<PAGE>
(Note: WORD for DOS; Courier 12; 1" margins)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
=========
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996, or
=============
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
COMMISSION FILE NUMBER 1-13318
==============================
REALTY INCOME CORPORATION
=========================
(Exact name of registrant as specified in its charter)
DELAWARE
========
(State or other jurisdiction of incorporation or organization)
33-0580106
==========
(I.R.S. Employer Identification No.)
220 WEST CREST STREET, ESCONDIDO, CALIFORNIA 92025
===================================================
(Address of principal executive offices)
(619) 741-2111
==============
(Registrant's telephone number)
Indicate by checkmark 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 [ ]
Number of shares outstanding of common stock as of
August 9, 1996: Common Stock, $1.00 par value; 22,976,237
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REALTY INCOME CORPORATION
Form 10-Q
June 30, 1996
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION Pages
============================== -----
Item 1: Financial Statements
Consolidated Balance Sheets........................ 3-4
Consolidated Statements of Income.................. 5-6
Consolidated Statements of Cash Flows.............. 7-8
Notes to Consolidated Financial Statements......... 9-13
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations......13-30
PART II. OTHER INFORMATION
==========================
Item 4: Submission of Matters to a
Vote of Security Holders........................... 30
Item 6: Exhibits and Reports on Form 8-K................... 31
SIGNATURE................................................... 32
EXHIBIT INDEX............................................... 33
EXHIBIT 27: Financial Data Schedule........................ 34
COVER LETTER................................................ 35
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PART I. FINANCIAL INFORMATION
==============================
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
===========================
June 30, 1996 And December 31, 1995
(dollars in thousands, except per share data)
(Unaudited)
1996 1995
========= =========
<S> <C> <C>
ASSETS
Real Estate, at Cost:
Land $ 150,087 $ 147,789
Buildings and Improvements 367,620 367,637
--------- ---------
517,707 515,426
Less - Accumulated Depreciation
and Amortization (132,029) (126,062)
--------- ---------
Net Real Estate, at Cost 385,678 389,364
Cash and Cash Equivalents 865 1,650
Accounts Receivable 1,012 1,638
Due from Affiliates 493 493
Other Assets 1,684 1,927
Goodwill 22,110 22,567
--------- ---------
TOTAL ASSETS $ 411,842 $ 417,639
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions Payable $ 3,561 $ 12,407
Accounts Payable and Accrued Expenses 364 673
Other Liabilities 4,426 4,541
Notes Payable -- 12,597
Line of Credit Payable 24,600 6,000
--------- ---------
TOTAL LIABILITIES 32,951 36,218
--------- ---------
</TABLE>
Continued on next page
Page 3
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<TABLE>
<CAPTION>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
===========================
June 30, 1996 And December 31, 1995
(dollars in thousands, except per share data)
(Unaudited)
1996 1995
========= =========
<S> <C> <C>
STOCKHOLDERS' EQUITY
Preferred Stock, Par Value
$1.00 Per Share, 5,000,000 Shares
Authorized, No Shares Issued
or Outstanding -- --
Common Stock, Par Value $1.00 Per
Share, 40,000,000 Shares
Authorized, 22,976,237 Shares
Issued and Outstanding 22,976 22,976
Capital in Excess of Par Value 515,931 516,119
Accumulated Distributions
in Excess of Net Income (160,016) (157,674)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 378,891 381,421
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 411,842 $ 417,639
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 4
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<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Income
=================================
For The Three And Six Months Ended June 30, 1996 And 1995
(dollars in thousands, except per share data)
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
========== ========== ========== ==========
<S> <C> <C>
REVENUE
Rental $ 13,602 $ 12,171 $ 27,330 $ 23,978
Interest 27 50 50 156
Other 8 22 35 37
---------- ---------- ---------- ----------
13,637 12,243 27,415 24,171
---------- ---------- ---------- ----------
EXPENSES
Depreciation
and Amorti-
zation 4,049 3,586 8,123 6,931
General and
Adminis-
trative 1,288 494 2,598 996
Advisor Fees -- 1,456 -- 2,908
Property 413 354 859 724
Interest 485 559 1,005 894
Provision for
Impairment
Losses -- -- 323 --
---------- ---------- ---------- ----------
6,235 6,449 12,908 12,453
---------- ---------- ---------- ----------
Income from
Operations 7,402 5,794 14,507 11,718
Gain on
Sales of
Properties 213 -- 958 77
---------- ---------- ---------- ----------
NET INCOME $ 7,615 $ 5,794 $ 15,465 $ 11,795
========== ========== ========== ==========
</TABLE>
Continued on next page
Page 5
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<TABLE>
<CAPTION>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Income
=================================
For The Three And Six Months Ended June 30, 1996 And 1995
(dollars in thousands, except per share data)
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
========== ========== ========== ==========
<S> <C> <C>
Net Income
Per Share $ 0.33 $ 0.30 $ 0.67 $ 0.60
========== ========== ========== ==========
Weighted
Average
Number of
Shares
Outstanding 22,976,469 19,503,080 22,976,756 19,503,080
========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 6
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<TABLE>
<CAPTION>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
=====================================
For The Six Months Ended June 30, 1996 And 1995
(dollars in thousands)
(Unaudited)
1996 1995
========= =========
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 15,465 $ 11,795
Adjustments to Net Income:
Depreciation and Amortization 8,123 6,931
Provision for Impairment Losses 323 --
Gain on Sales of Properties (958) (77)
Change in:
Accounts Receivable and
Other Assets 797 (1)
Accounts Payable, Accrued
Expenses and Other Liabilities (424) 557
--------- ---------
Net Cash Provided by
Operating Activities 23,326 19,205
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Properties 2,208 315
Acquisition of and Additions
to Properties (5,481) (41,607)
--------- ---------
Net Cash Used in
Investing Activities (3,273) (41,292)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of Distributions (26,653) (17,553)
Proceeds from Line of Credit 21,300 31,600
Payment of Line of Credit (2,700) --
Payment of Notes Payable (12,597) --
Stock Offering Costs (188) --
--------- ---------
Net Cash Provided By (Used in)
Financing Activities (20,838) 14,047
--------- ---------
</TABLE>
Continued on next page
Page 7
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<TABLE>
<CAPTION>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
=====================================
For The Six Months Ended June 30, 1996 And 1995
(dollars in thousands)
(Unaudited)
1996 1995
========= =========
<S> <C> <C>
Net Decrease in
Cash and Cash Equivalents (785) (8,040)
Cash and Cash Equivalents,
Beginning of Period 1,650 11,673
--------- ---------
Cash and Cash Equivalents,
End of Period $ 865 $ 3,633
========= =========
</TABLE>
Interest paid, net of interest capitalized, during the first six
months of 1996 and 1995 was $811,000 and $656,000, respectively.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 8
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REALTY INCOME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
==========================================
June 30, 1996
(Unaudited)
1. Management Statement and General
- ------------------------------------
The financial statements of Realty Income Corporation
("Realty Income" or the "Company") were prepared from the books
and records of the Company without audit or verification and in
the opinion of management include all adjustments (consisting of
only normal recurring accruals) necessary to present a fair
statement of results for the interim periods presented. Readers
of this quarterly report should refer to the audited financial
statements of the Company for the year ended December 31, 1995,
which are included in the Company's 1995 Annual Report on Form
10-K, as certain disclosures which would substantially duplicate
those contained in such audited financial statements have been
omitted from this report.
During the first quarter of 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and of Long-Lived Assets
to Be Disposed Of" ("Statement 121"). Statement 121 provides
guidance for the recognition and measurement of impairment of
long-lived assets, including goodwill, related both to assets to
be held and used and assets to be disposed of. Under Statement
121, a provision for impairment loss is recognized for assets to
be held and used if estimated future cash flows (undiscounted and
without interest charges) over a long-term holding period, plus
estimated disposition proceeds (undiscounted) are less than
current book value. In addition, for assets to be disposed of, a
provision for impairment loss is recognized for the amount by
which the current book value of the asset to be disposed of
exceeds its fair value less cost to sell.
During the first quarter of 1996, the Company recorded
provision for impairment losses of $323,000 related to two
properties to be disposed of. No provision was recognized in
1995 or the second quarter of 1996.
Certain of the 1995 balances have been reclassified to
conform to 1996 presentation. The reclassifications had no
effect on stockholders' equity or net income.
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2. Credit Facility
- -------------------
The Company has a $130 million, three-year, revolving,
unsecured acquisition credit facility that expires in November
1998. As of June 30, 1996 and December 31, 1995, the outstanding
balance on the credit facility was $24.6 million and $6.0
million, respectively, with an effective interest rate of
approximately 6.78% and 7.19%, respectively. A commitment fee of
0.15%, per annum, accrues on the average amount of the unused
available credit commitment. The fee can increase up to 0.35% if
the Company reaches certain debt levels.
The credit facility is subject to various leverage and
interest coverage ratio limitations, all of which the Company is
and has been in compliance with.
For the six months ended June 30, 1996 and 1995, interest of
$40,000 and $158,000 was capitalized on properties under
construction. For the three months ended June 30, 1996 and 1995,
interest of $26,000 and $112,000 was so capitalized.
3. Notes Payable
- -----------------
The Company redeemed, at par, the $12.6 million principal
amount of variable rate senior notes due 2001 on March 29, 1996.
Interest incurred on the notes for the six months ended
June 30, 1996 and 1995 was $217,000 and $519,000, respectively.
Interest incurred on the notes for the three months ended
June 30, 1996 and 1995 was $0 and $267,000.
4. Properties
- --------------
At June 30, 1996, the Company owned a diversified portfolio
of 692 properties in 42 states. Of the Company's properties, 682
are single tenant properties with the remaining properties being
multi-tenant properties. At June 30, 1996, eight unleased
properties were vacant and available for lease.
Page 10
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4. Properties (continued)
- --------------------------
Nine retail properties in six states were acquired during the
first six months of 1996 at an aggregate cost of approximately
$6.8 million (including the estimated unfunded development costs
on seven properties under construction totaling $2.3 million).
<TABLE>
<CAPTION>
Total
Invested
through
Tenant Industry City/State 06/30/96
====================== =========== ================ ==========
<S> <C> <C> <C>
1ST QUARTER
Carver's Restaurant Glendale, AZ $1,521,000
Econo Lube N' Tune Automotive Chula Vista, CA 706,000
Econo Lube N' Tune (1) Automotive Broomfield, CO 335,000
Econo Lube N' Tune (1) Automotive Dallas, TX 387,000
Econo Lube N' Tune (1) Automotive Lewisville, TX 312,000
2ND QUARTER
Dairy Mart (1) Convenience Mt Washington, KY 329,000
Dairy Mart (1) Convenience Tipp City, OH 355,000
Econo Lube N' Tune (1) Automotive Arvada, CO 274,000
Jiffy Lube (1) Automotive Centerville, OH 305,000
----------
Properties acquired in 1996 4,524,000
Funding in 1996 of buildings under
construction on land acquired in 1995 798,000
Capitalized Expenditures Relating
to Existing Properties 9,000
Acquisition of the Outstanding Class A Units of
R.I.C. Trade Center, Ltd., Silverton Business
Center, Ltd. and Empire Business Center, Ltd.
(after this purchase, the Company owned 100%
of these partnerships) 150,000
----------
TOTAL $5,481,000
==========
</TABLE>
(1) The Company acquired these properties as undeveloped land and
is funding construction and other costs relating to the
development of the properties by the prospective tenants. The
prospective tenants have entered into leases with the Company
covering these properties.
Page 11
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5. Gain on Sales of Properties
- -------------------------------
For the six months ended June 30, 1996, the Company sold two
restaurant properties and received compensation for granting an
easement totaling $2.2 million and recognized a gain of $958,000.
For the six months ended June 30, 1995, the Company sold one
child care property for $315,000 and recognized a gain of
$77,000.
For the three months ended June 30, 1996, the Company sold
one restaurant property for $685,000 and recognized a gain of
$213,000.
6. Related Party Transactions
- ------------------------------
A. Advisory Agreement
Prior to August 17, 1995, the Company was an advised real
estate investment trust pursuant to an advisory agreement under
which R.I.C. Advisor, Inc. (the "Advisor") advised the Company
with respect to its investments and assumed day-to-day management
of the Company. On August 17, 1995, the Advisor was merged into
the Company (the "Merger") and the advisory agreement was
terminated.
B. Acquisition of R.I.C. Advisor, Inc.
As consideration in the Merger, the Company issued 990,704
shares of common stock valued at approximately $21.2 million.
The following unaudited pro forma summary presents
information as if the Merger had occurred at the beginning of
1995. The pro forma information is provided for informational
purposes only. It is based on historical information and does
not necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results of
operations of the combined companies.
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1995
-----------------------------------------
Pro Forma
-----------
<S> <C>
Revenue $24,283,000
Net Income $11,817,000
Net Income Per Share $ 0.58
</TABLE>
Page 12
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7. Distributions Paid And Payable
- ----------------------------------
During the six months ended June 30, 1996, the Company paid a
special distribution of $0.23 per share and six monthly
distributions of $0.155 per share. The distributions for the six
months totaled $1.16 per share.
As of June 30, 1996, distributions of $0.155 per share were
declared and payable on July 15, 1996 to stockholders of record
on July 1, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
=======
Realty Income Corporation ("Realty Income" or the "Company")
is a fully integrated and self-managed real estate company with
in-house acquisition, leasing, legal, financial underwriting,
portfolio management and capital markets expertise. The seven
senior officers of the Company have each participated in the
management of the Company's properties and operations for between
six and 27 years. Realty Income has elected to be taxed as a
real estate investment trust ("REIT"). As of June 30, 1996,
Realty Income owned a diversified portfolio of 692 properties in
42 states consisting of over 4.68 million square feet of leasable
space.
Realty Income typically acquires, then leases back, retail
store locations from retail chain store operators, providing
capital to the operators for continued expansion and other
purposes. The Company concentrates its investments in single-
tenant, retail properties leased to national and regional retail
chains under long-term, triple-net lease agreements. Triple-net
leases typically require the tenant to be responsible for
substantially all property operating costs including property
taxes, insurance, maintenance and structural repairs. Management
believes that long-term leases, coupled with tenants assuming
responsibility for property expenses under the triple-net lease
structure, generally produce a more predictable income stream
than many other types of real estate portfolios.
The Company's primary business objective is to generate a
consistent and predictable level of funds from operations ("FFO")
per share and provide distributions to stockholders.
Additionally, the Company generally will seek to increase FFO per
share and distributions to stockholders through both internal and
external growth, while also seeking to lower the ratio of
distributions to stockholders as a percentage of FFO in order to
allow internal cash flow to be used to fund additional
Page 13
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acquisitions and for other corporate purposes. The Company
pursues internal growth through (i) contractual rent increases on
existing leases; (ii) rental increases at the termination of
existing leases when market conditions permit; and (iii) the
active management of the Company's property portfolio, including
selective sales of properties. The Company generally pursues
external growth through the acquisition of additional properties
under long-term, triple-net lease agreements with initial
contractual base rent which, at the time of acquisition, is in
excess of the Company's estimated cost of capital.
Prior to August 17, 1995, the Company's day-to-day affairs
were managed by R.I.C. Advisor, Inc. (the "Advisor") which
provided advice and assistance regarding acquisitions of
properties by the Company and performed the day-to-day management
of the Company's properties and business. On August 17, 1995,
the Advisor was merged with and into Realty Income (the
"Merger"). As part of the Merger the advisory agreement between
the Company and the Advisor was terminated.
In July 1996, the Company expanded its board of directors to
seven members. The new directors are Richard J. VanDerhoff,
President and Chief Operating Officer of the Company, and Willard
H. Smith, formerly the Managing Director, Equity Capital Markets
Division, of Merrill Lynch & Co from 1983 until his recent
retirement.
The Company's common stock is listed on the New York Stock
Exchange under the symbol "O."
Liquidity and Capital Resources
===============================
Cash Reserves
-------------
Realty Income was organized for the purpose of operating as
an equity REIT which distributes to stockholders, in the form of
monthly cash distributions, a substantial portion of its net cash
flow generated from lease revenue. The Company intends to retain
an appropriate amount of cash as working capital reserves. At
June 30, 1996, the Company had cash and cash equivalents totaling
approximately $865,000.
Management believes that the Company's cash on hand, cash
provided from operating activities and borrowing capacity are
sufficient to meet its liquidity needs for the foreseeable
future.
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Capital Funding
---------------
Realty Income has a $130 million three-year, revolving,
unsecured acquisition credit facility that expires in November
1998. The credit facility currently bears interest at 1.25% over
the London Interbank Offered Rate and offers the Company other
interest rate options. As of August 1, 1996, $104.4 million of
borrowing capacity was available to the Company under the
acquisition credit facility. At that time, the outstanding
balance on the credit facility was $25.6 million. This credit
facility was used to payoff senior notes, and has been and is
expected to be used to acquire additional retail properties
leased to national and regional retail chains under long term
lease agreements. Borrowings to fund additional properties will
increase the Company's exposure to interest rate risk.
On March 29, 1996, senior notes totaling $12.6 million were
redeemed at par. Proceeds from borrowings under the acquisition
credit facility were used to redeem the notes.
Realty Income expects to meet its long-term capital needs for
the acquisition of properties through the issuance of public or
private debt or equity. In August 1995, the Company filed a
universal shelf registration statement with the Securities and
Exchange Commission covering up to $200 million in value of
common stock, preferred stock or debt securities.
In the fourth quarter of 1995, the Company issued 2,540,000
shares of common stock at a price of $19.625 per share. The net
proceeds of $46.4 million from the stock offering were used to
repay borrowings under the acquisition credit facility. These
borrowings were used to acquire properties in 1995.
The Company is not currently involved in any negotiations and
has not entered into any arrangements relating to any additional
securities issuances.
Property Acquisitions
---------------------
During the first six months of 1996, Realty Income purchased
nine retail properties in six states for $6.8 million (including
the estimated unfunded development costs on seven properties
under construction totaling $2.3 million). These nine properties
will contain approximately 30,800 leasable square feet and are
100% leased under triple-net leases, with an average initial
lease term of 16.6 years. The weighted average annual
unleveraged return on the cost of the nine properties is
estimated to be 11.3%, computed as estimated contractual net
operating income (which in the case of a triple-net leased
property is equal to the base rent or, in the case of properties
Page 15
<PAGE>
under construction, the estimated base rent under the lease) for
the first year divided by the total acquisition and estimated
development costs. No assurance can be given that the actual
return on the cost of the nine properties acquired in 1996 will
not differ from the foregoing percentage.
In 1996, the Company also invested $696,000 in four
development properties originally acquired in 1995. These four
development properties have been completed and are paying rent.
Final construction funding of $585,000 is pending on two of these
properties and is anticipated to occur in the third quarter of
1996. Land adjacent to a current property in the portfolio was
acquired for $102,000 and leased to the adjacent Taco Bell
tenant.
The Company also invested $9,000 in existing properties and
purchased the outstanding Class A units in R.I.C. Trade Center,
Ltd., Silverton Business Center, Ltd. and Empire Business Center,
Ltd. for an aggregate of $150,000. After this purchase, Realty
Income owned 100% of these partnerships, which were then
dissolved. These partnerships owned three mixed-use light
industrial business parks in San Diego, CA.
From December 1994 through June 1996, Realty Income acquired
71 retail properties (the "New Properties") for an aggregate cost
of approximately $76.9 million (including the estimated unfunded
development costs on nine properties totaling $2.9 million). The
New Properties are located in 20 states, contain approximately
691,600 leasable square feet and are 100% leased under triple-net
leases, with an average initial lease term of 16.5 years. The
weighted average annual unleveraged return on the cost of the New
Properties is estimated to be 11.3%. No assurance can be given
that the actual return on the cost of the New Properties will not
differ from the foregoing percentage.
Of the New Properties, 64 were occupied as of June 30, 1996
and the remaining seven 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. All of the New Properties, including the properties
under development, are leased with initial terms of 10 to 20
years. The New Properties were purchased with $15.6 million of
cash on hand and $58.4 million from the acquisition credit
facility (of which, $46.4 million was repaid from the net
proceeds of the stock offering). The allocation of costs between
land, and buildings and improvements on the 64 completed and
occupied properties was 42% and 58%, respectively.
Page 16
<PAGE>
<TABLE>
<CAPTION>
1996 ACQUISITION ACTIVITY
THROUGH JUNE 30
Total
Approx-
Initial imate
Lease Leasable
Term Square
Tenant Industry Location (Years) Feet
============= ========== =============== ======= ========
<S> <C> <C> <C> <C>
1ST QTR
- -------
Carver's Restaurant Glendale, AZ 19.8 8,100
Econo Lube
N' Tune Automotive Chula Vista, CA 15.0 2,800
Econo Lube
N' Tune (1) Automotive Broomfield, CO 15.0 2,800
Econo Lube
N' Tune (1) Automotive Dallas, TX 15.0 2,700
Econo Lube
N' Tune (1) Automotive Lewisville, TX 15.0 2,700
2ND QTR
- -------
Dairy Mart (1) Automotive Mt. Washington, KY 20.0 2,800
Dairy Mart (1) Automotive Tipp City, OH KY 15.0 3,800
Econo Lube
N' Tune (1) Automotive Arvada, CO 15.0 2,800
Jiffy Lube (1) Automotive Centerville, OH 20.0 2,300
------ --------
Average/Total 16.6 30,800
====== ========
</TABLE>
(1) The Company acquired these properties as undeveloped land
and is funding construction and other costs relating to the
development of the properties by the prospective tenants. The
prospective tenants have entered into leases with the Company
covering these properties and are contractually obligated to
complete construction on a timely basis and to pay construction
cost overruns to the extent they exceed the construction budget
by more than 5%. As of June 30, 1996, the total acquisition and
estimated construction costs for the seven properties under
development was $4.6 million, of which $2.3 million had not been
funded.
Page 17
<PAGE>
Distributions
-------------
Cash distributions paid during the first six months of 1996
totaled $26.7 million, including a special distribution of $5.3
million. Cash distributions paid during the comparable period in
1995 totaled $17.6 million. During the first six months of 1996,
the Company paid a special distribution of $0.23 per share and
six monthly distributions of $0.155 per share, totaling $1.16 per
share. During the first six months of 1995, the Company paid six
monthly distributions of $0.15 per share, totaling $0.90 per
share. In June and July 1996, the Company declared two
distributions of $0.155 per share payable on July 15 and
August 15, 1996, respectively.
Funds from Operations ("FFO")
=============================
FFO for the second quarter of 1996 was $11.44 million versus
$9.38 million during the second quarter of 1995, an increase of
$2.06 million. FFO for the six months ended June 30, 1996 was
$22.93 million versus $18.65 million during the comparable period
in 1995, an increase of $4.28 million. Realty Income defines FFO
as net income less gain on sales of properties, plus provision
for impairment losses on properties held for sale, plus
depreciation and amortization. In accordance with the
recommendations of the National Association of Real Estate
Investment Trusts ("NAREIT"), amortization of deferred financing
costs are not added back to net income to calculate FFO.
Amortization of financing costs are included in interest expense
in the consolidated statements of income.
Management considers FFO to be an appropriate measure of the
performance of an equity REIT. FFO is used by financial analysts
in evaluating REITs and 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.
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 the Company's performance or to
cash flows from operating, investing, and financing activities as
a measure of liquidity or ability to make cash distributions.
Page 18
<PAGE>
Below is a reconciliation of net income to FFO for the
quarter ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
=========== ===========
<S> <C> <C>
Net Income $ 7,615,000 $ 5,794,000
Plus Depreciation and Amortization 4,049,000 3,586,000
Plus Provision for Impairment Losses -- --
Less Depreciation of Furniture,
Fixtures and Equipment (14,000) --
Less Gain on Sales of Properties (213,000) --
----------- -----------
Total Funds From Operations $11,437,000 $ 9,380,000
=========== ===========
</TABLE>
FFO for the quarter ended June 30, 1996 and 1995 exceeded
cash distributions by $753,000 and $603,000, respectively.
Below is a reconciliation of net income to FFO for the six
months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
=========== ===========
<S> <C> <C>
Net Income $15,465,000 $11,795,000
Plus Depreciation and Amortization 8,123,000 6,931,000
Plus Provision for Impairment Losses 323,000 --
Less Depreciation of Furniture,
Fixtures and Equipment (26,000) --
Less Gain on Sales of Properties (958,000) (77,000)
----------- -----------
Total Funds From Operations $22,927,000 $18,649,000
=========== ===========
</TABLE>
FFO for the six months ended June 30, 1996 and 1995 exceeded
cash distributions (excluding the non-recurring special
distribution) by $1.6 million and $1.1 million, respectively.
Results of Operations
=====================
The following is a comparison of the three and six months
ended June 30, 1996 to the three and six months ended
June 30, 1995.
Page 19
<PAGE>
Rental revenue was $13.6 million for the quarter ended
June 30, 1996 versus $12.2 million for the comparable quarter in
1995, an increase of $1.4 million. The increase in rental
revenue was primarily due to the New Properties. In the quarter
ended June 30, 1996 and 1995, the New Properties generated
revenue of $2.0 million and $614,000, respectively, an increase
of $1.4 million. Percentage rent, which is included in rental
revenue, in the second quarter of 1996 and 1995 was $101,000 and
$111,000, respectively.
Rental revenue was $27.3 million for the six months ended
June 30, 1996 versus $24.0 million for the comparable six months
in 1995, an increase of $3.3 million. The increase in rental
revenue was primarily due to the New Properties. In the six
months ended June 30, 1996 and 1995, the New Properties generated
revenue of $3.95 million and $769,000, respectively, an increase
of $3.18 million. Percentage rent for the six months ended
June 30, 1996 and 1995 was $320,000 and $325,000, respectively.
At June 30, 1996, 652 or 94.2% of the Company's leases
provide for increases in rents through (i) base rent increases
tied to a consumer price index with adjustment ceilings or (ii)
overage rent based on a percentage of the tenants' gross sales.
Some leases contain both types of clauses. Rental revenue
generated on 624 properties owned during both the first six
months of 1995 and 1996 increased by $284,000 or 1.2%, from
$23.19 million to $23.47 million. Rental revenue generated on
624 properties owned during both the second quarter of 1995 and
1996 increased by $102,000 or 0.9%, from $11.55 million to $11.65
million. When comparing 1996 to 1995, same store revenue
increased at a slower pace during the second quarter then during
the first six months, due to an increase in unleased properties
in 1996.
Unleased properties are a factor in determining gross revenue
generated and property costs incurred by the Company. At
June 30, 1996, the Company had eight properties that were not
under lease as compared to four properties at June 30, 1995.
Four of the eight unleased properties at June 30, 1996 became
available for lease during the second quarter of 1996. All of
the remaining properties were under lease agreements with third
party tenants.
Page 20
<PAGE>
The following table represents Realty Income's rental revenue
by industry for the six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
---------------------- ----------------------
Rental Percentage Rental Percentage
Industry Revenue of Total Revenue of Total
================= =========== ========== =========== ==========
<S> <C> <C> <C> <C>
Automotive $ 4,079,000 15% $ 3,622,000 15%
Child Care 11,536,000 42% 11,336,000 47%
Convenience Stores 1,293,000 5% 316,000 1%
Home Furnishings 1,248,000 4% 223,000 1%
Restaurant 6,779,000 25% 6,096,000 26%
Other 2,395,000 9% 2,385,000 10%
----------- ---- ----------- ----
Total $27,330,000 100% $23,978,000 100%
=========== ==== =========== ====
</TABLE>
Interest revenue decreased by $23,000 in the second quarter
of 1996 to $27,000 from $50,000 in 1995 and by $106,000 in the
six months ended June 30, 1996 to $50,000 from $156,000 in 1995.
The decrease in interest for both periods was due to lower cash
balances, which reflects the Company's desire to maintain an
appropriate amount of cash as working capital reserves and invest
excess available cash in properties. During the first six months
of 1995, the Company invested $10.0 million of cash on hand in
properties.
Depreciation and amortization was $4.0 million in the second
quarter of 1996 verses $3.6 million for the comparable quarter in
1995 and $8.1 million for the six months ended June 30, 1996
verses $6.9 million for the comparable six months in 1995. The
increase in both periods was primarily due to the depreciation of
the New Properties and amortization of goodwill recorded in
connection with the Merger.
Total advisor fees and general and administrative expenses
decreased by $662,000 to $1.3 million in the second quarter of
1996 versus $2.0 million in 1995. General and administrative
expenses were $1.3 million in the second quarter of 1996 versus
$494,000 in 1995 and advisor fees of $1.5 million in 1995. The
$794,000 increase in general and administrative expenses was due
to expenses for management, accounting systems, office
facilities, professional and support personnel (i.e. costs of
being self-administered). Such costs were the responsibility of
the Advisor through August 17, 1995, which received advisor fees
of $1.5 million in the second quarter of 1995. As part of the
Merger, the advisory agreement was terminated.
Page 21
<PAGE>
Total advisor fees and general and administrative expenses
decreased by $1.3 million to $2.6 million in the six months ended
June 30, 1996 versus $3.9 million in 1995. General and
administrative expenses were $2.6 million in 1996 versus $1.0
million in 1995 and advisor fees of $2.9 million in 1995. The
$1.6 million increase in general and administrative expenses was
due to expenses for management, accounting systems, office
facilities, professional and support personnel (i.e. costs of
being self-administered). Such costs were the responsibility of
the Advisor through August 17, 1995, which received advisor fees
of $2.9 million in the first six months of 1995.
Property expenses are broken down into costs associated with
multi-tenant non-triple net lease properties, unleased single-
tenant properties and general portfolio expenses. Costs on the
multi-tenant and unleased single-tenant properties include, but
are not limited to, property taxes, maintenance, insurance,
utilities, site checks, bad debt expense and legal fees. General
portfolio costs include, but are not limited to, insurance,
legal, site checks and title search fees.
Costs incurred on the ten multi-tenant properties during the
second quarter of 1996 and 11 multi-tenant properties in the
comparable period of 1995 totaled $280,000 and $244,000,
respectively. The increase was primarily due to an increase in
insurance. Two of the ten multi-tenant locations became vacant
during the second quarter of 1996. One multi-tenant property was
sold in August 1995. Costs incurred on the six unleased single-
tenant properties in the second quarter of 1996 and three
unleased single-tenant properties in the second
quarter of 1995 were $32,000 and $16,000, respectively. The
increase is due to property taxes, maintenance and utilities on
the additional vacant properties. General portfolio costs in
1996 and 1995 totaled $101,000 and $94,000, respectively. The
increase in general portfolio costs is primarily due to an
increase in title search fees.
Costs incurred on the ten multi-tenant properties during the
six months ended June 30, 1996 and 11 multi-tenant properties in
the comparable period of 1995 totaled $559,000 and $492,000. The
increase was primarily due to an increase in property taxes and
insurance. Costs incurred on the six unleased single-tenant
properties during the first six months of 1996 and three unleased
single-tenant properties in the comparable period of 1995 were
$91,000 and $43,000. The increase is due to property taxes,
maintenance and utilities on the additional vacant properties.
General portfolio costs in 1996 and 1995 totaled $209,000 and
$189,000, respectively. The increase in general portfolio costs
is primarily due to an increase in title search fees.
Interest expense is made up of four components which include;
(i) interest on outstanding loans and notes which is offset by;
Page 22
<PAGE>
(ii) interest capitalized on properties under development.
Interest capitalized on properties under development is included
in the costs of the completed property and amortized over the
estimated useful life of the property. The other two components
are; (iii) commitment fees on the undrawn portion of the credit
facility; and (iv) amortization of the credit facility
origination costs.
Interest expense for the second quarter of 1996 was $485,000
as compared to $559,000 for 1995. Interest accrued in 1996 and
1995 was $416,000 and $553,000, respectively. Interest accrued
was lower in 1996 than in 1995 due to a decrease in the average
outstanding balance and lower interest rates on the acquisition
credit facility and senior notes. During the second quarter of
1996, the average outstanding balance and interest rate were
$24.6 million and 6.81% as compared to $27.7 million and 7.99%
during the comparable period in 1995. Included in the 1996 and
1995 accrued interest was capitalized interest totaling $26,000
and $112,000, respectively. Commitment fees in 1996 were $40,000
as compared to $32,000 in 1995. In 1996 and 1995, a commitment
fee of 0.15% per annum was accrued on the undrawn portion of the
credit facility. Commitment fees increased in 1996 because the
borrowing capacity was increased to $130 million from $100
million in December 1995. Amortization of the credit facility
origination fees were $55,000 in 1996 as compared to $86,000 in
1995. The amortized credit facility origination fees decreased
in 1996 as compared to 1995, because in December 1995 the term of
the credit facility was extended one year, which extended the
period of time over which unamortized fees are amortized.
Interest expense for the six months ended June 30, 1996 was
$1.0 million as compared to $894,000 for 1995. Interest accrued
in 1996 and 1995 was $851,000 and $814,000, respectively.
Interest accrued was higher in 1996 than in 1995 due to an
increase in the average outstanding balance on the acquisition
credit facility and senior notes, partially offset by lower
interest rates. During the first six months of 1996, the average
outstanding balance and interest rate were $24.5 million and
6.97% as compared to $20.5 million and 7.99% during the
comparable period in 1995. Included in the 1996 and 1995 accrued
interest was capitalized interest totaling $40,000 and $158,000,
respectively. Commitment fees in 1996 were $85,000 as compared
to $70,000 in 1995. In 1996 and 1995, a commitment fee of 0.15%
per annum was accrued on the undrawn portion of the credit
facility. Commitment fees increased in 1996 because the
borrowing capacity was increased to $130 million from $100
million in December 1995. Amortization of the credit facility
origination fees were $109,000 in 1996 as compared to $168,000 in
1995. The amortized credit facility origination fees decreased
in 1996 as compared to 1995, because in December 1995 the term of
the credit facility was extended one year, which extended the
period of time over which unamortized fees are amortized.
Page 23
<PAGE>
The Company reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. In the first quarter
of 1996, a $323,000 charge was taken to reduce the net carrying
value on two properties because they are held for sale. No
charge was recorded for an impairment loss in 1995.
The Company anticipates a small number of property sales will
occur in the normal course of business. During the second
quarter of 1996, the Company recorded a gain of $213,000 on the
sale of one restaurant property which generated cash proceeds
from the sale of $685,000. No sales occurred during the
comparable period of 1995.
During the first six months 1996, the Company recorded a gain
of $958,000 on the sale of two restaurant properties and the
granting of an easement on another property. During 1995, the
Company recorded a gain of $77,000 on the sale of one child care
property. During 1996 and 1995 cash proceeds generated from
these sales were $2.2 million and $315,000, respectively.
For the second quarter of 1996, the Company had net income of
$7.6 million versus $5.8 million in 1995. The $1.8 million
increase in net income is primarily due to an increase in rental
revenue from New Properties of $1.4 million and a decrease in
interest, advisor fees, general and administrative expenses of
$736,000, offset by an increase in depreciation and amortization
expense.
For the six months ended June 30, 1996, the Company had net
income of $15.5 million versus $11.8 million in 1995. The $3.7
million increase in net income is primarily due to an increase in
rental revenue of $3.2 million on the New Properties and a net
decrease in interest, advisor fees, general and administrative
expenses of $1.2 million, offset by an increase in depreciation
and amortization expense.
Page 24
<PAGE>
Properties
==========
As of June 30, 1996, Realty Income owned a diversified
portfolio of 692 properties in 42 states consisting of over 4.68
million square feet of leasable space. The following table sets
forth certain geographic diversification information regarding
these properties:
<TABLE>
<CAPTION>
Total
Number Approx. Percent
of Leasable Annualized of Total
Proper- Percent Square Base Annualized
State ties Leased Feet Rent (1) Base Rent
============ ======= ======= ========= =========== =========
<S> <C> <C> <C> <C> <C>
Alabama 4 100% 20,300 $ 160,000 0.3%
Arizona 28 93 189,200 2,314,000 4.2
California 51 96 914,000 9,163,000 16.8
Colorado 40 100 228,200 2,821,000 5.2
Connecticut 3 100 7,100 160,000 0.3
Florida 40 100 298,600 2,974,000 5.4
Georgia 36 100 177,500 2,339,000 4.3
Idaho 11 100 52,000 653,000 1.2
Illinois 22 100 153,400 1,816,000 3.3
Indiana 20 95 89,800 1,237,000 2.3
Iowa 7 100 37,700 411,000 0.8
Kansas 13 100 80,500 900,000 1.7
Kentucky 11 100 33,400 827,000 1.5
Louisiana 2 100 10,700 126,000 0.2
Maryland 6 100 34,900 501,000 0.9
Massachusetts 4 100 20,900 431,000 0.8
Michigan 5 100 26,900 345,000 0.6
Minnesota 17 100 118,400 1,671,000 3.1
Mississippi 3 100 17,300 176,000 0.3
Missouri 26 96 161,300 1,775,000 3.2
Montana 1 100 5,400 71,000 0.1
Nebraska 8 100 47,100 509,000 0.9
Nevada 5 100 29,100 350,000 0.6
New Hampshire 1 100 6,400 119,000 0.2
New Jersey 2 100 22,700 344,000 0.6
New Mexico 3 100 12,000 102,000 0.2
New York 4 100 24,300 469,000 0.9
North Carolina 18 100 77,100 1,154,000 2.1
Ohio 40 100 176,800 2,724,000 5.0
Oklahoma 9 100 60,200 541,000 1.0
Oregon 18 100 98,500 1,129,000 2.1
Pennsylvania 4 100 28,300 420,000 0.8
South Carolina 19 95 82,000 1,022,000 1.9
South Dakota 1 100 6,100 79,000 0.1
</TABLE>
Page 25
<PAGE>
(continued)
<TABLE>
<CAPTION>
Total
Number Approx. Percent
of Leasable Annualized of Total
Proper- Percent Square Base Annualized
State ties Leased Feet Rent (1) Base Rent
============ ======= ======= ========= =========== =========
<S> <C> <C> <C> <C> <C>
Tennessee 8 100 56,400 784,000 1.4
Texas 125 99 832,400 8,545,000 15.6
Utah 7 100 45,400 588,000 1.1
Virginia 12 100 67,000 888,000 1.6
Washington 41 100 246,900 2,922,000 5.3
West Virginia 1 100 4,600 58,000 0.1
Wisconsin 10 100 55,200 665,000 1.2
Wyoming 6 100 32,100 410,000 0.8
------- ------- --------- ----------- ---------
Total/Average 692 99% 4,688,100 $54,693,000 100.0%
======= ======= ========= =========== =========
</TABLE>
(1) Does not include percentage rents (i.e., additional rent
calculated as a percentage of the tenant's gross sales above a
specified level), if any, that may be payable under leases
covering certain of the properties. Annualized base rent is
calculated by multiplying the monthly contractual base rent as of
June 30, 1996 for each of the properties by 12.
Realty Income's 692 properties consist of 140 after-market
automotive retail locations, 319 child care centers, 38
convenience stores, 4 home furnishings stores, 176 restaurant
facilities, and 15 other properties. Of the 692 properties, 623
or 90% are leased to national or major regional retail chain
operators; 44 or 6% are leased to franchisees of retail chain
operators; 17 or 3% are leased to other tenant types; and 8 or 1%
are available for lease. The following table sets forth certain
information regarding the Company's properties as of
June 30, 1996, classified according to the business of the
respective tenants:
Page 26
<PAGE>
<TABLE>
<CAPTION>
Approx. Realty Total
Total Income Approx. Annual-
Loca- Owned Leasable ized
Industry tions Loca- Square Base
Tenant Segment (1) tions Feet Rent (2)
============== ============ ======= ====== ========= ===========
<S> <C> <C> <C> <C> <C>
AUTOMOTIVE
- ----------
Discount Tire Parts 290 18 103,200 $ 1,155,000
Northern
Automotive Parts 560 79 409,100 4,177,000
R & S Strauss Parts 110 2 31,200 431,000
Econo Lube
N' Tune Service 210 6 16,700 402,000
Jiffy Lube Service 1,210 25 59,300 1,496,000
Q Lube Service 460 4 7,600 180,000
Speedy
Muffler
King Service 1,030 4 20,200 311,000
Other Automotive -- 2 6,500 90,000
------ --------- -----------
Total after-market automotive 140 653,800 8,242,000
CHILD CARE
- ----------
Children's
World
Learning
Centers Child Care 500 134 964,000 13,272,000
KinderCare
Learning
Centers Child Care 1,150 13 79,800 1,055,000
La Petite
Academy Child Care 770 171 977,300 8,732,000
Other Child Care -- 1 4,200 --
------ --------- -----------
Total child care 319 2,025,300 23,059,000
CONVENIENCE STORES
- ------------------
7-ELEVEN Convenience 15,000 3 9,700 235,000
Dairy Mart Convenience 870 20 60,100 1,314,000
The Pantry Convenience 390 14 34,400 1,333,000
Other Convenience -- 1 2,100 31,000
------ --------- -----------
Total convenience stores 38 106,300 2,913,000
</TABLE>
Page 27
<PAGE>
(continued)
<TABLE>
<CAPTION>
Approx. Realty Total
Total Income Approx. Annual-
Loca- Owned Leasable ized
Industry tions Loca- Square Base
Tenant Segment (1) tions Feet Rent (2)
============== ============ ======= ====== ========= ===========
<S> <C> <C> <C> <C> <C>
HOME FURNISHINGS
- ----------------
Levitz Home
Furnishings 130 4 376,400 2,496,000
------ --------- -----------
Total home furnishings 4 376,400 2,496,000
RESTAURANTS
- -----------
Don Pablo's Dinner House 50 7 60,700 597,000
Carver's Dinner House 90 3 26,600 495,000
Other Dinner House -- 13 107,900 1,125,000
Golden Corral Family 450 90 529,600 6,981,000
Sizzler Family 600 7 37,600 841,000
Other Family -- 4 23,900 157,000
Hardees Fast Food 3,870 3 10,300 108,000
Taco Bell Fast Food 4,620 24 54,100 1,501,000
Whataburger Fast Food 520 9 23,000 616,000
Other Fast Food -- 16 45,200 864,000
------ --------- -----------
Total restaurants 176 918,900 13,285,000
Total other Miscellaneous 15 607,400 4,698,000
------ --------- -----------
Total 692 4,688,100 $54,693,000
====== ========= ===========
</TABLE>
(1) Approximate total number of retail locations in operation
under this format (including both corporate owned and franchised
locations), based on information provided to the Company by the
respective tenants in the first quarter of 1996.
(2) Does not include percentage rents (i.e., additional rent
calculated as a percentage of the tenant's gross sales above a
specified level), if any, that may be payable under leases
covering certain of the properties. Annualized base rent is
calculated by multiplying the monthly contractual base rent as of
June 30, 1996 for each of the properties by 12.
Of the 692 properties owned at June 30, 1996, 682 are single-
tenant with the remaining being multi-tenant properties. The
Page 28
<PAGE>
average remaining lease term for all leases on the Company's
properties, excluding the multi-tenant properties, is
approximately 8.9 years. The lease expirations for seven
properties under construction are based on the estimated date of
completion of such properties.
The following table sets forth certain information regarding
the timing of lease expirations on the Company's 676 triple-net
leased, single tenant retail properties:
<TABLE>
<CAPTION>
Percent of Total
Number of Annualized Annualized
Year Leases Expiring Base Rent (2) Base Rent
======== =============== ============= =================
<S> <C> <C> <C>
1996 15 $ 572,000 1.1%
1997 15 587,000 1.2
1998 4 168,000 0.3
1999 20 897,000 1.8
2000 27 1,323,000 2.6
2001 46 3,599,000 7.1
2002 73 5,829,000 11.5
2003 69 5,134,000 10.1
2004 78 6,244,000 12.3
2005 87 6,027,000 11.7
2006 30 2,501,000 4.9
2007 78 4,395,000 8.6
2008 41 3,384,000 6.7
2009 11 714,000 1.4
2010 34 2,729,000 5.4
2011 16 1,290,000 2.5
2012 1 135,000 0.3
2013 0 -- --
2014 2 265,000 0.5
2015 25 4,789,000 9.4
2016 3 231,000 0.5
2017 0 -- --
2018 1 39,000 0.1
--------------- ------------- -----------------
Total 676 (1) $50,852,000 100.0%
=============== ============= =================
</TABLE>
(1) The table does not include ten multi-tenant properties and
six vacant, unleased single-tenant properties owned by the
Company.
(2) Does not include percentage rents (i.e., additional rent
calculated as a percentage of the tenant's gross sales above a
specified level), if any, that may be payable under leases
Page 29
<PAGE>
covering certain of the properties. Annualized base rent is
calculated by multiplying the monthly contractual base rent as of
June 30, 1996 for each of the properties by 12.
Impact Of Inflation
===================
Tenant leases generally provide for increases in rent as a
result of increases in the tenant's sales volumes or increases in
the consumer price index. Management expects that inflation will
cause these lease provisions to result in increases in rent over
time. However, inflation and increased costs may have an adverse
impact on the tenants if increases in the tenant's operating
expenses exceed increases in revenue. Approximately 98% of the
properties are leased to tenants under triple-net leases in which
the tenant is responsible for substantially all property costs
and expenses. These features in the leases reduce the Company's
exposure to rising expenses due to inflation.
PART II. OTHER INFORMATION
===========================
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of Realty Income
Corporation was held on May 14, 1996 for the purpose of electing
a board of directors. Proxies for the meeting were solicited
pursuant to Section 14(a) of the Securities Exchange Act of 1934
and there was no solicitation in opposition to management's
solicitations.
All of management's nominees for directors as listed in the
proxy statement were re-elected with the following vote:
Shares Withhold
Voted For Percent Authority
---------- ------- ---------
Donald R. Cameron 15,497,098 67.45 214,984
William E. Clark 15,484,424 67.39 227,658
Roger P. Kuppinger 15,489,982 67.42 222,100
Thomas A. Lewis 15,493,210 67.43 218,872
Michael D. McKee 15,489,156 67.41 222,926
Page 30
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
=========== ===========
<S> <C>
2.1 Agreement and Plan of Merger between Realty
Income Corporation and R.I.C. Advisor, Inc.
dated as of April 28, 1995 (incorporated by
reference to Appendix A to the Company's
definitive Proxy Statement filed
June 30, 1995)
3.1 Amended and Restated Certificate of
Incorporation of Realty Income Corporation
(filed as Exhibit 3.1 to the Company's Form
10-Q for the quarter ended September 30, 1994
and incorporated herein by reference)
3.2 Amended and Restated Bylaws of Realty Income
Corporation (filed as Exhibit 3.2 to the
Company's 10-Q for the quarter ended
September 30, 1995 and incorporated herein by
reference)
10.1 Revolving Credit Agreement (filed as Exhibit
99.2 to the Company's Form 8-K dated
December 16, 1994 and incorporated herein by
reference)
10.2 Second Amendment to the Revolving Credit
Agreement (filed as Exhibit 99.2 to the
Company's Form 8-K dated December 19, 1995
and incorporated herein by reference)
27 Financial Data Schedule (electronically filed
with the Securities and Exchange Commission
only)
</TABLE>
B. No report on Form 8-K was filed during the quarter for
which this report is filed.
A report on Form 8-K dated July 15, 1996 was filed on
July 22, 1996 reporting that Realty Income Corporation's board of
directors was expanded to seven members.
Page 31
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
REALTY INCOME CORPORATION
<TABLE>
<S> <C>
(Signature and Title) /s/ GARY M. MALINO
Date: August 9, 1996 ----------------------------------
Gary M. Malino, Vice President
Chief Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
Page 32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
=========== =========== ----
<S> <C> <C>
27 Financial Data Schedule (Electronically
filed with the Securities and Exchange
Commission only)............................ 34
</TABLE>
Page 33
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 865,000
<SECURITIES> 0
<RECEIVABLES> 1,012,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,747,000
<PP&E> 517,707,000
<DEPRECIATION> (132,029,000)
<TOTAL-ASSETS> 411,842,000
<CURRENT-LIABILITIES> 6,543,000
<BONDS> 26,408,000
<COMMON> 22,976,000
0
0
<OTHER-SE> 355,915,000
<TOTAL-LIABILITY-AND-EQUITY> 411,842,000
<SALES> 0
<TOTAL-REVENUES> 27,415,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,479,000
<LOSS-PROVISION> 424,000
<INTEREST-EXPENSE> 1,005,000
<INCOME-PRETAX> 15,465,000
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</TABLE>
