East Syracuse NY 14,738 03/31/99 300 Johnson City NY 14,283 03/31/99 300 Wellsville NY 9,488 03/31/99 300 West Amherst NY 15,802 03/31/99 300 Akron OH 41,903 09/17/97 300 Beaver Creek OH 54,998 02/13/97 09/03/96 300 Centerville OH 58,162 07/24/96 06/27/96 300 Cincinnati OH 18,039 09/17/97 300 Columbus OH 214,175 10/02/85 300 Columbus OH 227,172 10/24/85 300 Columbus OH 76,059 12/21/95 300 Dayton OH 209,897 10/31/85 300 Eastlake OH 74,330 12/22/95 300 Fairfield OH 21,176 09/17/97 300 Findlay OH 32,250 12/24/97 300 Hamilton OH 42,002 03/31/97 09/30/96 300 Page F-18 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Service - ------------------ Huber Heights OH 282,000 449,381 None None Miamisburg OH 63,996 296,701 None None Milford OH 353,324 269,997 None None Mt. Vernon OH 216,115 375,357 None None Northwood OH 65,978 263,912 None None Norwalk OH 200,205 366,000 None None Sandusky OH 264,708 404,011 None None Springboro OH 191,911 522,902 None None Toledo OH 91,655 366,621 None None Toledo OH 73,408 293,632 None None Midwest City OK 106,312 333,551 None None The Village OK 143,655 295,422 None None Bethel Park PA 299,595 331,264 None None Bethlehem PA 275,328 389,067 None None Bethlehem PA 229,162 310,526 None None Philadelphia PA 858,500 877,744 None None Springfield Twp. PA 82,740 383,601 None None York PA 249,436 347,424 None None Charleston SC 217,250 294,079 None None Columbia SC 343,785 295,001 None None Columbia SC 267,622 298,594 None None Greenville SC 221,946 315,163 None None Lexington SC 241,534 342,182 None 295 North Charleston SC 174,980 341,466 None None Brentwood TN 305,546 505,728 None None Nashville TN 342,960 227,440 None None Dallas TX 234,604 325,951 None None Houston TX 285,000 369,697 None None Houston TX 233,406 411,197 None None Houston TX 195,000 424,651 None None Lewisville TX 199,942 324,736 None None San Antonio TX 198,828 437,422 None None Richmond VA 149,780 399,415 None 411 Roanoke VA 349,628 322,545 None None Virginia Beach VA 287,675 382,125 None 402 Bremerton WA 261,172 373,080 None None Page F-19 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Service - ------------------ Huber Heights OH 282,000 449,381 731,381 Miamisburg OH 63,996 296,701 360,697 Milford OH 353,324 269,997 623,321 Mt. Vernon OH 216,115 375,357 591,472 Northwood OH 65,978 263,912 329,890 Norwalk OH 200,205 366,000 566,205 Sandusky OH 264,708 404,011 668,719 Springboro OH 191,911 522,902 714,813 Toledo OH 91,655 366,621 458,276 Toledo OH 73,408 293,632 367,040 Midwest City OK 106,312 333,551 439,863 The Village OK 143,655 295,422 439,077 Bethel Park PA 299,595 331,264 630,859 Bethlehem PA 275,328 389,067 664,395 Bethlehem PA 229,162 310,526 539,688 Philadelphia PA 858,500 877,744 1,736,244 Springfield Twp. PA 82,740 383,601 466,341 York PA 249,436 347,424 596,860 Charleston SC 217,250 294,079 511,329 Columbia SC 343,785 295,001 638,786 Columbia SC 267,622 298,594 566,216 Greenville SC 221,946 315,163 537,109 Lexington SC 241,534 342,477 584,011 North Charleston SC 174,980 341,466 516,446 Brentwood TN 305,546 505,728 811,274 Nashville TN 342,960 227,440 570,400 Dallas TX 234,604 325,951 560,555 Houston TX 285,000 369,697 654,697 Houston TX 233,406 411,197 644,603 Houston TX 195,000 424,651 619,651 Lewisville TX 199,942 324,736 524,678 San Antonio TX 198,828 437,422 636,250 Richmond VA 149,780 399,826 549,606 Roanoke VA 349,628 322,545 672,173 Virginia Beach VA 287,675 382,527 670,202 Bremerton WA 261,172 373,080 634,252 Page F-20 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Service - ------------------ Huber Heights OH 53,174 12/03/96 07/10/96 300 Miamisburg OH 192,782 10/08/85 300 Milford OH 24,402 09/18/97 300 Mt. Vernon OH 30,485 12/30/97 300 Northwood OH 234,405 09/12/86 180 Norwalk OH 29,727 12/19/97 300 Sandusky OH 32,827 12/19/97 300 Springboro OH 57,861 02/07/97 300 Toledo OH 325,631 09/12/86 180 Toledo OH 260,802 09/12/86 180 Midwest City OK 18,146 08/06/98 07/29/97 300 The Village OK 19,941 03/06/98 06/30/97 300 Bethel Park PA 26,914 12/19/97 300 Bethlehem PA 31,646 12/19/97 300 Bethlehem PA 25,193 12/23/97 300 Philadelphia PA 267,091 05/19/95 12/05/94 300 Springfield Twp. PA 242,154 02/28/86 300 York PA 28,205 12/24/97 300 Charleston SC 27,635 07/14/97 03/11/97 300 Columbia SC 29,551 05/27/97 01/31/97 300 Columbia SC 20,091 03/31/98 10/24/97 300 Greenville SC 27,569 09/05/97 03/31/97 300 Lexington SC 9,543 02/03/99 09/24/98 300 North Charleston SC 18,512 08/06/98 03/04/98 300 Brentwood TN 39,148 03/13/98 04/16/97 300 Nashville TN 20,503 09/17/97 300 Dallas TX 44,003 08/09/96 02/14/96 300 Houston TX 32,231 08/08/97 08/08/97 300 Houston TX 2,029 09/07/99 03/23/98 300 Houston TX 2,098 10/01/99 05/28/98 300 Lewisville TX 43,839 08/02/96 01/19/96 300 San Antonio TX 75,091 09/01/95 300 Richmond VA 48,595 12/20/96 300 Roanoke VA 26,173 12/19/97 300 Virginia Beach VA 44,956 01/07/97 09/27/96 300 Bremerton WA 46,243 03/19/97 07/18/96 300 Page F-21 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Automotive Service - ------------------ Milwaukee WI 173,005 499,244 None None Milwaukee WI 152,509 475,480 None None New Berlin WI 188,491 466,268 None None Book Stores - ----------- Tampa FL 998,250 3,696,707 None None Business Services - ----------------- Jackson MI 550,162 571,590 None None Child Care - ---------- Birmingham AL 63,800 295,791 None None Huntsville AL 28,600 197,165 None 277 Mobile AL 78,400 237,671 None 277 Mobile AL 63,000 292,084 None 277 Mesa AZ 308,951 1,025,561 None None Avondale AZ 242,723 1,129,103 None None Chandler AZ 144,083 668,079 None None Chandler AZ 291,720 647,923 None None Chandler AZ 271,695 603,446 None None Glendale AZ 115,000 285,172 None 76 Mesa AZ 297,500 660,755 None None Mesa AZ 276,770 590,417 None None Peoria AZ 281,750 625,779 None None Phoenix AZ 318,500 707,397 None None Phoenix AZ 264,504 587,471 None None Phoenix AZ 260,719 516,181 None None Scottsdale AZ 291,993 648,529 None None Tempe AZ 292,200 648,989 None None Tempe AZ 294,000 638,977 None None Tucson AZ 304,500 676,303 None None Tucson AZ 283,500 546,878 None None Calabasas CA 156,430 725,248 None None Carmichael CA 131,035 607,507 None None Chino CA 155,000 634,071 None None Chula Vista CA 350,563 778,614 None None Page F-22 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Automotive Service - ------------------ Milwaukee WI 173,005 499,244 672,249 Milwaukee WI 152,509 475,480 627,989 New Berlin WI 188,491 466,268 654,759 Book Stores - ----------- Tampa FL 998,250 3,696,707 4,694,957 Business Services - ----------------- Jackson MI 550,162 571,590 1,121,752 Child Care - ---------- Birmingham AL 63,800 295,791 359,591 Huntsville AL 28,600 197,442 226,042 Mobile AL 78,400 237,948 316,348 Mobile AL 63,000 292,361 355,361 Mesa AZ 308,951 1,025,561 1,334,512 Avondale AZ 242,723 1,129,103 1,371,826 Chandler AZ 144,083 668,079 812,162 Chandler AZ 291,720 647,923 939,643 Chandler AZ 271,695 603,446 875,141 Glendale AZ 115,000 285,248 400,248 Mesa AZ 297,500 660,755 958,255 Mesa AZ 276,770 590,417 867,187 Peoria AZ 281,750 625,779 907,529 Phoenix AZ 318,500 707,397 1,025,897 Phoenix AZ 264,504 587,471 851,975 Phoenix AZ 260,719 516,181 776,900 Scottsdale AZ 291,993 648,529 940,522 Tempe AZ 292,200 648,989 941,189 Tempe AZ 294,000 638,977 932,977 Tucson AZ 304,500 676,303 980,803 Tucson AZ 283,500 546,878 830,378 Calabasas CA 156,430 725,248 881,678 Carmichael CA 131,035 607,507 738,542 Chino CA 155,000 634,071 789,071 Chula Vista CA 350,563 778,614 1,129,177 Page F-23 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Automotive Service - ------------------ Milwaukee WI 80,711 12/22/95 300 Milwaukee WI 62,603 09/27/96 300 New Berlin WI 75,380 12/22/95 300 Book Stores - ----------- Tampa FL 412,444 03/07/97 300 Business Services - ----------------- Jackson MI 19,798 01/15/99 09/24/98 300 Child Care - ---------- Birmingham AL 210,702 10/31/84 300 Huntsville AL 197,234 06/15/82 180 Mobile AL 237,740 10/15/82 180 Mobile AL 199,474 04/25/85 300 Mesa AZ 11,895 07/26/99 01/13/99 300 Avondale AZ 24,386 04/20/99 07/27/98 300 Chandler AZ 395,616 12/17/86 300 Chandler AZ 285,193 12/11/87 300 Chandler AZ 265,698 12/14/87 300 Glendale AZ 285,191 02/08/84 180 Mesa AZ 273,613 09/29/88 300 Mesa AZ 244,489 09/29/88 300 Peoria AZ 270,021 03/30/88 300 Phoenix AZ 292,927 09/29/88 300 Phoenix AZ 207,829 06/29/90 300 Phoenix AZ 173,788 12/26/90 300 Scottsdale AZ 285,502 12/14/87 300 Tempe AZ 280,037 03/10/88 300 Tempe AZ 226,739 09/27/90 300 Tucson AZ 280,052 09/28/88 300 Tucson AZ 226,458 09/29/88 300 Calabasas CA 471,858 09/26/85 300 Carmichael CA 369,282 08/22/86 300 Chino CA 634,071 10/06/83 180 Chula Vista CA 347,313 10/30/87 300 Page F-24 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Corona CA 144,856 671,584 None None El Cajon CA 157,804 731,621 None None Encinitas CA 320,000 710,729 None None Escondido CA 276,286 613,638 None None Folsom CA 281,563 625,363 None None Mission Viejo CA 353,891 744,367 None None Moreno Valley CA 304,489 676,214 None None Oceanside CA 145,568 674,889 None None Palmdale CA 249,490 554,125 None None Rancho Cordova CA 276,328 613,733 None None Rancho Cucamonga CA 471,733 1,047,739 None None Roseville CA 297,343 660,411 None None Sacramento CA 290,734 645,732 None None Santee CA 248,418 551,748 None None Simi Valley CA 208,585 967,055 None None Valencia CA 301,295 669,185 None None Walnut CA 217,365 1,007,753 None None Aurora CO 141,811 657,497 None None Aurora CO 287,000 637,440 None None Aurora CO 301,455 655,610 None None Broomfield CO 107,000 403,080 None None Broomfield CO 155,306 344,941 None None Colorado Springs CO 58,400 271,217 None None Colorado Springs CO 92,570 241,413 None None Colorado Springs CO 115,542 535,700 None None Englewood CO 131,216 608,372 None None Englewood CO 158,651 735,572 None None Fort Collins CO 55,200 256,356 None 3,600 Fort Collins CO 117,105 542,950 None None Fort Collins CO 137,734 638,593 None None Greeley CO 58,400 270,755 None 227 Littleton CO 161,617 358,956 None None Littleton CO 287,000 637,435 None None Littleton CO 299,250 664,642 None None Longmont CO 115,592 535,931 None None Louisville CO 58,089 269,313 None None Page F-25 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Corona CA 144,856 671,584 816,440 El Cajon CA 157,804 731,621 889,425 Encinitas CA 320,000 710,729 1,030,729 Escondido CA 276,286 613,638 889,924 Folsom CA 281,563 625,363 906,926 Mission Viejo CA 353,891 744,367 1,098,258 Moreno Valley CA 304,489 676,214 980,703 Oceanside CA 145,568 674,889 820,457 Palmdale CA 249,490 554,125 803,615 Rancho Cordova CA 276,328 613,733 890,061 Rancho Cucamonga CA 471,733 1,047,739 1,519,472 Roseville CA 297,343 660,411 957,754 Sacramento CA 290,734 645,732 936,466 Santee CA 248,418 551,748 800,166 Simi Valley CA 208,585 967,055 1,175,640 Valencia CA 301,295 669,185 970,480 Walnut CA 217,365 1,007,753 1,225,118 Aurora CO 141,811 657,497 799,308 Aurora CO 287,000 637,440 924,440 Aurora CO 301,455 655,610 957,065 Broomfield CO 107,000 403,080 510,080 Broomfield CO 155,306 344,941 500,247 Colorado Springs CO 58,400 271,217 329,617 Colorado Springs CO 92,570 241,413 333,983 Colorado Springs CO 115,542 535,700 651,242 Englewood CO 131,216 608,372 739,588 Englewood CO 158,651 735,572 894,223 Fort Collins CO 55,200 259,956 315,156 Fort Collins CO 117,105 542,950 660,055 Fort Collins CO 137,734 638,593 776,327 Greeley CO 58,400 270,982 329,382 Littleton CO 161,617 358,956 520,573 Littleton CO 287,000 637,435 924,435 Littleton CO 299,250 664,642 963,892 Longmont CO 115,592 535,931 651,523 Louisville CO 58,089 269,313 327,402 Page F-26 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Corona CA 472,942 12/19/84 300 El Cajon CA 467,518 12/19/85 300 Encinitas CA 312,885 12/29/87 300 Escondido CA 270,140 12/31/87 300 Folsom CA 280,130 10/23/87 300 Mission Viejo CA 214,121 06/24/93 300 Moreno Valley CA 317,491 02/11/87 300 Oceanside CA 431,265 12/23/85 300 Palmdale CA 229,458 09/14/88 300 Rancho Cordova CA 243,510 03/22/89 300 Rancho Cucamonga CA 461,247 12/30/87 300 Roseville CA 295,821 10/21/87 300 Sacramento CA 288,038 10/05/87 300 Santee CA 250,956 07/23/87 300 Simi Valley CA 617,968 12/20/85 300 Valencia CA 282,921 06/23/88 300 Walnut CA 612,578 08/22/86 300 Aurora CO 412,496 03/25/86 300 Aurora CO 280,620 12/31/87 300 Aurora CO 294,948 09/27/89 300 Broomfield CO 403,080 01/12/83 180 Broomfield CO 148,841 03/15/88 300 Colorado Springs CO 271,217 12/22/82 180 Colorado Springs CO 241,413 08/31/83 180 Colorado Springs CO 318,881 12/04/86 300 Englewood CO 362,140 12/05/86 300 Englewood CO 435,583 12/29/86 300 Fort Collins CO 257,076 12/22/82 180 Fort Collins CO 340,631 03/25/86 300 Fort Collins CO 400,636 03/25/86 300 Greeley CO 191,813 11/21/84 300 Littleton CO 158,020 12/10/87 300 Littleton CO 263,956 09/29/88 300 Littleton CO 275,223 09/29/88 300 Longmont CO 336,229 03/25/86 300 Louisville CO 196,018 06/22/84 300 Page F-27 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Parker CO 153,551 341,042 None None Westminster CO 306,387 695,737 None None Bradenton FL 160,060 355,501 None None Clearwater FL 42,223 269,380 None None Jacksonville FL 38,500 228,481 None None Jacksonville FL 48,000 243,060 None None Jacksonville FL 184,800 410,447 None None Jupiter FL 78,000 360,088 None None Margate FL 66,686 309,183 None None Melbourne FL 256,439 549,345 None None Niceville FL 73,696 341,688 None None Orlando FL 68,001 313,922 None None Orlando FL 159,177 353,538 None None Orlando FL 245,249 544,704 None None Orlando FL 190,050 422,107 None None Oviedo FL 166,409 369,598 None None Panama City FL 69,500 244,314 None 283 Pensacola FL 147,000 326,492 None None Royal Palm Beach FL 194,193 431,309 None None Spring Hill FL 146,939 326,356 None None St. Augustine FL 44,800 213,040 None None Sunrise FL 69,400 246,671 None None Sunrise FL 245,000 533,280 None None Tallahassee FL 66,000 232,010 None 283 Tampa FL 53,385 199,846 None None Duluth GA 310,000 1,039,972 None None Douglasville GA 54,000 250,356 None None Dunwoody GA 318,500 707,399 None None Ellenwood GA 119,678 275,414 None None Fayetteville GA 148,400 329,601 None None Lawrenceville GA 141,449 314,161 None None Lilburn GA 116,350 539,488 None None Lithia Springs GA 187,444 363,358 None None Lithonia GA 239,715 524,459 None None Marietta GA 231,000 513,061 None None Marietta GA 273,000 619,076 None None Page F-28 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Parker CO 153,551 341,042 494,593 Westminster CO 306,387 695,737 1,002,124 Bradenton FL 160,060 355,501 515,561 Clearwater FL 42,223 269,380 311,603 Jacksonville FL 38,500 228,481 266,981 Jacksonville FL 48,000 243,060 291,060 Jacksonville FL 184,800 410,447 595,247 Jupiter FL 78,000 360,088 438,088 Margate FL 66,686 309,183 375,869 Melbourne FL 256,439 549,345 805,784 Niceville FL 73,696 341,688 415,384 Orlando FL 68,001 313,922 381,923 Orlando FL 159,177 353,538 512,715 Orlando FL 245,249 544,704 789,953 Orlando FL 190,050 422,107 612,157 Oviedo FL 166,409 369,598 536,007 Panama City FL 69,500 244,597 314,097 Pensacola FL 147,000 326,492 473,492 Royal Palm Beach FL 194,193 431,309 625,502 Spring Hill FL 146,939 326,356 473,295 St. Augustine FL 44,800 213,040 257,840 Sunrise FL 69,400 246,671 316,071 Sunrise FL 245,000 533,280 778,280 Tallahassee FL 66,000 232,293 298,293 Tampa FL 53,385 199,846 253,231 Duluth GA 310,000 1,039,972 1,349,972 Douglasville GA 54,000 251,976 305,976 Dunwoody GA 318,500 707,399 1,025,899 Ellenwood GA 119,678 275,414 395,092 Fayetteville GA 148,400 329,601 478,001 Lawrenceville GA 141,449 314,161 455,610 Lilburn GA 116,350 539,488 655,838 Lithia Springs GA 187,444 363,358 550,802 Lithonia GA 239,715 524,459 764,174 Marietta GA 231,000 513,061 744,061 Marietta GA 273,000 619,076 892,076 Page F-29 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Parker CO 152,764 10/19/87 300 Westminster CO 289,344 09/27/89 300 Bradenton FL 151,332 05/05/88 300 Clearwater FL 269,380 12/22/81 180 Jacksonville FL 228,481 12/22/81 180 Jacksonville FL 243,060 12/22/81 180 Jacksonville FL 162,853 03/30/89 300 Jupiter FL 235,325 09/11/85 300 Margate FL 183,090 12/16/86 300 Melbourne FL 160,046 04/16/93 300 Niceville FL 203,387 12/03/86 300 Orlando FL 205,154 09/04/85 300 Orlando FL 160,801 07/02/87 300 Orlando FL 239,793 12/10/87 300 Orlando FL 167,479 03/30/89 300 Oviedo FL 163,780 11/20/87 300 Panama City FL 244,314 06/15/82 180 Pensacola FL 129,542 03/28/89 300 Royal Palm Beach FL 176,108 11/15/88 300 Spring Hill FL 144,617 11/24/87 300 St. Augustine FL 213,040 12/22/81 180 Sunrise FL 246,671 06/15/82 180 Sunrise FL 212,817 05/25/89 300 Tallahassee FL 232,222 06/15/82 180 Tampa FL 199,846 12/22/81 180 Duluth GA 8,624 08/25/99 06/17/99 300 Douglasville GA 178,349 10/23/84 300 Dunwoody GA 288,838 11/16/88 300 Ellenwood GA 112,454 11/16/88 300 Fayetteville GA 130,776 03/29/89 300 Lawrenceville GA 131,911 07/07/88 300 Lilburn GA 319,468 12/23/86 300 Lithia Springs GA 140,759 12/28/89 300 Lithonia GA 194,418 08/20/91 300 Marietta GA 221,384 03/18/88 300 Marietta GA 265,329 04/26/88 300 Page F-30 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Marietta GA 148,620 330,090 None None Marietta GA 292,250 649,095 None None Marietta GA 295,750 596,299 None None Marietta GA 301,000 668,529 None None Martinez GA 141,153 313,504 None None Smyrna GA 274,750 610,229 None None Stockbridge GA 168,700 374,688 None None Stone Mountain GA 65,000 301,357 None None Stone Mountain GA 316,750 703,512 None None Valdosta GA 73,561 341,059 None None Cedar Rapids IA 194,950 427,085 None None Iowa City IA 186,900 408,910 None None Johnston IA 186,996 347,278 None None Addison IL 125,780 583,146 None None Algonquin IL 241,500 509,629 None None Aurora IL 468,000 1,259,890 None None Aurora IL 165,679 398,738 None None Bartlett IL 120,824 560,166 None None Bolingbrook IL 60,000 409,024 None None Carol Stream IL 122,831 586,416 None None Crystal Lake IL 400,000 1,259,388 None None Elk Grove VillageIL 126,860 588,175 None None Elk Grove VillageIL 214,845 477,181 None None Glendale Heights IL 318,500 707,399 None None Hoffman Estates IL 318,500 707,399 None None Hoffman Estates IL 211,082 468,818 None None Lake in the HillsIL 375,000 1,127,635 None None Lockport IL 189,477 442,018 None None Naperville IL 425,000 1,229,493 None None O'Fallon IL 141,250 313,722 None None Orland Park IL 218,499 485,296 None None Oswego IL 380,000 1,165,782 None None Palatine IL 121,911 565,232 None None Roselle IL 297,541 561,037 None None Schaumburg IL 218,798 485,955 None None Vernon Hills IL 132,523 614,430 None None Page F-31 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Marietta GA 148,620 330,090 478,710 Marietta GA 292,250 649,095 941,345 Marietta GA 295,750 596,299 892,049 Marietta GA 301,000 668,529 969,529 Martinez GA 141,153 313,504 454,657 Smyrna GA 274,750 610,229 884,979 Stockbridge GA 168,700 374,688 543,388 Stone Mountain GA 65,000 301,357 366,357 Stone Mountain GA 316,750 703,512 1,020,262 Valdosta GA 73,561 341,059 414,620 Cedar Rapids IA 194,950 427,085 622,035 Iowa City IA 186,900 408,910 595,810 Johnston IA 186,996 347,278 534,274 Addison IL 125,780 583,146 708,926 Algonquin IL 241,500 509,629 751,129 Aurora IL 468,000 1,259,890 1,727,890 Aurora IL 165,679 398,738 564,417 Bartlett IL 120,824 560,166 680,990 Bolingbrook IL 60,000 409,024 469,024 Carol Stream IL 122,831 586,416 709,247 Crystal Lake IL 400,000 1,259,388 1,659,388 Elk Grove VillageIL 126,860 588,175 715,035 Elk Grove VillageIL 214,845 477,181 692,026 Glendale Heights IL 318,500 707,399 1,025,899 Hoffman Estates IL 318,500 707,399 1,025,899 Hoffman Estates IL 211,082 468,818 679,900 Lake in the HillsIL 375,000 1,127,635 1,502,635 Lockport IL 189,477 442,018 631,495 Naperville IL 425,000 1,229,493 1,654,493 O'Fallon IL 141,250 313,722 454,972 Orland Park IL 218,499 485,296 703,795 Oswego IL 380,000 1,165,782 1,545,782 Palatine IL 121,911 565,232 687,143 Roselle IL 297,541 561,037 858,578 Schaumburg IL 218,798 485,955 704,753 Vernon Hills IL 132,523 614,430 746,953 Page F-32 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Marietta GA 136,792 09/16/88 300 Marietta GA 263,156 12/02/88 300 Marietta GA 241,753 12/30/88 300 Marietta GA 271,035 12/30/88 300 Martinez GA 138,011 12/31/87 300 Smyrna GA 249,162 11/15/88 300 Stockbridge GA 148,665 03/28/89 300 Stone Mountain GA 199,547 06/19/85 300 Stone Mountain GA 287,251 11/16/88 300 Valdosta GA 203,010 12/03/86 300 Cedar Rapids IA 139,944 09/24/92 300 Iowa City IA 135,985 09/24/92 300 Johnston IA 109,039 08/19/91 300 Addison IL 365,851 03/25/86 300 Algonquin IL 181,901 07/10/90 300 Aurora IL 2,091 10/26/99 06/29/99 300 Aurora IL 161,655 12/21/88 300 Bartlett IL 351,432 03/25/86 300 Bolingbrook IL 409,024 10/18/82 180 Carol Stream IL 367,902 03/25/86 300 Crystal Lake IL 6,266 09/28/99 05/14/99 300 Elk Grove VillageIL 369,006 03/26/86 300 Elk Grove VillageIL 204,515 04/08/88 300 Glendale Heights IL 288,838 11/16/88 300 Hoffman Estates IL 280,673 03/31/89 300 Hoffman Estates IL 173,892 12/08/89 300 Lake in the HillsIL 5,608 09/03/99 05/19/99 300 Lockport IL 197,160 10/29/87 300 Naperville IL 2,040 10/06/99 05/28/99 300 O'Fallon IL 139,931 10/30/87 300 Orland Park IL 216,465 10/28/87 300 Oswego IL 9,669 08/18/99 06/30/99 300 Palatine IL 354,611 03/25/86 300 Roselle IL 227,457 12/30/88 300 Schaumburg IL 213,930 12/17/87 300 Vernon Hills IL 385,476 03/25/86 300 Page F-33 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Westmont IL 124,742 578,330 None None Carmel IN 217,565 430,742 None None Fishers IN 212,118 419,958 None None Highland IN 220,460 436,476 None None Indianapolis IN 245,000 544,153 None None Noblesville IN 60,000 278,175 None None Zionsville IN 127,568 319,770 None None Lenexa KS 318,500 707,399 None None Olathe KS 304,500 676,308 None None Overland Park KS 357,500 1,115,135 None None Overland Park KS 305,691 707,397 None None Shawnee KS 315,000 699,629 None None Shawnee KS 288,246 935,839 None None Topeka KS 58,000 268,903 None None Wichita KS 108,569 401,829 None None Wichita KS 209,890 415,549 None None Lexington KY 210,427 420,883 None None Acton MA 315,533 700,813 None None Marlborough MA 352,765 776,488 None None Westborough MA 359,412 773,877 None None Ellicott City MD 219,368 630,839 None None Frederick MD 203,352 1,017,109 None None Olney MD 342,500 760,701 None None Waldorf MD 130,430 604,702 None None Waldorf MD 237,207 526,844 None None Canton MI 55,000 378,848 None None Apple Valley MN 113,523 526,319 None None Bloomington MN 124,113 575,416 None None Brooklyn Park MN 118,111 547,587 None None Brooklyn Park MN 112,823 523,073 None None Eagan MN 112,127 519,845 None None Eden Prairie MN 124,286 576,243 None None Maple Grove MN 111,691 517,822 None None Maple Grove MN 313,250 660,149 None None Minnetonka MN 146,847 680,842 None None Plymouth MN 134,221 622,350 None None Page F-34 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Westmont IL 124,742 578,330 703,072 Carmel IN 217,565 430,742 648,307 Fishers IN 212,118 419,958 632,076 Highland IN 220,460 436,476 656,936 Indianapolis IN 245,000 544,153 789,153 Noblesville IN 60,000 278,175 338,175 Zionsville IN 127,568 319,770 447,338 Lenexa KS 318,500 707,399 1,025,899 Olathe KS 304,500 676,308 980,808 Overland Park KS 357,500 1,115,135 1,472,635 Overland Park KS 305,691 707,397 1,013,088 Shawnee KS 315,000 699,629 1,014,629 Shawnee KS 288,246 935,839 1,224,085 Topeka KS 58,000 268,903 326,903 Wichita KS 108,569 401,829 510,398 Wichita KS 209,890 415,549 625,439 Lexington KY 210,427 420,883 631,310 Acton MA 315,533 700,813 1,016,346 Marlborough MA 352,765 776,488 1,129,253 Westborough MA 359,412 773,877 1,133,289 Ellicott City MD 219,368 630,839 850,207 Frederick MD 203,352 1,017,109 1,220,461 Olney MD 342,500 760,701 1,103,201 Waldorf MD 130,430 604,702 735,132 Waldorf MD 237,207 526,844 764,051 Canton MI 55,000 378,848 433,848 Apple Valley MN 113,523 526,319 639,842 Bloomington MN 124,113 575,416 699,529 Brooklyn Park MN 118,111 547,587 665,698 Brooklyn Park MN 112,823 523,073 635,896 Eagan MN 112,127 519,845 631,972 Eden Prairie MN 124,286 576,243 700,529 Maple Grove MN 111,691 517,822 629,513 Maple Grove MN 313,250 660,149 973,399 Minnetonka MN 146,847 680,842 827,689 Plymouth MN 134,221 622,350 756,571 Page F-35 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Westmont IL 362,828 03/25/86 300 Carmel IN 145,022 12/27/90 300 Fishers IN 141,392 12/27/90 300 Highland IN 146,952 12/26/90 300 Indianapolis IN 192,504 06/29/90 300 Noblesville IN 189,975 04/30/85 300 Zionsville IN 142,629 10/28/87 300 Lenexa KS 280,673 03/31/89 300 Olathe KS 280,054 09/28/88 300 Overland Park KS 12,943 07/23/99 05/19/99 300 Overland Park KS 292,927 09/28/88 300 Shawnee KS 287,686 10/27/88 300 Shawnee KS 32,614 12/29/98 08/21/98 300 Topeka KS 183,643 04/16/85 300 Wichita KS 221,366 12/16/86 300 Wichita KS 139,907 12/26/90 300 Lexington KY 149,596 08/20/91 300 Acton MA 290,201 09/30/88 300 Marlborough MA 317,046 11/04/88 300 Westborough MA 315,978 11/01/88 300 Ellicott City MD 255,754 12/19/88 300 Frederick MD 59,311 06/30/98 300 Olney MD 334,883 12/18/87 300 Waldorf MD 433,104 09/26/84 300 Waldorf MD 231,930 12/31/87 300 Canton MI 378,848 10/06/82 180 Apple Valley MN 330,199 03/26/86 300 Bloomington MN 361,001 03/27/86 300 Brooklyn Park MN 343,540 03/26/86 300 Brooklyn Park MN 328,162 03/27/86 300 Eagan MN 326,136 03/31/86 300 Eden Prairie MN 361,520 03/27/86 300 Maple Grove MN 324,868 03/26/86 300 Maple Grove MN 236,449 07/11/90 300 Minnetonka MN 405,278 12/12/86 300 Plymouth MN 370,459 12/12/86 300 Page F-36 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- W. Bloomington MN 40,000 468,484 None None White Bear Lake MN 260,750 579,133 None None White Bear Lake MN 242,165 537,856 None None Florissant MO 181,300 402,672 None None Florissant MO 318,500 707,399 None None Gladstone MO 294,000 652,987 None None Lee's Summit MO 313,740 939,331 None None Lee's Summit MO 330,000 993,751 None None Lee's Summit MO 239,627 532,220 None None Liberty MO 65,400 303,211 None None Manchester MO 287,000 637,435 None None North Kansas CityMO 307,784 898,137 None None St. Charles MO 259,000 575,246 None None Pearl MS 121,801 270,524 None None Cary NC 75,200 262,973 None 228 Chapel Hill NC 77,000 356,992 None 228 Charlotte NC 27,551 247,000 None 228 Charlotte NC 134,582 268,222 None None Concord NC 32,441 190,859 None None Durham NC 220,728 429,380 None None Durham NC 238,000 471,201 None None Hendersonville NC 32,748 186,152 None 228 Kernersville NC 162,216 316,300 None None Morrisville NC 175,700 390,234 None None Bellevue NE 60,568 280,819 None None Omaha NE 60,500 280,491 None None Omaha NE 53,000 245,720 None None Omaha NE 142,867 317,315 None None Londonderry NH 335,467 745,082 None None Clementon NJ 279,851 554,060 None None Henderson NV 82,000 380,173 None None Las Vegas NV 201,250 446,983 None None Sparks NV 244,752 543,605 None None Beavercreek OH 179,552 398,786 None None Centerville OH 174,519 387,613 None None Cincinnati OH 165,910 368,486 None None Page F-37 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- W. Bloomington MN 40,000 468,484 508,484 White Bear Lake MN 260,750 579,133 839,883 White Bear Lake MN 242,165 537,856 780,021 Florissant MO 181,300 402,672 583,972 Florissant MO 318,500 707,399 1,025,899 Gladstone MO 294,000 652,987 946,987 Lee's Summit MO 313,740 939,331 1,253,071 Lee's Summit MO 330,000 993,751 1,323,751 Lee's Summit MO 239,627 532,220 771,847 Liberty MO 65,400 303,211 368,611 Manchester MO 287,000 637,435 924,435 North Kansas CityMO 307,784 898,137 1,205,921 St. Charles MO 259,000 575,246 834,246 Pearl MS 121,801 270,524 392,325 Cary NC 75,200 263,201 338,401 Chapel Hill NC 77,000 357,220 434,220 Charlotte NC 27,551 247,228 274,779 Charlotte NC 134,582 268,222 402,804 Concord NC 32,441 190,859 223,300 Durham NC 220,728 429,380 650,108 Durham NC 238,000 471,201 709,201 Hendersonville NC 32,748 186,380 219,128 Kernersville NC 162,216 316,300 478,516 Morrisville NC 175,700 390,234 565,934 Bellevue NE 60,568 280,819 341,387 Omaha NE 60,500 280,491 340,991 Omaha NE 53,000 245,720 298,720 Omaha NE 142,867 317,315 460,182 Londonderry NH 335,467 745,082 1,080,549 Clementon NJ 279,851 554,060 833,911 Henderson NV 82,000 380,173 462,173 Las Vegas NV 201,250 446,983 648,233 Sparks NV 244,752 543,605 788,357 Beavercreek OH 179,552 398,786 578,338 Centerville OH 174,519 387,613 562,132 Cincinnati OH 165,910 368,486 534,396 Page F-38 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- W. Bloomington MN 468,484 06/18/82 180 White Bear Lake MN 254,951 12/23/87 300 White Bear Lake MN 187,209 08/30/90 300 Florissant MO 159,767 03/29/89 300 Florissant MO 280,673 03/30/89 300 Gladstone MO 270,397 09/29/88 300 Lee's Summit MO 7,787 09/08/99 06/30/99 300 Lee's Summit MO 11,539 07/26/99 06/29/99 300 Lee's Summit MO 200,922 09/27/89 300 Liberty MO 200,773 06/18/85 300 Manchester MO 280,618 12/22/87 300 North Kansas CityMO 37,271 09/28/99 08/21/98 300 St. Charles MO 253,241 12/23/87 300 Pearl MS 110,605 11/15/88 300 Cary NC 263,007 01/25/84 180 Chapel Hill NC 243,801 04/17/85 300 Charlotte NC 247,000 12/23/81 180 Charlotte NC 109,516 11/16/88 300 Concord NC 190,859 12/23/81 180 Durham NC 169,978 12/29/89 300 Durham NC 147,949 08/20/91 300 Hendersonville NC 186,186 12/23/81 180 Kernersville NC 126,784 12/14/89 300 Morrisville NC 154,832 03/29/89 300 Bellevue NE 166,293 12/16/86 300 Omaha NE 203,070 08/01/84 300 Omaha NE 175,786 10/11/84 300 Omaha NE 139,689 12/09/87 300 Londonderry NH 284,910 08/18/89 300 Clementon NJ 172,397 09/09/91 300 Henderson NV 259,632 04/17/85 300 Las Vegas NV 158,128 06/29/90 300 Sparks NV 237,727 01/29/88 300 Beavercreek OH 182,551 06/30/87 300 Centerville OH 176,301 07/23/87 300 Cincinnati OH 170,843 04/29/87 300 Page F-39 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Dublin OH 84,000 389,446 None None Englewood OH 74,000 343,083 None None Forest Park OH 170,778 379,305 None None Gahanna OH 86,000 398,718 None None Huber Heights OH 245,000 544,153 None None Loveland OH 206,136 457,829 None None Maineville OH 173,105 384,468 None None Pickerington OH 87,580 406,055 None None Westerville OH 82,000 380,173 None None Westerville OH 294,350 646,557 None None Broken Arrow OK 78,705 220,434 None 279 Midwest City OK 67,800 314,338 None 279 Oklahoma City OK 50,800 214,474 None None Oklahoma City OK 79,000 366,261 None 279 Yukon OK 61,000 282,812 None None Beaverton OR 135,148 626,647 None None Beaverton OR 115,232 534,301 None None Charleston SC 125,593 278,947 None None Charleston SC 140,700 312,498 None None Columbia SC 58,160 269,643 None 1,042 Elgin SC 160,831 313,600 None None Goose Creek SC 61,635 192,905 None 292 Ladson SC 31,543 177,457 None 292 Lexington SC 55,869 274,742 None 741 Mt. Pleasant SC 40,700 180,400 None None Summerville SC 44,400 174,500 None None Sumter SC 56,010 268,903 None 134 Memphis TN 238,263 504,897 None None Memphis TN 238,000 528,608 None None Memphis TN 221,501 491,962 None None Nashville TN 274,298 609,223 None None Atascocita TX 278,915 1,034,796 None None Colleyville TX 250,000 1,070,310 None None Corinth TX 285,000 1,040,521 None None Flower Mound TX 281,735 1,099,589 None None Sugarland TX 339,310 1,000,840 None None Page F-40 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Dublin OH 84,000 389,446 473,446 Englewood OH 74,000 343,083 417,083 Forest Park OH 170,778 379,305 550,083 Gahanna OH 86,000 398,718 484,718 Huber Heights OH 245,000 544,153 789,153 Loveland OH 206,136 457,829 663,965 Maineville OH 173,105 384,468 557,573 Pickerington OH 87,580 406,055 493,635 Westerville OH 82,000 380,173 462,173 Westerville OH 294,350 646,557 940,907 Broken Arrow OK 78,705 220,713 299,418 Midwest City OK 67,800 314,617 382,417 Oklahoma City OK 50,800 214,474 265,274 Oklahoma City OK 79,000 366,540 445,540 Yukon OK 61,000 282,812 343,812 Beaverton OR 135,148 626,647 761,795 Beaverton OR 115,232 534,301 649,533 Charleston SC 125,593 278,947 404,540 Charleston SC 140,700 312,498 453,198 Columbia SC 58,160 270,685 328,845 Elgin SC 160,831 313,600 474,431 Goose Creek SC 61,635 193,197 254,832 Ladson SC 31,543 177,749 209,292 Lexington SC 55,869 275,483 331,352 Mt. Pleasant SC 40,700 180,400 221,100 Summerville SC 44,400 174,500 218,900 Sumter SC 56,010 269,037 325,047 Memphis TN 238,263 504,897 743,160 Memphis TN 238,000 528,608 766,608 Memphis TN 221,501 491,962 713,463 Nashville TN 274,298 609,223 883,521 Atascocita TX 278,915 1,034,796 1,313,711 Colleyville TX 250,000 1,070,310 1,320,310 Corinth TX 285,000 1,040,521 1,325,521 Flower Mound TX 281,735 1,099,589 1,381,324 Sugarland TX 339,310 1,000,840 1,340,150 Page F-41 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Dublin OH 253,041 10/08/85 300 Englewood OH 221,891 10/23/85 300 Forest Park OH 171,231 09/28/87 300 Gahanna OH 256,332 11/26/85 300 Huber Heights OH 187,850 09/27/90 300 Loveland OH 213,609 03/20/87 300 Maineville OH 179,382 03/06/87 300 Pickerington OH 241,700 12/11/86 300 Westerville OH 247,017 10/08/85 300 Westerville OH 228,744 09/26/90 300 Broken Arrow OK 220,503 01/27/83 180 Midwest City OK 206,934 08/14/85 300 Oklahoma City OK 214,474 06/15/82 180 Oklahoma City OK 260,598 11/14/84 300 Yukon OK 192,022 05/02/85 300 Beaverton OR 371,080 12/17/86 300 Beaverton OR 316,397 12/22/86 300 Charleston SC 118,743 05/26/88 300 Charleston SC 123,990 03/28/89 300 Columbia SC 191,851 11/14/84 300 Elgin SC 125,702 12/14/89 300 Goose Creek SC 192,905 12/22/81 180 Ladson SC 177,530 12/22/81 180 Lexington SC 195,479 11/13/84 300 Mt. Pleasant SC 180,400 12/22/81 180 Summerville SC 174,500 12/22/81 180 Sumter SC 178,058 06/18/85 300 Memphis TN 209,072 09/29/88 300 Memphis TN 218,893 09/30/88 300 Memphis TN 171,235 08/31/90 300 Nashville TN 241,720 03/30/89 300 Atascocita TX 12,013 07/19/99 05/14/99 300 Colleyville TX 8,880 08/17/99 05/14/99 300 Corinth TX 15,536 06/04/99 05/28/99 300 Flower Mound TX 23,700 04/23/99 01/19/99 300 Sugarland TX 18,256 05/30/99 01/21/99 300 Page F-42 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Allen TX 177,637 394,538 None None Arlington TX 82,109 380,677 None None Arlington TX 70,000 324,538 None None Arlington TX 238,000 528,604 None None Arlington TX 241,500 550,559 None None Arlington TX 195,650 387,355 None None Austin TX 103,600 230,532 None 75 Austin TX 88,872 222,684 None 75 Austin TX 134,383 623,103 None None Austin TX 188,144 417,872 None None Austin TX 236,733 528,608 None None Austin TX 191,636 425,629 None None Austin TX 224,878 499,460 None None Austin TX 238,000 528,604 None None Austin TX 217,878 483,913 None None Bedford TX 241,500 550,559 None None Carrollton TX 277,850 617,113 None None Cedar Park TX 168,857 375,036 None None Colleyville TX 68,000 315,266 None None Converse TX 217,000 481,963 None None Coppell TX 139,224 645,550 None None Coppell TX 208,641 463,398 None None Desoto TX 86,000 398,715 None 2,027 Duncanville TX 93,000 431,172 None None Euless TX 234,111 519,962 None None Flower Mound TX 202,773 442,845 None None Fort Worth TX 85,518 396,495 None None Fort Worth TX 238,000 528,608 None None Fort Worth TX 210,007 444,460 None None Fort Worth TX 216,160 427,962 None None Garland TX 211,050 468,749 None None Grand Prairie TX 167,164 371,276 None None Houston TX 58,000 268,901 None 155 Houston TX 60,000 278,175 None 135 Houston TX 102,000 472,898 None 155 Houston TX 139,125 308,997 None 155 Page F-43 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Allen TX 177,637 394,538 572,175 Arlington TX 82,109 380,677 462,786 Arlington TX 70,000 324,538 394,538 Arlington TX 238,000 528,604 766,604 Arlington TX 241,500 550,559 792,059 Arlington TX 195,650 387,355 583,005 Austin TX 103,600 230,607 334,207 Austin TX 88,872 222,759 311,631 Austin TX 134,383 623,103 757,486 Austin TX 188,144 417,872 606,016 Austin TX 236,733 528,608 765,341 Austin TX 191,636 425,629 617,265 Austin TX 224,878 499,460 724,338 Austin TX 238,000 528,604 766,604 Austin TX 217,878 483,913 701,791 Bedford TX 241,500 550,559 792,059 Carrollton TX 277,850 617,113 894,963 Cedar Park TX 168,857 375,036 543,893 Colleyville TX 68,000 315,266 383,266 Converse TX 217,000 481,963 698,963 Coppell TX 139,224 645,550 784,774 Coppell TX 208,641 463,398 672,039 Desoto TX 86,000 400,742 486,742 Duncanville TX 93,000 431,172 524,172 Euless TX 234,111 519,962 754,073 Flower Mound TX 202,773 442,845 645,618 Fort Worth TX 85,518 396,495 482,013 Fort Worth TX 238,000 528,608 766,608 Fort Worth TX 210,007 444,460 654,467 Fort Worth TX 216,160 427,962 644,122 Garland TX 211,050 468,749 679,799 Grand Prairie TX 167,164 371,276 538,440 Houston TX 58,000 269,056 327,056 Houston TX 60,000 278,310 338,310 Houston TX 102,000 473,053 575,053 Houston TX 139,125 309,152 448,277 Page F-44 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Allen TX 161,088 11/21/88 300 Arlington TX 269,372 12/13/84 300 Arlington TX 220,352 05/08/85 300 Arlington TX 218,890 09/26/88 300 Arlington TX 272,272 09/22/89 300 Arlington TX 128,213 02/07/91 300 Austin TX 230,551 10/29/82 180 Austin TX 222,695 01/12/83 180 Austin TX 368,983 12/23/86 300 Austin TX 177,882 05/11/88 300 Austin TX 218,893 09/27/88 300 Austin TX 172,557 12/22/88 300 Austin TX 201,051 01/03/89 300 Austin TX 208,211 04/06/89 300 Austin TX 187,823 06/22/89 300 Bedford TX 272,272 09/22/89 300 Carrollton TX 271,672 12/11/87 300 Cedar Park TX 153,125 11/21/88 300 Colleyville TX 214,057 05/01/85 300 Converse TX 199,577 09/28/88 300 Coppell TX 382,275 12/17/86 300 Coppell TX 204,002 12/11/87 300 Desoto TX 284,019 10/24/84 300 Duncanville TX 292,753 05/08/85 300 Euless TX 239,547 05/08/87 300 Flower Mound TX 205,317 04/20/87 300 Fort Worth TX 236,010 12/03/86 300 Fort Worth TX 218,893 09/26/88 300 Fort Worth TX 164,994 02/01/90 300 Fort Worth TX 141,654 02/07/91 300 Garland TX 173,868 12/12/89 300 Grand Prairie TX 150,521 12/13/88 300 Houston TX 192,370 10/11/84 300 Houston TX 188,873 05/01/85 300 Houston TX 321,083 05/01/85 300 Houston TX 142,354 05/22/87 300 Page F-45 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Houston TX 139,125 308,997 None 135 Houston TX 141,296 313,824 None None Houston TX 219,100 486,631 None None Houston TX 219,100 486,628 None None Houston TX 149,109 323,314 None None Houston TX 294,582 919,261 None None Katy TX 309,898 982,998 None None Lewisville TX 79,000 366,264 None None Lewisville TX 192,777 428,121 None None Lewisville TX 192,218 426,922 None None Mansfield TX 181,375 402,839 None None Mesquite TX 85,000 394,079 None 107 Mesquite TX 139,466 326,525 None None Missouri City TX 221,025 437,593 None None N. Richland HillsTX 238,000 528,608 None None Pasadena TX 60,000 278,173 None 155 Plano TX 261,912 581,658 None None Plano TX 250,514 556,399 None None Plano TX 259,000 575,246 None None Round Rock TX 80,525 373,347 None None Round Rock TX 186,380 413,957 None None San Antonio TX 130,833 606,596 None None San Antonio TX 102,512 475,288 None None San Antonio TX 81,530 378,007 None None San Antonio TX 139,125 308,997 None None San Antonio TX 181,412 402,923 None None San Antonio TX 162,161 360,166 None None San Antonio TX 234,500 520,831 None None San Antonio TX 217,000 481,967 None None San Antonio TX 182,868 406,155 None None San Antonio TX 220,500 447,108 None None Southlake TX 228,279 511,750 None None Sugarland TX 193,800 430,437 None None The Woodlands TX 193,801 430,440 None None Watauga TX 165,914 368,502 None None Layton UT 136,574 269,008 None None Page F-46 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Houston TX 139,125 309,132 448,257 Houston TX 141,296 313,824 455,120 Houston TX 219,100 486,631 705,731 Houston TX 219,100 486,628 705,728 Houston TX 149,109 323,314 472,423 Houston TX 294,582 919,261 1,213,843 Katy TX 309,898 982,998 1,292,896 Lewisville TX 79,000 366,264 445,264 Lewisville TX 192,777 428,121 620,898 Lewisville TX 192,218 426,922 619,140 Mansfield TX 181,375 402,839 584,214 Mesquite TX 85,000 394,186 479,186 Mesquite TX 139,466 326,525 465,991 Missouri City TX 221,025 437,593 658,618 N. Richland HillsTX 238,000 528,608 766,608 Pasadena TX 60,000 278,328 338,328 Plano TX 261,912 581,658 843,570 Plano TX 250,514 556,399 806,913 Plano TX 259,000 575,246 834,246 Round Rock TX 80,525 373,347 453,872 Round Rock TX 186,380 413,957 600,337 San Antonio TX 130,833 606,596 737,429 San Antonio TX 102,512 475,288 577,800 San Antonio TX 81,530 378,007 459,537 San Antonio TX 139,125 308,997 448,122 San Antonio TX 181,412 402,923 584,335 San Antonio TX 162,161 360,166 522,327 San Antonio TX 234,500 520,831 755,331 San Antonio TX 217,000 481,967 698,967 San Antonio TX 182,868 406,155 589,023 San Antonio TX 220,500 447,108 667,608 Southlake TX 228,279 511,750 740,029 Sugarland TX 193,800 430,437 624,237 The Woodlands TX 193,801 430,440 624,241 Watauga TX 165,914 368,502 534,416 Layton UT 136,574 269,008 405,582 Page F-47 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Houston TX 142,354 05/22/87 300 Houston TX 142,740 07/24/87 300 Houston TX 201,511 09/30/88 300 Houston TX 198,695 11/16/88 300 Houston TX 139,528 06/26/89 300 Houston TX 28,991 01/11/99 08/14/98 300 Katy TX 37,540 11/30/98 08/14/98 300 Lewisville TX 242,526 06/26/85 300 Lewisville TX 201,828 01/07/87 300 Lewisville TX 173,083 12/29/88 300 Mansfield TX 149,421 12/20/89 300 Mesquite TX 280,715 10/24/84 300 Mesquite TX 127,563 10/08/92 300 Missouri City TX 147,329 12/13/90 300 N. Richland HillsTX 218,893 09/26/88 300 Pasadena TX 198,152 10/23/84 300 Plano TX 274,807 01/06/87 300 Plano TX 244,943 12/10/87 300 Plano TX 238,205 09/27/88 300 Round Rock TX 221,085 12/16/86 300 Round Rock TX 163,053 04/19/89 300 San Antonio TX 380,562 03/24/86 300 San Antonio TX 282,913 12/03/86 300 San Antonio TX 225,005 12/11/86 300 San Antonio TX 142,354 05/22/87 300 San Antonio TX 183,264 07/07/87 300 San Antonio TX 163,818 07/07/87 300 San Antonio TX 229,285 12/29/87 300 San Antonio TX 198,185 10/14/88 300 San Antonio TX 164,663 12/06/88 300 San Antonio TX 177,399 03/30/89 300 Southlake TX 168,206 03/10/93 300 Sugarland TX 195,779 07/31/87 300 The Woodlands TX 194,521 08/11/87 300 Watauga TX 167,608 07/07/87 300 Layton UT 107,017 02/01/90 300 Page F-48 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Child Care - ---------- Sandy UT 168,089 373,330 None None Centreville VA 371,000 824,003 None None Chesapeake VA 190,050 422,107 None None Glen Allen VA 74,643 346,060 None None Portsmouth VA 171,575 381,073 None None Richmond VA 71,001 327,771 None 322 Richmond VA 269,500 598,567 None None Virginia Beach VA 69,080 320,270 None 322 Virginia Beach VA 124,988 579,496 None None Woodbridge VA 358,050 795,239 None None Everett WA 120,000 540,363 None None Federal Way WA 150,785 699,101 None None Federal Way WA 261,943 581,782 None None Kent WA 128,300 539,141 None None Kent WA 140,763 678,809 None None Kirkland WA 301,000 668,534 None None Puyallup WA 195,552 434,327 None None Redmond WA 279,830 621,513 None None Renton WA 111,183 515,490 None None Appleton WI 196,000 424,038 None None Brookfield WI 233,100 461,500 None None Waukesha WI 215,950 427,546 None None Cheyenne WY 59,856 277,506 None None Consumer Electronics - -------------------- Oxford AL 323,085 406,655 None None Tuscaloosa AL 204,790 585,115 None None Thousand Oaks CA 2,703,726 6,125,829 None 68 Bradenton FL 174,948 240,928 None None MaryEsther FL 149,696 363,263 None None Melbourne FL 269,697 522,414 None None Merritt Island FL 309,652 482,459 None None Ocala FL 339,690 543,504 None None Pensacola FL 419,842 1,899,287 None None Tallahassee FL 319,807 502,697 None 283 Titusville FL 176,459 579,793 None None Page F-49 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Child Care - ---------- Sandy UT 168,089 373,330 541,419 Centreville VA 371,000 824,003 1,195,003 Chesapeake VA 190,050 422,107 612,157 Glen Allen VA 74,643 346,060 420,703 Portsmouth VA 171,575 381,073 552,648 Richmond VA 71,001 328,093 399,094 Richmond VA 269,500 598,567 868,067 Virginia Beach VA 69,080 320,592 389,672 Virginia Beach VA 124,988 579,496 704,484 Woodbridge VA 358,050 795,239 1,153,289 Everett WA 120,000 540,363 660,363 Federal Way WA 150,785 699,101 849,886 Federal Way WA 261,943 581,782 843,725 Kent WA 128,300 539,141 667,441 Kent WA 140,763 678,809 819,572 Kirkland WA 301,000 668,534 969,534 Puyallup WA 195,552 434,327 629,879 Redmond WA 279,830 621,513 901,343 Renton WA 111,183 515,490 626,673 Appleton WI 196,000 424,038 620,038 Brookfield WI 233,100 461,500 694,600 Waukesha WI 215,950 427,546 643,496 Cheyenne WY 59,856 277,733 337,589 Consumer Electronics - -------------------- Oxford AL 323,085 406,655 729,740 Tuscaloosa AL 204,790 585,115 789,905 Thousand Oaks CA 2,703,726 6,125,897 8,829,623 Bradenton FL 174,948 240,928 415,876 MaryEsther FL 149,696 363,263 512,959 Melbourne FL 269,697 522,414 792,111 Merritt Island FL 309,652 482,459 792,111 Ocala FL 339,690 543,504 883,194 Pensacola FL 419,842 1,899,287 2,319,129 Tallahassee FL 319,807 502,980 822,787 Titusville FL 176,459 579,793 756,252 Page F-50 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Child Care - ---------- Sandy UT 136,338 02/01/90 300 Centreville VA 312,724 09/29/89 300 Chesapeake VA 167,479 03/28/89 300 Glen Allen VA 251,876 06/20/84 300 Portsmouth VA 154,494 12/21/88 300 Richmond VA 214,206 09/04/85 300 Richmond VA 237,492 03/28/89 300 Virginia Beach VA 227,875 11/15/84 300 Virginia Beach VA 363,561 03/25/86 300 Woodbridge VA 329,302 09/29/88 300 Everett WA 540,363 11/22/82 180 Federal Way WA 413,987 12/17/86 300 Federal Way WA 237,541 11/21/88 300 Kent WA 539,141 06/03/83 180 Kent WA 401,971 12/17/86 300 Kirkland WA 288,470 03/31/88 300 Puyallup WA 176,083 12/06/88 300 Redmond WA 282,688 07/27/87 300 Renton WA 323,404 03/24/86 300 Appleton WI 152,547 07/10/90 300 Brookfield WI 155,377 12/13/90 300 Waukesha WI 143,946 12/13/90 300 Cheyenne WY 196,595 11/20/84 300 Consumer Electronics - -------------------- Oxford AL 50,832 11/26/96 300 Tuscaloosa AL 73,139 11/26/96 300 Thousand Oaks CA 806,563 09/09/96 300 Bradenton FL 30,116 11/26/96 300 MaryEsther FL 45,408 11/26/96 300 Melbourne FL 65,302 11/26/96 300 Merritt Island FL 60,307 11/26/96 300 Ocala FL 67,938 11/26/96 300 Pensacola FL 237,411 11/26/96 300 Tallahassee FL 62,837 11/26/96 300 Titusville FL 72,474 11/26/96 300 Page F-51 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Consumer Electronics - -------------------- Venice FL 259,686 362,562 None None Rome GA 254,902 486,812 None None Smyrna GA 1,094,058 3,090,236 None None Council Bluffs IA 255,217 117,792 None None Des Moines IA 188,520 367,614 None None Peoria IL 193,868 387,737 None None Rockford IL 159,587 618,398 None None Springfield IL 219,859 630,595 None None Anderson IN 180,628 653,162 None None Muncie IN 148,901 645,235 None None Richmond IN 93,999 193,753 None None Topeka KS 974,960 3,472,226 None None Columbus MS 144,908 463,707 None None Greenville MS 144,588 433,764 None None Gulfport MS 299,464 502,326 None None Hattiesburg MS 198,659 457,379 None None Jackson MS 405,360 656,296 None None Meridian MS 181,156 515,598 None None Tupelo MS 121,697 637,691 None None Vicksburg MS 494,532 174,541 None None Lakewood NY 144,859 526,301 None None Defiance OH 97,978 601,863 None None Kettering OH 229,246 488,393 None None Bristol TN 344,365 468,719 None None Clarksville TN 290,775 395,870 None None Vienna WV 324,797 526,670 None None Convenience Stores - ------------------ Fullerton CA 29,170 41,003 2,214 11,934 Manchester CT 118,262 305,510 None None Vernon CT 179,646 319,372 None None Westbrook CT 98,247 373,340 None None Archer FL 296,238 578,145 None None Gainesville FL 515,834 873,187 None None Gainesville FL 480,318 600,633 None None Gainesville FL 347,310 694,859 None None Page F-52 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Consumer Electronics - -------------------- Venice FL 259,686 362,562 622,248 Rome GA 254,902 486,812 741,714 Smyrna GA 1,094,058 3,090,236 4,184,294 Council Bluffs IA 255,217 117,792 373,009 Des Moines IA 188,520 367,614 556,134 Peoria IL 193,868 387,737 581,605 Rockford IL 159,587 618,398 777,985 Springfield IL 219,859 630,595 850,454 Anderson IN 180,628 653,162 833,790 Muncie IN 148,901 645,235 794,136 Richmond IN 93,999 193,753 287,752 Topeka KS 974,960 3,472,226 4,447,186 Columbus MS 144,908 463,707 608,615 Greenville MS 144,588 433,764 578,352 Gulfport MS 299,464 502,326 801,790 Hattiesburg MS 198,659 457,379 656,038 Jackson MS 405,360 656,296 1,061,656 Meridian MS 181,156 515,598 696,754 Tupelo MS 121,697 637,691 759,388 Vicksburg MS 494,532 174,541 669,073 Lakewood NY 144,859 526,301 671,160 Defiance OH 97,978 601,863 699,841 Kettering OH 229,246 488,393 717,639 Bristol TN 344,365 468,719 813,084 Clarksville TN 290,775 395,870 686,645 Vienna WV 324,797 526,670 851,467 Convenience Stores - ------------------ Fullerton CA 29,170 55,151 84,321 Manchester CT 118,262 305,510 423,772 Vernon CT 179,646 319,372 499,018 Westbrook CT 98,247 373,340 471,587 Archer FL 296,238 578,145 874,383 Gainesville FL 515,834 873,187 1,389,021 Gainesville FL 480,318 600,633 1,080,951 Gainesville FL 347,310 694,859 1,042,169 Page F-53 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Consumer Electronics - -------------------- Venice FL 45,320 11/26/96 300 Rome GA 60,852 11/26/96 300 Smyrna GA 313,464 06/09/97 300 Council Bluffs IA 14,724 11/26/96 300 Des Moines IA 45,952 11/26/96 300 Peoria IL 48,467 11/26/96 300 Rockford IL 77,300 11/26/96 300 Springfield IL 78,824 11/26/96 300 Anderson IN 81,630 11/11/96 300 Muncie IN 80,654 11/26/96 300 Richmond IN 24,219 11/26/96 300 Topeka KS 422,454 12/26/96 300 Columbus MS 57,963 11/26/96 300 Greenville MS 54,221 11/26/96 300 Gulfport MS 62,791 11/26/96 300 Hattiesburg MS 57,172 11/26/96 300 Jackson MS 82,037 11/26/96 300 Meridian MS 64,450 11/26/96 300 Tupelo MS 79,711 11/26/96 300 Vicksburg MS 21,818 11/26/96 300 Lakewood NY 65,788 11/26/96 300 Defiance OH 75,233 11/26/96 300 Kettering OH 61,049 11/26/96 300 Bristol TN 58,590 11/26/96 300 Clarksville TN 49,484 11/26/96 300 Vienna WV 65,834 11/26/96 300 Convenience Stores - ------------------ Fullerton CA 49,356 11/08/72 234 Manchester CT 58,556 03/03/95 300 Vernon CT 61,213 03/09/95 300 Westbrook CT 71,557 03/09/95 300 Archer FL 14,448 05/07/99 300 Gainesville FL 21,824 05/07/99 300 Gainesville FL 15,010 05/07/99 300 Gainesville FL 17,366 05/07/99 300 Page F-54 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ Gainesville FL 339,263 658,807 None None Gainesville FL 351,921 552,557 None None Gainesville FL 500,032 850,291 None None Jacksonville Bch FL 522,188 371,885 None None Orange Park FL 425,820 416,154 None None Augusta GA 320,000 382,323 None None Augusta GA 620,000 383,232 None None Augusta GA 540,000 337,853 None None Augusta GA 510,000 392,929 None None Augusta GA 180,000 422,020 None None Augusta GA 260,000 392,171 None None Hephzibah GA 580,000 523,535 None None Martinez GA 450,000 402,777 None None Dunwoody GA 545,462 724,254 None None Lithonia GA 386,784 776,436 None None Mabelton GA 491,069 355,957 None None Norcross GA 384,162 651,273 None None Stone Mountain GA 529,383 532,429 None None Godfrey IL 374,586 733,190 None None Granite City IL 362,287 737,255 None None Madison IL 173,812 625,030 None None New Albany IN 181,459 289,353 None None New Albany IN 262,465 331,796 None None Berea KY 252,077 360,815 None None Elizabethtown KY 286,106 286,106 None None Henderson KY 225,000 515,000 None None Lebanon KY 158,052 316,105 None None Louisville KY 198,926 368,014 None None Louisville KY 216,849 605,697 None None Mt. Washington KY 327,245 479,593 None None Owensboro KY 360,000 590,000 None None Seekonk MA 298,354 268,518 None None Flint MI 194,492 476,504 None None Greensboro NC 700,000 655,000 None None Cary NC 450,000 825,000 None None Greenville NC 330,000 515,000 None None Page F-55 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ Gainesville FL 339,263 658,807 998,070 Gainesville FL 351,921 552,557 904,478 Gainesville FL 500,032 850,291 1,350,323 Jacksonville Bch FL 522,188 371,885 894,073 Orange Park FL 425,820 416,154 841,974 Augusta GA 320,000 382,323 702,323 Augusta GA 620,000 383,232 1,003,232 Augusta GA 540,000 337,853 877,853 Augusta GA 510,000 392,929 902,929 Augusta GA 180,000 422,020 602,020 Augusta GA 260,000 392,171 652,171 Hephzibah GA 580,000 523,535 1,103,535 Martinez GA 450,000 402,777 852,777 Dunwoody GA 545,462 724,254 1,269,716 Lithonia GA 386,784 776,436 1,163,220 Mabelton GA 491,069 355,957 847,026 Norcross GA 384,162 651,273 1,035,435 Stone Mountain GA 529,383 532,429 1,061,812 Godfrey IL 374,586 733,190 1,107,776 Granite City IL 362,287 737,255 1,099,542 Madison IL 173,812 625,030 798,842 New Albany IN 181,459 289,353 470,812 New Albany IN 262,465 331,796 594,261 Berea KY 252,077 360,815 612,892 Elizabethtown KY 286,106 286,106 572,212 Henderson KY 225,000 515,000 740,000 Lebanon KY 158,052 316,105 474,157 Louisville KY 198,926 368,014 566,940 Louisville KY 216,849 605,697 822,546 Mt. Washington KY 327,245 479,593 806,838 Owensboro KY 360,000 590,000 950,000 Seekonk MA 298,354 268,518 566,872 Flint MI 194,492 476,504 670,996 Greensboro NC 700,000 655,000 1,355,000 Cary NC 450,000 825,000 1,275,000 Greenville NC 330,000 515,000 845,000 Page F-56 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ Gainesville FL 16,464 05/07/99 300 Gainesville FL 13,808 05/07/99 300 Gainesville FL 21,251 05/07/99 300 Jacksonville Bch FL 9,291 05/13/99 300 Orange Park FL 10,398 05/14/99 300 Augusta GA 7,002 07/22/99 300 Augusta GA 7,017 07/22/99 300 Augusta GA 6,186 07/22/99 300 Augusta GA 7,195 07/22/99 300 Augusta GA 7,730 07/22/99 300 Augusta GA 7,183 07/22/99 300 Hephzibah GA 9,589 07/22/99 300 Martinez GA 7,376 07/22/99 300 Dunwoody GA 73,280 06/27/97 300 Lithonia GA 78,646 06/27/97 300 Mabelton GA 35,946 06/27/97 300 Norcross GA 65,908 06/27/97 300 Stone Mountain GA 53,821 06/27/97 300 Godfrey IL 74,213 06/27/97 300 Granite City IL 74,634 06/25/97 300 Madison IL 63,321 06/27/97 300 New Albany IN 55,459 03/03/95 300 New Albany IN 63,594 03/06/95 300 Berea KY 69,156 03/08/95 300 Elizabethtown KY 54,837 03/03/95 300 Henderson KY 90,125 07/06/95 300 Lebanon KY 60,587 03/03/95 300 Louisville KY 70,536 03/03/95 300 Louisville KY 85,668 06/18/96 09/15/95 300 Mt. Washington KY 59,973 10/28/96 04/09/96 300 Owensboro KY 103,250 08/25/95 300 Seekonk MA 51,466 03/03/95 300 Flint MI 77,035 12/13/95 300 Greensboro NC 5,458 11/16/99 300 Cary NC 144,375 08/25/95 300 Greenville NC 90,125 08/25/95 300 Page F-57 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ Greenville NC 225,000 405,000 None None Jacksonville NC 150,000 530,000 None None Kinston NC 550,000 1,057,833 None None Kingston NY 257,763 456,042 None None Atwater OH 118,555 266,748 None None Columbus OH 147,296 304,411 None None Columbus OH 273,085 471,693 None None Cuyahoga Falls OH 297,982 357,579 None None Galion OH 138,981 327,597 None None Groveport OH 277,198 445,497 None None Perrysburg OH 211,678 390,680 None None Streetsboro OH 402,988 485,031 None None Tipp City OH 355,009 588,111 None None Triffin OH 117,017 273,040 None None Wadsworth OH 266,507 496,917 None None Tulsa OK 126,545 508,266 None None Aiken SC 320,000 432,527 None None Aiken SC 330,000 472,679 None None Aiken SC 560,000 543,588 None None Aiken SC 360,000 542,982 None None Aiken SC 540,000 388,058 None None Aiken SC 250,000 251,770 None None Belvedere SC 490,000 463,080 None None Greenville SC 390,000 462,847 None None Greenville SC 300,000 402,392 None None Greenville SC 370,000 432,695 None None Greenville SC 620,000 483,604 None None Greenville SC 720,000 534,059 None None Greenville SC 680,000 423,604 None None Greer SC 400,000 502,879 None None Jackson SC 170,000 632,626 None None Lexington SC 640,000 563,891 None None Lexington SC 540,000 563,588 None None Lexington SC 360,000 843,891 None None Mauldin SC 490,000 412,879 None None North Augusta SC 400,000 452,777 None None Page F-58 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ Greenville NC 225,000 405,000 630,000 Jacksonville NC 150,000 530,000 680,000 Kinston NC 550,000 1,057,833 1,607,833 Kingston NY 257,763 456,042 713,805 Atwater OH 118,555 266,748 385,303 Columbus OH 147,296 304,411 451,707 Columbus OH 273,085 471,693 744,778 Cuyahoga Falls OH 297,982 357,579 655,561 Galion OH 138,981 327,597 466,578 Groveport OH 277,198 445,497 722,695 Perrysburg OH 211,678 390,680 602,358 Streetsboro OH 402,988 485,031 888,019 Tipp City OH 355,009 588,111 943,120 Triffin OH 117,017 273,040 390,057 Wadsworth OH 266,507 496,917 763,424 Tulsa OK 126,545 508,266 634,811 Aiken SC 320,000 432,527 752,527 Aiken SC 330,000 472,679 802,679 Aiken SC 560,000 543,588 1,103,588 Aiken SC 360,000 542,982 902,982 Aiken SC 540,000 388,058 928,058 Aiken SC 250,000 251,770 501,770 Belvedere SC 490,000 463,080 953,080 Greenville SC 390,000 462,847 852,847 Greenville SC 300,000 402,392 702,392 Greenville SC 370,000 432,695 802,695 Greenville SC 620,000 483,604 1,103,604 Greenville SC 720,000 534,059 1,254,059 Greenville SC 680,000 423,604 1,103,604 Greer SC 400,000 502,879 902,879 Jackson SC 170,000 632,626 802,626 Lexington SC 640,000 563,891 1,203,891 Lexington SC 540,000 563,588 1,103,588 Lexington SC 360,000 843,891 1,203,891 Mauldin SC 490,000 412,879 902,879 North Augusta SC 400,000 452,777 852,777 Page F-59 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ Greenville NC 70,875 08/25/95 300 Jacksonville NC 92,750 08/25/95 300 Kinston NC 92,750 10/01/97 300 Kingston NY 85,888 04/06/95 300 Atwater OH 51,127 03/03/95 300 Columbus OH 58,346 03/03/95 300 Columbus OH 76,257 12/21/95 300 Cuyahoga Falls OH 68,536 03/03/95 300 Galion OH 62,789 03/06/95 300 Groveport OH 72,022 12/21/95 300 Perrysburg OH 47,872 01/10/96 08/25/95 300 Streetsboro OH 37,363 01/27/97 07/24/96 300 Tipp City OH 46,028 01/31/97 05/31/96 300 Triffin OH 52,333 03/07/95 300 Wadsworth OH 45,675 11/26/96 06/28/96 300 Tulsa OK 51,462 06/27/97 300 Aiken SC 7,921 07/22/99 300 Aiken SC 8,657 07/22/99 300 Aiken SC 9,956 07/22/99 300 Aiken SC 9,945 07/22/99 300 Aiken SC 7,105 07/22/99 300 Aiken SC 4,609 07/22/99 300 Belvedere SC 8,481 07/22/99 300 Greenville SC 8,476 07/22/99 300 Greenville SC 7,369 07/22/99 300 Greenville SC 7,924 07/22/99 300 Greenville SC 8,856 07/22/99 300 Greenville SC 9,780 07/22/99 300 Greenville SC 7,756 07/22/99 300 Greer SC 9,212 07/22/99 300 Jackson SC 11,590 07/22/99 300 Lexington SC 10,327 07/22/99 300 Lexington SC 10,322 07/22/99 300 Lexington SC 15,461 07/22/99 300 Mauldin SC 7,562 07/22/99 300 North Augusta SC 8,293 07/22/99 300 Page F-60 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Convenience Stores - ------------------ North Augusta SC 350,000 352,323 None None Simpsonville SC 530,000 573,485 None None Spartanburg SC 470,000 432,879 None None W. Columbia SC 410,000 693,574 None None West Aiken SC 400,000 402,665 None None Columbia SC 150,000 450,000 None None John's Isle SC 170,000 350,000 None None Lexington SC 255,000 545,000 None None Myrtle Beach SC 140,000 590,000 None None N. Charleston SC 400,000 650,000 None None Summerville SC 115,000 515,000 None None La Vergne TN 340,000 650,000 None None Shelbyville TN 200,000 465,000 None None Hampton VA 433,985 459,108 None None Midlothian VA 325,000 302,872 None None Newport News VA 490,616 205,304 None None Richmond VA 700,000 400,740 None None Richmond VA 700,000 440,965 None None Richmond VA 400,000 250,875 None None Richmond VA 1,000,000 740 None None Richmond VA 700,000 100,695 None None Stafford VA 271,865 601,997 None None Warrenton VA 515,971 649,125 None None Yorktown VA 309,435 447,144 None None Craft and Novelty - ----------------- Cutler Ridge FL 743,498 657,485 None 820 Stony Brook NY 980,000 1,801,586 None None Drug Stores - ----------- Casselberry FL -- 1,664,284 None None Entertainment - ------------- Vista CA 2,300,000 22 None None Dania FL 8,272,080 1,713 None None Roswell GA 3,383,780 1,126 None None Page F-61 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Convenience Stores - ------------------ North Augusta SC 350,000 352,323 702,323 Simpsonville SC 530,000 573,485 1,103,485 Spartanburg SC 470,000 432,879 902,879 W. Columbia SC 410,000 693,574 1,103,574 West Aiken SC 400,000 402,665 802,665 Columbia SC 150,000 450,000 600,000 John's Isle SC 170,000 350,000 520,000 Lexington SC 255,000 545,000 800,000 Myrtle Beach SC 140,000 590,000 730,000 N. Charleston SC 400,000 650,000 1,050,000 Summerville SC 115,000 515,000 630,000 La Vergne TN 340,000 650,000 990,000 Shelbyville TN 200,000 465,000 665,000 Hampton VA 433,985 459,108 893,093 Midlothian VA 325,000 302,872 627,872 Newport News VA 490,616 205,304 695,920 Richmond VA 700,000 400,740 1,100,740 Richmond VA 700,000 440,965 1,140,965 Richmond VA 400,000 250,875 650,875 Richmond VA 1,000,000 740 1,000,740 Richmond VA 700,000 100,695 800,695 Stafford VA 271,865 601,997 873,862 Warrenton VA 515,971 649,125 1,165,096 Yorktown VA 309,435 447,144 756,579 Craft and Novelty - ----------------- Cutler Ridge FL 743,498 658,305 1,401,803 Stony Brook NY 980,000 1,801,586 2,781,586 Drug Stores - ----------- Casselberry FL -- 1,664,284 1,664,284 Entertainment - ------------- Vista CA 2,300,000 22 2,300,022 Dania FL 8,272,080 1,713 8,273,793 Roswell GA 3,383,780 1,126 3,384,906 Page F-62 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Convenience Stores - ------------------ North Augusta SC 6,452 07/22/99 300 Simpsonville SC 10,506 07/23/99 300 Spartanburg SC 7,929 07/23/99 300 W. Columbia SC 12,706 07/22/99 300 West Aiken SC 7,374 07/22/99 300 Columbia SC 78,750 08/25/95 300 John's Isle SC 61,250 08/25/95 300 Lexington SC 95,375 08/25/95 300 Myrtle Beach SC 103,250 08/25/95 300 N. Charleston SC 113,750 08/25/95 300 Summerville SC 90,125 08/25/95 300 La Vergne TN 113,750 08/25/95 300 Shelbyville TN 81,375 08/25/95 300 Hampton VA 31,298 04/17/98 300 Midlothian VA 28,500 08/08/97 300 Newport News VA 13,966 04/17/98 300 Richmond VA 27,333 04/07/98 300 Richmond VA 30,067 04/17/98 300 Richmond VA 17,083 04/17/98 300 Richmond VA -- 04/17/98 300 Richmond VA 6,833 04/17/98 300 Stafford VA 73,242 12/20/96 300 Warrenton VA 78,977 11/26/96 300 Yorktown VA 30,447 04/17/98 300 Craft and Novelty - ----------------- Cutler Ridge FL 27,358 12/30/98 300 Stony Brook NY 69,040 12/31/98 300 Drug Stores - ----------- Casselberry FL 85,773 09/30/98 300 Entertainment - ------------- Vista CA -- 04/02/99 300 Dania FL -- 05/07/99 300 Roswell GA -- 06/30/99 300 Page F-63 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Entertainment - ------------- Flanders NJ 2,222,205 890 None None Brookhaven NY 1,500,000 745 None None Riverhead NY 3,800,000 744 None None General Merchandise - ------------------- Monte Vista CO 47,652 582,159 None None Groveland FL 101,782 189,258 None None Garnett KS 59,690 518,121 None None Caledonia MN 89,723 559,300 None None Long Prairie MN 88,892 553,997 None None Paynesville MN 49,483 525,406 None None Spring Valley MN 69,785 579,238 None None Warroad MN 70,000 580,000 None None Mayville ND 59,333 565,562 None None Bloomfield NM 59,559 616,252 None None Colorado City TX 92,535 505,276 None None Grocery - ------- Boulder CO 426,675 1,199,508 18,000 91,455 Sheboygan WI 1,513,216 4,339,469 None None Health and Fitness - ------------------ Diamond Bar CA 3,038,879 4,296,300 None None Norco CA 1,247,243 2,603,321 None None Paramount CA 86,400 278,827 None None Coral Springs FL 891,496 2,798,204 None None Pembroke Pines FL 1,714,388 357,703 None None West Kendall FL 3,115,101 2,031,834 None None Fort Worth TX 1,445,901 2,931,162 None None Home Furnishings - ---------------- Cathedral City CA 1,006,923 2,293,077 None 3,600 Danbury CT 630,171 3,621,163 None None Brandon FL 430,000 1,020,608 None None Tampa FL 685,000 885,624 None None Winter Park FL 2,404,598 3,382,402 None 376 Page F-64 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Entertainment - ------------- Flanders NJ 2,222,205 890 2,223,095 Brookhaven NY 1,500,000 745 1,500,745 Riverhead NY 3,800,000 744 3,800,744 General Merchandise - ------------------- Monte Vista CO 47,652 582,159 629,811 Groveland FL 101,782 189,258 291,040 Garnett KS 59,690 518,121 577,811 Caledonia MN 89,723 559,300 649,023 Long Prairie MN 88,892 553,997 642,889 Paynesville MN 49,483 525,406 574,889 Spring Valley MN 69,785 579,238 649,023 Warroad MN 70,000 580,000 650,000 Mayville ND 59,333 565,562 624,895 Bloomfield NM 59,559 616,252 675,811 Colorado City TX 92,535 505,276 597,811 Grocery - ------- Boulder CO 426,675 1,308,963 1,735,638 Sheboygan WI 1,513,216 4,339,469 5,852,685 Health and Fitness - ------------------ Diamond Bar CA 3,038,879 4,296,300 7,335,179 Norco CA 1,247,243 2,603,321 3,850,564 Paramount CA 86,400 278,827 365,227 Coral Springs FL 891,496 2,798,204 3,689,700 Pembroke Pines FL 1,714,388 357,703 2,072,091 West Kendall FL 3,115,101 2,031,834 5,146,935 Fort Worth TX 1,445,901 2,931,162 4,377,063 Home Furnishings - ---------------- Cathedral City CA 1,006,923 2,296,677 3,303,600 Danbury CT 630,171 3,621,163 4,251,334 Brandon FL 430,000 1,020,608 1,450,608 Tampa FL 685,000 885,624 1,570,624 Winter Park FL 2,404,598 3,382,778 5,787,376 Page F-65 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Entertainment - ------------- Flanders NJ -- 06/30/99 300 Brookhaven NY -- 10/01/99 300 Riverhead NY -- 08/24/99 300 General Merchandise - ------------------- Monte Vista CO 24,223 12/23/98 300 Groveland FL 5,986 03/31/99 300 Garnett KS 21,555 12/23/98 300 Caledonia MN 23,262 12/23/98 300 Long Prairie MN 23,046 12/23/98 300 Paynesville MN 21,855 12/18/98 300 Spring Valley MN 24,092 12/23/98 300 Warroad MN 24,167 12/23/98 300 Mayville ND 23,486 12/23/98 300 Bloomfield NM 25,643 12/23/98 300 Colorado City TX 21,019 12/23/98 300 Grocery - ------- Boulder CO 866,509 01/05/84 180 Sheboygan WI 64,433 06/03/99 08/24/98 300 Health and Fitness - ------------------ Diamond Bar CA 35,158 09/25/99 09/29/98 300 Norco CA -- In Process 06/30/99 300 Paramount CA 278,827 11/22/83 180 Coral Springs FL 132,789 11/03/98 03/30/98 300 Pembroke Pines FL -- In Process 11/08/99 300 West Kendall FL -- In Process 06/14/99 300 Fort Worth TX -- In Process 07/01/99 300 Home Furnishings - ---------------- Cathedral City CA 424,219 05/26/95 300 Danbury CT 330,045 09/30/97 300 Brandon FL 62,900 06/26/98 300 Tampa FL 54,575 06/26/98 300 Winter Park FL 625,744 05/31/95 300 Page F-66 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Home Furnishings - ---------------- Davenport IA 270,000 930,689 None None Joilet IL 440,000 910,689 None None Wichita KS 430,000 740,725 None None Alexandria LA 400,000 810,608 None None Monroe LA 450,000 835,608 None None Shreveport LA 525,000 725,642 None None Battle Creek MI 485,000 895,689 None None Eden Prairie MN 500,502 1,055,244 None None Hattiesburg MS 300,000 660,608 None None Ridgeland MS 281,867 769,890 None None Omaha NE 1,956,296 3,949,402 None None Henderson NV 1,268,655 3,109,995 None None Staten Island NY 3,190,883 2,569,802 None None Lancaster OH 250,000 830,689 None None Altoona PA 455,000 745,694 None None Erie PA 510,000 900,689 None None Muncy PA 315,000 835,648 None None Whitehall PA 515,525 1,146,868 None None Columbia SC 600,000 900,725 None None Jackson TN 380,000 750,608 None None Memphis TN 804,262 1,432,520 None None Abilene TX 400,000 680,616 None None Arlington TX 475,069 1,374,167 None None Cedar Park TX 253,591 827,237 None None Houston TX 867,767 687,042 None None Spring TX 1,794,872 1,810,069 None None Webster TX 283,604 538,002 None None Eau Claire WI 260,000 820,689 None None La Crosse WI 372,883 877,812 None None Home Improvement - ---------------- Mesa AZ 619,035 867,013 None None Lawndale CA 667,007 1,238,841 None None Los Angeles CA 902,494 1,676,204 None None Los Angeles CA 163,668 304,097 None None Van Nuys CA 750,293 1,393,545 None None Page F-67 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Home Furnishings - ---------------- Davenport IA 270,000 930,689 1,200,689 Joilet IL 440,000 910,689 1,350,689 Wichita KS 430,000 740,725 1,170,725 Alexandria LA 400,000 810,608 1,210,608 Monroe LA 450,000 835,608 1,285,608 Shreveport LA 525,000 725,642 1,250,642 Battle Creek MI 485,000 895,689 1,380,689 Eden Prairie MN 500,502 1,055,244 1,555,746 Hattiesburg MS 300,000 660,608 960,608 Ridgeland MS 281,867 769,890 1,051,757 Omaha NE 1,956,296 3,949,402 5,905,698 Henderson NV 1,268,655 3,109,995 4,378,650 Staten Island NY 3,190,883 2,569,802 5,760,685 Lancaster OH 250,000 830,689 1,080,689 Altoona PA 455,000 745,694 1,200,694 Erie PA 510,000 900,689 1,410,689 Muncy PA 315,000 835,648 1,150,648 Whitehall PA 515,525 1,146,868 1,662,393 Columbia SC 600,000 900,725 1,500,725 Jackson TN 380,000 750,608 1,130,608 Memphis TN 804,262 1,432,520 2,236,782 Abilene TX 400,000 680,616 1,080,616 Arlington TX 475,069 1,374,167 1,849,236 Cedar Park TX 253,591 827,237 1,080,828 Houston TX 867,767 687,042 1,554,809 Spring TX 1,794,872 1,810,069 3,604,941 Webster TX 283,604 538,002 821,606 Eau Claire WI 260,000 820,689 1,080,689 La Crosse WI 372,883 877,812 1,250,695 Home Improvement - ---------------- Mesa AZ 619,035 867,013 1,486,048 Lawndale CA 667,007 1,238,841 1,905,848 Los Angeles CA 902,494 1,676,204 2,578,698 Los Angeles CA 163,668 304,097 467,765 Van Nuys CA 750,293 1,393,545 2,143,838 Page F-68 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Home Furnishings - ---------------- Davenport IA 57,350 06/26/98 300 Joilet IL 56,117 06/26/98 300 Wichita KS 45,633 06/26/98 300 Alexandria LA 49,950 06/26/98 300 Monroe LA 51,492 06/26/98 300 Shreveport LA 44,708 06/26/98 300 Battle Creek MI 55,192 06/26/98 300 Eden Prairie MN 36,857 03/04/99 300 Hattiesburg MS 40,700 06/26/98 300 Ridgeland MS 77,840 06/27/97 300 Omaha NE 427,059 04/02/97 300 Henderson NV 283,465 09/18/97 300 Staten Island NY 182,944 03/26/98 300 Lancaster OH 51,183 06/26/98 300 Altoona PA 45,942 06/26/98 300 Erie PA 55,500 06/26/98 300 Muncy PA 51,492 06/26/98 300 Whitehall PA 70,680 06/30/98 300 Columbia SC 55,500 06/26/98 300 Jackson TN 46,250 06/26/98 300 Memphis TN 144,950 06/27/97 300 Abilene TX 41,933 06/12/98 300 Arlington TX 152,967 03/10/97 300 Cedar Park TX 92,088 03/13/97 300 Houston TX 76,264 03/07/97 300 Spring TX 164,530 09/26/97 300 Webster TX 54,417 06/12/97 300 Eau Claire WI 50,567 06/26/98 300 La Crosse WI 54,089 06/26/98 300 Home Improvement - ---------------- Mesa AZ 30,333 02/24/99 300 Lawndale CA 51,614 12/31/98 300 Los Angeles CA 69,836 12/31/98 300 Los Angeles CA 12,665 12/31/98 300 Van Nuys CA 58,058 12/31/98 300 Page F-69 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Home Improvement - ---------------- West Covina CA 311,040 577,733 None None Arvada CO 800,000 115,119 None None Boca Raton FL 355,000 864,636 None None Clearwater FL 476,179 725,023 None None Deerfield Beach FL 475,000 868,890 None None Jacksonville FL 478,314 618,348 None None Port Orange FL 500,000 1,209,769 None None Seminole FL 593,304 767,184 None None Tampa FL 494,763 767,737 None None Tampa FL 347,794 905,117 None None West Palm Beach FL 698,664 1,223,504 None None West Palm Beach FL 347,651 706,081 None None Des Moines IA 225,771 682,604 None None Broadview IL 345,166 641,739 None None Indianapolis IN 350,000 671,381 None None Baltimore MD 171,320 318,882 None None Huntersville NC 530,000 1,018,907 None None Matthews NC 768,222 843,401 None None Pineville NC 567,864 840,284 None None Albuquerque NM 684,036 874,914 None None Rochester NY 158,168 294,456 None None Reading PA 201,569 375,056 None None Pasadena TX 147,535 274,521 None None Plano TX 363,851 676,249 None None San Antonio TX 367,890 683,750 None None San Antonio TX 432,389 816,532 None None San Antonio TX 323,451 637,991 None None Riverdale UT 346,861 694,612 None None Chesapeake VA 144,014 649,869 None 11,754 Office Supplies - --------------- Lakewood CA 1,398,387 3,098,607 None None Riverside CA 1,410,177 1,659,850 None None Hutchinson KS 269,964 1,704,013 None None Salina KS 240,423 1,829,837 None None Helena MT 564,241 1,503,118 None None Page F-70 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Home Improvement - ---------------- West Covina CA 311,040 577,733 888,773 Arvada CO 800,000 115,119 915,119 Boca Raton FL 355,000 864,636 1,219,636 Clearwater FL 476,179 725,023 1,201,202 Deerfield Beach FL 475,000 868,890 1,343,890 Jacksonville FL 478,314 618,348 1,096,662 Port Orange FL 500,000 1,209,769 1,709,769 Seminole FL 593,304 767,184 1,360,488 Tampa FL 494,763 767,737 1,262,500 Tampa FL 347,794 905,117 1,252,911 West Palm Beach FL 698,664 1,223,504 1,922,168 West Palm Beach FL 347,651 706,081 1,053,732 Des Moines IA 225,771 682,604 908,375 Broadview IL 345,166 641,739 986,905 Indianapolis IN 350,000 671,381 1,021,381 Baltimore MD 171,320 318,882 490,202 Huntersville NC 530,000 1,018,907 1,548,907 Matthews NC 768,222 843,401 1,611,623 Pineville NC 567,864 840,284 1,408,148 Albuquerque NM 684,036 874,914 1,558,950 Rochester NY 158,168 294,456 452,624 Reading PA 201,569 375,056 576,625 Pasadena TX 147,535 274,521 422,056 Plano TX 363,851 676,249 1,040,100 San Antonio TX 367,890 683,750 1,051,640 San Antonio TX 432,389 816,532 1,248,921 San Antonio TX 323,451 637,991 961,442 Riverdale UT 346,861 694,612 1,041,473 Chesapeake VA 144,014 661,623 805,637 Office Supplies - --------------- Lakewood CA 1,398,387 3,098,607 4,496,994 Riverside CA 1,410,177 1,659,850 3,070,027 Hutchinson KS 269,964 1,704,013 1,973,977 Salina KS 240,423 1,829,837 2,070,260 Helena MT 564,241 1,503,118 2,067,359 Page F-71 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Home Improvement - ---------------- West Covina CA 24,069 12/31/98 300 Arvada CO -- In Process 06/30/99 300 Boca Raton FL 8,958 09/01/99 01/29/99 300 Clearwater FL 30,175 12/31/98 300 Deerfield Beach FL 26,404 02/25/99 01/29/99 300 Jacksonville FL 25,743 12/31/98 300 Port Orange FL 26,234 05/11/99 01/29/99 300 Seminole FL 31,931 12/31/98 300 Tampa FL 31,953 12/31/98 300 Tampa FL 37,678 12/31/98 300 West Palm Beach FL 50,944 12/31/98 300 West Palm Beach FL 29,385 12/31/98 300 Des Moines IA 26,152 02/11/99 300 Broadview IL 26,709 12/31/98 300 Indianapolis IN 16,662 03/29/99 02/10/99 300 Baltimore MD 13,257 12/31/98 300 Huntersville NC 18,648 12/18/98 01/29/99 300 Matthews NC 35,107 12/31/98 300 Pineville NC 34,977 12/31/98 300 Albuquerque NM 36,407 12/31/98 300 Rochester NY 12,239 12/31/98 300 Reading PA 15,598 12/31/98 300 Pasadena TX 11,416 12/31/98 300 Plano TX 28,155 12/31/98 300 San Antonio TX 28,468 12/31/98 300 San Antonio TX 33,985 12/31/98 300 San Antonio TX 26,546 12/31/98 300 Riverdale UT 28,905 12/31/98 300 Chesapeake VA 397,491 12/22/86 300 Office Supplies - --------------- Lakewood CA 366,411 12/27/96 300 Riverside CA 151,554 09/05/97 300 Hutchinson KS 172,810 06/25/97 300 Salina KS 185,563 06/20/97 300 Helena MT 152,141 06/06/97 300 Page F-72 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Office Supplies - --------------- Asheboro NC 465,557 2,176,416 None None Westbury NY 3,808,076 2,377,932 None None New Philadelphia OH 726,636 1,650,672 None None Pet Supplies and Services - ------------------------- Duluth GA 254,100 1,121,270 None None Marrietta GA 350,000 1,069,043 None None Indianapolis IN 427,000 764,514 None None Sudbury MA 385,000 1,594,430 None None Tyngsborough MA 312,204 1,222,522 None None Matthews NC 610,177 1,394,743 None None North Plainfield NJ -- 1,038,855 None None Dickson City PA 659,790 1,880,722 None None Private Education - ----------------- Coconut Creek FL 310,111 1,243,682 None None North Lauderdale FL 1,050,000 2,567,811 None None Las Vegas NV 1,080,444 3,346,772 None None Springfield VA 300,000 213,116 None None Centerville VA 688,917 2,339,597 None None University Place WA 255,000 718,614 53,612 24,142 Restaurants - ----------- Siloam Springs AR 190,000 352,808 None None Douglas AZ 75,000 347,719 None None Glendale AZ 624,761 895,976 None 76 Tucson AZ 107,393 497,904 None None Yuma AZ 236,121 541,651 None None Barstow CA 689,842 690,204 None None Chino CA 79,984 154,303 None 3,000 Diamond Bar CA 76,117 183,052 None 25,858 Fullerton CA 36,296 51,020 None 14,628 Hemet CA 106,164 199,179 11,922 7 Livermore CA 662,161 823,242 None None Rancho Cucamonga CA 230,733 481,225 None None Rancho Cucamonga CA 95,192 441,334 None None Page F-73 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Office Supplies - --------------- Asheboro NC 465,557 2,176,416 2,641,973 Westbury NY 3,808,076 2,377,932 6,186,008 New Philadelphia OH 726,636 1,650,672 2,377,308 Pet Supplies and Services - ------------------------- Duluth GA 254,100 1,121,270 1,375,370 Marrietta GA 350,000 1,069,043 1,419,043 Indianapolis IN 427,000 764,514 1,191,514 Sudbury MA 385,000 1,594,430 1,979,430 Tyngsborough MA 312,204 1,222,522 1,534,726 Matthews NC 610,177 1,394,743 2,004,920 North Plainfield NJ -- 1,038,855 1,038,855 Dickson City PA 659,790 1,880,722 2,540,512 Private Education - ----------------- Coconut Creek FL 310,111 1,243,682 1,553,793 North Lauderdale FL 1,050,000 2,567,811 3,617,811 Las Vegas NV 1,080,444 3,346,772 4,427,216 Springfield VA 300,000 213,116 513,116 Centerville VA 688,917 2,339,597 3,028,514 University Place WA 255,000 796,368 1,051,368 Restaurants - ----------- Siloam Springs AR 190,000 352,808 542,808 Douglas AZ 75,000 347,719 422,719 Glendale AZ 624,761 896,052 1,520,813 Tucson AZ 107,393 497,904 605,297 Yuma AZ 236,121 541,651 777,772 Barstow CA 689,842 690,204 1,380,046 Chino CA 79,984 157,303 237,287 Diamond Bar CA 76,117 208,910 285,027 Fullerton CA 36,296 65,648 101,944 Hemet CA 106,164 211,108 317,272 Livermore CA 662,161 823,242 1,485,403 Rancho Cucamonga CA 230,733 481,225 711,958 Rancho Cucamonga CA 95,192 441,334 536,526 Page F-74 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Office Supplies - --------------- Asheboro NC 155,394 03/27/98 300 Westbury NY 216,093 09/29/97 300 New Philadelphia OH 172,836 05/28/97 300 Pet Supplies and Services - ------------------------- Duluth GA 34,954 01/27/99 09/29/98 300 Marrietta GA 17,105 05/28/99 09/29/98 300 Indianapolis IN -- In Process 01/29/99 300 Sudbury MA -- In Process 09/29/98 300 Tyngsborough MA 75,260 06/12/98 300 Matthews NC 81,207 07/16/98 300 North Plainfield NJ 53,183 09/24/98 300 Dickson City PA 190,056 06/12/97 300 Private Education - ----------------- Coconut Creek FL 18,529 08/02/99 11/23/98 300 North Lauderdale FL 183,467 03/27/98 300 Las Vegas NV 239,335 02/27/98 300 Springfield VA -- In Process 11/18/99 300 Centerville VA 50,445 05/07/99 09/30/98 300 University Place WA 521,747 11/06/84 300 Restaurants - ----------- Siloam Springs AR 29,750 11/14/97 300 Douglas AZ 223,545 11/27/85 300 Glendale AZ 135,890 02/19/96 300 Tucson AZ 318,421 01/17/86 300 Yuma AZ 35,172 04/23/98 300 Barstow CA 35,642 09/23/98 300 Chino CA 154,504 06/23/75 300 Diamond Bar CA 181,395 09/25/78 300 Fullerton CA 59,309 11/08/72 234 Hemet CA 191,353 04/15/77 300 Livermore CA 42,505 09/21/98 300 Rancho Cucamonga CA 481,225 04/03/81 180 Rancho Cucamonga CA 282,020 12/20/85 300 Page F-75 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Red Bluff CA 136,740 633,984 None None Riverside CA 90,000 170,394 None None Sacramento CA 386,793 417,290 None None San Dimas CA 240,562 445,521 None None San Ramon CA 406,000 1,126,930 None None Colorado Springs CO 152,000 704,736 None None Colorado Springs CO 313,250 695,730 None None Montrose CO 217,595 483,284 None None Sterling CO 95,320 441,928 None None Westminster CO 338,940 1,571,401 20,000 13,440 Oviedo FL 204,200 659,585 None None Casselberry FL 403,900 897,075 None None Green Cove Sprgs FL 86,240 399,828 None None Jacksonville FL 150,210 693,445 None None Jacksonville FL 143,299 664,373 None None Orlando FL 230,000 1,066,339 None None Orlando FL 209,800 972,679 None None Orlando FL 339,500 746,333 None None Orlando FL 600,000 949,489 None None Palm Bay FL 330,000 556,668 None None Garden City GA 197,225 438,043 None None Hinesville GA 89,220 413,644 None None Hinesville GA 172,611 383,376 None None Lithonia GA 89,220 413,647 None None Savannah GA 143,993 345,548 None None Savannah GA 165,409 367,380 None None Statesboro GA 201,250 446,983 None None Stone Mountain GA 215,940 1,001,188 None None Ankeny IA 100,000 349,218 None None Boone IA 76,000 386,170 None None Boise ID 190,894 423,981 None None Boise ID 161,352 334,041 None None Nampa ID 74,156 343,820 None None Rexburg ID 90,760 420,787 None None Alton IL 225,785 419,315 None None Dixon IL 230,090 511,036 None None Page F-76 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Red Bluff CA 136,740 633,984 770,724 Riverside CA 90,000 170,394 260,394 Sacramento CA 386,793 417,290 804,083 San Dimas CA 240,562 445,521 686,083 San Ramon CA 406,000 1,126,930 1,532,930 Colorado Springs CO 152,000 704,736 856,736 Colorado Springs CO 313,250 695,730 1,008,980 Montrose CO 217,595 483,284 700,879 Sterling CO 95,320 441,928 537,248 Westminster CO 338,940 1,604,841 1,943,781 Oviedo FL 204,200 659,585 863,785 Casselberry FL 403,900 897,075 1,300,975 Green Cove Sprgs FL 86,240 399,828 486,068 Jacksonville FL 150,210 693,445 843,655 Jacksonville FL 143,299 664,373 807,672 Orlando FL 230,000 1,066,339 1,296,339 Orlando FL 209,800 972,679 1,182,479 Orlando FL 339,500 746,333 1,085,833 Orlando FL 600,000 949,489 1,549,489 Palm Bay FL 330,000 556,668 886,668 Garden City GA 197,225 438,043 635,268 Hinesville GA 89,220 413,644 502,864 Hinesville GA 172,611 383,376 555,987 Lithonia GA 89,220 413,647 502,867 Savannah GA 143,993 345,548 489,541 Savannah GA 165,409 367,380 532,789 Statesboro GA 201,250 446,983 648,233 Stone Mountain GA 215,940 1,001,188 1,217,128 Ankeny IA 100,000 349,218 449,218 Boone IA 76,000 386,170 462,170 Boise ID 190,894 423,981 614,875 Boise ID 161,352 334,041 495,393 Nampa ID 74,156 343,820 417,976 Rexburg ID 90,760 420,787 511,547 Alton IL 225,785 419,315 645,100 Dixon IL 230,090 511,036 741,126 Page F-77 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Red Bluff CA 375,428 12/18/86 300 Riverside CA 164,892 12/09/76 300 Sacramento CA 24,321 07/29/98 300 San Dimas CA 445,521 03/12/81 180 San Ramon CA 1,126,930 12/08/83 180 Colorado Springs CO 425,622 09/30/86 300 Colorado Springs CO 324,608 03/10/87 300 Montrose CO 212,755 12/17/87 300 Sterling CO 311,353 12/27/84 300 Westminster CO 1,175,748 06/28/84 300 Oveido FL -- 10/27/99 300 Casselberry FL 325,934 12/29/89 300 Green Cove Sprgs FL 281,693 12/19/84 300 Jacksonville FL 453,184 09/13/85 300 Jacksonville FL 426,546 12/13/85 300 Orlando FL 685,539 11/18/85 300 Orlando FL 594,238 08/15/86 300 Orlando FL 324,211 02/03/88 300 Orlando FL 23,532 05/27/99 12/18/98 300 Palm Bay FL 17,441 02/17/99 12/29/98 300 Garden City GA 172,540 04/20/89 300 Hinesville GA 291,424 12/20/84 300 Hinesville GA 168,774 12/22/87 300 Lithonia GA 291,083 01/04/85 300 Savannah GA 152,121 12/22/87 300 Savannah GA 161,732 12/22/87 300 Statesboro GA 167,075 11/14/89 300 Stone Mountain GA 600,739 10/30/86 300 Ankeny IA 349,218 07/28/83 180 Boone IA 386,170 12/27/83 180 Boise ID 180,483 05/17/88 300 Boise ID 137,357 10/07/88 300 Nampa ID 203,601 12/31/86 300 Rexburg ID 270,521 11/25/85 300 Alton IL 172,422 10/18/88 300 Dixon IL 224,957 12/28/87 300 Page F-78 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Salem IL 213,815 474,892 None None Anderson IN 197,523 438,706 None None Bedford IN 311,815 692,543 None None Decatur IN 181,020 385,618 None None Goshen IN 115,000 533,165 None None Muncie IN 136,400 632,380 8,000 13,335 Muncie IN 67,156 149,157 None None New Castle IN 246,192 320,572 None None Shelbyville IN 128,820 597,263 None None South Bend IN 133,200 617,545 None 19,211 Westfield IN 213,341 477,300 None None Derby KS 96,060 445,359 None None El Dorado KS 87,400 405,206 None None Great Bend KS 95,800 444,154 None None Wichita KS 98,000 454,350 None None Lexington KY 122,200 490,200 None None Alexandria LA 143,000 662,985 None 15,000 Jennings LA 107,120 496,636 None None La Plata MD 120,140 557,000 None None Flint MI 827,853 -- None None Sturgis MI 210,560 467,659 None None Albert Lea MN 213,150 473,412 None None Red Wing MN 248,325 551,541 None None Roseville MN 281,600 1,305,560 None None Belton MO 89,328 418,187 None None Blue Springs MO 111,440 516,665 None None Carthage MO 85,020 394,175 None None Chillicothe MO 81,080 375,908 None None Fulton MO 210,199 466,861 None None Hannibal MO 266,011 590,822 None None Hazelwood MO 157,117 725,327 None 12,930 Jackson MO 210,199 466,860 None None Mt. Vernon MO 160,000 282,586 None None Nevada MO 222,552 494,296 None None Ozark MO 140,000 292,482 None None Sedalia MO 269,798 599,231 None None Page F-79 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Salem IL 213,815 474,892 688,707 Anderson IN 197,523 438,706 636,229 Bedford IN 311,815 692,543 1,004,358 Decatur IN 181,020 385,618 566,638 Goshen IN 115,000 533,165 648,165 Muncie IN 136,400 653,715 790,115 Muncie IN 67,156 149,157 216,313 New Castle IN 246,192 320,572 566,764 Shelbyville IN 128,820 597,263 726,083 South Bend IN 133,200 636,756 769,956 Westfield IN 213,341 477,300 690,641 Derby KS 96,060 445,359 541,419 El Dorado KS 87,400 405,206 492,606 Great Bend KS 95,800 444,154 539,954 Wichita KS 98,000 454,350 552,350 Lexington KY 122,200 490,200 612,400 Alexandria LA 143,000 677,985 820,985 Jennings LA 107,120 496,636 603,756 La Plata MD 120,140 557,000 677,140 Flint MI 827,853 -- 827,853 Sturgis MI 210,560 467,659 678,219 Albert Lea MN 213,150 473,412 686,562 Red Wing MN 248,325 551,541 799,866 Roseville MN 281,600 1,305,560 1,587,160 Belton MO 89,328 418,187 507,515 Blue Springs MO 111,440 516,665 628,105 Carthage MO 85,020 394,175 479,195 Chillicothe MO 81,080 375,908 456,988 Fulton MO 210,199 466,861 677,060 Hannibal MO 266,011 590,822 856,833 Hazelwood MO 157,117 738,257 895,374 Jackson MO 210,199 466,860 677,059 Mt. Vernon MO 160,000 282,586 442,586 Nevada MO 222,552 494,296 716,848 Ozark MO 140,000 292,482 432,482 Sedalia MO 269,798 599,231 869,029 Page F-80 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Salem IL 211,833 10/30/87 300 Anderson IN 185,478 03/25/88 300 Bedford IN 314,994 07/15/87 300 Decatur IN 179,917 03/31/87 300 Goshen IN 327,807 07/07/86 300 Muncie IN 400,113 03/18/86 300 Muncie IN 64,361 03/30/88 300 New Castle IN 149,443 01/07/87 300 Shelbyville IN 353,682 12/18/86 300 South Bend IN 397,674 04/28/86 300 Westfield IN 175,016 12/21/89 300 Derby KS 288,039 10/29/85 300 El Dorado KS 253,870 04/10/86 300 Great Bend KS 312,919 12/26/84 300 Wichita KS 277,574 08/08/86 300 Lexington KY 291,797 12/03/86 300 Alexandria LA 432,840 01/17/86 300 Jennings LA 321,203 10/17/85 300 La Plata MD 357,610 12/03/85 300 Flint MI -- 04/13/95 300 Sturgis MI 207,241 11/12/87 300 Albert Lea MN 208,424 12/16/87 300 Red Wing MN 242,779 12/30/87 300 Roseville MN 919,807 12/18/84 300 Belton MO 294,627 12/18/84 300 Blue Springs MO 364,007 12/28/84 300 Carthage MO 253,071 12/03/85 300 Chillicothe MO 264,840 12/26/84 300 Fulton MO 212,346 07/30/87 300 Hannibal MO 268,728 07/30/87 300 Hazelwood MO 477,556 08/28/85 300 Jackson MO 212,346 07/30/87 300 Mt. Vernon MO 23,800 11/20/97 300 Nevada MO 224,825 07/30/87 300 Ozark MO 24,650 11/20/97 300 Sedalia MO 234,592 07/31/89 300 Page F-81 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- St. Charles MO 175,413 809,791 None 10,000 St. Charles MO 695,121 1,001,878 None 896 St. Joseph MO 107,648 496,958 None None Sullivan MO 85,500 396,400 None None Clinton MS 100,000 337,371 None None Southaven MS 263,900 582,303 None None Fayetteville NC 116,240 538,919 None None Wilkesboro NC 183,050 406,562 None None Omaha NE 629,592 1,051,244 None 887 Amherst NY 935,355 896,819 None 12 Fulton NY 294,009 653,006 None None Watertown NY 139,199 645,355 None None Akron OH 723,347 17 None None Ashland OH 120,740 559,801 None None Celina OH 207,060 459,841 None None Lebanon OH 210,134 466,717 None None Stow OH 317,546 712,455 None None Troy OH 130,540 605,238 None None Wash. Courthouse OH 123,120 570,836 None None Wilmington OH 119,320 553,217 None None Broken Arrow OK 245,000 369,002 None None Norman OK 734,335 -- None None Oklahoma City OK 759,826 -- None None Owasso OK 247,450 549,597 None None Ponca City OK 234,990 521,923 None None Corvallis OR 172,788 383,766 None None Hermiston OR 85,560 396,675 None None Lake Oswego OR 175,899 815,508 None None Milwaukie OR 179,174 830,689 None None Salem OR 198,540 440,964 None None Connellsville PA 264,670 587,843 None None Waynesburg PA 222,285 493,704 None None Pierre SD 251,790 559,232 None None Memphis TN 405,274 1,060,680 None 1,700 Nashville TN 484,975 1,192,627 20,000 31,098 Allen TX 165,000 306,771 None None Page F-82 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- St. Charles MO 175,413 819,791 995,204 St. Charles MO 695,121 1,002,774 1,697,895 St. Joseph MO 107,648 496,958 604,606 Sullivan MO 85,500 396,400 481,900 Clinton MS 100,000 337,371 437,371 Southaven MS 263,900 582,303 846,203 Fayetteville NC 116,240 538,919 655,159 Wilkesboro NC 183,050 406,562 589,612 Omaha NE 629,592 1,052,131 1,681,723 Amherst NY 935,355 896,831 1,832,186 Fulton NY 294,009 653,006 947,015 Watertown NY 139,199 645,355 784,554 Akron OH 723,347 17 723,364 Ashland OH 120,740 559,801 680,541 Celina OH 207,060 459,841 666,901 Lebanon OH 210,134 466,717 676,851 Stow OH 317,546 712,455 1,030,001 Troy OH 130,540 605,238 735,778 Wash. Courthouse OH 123,120 570,836 693,956 Wilmington OH 119,320 553,217 672,537 Broken Arrow OK 245,000 369,002 614,002 Norman OK 734,335 -- 734,335 Oklahoma City OK 759,826 -- 759,826 Owasso OK 247,450 549,597 797,047 Ponca City OK 234,990 521,923 756,913 Corvallis OR 172,788 383,766 556,554 Hermiston OR 85,560 396,675 482,235 Lake Oswego OR 175,899 815,508 991,407 Milwaukie OR 179,174 830,689 1,009,863 Salem OR 198,540 440,964 639,504 Connellsville PA 264,670 587,843 852,513 Waynesburg PA 222,285 493,704 715,989 Pierre SD 251,790 559,232 811,022 Memphis TN 405,274 1,062,380 1,467,654 Nashville TN 484,975 1,243,725 1,728,700 Allen TX 165,000 306,771 471,771 Page F-83 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- St. Charles MO 534,084 08/28/85 300 St. Charles MO 161,266 12/22/95 03/16/95 300 St. Joseph MO 324,770 09/04/85 300 Sullivan MO 279,275 12/27/84 300 Clinton MS 337,371 07/28/83 180 Southaven MS 268,267 05/11/87 300 Fayetteville NC 379,685 12/20/84 300 Wilkesboro NC 184,920 07/24/87 300 Omaha NE 190,976 06/02/95 02/24/95 300 Amherst NY 146,929 12/21/95 05/31/95 300 Fulton NY 286,606 12/24/87 300 Watertown NY 392,288 08/18/86 300 Akron OH -- 12/22/94 300 Ashland OH 331,497 12/19/86 300 Celina OH 217,254 01/02/87 300 Lebanon OH 212,280 07/31/87 300 Stow OH 312,922 12/31/87 300 Troy OH 360,275 12/05/86 300 Wash. Courthouse OH 338,032 12/19/86 300 Wilmington OH 327,600 12/31/86 300 Broken Arrow OK 29,808 12/10/97 300 Norman OK -- 09/29/95 05/31/95 300 Oklahoma City OK -- 06/05/95 300 Owasso OK 241,950 12/28/87 300 Ponca City OK 229,766 12/30/87 300 Corvallis OR 168,946 12/22/87 300 Hermiston OR 279,469 12/18/84 300 Lake Oswego OR 596,707 05/16/84 300 Milwaukie OR 610,320 05/08/84 300 Salem OR 170,031 05/23/89 300 Connellsville PA 265,653 08/17/87 300 Waynesburg PA 223,110 08/17/87 300 Pierre SD 246,190 12/01/87 300 Memphis TN 189,155 06/30/95 03/17/95 300 Nashville TN 1,227,011 05/20/83 180 Allen TX 5,558 07/09/99 06/07/99 300 Page F-84 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Athens TX 245,245 544,700 None None Bedford TX 919,303 98,231 None None Beeville TX 250,490 556,349 None None Brownwood TX 288,225 640,160 None None Crockett TX 90,780 420,880 None None Dallas TX 242,025 479,170 None None Dallas TX 742,507 -- None None El Campo TX 98,060 454,631 None None Ennis TX 173,250 384,793 None None Fort Worth TX 223,195 492,067 None None Fort Worth TX 423,281 382,059 None None Gainesville TX 89,220 413,644 None None Hewitt TX 120,240 207,216 None None Hillsboro TX 75,992 352,316 None None Houston TX 194,994 386,056 None None Houston TX 184,175 364,636 None None Killeen TX 262,500 583,014 None 14,398 League City TX 126,822 588,000 None 155 Lufkin TX 105,904 490,998 None None Mesquite TX 134,940 625,612 None None Mesquite TX 729,596 120,820 None None Mexia TX 93,620 434,046 None None New Braunfels TX 185,500 411,997 None None Orange TX 93,560 433,768 None None Plainview TX 125,000 350,767 None None Port Lavaca TX 244,759 543,619 None None Porter TX 227,067 333,031 None None Rowlett TX 126,933 585,986 None None Santa Fe TX 304,414 623,331 None None Sealy TX 197,871 391,753 None None Stafford TX 214,024 423,733 None None Temple TX 302,505 291,414 None None Vidor TX 90,618 420,124 None None Waxahachie TX 326,935 726,137 None None Cedar City UT 130,000 296,544 None None Orem UT 516,129 1,004,608 None None Page F-85 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Athens TX 245,245 544,700 789,945 Bedford TX 919,303 98,231 1,017,534 Beeville TX 250,490 556,349 806,839 Brownwood TX 288,225 640,160 928,385 Crockett TX 90,780 420,880 511,660 Dallas TX 242,025 479,170 721,195 Dallas TX 742,507 -- 742,507 El Campo TX 98,060 454,631 552,691 Ennis TX 173,250 384,793 558,043 Fort Worth TX 223,195 492,067 715,262 Fort Worth TX 423,281 382,059 805,340 Gainesville TX 89,220 413,644 502,864 Hewitt TX 120,240 207,216 327,456 Hillsboro TX 75,992 352,316 428,308 Houston TX 194,994 386,056 581,050 Houston TX 184,175 364,636 548,811 Killeen TX 262,500 597,412 859,912 League City TX 126,822 588,155 714,977 Lufkin TX 105,904 490,998 596,902 Mesquite TX 134,940 625,612 760,552 Mesquite TX 729,596 120,820 850,416 Mexia TX 93,620 434,046 527,666 New Braunfels TX 185,500 411,997 597,497 Orange TX 93,560 433,768 527,328 Plainview TX 125,000 350,767 475,767 Port Lavaca TX 244,759 543,619 788,378 Porter TX 227,067 333,031 560,098 Rowlett TX 126,933 585,986 712,919 Santa Fe TX 304,414 623,331 927,745 Sealy TX 197,871 391,753 589,624 Stafford TX 214,024 423,733 637,757 Temple TX 302,505 291,414 593,919 Vidor TX 90,618 420,124 510,742 Waxahachie TX 326,935 726,137 1,053,072 Cedar City UT 130,000 296,544 426,544 Orem UT 516,129 1,004,608 1,520,737 Page F-86 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Athens TX 239,794 12/01/87 300 Bedford TX 98,231 12/27/94 300 Beeville TX 253,049 07/31/87 300 Brownwood TX 281,707 12/28/87 300 Crockett TX 268,952 12/17/85 300 Dallas TX 153,166 06/25/91 300 Dallas TX -- 04/13/95 300 El Campo TX 292,278 11/25/85 300 Ennis TX 169,398 12/28/87 300 Fort Worth TX 166,640 06/26/91 300 Fort Worth TX 74,502 02/10/95 300 Gainesville TX 291,424 12/18/84 300 Hewitt TX 5,170 06/07/99 300 Hillsboro TX 255,071 08/01/84 300 Houston TX 123,402 06/25/91 300 Houston TX 116,555 06/25/91 300 Killeen TX 272,071 05/29/87 300 League City TX 348,195 12/30/86 300 Lufkin TX 319,025 10/08/85 300 Mesquite TX 392,492 03/20/86 300 Mesquite TX 120,820 12/23/94 300 Mexia TX 277,365 12/18/85 300 New Braunfels TX 192,225 03/26/87 300 Orange TX 278,491 12/10/85 300 Plainview TX 350,767 01/24/84 180 Port Lavaca TX 247,259 07/30/87 300 Porter TX 64,941 02/09/95 300 Rowlett TX 382,953 09/06/85 300 Santa Fe TX 44,360 03/20/98 300 Sealy TX 125,223 06/25/91 300 Stafford TX 135,445 06/26/91 300 Temple TX 56,826 02/09/95 300 Vidor TX 304,160 08/01/84 300 Waxahachie TX 319,608 12/29/87 300 Cedar City UT 296,544 08/04/83 180 Orem UT 162,412 11/17/95 300 Page F-87 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Restaurants - ----------- Sandy UT 635,945 884,792 None None Norfolk VA 251,207 575,250 None 12,983 Virginia Beach VA 314,790 699,161 None 322 Auburn WA 301,595 669,851 None None Marysville WA 276,273 613,612 None None Oak Harbor WA 275,940 612,874 None None Redmond WA 610,334 1,262,104 None None Spokane WA 479,531 646,719 None None Tacoma WA 198,857 921,947 None 653 Grafton WI 149,778 332,664 None None Monroe WI 193,130 428,947 None None Portage WI 199,605 443,328 None None Shawano WI 205,730 456,932 None None Sturgeon Bay WI 214,865 477,221 None None Oak Hill WV 85,860 398,069 None None Laramie WY 210,000 466,417 None None Riverton WY 216,685 481,267 None None Sheridan WY 117,160 543,184 None None Shoe Stores - ----------- Little Rock AR 1,079,232 2,594,956 None None Maplewood MN 785,023 2,715,629 None None Houston TX 1,096,376 2,300,690 None None Midland TX 544,075 1,322,431 None None Theaters - -------- Jacksonville FL 4,510,272 9,011,426 None None Buchanan WI 1,453,414 7,607,254 None None Video Rental - ------------ Birmingham AL 392,795 865,115 None None Southington CT 399,562 1,009,125 None None Port St. Lucie FL 612,695 701,759 None None Tampa FL 401,874 933,768 None None Atlanta GA 652,551 763,360 None None Brunswick GA 290,369 788,880 None None Page F-88 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Restaurants - ----------- Sandy UT 635,945 884,792 1,520,737 Norfolk VA 251,207 588,233 839,440 Virginia Beach VA 314,790 699,483 1,014,273 Auburn WA 301,595 669,851 971,446 Marysville WA 276,273 613,612 889,885 Oak Harbor WA 275,940 612,874 888,814 Redmond WA 610,334 1,262,104 1,872,438 Spokane WA 479,531 646,719 1,126,250 Tacoma WA 198,857 922,600 1,121,457 Grafton WI 149,778 332,664 482,442 Monroe WI 193,130 428,947 622,077 Portage WI 199,605 443,328 642,933 Shawano WI 205,730 456,932 662,662 Sturgeon Bay WI 214,865 477,221 692,086 Oak Hill WV 85,860 398,069 483,929 Laramie WY 210,000 466,417 676,417 Riverton WY 216,685 481,267 697,952 Sheridan WY 117,160 543,184 660,344 Shoe Stores - ----------- Little Rock AR 1,079,232 2,594,956 3,674,188 Maplewood MN 785,023 2,715,629 3,500,652 Houston TX 1,096,376 2,300,690 3,397,066 Midland TX 544,075 1,322,431 1,866,506 Theaters - -------- Jacksonville FL 4,510,272 9,011,426 13,521,698 Buchanan WI 1,453,414 7,607,254 9,060,668 Video Rental - ------------ Birmingham AL 392,795 865,115 1,257,910 Southington CT 399,562 1,009,125 1,408,687 Port St. Lucie FL 612,695 701,759 1,314,454 Tampa FL 401,874 933,768 1,335,642 Atlanta GA 652,551 763,360 1,415,911 Brunswick GA 290,369 788,880 1,079,249 Page F-89 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Restaurants - ----------- Sandy UT 143,041 12/22/95 300 Norfolk VA 262,946 10/15/87 300 Virginia Beach VA 313,915 09/03/87 300 Auburn WA 294,888 12/16/87 300 Marysville WA 277,299 08/27/87 300 Oak Harbor WA 278,757 07/16/87 300 Redmond WA 1,262,104 12/10/82 180 Spokane WA 46,065 03/26/98 300 Tacoma WA 674,587 05/29/84 300 Grafton WI 148,390 10/29/87 300 Monroe WI 188,834 12/17/87 300 Portage WI 195,150 12/23/87 300 Shawano WI 201,141 12/17/87 300 Sturgeon Bay WI 210,087 12/01/87 300 Oak Hill WV 280,452 12/28/84 300 Laramie WY 167,544 03/12/90 300 Riverton WY 211,868 12/01/87 300 Sheridan WY 347,106 12/31/85 300 Shoe Stores - ----------- Little Rock AR 151,360 07/17/98 300 Maplewood MN 76,927 05/07/99 300 Houston TX 210,139 09/02/97 300 Midland TX 98,675 01/30/98 300 Theaters - -------- Jacksonville FL 14,943 12/30/99 07/22/99 300 Buchanan WI 139,435 07/22/99 300 Video Rental - ------------ Birmingham AL 78,797 09/30/97 300 Southington CT 42,037 12/23/98 300 Port St. Lucie FL 26,559 12/09/98 08/24/98 300 Tampa FL 75,798 12/19/97 300 Atlanta GA 31,755 12/04/98 300 Brunswick GA 63,989 12/31/97 300 Page F-90 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Video Rental - ------------ Norcross GA 431,284 724,037 None None Plainfield IN 453,645 908,485 None None Topeka KS 285,802 966,286 None None Wichita KS 289,714 797,856 None None Winchester KY 355,474 929,177 None None Warren MI 356,348 903,351 None None Centerville OH 601,408 758,192 None None Dayton OH 401,723 698,872 None None Forest Park OH 328,187 921,232 None None Franklin OH 337,572 777,943 None None Springboro OH 261,916 897,489 None None Oklahoma City OK 307,658 474,096 None None Tulsa OK 318,441 1,004,663 None None Bartlett TN 420,000 612,285 None None Clarksville TN 499,885 840,869 None None Columbia TN 466,469 716,723 None None Hendersonville TN 333,677 938,592 None None Jackson TN 381,076 857,261 None None Memphis TN 381,265 900,580 None None Murfreesboro TN 385,437 782,396 None None Murfreesboro TN 406,056 886,293 None None Smyrna TN 302,372 836,214 None None Austin TX 407,910 885,113 None None Beaumont TX 293,919 832,154 None None Hurst TX 373,084 871,163 None None Lubbock TX 266,805 857,492 None None Woodway TX 372,487 835,198 None None Hampton VA 373,499 836,071 None None Virginia Beach VA 551,588 797,260 None None Other - ----- Mesa AZ 271,754 1,259,911 38,949 20,017 Phoenix AZ 322,708 1,496,144 242,472 10,462 Escondido CA -- -- 13,900 None Fresno CA 428,900 3,434,562 None None San Diego CA 3,745,000 8,885,351 15,693 20,410 Page F-91 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Video Rental - ------------ Norcross GA 431,284 724,037 1,155,321 Plainfield IN 453,645 908,485 1,362,130 Topeka KS 285,802 966,286 1,252,088 Wichita KS 289,714 797,856 1,087,570 Winchester KY 355,474 929,177 1,284,651 Warren MI 356,348 903,351 1,259,699 Centerville OH 601,408 758,192 1,359,600 Dayton OH 401,723 698,872 1,100,595 Forest Park OH 328,187 921,232 1,249,419 Franklin OH 337,572 777,943 1,115,515 Springboro OH 261,916 897,489 1,159,405 Oklahoma City OK 307,658 474,096 781,754 Tulsa OK 318,441 1,004,663 1,323,104 Bartlett TN 420,000 612,285 1,032,285 Clarksville TN 499,885 840,869 1,340,754 Columbia TN 466,469 716,723 1,183,192 Hendersonville TN 333,677 938,592 1,272,269 Jackson TN 381,076 857,261 1,238,337 Memphis TN 381,265 900,580 1,281,845 Murfreesboro TN 385,437 782,396 1,167,833 Murfreesboro TN 406,056 886,293 1,292,349 Smyrna TN 302,372 836,214 1,138,586 Austin TX 407,910 885,113 1,293,023 Beaumont TX 293,919 832,154 1,126,073 Hurst TX 373,084 871,163 1,244,247 Lubbock TX 266,805 857,492 1,124,297 Woodway TX 372,487 835,198 1,207,685 Hampton VA 373,499 836,071 1,209,570 Virginia Beach VA 551,588 797,260 1,348,848 Other - ----- Mesa AZ 271,754 1,318,877 1,590,631 Phoenix AZ 322,708 1,749,078 2,071,786 Escondido CA -- 13,900 13,900 Fresno CA 428,900 3,434,562 3,863,462 San Diego CA 3,745,000 8,921,454 12,666,454 Page F-92 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Video Rental - ------------ Norcross GA 63,318 09/30/97 300 Plainfield IN 70,716 01/09/98 300 Topeka KS 78,579 12/16/97 300 Wichita KS 35,852 11/10/98 300 Winchester KY 57,238 06/30/98 300 Warren MI 70,343 12/31/97 300 Centerville OH 46,698 06/29/98 300 Dayton OH 43,058 06/26/98 300 Forest Park OH 77,859 11/05/97 300 Franklin OH 63,014 12/30/97 300 Springboro OH 46,305 09/08/98 300 Oklahoma City OK 32,213 04/17/98 300 Tulsa OK 91,613 09/26/97 300 Bartlett TN 15,110 05/12/99 02/26/99 300 Clarksville TN 40,605 09/30/98 300 Columbia TN 65,265 09/26/97 300 Hendersonville TN 76,301 12/05/97 300 Jackson TN 78,160 09/26/97 300 Memphis TN 64,211 03/30/98 300 Murfreesboro TN 24,709 03/31/99 300 Murfreesboro TN 80,799 09/26/97 300 Smyrna TN 76,223 08/29/97 300 Austin TX 71,843 11/20/97 300 Beaumont TX 75,888 09/05/97 300 Hurst TX 50,689 07/28/98 300 Lubbock TX 81,018 08/21/97 300 Woodway TX 67,859 12/12/97 300 Hampton VA 67,868 12/19/97 300 Virginia Beach VA 59,356 02/20/98 300 Other - ----- Mesa AZ 793,513 06/30/86 300 Phoenix AZ 961,046 06/30/86 300 Escondido CA 162 Fresno CA 3,434,562 10/29/82 180 San Diego CA 5,395,848 03/08/86 03/25/86 300 Page F-93 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Cost Capitalized Subsequent Initial Cost to Company to Acquisition ----------------------- ---------------------- Buildings, Improvements and Description Acquisition Carrying (Note 1) Land Fees Improvements Costs - ------------------- --------- ----------- ------------ ------ Other - ----- San Diego CA 2,485,160 8,697,822 32,587 14,574 San Diego CA 5,797,411 15,473,497 40,214 19,115 Humble TX 106,000 545,518 10,422 5,990 Plano TX 565,000 6,935,000 None 174,352 Other -- 401,553 None 28,571 ----------- ----------- ------- ------- 350,517,264 710,782,659 532,276 646,931 =========== =========== ======= ======= Page F-94 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Gross Amount at Which Carried at Close of Period (Notes 2, 3 and 5) Buildings, Improvements and Description Acquisition (Note 1) Land Fees Total - ------------------- ------------ ------------ ---------- Other - ----- San Diego CA 2,485,160 8,744,983 11,230,143 San Diego CA 5,797,411 15,532,826 21,330,237 Humble TX 106,000 561,930 667,930 Plano TX 565,000 7,109,352 7,674,352 Other -- 430,124 430,124 ----------- ----------- ------------- 350,517,264 711,961,866 1,062,479,130 =========== =========== ============= Page F-95 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Life on which in latest Income Accumulated Statement Description Depreciation Date of Date is Computed (Note 1) (Note 4) Construction Acquired (in Months) - ------------------- ------------ ------------ -------- ----------- Other - ----- San Diego CA 3,967,897 01/23/89 09/19/86 300 San Diego CA 6,600,995 01/20/89 08/05/87 300 Humble TX 433,549 03/25/86 300 Plano TX 1,114,949 05/26/95 300 Other 381,290 ----------- 195,386,310 =========== </TABLE> Page F-96 REALTY INCOME CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Note 1. One thousand seventy-two of the properties are single unit retail outlets. One grocery property located in Sheboygan, WI and three other properties located in San Diego, CA are multi-tenant commercial properties. All properties were acquired on an all cash basis except one; no encumbrances were outstanding for the periods presented. Note 2. The aggregate cost for federal income tax purposes is $998,424,738. Note 3. Reconciliation of total real estate carrying value for the three years ended December 31, 1999 are as follows: <TABLE> 1999 1998 1997 ----------- ----------- ----------- <S> <C> <C> <C> Balance at beginning of period 889,835,701 699,797,446 564,539,993 Additions during period: Acquisitions 181,375,766 193,436,163 142,286,618 Equipment -- 14,685 -- Improvements, etc. 198,565 79,790 16,683 Other (leasing costs) 191,391 168,425 36,266 ------------- ----------- ----------- Total additions 181,765,722 193,699,063 142,339,567 ------------- ----------- ----------- Deductions during period: Cost of real estate sold 9,109,061 3,520,108 6,917,114 Cost of equipment sold -- 58,000 -- Other (fully amortized commissions) 13,232 82,700 -- Other (provision for impairment losses) -- -- 165,000 ------------- ----------- ----------- Total deductions 9,122,293 3,660,808 7,082,114 ------------- ----------- ----------- Balance at close of period: 1,062,479,130 889,835,701 699,797,446 ============= =========== =========== Note 4. Reconciliation of accumulated depreciation for the three years ended December 31, 1999 are as follows: (table continued) Page F-97
(continued) 1999 1998 1997 ----------- ----------- ----------- Balance at beginning of period: 171,555,267 152,206,136 138,307,408 Additions during period - provision for depreciation 23,844,275 20,766,430 17,465,979 Deductions during period: Accumulated depreciation of real estate and equipment sold -- 1,334,599 3,567,251 Other (fully amortized commissions) 13,232 82,700 -- ----------- ----------- ----------- Balance at close of period 195,386,310 171,555,267 152,206,136 =========== =========== =========== </TABLE> Note 5. In 1997, a provision for impairment loss was made on two vacant properties in Riverside, CA and Irving, TX which was sold in 1998 and a restaurant property in McMinnville, OR which was sold in 1997. Page F-98