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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, 1996
Commission File Number 1-13318
REALTY INCOME CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0580106
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
220 West Crest Street, Escondido, California 92025
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(Address of principal executive offices)
Registrant's telephone number, including area code: (760)741-2111
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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
- ----------------------------------- -----------------------
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 ]
<PAGE>
(continued)
At March 19, 1997 the aggregate market value of the
Registrant's shares of common stock, $1.00 par value, held by
non-affiliates of the Registrant was $532,447,000, at the New
York Stock Exchange closing price of $24.125.
There were 22,988,237 shares of common stock outstanding at
March 19, 1997.
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 13, 1997, 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.
This report on Form 10-K , including documents incorporated
herein by reference, contain forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act. Forward-looking statements are inherently
subject to risk and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and
otherwise, may differ materially from the results discussed in
the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in
"Management's Discussion and Analysis of Financial Condition and
Result of Operations."
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REALTY INCOME CORPORATION
Index To Form 10-K
==================
Page
PART I ----
Item 1: Business......................................... 3
Item 2: Properties....................................... 22
Item 3: Legal Proceedings................................ 22
Item 4: Submission of Matters to a
Vote of Security Holders......................... 22
PART II
Item 5: Market for the Registrant's Common
Equity and Related Stockholder Matters........... 23
Item 6: Selected Financial Data.......................... 24
Item 7: Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 25
Item 8: Financial Statements and Supplementary Data...... 41
Item 9: Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...........138
PART III
Item 10: Directors and Executive Officers
of the Registrant................................138
Item 11: Executive Compensation...........................138
Item 12: Security Ownership of Certain
Beneficial Owners and Management.................138
Item 13: Certain Relationships and Related
Transactions.....................................138
PART IV
Item 14: Exhibits, Financial Statement Schedules
and Reports on Form 8-K..........................139
SIGNATURES....................................................142
EXHIBIT INDEX.................................................145
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PART I
======
ITEM 1: BUSINESS
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THE COMPANY
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Realty Income Corporation ("Realty Income" or the "Company")
is a fully integrated, self-administered and self-managed Real
Estate Investment Trust ("REIT") which management believes is the
nation's largest publicly-traded owner of freestanding, single-
tenant, retail properties diversified geographically and by
industry and operated under net lease agreements. As of
January 1, 1997, the Company owned a diversified portfolio of 740
properties located in 42 states with over 5.2 million square feet
of leasable space. Approximately 99% of the Company's properties
were leased as of January 1, 1997. Unless otherwise indicated,
information regarding the Company's properties is as of
January 1, 1997.
Realty Income adheres to a focused strategy of acquiring
freestanding, single-tenant, retail properties leased to national
and regional retail chains under long-term, net lease agreements.
The Company typically acquires, and then leases back, retail
store locations from retail chain store operators, providing
capital to the operators for continued expansion and other
purposes. The Company's 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 provide for future rent increases
(typically subject to ceilings) based on increases in the
consumer price index or additional rent calculated as a
percentage of the tenant's gross sales above a specified level.
Since 1970, Realty Income has acquired and leased back to
national and regional retail chains over 700 properties
(including 25 properties that have been sold) and has collected
in excess of 98% of the original contractual rent obligations on
those properties. Realty Income believes that the long-term
ownership of an actively managed, diversified portfolio of retail
properties leased under long-term, net lease agreements can
produce consistent, predictable income and the potential for
long-term capital appreciation. Management believes that long-
term leases, coupled with tenants assuming responsibility for
property expenses under the net lease structure, generally
produce a more predictable income stream than many other types of
real estate portfolios. As of January 1, 1997, the Company's
single-tenant properties were leased pursuant to leases with an
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average remaining term (excluding extension options) of
approximately 8.6 years.
The Company was formed on September 9, 1993 in the State of
Delaware. 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 (the
"Consolidation"). Each of the partnerships was formed between
1970 and 1989 for the purpose of acquiring and managing long-
term, net leased properties.
The Company is a fully integrated real estate company with
in-house acquisition, leasing, legal, financial underwriting,
portfolio management and capital markets expertise. The seven
senior officers of the Company, who have each managed the
Company's properties and operations for between six and 27 years,
owned approximately 3.9% of the Company's outstanding common
stock as of March 19, 1997.
Realty Income has 35 employees as of March 19, 1997.
RECENT DEVELOPMENTS
===================
During 1996, the Company has continued implementing its
growth plan, which is intended to increase the Company's funds
from operations ("FFO") per share. FFO per share increased 4.0%
in 1996 to $2.08 compared to $2.00 in 1995. FFO is defined as
net income before net gain on sales of properties, plus provision
for impairment losses, plus depreciation and amortization. As
part of its growth plan, in 1996 and from the date of the
Consolidation through December 31, 1996, the Company acquired 62
and 124 additional net leased retail properties, respectively,
with an aggregate initial annual contractual base rent of
approximately $6.2 million and $14.0 million, respectively.
INCREASE IN MONTHLY DISTRIBUTION. In December 1996, the
Company increased its monthly distribution to $0.1575 per share
from $0.155 per share, representing an increase of 1.6%. The
Company has paid monthly distributions of $0.1575 per share in
December 1996 through March 1997. The monthly distribution of
$0.1575 per share represents a current annualized distribution of
$1.89 per share, and an annualized distribution yield of
approximately 7.3% based on the last reported sale price of the
Company's Common Stock on the New York Stock Exchange ("NYSE") of
$25.875 on February 24, 1997. Although the Company expects to
continue its policy of paying monthly distributions, there can be
no assurance that the current level of distributions will be
maintained by the Company or, because of fluctuations in the
price of its common stock, as to the actual distribution yield
for any future period.
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INVESTMENT GRADE CREDIT RATING. The Company received an
investment grade corporate senior debt credit rating by Duff &
Phelps Rating Company, Moody's Investor Service, Inc., and
Standard & Poors in December 1996. Duff & Phelps assigned a
rating of BBB, Moody's Baa3, and Standard & Poors BBB-. These
ratings are subject to change based upon, among other things, the
Company's results of operations and financial condition.
ACQUISITION OF 62 NET LEASED, RETAIL PROPERTIES. During
1996, the Company has increased the size of its portfolio through
a strategic program of acquisitions. The Company acquired 62
additional properties (the "New Properties"), and selectively
sold seven properties, increasing the number of properties in its
portfolio by 8.0% from 685 properties to 740 properties during
1996. Of the New Properties, 57 were occupied as of
February 1, 1997 and the remaining five 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. The New Properties were acquired for an aggregate
cost of approximately $55.5 million (excluding the estimated
unfunded development costs totaling $3.8 million on properties
under construction). The New Properties are located in 22
states, will contain approximately 603,900 leasable square feet
and are 100% leased under net leases, with an average initial
lease term of 11.7 years. The weighted average annual return on
the cost of the New Properties (excluding the estimated cost of
properties under construction) is estimated to be 10.6%, computed
as estimated contractual net operating income (which in the case
of a net leased property is equal to the base rent) for the first
year of each lease, divided by total acquisition and estimated
development costs. Since it is possible that a tenant could
default on the payment of contractual rent, no assurance can be
given that the actual return on the cost of the New Properties
will not differ from the foregoing percentage.
VARIABLE SENIOR NOTE REDEMPTION. On March 29, 1996, the
Company redeemed, at par, the $12.6 million principal amount of
variable rate senior notes due 2001. The notes were issued in
1994 as part of the Consolidation.
BUSINESS OBJECTIVES AND STRATEGY
================================
GENERAL. The Company's primary business objective is to
generate a consistent and predictable level of FFO per share and
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
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used to fund additional 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,
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.
INVESTMENT PHILOSOPHY. Realty Income believes that the
long-term ownership of an actively managed, diversified portfolio
of retail properties under long-term, net lease agreements should
produce consistent, predictable income and the potential for
long-term capital appreciation. Under a net lease agreement, the
tenant agrees to pay a minimum monthly rent and property expenses
(taxes, maintenance, and insurance) plus, typically, future rent
increases based on increases in the consumer price index or
additional rent calculated as a percentage of the tenant's gross
sales above a specified level. The Company believes that long-
term leases, coupled with the tenants assuming responsibility for
property expenses, produce a more predictable income stream than
many other types of real estate portfolios, while continuing to
offer the opportunity for capital appreciation.
INVESTMENT STRATEGY. In identifying new properties for
acquisition, Realty Income focuses on providing expansion capital
to middle market retail chains by acquiring, then leasing back,
their retail store locations. The Company classifies 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. In general, these
retail chains are thinly capitalized and are in the process of
solving distribution, marketing, concept, geographic adaptation,
and other problems associated with a new, growing company. Middle
market retail chains are those which typically have 50 to 500
retail outlets, operations in more than one geographic region,
success through one or more economic cycles, a proven, replicable
concept, and an objective of further expansion. The upper market
retail chains typically consist of companies with 500 or more
stores which operate nationally in a mature retail concept. They
generally have strong operating histories and access to several
sources of capital.
Realty Income focuses on acquiring properties leased to
emerging, middle market retail chains which the Company believes
are more attractive for investment because: (i) they generally
have overcome many of the operational and managerial obstacles
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that tend to adversely affect venture retailers; (ii) they
typically require capital to fund expansion but have more limited
financing options compared to upper market retailers; (iii)
historically, they generally have provided attractive risk-
adjusted returns to the Company over time, since their financial
strength has in many cases tended to improve as their businesses
have matured; (iv) their relatively large size compared to
venture retailers allows them to spread corporate expenses among
a greater number of stores; and (v) compared to venture
retailers, middle market retailers typically have the critical
mass to survive if a number of locations have to be closed due to
underperformance.
CREDIT STRATEGY. Realty Income provides sale leaseback
financing primarily to less than investment grade retail chains.
The Company believes that it is within this market that it can
receive the best risk adjusted return on the financing that it
provides to retailers.
Realty Income has identified retailers' four primary
financial obligations as their bank debt, bond debt, payment to
suppliers and real estate lease obligations. Because the Company
owns the land on which the tenant conducts its retail business,
the Company believes that the risk of default on the retailers'
lease obligations is significantly less than the retailers'
unsecured general obligations. It has been the Company's
experience that since retailers must retain their profitable
retail locations in order to survive, 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,
the Company believes it will fare better than unsecured creditors
of the same retailer in the event of a Chapter 11 reorganization.
In addition, Realty Income believes that the risk of default of
the real 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 the Company's
portfolio, new acquisitions must meet investment and credit
requirements. The properties must generate attractive current
yields, and the tenant must meet the Company's credit standards
and have a proven market concept. The Company has established a
three part analysis that examines each potential investment based
on: 1) industry, company, market conditions and credit profile;
2) location profitability; and 3) 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, attractive
demographics, and acquisition costs at or below appraised value.
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ACQUISITION STRATEGY. Realty Income seeks to invest in
industries that are dominated by independent local operators and
in which several well organized regional and national chains are
capturing market share through service, quality control,
economies of scale, mass media advertising, and selection of
prime retail locations. The Company executes its 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.
Relying on executives from its acquisitions, credit underwriting,
portfolio management, finance, accounting, operations, capital
markets, and legal departments, the Company undertakes thorough
research and analysis in identifying appropriate industries,
tenants, and property locations for investment. In selecting
real estate for potential investment, the Company generally will
seek to acquire properties that have the following
characteristics:
* Freestanding, commercially zoned property with a single tenant;
* Properties that are important retail locations for national and
regional 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;
* 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 (typically subject to ceilings) based on
increases in the consumer price index or through the payment of
additional rent calculated as a percentage of the tenant's
gross sales above a specified level; and
* Properties that can be acquired at or below their appraised
value at prices generally ranging from $300,000 to $10 million.
PORTFOLIO MANAGEMENT STRATEGY. The active management of the
property portfolio is an essential component of the Company's
long-term strategy. The Company continually monitors its
portfolio for changes that could affect the performance of the
industries, tenants, and locations in which it has invested.
Realty Income's executive committee meets at least monthly to
review industry and tenant research, due diligence, property
operations and portfolio management. This monitoring typically
includes ongoing review and analysis of: (i) the performance of
various tenant industries; (ii) the operation, management,
business planning, and financial condition of the tenants; (iii)
the health of the individual markets in which the Company owns
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properties, from both an economic and real estate standpoint; and
(iv) the physical maintenance of the Company's individual
properties. The portfolio is analyzed on an ongoing basis with a
view towards optimizing performance and returns.
While the Company generally intends to hold its net leased
properties for long-term investment, the Company believes that
opportunities may exist to increase FFO through the active
management of its portfolio of net lease properties. The Company
intends to pursue a strategy of identifying properties that may
be sold at attractive prices, particularly where the Company
believes reinvestment of the sales proceeds can generate a higher
cash flow to the Company than the property being sold. While the
Company intends to pursue such a strategy, it will only do so
within the constraints of the rules regarding REIT tax status.
CAPITAL STRATEGY. The Company utilizes its $130 million,
unsecured Acquisition Credit Facility as a vehicle for the short-
term financing of the acquisition of new properties. When
outstanding borrowings under the Acquisition Credit Facility
reach a certain level (generally in the range of $75 to $100
million), the Company intends to refinance those borrowings with
the net proceeds of long-term or permanent financing, which may
include the issuance of common stock, preferred stock or
convertible preferred stock, debt securities or convertible debt
securities. However, there can be no assurance that the Company
will be able to effect any such refinancing or that market
conditions prevailing at the time of refinancing will enable the
Company to issue equity or debt securities upon acceptable terms.
The Company believes that it is best served by a conservative
capital structure, with a majority of its capital consisting of
equity. As of December 31, 1996, the Company's total indebtedness
was approximately 12.8% of its equity market capitalization,
which equates to shares outstanding multiplied by the Company's
stock price on December 31, 1996.
The Company received an investment grade corporate credit
rating by Duff & Phelps Rating Company, Moody's Investor Service,
Inc., and Standard & Poors in December 1996. Duff & Phelps
assigned a rating of BBB, Moody's Baa3, and Standard & Poors
BBB-. These ratings are subject to change based upon, among
other things, the Company's results of operations and financial
condition.
In December 1996, the Company entered into a treasury
interest rate lock agreement to hedge against the possibility of
rising interest rates. Under the interest rate lock agreement,
the Company receives or makes a payment based on the differential
between a specified interest rate, 6.537%, and the actual 10-year
treasury interest rate on notional principal of $90 million, at
the end of six months. Based on the 10-year treasury interest
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rate at December 31, 1996, the Company has an unrecognized loss
on the agreement of $80,000. The Company anticipates issuing
debt during the second quarter of 1997, subject to market
conditions and acquisition levels.
COMPETITIVE STRATEGY. The Company believes that to utilize
its investment philosophy and strategy most successfully, it will
seek to maintain the following competitive strategy:
(i) SIZE AND TYPE OF INVESTMENT PROPERTIES: The Company
believes that smaller ($300,000 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, the Company believes that these types of properties have
not experienced significant institutional participation or the
corresponding yield reduction experienced by larger income
producing properties. The Company believes the less intensive
day to day property management required by net lease agreements,
coupled with the active management of a large portfolio of
smaller properties by the Company, is an effective investment
strategy.
In 1969, Realty Income identified a market niche and
systematically built a portfolio around this niche. Twenty-seven
years later, the Company is one of the largest owners of
freestanding retail properties in America with just over five
million square feet.
The tenants of Realty Income's freestanding retail
properties include convenience stores, consumer electronics
stores, child care centers, restaurants, and other retailers
providing goods and services which satisfy basic human needs and
are used by consumers every day. In order to grow and expand,
they need capital. Since the acquisition of real estate is
typically the single largest capital expenditure of many such
retailers, Realty Income's method of purchasing the property and
then leasing it back under a net lease arrangement, allows the
retail chain to free up capital.
(ii) INVESTMENT IN NEW INDUSTRIES: While specializing in
single tenant properties, the Company will seek to further
diversify its portfolio among a variety of industries. The
Company believes that diversification will allow it to invest in
industries that are currently growing and have characteristics
the Company finds attractive. These characteristics include, but
are not limited to, industries dominated by local operators where
national and regional chain operators can gain substantial market
share and dominance through more efficient operations, as well as
industries taking advantage of major demographic shifts in the
population base. For example, in the early 1970s, Realty Income
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targeted the fast food industry to take advantage of the
country's increasing desire to dine away from home, and in the
early 1980s, it targeted the child day care industry, responding
to the need for professional child care as more women entered the
work force.
(iii) DIVERSIFICATION: Diversification of the portfolio by
industry type, tenant and geographic location is key to the
Company's objective of providing predictable investment results
for its stockholders. As the Company expands it will seek to
further diversify its portfolio. During 1996 and 1995, the
Company added the consumer electronics and convenience store
industries, respectively, to the portfolio.
(iv) MANAGEMENT SPECIALIZATION: The Company believes that
its management's specialization in single tenant properties
operated under net lease agreements is important to meeting its
objectives. The Company plans 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.
(v) TECHNOLOGY: The Company intends to stay at the forefront
of technology in its efforts to efficiently and economically
carry out its operations. The Company maintains a sophisticated
information system that allows it to analyze its portfolio's
performance and actively manage its investments. The Company
believes that technology and information based systems will play
an increasingly important role in its competitiveness as an
investment manager and source of capital to a variety of
industries and tenants.
PROPERTIES
==========
As of January 1, 1997, the Company owned a diversified
portfolio of 740 properties in 42 states containing over 5.2
million square feet of leasable space. The portfolio consists of
153 after-market automotive retail locations (80 automotive parts
stores and 73 automotive service locations), 319 child care
centers, 36 consumer electronics stores, 42 convenience stores,
four home furnishings stores, 173 restaurant facilities and 13
other properties. Of the 740 properties, 672 or 91% were leased
to national or regional retail chain operators; 43 or 6% were
leased to franchisees of retail chain operators; 16 or 2% were
leased to other tenant types; and nine or 1% were available for
lease. Approximately 98% of the properties were under net lease
agreements. Net leases typically require the tenant to be
responsible for property operating costs including property
taxes, insurance, maintenance and structural repairs.
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The Company's net leased retail properties are primary
retail locations leased to national and regional retail chain
store operators. The properties averaged approximately 7,100
square feet of leasable retail space on approximately 43,100
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 sufficient market or trade area for the retailer's
business.
The following table sets forth certain geographic
diversification information regarding Realty Income's portfolio
at January 1, 1997:
Number Approx. Percent
of Leasable Annualized of Total
Proper- Percent Square Base Annualized
State ties Leased Feet Rent (1) Base Rent
============ ======= ======= ========= =========== =========
Alabama 6 100% 42,300 $ 319,000 0.5%
Arizona 27 96 184,900 2,342,000 3.9
California 52 98 973,200 10,207,000 17.0
Colorado 42 98 233,500 2,978,000 4.9
Connecticut 4 100 17,200 240,000 0.4
Florida 49 100 436,500 3,805,000 6.3
Georgia 37 100 187,600 2,441,000 4.1
Idaho 11 100 52,000 656,000 1.1
Illinois 25 100 182,600 2,081,000 3.5
Indiana 23 96 122,800 1,438,000 2.4
Iowa 8 100 51,700 452,000 0.8
Kansas 15 100 129,000 1,440,000 2.4
Kentucky 11 100 33,300 831,000 1.4
Louisiana 2 100 10,700 126,000 0.2
Maryland 6 100 34,900 505,000 0.8
Massachusetts 4 100 20,900 440,000 0.7
Michigan 5 100 26,900 353,000 0.6
Minnesota 17 100 118,400 1,713,000 2.8
Mississippi 11 100 106,600 792,000 1.3
Missouri 27 93 163,900 1,787,000 3.0
Montana 1 100 5,400 71,000 0.1
Nebraska 8 100 47,100 509,000 0.8
Nevada 5 100 29,100 353,000 0.6
New Hampshire 1 100 6,400 122,000 0.2
New Jersey 2 100 22,700 344,000 0.6
New Mexico 3 100 12,000 103,000 0.2
New York 5 100 38,300 539,000 0.9
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(continued)
Number Approx. Percent
of Leasable Annualized of Total
Proper- Percent Square Base Annualized
State ties Leased Feet Rent (1) Base Rent
============ ======= ======= ========= =========== =========
North Carolina 18 100 77,100 1,154,000 1.9
Ohio 47 100 208,100 3,343,000 5.6
Oklahoma 9 100 60,200 542,000 0.9
Oregon 18 100 98,500 1,133,000 1.9
Pennsylvania 4 100 28,300 420,000 0.7
South Carolina 19 95 82,000 1,027,000 1.7
South Dakota 1 100 6,100 79,000 0.1
Tennessee 10 100 78,900 963,000 1.6
Texas 124 99 819,200 8,578,000 14.2
Utah 7 100 45,400 588,000 1.0
Virginia 16 100 79,100 1,252,000 2.1
Washington 42 98 249,700 2,956,000 4.9
West Virginia 2 100 16,800 147,000 0.2
Wisconsin 11 100 60,500 735,000 1.2
Wyoming 5 100 26,900 324,000 0.5
------- ------- --------- ----------- ---------
Total/Average 740 99% 5,226,700 $60,228,000 100.0%
======= ======= ========= =========== =========
(1) Annualized base rent is calculated by multiplying the
monthly contractual base rent as of January 1, 1997 for each of
the properties by 12. Annualized base rent 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.
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The following table sets forth certain information regarding the
Company's properties, classified according to the business of the
respective tenants:
Approx. Realty
Total Income Approx. Annual-
Loca- Owned Leasable ized
Industry tions Loca- Square Base
Tenant Segment (1) tions Feet Rent (2)
============== ============ ======= ====== ========= ===========
AUTOMOTIVE
- ----------
CSK Auto, Inc.
(formerly
Northern
Automotive) Parts 580 79 409,100 $ 4,192,000
Discount Tire Service 310 18 103,200 1,155,000
Econo Lube
N' Tune Service 210 13 35,700 895,000
Jiffy Lube Service 1,400 28 66,300 1,762,000
Q Lube Service 490 4 7,600 180,000
R&S Strauss Service 110 2 31,200 431,000
Speedy Muffler
King Service 1,080 7 40,900 531,000
Other Automotive -- 2 6,500 90,000
------ --------- -----------
TOTAL AFTER-MARKET AUTOMOTIVE 153 700,500 9,236,000
CHILD CARE
- ----------
Children's
World
Learning
Centers Child Care 530 134 964,000 13,612,000
Kinder-Care
Learning
Centers Child Care 1,150 13 79,800 1,087,000
La Petite
Academy Child Care 790 171 977,300 8,733,000
Other Child Care -- 1 4,200 --
------ --------- -----------
TOTAL CHILD CARE 319 2,025,300 23,432,000
CONSUMER ELECTRONICS
- --------------------
Best Buy Consumer
Electronics 270 2 104,800 1,321,000
Rex Stores Consumer
Electronics 230 34 408,300 2,694,000
------ --------- -----------
TOTAL CONSUMER ELECTRONICS 36 513,100 4,015,000
Page 14
<PAGE>
(continued)
Approx. Realty
Total Income Approx. Annual-
Loca- Owned Leasable ized
Industry tions Loca- Square Base
Tenant Segment (1) tions Feet Rent (2)
============== ============ ======= ====== ========= ===========
CONVENIENCE STORES
- ------------------
7-ELEVEN Convenience 20,240 3 9,700 235,000
Dairy Mart Convenience 1,020 22 66,500 1,512,000
East Coast Oil Convenience 40 2 6,400 219,000
The Pantry Convenience 400 14 34,400 1,333,000
Other Convenience -- 1 2,100 31,000
------ --------- -----------
TOTAL CONVENIENCE STORES 42 119,100 3,330,000
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 70 7 60,700 604,000
Carver's Dinner House 90 3 26,600 495,000
Other Dinner House -- 13 108,400 1,015,000
Golden Corral Family 460 87 512,500 6,747,000
Sizzler Family 630 7 37,600 841,000
Other Family -- 4 23,900 96,000
Hardees Fast Food 3,100 3 10,300 144,000
Taco Bell Fast Food 4,890 24 54,100 1,501,000
Whataburger Fast Food 520 9 23,000 616,000
Other Fast Food -- 16 45,200 871,000
------ --------- -----------
TOTAL RESTAURANTS 173 902,300 12,930,000
TOTAL OTHER Miscellaneous 13 590,000 4,789,000
------ --------- -----------
Total 740 5,226,700 $60,228,000
====== ========= ===========
(1) Approximate total number of retail locations in operation
(including both owned and franchised locations), based on
information provided to the Company by the respective tenants.
Page 15
<PAGE>
(2) Annualized base rent is calculated by multiplying the
monthly contractual base rent as of January 1, 1997 for each of
the properties by 12. Annualized base rent 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.
Of the 740 properties in the portfolio, 732 are single-tenant
properties with the remaining properties being multi-tenant
properties. As of January 1, 1997, 724 or 99% of the single-
tenant properties were subject to net leases with an average
remaining lease term (excluding extension options) of
approximately 8.6 years. The following table sets forth certain
information regarding the timing of lease expirations on the
Company's 724 net leased, single tenant retail properties:
Percent
Number of of Total
Leases Annualized Annualized
Year Expiring Base Rent (2) Base Rent
======== ========= ============= ==========
1997 26 $ 984,000 1.7%
1998 4 168,000 0.3
1999 20 898,000 1.6
2000 27 1,328,000 2.4
2001 49 3,802,000 6.7
2002 73 5,877,000 10.4
2003 68 5,161,000 9.2
2004 110 8,894,000 15.8
2005 86 6,010,000 10.7
2006 29 2,434,000 4.3
2007 78 4,426,000 7.8
2008 42 3,471,000 6.2
2009 11 719,000 1.3
2010 34 2,729,000 4.8
2011 31 2,649,000 4.7
2012 1 362,000 0.6
2014 2 265,000 0.5
2015 25 4,789,000 8.5
2016 7 1,345,000 2.4
2018 1 39,000 0.1
--------- ------------- ----------
Total 724 (1) $56,350,000 100.0%
========= ============= ==========
(1) The table does not include eight multi-tenant properties and
eight vacant, unleased properties owned by the Company. The
lease expirations for properties under construction are based on
the estimated date of completion of such properties.
Page 16
<PAGE>
(2) Annualized base rent is calculated by multiplying the
monthly contractual base rent as of January 1, 1997 for each of
the properties by 12. Annualized base rent 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.
DESCRIPTION OF LEASING STRUCTURE. At January 1, 1997,
approximately 98% of the Company's 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. The leases generally provide for a
minimum base rent plus future increases (typically subject to
ceilings) based on increases in the consumer price index or
additional rent based upon the tenant's gross sales above a
specified level (i.e., percentage rent). Where leases provide for
rent increases based on increases in the consumer price index,
such 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 such level. In general, the leases require
the tenant to pay property taxes, insurance, and expenses of
maintaining the property.
Matters Pertaining to Certain Properties and Tenants
- ----------------------------------------------------
As of January 1, 1997, the Company's four largest tenants
were Children's World Learning Centers, La Petite Academy, Golden
Corral and CSK Auto, Inc., which accounted for approximately
23.7%, 16.5%, 12.4% and 8.4%, respectively, of the Company's
rental revenue for the year ended December 31, 1996. The
financial position and results of operations of the Company and
its ability to make distributions to stockholders and debt
service payments may be materially adversely affected by
financial difficulties experienced by any such major tenants of
other tenants, including, but not limited to, a bankruptcy,
insolvency or general downturn in the business of such tenants.
For the year ended December 31, 1996, approximately 42.0%,
24.3% and 15.3% of the Company's rental revenues were
attributable to tenants in the child care, restaurant and after-
market automotive industries, respectively. 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 the financial position and results of operations
of the Company and its ability to make distributions to
stockholders and debt service payments.
Page 17
<PAGE>
Nine of the Company's properties were vacant as of
January 1, 1997 and available for lease. Seven of the vacant
properties were previously leased to restaurant operators, one
was formerly leased to a child care operator and one operated as
a multi-tenant automotive center.
As of January 1, 1997, 21 of the Company's properties which
were under lease, were vacant and available for sublease by the
tenant. These 21 properties (13 restaurants, three automotive
stores, three child care, one other store and one medical
building) were available for sublease and had tenants who were
current with their rent and other lease obligations.
As of January 1, 1997, 18 of the Company's properties had
been sublet to tenants in different industries than the original
tenant. All of these tenants were current with their rent and
other lease obligations.
Development of Certain Properties
- ---------------------------------
Of the 62 New Properties acquired by the Company in 1996, 57
were occupied as of February 1, 1997 and the remaining five 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 opens for business. In the case of development
properties, the Company typically enters into an agreement with a
tenant pursuant to which the tenant retains a contractor to
construct the improvements on the property and the Company funds
the costs of such development. The tenant is contractually
obligated to complete the construction on a timely basis,
generally within eight months after the Company purchases the
land, to pay construction cost overruns to the extent they exceed
the construction budget by more than a predetermined amount. The
Company also enters into a lease with the tenant at the time the
Company purchases the land, which generally requires that the
tenant begin paying base rent, calculated as a percentage of the
Company's acquisition cost for the property, including
construction costs and capitalized interest, when the premises
opens for business. During 1996, the Company acquired 18
development properties, 13 of which have been completed, are
operating and paying rent. Completion of the remaining five
development properties is anticipated by April 1997. As of
December 31, 1996, the total acquisition and estimated
development costs for properties under development was $8.7
million, of which $3.8 million had not been funded. The Company
will continue to seek to acquire land for development under
similar arrangements.
Page 18
<PAGE>
DISTRIBUTION POLICY
===================
Distributions are paid to the Company's stockholders on a
monthly basis if, as and when declared by the Company's Board of
Directors. In order to maintain its tax status as a REIT, the
Company is generally required to distribute annually to its
stockholders at least 95% of its taxable income (determined
without regard to the deduction for dividends paid and by
excluding any net capital gain). The Company intends to make
distributions to its stockholders which are sufficient to meet
this requirement.
Future distributions by the Company will be at the
discretion of its Board of Directors and will depend on, among
other things, its 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"), its debt service requirements and such
other factors as the Board of Directors may deem relevant. In
addition, the Acquisition Credit Facility contains financial
covenants which could limit the amount of distributions payable
by the Company 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 Stock in the
event that the Company fails to pay when due (subject to any
applicable grace period) any principal of or interest on
borrowings under the Acquisition Credit Facility.
Distributions by the Company to the extent of its current
and accumulated earnings and profits for federal income tax
purposes generally will be taxable to stockholders as ordinary
income. Distributions in excess of such earnings and profits
generally will be treated as a non-taxable reduction in the
stockholders' basis in its stock to the extent of such basis, and
thereafter as a gain from the sale of such stock. Approximately
13.2% of the distributions made or deemed to have been made in
1996 were classified as a return of capital for federal income
tax purposes, the Company is unable to predict the portion of
1997 or future distributions which may be classified as a return
of capital since such amount depends on the Company's taxable
income for the entire year.
OTHER ITEMS
===========
COMPETITION FOR ACQUISITION OF REAL ESTATE. The Company
faces competition in the acquisition, operation and sale of its
properties. Such competition can be expected from other
businesses, individuals, fiduciary accounts and plans and other
entities engaged in real estate investment. Some of the
Page 19
<PAGE>
Company's competitors are larger and have greater financial
resources than the Company. This competition may result in a
higher cost for properties the Company wishes to purchase. The
tenants leasing the Company's properties generally face
significant competition from other operators. This may result in
an adverse impact on that portion, if any, of the rental stream
to be paid to the Company based on a tenant's revenues and may
also adversely impact the tenants' results of operations or
financial condition.
ENVIRONMENTAL MATTERS. Investments in real property create
a potential for environmental liability on the part of the owner
of such property for contamination resulting from the presence or
discharge of hazardous substances on the property. Such
liability may be imposed without regard to knowledge of, or the
timing, cause or person responsible for the release of such
substances onto the property. The Company believes that its
properties are in compliance in all material respects with all
federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances or petroleum products.
The Company has not been notified by any governmental authority,
and is not otherwise aware, of any material noncompliance,
liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of its present
properties. Moreover, the tenants are required to operate in
compliance with all applicable federal, state and local laws and
regulations. Nevertheless, if environmental contamination should
exist, the Company could be subject to strict liability by virtue
of its ownership interest.
In December 1996, the Company obtained a five year
environmental insurance policy on the property portfolio. Based
upon the 740 properties in the portfolio at December 31, 1996,
the cost of the insurance will be approximately $80,000 per year.
The limit of the policy is $10.0 million for each loss and $20.0
million in the aggregate, with a $100,000 deductible. There is a
sublimit on properties with underground storage tanks of $1.0
million per occurrence and $5.0 million in the aggregate, with a
deductible of $25,000.
TAXATION OF THE COMPANY. The Company has elected to be
taxed as a REIT under the Code, commencing with its taxable year
ended December 31, 1994. As long as the Company meets the
requirements under the Code for qualification as a REIT each
year, the Company will be entitled to a deduction when
calculating its taxable income for dividends paid to its
stockholders. For the Company to qualify as a REIT, however,
certain detailed technical requirements must be met (including
certain income, asset and stock ownership tests) under Code
provisions for which, in many cases, there are only limited
judicial or administrative interpretations. Although the Company
Page 20
<PAGE>
intends to operate so that it will continue to qualify as a REIT,
the highly complex nature of the rules governing REITs, the
ongoing importance of factual determinations and the possibility
of future changes in the Company's circumstances preclude any
assurance that the Company will so qualify in any year. For any
taxable year that the Company fails to qualify as a REIT, it
would not be entitled to a deduction for dividends paid to its
stockholders in calculating its taxable income. Consequently,
distributions to stockholders would be substantially reduced and
could be eliminated because of the Company's increased tax
liability. Should the Company's qualification as a REIT
terminate, the Company may not be able to elect to be treated as
a REIT for the subsequent five-year period, which would
substantially reduce and could eliminate distributions to
stockholders for the years involved.
EFFECT OF DISTRIBUTION REQUIREMENTS. To maintain its status
as a REIT for federal income tax purposes, the Company generally
is required each year to distribute to its stockholders at least
95% of its taxable income. In addition, the Company is subject
to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar
year are less than the sum of 85% of its ordinary income for such
calendar year, 95% of its capital gain net income for the
calendar year and any amount of such income that was not
distributed in prior years.
DILUTION OF COMMON STOCK. The Company's future growth will
depend in large part upon its ability to raise additional
capital. If the Company were to raise additional capital through
the issuance of equity securities, the interests of holders of
common stock could be diluted. Likewise, the Company's Board of
Directors is authorized to cause the Company to issue preferred
stock in one or more series and entitled to such dividends and
voting and other rights as the Board of Directors may determine.
Accordingly, the Board of Directors may authorize the issuance of
preferred stock with voting, dividend and other similar rights
which could be dilutive to or otherwise adversely affect the
interests of holders of Common Stock.
REAL ESTATE OWNERSHIP RISKS. The Company is subject to all
of the general risks associated with the ownership of real
estate, in particular the risk that rental revenue from the
properties will not be sufficient to cover all corporate
operating expenses and debt service payments on indebtedness
incurred by the Company. These 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, changes in
market rental rates, inability to lease properties upon
termination of existing leases, renewal of leases at lower rental
Page 21
<PAGE>
rates and inability to collect rents from tenants due to
financial hardship, including bankruptcy. Other risks include
changes in tax, real estate, zoning and environmental laws which
may have an adverse impact upon the value of real estate,
uninsured property liability, property damage or casualty losses
and unexpected expenditures for capital improvements or to bring
properties into compliance with applicable federal, state and
local laws. Acts of God and other factors beyond the control of
the Company's management might also adversely affect the Company.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on
the efforts of its executive officers and key employees. The
loss of the services of its executive officers and key employees
could have a material adverse effect on the Company's operations.
ITEM 2: PROPERTIES
- -------------------
Information pertaining to the properties of Realty Income
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
consolidated financial condition or results of operations of the
Company.
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 22
<PAGE>
PART II
=======
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
- ----------------------------------------------------------
A. The stock of the Company is traded on the New York Stock
Exchange under the symbol "O." The following table shows the
high and low sales prices per share for the Common Stock as
reported by the New York Stock Exchange and distributions
declared by Realty Income for the periods indicated.
Price Per Share
of Common Stock
------------------- Distributions
1995 High Low Declared (1)
- -----------------------------------------------------------------
First Quarter $19.250 $16.500 $0.450
Second Quarter 21.500 17.875 0.450
Third Quarter 22.000 20.250 0.465
Fourth Quarter 22.500 19.250 0.850 (2)
------
$2.215
======
1996
- -----------------------------------------------------------------
First Quarter $23.125 $20.375 $0.310 (3)
Second Quarter 21.375 19.500 0.465
Third Quarter 23.250 20.375 0.465
Fourth Quarter 24.500 22.250 0.470
------
$1.710
======
(1) Distributions currently are declared monthly by the Company
based on financial results for the prior months. At December 31,
1996 a distribution of $0.1575 per share had been declared and
was paid on January 15, 1997.
(2) In the fourth quarter of 1995, four monthly distributions of
$0.155 per share and a special distribution of $0.23 per share
were declared.
(3) In the first quarter of 1996, two monthly distributions of
$0.155 per share were declared.
B. There were 16,752 holders of record of Realty Income's
shares of common stock as of March 19, 1997, however, Realty
Income believes the total number of beneficial shareholders of
Realty Income to be approximately 46,000.
Page 23
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
- --------------------------------
(not covered by Independent Auditors' Report)
As Of Or For The Years Ended December 31,
(dollars in thousands, except per share data)
--------------------------------------------------
1996 1995 1994 1993 1992
========== ========== ========== ======== ========
Total Assets
(Book Value) $ 454,097 $ 417,639 $ 352,768 $384,474 $395,671
Cash and Cash
Equivalents 1,559 1,650 11,673 29,329 7,414
Long Term
Obligations 71,782 20,457 13,621 1,035 1,041
Total
Liabilities 79,856 36,218 17,352 2,570 2,150
Stockholders'
Equity 374,241 381,421 335,416 381,904 393,418
Net Cash
Provided by
Operating
Activities 48,073 40,312 28,460 38,485 41,441
Net Change in
Cash and Cash
Equivalents (91) (10,023) (17,656) 21,915 1,976
Total Revenue 56,957 51,555 48,863 49,018 49,034
Consolidation
Costs -- -- (11,201) -- --
Income from
Operations 30,768 25,582 14,059 25,735 26,940
Net Gain on
Sales of
Properties 1,455 18 1,165 3,583 1,113
Net Income 32,223 25,600 15,224 29,318 28,053
Distributions
Paid to
Stockholders/
Partners 48,079 36,710 44,666 40,831 41,567
Ratio of
Earnings to
Fixed Charges
(1) 14:1 10:1 39:1 5,865:1 N/A
Net Income
Per Share (2) 1.40 1.27 0.78
Distributions
Paid Per
Share (2)(3)(4) 2.093 1.825 0.60
Distributions
Declared Per
Share (2)(3)(4) 1.71 2.215 0.75
Page 24
<PAGE>
(continued)
As Of Or For The Years Ended December 31,
(dollars in thousands, except per share data)
--------------------------------------------------
1996 1995 1994 1993 1992
========== ========== ========== ======== ========
Weighted
Average
Number
of Shares
Outstanding
(2) 22,977,837 20,230,963 19,502,091
(1) Ratio of Earnings to Fixed Charges is calculated by dividing
earnings, by fixed charges. For this purpose, earnings consist
of net income before fixed charges. Fixed charges are comprised
of interest costs (including capitalized interest) and the
amortization of debt issuance costs. Ratio of Earnings to Fixed
Charges is not applicable for 1992 because the Company did not
have any fixed charges.
(2) Due to the change in the capital structure caused by the
Consolidation (See Item 8, note 1 to the consolidated financial
statements), per share information would not be meaningful for
1993 and 1992 and therefore has not been included.
(3) The 1994 amount represents distributions paid or declared,
as the case may be, after the Consolidation.
(4) 1996 distributions paid per share and 1995 distributions
declared per share include a special distribution of $0.23 per
share.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------
GENERAL
- -------
Realty Income Corporation ("Realty Income" or the "Company")
was organized to operate as an equity real estate investment
trust ("REIT"). The Company's primary business objective is to
generate a consistent and predictable level of funds from
operations ("FFO") per share and 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 25
<PAGE>
acquisitions and for other corporate purposes. Realty Income
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, 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.
The Company's common stock is listed on the New York Stock
Exchange (the "NYSE") under the symbol "O" and commenced trading
on October 18, 1994.
Realty Income was organized in the state of Delaware on
September 9, 1993 to facilitate the merger, which was effective
on August 15, 1994 (the "Consolidation"), of 10 private and 15
public real estate limited partnerships (the "Partnerships") with
and into Realty Income.
Investors in the Partnerships who elected to invest in the
equity of the Company received a total of 19,503,080 shares of
common stock. Certain investors elected to receive Variable Rate
Senior Notes due 2001 (the "Notes") totaling $12.6 million.
The Consolidation was accounted for as a reorganization of
affiliated entities in a manner similar to a pooling-of-
interests. Under this method, the assets and liabilities of the
Partnerships were carried over at their historical book values
and operations were recorded on a combined historical cost basis.
The pooling-of-interests method of accounting also requires the
reporting of the results of operations as though the entities had
been combined as of the beginning of the earliest period
presented. Accordingly, the results of operations for the year
ended December 31, 1994 comprise those of the separate entities
combined from the beginning of the period through August 15, 1994
(the date of the Consolidation) and those of the Company from
August 16, 1994 through December 31, 1994.
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")
and the advisory agreement between Realty Income and the Advisor
was terminated. Realty Income issued 990,704 shares of common
stock as consideration for the outstanding common stock of the
Advisor.
Page 26
<PAGE>
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 Jr, formerly a Managing Director, Equity Capital Markets
Division, of Merrill Lynch & Co from 1983 until his retirement in
August 1995.
In October 1996, the Company changed transfer agents from
Chase Mellon Shareholder Services to The Bank of New York.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash Reserves
Realty Income was 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 lease revenue. The Company intends to retain an
appropriate amount of cash as working capital reserves. At
December 31, 1996, the Company had cash and cash equivalents
totaling $1.6 million.
Management believes that the Company's cash and cash
equivalents on hand, cash provided from operating activities and
borrowing capacity are sufficient to meet its liquidity needs for
the foreseeable future.
Capital Funding
Realty Income has a $130 million three-year, revolving,
unsecured acquisition credit facility that expires in November
1999. The credit facility currently bears interest at 1.25% over
the London Interbank Offered Rate ("LIBOR") and offers the
Company other interest rate options. As of March 10, 1997, $49.5
million of borrowing capacity was available to the Company under
the acquisition credit facility. At that time, the outstanding
balance was $80.5 million. On March 29, 1996, this credit
facility was used to redeem the Notes at par, 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. Any additional borrowings will increase the
Company's exposure to interest rate risk.
Realty Income will seek 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.
Page 27
<PAGE>
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 were primarily used to repay borrowings under the
acquisition credit facility. These borrowings were used to
acquire properties in 1995.
In December 1996, the Company entered into a treasury
interest rate lock agreement to hedge against the possibility of
rising interest rates. Under the interest rate lock agreement,
the Company receives or makes a payment based on the differential
between a specified interest rate, 6.537%, and the actual 10-year
treasury interest rate on notional principal of $90 million, at
the end of six months. Based on the 10-year treasury interest
rate at December 31, 1996, the Company had an unrecognized loss
on the agreement of $80,000. The Company anticipates issuing
debt during the second quarter of 1997, subject to market
conditions and acquisition levels.
During the fourth quarter of 1996, the Company received
investment grade corporate credit ratings for senior unsecured
debt from Duff & Phelps Rating Co., Moody's Investor Services,
Inc. and Standard and Poors, of BBB, Baa3, and BBB-,
respectively. These ratings are subject to change based upon,
among other things, the Company's results of operations and
financial condition.
Property Acquisitions
During 1996, Realty Income purchased 62 retail properties
(the "New Properties") in 22 states for $55.5 million (excluding
the estimated unfunded development costs of $3.8 million on
properties under development). These 62 properties will contain
approximately 603,900 leasable square feet and are 100% leased
under net leases, with an average initial lease term of 11.7
years. The weighted average annual unleveraged return on the
cost of the 62 properties is estimated to be 10.6%, 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 divided by the total acquisition
and estimated development costs. Since it is possible that a
tenant could default on the payment of contractual rent, no
assurance can be given that the actual return on the cost of the
62 properties acquired in 1996 will not differ from the foregoing
percentage.
Of the 62 properties acquired in 1996, 57 were occupied as
of February 1, 1997 and the remaining five 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
Page 28
<PAGE>
open for business. All of the New Properties, including the
properties under development, are leased with initial terms of
7.75 to 20 years. The allocation of costs between land, and
buildings and improvements on the 57 completed and occupied New
Properties was approximately 34% and 66%, respectively.
During 1996, the Company purchased a property which was
adjacent to an existing tenant for $102,000 and leased the
property to that tenant. The Company also invested $37,000 in
existing properties, received equipment and other assets valued
at $58,000 as settlements for amounts receivable, 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.
1996 ACQUISITION ACTIVITY
Initial Approx.
Lease Leasable
Term Square
Tenant Industry Location (Years) Feet
============== ============= ================ ======= ========
1ST QUARTER
Carver's Restaurant Glendale, AZ 19.8 8,100
Econo Lube
N' Tune Auto Service Chula Vista, CA 15.0 2,800
Broomfield, CO 15.0 2,800
Dallas, TX 15.0 2,700
Lewisville, TX 15.0 2,600
2ND QUARTER
Dairy Mart Convenience
(1) Store Mt Washington, KY 20.0 2,800
(1) Tipp City, OH 15.0 3,800
Econo Lube
N' Tune Auto Service Arvada, CO 15.0 2,800
Jiffy Lube Auto Service Centerville, OH 20.0 2,400
3RD QUARTER
Best Buy Consumer
Electronics Thousand Oaks, CA 20.0 59,200
Dairy Mart Convenience
(1) Store Streetsboro, OH 15.0 3,800
(1) Wadsworth, OH 15.0 2,700
Page 29
<PAGE>
(continued)
1996 ACQUISITION ACTIVITY
Initial Approx.
Lease Leasable
Term Square
Tenant Industry Location (Years) Feet
============== ============= ================ ======= ========
3RD QUARTER (continued)
Econo Lube
N' Tune (1) Auto Service Arvada, CO 15.0 2,500
(1) Virginia Beach, VA 15.0 2,800
(1) Bremerton, WA 15.0 2,800
Jiffy Lube (1) Auto Service Beavercreek, OH 20.0 2,300
(1) Huber Heights, OH 20.0 2,300
Speedy Brake
& Muffler Auto Service Hartford, CT 15.0 10,000
Indianapolis, IN 15.0 5,300
Milwaukee, WI 15.0 5,300
4TH QUARTER
Best Buy Consumer
Electronics Topeka, KS 20.0 45,600
East Coast Oil Convenience
Store Stafford, VA 15.0 2,800
Warrenton, VA 15.0 3,600
Econo Lube
N' Tune (1) Auto Service Thornton, CO 15.0 2,800
(1) Olathe, KS 15.0 2,800
Independence, MO 15.0 2,800
Richmond, VA 15.0 2,900
Jiffy Lube (1) Auto Service Hamilton, OH 20.0 2,300
Rex Stores Consumer
Electronics Oxford, AL 7.8 10,000
Tuscaloosa, AL 7.8 12,000
Bradenton, FL 7.8 6,300
Mary Esther, FL 7.8 8,200
Melbourne, FL 7.8 8,000
Merritt Island, FL 7.8 10,000
Ocala, FL 7.8 10,000
Pensacola, FL 7.8 64,600
Tallahassee, FL 7.8 10,600
Titusville, FL 7.8 12,000
Venice, FL 7.8 8,200
Rome, GA 7.8 10,000
Council Bluffs, IA 7.8 9,000
Des Moines, IA 7.8 10,000
Peoria, IL 7.8 8,800
Page 30
<PAGE>
(continued)
1996 ACQUISITION ACTIVITY
Initial Approx.
Lease Leasable
Term Square
Tenant Industry Location (Years) Feet
============== ============= ================ ======= ========
4TH QUARTER (continued)
Rex Stores Consumer
Electronics Rockford, IL 7.8 10,100
Springfield, IL 7.8 10,300
Anderson, IN 7.8 15,600
Muncie, IN 7.8 12,500
Richmond, IN 7.8 6,500
Columbus, MS 7.8 10,000
Greenville, MS 7.8 9,100
Gulfport, MS 7.8 12,000
Hattiesburg, MS 7.8 12,000
Jackson, MS 7.8 15,100
Meridian, MS 7.8 9,000
Tupelo, MS 7.8 12,000
Vicksburg, MS 7.8 10,000
Lakewood, NY 7.8 14,100
Defiance, OH 7.8 7,200
Kettering, OH 7.8 10,600
Bristol, TN 7.8 12,400
Clarksville, TN 7.8 10,100
Vienna, WV 7.8 12,200
------- --------
Average / Total 11.7 603,900
======= ========
(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 tenants. The 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 a predetermined
percentage. As of December 31, 1996, the total acquisition and
estimated construction costs for the properties under development
was $8.7 million, of which $3.8 million had not been funded.
Distributions
Cash distributions paid for the years ended
December 31, 1996, 1995 and 1994 were $48.1 million, $36.7
million and $44.7 million, respectively. The 1996 and 1994 cash
Page 31
<PAGE>
distributions include a special distribution of $5.3 million and
$5.8 million, respectively.
For the year ended December 31, 1996, the Company paid 11
monthly distributions of $0.155 per share and increased the
monthly distributions to $0.1575 per share in December 1996. The
regular distributions paid during 1996 totaled $1.8625 per share.
In addition, the Company paid a special distribution of $0.23 per
share in January 1996. Total distributions paid in 1996 were
$2.0925 per share. For tax purposes, a portion of the special
distribution, in the amount of approximately $0.144 per share,
was taxable as ordinary income in 1995 and the remaining $0.086
per share was included in each stockholders 1996 Form 1099. In
December 1996, and January and February 1997, the Company
declared distributions of $0.1575 per share which were paid on
January 15, 1997, February 17, 1997 and payable on March 17,
1997, respectively.
For the year ended December 31, 1995, the Company paid
monthly distributions of $0.15 per share from January through
July and increased its monthly distributions to $0.155 per share
in August. Monthly distributions of $0.155 per share were paid
in August through December 1995. The distributions paid for 1995
totaled $1.825 per share.
The 1994 distributions were made up of eight partnership and
four corporate monthly distributions in the aggregate amount of
$38.9 million and the final partnership distribution of $5.8
million. The 1994 final partnership distributions were
substantially comprised of proceeds from the sales of properties
sold during 1993.
From August 15, 1994, the date of the Consolidation, through
December 31, 1994, the Company paid four monthly distributions of
$0.15 per share, totaling $0.60 per share. Prior to the
Consolidation on August 15, 1994, the Company did not have
equivalent shares outstanding so no comparative per share
information is presented.
Other Information
As a result of the Merger on August 17, 1995, the Company
assumed a defined benefit pension plan (the "Plan") covering
substantially all of its employees. The board of directors of
the Advisor froze the Plan effective May 31, 1995. For each Plan
participant, the accrued benefit earned under the Plan as of
May 31, 1995 was frozen. The Plan was terminated on
January 2, 1996. As part of the Plan's termination, the Company
met its obligation to the Plan of $2.3 million in February 1997.
Page 32
<PAGE>
In December 1996, the Company obtained a five year
environmental insurance policy on the property portfolio. Based
upon the 740 properties in the portfolio at December 31, 1996,
the cost of the insurance will be approximately $80,000 per year.
The limit of the policy is $10.0 million for each loss and $20.0
million in the aggregate, with a $100,000 deductible. There is a
sublimit on properties with underground storage tanks of $1.0
million per occurrence and $5.0 million in the aggregate, with a
deductible of $25,000.
FUNDS FROM OPERATIONS ("FFO")
- -----------------------------
Funds from operations ("FFO") for 1996 was $47.7 million
versus $40.4 million during 1995 and $39.2 million during 1994.
Realty Income defines FFO as net income before net gain on sales
of properties and the one-time expenses of the 1994
Consolidation, plus provision for impairment losses, 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, although it should be
noted that not all REITs calculate FFO the same way so
comparisons with such 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 the Company's performance or to
cash flow from operating, investing, and financing activities as
a measure of liquidity or ability to make cash distributions.
Page 33
<PAGE>
Below is the reconciliation of net income to funds from
operations (dollars in thousands):
1996 1995 1994
======= ======= =======
Net Income $32,223 $25,600 $15,224
Plus Depreciation and
Amortization 16,422 14,849 13,790
Plus Provision for Impairment
Losses 579 -- 135
Plus Consolidation Costs -- -- 11,201
Less Depreciation of Furniture,
Fixtures and Equipment (51) (17) --
Less Net Gain on Sales
of Properties (1,455) (18) (1,165)
------- ------- -------
Total Funds From Operations $47,718 $40,414 $39,185
======= ======= =======
For 1996, 1995 and 1994, FFO exceeded cash distributions,
excluding the non-recurring special distributions of $5.3 million
in 1996 (pertaining to the Advisor Merger) and $5.8 million in
1994 (final distribution for the predecessor partnerships), by
$4.9 million, $3.7 million and $369,000, respectively.
RESULTS OF OPERATIONS
- ---------------------
Prior to the Consolidation on August 15, 1994, the capital
structure of the Partnerships consisted of limited partner
interests with no long term debt. In the Consolidation, limited
partners exchanged their partnership units for shares of common
stock or Notes of the Company. The general partners did not
receive any shares or Notes for their general partner interest.
Due to these changes in capital structure, which were caused by
the Consolidation, and additional expenses associated with the
operations of a publicly traded REIT, the results of operations
for the year ended December 31, 1994 are not necessarily
comparable to 1996 and 1995.
Comparison of 1996 to 1995
Rental revenue was $56.8 million for 1996 versus $51.2
million for 1995, an increase of $5.6 million. The increase in
rental revenue was primarily due to the acquisition of 124
properties from December 1994 through December 1996. These
properties generated revenue in 1996 and 1995 of $8.8 million and
$3.8 million, respectively, an increase of $5.0 million. During
1997, the contractual lease payments (not including any
percentage rents) on these 124 properties are approximately $14.0
million.
Page 34
<PAGE>
At December 31, 1996, 723 or 98.8% of the Company's leases,
on the 732 single-tenant properties, 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 the 619 properties
owned for all of both 1995 and 1996 increased by $871,000 or
1.9%, to $48.0 million from $47.1 million. Percentage rent,
which is included in rental revenue, was $1.7 million for 1996 as
compared to $1.6 million in 1995.
The following table represents Realty Income's rental
revenue by industry for the years ended December 31, 1996 and
1995:
December 31, 1996 December 31, 1995
---------------------- ----------------------
Rental Percentage Rental Percentage
Industry Revenue of Total Revenue of Total
=================== =========== ========== =========== ==========
Automotive Parts $ 4,814,000 8.5% $ 4,724,000 9.2%
Automotive Service 3,859,000 6.8% 3,007,000 5.9%
Child Care 23,854,000 42.0% 23,358,000 45.6%
Consumer Electronics 507,000 0.9% -- --%
Convenience Stores 2,647,000 4.7% 1,254,000 2.4%
Home Furnishings 2,496,000 4.4% 1,471,000 2.9%
Restaurant 13,836,000 24.3% 12,632,000 24.7%
Other 4,764,000 8.4% 4,739,000 9.3%
----------- ------ ----------- ------
Total $56,777,000 100.0% $51,185,000 100.0%
=========== ====== =========== ======
Unleased properties are a factor in determining gross
revenue generated and property costs incurred by the Company. At
December 31, 1996, the Company had nine properties that were not
under lease as compared to four properties at December 31, 1995.
The remaining 731 properties were under lease agreements with
third party tenants as of December 31, 1996.
The significant portion of the remaining revenue earned
during 1996 and 1995 was attributable to interest earned on cash
invested in two funds which hold short-term investments in United
States government agency securities and treasury securities.
Interest revenue was $109,000 for 1996 as compared to $276,000
during 1995. The decrease in interest revenue was due to lower
average cash balances held during 1996, which reflects the
Company's desire to maintain an appropriate amount of cash as
working capital reserves and invest excess available cash in
properties.
Page 35
<PAGE>
Depreciation and amortization was $16.4 million in 1996
versus $14.8 million in 1995. The $1.6 million increase was
primarily due to the depreciation of properties acquired during
1995 and 1996 and amortization of goodwill recorded in connection
with the Merger of the Advisor.
Total advisor fees and general and administrative expenses
decreased by $1.7 million to $5.2 million in 1996 versus $6.9
million in 1995. General and administrative expenses were $5.2
million in 1996 versus $3.2 million in 1995 and advisor fees of
$3.7 million in 1995. The $2.0 million increase in general and
administrative expenses was due primarily to the Merger of the
Advisor. Subsequent to the Merger, the Company commenced paying
for management, accounting systems, office facilities,
professional and support personnel expenses (i.e. costs of being
self-administered). Prior to August 17, 1995, such costs were
the responsibility of the Advisor.
During the third quarter of 1996, the Company initiated a
401(k) plan. Costs of $65,000 associated with the plan are
included in general and administrative expenses.
Property expenses were $1.6 million in 1996 and 1995.
Property expenses are broken down into expenses associated with
multi-tenant non-triple net lease 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, 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.
Property expenses of $1.0 million were incurred on ten
multi-tenant properties during 1996, eight of which were owned at
the end of 1996. Property expenses of $1.0 million were incurred
on eleven multi-tenant properties in 1995, ten of which were
owned at the end of 1995. During 1996 two multi-tenant
properties were sold and in 1995 one multi-tenant property was
sold. Expenses incurred in 1996 on ten unleased single-tenant
properties totaled $250,000 as compared to $161,000 in 1995 on
seven unleased single-tenant properties. At December 31, 1996,
nine properties were available for lease, one of which was a
multi-tenant property. At December 31, 1995, four single-tenant
properties were available for lease. The $89,000 increase is due
to property taxes, maintenance and utilities on the additional
vacant properties. General portfolio expenses in 1996 and 1995
totaled $337,000 and $441,000, respectively. The decrease in
general portfolio expenses is primarily due to a decrease in
insurance costs.
Page 36
<PAGE>
Interest expense is made up of four components which
include: (i) interest on outstanding loans and notes; (ii)
commitment fees on the undrawn portion of the credit facility;
(iii) amortization of the credit facility origination costs;
which are offset, in part, by; (iv) interest capitalized on
properties under development. Interest capitalized on properties
under development is included in the cost of the completed
property and amortized over the estimated useful life of the
property.
Interest expense decreased by $275,000 to $2.4 million in
1996 as compared to $2.6 million for 1995. Interest incurred on
loans and notes in 1996 and 1995 was $2.1 million and $2.4
million, respectively. Interest incurred was $266,000 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 the Notes. During 1996, the average outstanding
balance and interest rate were $30.7 million and 6.96% as
compared to $31.3 million and 7.68% during the comparable period
in 1995. Included in the interest incurred in 1996 and 1995 was
capitalized interest totaling $150,000 and $217,000,
respectively. Commitment fees in 1996 were $156,000 as compared
to $127,000 in 1995. In 1996 and 1995, a commitment fee of 0.15%
per annum was incurred 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 $224,000 in 1996 as compared to $329,000 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.
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 1996, a
$579,000 charge was taken to reduce the net carrying value on
four properties because they became held for sale. No charge was
recorded for an impairment loss in 1995.
The Company anticipates property sales will occur in the
normal course of business. During 1996, the Company recorded a
gain of $1.5 million on the sale of two multi-tenant properties,
five restaurant properties and the granting of an easement on
another property. During 1995, the Company recorded a net gain
of $18,000 on the sale of two child care properties and a multi-
tenant property. During 1996 and 1995 cash proceeds generated
from these sales were $4.4 million and $617,000, respectively.
For 1996, the Company recorded net income of $32.2 million
versus $25.6 million in 1995. The $6.6 million increase in net
Page 37
<PAGE>
income is primarily due to an increase in rental revenue from 124
properties acquired from December 1994 through December 1996 of
$5.0 million, an increase in the net gain on sales of properties
of $1.4 million and a net decrease in advisor fees, general and
administrative expenses of $1.7 million, offset by an increase in
depreciation and amortization expense of $1.6 million.
Comparison of 1995 to 1994
Rental revenue was $51.2 million for 1995 versus $47.9
million for 1994, an increase of $3.3 million. The increase in
rental revenue was primarily due to the acquisition of 62
properties from December 1994 through December 1995. These
properties generated revenue of $3.8 million in 1995.
The decline in revenues from properties owned during both
1995 and 1994 was mainly attributable to a decline in percentage
rents. Percentage rent was $1.6 million for 1995 as compared to
$2.6 million in 1994.
The following table represents Realty Income's rental
revenue by industry for the years ended December 31, 1995 and
1994:
December 31, 1995 December 31, 1994
---------------------- ----------------------
Rental Percentage Rental Percentage
Industry Revenue of Total Revenue of Total
=================== =========== ========== =========== ==========
Automotive Parts $ 4,724,000 9.2% $ 4,977,000 10.4%
Automotive Service 3,007,000 5.9% 2,705,000 5.7%
Child Care 23,358,000 45.6% 23,522,000 49.1%
Convenience Stores 1,254,000 2.4% -- --
Home Furnishings 1,471,000 2.9% -- --
Restaurant 12,632,000 24.7% 12,047,000 25.1%
Other 4,739,000 9.3% 4,654,000 9.7%
----------- ------ ----------- ------
Total $51,185,000 100.0% $47,905,000 100.0%
=========== ====== =========== ======
Unleased properties are a factor in determining gross
revenue generated and property costs incurred by the Company. At
December 31, 1995 and 1994, the Company had four properties that
were not under lease, the remaining 681 and 626 properties,
respectively, were under lease agreements with third party
tenants.
The significant portion of the remaining revenue earned
during 1995 and 1994 was attributable to interest earned on cash
invested in two funds which hold short-term investments in United
States government agency securities or direct purchases of short-
Page 38
<PAGE>
term United States government agency securities. Interest
revenue was $276,000 for 1995 as compared to $862,000 during
1994. The decrease in interest revenue was due to a reduction of
cash held, which was invested in properties.
Depreciation and amortization was $14.8 million in 1995
versus $13.8 million in 1994. The $1.0 million increase was
primarily due to the depreciation of 62 properties acquired from
December 1994 through December 31, 1995 and amortization of
goodwill recorded in connection with the Merger of the Advisor.
Total advisor fees and general and administrative expenses
decreased by $312,000 to $6.9 million in 1995 versus $7.2 million
in 1994. General and administrative expenses were $3.2 million
in 1995 versus $1.8 million in 1994. Advisor fees were $3.7
million in 1995 versus $5.4 million in 1994. The $1.4 million
increase in general and administrative expenses and $1.7 million
decrease in advisor fees was due to the Merger of the Advisor.
Subsequent to the Merger, the Company commenced paying for
management, accounting systems, office facilities, professional
and support personnel expenses (i.e. costs of being self-
administered). Such costs were the responsibility of the Advisor
through August 17, 1995.
The advisor fees for 1995 were calculated in accordance with
the terms of the advisory agreement which became effective
August 15, 1994 and was terminated on August 17, 1995. Prior to
August 16, 1994, advisor fees were calculated in accordance with
the terms of the Partnership agreements of the Partnerships.
Administration expense in 1994 included approximately
$500,000 of one-time expenses primarily associated with the
distribution of stock certificates, shareholder informational
material and final partnership K-1's to shareholders after the
Consolidation had occurred. Other administrative expenses
increased in 1995 compared to 1994 due to additional expenses
associated with the operation of a publicly traded REIT
including, but not limited to, transfer agent fees, NYSE fees,
board of directors fees and property acquisition expenses.
Property expenses decreased to $1.6 million in 1995 as
compared to $2.1 million in 1994 The $488,000 decrease was is
primarily due to a decrease in property taxes, maintenance and
utilities.
Interest expense for 1995 was $2.6 million as compared to
$396,000 for 1994. Of the $2.2 million increase, $1.4 million
was for interest paid on the acquisition credit facility in 1995
and an increase of $665,000 of interest paid on the Notes.
Interest incurred on loans and notes in 1995 and 1994 was $2.4
million and $354,000, respectively. Interest incurred was higher
Page 39
<PAGE>
in 1995 due to borrowings on the credit facility, and senior
notes issued as part of the Consolidation. During 1995, the
average outstanding balances and interest rates on the
acquisition credit facility and the Notes were $31.3 million and
7.68%. Included in the interest incurred in 1995 was capitalized
interest totaling $217,000. No interest was capitalized in 1994.
Commitment fees in 1995 were $127,000 as compared to $13,000 in
1994. In 1995 and 1994, a commitment fee of 0.15% per annum was
incurred on the undrawn portion of the credit facility.
Amortization of the credit facility origination fees were
$329,000 in 1995 as compared to $29,000 in 1994. Commitment fees
and amortization of credit facility origination fees increased in
1995 because the credit facility was not entered into until
November 1994.
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 1994, a
$135,000 charge was taken to reduce the net carrying value on one
property because it became held for sale. No charge was recorded
for an impairment loss in 1995.
In 1994, the Company expensed Consolidation costs
aggregating $11.2 million which were nonrecurring costs incurred
to effect the Consolidation. In a manner similar to the pooling-
of-interests method of accounting, the Consolidation costs were
charged to expense upon the consummation of the Consolidation.
Such costs included, but were not limited to, fees paid to
underwriters, attorneys, and accountants, as well as costs
associated with obtaining a fairness opinion, soliciting the
stockholders, and registering and listing the common stock and
the Notes on the NYSE.
During 1995, the Company recorded a net gain of $18,000 on
the sale of two child care properties and a multi-tenant
property. During 1994, the Company recorded a gain of $1.2
million on the sale of five restaurant properties. During 1995
and 1994 cash proceeds generated from these sales were $617,000
and $3.8 million, respectively.
For 1995, the Company recorded net income of $25.6 million
versus $15.2 million in 1994. The net income in 1994 was
negatively impacted by one time Consolidation costs of $11.2
million. Net income for 1994, excluding the Consolidation costs,
was $26.4 million.
Page 40
<PAGE>
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 net leases in which the
tenant is responsible for property costs and expenses. These
features in the leases reduce the Company's exposure to rising
expenses due to inflation.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Table of Contents Page
- ----------------- ----
A. Independent Auditors' Report...............................42
B. Consolidated Balance Sheets,
December 31, 1996 and 1995...............................43
C. Consolidated Statements of Income,
Years ended December 31, 1996, 1995 and 1994.............45
D. Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1996, 1995 and 1994.............46
E. Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995 and 1994.............49
F. Notes to Consolidated Financial Statements.................51
G. Consolidated Quarterly Financial Data
(unaudited) for 1996 and 1995............................63
H. Schedule III-Real Estate and Accumulated
Depreciation.............................................64
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 41
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Realty Income Corporation:
We have audited the consolidated financial statements (Note 1) 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, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1996, 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 PEAT MARWICK LLP
San Diego, California
January 24, 1997,
except as to paragraph two of Note 11,
which is as of February 24, 1997
Page 42
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
===========================
December 31, 1996 and 1995
(dollars in thousands, except per share data)
1996 1995
========= =========
ASSETS
Real Estate, at Cost:
Land $ 165,598 $ 147,789
Buildings and Improvements 398,942 367,637
--------- ---------
564,540 515,426
Less - Accumulated Depreciation
and Amortization (138,307) (126,062)
--------- ---------
Net Real Estate 426,233 389,364
Cash and Cash Equivalents 1,559 1,650
Accounts Receivable 1,905 1,638
Due from Affiliates 383 493
Other Assets 2,183 1,927
Goodwill, Net 21,834 22,567
--------- ---------
TOTAL ASSETS $ 454,097 $ 417,639
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions Payable $ 3,619 $ 12,407
Accounts Payable and Accrued Expenses 1,172 673
Other Liabilities 5,065 4,541
Line of Credit Payable 70,000 6,000
Notes Payable -- 12,597
--------- ---------
TOTAL LIABILITIES 79,856 36,218
--------- ---------
Page 43
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
===========================
December 31, 1996 and 1995
(dollars in thousands, except per share data)
1996 1995
========= =========
Commitments and Contingencies
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,
22,979,537 and 22,976,237 Shares
Issued and Outstanding in 1996 and
1995, respectively 22,980 22,976
Capital in Excess of Par Value 516,004 516,119
Accumulated Distributions in Excess
of Net Income (164,743) (157,674)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 374,241 381,421
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 454,097 $ 417,639
========= =========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 44
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Income
=================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands, except per share data)
1996 1995 1994
(Note 1)
========== ========== ==========
REVENUE
Rental $ 56,777 $ 51,185 $ 47,905
Interest 109 276 862
Other 71 94 96
---------- ---------- ----------
56,957 51,555 48,863
---------- ---------- ----------
EXPENSES
Depreciation and
Amortization 16,422 14,849 13,790
General and Administrative 5,181 3,214 1,765
Advisor Fees -- 3,661 5,422
Property 1,640 1,607 2,095
Interest 2,367 2,642 396
Provision for Impairment
Losses 579 -- 135
Consolidation Costs -- -- 11,201
---------- ---------- ----------
26,189 25,973 34,804
---------- ---------- ----------
Income from Operations 30,768 25,582 14,059
Net Gain on Sales of
Properties 1,455 18 1,165
---------- ---------- ----------
NET INCOME $ 32,223 $ 25,600 $ 15,224
========== ========== ==========
Net Income Per Share $ 1.40 $ 1.27 $ 0.78
========== ========== ==========
Weighted Average Number of
Shares Outstanding 22,977,837 20,230,963 19,502,091
========== ========== ==========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 45
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Stockholders' Equity
========================================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
Accumu-
lated
Capital Distri-
in butions
Common Stock Excess in Excess
------------------- of Par of Net
Shares Amount Value Income Total
========== ======= ======== ========= ========
BALANCE,
December
31, 1993
(Note 1) -- $ -- $486,619 $(104,715) $381,904
Net Income -- -- -- 15,224 15,224
Distributions
to Partners -- -- -- (32,964) (32,964)
Distributions
Paid and
Payable to
Stockholders -- -- -- (14,627) (14,627)
Shares Issued
in Exchange
for Limited
Partnership
Interests 19,502,091 19,502 (19,502) -- --
Payment of
Promissory
Notes and
Fractional
Shares in
Exchange for
Limited
Partnership
Interests -- -- (1,505) -- (1,505)
Notes Payable
Issued in
Exchange for
Limited
Partnership
Interests -- -- (12,616) -- (12,616)
---------- ------- -------- --------- --------
BALANCE,
December
31, 1994
(Note 1) 19,502,091 19,502 452,996 (137,082) 335,416
Page 46
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Stockholders' Equity
========================================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
Accumu-
lated
Capital Distri-
in butions
Common Stock Excess in Excess
------------------- of Par of Net
Shares Amount Value Income Total
========== ======= ======== ========= ========
Net Income -- -- -- 25,600 25,600
Distributions
Paid and
Payable to
Stockholders -- -- -- (46,192) (46,192)
Shares Issued
in Exchange
for Advisor
Shares 990,704 991 20,186 -- 21,177
Shares Retired (57,547) (58) (1,172) -- (1,230)
Shares Issued
in Stock
Offering, net
of offering
costs of
$3,217 2,540,000 2,540 44,090 -- 46,630
Shares Issued
in Exchange
for Limited
Partnership
Interests 989 1 19 -- 20
---------- ------- -------- --------- --------
BALANCE,
December
31, 1995 22,976,237 22,976 516,119 (157,674) 381,421
Page 47
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Stockholders' Equity
========================================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
Accumu-
lated
Capital Distri-
in butions
Common Stock Excess in Excess
------------------- of Par of Net
Shares Amount Value Income Total
========== ======= ======== ========= ========
Net Income -- -- -- 32,223 32,223
Distributions
Paid and
Payable to
Stockholders -- -- -- (39,292) (39,292)
Shares Issued 3,300 4 73 -- 77
Stock Offering
Costs -- -- (188) -- (188)
---------- ------- -------- --------- --------
BALANCE,
December
31, 1996 22,979,537 $22,980 $516,004 $(164,743) $374,241
========== ======= ======== ========= ========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 48
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
=====================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
1996 1995 1994
(Note 1)
======== ======== ========
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income $ 32,223 $ 25,600 $ 15,224
Adjustments to Net Income:
Depreciation and Amortization 16,422 14,849 13,790
Provision for Impairment Losses 579 -- 135
Net Gain on Sales of Properties (1,455) (18) (1,165)
Changes in Assets and Liabilities
(net of the Merger with
the Advisor):
Accounts Receivable and
Other Assets (646) (1) 980
Accounts Payable, Accrued Expenses
and Other Liabilities 950 (86) 460
Due to Advisor -- (32) (964)
-------- -------- --------
Net Cash Provided by
Operating Activities 48,073 40,312 28,460
-------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from Sales of Properties 4,405 617 3,795
Acquisition of and Additions to
Properties (55,705) (65,890) (3,485)
Payment of Advisor Merger Costs -- (1,629) --
Cash Acquired from Advisor Merger -- 647 --
-------- -------- --------
Net Cash Provided by
(Used in) Investing
Activities (51,300) (66,255) 310
-------- -------- --------
Page 49
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
=====================================
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
1996 1995 1994
(Note 1)
======== ======== ========
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments of Distributions (48,079) (36,710) (44,666)
Proceeds from Lines of Credit 66,700 50,600 625
Payments of Lines of Credit (2,700) (44,600) (880)
Payment of Notes Payable (12,597) -- --
Proceeds from Stock Offering,
Net of Offering Costs
of $3,217 -- 46,630 --
Stock Offering Costs (188) -- --
Payments in Lieu of Promissory
Notes and Fractional Shares -- -- (1,505)
-------- -------- --------
Net Cash Provided by
(Used in) Financing
Activities 3,136 15,920 (46,426)
-------- -------- --------
Net Decrease in Cash and
Cash Equivalents (91) (10,023) (17,656)
Cash and Cash Equivalents,
Beginning of Year 1,650 11,673 29,329
-------- -------- --------
Cash and Cash Equivalents,
End of Year $ 1,559 $ 1,650 $ 11,673
======== ======== ========
For supplemental disclosures, see Note 9.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
Page 50
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
==========================================
December 31, 1996, 1995 and 1994
1. Organization and Operation
Realty Income Corporation (the "Company") was organized in
the state of Delaware in September 1993 to facilitate the merger,
which was effected on August 15, 1994 (the "Consolidation"), of
10 private and 15 public real estate limited partnerships (the
"Partnerships") with and into the Company. The Company invests
in commercial real estate and has elected to be taxed as a real
estate investment trust ("REIT").
Investors in the Partnerships who elected to invest in the
Company received common stock of the Company totaling 19,503,080
shares. Certain investors elected to receive Variable Rate
Senior Notes (the "Notes") totaling $12.6 million.
The Consolidation was accounted for as a reorganization of
affiliated entities under common control in a manner similar to a
pooling-of-interests. Under this method, the assets and
liabilities of the Partnerships were carried over at their
historical book values and their operations have been recorded on
a combined historical cost basis. The pooling-of-interests
method of accounting also requires the reporting of the results
of operations as though the entities had been combined as of the
beginning of the earliest period presented. Accordingly, the
results of operations for the year ended December 31, 1994
comprise those of the separate entities combined from
January 1, 1994 through August 15, 1994 and those of the Company
from August 16, 1994 through December 31, 1994. Costs incurred
to effect the Consolidation and integrate the continuing
operations of the separate entities were expenses of the Company
in the period the Consolidation was consummated. Prior to the
Consolidation, the Company had no significant operations;
therefore, the combined operations for the period prior to the
Consolidation represent the operations of the Partnerships. The
Consolidation did not require any material adjustments to conform
the accounting policies of the separate entities to that of the
Company. All intercompany transactions and balances have been
eliminated.
Page 51
<PAGE>
1. Organization and Operation (continued)
The results of operations of the previously separate entities
for the period before the Consolidation was consummated that are
included in the results of operations for the year ended
December 31, 1994 follow:
January 1, 1994
through
August 15, 1994
-----------------
(dollars in thousands)
Entity Net Income Revenue
=================================== ========== =======
Northridge Bell, Ltd. $ 15 $ 29
Tustin Bell, Ltd. 39 47
Marina Bell, Ltd. 5 7
Fullerton Commercial Property, Ltd. 70 73
Chino Commercial Property, Ltd. 49 55
R.I.C. 76, Ltd. 38 52
R.I.C. 781, Ltd. 50 75
Garden Grove BYH, Ltd. 14 19
R.I.C. Associates #1, Ltd. 7 11
R.I.C. Associates #2, Ltd. 35 55
R.I.C. 79, Ltd. 299 451
R.I.C. 81, Ltd. 451 754
R.I.C. 14, Ltd. 664 1,188
R.I.C. 15, Ltd. 142 898
R.I.C. 16, Ltd. 811 1,735
R.I.C. 17, Ltd. 1,612 3,490
R.I.C. 18, Ltd. 531 1,707
R.I.C. 19, Ltd. 1,638 2,537
R.I.C. 20, Ltd. 614 1,789
R.I.C. 21, Ltd. 1,841 2,978
R.I.C. 22, Ltd. 1,472 2,574
R.I.C. 23, Ltd. 2,225 3,463
R.I.C. 24, Ltd. 1,731 2,737
R.I.C. 25, Ltd. 1,934 2,900
R.I.C. 26, Ltd. 571 818
------- -------
Combined Results $16,858 $30,442
======= =======
Page 52
<PAGE>
2. Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated
financial statements include the accounts of the Company and
partnerships more than 50 percent owned (subsidiaries) after
elimination of all material intercompany balances and
transactions.
Cash and Cash Equivalents - The Company considers 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
approximately 25 years.
Leases - All leases are accounted for as operating leases.
Under this method, lease payments are recognized as revenue over
the term of the lease on a straight-line basis.
Income Taxes - Prior to the Consolidation, the Company's
operations were conducted through private and public real estate
limited partnerships. In accordance with partnership taxation,
each partner was responsible for reporting its share of taxable
income. Accordingly, no federal income tax provision has been
made in the accompanying consolidated financial statements prior
to August 16, 1994.
After August 15, 1994, the Company elected to be taxed as a
REIT under the Internal Revenue Code of 1986, as amended.
Management believes the Company 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 such distributions at the
Company's level. Accordingly, no provision has been made for
federal income taxes in the accompanying consolidated financial
statements for the period August 16, 1994 through
December 31, 1994 and the years ended December 31, 1996 and 1995.
Distributions Paid and Payable - For the year ended
December 31, 1996, cash distributions of $2.0925 per share were
paid. The 1996 distributions were paid as a special distribution
of $0.23 per share, eleven monthly distributions of $0.155 per
share and one distribution of $0.1575 per share. As of
December 31, 1996, a distribution of $0.1575 per share was
declared and payable.
Page 53
<PAGE>
2. Summary of Significant Accounting Policies (continued)
For the year ended December 31, 1995, cash distributions of
$1.825 per share were paid. The 1995 distributions were paid as
seven monthly distributions of $0.15 per share and five monthly
distributions of $0.155 per share. As of December 31, 1995,
three distributions totaling $0.54 per share were declared and
payable.
For the period August 16, 1994 through December 31, 1994,
cash distributions of $0.60 per share were paid. The 1994
distributions were paid as four monthly distributions of $0.15
per share.
The following presents the characterization for tax purposes
of distributions paid or deemed to be paid to stockholders for
the years ended December 31:
1996 1995 1994
------ ------ -----
Ordinary Income $1.691 $1.876 $0.60
Return of Capital 0.257 0.093 --
------ ------ -----
$1.948 $1.969 $0.60
====== ====== =====
For tax purposes, a portion of the distributions payable at
December 31, 1995, in the amount of $0.144 per share is deemed to
be paid in 1995. This amount is included in the $1.876 per share
taxable as ordinary income in 1995 and represents the remaining
portion of taxable earnings and profits which were assumed by the
Company in the merger with R.I.C. Advisor, Inc. (the "Advisor").
Provision for Impairment Losses - The Company reviews 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) over a long-term
holding period plus estimated disposition proceeds (undiscounted)
are less than the current book value. If properties are held for
sale, they are carried at the lower of costs or estimated fair
value, less costs to sell. For the years ended December 31, 1996
and 1994, provisions for impairment losses of $579,000 and
$135,000, respectively, were charged to operations to reduce the
net carrying value of four properties held for sale in 1996 and
one property held for sale in 1994. There was no provision for
impairment losses for the year ended December 31, 1995.
Page 54
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Net Income Per Share - Net income per share for 1996 and 1995
was calculated based upon the weighted average number of common
shares and common stock equivalents outstanding during the year.
Net income per share for 1994 was calculated assuming 19,502,091
shares of the Company's common stock were outstanding. Prior to
the Consolidation, no shares of common stock were outstanding.
Stock Option Plan - The Company accounts for its 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. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which 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 123 also 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 123 had been applied. The
Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS 123.
Derivative Financial Instrument - The Company uses an
interest rate treasury lock agreement to hedge the effect of
interest rate fluctuations. This instrument meets the
requirement for hedge accounting, including a high correlation to
a specific transaction. Accordingly, amounts receivable or
payable under the terms of the agreement and changes in market
value are recognized in income when the effects of related
changes of the hedge item are recognized.
Reclassifications - Certain of the 1995 and 1994 balances
have been reclassified to conform to the 1996 presentation. The
reclassifications had no effect on stockholders' equity or net
income.
Use of Estimates - Management of the Company has made a
number of estimates and assumptions relating to the reporting of
assets, liabilities, revenue and expenses and the disclosure of
contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Page 55
<PAGE>
3. Credit Facility Available for Acquisitions
The Company has a $130 million, three-year, revolving,
unsecured acquisition credit facility that expires in November
1999. The credit facility is from The Bank of New York, as
agent, and several major U.S. and non- U.S. banks. As of
December 31, 1996 and 1995, the outstanding balance on the credit
facility was $70.0 million and $6.0 million, respectively, with
an effective interest rate of approximately 6.85% and 7.19%,
respectively. A commitment fee of 0.15%, per annum accrues on
the average amount of the unused available credit commitment.
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.
In 1996 and 1995, interest of $150,000 and $217,000,
respectively, was capitalized on properties under construction.
No interest was capitalized in 1994.
4. Notes Payable
On March 29, 1996, the Company redeemed, at par, the $12.6
million principal amount of Notes. Interest incurred on the
Notes for the years ended December 31, 1996, 1995 and 1994 was
$217,000, $997,000 and $332,000, respectively.
5. Operating Leases
A. General
At December 31, 1996, the Company owned 740 properties in
42 states. Of the Company's properties, 732 are single-tenant
and the remainder are multi-tenant. At December 31, 1996, nine
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. The Company's leases are primarily for
initial terms of 10 to 20 years and provide for limited cost of
living increases and/or increased rent based upon a percentage of
the tenant's sales. Percentage rent for 1996, 1995 and 1994 was
$1.7 million, $1.6 million and $2.6 million, respectively.
Page 56
<PAGE>
5. Operating Leases (continued)
As of December 31, 1996, minimum annual rents to be
received on the operating leases are as follows (dollars in
thousands):
Years Ending December 31,
=========================
1997 $ 56,814
1998 55,577
1999 55,095
2000 54,034
2001 52,730
2002-2018 269,305
--------
TOTAL $543,555
========
B. Major Tenants
The following schedule presents rental income, including
percentage rents, from tenants representing more than 10% of the
Company's total revenue for at least one of the years ended
December 31, 1996, 1995 or 1994 (dollars in thousands):
Tenant 1996 1995 1994
=============================== ======= ======= =======
Children's World, Inc. $13,460 $13,121 $12,907
La Petite Academy, Inc. 9,339 9,189 9,574
Golden Corral Corporation 7,017 6,550 6,362
CSK Auto, Inc. (Formerly
Northern Automotive Corporation) 4,779 4,677 4,931
6. Net Gain on Sales of Properties
In 1996, the Company sold seven properties for a total of
$4.4 million and recognized a gain of $1.5 million. In 1995, the
Company sold three properties for a total of $617,000 and
recognized a net gain of $18,000. In 1994, the Company sold five
properties and had three land easement transactions for a total
of $3.8 million and recognized a net gain of $1.2 million.
7. The Merger of R.I.C. Advisor, Inc.
On August 17, 1995, the Company merged with the Advisor and
issued 990,704 shares of the Company's common stock valued at
approximately $21.2 million (the "Merger"). The Merger was
accounted for using the purchase method. Accordingly, the
purchase price was allocated to assets acquired based on their
Page 57
<PAGE>
7. The Merger of R.I.C. Advisor, Inc. (continued)
estimated fair values. This treatment resulted in approximately
$22.9 million of goodwill. Amortization of goodwill for the
years ended December 31, 1996 and 1995 was $916,000 and $340,000,
respectively.
The following unaudited pro forma summary presents
information as if the Merger had occurred at the beginning of the
period presented. The pro forma information is provided for
information 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 company.
For the Year Ended December 31, 1995
(dollars in thousands, except per share data)
-----------------------------------------------------
Pro Forma
Unaudited
=========
Revenue $ 51,765
Net Income $ 24,751
Net Income Per Share $ 1.22
8. Fair Value of Financial Instruments
Management of the Company believes that the carrying values
reflected in the balance sheets at December 31, 1996 and 1995
reasonably approximate the fair values for cash and cash
equivalents, accounts receivable, due from affiliates and all
liabilities. In making such assessments, the Company utilized
estimates and quoted market prices. See Note 13.
9. Supplemental Disclosure of Cash Flow Information
Interest paid during 1996, 1995 and 1994 was $1,987,000,
$2,186,000 and $354,000, respectively.
The following non-cash investing and financing activities are
included in the accompanying financial statements:
A. Distributions payable totaled $3.6 million and $12.4
million at December 31, 1996 and 1995, respectively.
B. In 1996, due from affiliates of $183,000 was reclassified
to goodwill, related to the resolution of a pre-acquisition
contingency.
Page 58
<PAGE>
9. Supplemental Disclosure of Cash Flow Information (continued)
C. The Merger of the Advisor into the Company on
August 17, 1995 resulted in the following:
(dollars in thousands)
Increases in:
Other Assets $ (1,143)
Goodwill (21,184)
Common Stock retired after the Merger (1,230)
Increases/(Decrease) in:
Other Liabilities 3,029
Due to Advisor (2)
Common Stock 991
Capital in Excess of Par Value 20,186
--------
Cash Acquired from Merger $ 647
========
In 1995, other assets of $95,000 were reclassified to
goodwill. Common stock retired after the Merger includes par
value of common stock and capital in excess of par value of
$58,000 and $1,172,000, respectively.
D. In 1996 and 1995, pursuant to the assumption of the
defined benefit pension plan by the Company (Note 11), the
Company recorded a due from affiliate and a liability (included
in other liabilities) of $73,000 and $493,000, respectively.
This represents the amount of the increase in the liability to
the plan, of which the Company is indemnified by the former
shareholders of the Advisor.
E. In 1994, the following increases occurred resulting from
exchanges of limited partnership units for Notes payable and
Common Stock (dollars in thousands):
Notes Payable $ 12,616
Common Stock 19,502
Capital in Excess of Par Value 452,996
10. Related Party Transactions
A. Advisory Agreement
In August 1994, in connection with the Consolidation, the
Company entered into an advisory agreement under which R.I.C.
Advisor, Inc. advised the Company with respect to its investments
and assumed day-to-day management of the Company (the "Advisory
Agreement"). The Advisory Agreement provided for a monthly
advisor fee equal to 0.1189% of the appraised value of the real
estate properties as of the Consolidation date plus the current
Page 59
<PAGE>
10. Related Party Transactions (continued)
book value of the non-real estate assets of the Company. Amounts
incurred under the Advisory Agreement for the period from
January 1, 1995 through August 17, 1995 and August 15, 1994
through December 31, 1994 were $3.7 million and $2.2 million,
respectively. Prior to the Consolidation, the general partners
of the Partnerships received management fees and reimbursements
from the Partnerships (Note 10B). On August 17, 1995, the
Advisor was merged into the Company (Note 7). As part of the
Merger, the Advisory Agreement was terminated.
B. Related Party Transactions Prior to the Consolidation
Cash Distributions - The Advisor and William E. and
Evelyn J. Clark, the former general partners of the Partnerships,
collectively, received distributions of $342,000 for the period
from January 1, 1994 through August 15, 1994.
Management Fees and Administrative Expenses - For the
period from January 1, 1994 through August 15, 1994, the Advisor
received management fees of $432,000 and reimbursements for
personnel and overhead costs incurred to administer the
operations of the Partnerships of $2.8 million. These
administrative expenses and management fees are included in
advisor fees in the accompanying consolidated statements of
income.
11. Employee Benefit Plan
As a result of the Merger on August 17, 1995, the Company
assumed a defined benefit pension plan (the "Plan") covering
substantially all of its employees. The Plan's benefit formulas
generally based payments to retired employees upon their length
of service and a percentage of qualifying compensation during the
final years of employment. The Company's funding policy was to
contribute annually the amount necessary to satisfy the Internal
Revenue Service's funding standards. The Plan did not provide
for funding of prior service costs.
The board of directors of the Advisor froze the Plan
effective May 31, 1995. No additional employees were entitled to
enter the Plan after May 31, 1995. For each Plan participant,
the accrued benefit earned under the Plan was frozen as of
May 31, 1995. The Plan was terminated on January 2, 1996. Final
disbursement of the Plan's assets occurred on February 24, 1997.
Page 60
<PAGE>
11. Employee Benefit Plan (continued)
The following table sets forth the Plan's funded status and
amounts recognized in the Company's consolidated financial
statements as of December 31, 1996 and 1995 (dollars in
thousands):
1996 1995
==== ====
Actuarial Present Value of Benefit Obligations:
Accumulated Benefit Obligation, All Vested $(7,817) $(7,526)
Plan Assets at Fair Value, Primarily Listed
Stock and Cash and Cash Equivalents 5,537 5,319
-------- -------
Benefit Obligation in Excess of Plan Assets
(Included in Other Liabilities) $(2,280) $(2,207)
======== =======
Assumptions Used:
Discount Rates 6.0% 6.0%
Rates of Increase in Compensation Levels N/A N/A
Expected Long-Term Rates of Return on Assets 8.0% 8.0%
At December 31, 1996 and 1995, the benefit obligation in
excess of plan assets is included in other liabilities in the
accompanying balance sheet. In connection with the Merger, the
Company assumed a benefit obligation of $1.9 million. The Merger
agreement provides for indemnification by the former shareholders
of the Advisor with respect to increases in the benefit
obligation. A receivable from the Advisor's former shareholders
has been recorded as of December 31, 1996 and 1995 for $383,000
and $493,000, respectively, and is included as due from
affiliates in the accompanying consolidated balance sheets, which
offsets the Company's benefit obligation.
12. Stock Incentive Plan
In September 1993, the board of directors of the Company
approved a stock incentive plan (the "Stock Plan") designed to
attract and retain directors, officers and employees of the
Company by enabling such individuals to participate in the
ownership of the Company. 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.
The Company adopted the disclosure-only option under SFAS
123, "Accounting for Stock-Based Compensation", as of
January 1, 1996. If the accounting provisions of SFAS 123 had
Page 61
<PAGE>
12. Stock Incentive Plan (continued)
been adopted as of the beginning of 1996, the effect on 1996 net
income and net income per share would have been immaterial.
Furthermore, based on current and anticipated use of stock
options, it is not anticipated that the impact of the provisions
of SFAS 123 would be material in any future period.
Stock options are granted with an exercise price equal to the
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 three and four years. At December 31, 1996,
1995 and 1994, options outstanding totaled 73,000, 30,000 and
30,000, respectively. Management believes that the impact of
these options on the financial position and results of operations
are immaterial and it is not anticipated that the impact of the
options would be material in any future period.
13. Derivative Financial Instrument
The Company has only limited involvement with a derivative
financial instrument and does not use it for trading purposes.
The derivative financial instrument is used to manage well-
defined interest rate risks.
In December 1996, the Company entered into a treasury
interest rate lock agreement to hedge against rising interest
rates. Under the interest rate lock agreement, which is in the
notional amount of $90 million, the Company receives or makes a
payment based on the differential between a specified interest
rate (6.537%) and the actual 10-year treasury interest rate.
Based on the December 31, 1996 10-year treasury interest rate,
the Company has an unrecognized loss of $80,000.
The Company is exposed to credit losses in the event of
nonperformance by the counterparty to this agreement. The
Company did not obtain collateral to support the financial
instrument but monitors the credit standing of the counterparty
and anticipates that the counterparty will be able to fully
satisfy its obligation under the contract.
14. Commitments and Contingencies
In the ordinary course of its business, the Company is a
party to various legal actions which the Company believes are
routine in nature and incidental to the operation of the business
of the Company. The Company believes that the outcome of the
proceedings will not have a material adverse effect upon its
consolidated operations, financial position or liquidity.
Page 62
<PAGE>
REALTY INCOME CORPORATION
AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
(dollars in thousands, except per share data)
(not covered by Independent Auditors' Report)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
======= ======= ======= ======= =======
1996
====
Total Revenue $13,778 $13,637 $13,840 $15,702 $56,957
Depreciation and
Amortization
Expense 4,074 4,049 4,052 4,247 16,422
Provision for
Impairment
Losses 323 -- -- 256 579
Other Expenses 2,276 2,186 2,166 2,560 9,188
Income from
Operations 7,105 7,402 7,622 8,639 30,768
Net Income 7,850 7,615 7,890 8,868 32,223
Net Income
Per Share 0.34 0.33 0.34 0.39 1.40
1995
====
Total Revenue $11,928 $12,243 $13,102 $14,282 $51,555
Depreciation and
Amortization
Expense 3,345 3,586 3,863 4,055 14,849
Other Expenses 2,659 2,863 3,098 2,504 11,124
Income from
Operations 5,924 5,794 6,141 7,723 25,582
Net Income 6,001 5,794 6,120 7,685 25,600
Net Income
Per Share 0.31 0.30 0.31 0.35 1.27
Page 63
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CSK AUTO, INC.
(Formerly
Northern
Automotive
Corporation)
Phoenix AZ 231,000 513,057 None None
Phoenix AZ 71,750 159,359 None None
Phoenix AZ 222,950 495,178 None None
Tucson AZ 194,250 431,434 None None
Grass Valley CA 325,000 384,955 None None
Jackson CA 300,000 390,849 None None
Sacramento CA 210,000 466,419 None None
Turlock CA 222,250 493,627 None None
Canon City CO 66,500 147,699 None None
Denver CO 141,400 314,056 None None
Denver CO 315,000 699,623 None None
Denver CO 283,500 629,666 None None
Littleton CO 252,925 561,759 None None
Council Bluffs IA 194,355 431,668 None None
Boise ID 158,400 351,813 None None
Boise ID 190,080 422,172 None None
Coeur D'Alene ID 165,900 368,468 None None
Lewiston ID 138,950 308,612 None None
Moscow ID 117,250 260,417 None None
Nampa ID 183,743 408,101 None None
Twin Falls ID 190,080 422,172 None None
Kansas City KS 185,955 413,014 None None
Kansas City KS 222,000 455,881 None None
Blue Springs MO 222,569 494,334 None None
Independence MO 210,643 467,845 None None
Kansas City MO 210,070 466,571 None None
Kansas City MO 168,350 373,910 None None
Kansas City MO 248,500 551,927 None None
Missoula MT 163,100 362,249 None None
Kearney NE 173,950 344,393 None None
Page 64
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
CSK AUTO, INC.
(Formerly
Northern
Automotive
Corporation)
Phoenix AZ 231,000 513,057 744,057
Phoenix AZ 71,750 159,359 231,109
Phoenix AZ 222,950 495,178 718,128
Tucson AZ 194,250 431,434 625,684
Grass Valley CA 325,000 384,955 709,955
Jackson CA 300,000 390,849 690,849
Sacramento CA 210,000 466,419 676,419
Turlock CA 222,250 493,627 715,877
Canon City CO 66,500 147,699 214,199
Denver CO 141,400 314,056 455,456
Denver CO 315,000 699,623 1,014,623
Denver CO 283,500 629,666 913,166
Littleton CO 252,925 561,759 814,684
Council Bluffs IA 194,355 431,668 626,023
Boise ID 158,400 351,813 510,213
Boise ID 190,080 422,172 612,252
Coeur D'Alene ID 165,900 368,468 534,368
Lewiston ID 138,950 308,612 447,562
Moscow ID 117,250 260,417 377,667
Nampa ID 183,743 408,101 591,844
Twin Falls ID 190,080 422,172 612,252
Kansas City KS 185,955 413,014 598,969
Kansas City KS 222,000 455,881 677,881
Blue Springs MO 222,569 494,334 716,903
Independence MO 210,643 467,845 678,488
Kansas City MO 210,070 466,571 676,641
Kansas City MO 168,350 373,910 542,260
Kansas City MO 248,500 551,927 800,427
Missoula MT 163,100 362,249 525,349
Kearney NE 173,950 344,393 518,343
Page 65
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CSK AUTO, INC.
(Formerly
Northern
Automotive
Corporation)
Phoenix AZ 160,574 N/A 11/09/87 300
Phoenix AZ 49,875 N/A 11/19/87 300
Phoenix AZ 124,329 N/A 11/02/89 300
Tucson AZ 136,215 N/A 10/30/87 300
Grass Valley CA 112,033 N/A 05/20/88 300
Jackson CA 109,383 N/A 05/17/88 300
Sacramento CA 145,977 N/A 11/25/87 300
Turlock CA 153,133 N/A 12/30/87 300
Canon City CO 46,226 N/A 11/12/87 300
Denver CO 98,291 N/A 11/18/87 300
Denver CO 207,413 N/A 05/16/88 300
Denver CO 186,673 N/A 05/27/88 300
Littleton CO 171,176 N/A 02/12/88 300
Council Bluffs IA 127,975 N/A 05/19/88 300
Boise ID 104,300 N/A 05/06/88 300
Boise ID 125,158 N/A 05/06/88 300
Coeur D'Alene ID 117,350 N/A 09/21/87 300
Lewiston ID 98,288 N/A 09/16/87 300
Moscow ID 82,938 N/A 09/14/87 300
Nampa ID 120,988 N/A 05/06/88 300
Twin Falls ID 125,158 N/A 05/06/88 300
Kansas City KS 122,445 N/A 05/13/88 300
Kansas City KS 135,054 N/A 05/16/88 300
Blue Springs MO 127,574 N/A 07/31/89 300
Independence MO 120,737 N/A 07/31/89 300
Kansas City MO 138,322 N/A 05/13/88 300
Kansas City MO 110,851 N/A 05/26/88 300
Kansas City MO 155,633 N/A 10/25/88 300
Missoula MT 114,372 N/A 10/30/87 300
Kearney NE 79,466 N/A 05/01/90 300
Page 66
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CSK AUTO, INC. (continued)
Omaha NE 196,000 435,321 None None
Omaha NE 199,100 412,042 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
Reno NV 456,000 562,344 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
Amarillo TX 140,000 419,734 None None
El Paso TX 66,150 146,922 None None
El Paso TX 56,350 125,156 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
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
Page 67
<PAGE>
(continued)
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
================= ============ ============ ============
CSK AUTO, INC. (continued)
Omaha NE 196,000 435,321 631,321
Omaha NE 199,100 412,042 611,142
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
Reno NV 456,000 562,344 1,018,344
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
Amarillo TX 140,000 419,734 559,734
El Paso TX 66,150 146,922 213,072
El Paso TX 56,350 125,156 181,506
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
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
Page 68
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CSK AUTO, INC. (continued)
Omaha NE 129,058 N/A 05/26/88 300
Omaha NE 120,114 N/A 05/27/88 300
Albuquerque NM 56,451 N/A 10/29/87 300
Rio Rancho NM 143,192 N/A 02/26/88 300
Sante Fe NM 49,088 N/A 10/29/87 300
Las Vegas NV 112,900 N/A 10/29/87 300
Reno NV 166,582 N/A 05/26/88 300
Albany OR 108,629 N/A 08/24/87 300
Beaverton OR 149,833 N/A 08/26/87 300
Corvallis OR 108,629 N/A 08/12/87 300
Eugene OR 131,892 N/A 02/10/88 300
Oak Grove OR 128,604 N/A 08/06/87 300
Portland OR 136,099 N/A 08/12/87 300
Portland OR 104,883 N/A 08/26/87 300
Portland OR 148,546 N/A 09/01/87 300
Salem OR 97,389 N/A 08/20/87 300
Tigard OR 117,370 N/A 08/26/87 300
Amarillo TX 119,490 N/A 09/12/88 300
El Paso TX 46,387 N/A 10/27/87 300
El Paso TX 39,515 N/A 10/27/87 300
Lubbock TX 29,451 N/A 10/26/87 300
Lubbock TX 34,361 N/A 10/29/87 300
Midland TX 31,906 N/A 10/27/87 300
Odessa TX 35,587 N/A 10/26/87 300
Bellevue WA 132,350 N/A 08/06/87 300
Bellingham WA 119,864 N/A 08/20/87 300
Bothell WA 142,342 N/A 08/20/87 300
Everett WA 255,457 N/A 11/17/87 300
Hazel Dell WA 106,043 N/A 05/23/88 300
Kennewick WA 115,122 N/A 08/26/87 300
Kent WA 142,338 N/A 08/06/87 300
Lacey WA 122,110 N/A 08/13/87 300
Marysville WA 119,867 N/A 08/20/87 300
Moses Lake WA 98,887 N/A 08/12/87 300
Page 69
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CSK AUTO, INC. (continued)
Pasco WA 161,700 359,142 None None
Puyallup WA 173,250 384,795 None None
Redmond WA 196,000 435,317 None None
Renton WA 185,500 412,003 None None
Richland WA 161,700 359,142 None None
Seattle WA 162,400 360,697 None None
Silverdale WA 183,808 419,777 None None
Spanaway WA 189,000 419,777 None None
Spokane WA 66,150 146,921 None None
Tacoma WA 191,800 425,996 None None
Tacoma WA 196,000 435,324 None None
Vancouver WA 180,250 400,343 None None
Walla Walla WA 170,100 377,793 None None
Wenatchee WA 148,400 329,602 None None
Woodinville WA 171,500 380,908 None None
DISCOUNT TIRE STORE
Tucson AZ 178,297 396,005 None None
Yuma AZ 120,750 268,190 None None
Aurora CO 221,691 492,382 None None
Colorado Sprgs CO 280,193 622,317 None None
Colorado Sprgs CO 192,988 433,542 None None
Pueblo CO 196,994 437,530 None None
Austin TX 185,454 411,899 None None
Dallas TX 191,267 424,811 None None
Garland TX 242,887 539,461 None None
Harlingen TX 134,599 298,948 None None
Houston TX 151,018 335,417 None None
Leon Valley TX 178,221 395,834 None None
Pasadena TX 107,391 238,518 None None
Plano TX 187,564 416,586 None None
San Antonio TX 245,164 544,518 None None
Bountiful UT 183,750 408,115 None None
Provo UT 125,395 278,507 None None
Page 70
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
CSK AUTO, INC. (continued)
Pasco WA 161,700 359,142 520,842
Puyallup WA 173,250 384,795 558,045
Redmond WA 196,000 435,317 631,317
Renton WA 185,500 412,003 597,503
Richland WA 161,700 359,142 520,842
Seattle WA 162,400 360,697 523,097
Silverdale WA 183,808 419,777 603,585
Spanaway WA 189,000 419,777 608,777
Spokane WA 66,150 146,921 213,071
Tacoma WA 191,800 425,996 617,796
Tacoma WA 196,000 435,324 631,324
Vancouver WA 180,250 400,343 580,593
Walla Walla WA 170,100 377,793 547,893
Wenatchee WA 148,400 329,602 478,002
Woodinville WA 171,500 380,908 552,408
DISCOUNT TIRE STORE
Tucson AZ 178,297 396,005 574,302
Yuma AZ 120,750 268,190 388,940
Aurora CO 221,691 492,382 714,073
Colorado Sprgs CO 280,193 622,317 902,510
Colorado Sprgs CO 192,988 433,542 626,530
Pueblo CO 196,994 437,530 634,524
Austin TX 185,454 411,899 597,353
Dallas TX 191,267 424,811 616,078
Garland TX 242,887 539,461 782,348
Harlingen TX 134,599 298,948 433,547
Houston TX 151,018 335,417 486,435
Leon Valley TX 178,221 395,834 574,055
Pasadena TX 107,391 238,518 345,909
Plano TX 187,564 416,586 604,150
San Antonio TX 245,164 544,518 789,682
Bountiful UT 183,750 408,115 591,865
Provo UT 125,395 278,507 403,902
Page 71
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CSK AUTO, INC. (continued)
Pasco WA 115,371 N/A 08/18/87 300
Puyallup WA 122,552 N/A 09/15/87 300
Redmond WA 138,643 N/A 09/17/87 300
Renton WA 131,215 N/A 09/15/87 300
Richland WA 115,371 N/A 08/13/87 300
Seattle WA 115,871 N/A 08/20/87 300
Silverdale WA 133,692 N/A 09/16/87 300
Spanaway WA 134,848 N/A 08/25/87 300
Spokane WA 45,982 N/A 11/18/87 300
Tacoma WA 136,848 N/A 08/18/87 300
Tacoma WA 137,444 N/A 10/15/87 300
Vancouver WA 128,606 N/A 08/20/87 300
Walla Walla WA 121,362 N/A 08/06/87 300
Wenatchee WA 105,883 N/A 08/25/87 300
Woodinville WA 122,363 N/A 08/20/87 300
DISCOUNT TIRE STORE
Tucson AZ 95,701 N/A 01/19/90 300
Yuma AZ 64,812 N/A 01/23/90 300
Aurora CO 118,993 N/A 01/29/90 300
Colorado Sprgs CO 150,393 N/A 01/23/90 300
Colorado Sprgs CO 65,372 N/A 05/20/93 300
Pueblo CO 105,736 N/A 01/26/90 300
Austin TX 98,417 N/A 02/06/90 300
Dallas TX 102,663 N/A 01/26/90 300
Garland TX 130,370 N/A 01/19/90 300
Harlingen TX 72,246 N/A 01/17/90 300
Houston TX 81,059 N/A 01/25/90 300
Leon Valley TX 95,660 N/A 01/17/90 300
Pasadena TX 57,642 N/A 01/24/90 300
Plano TX 100,675 N/A 01/18/90 300
San Antonio TX 130,104 N/A 02/14/90 300
Bountiful UT 98,628 N/A 01/30/90 300
Provo UT 67,306 N/A 01/25/90 300
Page 72
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
DISCOUNT TIRE STORE (continued)
Tacoma WA 187,111 415,579 None None
ECONO LUBE N' TUNE
Chula Vista CA 313,293 409,654 None None
Arvada CO 201,565 339,038 None None
Arvada CO 241,044 165,267 None None
Broomfield CO 154,930 503,626 None None
Thornton CO 276,084 250,393 None None
Olathe KS 217,995 2,084 None None
Independence MO 297,641 233,152 None None
Dallas TX 234,604 325,951 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 None
Virginia Beach VA 287,675 212,057 None None
Bremerton WA 261,172 322,377 None None
JIFFY LUBE
Beaver Creek OH 205,000 4,381 None None
Centerville OH 305,000 420,448 None None
Hamilton OH 252,608 4,219 None None
Huber Heights OH 282,000 8,855 None None
Denver CO 79,717 369,586 None None
Jacksonville FL 76,585 355,066 None None
Lauderdale Lks FL 65,987 305,931 None None
Seminole FL 68,000 315,266 None None
Sunrise FL 80,253 372,069 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
Marietta GA 60,900 293,461 None None
Marietta GA 69,561 346,024 None None
Page 73
<PAGE>
(continued)
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
================= ============ ============ ============
DISCOUNT TIRE STORE (continued)
Tacoma WA 187,111 415,579 602,690
ECONO LUBE N' TUNE
Chula Vista CA 313,293 409,654 722,947
Arvada CO 201,565 339,038 540,603
Arvada CO 241,044 165,267 406,311
Broomfield CO 154,930 503,626 658,556
Thornton CO 276,084 250,393 526,477
Olathe KS 217,995 2,084 220,079
Independence MO 297,641 233,152 530,793
Dallas TX 234,604 325,951 560,555
Lewisville TX 199,942 324,736 524,678
San Antonio TX 198,828 437,422 636,250
Richmond VA 149,780 399,415 549,195
Virginia Beach VA 287,675 212,057 499,732
Bremerton WA 261,172 322,377 583,549
JIFFY LUBE
Beaver Creek OH 205,000 4,381 209,381
Centerville OH 305,000 420,448 725,448
Hamilton OH 252,608 4,219 256,827
Huber Heights OH 282,000 8,855 290,855
Denver CO 79,717 369,586 449,303
Jacksonville FL 76,585 355,066 431,651
Lauderdale Lks FL 65,987 305,931 371,918
Seminole FL 68,000 315,266 383,266
Sunrise FL 80,253 372,069 452,322
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
Marietta GA 60,900 293,461 354,361
Marietta GA 69,561 346,024 415,585
Page 74
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
DISCOUNT TIRE STORE (continued)
Tacoma WA 100,431 N/A 01/25/90 300
ECONO LUBE N' TUNE
Chula Vista CA 10,241 05/01/96 01/19/96 300
Arvada CO 5,086 08/28/96 04/09/96 300
Arvada CO 0 01/03/97 07/10/96 300
Broomfield CO 7,554 08/22/96 03/15/96 300
Thornton CO 0 12/31/96 10/31/96 300
Olathe KS 0 In Prcss 11/11/96 300
Independence MO 389 N/A 12/20/96 300
Dallas TX 4,889 08/09/96 02/19/96 300
Lewisville TX 4,871 08/02/96 02/14/96 300
San Antonio TX 22,600 N/A 09/15/95 300
Richmond VA 666 N/A 12/26/96 300
Virginia Beach VA 0 01/07/97 09/27/96 300
Bremerton WA 1,571 11/27/96 07/24/96 300
JIFFY LUBE
Beaver Creek OH 0 In Prcss 09/09/96 300
Centerville OH 7,708 07/24/96 06/28/96 300
Hamilton OH 0 In Prcss 10/04/96 300
Huber Heights OH 0 12/03/96 07/18/96 300
Denver CO 204,014 N/A 10/08/85 300
Jacksonville FL 191,672 N/A 12/23/85 300
Lauderdale Lks FL 162,589 N/A 02/19/86 300
Seminole FL 170,186 N/A 12/23/85 300
Sunrise FL 199,168 N/A 02/14/86 300
Tampa FL 175,192 N/A 12/27/85 300
Tampa FL 167,684 N/A 12/27/85 300
Tampa FL 204,730 N/A 07/23/86 300
Atlanta GA 140,836 N/A 11/27/85 300
Atlanta GA 196,832 N/A 12/18/85 300
Marietta GA 158,414 N/A 12/26/85 300
Marietta GA 179,431 N/A 06/03/86 300
Page 75
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
JIFFY LUBE (continued)
Louisville KY 56,054 259,881 None None
Clinton MD 70,880 328,620 None None
Durham NC 55,074 255,336 None None
Raleigh NC 89,145 413,301 None None
Columbus OH 71,098 329,626 None None
Columbus OH 75,761 351,246 None None
Dayton OH 70,000 324,538 None None
Miamisburg OH 63,996 296,701 None None
Northwood OH 65,978 263,912 None None
Toledo OH 91,655 366,621 None None
Toledo OH 73,408 293,632 None None
Springfield Twp. PA 82,740 383,601 None None
Q LUBE
Bogart GA 66,807 309,732 None None
Gainesville GA 53,589 248,452 None None
Riverdale GA 58,444 270,961 None None
Rome GA 56,454 261,733 None None
R & S STRAUSS
Cherry Hill NJ 1,074,640 1,032,304 None None
Philadelphia PA 858,500 877,745 None None
SPEEDY MUFFLER KING
Hartford CT 248,540 482,460 None None
Columbus OH 245,036 470,468 None None
Eastlake OH 321,347 459,774 None None
Indianapolis IN 231,384 428,307 None None
Milwaukee WI 173,005 499,244 None None
Milwaukee WI 152,509 475,468 None None
New Berlin WI 188,491 466,268 None None
Page 76
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
JIFFY LUBE (continued)
Louisville KY 56,054 259,881 315,935
Clinton MD 70,880 328,620 399,500
Durham NC 55,074 255,336 310,410
Raleigh NC 89,145 413,301 502,446
Columbus OH 71,098 329,626 400,724
Columbus OH 75,761 351,246 427,007
Dayton OH 70,000 324,538 394,538
Miamisburg OH 63,996 296,701 360,697
Northwood OH 65,978 263,912 329,890
Toledo OH 91,655 366,621 458,276
Toledo OH 73,408 293,632 367,040
Springfield Twp. PA 82,740 383,601 466,341
Q LUBE
Bogart GA 66,807 309,732 376,539
Gainesville GA 53,589 248,452 302,041
Riverdale GA 58,444 270,961 329,405
Rome GA 56,454 261,733 318,187
R & S STRAUSS
Cherry Hill NJ 1,074,640 1,032,304 2,106,944
Philadelphia PA 858,500 877,745 1,736,245
SPEEDY MUFFLER KING
Hartford CT 248,540 482,460 731,000
Columbus OH 245,036 470,468 715,504
Eastlake OH 321,347 459,774 781,121
Indianapolis IN 231,384 428,307 659,691
Milwaukee WI 173,005 499,244 672,249
Milwaukee WI 152,509 475,468 627,977
New Berlin WI 188,491 466,268 654,759
Page 77
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
JIFFY LUBE (continued)
Louisville KY 140,289 N/A 12/17/85 300
Clinton MD 180,029 N/A 11/15/85 300
Durham NC 139,884 N/A 11/13/85 300
Raleigh NC 226,563 N/A 10/28/85 300
Columbus OH 181,956 N/A 10/02/85 300
Columbus OH 192,546 N/A 10/24/85 300
Dayton OH 177,904 N/A 10/31/85 300
Miamisburg OH 163,781 N/A 10/08/85 300
Northwood OH 181,293 N/A 09/12/86 180
Toledo OH 251,847 N/A 09/12/86 180
Toledo OH 201,708 N/A 09/12/86 180
Springfield Twp. PA 203,868 N/A 02/28/86 300
Q LUBE
Bogart GA 167,201 N/A 12/20/85 300
Gainesville GA 134,117 N/A 12/19/85 300
Riverdale GA 145,137 N/A 01/15/86 300
Rome GA 141,287 N/A 12/19/85 300
R & S STRAUSS
Cherry Hill NJ 56,777 08/02/95 01/26/95 300
Philadelphia PA 162,880 05/19/95 12/05/94 300
SPEEDY MUFFLER KING
Hartford CT 5,629 N/A 09/30/96 300
Columbus OH 19,603 N/A 12/22/95 300
Eastlake OH 19,157 N/A 12/22/95 300
Indianapolis IN 4,997 N/A 09/27/96 300
Milwaukee WI 20,802 N/A 12/22/95 300
Milwaukee WI 5,547 N/A 09/27/96 300
New Berlin WI 19,428 N/A 12/22/95 300
Page 78
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
OTHER AUTOMOTIVE
Fullerton CA 47,325 66,522 None None
Minneapolis MN 58,000 268,903 None None
CHILDREN'S WORLD
Chandler AZ 144,083 668,080 None None
Chandler AZ 291,720 647,923 None None
Chandler AZ 271,695 603,446 None None
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
Scottsdale AZ 291,993 648,530 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
Corona CA 144,856 671,585 None None
El Cajon CA 157,804 731,621 None None
Encinitas CA 320,000 710,729 None None
Moreno Valley CA 304,489 676,214 None None
Oceanside CA 145,568 674,889 None None
R. Cucamonga CA 471,733 1,047,739 None None
Sacramento CA 290,734 645,731 None None
Simi Valley CA 208,585 967,055 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 301,455 655,609 None None
Broomfield CO 107,000 403,080 None None
Colorado Sprgs CO 115,542 535,700 None None
Page 79
<PAGE>
(continued)
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 AUTOMOTIVE
Fullerton CA 47,325 66,522 113,847
Minneapolis MN 58,000 268,903 326,903
CHILDREN'S WORLD
Chandler AZ 144,083 668,080 812,163
Chandler AZ 291,720 647,923 939,643
Chandler AZ 271,695 603,446 875,141
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
Scottsdale AZ 291,993 648,530 940,523
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
Corona CA 144,856 671,585 816,441
El Cajon CA 157,804 731,621 889,425
Encinitas CA 320,000 710,729 1,030,729
Moreno Valley CA 304,489 676,214 980,703
Oceanside CA 145,568 674,889 820,457
R. Cucamonga CA 471,733 1,047,739 1,519,472
Sacramento CA 290,734 645,731 936,465
Simi Valley CA 208,585 967,055 1,175,640
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 301,455 655,609 957,064
Broomfield CO 107,000 403,080 510,080
Colorado Sprgs CO 115,542 535,700 651,242
Page 80
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
OTHER AUTOMOTIVE
Fullerton CA 66,522 N/A 08/21/72 234
Minneapolis MN 145,160 N/A 12/18/85 300
CHILDREN'S WORLD
Chandler AZ 327,024 N/A 12/17/86 300
Chandler AZ 200,946 N/A 12/11/87 300
Chandler AZ 187,253 N/A 12/14/87 300
Mesa AZ 188,630 N/A 09/29/88 300
Mesa AZ 168,554 N/A 09/29/88 300
Peoria AZ 188,962 N/A 03/30/88 300
Phoenix AZ 201,946 N/A 09/29/88 300
Scottsdale AZ 201,186 N/A 12/14/87 300
Tempe AZ 195,972 N/A 03/10/88 300
Tempe AZ 147,800 N/A 09/27/90 300
Tucson AZ 193,070 N/A 09/28/88 300
Tucson AZ 156,122 N/A 09/29/88 300
Calabasas CA 400,592 N/A 09/26/85 300
Carmichael CA 307,583 N/A 08/22/86 300
Chino CA 560,026 N/A 10/06/83 180
Chula Vista CA 245,831 N/A 10/30/87 300
Corona CA 412,848 N/A 12/19/84 300
El Cajon CA 394,941 N/A 12/19/85 300
Encinitas CA 220,482 N/A 12/29/87 300
Moreno Valley CA 228,428 N/A 02/11/87 300
Oceanside CA 364,315 N/A 12/23/85 300
R. Cucamonga CA 325,030 N/A 12/30/87 300
Sacramento CA 203,875 N/A 10/05/87 300
Simi Valley CA 522,035 N/A 12/20/85 300
Walnut CA 510,230 N/A 08/22/86 300
Aurora CO 346,674 N/A 03/25/86 300
Aurora CO 197,745 N/A 12/31/87 300
Aurora CO 213,404 N/A 09/27/89 300
Broomfield CO 376,143 N/A 01/12/83 180
Colorado Sprgs CO 264,297 N/A 12/04/86 300
Page 81
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CHILDREN'S WORLD (continued)
Englewood CO 131,216 608,372 None None
Englewood CO 158,651 735,571 None None
Fort Collins CO 117,105 542,950 None None
Fort Collins CO 137,734 638,594 None None
Littleton CO 287,000 637,435 None None
Littleton CO 299,250 664,642 None None
Longmont CO 115,592 535,931 None None
Westminster CO 306,387 695,737 None None
Dunwoody GA 318,500 707,399 None None
Lilburn GA 116,350 539,488 None None
Marietta GA 231,000 513,061 None None
Marietta GA 273,000 619,076 None None
Marietta GA 292,250 649,095 None None
Marietta GA 295,750 596,299 None None
Marietta GA 301,000 668,529 None None
Smyrna GA 274,750 610,229 None None
Stone Mountain GA 316,750 703,512 None None
Addison IL 125,780 583,146 None None
Bartlett IL 120,824 560,166 None None
Bolingbrook IL 60,000 409,024 None None
Carol Stream IL 122,831 586,416 None None
Elk Grove Village IL 126,860 588,175 None None
Glendale Heights IL 318,500 707,399 None None
Hoffman Estates IL 318,500 707,399 None None
Palatine IL 121,911 565,233 None None
Roselle IL 297,541 561,036 None None
Vernon Hills IL 132,523 614,430 None None
Westmont IL 124,742 578,330 None None
Lenexa KS 318,500 707,399 None None
Olathe KS 304,500 676,308 None None
Overland Park KS 305,691 707,397 None None
Shawnee KS 315,000 699,629 None None
Acton MA 315,533 700,813 None None
Marlborough MA 352,765 776,487 None None
Page 82
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
CHILDREN'S WORLD (continued)
Englewood CO 131,216 608,372 739,588
Englewood CO 158,651 735,571 894,222
Fort Collins CO 117,105 542,950 660,055
Fort Collins CO 137,734 638,594 776,328
Littleton CO 287,000 637,435 924,435
Littleton CO 299,250 664,642 963,892
Longmont CO 115,592 535,931 651,523
Westminster CO 306,387 695,737 1,002,124
Dunwoody GA 318,500 707,399 1,025,899
Lilburn GA 116,350 539,488 655,838
Marietta GA 231,000 513,061 744,061
Marietta GA 273,000 619,076 892,076
Marietta GA 292,250 649,095 941,345
Marietta GA 295,750 596,299 892,049
Marietta GA 301,000 668,529 969,529
Smyrna GA 274,750 610,229 884,979
Stone Mountain GA 316,750 703,512 1,020,262
Addison IL 125,780 583,146 708,926
Bartlett IL 120,824 560,166 680,990
Bolingbrook IL 60,000 409,024 469,024
Carol Stream IL 122,831 586,416 709,247
Elk Grove Village IL 126,860 588,175 715,035
Glendale Heights IL 318,500 707,399 1,025,899
Hoffman Estates IL 318,500 707,399 1,025,899
Palatine IL 121,911 565,233 687,144
Roselle IL 297,541 561,036 858,577
Vernon Hills IL 132,523 614,430 746,953
Westmont IL 124,742 578,330 703,072
Lenexa KS 318,500 707,399 1,025,899
Olathe KS 304,500 676,308 980,808
Overland Park KS 305,691 707,397 1,013,088
Shawnee KS 315,000 699,629 1,014,629
Acton MA 315,533 700,813 1,016,346
Marlborough MA 352,765 776,487 1,129,252
Page 83
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CHILDREN'S WORLD (continued)
Englewood CO 300,152 N/A 12/05/86 300
Englewood CO 360,061 N/A 12/29/86 300
Fort Collins CO 286,277 N/A 03/25/86 300
Fort Collins CO 336,707 N/A 03/25/86 300
Littleton CO 181,973 N/A 09/29/88 300
Littleton CO 189,741 N/A 09/29/88 300
Longmont CO 282,577 N/A 03/25/86 300
Westminster CO 203,860 N/A 09/27/89 300
Dunwoody GA 198,065 N/A 11/16/88 300
Lilburn GA 264,079 N/A 12/23/86 300
Marietta GA 154,926 N/A 03/18/88 300
Marietta GA 185,236 N/A 04/26/88 300
Marietta GA 179,960 N/A 12/02/88 300
Marietta GA 165,323 N/A 12/30/88 300
Marietta GA 185,347 N/A 12/30/88 300
Smyrna GA 170,859 N/A 11/15/88 300
Stone Mountain GA 196,977 N/A 11/16/88 300
Addison IL 307,473 N/A 03/25/86 300
Bartlett IL 295,355 N/A 03/25/86 300
Bolingbrook IL 387,953 N/A 10/18/82 180
Carol Stream IL 309,197 N/A 03/25/86 300
Elk Grove Village IL 310,125 N/A 03/26/86 300
Glendale Heights IL 198,065 N/A 11/16/88 300
Hoffman Estates IL 190,308 N/A 03/31/89 300
Palatine IL 298,026 N/A 03/25/86 300
Roselle IL 155,547 N/A 12/30/88 300
Vernon Hills IL 323,966 N/A 03/25/86 300
Westmont IL 304,932 N/A 03/25/86 300
Lenexa KS 190,308 N/A 03/31/89 300
Olathe KS 193,071 N/A 09/28/88 300
Overland Park KS 201,946 N/A 09/28/88 300
Shawnee KS 197,808 N/A 10/27/88 300
Acton MA 200,067 N/A 09/30/88 300
Marlborough MA 217,408 N/A 11/04/88 300
Page 84
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CHILDREN'S WORLD (continued)
Westborough MA 359,412 773,877 None None
Olney MD 342,500 760,701 None None
Waldorf MD 130,430 604,702 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 118,111 547,586 None None
Brooklyn Park MN 112,823 523,073 None None
Eagan MN 112,127 519,844 None None
Eden Prairie MN 124,286 576,243 None None
Maple Grove MN 111,691 517,822 None None
Minnetonka MN 146,847 680,842 None None
Plymouth MN 134,221 622,350 None None
White Bear Lake MN 260,750 579,133 None None
W Bloomington MN 40,000 468,484 None None
Florissant MO 318,500 707,399 None None
Gladstone MO 294,000 652,987 None None
Lee's Summit MO 239,627 532,220 None None
Manchester MO 287,000 637,435 None None
St. Charles MO 259,000 575,246 None None
Londonderry NH 335,467 745,082 None None
Beavercreek OH 179,552 398,786 None None
Centerville OH 174,519 387,613 None None
Forest Park OH 170,778 379,305 None None
Huber Heights OH 245,000 544,153 None None
Loveland OH 206,136 457,829 None None
Maineville OH 173,105 384,469 None None
Westerville OH 294,350 646,557 None None
Beaverton OR 135,148 626,647 None None
Beaverton OR 115,232 534,301 None None
Memphis TN 238,263 504,897 None None
Memphis TN 238,000 528,608 None None
Nashville TN 274,298 609,223 None None
Arlington TX 82,109 380,678 None None
Page 85
<PAGE>
(continued)
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
================= ============ ============ ============
CHILDREN'S WORLD (continued)
Westborough MA 359,412 773,877 1,133,289
Olney MD 342,500 760,701 1,103,201
Waldorf MD 130,430 604,702 735,132
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 118,111 547,586 665,697
Brooklyn Park MN 112,823 523,073 635,896
Eagan MN 112,127 519,844 631,971
Eden Prairie MN 124,286 576,243 700,529
Maple Grove MN 111,691 517,822 629,513
Minnetonka MN 146,847 680,842 827,689
Plymouth MN 134,221 622,350 756,571
White Bear Lake MN 260,750 579,133 839,883
W Bloomington MN 40,000 468,484 508,484
Florissant MO 318,500 707,399 1,025,899
Gladstone MO 294,000 652,987 946,987
Lee's Summit MO 239,627 532,220 771,847
Manchester MO 287,000 637,435 924,435
St. Charles MO 259,000 575,246 834,246
Londonderry NH 335,467 745,082 1,080,549
Beavercreek OH 179,552 398,786 578,338
Centerville OH 174,519 387,613 562,132
Forest Park OH 170,778 379,305 550,083
Huber Heights OH 245,000 544,153 789,153
Loveland OH 206,136 457,829 663,965
Maineville OH 173,105 384,469 557,574
Westerville OH 294,350 646,557 940,907
Beaverton OR 135,148 626,647 761,795
Beaverton OR 115,232 534,301 649,533
Memphis TN 238,263 504,897 743,160
Memphis TN 238,000 528,608 766,608
Nashville TN 274,298 609,223 883,521
Arlington TX 82,109 380,678 462,787
Page 86
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CHILDREN'S WORLD (continued)
Westborough MA 216,675 N/A 11/01/88 300
Olney MD 235,983 N/A 12/18/87 300
Waldorf MD 379,849 N/A 09/26/84 300
Canton MI 359,903 N/A 10/06/82 180
Apple Valley MN 277,510 N/A 03/26/86 300
Bloomington MN 303,397 N/A 03/27/86 300
Brooklyn Park MN 288,722 N/A 03/26/86 300
Brooklyn Park MN 275,798 N/A 03/27/86 300
Eagan MN 274,095 N/A 03/31/86 300
Eden Prairie MN 303,833 N/A 03/27/86 300
Maple Grove MN 273,030 N/A 03/26/86 300
Minnetonka MN 335,906 N/A 12/12/86 300
Plymouth MN 307,045 N/A 12/12/86 300
White Bear Lake MN 179,657 N/A 12/23/87 300
W Bloomington MN 454,457 N/A 06/18/82 180
Florissant MO 190,308 N/A 03/30/89 300
Gladstone MO 186,414 N/A 09/29/88 300
Lee's Summit MO 133,156 N/A 09/27/89 300
Manchester MO 197,744 N/A 12/22/87 300
St. Charles MO 178,453 N/A 12/23/87 300
Londonderry NH 190,246 N/A 08/18/89 300
Beavercreek OH 130,306 N/A 06/30/87 300
Centerville OH 125,586 N/A 07/23/87 300
Forest Park OH 121,950 N/A 09/28/87 300
Huber Heights OH 119,622 N/A 09/27/90 300
Loveland OH 153,391 N/A 03/20/87 300
Maineville OH 128,812 N/A 03/06/87 300
Westerville OH 148,737 N/A 09/26/90 300
Beaverton OR 306,742 N/A 12/17/86 300
Beaverton OR 261,540 N/A 12/22/86 300
Memphis TN 144,135 N/A 09/29/88 300
Memphis TN 150,906 N/A 09/30/88 300
Nashville TN 163,896 N/A 03/30/89 300
Arlington TX 235,699 N/A 12/13/84 300
Page 87
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CHILDREN'S WORLD (continued)
Arlington TX 238,000 528,604 None None
Arlington TX 241,500 550,559 None None
Austin TX 134,383 623,103 None None
Austin TX 236,733 528,608 None None
Austin TX 238,000 528,604 None None
Bedford TX 241,500 550,559 None None
Carrollton TX 277,850 617,113 None None
Converse TX 217,000 481,963 None None
Coppell TX 139,224 645,551 None None
Coppell TX 208,641 463,398 None None
Euless TX 234,111 519,962 None None
Flowermound TX 202,773 442,846 None None
Fort Worth TX 238,000 528,608 None None
Houston TX 219,100 486,631 None None
Houston TX 219,100 486,628 None None
Houston TX 149,109 323,314 None None
Lewisville TX 192,777 428,121 None None
Lewisville TX 192,218 426,922 None None
N Richland Hills TX 238,000 528,608 None None
Plano TX 261,912 581,658 None None
Plano TX 250,514 556,399 None None
Plano TX 259,000 575,246 None None
San Antonio TX 130,833 606,595 None None
San Antonio TX 234,500 520,831 None None
San Antonio TX 217,000 481,967 None None
San Antonio TX 220,500 447,108 None None
Centreville VA 371,000 824,003 None None
Richmond VA 269,500 598,567 None None
Virginia Beach VA 124,988 579,496 None None
Woodbridge VA 358,050 795,239 None None
Everett WA 120,000 540,363 None None
Federal Way WA 150,785 699,100 None None
Kent WA 128,300 539,141 None None
Kent WA 140,763 678,809 None None
Page 88
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
CHILDREN'S WORLD (continued)
Arlington TX 238,000 528,604 766,604
Arlington TX 241,500 550,559 792,059
Austin TX 134,383 623,103 757,486
Austin TX 236,733 528,608 765,341
Austin TX 238,000 528,604 766,604
Bedford TX 241,500 550,559 792,059
Carrollton TX 277,850 617,113 894,963
Converse TX 217,000 481,963 698,963
Coppell TX 139,224 645,551 784,775
Coppell TX 208,641 463,398 672,039
Euless TX 234,111 519,962 754,073
Flowermound TX 202,773 442,846 645,619
Fort Worth TX 238,000 528,608 766,608
Houston TX 219,100 486,631 705,731
Houston TX 219,100 486,628 705,728
Houston TX 149,109 323,314 472,423
Lewisville TX 192,777 428,121 620,898
Lewisville TX 192,218 426,922 619,140
N Richland Hills TX 238,000 528,608 766,608
Plano TX 261,912 581,658 843,570
Plano TX 250,514 556,399 806,913
Plano TX 259,000 575,246 834,246
San Antonio TX 130,833 606,595 737,428
San Antonio TX 234,500 520,831 755,331
San Antonio TX 217,000 481,967 698,967
San Antonio TX 220,500 447,108 667,608
Centreville VA 371,000 824,003 1,195,003
Richmond VA 269,500 598,567 868,067
Virginia Beach VA 124,988 579,496 704,484
Woodbridge VA 358,050 795,239 1,153,289
Everett WA 120,000 540,363 660,363
Federal Way WA 150,785 699,100 849,885
Kent WA 128,300 539,141 667,441
Kent WA 140,763 678,809 819,572
Page 89
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CHILDREN'S WORLD (continued)
Arlington TX 150,904 N/A 09/26/88 300
Arlington TX 201,742 N/A 09/22/89 300
Austin TX 305,009 N/A 12/23/86 300
Austin TX 150,906 N/A 09/27/88 300
Austin TX 140,760 N/A 04/06/89 300
Bedford TX 201,743 N/A 09/22/89 300
Carrollton TX 191,440 N/A 12/11/87 300
Converse TX 137,590 N/A 09/28/88 300
Coppell TX 315,995 N/A 12/17/86 300
Coppell TX 143,755 N/A 12/11/87 300
Euless TX 171,338 N/A 05/08/87 300
Flowermound TX 147,147 N/A 04/20/87 300
Fort Worth TX 150,906 N/A 09/26/88 300
Houston TX 138,923 N/A 09/30/88 300
Houston TX 136,252 N/A 11/16/88 300
Houston TX 101,283 N/A 06/26/89 300
Lewisville TX 145,629 N/A 01/07/87 300
Lewisville TX 118,363 N/A 12/29/88 300
N Richland Hills TX 150,906 N/A 09/26/88 300
Plano TX 198,094 N/A 01/06/87 300
Plano TX 172,604 N/A 12/10/87 300
Plano TX 164,220 N/A 09/27/88 300
San Antonio TX 319,836 N/A 03/24/86 300
San Antonio TX 161,571 N/A 12/29/87 300
San Antonio TX 136,269 N/A 10/14/88 300
San Antonio TX 120,284 N/A 03/30/89 300
Centreville VA 208,144 N/A 09/29/89 300
Richmond VA 161,029 N/A 03/28/89 300
Virginia Beach VA 305,548 N/A 03/25/86 300
Woodbridge VA 227,024 N/A 09/29/88 300
Everett WA 509,459 N/A 11/22/82 180
Federal Way WA 342,210 N/A 12/17/86 300
Kent WA 488,080 N/A 06/03/83 180
Kent WA 332,277 N/A 12/17/86 300
Page 90
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
CHILDREN'S WORLD (continued)
Kirkland WA 301,000 668,534 None None
Renton WA 111,183 515,490 None None
KINDER CARE
Phoenix AZ 264,504 587,471 None None
Phoenix AZ 260,719 516,181 None None
Algonquin IL 241,500 509,629 None None
Carmel IN 217,565 430,742 None None
Fishers IN 212,118 419,959 None None
Highland IN 220,460 436,476 None None
Indianapolis IN 245,000 544,153 None None
Wichita KS 209,890 415,549 None None
Maple Grove MN 313,250 660,149 None None
White Bear Lake MN 242,165 537,855 None None
Las Vegas NV 201,250 446,983 None None
Memphis TN 221,501 491,962 None None
Appleton WI 196,000 424,038 None None
LA PETITE ACADEMY
Birmingham AL 63,800 295,791 None None
Huntsville AL 28,600 197,165 None None
Mobile AL 78,400 237,671 None None
Mobile AL 63,000 292,084 None None
Glendale AZ 115,000 285,172 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
Palmdale CA 249,490 554,125 None None
Rancho Cordova CA 276,328 613,733 None None
Roseville CA 297,343 660,412 None None
Santee CA 248,418 551,748 None None
Valencia CA 301,295 669,185 None None
Broomfield CO 155,306 344,941 None None
Colorado Sprgs CO 58,400 271,217 None None
Page 91
<PAGE>
(continued)
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
================= ============ ============ ============
CHILDREN'S WORLD (continued)
Kirkland WA 301,000 668,534 969,534
Renton WA 111,183 515,490 626,673
KINDER CARE
Phoenix AZ 264,504 587,471 851,975
Phoenix AZ 260,719 516,181 776,900
Algonquin IL 241,500 509,629 751,129
Carmel IN 217,565 430,742 648,307
Fishers IN 212,118 419,959 632,077
Highland IN 220,460 436,476 656,936
Indianapolis IN 245,000 544,153 789,153
Wichita KS 209,890 415,549 625,439
Maple Grove MN 313,250 660,149 973,399
White Bear Lake MN 242,165 537,855 780,020
Las Vegas NV 201,250 446,983 648,233
Memphis TN 221,501 491,962 713,463
Appleton WI 196,000 424,038 620,038
LA PETITE ACADEMY
Birmingham AL 63,800 295,791 359,591
Huntsville AL 28,600 197,165 225,765
Mobile AL 78,400 237,671 316,071
Mobile AL 63,000 292,084 355,084
Glendale AZ 115,000 285,172 400,172
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
Palmdale CA 249,490 554,125 803,615
Rancho Cordova CA 276,328 613,733 890,061
Roseville CA 297,343 660,412 957,755
Santee CA 248,418 551,748 800,166
Valencia CA 301,295 669,185 970,480
Broomfield CO 155,306 344,941 500,247
Colorado Sprgs CO 58,400 271,217 329,617
Page 92
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
CHILDREN'S WORLD (continued)
Kirkland WA 201,873 N/A 03/31/88 300
Renton WA 271,799 N/A 03/24/86 300
KINDER CARE
Phoenix AZ 133,953 N/A 06/29/90 300
Phoenix AZ 109,253 N/A 12/26/90 300
Algonquin IL 118,469 N/A 07/10/90 300
Carmel IN 91,170 N/A 12/27/90 300
Fishers IN 88,887 N/A 12/27/90 300
Highland IN 92,382 N/A 12/26/90 300
Indianapolis IN 124,075 N/A 06/29/90 300
Wichita KS 87,954 N/A 12/26/90 300
Maple Grove MN 154,442 N/A 07/11/90 300
White Bear Lake MN 119,705 N/A 08/30/90 300
Las Vegas NV 101,919 N/A 06/29/90 300
Memphis TN 109,491 N/A 08/31/90 300
Appleton WI 100,000 N/A 07/10/90 300
LA PETITE ACADEMY
Birmingham AL 184,521 N/A 10/31/84 300
Huntsville AL 191,688 N/A 06/15/82 180
Mobile AL 225,787 N/A 10/15/82 180
Mobile AL 172,369 N/A 04/25/85 300
Glendale AZ 245,557 N/A 02/08/84 180
Escondido CA 190,360 N/A 12/31/87 300
Folsom CA 198,898 N/A 10/23/87 300
Mission Viejo CA 124,478 N/A 06/24/93 300
Palmdale CA 158,190 N/A 09/14/88 300
Rancho Cordova CA 165,110 N/A 03/22/89 300
Roseville CA 210,035 N/A 10/21/87 300
Santee CA 178,766 N/A 07/23/87 300
Valencia CA 196,552 N/A 06/23/88 300
Broomfield CO 104,160 N/A 03/15/88 300
Colorado Sprgs CO 253,578 N/A 12/22/82 180
Page 93
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
LA PETITE ACADEMY (continued)
Colorado Sprgs CO 92,570 241,413 None None
Fort Collins CO 55,200 256,356 None None
Greeley CO 58,400 270,755 None None
Littleton CO 161,617 358,956 None None
Louisville CO 58,089 269,313 None None
Parker CO 153,551 341,043 None None
Bradenton FL 160,060 355,501 None None
Clearwater FL 42,223 269,380 None None
Fort Myers FL 66,100 210,462 None None
Jacksonville FL 38,500 228,481 None None
Jacksonville FL 48,000 243,060 None None
Jacksonville FL 184,800 410,447 None None
Jupiter FL 78,000 360,088 None None
Margate FL 66,686 309,183 None None
Melbourne FL 256,439 549,345 None None
Niceville FL 73,696 341,688 None None
Orange Park FL 45,000 208,986 None None
Orlando FL 68,001 313,922 None None
Orlando FL 159,177 353,538 None None
Orlando FL 245,249 544,704 None None
Orlando FL 190,050 422,107 None None
Oviedo FL 166,409 369,598 None None
Panama City FL 69,500 244,314 None None
Pensacola FL 147,000 326,492 None None
Royal Palm Beach FL 194,193 431,309 None None
Spring Hill FL 146,939 326,356 None None
St. Augustine FL 44,800 213,040 None None
Sunrise FL 69,400 246,671 None None
Sunrise FL 245,000 533,280 None None
Tallahassee FL 66,000 232,010 None None
Tampa FL 53,385 199,846 None None
Douglasville GA 54,000 250,356 None None
Ellenwood GA 119,678 275,414 None None
Fayetteville GA 148,400 329,601 None None
Page 94
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
LA PETITE ACADEMY (continued)
Colorado Sprgs CO 92,570 241,413 333,983
Fort Collins CO 55,200 256,356 311,556
Greeley CO 58,400 270,755 329,155
Littleton CO 161,617 358,956 520,573
Louisville CO 58,089 269,313 327,402
Parker CO 153,551 341,043 494,594
Bradenton FL 160,060 355,501 515,561
Clearwater FL 42,223 269,380 311,603
Fort Myers FL 66,100 210,462 276,562
Jacksonville FL 38,500 228,481 266,981
Jacksonville FL 48,000 243,060 291,060
Jacksonville FL 184,800 410,447 595,247
Jupiter FL 78,000 360,088 438,088
Margate FL 66,686 309,183 375,869
Melbourne FL 256,439 549,345 805,784
Niceville FL 73,696 341,688 415,384
Orange Park FL 45,000 208,986 253,986
Orlando FL 68,001 313,922 381,923
Orlando FL 159,177 353,538 512,715
Orlando FL 245,249 544,704 789,953
Orlando FL 190,050 422,107 612,157
Oviedo FL 166,409 369,598 536,007
Panama City FL 69,500 244,314 313,814
Pensacola FL 147,000 326,492 473,492
Royal Palm Beach FL 194,193 431,309 625,502
Spring Hill FL 146,939 326,356 473,295
St. Augustine FL 44,800 213,040 257,840
Sunrise FL 69,400 246,671 316,071
Sunrise FL 245,000 533,280 778,280
Tallahassee FL 66,000 232,010 298,010
Tampa FL 53,385 199,846 253,231
Douglasville GA 54,000 250,356 304,356
Ellenwood GA 119,678 275,414 395,092
Fayetteville GA 148,400 329,601 478,001
Page 95
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
LA PETITE ACADEMY (continued)
Colorado Sprgs CO 215,874 N/A 08/31/83 180
Fort Collins CO 239,843 N/A 12/22/82 180
Greeley CO 167,729 N/A 11/21/84 300
Littleton CO 111,351 N/A 12/10/87 300
Louisville CO 172,667 N/A 06/22/84 300
Parker CO 108,463 N/A 10/19/87 300
Bradenton FL 105,394 N/A 05/05/88 300
Clearwater FL 269,380 N/A 12/22/81 180
Fort Myers FL 204,616 N/A 06/15/82 180
Jacksonville FL 228,481 N/A 12/22/81 180
Jacksonville FL 243,060 N/A 12/22/81 180
Jacksonville FL 110,421 N/A 03/30/89 300
Jupiter FL 200,235 N/A 09/11/85 300
Margate FL 151,346 N/A 12/16/86 300
Melbourne FL 93,369 N/A 04/16/93 300
Niceville FL 168,570 N/A 12/03/86 300
Orange Park FL 203,180 N/A 06/15/82 180
Orlando FL 174,563 N/A 09/04/85 300
Orlando FL 114,545 N/A 07/02/87 300
Orlando FL 168,975 N/A 12/10/87 300
Orlando FL 113,558 N/A 03/30/89 300
Oviedo FL 115,667 N/A 11/20/87 300
Panama City FL 237,527 N/A 06/15/82 180
Pensacola FL 87,835 N/A 03/28/89 300
Royal Palm Beach FL 120,763 N/A 11/15/88 300
Spring Hill FL 102,133 N/A 11/24/87 300
St. Augustine FL 213,040 N/A 12/22/81 180
Sunrise FL 239,819 N/A 06/15/82 180
Sunrise FL 145,743 N/A 05/25/89 300
Tallahassee FL 225,565 N/A 06/15/82 180
Tampa FL 199,846 N/A 12/22/81 180
Douglasville GA 156,193 N/A 10/23/84 300
Ellenwood GA 77,113 N/A 11/16/88 300
Fayetteville GA 88,672 N/A 03/29/89 300
Page 96
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
LA PETITE ACADEMY (continued)
Lawrenceville GA 141,449 314,161 None None
Lithia Springs GA 187,444 363,358 None None
Lithonia GA 239,715 524,459 None None
Marietta GA 148,620 330,090 None None
Martinez GA 141,153 313,504 None None
Stockbridge GA 168,700 374,688 None None
Stone Mountain GA 65,000 301,357 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
Aurora IL 165,679 398,739 None None
Elk Grove Village IL 214,845 477,180 None None
Hoffman Estates IL 211,082 468,818 None None
Lockport IL 189,477 442,018 None None
O'Fallon IL 141,250 313,722 None None
Orland Park IL 218,499 485,295 None None
Schaumburg IL 218,798 485,956 None None
Noblesville IN 60,000 278,175 None None
Zionsville IN 127,568 319,770 None None
Topeka KS 58,000 268,903 None None
Wichita KS 108,569 401,828 None None
Lexington KY 210,427 420,883 None None
Ellicott City MD 219,368 630,839 None None
Waldorf MD 237,207 526,844 None None
Florissant MO 181,300 402,672 None None
Liberty MO 65,400 303,211 None None
Pearl MS 121,801 270,525 None None
Cary NC 75,200 262,973 None None
Chapel Hill NC 77,000 356,992 None None
Charlotte NC 27,551 247,000 None None
Charlotte NC 134,582 268,222 None None
Concord NC 32,441 190,859 None None
Durham NC 220,728 429,380 None None
Page 97
<PAGE>
(continued)
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
================= ============ ============ ============
LA PETITE ACADEMY (continued)
Lawrenceville GA 141,449 314,161 455,610
Lithia Springs GA 187,444 363,358 550,802
Lithonia GA 239,715 524,459 764,174
Marietta GA 148,620 330,090 478,710
Martinez GA 141,153 313,504 454,657
Stockbridge GA 168,700 374,688 543,388
Stone Mountain GA 65,000 301,357 366,357
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
Aurora IL 165,679 398,739 564,418
Elk Grove Village IL 214,845 477,180 692,025
Hoffman Estates IL 211,082 468,818 679,900
Lockport IL 189,477 442,018 631,495
O'Fallon IL 141,250 313,722 454,972
Orland Park IL 218,499 485,295 703,794
Schaumburg IL 218,798 485,956 704,754
Noblesville IN 60,000 278,175 338,175
Zionsville IN 127,568 319,770 447,338
Topeka KS 58,000 268,903 326,903
Wichita KS 108,569 401,828 510,397
Lexington KY 210,427 420,883 631,310
Ellicott City MD 219,368 630,839 850,207
Waldorf MD 237,207 526,844 764,051
Florissant MO 181,300 402,672 583,972
Liberty MO 65,400 303,211 368,611
Pearl MS 121,801 270,525 392,326
Cary NC 75,200 262,973 338,173
Chapel Hill NC 77,000 356,992 433,992
Charlotte NC 27,551 247,000 274,551
Charlotte NC 134,582 268,222 402,804
Concord NC 32,441 190,859 223,300
Durham NC 220,728 429,380 650,108
Page 98
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
LA PETITE ACADEMY (continued)
Lawrenceville GA 91,411 N/A 07/07/88 300
Lithia Springs GA 94,912 N/A 12/28/89 300
Lithonia GA 132,077 N/A 08/20/91 300
Marietta GA 94,276 N/A 09/16/88 300
Martinez GA 97,251 N/A 12/31/87 300
Stockbridge GA 100,801 N/A 03/28/89 300
Stone Mountain GA 170,226 N/A 06/19/85 300
Valdosta GA 168,257 N/A 12/03/86 300
Cedar Rapids IA 88,912 N/A 09/24/92 300
Iowa City IA 87,275 N/A 09/24/92 300
Johnston IA 65,941 N/A 08/19/91 300
Aurora IL 110,548 N/A 12/21/88 300
Elk Grove Village IL 142,780 N/A 04/08/88 300
Hoffman Estates IL 114,578 N/A 12/08/89 300
Lockport IL 139,546 N/A 10/29/87 300
O'Fallon IL 99,039 N/A 10/30/87 300
Orland Park IL 153,210 N/A 10/28/87 300
Schaumburg IL 150,750 N/A 12/17/87 300
Noblesville IN 164,160 N/A 04/30/85 300
Zionsville IN 100,949 N/A 10/28/87 300
Topeka KS 158,689 N/A 04/16/85 300
Wichita KS 177,846 N/A 12/16/86 300
Lexington KY 100,138 N/A 08/20/91 300
Ellicott City MD 174,897 N/A 12/19/88 300
Waldorf MD 163,434 N/A 12/31/87 300
Florissant MO 108,329 N/A 03/29/89 300
Liberty MO 171,271 N/A 06/18/85 300
Pearl MS 75,923 N/A 11/15/88 300
Cary NC 227,181 N/A 01/25/84 180
Chapel Hill NC 210,673 N/A 04/17/85 300
Charlotte NC 247,000 N/A 12/23/81 180
Charlotte NC 75,097 N/A 11/16/88 300
Concord NC 190,859 N/A 12/23/81 180
Durham NC 117,150 N/A 12/29/89 300
Page 99
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
LA PETITE ACADEMY (continued)
Durham NC 238,000 471,201 None None
Hendersonville NC 32,748 186,152 None None
Kernersville NC 162,216 316,299 None None
Morrisville NC 175,700 390,234 None None
Bellevue NE 60,568 280,819 None None
Omaha NE 60,500 280,491 None None
Omaha NE 53,000 245,720 None None
Omaha NE 142,867 317,315 None None
Clementon NJ 279,851 554,060 None None
Henderson NV 82,000 380,173 None None
Sparks NV 244,752 543,604 None None
Cincinnati OH 165,910 368,486 None None
Dublin OH 84,000 389,446 None None
Englewood OH 74,000 343,083 None None
Gahanna OH 86,000 398,718 None None
Pickerington OH 87,580 406,055 None None
Westerville OH 82,000 380,173 None None
Broken Arrow OK 78,705 220,434 None None
Midwest City OK 67,800 314,338 None None
Oklahoma City OK 50,800 214,474 None None
Oklahoma City OK 79,000 366,261 None None
Yukon OK 61,000 282,812 None None
Charleston SC 125,593 278,946 None None
Charleston SC 140,700 312,498 None None
Columbia SC 58,160 269,643 None None
Elgin SC 160,831 313,600 None None
Goose Creek SC 61,635 192,905 None None
Ladson SC 31,543 177,457 None None
Lexington SC 55,869 274,742 None None
Mt. Pleasant SC 40,700 180,400 None None
Summerville SC 44,400 174,500 None None
Sumter SC 56,010 268,903 None None
Allen TX 177,637 394,537 None None
Arlington TX 70,000 324,538 None None
Page 100
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
LA PETITE ACADEMY (continued)
Durham NC 238,000 471,201 709,201
Hendersonville NC 32,748 186,152 218,900
Kernersville NC 162,216 316,299 478,515
Morrisville NC 175,700 390,234 565,934
Bellevue NE 60,568 280,819 341,387
Omaha NE 60,500 280,491 340,991
Omaha NE 53,000 245,720 298,720
Omaha NE 142,867 317,315 460,182
Clementon NJ 279,851 554,060 833,911
Henderson NV 82,000 380,173 462,173
Sparks NV 244,752 543,604 788,356
Cincinnati OH 165,910 368,486 534,396
Dublin OH 84,000 389,446 473,446
Englewood OH 74,000 343,083 417,083
Gahanna OH 86,000 398,718 484,718
Pickerington OH 87,580 406,055 493,635
Westerville OH 82,000 380,173 462,173
Broken Arrow OK 78,705 220,434 299,139
Midwest City OK 67,800 314,338 382,138
Oklahoma City OK 50,800 214,474 265,274
Oklahoma City OK 79,000 366,261 445,261
Yukon OK 61,000 282,812 343,812
Charleston SC 125,593 278,946 404,539
Charleston SC 140,700 312,498 453,198
Columbia SC 58,160 269,643 327,803
Elgin SC 160,831 313,600 474,431
Goose Creek SC 61,635 192,905 254,540
Ladson SC 31,543 177,457 209,000
Lexington SC 55,869 274,742 330,611
Mt. Pleasant SC 40,700 180,400 221,100
Summerville SC 44,400 174,500 218,900
Sumter SC 56,010 268,903 324,913
Allen TX 177,637 394,537 572,174
Arlington TX 70,000 324,538 394,538
Page 101
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
LA PETITE ACADEMY (continued)
Durham NC 89,471 N/A 08/20/91 300
Hendersonville NC 186,152 N/A 12/23/81 180
Kernersville NC 88,669 N/A 12/14/89 300
Morrisville NC 104,982 N/A 03/29/89 300
Bellevue NE 137,461 N/A 12/16/86 300
Omaha NE 178,621 N/A 08/01/84 300
Omaha NE 154,268 N/A 10/11/84 300
Omaha NE 98,433 N/A 12/09/87 300
Clementon NJ 103,698 N/A 09/09/91 300
Henderson NV 224,352 N/A 04/17/85 300
Sparks NV 167,139 N/A 01/29/88 300
Cincinnati OH 122,440 N/A 04/29/87 300
Dublin OH 214,975 N/A 10/08/85 300
Englewood OH 188,070 N/A 10/23/85 300
Gahanna OH 216,901 N/A 11/26/85 300
Pickerington OH 200,324 N/A 12/11/86 300
Westerville OH 209,857 N/A 10/08/85 300
Broken Arrow OK 205,330 N/A 01/27/83 180
Midwest City OK 176,247 N/A 08/14/85 300
Oklahoma City OK 208,516 N/A 06/15/82 180
Oklahoma City OK 228,361 N/A 11/14/84 300
Yukon OK 165,663 N/A 05/02/85 300
Charleston SC 82,697 N/A 05/26/88 300
Charleston SC 84,070 N/A 03/28/89 300
Columbia SC 168,119 N/A 11/14/84 300
Elgin SC 87,912 N/A 12/14/89 300
Goose Creek SC 192,905 N/A 12/22/81 180
Ladson SC 177,457 N/A 12/22/81 180
Lexington SC 171,297 N/A 11/13/84 300
Mt. Pleasant SC 180,400 N/A 12/22/81 180
Summerville SC 174,500 N/A 12/22/81 180
Sumter SC 151,895 N/A 06/18/85 300
Allen TX 110,460 N/A 11/21/88 300
Arlington TX 190,105 N/A 05/08/85 300
Page 102
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
LA PETITE ACADEMY (continued)
Arlington TX 195,650 387,355 None None
Austin TX 103,600 230,532 None None
Austin TX 88,872 222,684 None None
Austin TX 188,144 417,872 None None
Austin TX 191,636 425,629 None None
Austin TX 224,878 499,461 None None
Austin TX 217,878 483,913 None None
Cedar Park TX 168,857 375,036 None None
Colleyville TX 68,000 315,266 None None
Desoto TX 86,000 398,715 None None
Duncanville TX 93,000 431,172 None None
Fort Worth TX 85,518 396,495 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 167,164 371,275 None None
Houston TX 58,000 268,901 None None
Houston TX 60,000 278,175 None None
Houston TX 102,000 472,898 None None
Houston TX 139,125 308,997 None None
Houston TX 139,125 308,997 None None
Houston TX 141,296 313,824 None None
Lewisville TX 79,000 366,264 None None
Mansfield TX 181,375 402,838 None None
Mesquite TX 85,000 394,079 None None
Mesquite TX 139,466 326,525 None None
Missouri City TX 221,025 437,593 None None
Pasadena TX 60,000 278,173 None None
Round Rock TX 80,525 373,347 None None
Round Rock TX 186,380 413,957 None None
San Antonio TX 102,512 475,289 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
Page 103
<PAGE>
(continued)
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
================= ============ ============ ============
LA PETITE ACADEMY (continued)
Arlington TX 195,650 387,355 583,005
Austin TX 103,600 230,532 334,132
Austin TX 88,872 222,684 311,556
Austin TX 188,144 417,872 606,016
Austin TX 191,636 425,629 617,265
Austin TX 224,878 499,461 724,339
Austin TX 217,878 483,913 701,791
Cedar Park TX 168,857 375,036 543,893
Colleyville TX 68,000 315,266 383,266
Desoto TX 86,000 398,715 484,715
Duncanville TX 93,000 431,172 524,172
Fort Worth TX 85,518 396,495 482,013
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 167,164 371,275 538,439
Houston TX 58,000 268,901 326,901
Houston TX 60,000 278,175 338,175
Houston TX 102,000 472,898 574,898
Houston TX 139,125 308,997 448,122
Houston TX 139,125 308,997 448,122
Houston TX 141,296 313,824 455,120
Lewisville TX 79,000 366,264 445,264
Mansfield TX 181,375 402,838 584,213
Mesquite TX 85,000 394,079 479,079
Mesquite TX 139,466 326,525 465,991
Missouri City TX 221,025 437,593 658,618
Pasadena TX 60,000 278,173 338,173
Round Rock TX 80,525 373,347 453,872
Round Rock TX 186,380 413,957 600,337
San Antonio TX 102,512 475,289 577,801
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
Page 104
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
LA PETITE ACADEMY (continued)
Arlington TX 79,876 N/A 02/07/91 300
Austin TX 218,657 N/A 10/29/82 180
Austin TX 207,839 N/A 01/12/83 180
Austin TX 123,885 N/A 05/11/88 300
Austin TX 118,003 N/A 12/22/88 300
Austin TX 137,106 N/A 01/03/89 300
Austin TX 126,209 N/A 06/22/89 300
Cedar Park TX 105,000 N/A 11/21/88 300
Colleyville TX 184,674 N/A 05/01/85 300
Desoto TX 248,723 N/A 10/24/84 300
Duncanville TX 252,567 N/A 05/08/85 300
Fort Worth TX 195,608 N/A 12/03/86 300
Fort Worth TX 108,832 N/A 02/01/90 300
Fort Worth TX 88,249 N/A 02/07/91 300
Garland TX 114,562 N/A 12/12/89 300
Grand Prairie TX 102,933 N/A 12/13/88 300
Houston TX 168,822 N/A 10/11/84 300
Houston TX 162,947 N/A 05/01/85 300
Houston TX 277,008 N/A 05/01/85 300
Houston TX 101,819 N/A 05/22/87 300
Houston TX 101,819 N/A 05/22/87 300
Houston TX 101,679 N/A 07/24/87 300
Lewisville TX 206,889 N/A 06/26/85 300
Mansfield TX 98,454 N/A 12/20/89 300
Mesquite TX 245,834 N/A 10/24/84 300
Mesquite TX 90,971 N/A 10/08/92 300
Missouri City TX 92,619 N/A 12/13/90 300
Pasadena TX 173,530 N/A 10/23/84 300
Round Rock TX 182,754 N/A 12/16/86 300
Round Rock TX 110,231 N/A 04/19/89 300
San Antonio TX 234,483 N/A 12/03/86 300
San Antonio TX 186,487 N/A 12/11/86 300
San Antonio TX 101,819 N/A 05/22/87 300
San Antonio TX 130,545 N/A 07/07/87 300
Page 105
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
LA PETITE ACADEMY (continued)
San Antonio TX 162,161 360,166 None None
San Antonio TX 182,868 406,155 None None
Southlake TX 228,279 511,750 None None
Sugarland TX 193,800 430,436 None None
Texas City TX 48,000 222,918 None None
The Woodlands TX 193,801 430,441 None None
Watauga TX 165,914 368,502 None None
Layton UT 136,574 269,009 None None
Sandy UT 168,089 373,330 None None
Chesapeake VA 190,050 422,107 None None
Glen Allen VA 74,643 346,060 None None
Portsmouth VA 171,575 381,072 None None
Richmond VA 71,001 327,771 None None
Virginia Beach VA 69,080 320,270 None None
Federal Way WA 261,943 581,782 None None
Puyallup WA 195,552 434,327 None None
Redmond WA 279,830 621,512 None None
Brookfield WI 233,100 461,500 None None
Waukesha WI 215,950 427,546 None None
Cheyenne WY 59,856 277,506 None None
OTHER CHILD CARE
Irving TX 63,853 296,034 None None
BEST BUY
Thousand Oaks CA 2,703,726 6,125,784 None None
Topeka KS 974,960 3,472,226 None None
REX STORES
Oxford AL 323,085 406,655 None None
Tuscaloosa AL 204,790 585,115 None None
Bradenton FL 174,948 240,928 None None
MaryEsther FL 149,696 363,263 None None
Melbourne FL 269,697 522,414 None None
Page 106
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
LA PETITE ACADEMY (continued)
San Antonio TX 162,161 360,166 522,327
San Antonio TX 182,868 406,155 589,023
Southlake TX 228,279 511,750 740,029
Sugarland TX 193,800 430,436 624,236
Texas City TX 48,000 222,918 270,918
The Woodlands TX 193,801 430,441 624,242
Watauga TX 165,914 368,502 534,416
Layton UT 136,574 269,009 405,583
Sandy UT 168,089 373,330 541,419
Chesapeake VA 190,050 422,107 612,157
Glen Allen VA 74,643 346,060 420,703
Portsmouth VA 171,575 381,072 552,647
Richmond VA 71,001 327,771 398,772
Virginia Beach VA 69,080 320,270 389,350
Federal Way WA 261,943 581,782 843,725
Puyallup WA 195,552 434,327 629,879
Redmond WA 279,830 621,512 901,342
Brookfield WI 233,100 461,500 694,600
Waukesha WI 215,950 427,546 643,496
Cheyenne WY 59,856 277,506 337,362
OTHER CHILD CARE
Irving TX 63,853 296,034 359,887
BEST BUY
Thousand Oaks CA 2,703,726 6,125,784 8,829,510
Topeka KS 974,960 3,472,226 4,447,186
REX STORES
Oxford AL 323,085 406,655 729,740
Tuscaloosa AL 204,790 585,115 789,905
Bradenton FL 174,948 240,928 415,876
MaryEsther FL 149,696 363,263 512,959
Melbourne FL 269,697 522,414 792,111
Page 107
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
LA PETITE ACADEMY (continued)
San Antonio TX 116,694 N/A 07/07/87 300
San Antonio TX 112,605 N/A 12/06/88 300
Southlake TX 108,010 N/A 03/10/93 300
Sugarland TX 139,462 N/A 07/31/87 300
Texas City TX 216,725 N/A 06/15/82 180
The Woodlands TX 138,275 N/A 08/11/87 300
Watauga TX 119,393 N/A 07/07/87 300
Layton UT 73,943 N/A 02/01/90 300
Sandy UT 89,201 N/A 02/01/90 300
Chesapeake VA 113,558 N/A 03/28/89 300
Glen Allen VA 221,870 N/A 06/20/84 300
Portsmouth VA 105,650 N/A 12/21/88 300
Richmond VA 182,265 N/A 09/04/85 300
Virginia Beach VA 199,686 N/A 11/15/84 300
Federal Way WA 162,886 N/A 11/21/88 300
Puyallup WA 120,414 N/A 12/06/88 300
Redmond WA 201,370 N/A 07/27/87 300
Brookfield WI 97,679 N/A 12/13/90 300
Waukesha WI 90,493 N/A 12/13/90 300
Cheyenne WY 171,910 N/A 11/20/84 300
OTHER CHILD CARE
Irving TX 154,849 N/A 04/23/86 300
BEST BUY
Thousand Oaks CA 71,467 N/A 09/27/96 300
Topeka KS 5,787 N/A 12/27/96 300
REX STORES
Oxford AL 2,033 N/A 11/26/96 300
Tuscaloosa AL 2,926 N/A 11/26/96 300
Bradenton FL 1,205 N/A 11/26/96 300
MaryEsther FL 1,816 N/A 11/26/96 300
Melbourne FL 2,612 N/A 11/26/96 300
Page 108
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
REX STORES (continued)
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 None
Titusville FL 176,459 579,793 None None
Venice FL 259,686 362,562 None None
Rome GA 254,902 486,812 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 180,628 653,038 None None
Muncie IN 148,901 645,235 None None
Richmond IN 93,999 193,753 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
DAIRYMART
Manchester CT 118,262 305,510 None None
Vernon CT 179,646 319,372 None None
Westbrook CT 98,247 373,340 None None
Page 109
<PAGE>
(continued)
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
================= ============ ============ ============
REX STORES (continued)
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 319,807 502,697 822,504
Titusville FL 176,459 579,793 756,252
Venice FL 259,686 362,562 622,248
Rome GA 254,902 486,812 741,714
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 180,628 653,038 833,666
Muncie IN 148,901 645,235 794,136
Richmond IN 93,999 193,753 287,752
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
DAIRYMART
Manchester CT 118,262 305,510 423,772
Vernon CT 179,646 319,372 499,018
Westbrook CT 98,247 373,340 471,587
Page 110
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
REX STORES (continued)
Merritt Island FL 2,412 N/A 11/26/96 300
Ocala FL 2,718 N/A 11/26/96 300
Pensacola FL 9,496 N/A 11/26/96 300
Tallahassee FL 2,513 N/A 11/26/96 300
Titusville FL 2,899 N/A 11/26/96 300
Venice FL 1,813 N/A 11/26/96 300
Rome GA 2,434 N/A 11/26/96 300
Council Bluffs IA 589 N/A 11/26/96 300
Des Moines IA 1,838 N/A 11/26/96 300
Peoria IL 1,939 N/A 11/26/96 300
Rockford IL 3,092 N/A 11/26/96 300
Springfield IL 3,153 N/A 11/26/96 300
Anderson IN 3,265 N/A 11/26/96 300
Muncie IN 3,226 N/A 11/26/96 300
Richmond IN 969 N/A 11/26/96 300
Columbus MS 2,319 N/A 11/26/96 300
Greenville MS 2,169 N/A 11/26/96 300
Gulfport MS 2,512 N/A 11/26/96 300
Hattiesburg MS 2,287 N/A 11/26/96 300
Jackson MS 3,281 N/A 11/26/96 300
Meridian MS 2,578 N/A 11/26/96 300
Tupelo MS 3,188 N/A 11/26/96 300
Vicksburg MS 873 N/A 11/26/96 300
Lakewood NY 2,632 N/A 11/26/96 300
Defiance OH 3,009 N/A 11/26/96 300
Kettering OH 2,442 N/A 11/26/96 300
Bristol TN 2,344 N/A 11/26/96 300
Clarksville TN 1,979 N/A 11/26/96 300
Vienna WV 2,633 N/A 11/26/96 300
DAIRYMART
Manchester CT 21,895 N/A 03/03/95 300
Vernon CT 22,888 N/A 03/09/95 300
Westbrook CT 26,756 N/A 03/09/95 300
Page 111
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
DAIRYMART (continued)
New Albany IN 181,459 289,353 None None
New Albany IN 262,465 331,796 None None
Berea KY 252,077 360,815 None None
Elizabethtown KY 286,106 286,106 None None
Lebanon KY 158,052 316,105 None None
Louisville KY 198,926 368,014 None None
Louisville KY 216,849 600,765 None None
Mt. Washington KY 327,245 333,709 None None
Seekonk MA 298,354 268,518 None None
Kingston NY 257,763 456,042 None None
Atwater OH 118,555 266,748 None None
Columbus OH 147,296 304,411 None None
Cuyahoga Falls OH 297,982 357,579 None None
Galion OH 138,981 327,597 None None
Perrysburg OH 211,678 168,080 None None
Streetsboro OH 402,988 137,998 None None
Tipp City OH 355,009 219,816 None None
Triffin OH 117,017 273,040 None None
Wadsworth OH 266,507 153,760 None None
7-ELEVEN
Flint MI 194,492 476,504 None None
Columbus OH 273,085 471,693 None None
Groveport OH 277,198 445,497 None None
THE PANTRY INC.
Henderson KY 225,000 515,000 None None
Owensboro KY 360,000 590,000 None None
Cary NC 450,000 825,000 None None
Greenville NC 330,000 515,000 None None
Greenville NC 225,000 405,000 None None
Jacksonville NC 150,000 530,000 None None
Columbia SC 150,000 450,000 None None
John's Isle SC 170,000 350,000 None None
Page 112
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
DAIRYMART (continued)
New Albany IN 181,459 289,353 470,812
New Albany IN 262,465 331,796 594,261
Berea KY 252,077 360,815 612,892
Elizabethtown KY 286,106 286,106 572,212
Lebanon KY 158,052 316,105 474,157
Louisville KY 198,926 368,014 566,940
Louisville KY 216,849 600,765 817,614
Mt. Washington KY 327,245 333,709 660,954
Seekonk MA 298,354 268,518 566,872
Kingston NY 257,763 456,042 713,805
Atwater OH 118,555 266,748 385,303
Columbus OH 147,296 304,411 451,707
Cuyahoga Falls OH 297,982 357,579 655,561
Galion OH 138,981 327,597 466,578
Perrysburg OH 211,678 168,080 379,758
Streetsboro OH 402,988 137,998 540,986
Tipp City OH 355,009 219,816 574,825
Triffin OH 117,017 273,040 390,057
Wadsworth OH 266,507 153,760 420,267
7-ELEVEN
Flint MI 194,492 476,504 670,996
Columbus OH 273,085 471,693 744,778
Groveport OH 277,198 445,497 722,695
THE PANTRY, INC.
Henderson KY 225,000 515,000 740,000
Owensboro KY 360,000 590,000 950,000
Cary NC 450,000 825,000 1,275,000
Greenville NC 330,000 515,000 845,000
Greenville NC 225,000 405,000 630,000
Jacksonville NC 150,000 530,000 680,000
Columbia SC 150,000 450,000 600,000
John's Isle SC 170,000 350,000 520,000
Page 113
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
DAIRYMART (continued)
New Albany IN 20,737 N/A 03/03/95 300
New Albany IN 23,779 N/A 03/06/95 300
Berea KY 25,858 N/A 03/08/95 300
Elizabethtown KY 20,504 N/A 03/03/95 300
Lebanon KY 22,654 N/A 03/03/95 300
Louisville KY 26,374 N/A 03/03/95 300
Louisville KY 13,017 06/18/96 11/17/95 300
Mt. Washington KY 2,694 10/28/96 05/31/96 300
Seekonk MA 19,244 N/A 03/03/95 300
Kingston NY 31,163 N/A 04/06/95 300
Atwater OH 19,117 N/A 03/03/95 300
Columbus OH 21,816 N/A 03/03/95 300
Cuyahoga Falls OH 25,627 N/A 03/03/95 300
Galion OH 23,478 N/A 03/06/95 300
Perrysburg OH 6,569 01/10/96 09/01/95 300
Streetsboro OH 0 In Prcss 09/03/96 300
Tipp City OH 0 In Prcss 06/27/96 300
Triffin OH 19,568 N/A 03/07/95 300
Wadsworth OH 729 11/26/96 07/01/96 300
7-ELEVEN
Flint MI 19,854 N/A 12/21/95 300
Columbus OH 19,654 N/A 12/21/95 300
Groveport OH 18,562 N/A 12/21/95 300
THE PANTRY, INC.
Henderson KY 28,325 N/A 08/25/95 300
Owensboro KY 32,450 N/A 08/25/95 300
Cary NC 45,375 N/A 08/25/95 300
Greenville NC 28,325 N/A 08/25/95 300
Greenville NC 22,275 N/A 08/25/95 300
Jacksonville NC 29,150 N/A 08/25/95 300
Columbia SC 24,750 N/A 08/25/95 300
John's Isle SC 19,250 N/A 08/25/95 300
Page 114
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
THE PANTRY INC. (continued)
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
EAST COAST OIL
Stafford VA 271,865 601,986 None None
Warrenton VA 515,971 649,125 None None
OTHER CONVENIENCE STORES
Fullerton CA 29,170 41,003 None 11,934
LEVITZ FURNITURE
Cathedral City CA 1,006,923 2,293,077 None None
Concord CA 4,162,500 3,037,500 None None
Winter Park FL 2,404,598 3,382,402 None None
Plano TX 565,000 5,835,000 None None
DON PABLO'S
Flint MI 827,853 0 None None
Akron OH 723,347 0 None None
Norman OK 734,335 0 None None
Oklahoma City OK 759,826 0 None None
Bedford TX 919,303 98,231 None None
Dallas TX 742,507 0 None None
Mesquite TX 729,596 120,820 None None
CARVERS STEAKHOUSE
Glendale AZ 624,761 895,976 None None
Orem UT 516,129 1,004,608 None None
Sandy UT 635,945 884,792 None None
Page 115
<PAGE>
(continued)
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
================= ============ ============ ============
THE PANTRY, INC. (continued)
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
EAST COAST OIL
Stafford VA 271,865 601,986 873,851
Warrenton VA 515,971 649,125 1,165,096
OTHER CONVENIENCE STORES
Fullerton CA 29,170 52,937 82,107
LEVITZ FURNITURE
Cathedral City CA 1,006,923 2,293,077 3,300,000
Concord CA 4,162,500 3,037,500 7,200,000
Winter Park FL 2,404,598 3,382,402 5,787,000
Plano TX 565,000 5,835,000 6,400,000
DON PABLO'S
Flint MI 827,853 0 827,853
Akron OH 723,347 0 723,347
Norman OK 734,335 0 734,335
Oklahoma City OK 759,826 0 759,826
Bedford TX 919,303 98,231 1,017,534
Dallas TX 742,507 0 742,507
Mesquite TX 729,596 120,820 850,416
CARVERS STEAKHOUSE
Glendale AZ 624,761 895,976 1,520,737
Orem UT 516,129 1,004,608 1,520,737
Sandy UT 635,945 884,792 1,520,737
Page 116
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
THE PANTRY, INC. (continued)
Lexington SC 29,975 N/A 08/25/95 300
Myrtle Beach SC 32,450 N/A 08/25/95 300
N Charleston SC 35,750 N/A 08/25/95 300
Summerville SC 28,325 N/A 08/25/95 300
La Vergne TN 35,750 N/A 08/25/95 300
Shelbyville TN 25,575 N/A 08/25/95 300
EAST COAST OIL
Stafford VA 1,003 N/A 12/20/96 300
Warrenton VA 1,082 N/A 12/20/96 300
OTHER CONVENIENCE STORES
Fullerton CA 45,776 N/A 11/08/72 234
LEVITZ FURNITURE
Cathedral City CA 149,050 N/A 05/26/95 300
Concord CA 197,438 N/A 05/31/95 300
Winter Park FL 219,856 N/A 05/31/95 300
Plano TX 379,275 N/A 05/26/95 300
DON PABLO'S
Flint MI 0 N/A 04/13/95 None
Akron OH 0 N/A 12/22/94 None
Norman OK 0 09/29/95 06/05/95 None
Oklahoma City OK 0 N/A 07/06/95 None
Bedford TX 90,500 N/A 12/27/94 300
Dallas TX 0 N/A 04/13/95 None
Mesquite TX 112,094 N/A 12/23/94 300
CARVERS STEAKHOUSE
Glendale AZ 28,373 N/A 03/06/96 300
Orem UT 41,859 N/A 12/13/95 300
Sandy UT 36,866 N/A 12/22/95 300
Page 117
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
OTHER DINNER HOUSE RESTAURANTS
Riverside CA 225,795 534,679 35,000 21,560
San Ramon CA 406,000 1,126,930 None None
Westminster CO 338,940 1,571,401 20,000 13,440
Alexandria LA 143,000 662,985 None 15,000
Roseville MN 281,600 1,305,560 None None
Lake Oswego OR 175,899 815,509 None None
Milwaukie OR 179,174 830,689 None None
Greenville SC 500,000 1,273,648 20,000 None
Nashville TN 484,975 1,192,627 20,000 31,098
Redmond WA 610,334 1,262,103 None None
Tacoma WA 198,857 921,947 None None
Tacoma WA 255,000 718,614 None None
Cheyenne WY 220,764 790,772 None 13,500
GOLDEN CORRAL
Red Bluff CA 136,740 633,984 None None
Montrose CO 217,595 483,284 None None
Sterling CO 95,320 441,928 None None
Green Cove Sprgs FL 86,240 399,828 None None
Hinesville GA 89,220 413,644 None None
Lithonia GA 89,220 413,647 None None
Stone Mountain GA 215,940 1,001,188 None None
Ankeny IA 100,000 349,218 None None
Boone IA 76,000 386,170 None None
Rexburg ID 90,760 420,787 None None
Alton IL 225,785 419,315 None None
Dixon IL 230,090 511,036 None None
Salem IL 213,815 474,892 None None
Bedford IN 311,815 692,543 None None
Decatur IN 181,020 385,618 None None
Martinsville IN 100,000 463,642 None None
Shelbyville IN 128,820 597,263 None None
Derby KS 96,060 445,359 None None
El Dorado KS 87,400 405,206 None None
Page 118
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
OTHER DINNER HOUSE RESTAURANTS
Riverside CA 225,795 591,239 817,034
San Ramon CA 406,000 1,126,930 1,532,930
Westminster CO 338,940 1,604,841 1,943,781
Alexandria LA 143,000 677,985 820,985
Roseville MN 281,600 1,305,560 1,587,160
Lake Oswego OR 175,899 815,509 991,408
Milwaukie OR 179,174 830,689 1,009,863
Greenville SC 500,000 1,293,648 1,793,648
Nashville TN 484,975 1,243,725 1,728,700
Redmond WA 610,334 1,262,103 1,872,437
Tacoma WA 198,857 921,947 1,120,804
Tacoma WA 255,000 718,614 973,614
Cheyenne WY 220,764 804,272 1,025,036
GOLDEN CORRAL
Red Bluff CA 136,740 633,984 770,724
Montrose CO 217,595 483,284 700,879
Sterling CO 95,320 441,928 537,248
Green Cove Sprgs FL 86,240 399,828 486,068
Hinesville GA 89,220 413,644 502,864
Lithonia GA 89,220 413,647 502,867
Stone Mountain GA 215,940 1,001,188 1,217,128
Ankeny IA 100,000 349,218 449,218
Boone IA 76,000 386,170 462,170
Rexburg ID 90,760 420,787 511,547
Alton IL 225,785 419,315 645,100
Dixon IL 230,090 511,036 741,126
Salem IL 213,815 474,892 688,707
Bedford IN 311,815 692,543 1,004,358
Decatur IN 181,020 385,618 566,638
Martinsville IN 100,000 463,642 563,642
Shelbyville IN 128,820 597,263 726,083
Derby KS 96,060 445,359 541,419
El Dorado KS 87,400 405,206 492,606
Page 119
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
OTHER DINNER HOUSE RESTAURANTS
Riverside CA 200,126 N/A 10/01/81 300
San Ramon CA 982,887 N/A 12/08/83 180
Westminster CO 1,025,650 N/A 06/28/84 300
Alexandria LA 363,869 N/A 01/17/86 300
Roseville MN 803,109 N/A 12/18/84 300
Lake Oswego OR 526,378 N/A 05/16/84 300
Milwaukie OR 539,488 N/A 05/08/84 300
Greenville SC 1,162,998 N/A 06/15/83 180
Nashville TN 1,099,959 N/A 05/20/83 180
Redmond WA 1,184,974 N/A 12/10/82 180
Tacoma WA 595,079 N/A 05/29/84 300
Tacoma WA 448,049 N/A 11/06/84 300
Cheyenne WY 688,410 N/A 01/12/84 180
GOLDEN CORRAL
Red Bluff CA 310,336 N/A 12/18/86 300
Montrose CO 149,923 N/A 12/17/87 300
Sterling CO 271,852 N/A 12/27/84 300
Green Cove Sprgs FL 245,954 N/A 12/19/84 300
Hinesville GA 254,450 N/A 12/20/84 300
Lithonia GA 254,314 N/A 01/04/85 300
Stone Mountain GA 498,496 N/A 10/30/86 300
Ankeny IA 313,394 N/A 07/28/83 180
Boone IA 335,768 N/A 12/27/83 180
Rexburg ID 228,909 N/A 11/25/85 300
Alton IL 118,555 N/A 10/18/88 300
Dixon IL 158,513 N/A 12/28/87 300
Salem IL 149,937 N/A 10/30/87 300
Bedford IN 224,382 N/A 07/15/87 300
Decatur IN 129,196 N/A 03/31/87 300
Martinsville IN 226,952 N/A 12/23/86 300
Shelbyville IN 292,361 N/A 12/18/86 300
Derby KS 244,136 N/A 10/29/85 300
El Dorado KS 213,514 N/A 04/10/86 300
Page 120
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
GOLDEN CORRAL (continued)
Great Bend KS 95,800 444,154 None None
Jennings LA 107,120 496,636 None None
La Plata MD 120,140 557,000 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
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
Jackson MO 210,199 466,860 None None
Nevada MO 222,552 494,296 None None
Sedalia MO 269,798 599,232 None None
St. Charles MO 695,121 1,001,878 None None
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
Omaha NE 629,592 1,051,244 None None
Amherst NY 935,355 896,819 None None
Fulton NY 294,009 653,006 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
Owasso OK 247,450 549,597 None None
Ponca City OK 234,990 521,923 None None
Hermiston OR 85,560 396,675 None None
Page 121
<PAGE>
(continued)
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
================= ============ ============ ============
GOLDEN CORRAL (continued)
Great Bend KS 95,800 444,154 539,954
Jennings LA 107,120 496,636 603,756
La Plata MD 120,140 557,000 677,140
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
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
Jackson MO 210,199 466,860 677,059
Nevada MO 222,552 494,296 716,848
Sedalia MO 269,798 599,232 869,030
St. Charles MO 695,121 1,001,878 1,696,999
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
Omaha NE 629,592 1,051,244 1,680,836
Amherst NY 935,355 896,819 1,832,174
Fulton NY 294,009 653,006 947,015
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
Owasso OK 247,450 549,597 797,047
Ponca City OK 234,990 521,923 756,913
Hermiston OR 85,560 396,675 482,235
Page 122
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
GOLDEN CORRAL (continued)
Great Bend KS 273,218 N/A 12/26/84 300
Jennings LA 272,245 N/A 10/17/85 300
La Plata MD 302,816 N/A 12/03/85 300
Sturgis MI 146,364 N/A 11/12/87 300
Albert Lea MN 146,878 N/A 12/16/87 300
Red Wing MN 171,067 N/A 12/30/87 300
Belton MO 257,247 N/A 12/18/84 300
Blue Springs MO 317,825 N/A 12/28/84 300
Carthage MO 214,294 N/A 12/03/85 300
Chillicothe MO 231,239 N/A 12/26/84 300
Fulton MO 151,262 N/A 07/30/87 300
Hannibal MO 191,425 N/A 07/30/87 300
Jackson MO 151,262 N/A 07/30/87 300
Nevada MO 160,151 N/A 07/30/87 300
Sedalia MO 159,150 N/A 07/31/89 300
St. Charles MO 41,041 12/22/95 03/16/95 300
St. Joseph MO 276,342 N/A 09/04/85 300
Sullivan MO 243,843 N/A 12/27/84 300
Clinton MS 302,758 N/A 07/28/83 180
Southaven MS 191,880 N/A 05/11/87 300
Fayetteville NC 331,514 N/A 12/20/84 300
Omaha NE 64,827 06/02/95 02/24/95 300
Amherst NY 39,311 12/21/95 05/31/95 300
Fulton NY 201,507 N/A 12/24/87 300
Ashland OH 274,022 N/A 12/19/86 300
Celina OH 156,608 N/A 01/02/87 300
Lebanon OH 151,215 N/A 07/31/87 300
Stow OH 220,127 N/A 12/31/87 300
Troy OH 298,605 N/A 12/05/86 300
Wash. Courthouse OH 279,424 N/A 12/19/86 300
Wilmington OH 270,801 N/A 12/31/86 300
Owasso OK 170,497 N/A 12/28/87 300
Ponca City OK 161,910 N/A 12/30/87 300
Hermiston OR 244,011 N/A 12/18/84 300
Page 123
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
GOLDEN CORRAL (continued)
McMinnville OR 227,780 505,905 None None
Connellsville PA 264,670 587,843 None None
Waynesburg PA 222,285 493,704 None None
Pierre SD 251,790 559,232 None None
Memphis TN 405,274 1,060,680 None None
Athens TX 245,245 544,700 None None
Beeville TX 250,490 556,349 None None
Brownwood TX 288,225 640,160 None None
Crockett TX 90,780 420,880 None None
El Campo TX 98,060 454,631 None None
Gainesville TX 89,220 413,644 None None
Hillsboro TX 75,992 352,316 None None
League City TX 126,822 588,000 None None
Lufkin TX 105,904 490,998 None None
Mesquite TX 134,940 625,612 None None
Mexia TX 93,620 434,046 None None
Orange TX 93,560 433,768 None None
Plainview TX 125,000 350,767 None None
Port Lavaca TX 244,759 543,619 None None
Rowlett TX 126,933 585,986 None None
Vidor TX 90,618 420,124 None None
Waxahachie TX 326,935 726,137 None None
Cedar City UT 130,000 296,544 None None
Virginia Beach VA 314,790 699,161 None None
Auburn WA 301,595 669,852 None None
Marysville WA 276,273 613,613 None None
Oak Harbor WA 275,940 612,874 None None
Monroe WI 193,130 428,947 None None
Portage WI 199,605 443,328 None None
Shawano WI 205,730 456,932 None None
Sturgeon Bay WI 214,865 477,221 None None
Oak Hill WV 85,860 398,069 None None
Riverton WY 216,685 481,267 None None
Sheridan WY 117,160 543,184 None None
Page 124
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
GOLDEN CORRAL (continued)
McMinnville OR 227,780 505,905 733,685
Connellsville PA 264,670 587,843 852,513
Waynesburg PA 222,285 493,704 715,989
Pierre SD 251,790 559,232 811,022
Memphis TN 405,274 1,060,680 1,465,954
Athens TX 245,245 544,700 789,945
Beeville TX 250,490 556,349 806,839
Brownwood TX 288,225 640,160 928,385
Crockett TX 90,780 420,880 511,660
El Campo TX 98,060 454,631 552,691
Gainesville TX 89,220 413,644 502,864
Hillsboro TX 75,992 352,316 428,308
League City TX 126,822 588,000 714,822
Lufkin TX 105,904 490,998 596,902
Mesquite TX 134,940 625,612 760,552
Mexia TX 93,620 434,046 527,666
Orange TX 93,560 433,768 527,328
Plainview TX 125,000 350,767 475,767
Port Lavaca TX 244,759 543,619 788,378
Rowlett TX 126,933 585,986 712,919
Vidor TX 90,618 420,124 510,742
Waxahachie TX 326,935 726,137 1,053,072
Cedar City UT 130,000 296,544 426,544
Virginia Beach VA 314,790 699,161 1,013,951
Auburn WA 301,595 669,852 971,447
Marysville WA 276,273 613,613 889,886
Oak Harbor WA 275,940 612,874 888,814
Monroe WI 193,130 428,947 622,077
Portage WI 199,605 443,328 642,933
Shawano WI 205,730 456,932 662,662
Sturgeon Bay WI 214,865 477,221 692,086
Oak Hill WV 85,860 398,069 483,929
Riverton WY 216,685 481,267 697,952
Sheridan WY 117,160 543,184 660,344
Page 125
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
GOLDEN CORRAL (continued)
McMinnville OR 158,334 N/A 11/12/87 300
Connellsville PA 188,840 N/A 08/17/87 300
Waynesburg PA 158,597 N/A 08/17/87 300
Pierre SD 173,484 N/A 12/01/87 300
Memphis TN 61,873 06/30/95 03/17/95 300
Athens TX 168,977 N/A 12/01/87 300
Beeville TX 180,257 N/A 07/31/87 300
Brownwood TX 198,454 N/A 12/28/87 300
Crockett TX 227,200 N/A 12/17/85 300
El Campo TX 247,319 N/A 11/25/85 300
Gainesville TX 254,450 N/A 12/18/84 300
Hillsboro TX 224,362 N/A 08/01/84 300
League City TX 287,825 N/A 12/30/86 300
Lufkin TX 271,033 N/A 10/08/85 300
Mesquite TX 329,864 N/A 03/20/86 300
Mexia TX 234,308 N/A 12/18/85 300
Orange TX 235,819 N/A 12/10/85 300
Plainview TX 303,030 N/A 01/24/84 180
Port Lavaca TX 176,133 N/A 07/30/87 300
Rowlett TX 325,850 N/A 09/06/85 300
Vidor TX 267,539 N/A 08/01/84 300
Waxahachie TX 225,188 N/A 12/29/87 300
Cedar City UT 265,186 N/A 08/04/83 180
Virginia Beach VA 222,673 N/A 09/03/87 300
Auburn WA 207,800 N/A 12/16/87 300
Marysville WA 197,118 N/A 08/27/87 300
Oak Harbor WA 198,569 N/A 07/16/87 300
Monroe WI 133,066 N/A 12/17/87 300
Portage WI 137,509 N/A 12/23/87 300
Shawano WI 141,732 N/A 12/17/87 300
Sturgeon Bay WI 148,043 N/A 12/01/87 300
Oak Hill WV 244,871 N/A 12/28/84 300
Riverton WY 149,298 N/A 12/01/87 300
Sheridan WY 293,222 N/A 12/31/85 300
Page 126
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
SIZZLER
R. Cucamonga CA 230,733 481,225 None None
San Dimas CA 240,562 445,521 None None
Casselberry FL 403,900 897,075 None None
Orlando FL 230,000 1,066,339 None None
Orlando FL 209,800 972,679 None None
Nampa ID 74,156 343,821 None None
Albion MI 143,280 694,578 None 12,341
OTHER FAMILY RESTAURANTS
Hazelwood MO 157,117 725,327 None None
St. Charles MO 175,413 809,790 None None
Laramie WY 210,000 466,417 None None
HARDEE'S
Colorado Sprgs CO 152,000 704,736 None None
Colorado Sprgs CO 313,250 695,730 None None
Security CO 150,000 695,463 None None
TACO BELL
Tucson AZ 107,393 497,904 None None
Chino CA 26,729 51,555 None None
R. Cucamonga CA 95,192 441,334 None None
Orlando FL 339,500 746,333 None None
Garden City GA 197,225 438,043 None None
Hinesville GA 172,611 383,376 None None
Savannah GA 165,409 367,379 None None
Savannah GA 143,993 345,548 None None
Statesboro GA 201,250 446,983 None None
Boise ID 190,894 423,981 None None
Boise ID 161,352 334,041 None None
Anderson IN 197,523 438,707 None None
Muncie IN 67,156 149,157 None None
New Castle IN 246,192 320,572 None None
Westfield IN 213,341 477,300 None None
Page 127
<PAGE>
(continued)
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
================= ============ ============ ============
SIZZLER
R. Cucamonga CA 230,733 481,225 711,958
San Dimas CA 240,562 445,521 686,083
Casselberry FL 403,900 897,075 1,300,975
Orlando FL 230,000 1,066,339 1,296,339
Orlando FL 209,800 972,679 1,182,479
Nampa ID 74,156 343,821 417,977
Albion MI 143,280 706,919 850,199
OTHER FAMILY RESTAURANTS
Hazelwood MO 157,117 725,327 882,444
St. Charles MO 175,413 809,790 985,203
Laramie WY 210,000 466,417 676,417
HARDEE'S
Colorado Sprgs CO 152,000 704,736 856,736
Colorado Sprgs CO 313,250 695,730 1,008,980
Security CO 150,000 695,463 845,463
TACO BELL
Tucson AZ 107,393 497,904 605,297
Chino CA 26,729 51,555 78,284
R. Cucamonga CA 95,192 441,334 536,526
Orlando FL 339,500 746,333 1,085,833
Garden City GA 197,225 438,043 635,268
Hinesville GA 172,611 383,376 555,987
Savannah GA 165,409 367,379 532,788
Savannah GA 143,993 345,548 489,541
Statesboro GA 201,250 446,983 648,233
Boise ID 190,894 423,981 614,875
Boise ID 161,352 334,041 495,393
Anderson IN 197,523 438,707 636,230
Muncie IN 67,156 149,157 216,313
New Castle IN 246,192 320,572 566,764
Westfield IN 213,341 477,300 690,641
Page 128
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
SIZZLER
R. Cucamonga CA 481,225 N/A 04/03/81 180
San Dimas CA 445,521 N/A 03/12/81 180
Casselberry FL 211,068 N/A 12/29/89 300
Orlando FL 580,086 N/A 11/18/85 300
Orlando FL 496,224 N/A 08/15/86 300
Nampa ID 168,301 N/A 12/31/86 300
Albion MI 372,154 N/A 03/06/86 300
OTHER FAMILY RESTAURANTS
Hazelwood MO 403,588 N/A 08/28/85 300
St. Charles MO 450,583 N/A 08/28/85 300
Laramie WY 108,426 N/A 03/12/90 300
HARDEE'S
Colorado Sprgs CO 353,850 N/A 09/30/86 300
Colorado Sprgs CO 233,099 N/A 03/10/87 300
Security CO 349,194 N/A 09/30/86 300
TACO BELL
Tucson AZ 267,566 N/A 01/17/86 300
Chino CA 50,883 N/A 06/23/75 300
R. Cucamonga CA 238,239 N/A 12/20/85 300
Orlando FL 227,418 N/A 02/03/88 300
Garden City GA 116,645 N/A 04/20/89 300
Hinesville GA 118,931 N/A 12/22/87 300
Savannah GA 113,969 N/A 12/22/87 300
Savannah GA 107,196 N/A 12/22/87 300
Statesboro GA 110,464 N/A 11/14/89 300
Boise ID 125,696 N/A 05/17/88 300
Boise ID 94,444 N/A 10/07/88 300
Anderson IN 128,855 N/A 03/25/88 300
Muncie IN 45,040 N/A 03/30/88 300
New Castle IN 108,372 N/A 01/07/87 300
Westfield IN 114,221 N/A 12/21/89 300
Page 129
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- ------------------
Buildings,
Improvements
and
Description Acquisition Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
TACO BELL (continued)
Lexington KY 122,200 490,200 None None
Wilkesboro NC 183,050 406,562 None None
Corvallis OR 172,788 383,766 None None
Salem OR 198,540 440,964 None None
Killeen TX 262,500 583,014 None 14,398
New Braunfels TX 185,500 411,997 None None
Norfolk VA 251,207 575,250 None 12,983
Grafton WI 149,778 332,664 None None
WHATABURGER
Dallas TX 242,025 479,170 None None
Fort Worth TX 223,195 492,067 None None
Ft. Worth TX 423,281 382,059 None None
Houston TX 194,994 386,056 None None
Houston TX 184,175 364,636 None None
Porter TX 227,067 333,031 None None
Sealy TX 197,871 391,754 None None
Stafford TX 214,024 423,732 None None
Temple TX 302,505 291,414 None None
OTHER FAST FOOD RESTAURANTS
Douglas AZ 75,000 347,719 None None
Diamond Bar CA 76,117 183,052 None 15,000
Fullerton CA 36,296 51,020 None 14,628
Hemet CA 106,164 199,179 None None
Riverside CA 90,000 170,394 None None
Boulder CO 426,675 822,676 18,000 None
Jacksonville FL 150,210 693,446 None None
Jacksonville FL 143,299 664,373 None None
Goshen IN 115,000 533,165 None None
Muncie IN 136,400 632,380 None None
South Bend IN 133,200 617,545 None 19,211
Wichita KS 98,000 454,350 None None
Watertown NY 139,199 645,355 None None
Page 130
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross Amount at Which Carried
at Close of Period (Notes 2, 3 and 5)
----------------------------------------
Buildings,
Improvements
and
Description Acquisition
(Note 1) Land ($) Fees ($) Total
================= ============ ============ ============
TACO BELL (continued)
Lexington KY 122,200 490,200 612,400
Wilkesboro NC 183,050 406,562 589,612
Corvallis OR 172,788 383,766 556,554
Salem OR 198,540 440,964 639,504
Killeen TX 262,500 597,412 859,912
New Braunfels TX 185,500 411,997 597,497
Norfolk VA 251,207 588,233 839,440
Grafton WI 149,778 332,664 482,442
WHATABURGER
Dallas TX 242,025 479,170 721,195
Fort Worth TX 223,195 492,067 715,262
Ft. Worth TX 423,281 382,059 805,340
Houston TX 194,994 386,056 581,050
Houston TX 184,175 364,636 548,811
Porter TX 227,067 333,031 560,098
Sealy TX 197,871 391,754 589,625
Stafford TX 214,024 423,732 637,756
Temple TX 302,505 291,414 593,919
OTHER FAST FOOD RESTAURANTS
Douglas AZ 75,000 347,719 422,719
Diamond Bar CA 76,117 198,052 274,169
Fullerton CA 36,296 65,648 101,944
Hemet CA 106,164 199,179 305,343
Riverside CA 90,000 170,394 260,394
Boulder CO 426,675 840,676 1,267,351
Jacksonville FL 150,210 693,446 843,656
Jacksonville FL 143,299 664,373 807,672
Goshen IN 115,000 533,165 648,165
Muncie IN 136,400 632,380 768,780
South Bend IN 133,200 636,756 769,956
Wichita KS 98,000 454,350 552,350
Watertown NY 139,199 645,355 784,554
Page 131
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
TACO BELL (continued)
Lexington KY 241,849 N/A 12/03/86 300
Wilkesboro NC 131,727 N/A 07/24/87 300
Corvallis OR 119,052 N/A 12/22/87 300
Salem OR 113,324 N/A 05/23/89 300
Killeen TX 193,394 N/A 05/29/87 300
New Braunfels TX 138,035 N/A 03/26/87 300
Norfolk VA 185,374 N/A 10/15/87 300
Grafton WI 105,032 N/A 10/29/87 300
WHATABURGER
Dallas TX 93,591 N/A 06/25/91 300
Fort Worth TX 105,022 N/A 06/26/91 300
Ft. Worth TX 28,654 N/A 02/10/95 300
Houston TX 75,404 N/A 06/25/91 300
Houston TX 71,220 N/A 06/25/91 300
Porter TX 24,977 N/A 02/09/95 300
Sealy TX 76,517 N/A 06/25/91 300
Stafford TX 82,763 N/A 06/26/91 300
Temple TX 21,856 N/A 02/09/95 300
OTHER FAST FOOD RESTAURANTS
Douglas AZ 189,159 N/A 11/27/85 300
Diamond Bar CA 165,147 N/A 09/25/78 300
Fullerton CA 54,921 N/A 11/08/72 234
Hemet CA 180,317 N/A 04/15/77 300
Riverside CA 156,410 N/A 12/09/76 300
Boulder CO 724,547 N/A 01/05/84 180
Jacksonville FL 385,611 N/A 09/13/85 300
Jacksonville FL 361,189 N/A 12/13/85 300
Goshen IN 274,235 N/A 07/07/86 300
Muncie IN 333,431 N/A 03/18/86 300
South Bend IN 329,906 N/A 04/28/86 300
Wichita KS 231,791 N/A 08/08/86 300
Watertown NY 326,745 N/A 08/18/86 300
Page 132
<PAGE>
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 Improve- Carrying
(Note 1) Land ($) Fees ($) ments Costs
================= ============ ============ ======== ========
OTHER FAST FOOD RESTAURANTS (continued)
Lexington SC 165,774 392,619 None None
West Columbia SC 147,735 328,123 None None
Ennis TX 173,250 384,793 None None
OTHER PROPERTIES
Mesa AZ 271,754 1,259,910 27,961 None
Phoenix AZ 113,658 558,122 None None
Phoenix AZ 322,708 1,496,143 189,456 10,462
Chino CA 53,271 102,748 None None
Escondido CA 332,500 904,690 164,176 61,140
Fresno CA 428,900 3,434,562 None None
Paramount CA 86,400 278,827 None None
San Diego CA 3,745,000 8,772,525 None 112,826
San Diego CA 2,485,160 8,595,722 None 102,100
San Diego CA 5,797,411 15,301,354 None 172,143
Humble TX 106,000 545,518 None None
Chesapeake VA 144,014 649,869 None 11,754
None 398,230 None 28,079
165,597,878 397,753,925 494,593 693,597
Page 133
<PAGE>
(continued)
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 FAST FOOD RESTAURANTS (continued)
Lexington SC 165,774 392,619 558,393
West Columbia SC 147,735 328,123 475,858
Ennis TX 173,250 384,793 558,043
OTHER PROPERTIES
Mesa AZ 271,754 1,287,871 1,559,625
Phoenix AZ 113,658 558,122 671,780
Phoenix AZ 322,708 1,696,061 2,018,769
Chino CA 53,271 102,748 156,019
Escondido CA 332,500 1,130,006 1,462,506
Fresno CA 428,900 3,434,562 3,863,462
Paramount CA 86,400 278,827 365,227
San Diego CA 3,745,000 8,885,351 12,630,351
San Diego CA 2,485,160 8,697,822 11,182,982
San Diego CA 5,797,411 15,473,497 21,270,908
Humble TX 106,000 545,518 651,518
Chesapeake VA 144,014 661,623 805,637
None 426,309 426,309
165,597,878 398,942,115 564,539,993
Page 134
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Life on
which De-
preciation
in latest
Income
Statement
Accumulated Date of is Com-
Description Depreciation Constr- Date uted (in
(Note 1) (Note 4) ($) uction Acquired Months)
================= ============ ======== ========== ==========
OTHER FAST FOOD RESTAURANTS (continued)
Lexington SC 114,240 N/A 07/06/88 300
West Columbia SC 100,888 N/A 01/13/88 300
Ennis TX 119,371 N/A 12/28/87 300
OTHER PROPERTIES
Mesa AZ 649,468 N/A 06/30/86 300
Phoenix AZ 403,936 N/A 01/30/86 300
Phoenix AZ 781,977 N/A 06/30/86 300
Chino CA 101,409 N/A 01/07/75 300
Escondido CA 342,687 N/A 01/11/84 300
Fresno CA 3,255,811 N/A 10/29/82 180
Paramount CA 243,993 N/A 11/22/83 180
San Diego CA 4,505,936 03/08/86 03/25/86 300
San Diego CA 2,809,567 01/23/89 09/19/86 300
San Diego CA 4,580,428 01/20/89 08/05/87 300
Humble TX 398,423 N/A 03/25/86 300
Chesapeake VA 331,825 N/A 12/22/86 300
255,122 N/A Various Various
138,307,408
Page 135
<PAGE>
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Note 1. Seven hundred thirty seven of the properties are single
unit retail outlets. The Trade Center, Silverton Business Center
and Empire Business Center properties 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
$499,387,310.
Note 3. Reconciliation of total real estate carrying value for
the three years ended December 31, 1996 are as follows:
1996 1995 1994
============ ============ ============
Balance at Beginning
of Period $515,425,560 $450,703,481 $451,738,008
Additions During
Period:
Acquisitions 55,667,447 65,392,559 3,285,413
Equipment 35,000 0 0
Improvements, Etc. 60,303 447,720 83,571
Other (Leasing
Costs) 0 50,138 115,977
------------ ------------ ------------
Total Additions 55,762,750 65,890,417 3,484,961
------------ ------------ ------------
Deductions During
Period:
Cost of Real
Estate Sold 6,054,250 1,162,098 4,326,985
Cost of Equipment
Sold 0 0 1,500
Other (Fully
Amortized
Commissions) 15,067 6,240 56,003
Other (Provision
for Impairment
Losses) 579,000 0 135,000
------------ ------------ ------------
Total Deductions 6,648,317 1,168,338 4,519,488
------------ ------------ ------------
Balance at Close
of Period $564,539,993 $515,425,560 $450,703,481
============ ============ ============
Page 136
<PAGE>
(continued)
REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Note 4. Reconciliation of accumulated depreciation for the three
years ended December 31, 1996 are as follows:
1996 1995 1994
============ ============ ============
Balance at Beginning
of Period $126,062,055 $112,168,982 $100,133,571
Additions During
Period - Provision
for Depreciation 15,364,936 14,462,491 13,788,354
Deductions During
Period:
Accumulated
Depreciation
of Real
Estate Sold 3,104,516 563,178 1,696,940
Other (Fully
Amortized
Commissions) 15,067 6,240 56,003
------------ ------------ ------------
Balance at Close
of Period $138,307,408 $126,062,055 $112,168,982
============ ============ ============
Note 5. A provision for impairment loss was made on the Automall
in Mesa, AZ in 1994 and on the Automall in Phoenix, AZ; the
Automall in Glendale, AZ; the Stone Meadow Center in Spring, TX
and the Lizard's Thicket in Lexington, SC in 1996.
Page 137
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ---------------------------------------------------------
The corporation has had no disagreements with its
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 in the definitive proxy
statement for the Annual Meeting of Shareholders presently
scheduled to be held on May 13, 1997, 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 Shareholders presently scheduled to be held on
May 13, 1997, 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 Shareholders
presently scheduled to be held on May 13, 1997, to be filed
pursuant to Regulation 14A.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Not applicable.
Page 138
<PAGE>
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, 1996 and 1995
c. Consolidated Statements of Income,
Years ended December 31, 1996, 1995 and 1994
d. Consolidated Statements of
Stockholders' Equity,
Years ended December 31, 1996, 1995 and 1994
e. Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995 and 1994
f. Notes to Consolidated Financial Statements
g. Consolidated Quarterly Financial Data
(unaudited) for 1996 and 1995
2. Financial Statement Schedule (see Item 8)
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 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)
Page 139
<PAGE>
3.1 Amended and Restated Certificate of
Incorporation of Realty Income Corporation
(filed as Exhibit 3.1 to the Company's 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)
4.1 Form of Stock Certificate (filed as Exhibit
4.04 to the Company's Registration Statement
on S-4 (Registration Statement No. 33-69410)
and incorporated herein by reference)
4.2 Form of Indenture (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-3
(Registration No. 33-95374) and incorporated
herein by reference)
4.3 Form of Debt Security (filed and included as
Exhibit 4.3 to the Company's Registration
Statement on Form S-3 (Registration No.
33-95374) and incorporated herein by
reference)
10.1 Revolving Credit Agreement (filed as Exhibit
99.2 to the Company's 8-K dated
December 16, 1994 and incorporated herein by
reference)
10.2 First Amendment to the Revolving Credit
Agreement (filed as Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended
September 30, 1996 and incorporated herein
by reference)
10.3 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)
10.4 Third Amendment to the Revolving Credit
Agreement, filed herewith
10.5 Stock Incentive Plan (filed as Exhibit 4.1 to
the Company's Registration Statement on Form
S-8 (Registration No. 33-95708) and
incorporated by reference)
Page 140
<PAGE>
10.6 Form of Indemnification Agreement to be
entered into between the Company and the
executive officers of the Company (filed as
Exhibit 10.4 to the Company's Form 10-Q for
the quarter ended September 30, 1996 and
incorporated herein by reference)
10.7 Form of Management Incentive Plan (filed as
Exhibit 10.5 to the Company's Form 10-Q for
the quarter ended September 30, 1996 and
incorporated herein by reference)
21.1 Subsidiaries of the Company as of
January 1, 1997, filed herewith
24.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule (electronically filed
with the Securities and Exchange Commission
only)
B. No report on Form 8-K was filed by registrant during the
last quarter of the period covered by this report.
Page 141
<PAGE>
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/WILLIAM E. CLARK
-----------------------------------------------------------
William E. Clark
Chairman and Chief Executive Officer
Date: March 21, 1997
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 and
Chief Executive Officer
(Principal Executive Officer)
Date: March 21, 1997
By: /s/THOMAS A. LEWIS
-----------------------------------------------------------
Thomas A. Lewis
Vice Chairman of the Board of Directors and
Vice President, Capital Markets
Date: March 24, 1997
Page 142
<PAGE>
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/DONALD R. CAMERON
-----------------------------------------------------------
Donald R. Cameron
Director
Date: March 19, 1997
By: /s/ROGER P. KUPPINGER
-----------------------------------------------------------
Roger P. Kuppinger
Director
Date: March 19, 1997
By: /s/MICHAEL D. MCKEE
-----------------------------------------------------------
Michael D. McKee
Director
Date: March 19, 1997
By: /s/WILLARD H. SMITH JR
-----------------------------------------------------------
Willard H. Smith Jr
Director
Date: March 19, 1997
By: /s/RICHARD J. VANDERHOFF
-----------------------------------------------------------
Richard J. VanDerhoff
Director, President and Chief Operating Officer
Date: March 25, 1997
Page 143
<PAGE>
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/GARY MALINO
-----------------------------------------------------------
Gary Malino
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: March 25, 1997
By: /s/GREGORY J. FAHEY
-----------------------------------------------------------
Gregory J. Fahey
Controller
Date: March 25, 1997
Page 144
<PAGE>
EXHIBIT INDEX
=============
Exhibit No. Description Page
- ----------- ----------- ----
10.4 Third Amendment to the Revolving
Credit Agreement..............................146
21.1 Subsidiaries of the Company as of
January 1, 1997...............................152
24.1 Consent of KPMG Peat Marwick LLP..............153
27 Financial Data Schedule (electronically
filed with the Securities and Exchange
Commission only)..............................154
Page 145
Exhibit 10.4
============
THIRD AMENDMENT TO
REVOLVING CREDIT AGREEMENT
--------------------------
THIS THIRD AMENDMENT TO THE REVOLVING CREDIT AGREEMENT
("Amendment") is made as of March 7, 1997, among Realty Income
Corporation, a Delaware corporation (the "Company"), each of the
banks identified on the signature pages hereof (each a "Bank"
and, collectively, the "Banks") and The Bank of New York, as
Agent and Swing Line Bank.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company, the Banks, the Agent and the
Swing Line Bank entered into the Revolving Credit Agreement,
dated as of November 29, 1994, as amended by the First Amendment
to the Revolving Credit Agreement, dated January 26, 1995 and the
Second Amendment to the Revolving Credit Agreement, dated
December 4, 1995 (the "Credit Agreement"); and
WHEREAS, the signatories hereto desire to amend the
Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and of
the covenants and agreements contained herein and in the Credit
Agreement, the parties hereto agree that the Credit Agreement is
hereby amended as set forth herein:
1. Capitalized terms used herein which are not
otherwise defined herein but are defined in the Credit Agreement
shall have the meanings given to such terms in the Credit
Agreement.
2. The following definitions in Section 1.01 of the
Credit Agreement are amended in their entirety to read as
follows:
"APPLICABLE MARGIN" shall mean the margin set forth in
the following chart applicable to the Pricing Level then in
effect:
Page 146
<PAGE>
Applicable Applicable
Pricing Level LIBOR Margin ABR Margin
---------------------------------------------
I 0.750% 0.000%
II 0.875% 0.000%
III 1.000% 0.000%
IV 1.125% 0.000%
V 1.250% 0.000%
VI 1.500% 0.250%
"Pricing Level I" shall be applicable for so long as the
Company's Debt Rating is better than or equal to A/A2;
"Pricing Level II" shall be applicable for so long as the
Company's Debt Rating is lower than A/A2 but better than or
equal to A-/A3; "Pricing Level III" shall be applicable for
so long as the Company's Debt Rating is lower than A-/A3 but
better than or equal to BBB+/Baa1; "Pricing Level IV" shall
be applicable for so long as the Company's Debt Rating is
lower than BBB+/Baa1 but better than or equal to BBB/Baa2;
"Pricing Level V" shall be applicable for so long as the
Company's Debt Rating is lower than BBB/Baa2 but better than
or equal to BBB-/Baa3; and "Pricing Level VI" shall be
applicable for so long as the Company's Debt Rating is lower
than BBB-/Baa3. Changes in the applicable Pricing Level
shall be effective as of the first day of the calendar
quarter following the receipt by the Agent of a letter or
letters from the applicable Rating Agencies evidencing a
change in the Company's Debt Rating.
"COMMITMENT FEE RATE" with respect to any Commitment
Fee payment shall mean the commitment fee rate set forth in
the following chart applicable to the Pricing Level
(determined as set forth under "Applicable Margin" above
including the receipt by the Agent of a letter or letters
evidencing the Company's Debt Rating) in effect on the date
on which such Commitment Fee payment is due:
Pricing Level Commitment Fee
---------------------------------------------
I 0.150%
II 0.150%
III 0.150%
IV 0.150%
V 0.150%
VI 0.250%
"KEY MANAGEMENT" shall mean William E. Clark, Thomas A.
Lewis, Richard J. VanDerhoff, Gary M. Malino, Michael R.
Pfeiffer and Richard G. Collins.
Page 147
<PAGE>
"TERMINATION DATE" shall mean, with respect to any
Bank, the earliest to occur of (i) November 27, 1999 or such
later date as may be agreed to by such Bank pursuant to
SECTION 11.12, (ii) the date on which the obligations of the
Banks to make loans hereunder shall terminate pursuant to
SECTION 8.01 or the Commitments shall be reduced to zero
pursuant to SECTION 2.05, and (iii) the date specified as
such Bank's Termination Date pursuant to SECTION 11.12, or,
if in any case (other than clause (ii) above) such day is
not a Business Day, the next succeeding Business Day; in all
cases, subject to the provisions of SECTION 11.12 (d).
3. Section 1.01 is hereby further amended to add the
following definitions:
"DEBT RATING" shall mean the highest rating published
by at least two of the three Rating Agencies with respect to
the senior unsecured debt of the Company, PROVIDED, that if
no two Rating Agencies have published the same rating with
respect to the Company's senior unsecured debt, the Debt
Rating shall be the rating that is at the middle of the
three published ratings.
"RATING AGENCY" shall mean Moody's Investors Service,
Inc., Standard & Poors, a division of the McGraw Hill
Companies, Inc., or Duff & Phelps Credit Rating Co.
4. Section 7.01(b) is hereby amended by replacing the
word "and" immediately prior to clause (iv) of the first sentence
with a comma, and inserting the following clause after clause
(iv) of the first sentence:
"and (v) promptly, and in any event not later than five days
after the end of the calendar quarter in which the Company
receives notice of a change in the rating published by any
of the Rating Agencies with respect to the Company's senior
unsecured debt."
5. Section 7.02(c) of the Credit Agreement is hereby
amended by restating clause (ii) thereof as follows:
"(ii) enter into any merger or consolidation, or permit any
Subsidiary to do so, other than (a) a merger or
consolidation of a Wholly owned Subsidiary with one or more
other Wholly owned Subsidiaries or into the Company, (b) a
merger or consolidation of a Subsidiary or the Company with
an entity for the purpose of controlling the property of
that entity in the ordinary course of the Company's
business, provided that the aggregate purchase price paid by
the Company in all transactions under this clause (b) and
clause (i)(b) above shall not exceed $10,000,000, or (c) a
Page 148
<PAGE>
merger of the Company into another corporation primarily for
the purpose of changing the jurisdiction of incorporation of
the Company, provided that the surviving entity shall assume
all obligations of the Company hereunder;"
6. Section 11.12(a) of the Credit Agreement is
restated hereby as follows:
"(a) No later than February 28, 1998, the Company may, at
its option, request all the Banks then party to this
Agreement to extend their scheduled Termination Dates by one
calendar year by means of a letter, addressed to each such
Bank and the Agent. Each Bank electing (in its sole
discretion) so to extend its scheduled Termination Date
shall execute and deliver within forty-five (45) days
following such request counterparts of such letter to the
Company and the Agent, whereupon (unless Banks with an
aggregate percentage of the Total Commitment in excess of
25% decline to extend their respective scheduled Termination
Dates, in which event the Agent shall notify all the Banks
thereof), such Bank's scheduled Termination Date shall be
extended to the anniversary date of the year immediately
succeeding such Bank's then-current scheduled Termination
Date. If no such election is received within such forty-
five day period from any Bank, such Bank shall be deemed to
have elected not to extend its scheduled Termination Date."
7. The Company agrees to pay on demand all reasonable
costs and expenses of the Agent (including all reasonable fees
and expenses of counsel to the Agent) in connection with the
preparation and execution of this Amendment.
8. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
UNITED STATES OF AMERICA.
9. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
10. The Credit Agreement, as amended hereby, shall be
binding upon the Company, the Banks, the Agent and the Swing Line
Bank and their respective successors and assigns, and shall inure
to the benefit of the Company, the Banks, the Agent, the Swing
Line Bank and their respective successors and assigns.
11. Except as expressly provided in this Amendment,
all of the terms, covenants, conditions, restrictions and other
provisions contained in the Credit Agreement shall remain in full
force and effect.
Page 149
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date first above written.
REALTY INCOME CORPORATION
By: /s/MICHAEL R. PFEIFFER
Name: Michael R. Pfeiffer
Title: Vice President, General
Counsel and Secretary
THE BANK OF NEW YORK
as Agent for the Banks
By: /s/LISA Y. BROWN
Name: Lisa Y. Brown
Title: Vice President
THE BANK OF NEW YORK
as a Bank and as the Swing Line Bank
By: /s/LISA Y. BROWN
Name: Lisa Y. Brown
Title: Vice President
SANWA BANK CALIFORNIA
By: /s/JOHN LINDER
Name: John Linder
Title: Vice President
SIGNET BANK VIRGINIA
By: /s/ERIC A. LAWRENCE
Name: Eric A. Lawrence
Title: Senior Vice President
Page 150
<PAGE>
BANK HAPAOLIM, B.M.,
SAN FRANCISCO BRANCH
By: /s/PAUL WATSON
Name: Paul Watson
Title: Vice President
By: /s/JOHN RICE
Name: John Rice
Title: Vice President
DRESDNER BANK, A.G.,
NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By: /s/CHRISTOPHER E. SARISKY
Name: Christopher E. Sarisky
Title: Assistant Treasurer
By: /s/THOMAS J. NADRAMIA
Name: Thomas J. Nadramia
Title: Vice President
WELLS FARGO BANK
By: /s/CHERYL SALGADO
Name: Cheryl Salgado
Title: Vice President
Page 151
Exhibit 21.1
============
Subsidiaries of the Company as of January 1, 1997
- -------------------------------------------------
Realty Income Texas Properties, L.P., a Delaware limited
partnership
Realty Income Texas Properties, Inc., a Delaware corporation
Page 152
Exhibit 24.1
============
The Board of Directors
Realty Income Corporation:
We consent to incorporation by reference in Amendment No. 1 to
the Registration Statement No. 33-95374 on Form S-3 of Realty
Income Corporation and to incorporation by reference in
Registration Statement No. 33-95708 on Form S-8 of Realty Income
Corporation, of our report relating to the consolidated balance
sheets of Realty Income Corporation as of December 31, 1996 and
1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996, and the related
Schedule III. Such report is dated January 24, 1997, except as
to paragraph two of Note 11, which is as of February 24, 1997,
and appears in the December 31, 1996 annual report on Form 10-K
of Realty Income Corporation.
/s/KPMG PEAT MARWICK LLP
San Diego, California
March 25, 1997
Page 153
<TABLE> <S> <C>
<PAGE>
<S> <C>
<ARTICLE>5
<LEGEND>
This Schedule contains summary financial information extracted
from the registrant's Balance Sheet as of December 31, 1996 and
Income Statement for the nine months ended December 31, 1996 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER>1
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,559,000
<SECURITIES> 0
<RECEIVABLES> 2,288,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> <F1> 0
<PP&E> 564,540,000
<DEPRECIATION> 138,307,000
<TOTAL-ASSETS> 454,097,000
<CURRENT-LIABILITIES> <F1> 0
<BONDS> 71,782,000
<COMMON> 22,980,000
0
0
<OTHER-SE> 351,261,000
<TOTAL-LIABILITY-AND-EQUITY> 454,097,000
<SALES> 0
<TOTAL-REVENUES> 56,957,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,143,000
<LOSS-PROVISION> 679,000
<INTEREST-EXPENSE> 2,367,000
<INCOME-PRETAX> 32,223,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 32,223,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,223,000
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<FN>
F1 Current assets and current liabilities are not applicable to
the Company under current industry standards.
Page 154
</TABLE>
