8-K

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report: October 31, 2007

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)

Maryland	1-13374	33-0580106
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(IRS Employer Identification No.)

600 La Terraza Boulevard, Escondido, California 92025

(Address of principal executive offices)

(760) 741-2111

(Registrant's telephone number, including area code)

N/A

(former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02        Results of Operations and Financial Condition

On October 31, 2007, we issued a press release, which sets forth our results of operations for the quarter ended September 30, 2007.  A copy of our press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  This information shall not be deemed “filed” for any purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.

Item 9.01 Financial Statements and Exhibits

Exhibits The following exhibit is filed with this Form 8-K:

99.1   Press release dated October 31, 2007

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 31, 2007	REALTY INCOME CORPORATION
	By:	/s/ Michael R. Pfeiffer
		Michael R. Pfeiffer
		Executive Vice President, General Counsel and Secretary

EX-99.1

Exhibit 99.1

CONTACT:

Tere Miller

Vice President, Corporate Communications

760-741-2111 ext. 1177

REALTY INCOME ANNOUNCES RECORD

THIRD QUARTER AND NINE MONTH OPERATING RESULTS

ESCONDIDO, CALIFORNIA, October 31, 2007...Realty Income, The Monthly Dividend Company^® (NYSE: O), today announced operating results for the third quarter and nine months ended September 30, 2007.

COMPANY HIGHLIGHTS:

(For the quarter ended September 30, 2007,

as compared to the same quarterly period in 2006)

·Revenue increased 25.2% to $74.1 million

·Funds from Operations (FFO) available to common stockholders increased 22.6% to $46.6 million

·FFO per diluted common share increased 9.3% to $0.47 per share

·Net income available to common stockholders per diluted common share was $0.28 per share

·Portfolio occupancy was 98.3%

·Same store rents increased 1.4% to $52.28 million

·Issued $550 million of 6.75% 12-year senior unsecured notes

·Invested $314.6 million in 218 additional properties at an 8.6% capitalization rate

·Dividends paid per common share increased 8.6%

·Increased the monthly dividend 6.1% in August to an annual amount of $1.626 per common share

·In September, increased the monthly dividend for the 40^th consecutive quarter to an annualized amount

       of $1.6335 per share

Financial Results

All per share amounts presented in this press release are on a diluted per common share basis.

Revenue Increases

Realty Income’s revenue, for the third quarter ended September 30, 2007, increased 25.2% to $74.1 million as compared to $59.2 million for the same period in 2006.

Revenue, for the nine months ended September 30, 2007, increased 26.6% to $215.9 million as compared to $170.6 million for the same period in 2006.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended September 30, 2007, was $27.9 million as compared to $24.2 million for the same period in 2006. On a per share basis, net income for the quarter was $0.28 per share as compared to $0.27 per share for the same period in 2006.

Net income available to common stockholders, for the nine months ended September 30, 2007, was $89.0 million as compared to $71.0 million for the same period in 2006. On a per share basis, net income was $0.89 per share as compared to $0.82 per share for the same period in 2006.

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The calculation to determine net income for a real estate company includes gains from the sales of investment properties and impairments. Net income can be significantly impacted by gains on property sales and impairments, which vary from quarter to quarter.

During the third quarter of 2007, income from continuing operations available to common stockholders was $0.25 per share as compared to $0.26 per share for the same period in 2006.

During the first nine months of 2007, income from continuing operations available to common stockholders was $0.79 per share as compared to $0.76 per share for the same period in 2006.

FFO Available to Common Stockholders

FFO, for the third quarter ended September 30, 2007, increased 22.6% to $46.6 million as compared to $38.0 million for the same period in 2006. FFO per share, for the third quarter ended September 30, 2007, increased 9.3% to $0.47 per share, as compared to $0.43 per share for the same period in 2006. FFO per share before Crest’s contribution, for the third quarter ended September 30, 2007, increased 7.1% to $0.45 per share as compared to $0.42 per share for the same period in 2006. Crest Net Lease, Inc. (Crest) is a wholly-owned subsidiary of Realty Income.

FFO, for the nine months ended September 30, 2007, increased 28.0% to $141.9 million as compared to $110.9 million for the same period in 2006. FFO per share, for the nine months ended September 30, 2007, increased 11.0% to $1.41 per share as compared to $1.27 per share for the same period in 2006. FFO per share before Crest’s contribution, for the nine months ended September 30, 2007, increased 6.3% to $1.34 per share as compared to $1.26 per share for the same period in 2006. For a calculation of FFO before Crest’s contributions, see pages 7 and 8.

The Company considers FFO to be an appropriate supplemental measure of a Real Estate Investment Trust’s (REIT’s) operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. FFO is an alternative, non-GAAP, measure that is also considered to be a good indicator of a company’s ability to generate income to pay dividends. Realty Income defines FFO consistent with the National Association of Real Estate Investment Trust’s (NAREIT’s) definition as net income available to common stockholders plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items. See reconciliation of net income available to common stockholders to FFO on

page 7.

Dividend Information

In August 2007, Realty Income increased the amount of the monthly common stock dividend by 6.1% to an annualized amount of $1.626 per share. Then, in September 2007 the Company again increased the amount of the monthly dividend to an annualized amount of $1.6335. The September increase in the monthly dividend was the 40^th consecutive quarterly increase and the 46^th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. Monthly dividends paid for the nine months ended September 30, 2007, increased 8.7% to $1.152 per share as compared to $1.060 per share in monthly dividends paid for the same period in 2006. Through September 30, 2007, the Company had paid 446 consecutive monthly dividends and continues its 38-year history of declaring and paying dividends every month.

Real Estate Portfolio Update

As of September 30, 2007, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 2,181 properties located in 49 states, leased to 110 retail chains doing business in 30 retail industries. The properties are leased under long-term, net leases with a weighted average remaining lease term of approximately 13.0 years.

Portfolio Management Activities

The Company’s portfolio of retail real estate, owned primarily under 15- to 20-year net leases, continues to perform well and provide dependable lease revenue supporting the payment of monthly dividends. As of September 30, 2007, portfolio occupancy was 98.3% with only 37 properties available for lease out of 2,181 properties in the portfolio.

Rent Increases

Same store rents on 1,536 properties under lease, during the three months ended September 30, 2007, increased 1.4% to $52.28 million compared to $51.54 million for the same quarter in 2006. Same store rents on 1,536 properties under lease, during the nine months ended September 30, 2007, increased 1.6% to $156.40 million as compared to $154.00 million for the same period in 2006.

Property Acquisitions

During the third quarter, Realty Income and Crest invested $314.6 million in 218 new properties and properties under development. Realty Income invested $284.7 million in 186 new properties and properties under development with an

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initial average contractual lease yield of 8.6%. The 186 new properties acquired by Realty Income are located in 31 states and are 100% leased under net-lease agreements with an average lease term of 19.1 years. They are leased to three different retail chains in three separate industries.

During the nine months ended September 30, 2007, Realty Income and Crest invested $412.9 million in 264 new properties and properties under development. Realty Income invested $383.0 million in 232 new properties and properties under development with an initial average contractual lease yield of 8.6%. The 232 new properties are located in 33 states and are 100% leased under net-lease agreements with an initial average lease length of 19.1 years. They are leased to nine different retail chains in seven separate industries.

Realty Income maintains a $300 million unsecured acquisition credit facility, which is used to fund property acquisitions in the near term. There was no outstanding balance on the Company’s acquisition credit facility at the end of the third quarter, and $300 million is available to fund new property acquisitions. In addition, at September 30, 2007, the Company had cash and cash equivalents of $266.6 million.

Property Dispositions

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

During the third quarter ended September 30, 2007, Realty Income sold three properties for $4.4 million, which resulted in a gain on sales of $770,000.  In addition, Realty Income sold excess land and improvements from two properties for $529,000, which resulted in a gain of $29,000.   This gain from the land and improvements sales is reported in “other revenue” on the Company’s consolidated statements of income because this excess land and improvements was associated with properties that continue to be owned as part of Realty Income’s core operations.

During the nine months ended September 30, 2007, Realty Income sold six properties for $5.9 million, which resulted in a gain on sales of $1.4 million. In addition, Realty Income sold excess land and improvements from five properties for $4.4 million, which resulted in a gain on sales of $1.8 million. This gain from the land and improvements sales is reported in “other revenue” on the Company’s consolidated statements of income because this excess land and improvements was associated with properties that continue to be owned as part of Realty Income’s “core operations.”

Other Third Quarter 2007 Activities

Issued $550 million of 6.75% 12-year Senior Unsecured Notes

In September 2007, Realty Income issued $550 million of 6.75% senior unsecured notes due 2019. The public offering price for the notes was 99.827% of the principal amount for an effective yield of 6.772%. The securities are rated BBB+ by Fitch Ratings, Baa1 by Moody’s Investors Service, and BBB by Standard & Poor’s Ratings Group. The net proceeds from the offering were used to fund certain property acquisitions, repay borrowings under the Company’s acquisition credit facility, and for general corporate purposes. The remaining net proceeds, which are included in cash and cash equivalents, will be used for general corporate purposes that may include additional property acquisitions.

Crest Net Lease

Crest is focused on acquiring and subsequently marketing net-leased properties for sale. During the third quarter ended September 30, 2007, Crest sold 14 properties for $28.3 million and reported a gain on sales of $2.2 million. Crest also invested $29.9 million in 32 new properties during the third quarter.

For the nine months ended September 30, 2007, Crest sold 45 properties for $97.9 million and reported a gain on sales of $8.8 million. During this same period, Crest invested $29.9 million in 32 new properties and properties under development. As of September 30, 2007, Crest carried an inventory of $78.3 million, which consists of 47 properties that are held for sale.

Crest’s contribution to Realty Income’s FFO (and net income) depends on the timing and number of property sales, if any, in a given quarter. Therefore, Crest’s contribution can fluctuate and add volatility to Realty Income’s reported FFO and net income on a comparable quarterly and annualized basis. During the third quarter of 2007, Crest generated $1.9 million, or $0.02 per share, as compared to $99,000 or $0.00 per share, in FFO for the same period in 2006.

During the nine months ended September 30, 2007, Crest generated $8.0 million, or $0.08 per share, in FFO for Realty Income as compared to $1.5 million, or $0.02 per share, in FFO for Realty Income for the same period in 2006.

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CEO Comments on Operating Results

Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer, said, “We are very pleased to report strong growth in our revenue, funds from operations and dividends paid during the third quarter of 2007. These positive results are due to record property acquisitions over the past 12 months and positive operating results from our existing portfolio of properties.

“Revenue during the third quarter of 2007 increased 25.2%, leading to funds from operations, or FFO, growth of 22.6%.  On a per share basis, FFO per diluted common share rose 9.3% during the quarter.  During the first nine months, revenue increased 26.6% and funds from operations rose 28%.  On a per share basis, FFO per diluted common share rose 11% for the first nine months of the year.  Because of these strong financial results we were able to once again substantially increase the amount of the monthly dividend in August 2007 as well as provide our shareholders with the 40^th consecutive quarterly dividend increase in September 2007.  Dividends paid per common share increased 8.7% during the first nine months of 2007, as compared to the same period in 2006.

“Property acquisitions were also robust during the quarter.  We invested $314.6 million in 218 new properties with an initial average lease rate of 8.6%.  During the first nine months, we invested $412.9 million in 264 new properties with an initial average lease rate of 8.6%.  We are quite pleased with the initial cash-on-cash returns for acquisitions made during 2007 as they represent an excellent spread over our nominal cost of capital.  In addition, the initial average lease term on the properties acquired this year is 19.2 years, which provides us with the long-term lease revenue to support the payment of monthly dividends.

“In addition, there are ample investment opportunities to pursue, though strict due diligence is required so that every property meets our stringent investment requirements.  Despite the current challenges in the credit markets, however, we have yet to see significant upward movement in cap rates on new property acquisitions.  We anticipate, moreover, that conditions in the credit markets will not substantially improve, which could result in additional acquisition opportunities for us to consider during the next few quarters.

“We were also very pleased to have been able to access the capital markets, issuing $550 million of 6.75%, 12-year, unsecured notes during September 2007.  Due to the strong demand for the notes and size of the offering, we were able to permanently fund all property acquisitions made during the first nine months of 2007.  Given the current contraction of the credit markets, we were quite pleased to have been able to access attractively priced debt capital this quarter. This provides us with excellent liquidity as we head into the fourth quarter with $266.6 million of cash on hand and all $300 million available on our acquisition credit facility.  Our balance sheet continues to be very strong with debt outstanding of just 31.7% of our total market capitalization.

“The Company’s property portfolio is also performing extremely well.  We have just 37 properties available for lease out of 2,181 properties in the portfolio. This represents occupancy of 98.3%, which is consistent with our historical track record of occupancy in excess of 97% over the past 38 years of operating history.  Same store rent increases continue to improve.  During the quarter they rose 1.4% and during the first nine months, same store rents rose 1.6% as compared to the same periods in 2006.”

FFO Commentary

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

2007 Estimates

Management estimates that FFO per share for 2007 should range from $1.88 to $1.89, which represents annual FFO per share growth of approximately 8.7% to 9.2%, as compared to 2006 FFO per share of $1.73. This represents an increase from our previous 2007 FFO per share guidance of $1.86 to $1.89 per share.  FFO for 2007 is based on an estimated net income per share range of $1.16 to $1.17, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.76 and potential gain on sales of investment properties of $0.04 per share.

Management further estimates that Crest should contribute between $0.10 to $0.11 per share to Realty Income’s FFO during 2007. This represents an increase in our previous guidance of an $0.08 to $0.10 per share contribution to Realty Income’s FFO.  Crest’s primary business is the purchase and sale of properties for a profit. These sales may occur at

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various times during the course of the year, which could cause FFO, in certain quarters, to fluctuate on a comparable quarterly and annualized basis.

2008 Estimates

Management estimates that FFO per share for 2008 should range from $1.94 to $2.00, which represents annual FFO per share growth of approximately 2.6% to 6.4% as compared to an estimated 2007 FFO per share of $1.88 to $1.89. FFO for 2008 is based on an estimated net income per share range of $1.16 to $1.22, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.82 and potential gain on sales of investment properties of $0.04 per share.

Management further estimates that Crest could contribute between $0.02 to $0.07 per share to Realty Income’s FFO during 2008. Crest’s primary business is the purchase and sale of properties for a profit. These sales may occur at various times during the course of the year, which could cause FFO, in certain quarters, to fluctuate on a comparable quarterly and annualized basis.

The Company does not intend to provide quarterly estimates of FFO. Absent changes in annual FFO guidance at the end of each quarter, it may be presumed that the Company’s overall estimates for 2007 have not changed.

Forward-Looking Statements

Statements in this press release that are not strictly historical are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, the availability of capital to finance planned growth, property acquisitions and the timing of these acquisitions, charges for property impairments, the outcome of any legal proceedings to which the Company is a party, and the profitability of Crest, the Company’s subsidiary, as described in the Company’s filings with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Realty Income is The Monthly Dividend Company^®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of September 30, 2007, the Company had paid 446 consecutive monthly dividends throughout its 38-year operating history. The monthly income is supported by the cash flows from 2,181 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net-leased retail properties nationwide.

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CONSOLIDATED STATEMENTS OF INCOME

For the three and nine months ended September 30, 2007 and 2006

(dollars in thousands, except per share amounts)

	Three Months Ended 9/30/07			Three Months Ended 9/30/06			Nine Months Ended 9/30/07			Nine Months Ended 9/30/06
REVENUE
Rental	$	72,794		$	58,919		$	212,237		$	169,468
Other		1,295			245			3,660			1,096
		74,089			59,164			215,897			170,564
EXPENSES
Depreciation and amortization		19,564			14,586			56,132			42,796
Interest		16,163			12,530			41,612			37,657
General and administrative		6,290			4,083			17,219			12,683
Property		819			787			2,652			2,331
Income taxes		350			96			948			558
Loss on extinguishment of debt		--			1,555			--			1,555
		43,186			33,637			118,563			97,580
Income from continuing operations		30,903			25,527			97,334			72,984
Income from discontinued operations:
Real estate acquired for resale by Crest		1,937			99			7,967			1,515
Real estate held for investment		1,133			932			1,932			3,586
		3,070			1,031			9,899			5,101
Net income		33,973			26,558			107,233			78,085
Preferred stock cash dividends		(6,063	)		(2,351	)		(18,190	)		(7,052	)
Net income available to common stockholders	$	27,910		$	24,207		$	89,043		$	71,033
Funds from operations available to common stockholders (FFO)	$	46,625		$	37,976		$	141,924		$	110,898
Per share information for common stockholders, basic and diluted:
Income from continuing operations	$	0.25		$	0.26		$	0.79		$	0.76
Net income	$	0.28		$	0.27		$	0.89		$	0.82
FFO, basic(1):
FFO before Crest contribution	$	0.45		$	0.42		$	1.34		$	1.26
Crest Net Lease	$	0.02		$	0.00		$	0.08		$	0.02
Total FFO	$	0.47		$	0.43		$	1.42		$	1.28
FFO, diluted(1):
FFO before Crest contribution	$	0.45		$	0.42		$	1.34		$	1.26
Crest Net Lease	$	0.02		$	0.00		$	0.08		$	0.02
Total FFO	$	0.47		$	0.43		$	1.41		$	1.27
Cash dividends paid	$	0.391		$	0.360		$	1.152		$	1.060
(1) The above FFO per share amounts have been rounded to the nearest two decimals and, as such, the individual amounts may not add up to the "Total FFO" amount.

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FUNDS FROM OPERATIONS

 (dollars in thousands, except per share amounts)

	Three Months Ended 9/30/07			Three Months Ended 9/30/06			Nine Months Ended 9/30/07			Nine Months Ended 9/30/06
Net income available to common stockholders	$	27,910		$	24,207		$	89,043		$	71,033
Depreciation and amortization:
Continuing operations		19,564			14,586			56,132			42,796
Discontinued operations		29			75			113			247
Depreciation of furniture, fixtures & equipment		(79	)		(49	)		(174	)		(142	)
Gain on sales of investment properties: Continuing operations		(29	)		--			(1,835	)		--
Discontinued operations		(770	)		(843	)		(1,355	)		(3,036	)
Funds from operations available to common stockholders	$	46,625		$	37,976		$	141,924		$	110,898
Dividends paid to common stockholders	$	39,519		$	32,109		$	116,382		$	92,605
FFO in excess of dividends paid to common stockholders	$	7,106		$	5,867		$	25,542		$	18,293
FFO per common share:
Basic	$	0.47		$	0.43		$	1.42		$	1.28
Diluted	$	0.47		$	0.43		$	1.41		$	1.27
Weighted average number of common shares used for computation per share:
Basic		100,187,901			89,166,429			100,148,993			86,936,161
Diluted		100,252,953			89,267,138			100,326,859			87,084,545

CONTRIBUTIONS BY CREST TO FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

Crest acquires properties with the intention of reselling them rather than holding them as investments and operating the properties. Consequently, we classify properties acquired by Crest as held for sale at the date of acquisition and do not depreciate them. The operations of Crest’s properties are classified as “income from discontinued operations, real estate acquired for resale.”
	Three Months Ended 9/30/07			Three Months Ended 9/30/06			Nine Months Ended 9/30/07			Nine Months Ended 9/30/06
Gain on sales of real estate acquired for resale	$	2,219		$	313		$	8,786		$	1,739
Rental revenue		1,547			913			6,736			2,996
Other revenue		68			--			128			11
Interest expense		(1,239	)		(711	)		(5,115	)		(2,175	)
General and administrative expense		(224	)		(73	)		(507	)		(227	)
Property expenses		(14	)		(17	)		(29	)		(50	)
Provisions for impairment		--			(308	)		--			(308	)
Income taxes		(420	)		(18	)		(2,032	)		(471	)
Funds from operations contributed by Crest	$	1,937		$	99		$	7,967		$	1,515
Crest FFO per common share, basic and diluted	$	0.02		$	0.00		$	0.08		$	0.02

Total FFO	$	46,625		$	37,976		$	141,924		$	110,898
Less FFO contributed by Crest		(1,937	)		(99	)		(7,967	)		(1,515	)
FFO before Crest contribution	$	44,688		$	37,877		$	133,957		$	109,383
FFO before Crest contribution per common share, basic and diluted	$	0.45		$	0.42		$	1.34		$	1.26

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.

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HISTORICAL FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

For the three months ended September 30,	2007			2006			2005			2004			2003
Net income available to common stockholders	$	27,910		$	24,207		$	20,771		$	21,988		$	17,901
Depreciation and amortization		19,514			14,612			11,280			10,321			8,295
Gain on sales of investment properties		(799	)		(843	)		(303	)		(2,831	)		(1,133	)
Total FFO	$	46,625		$	37,976		$	31,748		$	29,478		$	25,063
Total FFO per diluted share	$	0.47		$	0.43		$	0.40		$	0.37		$	0.36
Total FFO	$	46,625		$	37,976		$	31,748		$	29,478		$	25,063
Less FFO contributed by Crest		(1,937	)		(99	)		(566	)		(1,095	)		(244	)
FFO before Crest contribution	$	44,688		$	37,877		$	31,182		$	28,383		$	24,819
FFO components, per diluted share(1):
FFO before Crest contribution	$	0.45		$	0.42		$	0.39		$	0.36		$	0.35
Crest FFO contribution	$	0.02		$	0.00		$	0.01		$	0.01		$	0.00
Total FFO	$	0.47		$	0.43		$	0.40		$	0.37		$	0.36
Cash dividends paid per share	$	0.391		$	0.360		$	0.338		$	0.311		$	0.296
Diluted shares outstanding		100,252,953			89,267,138			79,843,553			79,349,986			70,145,462
For the nine months ended September 30,
Net income available to common stockholders	$	89,043		$	71,033		$	64,239		$	65,856		$	51,667
Depreciation and amortization		56,071			42,901			33,326			30,313			24,651
Gain on sales of investment properties		(3,190	)		(3,036	)		(3,781	)		(6,780	)		(4,256	)
Total FFO	$	141,924		$	110,898		$	93,784		$	89,389		$	72,062
Total FFO per diluted share	$	1.41		$	1.27		$	1.18		$	1.14		$	1.03
Total FFO	$	141,924		$	110,898		$	93,784		$	89,389		$	72,062
Less FFO contributed by Crest		(7,967	)		(1,515	)		(1,695	)		(7,249	)		(467	)
FFO before Crest contribution	$	133,957		$	109,383		$	92,089		$	82,140		$	71,595
FFO components, per diluted share(1):
FFO before Crest contribution	$	1.34		$	1.26		$	1.16		$	1.05		$	1.02
Crest FFO contribution	$	0.08		$	0.02		$	0.02		$	0.09		$	0.01
Total FFO	$	1.41		$	1.27		$	1.18		$	1.14		$	1.03
Cash dividends paid per share	$	1.152		$	1.060		$	0.999		$	0.913		$	0.883
Diluted shares outstanding		100,326,859			87,084,545			79,727,036			78,335,150			70,092,704
(1) The above FFO per share amounts have been rounded to the nearest two decimals and, as such, the individual amounts may not add up to the "Total FFO" amount.

8

CONSOLIDATED BALANCE SHEETS

As of September 30, 2007 and December 31, 2006

(dollars in thousands, except per share amounts)

	2007			2006
ASSETS
Real estate, at cost:
Land	$	1,075,103		$	958,770
Buildings and improvements		2,042,767			1,785,203
		3,117,870			2,743,973
Less accumulated depreciation and amortization		(450,222	)		(396,854	)
Net real estate held for investment		2,667,648			2,347,119
Real estate held for sale, net		78,552			137,962
Net real estate		2,746,200			2,485,081
Cash and cash equivalents		266,644			10,573
Accounts receivable		6,098			5,953
Goodwill		17,206			17,206
Other assets, net		40,114			27,695
Total assets	$	3,076,262		$	2,546,508
LIABILITIES AND STOCKHOLDERS’ EQUITY
Distributions payable	$	15,780		$	15,096
Accounts payable and accrued expenses		29,242			27,004
Other liabilities		9,840			8,416
Line of credit payable		--			--
Notes payable		1,470,000			920,000
Total liabilities		1,524,862			970,516
Stockholders’ equity:
Preferred stock and paid in capital, par value $1.00 per share, 20,000,000 shares authorized, 13,900,000 issued and outstanding in 2007 and 2006		337,790			337,781
Common stock and paid in capital, par value $1.00 per share, 200,000,000 shares authorized, 101,072,360 and 100,746,226 shares issued and outstanding in 2007 and 2006, respectively		1,544,117			1,540,365
Distributions in excess of net income		(330,507	)		(302,154	)
Total stockholders’ equity		1,551,400			1,575,992
Total liabilities and stockholders’ equity	$	3,076,262		$	2,546,508

9

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 September 30, 2007			Dec 31, 2006			Dec 31, 2005			Dec 31, 2004			Dec 31, 2003			Dec 31, 2002			Dec 31, 2001
Apparel stores		1.2	%		1.7	%		1.6	%		1.8	%		2.1	%		2.3	%		2.4	%
Automotive collision services		1.1			1.3			1.3			1.0			0.3			--			--
Automotive parts		2.1			2.8			3.4			3.8			4.5			4.9			5.7
Automotive service		5.2			6.9			7.6			7.7			8.3			7.0			5.7
Automotive tire services		7.3			6.1			7.2			7.8			3.1			2.7			2.6
Book stores		0.2			0.2			0.3			0.3			0.4			0.4			0.4
Business services		*			0.1			0.1			0.1			0.1			0.1			0.1
Child care		8.3			10.3			12.7			14.4			17.8			20.8			23.9
Consumer electronics		0.9			1.1			1.3			2.1			3.0			3.3			4.0
Convenience stores		14.1			16.1			18.7			19.2			13.3			9.1			8.4
Crafts and novelties		0.3			0.4			0.4			0.5			0.6			0.4			0.4
Distribution and office		0.6			--			--			--			--			--			--
Drug stores		2.7			2.9			2.8			0.1			0.2			0.2			0.2
Entertainment		1.4			1.6			2.1			2.3			2.6			2.3			1.8
Equipment rental services		0.2			0.2			0.4			0.3			0.2			--			--
Financial services		0.2			0.1			0.1			0.1			--			--			--
General merchandise		0.7			0.6			0.5			0.4			0.5			0.5			0.6
Grocery stores		0.7			0.7			0.7			0.8			0.4			0.5			0.6
Health and fitness		5.3			4.3			3.7			4.0			3.8			3.8			3.6
Home furnishings		2.6			3.1			3.7			4.1			4.9			5.4			6.0
Home improvement		2.1			3.4			1.1			1.0			1.1			1.2			1.3
Motor vehicle dealerships		3.3			3.4			2.6			0.6			--			--			--
Office supplies		1.1			1.3			1.5			1.6			1.9			2.1			2.2
Pet supplies and services		0.9			1.1			1.3			1.4			1.7			1.7			1.6
Private education		0.8			0.8			0.8			1.1			1.2			1.3			1.5
Restaurants		21.0			11.9			9.4			9.7			11.8			13.5			12.2
Shoe stores		--			--			0.3			0.3			0.9			0.8			0.7
Sporting goods		2.6			2.9			3.4			3.4			3.8			4.1			0.9
Theaters		8.9			9.6			5.2			3.5			4.1			3.9			4.3
Travel plazas		0.2			0.3			0.3			0.4			0.3			--			--
Video rental		1.7			2.1			2.5			2.8			3.3			3.3			3.7
Other		2.3			2.7			3.0			3.4			3.8			4.4			5.2
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 to discontinued operations.

10

Lease Expiration Schedule

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 2,134 net leased, single-tenant retail properties as of September 30, 2007 (dollars in thousands):

	Total Portfolio							Initial Expirations(3)							Subsequent Expirations(4)
Year	Total Number of Leases Expiring(1)		Rental Revenue for the Quarter Ended 9/30/07(2)		% of Total Rental Revenue			Number  of Leases Expiring		Rental Revenue for the Quarter Ended 9/30/07		% of Total Rental Revenue			Number of Leases Expiring		Rental Revenue for the Quarter Ended 9/30/07		% of Total Rental Revenue
2007		55	$	971		1.4	%		33	$	605		0.9	%		22	$	366		0.5	%
2008		115		2,436		3.5			60		1,386		2.0			55		1,050		1.5
2009		119		2,601		3.7			37		886		1.3			82		1,715		2.4
2010		75		1,561		2.2			33		817		1.2			42		744		1.0
2011		80		2,356		3.3			36		1,365		1.9			44		991		1.4
2012		94		2,290		3.2			74		1,919		2.7			20		371		0.5
2013		79		3,494		5.0			70		3,270		4.7			9		224		0.3
2014		48		2,039		2.9			35		1,738		2.5			13		301		0.4
2015		90		1,818		2.6			65		1,237		1.8			25		581		0.8
2016		112		1,905		2.7			111		1,880		2.7			1		25		*
2017		45		1,795		2.5			40		1,708		2.4			5		87		0.1
2018		24		1,023		1.5			24		1,023		1.5			--		--		--
2019		94		4,650		6.6			93		4,456		6.3			1		194		0.3
2020		81		3,087		4.4			78		3,024		4.3			3		63		0.1
2021		149		5,648		8.0			148		5,594		7.9			1		54		0.1
2022		99		2,933		4.2			99		2,933		4.2			--		--		--
2023		238		6,493		9.2			237		6,468		9.2			1		25		*
2024		63		1,838		2.6			63		1,838		2.6			--		--		--
2025		76		6,409		9.1			72		6,344		9.0			4		65		0.1
2026		216		11,208		15.9			214		11,151		15.8			2		57		0.1
2027		96		1,626		2.3			96		1,626		2.3			--		--		--
2028		36		514		0.7			35		506		0.7			1		8		*
2029		27		454		0.6			27		454		0.6			--		--		--
2030		13		411		0.6			13		411		0.6			--		--		--
2031		1		18		*			1		18		*			--		--		--
2032		1		6		*			1		6		*			--		--		--
2033		3		357		0.5			3		357		0.5			--		--		--
2034		2		230		0.3			2		230		0.3			--		--		--
2037		2		341		0.5			2		341		0.5			--		--		--
2043		1		13		*			--		--		--			1		13		*
Totals		2,134	$	70,525		100.0	%		1,802	$	63,591		90.4	%		332	$	6,934		9.6	%

*Less than 0.1%

⁽¹⁾ Excludes ten multi-tenant properties and 37 vacant unleased properties, one of which is a multi-tenant property.  The lease

     expirations for properties under construction are based on the estimated date of completion of those properties.

⁽²⁾ Includes rental revenue of $15 from properties reclassified to discontinued operations and excludes revenue of

     $2,284 from ten multi-tenant properties and from 37 vacant and unleased properties at September 30, 2007.

⁽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.

11

Geographic Diversification

The following table sets forth certain state-by-state information regarding Realty Income’s property portfolio (excluding properties owned by Crest) as of September 30, 2007 (dollars in thousands):

State	Number of Properties		Percent Leased			Approximate  Leasable Square Feet		Rental Revenue for the Quarter Ended September 30, 2007(1)		Percentage of  Rental Revenue
Alabama		60		100	%		410,900	$	1,898		2.6	%
Alaska		2		100			128,500		277		0.4
Arizona		79		99			394,100		2,168		3.0
Arkansas		15		100			94,500		411		0.6
California		62		98			1,107,200		3,990		5.5
Colorado		54		98			451,000		1,787		2.5
Connecticut		25		100			278,900		1,132		1.6
Delaware		16		100			31,500		332		0.5
Florida		167		99			1,451,700		6,342		8.7
Georgia		131		98			924,200		3,941		5.4
Idaho		14		100			91,900		387		0.5
Illinois		71		100			853,300		3,787		5.2
Indiana		80		98			683,200		2,868		3.9
Iowa		19		95			138,700		449		0.6
Kansas		33		94			573,500		1,036		1.4
Kentucky		22		100			111,500		687		0.9
Louisiana		33		100			190,400		965		1.3
Maine		2		100			8,000		13		*
Maryland		28		100			256,200		1,417		1.9
Massachusetts		68		100			585,400		1,581		2.2
Michigan		22		100			165,200		696		1.0
Minnesota		21		100			392,100		1,263		1.7
Mississippi		70		97			353,800		1,453		2.0
Missouri		62		98			640,100		2,116		2.9
Montana		2		100			30,000		74		0.1
Nebraska		19		100			196,300		615		0.8
Nevada		15		100			191,000		838		1.2
New Hampshire		14		100			109,900		447		0.6
New Jersey		35		100			261,700		1,747		2.4
New Mexico		8		100			56,400		154		0.2
New York		44		98			508,100		2,288		3.1
North Carolina		61		98			441,100		2,032		2.8
North Dakota		6		100			36,600		55		0.1
Ohio		128		100			813,900		3,045		4.2
Oklahoma		25		100			145,900		600		0.8
Oregon		18		94			289,100		805		1.1
Pennsylvania		94		100			592,800		2,730		3.7
Rhode Island		4		100			14,500		52		0.1
South Carolina		59		98			250,700		1,522		2.1
South Dakota		9		100			24,900		97		0.1
Tennessee		126		99			608,800		2,961		4.1
Texas		217		96			2,287,600		7,760		10.7
Utah		6		67			35,100		93		0.1
Vermont		4		100			12,700		59		0.1
Virginia		74		100			511,300		2,689		3.7
Washington		37		89			240,800		693		1.0
West Virginia		2		50			23,200		44		0.1
Wisconsin		17		94			157,400		395		0.5
Wyoming		1		100			4,200		18		*
Totals/Average		2,181		98	%		18,159,800	$	72,809		100.0	%

* Less than 0.1%

⁽¹⁾ Includes rental revenue for all properties owned by Realty Income at September 30, 2007, including revenue from properties reclassified to discontinued operations of $15.

12