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, 2009

Commission File Number 1-13374

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)

Maryland	33-0580106
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification Number)

600 La Terraza Boulevard, Escondido, California  92025-3873

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (760) 741-2111

Securities registered pursuant to Section 12 (b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Common Stock, $1.00 Par Value	New York Stock Exchange
Class D Preferred Stock, $1.00 Par Value	New York Stock Exchange
Class E Preferred Stock, $1.00 Par Value	New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES x     NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o     NO x

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES o    NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x   Accelerated filer o  Non-accelerated filer o  Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO x

At June 30, 2009, the aggregate market value of the Registrant’s shares of common stock, $1.00 par value, held by non-affiliates of the Registrant was $2.3 billion based upon the last reported sale price of $21.92 per share on the New York Stock Exchange on June 30, 2009, the last business day of the Registrant's most recently completed second fiscal quarter.

At February 8, 2010, the number of shares of common stock outstanding was 104,400,757, the number of shares of Class D preferred stock outstanding was 5,100,000 and the number of shares of Class E preferred stock outstanding was 8,800,000.

DOCUMENTS INCORPORATED BY REFERENCE

Part III, Items 10, 11, 12, 13 and 14 incorporate by reference certain specific portions of the definitive Proxy Statement for Realty Income Corporation’s Annual Meeting to be held on May 12, 2010, 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.

REALTY INCOME CORPORATION

Index to Form 10-K

PART I			Page
	Item 1:	Business
		The Company	2
		Recent Developments	3
		Distribution Policy	5
		Business Philosophy and Strategy	6
		Property Portfolio Information	11
		Forward-Looking Statements	16
	Item 1A:	Risk Factors	16
	Item 1B:	Unresolved Staff Comments	25
	Item 2:	Properties	25
	Item 3:	Legal Proceedings	25
	Item 4:	Submission of Matters to a Vote of Security Holders	25
PART II
	Item 5:	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
	Item 6:	Selected Financial Data	26
	Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
		General	27
		Liquidity and Capital Resources	27
		Results of Operations	31
		Funds from Operations Available to Common Stockholders (FFO)	39
		Impact of Inflation	40
		Impact of Recent Accounting Pronouncements	40
	Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 8:	Financial Statements and Supplementary Data	42
	Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
	Item 9A:	Controls and Procedures	67
	Item 9B:	Other Information	68
PART III
	Item 10:	Directors, Executive Officers and Corporate Governance	68
	Item 11:	Executive Compensation	68
	Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
	Item 13:	Certain Relationships, Related Transactions and Director Independence	68
	Item 14:	Principal Accounting Fees and Services	68
PART IV
	Item 15:	Exhibits and Financial Statement Schedules	69
SIGNATURES			72

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PART I

Item 1:                      Business

THE COMPANY

Realty Income Corporation, The Monthly Dividend Company®, is a Maryland corporation organized to operate as an equity real estate investment trust, or REIT. Our primary business objective is to generate dependable monthly cash distributions from a consistent and predictable level of funds from operations, or FFO, per share.  Our monthly distributions are supported by the cash flow from our portfolio of retail properties leased to regional and national retail chains. We have in-house acquisition, leasing, legal, credit research, real estate research, portfolio management and capital markets expertise. Over the past 40 years, Realty Income and its predecessors have been acquiring and owning freestanding retail properties that generate rental revenue under long-term lease agreements (primarily 15 to 20 years).

In addition, we seek to increase distributions to common stockholders and FFO per share through both active portfolio management and the acquisition of additional properties. Our portfolio management focus includes:

●   Contractual rent increases on existing leases;

●   Rent increases at the termination of existing leases, when market conditions permit; and

●   The active management of our property portfolio, including re-leasing vacant properties and selectively selling properties, thereby mitigating our exposure to certain tenants and markets.

In acquiring additional properties, we adhere to a focused strategy of primarily acquiring properties that are:

●   Freestanding, single-tenant, retail locations;

●   Leased to regional and national retail chains; and

●   Leased under long-term, net-lease agreements.

At December 31, 2009, we owned a diversified portfolio:

●   Of 2,339 retail properties;

●   With an occupancy rate of 96.8%, or 2,264 properties occupied and only 75 properties available for lease;

●   Leased to 118 different retail chains doing business in 30 separate retail industries;

●   Located in 49 states;

●   With over 19.1 million square feet of leasable space; and

●   With an average leasable retail space per property of approximately 8,200 square feet.

Of the 2,339 properties in the portfolio, 2,328, or 99.5%, are single-tenant, retail properties and the remaining 11 are multi-tenant, distribution and office properties. At December 31, 2009, of the 2,328 single-tenant properties, 2,254 were leased with a weighted average remaining lease term (excluding extension options) of approximately 11.2 years.

In addition, at December 31, 2009, our wholly-owned taxable REIT subsidiary, Crest Net Lease, Inc. ("Crest"), had an inventory of three properties valued at $3.8 million, which are classified as held for sale. Crest was created to buy and sell properties, primarily to individual investors who are involved in tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"). In addition to the three properties, Crest also holds notes receivable on properties previously sold of $22.2 million at

December 31, 2009.

We typically acquire retail store properties under long-term leases with retail chain store operators. These transactions generally provide capital to owners of retail real estate and retail chains for expansion or other corporate purposes. Our acquisition and investment activities are concentrated in well-defined target markets and generally focus on retail chains providing goods and services that satisfy basic consumer needs.

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Our net-lease agreements generally:

●   Are for initial terms of 15 to 20 years;

●   Require the tenant to pay minimum monthly rent and property operating expenses (taxes, insurance and maintenance); and

●   Provide for future rent increases based on increases in the consumer price index (typically subject to ceilings), fixed increases, or additional rent calculated as a percentage of the tenants’ gross sales above a specified level.

We commenced operations as a REIT on August 15, 1994 through the merger of 25 public and private real estate limited partnerships. Each of the partnerships was formed between 1970 and 1989 for the purpose of acquiring and managing long-term, net-leased properties.

The seven senior officers of Realty Income owned 1.1% of our outstanding common stock with a market value of $28.9 million at February 8, 2010. The directors and seven senior officers of Realty Income, as a group, owned 1.3% of our outstanding common stock with a market value of $35.6 million at February 8, 2010.

Our common stock is listed on The New York Stock Exchange ("NYSE") under the ticker symbol "O" with a cusip number of 756109-104. Our central index key number is 726728.

Our Class D cumulative redeemable preferred stock is listed on the NYSE under the ticker symbol "OprD" with a cusip number of 756109-609.

Our Class E cumulative redeemable preferred stock is listed on the NYSE under the ticker symbol "OprE" with a cusip number of 756109-708.

In February 2010, we had 72 employees as compared to 69 employees in February 2009.

We maintain an Internet website at www.realtyincome.com. On our website we make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, Form 3s, Form 4s, Form 5s, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we electronically file these reports with the Securities and Exchange Commission, or SEC.  None of the information on our website is deemed to be part of this report.

RECENT DEVELOPMENTS

Increases in Monthly Distributions to Common Stockholders

We have continued our 40-year policy of paying distributions monthly. Monthly distributions per share increased in January 2010 by $0.0003125 to $0.143. The increase in January 2010 was our 49th consecutive quarterly increase and the 56th increase in the amount of our dividend since our listing on the NYSE in 1994. In 2009, we paid three monthly cash distributions per share in the amount of $0.14175, three in the amount of $0.1420625, three in the amount of $0.142375 and three in the amount of $0.1426875, totaling $1.706625. In December 2009 and January 2010, we declared distributions of $0.143 per share, which were paid in January 2010 and will be paid in February 2010, respectively.

The monthly distribution of $0.143 per share represents a current annualized distribution of $1.716 per share, and an annualized distribution yield of approximately 6.7% based on the last reported sale price of our common stock on the NYSE of $25.74 on February 8, 2010. Although we expect to continue our policy of paying monthly distributions, we cannot guarantee that we will maintain our current level of distributions, that we will continue our pattern of increasing distributions per share, or what our actual distribution yield will be in any future period.

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Acquisitions During 2009

During 2009, we invested $57.9 million in 16 new properties with an initial weighted average contractual lease rate of 9.7%. These 16 properties are located in five states, contain over 278,000 leasable square feet, and are 100% leased with an average lease term of 17.9 years. The 16 new properties we acquired are net-leased to four different retail chains. There were no acquisitions by Crest in 2009.

We made fewer portfolio acquisitions in 2008 and 2009 than in previous years because we felt that preserving our capital resources and maintaining a high level of liquidity until property prices adjusted and the general economy improved was the prudent course of action. In late 2009, we felt that market conditions had become more attractive for acquisitions, and we currently believe that there are many retail chains, with solid operating concepts, that are in need of capital. We believe that our solid financial position, strong balance sheet and access to capital give us the ability to expand our acquisition activities in 2010 and invest in new retail properties that have the potential to contribute to our earnings.

The initial weighted average contractual lease rate is computed as estimated contractual net operating income (in a net-leased property that is equal to the aggregate base cash flow or, in the case of properties under development, the estimated aggregate base cash flow under the lease) for the first year of each lease, divided by the estimated total cost of the properties. Since it is possible that a tenant could default on the payment of contractual rent, we cannot assure you that the actual return on the funds invested will remain at the percentages listed above.

Investments in Existing Properties

In 2009, we capitalized costs of $3.1 million on existing properties in our portfolio, consisting of $1.2 million for re-leasing costs and $1.9 million for building improvements.

Net Income Available to Common Stockholders

Net income available to common stockholders was $106.9 million in 2009 versus $107.6 million in 2008, a decrease of $714,000. On a diluted per common share basis, net income was $1.03 per share in 2009 as compared to $1.06 per share in 2008.

The calculation to determine net income available to common stockholders includes gains from the sale of properties. The amount of gains varies from period to period based on the timing of property sales and can significantly impact net income available to common stockholders.

The gain from the sale of properties during 2009 was $8.1 million, as compared to $13.6 million during 2008.

Funds from Operations (FFO)

In 2009, our FFO increased by $4.9 million, or 2.6%, to $190.4 million versus $185.5 million in 2008.  On a diluted per common share basis, FFO was $1.84 in 2009 compared to $1.83 in 2008, an increase of $0.01, or 0.5%.

See our discussion of FFO in the section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this annual report, which includes a reconciliation of net income available to common stockholders to FFO.

Crest’s Property Sales

During 2009, Crest sold two properties from its inventory for an aggregate of $2.0 million, which resulted in no gain.

Crest’s Property Inventory

Crest’s had an inventory of three properties valued at $3.8 million at December 31, 2009, which is included in "real estate held for sale, net" on our consolidated balance sheet at December 31, 2009.

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Note Redemption

Upon their maturity in January 2009, we redeemed, using cash on hand, the $20 million outstanding principal amount of our 8% Notes due 2009, or 2009 Notes. The 2009 Notes were redeemed at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest. We have no debt maturities until March 2013.

Retirement of Board Members

William E. Clark, our previous non-executive chairman, retired from the Board of Directors in February 2009. Mr. Clark had served as our Chairman of the Board since the inception of Realty Income. Our Corporate Governance and Nominating Committee recommended, and the Board of Directors elected, Donald R. Cameron as our new non-executive chairman.

Roger P. Kuppinger and Willard H Smith Jr retired from the Board of Directors in May 2009, at which time Ronald L. Merriman succeeded Mr. Kuppinger as chairman of the Audit Committee.

DISTRIBUTION POLICY

Distributions are paid monthly to our common, Class D preferred and Class E preferred stockholders if, and when, declared by our Board of Directors.

In order to maintain our status as a REIT for federal income tax purposes, we generally are required to distribute dividends to our stockholders aggregating annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gains), and we are subject to income tax to the extent we distribute less than 100% of our REIT taxable income (including net capital gains). In 2009, our cash distributions totaled $202.3 million, or approximately 130.5% of our estimated REIT taxable income of $155.0 million. Our estimated REIT taxable income reflects non-cash deductions for depreciation and amortization. Our estimated REIT taxable income is presented to show our compliance with REIT distribution requirements and is not a measure of our liquidity or performance.

We intend to continue to make distributions to our stockholders that are sufficient to meet this distribution requirement and that will reduce our exposure to income taxes. Furthermore, we believe our funds from operations are more than sufficient to support our current level of cash distributions to our stockholders. Our 2009 cash distributions to common stockholders totaled $178.0 million, representing 93.5% of our funds from operations available to common stockholders of $190.4 million.

The Class D preferred stockholders receive cumulative distributions at a rate of 7.375% per annum on the $25 per share liquidation preference (equivalent to $1.84375 per annum per share). The Class E preferred stockholders receive cumulative distributions at a rate of 6.75% per annum on the $25 per share liquidation preference (equivalent to $1.6875 per annum per share). Dividends on our Class D and Class E preferred stock are current.

Future distributions will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, FFO, cash flow from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code, our debt service requirements and any other factors the Board of Directors may deem relevant. In addition, our credit facility contains financial covenants that could limit the amount of distributions payable by us in the event of a deterioration in our results of operations or financial condition, and which prohibit the payment of distributions on the common or preferred stock in the event that we fail to pay when due (subject to any applicable grace period) any principal or interest on borrowings under our credit facility.

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Distributions of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to stockholders as ordinary income, except to the extent that we recognize capital gains and declare a capital gains dividend, or that such amounts constitute "qualified dividend income" subject to a reduced tax rate. The maximum tax rate of non-corporate taxpayers for "qualified dividend income" has generally been reduced to 15% (until it “sunsets” or reverts to the provisions of prior law, which under current law will occur with respect to taxable years beginning after December 31, 2010). In general, dividends payable by REITs are not eligible for the reduced tax rate on corporate dividends, except to the extent the REIT’s dividends are attributable to dividends received from taxable corporations (such as our taxable REIT subsidiary, Crest), to income that was subject to tax at the corporate or REIT level (for example, if we distribute taxable income that we retained and paid tax on in the prior taxable year) or, as discussed above, dividends properly designated by us as "capital gain dividends." Distributions in excess of earnings and profits generally will be treated as a non-taxable reduction in the stockholders' basis in their stock. Distributions above that basis, generally, will be taxable as a capital gain to stockholders who hold their shares as a capital asset. Approximately 24.1% of the distributions to our common stockholders, made or deemed to have been made in 2009, were classified as a return of capital for federal income tax purposes. We are unable to predict the portion of future distributions that may be classified as a return of capital.

BUSINESS PHILOSOPHY AND STRATEGY

Capital Philosophy

Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and long-term unsecured notes and bonds. Over the long term, we believe that common stock should be the majority of our capital structure. However, we may issue additional preferred stock or debt securities from time to time. We may issue common stock when we believe that our share price is at a level that allows for the proceeds of any offering to be accretively invested into additional properties. In addition, we may issue common stock to permanently finance properties that were financed by our credit facility or debt securities. However, we cannot assure you that we will have access to the capital markets at times and at terms that are acceptable to us.

Conservative Capital Structure

We believe that our stockholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet and solid interest and fixed charge coverage ratios. At December 31, 2009, our total outstanding credit facility borrowings and outstanding notes were $1.355 billion, or approximately 30.8% of our total market capitalization of $4.40 billion.

We define our total market capitalization at December 31, 2009 as the sum of:

●   Shares of our common stock outstanding of 104,286,705 multiplied by the last reported sales price of our common stock on the NYSE of $25.91 per share on December 31, 2009, or $2.70 billion;

●   Aggregate liquidation value (par value of $25 per share) of the Class D preferred stock of $127.5 million;

●   Aggregate liquidation value (par value of $25 per share) of the Class E preferred stock of $220 million;

●   Outstanding notes of $1.35 billion; and

●   Outstanding borrowings of $4.6 million on our credit facility.

Investment Philosophy

We believe that owning an actively managed, diversified portfolio of retail properties under long-term, net leases produces consistent and predictable income. Net leases typically require the tenant to be responsible for monthly rent and property operating expenses including property taxes, insurance and maintenance. In addition, tenants are typically responsible for future rent increases based on increases in the consumer price index (typically subject to ceilings), fixed increases or additional rent calculated as a percentage of the tenants' gross sales above a specified level. We believe that a portfolio of properties under long-term leases, coupled with the tenant's responsibility for property expenses, generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

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Investment Strategy

When identifying new properties for acquisition, our focus is generally on providing capital to retail chain owners and operators by acquiring, then leasing back, retail store locations. We categorize retail tenants as: 1) venture market, 2) middle market, and 3) upper market. Venture companies typically offer a new retail concept in one geographic region of the country and operate between five and 50 retail locations. Middle market retail chains typically have 50 to 500 retail locations, operations in more than one geographic region, have been successful through one or more economic cycles, and have a proven, replicable concept. The upper market retail chains typically consist of companies with 500 or more locations, operating nationally, in a proven, mature retail concept. Upper market retail chains generally have strong operating histories and access to several sources of capital.

We primarily focus on acquiring properties leased to middle market retail chains that we believe are attractive for investment because:

●   They generally have overcome many of the operational and managerial obstacles that can adversely affect venture retailers;

●   They typically require capital to fund expansion but have more limited financing options than upper market retail chains;

●   They generally have provided us with attractive risk-adjusted returns over time since their financial strength has, in many cases, tended to improve as their businesses have matured;

●   Their relatively large size allows them to spread corporate expenses across a greater number of stores; and

●   Middle market retailers typically have the critical mass to survive if a number of locations are closed due to underperformance.

Historically, our investment focus has primarily been on retail industries that have a service component because we believe the lease revenue from these types of businesses is more stable. Because of this investment focus, for the quarter ended December 31, 2009, approximately 84.3% of our rental revenue was derived from retailers with a service component in their business. Furthermore, we believe these service-oriented businesses would be difficult to duplicate over the Internet and that our properties continue to perform well relative to competition from Internet businesses.

Credit Strategy

We generally provide sale-leaseback financing to less than investment grade retail chains. We typically acquire and lease back properties to regional and national retail chains and believe that within this market we can achieve an attractive risk-adjusted return on the financing we provide to retailers. Since 1970, our overall weighted average occupancy rate at the end of each year has been 98.3%, and our occupancy rate at the end of each year has never been below 96%.

We believe the principal financial obligations of most retailers typically include their bank and other debt, payment obligations to suppliers and real estate lease obligations. Because we typically own the land and building in which a tenant conducts its retail business, we believe the risk of default on a retailers’ lease obligations is less than the retailers' unsecured general obligations. It has been our experience that since retailers must retain their profitable retail locations in order to survive, in the event of reorganization they are less likely to reject a lease for a profitable location because this would terminate their right to use the property. Thus, as the property owner, we believe we will fare better than unsecured creditors of the same retailer in the event of reorganization. If a property is rejected by the tenant during reorganization, we own the property and can either lease it to a new tenant or sell the property. In addition, we believe that the risk of default on the real estate leases can be further mitigated by monitoring the performance of the retailers' individual unit locations and considering whether to sell locations that are weaker performers.

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In order to qualify for inclusion in our portfolio, new property acquisitions must meet stringent investment and credit requirements. The properties must generate attractive current yields and the tenant must meet our credit profile.  We have established a three-part analysis that examines each potential investment based on:

●   Industry, company, market conditions and credit profile;

●   Store profitability, if profitability data is available; and

●   Overall real estate characteristics, including property value and comparative rental rates.

The typical profile of companies whose properties have been approved for acquisition are those with 50 or more retail locations. Generally the properties:

●   Are located in highly visible areas;

●   Have easy access to major thoroughfares; and

●   Have attractive demographics.

Acquisition Strategy

We seek to invest in industries in which several, well-organized, regional and national retail chains are capturing market share through service, quality control, economies of scale, advertising and the selection of prime retail locations. We execute our acquisition strategy by acting as a source of capital to regional and national retail chain store owners and operators, doing business in a variety of industries, by acquiring and leasing back retail store locations. We undertake thorough research and analysis to identify what we consider to be appropriate industries, tenants and property locations for investment. Our research expertise is fundamental to uncovering net-lease opportunities in markets where our real estate financing program adds value. In selecting real estate for potential investment, we generally seek to acquire properties that have the following characteristics:

●   Freestanding, commercially-zoned property with a single tenant;

●   Properties that are important retail locations for regional and national retail chains;

●   Properties that we deem to be profitable for the retailers;

●   Properties that are located within attractive demographic areas relative to the business of our tenants, with high visibility and easy access to major thoroughfares; and

●   Properties that can be purchased with the simultaneous execution or assumption of long-term, net-lease agreements, offering both current income and the potential for rent increases.

Impact of Real Estate and Credit Markets

In the commercial retail real estate market throughout 2008 and 2009, property prices generally continued to decline and lease rates rose. Likewise, the U.S. credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have impacted our access to and the cost of our capital. We continue to monitor the commercial retail real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly. See Item 1A entitled "Risk Factors" in this annual report.

Portfolio Management Strategy

The active management of the property portfolio is an essential component of our long-term strategy. We continually monitor our portfolio for any changes that could affect the performance of the industries, tenants and locations in which we have invested. We also regularly analyze our portfolio with a view toward optimizing its returns and enhancing its credit quality. Our executives review industry research, tenant research, property due diligence and significant portfolio management activities. This monitoring typically includes regular review and analysis of:

●   The performance of various retail industries; and

●   The operation, management, business planning and financial condition of the tenants.

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We have an active portfolio management program that incorporates the sale of assets when we believe the reinvestment of the sale proceeds will:

●   generate higher returns;

●   enhance the credit quality of our real estate portfolio;

●   extend our average remaining lease term; or

●   decrease tenant or industry concentration.

At December 31, 2009, we classified real estate with a carrying amount of $8.3 million as held for sale on our balance sheet, which includes three properties owned by Crest, valued at $3.8 million. Additionally, we anticipate selling investment properties in our portfolio that have not yet been specifically identified, from which we anticipate receiving between $10 million and $35 million in proceeds during the next 12 months. We intend to invest these proceeds into new property acquisitions, if there are attractive opportunities available. However, we cannot guarantee that we will sell properties during the next 12 months or be able to invest the proceeds from the sales of any properties in new properties.

Universal Shelf Registration

In March 2009, we filed a shelf registration statement with the SEC, which is effective for a term of three years, to replace our prior shelf registration statement which was set to expire in April 2009. Our new shelf registration  statement expires in March 2012. In accordance with the SEC rules, the amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit. The securities covered by this registration statement include common stock, preferred stock, debt securities, or any combination of these securities. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

$355 Million Acquisition Credit Facility

In May 2008, we entered into a $355 million revolving, unsecured credit facility which replaced our previous $300 million acquisition credit facility. The term of our credit facility is for three years, until May 2011, plus two, one-year extension options. Under our credit facility, our investment grade credit ratings provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 100 basis points with a facility fee of 27.5 basis points, for all-in drawn pricing of 127.5 basis points over LIBOR. We also have other interest rate options available to us. At December 31, 2009, we had a borrowing capacity of $350.4 million available on our credit facility and an outstanding balance of $4.6 million at an effective interest rate of 1.23%.

We expect to use our credit facility to acquire additional retail properties and for other corporate purposes. Any additional borrowings will increase our exposure to interest rate risk. We have the right to request an increase in the borrowing capacity of the credit facility, up to $100 million, to a total borrowing capacity of $455 million.  Any increase in the borrowing capacity is subject to approval by the banks participating in our credit facility.

We generally use our credit facility for the short-term financing of new property acquisitions. Thereafter, when capital is available on acceptable terms, we generally seek to refinance those borrowings with the net proceeds of long-term or permanent financing, which may include the issuance of common stock, preferred stock or debt securities. We cannot assure you, however, that we will be able to obtain any such refinancing, or that market conditions prevailing at the time of refinancing will enable us to issue equity or debt securities upon acceptable terms.

Credit Agency Ratings

We are currently assigned investment grade corporate credit ratings on our senior unsecured notes. Fitch Ratings has assigned a rating of BBB+, Moody’s Investors Service has assigned a rating of Baa1 and Standard & Poor’s Ratings Group has assigned a rating of BBB to our senior notes. All of these ratings have "stable" outlooks.

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We have also been assigned credit ratings on our preferred stock. Fitch Ratings has assigned a rating of BBB-, Moody’s has assigned a rating of Baa2 and Standard & Poor’s has assigned a rating of BB+ to our preferred stock. All of these ratings have "stable" outlooks.

The credit ratings assigned to us could change based upon, among other things, our results of operations and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies and we cannot assure you that our ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, a rating is not a recommendation to buy, sell or hold our debt securities, preferred stock or common stock.

Mortgage Debt

We have no mortgage debt on any of our properties.

No Off-Balance Sheet Arrangements or Unconsolidated Investments

We have no unconsolidated or off-balance sheet investments in "variable interest entities" or off-balance sheet financing, nor do we engage in trading activities involving energy or commodity contracts or other derivative instruments. Additionally, we have no joint ventures or mandatorily redeemable preferred stock. As such, our financial position and results of operations are not affected by accounting regulations regarding the consolidation of off-balance sheet entities and classification of financial instruments with characteristics of both liabilities and equity.

Competitive Strategy

We believe that to successfully pursue our investment philosophy and strategy, we must seek to maintain the following competitive advantages:

●   Size and Type of Investment Properties: We believe smaller ($500,000 to $10,000,000) net-leased retail properties represent an attractive investment opportunity in today's real estate environment. Due to the complexities of acquiring and managing a large portfolio of relatively small assets, we believe these types of properties have not experienced significant institutional ownership interest or the corresponding yield reduction experienced by larger income-producing properties. We believe the less intensive day-to-day property management required by net-lease agreements, coupled with the active management of a large portfolio of smaller properties, is an effective investment strategy. The tenants of our freestanding retail properties generally provide goods and services that satisfy basic consumer needs. In order to grow and expand, they generally need capital. Since the acquisition of real estate is typically the single largest capital expenditure of many of these retailers, our method of purchasing the property and then leasing it back, under a net-lease arrangement, allows the retail chain to free up capital.

●   Investment in New Retail Industries: We will seek to further diversify our portfolio among a variety of retail industries. We believe diversification will allow us to invest in retail industries that currently are growing and have characteristics we find attractive. These characteristics include, but are not limited to, retail industries that are dominated by local store operators where regional and national chain store operators can increase market share and dominance by consolidating local operators and streamlining their operations, as well as capitalizing on major demographic shifts in a population base.

●   Diversification: Diversification of the portfolio by retail industry type, tenant, and geographic location is key to our objective of providing predictable investment results for our stockholders, therefore further diversification of our portfolio is a continuing objective. At December 31, 2009, our retail property portfolio consisted of 2,339 properties located in 49 states, leased to 118 retail chains doing business in 30 industry segments. Each of the 30 industry segments, represented in our property portfolio, individually accounted for no more than 21.3% of our rental revenue for the quarter ended December 31, 2009.

●   Management Specialization: We believe that our management's specialization in single-tenant retail properties, operated under net-lease agreements, is important to meeting our objectives. We plan to maintain this specialization and will seek to employ and train high-quality professionals in this specialized area of real estate ownership, finance and management.

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●   Technology: We intend to stay at the forefront of technology in our efforts to efficiently and economically carry out our operations. We maintain sophisticated information systems that allow us to analyze our portfolio's performance and actively manage our investments. We believe that technology and information-based systems play an important role in our competitiveness as an investment manager and source of capital to a variety of industries and tenants.

PROPERTY PORTFOLIO INFORMATION

At December 31, 2009, we owned a diversified portfolio:

●   Of 2,339 retail properties;

●   With an occupancy rate of 96.8%, or 2,264 properties occupied and only 75 properties available for lease;

●   Leased to 118 different retail chains doing business in 30 separate retail industries;

●   Located in 49 states;

●   With over 19.1 million square feet of leasable space; and

●   With an average leasable retail space per property of approximately 8,200 square feet.

In addition to our real estate portfolio, our subsidiary, Crest, had an inventory of three properties located in three states at December 31, 2009. These properties are valued at $3.8 million and are classified as held for sale.

At December 31, 2009, of our 2,339 retail properties, 2,254 were leased under net-lease agreements. A net lease typically requires the tenant to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance and maintenance. In addition, our tenants are typically responsible for future rent increases based on increases in the consumer price index (typically subject to ceilings), fixed increases or additional rent calculated as a percentage of the tenants' gross sales above a specified level.

Our net-leased retail properties primarily are leased to regional and national retail chain store operators. Most buildings are single-story structures with adequate parking on site to accommodate peak retail traffic periods. The properties tend to be on major thoroughfares with relatively high traffic counts, adequate access and proximity to a sufficient population base to constitute a suitable market or trade area for the retailer's business.

Our net-lease agreements generally:

●   Are for initial terms of 15 to 20 years;

●   Require the tenant to pay minimum monthly rents and property operating expenses (taxes, insurance and maintenance); and

●   Provide for future rent increases based on increases in the consumer price index (typically subject to ceilings), fixed increases, or additional rent calculated as a percentage of the tenants' gross sales above a specified level. Where leases provide for rent increases based on increases in the consumer price index, generally these increases become part of the new permanent base rent. Where leases provide for percentage rent, this additional rent is typically payable only if the tenants' gross sales, for a given period (usually one year), exceed a specified level and is then typically calculated as a percentage of only the amount of gross sales in excess of that level.

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Industry Diversification

The following table sets forth certain information regarding Realty Income’s property portfolio (excluding properties owned by Crest) classified according to the business of the respective tenants, expressed as a percentage of our total rental revenue:

	Percentage of Rental Revenue(1)
	For the Quarter			For the Years Ended
Industries	Ended December 31, 2009			Dec 31, 2009			Dec 31, 2008			Dec 31, 2007			Dec 31, 2006			Dec 31, 2005			Dec 31, 2004
Apparel stores		1.1	%		1.1	%		1.1	%		1.2	%		1.7	%		1.6	%		1.8	%
Automotive collision services		1.1			1.1			1.0			1.1			1.3			1.3			1.0
Automotive parts		1.6			1.5			1.6			2.1			2.8			3.4			3.8
Automotive service		4.8			4.8			4.8			5.2			6.9			7.6			7.7
Automotive tire services		6.7			6.9			6.7			7.3			6.1			7.2			7.8
Book stores		0.2			0.2			0.2			0.2			0.2			0.3			0.3
Business services		*			*			*			0.1			0.1			0.1			0.1
Child care		6.9			7.3			7.6			8.4			10.3			12.7			14.4
Consumer electronics		0.6			0.7			0.8			0.9			1.1			1.3			2.1
Convenience stores		17.0			16.9			15.8			14.0			16.1			18.7			19.2
Crafts and novelties		0.3			0.3			0.3			0.3			0.4			0.4			0.5
Distribution and office		1.1			1.0			1.0			0.6			--			--			--
Drug stores		4.3			4.3			4.1			2.7			2.9			2.8			0.1
Entertainment		1.3			1.3			1.2			1.4			1.6			2.1			2.3
Equipment rental services		0.2			0.2			0.2			0.2			0.2			0.4			0.3
Financial services		0.2			0.2			0.2			0.2			0.1			0.1			0.1
General merchandise		0.8			0.8			0.8			0.7			0.6			0.5			0.4
Grocery stores		0.7			0.7			0.7			0.7			0.7			0.7			0.8
Health and fitness		6.1			5.9			5.6			5.1			4.3			3.7			4.0
Home furnishings		1.3			1.3			2.4			2.6			3.1			3.7			4.1
Home improvement		1.9			1.9			1.9			2.1			3.4			1.1			1.0
Motor vehicle dealerships		2.8			2.7			3.1			3.1			3.4			2.6			0.6
Office supplies		1.0			1.0			1.0			1.1			1.3			1.5			1.6
Pet supplies and services		0.9			0.9			0.8			0.9			1.1			1.3			1.4
Private education		0.9			0.9			0.8			0.8			0.8			0.8			1.1
Restaurants		21.3			21.3			21.8			21.2			11.9			9.4			9.7
Shoe stores		--			--			--			--			--			0.3			0.3
Sporting goods		2.5			2.6			2.3			2.6			2.9			3.4			3.4
Theaters		9.3			9.2			9.0			9.0			9.6			5.2			3.5
Travel plazas		0.2			0.2			0.2			0.2			0.3			0.3			0.4
Video rental		1.1			1.0			1.1			1.7			2.1			2.5			2.8
Other		1.8			1.8			1.9			2.3			2.7			3.0			3.4
Totals		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

* Less than 0.1%

(1) Includes rental revenue for all properties owned by Realty Income at the end of each period presented, including revenue from properties reclassified as discontinued operations.

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Service Category Diversification

The following table sets forth certain information regarding the properties owned by Realty Income (excluding properties owned by Crest) at December 31, 2009, classified according to the retail business types and the level of services they provide (dollars in thousands):

Industry	Number of Properties		Rental Revenue for the Quarter Ended December 31, 2009(1)		Percentage of  Rental  Revenue
Tenants Providing Services
Automotive collision services		13	$	884		1.1	%
Automotive service		236		3,902		4.8
Child care		252		5,665		6.9
Entertainment		8		1,083		1.3
Equipment rental services		2		150		0.2
Financial services		13		188		0.2
Health and fitness		31		4,999		6.1
Private education		11		719		0.9
Theaters		34		7,585		9.3
Other		12		1,465		1.8
		612		26,640		32.6
Tenants Selling Goods and Services
Automotive parts (with installation)		23		468		0.5
Automotive tire services		154		5,447		6.7
Business services		1		5		*
Convenience stores		584		13,898		17.0
Distribution and office		3		864		1.1
Home improvement		3		111		0.1
Motor vehicle dealerships		17		2,252		2.8
Pet supplies and services		12		702		0.9
Restaurants		637		17,461		21.3
Travel plazas		1		187		0.2
Video rental		27		866		1.1
		1,462		42,261		51.7
Tenants Selling Goods
Apparel stores		6		902		1.1
Automotive parts		49		884		1.1
Book stores		2		146		0.2
Consumer electronics		9		524		0.6
Crafts and novelties		5		227		0.3
Drug stores		51		3,482		4.3
General merchandise		33		684		0.8
Grocery stores		9		578		0.7
Home furnishings		43		1,101		1.3
Home improvement		29		1,451		1.8
Office supplies		10		788		1.0
Pet supplies		2		40		*
Sporting goods		17		2,087		2.5
		265		12,894		15.7
Totals		2,339	$	81,795		100.0	%

* Less than 0.1%

(1)  Includes rental revenue for all properties owned by Realty Income at December 31, 2009, including revenue from properties reclassified as discontinued operations of $169.

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Lease Expirations

The following table sets forth certain information regarding Realty Income’s property portfolio (excluding properties owned by Crest) regarding the timing of the lease term expirations (excluding extension options) on our 2,254 net leased, single-tenant retail properties as of December 31, 2009 (dollars in thousands):

	Total Portfolio							Initial Expirations(3)							Subsequent Expirations(4)
Year	Total Number of Leases  Expiring(1)		Rental Revenue  for the Quarter Ended December 31, 2009(2)		% of Total Rental Revenue			Number  of Leases Expiring		Rental  Revenue for the Quarter Ended December 31, 2009		% of  Total Rental   Revenue			Number  of Leases Expiring		Rental  Revenue for the Quarter Ended December 31, 2009		% of Total Rental Revenue
2010		141	$	2,776		3.5	%		45	$	997		1.3	%		96	$	1,779		2.2	%
2011		115		3,384		4.3			53		1,909		2.4			62		1,475		1.9
2012		135		3,189		4.0			72		1,861		2.3			63		1,328		1.7
2013		140		5,040		6.3			98		3,447		4.3			42		1,593		2.0
2014		107		3,305		4.2			71		2,457		3.1			36		848		1.1
2015		115		2,986		3.8			81		2,218		2.8			34		768		1.0
2016		115		2,085		2.6			112		2,006		2.5			3		79		0.1
2017		49		1,835		2.3			42		1,662		2.1			7		173		0.2
2018		42		1,869		2.4			33		1,553		2.0			9		316		0.4
2019		99		5,148		6.5			92		4,665		5.9			7		483		0.6
2020		80		3,224		4.1			74		3,059		3.9			6		165		0.2
2021		177		7,553		9.5			170		7,163		9.0			7		390		0.5
2022		100		2,938		3.7			98		2,858		3.6			2		80		0.1
2023		249		8,169		10.3			248		8,124		10.2			1		45		0.1
2024		62		1,697		2.1			61		1,675		2.1			1		22		*
2025		69		5,389		6.8			65		5,317		6.7			4		72		0.1
2026		108		6,169		7.8			105		5,932		7.5			3		237		0.3
2027		159		4,642		5.8			158		4,625		5.8			1		17		*
2028		82		4,143		5.2			81		4,119		5.2			1		24		*
2029		49		1,151		1.4			49		1,151		1.4			--		--		--
2030		20		929		1.2			20		929		1.2			--		--		--
2031		27		650		0.8			27		650		0.8			--		--		--
2032		2		57		0.1			2		57		0.1			--		--		--
2033		7		460		0.6			7		460		0.6			--		--		--
2034		2		276		0.3			2		276		0.3			--		--		--
2037		2		354		0.4			2		354		0.4			--		--		--
2043		1		13		*			--		--		--			1		13		*
Totals		2,254	$	79,431		100.0	%		1,868	$	69,524		87.5	%		386	$	9,907		12.5	%

*Less than 0.1%

(1) Excludes ten multi-tenant properties and 75 vacant unleased properties. The lease expirations for properties under construction are based on the estimated date of completion of those properties.

(2) Includes rental revenue of $169 from properties reclassified as discontinued operations and excludes revenue of $2,364 from ten multi-tenant properties and from 75 vacant and unleased properties at December 31, 2009.

(3) Represents leases to the initial tenant of the property that are expiring for the first time.

(4) Represents lease expirations on properties in the portfolio, which have previously been renewed, extended or re-tenanted.

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State Diversification

The following table sets forth certain state-by-state information regarding Realty Income’s property portfolio (excluding properties owned by Crest) as of December 31, 2009 (dollars in thousands):

State	Number of Properties		Percent Leased			Approximate Leasable Square Feet		Rental Revenue for the Quarter Ended December 31, 2009(1)		Percentage of Rental Revenue
Alabama		63		97	%		425,300	$	1,822		2.2	%
Alaska		2		100			128,500		277		0.3
Arizona		79		99			392,700		2,479		3.0
Arkansas		17		94			92,400		377		0.5
California		65		97			1,178,900		4,390		5.4
Colorado		51		98			471,500		1,865		2.3
Connecticut		24		96			276,600		1,194		1.5
Delaware		17		100			33,300		429		0.5
Florida		166		93			1,426,700		6,534		8.0
Georgia		131		96			914,300		3,872		4.7
Idaho		12		100			80,700		339		0.4
Illinois		85		98			1,008,800		4,216		5.1
Indiana		81		96			686,400		3,244		4.0
Iowa		21		100			290,600		1,013		1.2
Kansas		33		88			573,200		1,118		1.4
Kentucky		22		100			110,600		679		0.8
Louisiana		32		100			184,900		899		1.1
Maine		3		100			22,500		161		0.2
Maryland		28		100			266,600		1,613		2.0
Massachusetts		64		98			575,400		2,576		3.1
Michigan		52		98			257,300		1,249		1.5
Minnesota		21		95			392,100		1,557		1.9
Mississippi		71		96			347,600		1,470		1.8
Missouri		62		94			640,100		2,109		2.6
Montana		2		100			30,000		76		0.1
Nebraska		19		95			196,300		478		0.6
Nevada		14		100			153,300		750		0.9
New Hampshire		14		100			109,900		585		0.7
New Jersey		33		100			261,300		1,936		2.4
New Mexico		8		100			56,400		182		0.2
New York		40		93			502,300		2,383		2.9
North Carolina		96		97			548,300		2,850		3.5
North Dakota		6		100			36,600		68		0.1
Ohio		136		96			845,500		3,323		4.1
Oklahoma		24		100			137,400		587		0.7
Oregon		18		94			297,300		894		1.1
Pennsylvania		98		99			677,200		3,507		4.3
Rhode Island		3		100			11,000		58		0.1
South Carolina		100		100			374,400		2,252		2.8
South Dakota		9		100			24,900		102		0.1
Tennessee		133		96			621,800		2,925		3.6
Texas		212		97			2,280,000		7,918		9.7
Utah		4		100			25,200		91		0.1
Vermont		4		100			12,700		127		0.2
Virginia		104		98			637,100		3,513		4.3
Washington		36		94			286,200		790		1.0
West Virginia		2		100			23,000		121		0.1
Wisconsin		21		90			252,700		779		0.9
Wyoming		1		100			4,200		18		*
Totals/Average		2,339		97	%		19,182,000	$	81,795		100.0	%

* Less than 0.1%

(1) Includes rental revenue for all properties owned by Realty Income at December 31, 2009, including revenue from properties reclassified as discontinued operations of $169.

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FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, including the documents incorporated herein by reference, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. When used in this annual report, the words "estimated", "anticipated", "expect", "believe", "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions of strategy, plans or intentions of management. Forward-looking statements are subject to risks, uncertainties, and assumptions about Realty Income Corporation, including, among other things:

●   Our anticipated growth strategies;

●   Our intention to acquire additional properties and the timing of these acquisitions;

●   Our intention to sell properties and the timing of these property sales;

●   Our intention to re-lease vacant properties;

●   Anticipated trends in our business, including trends in the market for long-term net-leases of freestanding, single-tenant retail properties;

●   Future expenditures for development projects; and

●   Profitability of our subsidiary, Crest.

Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements.  In particular, some of the factors that could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements are:

●   Our continued qualification as a real estate investment trust;

●   General business and economic conditions;

●   Competition;

●   Fluctuating interest rates;

●   Access to debt and equity capital markets;

●   Continued volatility and uncertainty in the credit markets and broader financial markets;

●   Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters, illiquidity of real estate investments, and potential damages from natural disasters;

●   Impairments in the value of our real estate assets;

●   Changes in the tax laws of the United States of America;

●   The outcome of any legal proceedings to which we are a party; and

●   Acts of terrorism and war.

Additional factors that may cause risks and uncertainties include those discussed in the sections entitled "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this annual report.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that this annual report was filed with the SEC. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, the forward-looking events discussed in this annual report might not occur.

Item 1A:                      Risk Factors

This "Risk Factors" section contains references to our "capital stock" and to our "stockholders."  Unless expressly stated otherwise, the references to our "capital stock" represent our common stock and any class or series of our preferred stock, while the references to our "stockholders" represent holders of our common stock and any class or series of our preferred stock.

-16-

In order to grow we need to continue to acquire investment properties.  The acquisition of investment properties may be subject to competitive pressures.

We face competition in the acquisition, operation and sale of property. We expect competition from:

●   Businesses;

●   Individuals;

●   Fiduciary accounts and plans; and

●   Other entities engaged in real estate investment and financing.

Some of these competitors are larger than we are and have greater financial resources. This competition may result in a higher cost for properties we wish to purchase.

Negative market conditions or adverse events affecting our existing or potential tenants, or the industries in which they operate, could have an adverse impact on our ability to attract new tenants, re-lease space, collect rent or renew leases, which could adversely affect our cash flow from operations and inhibit growth.

Cash flow from operations depends in part on the ability to lease space to tenants on economically favorable terms. We could be adversely affected by various facts and events over which we have limited or no control, such as:

●   Lack of demand in areas where our properties are located;

●   Inability to retain existing tenants and attract new tenants;

●   Oversupply of space and changes in market rental rates;

●   Our tenants' creditworthiness and ability to pay rent, which may be affected by their operations, the current economic situation and competition within their industries from other operators;

●   Defaults by and bankruptcies of tenants, failure of tenants to pay rent on a timely basis, or failure of tenants to comply with their contractual obligations; and

●   Economic or physical decline of the areas where the properties are located.

At any time, any tenant may experience a downturn in its business that may weaken its operating results or overall financial condition. As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. Any tenant bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in the termination of the tenant's lease and material losses to us.

If tenants do not renew their leases as they expire, we may not be able to rent or sell the properties.  Furthermore, leases that are renewed, and some new leases for properties that are re-leased, may have terms that are less economically favorable than expiring lease terms, or may require us to incur significant costs, such as renovations, tenant improvements or lease transaction costs. Negative market conditions may cause us to sell vacant properties for less than their carrying value, which could result in impairments. Any of these events could adversely affect cash flow from operations and our ability to make distributions to shareholders and service indebtedness. A significant portion of the costs of owning property, such as real estate taxes, insurance and maintenance, are not necessarily reduced when circumstances cause a decrease in rental revenue from the properties. In a weakened financial condition, tenants may not be able to pay these costs of ownership and we may be unable to recover these operating expenses from them.

Further, the occurrence of a tenant bankruptcy or insolvency could diminish the income we receive from the tenant's lease or leases. In addition, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that most likely would be substantially less than the remaining rent we are owed under the leases. In addition, any claim we have for unpaid past rent, if any, may not be paid in full. As a result, tenant bankruptcies may have a material adverse effect on our results of operations.

-17-

Seventy-five of our properties were available for lease or sale at December 31, 2009, of which all but one were single-tenant properties. As of February 8, 2010, transactions to lease or sell ten of the 75 properties were underway or completed. At December 31, 2009, 36 of our properties under lease were unoccupied and available for sublease by the tenants, all of which were current with their rent and other obligations. During 2009, each of our tenants accounted for less than 10% of our rental revenue.

For 2009, our tenants in the restaurant and convenience store industries accounted for approximately 21.3% and 17.0%, respectively, of our rental revenue. A downturn in either of these industries, whether nationwide or limited to specific sectors of the United States, could adversely affect our tenants in these industries, which in turn could have a material adverse affect on our financial position, results of operations and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions on our common stock and preferred stock. Individually, each of the other industries in our property portfolio accounted for less than 10% of our rental revenue for 2009. Nevertheless, downturns in these other industries could also adversely affect our tenants, which in turn could also have a material adverse affect on our financial position, results of operations and our ability to make debt payments and distributions on our common and preferred stock.

In addition, a substantial number of our properties are leased to middle-market retail chains that generally have more limited financial and other resources than certain upper-market retail chains, and therefore they are more likely to be adversely affected by a downturn in their respective businesses or in the regional or national economy.

As a property owner, we may be subject to unknown environmental liabilities.

Investments in real property can create a potential for environmental liability. An owner of property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We can face such liability regardless of:

●   Our knowledge of the contamination;

●   The timing of the contamination;

●   The cause of the contamination; or

●   The party responsible for the contamination of the property.

There may be environmental problems associated with our properties of which we are unaware. In that regard, a number of our properties are leased to operators of convenience stores that sell petroleum-based fuels, as well as to operators of oil change and tune-up facilities. These facilities, and some other of our properties, use, or may have used in the past, underground lifts or underground tanks for the storage of petroleum-based or waste products, which could create a potential for the release of hazardous substances.

The presence of hazardous substances on a property may adversely affect our ability to lease or sell that property and we may incur substantial remediation costs. Although our leases generally require our tenants to operate in compliance with all applicable federal, state and local environmental laws, ordinances and regulations, and to indemnify us against any environmental liabilities arising from the tenants’ activities on the property, we could nevertheless be subject to strict liability by virtue of our ownership interest. There also can be no assurance that our tenants could or would satisfy their indemnification obligations under their leases. The discovery of environmental liabilities attached to our properties could have an adverse effect on our results of operations, our financial condition or our ability to make distributions to stockholders and to pay the principal of and interest on our debt securities and other indebtedness.

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In addition, several of our properties were built during the period when asbestos was commonly used in building construction and other buildings with asbestos may be acquired by us in the future. Environmental laws govern the presence, maintenance and removal of asbestos-containing materials, or ACMs, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, that they adequately inform or train those who may come into contact with asbestos and that they undertake special precautions, including removal or other abatement in the event that asbestos is disturbed during renovation or demolition of a building. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.

It is also possible that some of our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediation of the problem. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, should our tenants or their employees or customers be exposed to mold at any of our properties we could be required to undertake a costly remediation program to contain or remove the mold from the affected property, which would reduce our cash available for distribution. In addition, exposure to mold by our tenants or others could expose us to liability if property damage or health concerns arise.

Compliance.  We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous substances, toxic substances, or petroleum products in connection with any of our present properties. In addition, we believe we are in compliance in all material respects with all present federal, state and local laws relating to ACMs. Nevertheless, if environmental contamination should exist, we could be subject to strict liability by virtue of our ownership interest.

Insurance and Indemnity.  In June 2005, we entered into a seven-year environmental insurance policy ("June 2005 policy") which expires on June 1, 2012 on our property portfolio which replaced the previous five-year environmental insurance policy. The limits on our current policy are $10 million per occurrence, and $50 million in the aggregate, subject to a $40,000 self insurance retention, per occurrence, for properties with underground storage tanks and a $100,000 self insurance retention, per occurrence, for all other properties.

Additionally, in December 2009, we entered into a ten-year environmental insurance policy that expires in December 2019 that will initially act in an excess capacity to our June 2005 policy.  On June 1, 2012, this policy will become our primary environmental policy with the same limits as the June 2005 policy, except that once we pay a total of $1 million for self insurance retention, there will be a $50,000 per loss maintenance fee, rather than the $100,000 self insurance retention, per occurrence, for general environmental claims.

It is possible that our insurance could be insufficient to address any particular environmental situation and that, in the future, we could be unable to obtain insurance for environmental matters at a reasonable cost, or at all. Our tenants are generally responsible for, and indemnify us against, liabilities for environmental matters that occur on our properties.  For properties that have underground storage tanks, in addition to providing an indemnity in our favor, the tenants generally obtain environmental insurance or rely upon the state funds in the states where these properties are located to reimburse tenants for environmental remediation.

If we fail to qualify as a real estate investment trust, the amount of dividends we are able to pay would decrease, which could adversely affect the market price of our capital stock and could adversely affect the value of our debt securities.

Commencing with our taxable year ended December 31, 1994, we believe that we have been organized and have operated, and we intend to continue to operate, so as to qualify as a "REIT" under Sections 856 through 860 of the Code. However, we cannot assure you that we have been organized or have operated in a manner that has satisfied the requirements for qualification as a REIT, or that we will continue to be organized or operate in a manner that will allow us to continue to qualify as a REIT.

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Qualification as a REIT involves the satisfaction of numerous requirements under highly technical and complex Code provisions, for which there are only limited judicial and administrative interpretations, as well as the determination of various factual matters and circumstances not entirely within our control.

For example, in order to qualify as a REIT, at least 95% of our gross income in each year must be derived from qualifying sources, and we must pay distributions to stockholders aggregating annually at least 90% of our REIT taxable income (as defined in the Code and determined without regard to the dividends paid deduction and by excluding net capital gains).

In the future, it is possible that legislation, new regulations, administrative interpretations or court decisions will change the tax laws with respect to qualification as a REIT, or the federal income tax consequences of such qualification.

If we fail to satisfy all of the requirements for qualification as a REIT, we may be subject to certain penalty taxes or, in some circumstances, we may fail to qualify as a REIT.  If we were to fail to qualify as a REIT in any taxable year:

●   We would be required to pay federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates;

●   We would not be allowed a deduction in computing our taxable income for amounts distributed to our stockholders;

●   We could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost;

●   We would no longer be required to make distributions to stockholders; and

●   This treatment would substantially reduce amounts available for investment or distribution to stockholders because of the additional tax liability for the years involved, which could have a material adverse effect on the market price of our capital stock and the value of our debt securities.

Even if we qualify for and maintain our REIT status, we may be subject to certain federal, state and local taxes on our income and property. For example, if we have net income from a prohibited transaction, that income will be subject to a 100% tax. Our subsidiary, Crest, is subject to federal and state taxes at the applicable tax rates on its income and property.

Distributions requirements imposed by law limit our flexibility.

To maintain our status as a REIT for federal income tax purposes, we generally are required to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains each year. We also are subject to tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income (including net capital gains) each year.

In addition, we are subject to a 4% nondeductible excise tax to the extent that we fail to distribute during any calendar year at least the sum of 85% of our ordinary income for that calendar year, 95% of our capital gain net income for the calendar year, and any amount of that income that was not distributed in prior years.

We intend to continue to make distributions to our stockholders to comply with the distribution requirements of the Code as well as to reduce our exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization payments, could require us to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.

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Future issuances of equity securities could dilute the interest of holders of our common stock.

Our future growth will depend, in large part, upon our ability to raise additional capital. If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of our common stock. The interests of our common stockholders could also be diluted by the issuance of shares of common stock upon the exercise of outstanding options or pursuant to stock incentive plans. Likewise, our Board of Directors is authorized to cause us to issue preferred stock of any class or series (with dividend, voting and other rights as determined by the Board of Directors). Accordingly, the Board of Directors may authorize the issuance of preferred stock with voting, dividend and other similar rights that could dilute, or otherwise adversely affect, the interest of holders of our common stock.

We are subject to risks associated with debt and capital stock financing.

We intend to incur additional indebtedness in the future, including borrowings under our $355 million acquisition credit facility. At December 31, 2009, we had borrowings outstanding under our $355 million acquisition credit facility of $4.6 million and we had a total of $1.355 billion of outstanding credit facility borrowings and aggregate principal amount of outstanding unsecured senior debt securities. To the extent that new indebtedness is added to our current debt levels, the related risks that we now face would increase. As a result, we are and will be subject to risks associated with debt financing, including the risk that our cash flow could be insufficient to meet required payments on our debt. We also face variable interest rate risk as the interest rate on our $355 million credit facility is variable and could therefore increase over time.  We also face the risk that we may be unable to refinance or repay our debt as it comes due. Given the recent disruptions in the financial markets, we also face the risk that one or more of the participants in our credit facility may not be able to lend us money.

In addition, our $355 million credit facility contains provisions that could limit the amount of distributions payable by us on our common stock and preferred stock. In particular, our $355 million acquisition credit facility provides that the aggregate amount of cash distributions paid on, plus any payments made to repurchase, our common stock and preferred stock may not exceed the sum of (a) 95% of our funds from operations (as defined in the credit facility) plus (b) cash distributions on our preferred stock, determined as of the end of each fiscal quarter for the four fiscal quarters then ending, except that we may repurchase preferred stock with the net proceeds from the issuance of our common stock or preferred stock. The credit facility further provides that, in the event of a failure to pay principal, interest or any other amount payable thereunder when due or upon the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to us or any of our subsidiaries, we and our subsidiaries may not pay any distributions on, or repurchase, any shares of our capital stock, including our common stock and preferred stock. In addition, the credit facility provides that, if any other event of default (as defined in the credit facility) thereunder exists, we and our subsidiaries may not pay any distributions on, or repurchase, any shares of our capital stock, including our common stock and preferred stock, except that we may pay cash distributions to stockholders in the minimum amount necessary to maintain our status as a REIT.  If this were to occur, it would likely have a material adverse effect on the market price of our outstanding common and preferred stock and on the value of our debt securities and may adversely affect our ability to qualify as a REIT or our tax treatment as a REIT.

Our indebtedness could also have other important consequences to holders of our common and preferred stock, including:

●   Increasing our vulnerability to general adverse economic and industry conditions;

●   Limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

●   Requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements;

●   Limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and

●   Putting us at a disadvantage compared to our competitors with less indebtedness.

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Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness.

Our ability to make distributions on our common stock and preferred stock and payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future.  We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock and preferred stock, to pay our indebtedness or to fund our other liquidity needs.

The market value of our capital stock and debt securities could be substantially affected by various factors.

The market value of our capital stock and debt securities will depend on many factors, which may change from time to time, including:

●   Prevailing interest rates, increases in which may have an adverse effect on the market value of our capital stock and debt securities;

●   The market for similar securities issued by other REITs;

●   General economic and financial market conditions;

●   The financial condition, performance and prospects of us, our tenants and our competitors;

●   Changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry;

●   Changes in our credit ratings; and

●   Actual or anticipated variations in quarterly operating results.

In addition, over the last two years, stock prices in the U.S. markets have been experiencing extreme price fluctuations, and the market value of our common stock has fluctuated significantly during this period. As a result of these and other factors, investors who purchase our capital stock and debt securities may experience a decrease, which could be substantial and rapid, in the market value of our capital stock and debt securities, including decreases unrelated to our operating performance or prospects.

Real estate ownership is subject to particular economic conditions that may have a negative impact on our revenue.

We are subject to all of the inherent risks associated with the ownership of real estate.  In particular, we face the risk that rental revenue from our properties may be insufficient to cover all corporate operating expenses, debt service payments on indebtedness we incur and distributions on our capital stock. Additional real estate ownership risks include:

●   Adverse changes in general or local economic conditions;

●   Changes in supply of, or demand for, similar or competing properties;

●   Changes in interest rates and operating expenses;

●   Competition for tenants;

●   Changes in market rental rates;

●   Inability to lease properties upon termination of existing leases;

●   Renewal of leases at lower rental rates;

●   Inability to collect rents from tenants due to financial hardship, including bankruptcy;

●   Changes in tax, real estate, zoning and environmental laws that may have an adverse impact upon the value of real estate;

●   Uninsured property liability;

●   Property damage or casualty losses;

●   Unexpected expenditures for capital improvements or to bring properties into compliance with applicable federal, state and local laws;

●   The need to periodically renovate and repair our properties;

●   Physical or weather-related damage to properties;

●   The potential risk of functional obsolescence of properties over time;

●   Acts of terrorism and war; and

●   Acts of God and other factors beyond the control of our management.

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An uninsured loss or a loss that exceeds the policy limits on our properties could subject us to lost capital or revenue on those properties.

Under the terms and conditions of the leases currently in force on our properties, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons, air, water, land or property, due to activities conducted on the properties, except for claims arising from the negligence or intentional misconduct of us or our agents. Additionally, tenants are generally required, at the tenant's expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. The insurance policies our tenants are required to maintain for property damage are generally in amounts not less than the full replacement cost of the improvements less slab, foundations, supports and other customarily excluded improvements. Our tenants are generally required to maintain general liability coverage varying between $1,000,000 and $10,000,000 depending on the tenant and the industry in which the tenant operates.

In addition to the indemnities and required insurance policies identified above, many of our properties are also covered by flood and earthquake insurance policies (subject to substantial deductibles) obtained and paid for by the tenants as part of their risk management programs. Additionally, we have obtained blanket liability, flood and earthquake (subject to substantial deductibles) and property damage insurance policies to protect us and our properties against loss should the indemnities and insurance policies provided by the tenants fail to restore the properties to their condition prior to a loss. However, should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, we could lose all or part of our capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. Given the recent disruptions in the insurance industry, we also face the risk that our insurance carriers may not be able to provide payment under any potential claims that might arise under the terms of our insurance policies, and we may not have the ability to purchase insurance policies we desire.

Compliance with the Americans with Disabilities Act of 1990 and fire, safety, and other regulations may require us to make unintended expenditures that could adversely impact our results of operations.

Our properties are generally required to comply with the Americans with Disabilities Act of 1990, or the ADA. The ADA has separate compliance requirements for "public accommodations" and "commercial facilities," but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants. The retailers to whom we lease properties are obligated by law to comply with the ADA provisions, and we believe that these retailers may be obligated to cover costs associated with compliance. If required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these retailers to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could materially adversely affect our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on our results of operations or financial condition and our ability to pay the principal of and interest on our debt securities and other indebtedness and to make distributions to our stockholders.

Property taxes may increase without notice.

The real property taxes on our properties and any other properties that we develop or acquire in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities.

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We depend on key personnel.

We depend on the efforts of our executive officers and key employees. The loss of the services of our executive officers and key employees could have a material adverse effect on our results of operations or financial condition and on our ability to pay the principal and interest on our debt securities and other indebtedness and to make distributions to our stockholders. It is possible that we will not be able to recruit additional personnel with equivalent experience in the retail, net-lease industry.

Terrorist attacks and other acts of violence or war may affect the value of our debt and equity securities, the markets in which we operate and our results of operations.

Terrorist attacks may negatively affect our operations, the market price of our capital stock and the value of our debt securities. There can be no assurance that there will not be further terrorist attacks against the United States or U.S. businesses. These attacks, or armed conflicts, may directly impact our physical facilities or the businesses of our tenants.

If events like these were to occur, they could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in or prolong an economic recession in the U.S. or abroad. Any of these occurrences could have a significant adverse impact on our operating results and revenues and on the market price of our capital stock and on the value of our debt securities. It could also have an adverse effect on our ability to pay principal and interest on our debt securities or other indebtedness and to make distributions to our stockholders.

Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.

Over the last two years, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in certain cases have resulted in the unavailability of certain types of financing. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing at reasonable terms, which may negatively affect our ability to make acquisitions. A prolonged downturn in the stock or credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of financing or difficulties in obtaining financing. These events in the stock and credit markets may make it more difficult or costly for us to raise capital through the issuance of our common stock or preferred stock. These disruptions in the financial markets also may have a material adverse effect on the market value of our common stock, the income we receive from our properties and the lease rates we can charge for our properties, and may have other unknown adverse effects on us or the economy in general.

Inflation may adversely affect our financial condition and results of operations.

Although inflation has not materially impacted our results of operations in the recent past, increased inflation could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation. Likewise, even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue, which may adversely affect the tenants' ability to pay rent.

Current volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements.

Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), and various receivables. Often these estimates require the use of market data values which are currently difficult to assess, as well as estimates of future performance or receivables collectability which can also be difficult to accurately predict. Although management believes it has been prudent and used reasonable judgment in making these estimates, it is possible that actual results may differ from these estimates.

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Item 1B:         Unresolved Staff comments

There are no unresolved staff comments.

Item 2:           Properties

Information pertaining to our properties can be found under Item 1.

Item 3:           Legal Proceedings

We are subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.

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.

PART II

Item 5: Market For The Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

A.  Our common stock is traded on the NYSE under the ticker symbol “O.” The following table shows the high and low sales prices per share for our common stock as reported by the NYSE, and distributions declared per share of common stock for the periods indicated.

	Price Per Share
	of Common Stock				Distributions
	High		Low		Declared(1)
2009
First quarter	$	23.41	$	14.26	$	0.425563
Second quarter		23.23		17.90		0.426500
Third quarter		28.20		19.83		0.427438
Fourth quarter		27.53		22.17		0.428375
Total					$	1.707876
2008
First quarter	$	27.16	$	20.27	$	0.410875
Second quarter		28.15		22.67		0.412750
Third quarter		34.86		21.38		0.419625
Fourth quarter		26.50		15.00		0.424000
Total					$	1.667250

 (1) Common stock cash distributions currently are declared monthly by us based on financial results for the prior months.  At December 31, 2009, a distribution of $0.143 per common share had been declared and was paid in January 2010.

There were 8,755 registered holders of record of our common stock as of January 1, 2010. We estimate that our total number of shareholders is approximately 99,000 when we include both registered and beneficial holders of our common stock.

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Item 6:           Selected Financial Data

(not covered by Report of Independent Registered Public Accounting Firm)

(dollars in thousands, except for per share data)

As of or for the years ended December 31,	2009			2008			2007			2006			2005
Total assets (book value)	$	2,914,787		$	2,994,179		$	3,077,352		$	2,546,508		$	1,920,988
Cash and cash equivalents		10,026			46,815			193,101			10,573			65,704
Lines of credit and notes payable		1,354,600			1,370,000			1,470,000			920,000			891,700
Total liabilities		1,426,778			1,439,518			1,539,260			970,516			931,774
Total stockholders’ equity		1,488,009			1,554,661			1,538,092			1,575,992			989,214
Net cash provided by operating activities		226,707			246,155			318,169			86,945			109,557
Net change in cash and cash equivalents		(36,789	)		(146,286	)		182,528			(55,131	)		63,563
Total revenue		327,581			327,773			291,483			234,527			190,460
Income from continuing operations		122,133			115,427			123,778			102,227			84,717
Income from discontinued operations		8,994			16,414			16,631			8,554			14,402
Net income		131,127			131,841			140,409			110,781			99,119
Preferred stock cash dividends		(24,253	)		(24,253	)		(24,253	)		(11,362	)		(9,403	)
Net income available to common stockholders		106,874			107,588			116,156			99,419			89,716
Cash distributions paid to common stockholders		178,008			169,655			157,659			129,667			108,575
Basic and diluted net income per common share		1.03			1.06			1.16			1.11			1.12
Cash distributions paid per common share		1.706625			1.662250			1.560250			1.437250			1.346250
Cash distributions declared per common share		1.707876			1.667250			1.570500			1.447500			1.352500
Basic weighted average number of common shares outstanding		103,577,507			101,178,191			100,195,031			89,766,714			79,950,255
Diluted weighted average number of common shares outstanding		103,581,053			101,209,883			100,333,966			89,917,554			80,208,593

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Item 7:                      Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Realty Income Corporation, The Monthly Dividend Company®, is a Maryland corporation organized to operate as an equity real estate investment trust, or REIT. Our primary business objective is to generate dependable monthly cash distributions from a consistent and predictable level of funds from operations, or FFO, per share.  Our monthly distributions are supported by the cash flow from our portfolio of retail properties leased to regional and national retail chains. We have in-house acquisition, leasing, legal, credit research, real estate research, portfolio management and capital markets expertise. Over the past 40 years, Realty Income and its predecessors have been acquiring and owning freestanding retail properties that generate rental revenue under long-term lease agreements (primarily 15 to 20 years).

In addition, we seek to increase distributions to stockholders and FFO per share through both active portfolio management and the acquisition of additional properties.

At December 31, 2009, we owned a diversified portfolio:

●   Of 2,339 retail properties;

●   With an occupancy rate of 96.8%, or 2,264 properties occupied and only 75 properties available for lease;

●   Leased to 118 different retail chains doing business in 30 separate retail industries;

●   Located in 49 states;

●   With over 19.1 million square feet of leasable space; and

●   With an average leasable retail space per property of approximately 8,200 square feet.

Of the 2,339 properties in the portfolio, 2,328, or 99.5%, are single-tenant, retail properties and the remaining 11 are multi-tenant, distribution and office properties. At December 31, 2009, of the 2,328 single-tenant properties, 2,254 were leased with a weighted average remaining lease term (excluding extension options) of approximately 11.2 years.

In addition, at December 31, 2009, our wholly-owned taxable REIT subsidiary, Crest Net Lease, Inc. ("Crest"), had an inventory of three properties valued at $3.8 million, which are classified as held for sale. Crest was created to buy and sell properties, primarily to individual investors who are involved in tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition to the three properties, Crest also holds notes receivable of $22.2 million at December 31, 2009. Crest did not acquire any properties in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Capital Philosophy

Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and long-term unsecured notes and bonds. Over the long term, we believe that common stock should be the majority of our capital structure. However, we may issue additional preferred stock or debt securities from time to time. We may issue common stock when we believe that our share price is at a level that allows for the proceeds of any offering to be accretively invested into additional properties. In addition, we may issue common stock to permanently finance properties that were financed by our credit facility or debt securities. However, we cannot assure you that we will have access to the capital markets at times and at terms that are acceptable to us.

Conservative Capital Structure

We believe that our stockholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet and solid interest and fixed charge coverage ratios. At December 31, 2009, our total outstanding credit facility borrowings and outstanding notes were $1.355 billion, or approximately 30.8% of our total market capitalization of $4.40 billion.

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We define our total market capitalization at December 31, 2009 as the sum of:

●   Shares of our common stock outstanding of 104,286,705 multiplied by the last reported sales price of our common stock on the NYSE of $25.91 per share on December 31, 2009, or $2.70 billion;

●   Aggregate liquidation value (par value of $25 per share) of the Class D preferred stock of $127.5 million;

●   Aggregate liquidation value (par value of $25 per share) of the Class E preferred stock of $220 million;

●   Outstanding notes of $1.35 billion; and

●   Outstanding borrowings of $4.6 million on our credit facility.

Mortgage Debt

We have no mortgage debt on any of our properties.

$355 Million Acquisition Credit Facility

In May 2008, we entered into a $355 million revolving, unsecured credit facility that replaced our previous

$300 million acquisition credit facility. The term of our credit facility is for three years, until May 2011, plus two, one-year extension options. Under our credit facility, our investment grade credit ratings provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 100 basis points with a facility fee of 27.5 basis points, for all-in drawn pricing of 127.5 basis points over LIBOR. We also have other interest rate options available to us. At December 31, 2009, we had a borrowing capacity of $350.4 million available on our credit facility and an outstanding balance of $4.6 million at an effective interest rate of 1.23%.

We expect to use the credit facility to acquire additional retail properties and for other corporate purposes. Any additional borrowings will increase our exposure to interest rate risk. We have the right to request an increase in the borrowing capacity of the credit facility, up to $100 million, to a total borrowing capacity of $455 million.  Any increase in the borrowing capacity is subject to approval by the lending banks participating in our credit facility.

Cash Reserves

We are organized to operate as an equity REIT that acquires and leases properties and distributes to stockholders, in the form of monthly cash distributions, a substantial portion of our net cash flow generated from leases on our retail properties. We intend to retain an appropriate amount of cash as working capital. At December 31, 2009, we had cash and cash equivalents totaling $10 million.

We believe that our cash and cash equivalents on hand, cash provided from operating activities and borrowing capacity is sufficient to meet our liquidity needs for the foreseeable future. We intend, however, to use additional sources of capital to fund property acquisitions and to repay future borrowings under our credit facility.

Acquisitions During 2009

During 2009, we invested $57.9 million in 16 new properties with an initial weighted average contractual lease rate of 9.7%. These 16 properties are located in five states, contain over 278,000 leasable square feet, and are 100% leased with an average lease term of 17.9 years. The 16 new properties we acquired are net-leased to four different retail chains. There were no acquisitions by Crest in 2009.

We made fewer portfolio acquisitions in 2008 and 2009 than in previous years because we felt that preserving our capital resources and maintaining a high level of liquidity until property prices adjusted and the general economy improved was the prudent course of action. In late 2009, we felt that market conditions had become more attractive for acquisitions, and we currently believe that there are many retail chains, with solid operating concepts, that are in need of capital. We believe that our solid financial position, strong balance sheet and access to capital give us the ability to expand our acquisition activities in 2010 and invest in new retail properties that have the potential to contribute to our earnings.

The initial weighted average contractual lease rate is computed as estimated contractual net operating income (in a net-leased property that is equal to the aggregate base cash flow or, in the case of properties under development, the estimated aggregate base cash flow under the lease) for the first year of each lease, divided by the estimated total cost of the properties. Since it is possible that a tenant could default on the payment of contractual rent, we cannot assure you that the actual return on the funds invested will remain at the percentages listed above.

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Impact of Real Estate and Credit Markets

In the commercial retail real estate market, property prices generally continued to decline and lease rates rose throughout 2008 and 2009. Likewise, the U.S. credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have impacted our access to and cost of capital. We continue to monitor the commercial retail real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly. See our discussion of "Risk Factors" in this annual report.

Increases in Monthly Distributions to Common Stockholders

We have continued our 40-year policy of paying distributions monthly. Monthly distributions per share were increased in January 2010 by $0.0003125 to $0.143. The increase in January 2010 was our 49th consecutive quarterly increase and the 56th increase in the amount of our dividend since our listing on the New York Stock Exchange, or NYSE, in 1994. In 2009, we paid three monthly cash distributions per share in the amount of $0.14175, three in the amount of $0.1420625, three in the amount of $0.142375 and three in the amount of $0.1426875, totaling $1.706625. In December 2009 and January 2010, we declared distributions of $0.143 per share, which were paid in January 2010 and will be paid in February 2010, respectively.

The monthly distribution of $0.143 per share represents a current annualized distribution of $1.716 per share, and an annualized distribution yield of approximately 6.7% based on the last reported sale price of our common stock on the NYSE of $25.74 on February 8, 2010. Although we expect to continue our policy of paying monthly distributions, we cannot guarantee that we will maintain our current level of distributions, that we will continue our pattern of increasing distributions per share, or what our actual distribution yield will be in any future period.

Note Redemptions

Upon their maturity in January 2009, we redeemed, using cash on hand, the $20 million outstanding principal amount of our 8% Notes due 2009, or 2009 Notes. The 2009 Notes were redeemed at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest. We have no debt maturities until March 2013.

Universal Shelf Registration

In March 2009, we filed a shelf registration statement with the SEC, which is effective for a term of three years, to replace our prior shelf registration statement which was set to expire in April 2009. Our new shelf registration  statement expires in March 2012. In accordance with the SEC rules, the amount of the securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit. The securities covered by this registration statement include common stock, preferred stock, debt securities, or any combination of these securities. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

Credit Agency Ratings

We are currently assigned investment grade corporate credit ratings on our senior unsecured notes. Fitch Ratings has assigned a rating of BBB+, Moody’s Investors Service has assigned a rating of Baa1 and Standard & Poor’s Ratings Group has assigned a rating of BBB to our senior notes. All of these ratings have "stable" outlooks.

We have also been assigned credit ratings on our preferred stock. Fitch Ratings has assigned a rating of BBB-, Moody's has assigned a rating of Baa2 and Standard & Poor’s has assigned a rating of BB+ to our preferred stock.  All of these ratings have "stable" outlooks.

The credit ratings assigned to us could change based upon, among other things, our results of operations and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies and we cannot assure you that our ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, a rating is not a recommendation to buy, sell or hold our debt securities, preferred stock or common stock.

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Notes Outstanding

Our senior unsecured note obligations consist of the following as of December 31, 2009, sorted by maturity date (dollars in millions):

5.375% notes, issued in March 2003 and due in March 2013	$	100.0
5.5% notes, issued in November 2003 and due in November 2015		150.0
5.95% notes, issued in September 2006 and due in September 2016		275.0
5.375% notes, issued in September 2005 and due in September 2017		175.0
6.75% notes, issued in September 2007 and due in August 2019		550.0
5.875% bonds, issued in March 2005 and due in March 2035		100.0
	$	1,350.0

All of our outstanding notes and bonds have fixed interest rates. Interest on all of our senior note and bond obligations is paid semiannually. All of these notes and bonds contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. We have been in compliance with these covenants since each of the notes and bonds was issued.

The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our notes. These calculations, which are not based on U.S. generally accepted accounting principles, or GAAP, measurements, are presented to investors to show our ability to incur additional debt under the terms of our notes only and are not measures of our liquidity or performance.  The actual amounts as of December 31, 2009 are:

Note Covenants	Required	Actual
Limitation on incurrence of total debt	≤ 60%	38.6%
Limitation on incurrence of secured debt	≤ 40%	0.0%
Debt service coverage (trailing 12 months)	≥ 1.5 x	3.6 x
Maintenance of total unencumbered assets	≥ 150% of unsecured debt	259%

The following table summarizes the maturity of each of our obligations as of December 31, 2009 (dollars in millions):

Table of Obligations							Ground		Ground
							Leases		Leases
							Paid by		Paid by
Year of	Credit						Realty		Our
Maturity	Facility		Notes		Interest(1)		Income(2)		Tenants(3)		Other(4)		Totals
2010	$	--	$	--	$	82.4	$	0.1	$	3.7	$	1.5	$	87.7
2011		4.6		--		82.4		0.1		3.7		--		90.8
2012		--		--		82.4		0.1		3.6		--		86.1
2013		--		100.0		78.1		0.1		3.5		--		181.7
2014		--		--		77.0		0.1		3.3		--		80.4
Thereafter		--		1,250.0		350.9		0.8		37.7		--		1,639.4
Totals	$	4.6	$	1,350.0	$	753.2	$	1.3	$	55.5	$	1.5	$	2,166.1

(1) Interest on the credit facility and notes has been calculated based on outstanding balances as of December 31, 2009 through their respective maturity dates.

(2) Realty Income currently pays the ground lessors directly for the rent under the ground leases. A majority of this rent is reimbursed to Realty Income as additional rent from our tenants.

(3) Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

(4) “Other” consists of $295,000 of commitments under construction contracts and $1.2 million of contingent payments for tenant improvements and leasing costs.

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Our credit facility and note obligations are unsecured. Accordingly, we have not pledged any assets as collateral for these obligations.

Preferred Stock Outstanding

In 2004, we issued 5.1 million shares of 7.375% Class D cumulative redeemable preferred stock. In May 2009, shares of Class D preferred stock became redeemable at our option for $25 per share, plus any accrued and unpaid dividends. Dividends on shares of Class D preferred stock are paid monthly in arrears.

In 2006, we issued 8.8 million shares of 6.75% Class E cumulative redeemable preferred stock. Beginning December 7, 2011, shares of Class E preferred stock are redeemable at our option for $25 per share, plus any accrued and unpaid dividends. Dividends on shares of Class E preferred stock are paid monthly in arrears.

Dividends on our Class D and Class E preferred stock are current.

No Off-Balance Sheet Arrangements or Unconsolidated Investments

We have no unconsolidated or off-balance sheet investments in "variable interest entities" or off-balance sheet financing, nor do we engage in trading activities involving energy or commodity contracts or other derivative instruments. Additionally, we have no joint ventures or mandatorily redeemable preferred stock. As such, our financial position and results of operations are not affected by accounting regulations regarding the consolidation of off-balance sheet entities and classification of financial instruments with characteristics of both liabilities and equity.

RESULTS OF OPERATIONS

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with GAAP. Our consolidated financial statements are the basis for our discussion and analysis of financial condition and results of operations. Preparing our consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. We believe that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions.

In order to prepare our consolidated financial statements according to the rules and guidelines set forth by GAAP, many subjective judgments must be made with regard to critical accounting policies. One of these judgments is our estimate for useful lives in determining depreciation expense for our properties. Depreciation of buildings and improvements is generally computed using the straight–line method over an estimated useful life of 25 years. If we use a shorter or longer estimated useful life, it could have a material impact on our results of operations. We believe that 25 years is an appropriate estimate of useful life. No depreciation has been recorded on Crest's properties that are classified as held for sale.

When acquiring a property for investment purposes, we allocate the fair value of real estate acquired with in-place operating leases to: (1) land, (2) building and improvements, (3) identified intangible assets and liabilities, based in each case on their fair values. Intangible assets and liabilities consist of above-market and below-market leases, the value of in-place leases and tenant relationships.

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Another significant judgment must be made as to if, and when, impairment losses should be taken on our properties when events or a change in circumstances indicate that the carrying amount of the asset may not be recoverable. Generally, a provision is made for impairment if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we estimate in this analysis include projected rental rates, capital expenditures and property sales capitalization rates. If a property is held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell. The carrying value of our real estate is the largest component of our consolidated balance sheet. If events should occur that require us to reduce the carrying value of our real estate by recording provisions for impairment, it could have a material impact on our results of operations.

The following is a comparison of our results of operations for the years ended December 31, 2009, 2008 and 2007.

Rental Revenue

Rental revenue was $326.1 million for 2009 versus $325.9 million for 2008, an increase of $249,000, or 0.1%. Rental revenue was $285.1 million in 2007. The increase in rental revenue in 2009 compared to 2008 is primarily attributable to:

●   The 16 retail properties acquired by Realty Income in 2009, which generated $490,000 of rent in 2009;

●   The 107 retail properties acquired by Realty Income in 2008, which generated $16.08 million of rent in 2009 compared to $13.04 million in 2008, an increase of $3.0 million;

●   Same store rents generated on 2,063 properties during the entire years of 2009 and 2008, increased by $1.3 million, or 0.4%, to $299.15 million from $297.84 million; net of

●   A  net decrease of $3.7 million relating to the aggregate of (i) development properties acquired before 2008 that started paying rent in 2008, (ii) properties that were vacant during part of 2009 or 2008, (iii) properties sold during 2009 and 2008 and (iv) lease termination settlements, which in aggregate, totaled $9.2 million in 2009 compared to $12.9 million in 2008; and

●   A decrease in straight-line rent and other non-cash adjustments to rent of $879,000 in 2009 as compared to 2008.

Overall, comparing 2009 versus 2008, revenue has been generally flat as we own 2,339 properties at December 31, 2009, compared to 2,348 properties at December 31, 2008.

Of the 2,339 properties in the portfolio at December 31, 2009, 2,328, or 99.5%, are single-tenant properties and the remaining 11 are multi-tenant, distribution and office properties. Of the 2,328 single-tenant properties, 2,254, or 96.8%, were net leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 11.2 years at December 31, 2009. Of our 2,254 leased single-tenant properties, 2,071 or 91.9% were under leases that provide for increases in rents through:

●   Primarily base rent increases tied to a consumer price index (typically subject to ceilings);

●   Fixed increases;

●   Overage rent based on a percentage of the tenants' gross sales, or;

●   A combination of two or more of the above rent provisions.

Percentage rent, which is included in rental revenue, was $1.3 million in 2009, $1.2 million in 2008 and $795,000 in 2007 (excluding percentage rent reclassified to discontinued operations of $22,000 in 2008 and $55,000 in 2007). Percentage rent in 2009 was less than 1% of rental revenue and we anticipate percentage rent to be less than 1% of rental revenue in 2010.

Our portfolio of retail real estate, leased primarily to regional and national chains under net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends to our stockholders.  At December 31, 2009, our portfolio of 2,339 retail properties was 96.8% leased with 75 properties available for lease as compared to 70 at December 31, 2008.

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As of February 8, 2010, transactions to lease or sell ten of the 75 properties available for lease at December 31, 2009 were underway or completed. We anticipate these transactions will be completed during the next several months, although we cannot guarantee that all of these properties can be leased or sold within this period. It has been our experience that approximately 1% to 4% of our property portfolio will be unleased at any given time; however, we cannot assure you that the number of properties available for lease will not exceed these levels.

Depreciation and Amortization

Depreciation and amortization was $91.4 million in 2009 versus $89.9 million in 2008 and $75.9 million in 2007. The increases in depreciation and amortization in 2009 and 2008 were primarily due to the acquisition of properties in 2009, 2008 and 2007, which was partially offset by property sales in these years.  As discussed in the section entitled "Funds from Operations Available to Common Stockholders," depreciation and amortization is a non-cash item that is added back to net income available to common stockholders for our calculation of FFO.

Interest Expense

Interest expense was $85.5 million in 2009 versus $94.0 million in 2008 and $64.3 million in 2007. Interest expense decreased in 2009 primarily due to lower average outstanding balances and, to a lesser extent, lower interest rates.  We redeemed, in November 2008, the $100 million outstanding principal amount of our 8.25% Monthly Income Senior Notes and, in January 2009, the $20 million outstanding principal amount of our 8% Notes, both of which contributed to the decrease in average outstanding balances and lower average interest rates on our debt.

In May 2008, as a result of entering into our current credit facility, we incurred $3.2 million of credit facility origination costs that were capitalized and are being amortized over three years. At December 31, 2009, $1.5 million of the $3.2 million is included in "other assets" on our consolidated balance sheet.

The following is a summary of the components of our interest expense (dollars in thousands):

	2009			2008			2007
Interest on our credit facility and notes	$	82,460		$	91,213		$	67,964
Interest included in discontinued operations from real estate acquired for resale by Crest		(595	)		(1,797	)		(6,201	)
Credit facility commitment fees		990			795			456
Amortization of credit facility origination costs and deferred bond financing costs		2,678			3,078			2,235
Amortization of settlements on treasury lock agreement		--			759			870
Interest capitalized		(5	)		(92	)		(993	)
Interest expense	$	85,528		$	93,956		$	64,331

Credit facility and notes outstanding	2009			2008			2007
Average outstanding balances (dollars in thousands)	$	1,350,791		$	1,457,222		$	1,111,914
Average interest rates		6.10	%		6.26	%		6.11	%

At December 31, 2009, the weighted average interest rate on our:

●   Notes payable of $1.35 billion was 6.10%;

●   Credit facility outstanding borrowings of $4.6 million was 1.23%; and

●   Combined outstanding notes and credit facility borrowings of $1.355 billion was 6.10%.

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Interest Coverage Ratio

Our interest coverage ratio for 2009 was 3.5 times, for 2008 was 3.2 times and for 2007 was 4.1 times.  Interest coverage ratio is calculated as: the interest coverage amount (as calculated in the following table) divided by interest expense, including interest recorded as discontinued operations. We consider interest coverage ratio to be an appropriate supplemental measure of a company’s ability to meet its interest expense obligations. Our calculation of interest coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.

The following is a reconciliation of net cash provided by operating activities on our consolidated statements of cash flow to our interest coverage amount (dollars in thousands):

	2009			2008			2007
Net cash provided by operating activities	$	226,707		$	246,155		$	318,169
Interest expense		85,528			93,956			64,331
Interest expense included in discontinued operations(1)		595			1,797			6,201
Income taxes		677			1,230			1,392
Income taxes (benefit) included in discontinued operations(1)		(645	)		225			3,039
Investment in real estate acquired for resale(1)		--			9			29,886
Proceeds from sales of real estate acquired for resale(1)		(1,987	)		(31,455	)		(119,790	)
Collection of note receivables by Crest(1)		(129	)		(87	)		(651	)
Crest provisions for impairment(1)		(277	)		(3,374	)		--
Gain on sales of real estate acquired for resale(1)		--			4,642			12,319
Amortization of share-based compensation		(4,726	)		(5,049	)		(3,857	)
Changes in assets and liabilities:
Accounts receivable and other assets		(3,607	)		930			49
Accounts payable, accrued expenses and other liabilities		(856	)		(1,675	)		(21,675	)
Interest coverage amount	$	301,280		$	307,304		$	289,413
Divided by interest expense(2)	$	86,123		$	95,753		$	70,532
Interest coverage ratio		3.5			3.2			4.1

(1) Crest activities.

(2) Includes interest expense recorded to “income from discontinued operations, real estate acquired for resale by Crest” on our consolidated statements of income.

Fixed Charge Coverage Ratio

Our fixed charge coverage ratio for 2009 was 2.7 times, for 2008 was 2.6 times and for 2007 was 3.1 times. Fixed charge coverage ratio is calculated in exactly the same manner as interest coverage ratio, except that preferred stock dividends are also added to the denominator. We consider fixed charge coverage ratio to be an appropriate supplemental measure of a company’s ability to make its interest and preferred stock dividend payments. Our calculation of the fixed charge coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures or information presented in Exhibit 12.1 to this Annual Report.

Interest coverage amount divided by interest expense plus preferred stock dividends (dollars in thousands):

	2009		2008		2007
Interest coverage amount	$	301,280	$	307,304	$	289,413
Divided by interest expense plus preferred stock dividends(1)	$	110,376	$	120,006	$	94,785
Fixed charge coverage ratio		2.7		2.6		3.1

 (1) Includes interest expense recorded to “income from discontinued operations, real estate acquired for resale by Crest” on our consolidated statements of income.

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General and Administrative Expenses

General and administrative expenses decreased by $672,000 to $20.9 million in 2009 as compared to $21.6 million in 2008. General and administrative expenses were $22.7 million in 2007.  In 2009, general and administrative expenses as a percentage of total revenue were 6.4% as compared to 6.6% in 2008 and 7.8% in 2007. General and administrative expenses decreased during 2009 primarily due to decreases in employee costs. For 2009, general and administrative expenses include transaction costs of $62,000 related to the acquisition of 16 new properties during 2009. Prior to 2009, these transaction costs would have been capitalized as part of the property investments.

In February 2010, we had 72 employees as compared to 69 employees in February 2009.

Property Expenses

Property expenses are broken down into costs associated with non-net leased multi-tenant properties, unleased single-tenant properties and general portfolio expenses. Expenses related to the multi-tenant and unleased single-tenant properties include, but are not limited to, property taxes, maintenance, insurance, utilities, property inspections, bad debt expense and legal fees. General portfolio costs include, but are not limited to, insurance, legal, bad debt expense, property inspections and title search fees. At December 31, 2009, 75 properties were available for lease, as compared to 70 at December 31, 2008 and 48 at December 31, 2007.

Property expenses were $6.9 million in 2009, $5.6 million in 2008 and $3.4 million in 2007. The increase in property expenses in 2009 is primarily attributable to an increase in maintenance and utilities associated with properties available for lease and an increase in bad debt expense, partially offset by lower property taxes and legal fees. In 2007, property expenses included provisions for impairment of $138,000 recorded for one property.

Income Taxes

Income taxes were $677,000 in 2009 as compared to $1.2 million in 2008 and $1.4 million in 2007. These amounts are for city and state income taxes paid by Realty Income. After conducting an extensive review of our recent state tax filings, we determined that it was appropriate to amend some prior year tax returns from which we realized a tax benefit of $308,000. 

In addition, Crest recorded state and federal income tax benefits of $645,000 in 2009 as compared to income tax expense of $225,000 in 2008 and $3.0 million in 2007. These amounts are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income. The Crest 2009 tax benefit includes a benefit of $303,000 attributable to amendments of certain prior year state tax returns.

Discontinued Operations

Crest acquires properties with the intention of reselling them rather than holding them as investments and operating the properties. Consequently, we typically classify properties acquired by Crest as held for sale at the date of acquisition and do not depreciate them. The operation of Crest’s properties is classified as "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income.

If we decide not to sell a property previously classified as held for sale, the property is reclassified as real estate held for investment. A property that is reclassified to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment, and (ii) the fair value at the date of the subsequent decision not to sell.

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The following is a summary of Crest’s "income from discontinued operations, real estate acquired for resale" on our consolidated statements of income (dollars in thousands, except per share data):

Crest’s income from discontinued operations, real estate acquired for resale	2009			2008			2007
Rental revenue	$	246		$	1,830		$	8,165
Other revenue		1,403			914			190
Gain on sales of real estate acquired for resale		--			4,642			12,319
Interest expense		(595	)		(1,797	)		(6,201	)
General and administrative expense		(336	)		(511	)		(691	)
Property expenses		(128	)		(133	)		(40	)
Provisions for impairment		(277	)		(3,374	)		--
Depreciation(1)		--			(771	)		--
Income taxes		645			(225	)		(3,039	)
Income from discontinued operations, real estate acquired for resale by Crest	$	958		$	575		$	10,703
Per common share, basic and diluted	$	0.01		$	0.01		$	0.11

(1) Depreciation was recorded on one property that was classified as held for investment. This property was sold in 2008.

Realty Income’s operations from seven investment properties classified as held for sale at December 31, 2009, plus properties sold in 2009, 2008 and 2007 have been classified as discontinued operations. The following is a summary of Realty Income’s "income from discontinued operations, real estate held for investment" on our consolidated statements of income (dollars in thousands, except per share data):

Realty Income’s income from discontinued operations, real estate held for investment	2009			2008			2007
Gain on sales of investment properties	$	8,044		$	13,314		$	1,724
Rental revenue		1,178			3,831			5,907
Other revenue		35			96			6
Depreciation and amortization		(564	)		(1,093	)		(1,390	)
Property expenses		(547	)		(309	)		(185	)
Provisions for impairment		(110	)		--			(134	)
Income from discontinued operations, real estate held for investment	$	8,036		$	15,839		$	5,928

Per common share, basic and diluted $ 0.08 $ 0.16 $ 0.06

The following is a summary of our total income from discontinued operations (dollars in thousands, except per share data):

Total discontinued operations	2009		2008		2007
Real estate acquired for resale by Crest	$	958	$	575	$	10,703
Real estate held for investment		8,036		15,839		5,928
Income from discontinued operations	$	8,994	$	16,414	$	16,631
Per common share, basic and diluted	$	0.09	$	0.16	$	0.17

The above per share amounts have each been calculated independently.

Crest’s Property Sales

In 2009, Crest sold two properties for $2.0 million, which resulted in no gain. In 2008, Crest sold 25 properties for $50.7 million, which resulted in a gain of $4.6 million. In 2008, as part of two sales, Crest provided buyer financing of $19.2 million. In 2007, Crest sold 62 properties for $123.6 million, which resulted in a gain of $12.3 million. In 2007, as part of two sales, Crest provided buyer financing of $3.8 million, of which $619,000 was paid in full in November 2007. Crest’s gains on sales are reported before income taxes and are included in discontinued operations.

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Crest’s Property Inventory

At December 31, 2009, Crest had an inventory of three properties valued at $3.8 million, all of which are classified as held for sale. At December 31, 2008, Crest had a property inventory of five properties valued at $6.0 million.

Gain on Sales of Investment Properties by Realty Income

In 2009, we sold 25 investment properties for $20.3 million, which resulted in a gain of $8.0 million. The results of operations for these properties have been reclassified as discontinued operations. Additionally, we received proceeds of $170,000 from the sale of excess land from one property, which resulted in a gain of $15,000. This gain is included in "other revenue" on our consolidated statement of income for 2009 because this excess land was associated with a property that continues to be owned as part of our core operations.

In 2008, we sold 29 investment properties for an aggregate of $27.4 million, which resulted in a gain of $13.3 million. The results of operations for these properties have been reclassified as discontinued operations.  Additionally, we received proceeds of $439,000 from the sale of excess land from one property, which resulted in a gain of $236,000. This gain is included in "other revenue" on our consolidated statement of income for 2008 because this excess land was associated with a property that continues to be owned as part of our core operations.

In 2007, we sold ten investment properties for $7.0 million, which resulted in a gain of $1.7 million. The results of operations for these properties have been reclassified as discontinued operations. Additionally, we sold excess land and improvements from five properties for an aggregate of $4.4 million, which resulted in a gain of $1.8 million. This gain is included in "other revenue" on our consolidated statement of income for 2007 because these improvements and excess land were associated with properties that continue to be owned as part of our core operations.

We have an active portfolio management program that incorporates the sale of assets when we believe the reinvestment of the sale proceeds will:

●   generate higher returns;

●   enhance the credit quality of our real estate portfolio;

●   extend our average remaining lease term; or

●   decrease tenant or industry concentration.

At December 31, 2009, we classified real estate with a carrying amount of $8.3 million as held for sale on our balance sheet, which includes three properties owned by Crest, valued at $3.8 million. Additionally, we anticipate selling investment properties from our portfolio that have not yet been specifically identified, from which we anticipate receiving between $10 million and $35 million in proceeds during the next 12 months. We intend to invest these proceeds into new property acquisitions, if there are attractive opportunities available. However, we cannot guarantee that we will sell properties during the next 12 months or be able to invest the proceeds from the sales of any properties in new properties.

Provisions for Impairment on Real Estate Acquired for Resale by Crest

In 2009, provisions for impairment of $277,000 were recorded by Crest on three retail properties held for sale and two properties which were sold in 2009. In 2008, provisions for impairment of $3.4 million were recorded by Crest on three properties held for sale. No provisions for impairment were recorded by Crest in 2007. These provisions for impairment adjusted the carrying values to the estimated fair-market values of those properties, net of estimated selling costs, and are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income.

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Provisions for Impairment on Realty Income Investment Properties

In 2009, we recorded a provision for impairment of $110,000 on one property, which is included in "income from discontinued operations, real estate held for investment" on our consolidated statement of income for 2009, as the property is held for sale. No provisions for impairment were recorded in 2008. In 2007, we recorded a provision for impairment of $134,000 on one property, which is included in "income from discontinued operations, real estate held for investment" on our consolidated statement of income for 2007, as the property was subsequently sold. Additionally, in 2007, we recorded a provision for impairment of $138,000 on another property, which is included in property expense on our consolidated statement of income for 2007.

Preferred Stock Dividends

Preferred stock cash dividends totaled $24.3 million in 2009, 2008 and 2007.

Net Income Available to Common Stockholders

Net income available to common stockholders was $106.9 million in 2009, a decrease of $714,000 as compared to $107.6 million in 2008. Net income available to common stockholders in 2007 was $116.2 million.

The calculation to determine net income available to common stockholders includes gains from the sale of properties. The amount of gains varies from period to period based on the timing of property sales and can significantly impact net income available to common stockholders.

Gain from the sale of investment properties and the sale of excess land recognized during 2009 was $8.1 million, as compared to a $13.6 million gain recognized during 2008 and a $3.6 million gain recognized during 2007. Crest’s recognized no gain from the sale of properties during 2009 as compared to $4.6 million during 2008 and $12.3 million during 2007.

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FUNDS FROM OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (FFO)

FFO for 2009 increased by $4.9 million, or 2.6%, to $190.4 million, as compared to $185.5 million in 2008 and $189.7 million in 2007. The following is a reconciliation of net income available to common stockholders (which we believe is the most comparable GAAP measure) to FFO. Also presented is information regarding distributions paid to common stockholders and the weighted average number of common shares used for the basic and diluted computation per share (dollars in thousands, except per share amounts):

	2009			2008			2007
Net income available to common stockholders	$	106,874		$	107,588		$	116,156
Depreciation and amortization:
Continuing operations		91,383			89,941			75,932
Discontinued operations		564			1,864			1,390
Depreciation of furniture, fixtures and equipment		(318	)		(319	)		(244	)
Gain on sales of land and investment properties:
Continuing operations		(15	)		(236	)		(1,835	)
Discontinued operations		(8,044	)		(13,314	)		(1,724	)
FFO available to common stockholders	$	190,444		$	185,524		$	189,675
FFO per common share:
Basic	$	1.84		$	1.83		$	1.89
Diluted	$	1.84		$	1.83		$	1.89
Distributions paid to common stockholders	$	178,008		$	169,655		$	157,659
FFO in excess of distributions paid to common stockholders	$	12,436		$	15,869		$	32,016
Weighted average number of common shares used for computation per share:
Basic		103,577,507			101,178,191			100,195,031
Diluted		103,581,053			101,209,883			100,333,966

We define FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’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.

We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. The use of FFO is recommended by the REIT industry as a supplemental performance measure. In addition, FFO is used as a measure of our compliance with the financial covenants of our credit facility.

Presentation of this information is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, 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 our performance. In addition, FFO should not be considered as an alternative to reviewing our cash flows from operating, investing and financing activities as a measure of liquidity, of our ability to make cash distributions or of our ability to pay interest payments.

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Other Non-Cash Items and Capitalized Expenditures

The following information includes non-cash items and capitalized expenditures on existing properties in our portfolio. These items are not included in the adjustments to net income available to common stockholders to arrive at FFO. Analysts and investors often request this supplemental information.

(dollars in thousands)	2009			2008			2007
Amortization of share-based compensation	$	4,726		$	5,049		$	3,857
Amortization of deferred note financing costs(1)		1,363			1,748			1,494
Crest provisions for impairment		277			3,374			--
Provisions for impairment		110			--			272
Amortization of settlements on treasury lock agreements(2)		--			759			870
Capitalized leasing costs and commissions		(1,185	)		(956	)		(614	)
Capitalized building improvements		(1,879	)		(1,498	)		(1,258	)
Straight-line rent revenue(3)		(1,117	)		(1,997	)		(1,217	)

(1) Amortization of deferred note financing costs includes the amortization of costs incurred and capitalized when our notes were issued in October 1998, January 1999, March 2003, November 2003, March 2005, September 2005, September 2006 and September 2007. These costs are being amortized over the lives of these notes. No costs associated with our credit facility agreements or annual fees paid to credit rating agencies have been included.

 (2) The settlement on the treasury lock agreements resulted from an interest rate risk prevention strategy that we used in 1997 and 1998, which correlated to pending issuances of senior note securities. We have not employed this strategy since 1998.

 (3) A negative amount indicates that our straight-line rent was greater than our actual cash rent collected.

IMPACT OF INFLATION

Tenant leases generally provide for limited increases in rent as a result of increases in the tenants' sales volumes, increases in the consumer price index (typically subject to ceilings), and/or fixed increases. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.

Of our 2,339 retail properties in the portfolio, approximately 96.4% or 2,254 are leased to tenants under net leases where the tenant is responsible for property expenses. Net leases tend to reduce our exposure to rising property expenses due to inflation. Inflation and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

For information on the impact of recent accounting pronouncements on our business, see note 2 of the Notes to Consolidated Financial Statements.

Item 7A:                      Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate changes primarily as a result of our credit facility and long-term notes and bonds used to maintain liquidity and expand our real estate investment portfolio and operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower our overall borrowing costs. To achieve these objectives we issue long-term notes and bonds, primarily at fixed rates. We were not a party to any derivative financial instruments at December 31, 2009. We do not enter into any derivative transactions for speculative or trading purposes.

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The following table presents by year of expected maturity, the principal amounts, average interest rates and fair values as of December 31, 2009. This information is presented to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in millions):

Expected Maturity Data

Year of maturity	Fixed rate debt		Average interest rate on fixed rate debt			Variable rate debt		Average interest rate on variable rate debt
2010	$	--		--	%	$	--		--	%
2011(1)		--		--			4.6		1.231
2012		--		--			--		--
2013(2)		100.0		5.375			--		--
2014		--		--			--		--
Thereafter(3)		1,250.0		6.162			--		--
Totals	$	1,350.0		6.103	%	$	--		1.231	%
Fair Value(4)	$	1,276.4				$	--

(1) The credit facility expires in May 2011.

(2) $100 million matures in March 2013.

(3) $150 million matures in November 2015, $275 million matures in September 2016, $175 million matures in September 2017, $550 million matures in August 2019 and $100 million matures in March 2035.

(4) We base the fair value of the fixed rate debt at December 31, 2009 on indicative market prices and recent trading activity of our notes payable.

The table incorporates only those exposures that exist as of December 31, 2009. It does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss, with respect to interest rate fluctuations, would depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates.

All of our outstanding notes and bonds have fixed interest rates. Our credit facility interest rate is variable. Based on our credit facility balance of $4.6 million at December 31, 2009, a 1% change in interest rates would change our interest costs by $46,000 per year.

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Item 8:                      Financial Statements and Supplementary Data

Table of Contents

A. Report of Independent Registered Public Accounting Firm

B. Consolidated Balance Sheets,

December 31, 2009 and 2008

C. Consolidated Statements of Income,

Years ended December 31, 2009, 2008 and 2007

D. Consolidated Statements of Stockholders’ Equity,

Years ended December 31, 2009, 2008 and 2007

E. Consolidated Statements of Cash Flows,

Years ended December 31, 2009, 2008 and 2007

F. Notes to Consolidated Financial Statements

G. Consolidated Quarterly Financial Data

(unaudited) for 2009 and 2008

H. Schedule III Real Estate and Accumulated Depreciation

Schedules not filed:  All schedules, other than that indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Realty Income Corporation:

We have audited the accompanying consolidated balance sheets of Realty Income Corporation and subsidiaries as of December 31, 2009 and 2008, 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, 2009. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule III. We have also audited Realty Income Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Realty Income Corporation’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule, and an opinion on Realty Income Corporation's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.  Additionally, in our opinion, the related financial statement schedule, 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. Also in our opinion, Realty Income Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ KPMG

San Diego, California

February 10, 2010

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REALTY INCOME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2009 and 2008

(dollars in thousands, except per share data)

	2009			2008
ASSETS
Real estate, at cost:
Land	$	1,169,295		$	1,157,885
Buildings and improvements		2,270,161			2,251,025
Total real estate, at cost		3,439,456			3,408,910
Less accumulated depreciation and amortization		(630,840	)		(553,417	)
Net real estate held for investment		2,808,616			2,855,493
Real estate held for sale, net		8,266			6,660
Net real estate		2,816,882			2,862,153
Cash and cash equivalents		10,026			46,815
Accounts receivable, net		10,396			10,624
Goodwill		17,206			17,206
Other assets, net		60,277			57,381
Total assets	$	2,914,787		$	2,994,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Distributions payable	$	16,926		$	16,793
Accounts payable and accrued expenses		38,445			38,027
Other liabilities		16,807			14,698
Line of credit payable		4,600			--
Notes payable		1,350,000			1,370,000
Total liabilities		1,426,778			1,439,518
Commitments and contingencies
Stockholders’ equity:
Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 13,900,000 shares issued and outstanding in 2009 and 2008		337,790			337,790
Common stock and paid in capital, par value $1.00 per share, 200,000,000 shares authorized, 104,286,705 and 104,211,541 shares issued and outstanding as of December 31, 2009 and 2008, respectively		1,629,237			1,624,622
Distributions in excess of net income		(479,018	)		(407,751	)
Total stockholders' equity		1,488,009			1,554,661
Total liabilities and stockholders' equity	$	2,914,787		$	2,994,179

The accompanying notes to consolidated financial statements are an integral part of these statements.

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REALTY INCOME CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Income

Years Ended December 31, 2009, 2008 and 2007

(dollars in thousands, except per share data)

	2009			2008			2007
REVENUE
Rental	$	326,145		$	325,896		$	285,133
Other		1,436			1,877			6,350
Total revenue		327,581			327,773			291,483
EXPENSES
Depreciation and amortization		91,383			89,941			75,932
Interest		85,528			93,956			64,331
General and administrative		20,946			21,618			22,694
Property		6,914			5,601			3,356
Income taxes		677			1,230			1,392
Total expenses		205,448			212,346			167,705
Income from continuing operations		122,133			115,427			123,778
Income from discontinued operations:
Real estate acquired for resale by Crest		958			575			10,703
Real estate held for investment		8,036			15,839			5,928
Total income from discontinued operations		8,994			16,414			16,631
Net income		131,127			131,841			140,409
Preferred stock cash dividends		(24,253	)		(24,253	)		(24,253	)
Net income available to common stockholders	$	106,874		$	107,588		$	116,156
Amounts available to common stockholders per common share:
Income from continuing operations:
Basic	$	0.94		$	0.90		$	0.99
Diluted	$	0.94		$	0.90		$	0.99
Net income:
Basic	$	1.03		$	1.06		$	1.16
Diluted	$	1.03		$	1.06		$	1.16
Weighted average common shares outstanding:
Basic		103,577,507			101,178,191			100,195,031
Diluted		103,581,053			101,209,883			100,333,966

The accompanying notes to consolidated financial statements are an integral part of these statements.

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REALTY INCOME CORPORATION AND SUBSIDIARIES

    Consolidated Statements Of Stockholders’ Equity

Years Ended December 31, 2009, 2008 and 2007

(dollars in thousands)

					Preferred		Common
	Shares of		Shares of		stock and		stock and		Distributions
	preferred stock		common stock		paid in capital		paid in capital		in excess of net income			Total
Balance, December 31, 2006		13,900,000		100,746,226	$	337,781	$	1,540,365	$	(302,154	)	$	1,575,992
Net income		--		--		--		--		140,409			140,409
Distributions paid and payable		--		--		--		--		(182,990	)		(182,990	)
Preferred stock issuance cost		--		--		9		--		--			9
Share-based compensation		--		336,491		--		4,672		--			4,672
Balance, December 31, 2007		13,900,000		101,082,717		337,790		1,545,037		(344,735	)		1,538,092
Net income		--		--		--		--		131,841			131,841
Distributions paid and payable		--		--		--		--		(194,857	)		(194,857	)
Shares  issued in stock offering, net of offering costs of $4,024		--		2,925,000		--		74,425		--			74,425
Share-based compensation		--		203,824		--		5,160		--			5,160
Balance, December 31, 2008		13,900,000		104,211,541		337,790		1,624,622		(407,751	)		1,554,661
Net income		--		--		--		--		131,127			131,127
Distributions paid and payable		--		--		--		--		(202,394	)		(202,394	)
Share-based compensation		--		75,164		--		4,615		--			4,615
Balance, December 31, 2009		13,900,000		104,286,705	$	337,790	$	1,629,237	$	(479,018	)	$	1,488,009

The accompanying notes to consolidated financial statements are an integral part of these statements.

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    REALTY INCOME CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Cash Flows

Years Ended December 31, 2009, 2008 and 2007

(dollars in thousands)

	2009			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	131,127		$	131,841		$	140,409
Adjustments to net income:
Depreciation and amortization		91,383			89,941			75,932
Income from discontinued operations:
Real estate acquired for resale		(958	)		(575	)		(10,703	)
Real estate held for investment		(8,036	)		(15,839	)		(5,928	)
Gain on sales of land and improvements		(15	)		(236	)		(1,835	)
Amortization of share-based compensation		4,726			5,049			3,857
Provisions for impairment on real estate held for investment		--			--			138
Cash provided by (used in) discontinued operations:
Real estate acquired for resale		1,235			78			(1,610	)
Real estate held for investment		666			3,618			5,728
Investment in real estate acquired for resale		--			(9	)		(29,886	)
Proceeds from sales of real estate acquired for resale		1,987			31,455			119,790
Collection of notes receivable by Crest		129			87			651
Change in assets and liabilities:
Accounts receivable and other assets		3,607			(930	)		(49	)
Accounts payable, accrued expenses and other liabilities		856			1,675			21,675
Net cash provided by operating activities		226,707			246,155			318,169
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment properties:
Continuing operations		170			439			4,370
Discontinued operations		15,425			24,191			7,014
Acquisition of and improvements to investment properties		(60,459	)		(194,106	)		(506,360	)
Intangibles acquired in connection with acquisitions of investment properties		(860	)		(397	)		(997	)
Restricted escrow funds acquired in connection with acquisitions of investment properties		--			--			(2,648	)
Net cash used in investing activities		(45,724	)		(169,873	)		(498,621	)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to common stockholders		(178,008	)		(169,655	)		(157,659	)
Cash dividends to preferred stockholders		(24,253	)		(24,253	)		(24,583	)
Principal payment on notes payable		(20,000	)		(100,000	)		--
Proceeds from common stock offerings, net		--			74,425			--
Debt issuance costs		--			(3,196	)		--
Proceeds from notes issued, net		--			--			544,397
Borrowings from lines of credit		4,600			--			407,800
Payments under lines of credit		--			--			(407,800	)
Proceeds from preferred stock offerings, net		--			--			9
Other items		(111	)		111			816
Net cash (used in) provided by financing activities		(217,772	)		(222,568	)		362,980
Net (decrease) increase in cash and cash equivalents		(36,789	)		(146,286	)		182,528
Cash and cash equivalents, beginning of year		46,815			193,101			10,573
Cash and cash equivalents, end of year	$	10,026		$	46,815		$	193,101

For supplemental disclosures, see note 13.

The accompanying notes to consolidated financial statements are an integral part of these statements.

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REALTY INCOME CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

December 31, 2009, 2008 and 2007

1.         Organization and Operation

Realty Income Corporation (“Realty Income,” the “Company,” “we", “our” or "us") is organized as a Maryland corporation. We invest in commercial retail real estate and have elected to be taxed as a real estate investment trust ("REIT").

At December 31, 2009, we owned 2,339 properties, located in 49 states, containing over 19.1 million leasable square feet, along with three properties owned by our wholly-owned taxable REIT subsidiary, Crest Net Lease, Inc. ("Crest"). Crest was created to buy and sell properties, primarily to individual investors who are involved in tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code").

Information with respect to number of properties, square feet, average initial lease term and weighted average contractual lease rate is unaudited.

2. Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements

Federal Income Taxes. We have elected to be taxed as a REIT under the Code. We believe we have qualified and continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct distributions paid to our stockholders and generally will not be required to pay federal corporate income taxes on such income. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, except for the federal income taxes of Crest, which are included in discontinued operations.

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things.

The following reconciles our net income available to common stockholders to taxable income (dollars in thousands):

	2009(1)			2008			2007
Net income available to common stockholders	$	106,874		$	107,588		$	116,156
Preferred stock cash dividends		24,253			24,253			24,583
Depreciation and amortization timing differences		27,094			28,624			22,668
Tax gain on the sales of real estate less than book gain		(5,436	)		(4,518	)		--
Tax loss on the sale of real estate less than book gain		--			--			(3,839	)
Dividends received from Crest		--			2,500			3,300
Elimination of net revenue and expenses from Crest		378			270			(6,677	)
Adjustment for share-based compensation		1,824			2,270			314
Adjustment for straight-line rent		(1,117	)		(1,997	)		(1,217	)
Adjustment for an increase (decrease) in prepaid rent		1,273			(1,226	)		5,608
Other adjustments		(191	)		(321	)		(453	)
Taxable net income, before our dividends paid deduction	$	154,952		$	157,443		$	160,443

(1)   The 2009 information presented is a reconciliation of our net income available to common stockholders to estimated taxable net income.

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We regularly analyze our various federal and state filing positions and only recognize the income tax effect in our financial statements when certain criteria regarding uncertain income tax positions have been met. We believe that our income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no reserves for uncertain income tax positions have been recorded in our financial statements.

Absent an election to the contrary, if a REIT acquires property that is or has been owned by a C corporation in a transaction in which the tax basis of the property in the hands of the REIT is determined by reference to the tax basis of the property in the hands of the C corporation, and the REIT recognizes gain on the disposition of such property during the 10 year period beginning on the date on which it acquired the property, then the REIT will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of the fair market value of the property over the REIT’s adjusted basis in the property, in each case determined as of the date the REIT acquired the property. In August 2007, we acquired 100% of the stock of a C corporation that owned real property. At the time of acquisition, the C corporation became a Qualified REIT Subsidiary, was deemed to be liquidated for Federal income tax purposes, and the real property was deemed to be transferred to us with a carryover tax basis. As of December 31, 2009, we have built-in gains of $60 million with respect to such property. We do not expect that we will be required to pay income tax on the built-in gains in these properties during the ten-year period ending August 28, 2017. It is our intent, and we have the ability, to defer any dispositions of these properties to periods when the related gains would not be subject to the built-in gain income tax or otherwise to defer the recognition of the built-in gain related to these properties. However, our plans could change and it may be necessary to dispose of one or more of these properties in a taxable transaction before August 28, 2017, in which case we would be required to pay corporate level tax with respect to the built-in gains on these properties as described above.

Net Income Per Common Share. Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to common stockholders for the period by the weighted average number of common shares that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.

The following is a reconciliation of the denominator of the basic net income per common share computation to the denominator of the diluted net income per common share computation:

	2009	2008	2007
Weighted average shares used for the basic net income per share computation	103,577,507	101,178,191	100,195,031
Incremental shares from share-based compensation	3,546	31,692	138,935
Adjusted weighted average shares used for diluted net income per share computation	103,581,053	101,209,883	100,333,966
Unvested shares from share-based compensation that were anti-dilutive	542,368	614,917	243,631

No stock options were anti-dilutive in 2009, 2008 or 2007.

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Other Assets. Other assets consist of the following (dollars in thousands) at:

December 31,	2009		2008
Notes receivable issued in connection with Crest property sales	$	22,214	$	22,344
Deferred bond financing costs, net		11,899		13,249
Value of in-place and above-market leases, net		10,928		10,534
Prepaid expenses		7,738		4,244
Escrow deposits for Section 1031 tax-deferred exchanges		4,479		3,174
Credit facility organization costs, net		1,470		2,552
Corporate assets, net of accumulated depreciation and amortization		1,058		1,277
Other items		491		7
	$	60,277	$	57,381

Distributions Payable. Distributions payable consist of the following declared distributions (dollars in thousands) at:

December 31,	2009		2008
Common stock distributions	$	14,905	$	14,772
Preferred stock dividends		2,021		2,021
	$	16,926	$	16,793

Accounts Payable and Accrued Expenses. Accounts payable and accrued expenses consist of the following (dollars in thousands) at:

December 31,	2009		2008
Bond interest payable	$	25,972	$	26,706
Other items		12,473		11,321
	$	38,445	$	38,027

Other Liabilities. Other liabilities consist of the following (dollars in thousands) at:

December 31,	2009		2008
Rent received in advance	$	10,341	$	9,083
Security deposits		4,334		3,937
Value of below-market leases, net		2,132		1,678
	$	16,807	$	14,698

Discontinued Operations. Realty Income's operations from seven investment properties classified as held for sale at December 31, 2009, plus properties sold in 2009, 2008 and 2007, are reported as discontinued operations. Their respective results of operations have been reclassified as "income from discontinued operations, real estate held for investment" on our consolidated statements of income. We do not depreciate properties that are classified as held for sale.

Crest acquires properties with the intention of reselling them rather than holding them for investment and operating the properties. Consequently, we typically classify properties acquired by Crest as held for sale at the date of acquisition and do not depreciate them. As a result, the operations of Crest’s properties are classified as "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income.

No debt was assumed by buyers of our investment properties, or repaid as a result of our investment property sales, and we do not allocate interest expense to discontinued operations related to real estate held for investment. We allocate interest expense related to borrowings specifically attributable to Crest’s properties.  The interest expense amounts allocated to the Crest properties held for sale are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income.

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If circumstances arise, which were previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, the property is reclassified as real estate held for investment. A property that is reclassified to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held for investment, or (ii) the fair value at the date of the subsequent decision not to sell.

The following is a summary of Crest’s "income from discontinued operations, real estate acquired for resale" on our consolidated statements of income (dollars in thousands):

Crest’s income from discontinued operations, real estate acquired for resale	2009			2008			2007
Rental revenue	$	246		$	1,830		$	8,165
Other revenue		1,403			914			190
Gain on sales of real estate acquired for resale		--			4,642			12,319
Interest expense		(595	)		(1,797	)		(6,201	)
General and administrative expense		(336	)		(511	)		(691	)
Property expenses		(128	)		(133	)		(40	)
Provisions for impairment		(277	)		(3,374	)		--
Depreciation(1)		--			(771	)		--
Income taxes		645			(225	)		(3,039	)
Income from discontinued operations, real estate acquired for resale by Crest	$	958		$	575		$	10,703

(1)    Depreciation was recorded on one property that was classified as held for investment.  This property was sold in 2008.

The following is a summary of Realty Income’s "income from discontinued operations, from real estate held for investment" on our consolidated statements of income (dollars in thousands):

Realty Income’s income from discontinued operations, real estate held for investment	2009			2008			2007
Gain on sales of investment properties	$	8,044		$	13,314		$	1,724
Rental revenue		1,178			3,831			5,907
Other revenue		35			96			6
Depreciation and amortization		(564	)		(1,093	)		(1,390	)
Property expenses		(547	)		(309	)		(185	)
Provisions for impairment		(110	)		--			(134	)
Income from discontinued operations, real estate held for investment	$	8,036		$	15,839		$	5,928

The following is a summary of our total income from discontinued operations (dollars in thousands, except per share data):

Total discontinued operations	2009		2008		2007
Real estate acquired for resale by Crest	$	958	$	575	$	10,703
Real estate held for investment		8,036		15,839		5,928
Income from discontinued operations	$	8,994	$	16,414	$	16,631
Per common share, basic and diluted	$	0.09	$	0.16	$	0.17

The per share amounts for "income from discontinued operations" above and the "income from continuing operations" and "net income" reported on the consolidated statements of income have each been calculated independently.

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Revenue Recognition and Accounts Receivable. All leases are accounted for as operating leases. Under this method, lease payments that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Any rental revenue contingent upon a tenant’s sales is recognized only after the tenant exceeds their sales breakpoint. Rental increases based upon changes in the consumer price indexes are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements.

We recognize an allowance for doubtful accounts relating to accounts receivable for amounts deemed uncollectible. We consider tenant specific issues, such as financial stability and ability to pay, when determining collectibility of accounts receivable and appropriate allowances to record. Our allowance for doubtful accounts at December 31, 2009 was $865,000 and at December 31, 2008 was $637,000.

Other revenue includes non-operating interest earned from investments in money market funds and other notes of $51,000 in 2009, $1.4 million in 2008 and $3.6 million in 2007.

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Realty Income, Crest and other entities for which we make operating and financial decisions (i.e. control), after elimination of all material intercompany balances and transactions. All of Realty Income’s subsidiaries are wholly-owned. We have no unconsolidated or off-balance sheet investments in variable interest entities.

Cash Equivalents. We consider all short-term, highly liquid investments that are readily convertible to cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Our cash equivalents are primarily investments in United States Treasury or government money market funds.

Gain on Sales of Properties. When real estate is sold, the related net book value of the applicable assets is removed and a gain from the sale is recognized in our consolidated statements of income. We generally record a gain from the sale of real estate provided that various criteria, relating to the terms of the sale and any subsequent involvement by us with the real estate, have been met.

Allocation of the Purchase Price of Real Estate Acquisitions. When acquiring a property for investment purposes, we allocate the fair value of real estate acquired with in-place operating leases to: 1) land, 2) building and improvements, and 3) identified intangible assets and liabilities, based in each case on their fair values. Intangible assets and liabilities consist of above-market and below-market leases, the value of in-place leases and tenant relationships.

The fair value of the tangible assets of an acquired property (which includes land and buildings/improvements) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and buildings/improvements based on our determination of the relative fair value of these assets. Our determinations are based on a real estate appraisal for each property, generated by an independent appraisal firm, and consider estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases. In allocating the fair value to identified intangibles for above-market or below-market leases, an amount is recorded based on the present value of the difference between (i) the contractual amount to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rate for the corresponding in-place lease, measured over a period equal to the remaining term of the lease.

Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods.

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The aggregate value of other acquired intangible assets consists of the value of in-place leases and tenant relationships. These are measured by the excess of the purchase price paid for a property, after adjusting for above or below-market lease value, less the estimated fair value of the property “as if vacant,” determined as set forth above. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense as appropriate.

Depreciation and Amortization. Land, buildings and improvements are recorded and stated at cost. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and any other costs incurred during the period of development are capitalized. We cease capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in any event no later than one year from the completion of major construction activity.

Properties are depreciated using the straight-line method over the estimated useful lives of the assets.  The estimated useful lives are as follows:

Buildings                                                                  25 years

Building improvements                                               4 to 15 years

Tenant improvements and lease commissions             The shorter of the term of the related lease or useful life

Acquired in-place leases                                            Remaining terms of the respective leases

Provisions for Impairment. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Generally, a provision for impairment is recorded if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we estimate in this analysis include projected rental rates, capital expenditures and property sales capitalization rates. Additionally, a property classified as held for sale is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.

In 2009, we recorded a provision for impairment of $110,000 on one retail investment property in the convenience store industry, which is held for sale. This provision for impairment is included in "income from discontinued operations, real estate held for investment" on our consolidated statement of income for 2009. Additionally, in 2009, Crest recorded total provisions for impairment of $277,000 on three retail properties held for sale at December 31, 2009 and two properties which were sold in 2009. These provisions for impairment are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statement of income for 2009.

No provisions for impairment were recorded by Realty Income in 2008. In 2008, Crest recorded total provisions for impairment of $3.4 million on three retail properties, which were held for sale at December 31, 2008. These provisions for impairment are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statement of income for 2008.

In 2007, we recorded a provision for impairment of $134,000 on one retail investment property in the motor vehicle industry.  This provision for impairment is included in “income from discontinued operations, real estate held for investment” on our consolidated statement of income for 2007.  In 2007, we also recorded a provision for impairment of $138,000 on one retail investment property in the consumer electronics industry.  This provision for impairment is included in "property expense" on our consolidated statement of income for 2007.  No provisions for impairment were recorded by Crest in 2007.

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Asset Retirement Obligations. We analyze our future legal obligations associated with the other-than-temporary removal of tangible long-lived assets, also referred to as asset retirement obligations. When we determine that we have a legal obligation to provide services upon the retirement of a tangible long-lived asset, we record a liability for this obligation based on the estimated fair market value of this obligation and adjust the carrying amount of the related long-lived asset by the same amount. This asset is amortized over its estimated useful life. The estimated fair value of the asset retirement obligation is calculated by discounting the future cash flows using a credit-adjusted risk-free interest rate.

Goodwill. Goodwill is tested for impairment during the second quarter of each year as well as when events or circumstances occur indicating that our goodwill might be impaired.  We did not record any new goodwill or impairment on our existing goodwill during 2009, 2008 or 2007.

Sales Taxes. We collect and remit sales taxes assessed by different governmental authorities that are both imposed on and concurrent with a revenue-producing transaction between us and our tenants. We report the collection of these taxes on a net basis (excluded from revenues). The amounts of these taxes are not significant to our financial position or results of operations.

Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles, or GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Impact of Recent Accounting Pronouncements. In August 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2009-05, Fair Value Measurements and Disclosures. ASU No. 2009-05, which became effective for us in 2009, provides clarification to measuring the fair value of a liability. In circumstances in which a quoted market price in an active market for the identical liability is not available, a reporting entity is required to measure fair value by using either (1) a valuation technique that uses quoted prices for identical or similar liabilities or (2) another valuation technique, such as a present value technique or a technique that is based on the amount paid or received by the reporting entity to transfer an identical liability. ASU No. 2009-05 only applies to our disclosures in note 12 related to the estimated fair value of our notes payable and did not have a significant impact on our footnote disclosures.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. Effective for interim and annual reporting periods beginning after December 15, 2009, this ASU requires new disclosures and clarifies existing disclosure requirements about fair value measurement. ASU No. 2010-06 only applies to our disclosures in note 12 related to the estimated fair values of our notes payable and notes receivable and is not expected to have a significant impact on our footnote disclosures.

Reclassifications. Certain of the 2008 and 2007 balances have been reclassified to conform to the 2009 presentation.

3.           Retail Properties Acquired

We acquire land, buildings and improvements that are used by retail operators.

A.  During 2009, Realty Income invested $57.9 million in 16 new properties with an initial weighted average contractual lease rate of 9.7%. These 16 properties are located in five states, contain over 278,000 leasable square feet, and are 100% leased with an average lease term of 17.9 years. The initial weighted average contractual lease rate is computed by dividing the estimated aggregate base cash flow for the first year of each lease by the estimated total cost of the properties. In connection with these acquisitions, transaction costs of $62,000 were recorded to "general and administrative" expense on our consolidated statement of income for 2009.

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In comparison, during 2008, Realty Income invested $189.6 million in 108 new retail properties and properties under development with an initial weighted average contractual lease rate of 8.7%. These 108 properties are located in 14 states, contain over 714,000 leasable square feet, and are 100% leased with an average lease term of 20.6 years.

B.  During 2009 and 2008, Crest did not invest in any new retail properties.

C.  Crest’s property inventory at December 31, 2009 consisted of three properties valued at $3.8 million, and at December 31, 2008, consisted of five properties valued at $6.0 million. These amounts are included on our consolidated balance sheets in "real estate held for sale, net."

D.  Of the $57.9 million invested by Realty Income in 2009, $10.5 million was used to acquire three retail properties with existing leases. Realty Income recorded $1.4 million as the intangible value of the in-place leases, $150,000 as the intangible value of above-market leases and $655,000 as the intangible value of below-market leases for 2009. The value of the in-place and above-market leases are recorded to "other assets" on our consolidated balance sheet, as of December 31, 2009, and the value of the below-market leases are recorded to "other liabilities" on our consolidated balance sheet as of December 31, 2009. All of these amounts are amortized over the life of the respective leases.

Of the $189.6 million invested by Realty Income in 2008, $10.0 million was used to acquire two retail properties with existing leases. Realty Income recorded $397,000 as the intangible value of the in-place leases for 2008.  This amount is recorded to "other assets" on our consolidated balance sheets and amortized over the life of the respective leases.

4.           Credit Facility

In May 2008, we entered into a $355 million revolving, unsecured credit facility that replaced our previous $300 million acquisition credit facility. The term of our credit facility is for three years, until May 2011, plus two, one-year extension options. Under our credit facility, our investment grade credit ratings provide for financing at the London Interbank Offered Rate, commonly referred to as LIBOR, plus 100 basis points with a facility commitment fee of 27.5 basis points, for all-in drawn pricing of 127.5 basis points over LIBOR. We also have other interest rate options available to us. Our credit facility is unsecured and, accordingly, we have not pledged any assets as collateral for this obligation.

In May 2008, as a result of entering into our current credit facility, we incurred $3.2 million of credit facility origination costs that were capitalized and are being amortized over three years. Included in "other assets" on our consolidated balance sheets, at December 31, 2009, is $1.5 million of the $3.2 million, and at December 31, 2008, is $2.6 million.

In 2009, we did not utilize our credit facility until December and we did not utilize our credit facility during 2008. Our average borrowing rate on our credit facility during December 2009 was 1.2% and during 2007 was 6.0%. Our effective borrowing rate at December 31, 2009 was 1.2% and at December 31, 2008 was 1.4%. Our current and prior credit facilities are and were subject to various leverage and interest coverage ratio limitations. We are and have been in compliance with these covenants.

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5.           Notes Payable

A.   General

Our senior unsecured note obligations consist of the following, sorted by maturity date, (dollars in millions):

December 31,	2009		2008
8% notes, issued in January 1999 and due in January 2009	$	--	$	20.0
5.375% notes, issued in March 2003 and due in March 2013		100.0		100.0
5.5% notes, issued in November 2003 and due in November 2015		150.0		150.0
5.95% notes, issued in September 2006 and due in September 2016		275.0		275.0
5.375% notes, issued in September 2005 and due in September 2017		175.0		175.0
6.75% notes, issued in September 2007 and due in August 2019		550.0		550.0
5.875% bonds, issued in March 2005 and due in March 2035		100.0		100.0
	$	1,350.0	$	1,370.0

The following table summarizes the maturity of our notes payable as of December 31, 2009 (dollars in millions):

Year of Maturity	Notes
2010	$	--
2011		--
2012		--
2013		100.0
2014		--
Thereafter		1,250.0
Totals	$	1,350.0

Interest incurred on all of the notes for 2009 was $82.5 million, for 2008 was $91.2 million and for 2007 was $67.1 million. The interest rate on each of these notes is fixed.

Our outstanding notes are unsecured; accordingly, we have not pledged any assets as collateral for these or any other obligations. Interest on all of the senior note obligations is paid semiannually.

All of these notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause our debt to total adjusted assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause our secured debt to total adjusted assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of our outstanding unsecured debt. We have been in compliance with these covenants since each of the notes were issued.

B.   Note Redemptions

On their maturity date in January 2009, we redeemed, using cash on hand, all of our outstanding 8.00% notes issued in January 1999 at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest.

On their maturity date in November 2008, we redeemed, using proceeds from our September 2008 common stock offering and cash on hand, all of our outstanding 8.25% senior notes issued in October 1998 (the "2008 Notes") at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest.

C.   Note Issuance

In September 2007, we issued $550 million in aggregate principal amount of 6.75% senior unsecured notes due 2019 (the “2019 Notes”). The price to the investor for the 2019 Notes was 99.827% of the principal amount for an effective yield of 6.772%. The net proceeds of approximately $544.4 million from this offering were used to fund certain property acquisitions, repay borrowings under our acquisition credit facility and for general corporate purposes, including additional property acquisitions.

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6.           Common Stock Offerings

In September 2008, we issued 2.925 million shares of common stock at a price of $26.82 per share. The net proceeds of approximately $74.4 million were used, along with our available cash on hand, to redeem the $100 million outstanding principal amount of our 2008 Notes in November 2008.

7.           Preferred Stock

A.           In 2004, we issued 5.1 million shares of 7.375% Monthly Income Class D cumulative redeemable preferred stock. In May 2009, the Class D preferred shares became redeemable, at our option, for $25 per share. During 2009, 2008 and 2007, we paid twelve monthly dividends to holders of our Class D preferred stock totaling $1.8437508 per share, or $9.4 million, and at December 31, 2009, a monthly dividend of $0.1536459 per share was payable and was paid in January 2010.

B.           In 2006, we issued 8.8 million shares of 6.75% Monthly Income Class E cumulative redeemable preferred stock. Beginning December 7, 2011, the Class E preferred shares are redeemable, at our option, for $25 per share. During both 2009 and 2008, we paid twelve monthly dividends to holders of our Class E preferred stock totaling $1.6875 per share, or $14.9 million, and at December 31, 2009, a monthly dividend of $0.140625 per share was payable and was paid in January 2010. During 2007, we paid twelve monthly dividends to holders of our Class E preferred stock totaling $1.725 per share, or $15.2 million. In January 2007, we paid the first Class E preferred dividend of $0.178125 per share, which covered a period of 38 days.

8.           Distributions Paid and Payable

A.   Common Stock

We pay monthly distributions to our common stockholders.  The following is a summary of monthly distributions paid per common share for the years:

Month	2009		2008		2007
January	$	0.1417500	$	0.136750	$	0.126500
February		0.1417500		0.136750		0.126500
March		0.1417500		0.136750		0.126500
April		0.1420625		0.137375		0.127125
May		0.1420625		0.137375		0.127125
June		0.1420625		0.137375		0.127125
July		0.1423750		0.138000		0.127750
August		0.1423750		0.138000		0.127750
September		0.1423750		0.140500		0.135500
October		0.1426875		0.141125		0.136125
November		0.1426875		0.141125		0.136125
December		0.1426875		0.141125		0.136125
Total	$	1.7066250	$	1.662250	$	1.560250

The following presents the federal income tax characterization of distributions paid or deemed to be paid per common share for the years:

	2009		2008		2007
Ordinary income	$	1.2739214	$	1.2681285	$	1.3847719
Nontaxable distributions		0.4113034		0.3121490		0.1754781
Capital gain		0.0214002		0.0819725		--
Totals	$	1.7066250	$	1.6622500	$	1.5602500

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At December 31, 2009, a distribution of $0.143 per common share was payable and was paid in January 2010. At December 31, 2008, a distribution of $0.14175 per common share was payable and was paid in January 2009.

B.   Class D Preferred Stock

Dividends of $0.1536459 per share are paid monthly in arrears on the Class D preferred stock. We declared dividends to holders of our Class D preferred stock totaling $9.4 million in 2009, 2008 and 2007, respectively.

The following presents the federal income tax characterization of dividends paid per share to our Class D preferred stockholders for the years:

	2009		2008		2007
Ordinary income	$	1.8206316	$	1.7528280	$	1.8437508
Capital gain		0.0231192		0.0909228		--
Totals	$	1.8437508	$	1.8437508	$	1.8437508

C.   Class E Preferred Stock

Dividends of $0.140625 per share are paid monthly in arrears on the Class E preferred stock.  We declared dividends to holders of our Class E preferred stock totaling $14.9 million in 2009, 2008 and 2007. The first Class E dividend was paid in January 2007.

The following presents the federal income tax characterization of dividends paid per share to our Class E preferred stockholders for the years:

	2009		2008		2007
Ordinary income	$	1.6663392	$	1.6042824	$	1.7250000
Capital gain		0.0211608		0.0832176		--
Totals	$	1.6875000	$	1.6875000	$	1.7250000

9.           Operating Leases

A.    At December 31, 2009, we owned 2,339 properties in 49 states, plus an additional three properties owned by Crest. Of the 2,339 properties, 2,328, or 99.5%, are single-tenant, retail properties and the remaining 11 are multi-tenant, distribution and office properties. At December 31, 2009, 75 properties were vacant and available for lease or sale.

Substantially all leases are net leases where the tenant pays property taxes and assessments, maintains the interior and exterior of the building and leased premises, and carries insurance coverage for public liability, property damage, fire and extended coverage.

Rent based on a percentage of a tenants’ gross sales (percentage rents) for 2009 was $1.3 million, for 2008 was $1.3 million and for 2007 was $851,000, including amounts recorded to discontinued operations of $22,000 in 2008 and $55,000 in 2007.

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At December 31, 2009, minimum future annual rents to be received on the operating leases for the next five years and thereafter are as follows (dollars in thousands):

2010	$	320,273
2011		310,454
2012		297,332
2013		281,468
2014		264,021
Thereafter		2,223,917
Total	$	3,697,465

B.           Major Tenants – No individual tenant’s rental revenue, including percentage rents, represented more than 10% of our total revenue for each of the years ended December 31, 2009, 2008 or 2007.

10.           Gain on Sales of Real Estate Acquired for Resale by Crest

In 2009, Crest sold two properties for $2.0 million, which resulted in no gain. In 2008, Crest sold 25 properties for $50.7 million, which resulted in a gain of $4.6 million. In 2008, as part of two sales, Crest provided buyer financing of $19.2 million. In 2007, Crest sold 62 properties for $123.6 million, which resulted in a gain of $12.3 million. In 2007, as part of two sales, Crest provided buyer financing of $3.8 million, of which $619,000 was paid in full in November 2007. Crest’s gains on sales are reported before income taxes and are included in discontinued operations.

11.           Gain on Sales of Investment Properties by Realty Income

In 2009, we sold 25 investment properties for $20.3 million, which resulted in a gain of $8.0 million. The results of operations for these properties have been reclassified as discontinued operations. Additionally, we received proceeds of $170,000 from the sale of excess land from one property, which resulted in a gain of $15,000. This gain is included in "other revenue" on our consolidated statement of income for 2009 because this excess land was associated with a property that continues to be owned as part of our core operations.

In 2008, we sold 29 investment properties for $27.4 million, which resulted in a gain of $13.3 million. The results of operations for these properties have been reclassified as discontinued operations.  Additionally, we received proceeds of $439,000 from the sale of excess land from one property, which resulted in a gain of $236,000. This gain is included in “other revenue” on our consolidated statement of income for 2008 because this excess land was associated with a property that continues to be owned as part of our core operations.

In 2007, we sold ten investment properties for $7.0 million, which resulted in a gain of $1.7 million. The results of operations for these properties have been reclassified as discontinued operations. Additionally, we sold excess land and improvements from five properties for an aggregate of $4.4 million, which resulted in a gain of $1.8 million. This gain is reported in “other revenue” on our consolidated statement of income for 2007 because these improvements and excess land were associated with properties that continue to be owned as part of our core operations.

12.           Fair Value of Financial Instruments

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring the fair value of an asset. The disclosure for assets and liabilities measured at fair value requires allocation to a three-level valuation hierarchy. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, and all liabilities, due to their short-term nature, except for the notes receivable issued in connection with property sales and the notes payable, which are disclosed below (dollars in millions):

	Carrying value per		Estimated fair
At December 31, 2009	balance sheet		market value
Notes receivable issued in connection with Crest property sales	$	22.2	$	20.0
Notes payable	$	1,350.0	$	1,276.4

	Carrying value per		Estimated fair
At December 31, 2008	balance sheet		market value
Notes receivable issued in connection with Crest property sales	$	22.3	$	21.9
Notes payable	$	1,370.0	$	949.4

The estimated fair value of the notes receivable issued in connection with property sales has been calculated by discounting the future cash flows using an interest rate based upon the current 5-year, 7-year, or 10-year Treasury yield curve, plus an applicable credit-adjusted spread. The notes receivable were issued in connection with the sale of three Crest properties. Payments to us on these notes receivable are current and no allowance for doubtful accounts has been recorded for them.

The estimated fair value of the notes payable is based upon indicative market prices and recent trading activity of our notes payable. 

13.           Supplemental Disclosures of Cash Flow Information

Interest paid in 2009 was $83.2 million, in 2008 was $90.3 million and in 2007 was $56.7 million.

Interest capitalized to properties under development in 2009 was $5,000, in 2008 was $92,000 and in 2007 was $993,000.

Income taxes paid by Realty Income and Crest in 2009 were $1.2 million, in 2008 were $1.7 million and in 2007 were $4.3 million.

The following non-cash investing and financing activities are included in the accompanying consolidated financial statements:

A.   Share-based compensation expense for 2009 was $4.7 million, for 2008 was $5.0 million and for 2007 was $3.9 million.

B.   See “Provisions for Impairment” in note 2 for a discussion of provisions for impairments recorded by Realty Income and Crest.

C.   In 2008, Crest sold two properties for $23.5 million and received notes totaling $19.2 million from the buyers, which are included in “other assets” on our consolidated balance sheets.

D.   In 2007, Crest sold two properties for an aggregate of $5.5 million and received notes totaling $3.8 million from the buyers, of which $619,000 was paid in full in November 2007. The remaining note is included in “other assets” on our consolidated balance sheets.

E.   At December 31, 2009, Realty Income had escrow deposits of $4.5 million held for tax-deferred exchanges under Section 1031 of the Code. The $4.5 million is included in "other assets" on our consolidated balance sheet at December 31, 2009.

F.   At December 31, 2008, Realty Income had escrow deposits of $3.2 million held for tax-deferred exchanges under Section 1031 of the Code.  The $3.2 million is included in “other assets” on our consolidated balance sheet at December 31, 2008.

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G.   At December 31, 2009, Realty Income recorded $1.5 million for a new environmental insurance policy, which supplements its primary insurance policy.  The $1.5 million is included in "other assets" and "accounts payable and accrued expenses" on our consolidated balance sheet at December 31, 2009.

H.   In 2009, Realty Income and Crest amended certain prior year state tax returns and determined that it is more-likely-than-not that we will be collecting refunds in the future as a result of these amendments.  As a result of this, in 2009, Realty Income recorded a tax receivable of $454,000 and Crest recorded a tax receivable of $303,000.

I.   In accordance with our policy, we recorded adjustments to our estimated legal obligations related to asset retirement obligations on two land leases in the following amounts: a reduction of $63,000 in 2009 and increases of $335,000 in 2008 and $239,000 in 2007. These asset retirement obligations account for the difference between our obligations to the landlord under the two land leases and our subtenant’s obligations to us under the subleases.

J.   In connection with the acquisition of seven properties during 2007, we acquired restricted escrow funds totaling $2.6 million. During the remainder of 2007, all of these funds were invested in improvements to these properties.

14.           Employee Benefit Plan

We have a 401(k) plan covering substantially all of our employees. Under our 401(k) plan, employees may elect to make contributions to the plan up to a maximum of 60% of their compensation, subject to limits under the IRS Code. We match 50% of our employee’s contributions, up to 3% of the employee’s compensation. Our aggregate matching contributions each year have been immaterial to our results of operations.

15.           Common Stock Incentive Plan

In 2003, our Board of Directors adopted, and stockholders approved, the 2003 Incentive Award Plan of Realty Income Corporation (the "Stock Plan") to enable us to attract and retain the services of directors, employees and consultants, considered essential to our long-term success. The Stock Plan offers our directors, employees and consultants an opportunity to own stock in Realty Income and/or rights that will reflect our growth, development and financial success. The Stock Plan was amended and restated by our Board of Directors in February 2006 and in May 2007. Under the terms of this plan, the aggregate number of shares of our common stock subject to options, stock purchase rights (SPR), stock appreciation rights (SAR) and other awards will be no more than 3,428,000 shares. The maximum number of shares that may be subject to options, SPR, SAR and other awards granted under the plan to any individual in any calendar year may not exceed 1,600,000 shares. This plan has a term of 10 years from the date it was adopted by our Board of Directors, which was March 12, 2003. To date, we have not issued any SPR or SAR.

The amount of share-based compensation costs recognized in "general and administrative expense" on our consolidated statements of income during 2009 was $4.7 million, during 2008 was $5.0 million and during 2007 was $3.9 million.

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The following table summarizes our common stock grant activity under our Stock Plan. Our common stock grants vest over periods ranging from immediately to 10 years.

	2009					2008					2007
	Number of shares			Weighted average price(1)		Number of shares			Weighted average price(1)		Number of shares			Weighted average price(1)
Outstanding nonvested shares, beginning of year		994,453		$	19.70		994,572		$	19.46		868,726		$	17.96
Shares granted		142,860			22.86		249,447			26.63		276,631			27.64
Shares vested		(214,521	)		23.14		(188,215	)		21.96		(149,284	)		20.94
Shares forfeited		(69,558	)		25.95		(61,351	)		22.13		(1,501	)		24.81
Outstanding nonvested shares, end of year		853,234		$	19.14		994,453		$	19.70		994,572		$	19.46

(1) Grant date fair value.

During 2009, we issued 142,860 shares of common stock under our Stock Plan. These shares vest over the following service periods: 25,000 vested immediately, 14,500 vest over a service period of three years and 103,360 vest over a service period of five years.

The vesting schedule for shares granted to non-employee directors is as follows:

   ● For directors with less than six years of service at the date of grant, shares vest in 33.33% increments on each of the first three anniversaries of the date the shares of stock are granted;

   ● For directors with six years of service at the date of grant, shares vest in 50% increments on each of the first two anniversaries of the date the shares of stock are granted;

   ● For directors with seven years of service at the date of grant, shares are 100% vested on the first anniversary of the date the shares of stock are granted; and

   ● For directors with eight or more years of service at the date of grant, there is immediate vesting as of the date the shares of stock are granted.

In August 2008, our Board of Directors approved a new vesting schedule for shares granted to employees after August 20, 2008. The reason for this change was to provide a shorter vesting period for employees who were closer to the age of retirement, and to adjust the vesting period for employees age 55 and below to be more in line with comparable vesting schedules in the market. The new vesting schedule for shares granted to employees is as follows:

   ● For employees age 55 and below at the grant date, shares vest in 20% increments on each of the first five anniversaries of the grant date;

   ● For employees age 56 at the grant date, shares vest in 25% increments on each of the first four anniversaries of the grant date;

   ● For employees age 57 at the grant date, shares vest in 33.33% increments on each of the first three anniversaries of the grant date;

   ● For employees age 58 at the grant date, shares vest in 50% increments on each of the first two anniversaries of the grant date;

   ● For employees age 59 at the grant date, shares are 100% vested on the first anniversary of the grant date; and

   ● For employees age 60 and above at the grant date, shares vest immediately on the grant date.

In addition, after they have been employed for six full months, all non-executive employees receive 200 shares of nonvested stock which vests over a five year period.

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Prior to August 20, 2008, shares granted to employees age 49 and below at the grant date vested in 10% increments on each of the first ten anniversaries of the grant date, and shares granted to employees age 50 through 55 at the grant date vested in 20% increments on each of the first five anniversaries of the grant date.  The consolidation of these two groups represents the only difference between the new and prior vesting schedules.

As of December 31, 2009, the remaining unamortized share-based compensation expense totaled $16.3 million, which is being amortized on a straight-line basis over the service period of each applicable award. The amount of share-based compensation is based on the fair value of the stock at the grant date. We define the grant date as the date the recipient and Realty Income have a mutual understanding of the key terms and condition of the award, and the recipient of the grant begins to benefit from, or be adversely affected by, subsequent changes in the price of the shares.

The effect of pre-vesting forfeitures on our recorded expense has historically been negligible. Any future pre-vesting forfeitures are also expected to be negligible, and we will record the benefit related to such forfeitures as they occur. Under the terms of our Stock Plan, we pay non-refundable dividends to the holders of our nonvested shares. Applicable accounting guidance requires that the dividends paid to holders of these nonvested shares be charged as compensation expense to the extent that they relate to nonvested shares that do not or are not expected to vest. However, given the negligible historical and prospective forfeiture rate determined by us, we did not record any amount to compensation expense related to dividends paid in 2009, 2008 or 2007.

No stock options were granted after January 1, 2002, all outstanding options were fully vested as of December 31, 2006, and 2006 represented the last year for which we recorded expense on our stock option awards. Stock options were granted with an exercise price equal to the underlying stock’s fair market value at the date of grant. Stock options expire ten years from the date they are granted and vested over service periods of one, three, four or five years.

The following table summarizes our stock option activity for the years:

	2009					2008					2007
	Number of shares			Weighted average exercise price		Number of shares			Weighted average exercise price		Number of shares			Weighted average exercise price
Outstanding options, beginning of year		21,294		$	13.33		45,007		$	12.71		106,368		$	13.06
Options exercised		(15,448	)		12.81		(23,713	)		12.15		(61,361	)		13.32
Outstanding and exercisable options, end of year		5,846		$	14.70		21,294		$	13.33		45,007		$	12.71

At December 31, 2009, the options outstanding and exercisable had an exercise price of $14.70, an expiration date of December 2011 and a remaining term of 2.0 years.

The intrinsic value of a stock option is the amount by which the market value of the underlying stock at December 31 of each year exceeds the exercise price of the option. The market value of our stock was $25.91, $23.15 and $27.02 at December 31, 2009, 2008 and 2007, respectively. The total intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 was $157,000, $319,000 and $904,000, respectively. The aggregate intrinsic value of options outstanding and exercisable was $66,000, $209,000 and $644,000 at December 31, 2009, 2008 and 2007, respectively.

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16.           Segment Information

We evaluate performance and make resource allocation decisions on an industry by industry basis. For financial reporting purposes, we have grouped our tenants into 31 industry and activity segments (including properties owned by Crest that are grouped together as a segment). All of the properties are incorporated into one of the applicable segments. Because almost all of our leases require the tenant to pay operating expenses, revenue is the only component of segment profit and loss we measure.

The following tables set forth certain information regarding the properties owned by us, classified according to the business of the respective tenants, as of December 31, 2009 (dollars in thousands):

Assets, as of December 31:	2009		2008
Segment net real estate:
Automotive service	$	105,085	$	107,942
Automotive tire services		201,233		207,409
Child care		77,769		83,844
Convenience stores		477,555		472,588
Drug stores		141,057		145,919
Health and fitness		197,820		167,658
Motor vehicle dealerships		91,690		94,883
Restaurants		729,489		751,466
Sporting goods		63,665		65,657
Theaters		290,386		299,690
21 non-reportable segments		441,133		465,097
Total segment net real estate		2,816,882		2,862,153
Other intangible assets - Automotive tire service		647		706
Other intangible assets - Drug stores		6,066		6,727
Other intangible assets - Grocery stores		860		911
Other intangible assets - Health and fitness		845		--
Other intangible assets - Theaters		1,885		2,190
Other intangible assets - non-reportable segments		625		--
Goodwill – Automotive service		1,338		1,338
Goodwill – Child care		5,353		5,353
Goodwill – Convenience stores		2,074		2,074
Goodwill – Home furnishings		1,557		1,557
Goodwill – Restaurants		3,779		3,779
Goodwill – non reportable segments		3,105		3,105
Other corporate assets		69,771		104,286
Total assets	$	2,914,787	$	2,994,179

	Revenue
For the years ended December 31,	2009		2008		2007
Segment rental revenue:
Automotive service	$	15,735	$	15,817	$	15,047
Automotive tire services		22,616		22,040		21,113
Child care		23,761		24,247		23,129
Convenience stores		55,114		51,949		40,727
Drug stores		13,727		13,125		7,632
Health and fitness		19,280		18,390		14,874
Motor vehicle dealerships		8,837		9,290		8,640
Restaurants		69,456		70,986		59,058
Sporting goods		8,363		8,480		8,265
Theaters		30,078		29,640		26,120
21 non-reportable segments(1)		59,178		61,932		60,528
Total rental revenue		326,145		325,896		285,133
Other revenue		1,436		1,877		6,350
Total revenue	$	327,581	$	327,773	$	291,483

(1)  Crest’s revenue appears in “income from discontinued operations, real estate acquired for resale by Crest” and is not included in this table, which covers revenue but does not include revenue classified as part of income from discontinued operations.

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17.           Commitments and Contingencies

In the ordinary course of our business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.

At December 31, 2009, we have contingent payments of $1.2 million for tenant improvements and leasing costs. In addition, we have committed $295,000 under construction contracts, which is expected to be paid in the next six months.

We have certain properties that are subject to ground leases which are accounted for as operating leases.  At December 31, 2009, minimum future rental payments for the next five years and thereafter are as follows (dollars in thousands):

	Ground Leases Paid by Realty Income (1)		Ground Leases Paid by Our Tenants (2)		Total
2010	$	82	$	3,750	$	3,832
2011		69		3,736		3,805
2012		69		3,627		3,696
2013		69		3,485		3,554
2014		69		3,250		3,319
Thereafter		832		37,662		38,494
Total	$	1,190	$	55,510	$	56,700

 (1) Realty Income currently pays the ground lessors directly for the rent under the ground leases. A majority of this rent is reimbursed to Realty Income as additional rent from our tenants.

(2) Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

18.           Subsequent Events

We evaluated all events subsequent to the balance sheet date of December 31, 2009, through February 10, 2010, which is the date our consolidated financial statements were issued. We determined that no subsequent events require disclosure or adjustment to the consolidated financial statements, except as follows:

In January 2010 and February 2010, we declared the following dividends, which will be paid in February 2010 and March 2010, respectively:

●   $0.143 per share to our common stockholders;

●   $0.1536459 per share to our Class D preferred stockholders; and

●   $1.675 per share to our Class E preferred stockholders.

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REALTY INCOME CORPORATION AND SUBSIDIARIES

Consolidated Quarterly Financial Data

(dollars in thousands, except per share data)

(not covered by Report of Independent Registered Public Accounting Firm)

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter		Year(2)
2009(1)
Total revenue	$	82,558	$	81,376	$	81,851	$	81,796	$	327,581
Depreciation and amortization expense		22,787		22,826		22,845		22,925		91,383
Interest expense		21,410		21,367		21,374		21,377		85,528
Other expenses		8,405		7,136		6,540		6,456		28,537
Income from continuing operations		29,956		30,047		31,092		31,038		122,133
Income from discontinued operations		128		2,513		2,060		4,293		8,994
Net income		30,084		32,560		33,152		35,331		131,127
Net income available to common stockholders		24,021		26,497		27,089		29,268		106,874
Net income per common share:     Basic and diluted		0.23		0.26		0.26		0.28		1.03
Dividends paid per common share		0.4252500		0.4261875		0.4271250		0.4280625		1.7066250
2008(1)
Total revenue	$	82,050	$	81,589	$	81,932	$	82,203	$	327,773
Depreciation and amortization expense		21,920		22,616		22,669		22,735		89,941
Interest expense		23,386		23,929		23,915		22,726		93,956
Other expenses		7,150		7,233		7,115		6,954		28,449
Income from continuing operations		29,594		27,811		28,233		29,788		115,427
Income from discontinued operations		167		5,240		6,464		4,544		16,414
Net income		29,761		33,051		34,697		34,332		131,841
Net income available to common stockholders		23,698		26,988		28,634		28,269		107,588
Net income per common share:     Basic and diluted		0.24		0.27		0.29		0.27		1.06
Dividends paid per common share		0.4102500		0.4121250		0.4165000		0.4233750		1.6622500

(1)   The consolidated quarterly financial data includes revenues and expenses from our continuing and discontinued operations. The results of operations related to certain properties, classified as held for sale or disposed of, have been reclassified to income from discontinued operations. Therefore, some of the information may not agree to our previously filed 10-Qs.

(2)   Amounts for each period are calculated independently. The sum of the quarters may differ from the annual amount.

Item 9:                        Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

We have had no disagreements with our independent registered public accounting firm on accountancy or financial disclosure, nor have we changed accountants in the two most recent fiscal years.

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Item 9A:                      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of and for the year ended December 31, 2009, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

Management's Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management has used the framework set forth in the report entitled "Internal Control--Integrated Framework" published by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission to evaluate the effectiveness of the Company's internal control over financial reporting. Management has concluded that the Company's internal control over financial reporting was effective as of the end of the most recent fiscal year.  KPMG LLP has issued an attestation report on the effectiveness of the Company's internal control over financial reporting.

Submitted on February 10, 2010 by,

Thomas A Lewis, Chief Executive Officer and Vice Chairman

Paul M. Meurer, Chief Financial Officer, Executive Vice President and Treasurer

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Changes in Internal Controls

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation in the fourth quarter of 2009. As of December 31, 2009, there were no material weaknesses in our internal controls, and therefore no corrective actions were taken.

Limitations on the Effectiveness of Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Item 9B:                      Other Information

None.

PART III

Item 10:                      Directors, Executive Officers and Corporate Governance

The information required by this item is set forth under the captions “Board of Directors” and “Executive Officers of the Company” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference. The Annual Meeting of Stockholders is presently scheduled to be held on May 12, 2010.

Item 11:                      Executive Compensation

The information required by this item is set forth under the caption “Executive Compensation” in our definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 12:                 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 13:                      Certain Relationships, Related Transactions and Director Independence

The information required by this item is set forth under the caption “Related Party Transactions” in our definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

Item 14:                      Principal Accounting Fees and Services

The information required by this item is set forth under the caption “Independent Registered Public Accounting Firm Fees and Services” in our definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

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PART IV

Item 15:                      Exhibits and Financial Statement Schedules

A.           The following documents are filed as part of this report.

1.   Financial Statements (see Item 8)

a.     Report of Independent Registered Public Accounting Firm

b.     Consolidated Balance Sheets,

December 31, 2009 and 2008

c.     Consolidated Statements of Income,

Years ended December 31, 2009, 2008 and 2007

d.     Consolidated Statements of Stockholders’ Equity,

Years ended December 31, 2009, 2008 and 2007

e.     Consolidated Statements of Cash Flows,

Years ended December 31, 2009, 2008 and 2007

f.     Notes to Consolidated Financial Statements

g.     Consolidated Quarterly Financial Data,

(unaudited) for 2009 and 2008

2.   Financial Statement Schedule.  Reference is made to page F-1 of this report for Schedule III Real Estate and Accumulated Depreciation (electronically filed with the Securities and Exchange Commission).

Schedules not Filed:  All schedules, other than those indicated in the Table of Contents, have been omitted as the required information is either not material, inapplicable or the information is presented in the financial statements or related notes.

3.   Exhibits

Articles of Incorporation and By-Laws

    Exhibit No.       Description

3.1 Articles of Incorporation of the Company, as amended by amendment No. 1 dated May 10, 2005 and amendment No. 2 dated May 10, 2005 (filed as exhibit 3.1 to the Company’s Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).

3.2 Amended and Restated Bylaws of the Company dated December 12, 2007 (filed as exhibit 3.1 to the Company's Form 8-K, filed on December 13, 2007 and dated December 12, 2007 and incorporated herein by reference), as amended on May 13, 2008 (amendment filed as exhibit 3.1 to the Company’s Form 8-K, filed on May 14, 2008 and dated May 13, 2008, and incorporated herein by reference).

3.3 Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 7.375% Monthly Income Class D Cumulative Redeemable Preferred Stock (filed as exhibit 3.8 to the Company’s Form 8-A, filed on May 25, 2004 and incorporated herein by reference).

-69-

3.4 Articles Supplementary to the Articles of Incorporation of the Company classifying and designating additional shares of the 7.375% Monthly Income Class D Cumulative Redeemable Preferred Stock (filed as exhibit 3.2 to the Company's Form 8-K, filed on October 19, 2004 and dated October 12, 2004, and incorporated herein by reference).

3.5 Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 6.75% Class E Cumulative Redeemable Preferred Stock (filed as exhibit 3.5 to the Company’s Form 8-A, filed on December 5, 2006 and incorporated herein by reference).

Instruments defining the rights of security holders, including indentures

4.1 Indenture dated as of October 28, 1998 between the Company and The Bank of New York (filed as exhibit 4.1 to the Company’s Form 8-K, filed on October 28, 1998 and dated October 27, 1998 and incorporated herein by reference).

4.2 Form of 5.375% Senior Notes due 2013 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on March 7, 2003 and dated March 5, 2003 and incorporated herein by reference).

4.3 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.375% Senior Notes due 2013 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on March 7, 2003 and dated March 5, 2003 and incorporated herein by reference).

4.4 Form of 5.50% Senior Notes due 2015 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on November 24, 2003 and dated November 19, 2003 and incorporated herein by reference).

4.5 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.50% Senior Notes due 2015 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on November 24, 2003 and dated November 19, 2003 and incorporated herein by reference).

4.6 Form of 5.875% Senior Notes due 2035 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on March 11, 2005 and dated March 8, 2005 and incorporated herein by reference).

4.7 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.875% Senior Debentures due 2035 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on March 11, 2005 and dated March 8, 2005 and incorporated herein by reference).

4.8 Form of 5.375% Senior Notes due 2017 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on September 16, 2005 and dated September 8, 2005 and incorporated herein by reference).

4.9 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.375% Senior Notes due 2017 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 16, 2005 and dated September 8, 2005 and incorporated herein by reference).

4.10 Form of 5.95% Senior Notes due 2016 (filed as exhibit 4.2 to the Company’s Form 8-K, filed on September 18, 2006 and dated September 6, 2006 and incorporated herein by reference).

-70-

4.11 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled 5.95% Senior Notes due 2016 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 18, 2006 and dated September 6, 2006 and incorporated herein by reference).

4.12 Form of 6.75% Notes due 2019 (filed as exhibit 4.2 to Company’s Form 8-K, filed on September 5, 2007 and dated August 30, 2007 and incorporated herein by reference).

4.13 Officer’s Certificate pursuant to sections 201, 301 and 303 of the Indenture dated October 28, 1998 between the Company and The Bank of New York Trust Company, N.A., as Trustee, establishing a series of securities entitled 6.75% Senior Notes due 2019 (filed as exhibit 4.3 to the Company’s Form 8-K, filed on September 5, 2007 and dated August 30, 2007 and incorporated herein by reference).

Material Contracts

10.1 Form indemnification agreement between the Company and each executive officer and each director of the Board of Directors of the Company (filed as exhibit 10.1 to the Company’s Form 8-K, filed on August 26, 2005 and dated August 23, 2005 and incorporated herein by reference).

10.2 1994 Stock Option and Incentive Plan (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (registration number 33-95708), dated August 11, 1995, and incorporated herein by reference).

10.3 First Amendment to the 1994 Stock Option and Incentive Plan, dated June 12, 1997 (filed as Exhibit 10.9 to the Company’s Form 8-B, filed on July 29, 1997 and incorporated herein by reference).

10.4 Second Amendment to the 1994 Stock Option and Incentive Plan, dated December 16, 1997 (filed as Exhibit 10.9 to the Company’s Form 10-K for the year ended December 31, 1997 and incorporated herein by reference).

10.5 Management Incentive Plan (filed as Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 1997 and incorporated herein by reference).

10.6 Form of Nonqualified Stock Option Agreement for Independent Directors (filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1997 and incorporated herein by reference).

10.7 Form of Restricted Stock Agreement between the Company and Executive Officers (filed as exhibit 10.11 to the Company’s Form 8-K, filed on January 6, 2005 and dated January 1, 2005 and incorporated herein by reference).

10.8 2003 Stock Incentive Award Plan of Realty Income Corporation, as amended and restated February 21, 2006 (filed as exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).

10.9 Amendment dated May 15, 2007 to the Amended and Restated 2003 Stock Incentive Award Plan of Realty Income Corporation (filed as exhibit 10.1 to the Company’s Form 10-Q, for the quarter ended June 30, 2007 and incorporated herein by reference).

10.10 Form of Restricted Stock Agreement (filed as exhibit 10.2 to the Company’s Form 10-Q, for the quarter ended June 30, 2007 and incorporated herein by reference).

-71-

10.11 Credit Agreement dated May 15, 2008 (filed as exhibit 10.1 to the Company’s Form 8-K, filed on May 16, 2008 and dated May 15, 2008 and incorporated herein by reference).

10.12 Amended and Restated Form of Employment Agreement between the Company and its Executive Officers (filed as exhibit 10.1 to the Company’s Form 8-K, filed on January 7, 2010 and dated January 5, 2010 and incorporated herein by reference).

Statement of Ratios

*12.1 Statements re computation of ratios.

Subsidiaries of the Registrant

*21.1 Subsidiaries of the Company as of February 10, 2010.

Consents of Experts and Counsel

*23.1 Consent of Independent Registered Public Accounting Firm.

Certifications

*31.1 Rule 13a-14(a) Certifications as filed by the Chief Executive Officer pursuant to SEC release No. 33-8212 and 34-47551.

*31.2 Rule 13a-14(a) Certifications as filed by the Chief Financial Officer pursuant to SEC release No. 33-8212 and 34-47551.

*32 Section 1350 Certifications as furnished by the Chief Executive Officer and the Chief Financial Officer pursuant to SEC release No. 33-8212 and 34-47551.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

REALTY INCOME CORPORATION

By:       /s/THOMAS A. LEWIS                                                      Date: February 10, 2010

Thomas A. Lewis

Vice Chairman of the Board of Directors,

Chief Executive Officer

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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                                                       Date: February 10, 2010

Donald R. Cameron

Non-Executive Chairman of the Board of Directors

By:        /s/THOMAS A. LEWIS                                                        Date: February 10, 2010

Thomas A. Lewis

Vice Chairman of the Board of Directors,

Chief Executive Officer

(Principal Executive Officer)

By:        /s/KATHLEEN R. ALLEN, Ph.D.                                                            Date: February 10, 2010

Kathleen R. Allen, Ph.D.

Director

By:       /s/PRIYA CHERIAN HUSKINS                                                               Date: February 10, 2010

Priya Cherian Huskins

Director

By:       /s/MICHAEL D. MCKEE                                                            Date: February 10, 2010

Michael D. McKee

Director

By:       /s/GREGORY T. MCLAUGHLIN                                                              Date: February 10, 2010

Gregory T. McLaughlin

Director

By:       /s/RONALD L. MERRIMAN                                                                    Date: February 10, 2010

Ronald L. Merriman

Director

By:       /s/PAUL M. MEURER                                                          Date: February 10, 2010

Paul M. Meurer

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

By:       /s/GREGORY J. FAHEY                                                                        Date: February 10, 2010

Gregory J. Fahey

Vice President, Controller

(Principal Accounting Officer)

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REALTY INCOME CORPORATION AND SUBSIDIARIES
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Apparel Stores
Little Rock	AR	1,079,232	2,594,956	40,439	52,605	1,079,232	2,688,000	3,767,232	1,239,119		07/21/98	300
Mesa	AZ	619,035	867,013	1,760	43,549	619,035	912,322	1,531,357	411,523		02/11/99	300
Danbury	CT	1,096,861	6,217,688	43,163	None	1,096,861	6,260,851	7,357,712	3,087,358		09/30/97	300
Manchester	CT	771,660	3,653,539	1,661	None	771,660	3,655,200	4,426,860	1,723,532		03/26/98	300
Manchester	CT	1,250,464	5,917,037	3,555	None	1,250,464	5,920,592	7,171,056	2,791,623		03/26/98	300
Staten Island	NY	4,202,093	3,385,021	None	None	4,202,093	3,385,021	7,587,114	1,596,290		03/26/98	300
Automotive Collision Services
Highlands Ranch	CO	583,289	2,139,057	None	None	583,289	2,139,057	2,722,346	487,707	07/10/07	08/11/03	300
Littleton	CO	601,388	2,169,898	None	None	601,388	2,169,898	2,771,286	347,971	02/02/06	11/12/04	300
Parker	CO	678,768	2,100,854	None	None	678,768	2,100,854	2,779,622	485,743	02/20/04	07/03/03	300
Thornton	CO	693,323	1,896,616	None	128	693,323	1,896,744	2,590,067	380,558	10/05/04	10/15/03	300
Cumming	GA	661,624	1,822,363	None	None	661,624	1,822,363	2,483,987	453,884	09/18/03	12/31/02	300
Douglasville	GA	679,868	1,935,515	None	None	679,868	1,935,515	2,615,383	487,810	08/11/03	12/30/02	300
Morrow	GA	725,948	1,846,315	None	None	725,948	1,846,315	2,572,263	470,745	07/07/03	08/30/02	300
Peachtree City	GA	1,190,380	689,284	None	None	1,190,380	689,284	1,879,664	192,693	12/16/02	09/19/02	300
Ham Lake	MN	192,610	1,930,958	None	None	192,610	1,930,958	2,123,568	389,622	07/01/04	10/31/03	300
Cary	NC	610,389	1,492,235	None	None	610,389	1,492,235	2,102,624	216,374		05/25/06	300
Durham	NC	680,969	1,323,140	None	24	680,969	1,323,164	2,004,133	191,864		05/25/06	300
Wilmington	NC	378,813	1,150,679	None	None	378,813	1,150,679	1,529,492	204,252	07/15/05	12/21/04	300
Bartlett	TN	648,526	1,960,733	None	None	648,526	1,960,733	2,609,259	395,636	08/03/04	10/27/03	300
Automotive Parts
Millbrook	AL	108,000	518,741	4,157	211	108,000	523,109	631,109	227,361	12/10/98	01/21/99	300
Montgomery	AL	254,465	502,350	10,819	211	254,465	513,380	767,845	233,071		06/30/98	300
Wynne	AR	70,000	547,576	26,595	None	70,000	574,171	644,171	264,673	11/10/98	02/24/99	300
Phoenix	AZ	231,000	513,057	None	88	231,000	513,145	744,145	450,069		11/09/87	300
Phoenix	AZ	222,950	495,178	None	190	222,950	495,368	718,318	396,629		11/02/89	300
Tucson	AZ	194,250	431,434	None	None	194,250	431,434	625,684	379,888		10/30/87	300
Grass Valley	CA	325,000	384,955	None	None	325,000	384,955	709,955	329,256		05/20/88	300
Jackson	CA	300,000	390,849	6,775	96	300,000	397,720	697,720	334,041		05/17/88	300
Sacramento	CA	210,000	466,419	None	127	210,000	466,546	676,546	409,151		11/25/87	300
Turlock	CA	222,250	493,627	None	None	222,250	493,627	715,877	431,233		12/30/87	300
Denver	CO	141,400	314,056	None	146	141,400	314,202	455,602	275,557		11/18/87	300
Denver	CO	315,000	699,623	None	128	315,000	699,751	1,014,751	599,219		05/16/88	300
Littleton	CO	252,925	561,758	None	274	252,925	562,032	814,957	487,039		02/12/88	300
Smyrna	DE	232,273	472,855	None	None	232,273	472,855	705,128	215,150		08/07/98	300
Deerfield Beach	FL	475,000	871,738	2,420	16,071	475,000	890,229	1,365,229	375,729		01/29/99	300
Atlanta	GA	652,551	763,360	None	45,476	652,551	808,836	1,461,387	340,016		12/18/98	300
Council Bluffs	IA	194,355	431,668	None	None	194,355	431,668	626,023	369,690		05/19/88	300
Lewiston	ID	138,950	308,612	None	None	138,950	308,612	447,562	272,812		09/16/87	300
Moscow	ID	117,250	260,417	None	None	117,250	260,417	377,667	230,208		09/14/87	300
Peoria	IL	193,868	387,737	19,808	None	193,868	407,545	601,413	206,395		11/26/96	300
Brazil	IN	183,952	453,831	8,942	173	183,952	462,946	646,898	196,459		03/31/99	300
Muncie	IN	148,901	645,660	147,678	28,805	148,901	822,143	971,044	369,897		11/26/96	300
Princeton	IN	134,209	560,113	None	211	134,209	560,324	694,533	241,829		03/31/99	300
Vincennes	IN	185,312	489,779	None	173	185,312	489,952	675,264	211,489		03/31/99	300
Kansas City	KS	185,955	413,014	12,810	None	185,955	425,824	611,779	354,494		05/13/88	300
Kansas City	KS	222,000	455,881	18,738	146	222,000	474,765	696,765	394,093		05/16/88	300
Alma	MI	155,000	600,282	None	122	155,000	600,404	755,404	255,071	04/29/99	02/10/99	300
Lansing	MI	265,000	574,931	57,278	209	265,000	632,418	897,418	266,871	04/30/99	12/03/98	300
Sturgis	MI	109,558	550,274	None	None	109,558	550,274	659,832	243,015		12/30/98	300
Batesville	MS	190,124	485,670	None	None	190,124	485,670	675,794	222,599		07/27/98	300
Horn Lake	MS	142,702	514,779	None	211	142,702	514,990	657,692	237,773		06/30/98	300

F-1

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Jackson	MS	248,483	572,522	None	211	248,483	572,733	821,216	232,001		11/16/99	300
Richland	MS	243,565	558,645	None	211	243,565	558,856	802,421	224,522		12/21/99	300
Missoula	MT	163,100	362,249	None	None	163,100	362,249	525,349	318,969		10/30/87	300
Kearney	NE	173,950	344,393	None	191	173,950	344,584	518,534	267,368		05/01/90	300
Omaha	NE	196,000	435,321	None	None	196,000	435,321	631,321	372,818		05/26/88	300
Omaha	NE	199,100	412,042	None	None	199,100	412,042	611,142	352,465		05/27/88	300
Rio Rancho	NM	211,577	469,923	None	None	211,577	469,923	681,500	407,285		02/26/88	300
Las Vegas	NV	161,000	357,585	260,000	None	161,000	617,585	778,585	410,196		10/29/87	300
Canton	OH	396,560	597,553	None	25,682	396,560	623,235	1,019,795	273,137		08/14/98	300
Hamilton	OH	183,000	515,727	2,941	122	183,000	518,790	701,790	221,871	04/07/99	12/03/98	300
Hubbard	OH	147,043	481,217	450	156	147,043	481,823	628,866	222,323		06/30/98	300
Albany	OR	152,250	338,153	None	215	152,250	338,368	490,618	300,247		08/24/87	300
Beaverton	OR	210,000	466,419	None	215	210,000	466,634	676,634	414,080		08/26/87	300
Portland	OR	190,750	423,664	None	215	190,750	423,879	614,629	376,136		08/12/87	300
Portland	OR	147,000	326,493	None	215	147,000	326,708	473,708	289,899		08/26/87	300
Salem	OR	136,500	303,170	None	215	136,500	303,385	439,885	269,200		08/20/87	300
Butler	PA	339,929	633,078	20,558	230	339,929	653,866	993,795	294,862		08/07/98	300
Dover	PA	265,112	593,341	None	None	265,112	593,341	858,453	273,925		06/30/98	300
Enola	PA	220,228	546,026	None	None	220,228	546,026	766,254	242,988		11/10/98	300
Hanover	PA	132,500	719,511	None	232	132,500	719,743	852,243	298,815	07/26/99	05/13/99	300
Harrisburg	PA	327,781	608,291	None	None	327,781	608,291	936,072	280,826		06/30/98	300
Harrisburg	PA	283,417	352,473	None	None	283,417	352,473	635,890	159,205		09/30/98	300
Lancaster	PA	199,899	774,838	10,913	None	199,899	785,751	985,650	358,433		08/14/98	300
New Castle	PA	180,009	525,774	8,120	230	180,009	534,124	714,133	246,981		06/30/98	300
Reading	PA	379,000	658,722	10,100	232	379,000	669,054	1,048,054	283,351	06/09/99	12/04/98	300
Columbia	TN	273,120	431,716	None	211	273,120	431,927	705,047	182,092		06/30/99	300
Bellevue	WA	185,500	411,997	None	117	185,500	412,114	597,614	365,714		08/06/87	300
Bellingham	WA	168,000	373,133	None	117	168,000	373,250	541,250	331,223		08/20/87	300
Hazel Dell	WA	168,000	373,135	None	None	168,000	373,135	541,135	318,627		05/23/88	300
Kenmore	WA	199,500	443,098	None	117	199,500	443,215	642,715	393,316		08/20/87	300
Kennewick	WA	161,350	358,365	None	9	161,350	358,374	519,724	318,044		08/26/87	300
Kent	WA	199,500	443,091	None	117	199,500	443,208	642,708	393,310		08/06/87	300
Lakewood	WA	191,800	425,996	None	117	191,800	426,113	617,913	378,138		08/18/87	300
Moses Lake	WA	138,600	307,831	None	None	138,600	307,831	446,431	273,194		08/12/87	300
Renton	WA	185,500	412,003	None	117	185,500	412,120	597,620	364,286		09/15/87	300
Seattle	WA	162,400	360,697	None	117	162,400	360,814	523,214	320,187		08/20/87	300
Silverdale	WA	183,808	419,777	None	117	183,808	419,894	603,702	371,158		09/16/87	300
Tacoma	WA	196,000	435,324	None	117	196,000	435,441	631,441	383,390		10/15/87	300
Vancouver	WA	180,250	400,343	None	215	180,250	400,558	580,808	355,438		08/20/87	300
Walla Walla	WA	170,100	377,793	None	6,604	170,100	384,397	554,497	337,894		08/06/87	300
Wenatchee	WA	148,400	329,602	None	None	148,400	329,602	478,002	292,515		08/25/87	300
Automotive Service
Flagstaff	AZ	144,821	417,485	None	None	144,821	417,485	562,306	189,540	04/11/02	08/29/97	300
Mesa	AZ	210,620	475,072	None	None	210,620	475,072	685,692	144,893		05/14/02	300
Phoenix	AZ	189,341	546,984	None	110	189,341	547,094	736,435	166,871		05/14/02	300
Phoenix	AZ	384,608	279,824	None	None	384,608	279,824	664,432	85,344		05/14/02	300
Sierra Vista	AZ	175,114	345,508	None	None	175,114	345,508	520,622	105,378		05/14/02	300
Tucson	AZ	226,596	437,972	None	None	226,596	437,972	664,568	133,580		05/14/02	300
Bakersfield	CA	65,165	206,927	None	None	65,165	206,927	272,092	63,111		05/14/02	300
Chula Vista	CA	313,293	409,654	None	None	313,293	409,654	722,947	223,261	05/01/96	01/19/96	300
Dublin	CA	415,620	1,153,928	None	None	415,620	1,153,928	1,569,548	351,946		05/14/02	300
Folsom	CA	471,813	325,610	None	None	471,813	325,610	797,423	99,309		05/14/02	300
Indio	CA	264,956	265,509	None	None	264,956	265,509	530,465	80,978		05/14/02	300
Los Angeles	CA	580,446	158,876	None	None	580,446	158,876	739,322	48,455		05/14/02	300

F-2

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Oxnard	CA	186,980	198,236	None	None	186,980	198,236	385,216	60,460		05/14/02	300
Simi Valley	CA	213,920	161,012	None	None	213,920	161,012	374,932	49,107		05/14/02	300
Vacaville	CA	358,067	284,931	None	None	358,067	284,931	642,998	86,902		05/14/02	300
Aurora	CO	231,314	430,495	None	None	231,314	430,495	661,809	39,462		09/04/07	300
Broomfield	CO	154,930	503,626	None	None	154,930	503,626	658,556	269,440	08/22/96	03/15/96	300
Denver	CO	79,717	369,587	None	169	79,717	369,756	449,473	360,640		10/08/85	300
Denver	CO	239,024	444,785	None	None	239,024	444,785	683,809	40,772		09/04/07	300
Lakewood	CO	70,422	132,296	None	None	70,422	132,296	202,718	12,127		09/04/07	300
Longmont	CO	87,385	163,169	None	None	87,385	163,169	250,554	14,957		09/04/07	300
Thornton	CO	276,084	415,464	None	None	276,084	415,464	691,548	215,191	12/31/96	10/31/96	300
Hartford	CT	248,540	482,460	None	None	248,540	482,460	731,000	256,508		09/30/96	300
Southington	CT	225,882	672,910	None	None	225,882	672,910	898,792	337,466		06/06/97	300
Vernon	CT	81,529	300,518	None	None	81,529	300,518	382,047	90,656		06/27/02	300
Carol City	FL	163,239	262,726	None	None	163,239	262,726	425,965	79,256		06/27/02	300
Jacksonville	FL	76,585	355,066	6,980	240	76,585	362,286	438,871	346,025		12/23/85	300
Lauderdale Lakes	FL	65,987	305,931	None	None	65,987	305,931	371,918	294,905		02/19/86	300
Orange City	FL	99,613	139,008	None	None	99,613	139,008	238,621	42,395		05/14/02	300
Seminole	FL	68,000	315,266	None	124	68,000	315,390	383,390	305,834		12/23/85	300
Sunrise	FL	80,253	372,070	None	None	80,253	372,070	452,323	358,770		02/14/86	300
Tampa	FL	70,000	324,538	None	162	70,000	324,700	394,700	314,855		12/27/85	300
Tampa	FL	67,000	310,629	None	124	67,000	310,753	377,753	301,338		12/27/85	300
Tampa	FL	86,502	401,041	None	141	86,502	401,182	487,684	380,871		07/23/86	300
Atlanta	GA	55,840	258,889	None	452	55,840	259,341	315,181	251,890		11/27/85	300
Bogart	GA	66,807	309,733	None	None	66,807	309,733	376,540	300,344		12/20/85	300
Douglasville	GA	214,771	129,519	None	None	214,771	129,519	344,290	39,501		05/14/02	300
Duluth	GA	222,275	316,925	None	None	222,275	316,925	539,200	152,032	10/24/97	06/20/97	300
Duluth	GA	290,842	110,056	None	None	290,842	110,056	400,898	33,565		05/14/02	300
Gainesville	GA	53,589	248,452	None	None	53,589	248,452	302,041	240,921		12/19/85	300
Kennesaw	GA	266,865	139,425	None	None	266,865	139,425	406,290	42,523		05/14/02	300
Marietta	GA	60,900	293,461	67,871	446	60,900	361,778	422,678	290,417		12/26/85	300
Marietta	GA	69,561	346,024	None	356	69,561	346,380	415,941	329,979		06/03/86	300
Norcross	GA	244,124	151,831	None	None	244,124	151,831	395,955	46,306		05/14/02	300
Norcross	GA	503,773	937,121	39,032	21,600	503,773	997,753	1,501,526	119,282		11/22/06	300
Riverdale	GA	58,444	270,961	None	None	58,444	270,961	329,405	261,974		01/15/86	300
Rome	GA	56,454	261,733	None	None	56,454	261,733	318,187	253,800		12/19/85	300
Snellville	GA	253,316	132,124	None	None	253,316	132,124	385,440	40,296		05/14/02	300
Tucker	GA	78,646	364,625	None	9,589	78,646	374,214	452,860	354,182		12/18/85	300
Arlington Hts	IL	441,437	215,983	None	None	441,437	215,983	657,420	65,873		05/14/02	300
Chicago	IL	329,076	255,294	None	None	329,076	255,294	584,370	77,863		05/14/02	300
Round Lake Beach	IL	472,132	236,585	None	None	472,132	236,585	708,717	72,157		05/14/02	300
Westchester	IL	421,239	184,812	None	None	421,239	184,812	606,051	56,366		05/14/02	300
Anderson	IN	232,170	385,661	None	163	232,170	385,824	617,994	185,864		12/19/97	300
Indianapolis	IN	231,384	428,307	None	None	231,384	428,307	659,691	227,716		09/27/96	300
Michigan City	IN	392,638	297,650	-3,065	None	389,573	297,650	687,223	90,782		05/14/02	300
Warsaw	IN	140,893	228,116	None	None	140,893	228,116	369,009	69,574		05/14/02	300
Olathe	KS	217,995	367,055	None	16,747	217,995	383,802	601,797	185,359	04/22/97	11/11/96	300
Topeka	KS	32,022	60,368	None	None	32,022	60,368	92,390	5,534		09/04/07	300
Louisville	KY	56,054	259,881	None	64	56,054	259,945	315,999	252,059		12/17/85	300
Newport	KY	323,511	289,017	None	None	323,511	289,017	612,528	142,045		09/17/97	300
Billerica	MA	399,043	462,240	None	None	399,043	462,240	861,283	234,874		04/02/97	300
East Falmouth	MA	191,302	340,539	None	None	191,302	340,539	531,841	103,863		05/14/02	300
East Wareham	MA	149,680	278,669	None	None	149,680	278,669	428,349	84,992		05/14/02	300
Fairhaven	MA	138,957	289,294	None	None	138,957	289,294	428,251	88,232		05/14/02	300
Gardner	MA	138,990	289,361	None	None	138,990	289,361	428,351	88,253		05/14/02	300
Hyannis	MA	180,653	458,522	None	None	180,653	458,522	639,175	138,321		06/27/02	300
Lenox	MA	287,769	535,273	None	232	287,769	535,505	823,274	231,106		03/31/99	300

F-3

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Newburyport	MA	274,698	466,449	None	None	274,698	466,449	741,147	140,712		06/27/02	300
North Reading	MA	180,546	351,161	None	None	180,546	351,161	531,707	107,102		05/14/02	300
Orleans	MA	138,212	394,065	None	None	138,212	394,065	532,277	120,187		05/14/02	300
Aberdeen	MD	223,617	225,605	None	None	223,617	225,605	449,222	68,058		06/27/02	300
Bethesda	MD	282,717	525,928	None	None	282,717	525,928	808,645	48,210		09/04/07	300
Capital Heights	MD	547,173	219,979	-12,319	None	534,854	219,979	754,833	67,090		05/14/02	300
Clinton	MD	70,880	328,620	11,440	459	70,880	340,519	411,399	321,928		11/15/85	300
Lexington Park	MD	111,396	335,288	-7,600	None	103,796	335,288	439,084	102,259		05/14/02	300
Kalamazoo	MI	391,745	296,975	-2,196	None	389,549	296,975	686,524	90,576		05/14/02	300
Portage	MI	402,409	286,441	-2,112	None	400,297	286,441	686,738	87,363		05/14/02	300
Southfield	MI	275,952	350,765	None	None	275,952	350,765	626,717	106,982		05/14/02	300
Troy	MI	214,893	199,299	None	None	214,893	199,299	414,192	60,785		05/14/02	300
Minneapolis	MN	58,000	268,903	1,485	5	58,000	270,393	328,393	260,759		12/18/85	300
St. Cloud	MN	203,338	258,626	None	None	203,338	258,626	461,964	78,019		06/27/02	300
Independence	MO	297,641	233,152	None	None	297,641	233,152	530,793	121,628		12/20/96	300
Asheville	NC	441,746	242,565	None	None	441,746	242,565	684,311	73,980		05/14/02	300
Charlotte	NC	508,100	457,295	None	None	508,100	457,295	965,395	121,183		05/27/03	300
Concord	NC	237,688	357,976	None	152	237,688	358,128	595,816	164,309		11/05/97	300
Durham	NC	55,074	255,336	None	289	55,074	255,625	310,699	248,511		11/13/85	300
Durham	NC	354,676	361,203	3,400	266	354,676	364,869	719,545	180,831	08/29/97	03/31/97	300
Fayetteville	NC	224,326	257,733	None	205	224,326	257,938	482,264	124,227		12/03/97	300
Greensboro	NC	286,068	244,606	None	None	286,068	244,606	530,674	74,596		05/14/02	300
Matthews	NC	295,580	338,472	10,000	192	295,580	348,664	644,244	158,060	08/28/98	02/27/98	300
Pineville	NC	254,460	355,630	None	205	254,460	355,835	610,295	174,912	08/28/97	04/16/97	300
Raleigh	NC	89,145	413,301	None	94	89,145	413,395	502,540	403,209		10/28/85	300
Raleigh	NC	398,694	263,621	None	None	398,694	263,621	662,315	128,700		10/01/97	300
Salisbury	NC	235,614	150,592	None	None	235,614	150,592	386,206	45,929		05/14/02	300
Fargo	ND	53,973	100,262	None	None	53,973	100,262	154,235	9,191		09/04/07	300
Lincoln	NE	337,138	316,958	None	None	337,138	316,958	654,096	96,669		05/14/02	300
Scotts Bluff	NE	33,307	63,355	None	None	33,307	63,355	96,662	5,807		09/04/07	300
Cherry Hill	NJ	463,808	862,240	None	None	463,808	862,240	1,326,048	79,038		09/04/07	300
Edison	NJ	448,936	238,773	None	None	448,936	238,773	687,709	72,822		05/14/02	300
Glassboro	NJ	182,013	312,480	None	None	182,013	312,480	494,493	94,265		06/27/02	300
Hamilton Square	NJ	422,477	291,555	None	None	422,477	291,555	714,032	88,921		05/14/02	300
Hamilton Township	NJ	265,238	298,167	None	None	265,238	298,167	563,405	90,937		05/14/02	300
Pleasantville	NJ	77,105	144,693	None	None	77,105	144,693	221,798	13,263		09/04/07	300
Randolph	NJ	452,629	390,163	None	None	452,629	390,163	842,792	118,997		05/14/02	300
Westfield	NJ	705,337	288,720	None	None	705,337	288,720	994,057	88,055		05/14/02	300
Woodbury	NJ	212,788	320,283	None	None	212,788	320,283	533,071	97,683		05/14/02	300
Las Vegas	NV	326,879	359,101	None	None	326,879	359,101	685,980	109,524		05/14/02	300
Las Vegas	NV	316,441	369,768	None	None	316,441	369,768	686,209	112,777		05/14/02	300
Las Vegas	NV	252,169	562,715	None	None	252,169	562,715	814,884	171,626		05/14/02	300
Sparks	NV	326,813	306,311	None	None	326,813	306,311	633,124	93,423		05/14/02	300
Albion	NY	170,589	317,424	None	None	170,589	317,424	488,013	137,013		03/31/99	300
Bethpage	NY	334,120	621,391	None	None	334,120	621,391	955,511	56,961		09/04/07	300
Commack	NY	400,427	744,533	None	None	400,427	744,533	1,144,960	68,249		09/04/07	300
Dansville	NY	181,664	337,991	None	None	181,664	337,991	519,655	145,891		03/31/99	300
East Amherst	NY	260,708	484,788	None	156	260,708	484,944	745,652	209,266		03/31/99	300
East Syracuse	NY	250,609	466,264	None	156	250,609	466,420	717,029	201,267		03/31/99	300
Freeport	NY	134,828	251,894	None	None	134,828	251,894	386,722	23,090		09/04/07	300
Johnson City	NY	242,863	451,877	None	156	242,863	452,033	694,896	195,057		03/31/99	300
Queens Village	NY	242,775	451,749	None	None	242,775	451,749	694,524	41,410		09/04/07	300
Riverhead	NY	143,929	268,795	None	None	143,929	268,795	412,724	24,639		09/04/07	300
Wellsville	NY	161,331	300,231	None	None	161,331	300,231	461,562	129,591		03/31/99	300
West Amherst	NY	268,692	499,619	None	156	268,692	499,775	768,467	215,668		03/31/99	300
Akron	OH	139,126	460,334	None	None	139,126	460,334	599,460	226,293		09/18/97	300

F-4

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Beaver Creek	OH	349,091	251,127	None	None	349,091	251,127	600,218	53,155		09/17/04	300
Beavercreek	OH	205,000	492,538	None	None	205,000	492,538	697,538	252,014	02/13/97	09/09/96	300
Canal Winchester	OH	443,751	825,491	None	None	443,751	825,491	1,269,242	230,807	12/19/02	08/21/02	300
Centerville	OH	305,000	420,448	None	None	305,000	420,448	725,448	226,341	07/24/96	06/28/96	300
Cincinnati	OH	293,005	201,340	None	None	293,005	201,340	494,345	98,922		09/17/97	300
Cincinnati	OH	211,185	392,210	None	None	211,185	392,210	603,395	96,092		11/03/03	300
Cincinnati	OH	305,556	244,662	None	None	305,556	244,662	550,218	51,786		09/17/04	300
Cincinnati	OH	589,286	160,932	None	None	589,286	160,932	750,218	34,063		09/17/04	300
Cincinnati	OH	159,375	265,842	None	None	159,375	265,842	425,217	56,270		09/17/04	300
Cincinnati	OH	350,000	300,217	None	None	350,000	300,217	650,217	60,544		12/20/04	300
Cleveland	OH	215,111	216,517	None	None	215,111	216,517	431,628	65,316		06/27/02	300
Columbus	OH	71,098	329,627	None	27	71,098	329,654	400,752	321,595		10/02/85	300
Columbus	OH	75,761	351,247	None	None	75,761	351,247	427,008	342,590		10/24/85	300
Columbus	OH	245,036	470,468	None	122	245,036	470,590	715,626	264,274		12/22/95	300
Columbus	OH	432,110	386,553	None	None	432,110	386,553	818,663	102,436		05/27/03	300
Columbus	OH	466,696	548,133	None	None	466,696	548,133	1,014,829	145,254		05/27/03	300
Columbus	OH	337,679	272,484	None	None	337,679	272,484	610,163	57,675		09/17/04	300
Columbus	OH	190,000	260,162	None	None	190,000	260,162	450,162	55,067		09/17/04	300
Columbus	OH	371,429	278,734	None	None	371,429	278,734	650,163	58,998		09/17/04	300
Columbus	OH	214,737	85,425	19,605	5	214,737	105,035	319,772	19,057		09/17/04	300
Cuyahoga Falls	OH	253,750	271,400	None	None	253,750	271,400	525,150	57,446		09/17/04	300
Dayton	OH	70,000	324,538	None	286	70,000	324,824	394,824	316,718		10/31/85	300
Dublin	OH	437,887	428,046	None	None	437,887	428,046	865,933	113,431		05/27/03	300
Eastlake	OH	321,347	459,774	None	209	321,347	459,983	781,330	258,259		12/22/95	300
Fairfield	OH	323,408	235,024	None	None	323,408	235,024	558,432	115,495		09/17/97	300
Fairlawn	OH	280,000	270,150	None	None	280,000	270,150	550,150	57,181		09/17/04	300
Findlay	OH	283,515	397,004	None	None	283,515	397,004	680,519	191,227		12/24/97	300
Hamilton	OH	252,608	413,279	None	None	252,608	413,279	665,887	207,325	03/31/97	10/04/96	300
Huber Heights	OH	282,000	449,381	None	None	282,000	449,381	731,381	232,928	12/03/96	07/18/96	300
Lima	OH	241,132	114,085	None	None	241,132	114,085	355,217	24,148		09/17/04	300
Marion	OH	100,000	275,162	None	None	100,000	275,162	375,162	55,491		12/20/04	300
Mason	OH	310,990	405,373	None	None	310,990	405,373	716,363	107,423		05/27/03	300
Middleburg Hghts	OH	317,308	307,842	None	None	317,308	307,842	625,150	65,160		09/17/04	300
Milford	OH	353,324	269,997	None	None	353,324	269,997	623,321	132,707		09/18/97	300
Mt. Vernon	OH	216,115	375,357	None	None	216,115	375,357	591,472	180,797		12/30/97	300
Northwood	OH	65,978	263,912	36,827	362	65,978	301,101	367,079	265,690		09/12/86	180
Norwalk	OH	200,205	366,000	None	None	200,205	366,000	566,205	176,289		12/19/97	300
Parma	OH	268,966	381,184	None	None	268,966	381,184	650,150	80,684		09/17/04	300
Reynoldsburg	OH	267,750	497,371	None	None	267,750	497,371	765,121	105,277		09/15/04	300
Reynoldsburg	OH	374,000	176,162	None	None	374,000	176,162	550,162	37,287		09/17/04	300
S. Euclid	OH	337,593	451,944	None	None	337,593	451,944	789,537	119,765		05/27/03	300
Sandusky	OH	264,708	404,011	None	230	264,708	404,241	668,949	194,690		12/19/97	300
Solon	OH	794,305	222,797	None	None	794,305	222,797	1,017,102	59,041		05/27/03	300
Springboro	OH	191,911	522,902	None	None	191,911	522,902	714,813	267,392		03/07/97	300
Springfield	OH	320,000	280,217	None	None	320,000	280,217	600,217	59,312		09/17/04	300
Springfield	OH	189,091	136,127	None	None	189,091	136,127	325,218	28,813		09/17/04	300
Stow	OH	310,000	415,150	None	None	310,000	415,150	725,150	87,873		09/17/04	300
Toledo	OH	91,655	366,621	36,699	369	91,655	403,689	495,344	368,396		09/12/86	180
Toledo	OH	73,408	293,632	43,892	364	73,408	337,888	411,296	295,736		09/12/86	180
Toledo	OH	120,000	230,217	None	None	120,000	230,217	350,217	48,729		09/17/04	300
Toledo	OH	250,000	175,217	None	25	250,000	175,242	425,242	37,093		09/17/04	300
Toledo	OH	320,000	280,217	None	None	320,000	280,217	600,217	59,312		09/17/04	300
Toledo	OH	250,000	530,217	None	None	250,000	530,217	780,217	112,229		09/17/04	300
West Chester	OH	446,449	768,644	None	None	446,449	768,644	1,215,093	197,671	06/27/03	03/11/03	300
Zanesville	OH	125,000	300,162	None	None	125,000	300,162	425,162	63,534		09/17/04	300
Midwest City	OK	106,312	333,551	None	None	106,312	333,551	439,863	151,847	08/06/98	08/08/97	300

F-5

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Oklahoma City	OK	143,655	295,422	None	None	143,655	295,422	439,077	138,371	03/06/98	07/29/97	300
Tulsa	OK	133,648	249,702	None	None	133,648	249,702	383,350	22,889		09/04/07	300
Portland	OR	251,499	345,952	None	None	251,499	345,952	597,451	100,325		09/26/02	300
Salem	OR	337,711	253,855	None	None	337,711	253,855	591,566	77,424		05/14/02	300
Bethel Park	PA	299,595	331,264	None	None	299,595	331,264	630,859	159,566		12/19/97	300
Bethlehem	PA	275,328	389,067	None	457	275,328	389,524	664,852	187,648		12/19/97	300
Bethlehem	PA	229,162	310,526	None	None	229,162	310,526	539,688	149,566		12/24/97	300
Bridgeville	PA	275,000	375,150	None	None	275,000	375,150	650,150	79,406		09/17/04	300
Coraopolis	PA	225,000	375,150	None	None	225,000	375,150	600,150	79,406		09/17/04	300
Harrisburg	PA	131,529	220,317	-2,515	None	129,014	220,317	349,331	67,193		05/14/02	300
Monroeville	PA	275,000	250,150	None	None	275,000	250,150	525,150	52,948		09/17/04	300
Philadelphia	PA	858,500	877,744	None	1,540	858,500	879,284	1,737,784	566,960	05/19/95	12/05/94	300
Pittsburgh	PA	378,715	685,374	None	None	378,715	685,374	1,064,089	196,828	08/22/02	01/17/02	300
Pittsburgh	PA	219,938	408,466	None	None	219,938	408,466	628,404	100,074		11/03/03	300
Pittsburgh	PA	175,000	300,150	None	None	175,000	300,150	475,150	63,531		09/17/04	300
Pittsburgh	PA	243,750	406,400	None	None	243,750	406,400	650,150	86,021		09/17/04	300
Pittsburgh	PA	208,333	416,817	None	None	208,333	416,817	625,150	88,226		09/17/04	300
Pittsburgh	PA	121,429	303,721	None	None	121,429	303,721	425,150	64,287		09/17/04	300
Warminster	PA	323,847	216,999	-3,929	None	319,918	216,999	536,917	66,181		05/14/02	300
Wexford	PA	284,375	240,775	None	None	284,375	240,775	525,150	50,964		09/17/04	300
York	PA	249,436	347,424	None	232	249,436	347,656	597,092	167,402		12/30/97	300
Charleston	SC	217,250	294,079	None	None	217,250	294,079	511,329	145,520	07/14/97	03/13/97	300
Columbia	SC	267,622	298,594	None	7,127	267,622	305,721	573,343	146,442	03/31/98	11/05/97	300
Greenville	SC	221,946	315,163	None	8,538	221,946	323,701	545,647	162,121	09/05/97	03/31/97	300
Lexington	SC	241,534	342,182	None	302	241,534	342,484	584,018	146,910		09/24/98	300
North Charleston	SC	174,980	341,466	5,875	5,260	174,980	352,601	527,581	156,766	08/06/98	03/12/98	300
Sioux Falls	SD	48,833	91,572	None	None	48,833	91,572	140,405	8,394		09/04/07	300
Brentwood	TN	305,546	505,728	None	None	305,546	505,728	811,274	241,899	03/13/98	05/28/97	300
Hendersonville	TN	175,764	327,096	None	None	175,764	327,096	502,860	91,042		01/21/03	300
Hermitage	TN	560,443	1,011,799	None	None	560,443	1,011,799	1,572,242	299,963	10/15/01	05/09/01	300
Hermitage	TN	204,296	172,695	None	None	204,296	172,695	376,991	52,670		05/14/02	300
Madison	TN	175,769	327,068	None	None	175,769	327,068	502,837	91,034		01/21/03	300
Memphis	TN	108,094	217,079	None	None	108,094	217,079	325,173	66,206		05/14/02	300
Memphis	TN	214,110	193,591	None	None	214,110	193,591	407,701	59,042		05/14/02	300
Memphis	TN	215,017	216,794	None	None	215,017	216,794	431,811	65,400		06/27/02	300
Murfreesboro	TN	150,411	215,528	None	None	150,411	215,528	365,939	65,734		05/14/02	300
Nashville	TN	342,960	227,440	None	None	342,960	227,440	570,400	111,774		09/17/97	300
Carrollton	TX	174,284	98,623	None	None	174,284	98,623	272,907	30,078		05/14/02	300
Carrolton	TX	177,041	199,088	None	None	177,041	199,088	376,129	60,720		05/14/02	300
Dallas	TX	234,604	325,951	None	None	234,604	325,951	560,555	174,384	08/09/96	02/19/96	300
Fort Worth	TX	83,530	111,960	None	None	83,530	111,960	195,490	34,146		05/14/02	300
Houston	TX	285,000	369,697	None	None	285,000	369,697	654,697	180,496	08/08/97	08/08/97	300
Humble	TX	257,169	325,652	None	None	257,169	325,652	582,821	99,322		05/14/02	300
Lake Jackson	TX	197,170	256,376	None	None	197,170	256,376	453,546	78,193		05/14/02	300
Lewisville	TX	199,942	324,736	None	None	199,942	324,736	524,678	173,733	08/02/96	02/14/96	300
Lewisville	TX	130,238	207,683	None	None	130,238	207,683	337,921	62,651		06/27/02	300
San Antonio	TX	198,828	437,422	7,385	23,232	198,828	468,039	666,867	253,975		09/15/95	300
Richmond	VA	403,549	876,981	None	None	403,549	876,981	1,280,530	207,954	07/08/04	10/17/02	300
Roanoke	VA	349,628	322,545	None	203	349,628	322,748	672,376	155,518		12/19/97	300
Warrenton	VA	186,723	241,173	None	None	186,723	241,173	427,896	73,554		05/14/02	300
Bremerton	WA	261,172	373,080	None	None	261,172	373,080	634,252	195,475	03/19/97	07/24/96	300
Tacoma	WA	109,127	202,691	None	None	109,127	202,691	311,818	18,580		09/04/07	300
Milwaukee	WI	173,005	499,244	None	172	173,005	499,416	672,421	280,451		12/22/95	300
Milwaukee	WI	152,509	475,480	None	None	152,509	475,480	627,989	252,796		09/27/96	300
New Berlin	WI	188,491	466,268	None	172	188,491	466,440	654,931	261,930		12/22/95	300
Racine	WI	184,002	114,167	None	None	184,002	114,167	298,169	34,819		05/14/02	300

F-6

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Automotive Tire Services
Athens	AL	760,031	1,413,494	None	None	760,031	1,413,494	2,173,525	176,683		11/22/06	300
Auburn	AL	660,210	1,228,112	None	500	660,210	1,228,612	1,888,822	153,585		11/22/06	300
Birmingham	AL	635,111	1,180,909	None	500	635,111	1,181,409	1,816,520	147,685		11/22/06	300
Daphne	AL	876,139	1,629,123	None	500	876,139	1,629,623	2,505,762	203,711		11/22/06	300
Decatur	AL	635,111	1,181,499	None	500	635,111	1,181,999	1,817,110	147,758		11/22/06	300
Dothan	AL	455,651	565,343	None	None	455,651	565,343	1,020,994	26,000	10/17/08	06/10/08	300
Foley	AL	870,031	1,617,357	None	500	870,031	1,617,857	2,487,888	202,241		11/22/06	300
Gardendale	AL	610,055	1,134,554	None	500	610,055	1,135,054	1,745,109	141,256		11/22/06	300
Hoover	AL	504,396	938,299	None	None	504,396	938,299	1,442,695	117,283		11/22/06	300
Hoover	AL	620,270	1,153,493	None	None	620,270	1,153,493	1,773,763	144,183		11/22/06	300
Huntsville	AL	499,843	929,863	None	500	499,843	930,363	1,430,206	116,304		11/22/06	300
Huntsville	AL	635,111	1,181,499	None	None	635,111	1,181,499	1,816,610	147,683		11/22/06	300
Madison	AL	635,111	1,181,532	None	None	635,111	1,181,532	1,816,643	147,687		11/22/06	300
Mobile	AL	635,111	1,181,499	None	None	635,111	1,181,499	1,816,610	147,683		11/22/06	300
Mobile	AL	525,750	977,810	None	None	525,750	977,810	1,503,560	122,222		11/22/06	300
Montgomery	AL	544,181	654,046	None	500	544,181	654,546	1,198,727	41,051		01/24/08	300
Orange Beach	AL	630,244	1,172,036	None	500	630,244	1,172,536	1,802,780	146,576		11/22/06	300
Pelham	AL	635,111	1,180,909	None	None	635,111	1,180,909	1,816,020	147,610		11/22/06	300
Phenix City	AL	630,244	1,172,024	None	500	630,244	1,172,524	1,802,768	146,574		11/22/06	300
Tucson	AZ	178,297	396,004	None	12	178,297	396,016	574,313	312,599		01/19/90	300
Arvada	CO	301,489	931,092	None	None	301,489	931,092	1,232,581	339,886	09/22/00	11/18/99	300
Aurora	CO	221,691	492,382	None	None	221,691	492,382	714,073	388,663		01/29/90	300
Aurora	CO	353,283	1,135,051	None	None	353,283	1,135,051	1,488,334	399,196	01/03/01	03/10/00	300
Colorado Springs	CO	280,193	622,317	None	None	280,193	622,317	902,510	491,227		01/23/90	300
Colorado Springs	CO	192,988	433,542	None	None	192,988	433,542	626,530	295,822		05/20/93	300
Denver	CO	688,292	1,331,224	None	None	688,292	1,331,224	2,019,516	372,518	01/10/03	05/30/02	300
Westminster	CO	526,620	1,099,523	None	None	526,620	1,099,523	1,626,143	386,700	01/12/01	01/18/00	300
Destin	FL	1,034,411	1,922,591	None	None	1,034,411	1,922,591	2,957,002	240,320		11/22/06	300
Ft. Walton Bch	FL	635,111	1,181,032	None	500	635,111	1,181,532	1,816,643	147,700		11/22/06	300
Ft. Walton Bch	FL	635,111	1,181,032	None	500	635,111	1,181,532	1,816,643	147,700		11/22/06	300
Lakeland	FL	500,000	645,402	None	None	500,000	645,402	1,145,402	291,695	06/04/98	12/31/97	300
Milton	FL	635,111	1,181,145	None	None	635,111	1,181,145	1,816,256	147,639		11/22/06	300
Niceville	FL	920,803	1,711,621	None	None	920,803	1,711,621	2,632,424	213,949		11/22/06	300
Orlando	FL	635,111	1,181,076	None	500	635,111	1,181,576	1,816,687	147,705		11/22/06	300
Orlando	FL	630,244	1,172,023	None	None	630,244	1,172,023	1,802,267	146,499		11/22/06	300
Oviedo	FL	971,996	1,806,780	None	None	971,996	1,806,780	2,778,776	225,844		11/22/06	300
Pace	FL	630,244	1,171,993	None	500	630,244	1,172,493	1,802,737	146,570		11/22/06	300
Panama City Bch	FL	635,111	1,181,076	None	500	635,111	1,181,576	1,816,687	147,705		11/22/06	300
Pensacola	FL	308,067	573,708	None	143	308,067	573,851	881,918	71,717		11/22/06	300
Pensacola	FL	635,111	1,181,063	None	None	635,111	1,181,063	1,816,174	147,629		11/22/06	300
Pensacola	FL	588,305	1,094,130	None	None	588,305	1,094,130	1,682,435	136,762		11/22/06	300
Sanford	FL	630,244	1,172,023	None	None	630,244	1,172,023	1,802,267	146,499		11/22/06	300
St. Cloud	FL	525,207	976,968	None	None	525,207	976,968	1,502,175	122,117		11/22/06	300
Tallahassee	FL	419,902	781,405	None	None	419,902	781,405	1,201,307	97,671		11/22/06	300
Tallahassee	FL	611,916	1,137,986	None	500	611,916	1,138,486	1,750,402	142,319		11/22/06	300
Tampa	FL	427,395	472,030	None	None	427,395	472,030	899,425	213,360	06/10/98	12/05/97	300
Union Park	FL	1,004,103	1,866,287	None	None	1,004,103	1,866,287	2,870,390	233,282		11/22/06	300
Alpharetta	GA	630,244	1,171,870	None	500	630,244	1,172,370	1,802,614	146,555		11/22/06	300
Columbus	GA	630,244	1,171,988	None	None	630,244	1,171,988	1,802,232	146,494		11/22/06	300
Conyers	GA	531,935	1,180,296	None	None	531,935	1,180,296	1,712,231	363,610	03/28/02	11/13/01	300
Conyers	GA	635,111	1,181,027	None	None	635,111	1,181,027	1,816,138	147,624		11/22/06	300
Duluth	GA	638,509	1,186,594	None	None	638,509	1,186,594	1,825,103	290,711		11/29/03	300
Hiram	GA	635,111	1,181,017	None	None	635,111	1,181,017	1,816,128	147,623		11/22/06	300

F-7

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Kennesaw	GA	519,903	967,180	None	None	519,903	967,180	1,487,083	120,893		11/22/06	300
Lawrenceville	GA	635,111	1,181,137	None	500	635,111	1,181,637	1,816,748	147,713		11/22/06	300
Marietta	GA	500,293	930,657	None	None	500,293	930,657	1,430,950	116,328		11/22/06	300
Mcdonough	GA	635,111	1,181,032	None	500	635,111	1,181,532	1,816,643	147,700		11/22/06	300
Peachtree City	GA	625,316	1,162,827	None	None	625,316	1,162,827	1,788,143	145,349		11/22/06	300
Roswell	GA	515,617	959,138	None	None	515,617	959,138	1,474,755	119,888		11/22/06	300
Sandy Springs	GA	586,211	1,090,241	None	None	586,211	1,090,241	1,676,452	136,276		11/22/06	300
Stockbridge	GA	632,128	1,175,478	None	500	632,128	1,175,978	1,808,106	147,006		11/22/06	300
Aurora	IL	513,204	953,885	None	None	513,204	953,885	1,467,089	233,698		11/29/03	300
Joliet	IL	452,267	840,716	None	None	452,267	840,716	1,292,983	205,971		11/29/03	300
Niles	IL	366,969	682,306	None	None	366,969	682,306	1,049,275	167,161		11/29/03	300
Orland Park	IL	663,087	1,232,240	None	None	663,087	1,232,240	1,895,327	301,895		11/29/03	300
Vernon Hills	IL	524,948	975,668	None	None	524,948	975,668	1,500,616	239,035		11/29/03	300
Village ofLombard	IL	428,170	795,965	None	2,000	428,170	797,965	1,226,135	195,517		11/29/03	300
West Dundee	IL	530,835	986,628	None	None	530,835	986,628	1,517,463	241,720		11/29/03	300
Overland Park	KS	1,101,841	2,047,067	None	None	1,101,841	2,047,067	3,148,908	501,527		11/29/03	300
Allston	MA	576,505	1,071,520	None	None	576,505	1,071,520	1,648,025	262,517		11/29/03	300
Shrewsbury	MA	721,065	1,339,913	None	None	721,065	1,339,913	2,060,978	328,275		11/29/03	300
Waltham	MA	338,955	630,279	None	None	338,955	630,279	969,234	154,414		11/29/03	300
Weymouth	MA	752,234	1,397,799	None	None	752,234	1,397,799	2,150,033	342,457		11/29/03	300
Woburn	MA	676,968	1,258,018	None	None	676,968	1,258,018	1,934,986	308,210		11/29/03	300
Annapolis	MD	780,806	1,450,860	None	None	780,806	1,450,860	2,231,666	355,457		11/29/03	300
Bowie	MD	734,558	1,364,970	None	None	734,558	1,364,970	2,099,528	334,414		11/29/03	300
Capital Heights	MD	701,705	1,303,958	None	None	701,705	1,303,958	2,005,663	319,466		11/29/03	300
Germantown	MD	808,296	1,501,913	None	None	808,296	1,501,913	2,310,209	367,965		11/29/03	300
Waldorf	MD	427,033	793,854	None	None	427,033	793,854	1,220,887	194,490		11/29/03	300
Eagan	MN	902,443	845,536	None	None	902,443	845,536	1,747,979	384,744	06/19/98	02/20/98	300
Ferguson	MO	386,112	717,856	None	None	386,112	717,856	1,103,968	175,871		11/29/03	300
Grandview	MO	347,150	711,024	None	None	347,150	711,024	1,058,174	321,179	08/20/98	02/20/98	300
Independence	MO	721,020	1,339,829	None	None	721,020	1,339,829	2,060,849	328,254		11/29/03	300
Charlotte	NC	181,662	338,164	None	None	181,662	338,164	519,826	82,846		11/29/03	300
Clemmons	NC	630,000	1,100,160	None	None	630,000	1,100,160	1,730,160	93,514		11/09/07	300
Jamestown	NC	650,000	857,823	None	None	650,000	857,823	1,507,823	72,915		11/09/07	300
Matthews	NC	489,063	909,052	None	None	489,063	909,052	1,398,115	222,714		11/29/03	300
Omaha	NE	253,128	810,922	None	None	253,128	810,922	1,064,050	333,878	07/22/99	03/04/99	300
Manchester	NH	722,532	1,342,636	None	None	722,532	1,342,636	2,065,168	328,942		11/29/03	300
Newington	NH	690,753	1,283,624	None	None	690,753	1,283,624	1,974,377	314,484		11/29/03	300
Salem	NH	597,833	1,111,059	None	None	597,833	1,111,059	1,708,892	272,205		11/29/03	300
Deptford	NJ	619,376	1,151,062	None	None	619,376	1,151,062	1,770,438	282,006		11/29/03	300
Maple Shade	NJ	508,285	944,750	None	None	508,285	944,750	1,453,035	231,460		11/29/03	300
Akron	OH	242,133	450,467	None	None	242,133	450,467	692,600	110,360		11/29/03	300
Cambridge	OH	103,368	192,760	None	7	103,368	192,767	296,135	47,228		11/29/03	300
Canton	OH	337,161	626,948	None	None	337,161	626,948	964,109	153,598		11/29/03	300
Cleveland	OH	582,107	1,081,848	None	None	582,107	1,081,848	1,663,955	265,049		11/29/03	300
Columbus	OH	385,878	717,422	None	None	385,878	717,422	1,103,300	175,764		11/29/03	300
Oklahoma City	OK	509,370	752,691	None	None	509,370	752,691	1,262,061	317,556	04/14/99	09/24/98	300
Oklahoma City	OK	404,815	771,625	None	None	404,815	771,625	1,176,440	325,524	04/09/99	10/16/98	300
Greensburg	PA	594,891	1,105,589	None	None	594,891	1,105,589	1,700,480	270,865		11/29/03	300
Lancaster	PA	431,050	801,313	None	None	431,050	801,313	1,232,363	196,318		11/29/03	300
Mechanicsburg	PA	455,854	847,377	None	None	455,854	847,377	1,303,231	207,603		11/29/03	300
Monroeville	PA	723,660	1,344,733	None	None	723,660	1,344,733	2,068,393	329,455		11/29/03	300
Philadelphia	PA	334,939	622,821	None	None	334,939	622,821	957,760	152,587		11/29/03	300
Pittsburgh	PA	384,756	715,339	None	None	384,756	715,339	1,100,095	175,254		11/29/03	300
York	PA	389,291	723,760	None	None	389,291	723,760	1,113,051	177,317		11/29/03	300
Columbia	SC	343,785	295,001	183,130	None	343,785	478,131	821,916	248,620	05/27/97	02/07/97	300
Sioux Falls	SD	332,979	498,108	None	None	332,979	498,108	831,087	226,653	06/01/99	02/27/98	300

F-8

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Goodlettsville	TN	601,306	1,117,504	None	None	601,306	1,117,504	1,718,810	273,784		11/29/03	300
Arlington	TX	599,558	1,114,256	None	None	599,558	1,114,256	1,713,814	272,989		11/29/03	300
Austin	TX	185,454	411,899	None	None	185,454	411,899	597,353	323,777		02/06/90	300
Austin	TX	710,485	1,320,293	None	None	710,485	1,320,293	2,030,778	323,467		11/29/03	300
Austin	TX	590,828	1,098,073	None	None	590,828	1,098,073	1,688,901	269,023		11/29/03	300
Austin	TX	569,909	1,059,195	None	None	569,909	1,059,195	1,629,104	259,499		11/29/03	300
Austin	TX	532,497	989,715	None	None	532,497	989,715	1,522,212	242,476		11/29/03	300
Carrollton	TX	568,401	1,056,394	None	None	568,401	1,056,394	1,624,795	258,812		11/29/03	300
Conroe	TX	396,068	736,346	None	None	396,068	736,346	1,132,414	180,401		11/29/03	300
Dallas	TX	191,267	424,811	None	15,282	191,267	440,093	631,360	350,046		01/26/90	300
Fort Worth	TX	543,950	1,010,984	None	None	543,950	1,010,984	1,554,934	247,687		11/29/03	300
Garland	TX	242,887	539,461	None	None	242,887	539,461	782,348	425,824		01/19/90	300
Harlingen	TX	134,599	298,948	None	None	134,599	298,948	433,547	235,975		01/17/90	300
Houston	TX	151,018	335,417	None	None	151,018	335,417	486,435	264,762		01/25/90	300
Houston	TX	392,113	729,002	None	None	392,113	729,002	1,121,115	178,601		11/29/03	300
Houston	TX	1,030,379	1,914,353	None	None	1,030,379	1,914,353	2,944,732	469,012		11/29/03	300
Houston	TX	619,101	1,150,551	None	None	619,101	1,150,551	1,769,652	281,881		11/29/03	300
Houston	TX	642,495	1,193,997	None	None	642,495	1,193,997	1,836,492	292,525		11/29/03	300
Houston	TX	872,866	1,621,829	None	None	872,866	1,621,829	2,494,695	397,344		11/29/03	300
Humble	TX	612,414	1,138,132	None	None	612,414	1,138,132	1,750,546	278,838		11/29/03	300
Leon Valley	TX	178,221	395,834	None	None	178,221	395,834	574,055	312,452		01/17/90	300
Leon Valley	TX	529,967	985,046	None	None	529,967	985,046	1,515,013	241,331		11/29/03	300
Mesquite	TX	591,538	1,099,363	None	None	591,538	1,099,363	1,690,901	269,340		11/29/03	300
N. Richland Hills	TX	509,861	947,707	None	None	509,861	947,707	1,457,568	232,183		11/29/03	300
Pasadena	TX	107,391	238,519	None	None	107,391	238,519	345,910	188,275		01/24/90	300
Plano	TX	187,564	417,157	700	None	187,564	417,857	605,421	329,108		01/18/90	300
Plano	TX	494,407	918,976	None	None	494,407	918,976	1,413,383	225,145		11/29/03	300
Richardson	TX	555,188	1,031,855	None	None	555,188	1,031,855	1,587,043	252,800		11/29/03	300
San Antonio	TX	245,164	544,518	None	None	245,164	544,518	789,682	428,023		02/14/90	300
San Antonio	TX	688,249	1,278,967	None	None	688,249	1,278,967	1,967,216	313,343		11/29/03	300
Stafford	TX	706,786	1,313,395	None	None	706,786	1,313,395	2,020,181	321,778		11/29/03	300
Waco	TX	401,999	747,362	None	None	401,999	747,362	1,149,361	183,100		11/29/03	300
Webster	TX	600,261	1,115,563	None	None	600,261	1,115,563	1,715,824	273,309		11/29/03	300
Bountiful	UT	183,750	408,115	None	111	183,750	408,226	591,976	322,159		01/30/90	300
Alexandria	VA	542,791	1,008,832	None	None	542,791	1,008,832	1,551,623	247,160		11/29/03	300
Alexandria	VA	592,698	1,101,517	None	None	592,698	1,101,517	1,694,215	269,867		11/29/03	300
Chesapeake	VA	770,000	1,112,334	None	None	770,000	1,112,334	1,882,334	94,548		11/09/07	300
Lynchburg	VA	342,751	637,329	None	None	342,751	637,329	980,080	156,142		11/29/03	300
Virginia Beach	VA	780,000	1,026,384	None	None	780,000	1,026,384	1,806,384	87,243		11/09/07	300
Woodbridge	VA	774,854	1,439,806	None	None	774,854	1,439,806	2,214,660	352,748		11/29/03	300
Tacoma	WA	187,111	415,579	None	None	187,111	415,579	602,690	328,038		01/25/90	300
Brown Deer	WI	257,408	802,141	None	None	257,408	802,141	1,059,549	354,341	12/15/98	07/16/98	300
Delafield	WI	324,574	772,702	None	None	324,574	772,702	1,097,276	317,441	07/29/99	02/26/99	300
Madison	WI	452,630	811,977	None	None	452,630	811,977	1,264,607	364,093	10/20/98	04/07/98	300
Oak Creek	WI	420,465	852,408	None	None	420,465	852,408	1,272,873	382,222	08/07/98	03/20/98	300
Book Stores
Tampa	FL	998,250	3,696,707	None	None	998,250	3,696,707	4,694,957	1,891,415		03/11/97	300
Matthews	NC	768,222	843,401	21,654	418	768,222	865,473	1,633,695	382,300		12/31/98	300
Business Services
Midland	TX	45,500	101,058	None	295	45,500	101,353	146,853	89,136		10/27/87	300
Child Care
Birmingham	AL	63,800	295,791	None	None	63,800	295,791	359,591	295,791		10/31/84	300

F-9

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Avondale	AZ	242,723	1,129,139	None	None	242,723	1,129,139	1,371,862	476,207	04/20/99	07/28/98	300
Chandler	AZ	291,720	647,923	None	110	291,720	648,033	939,753	566,057		12/11/87	300
Chandler	AZ	271,695	603,446	None	29,100	271,695	632,546	904,241	532,537		12/14/87	300
Mesa	AZ	308,951	1,025,612	None	None	308,951	1,025,612	1,334,563	422,248	07/26/99	01/13/99	300
Phoenix	AZ	115,000	285,172	39,971	22,413	115,000	347,556	462,556	303,011		02/08/84	180
Phoenix	AZ	318,500	707,397	None	134	318,500	707,531	1,026,031	596,217		09/29/88	300
Phoenix	AZ	264,504	587,471	None	88	264,504	587,559	852,063	454,172		06/29/90	300
Phoenix	AZ	260,719	516,181	None	32,173	260,719	548,354	809,073	392,124		12/26/90	300
Scottsdale	AZ	291,993	648,529	None	110	291,993	648,639	940,632	566,596		12/14/87	300
Tempe	AZ	292,200	648,989	None	110	292,200	649,099	941,299	560,294		03/10/88	300
Tucson	AZ	304,500	676,303	None	107	304,500	676,410	980,910	570,064		09/28/88	300
Tucson	AZ	283,500	546,878	None	110	283,500	546,988	830,488	460,952		09/29/88	300
Calabasas	CA	156,430	725,248	100,838	58,993	156,430	885,079	1,041,509	736,652		09/26/85	300
Carmichael	CA	131,035	607,507	5,528	25,249	131,035	638,284	769,319	579,650		08/22/86	300
Chino	CA	155,000	634,071	None	22	155,000	634,093	789,093	634,073		10/06/83	180
Chula Vista	CA	350,563	778,614	None	None	350,563	778,614	1,129,177	685,589		10/30/87	300
Corona	CA	144,856	671,584	None	54	144,856	671,638	816,494	671,634		12/19/84	300
El Cajon	CA	157,804	731,621	None	122	157,804	731,743	889,547	709,533		12/19/85	300
Escondido	CA	276,286	613,638	4,030	44,389	276,286	662,057	938,343	545,123		12/31/87	300
Folsom	CA	281,563	625,363	None	None	281,563	625,363	906,926	550,901		10/23/87	300
Mission Viejo	CA	353,891	744,367	12,500	None	353,891	756,867	1,110,758	525,432		06/24/93	300
Moreno Valley	CA	304,489	676,214	None	131	304,489	676,345	980,834	614,411		02/11/87	300
Oceanside	CA	145,568	674,889	11,000	22,105	145,568	707,994	853,562	680,639		12/23/85	300
Palmdale	CA	249,490	554,125	9,864	None	249,490	563,989	813,479	474,234		09/14/88	300
Rancho Cordova	CA	276,328	613,733	24,967	None	276,328	638,700	915,028	516,402		03/22/89	300
Rancho Cucamonga	CA	471,733	1,047,739	49,000	80	471,733	1,096,819	1,568,552	916,153		12/30/87	300
Roseville	CA	297,343	660,411	27,496	None	297,343	687,907	985,250	594,705		10/21/87	300
Sacramento	CA	290,734	645,732	None	127	290,734	645,859	936,593	568,656		10/05/87	300
Santee	CA	248,418	551,748	None	15	248,418	551,763	800,181	491,605		07/23/87	300
Simi Valley	CA	208,585	967,055	22,800	75,638	208,585	1,065,493	1,274,078	995,094		12/20/85	300
Valencia	CA	301,295	669,185	25,000	80	301,295	694,265	995,560	581,261		06/23/88	300
Walnut	CA	217,365	1,007,753	1,200	51,312	217,365	1,060,265	1,277,630	961,908		08/22/86	300
Aurora	CO	287,000	637,440	None	196	287,000	637,636	924,636	556,902		12/31/87	300
Broomfield	CO	107,000	403,080	16,438	8,241	107,000	427,759	534,759	418,998		01/12/83	180
Broomfield	CO	155,306	344,941	25,000	128	155,306	370,069	525,375	310,347		03/15/88	300
Colorado Springs	CO	58,400	271,217	25,000	128	58,400	296,345	354,745	281,272		12/22/82	180
Colorado Springs	CO	115,542	535,700	None	146	115,542	535,846	651,388	500,939		12/04/86	300
Fort Collins	CO	55,200	256,356	None	None	55,200	256,356	311,556	256,356		12/22/82	180
Fort Collins	CO	137,734	638,593	None	22,196	137,734	660,789	798,523	626,341		03/25/86	300
Greeley	CO	58,400	270,755	25,000	196	58,400	295,951	354,351	283,340		11/21/84	300
Greenwood Village	CO	131,216	608,372	6,862	175	131,216	615,409	746,625	568,969		12/05/86	300
Littleton	CO	161,617	358,956	None	146	161,617	359,102	520,719	313,696		12/10/87	300
Longmont	CO	115,592	535,931	None	146	115,592	536,077	651,669	515,178		03/25/86	300
Louisville	CO	58,089	269,313	None	274	58,089	269,587	327,676	269,472		06/22/84	300
Parker	CO	153,551	341,042	None	274	153,551	341,316	494,867	300,592		10/19/87	300
Westminster	CO	306,387	695,737	None	196	306,387	695,933	1,002,320	574,084		09/27/89	300
Bradenton	FL	160,060	355,501	25,000	None	160,060	380,501	540,561	318,404		05/05/88	300
Clearwater	FL	42,223	269,380	None	124	42,223	269,504	311,727	269,504		12/22/81	180
Jacksonville	FL	48,000	243,060	None	None	48,000	243,060	291,060	243,060		12/22/81	180
Jacksonville	FL	184,800	410,447	22,872	189	184,800	433,508	618,308	348,438		03/30/89	300
Margate	FL	66,686	309,183	None	424	66,686	309,607	376,293	289,054		12/16/86	300
Melbourne	FL	256,439	549,345	None	None	256,439	549,345	805,784	381,922		04/16/93	300
Niceville	FL	73,696	341,688	None	None	73,696	341,688	415,384	319,444		12/03/86	300
Orlando	FL	68,001	313,922	None	497	68,001	314,419	382,420	307,441		09/04/85	300
Orlando	FL	159,177	353,538	None	184	159,177	353,722	512,899	315,127		07/02/87	300
Orlando	FL	190,050	422,107	5,707	189	190,050	428,003	618,053	348,277		03/30/89	300

F-10

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Oviedo	FL	166,409	369,598	None	184	166,409	369,782	536,191	324,294		11/20/87	300
Panama City	FL	69,500	244,314	14,500	240	69,500	259,054	328,554	253,392		06/15/82	180
Pensacola	FL	147,000	326,492	20,000	240	147,000	346,732	493,732	270,393		03/28/89	300
Royal Palm Beach	FL	194,193	431,309	25,000	None	194,193	456,309	650,502	367,952		11/15/88	300
Spring Hill	FL	146,939	326,356	None	None	146,939	326,356	473,295	286,232		11/24/87	300
St. Augustine	FL	44,800	213,040	23,090	189	44,800	236,319	281,119	215,843		12/22/81	180
Sunrise	FL	245,000	533,280	92,266	28,408	245,000	653,954	898,954	455,112		05/25/89	300
Tampa	FL	53,385	199,846	None	None	53,385	199,846	253,231	199,846		12/22/81	180
Duluth	GA	310,000	1,040,008	None	None	310,000	1,040,008	1,350,008	424,719	08/25/99	06/07/99	300
Ellenwood	GA	119,678	275,414	None	205	119,678	275,619	395,297	230,359		11/16/88	300
Lawrenceville	GA	141,449	314,161	3,766	None	141,449	317,927	459,376	268,606		07/07/88	300
Lithia Springs	GA	187,444	363,358	None	147	187,444	363,505	550,949	291,292		12/28/89	300
Lithonia	GA	239,715	524,459	24,410	26,108	239,715	574,977	814,692	413,917		08/20/91	300
Marietta	GA	148,620	330,090	25,000	205	148,620	355,295	503,915	290,135		09/16/88	300
Marietta	GA	292,250	649,095	None	415	292,250	649,510	941,760	540,560		12/02/88	300
Marietta	GA	295,750	596,299	None	426	295,750	596,725	892,475	496,600		12/30/88	300
Marietta	GA	301,000	668,529	None	11,707	301,000	680,236	981,236	556,742		12/30/88	300
Smyrna	GA	274,750	610,229	None	415	274,750	610,644	885,394	510,257		11/15/88	300
Stockbridge	GA	168,700	374,688	24,894	415	168,700	399,997	568,697	319,051		03/28/89	300
Stone Mountain	GA	65,000	-	None	None	65,000	-	65,000	0		06/19/85	300
Cedar Rapids	IA	194,950	427,085	None	None	194,950	427,085	622,035	310,052		09/24/92	300
Iowa City	IA	186,900	408,910	None	None	186,900	408,910	595,810	298,351		09/24/92	300
Addison	IL	125,780	583,146	None	241	125,780	583,387	709,167	560,646		03/25/86	300
Algonquin	IL	241,500	509,629	None	20,382	241,500	530,011	771,511	406,904		07/10/90	300
Aurora	IL	165,679	398,738	27,450	21,087	165,679	447,275	612,954	342,581		12/21/88	300
Aurora	IL	468,000	1,259,926	None	None	468,000	1,259,926	1,727,926	506,161	10/26/99	06/14/99	300
Bartlett	IL	120,824	560,166	None	241	120,824	560,407	681,231	538,561		03/25/86	300
Carol Stream	IL	122,831	586,416	None	241	122,831	586,657	709,488	563,789		03/25/86	300
Crystal Lake	IL	400,000	1,259,424	None	None	400,000	1,259,424	1,659,424	510,148	09/28/99	05/14/99	300
Elk Grove Village	IL	126,860	588,175	None	241	126,860	588,416	715,276	565,480		03/26/86	300
Glendale Heights	IL	318,500	707,399	None	172	318,500	707,571	1,026,071	591,454		11/16/88	300
Hoffman Estates	IL	318,500	707,399	None	172	318,500	707,571	1,026,071	581,934		03/31/89	300
Lake in the Hills	IL	375,000	1,127,678	None	None	375,000	1,127,678	1,502,678	456,787	09/03/99	05/14/99	300
Lockport	IL	189,477	442,018	None	151	189,477	442,169	631,646	389,318		10/29/87	300
Naperville	IL	425,000	1,230,654	None	None	425,000	1,230,654	1,655,654	494,396	10/06/99	05/19/99	300
O'Fallon	IL	141,250	313,722	None	None	141,250	313,722	454,972	276,237		10/30/87	300
Oswego	IL	380,000	1,165,818	None	None	380,000	1,165,818	1,545,818	476,096	08/18/99	06/30/99	300
Palatine	IL	121,911	565,232	None	241	121,911	565,473	687,384	543,430		03/25/86	300
Roselle	IL	297,541	561,037	None	172	297,541	561,209	858,750	467,197		12/30/88	300
Schaumburg	IL	218,798	485,955	20,461	None	218,798	506,416	725,214	428,111		12/17/87	300
Vernon Hills	IL	132,523	614,430	None	241	132,523	614,671	747,194	590,713		03/25/86	300
Westmont	IL	124,742	578,330	None	413	124,742	578,743	703,485	556,061		03/25/86	300
Carmel	IN	217,565	430,742	None	432	217,565	431,174	648,739	324,766		12/27/90	300
Fishers	IN	60,000	278,175	None	154	60,000	278,329	338,329	276,165		04/30/85	300
Fishers	IN	212,118	419,958	None	595	212,118	420,553	632,671	316,742		12/27/90	300
Highland	IN	220,460	436,476	None	404	220,460	436,880	657,340	328,966		12/26/90	300
Indianapolis	IN	245,000	544,153	None	365	245,000	544,518	789,518	420,795		06/29/90	300
Lenexa	KS	318,500	707,399	14,200	167	318,500	721,766	1,040,266	588,285		03/31/89	300
Olathe	KS	304,500	676,308	37,904	9,147	304,500	723,359	1,027,859	584,124		09/28/88	300
Overland Park	KS	357,500	1,115,171	None	None	357,500	1,115,171	1,472,671	459,116	07/23/99	05/14/99	300
Shawnee	KS	315,000	699,629	None	233	315,000	699,862	1,014,862	587,375		10/27/88	300
Shawnee	KS	288,246	935,875	None	None	288,246	935,875	1,224,121	407,146	12/29/98	08/24/98	300
Wichita	KS	108,569	350,312	None	None	108,569	350,312	458,881	1,182		12/16/86	300
Wichita	KS	209,890	415,549	25,699	16,136	209,890	457,384	667,274	327,055		12/26/90	300
Lexington	KY	210,427	420,883	None	None	210,427	420,883	631,310	314,455		08/20/91	300
Acton	MA	315,533	700,813	None	278	315,533	701,091	1,016,624	590,741		09/30/88	300

F-11

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Marlborough	MA	352,765	776,488	None	286	352,765	776,774	1,129,539	649,280		11/04/88	300
Westborough	MA	359,412	773,877	None	250	359,412	774,127	1,133,539	647,048		11/01/88	300
Ellicott City	MD	219,368	630,839	26,550	None	219,368	657,389	876,757	534,720		12/19/88	300
Frederick	MD	203,352	1,017,109	None	None	203,352	1,017,109	1,220,461	466,175		07/06/98	300
Olney	MD	342,500	760,701	4,400	41,605	342,500	806,706	1,149,206	669,437		12/18/87	300
Waldorf	MD	130,430	604,702	None	731	130,430	605,433	735,863	605,241		09/26/84	300
Waldorf	MD	237,207	526,844	None	399	237,207	527,243	764,450	460,647		12/31/87	300
Canton	MI	55,000	378,848	2,913	None	55,000	381,761	436,761	378,860		10/06/82	180
Apple Valley	MN	113,523	526,319	None	333	113,523	526,652	640,175	506,123		03/26/86	300
Brooklyn Park	MN	118,111	547,587	None	333	118,111	547,920	666,031	526,563		03/26/86	300
Eagan	MN	112,127	519,845	None	925	112,127	520,770	632,897	500,018		03/31/86	300
Eden Prairie	MN	124,286	576,243	None	333	124,286	576,576	700,862	554,104		03/27/86	300
Maple Grove	MN	313,250	660,149	None	460	313,250	660,609	973,859	510,078		07/11/90	300
Plymouth	MN	134,221	622,350	None	182	134,221	622,532	756,753	582,017		12/12/86	300
White Bear Lake	MN	242,165	537,856	None	460	242,165	538,316	780,481	412,497		08/30/90	300
Florissant	MO	181,300	402,672	23,000	41	181,300	425,713	607,013	333,488		03/29/89	300
Florissant	MO	318,500	707,399	None	None	318,500	707,399	1,025,899	581,891		03/30/89	300
Gladstone	MO	294,000	652,987	None	326	294,000	653,313	947,313	550,529		09/29/88	300
Lee's Summit	MO	239,627	532,220	None	179	239,627	532,399	772,026	426,852		09/27/89	300
Lee's Summit	MO	330,000	993,787	None	None	330,000	993,787	1,323,787	409,138	07/26/99	06/17/99	300
Lee's Summit	MO	313,740	939,367	None	None	313,740	939,367	1,253,107	383,622	09/08/99	06/30/99	300
Liberty	MO	65,400	303,211	25,000	None	65,400	328,211	393,611	311,342		06/18/85	300
North Kansas City	MO	307,784	910,401	None	None	307,784	910,401	1,218,185	401,573	09/28/99	08/21/98	300
Pearl	MS	121,801	270,524	18,837	11,896	121,801	301,257	423,058	245,179		11/15/88	300
Cary	NC	75,200	262,973	15,000	94	75,200	278,067	353,267	264,275		01/25/84	180
Charlotte	NC	27,551	247,000	None	168	27,551	247,168	274,719	247,011		12/23/81	180
Charlotte	NC	134,582	268,222	24,478	139	134,582	292,839	427,421	234,736		11/16/88	300
Concord	NC	32,441	190,859	None	139	32,441	190,998	223,439	190,938		12/23/81	180
Durham	NC	175,700	390,234	26,312	94	175,700	416,640	592,340	334,590		03/29/89	300
Durham	NC	220,728	429,380	None	270	220,728	429,650	650,378	344,494		12/29/89	300
Durham	NC	238,000	471,201	5,375	25	238,000	476,601	714,601	342,932		08/20/91	300
Kernersville	NC	162,216	316,300	None	316	162,216	316,616	478,832	254,005		12/14/89	300
Bellevue	NE	60,568	280,819	None	345	60,568	281,164	341,732	262,565		12/16/86	300
Omaha	NE	60,500	280,491	None	179	60,500	280,670	341,170	280,536		08/01/84	300
Omaha	NE	53,000	245,720	22,027	179	53,000	267,926	320,926	248,189		10/11/84	300
Omaha	NE	142,867	317,315	None	312	142,867	317,627	460,494	277,393		12/09/87	300
Londonderry	NH	335,467	745,082	None	332	335,467	745,414	1,080,881	600,599		08/18/89	300
Clementon	NJ	279,851	554,060	None	399	279,851	554,459	834,310	401,791		09/09/91	300
Las Vegas	NV	201,250	446,983	None	126	201,250	447,109	648,359	345,534		06/29/90	300
Sparks	NV	244,752	543,605	19,912	285	244,752	563,802	808,554	478,796		01/29/88	300
Beavercreek	OH	179,552	398,786	None	273	179,552	399,059	578,611	356,832		06/30/87	300
Centerville	OH	174,519	387,613	None	273	174,519	387,886	562,405	345,482		07/23/87	300
Dublin	OH	84,000	389,446	None	230	84,000	389,676	473,676	380,017		10/08/85	300
Englewood	OH	74,000	343,083	None	327	74,000	343,410	417,410	334,842		10/23/85	300
Forest Park	OH	170,778	379,305	None	151	170,778	379,456	550,234	335,603		09/28/87	300
Huber Heights	OH	245,000	544,153	None	176	245,000	544,329	789,329	415,355		09/27/90	300
Loveland	OH	206,136	457,829	23,656	23	206,136	481,508	687,644	415,257		03/20/87	300
Pickerington	OH	87,580	406,055	None	None	87,580	406,055	493,635	379,621		12/11/86	300
Westerville	OH	82,000	380,173	None	122	82,000	380,295	462,295	370,911		10/08/85	300
Westerville	OH	294,350	646,557	None	176	294,350	646,733	941,083	495,511		09/26/90	300
Broken Arrow	OK	78,705	220,434	None	None	78,705	220,434	299,139	220,434		01/27/83	180
Midwest City	OK	67,800	314,338	None	124	67,800	314,462	382,262	309,315		08/14/85	300
Oklahoma City	OK	50,800	214,474	None	173	50,800	214,647	265,447	214,517		06/15/82	180
Oklahoma City	OK	79,000	366,261	17,659	173	79,000	384,093	463,093	379,213		11/14/84	300
Yukon	OK	61,000	282,812	27,000	173	61,000	309,985	370,985	293,072		05/02/85	300
Beaverton	OR	135,148	626,647	None	249	135,148	626,896	762,044	585,689		12/17/86	300

F-12

				Cost  Capitalized								Life on
				Subsequent		Gross Amount at Which Carried						which
		Initial Cost to Company		to Acquisition		at Close of Period (Notes 2, 3, 5, 6 and 7)						depreciation
			Buildings,				Buildings,					in latest
			Improvements				Improvements					Income
			and				and		Accumulated			Statement is
Description			Acquisition		Carrying		Acquisition		Depreciation	Date of	Date	Computed
(Note 1)		Land	Fees	Improvements	Costs	Land	Fees	Total	(Note 4)	Construction	Acquired	(in Months)
Charleston	SC	125,593	278,947	None	361	125,593	279,308	404,901	239,053		05/26/88	300
Charleston	SC	140,700	312,498	25,000	223	140,700	337,721	478,421	269,409		03/28/89	300
Columbia	SC	58,160	269,643	None	330	58,160	269,973	328,133	269,913		11/14/84	300
Elgin	SC	160,831	313,600	None	223	160,831	313,823	474,654	251,745		12/14/89	300
Goose Creek	SC	61,635	192,905	None	223	61,635	193,128	254,763	192,983		12/22/81	180
Summerville	SC	44,400	174,500	None	168	44,400	174,668	219,068	174,511		12/22/81	180
Sumter	SC	56,010	268,903	None	1,351	56,010	270,254	326,264	266,407		06/18/85	300
Memphis	TN	238,263	504,897	None	248	238,263	505,145	743,408	425,700		09/29/88	300
Memphis	TN	238,000	528,608	None	349	238,000	528,957	766,957	445,698		09/30/88	300
Nashville	TN	274,298	609,223	None	293	274,298	609,516	883,814	501,193		03/30/89	300
Arlington	TX	82,109	380,677	None	149	82,109	380,826	462,935	380,765		12/13/84	300
Arlington	TX	238,000	528,604	16,747	404	238,000	545,755	783,755	446,887		09/26/88	300
Arlington	TX	241,500	550,559	33,725	13,377	241,500	597,661	839,161	478,562		09/22/89	300
Austin	TX	103,600	230,532	8,750	142	103,600	239,424	343,024	236,063		10/29/82	180
Austin	TX	88,872	222,684	48,416	14,887	88,872	285,987	374,859	238,918		01/12/83	180
Austin	TX	134,383	623,103	None	566	134,383	623,669	758,052	582,570		12/23/86	300
Austin	TX	236,733	640,023	36,746	11,951	236,733	688,720	925,453	486,050		09/27/88	300
Austin	TX	191,636	425,629	15,530	294	191,636	441,453	633,089	364,148		12/22/88	300
Austin	TX	217,878	483,913	29,469	None	217,878	513,382	731,260	407,558		06/22/89	300
Bedford	TX	241,500	550,559	None	73	241,500	550,632	792,132	462,033		09/22/89	300
Carrollton	TX	277,850	617,113	12,086	18,283	277,850	647,482	925,332	545,647		12/11/87	300
Cedar Park	TX	168,857	375,036	5,200	142	168,857	380,378	549,235	315,988		11/21/88	300
Colleyville	TX	250,000	1,070,360	None	None	250,000	1,070,360	1,320,360	437,109	08/17/99	05/14/99	300
Converse	TX	217,000	481,963	None	294	217,000	482,257	699,257	406,267		09/28/88	300
Corinth	TX	285,000	1,041,626	None	None	285,000	1,041,626	1,326,626	432,270	06/04/99	05/19/99	300
Denton	TX	192,777	428,121	None	237	192,777	428,358	621,135	389,313		01/07/87	300
Euless	TX	234,111	519,962	None	217	234,111	520,179	754,290	467,010		05/08/87	300
Flower Mound	TX	202,773	442,845	8,877	9,358	202,773	461,080	663,853	406,921		04/20/87	300
Flower Mound	TX	281,735	1,099,726	None	None	281,735	1,099,726	1,381,461	463,690	04/23/99	01/13/99	300
Fort Worth	TX	85,518	396,495	24,625	95	85,518	421,215	506,733	381,545		12/03/86	300
Fort Worth	TX	238,000	528,608	None	95	238,000	528,703	766,703	445,552		09/26/88	300
Fort Worth	TX	216,160	427,962	None	95	216,160	428,057	644,217	319,707		02/07/91	300
Garland	TX	211,050	468,749	19,199	17,516	211,050	505,464	716,514	375,258		12/12/89	300
Grand Prairie	TX	167,164	371,276	30,086	19,492	167,164	420,854	588,018	325,096		12/13/88	300
Houston	TX	60,000	278,175	None	263	60,000	278,438	338,438	275,326		05/01/85	300
Houston	TX	139,125	308,997	19,128	3,036	139,125	331,161	470,286	284,039		05/22/87	300
Houston	TX	141,296	313,824	12,442	7	141,296	326,273	467,569	282,316		07/24/87	300
Houston	TX	219,100	486,631	None	256	219,100