Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Realty Income second quarter 2010 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today Thursday, October 28th, 2010. I would now like to turn the conference over to Mr. Tom Lewis, CEO of Realty Income. Please go ahead, sir.

Thank you very much, Mitch, good afternoon, everyone, and welcome to the conference call, obviously to go over our operations and results for the third quarter 2010. In the room with me today is Paul Meurer, our Executive Vice President and Chief Financial Officer; Gary Malino, our President and COO; Mike Pfeiffer, our Executive Vice President and General Counsel; and John Case, our Executive Vice President and Chief Investment Officer. And as always, the starring part of the call is that 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 discussed in any forward-looking statements. And we will disclose in greater detail on the company’s quarterly and on Form 10-Q, the factors that may cause such differences. And we’ll just start with Paul running through the numbers for the quarter. Paul?

Thanks Tom. As usual, I will briefly comment on our financial statements, provide a few highlights of those financial results for the quarter, starting with the income statement. Total revenue increased to $87.2 this quarter versus $81.5 million during the third quarter of last year. Rental revenue increased over 7% reflecting new acquisitions over the past year, and positive same-store rent increases for the quarterly period. On the expense side, depreciation and amortization expense increased by about $1.4 million in the comparative quarterly period, naturally depreciation expense increases as our property portfolio continues to grow.Interest expense increased by approximately $3.76 million. This increase was due to the $250 million of senior notes due 2021, which we issued in June. On a related note our coverage ratios remain strong with interest coverage at 3.1 times and fixed charge coverage at 2.5 times. General and administrative or G&A expenses in the third quarter were $6,165,000 up from last year, but down about $500,000 from the second quarter of this year. As we mentioned on our last two earnings call, the increase in G&A this year is due largely to recent hiring and our acquisitions and research department. Our current projection for G&A for 2010 remains the same at about $26 million or about 7.5% of total revenues. Property expenses were $1,753,000 for the quarter. This is an increase of $291,000 for the comparative quarterly period, but only about $75,000 from last year. These expenses are primarily associated with the taxes maintenance and insurance expenses which we are responsible for on the properties available for lease. Income taxes consist of income taxes paid to various states by the company and they were $335,000 during the quarter. Income from discontinued operations for the quarter totaled just under $2 million. Real estate acquired for resale…

Thank you, Paul. And I’ll start with the portfolio, which continued to perform well during the third quarter. I would kind of describe operations as being in a back to normal state versus what we’ve had in the last few years which was nice to see. And there were no significant tenant issues that rose during the quarter and we have none on our radar currently, so it’s nice and quiet in the portfolio. At the end of the quarter, our largest 15 tenants accounted for about 54.8% of our revenue and remained pretty healthy. The average cash flow coverage of rent at the store level for the 15 largest tenants was just under 2.4 times, so it remained very healthy. Occupancy in the third quarter ended at 96.4%, that’s 84 properties available for lease side of the 2,342 we own, that’s up about 20 basis points from the second quarter and down about 40 from a year ago. In the last quarter, we had only 12 new vacancies which is about half of what we have had in the previous quarter and were leased or sold 18 properties during the quarter and that was the reason for the increase in occupancy. Obviously at 96.4%, it’s still very high and up a little bit versus last quarter as we expected. We’d also look for I think small but continued improvement in occupancy in the fourth quarter as we’re going through things right now and we think we’ll be up a little bit at the end of the year. Same-store rents on the core portfolio increased 0.3% during the third quarter compared to 0.1% in the second a small increase to positive. And if you take a look at where the increases and decreases came from, there were three of our…

(Operator Instructions). Our first question comes from the line of Lindsay Schroll (ph). Go ahead please.

Hi good afternoon.

Hello Lindsay.

Could you talk a little bit about what the competitive landscape looks like for acquisitions?

Yes, it’s very interesting historically for the company; the biggest competitor obviously has been the 1031 tax-deferred exchange market. And that is much, much quieter than it has been in recent years mostly because there is not a lot of people out there with gains they need to shelter. So on the one-off there is actually a lot less competition than used to be. In terms of larger transactions, as always there is competition. Generally, if you look over the last 15 years, there has been four or five people out there trying to do larger transactions and today it maybe two or three that are out there, but given that the volume, it’s a little lower than last few years. There is competition that it’s reasonable and at least I think for us we have a cost to capital that allows us to compete effectively. The other area of competition that is very big for the company since we tend to work on these larger, on M&A investment banking type deals. It’s a high yield market. And as we all know the high yield market is very accessible at very good rates today. And I’d say that really is the primary competition that we’re seeing out there today is in the high yield market. If you saw the high yield markets soften, that probably would be a positive for our acquisitions.

Great, and is there a maximum amount of acquisitions you think you could handle in the year, I mean does that impact sort of your staffing or would it make it sense to bring back Crest at some point?

Yes, it’s an interesting question. I’m not sure if ever got, one before. But I think it would really come down to the ability to access capital at a substantial spread for us from a manpower standpoint, particularly since the additions we made earlier in the year, we’re setup very well for that and we don’t think that would be a substantial problem. Relative to Crest, while things seemed to have settled down here and interest rates are low and properties can't be sold in the one-off market. I think it’s a volatile enough environment that I wouldn’t anticipate using Crest in large numbers to buy and then sell properties. I think the risk it might take on relative to mark-to-market if things went the other way would be very difficult. So right now, I think we wouldn’t really want to use Crest very much. But if you look at next year, I mean this year we did close to $700 million, I think we did that one year before. That would be just fine but if we did more than that and capital is available, we’d be happy to do whatever volume we can find that we like from an underwriting standpoint and we can fund it good and clean spreads.

Great, thank you.

Thank you. And our next question comes from the line of Michael Bilerman. Go ahead please. Greg Hannon (ph) – Citi: Hi it’s Greg Hannon with Michael.

Hi Greg.

Hi Greg. Greg Hannon – Citi: Could you guys walkthrough the diligence on the underwriting process as you go through these bigger volumes on these deals?

Sure, it’s really hasn’t changed all that much. Initially what happens is we’ll generally get in some type of book, small book or just some information that will say here is the measures (ph) the industry, here is the number of properties about how much money they’re looking for. And generally we’re in that industry already. We’ve already comp it, we know who the other players are. We pretty much know what replacement costs are for that type of property and it gives us a starting point. And very quickly we’ll talk for the company, try and get an idea what our plans are and why they’re doing what they’re doing, what they’re looking and do and over what period of time. And see if we’re going to get there relative to the economic and spread, and that’s kind of a starting point. At that point, what happens is research then gets involved and we get there public financials of the tenant who are public or private. And we get their financials and we go through them, we dart (ph) them which is our internal credit scoring methodology that kind of equates to about 90%, 95% correlation of an S&P rating. So we can get an idea where we keep them from an unscored credit standpoint. We would also at that point kind of spreadsheet out the properties relative to the price cost per square foot and then we try and get store operating numbers which is the EBITDA of the stores and lay that out and get an idea of what that looks like for rent and so there is an effort there. And then the third part of the property is with a list of where they are, how many square feet and then we start passing that…

Not meaningfully no. Greg Hannon – Citi: Okay, and then the cap rates spread between the 123 deal, that you’ve closed and the pending deal. Would that be about 1%?

Separate spread between those two? Greg Hannon – Citi: Between those two.

No I don’t think so. I think you can kind of get there if you look at what we’ve done through the second quarter and what the cap rate was there or through the third quarter and then blend in what the balance it have to be to get to 8%, that’s darn pretty close. Greg Hannon – Citi: Okay, and then the – I can assume the cash flow coverage is on those two pending deals are in line with the average?

Pretty standard, yes. Greg Hannon – Citi: Okay, thank you very much.

Thank you. And our next question comes from the line of Jeffrey Donnelly .Go ahead please. Jeffrey Donnelly – Wells Fargo: Good afternoon guys.

Hi Jeff.

Hi Jeff. Jeffrey Donnelly – Wells Fargo: Tom, I guess a question for you in cap rates it was helpful you were talking about what you’re seeing in the marketplace, but I’m curious why you think you haven't seen cap rates compress I guess more at least factor, traditionally its very debt sensitive.

Right. Jeffrey Donnelly – Wells Fargo: Products, I think when you look at some of the other property types out there, you see many other property types trading towards the historical low end of the range of what they seen on cap rates and it doesn’t feel like that's the case with at least, if you’re able to kind of hung in there in the 8.

It did a little bit but I’d also share with you the date of kind of the all-time low for us too. If you look back over the years, I don’t think we’ve had a year below a cap rate then we’re really on the edge of it now. So we see that compression. I also share with you and I think you’ve picked this up on some of the work we’ve done looking at the 1031 market out there, given the lower transaction flow and the lower closed flow a cap rates at some points become a little more anecdotal and looking at the history and listing rates and closing cap rates there can be a pretty good spread for us. Here it’s been us mattering a smaller set for a couple of big transaction that got us to that number. But you can Jeff, definitely see the impact and I think it’s primarily coming from the high yield markets and so 8% is at the low end for us. Jeffrey Donnelly – Wells Fargo: And where I guess when you look at sort of the higher credit tenants out there the traditionally like a Walgreen for examples, years ago you used to see those go substantially below 8%. It’s not unhurt to see some of those transactions in the fives and sixes at one point, I think you pursued them, but where are some of those higher investment grade rated tenants going today on a least basis?

Yes, I’d say six but just for the value of them they’re used to be really heavily 100% financing things and no yield and but they’re back down there again but a lot of it is little more cash flow panic. They’re low too in the one-offs, if you can get a really good credit where yields are people are jumping at them. Jeffrey Donnelly – Wells Fargo: It’s helpful. And then just one question is, I think I asked you guys about it earlier in the year and you touched on it too is, what’s your AFFO dividend coverage, just really looking for an update because year-to-date, its continued to narrow a little bit versus last year and I’m curious with the acquisitions that you’re doing. Do you expect that the stabilize, and begin to turn the other way and I guess do you have something of a target of where you’d like to bring that to in a certain timeframe?

Yes, if you use AFFO that’s generally a penny or two above our FFO and then what we’ve always done is drove Crest out. So a few years ago when the payout ratio, it probably looked lower to other people than it did to us because you had Crest in there which we did not used to pay dividends but if you look at core FFO and you really get back to about 2005, I think core was about $1.59, the dividend was $1.35, it was about an 85% payout ratio. And ’06 off core was 84% and then you really enter a period kind of ’07, ’08, ’09, and ’010 where FFO was a little flattish. It’s up and quite a bit in ’07 but in ’08, ’09 and ‘010. It’s been flat. And we’ve done modest increases with the dividend. And the dividend for 2010 off core if you guess for $1.82 is about 95% payout ratio. And we’ve always wanted to payout probably 85 into the low 90s and they’re comfortable there given the stability of the business. However next year if you look at the guidance we put out and if you took it towards the mid upper end, you’re really dropping back down to a 87%, 88% payout ratio and we don’t think that’s a bad thing to do at all. So I think we’ll be able to modestly increase the dividend, but if we hit those numbers brought that payout back to low 80s and operate between 85 and 90 and that’s where I probably like to for a couple of years while we’re all seeing with low interest rates, things stabilize a bit. I’d like to get payout ratio down a little bit and hold it there till we have a little more clarity. Jeffrey Donnelly – Wells Fargo: And actually just one more question appeared to me, just I’ve asked you on a few calls sort of what’s your view of the future was because service back off so how you’re thinking about leverage, balance sheet and acquisitions. I think year ago I can't remember but quite how you categorize them but it was sort of the Japan like outcome if you will where the decade of the last decade and some of those (inaudible) how you’ve kind of looking at the future right now?

My insights will be every penny you pay for them, which is I think the double-dip scenario which I had pretty high of backed off a little bit. The Japan low growth scenario, I lean a little more heavily towards and while I’d like to see some additional growth, I think it will come with higher interest rates and today I don’t know where you did double-dip 25, probably to Japan 35 and I’ll hope for slow growth but a little inflation on the upside but my first of all little cloudier than others and that leaves me to think that keeping leverage down below 30% which has dropped too here just makes me feel really good and not adding substantially to any near-term debt rollover would be great. So if we issued debt it would be 10, 12 plus years is we know that permanent preferred sounds great and equity doesn’t sounds bad, but I think generally maintain low leverage through this environment even though interest rates are low if they change them they would likely to do whether its five, six, seven years out that will have an impact on the income statement as you refinance and so you probably want to minimize that.

Thank you. And ladies and gentlemen this concludes today’s conference call. I will turn the call back over to management for any closing remarks.

Well thank you everybody again for joining us during a very busy earnings season and we’ll be interesting to see how the rest of the quarter turns out and we look forward to talking to you next quarter. Thank you. And that concludes our call.

And ladies and gentlemen, this concludes the Realty Income third quarter 2010 earnings conference call. You may now disconnect and thank you for using ACT Conferencing.