Good afternoon ladies and gentlemen. Welcome to the Realty Income first quarter earnings conference call. (Operator instructions) I would now like to turn the conference over to Mr. Tom Lewis, CEO of Realty Income; please go ahead, sir.

Good afternoon, everybody. Thanks for joining us late in the day. As always, in the room with me is Gary Malino, our President, and Chief Operating Officer; Paul Meuer, our Executive Vice President and Chief Financial Officer, Mike Pfeiffer, our Executive Vice President and General Counsel, and Tere Miller, Vice President Corporate Communications. And as I’m obligated to say that during the 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 discussed in any forward-looking statements, and we will disclose in greater detail on the company’s Quarterly Report on Form 10-K the factors that may cause such differences. Paul, why don’t we start with an overview of the numbers and then I’ll come back.

Thanks Tom, as usual let me comment on our financial statement, just provide a few highlights of them as a result of the quarter. Starting with walking through the income statement total revenue increased 0.2% for the quarter. Rental revenue for the quarter was approximately $82.1 million. Same store rental revenue increased only 0.2% for the quarterly period, however excluding Buffets same store rent growth was healthier at 1.2% for the quarter reflecting the rest of our portfolio. Other income was $754,000 for the quarter. On the expense side, depreciation and amortization expense increased by $875,000 in the comparative quarterly period. Interest expense increased for the quarter to $21.4 million. This reduction reflects the retirement of the $120 million of our bonds which we have retired over the past few months. We had zero borrowings on our credit facility throughout the entire quarter. On a related note, our interest coverage ratio increased to 3.5x, while our fixed charge coverage ratio increased to 2.7x. General and administrative, or G&A expenses in the first quarter were $5.95 million. This increase of about $400,000 from the same quarter last year was primarily the result of the immediate [inaudible] of some stock including shares held by our retiring chairman. We expect G&A expenses in 2009 to remain similar to 2008 and only about 6.5% to 7% of total revenues or an estimate of about $23 million total for the year. Property expenses were $2.2 million in the quarter. These expenses are primarily associated with the taxes, maintenance, and insurance expenses which we are responsible for on properties available for lease. These expenses have increased a bit as we have a few more properties available for lease. In addition we did record additional bad debt expense in the first quarter of $700,000 which resulted from…

Thanks Paul, I’ll start with the portfolio which I think is doing pretty well especially given the state of the world today. Obviously it continues to be tough out there in retail but quite frankly in the first quarter the deterioration we saw in the fourth was moderated and actually feel decently about pending things in the portfolio today. We don’t see a lot. With that said, our tenants operate in the same environment as everybody else. Its challenging out there and over the last six to eight months, we are very fortunate we feel to have dodged a lot of the bullets of retailers that have had problems. And in the few cases where we’ve had properties with them its been either just a few that we owned or we owned the more profitable properties they had which means we were able to keep them leased and keep the rent up. I think the key for us as always is owning those profitable properties and having the high cash flow coverage of rent on a unit basis for the profitability of the units and that’s really where our margin of safety comes from. As always if you look at our top 15 tenants, they accounted during the quarter for about 53.8% of revenue and the average cash flow coverage for those top 15 tenants, and I’ll kind of do this in sequence so its easier to do, in the third quarter the average cash flow coverage of rent on a unit basis was about 2.79x and ranged from 1.7 to 455. At the end of the fourth quarter it was 2.4x which ranged from 122 to 375 and while that’s still pretty healthy you can see the erosion at the end of the quarter. At the end of the…

(Operator Instructions) Your first question comes from the line of Michael Bilerman – Citi Michael Bilerman – Citi : Could you tell us a bit more about the drivers of the occupancy decline, specifically which tenants gave their units back that you weren’t expecting.

Let’s see, it was pretty much broad based, I think about 13, 14 of the 21 were really just lease rollover which is the normal activity of anywhere from 2% to 4% of the leases that come off at the end of the year. And then the rest were really kind of one-offs, there’s no grouping by a big tenant. There are 119 tenants we count, those are multiple units, and then there’s a lot of others that are just one-offs. There was no grouping I think in the fourth quarter. It was pretty much spread around. Michael Bilerman – Citi : Was there any grouping for the reason for the increase in the bad debt expense.

The bad debt expense was really driven by one specific situation on a relatively smaller tenant, so not a big number that was in reorganization and we had put in place accounts receivable for some rent then and we misjudged it. So it wasn’t an accounting error it was a judgment error in terms of collectability of that specific rent receivable. When that reorganization reached its conclusion then we actually had to reverse that out and charge that as bad debt expense. I should tell you that as part of that, and it’s a process we do every quarter, we go through all of our receivables every quarter, kind of scrub them, think them through in terms of what their collectability and in particular look at any situations like that where you may have a tenant in sort of distress or what have you. And we don’t have any other issues or lack of confidence relative to the remainder at this time of our accounts receivable. So it was kind of a unique situation, there was a grouping in that, and it was a large charge associated with one tenant where there was a handful of months aggregated together in that accounts receivable balance. Michael Bilerman – Citi : How prevalent are rent relief requests from tenants these days.

I would say in the last month or so I haven’t heard as much about it, but it was very prevalent towards the end of the fourth quarter and its interesting because I think what happened is there were a few, actually a lot of Chapter 11 in retail, not for us, but generically last year and we keep a chart of them and it was a big number, and as part of those everybody who goes into a Chapter 11 in retail hires the same three or four firms to go and get rent relief. And they’ll go to the mall owners or whoever it is that’s their landlord and say, gee things are tough and we’re going to have to renegotiate some rent. And what typically happens if you’re a larger landlord you’re aware of how your units are doing, or what the profitability is and your reaction is, we own your more profitable units, there aren’t going to be rent reductions. However what did work last year for a lot of retailers was going back and if they had some one-off owners of buildings, particularly when they had mortgage financing on it and saying, look we may have a problem here if you can’t cut rent. If they could get some knowledge of what the one-off owners’ payments were, I think there was some success in getting that person to do a rent reduction. And so just like REIT industry when a couple of people do something and you go to an AREIT meeting and everybody hears about it on a panel, I think in retail last year everybody went to the retail conferences and three guys from these companies that try and get rent reductions got up on a panel and then we got a whole bunch of phone calls and basically said, our units are profitable the answer is no. So I think that was a trend but it was really a trend towards the end of the last year and it really moderated coming into the first quarter. Michael Bilerman – Citi : And have you granted any concessions.

Not much, not that I can think of. One here, two there, nothing big, no.

Your next question comes from the line of David Fick – Stifel Nicolaus David Fick – Stifel Nicolaus: I had a chance to go through your beautiful glossy Annual Report the other day and its always one of the most interesting reports in our industry, you try to make it humorous and you had two facing pages that show the old business plan and the new business plan sort of delineated and there’s virtually no changes in the words from the old plan to the new plan. However I would point out that there’s no reference in there to acquisition strategy and you’ve already referenced that you might do some acquisitions later this year. Just sort of wondering given your view and we think we agree with it that there is a continued shift in cap rates, where will you be comfortable number one, and number two what is going to give you confidence that you will not continue to see a loss in value for anything you buy later this year.

Yes, a very good question a very good comment. As long as we think that prices will decline and cap rates are up, yes it is good to step back and that’s why we’re doing it. My sense at some point is barring your call generally on the economy is when cap rates get up into the 10, 10 plus range they’re likely to become a bit more stable. Now its always hard to call the future. Maybe they could get to 11 but looking back historically throughout our history, getting up over 11 happens occasionally but that’s kind of where things have stopped and so if we can get up into the 10’s I think I might have some confidence that there wouldn’t be a huge amount of erosion above that. But I would also really say that part of not buying today is two other things, one is its just looking at your cost of capital. If you look at debt or preferred out there today in the market I don’t think you can find a way to issue either one and make it accretive on an upfront basis to go out and buy properties and we really need 100 to 140, 150 basis points spread up front before you want to take on the risk of an acquisition and lock that in up front. And so you really have to start looking at equity and if you start looking at equity and its pricing, I think today we closed around 23.5, I think if you took the midline which is about 185 and you divided that by the price of the stock you’d end up somewhere in about the 8 2 range, and if you gross that out for offering costs, if you divided it by about…

I’ll kind of run through it, I think most people are familiar with it but if not they did their 11, went into 11 15 months ago. It was our largest tenant, it was about a little over 7% of rent, and obviously they’ve now completed the process, have a better balance sheet, new financing and they’re out and operating with a smaller group of stores. We were on the creditors committee throughout it so worked very closely with it and I do think its instructive. When we originally did the transaction it was back in November of 2006 and it was Hometown Buffet which is a buffet chain out of Minnesota, that had a footprint that kind of went the northern part of the country out to here and then one in the southeast which was Ryan, and Hometown Buffet bought Ryan. Together they had 672 restaurants, Hometown Buffet paid about $870 million for the company and financed it really through a recap of the whole organization so kind of the recap doesn’t equal the purchase price. But the financing was unsecured bonds or debt of about $300 million. It was secured bank debt of about $530 million which was some old rolling and some new. There was a sale-leaseback on a lot of the property that the company owned, that was $566 million of which we were involved in about $350 million of for 146 properties. We took 30 of those for sale and [inaudible] and just have a couple left so those were sold and that left us really at the time of filing with 116 properties that we had paid $285 million for and they merged the two companies, took the footprint down to about 625 stores and the company then had about a $169 million…

Yes, Buffets is higher then that and I don’t want to go much more then that because as we reduce the rent, one of the things that you want to do is make sure that they have some room to operate those properties properly coming out just as you do as you write that data unsecured, secured or whatever. For the portfolio it runs 1 2 2, up into the high 3’s. If we were looking at underwriting a transaction today, generally in the past we wanted to be north of 2 and its really industry specific, closer to 2.5 with a minimum maybe on a few units in a transaction down towards 1.5. I would say the other lesson out of that which I should have brought up, at least in light of where the economy is today, and maybe permanently is we probably want to be up closer into the mid to high 2’s generally and the left side of the bell curve kind of at a minimum of 1 7 5. But is really industry specific because everybody’s got different operating margins.

Your next question comes from the line of Jeffrey Donnelly – Wachovia Capital Markets Jeffrey Donnelly – Wachovia Capital Markets: A follow-up to that, what percentage of your retailers or your leases are operating say below one, one or one, two coverage.

I don’t know out of the 2,358 but I would say there’s a very small number under the 1 0. When I get to the 1 2 you’re really dropping down big for one particular tenant and one particular industry and there’s a smattering throughout the portfolio, but I really don’t think it’s a big number. As we’ve gone back and looked through the tenants and getting through the top 25, there’s always going to be one or two with a tenant that something happens in an area, but I don’t think it’s a very large number. Jeffrey Donnelly – Wachovia Capital Markets: I think one of your tenants, and I’m positive you addressed this earlier, I think it’s the Big Ten Tires recently filed, what’s your exposure there and I guess what do you see as the outcome of their issues.

Big Ten is in 11, its only about a little over 2% of rents for us. We have 50 properties with them, two were rejected when they did the bankruptcy. This will all sound familiar to you, there’s a fairly leveraged transaction from a balance sheet standpoint and we think the primary issue for them is debt and we believe generally they’re profitable properties and assets will do pretty well. And I think we have a good handle on the operations of their units. By the way we did build that kind of seen it coming and its small into the guidance that we did last quarter and its in this quarter’s guidance. And beyond that once again and again this will sound familiar, we are again on the creditors committee, in fact I think in this one we’re chairing it and as such under confidentiality agreement we’ll work through it and I think it will look like most of the others that this is for us. But given the size of the tenant to us, I don’t think its meaningful. I guess the other thing to say in our top 25 which gets you down to about 1% of rent, this is the only tenant in that situation and I know I’ve been asked a couple of times and we demure on tenant names, are you in this one, this one, this one, but when you do our top 25 and it gets down to 1% of rent, this is the only tenant in that situation and we’ll watch it transpire. Jeffrey Donnelly – Wachovia Capital Markets: Have you added or removed any retailers from your guidance that you now gave most recently because of threats that you think have gone away or threats that are on the landscape.

Its exactly what it was three months ago. Jeffrey Donnelly – Wachovia Capital Markets: On the tenant side at least, do you have any details on the percentage of your revenues that are exposed to I guess I’ll call it private equity or LBO type situations like you saw with Buffets and some of these other companies. Because there’s certainly a lot of activity with the other retail REITs, probably 5% to 6% of their revenues out there are in the hands of groups like fund capital and some of the other firms that have seen a lot of bankruptcies of late.

Yes, I think that would be the case for us. We’ve obviously dodged a huge amount of it but we did a lot of private equity but we really underwrote it understanding where that balance sheet sat at the time we did it and what the properties needed to have for cash flow coverage. I have not done a calculation for private equity but there’s a fair amount of it in there like everybody else. Jeffrey Donnelly – Wachovia Capital Markets: Many of your peers are out there in the REIT space are raising capital some at prices which are I guess attractive versus, or vis-a-vie their NAV, what’s your thought on accessing the equity markets at this point to perhaps build up some dry powder in anticipation of either retailers needing some capital or maybe some of these private equity firms who are looking to restructure ownership of their store base.

I can’t comment in general on the industry, I can only comment on the situation we’re in which is our balance sheet is in great shape, we have low leverage, cash on hand, a new line we put in place a year ago that runs for a couple more years and has no borrowings on it. So we have liquidity and don’t have any need to refinance and in particular no debt maturing until 2013 and even then, its only $100 million. We’ve got nothing in 2014 and only $150 million in 2015. So we don’t have any near-term issues call it for the next six years let’s call it. So it really would be dependent upon acquisitions. In general the way I answer your question is we tend to think of equity issuance as something that we view as needing to be accretive when we do it in terms of adding to the bottom line, growing our earnings and then also allowing us to grow the dividends of the company and pay steady and increasing dividends over time which has always been what our mission is. So it really will go back to what Tom described earlier is the acquisition environment, cap rates, are they at numbers that are accretive relative to the stock price, and where our equity cost of capital is and kind of what Tom was describing earlier. And is it something we can pursue in an accretive manner and perhaps that’s a thought that hasn’t been talked about in a while. But that’s still how we continue to view equity capital and our need to access the capital market.

If you’re going to take any dilution it better be for a month or two or three or four. I mean if you’re, unless you need capital for a balance sheet issue and that I understand, but I think the history of capital allocation of raising a bunch of money and then doing something that’s not accretive in the hope that it comes accretive, its tough to handle. And in that lease business, its just damned impossible because you’ve got to be contracting for it and get your spread up front and I don’t have the visibility right relative to a transaction where we do that. If all of a sudden I knew there was $200 million that we thought we were getting very close on or $100 million and it would be very accretive to where the stock was today and I thought I was closing in 30 days and I was certain of it, or 60 days, then I’d start talking. But to build a war chest for something that may come down and take $0.20, $0.30 out today, when you put that war chest to work as I run the numbers you’re only going to get the $0.20, $0.30 anyway so it becomes hard to do. Now I recognize our property type is maybe different and there are other people who could buy very cheap and the rents will go up but I don’t really think its our game so I think we’d have to have a lot of visibility coming up pretty close on a transaction we know would be accretive to issue much in the way of equity. Jeffrey Donnelly – Wachovia Capital Markets: Well thanks for the refresher and you could have just said no too.

Gary do you have an answer?

No, I think you covered it. Jeffrey Donnelly – Wachovia Capital Markets: Actually one last question and I know its kind of minute but I guess I haven’t asked about it in a while is Silverton and I’m asking only because it’s a facility that, I know its just one asset that’s fairly large and my recollection—

The asset manager job is available there if you’d like— Jeffrey Donnelly – Wachovia Capital Markets: No thank you, I think it would be very intensive. I’m asking because there are a lot of, my recollection is there’s a lot of tenants at that property who are more, I’ll call it small business or mom and pop oriented, have you seen a lot of turnover or loss there that’s of note.

You know, it’s a funny property. Let me give some people some history. We own one light industrial 400,000 square foot incubator space type industrial property in North County, San Diego right next to Miramar Air Base, which for those of you from around the country is where they filmed Top Gun. And it is something that we bought 20 plus years ago that blew up in our faces and after much debate we kept it and got back everything that we lost on it and then rents when through the roof and a couple three years ago has a very active debate within our committee here, should we sell it, its unusual for what we own and it usually comes up, its in our backyard, its perfectly placed and so occupancy was running what 95, 96 and today we’re at about 90% so there’s been a little bit, you know San Diego pretty well because you were here and that Miramar market is very, very, its tight, there’s not a lot of room to build. So you have seen a little bit but not a great amount but again its not a huge amount of property for us.

Your next question comes from the line of [Todd Lucasik] – Morningstar [Todd Lucasik] – Morningstar : Just a question with regards to acquisition finance facility, if you do do the $250 million by the end of the year is that debt that you can hold onto that facility through 2013 with two extensions or does it have to be taken out earlier.

If we wanted to we could hold it as a balance on that facility for the length of the facility. That would not be our approach. As Tom mentioned earlier we really wouldn’t want to assume a nice spread off of the cost of the facility and kind of carry that variable rate debt and that really hasn’t been our approach historically. I think historically if our balance in our facility got to $100, $150 we would do something. Today that trigger might even be smaller then that, south of $100 million, or we’d want to take it out with permanent capital and in our case, as we’ve described, we’re thinking about that as equity permanent capital.

But if we were about to raise equity and we were about to close and we were very comfortable we’d probably put it on the line for a short period of time and then go ahead and issue equity and Mr. Donnelly who was on right before you put a spell on us and went down, yes, our backup would be to have a capacity to hold it for a while. [Todd Lucasik] – Morningstar : This might be another yes no question, or at least potentially one, is there, if you were considering debt, is there a spread between, would you ever consider secured debt. Is there a spread between secured financing and unsecured debt at which you might consider mortgages on properties.

We’ve been here for 40 years and have never had a mortgage on a property. So that’s a lot, however we’ve always viewed and never really had this talk about it, I think I’ll talk about it for the first time now, one of the reasons we use unsecured debt and do long-term fixed rate debt and keep debt fairly low on the balance sheet is that we have a very conservative investor, most of who are retired and can’t take a huge amount of risk relative to the balance sheet. And one of the reasons to become fully unencumbered is if you got into a period of time when the unsecured market was not available for long period of time obviously you could go out on a very large portfolio and on a very low, low, a low to value ratio you secure debt as your emergency shoot in the event the markets were closed. We do not anticipate doing that because we don’t have near-term maturity but that’s always been the reason to keep it unencumbered and it really speaks back to who the investor base is. I think you always have to have that reserve shoot if you’ve got 70,000 shareholders who are retired.

Your next question comes from the line of Ryan Levinson – Private Fund Management Ryan Levinson – Private Fund Management : On the same store rents by my calculation Buffets was down about 15% year over year, I’m just wondering if that’s the kind of the expectation that we should have on sort of your more stressed retailers, if they come in for getting some sort of concession.

If they’re Chapter 11 I think that’s, its not a bad number to use but I would say that its really tenant specific. And I would say again what I said about Buffets, that’s the worst meltdown in EBITDA in 11 I’ve ever seen. So we did underwrite it well. I think generically we have but that was a pretty big one. Ryan Levinson – Private Fund Management : What are the lease spreads coming in on some of the leases, that are coming up for renewal naturally.

Generally lease renewal right now is about flat and it has been up slightly for the last two, three years. Lease spreads when you’re speaking about net lease is a different business then I think a shopping center where you’re really leasing open space, so a lot of net lease properties are very tenant specific. They tend to either release the property if its profitable to them or they don’t if it is not. If it is then generally in most of the leases there’s a bump that works anywhere from 3% to 5% and that’s a function of just being some extensions on top of a 15 to 20 year base lease. If they walk away generally its because it was unprofitable to them. It is a weaker unit and in that case your lease spread goes negative. That’s been the history. If you look at lease turning over this year, its fairly small. The vast majority of it are properties that have rolled over before where a tenant had it for 20 years or 15 years and then we signed a new five year lease because it was profitable to the tenant and its rolling over again. So the vast majority of our leases rolling over this year are secondary leases which should be profitable but given the economy we’re guessing a ballpark flat.

I would add one thing to that, which is that our annual historic experience with rollover has been that about two thirds of the leases that roll over get accepted by the existing tenant which as Tom described becomes a positive rent event typically. That hasn’t changed. So that experience relative to about two thirds of them being released to the same tenant, so that’s been a good trend to watch and then on top of that as Tom described, to the extent that when you look at our expiration schedule and the subsequent expirations, we expect those subsequent ones to be more likely to re up themselves because they’ve already made that decision once on that existing space.

Answer to the question, flat. Ryan Levinson – Private Fund Management : That was actually my next question, was that in the first quarter it looks like if I assume that of the 148 leases that you had expiring this year if I assume that that’s spread evenly over the year it looks like about two thirds renewed, is that what we should expect for the remainder of the year as well.

I think it will be higher this year and I think that’s a function if you look at the table in the back of the press release that a high percentage of the rollovers this year are secondary or subsequent expirations. Ryan Levinson – Private Fund Management : In any event though, it looks like that adds close to 200 basis points of vacancy to the portfolio.

I don’t—

I know that’s not what we’re projecting—

Maybe offline you can share the math with us because we, I’m not sure we’d get there. We also on the ones that don’t roll over we release them.

And we plan that a year ahead of time. This isn’t like moment in time tenant tells us that day, stay or go. We’ve had dialogue leading up six to 12 months beforehand about what their plans are. Its usually not one-off, it might be somebody who has eight, 10, 12 at that particular time so we have a sense, a plan in place, we’re already working on releasing, selling a property, that sort of thing. It’s a little bit more active then that. Its not like it goes blank that day and then we’ve got to struggle to figure out what to do with it.

In the portfolio management department we’re pretty close with the tenants so we’ll start anywhere from a year and a half to two years out from the point of rollover talking to the tenant. We know how profitable the unit is so we can pretty much without calling them get a decent idea of which ones are going to keep and just move those aside. And on the ones we think that are in question, we’re in well over a year ahead of time and on the ones that they’re going to give back, we usually know it six months, eight months ahead of time so it tends not to turn into a lot of incremental vacancy.

Plus we’re releasing the existing stuff that is vacant so properties are coming off of that list as well. Ryan Levinson – Private Fund Management : The EBIDAR to rent ratio, you said that some of the tenants only disclose their financials annually, I was just wondering if the RV dealer, Camping World, that’s at that 1.22x at the low end, if they are one of the ones that only discloses annually. I was just surprised to see that 1.22 didn’t move.

We do not discuss the individual business of tenants so I wouldn’t comment to that.

And we never referred to them as that tenant. I want to be specific on that. Ryan Levinson – Private Fund Management : But you said it was an auto dealer.

I said a dealer. Ryan Levinson – Private Fund Management : I thought I heard that you said it was an auto dealer.

If I did, I misspoke.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thank you all very much, I know on the east coast its getting late and there its busy with a lot of calls and we really appreciate it and thank you. Have a good day.