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: July 30, 2008

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 July 30, 2008, Realty Income Corporation (the "Company") issued a press release setting forth its results of operations for the quarter ended June 30, 2008.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  This information, including the information contained in the press release, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any of the Company's filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.

Item 9.01 FinancialStatements and Exhibits

(d)  Exhibits

99.1   Press release dated July 30, 2008

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: July 30, 2008	REALTY INCOME CORPORATION
	By:	/s/ MICHAEL R. PFEIFFER
		Michael R. Pfeiffer
		Executive Vice President, General Counsel and Secretary

INDEX TO EXHIBITS

Exhibit No.                                           Description

99.1                                   Press release dated July 30, 2008

EX-99.1

Exhibit 99.1

CONTACT:

Tere Miller

Vice President, Corporate Communications

760-741-2111 ext. 1177

REALTY INCOME ANNOUNCES SECOND QUARTER

AND MID-YEAR OPERATING RESULTS

ESCONDIDO, CALIFORNIA, July 30, 2008...Realty Income Corporation (Realty Income), The Monthly Dividend Company® (NYSE: O) today announced operating results for the second quarter ended June 30, 2008.

COMPANY HIGHLIGHTS:

(For the quarter ended June 30, 2008,

 as compared to the same quarterly period in 2007)

● Revenue increased 17.2% to $82.4 million

● Funds from Operations (FFO) available to common stockholders decreased 4.1% to $46.8 million

●FFO per diluted common share decreased 4.1% to $0.47 per share

●FFO per diluted common share before Crest’s contribution increased 2.3% to $0.45 per share

●Net income available to common stockholders per diluted common share was $0.27 per share

●Portfolio occupancy was 96.8%

●Same store rents increased 1.4% to $65.0 million

●Invested $2.7 million in real estate at an 8.5% capitalization rate

●Dividends paid per common share increased 8.1%

●Increased the monthly dividend for the 43rd consecutive quarter to an annualized amount of $1.656 per share

●Entered into a new $355 million unsecured acquisition credit facility

Financial Results

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

Revenue Increases

Realty Income’s revenue for the second quarter ended June 30, 2008, increased 17.2% to $82.4 million as compared to $70.3 million for the same period in 2007.

Revenue, for the six months ended June 30, 2008, increased 17.1% to $165.5 million as compared to $141.3 million for the same period in 2007.

Net Income Available to Common Stockholders

Net income available to common stockholders, for the quarter ended June 30, 2008, was $27.0 million as compared to $30.9 million for the same period in 2007. Net income per share for the quarter was $0.27 as compared to $0.31 for the same period in 2007.

Net income available to common stockholders, for the six months ended June 30, 2008, was $50.7 million as compared to $61.1 million for the same period in 2007. Net income per share for the quarter was $0.50 as compared to $0.61 for the same period in 2007.

1

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

During the second quarter of 2008, income from continuing operations available to common stockholders was $0.22 per share as compared to $0.26 per share for the same period in 2007.

During the first six months of 2008, income from continuing operations available to common stockholders was $0.46 per share as compared to $0.54 per share for the same period in 2007.

FFO Available to Common Stockholders

FFO, for the second quarter ended June 30, 2008, decreased 4.1% to $46.8 million as compared to $48.8 million for the same period in 2007. FFO per share, for the second quarter ended June 30, 2008, decreased 4.1% to $0.47 per share, as compared to $0.49 per share for the same period in 2007. FFO before Crest’s contribution, for the second quarter ended June 30, 2008, increased 2.3% to $0.45 per share as compared to $0.44 per share for the same period in 2007. Crest Net Lease, Inc. (Crest) is a wholly-owned subsidiary of Realty Income.

FFO, for the six months ended June 30, 2008, decreased 2.7% to $92.7 million as compared to $95.3 million for the same period in 2007. FFO per share, for the six months ended June 30, 2008, decreased 3.2% to $0.92 per share, as compared to $0.95 per share for the same period in 2007. FFO before Crest’s contribution, for the six months ended June 30, 2008, increased 2.2% to $0.91 per share as compared to $0.89 per share for the same period in 2007. For a calculation of FFO before Crest’s contribution, see pages 6 and 7.

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 pages 7 and 8.

Dividend Information

In June 2008, Realty Income announced the 43rd consecutive quarterly increase, and the 49th increase in the amount of the dividend since the Company’s listing on the New York Stock Exchange in 1994. The annualized dividend amount as of June 30, 2008 was $1.656 per share. The amount of the monthly dividends paid during the second quarter increased 8.1% to $0.412 per share from $0.381 per share for the same period in 2007. Through June 30, 2008, the Company had paid 455 consecutive monthly dividends and continues its 39-year history of declaring and paying dividends every month.

Real Estate Portfolio Update

As of June 30, 2008, Realty Income’s portfolio of freestanding, single-tenant, retail properties consisted of 2,367 properties located in 49 states, leased to 118 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 June 30, 2008, portfolio occupancy was 96.8% with 75 properties available for lease out of 2,367 properties in the portfolio.  As of July 28, 2008, transactions to lease or sell 20 of the 75 properties were underway or completed.

Rent Increases

Same store rents on 1,798 properties under lease, during the three months ended June 30, 2008, increased 1.4% to $65.0 million compared to $64.1 million for the same quarter in 2007. Same store rents on 1,798 properties under lease, during the six months ended June 30, 2008, increased 1.4% to $130.05 million compared to $128.24 million for the same period in 2007.

Property Acquisitions

During the second quarter, Realty Income invested $2.7 million in one new property and properties under development with an initial average contractual lease yield of 8.5%. The property is 100% leased under a net-lease

2

agreement with an initial lease term of 20.0 years. The property is leased to a retail chain in the automotive tire service industry.

During the six months ended June 30, 2008, Realty Income invested $184.2 million in 107 new properties and properties under development with an initial average contractual lease yield of 8.7%. The 107 properties are located in 14 states and are 100% leased under net-lease agreements with an initial average lease term of 20.6 years. They are leased to eight different retail chains in seven separate industries. Crest did not acquire any new properties during the six months ended June 30, 2008.

Realty Income entered into a $355 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 second quarter, and $355 million is available to fund new property acquisitions. In addition, the Company had cash and cash equivalents of $39.4 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 second quarter ended June 30, 2008, Realty Income sold eight properties for $7.4 million, which resulted in a gain on sales of $3.1 million.

During the six months ended June 30, 2008, Realty Income sold nine properties and a portion of land from another property for $8.2 million, which resulted in a gain on sales of $3.7 million. The proceeds have been or will be used to invest in new properties and for other corporate purposes.

Other 2008 Activities

New and Expanded Credit Facility

In May 2008, Realty Income entered into a new $355 million unsecured acquisition credit facility to replace its existing $300 million acquisition credit facility. Under the terms of the new facility, available funds were increased by $55 million plus an additional $100 million accordion expansion feature. The initial term runs from May 2008 through May 2011 plus two, one-year extension options.

Crest Net Lease

Crest is focused on acquiring and subsequently marketing net-leased properties for sale. During the second quarter ended June 30, 2008, Crest sold seven properties for $28.6 million and reported a gain on sales of $1.7 million. Crest did not acquire any new properties during the second quarter.

During the six months ended June 30, 2008, Crest sold 22 properties for $46.1 million and reported a gain on sales of $4.4 million. As of June 30, 2008, Crest carried an inventory of $10.4 million, which consisted of eight properties 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 second quarter of 2008, Crest generated $1.3 million or $0.01 per share in FFO for Realty Income, as compared to $4.3 million or $0.04 per share, generated by Crest for Realty Income during the same period in 2007.

During the six months ended June 30. 2008, Crest generated $1.1 million, or $0.01 per share in FFO for Realty Income as compared to $6.0 million, or $0.06 per share, in FFO for Realty Income for the same period in 2007.

CEO Comments on Operating Results

Commenting on Realty Income’s financial results and real estate operations, Tom A. Lewis, Chief Executive Officer stated, “We are pleased with our results given a challenging environment in the overall economy and in the retail sector. During the second quarter we experienced strong revenue growth of 17.2%. Funds from operation (FFO) generated by our core portfolio (or FFO before Crest’s contribution), from which we pay monthly dividends, increased during the second quarter and first six months of 2008. For the quarter ended June 30, 2008, FFO per share generated by the core portfolio increased 2.3% to $0.45 per share from $0.44 per share for the same period in 2007. During the first six months of 2008 FFO per share generated by the core portfolio increased 2.2% to $0.91 per share

3

as compared to $0.89 per share. This growth in our core FFO allowed us to increase the amount of the monthly dividend for the 43rd consecutive quarter and for the 49th time since we went public in 1994."

“We are also pleased with the ongoing stability of our portfolio given conditions in the economy and retail arena. We have been able to maintain high occupancy at 96.8%. In addition, same store rents grew 1.4% for the second quarter and first six months of the year.  The continued strength in our real estate portfolio should allow us to continue to grow our core FFO, which should allow us to continue to increase the dividend throughout the balance of the year."

“We are also very pleased with the continued progress in reducing the inventory and activity in Crest Net Lease.  Crest has been helpful to us in competing for large portfolio transactions so that we can manage tenant level concentration and maintain diversification in our core real estate portfolio.  However, since we are currently experiencing less competition for acquisitions, we see a reduced role for Crest in the near term and believe that adding inventory in Crest now presents more risk than is advisable in an unstable cap rate environment. We also anticipate a weaker environment for  selling properties in the 1031 tax-deferred exchange market; thus we feel it is prudent to reduce our operations in Crest for the time being until cap rates stabilize and the economy strengthens.  Crest’s inventory at the end of the second quarter was just eight properties valued at $10.4 million, down from a peak of over $130 million during 2007. We have made additional progress in reducing Crest’s inventory after the close of the quarter and therefore anticipate that the risks we see in the marketplace of rising cap rates and slow sales should not have an impact on Realty Income’s operations or financial position throughout the remainder of the year."

“With respect to real estate acquisitions, we are being patient.  We have provided guidance of $250 million in acquisitions for 2008. During the second quarter we invested $2.7 million in one new property with an initial contractual lease yield of 8.5%. Through June 30, 2008, we have invested $184.2 million in 107 properties and properties under development with an initial contractual lease yield of 8.7%.  We continue to think cap rates are rising and prices declining and therefore believe that being patient relative to acquisitions is prudent at this time.  We believe that we will be rewarded with higher cap rates and lower prices in the future."

“We have excellent liquidity and available capital to acquire attractively priced retail properties should such opportunities present themselves.  Our balance sheet is only moderately leveraged; we have no mortgages on our properties and no balance on our new and expanded $355 million unsecured acquisition credit facility. We also have approximately $39.4 million in cash on hand.  In addition, we anticipate that a significant amount of capital this year will be generated internally through property sales and free cash flow.  We believe this high level of liquidity will serve us well as acquisition opportunities present themselves in the future."

“While we continue to operate conservatively in a challenging economic and retail environment, we are fortunate to own a strong portfolio of good properties that remain profitable to our retailers and are key to the continued profitability of their businesses.  We believe this will keep our occupancy high and lead to continued growth in our portfolio which, coupled with our conservative balance sheet and strong liquidity, should allow us to enjoy continued progress and growth in our core FFO and dividends during the balance of 2008.”

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.

2008 Estimates

Management estimates that FFO per share for 2008 should range from $1.84 to $1.90, which represents annual FFO per share change of approximately -2.6% to 0.5% as compared to 2007 FFO per share of $1.89. FFO for 2008 is based on an estimated net income per share range of $1.00 to $1.06, adjusted (in accordance with NAREIT’s definition of FFO) for estimated real estate depreciation of $0.90 and potential gain on sales of investment properties of $0.06 per share.

Management further estimates that Crest could contribute between $0.01 to $0.02 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.

4

About Realty Income

Realty Income is The Monthly Dividend Company®, a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. As of June 30, 2008, the Company had paid 455 consecutive monthly dividends throughout its 39-year operating history. The monthly income is supported by the cash flows from 2,367 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.

Forward-Looking Statements

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

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

5

CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended June 30, 2008 and 2007

(dollars in thousands, except per share amounts)

	Three Months Ended 6/30/08			Three Months Ended 6/30/07			Six Months Ended 6/30/08			Six Months Ended 6/30/07
REVENUE
Rental	$	82,352		$	70,112		$	163,948		$	138,895
Other		80			213			1,529			2,365
		82,432			70,325			165,477			141,260
EXPENSES
Interest		23,929			13,029			47,315			25,449
Depreciation and amortization		22,916			18,414			45,830			36,435
General and administrative		5,924			5,838			11,467			10,929
Property		1,093			958			2,354			1,816
Income taxes		218			353			615			598
		54,080			38,592			107,581			75,227
Income from continuing operations		28,352			31,733			57,896			66,033
Income from discontinued operations:
Real estate acquired for resale by Crest		1,295			4,282			1,101			6,030
Real estate held for investment		3,404			921			3,816			1,197
		4,699			5,203			4,917			7,227
Net income		33,051			36,936			62,813			73,260
Preferred stock cash dividends		(6,063	)		(6,063	)		(12,127	)		(12,127	)
Net income available to common stockholders	$	26,988		$	30,873		$	50,686		$	61,133
Funds from operations available to common stockholders (FFO)	$	46,812		$	48,760		$	92,749		$	95,299
Per share information for common stockholders:
Income from continuing operations: Basic and diluted	$	0.22		$	0.26		$	0.46		$	0.54
Net income:
Basic	$	0.27		$	0.31		$	0.51		$	0.61
Diluted	$	0.27		$	0.31		$	0.50		$	0.61
FFO, basic and diluted:(1)
FFO before Crest contribution	$	0.45		$	0.44		$	0.91		$	0.89
Crest Net Lease	$	0.01		$	0.04		$	0.01		$	0.06
Total FFO	$	0.47		$	0.49		$	0.92		$	0.95
Cash dividends paid	$	0.412		$	0.381		$	0.822		$	0.761

(       (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.

6

FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

	Three Months Ended 6/30/08			Three Months Ended 6/30/07			Six Months Ended 6/30/08			Six Months Ended 6/30/07
Net income available to common stockholders	$	26,988		$	30,873		$	50,686		$	61,133
Depreciation and amortization:
Continuing operations		22,916			18,414			45,830			36,435
Discontinued operations		39			104			99			217
Depreciation of furniture, fixtures & equipment		(79	)		(46	)		(157	)		(95	)
(Gain) loss on sales of investment properties: Continuing operations		203			--			(236	)		(1,806	)
Discontinued operations		(3,255	)		(585	)		(3,473	)		(585	)
Funds from operations available to common stockholders	$	46,812		$	48,760		$	92,749		$	95,299
FFO per common share, basic and diluted:	$	0.47		$	0.49		$	0.92		$	0.95
Dividends paid to common stockholders	$	41,756		$	38,533		$	83,310		$	76,863
FFO in excess of dividends paid to common stockholders	$	5,056		$	10,227		$	9,439		$	18,436
Weighted average number of common shares used for computation per share:
Basic		100,346,512			100,133,094			100,326,039			100,111,734
Diluted		100,394,431			100,246,112			100,420,692			100,304,617

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 typically 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 6/30/08			Three Months Ended 6/30/07			Six Months Ended 6/30/08			Six Months Ended 6/30/07
Gain on sales of real estate acquired for resale	$	1,737		$	5,326		$	4,444		$	6,566
Rental revenue		598			2,310			1,634			5,188
Other revenue		138			55			208			61
Interest expense		(433	)		(1,758	)		(1,065	)		(3,877	)
General and administrative expense		(126	)		(179	)		(287	)		(282	)
Property expenses		(53	)		(9	)		(65	)		(14	)
Provisions for impairment		(953	)		--			(3,347	)		--
Income taxes		387			(1,463	)		(421	)		(1,612	)
Funds from operations contributed by Crest	$	1,295		$	4,282		$	1,101		$	6,030
Crest FFO per common share, basic and diluted	$	0.01		$	0.04		$	0.01		$	0.06

Total FFO	$	46,812		$	48,760		$	92,749		$	95,299
Less FFO contributed by Crest		(1,295	)		(4,282	)		(1,101	)		(6,030	)
FFO before Crest contribution	$	45,517		$	44,478		$	91,648		$	89,269
FFO before Crest contribution per common share, basic and diluted	$	0.45		$	0.44		$	0.91		$	0.89

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.

7

HISTORICAL FUNDS FROM OPERATIONS

(dollars in thousands, except per share amounts)

For the three months ended June 30,	2008			2007			2006			2005			2004
Net income available to common stockholders	$	26,988		$	30,873		$	24,289		$	22,315		$	21,446
Depreciation and amortization		22,876			18,472			14,774			11,214			10,205
Gain on sales of investment properties		(3,052	)		(585	)		(1,441	)		(2,655	)		(2,500	)
Total FFO	$	46,812		$	48,760		$	37,622		$	30,874		$	29,151
Total FFO per diluted share	$	0.47		$	0.49		$	0.43		$	0.39		$	0.37
Total FFO	$	46,812		$	48,760		$	37,622		$	30,874		$	29,151
Less FFO contributed by Crest		(1,295	)		(4,282	)		(537	)		(296	)		(2,879	)
FFO before Crest contribution	$	45,517		$	44,478		$	37,085		$	30,578		$	26,272
FFO components, per diluted share(1):
FFO before Crest contribution	$	0.45		$	0.44		$	0.42		$	0.38		$	0.33
Crest FFO contribution	$	0.01		$	0.04		$	0.01		$	0.00		$	0.04
Total FFO	$	0.47		$	0.49		$	0.43		$	0.39		$	0.37
Cash dividends paid per share	$	0.412		$	0.381		$	0.351		$	0.332		$	0.302
Diluted shares outstanding		100,394,431			100,246,112			88,466,024			79,676,168			79,323,180

For the six months ended June 30,
Net income available to common stockholders	$	50,686		$	61,133		$	46,826		$	43,467		$	43,868
Depreciation and amortization		45,772			36,557			28,289			22,046			19,991
Gain on sales of investment properties		(3,709	)		(2,391	)		(2,193	)		(3,477	)		(3,949	)
Total FFO	$	92,749		$	95,299		$	72,922		$	62,036		$	59,910
Total FFO per diluted share	$	0.92		$	0.95		$	0.85		$	0.78		$	0.77
Total FFO	$	92,749		$	95,299		$	72,922		$	62,036		$	59,910
Less FFO contributed by Crest		(1,101	)		(6,030	)		(1,416	)		(1,129	)		(6,154	)
FFO before Crest contribution	$	91,648		$	89,269		$	71,506		$	60,907		$	53,756
FFO components, per diluted share(1):
FFO before Crest contribution	$	0.91		$	0.89		$	0.83		$	0.76		$	0.69
Crest FFO contribution	$	0.01		$	0.06		$	0.02		$	0.01		$	0.08
Total FFO	$	0.92		$	0.95		$	0.85		$	0.78		$	0.77
Cash dividends paid per share	$	0.822		$	0.761		$	0.699		$	0.662		$	0.602
Diluted shares outstanding		100,420,692			100,304,617			85,988,206			79,667,812			77,822,186

(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 June 30, 2008 and December 31, 2007

(dollars in thousands, except per share amounts)

	2008			2007
ASSETS
Real estate, at cost:
Land	$	1,161,705		$	1,110,897
Buildings and improvements		2,250,919			2,127,897
		3,412,624			3,238,794
Less accumulated depreciation and amortization		(512,082	)		(470,695	)
Net real estate held for investment		2,900,542			2,768,099
Real estate held for sale, net		13,892			56,156
Net real estate		2,914,434			2,824,255
Cash and cash equivalents		39,373			193,101
Accounts receivable		9,130			7,142
Goodwill		17,206			17,206
Other assets, net		62,794			35,648
Total assets	$	3,042,937		$	3,077,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
Distributions payable	$	16,006		$	15,844
Accounts payable and accrued expenses		37,377			38,112
Other liabilities		11,233			15,304
Lines of credit payable		--			--
Notes payable		1,470,000			1,470,000
Total liabilities		1,534,616			1,539,260
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 2008 and 2007		337,790			337,790
Common stock and paid in capital, par value $1.00 per share, 200,000,000 shares authorized, 101,341,289 and 101,082,717 shares issued and outstanding in 2008 and 2007, respectively		1,548,052			1,545,037
Distributions in excess of net income		(377,521	)		(344,735	)
Total stockholders’ equity		1,508,321			1,538,092
Total liabilities and stockholders’ equity	$	3,042,937		$	3,077,352

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 June 30, 2008			Dec 31, 2007			Dec 31, 2006			Dec 31, 2005			Dec 31, 2004			Dec 31, 2003			Dec 31, 2002
Apparel stores		1.1	%		1.2	%		1.7	%		1.6	%		1.8	%		2.1	%		2.3	%
Automotive collision services		1.0			1.1			1.3			1.3			1.0			0.3			--
Automotive parts		1.6			2.1			2.8			3.4			3.8			4.5			4.9
Automotive service		4.8			5.2			6.9			7.6			7.7			8.3			7.0
Automotive tire services		6.7			7.3			6.1			7.2			7.8			3.1			2.7
Book stores		0.2			0.2			0.2			0.3			0.3			0.4			0.4
Business services		*			0.1			0.1			0.1			0.1			0.1			0.1
Child care		7.5			8.4			10.3			12.7			14.4			17.8			20.8
Consumer electronics		0.8			0.9			1.1			1.3			2.1			3.0			3.3
Convenience stores		16.2			14.0			16.1			18.7			19.2			13.3			9.1
Crafts and novelties		0.3			0.3			0.4			0.4			0.5			0.6			0.4
Distribution and office		1.0			0.6			--			--			--			--			--
Drug stores		4.2			2.7			2.9			2.8			0.1			0.2			0.2
Entertainment		1.2			1.4			1.6			2.1			2.3			2.6			2.3
Equipment rental services		0.2			0.2			0.2			0.4			0.3			0.2			--
Financial services		0.2			0.2			0.1			0.1			0.1			--			--
General merchandise		0.7			0.7			0.6			0.5			0.4			0.5			0.5
Grocery stores		0.6			0.7			0.7			0.7			0.8			0.4			0.5
Health and fitness		5.5			5.1			4.3			3.7			4.0			3.8			3.8
Home furnishings		2.3			2.6			3.1			3.7			4.1			4.9			5.4
Home improvement		1.9			2.1			3.4			1.1			1.0			1.1			1.2
Motor vehicle dealerships		3.2			3.1			3.4			2.6			0.6			--			--
Office supplies		1.0			1.1			1.3			1.5			1.6			1.9			2.1
Pet supplies and services		0.8			0.9			1.1			1.3			1.4			1.7			1.7
Private education		0.8			0.8			0.8			0.8			1.1			1.2			1.3
Restaurants		21.7			21.2			11.9			9.4			9.7			11.8			13.5
Shoe stores		--			--			--			0.3			0.3			0.9			0.8
Sporting goods		2.3			2.6			2.9			3.4			3.4			3.8			4.1
Theaters		9.1			9.0			9.6			5.2			3.5			4.1			3.9
Travel plazas		0.2			0.2			0.3			0.3			0.4			0.3			--
Video rental		1.0			1.7			2.1			2.5			2.8			3.3			3.3
Other		1.9			2.3			2.7			3.0			3.4			3.8			4.4
Totals		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

* Less than 0.1%

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

10

Lease Expirations

The following table sets forth certain information regarding Realty Income’s property portfolio (excluding properties owned by Crest) regarding the timing of the lease term expirations (excluding extension options) on our 2,282 net leased, single-tenant retail properties as of June 30, 2008 (dollars in thousands):

	Total Portfolio							Initial Expirations(3)							Subsequent Expirations(4)
Year	Total Number of  Leases Expiring(1)		Rental Revenue  for the Quarter Ended June 30, 2008(2)		% of Total Rental Revenue			Number  of Leases Expiring		Rental Revenue for the Quarter Ended  June 30, 2008		% of Total Rental Revenue			Number of Leases Expiring		Rental Revenue for the Quarter Ended June 30, 2008		% of Total Rental Revenue
2008		81	$	1,795		2.3	%		37	$	769		1.0	%		44	$	1,026		1.3	%
2009		124		2,741		3.4			42		914		1.1			82		1,827		2.3
2010		81		1,668		2.1			41		1,026		1.3			40		642		0.8
2011		81		2,343		2.9			30		1,283		1.6			51		1,060		1.3
2012		114		2,704		3.4			74		1,777		2.2			40		927		1.2
2013		102		3,924		4.9			84		3,526		4.4			18		398		0.5
2014		49		1,992		2.5			41		1,823		2.3			8		169		0.2
2015		90		1,807		2.3			65		1,272		1.6			25		535		0.7
2016		112		1,915		2.4			103		1,700		2.1			9		215		0.3
2017		50		2,024		2.5			45		1,929		2.4			5		95		0.1
2018		27		1,094		1.4			17		869		1.1			10		225		0.3
2019		95		4,691		5.9			94		4,616		5.8			1		75		0.1
2020		82		2,986		3.7			79		2,922		3.6			3		64		0.1
2021		147		5,814		7.3			145		5,738		7.2			2		76		0.1
2022		104		3,226		4.1			102		3,153		4.0			2		73		0.1
2023		244		7,240		9.1			243		7,195		9.0			1		45		0.1
2024		64		1,900		2.4			64		1,900		2.4			--		--		--
2025		74		6,152		7.7			68		5,997		7.5			6		155		0.2
2026		210		11,020		13.8			198		10,287		12.9			12		733		0.9
2027		163		5,218		6.6			162		5,147		6.5			1		71		0.1
2028		83		3,786		4.7			81		3,769		4.7			2		17		*
2029		44		1,053		1.3			44		1,053		1.3			--		--		--
2030		21		939		1.2			21		939		1.2			--		--		--
2031		26		637		0.8			26		637		0.8			--		--		--
2032		2		56		0.1			2		56		0.1			--		--		--
2033		7		423		0.5			7		423		0.5			--		--		--
2034		2		230		0.3			2		230		0.3			--		--		--
2037		2		354		0.4			2		354		0.4			--		--		--
2043		1		13		*			--		--		--			1		13		*
Totals		2,282	$	79,745		100.0	%		1,919	$	71,304		89.3	%		363	$	8,441		10.7	%

*Less than 0.1%

(1) Excludes ten multi-tenant properties and 75 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 $109 from properties reclassified to discontinued operations and excludes revenue of $2,716 from ten multi-tenant properties and from 75 vacant and unleased properties at June 30, 2008.

 (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 June 30, 2008 (dollars in thousands):

State	Number of Properties		Percent Leased			Approximate Leasable Square Feet		Rental Revenue for  the Quarter Ended June 30, 2008(1)		Percentage of  Rental Revenue
Alabama		63		98	%		425,400	$	1,872		2.3	%
Alaska		2		100			128,500		277		0.3
Arizona		80		98			395,800		2,413		2.9
Arkansas		18		100			98,500		460		0.6
California		65		100			1,167,300		4,512		5.5
Colorado		53		96			486,300		1,862		2.3
Connecticut		26		100			282,300		1,351		1.6
Delaware		17		100			33,300		427		0.5
Florida		168		97			1,451,000		6,688		8.1
Georgia		132		98			926,900		3,946		4.8
Idaho		14		71			90,200		348		0.4
Illinois		74		96			870,300		4,207		5.1
Indiana		82		96			692,400		3,190		3.9
Iowa		22		95			296,200		999		1.2
Kansas		33		94			573,500		1,113		1.4
Kentucky		22		100			111,500		698		0.8
Louisiana		33		97			190,400		912		1.1
Maine		3		100			22,500		160		0.2
Maryland		29		100			271,200		1,607		2.0
Massachusetts		67		100			582,800		2,561		3.1
Michigan		52		98			257,300		1,323		1.6
Minnesota		21		100			392,100		1,516		1.8
Mississippi		72		96			359,600		1,441		1.7
Missouri		62		97			640,100		2,098		2.5
Montana		2		100			30,000		74		0.1
Nebraska		19		100			196,300		649		0.8
Nevada		15		93			191,000		858		1.0
New Hampshire		14		100			109,900		544		0.7
New Jersey		35		100			266,300		1,922		2.3
New Mexico		8		100			56,400		176		0.2
New York		42		95			503,200		2,514		3.1
North Carolina		97		99			551,100		2,951		3.6
North Dakota		6		100			36,600		57		0.1
Ohio		137		98			850,900		3,453		4.2
Oklahoma		25		96			145,900		593		0.7
Oregon		18		100			297,300		846		1.0
Pennsylvania		101		100			688,800		3,512		4.3
Rhode Island		4		100			14,500		87		0.1
South Carolina		100		99			374,400		2,223		2.7
South Dakota		9		100			24,900		102		0.1
Tennessee		135		95			635,500		2,928		3.6
Texas		216		92			2,317,100		7,668		9.3
Utah		6		67			35,100		87		0.1
Vermont		4		100			12,700		122		0.2
Virginia		104		99			637,100		3,504		4.2
Washington		36		89			235,100		673		0.8
West Virginia		3		67			35,100		145		0.2
Wisconsin		20		95			248,100		774		0.9
Wyoming		1		100			4,200		18		*
Totals/Average		2,367		97	%		19,242,900	$	82,461		100.0	%

* Less than 0.1%

(1) Includes rental revenue for all properties owned by Realty Income at June 30, 2008, including revenue from properties reclassified to discontinued operations of $109.

12