-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rz+z9PL3Bx74luLdFYEPJic6yYKcjjjbCc2N+ajijNZFKM6ABbba96UfV7DqvCU0 xaFnEQdOVvSMVn4U6GsY7g== 0000726728-96-000024.txt : 19960812 0000726728-96-000024.hdr.sgml : 19960812 ACCESSION NUMBER: 0000726728-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REALTY INCOME CORP CENTRAL INDEX KEY: 0000726728 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330580106 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13374 FILM NUMBER: 96607367 BUSINESS ADDRESS: STREET 1: 220 W CREST ST CITY: ESCONDIDO STATE: CA ZIP: 92025 BUSINESS PHONE: 6197412111 MAIL ADDRESS: STREET 1: 220 WEST CREST ST CITY: ESCONDIDO STATE: CA ZIP: 92025 10-Q 1 (Note: WORD for DOS; Courier 12; 1" margins) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ========= [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1996, or ============= [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER 1-13318 ============================== REALTY INCOME CORPORATION ========================= (Exact name of registrant as specified in its charter) DELAWARE ======== (State or other jurisdiction of incorporation or organization) 33-0580106 ========== (I.R.S. Employer Identification No.) 220 WEST CREST STREET, ESCONDIDO, CALIFORNIA 92025 =================================================== (Address of principal executive offices) (619) 741-2111 ============== (Registrant's telephone number) Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Number of shares outstanding of common stock as of August 9, 1996: Common Stock, $1.00 par value; 22,976,237 Page 1 REALTY INCOME CORPORATION Form 10-Q June 30, 1996 Table of Contents ----------------- PART I. FINANCIAL INFORMATION Pages ============================== ----- Item 1: Financial Statements Consolidated Balance Sheets........................ 3-4 Consolidated Statements of Income.................. 5-6 Consolidated Statements of Cash Flows.............. 7-8 Notes to Consolidated Financial Statements......... 9-13 Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations......13-30 PART II. OTHER INFORMATION ========================== Item 4: Submission of Matters to a Vote of Security Holders........................... 30 Item 6: Exhibits and Reports on Form 8-K................... 31 SIGNATURE................................................... 32 EXHIBIT INDEX............................................... 33 EXHIBIT 27: Financial Data Schedule........................ 34 COVER LETTER................................................ 35 Page 2 PART I. FINANCIAL INFORMATION ============================== ITEM 1. FINANCIAL STATEMENTS
REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== June 30, 1996 And December 31, 1995 (dollars in thousands, except per share data) (Unaudited) 1996 1995 ========= ========= ASSETS Real Estate, at Cost: Land $ 150,087 $ 147,789 Buildings and Improvements 367,620 367,637 --------- --------- 517,707 515,426 Less - Accumulated Depreciation and Amortization (132,029) (126,062) --------- --------- Net Real Estate, at Cost 385,678 389,364 Cash and Cash Equivalents 865 1,650 Accounts Receivable 1,012 1,638 Due from Affiliates 493 493 Other Assets 1,684 1,927 Goodwill 22,110 22,567 --------- --------- TOTAL ASSETS $ 411,842 $ 417,639 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Distributions Payable $ 3,561 $ 12,407 Accounts Payable and Accrued Expenses 364 673 Other Liabilities 4,426 4,541 Notes Payable -- 12,597 Line of Credit Payable 24,600 6,000 --------- --------- TOTAL LIABILITIES 32,951 36,218 --------- ---------
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(continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets =========================== June 30, 1996 And December 31, 1995 (dollars in thousands, except per share data) (Unaudited) 1996 1995 ========= ========= STOCKHOLDERS' EQUITY Preferred Stock, Par Value $1.00 Per Share, 5,000,000 Shares Authorized, No Shares Issued or Outstanding -- -- Common Stock, Par Value $1.00 Per Share, 40,000,000 Shares Authorized, 22,976,237 Shares Issued and Outstanding 22,976 22,976 Capital in Excess of Par Value 515,931 516,119 Accumulated Distributions in Excess of Net Income (160,016) (157,674) --------- --------- TOTAL STOCKHOLDERS' EQUITY 378,891 381,421 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 411,842 $ 417,639 ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. Page 4
REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements Of Income ================================= For The Three And Six Months Ended June 30, 1996 And 1995 (dollars in thousands, except per share data) (Unaudited) Three Three Six Six Months Months Months Months Ended Ended Ended Ended 6/30/96 6/30/95 6/30/96 6/30/95 ========== ========== ========== ========== REVENUE Rental $ 13,602 $ 12,171 $ 27,330 $ 23,978 Interest 27 50 50 156 Other 8 22 35 37 ---------- ---------- ---------- ---------- 13,637 12,243 27,415 24,171 ---------- ---------- ---------- ---------- EXPENSES Depreciation and Amorti- zation 4,049 3,586 8,123 6,931 General and Adminis- trative 1,288 494 2,598 996 Advisor Fees -- 1,456 -- 2,908 Property 413 354 859 724 Interest 485 559 1,005 894 Provision for Impairment Losses -- -- 323 -- ---------- ---------- ---------- ---------- 6,235 6,449 12,908 12,453 ---------- ---------- ---------- ---------- Income from Operations 7,402 5,794 14,507 11,718 Gain on Sales of Properties 213 -- 958 77 ---------- ---------- ---------- ---------- NET INCOME $ 7,615 $ 5,794 $ 15,465 $ 11,795 ========== ========== ========== ==========
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(continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements Of Income ================================= For The Three And Six Months Ended June 30, 1996 And 1995 (dollars in thousands, except per share data) (Unaudited) Three Three Six Six Months Months Months Months Ended Ended Ended Ended 6/30/96 6/30/95 6/30/96 6/30/95 ========== ========== ========== ========== Net Income Per Share $ 0.33 $ 0.30 $ 0.67 $ 0.60 ========== ========== ========== ========== Weighted Average Number of Shares Outstanding 22,976,469 19,503,080 22,976,756 19,503,080 ========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. Page 6
REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements Of Cash Flows ===================================== For The Six Months Ended June 30, 1996 And 1995 (dollars in thousands) (Unaudited) 1996 1995 ========= ========= CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 15,465 $ 11,795 Adjustments to Net Income: Depreciation and Amortization 8,123 6,931 Provision for Impairment Losses 323 -- Gain on Sales of Properties (958) (77) Change in: Accounts Receivable and Other Assets 797 (1) Accounts Payable, Accrued Expenses and Other Liabilities (424) 557 --------- --------- Net Cash Provided by Operating Activities 23,326 19,205 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from Sales of Properties 2,208 315 Acquisition of and Additions to Properties (5,481) (41,607) --------- --------- Net Cash Used in Investing Activities (3,273) (41,292) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of Distributions (26,653) (17,553) Proceeds from Line of Credit 21,300 31,600 Payment of Line of Credit (2,700) -- Payment of Notes Payable (12,597) -- Stock Offering Costs (188) -- --------- --------- Net Cash Provided By (Used in) Financing Activities (20,838) 14,047 --------- ---------
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(continued) REALTY INCOME CORPORATION AND SUBSIDIARIES Consolidated Statements Of Cash Flows ===================================== For The Six Months Ended June 30, 1996 And 1995 (dollars in thousands) (Unaudited) 1996 1995 ========= ========= Net Decrease in Cash and Cash Equivalents (785) (8,040) Cash and Cash Equivalents, Beginning of Period 1,650 11,673 --------- --------- Cash and Cash Equivalents, End of Period $ 865 $ 3,633 ========= =========
Interest paid, net of interest capitalized, during the first six months of 1996 and 1995 was $811,000 and $656,000, respectively. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. Page 8 REALTY INCOME CORPORATION AND SUBSIDIARIES Notes To Consolidated Financial Statements ========================================== June 30, 1996 (Unaudited) 1. Management Statement and General - ------------------------------------ The financial statements of Realty Income Corporation ("Realty Income" or the "Company") were prepared from the books and records of the Company without audit or verification and in the opinion of management include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to the audited financial statements of the Company for the year ended December 31, 1995, which are included in the Company's 1995 Annual Report on Form 10-K, as certain disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. During the first quarter of 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and of Long-Lived Assets to Be Disposed Of" ("Statement 121"). Statement 121 provides guidance for the recognition and measurement of impairment of long-lived assets, including goodwill, related both to assets to be held and used and assets to be disposed of. Under Statement 121, a provision for impairment loss is recognized for assets to be held and used if estimated future cash flows (undiscounted and without interest charges) over a long-term holding period, plus estimated disposition proceeds (undiscounted) are less than current book value. In addition, for assets to be disposed of, a provision for impairment loss is recognized for the amount by which the current book value of the asset to be disposed of exceeds its fair value less cost to sell. During the first quarter of 1996, the Company recorded provision for impairment losses of $323,000 related to two properties to be disposed of. No provision was recognized in 1995 or the second quarter of 1996. Certain of the 1995 balances have been reclassified to conform to 1996 presentation. The reclassifications had no effect on stockholders' equity or net income. Page 9 2. Credit Facility - ------------------- The Company has a $130 million, three-year, revolving, unsecured acquisition credit facility that expires in November 1998. As of June 30, 1996 and December 31, 1995, the outstanding balance on the credit facility was $24.6 million and $6.0 million, respectively, with an effective interest rate of approximately 6.78% and 7.19%, respectively. A commitment fee of 0.15%, per annum, accrues on the average amount of the unused available credit commitment. The fee can increase up to 0.35% if the Company reaches certain debt levels. The credit facility is subject to various leverage and interest coverage ratio limitations, all of which the Company is and has been in compliance with. For the six months ended June 30, 1996 and 1995, interest of $40,000 and $158,000 was capitalized on properties under construction. For the three months ended June 30, 1996 and 1995, interest of $26,000 and $112,000 was so capitalized. 3. Notes Payable - ----------------- The Company redeemed, at par, the $12.6 million principal amount of variable rate senior notes due 2001 on March 29, 1996. Interest incurred on the notes for the six months ended June 30, 1996 and 1995 was $217,000 and $519,000, respectively. Interest incurred on the notes for the three months ended June 30, 1996 and 1995 was $0 and $267,000. 4. Properties - -------------- At June 30, 1996, the Company owned a diversified portfolio of 692 properties in 42 states. Of the Company's properties, 682 are single tenant properties with the remaining properties being multi-tenant properties. At June 30, 1996, eight unleased properties were vacant and available for lease. Page 10 4. Properties (continued) - -------------------------- Nine retail properties in six states were acquired during the first six months of 1996 at an aggregate cost of approximately $6.8 million (including the estimated unfunded development costs on seven properties under construction totaling $2.3 million).
Total Invested through Tenant Industry City/State 06/30/96 ====================== =========== ================ ========== 1ST QUARTER Carver's Restaurant Glendale, AZ $1,521,000 Econo Lube N' Tune Automotive Chula Vista, CA 706,000 Econo Lube N' Tune (1) Automotive Broomfield, CO 335,000 Econo Lube N' Tune (1) Automotive Dallas, TX 387,000 Econo Lube N' Tune (1) Automotive Lewisville, TX 312,000 2ND QUARTER Dairy Mart (1) Convenience Mt Washington, KY 329,000 Dairy Mart (1) Convenience Tipp City, OH 355,000 Econo Lube N' Tune (1) Automotive Arvada, CO 274,000 Jiffy Lube (1) Automotive Centerville, OH 305,000 ---------- Properties acquired in 1996 4,524,000 Funding in 1996 of buildings under construction on land acquired in 1995 798,000 Capitalized Expenditures Relating to Existing Properties 9,000 Acquisition of the Outstanding Class A Units of R.I.C. Trade Center, Ltd., Silverton Business Center, Ltd. and Empire Business Center, Ltd. (after this purchase, the Company owned 100% of these partnerships) 150,000 ---------- TOTAL $5,481,000 ==========
(1) The Company acquired these properties as undeveloped land and is funding construction and other costs relating to the development of the properties by the prospective tenants. The prospective tenants have entered into leases with the Company covering these properties. Page 11 5. Gain on Sales of Properties - ------------------------------- For the six months ended June 30, 1996, the Company sold two restaurant properties and received compensation for granting an easement totaling $2.2 million and recognized a gain of $958,000. For the six months ended June 30, 1995, the Company sold one child care property for $315,000 and recognized a gain of $77,000. For the three months ended June 30, 1996, the Company sold one restaurant property for $685,000 and recognized a gain of $213,000. 6. Related Party Transactions - ------------------------------ A. Advisory Agreement Prior to August 17, 1995, the Company was an advised real estate investment trust pursuant to an advisory agreement under which R.I.C. Advisor, Inc. (the "Advisor") advised the Company with respect to its investments and assumed day-to-day management of the Company. On August 17, 1995, the Advisor was merged into the Company (the "Merger") and the advisory agreement was terminated. B. Acquisition of R.I.C. Advisor, Inc. As consideration in the Merger, the Company issued 990,704 shares of common stock valued at approximately $21.2 million. The following unaudited pro forma summary presents information as if the Merger had occurred at the beginning of 1995. The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined companies.
For the Six Months Ended June 30, 1995 ----------------------------------------- Pro Forma ----------- Revenue $24,283,000 Net Income $11,817,000 Net Income Per Share $ 0.58
Page 12 7. Distributions Paid And Payable - ---------------------------------- During the six months ended June 30, 1996, the Company paid a special distribution of $0.23 per share and six monthly distributions of $0.155 per share. The distributions for the six months totaled $1.16 per share. As of June 30, 1996, distributions of $0.155 per share were declared and payable on July 15, 1996 to stockholders of record on July 1, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General ======= Realty Income Corporation ("Realty Income" or the "Company") is a fully integrated and self-managed real estate company with in-house acquisition, leasing, legal, financial underwriting, portfolio management and capital markets expertise. The seven senior officers of the Company have each participated in the management of the Company's properties and operations for between six and 27 years. Realty Income has elected to be taxed as a real estate investment trust ("REIT"). As of June 30, 1996, Realty Income owned a diversified portfolio of 692 properties in 42 states consisting of over 4.68 million square feet of leasable space. Realty Income typically acquires, then leases back, retail store locations from retail chain store operators, providing capital to the operators for continued expansion and other purposes. The Company concentrates its investments in single- tenant, retail properties leased to national and regional retail chains under long-term, triple-net lease agreements. Triple-net leases typically require the tenant to be responsible for substantially all property operating costs including property taxes, insurance, maintenance and structural repairs. Management believes that long-term leases, coupled with tenants assuming responsibility for property expenses under the triple-net lease structure, generally produce a more predictable income stream than many other types of real estate portfolios. The Company's primary business objective is to generate a consistent and predictable level of funds from operations ("FFO") per share and provide distributions to stockholders. Additionally, the Company generally will seek to increase FFO per share and distributions to stockholders through both internal and external growth, while also seeking to lower the ratio of distributions to stockholders as a percentage of FFO in order to allow internal cash flow to be used to fund additional Page 13 acquisitions and for other corporate purposes. The Company pursues internal growth through (i) contractual rent increases on existing leases; (ii) rental increases at the termination of existing leases when market conditions permit; and (iii) the active management of the Company's property portfolio, including selective sales of properties. The Company generally pursues external growth through the acquisition of additional properties under long-term, triple-net lease agreements with initial contractual base rent which, at the time of acquisition, is in excess of the Company's estimated cost of capital. Prior to August 17, 1995, the Company's day-to-day affairs were managed by R.I.C. Advisor, Inc. (the "Advisor") which provided advice and assistance regarding acquisitions of properties by the Company and performed the day-to-day management of the Company's properties and business. On August 17, 1995, the Advisor was merged with and into Realty Income (the "Merger"). As part of the Merger the advisory agreement between the Company and the Advisor was terminated. In July 1996, the Company expanded its board of directors to seven members. The new directors are Richard J. VanDerhoff, President and Chief Operating Officer of the Company, and Willard H. Smith, formerly the Managing Director, Equity Capital Markets Division, of Merrill Lynch & Co from 1983 until his recent retirement. The Company's common stock is listed on the New York Stock Exchange under the symbol "O." Liquidity and Capital Resources =============================== Cash Reserves ------------- Realty Income was organized for the purpose of operating as an equity REIT which distributes to stockholders, in the form of monthly cash distributions, a substantial portion of its net cash flow generated from lease revenue. The Company intends to retain an appropriate amount of cash as working capital reserves. At June 30, 1996, the Company had cash and cash equivalents totaling approximately $865,000. Management believes that the Company's cash on hand, cash provided from operating activities and borrowing capacity are sufficient to meet its liquidity needs for the foreseeable future. Page 14 Capital Funding --------------- Realty Income has a $130 million three-year, revolving, unsecured acquisition credit facility that expires in November 1998. The credit facility currently bears interest at 1.25% over the London Interbank Offered Rate and offers the Company other interest rate options. As of August 1, 1996, $104.4 million of borrowing capacity was available to the Company under the acquisition credit facility. At that time, the outstanding balance on the credit facility was $25.6 million. This credit facility was used to payoff senior notes, and has been and is expected to be used to acquire additional retail properties leased to national and regional retail chains under long term lease agreements. Borrowings to fund additional properties will increase the Company's exposure to interest rate risk. On March 29, 1996, senior notes totaling $12.6 million were redeemed at par. Proceeds from borrowings under the acquisition credit facility were used to redeem the notes. Realty Income expects to meet its long-term capital needs for the acquisition of properties through the issuance of public or private debt or equity. In August 1995, the Company filed a universal shelf registration statement with the Securities and Exchange Commission covering up to $200 million in value of common stock, preferred stock or debt securities. In the fourth quarter of 1995, the Company issued 2,540,000 shares of common stock at a price of $19.625 per share. The net proceeds of $46.4 million from the stock offering were used to repay borrowings under the acquisition credit facility. These borrowings were used to acquire properties in 1995. The Company is not currently involved in any negotiations and has not entered into any arrangements relating to any additional securities issuances. Property Acquisitions --------------------- During the first six months of 1996, Realty Income purchased nine retail properties in six states for $6.8 million (including the estimated unfunded development costs on seven properties under construction totaling $2.3 million). These nine properties will contain approximately 30,800 leasable square feet and are 100% leased under triple-net leases, with an average initial lease term of 16.6 years. The weighted average annual unleveraged return on the cost of the nine properties is estimated to be 11.3%, computed as estimated contractual net operating income (which in the case of a triple-net leased property is equal to the base rent or, in the case of properties Page 15 under construction, the estimated base rent under the lease) for the first year divided by the total acquisition and estimated development costs. No assurance can be given that the actual return on the cost of the nine properties acquired in 1996 will not differ from the foregoing percentage. In 1996, the Company also invested $696,000 in four development properties originally acquired in 1995. These four development properties have been completed and are paying rent. Final construction funding of $585,000 is pending on two of these properties and is anticipated to occur in the third quarter of 1996. Land adjacent to a current property in the portfolio was acquired for $102,000 and leased to the adjacent Taco Bell tenant. The Company also invested $9,000 in existing properties and purchased the outstanding Class A units in R.I.C. Trade Center, Ltd., Silverton Business Center, Ltd. and Empire Business Center, Ltd. for an aggregate of $150,000. After this purchase, Realty Income owned 100% of these partnerships, which were then dissolved. These partnerships owned three mixed-use light industrial business parks in San Diego, CA. From December 1994 through June 1996, Realty Income acquired 71 retail properties (the "New Properties") for an aggregate cost of approximately $76.9 million (including the estimated unfunded development costs on nine properties totaling $2.9 million). The New Properties are located in 20 states, contain approximately 691,600 leasable square feet and are 100% leased under triple-net leases, with an average initial lease term of 16.5 years. The weighted average annual unleveraged return on the cost of the New Properties is estimated to be 11.3%. No assurance can be given that the actual return on the cost of the New Properties will not differ from the foregoing percentage. Of the New Properties, 64 were occupied as of June 30, 1996 and the remaining seven were pre-leased and under construction pursuant to contracts under which the tenants have agreed to develop the properties (with development costs funded by the Company) and to begin paying rent when the premises open for business. All of the New Properties, including the properties under development, are leased with initial terms of 10 to 20 years. The New Properties were purchased with $15.6 million of cash on hand and $58.4 million from the acquisition credit facility (of which, $46.4 million was repaid from the net proceeds of the stock offering). The allocation of costs between land, and buildings and improvements on the 64 completed and occupied properties was 42% and 58%, respectively. Page 16
1996 ACQUISITION ACTIVITY THROUGH JUNE 30 Total Approx- Initial imate Lease Leasable Term Square Tenant Industry Location (Years) Feet ============= ========== =============== ======= ======== 1ST QTR - ------- Carver's Restaurant Glendale, AZ 19.8 8,100 Econo Lube N' Tune Automotive Chula Vista, CA 15.0 2,800 Econo Lube N' Tune (1) Automotive Broomfield, CO 15.0 2,800 Econo Lube N' Tune (1) Automotive Dallas, TX 15.0 2,700 Econo Lube N' Tune (1) Automotive Lewisville, TX 15.0 2,700 2ND QTR - ------- Dairy Mart (1) Automotive Mt. Washington, KY 20.0 2,800 Dairy Mart (1) Automotive Tipp City, OH KY 15.0 3,800 Econo Lube N' Tune (1) Automotive Arvada, CO 15.0 2,800 Jiffy Lube (1) Automotive Centerville, OH 20.0 2,300 ------ -------- Average/Total 16.6 30,800 ====== ========
(1) The Company acquired these properties as undeveloped land and is funding construction and other costs relating to the development of the properties by the prospective tenants. The prospective tenants have entered into leases with the Company covering these properties and are contractually obligated to complete construction on a timely basis and to pay construction cost overruns to the extent they exceed the construction budget by more than 5%. As of June 30, 1996, the total acquisition and estimated construction costs for the seven properties under development was $4.6 million, of which $2.3 million had not been funded. Page 17 Distributions ------------- Cash distributions paid during the first six months of 1996 totaled $26.7 million, including a special distribution of $5.3 million. Cash distributions paid during the comparable period in 1995 totaled $17.6 million. During the first six months of 1996, the Company paid a special distribution of $0.23 per share and six monthly distributions of $0.155 per share, totaling $1.16 per share. During the first six months of 1995, the Company paid six monthly distributions of $0.15 per share, totaling $0.90 per share. In June and July 1996, the Company declared two distributions of $0.155 per share payable on July 15 and August 15, 1996, respectively. Funds from Operations ("FFO") ============================= FFO for the second quarter of 1996 was $11.44 million versus $9.38 million during the second quarter of 1995, an increase of $2.06 million. FFO for the six months ended June 30, 1996 was $22.93 million versus $18.65 million during the comparable period in 1995, an increase of $4.28 million. Realty Income defines FFO as net income less gain on sales of properties, plus provision for impairment losses on properties held for sale, plus depreciation and amortization. In accordance with the recommendations of the National Association of Real Estate Investment Trusts ("NAREIT"), amortization of deferred financing costs are not added back to net income to calculate FFO. Amortization of financing costs are included in interest expense in the consolidated statements of income. Management considers FFO to be an appropriate measure of the performance of an equity REIT. FFO is used by financial analysts in evaluating REITs and can be one measure of a REIT's ability to make cash distribution payments. Presentation of this information provides the reader with an additional measure to compare the performance of different REITs. FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of the Company's performance or to cash flows from operating, investing, and financing activities as a measure of liquidity or ability to make cash distributions. Page 18 Below is a reconciliation of net income to FFO for the quarter ended June 30, 1996 and 1995:
1996 1995 =========== =========== Net Income $ 7,615,000 $ 5,794,000 Plus Depreciation and Amortization 4,049,000 3,586,000 Plus Provision for Impairment Losses -- -- Less Depreciation of Furniture, Fixtures and Equipment (14,000) -- Less Gain on Sales of Properties (213,000) -- ----------- ----------- Total Funds From Operations $11,437,000 $ 9,380,000 =========== ===========
FFO for the quarter ended June 30, 1996 and 1995 exceeded cash distributions by $753,000 and $603,000, respectively. Below is a reconciliation of net income to FFO for the six months ended June 30, 1996 and 1995:
1996 1995 =========== =========== Net Income $15,465,000 $11,795,000 Plus Depreciation and Amortization 8,123,000 6,931,000 Plus Provision for Impairment Losses 323,000 -- Less Depreciation of Furniture, Fixtures and Equipment (26,000) -- Less Gain on Sales of Properties (958,000) (77,000) ----------- ----------- Total Funds From Operations $22,927,000 $18,649,000 =========== ===========
FFO for the six months ended June 30, 1996 and 1995 exceeded cash distributions (excluding the non-recurring special distribution) by $1.6 million and $1.1 million, respectively. Results of Operations ===================== The following is a comparison of the three and six months ended June 30, 1996 to the three and six months ended June 30, 1995. Page 19 Rental revenue was $13.6 million for the quarter ended June 30, 1996 versus $12.2 million for the comparable quarter in 1995, an increase of $1.4 million. The increase in rental revenue was primarily due to the New Properties. In the quarter ended June 30, 1996 and 1995, the New Properties generated revenue of $2.0 million and $614,000, respectively, an increase of $1.4 million. Percentage rent, which is included in rental revenue, in the second quarter of 1996 and 1995 was $101,000 and $111,000, respectively. Rental revenue was $27.3 million for the six months ended June 30, 1996 versus $24.0 million for the comparable six months in 1995, an increase of $3.3 million. The increase in rental revenue was primarily due to the New Properties. In the six months ended June 30, 1996 and 1995, the New Properties generated revenue of $3.95 million and $769,000, respectively, an increase of $3.18 million. Percentage rent for the six months ended June 30, 1996 and 1995 was $320,000 and $325,000, respectively. At June 30, 1996, 652 or 94.2% of the Company's leases provide for increases in rents through (i) base rent increases tied to a consumer price index with adjustment ceilings or (ii) overage rent based on a percentage of the tenants' gross sales. Some leases contain both types of clauses. Rental revenue generated on 624 properties owned during both the first six months of 1995 and 1996 increased by $284,000 or 1.2%, from $23.19 million to $23.47 million. Rental revenue generated on 624 properties owned during both the second quarter of 1995 and 1996 increased by $102,000 or 0.9%, from $11.55 million to $11.65 million. When comparing 1996 to 1995, same store revenue increased at a slower pace during the second quarter then during the first six months, due to an increase in unleased properties in 1996. Unleased properties are a factor in determining gross revenue generated and property costs incurred by the Company. At June 30, 1996, the Company had eight properties that were not under lease as compared to four properties at June 30, 1995. Four of the eight unleased properties at June 30, 1996 became available for lease during the second quarter of 1996. All of the remaining properties were under lease agreements with third party tenants. Page 20 The following table represents Realty Income's rental revenue by industry for the six months ended June 30, 1996 and 1995:
June 30, 1996 June 30, 1995 ---------------------- ---------------------- Rental Percentage Rental Percentage Industry Revenue of Total Revenue of Total ================= =========== ========== =========== ========== Automotive $ 4,079,000 15% $ 3,622,000 15% Child Care 11,536,000 42% 11,336,000 47% Convenience Stores 1,293,000 5% 316,000 1% Home Furnishings 1,248,000 4% 223,000 1% Restaurant 6,779,000 25% 6,096,000 26% Other 2,395,000 9% 2,385,000 10% ----------- ---- ----------- ---- Total $27,330,000 100% $23,978,000 100% =========== ==== =========== ====
Interest revenue decreased by $23,000 in the second quarter of 1996 to $27,000 from $50,000 in 1995 and by $106,000 in the six months ended June 30, 1996 to $50,000 from $156,000 in 1995. The decrease in interest for both periods was due to lower cash balances, which reflects the Company's desire to maintain an appropriate amount of cash as working capital reserves and invest excess available cash in properties. During the first six months of 1995, the Company invested $10.0 million of cash on hand in properties. Depreciation and amortization was $4.0 million in the second quarter of 1996 verses $3.6 million for the comparable quarter in 1995 and $8.1 million for the six months ended June 30, 1996 verses $6.9 million for the comparable six months in 1995. The increase in both periods was primarily due to the depreciation of the New Properties and amortization of goodwill recorded in connection with the Merger. Total advisor fees and general and administrative expenses decreased by $662,000 to $1.3 million in the second quarter of 1996 versus $2.0 million in 1995. General and administrative expenses were $1.3 million in the second quarter of 1996 versus $494,000 in 1995 and advisor fees of $1.5 million in 1995. The $794,000 increase in general and administrative expenses was due to expenses for management, accounting systems, office facilities, professional and support personnel (i.e. costs of being self-administered). Such costs were the responsibility of the Advisor through August 17, 1995, which received advisor fees of $1.5 million in the second quarter of 1995. As part of the Merger, the advisory agreement was terminated. Page 21 Total advisor fees and general and administrative expenses decreased by $1.3 million to $2.6 million in the six months ended June 30, 1996 versus $3.9 million in 1995. General and administrative expenses were $2.6 million in 1996 versus $1.0 million in 1995 and advisor fees of $2.9 million in 1995. The $1.6 million increase in general and administrative expenses was due to expenses for management, accounting systems, office facilities, professional and support personnel (i.e. costs of being self-administered). Such costs were the responsibility of the Advisor through August 17, 1995, which received advisor fees of $2.9 million in the first six months of 1995. Property expenses are broken down into costs associated with multi-tenant non-triple net lease properties, unleased single- tenant properties and general portfolio expenses. Costs on the multi-tenant and unleased single-tenant properties include, but are not limited to, property taxes, maintenance, insurance, utilities, site checks, bad debt expense and legal fees. General portfolio costs include, but are not limited to, insurance, legal, site checks and title search fees. Costs incurred on the ten multi-tenant properties during the second quarter of 1996 and 11 multi-tenant properties in the comparable period of 1995 totaled $280,000 and $244,000, respectively. The increase was primarily due to an increase in insurance. Two of the ten multi-tenant locations became vacant during the second quarter of 1996. One multi-tenant property was sold in August 1995. Costs incurred on the six unleased single- tenant properties in the second quarter of 1996 and three unleased single-tenant properties in the second quarter of 1995 were $32,000 and $16,000, respectively. The increase is due to property taxes, maintenance and utilities on the additional vacant properties. General portfolio costs in 1996 and 1995 totaled $101,000 and $94,000, respectively. The increase in general portfolio costs is primarily due to an increase in title search fees. Costs incurred on the ten multi-tenant properties during the six months ended June 30, 1996 and 11 multi-tenant properties in the comparable period of 1995 totaled $559,000 and $492,000. The increase was primarily due to an increase in property taxes and insurance. Costs incurred on the six unleased single-tenant properties during the first six months of 1996 and three unleased single-tenant properties in the comparable period of 1995 were $91,000 and $43,000. The increase is due to property taxes, maintenance and utilities on the additional vacant properties. General portfolio costs in 1996 and 1995 totaled $209,000 and $189,000, respectively. The increase in general portfolio costs is primarily due to an increase in title search fees. Interest expense is made up of four components which include; (i) interest on outstanding loans and notes which is offset by; Page 22 (ii) interest capitalized on properties under development. Interest capitalized on properties under development is included in the costs of the completed property and amortized over the estimated useful life of the property. The other two components are; (iii) commitment fees on the undrawn portion of the credit facility; and (iv) amortization of the credit facility origination costs. Interest expense for the second quarter of 1996 was $485,000 as compared to $559,000 for 1995. Interest accrued in 1996 and 1995 was $416,000 and $553,000, respectively. Interest accrued was lower in 1996 than in 1995 due to a decrease in the average outstanding balance and lower interest rates on the acquisition credit facility and senior notes. During the second quarter of 1996, the average outstanding balance and interest rate were $24.6 million and 6.81% as compared to $27.7 million and 7.99% during the comparable period in 1995. Included in the 1996 and 1995 accrued interest was capitalized interest totaling $26,000 and $112,000, respectively. Commitment fees in 1996 were $40,000 as compared to $32,000 in 1995. In 1996 and 1995, a commitment fee of 0.15% per annum was accrued on the undrawn portion of the credit facility. Commitment fees increased in 1996 because the borrowing capacity was increased to $130 million from $100 million in December 1995. Amortization of the credit facility origination fees were $55,000 in 1996 as compared to $86,000 in 1995. The amortized credit facility origination fees decreased in 1996 as compared to 1995, because in December 1995 the term of the credit facility was extended one year, which extended the period of time over which unamortized fees are amortized. Interest expense for the six months ended June 30, 1996 was $1.0 million as compared to $894,000 for 1995. Interest accrued in 1996 and 1995 was $851,000 and $814,000, respectively. Interest accrued was higher in 1996 than in 1995 due to an increase in the average outstanding balance on the acquisition credit facility and senior notes, partially offset by lower interest rates. During the first six months of 1996, the average outstanding balance and interest rate were $24.5 million and 6.97% as compared to $20.5 million and 7.99% during the comparable period in 1995. Included in the 1996 and 1995 accrued interest was capitalized interest totaling $40,000 and $158,000, respectively. Commitment fees in 1996 were $85,000 as compared to $70,000 in 1995. In 1996 and 1995, a commitment fee of 0.15% per annum was accrued on the undrawn portion of the credit facility. Commitment fees increased in 1996 because the borrowing capacity was increased to $130 million from $100 million in December 1995. Amortization of the credit facility origination fees were $109,000 in 1996 as compared to $168,000 in 1995. The amortized credit facility origination fees decreased in 1996 as compared to 1995, because in December 1995 the term of the credit facility was extended one year, which extended the period of time over which unamortized fees are amortized. Page 23 The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In the first quarter of 1996, a $323,000 charge was taken to reduce the net carrying value on two properties because they are held for sale. No charge was recorded for an impairment loss in 1995. The Company anticipates a small number of property sales will occur in the normal course of business. During the second quarter of 1996, the Company recorded a gain of $213,000 on the sale of one restaurant property which generated cash proceeds from the sale of $685,000. No sales occurred during the comparable period of 1995. During the first six months 1996, the Company recorded a gain of $958,000 on the sale of two restaurant properties and the granting of an easement on another property. During 1995, the Company recorded a gain of $77,000 on the sale of one child care property. During 1996 and 1995 cash proceeds generated from these sales were $2.2 million and $315,000, respectively. For the second quarter of 1996, the Company had net income of $7.6 million versus $5.8 million in 1995. The $1.8 million increase in net income is primarily due to an increase in rental revenue from New Properties of $1.4 million and a decrease in interest, advisor fees, general and administrative expenses of $736,000, offset by an increase in depreciation and amortization expense. For the six months ended June 30, 1996, the Company had net income of $15.5 million versus $11.8 million in 1995. The $3.7 million increase in net income is primarily due to an increase in rental revenue of $3.2 million on the New Properties and a net decrease in interest, advisor fees, general and administrative expenses of $1.2 million, offset by an increase in depreciation and amortization expense. Page 24 Properties ========== As of June 30, 1996, Realty Income owned a diversified portfolio of 692 properties in 42 states consisting of over 4.68 million square feet of leasable space. The following table sets forth certain geographic diversification information regarding these properties:
Total Number Approx. Percent of Leasable Annualized of Total Proper- Percent Square Base Annualized State ties Leased Feet Rent (1) Base Rent ============ ======= ======= ========= =========== ========= Alabama 4 100% 20,300 $ 160,000 0.3% Arizona 28 93 189,200 2,314,000 4.2 California 51 96 914,000 9,163,000 16.8 Colorado 40 100 228,200 2,821,000 5.2 Connecticut 3 100 7,100 160,000 0.3 Florida 40 100 298,600 2,974,000 5.4 Georgia 36 100 177,500 2,339,000 4.3 Idaho 11 100 52,000 653,000 1.2 Illinois 22 100 153,400 1,816,000 3.3 Indiana 20 95 89,800 1,237,000 2.3 Iowa 7 100 37,700 411,000 0.8 Kansas 13 100 80,500 900,000 1.7 Kentucky 11 100 33,400 827,000 1.5 Louisiana 2 100 10,700 126,000 0.2 Maryland 6 100 34,900 501,000 0.9 Massachusetts 4 100 20,900 431,000 0.8 Michigan 5 100 26,900 345,000 0.6 Minnesota 17 100 118,400 1,671,000 3.1 Mississippi 3 100 17,300 176,000 0.3 Missouri 26 96 161,300 1,775,000 3.2 Montana 1 100 5,400 71,000 0.1 Nebraska 8 100 47,100 509,000 0.9 Nevada 5 100 29,100 350,000 0.6 New Hampshire 1 100 6,400 119,000 0.2 New Jersey 2 100 22,700 344,000 0.6 New Mexico 3 100 12,000 102,000 0.2 New York 4 100 24,300 469,000 0.9 North Carolina 18 100 77,100 1,154,000 2.1 Ohio 40 100 176,800 2,724,000 5.0 Oklahoma 9 100 60,200 541,000 1.0 Oregon 18 100 98,500 1,129,000 2.1 Pennsylvania 4 100 28,300 420,000 0.8 South Carolina 19 95 82,000 1,022,000 1.9 South Dakota 1 100 6,100 79,000 0.1
Page 25 (continued)
Total Number Approx. Percent of Leasable Annualized of Total Proper- Percent Square Base Annualized State ties Leased Feet Rent (1) Base Rent ============ ======= ======= ========= =========== ========= Tennessee 8 100 56,400 784,000 1.4 Texas 125 99 832,400 8,545,000 15.6 Utah 7 100 45,400 588,000 1.1 Virginia 12 100 67,000 888,000 1.6 Washington 41 100 246,900 2,922,000 5.3 West Virginia 1 100 4,600 58,000 0.1 Wisconsin 10 100 55,200 665,000 1.2 Wyoming 6 100 32,100 410,000 0.8 ------- ------- --------- ----------- --------- Total/Average 692 99% 4,688,100 $54,693,000 100.0% ======= ======= ========= =========== =========
(1) Does not include percentage rents (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level), if any, that may be payable under leases covering certain of the properties. Annualized base rent is calculated by multiplying the monthly contractual base rent as of June 30, 1996 for each of the properties by 12. Realty Income's 692 properties consist of 140 after-market automotive retail locations, 319 child care centers, 38 convenience stores, 4 home furnishings stores, 176 restaurant facilities, and 15 other properties. Of the 692 properties, 623 or 90% are leased to national or major regional retail chain operators; 44 or 6% are leased to franchisees of retail chain operators; 17 or 3% are leased to other tenant types; and 8 or 1% are available for lease. The following table sets forth certain information regarding the Company's properties as of June 30, 1996, classified according to the business of the respective tenants: Page 26
Approx. Realty Total Total Income Approx. Annual- Loca- Owned Leasable ized Industry tions Loca- Square Base Tenant Segment (1) tions Feet Rent (2) ============== ============ ======= ====== ========= =========== AUTOMOTIVE - ---------- Discount Tire Parts 290 18 103,200 $ 1,155,000 Northern Automotive Parts 560 79 409,100 4,177,000 R & S Strauss Parts 110 2 31,200 431,000 Econo Lube N' Tune Service 210 6 16,700 402,000 Jiffy Lube Service 1,210 25 59,300 1,496,000 Q Lube Service 460 4 7,600 180,000 Speedy Muffler King Service 1,030 4 20,200 311,000 Other Automotive -- 2 6,500 90,000 ------ --------- ----------- Total after-market automotive 140 653,800 8,242,000 CHILD CARE - ---------- Children's World Learning Centers Child Care 500 134 964,000 13,272,000 KinderCare Learning Centers Child Care 1,150 13 79,800 1,055,000 La Petite Academy Child Care 770 171 977,300 8,732,000 Other Child Care -- 1 4,200 -- ------ --------- ----------- Total child care 319 2,025,300 23,059,000 CONVENIENCE STORES - ------------------ 7-ELEVEN Convenience 15,000 3 9,700 235,000 Dairy Mart Convenience 870 20 60,100 1,314,000 The Pantry Convenience 390 14 34,400 1,333,000 Other Convenience -- 1 2,100 31,000 ------ --------- ----------- Total convenience stores 38 106,300 2,913,000
Page 27 (continued)
Approx. Realty Total Total Income Approx. Annual- Loca- Owned Leasable ized Industry tions Loca- Square Base Tenant Segment (1) tions Feet Rent (2) ============== ============ ======= ====== ========= =========== HOME FURNISHINGS - ---------------- Levitz Home Furnishings 130 4 376,400 2,496,000 ------ --------- ----------- Total home furnishings 4 376,400 2,496,000 RESTAURANTS - ----------- Don Pablo's Dinner House 50 7 60,700 597,000 Carver's Dinner House 90 3 26,600 495,000 Other Dinner House -- 13 107,900 1,125,000 Golden Corral Family 450 90 529,600 6,981,000 Sizzler Family 600 7 37,600 841,000 Other Family -- 4 23,900 157,000 Hardees Fast Food 3,870 3 10,300 108,000 Taco Bell Fast Food 4,620 24 54,100 1,501,000 Whataburger Fast Food 520 9 23,000 616,000 Other Fast Food -- 16 45,200 864,000 ------ --------- ----------- Total restaurants 176 918,900 13,285,000 Total other Miscellaneous 15 607,400 4,698,000 ------ --------- ----------- Total 692 4,688,100 $54,693,000 ====== ========= ===========
(1) Approximate total number of retail locations in operation under this format (including both corporate owned and franchised locations), based on information provided to the Company by the respective tenants in the first quarter of 1996. (2) Does not include percentage rents (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level), if any, that may be payable under leases covering certain of the properties. Annualized base rent is calculated by multiplying the monthly contractual base rent as of June 30, 1996 for each of the properties by 12. Of the 692 properties owned at June 30, 1996, 682 are single- tenant with the remaining being multi-tenant properties. The Page 28 average remaining lease term for all leases on the Company's properties, excluding the multi-tenant properties, is approximately 8.9 years. The lease expirations for seven properties under construction are based on the estimated date of completion of such properties. The following table sets forth certain information regarding the timing of lease expirations on the Company's 676 triple-net leased, single tenant retail properties:
Percent of Total Number of Annualized Annualized Year Leases Expiring Base Rent (2) Base Rent ======== =============== ============= ================= 1996 15 $ 572,000 1.1% 1997 15 587,000 1.2 1998 4 168,000 0.3 1999 20 897,000 1.8 2000 27 1,323,000 2.6 2001 46 3,599,000 7.1 2002 73 5,829,000 11.5 2003 69 5,134,000 10.1 2004 78 6,244,000 12.3 2005 87 6,027,000 11.7 2006 30 2,501,000 4.9 2007 78 4,395,000 8.6 2008 41 3,384,000 6.7 2009 11 714,000 1.4 2010 34 2,729,000 5.4 2011 16 1,290,000 2.5 2012 1 135,000 0.3 2013 0 -- -- 2014 2 265,000 0.5 2015 25 4,789,000 9.4 2016 3 231,000 0.5 2017 0 -- -- 2018 1 39,000 0.1 --------------- ------------- ----------------- Total 676 (1) $50,852,000 100.0% =============== ============= =================
(1) The table does not include ten multi-tenant properties and six vacant, unleased single-tenant properties owned by the Company. (2) Does not include percentage rents (i.e., additional rent calculated as a percentage of the tenant's gross sales above a specified level), if any, that may be payable under leases Page 29 covering certain of the properties. Annualized base rent is calculated by multiplying the monthly contractual base rent as of June 30, 1996 for each of the properties by 12. Impact Of Inflation =================== Tenant leases generally provide for increases in rent as a result of increases in the tenant's sales volumes or increases in the consumer price index. Management expects that inflation will cause these lease provisions to result in increases in rent over time. However, inflation and increased costs may have an adverse impact on the tenants if increases in the tenant's operating expenses exceed increases in revenue. Approximately 98% of the properties are leased to tenants under triple-net leases in which the tenant is responsible for substantially all property costs and expenses. These features in the leases reduce the Company's exposure to rising expenses due to inflation. PART II. OTHER INFORMATION =========================== ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders of Realty Income Corporation was held on May 14, 1996 for the purpose of electing a board of directors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors as listed in the proxy statement were re-elected with the following vote: Shares Withhold Voted For Percent Authority ---------- ------- --------- Donald R. Cameron 15,497,098 67.45 214,984 William E. Clark 15,484,424 67.39 227,658 Roger P. Kuppinger 15,489,982 67.42 222,100 Thomas A. Lewis 15,493,210 67.43 218,872 Michael D. McKee 15,489,156 67.41 222,926 Page 30 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits:
Exhibit No. Description =========== =========== 2.1 Agreement and Plan of Merger between Realty Income Corporation and R.I.C. Advisor, Inc. dated as of April 28, 1995 (incorporated by reference to Appendix A to the Company's definitive Proxy Statement filed June 30, 1995) 3.1 Amended and Restated Certificate of Incorporation of Realty Income Corporation (filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference) 3.2 Amended and Restated Bylaws of Realty Income Corporation (filed as Exhibit 3.2 to the Company's 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference) 10.1 Revolving Credit Agreement (filed as Exhibit 99.2 to the Company's Form 8-K dated December 16, 1994 and incorporated herein by reference) 10.2 Second Amendment to the Revolving Credit Agreement (filed as Exhibit 99.2 to the Company's Form 8-K dated December 19, 1995 and incorporated herein by reference) 27 Financial Data Schedule (electronically filed with the Securities and Exchange Commission only)
B. No report on Form 8-K was filed during the quarter for which this report is filed. A report on Form 8-K dated July 15, 1996 was filed on July 22, 1996 reporting that Realty Income Corporation's board of directors was expanded to seven members. Page 31 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REALTY INCOME CORPORATION (Signature and Title) /s/ GARY M. MALINO Date: August 9, 1996 ---------------------------------- Gary M. Malino, Vice President Chief Financial Officer (Principal Financial and Accounting Officer)
Page 32 EXHIBIT INDEX
Exhibit No. Description Page =========== =========== ---- 27 Financial Data Schedule (Electronically filed with the Securities and Exchange Commission only)............................ 34
Page 33 EX-27 2
5 1 6-MOS DEC-31-1996 JUN-30-1996 865,000 0 1,012,000 0 0 2,747,000 517,707,000 (132,029,000) 411,842,000 6,543,000 26,408,000 22,976,000 0 0 355,915,000 411,842,000 0 27,415,000 0 0 11,479,000 424,000 1,005,000 15,465,000 0 15,465,000 0 0 0 15,465,000 0.67 0.67
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