Realty Income Announces Second Quarter and Mid-Year Operating Results

Realty Income Corporation (Realty Income), The Monthly Dividend Company^® (NYSE: O), today announced operating results for the second quarter ended June 30, 2010. All per share amounts presented in this press release are on a diluted per common share basis, unless stated otherwise.

COMPANY HIGHLIGHTS:

(For the quarter ended June 30, 2010, as compared to the same quarterly period in 2009)

• Revenue increased to $83.5 million as compared to $81.3 million
• FFO available to common stockholders decreased 0.8% to $46.8 million
• FFO per share decreased 2.2% to $0.45
• AFFO per share was unchanged at $0.46
• Net income available to common stockholders per share was $0.24
• Portfolio occupancy was 96.2%
• Same store rents increased 0.1% to $79.0 million
• Dividends paid per common share increased 0.9%
• The monthly dividend increased for the 51^st consecutive quarter to an annualized amount of $1.7235 per share
• Invested $261.2 million in 13 new properties
• Issued $250 million of 5.75% 10-year notes

Financial Results

Revenue

Realty Income’s revenue, for the quarter ended June 30, 2010, increased 2.7% to $83.5 million as compared to $81.3 million for the same quarter in 2009. Revenue, for the six months ended June 30, 2010, increased 1.8% to $166.7 million as compared to $163.8 million for the same period in 2009.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended June 30, 2010, was $25.0 million as compared to $26.5 million for the same quarter in 2009. Net income per share for the quarter was $0.24 as compared to $0.26 for the same quarter in 2009.

Net income available to common stockholders, for the six months ended June 30, 2010, was $49.1 million as compared to $50.5 million for the same period in 2009. Net income per share, for the six months ended June 30, 2010, was $0.47 as compared to $0.49 for the same period in 2009.

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

During the second quarter of 2010, income from continuing operations available to common stockholders was unchanged at $0.23 per share as compared to the same quarter in 2009.

During the first six months of 2010, income from continuing operations available to common stockholders was $0.45 per share as compared to $0.46 per share for the same period in 2009.

FFO Available to Common Stockholders

Funds from Operations (FFO), for the quarter ended June 30, 2010, decreased 0.8% to $46.8 million as compared to $47.2 million for the same quarter in 2009. FFO per share, for the quarter ended June 30, 2010, decreased 2.2% to $0.45 as compared to $0.46 for the same quarter in 2009.

FFO, for the six months ended June 30, 2010, decreased 0.5% to $93.4 million as compared to $93.9 million for the same period in 2009. FFO per share, for the six months ended June 30, 2010, decreased 1.1% to $0.90 as compared to $0.91 for the same period in 2009.

AFFO Available to Common Stockholders

Adjusted Funds from Operations (AFFO), for the quarter ended June 30, 2010, was $47.7 million as compared to $47.9 million for the same quarter in 2009. AFFO per share, for the quarter ended June 30, 2010, was unchanged at $0.46 as compared to the same quarter in 2009.

AFFO, for the six months ended June 30, 2010, was $95.3 million as compared to $95.6 million for the same period in 2009. AFFO per share, for the six months ended June 30, 2010, was unchanged at $0.92 as compared to the same period in 2009.

The Company considers FFO and AFFO to be appropriate supplemental measures of a Real Estate Investment Trust’s (REIT’s) operating performance as they are based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. FFO and AFFO are alternative, non-GAAP measures that are also considered to be good indicators of a company’s ability to generate income to pay dividends. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT’s) definition as net income available to common stockholders plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items. AFFO further adjusts FFO by adding back non-cash items that reduce net income in accordance with GAAP, and deducting such items as capitalized expenditures and straight-line rent revenue. See our reconciliation of net income available to common stockholders to FFO and AFFO on page 7.

Dividend Information

In June 2010, Realty Income announced the 51^st consecutive quarterly increase, which is the 58^th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The annualized dividend amount, as of June 30, 2010, was $1.7235 per share. The amount of the monthly dividends paid during the first half of 2010 increased 0.9% to $0.859 per share from $0.851 per share compared to the same period in 2009. Through June 30, 2010, the Company has paid 479 consecutive monthly dividends.

Real Estate Portfolio Update

As of June 30, 2010, Realty Income’s portfolio of freestanding, single-tenant properties consisted of 2,350 properties located in 49 states, leased to 118 commercial enterprises doing business in 32 industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 11.4 years.

Portfolio Management Activities

The Company’s portfolio of commercial real estate, owned primarily under 15- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of June 30, 2010, portfolio occupancy was 96.2% with 90 properties available for lease out of a total of 2,350 properties in the portfolio.

Rent Increases

During the quarter ended June 30, 2010, same store rents on 2,167 properties under lease increased 0.1%, as compared to the same quarter in 2009. During the six months ended June 30, 2010, same store rents on 2,167 properties under lease increased 0.4%, as compared to the same period in 2009.

Property Acquisitions

During the second quarter of 2010, Realty Income invested $261.2 million in 13 new properties. The new properties are located in two states and are 100% leased with an initial average lease term of 19.8 years and an initial average lease yield of 7.5%. During the six months ended June 30, 2010, Realty Income invested $289.0 million in 21 new properties. The new properties are located in seven states and are 100% leased with an initial average lease term of 19.2 years and an initial average lease yield of 7.6%.

Realty Income maintains a $355 million unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. As of June 30, 2010, the outstanding balance on the Company’s acquisition credit facility was $26.9 million, and $328.1 million was available to fund new property acquisitions.

Property Dispositions

Realty Income continued to successfully execute its asset disposition program in 2010. The objective of this program is to sell assets when the Company believes the reinvestment of the sales proceeds will generate higher returns, enhance the credit quality of the Company’s real estate portfolio, increase the average lease length, or decrease tenant or industry concentration.

During the quarter ended June 30, 2010, Realty Income sold seven properties for $6.0 million, which resulted in a gain on sales of $1.7 million. During the six months ended June 30, 2010, Realty Income sold ten properties for $7.8 million, which resulted in a gain on sales of $2.4 million.

Other Activities

Crest Net Lease

Crest is focused on acquiring and subsequently marketing net-leased properties for sale. Crest did not acquire or sell any properties during the first half of 2010. At June 30, 2010, Crest’s property inventory consisted of three properties valued at $3.8 million. During the second quarter of 2010 and 2009, Crest did not contribute to Realty Income’s FFO per share.

Issued $250 Million of 5.75% Senior Unsecured Notes

In June 2010, Realty Income issued $250 million of 5.75% senior unsecured notes due January 2021. The public offering price for the notes was 99.404% of the principal amount for an effective yield to maturity of 5.826%. These securities are rated BBB+ by Fitch Ratings, Baa1 by Moody’s Investors Service and BBB by Standard & Poor’s Ratings Group. The net proceeds from the offering were used to repay borrowings under our acquisition credit facility, which were incurred to fund a majority of the Diageo property acquisition that closed during the second quarter.

Acquired $269 Million of Diageo Chateau & Estate Wines Properties

On June 25, 2010, Realty Income acquired $258 million of winery and vineyard properties of Diageo Chateau & Estate Wines, with a remaining property to be acquired for approximately $11 million. The leases are guaranteed by Diageo plc (NYSE: ADR: DEO), the world’s leading premium drinks company. The company produces and distributes more than 65 consumer brands in 180 markets worldwide and carries investment grade corporate debt ratings from Fitch Ratings (A-), Moody’s Investors Service (A3) and Standard & Poor’s Ratings Group (A-). Diageo’s shares are listed on the London and New York Stock Exchanges.

The properties acquired are located throughout the Napa Valley in Napa County, California, the United States’ premier wine producing region. The properties are comprised of approximately 2,000 acres of vineyard properties as well as the winery, production, retail and visitor center buildings of both the Sterling Vineyards winery and the Beaulieu Vineyards (BV) winery, with combined leasable space of approximately 400,000 square feet. Diageo Chateau & Estate Wines will continue to manage and operate the properties and will retain ownership and marketing of their wine brands. The vineyards being acquired in the transaction have been in production for between 25 to 100 years, and the premium grapes grown and processed on the properties are used for several of Diageo’s most highly regarded wine brands.

CEO Comments on Operating Results

Commenting on Realty Income’s financial results and real estate operations, Chief Executive Officer Tom A. Lewis said, "We continue to enjoy steady performance in our property portfolio and business operations that support the payment of monthly dividends to our shareholders. Our focus during the second quarter was on additional property acquisitions while maintaining a high level of portfolio occupancy.”

"During the quarter, we reviewed numerous acquisition opportunities and purchased 13 new properties for $261.2 million, which brought our year-to-date acquisitions to 21 properties acquired for $289 million. The properties acquired during the quarter had initial average lease lengths of just under 20 years and initial yields of 7.5%, which will increase over time and significantly add to our revenue stream. We were also successful in permanently financing the majority of these transactions by issuing $250 million of 5.75%, 10-year senior unsecured notes, which represented a very attractive spread relative to the initial average lease yield on the properties. The capital raised also leaves us in a very liquid position to pursue additional acquisition opportunities during the balance of the year. We are continuing to see an increasing flow of potential acquisitions and believe that our recent additions to staff should allow us to access additional property acquisitions during the balance of the year.”

"With respect to ongoing real estate portfolio performance, we continue to enjoy a high level of portfolio occupancy of 96.2%. In addition, same store rent growth remained slightly positive during the quarter. Over the last two years, we have dealt with a number of retailers that have experienced operating and financial challenges, however, our portfolio management team has continued to do a great job of re-leasing the impacted properties, which has led to continued high occupancy. Absent additional unforeseen difficulties in the economy, we believe we may have seen the worst of the impact of the recession on the portfolio, and we would anticipate an increased level of occupancy and same store rent growth over the next year.”

"Finally, our solid operating performance allowed us to increase the amount of the dividend once again during the second quarter. Providing monthly dividends that increase over time is our mission, so we remain focused on operating the business in a manner that supports the payment of monthly dividends that increase over time to our shareholders.”

FFO Commentary

Realty Income’s FFO per share has historically tended to be stable and fairly predictable because of the long-term leases that are the primary source of the Company’s revenue. There are, however, several factors that can cause FFO per share to vary from levels that have been anticipated by the Company. These factors include, but are not limited to, changes in interest rates and occupancy rates, periodically accessing the capital markets, the level and timing of property acquisitions and dispositions, lease rollovers, the general real estate market, the economy, charges for property impairments, and the operations of Crest.

2010 Estimates

Management estimates that FFO per share for 2010 should range from $1.84 to $1.86, which represents annual FFO per share growth of approximately 0% to 1.1%, as compared to 2009 FFO per share of $1.84. FFO for 2010 is based on an estimated net income per share range of $0.97 to $0.99 plus (in accordance with NAREIT’s definition of FFO) estimated real estate depreciation of $0.91 and reduced by potential gain on sales of investment properties of $0.04 per share.

2011 Estimates

Management estimates that FFO per share for 2011 should range between $1.96 to $2.00 per share, or an increase of 5.4% to 8.7% in annual FFO growth, compared to its 2010 estimate of $1.84 to $1.86. FFO for 2011 is based on an estimated net income per share range of $1.08 to $1.12 plus (in accordance with NAREIT’s definition of FFO) estimated real estate depreciation of $0.92 and reduced by potential gains on sales of investment properties of $0.04 per share.

About Realty Income

Realty Income is The Monthly Dividend Company^®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of June 30, 2010, the Company had paid 479 consecutive monthly dividends throughout its 41-year operating history. The monthly income is supported by the cash flows from over 2,300 properties owned under long-term lease agreements with regional and national retail chains and other commercial enterprises. The Company is an active buyer of net-leased properties nationwide.

Forward-Looking Statements

Statements in this press release that are not strictly historical are "forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, the availability of capital to finance planned growth, continued volatility and uncertainty in the credit markets and broader financial markets, property acquisitions and the timing of these acquisitions, charges for property impairments, the outcome of any legal proceedings to which the Company is a party, and the profitability of Crest, the Company’s subsidiary, as described in the Company’s filings with the Securities and Exchange Commission. Consequently, forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or

forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Note to Editors: Realty Income press releases are available at no charge by calling our toll-free investor hotline number: 888-811-2001, or via the internet at http://www.realtyincome.com/Investing/News.html.