Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Realty Income third quarter 2008 earnings conference call. (Operator instructions) At this time, I would like to turn the Conference over to the Chief Executive Officer of Realty Income, Tom Lewis. Please go ahead, sir.

Thank you, Andrew. Good afternoon, everybody, and welcome to our conference call, where we’ll run through the third quarter and nine months, and then see if we can give some color or additional information on the balance of the year. In the room with me today is Gary Malino, our President and Chief Operating Officer; Paul Meurer, our Executive Vice President and CFO; Mike Pfeiffer, our Executive Vice President, General Counsel; and Tere Miller, as always, our Vice President, Corporate Communications. And as I am oriented to do on all of these is to say during this conference call, we will make certain statements that may be considered to be forward-looking statements under Federal Securities law. The company’s actual future results may differ significantly from the matters disclosed in any forward-looking statements, and we will disclose in greater detail on the company’s quarterly 10-Q the factors that may cause such differences. And Paul, if you want to start up by going through the numbers, that’ll be great.

Thanks, Tom. As usual, I’m going to comment on our financial statements, provide a few highlights of our financial results for the third quarter, starting with the income statement. Total revenue increased 12.2% for the third quarter as compared to the third quarter of 2007. Rental revenue increased to approximately $82.2 million in the quarter as a result of new property acquisitions. Same-store rental revenue increased 1.1% for the quarterly period, and other income was $322,000 for the quarter. On the expense side, interest expense increased by about $7.8 million during the third quarter as compared to the third quarter of last year and this increase is due to more bonds outstanding as compared to a year ago, the $550 million of 2019 notes that we issued in September of 2007. We had zero borrowings on our credit facility throughout the third quarter. On a related note, our interest coverage ratio continues to be strong, at 3.2 times, while our fixed-charge coverage ratio was 2.5 times. Depreciation and amortization expense increased by about $3.4 million in the comparative quarterly period, as depreciation expense has increased as our portfolio continues to grow. General and administrative expenses, or G&A expenses, for the third quarter were about $5.1 million, a reduction of almost $1.2 million from last year. G&A represents only 6.2% of total revenues for the quarter. We expect G&A expenses in 2008 to remain below 2007 levels. Property expenses increased by $963,000 for the quarter and these are the expenses primarily associated with the taxes, maintenance, and insurance expenses, which we are responsible for on properties that are available for lease or sale. Income taxes consist of income taxes paid to various states by the company, and these taxes total $308,000 for the quarterly period. Income from discontinued operations for the…

Thank you, Paul and as is our custom, I’ll just run through the various areas of the Business and I’ll start with the portfolio. We ended the third quarter with 96.9% occupancy in 73 properties available for lease. That’s out of the 2,355 we own. That’s up 10 BPs from last quarter and I’ll tell you, I never thought I would get excited about occupancy going up 10 BPs, but I am, given this environment, and we’ll certainly take that. We had 14 new vacancies for the quarter. We re-leased 12 of those, and we sold four property which gets us to the increase in occupancy. Only four of the 14 new vacancies came from credit default, from a couple of smaller tenants this quarter. That’s obviously not a large number, given the 2,300 properties and the other 10, the balance, really came through the normal lease rollover that’s going on in the portfolio at all times, which ebbs and flows, so pretty good there. Our sense, looking forward for the fourth quarter as of right now, is occupancy should remain strong. We’re not seeing a lot of default reflected in the portfolio at the moment, but obviously, the retail environment is very tough, and things could change. I think we have a good handle on the lease rollover, and we’re making decent progress on the leasing that comes up. So our expectations as of right now would be once again very high; 96% to 97% occupancy at the end of the fourth quarter, so fairly stable. Same-store rents, as you saw in the release, on the core portfolio, increased 1.1% during the third quarter, 1.3% for the year. Most of you know we have 30 retail industries in the portfolio. Two had declining same-store rents, three were flat, and…

Thank you, sir. (Operator instructions) We’ll take the first question from the line of Michael Bilerman with Citigroup. Please go ahead. Greg Schweitzer – Citigroup: Hi, it’s Greg Schweitzer, I’m here with Michael. This one’s probably for Paul. What occupancy expectation for the full year are you baking into the ‘09 guidance range?

We do take into consideration that there might be some additional stress, if you will, in the portfolio. As kind of a general comment, I’d say about 1% occupancy down is something that’s already in those numbers and those assumptions. Greg Schweitzer – Citigroup: How would that compare to when you were at this point last year; deciding on ‘08 occupancy and when you made the ‘08 plan were you sort of also baking in sort of a decline there?

Something similar, maybe a little bit less, maybe half of a percentage point, or that sort of thing, at that point, but there’s always something like that baked in just as a more of a conservative view in the model and at this point in time, it seems prudent certainly to have something in there as part of the viewpoint for how the portfolio might perform and that would mean, what, 96% occupancy or similar. What have you, instead of 97%? Greg Schweitzer – Citigroup: Right.

It may not be as conservative as it has been in previous year, given the market we’re talking about.

No and then of course, if it’s a little bit more than that, but yet we do some acquisitions, then obviously, we’re still in that range in terms of earnings performance. Greg Schweitzer – Citigroup: Okay and then Tom, just touching on Buffets to get your thoughts, we had disappointing September sales clearly and the default on the loan. How shall we think about the situation?

It’s an interesting one. I’m not overly concerned. I’ll mention we’re on the Creditors Committee and subject to confidentiality agreements and the reorganization is likely not to be completed till early next year. So I’ll give you some color on it, but relative to parsing that while it’s still going on and we’re in committee is something we can’t do. They filed last January. We had 116 properties; we got 12 back. They were about 7.6% of rents in our largest tenant and we took the 12 back and went off on those, and really started focusing on the 104 properties that we own. And as we mentioned three months ago now or so, or four months, the agreement we put together with Buffets is to lease all of the 104 properties and adjust the rent from a little over $22 million to a little over $19 million, or about 87% of previous rent. That agreement was signed by all parties; it was approved by the court and we’re operating under that in the fourth quarter and I think it was pretty consistent with what we thought and it’s also what we had in the guidance, so that really didn’t change guidance. Our thought on Buffets, as we worked through, even though their EBITDA declined substantially post their merger, there was still a lot of EBITDA in the chain, and it was going to be a reorganization. And while we had some properties that had been, I think, substantially weakened in their operations, we had mostly profitable properties and we knew that they would want those profitable properties and we felt, given the level of EBITDA, that they would go forward, and we continue to think that today. It’s interesting, as we looked at it. One of the goals we…

In the confidentiality agreements, the only thing I could speak to was rent levels and terms, but saying that we want the cash flow coverages in levels we’re comfortable with – for those of you that watched the underwriting in recent years, I think you know where those levels are and obviously that would take a substantial decrease. Greg Schweitzer – Citigroup: Okay and then just finally, are you able to provide some color on the revised lease lengths?

Yes, sure. They vary. We cut the portfolio up into pieces with them and on that, I’ll give it to you exactly, here we go.

And by the way, before he answers, Greg, just so you know, the expiration schedule that’s currently in our press release now and will be in our 10-Q, and of course on a go-forward basis, does reflect all of these changes that were made to the Buffets lease plan. Michael Bilerman – Citigroup: And Paul, it's Michael Bilerman, that takes effect as of October 1 or at what point in the fourth quarter?

It’s September 15.

We reflected that in the numbers at the end of the quarter relative to cash flow coverages, and also the lease rollover. Anyway, of the 104, we had 15 of them where we cut the rents pretty substantially and went to a three-year lease, but again, putting the cash flow coverages up into a very comfortable range didn’t bother us that much. We had 11 that we did at five-year, we had 34 at seven-year, we had 10 we did 10-year leases, and we had 34 where we did 13-year leases and again, the focus for us is – if you get the cash flow coverage very high, then lease length is not your issue. Greg Schweitzer – Citigroup: Right, thank you.

Thank you. We’ll move to our next question from the line of Todd Lukasik with Morningstar. Please go ahead. Todd Lukasik – Morningstar: Hi, thanks for taking my questions.

Hey, Todd.

Hey, Todd. Todd Lukasik – Morningstar: Hi. Just seems like you guys have some dry powder to potentially take advantage of some good deals in the acquisition space. Can you just speak a little bit about what metrics you all will use to know when cap rates have gone high enough?

That’s a great question and like most decisions, rather than rely on one thing, there are a number of things, but I think, given what I talked about in historical cap rates, I think we’re really going to need them up over 10, so that’s one. Second, at the same time that they need to be up over 10, I think that it’d be smart for us to be a little more stringent with our cash flow coverages. So if you’re raising the rent a bit, the properties have to be more profitable to be up at 2.5 to three times cash flow coverage. So I think it’s really a mix of cap, and as well as a price adjustment in a seller’s mind, relative to where prices have to be, but my sense is 10-plus. The other part of this is in net lease. While our leases do grow, we have to make a good spread right up front. So I think if you look at your cap rate, and then you start looking at cost of capital, I think it shows you that cap rates do need to be high before it makes sense to make accretive acquisitions. If you look at debt costs for us today, BBB spreads have gapped out. In the REIT world, I think you’re over 10%. If you look at preferred, obviously that market’s been beaten up pretty bad, so you’re looking at 12%. So you kind of look for permanent financing in the common equity area and I think if you take the guidance we have for 2008 as an example, and you did $1.82 to $1.84, and you divided that by the price of the stock at $21, a price of the equity around there on a nominal basis, if you then mark it up for underwriting costs, you’re going to be looking at 9% or so as a cost of equity. And so I think you really have to be looking at a spread of 100 basis points before it makes sense to add accretive acquisitions. So it’s one, the market relative to cap, which I think has to be 10-plus. I think it’s then secondarily making sure that in this environment, which will be volatile for a few years and a tough financing market for people for a few years – we make sure that cash flow coverages are even higher than they were before and then it’ll be a look just personally at our company, and I think for anybody else in the business, at what point is it accretive enough on a nominal basis over your cost of capital where it makes sense. Todd Lukasik – Morningstar: Okay and can you talk a little bit about the process that you go through internally? Do you guys proactively go out and look for attractive property portfolios and approach the current owners or is it mainly reactive, where people are coming to you with opportunities?

It’s a mix of the two, but if it’s reactive, it’s because we have a list of close to 1,000 retailers, and a lot of owners and our people are out really acting like investment bankers and calling on those people, and talking to them about their portfolio, first of all, but also talking to them about their business plans and their balance sheets and their sources of capital and the majority of the transactions really come from those discussions, either through, gee, that’s interesting, let’s take a look at it; or, after having talked to the guy for five years, he wakes up and says, gee, the debt market’s no good, I’m going to need to use my real estate to get some capital, and we get that call. So I would say it’s almost all a function of being fairly proactive, calling on people and we’ve tried to be knowledgeable in terms of who’s asset-rich and who has portfolios. We’ve also tried to be proactive relative to understanding people’s debt maturities that are coming up. In our industry, there was a lot of net lease financing that was done in the CMBS market over the last five to seven years and a lot of those were five-year floaters. So they’re going to be coming up in ‘09, ‘10 and ‘11 and I think, unless the capital markets change dramatically relative to access and even if they do, they probably won’t get back to the pricing of a few years ago that sale leaseback may end up being more attractive to them than the spreads they’re going to experience as they see in the CMBS market. So we’ve been proactive calling on people. That’s where it comes from, but I think a lot of it’ll come from refinance in the next few years, versus M&A, where it came the last few years. Todd Lukasik – Morningstar: Okay and it sounds like you may even expect more opportunities than sort of the $0.5 billion that you’ve said might be available next year. Do you have a sense, from your own balance sheet, what other funding opportunities might be available to you all to take advantage of even more potential acquisitions?

There’ve been a lot of things used in the last few years in the REIT business to fund capital for growth and I think one of the things that has served us better than anything is keeping a very uncomplicated balance sheet and so I think it’s primarily going to be through some asset recycling and it would be through issuance of additional securities, where it’s accretive to do so. The credit facility, the $355 million, has no balance on it, and we don’t anticipate it’s going to have a balance on it in the near future. So that’s available to buy properties, but I think before you put a lot on a credit line today, it would be very wise to know what your takeout’s going to be and I think that’s going to be asset recycling and issuance of new securities, if they’re profitable.

And Todd, just to be clear, in terms of opportunity our historic track record has been more in the 10% to 15% range, in terms of what we purchase, of opportunities, not only that we hear about but really look at and underwrite, so that those are opportunities that are looked at internally through our Investment Committee, where we do the real estate work, the credit work, the cash flow coverage work. So when we say $500 million next year, to do that, we’d end up having to look at a whole lot more than that. Because we continue to be pretty stringent on opportunities we close on and make the final decision on relative to purchase. Activity levels and opportunities, I would say, has slowed down a bit, but it is still strong, and we are still looking at lots of opportunities. We clearly have seen cap rate movement, but we don’t think the volume, as Tom mentioned, will really tick back up again until people kind of get over the sticker shock, if you will, and realize that the alternatives available to them, from a refinancing or recapitalization perspective, are quite limited. And while the debt product historically was our big competitor whether that be CMBS, high-yield debt, leveraged loan or bank credit facilities. That competitor has largely completely disappeared for the BB retailer. Or if it’s there, it’s very, very expensive. So equity sale leaseback capital will be attractive to them and make a lot of sense and when you start talking 10%, 11% equity sale leaseback capital to a BB retailer who doesn’t have a lot of other alternatives relative to their balance sheet, it’s still a very attractive alternative to them. Once they get over that hump, start realizing that they’re not quite there yet, but once they do, we think we’ll have a lot of activity to look at.

I’ll just make one more comment. I would assume on the low side of the range and until we see that movement and then, we’ll guide up in future quarters if it should be. So if I was doing what you’re doing, I’d assume right in the midline, and understand it could be lower than that. Todd Lukasik – Morningstar: Right, okay, that’s very helpful. Thanks again for taking my questions.

Thank you. Our next question will come from the line of Suneet Parikh [ph], Banc of America Securities. Suneet Parikh – Banc of America Securities: Hi, I’m here with Dustin as well. The question is given that you’re partially in the business of helping to extract real estate value from retailers then, there’s been some talk in the market about trying to do that with one large public big-box retailer in particular. Could you provide maybe your thoughts on this type of strategy to create liquidity for a retailer in an environment when underlying real estate values are so much in question?

That’s a great question, and I’ll speak generically. I’m aware of the one you’re thinking of, but my sense is, is the move to extract value out of the retailer to give further value to the equity holders and to do so by forming a REIT today is something that I think was talked about a lot a few years ago, and done, and a piece of financial engineering in a very well-capitalized market that might make sense. In this market, if you’re going to extract "value" out of the real estate portfolio in this environment, if I was running a retailer, it would be to make sure I’m solving a problem relative to my balance sheet, and stay as liquid and with the biggest margins I can, because it’s certainly a tough market out there. And then the second part is how that would be valued in the market, obviously, as it was discussed in the press, would be a decent structure, but it would be only one tenant and even if you look at REITs today and you’re doing this every day, and look at the valuations they’re getting perhaps the value extraction might not be as high as somebody thinks, but for a retailer who’s got a financing problem, I think that’s where you step up to it today, or you want to build cash, unless you’ve got something compelling to do with the business. But I think in most businesses, it’s probably not a period when huge CapEx investments are going to generate a lot of incremental revenue. It’s a better time to take care of your balance sheet. Suneet Parikh – Banc of America Securities: Sure and then, I guess, then just as a follow-up on that. Where do you think, I guess, a ground lease for a well-capitalized big-box retailer would trade right now?

You know, I could have probably given you a really good answer six months ago or 12 months ago, and I think it would have been down in the sixes, but today, it could be substantially higher and I think if you just take a look at our yield and look at the balance sheet, and kind of run through the implied cap rate there, you’d maybe take 100 basis points off for it and then understand your standard deviation on that guess may be 200 basis points. I apologize for not being that helpful in this market. Suneet Parikh – Banc of America Securities: No, that’s fine and I guess, lastly I guess your troubled-tenant watch list – has there been any changes? Has your watch list maybe increased? And I’m sure you look at rent coverage ratios for your troubled tenants. How’s that been going? Have they gone down?

It’s interesting; the watch list today has a couple of retailers on it. They’re not huge positions for us; they’re small and there’s nothing imminent and like all of you, I know it’s a difficult market out there, and it’s difficult for the retailers, particularly those that have a lot of debt and I think for those, their primary problem is their debt; it’s not their real estate and so some of them may well have to deal with that. But it’s not expanded as fast as I thought it would. It’s not large and if I go back six or eight months ago, it looks about the same as it did then. And I think cash flow coverages again in the portfolio are like 2.7, and they range from 1.7 to 4.55. So you can assume that if we have somebody that’s on the watch list, my sense is they’d probably be at the 1.7 to 2.1 at the lower end of that range.

We try to make some pretty affirmative statements on these calls every quarter, as a good form of disclosure, relative to our tenant base. Because we recognize that we don’t disclose specific tenant names for competitive business reasons. So let me just say a couple more things beyond what Tom said in his call remarks at the beginning. That is, in our top 20, we don’t have any other retailers in bankruptcy. So when you get down beyond our top 20 tenants, now you’re getting down to about 1% of rent. So that’s just kind of an affirmative statement that might be helpful to a lot of folks out there wondering about our portfolio.

I’ll also just want to say, so people know we know. Obviously, the economic position is not positive out there. There’s a lack of credit available, you’ve got an over-levered, worried consumer, who’s worrying about his house and equity portfolio declines. Consumer debt’s high, credit cards are tough; while gas price and food inflation has come off at bit, which is certainly helpful. That’s really offset by a low consumer confidence level. So I think for a lot of retailers, you need to dig in your heels and operate well, and watch your CapEx and your balance sheet and retail sales were up about 1.2% September. I think it’ll be worse in October, and then we’ll have to see. So with that said, though, with high cash flow coverages, we hear noise and complaints from tenants, but there’s nothing that I can say today, gee, I think in the second quarter, X is going to happen, or Y, but it’s a market also where we know that things can change, but for right now, not bad. Suneet Parikh – Banc of America Securities: All right, that’s it from me, thanks.

Thank you, our next question comes from the line of Craig Kucera with BB&T Capital Markets. Please go ahead. Steve Redona – BB&T Capital Markets: Yeah hi, good afternoon. This is actually –

Hey, Craig. Steve Redona – BB&T Capital Markets: This is Steve Redona, for Craig. On the C-store acquisition, albeit it was a small one, is that pricing, the 10/1, is that indicative of what you’re seeing now or was this more or less a distress situation?

That’s what we’re telling them it’s going to take and so this was a situation, actually, with an existing tenant, who had another property they wanted to get done and we had done business with them and we said, look, that’s the new rate and it’s just a poster child. We just say, look at the spread on our 10-year, and look at how much it’s moved and so the fact that we’re moving you up 130 basis points is really still pretty much of a bargain and if you don’t need to do it, and you think things will get better, then hang out and wait, but our advice is that cap rates will go up before they go down and again, it’s really anecdotal, because it was a one-off, but they felt that was the easiest thing to do for the one property. We’ve had a couple other three people come in the door and the discussions have been up in that range, or maybe even higher, but I think it has been to date some challenged credits, where even at a higher rate, it didn’t meet some of the other pieces of the puzzle, but that’s where we’re quoting. Craig Kucera – BB&T Capital Markets: Okay and then on the sales, the 13 sales in the quarter, do you have kind of a blended cap rate on those?

Yes. It was 7.9%. Craig Kucera – BB&T Capital Markets: 7.9%.

Obviously lower than you’ve seen on sales in the past, but it was lightening up on what were some attractive properties, smaller price point, in good markets, which I think over the last quarter there was still a pretty good market in that and I think I would look for higher cap rates on sale and not put that in your model. Craig Kucera – BB&T Capital Markets: Okay. And then just broadly, what industries are you seeing the best risk-adjusted returns right now? Are you still taking a look at any banks, sale leasebacks there and if you can just talk sort of through your major industries there?

You could send us a list of which banks you think are perfectly safe, and get a look at that sector.

As Tom’s grabbing his notes here, let me just make a comment on this, which is that banks or not banks, but it’s really going to be balance sheet-driven as opposed to industry-driven, relative to where the opportunities are. So we’re kind of seeing a mix, if you will, come in the door.

What Paul’s saying is I don’t think there’s an industry theme that we’re going to see. I think it’s going to be looking at each of our industries and having a view of how we feel about their business and their future, and how much they’re impacted right now by the consumer; i.e., are they are a low-price point basic human need or value that seems to be holding up? Or are they a consumer discretionary that’s not holding up, or anything home-related that’s not holding up? And we’ll start with kind of that view of whether we like them or not, but I think, to get to the cap rates we want in this environment, when these guys really aren’t trying to grow, it’s going to be balance sheet-related, and them really doing some liquidity. We’ve looked at banks. Banks are something we’ll continue to look at. About three years ago, we took one of our people and had him spend a year on banks – talked to everybody in the business, underwrite the industry, go through it and what we found out is there wasn’t a bank in America that needed any money that we could find, that was a bank in America, not the Bank of America. As such, we spent a year and didn’t do any business, but put the files away thinking there are points, albeit far between, where banks need capital and now that we’re in that, we’re starting to see portfolios come across in banks and it’s a very careful underwriting process. So I’m not particularly optimistic relative to doing large volumes there. The other challenge is if cash flow coverage at the unit level is our best metric for credit, that’s something that’s a lot more difficult to do in a bank branch than it is in other type of retail, and just from the standpoint of identifying what those are. Then more importantly, can they migrate down the street if a bank has two branches? And we believe it can migrate. So it really has to fall so heavily on the overall credit of the bank, that’s a difficult one today and then secondarily, the real estate and secondary use, which is a little better in the newer de novo type branches, but it may be a challenge to do a lot there, but we’re seeing them, and we’re looking at them. Craig Kucera – BB&T Capital Markets: Great, thanks.

Thank you. We’ll take the next question from the line of Jeff Donnelly with Wachovia Securities. Please go ahead. Jeff Donnelly – Wachovia Securities: Good afternoon. Paul, in light of the fact, I think two-thirds of the people on the call work for a bank alright, (inaudible) talking here somewhere, but frankly it alludes me.

Hey, I did not mean it in that light.

Don’t write bad things about the company now because of it, please. Jeff Donnelly – Wachovia Securities: Of course not. Actually, the question is historically, you guys have used an internal credit-scoring system. I guess it’s the DARTH score, I believe to score deals and determine somewhat of a baseline, I think, for an appropriate cap rate. However, with the debt markets blown out, I guess, how valuable are the conclusions there from a pricing standpoint? And I guess as a follow-up, where does your portfolio-wide DARTH score fall today on the S&P credit scale? And what sort of yield would that imply for your portfolio?

Yes. The last part of that I’m not quite sure I can answer, Jeff. It’s our DARF score that gets us to where we really think in it. I think the DARTH scores generally have held up to date. They’re higher than they were a few years ago. However, I anticipate they’re going to decline and I will tell you, of the three credit metrics we use – which is an unsecured underwriting, which is what you’re talking about – versus the real estate and cash flow coverage at a unit level, it’s the one we assign the less, I think, credence to relative to underwriting. Where that goes with yield – I mean, if you’re trying to take a cap rate to their debt spreads, obviously it’d be significantly higher. So I’m kind of struggling with a good answer here for you.

Well, let me just say this, Jeff. Similar to what you guys are doing to the REIT space, and really, I think, most investors or analysts are trying to do to any companies out there – our credit analysis has adapted to the current environment and when we’re looking at credit, what’s the first thing we do? The balance sheet. What do the debt maturities look like for the next two to three years, and are we comfortable with that? If the use of proceeds for the sale leaseback we’re talking about solve some of that problem, great, but are there additional problems beyond that in the balance sheet? And then we look at cash flow metrics. In our case, in our industry, it’s going to be payout ratio, if you will, but say, in a general corporate underwriting, it might be a fixed-charge coverage ratio type calculation. So we’re – it’s reordered, if you will, in terms of what the priority is of what we look at, whereas in the past, we might have been less concerned, if you will, about a debt maturity coming up in their balance sheet a year from now. Like sure, they’ll have access to the capital to repay that. Well, guess what? As we know, that’s not always the case and so – and certainly not the case today, and certainly not the case for a BB retailer. So I’d say that the analysis and approach we go through has naturally adapted to the current times, but in terms of the actual scoring system, it hasn’t really changed. They’re hanging in there. As Tom said, they’ll probably go down, I would guess, but in terms of our approach to credit underwriting, it’s certainly adapted to the current times.

Yes, I’d throw in BB minus as kind of the unsecured debt scoring – obviously we own the real estate and don’t own their equity debt converts, credit default swaps, or whatever securities out there. Jeff Donnelly – Wachovia Securities: And then, I’m curious – I guess it’s a follow-up to an earlier question on banks. You know 12 to 24 months ago, banks were sort of maybe the hot tenant, if you will. The margin that – they were paying top-dollar rents, and there’s top-dollar pricing for their assets. I’m curious where that has gone. Because you said a year or two ago, none of the banks really wanted or needed money. Could you argue that now, in this environment, they definitely want capital? And has TARP effectively provided some degree of a government backstop or cushion that you could argue that this is an industry that’s sort of back on its heels, or a group of creditors that are back on their heels a little bit, but at the end of the day, their credit’s actually better than it appears?

Maybe. With the regional banks – or the ones that have been coming in the door are the local banks and I’ll tell you, we’ve looked at a number of them and a part of our underwriting requires that we get into their portfolio, and we get into the portfolio, and we start looking at the real estate and the real estate development loans, and backing residential homebuilders and the rest of us – quite frankly, in a number of them, we just threw up our hands in the middle of the underwriting and said we’re not smart enough to do this at this juncture. And the people that are not in that situation and are really backed by TARP and the bigger banks – it just would have to be a decision to build liquidity, but I don’t think the cap rate’s going to be in a range where we would do it right now. Jeff Donnelly – Wachovia Securities: Okay and I guess, just last question – point of clarification – the low end of your $1.86 guidance next year – that includes the $0.05 of investment sale gains, correct?

No. We’ve never included property gains – sales gains in our –

No.

– numbers. Jeff Donnelly – Wachovia Securities: Okay. I wasn’t sure. Just, when I was reading through your –

No, just Crest and Crest essentially is estimated, to be honest, at 0 next year. Jeff Donnelly – Wachovia Securities: Okay.

We say 0 to 1, just put something in there, but its 0. Jeff Donnelly – Wachovia Securities: Okay. And then, I’m curious – how plausible is it that you could actually face a year-over-year decline in FFO? Or maybe, what sort of magnitude of occupancy decline would you need to make that a reality?

Well, there’s a lot of moving parts to it, and no acquisitions and we have 1% growth in the portfolio. I’m just doing the math in my head. Then it would take a – and we’ve built about 100 BPs decline in occupancy into the model.

Already.

So I would say, why don’t you start at a couple hundred BPs, 300, to see some decline, but –

I think at that point, Jeff – if I could say this – and I don’t mean it cavalierly – Realty Income might not be the company you’re going to be worried about under that scenario. It’s going to be a pretty significant issue in the economy and I tend to think, on a relative basis, we’ll still be hanging in there pretty well.

Yes, but I think you just take – you take the bottom end of the range and understand we got a 100 BP decline in there, and you see the number it gets it – and it’s all core; there’s no crest. So it’s easy to do and then you can start working some numbers. Jeff Donnelly – Wachovia Securities: Okay, and thanks. Oh, sorry, before I meant $0.01, not $0.05. Thanks, guys.

Thank you.

Thank you. We’ll move to the next question from the line of Ryan Levinson [ph] with Private Fund [ph]. Please go ahead. Ryan Levinson – Private Fund: Thanks for taking my question. My first one is, I think you just said these numbers, but I was busy talking to somebody and missed them. The kind of the portfolio leverage numbers that you used that range of EBITDA to lease coverage?

Yes. Ryan Levinson – Private Fund: Just repeat that?

Yes, sure, I will. When we’re in the portfolio for the quarter, the top 15 tenants – and this is EBITDAR, the "R" being rent – to rent was 2.79 times on average on the stores we own in our top tenants, top 15 tenants. The lowest tenant was a 1.7, the highest, 4.55. And typically, I think if you look back over the last five, six, seven years, we’re a company that has liked a 2.5 times coverage and it would really vary industry to industry, but when you get down to 1.5, we’re getting uncomfortable. So it’s really like a 2-plus is what we’re looking for. And then obviously, the higher the coverage, better and that goes up as, hopefully, EBITDAR goes up over time. So we’re really looking at about 2.5, and when we go and do an acquire and in the past, I would say there were a few transactions where there’d be a couple properties that might get down to a 1.6, 1.7 – I would say and something we’re doing today, we’d be a lot less patient with having a cash flow coverage under 2 at all and we’d want the transaction overall to be 2.5 to 3 times, I would think. Ryan Levinson – Private Fund: Okay and so that’s just EBITDAR to rent.

Right. Ryan Levinson – Private Fund: Given that you’re dealing with all less-than-investment-grade credits, they’re all leveraged – what is EBITDAR to rent plus interest?

The EBITDAR to rent is what we look at on a unit basis. When we do our underwriting for the tenant, we do a full unsecured underwriting and there are many, many metrics, of which that’s one and primarily, what we’re looking for somebody is that we think – we just start by saying that we’ve got a business that is a low-price point basic human needs and it’s something that their product’s going to be used over a long period of time, that there’s a lot of EBITDAR. So if they ever had a problem by overleveraging the balance sheet – that it’ll be a Chapter 11, and not a Chapter 7 and then we really go and focus on cash flow coverage at the unit level to survive that type of event, and real estate prices, so if we ever get a unit back, then we’d have a decent chance of leasing it. But then it ranges all over the board, and I’ll give you an example. In 2000, when all the theater companies were having a significant problem, we walked into one that we knew was going to do a Chapter 11 in about three months, and really structured a transaction where we looked at a group of their movie theaters that were very profitable, and then we bought the land under them at very high cash flow coverages and so we were happy, knowing we had a tenant who might do an 11, to go in and underwrite that. Conversely, we’ve been in situations with a tenant that we think has a business that’s a little more volatile and we’ve required that just their balance sheet would be in better shape. But I’ll give you our lessons of 39 years and that is we own properties…

We stand in front of the interest expense in a bankruptcy scenario. So we’re in front of the debt-holders, if you will. If we have a positive cash flow EBITDAR-to-rent property that’s cash flow-positive, they need to accept the leases to keep those properties, to generate cash flow to pay the debt-holders. So we stand in front of that. So we, on some level, really don’t care, meaning yes, we look at how leveraged a credit might be, and don’t want them, in a best-case scenario, to go into bankruptcy, but, if you will, at the same time, you should assume most of the BB retailers we do business with are generally going to be leveraged. I mean, they’ve been leveraged for 39 years. They’re hitting a pretty bad cycle right now, over the past couple years, combined with some operating metric downturns. But in terms of the leverage element, that’s nothing new and so that’s why we don’t kind of add that into our calculation. Now we do – as Tom said, when we do credit underwriting, to make sure, from a fixed-charge coverage ratio, that they’re cash flow-positive. We certainly don’t want them to be not being able to pay their interest expense and make money as an entity. But we also assume that over the course of a 10-year, 15-year, 20-year lease, they’ll probably take on more leverage than even what we’re looking at upfront in our underwriting. Ryan Levinson – Private Fund: I’m just a little perplexed by something. How do your leases – is there a provision written that some sort of document that works with your creditors, with your tenants’ creditors as well, that puts the leases ahead? Or are you just saying, kind of notionally, that if they want to stay in the building that they have to accept the terms of your lease? I don’t – because I think the mechanics of it –

It's your latter comment. Ryan Levinson – Private Fund: Okay.

That is –

Chapter 11, right.

What happens – in an 11, obviously the equity-holders typically get wiped out. The debt-holders have their position markedly changed and very often, they end up the equity-holders primarily and that happens in a Chapter 11. You then go to what happens to the real estate – and it’s pretty simple – is they either want to keep the unit, or they don’t want to keep the unit and that is going to be based on their profitability and the way we measure that is EBITDAR divided by rent. So if it’s 2.5 times, that means for every buck of rent, they’re making $2.50 EBITDAR, and their choice is pretty clear. They can A, reject the lease, in which case we get the building back. We have our asset and our risk as what we can rent to somebody else versus them – or they can accept it. If they accept it, then we have had no credit event. So if you have a substantially cash flow-positive property, that is what happens to it because they have to have the stores to sell their goods to generate their EBITDA and they can’t have it without paying rent. And I think if you look at Buffets, that was a very good example. Here’s a tenant that had an M&A that they struggled through their top line, really got hit, their middle line really got hit; all of those three things happened at once. It was our largest tenant. We had 116 properties. We got 12 back immediately that we’re out re-renting and then on the balance, the majority of them had no rent change whatsoever and overall, we maintained 87% of the rent on that portfolio. So that’s kind of how it works. Ryan Levinson – Private Fund: Okay. Let me just switch gears, if I could. I’m just curious. On the guidance, the $1.86 to $1.96, there’s nothing for Crest, but where does the growth come from? I know you have some modest escalations built into some of the leases, but if you have 100 BPs of a decline in occupancy, what’s more than offsetting that?

Well, we have lower G&A, which you saw in this quarter and we anticipate will continue. That’s primarily a function of compensation of the lower level of activity and outside of that, and maybe something else –

We had same-store rent growth, we had free cash flow.

If you’re 40% levered, which I guess if you add debt and preferred, and you have one –

Our interest expense is going to go down pretty significantly –

– 1.1% to 1.3% growth, then that gets up around 2%.

Our interest expense is going to go down pretty significantly after we pay off the bonds.

And the balance is acquisitions. Ryan Levinson – Private Fund: Okay. So – pardon me – and so acquisitions gets you to the $1.96; no acquisitions gets you the $1.86?

Correct.

Correct. Ryan Levinson – Private Fund: Okay. All right, thanks a lot.

Thanks, Ryan.

You bet.

Thank you. Our next question comes from the line of Philip Martin with Cantor Fitzgerald. Philip Martin – Cantor Fitzgerald: Good afternoon.

Hey, Philip. Philip Martin – Cantor Fitzgerald: I guess my only question – a lot of them have been answered – but how will Crest impact your ability to go after and take advantage of opportunities, I guess, along the risk curve in 2009? I mean, for example, an opportunity may present itself that may combine a higher-risk, less desirable – or that may contain higher-risk or less desirable assets, but this might occur before Crest’s business really comes back. So, I guess how do you manage that and balance that?

I can answer that, Philip. If you go back two years ago, when we were – last eight years, when we were using Crest a lot, I’ll make a blanket comment that cash was a commodity, and property was valuable. And as such, the person selling the property to a number of people who had cash in a competitive environment was able to put into a number of properties that may not have hit where you wanted to underwrite to, or secondarily, it may be a large enough portfolio where you needed out of diversification by selling off. Today, that has completely flip-flopped, where I think properties are a bit of a commodity and cash is what’s valuable. For somebody looking for cash, it’s a very different market. We competed primarily with a 1031 tax-deferred exchange market that really bought the bulk of all net lease properties out there and that market has just shut down; it’s just really declining extraordinarily fast, as the people in that market, A, either don’t need a 1031, because they’re not selling properties at profit; or B, can’t get their financing. And then secondarily, because other forms of financing have been dramatically impacted because the spread expansion in the debt markets, or the shutdown of the CMBS – I think we’re in a situation today where there’s a dearth of buyers who have cash and there are a number of sellers out there and I think next year that there’s going to be a dramatic number of sellers and not a lot of buyers. So the answer is, if we had to use Crest, it’d be no. If they want to put in some properties we don’t want to buy, we’d take them out and it’s just a very different market. Philip Martin – Cantor Fitzgerald: Then you just have the negotiating leverage, obviously, to do that in this market with – okay. Okay.

And that’s what I – and that’s what it is and I anticipate, but don’t know for sure that we’re going to kind of sit back here in the fourth quarter. We’re looking at transactions and if we find the right one, we’ll do it. But my sense is it’s going to be coming in the next year, when the reality for a lot of folks – who are just hoping with all their might that the credit markets come back – capital markets come back – that reality will impede, and there’ll be a lot of properties out there. If – look, if credit comes running back in, and the world is just great, and interest rates go low, and equities go high, then you’re back into a situation where you could probably use Crest again, and I guess we would, but I’d be amazed if that happens. Philip Martin – Cantor Fitzgerald: If that happens, okay. Okay, thank you.

Thank you, sir. Management, at this time, I’d like to turn the conference to you for any closing remarks.

Thank you. Thank you very much, everybody. As always, it’s a busy earnings season, and there’s a lot of complicated things going on and we appreciate the coverage and the support and appreciate your attention. Thank you very much.

Thank you. Ladies and gentlemen, at this time, we will conclude today’s teleconference. We do thank you for your participation and for using ACT Teleconferencing. You may now disconnect, and please have a pleasant afternoon.