Good day, ladies and gentlemen, thank you for standing by. Welcome to the Realty Income fourth quarter 2011 earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today February 9, 2012. It is now my pleasure to introduce your host for today Mr. Tom Lewis, CEO or Realty. Please go ahead.

Thank you, Joe. Good afternoon everyone and welcome to our conference call. We will go throw the operations and results for the fourth quarter and full year 2011. In the room with me as usually is Gary Malino, our President Chief Operating Officer, Paul Meurer, our EVP and CFO, John Case, our EVP and Chief Investment Office and Mike Pfeiffer, our EVP and General Counsel and Terry Miller, our Vice President Corporate Communications. And as always during this call, we will make certain statements that may be considered to be forward-looking statements under Federal Securities Law. Company’s actual future results may differ significantly from the matters discussed in the forward-looking statements and we will disclose in greater detail in the company’s Form 10-Q, the factors that could cause those differences. And we will start as we always do with the numbers Paul?

Thanks, Tom. So as usual, I will provide some brief comments on our financial statements and provide some highlights of the financial results for both the quarter and the year starting with the income statement. Total revenue increased 23.6% for the quarter and 22.6% for the year. Our revenue for the quarter was $114 million or approximately $456 million on an annualized basis. This obviously reflects the significant amount of new acquisitions over the past year and positive same store rent in our portfolio increases per year of 1.3%. On the expense side, depreciation and amortization expense increased by about $9.5 million in the comparative quarterly period as depreciation expense increased obviously as our property portfolio continue to grow. Interest expense increased by just under $3.9 million and this increase was due primarily to the June issuance of $150 million of notes in the reopening of our 2035 bond, as well as the $237 million of credit facility borrowings, which we had at year end. On a related note, our coverage ratios do remain strong with interest coverage at 3.5 times and fixed charge coverage at 2.9 times. General and administrative or G&A expenses in the fourth quarter were $7.95 million or 7% of total revenues. Our G&A expense has increased as our acquisition activity has increased. And we invested in some new personnel for future growth. G&A was also impacted by the expensing of acquisition to diligent cost $357,000 during the quarter and a total of $1.5 million in expense during the year. Our current projection for G&A for 2012 is approximately $33 million, which will continue to present only 7% of total revenue. Property expenses were $2.3 million for the quarter and $7.4 million for the year. These in course of the expenses primarily associated with the tax…

Great, I will start with the portfolio. During the fourth quarter the portfolio continue to generate very consistent cash flow. At the end of the quarter our largest 15 tenants accounted for about 49.8% of our revenue that’s down 480 basis points from the same period a year ago and 220 basis points from the third quarter. So our acquisition efforts continue to help us reduce our concentrations in the portfolio getting that down to 49.8. The average cash flow coverage at the store level for those top 15 tenants, which we mentioned each time was right at 242 times so very healthy. We ended the fourth quarter with 96.7% occupancy and 87 properties available for lease out of the 2634 in the portfolio that is down about 100 basis points from the third quarter and up about 10 basis points for the same period a year ago. During the quarter, we had 43 new vacancies 25 of those came from expirations at the end of the lease and that is a little higher number than usual but occasionally with the expirations it gets a little bit lumpy and that was the case in the quarter. We also had 18, which were defaults primarily related to Friendly’s we also leased or sold 15 properties during the quarter and also added properties portfolio, which is how you get to the 96.7% number. If we look forward into the first quarter I think it was about phase filing and as we begin leasing the properties up that they are on the vacancy list we could see another 20 or 30 basis points decline in occupancy down to around 96.5 or 96.4% is the best estimate right now. And then we would anticipate that we would see occupancy increasing from there over the…

All right, Tom. We remain quite active on the acquisitions front in the fourth quarter. We acquired 39 properties for approximately $190 million. The average in this release yield on these investments was 7.5%. The average least term is just under 20 years. Properties are diversified by geography, tenant, industry and property type. They are located in seven states, 100% leased to four tenants in four different industries and represent three property types with our traditional retail investments accounting for 86% of our funds invested during the fourth quarter. 80% of the acquisitions are leased to new tenants, which further diversifies our portfolio. In the fourth quarter we closed to file $19 million of the $544 million diversified net lease portfolio or ECM transaction we announced in the first quarter of 2011. Our fourth quarter activity brought us to $1 billion…

Is that a billion?

That’s a billion, Tom.

With B?

With a B, $1 billion in property investments for 2011, the most we’ve ever completed in a single year in dollar terms. The billion for the year was comprised of 164 properties having initial average initial yield of 7.8% and an average lease term of 13.4 years. The properties are leased to 22 separate tenants and 17 different industries. We continue to be pleased with our level of acquisition activity, which really helped us drive our FFO growth in 2011. Most of you have heard Tom describe our acquisition activities lumpy before. Well, it continues to be that way. $852 million of our 2011 acquisitions came from three large portfolio transactions. The remaining $148 million of acquisitions came from single property and smaller portfolio opportunities. We generally this from quarter to quarter by just being in the marketplace and this should lead to about $100 million to $150 million of acquisitions annually. So our success on the three large portfolio has really drove our volume in 2011. On this yearend call, we usually give you an overview of the previous year’s acquisition transaction flow and provide some additional perspective. I’m going to go slowly here because there are a lot of numbers I want to share with you. In 2011, we sourced $13 billion in total acquisitions opportunities. This is everything that comes in the door, not all of it makes sense for us. So of the $13 billion sourced, our acquisitions team analyzed about $8 billion in opportunities in 2011, an increase of about 70% versus 2010. Of this amount, just under $3 billion was taken through our investment committee. The $3 billion represented 1,300 properties with 45 different tenants. Over the last 10 years our investment committee has averaged working on about $3 billion in opportunities per year,…

John’s promise still average 7.75%.

Yeah.

Thanks. Obviously we’re pleased with the results for 2011 in acquisitions and I think is much from by the pace of transactions just coming in the door right now that will drive what we are able to do this year and we think that will continue to play a role in obviously growing the revenue and AFFO, which is what drives dividend increases. I think secondly and equally important for us is it will also help us in adjusting the makeup of our portfolio where we’re trying to do a couple of things, which is move up the credit curve with the tenant base and then also into areas both inside and outside of retail that we think want to make up a larger piece of the portfolio and going forward. If you look at the last 24 months or so, we bought about $1.7 billion of property, $1 billion of it was in retail and I think much in the sector is that we think will do well if we continue with a tougher retail environment where lower income consumers continue to struggle. $720 million of the properties we bought are into areas outside of retail that we think will do well for us and of the $1.7 billion total about $770 million was done with investment grade tenants and a good measure of the rest of the acquisitions are also up the credit curve close to investment grade and we’re pleased with that. The other thing about it is how we’ve funded the acquisitions. Living in a very low interest rate environment that’s largely generated by monetary policy at the federal level, I think it’s easy to get lulled in to the assumption that rates will stay low, which they might. However, we want to be mindful of…

Thank you. We will now begin the question and answer session. (Operator Instructions) And we have a question from the line of Lindsay Schroll from Bank of America/Merrill Lynch. Please go ahead. Lindsay Schroll – Bank of America/Merrill Lynch: Good afternoon. Can you guys please discuss the health of the casual dining (inaudible) overall and whether the filings by Friendly’s and Buffets are more retailer specific issues or indicative of broader industry trends?

Yeah. It’s a good question, happy to do that. We’re not overly positive on the industry to say the least. I think a theme in almost everything we’ve looked at today is whether it’s in casual dining or somewhere else is to try and look at the consumer at that individual retailer or here restaurant is targeting because if you look at kind of the upper income consumer, they are spending both discretionary and non-discretionary. The middle market consumer which seems to be a little smaller group today is spending on non-discretionary but is really looking for value when they’re our doing discretionary spending and that includes casual dining. And then when you get to the lower end consumer, not only are they extraordinarily value-conscious on discretionary or non-discretionary they are almost aren’t spending on discretionary. So pick your casual dining and pick who their customer is but I think for a lot of people most of those changed or appealing to the middle and lower market and it’s a tough operating environment and we think it will continue to be so. The other thing that’s going in there over the last couple of year is also minimum wage has gone from I think $5.85 an hour up to over $7 in the quarter, so they’ve seen some labor pressures and then at the same time had some commodity costs move. But we have the industry rather – relative to further investment kind of we’re not going to do it and then we’d like to continue to reduce it as part of the portfolio because it’s an area that even though for short periods it can snap back. We are not overly positive with it. I’d be remiss if I didn’t note there were chains doing very well in that industry and there are but casual dining for us as we watch is an industry that we’re not going to be doing additional acquisitions in. Lindsay Schroll – Bank of America/Merrill Lynch: Okay. And then I think you’ve talked about wanting to dispose of your office assets and I’m just wondering what demand is those versus retail, if the cap rates are similar, the buyer is the same. If you can just talk about that?

Yeah. I don’t think we’re looking to dispose of it. We don’t have much in that area and they’re with very high quality tenants. I think it’s more of comments that that’s not something we’re looking to aggressively add to the portfolio. In the ECM transaction we had a couple of few office buildings that came with that but it’s still a relative small part of the portfolio, it’s only about 2.6% of rent. So I wouldn’t see it increasing but currently we don’t have plans to sell the assets. Lindsay Schroll – Bank of America/Merrill Lynch: Okay. Thank you.

Thank you. And our next question comes from the line of Joshua Barber with Stifel Nicolaus. Please go ahead Joshua Barber – Stifel Nicolaus: Hi, good afternoon. I certainly hope there’s not going to be a quiz on all those numbers that you guys threw out.

Sorry about that. Joshua Barber – Stifel Nicolaus: That’s okay. Just a couple of quick questions, when you guys were talking about the eventual rents from releasing the Buffets and the Friendly’s deal what’s the time horizon that you’re using for releasing those assets?

It varies a little. In the Friendly’s, I believe we assumed in our -- that we didn’t lease anything until late in the year or early in the next year. We think we’ll do better with the Buffets. We had a little more aggressive move on it because we’ve had a little better luck as we’ve gone through this recently. Joshua Barber – Stifel Nicolaus: Okay. Has any of them actually been released so far?

There are LOIs in place in a handful and so I think of that estimate is kind of 6 to 18 months and what that means is you’ll have some outliers that happen sooner and you’ll have some outliers that happen later than that. Joshua Barber – Stifel Nicolaus: Okay. And regarding casual dining, obviously we’ve talked a lot about that. Can you talk about these sponsors of the casual diners especially the ones that you have exposure to and what their wiliness to restructure or to keep those entities going rather that bankrupt them right now? What those owner posture tends to be of today?

They tend not to be 7s, they tend to be 11s. Certainly that was the case in Friendly’s and that’s the case in Buffets. And when you think to sponsor you kind of wanted – there’s a couple of things obviously, these are levered entities and one of the strategies in the toolbox of these people has been to – if the chain starts to struggle in the debt trades to a discount, go into the market, buy the debt and they become both the debt and equity owner and that gives us some optionality to go through an 11, continue it on the chains and do some work on the contracts, other contracts of it. But I think as long as they can see in the properties profitability and the chain overall they’re obviously going to look for an 11 and that will either be through the debtor is becoming the owner or in the case as I mentioned were both – both have the same. But if you look Friendly’s and Buffets both the rents are pretty low, which gives them the opportunity to do that and the what we’ve tried to do in all of these of course is get some optionality for if the business recovers that we can get a piece of that. But in most cases, they do want to operate but it’s a chain by chain basis. There has been a fair amount of bankruptcy in that industry over the last four or five years, 34 or 35 of them and the vast majority have been 11. Joshua Barber – Stifel Nicolaus: Great, thank you very much.

And our next question comes from the line of Todd Lukasik with Morningstar. Todd Lukasik – Morningstar: Hi good afternoon guys.

Hey, Todd. Todd Lukasik – Morningstar: Just a quick question on the acquisitions. Do you guys have a preference right now for doing deals with the credit tenants in 7s versus the non-credit tenants in the 8s or still happy to do either category?

We are happy to do either and it really is investment grade and we would like to take it up the credit curve when we can find them. It’s a competitive world today, but like to do that. And then, when they are not investment grade, we’d rather be moving kind of up the cusp with it. And when you get to non-investment grade, it again is kind of a tenant with a low income consumer and discretionary we really don’t want to be investing there even though yields can be very attractive and we are willing to do both today. Todd Lukasik – Morningstar: Okay. And then, just the acquisition assumption that’s currently embedded in your guidance?

I think right now about $0.5 billion is what I have got in there. Todd Lukasik – Morningstar: Okay. And in thinking about same store rent growth, is 1% to 2% still a good long-term assumption for that?

Yeah, I would think I would hang around the 1% level or closer to that through the first half of the year as we deal with some of these properties and that was a case a few years ago. And then, I think it probably – long-term probably 1% to 1.5% is to consider average, when we get above 1.5% that’s high just given the way lease structures work. Todd Lukasik – Morningstar: Okay. And you mentioned that I guess a couple of other categories that contributed to the increase in the last quarter, the motor vehicles and the casual dining that was from the expiration of rent reductions. And this quarter, I guess is that something that lasts than for 12 months in the same store numbers, but that this time next year that impact would drop off?

Yes, I think that’s the case and then I would also think we will get some boost from leasing. Todd Lukasik – Morningstar: Okay, great. Thanks for taking my questions.

Okay, you bet.

Thank you. And you next question comes from the line of Todd Stender with Wells Fargo Securities. Please go ahead. Todd Stender – Wells Fargo Securities: Hi guys, thanks. Tom, you were indicating a vacancy that’s higher than expected in the fourth quarter. Other than the friendly stuff, who was the tenant on the bulk of those?

I would have to go look. It was an automotive, it was service, but what it was is, we have vacant properties and then we have a list and there is generally 20 to 30 properties on it that are closed properties, but they are still under a long-term lease and the tenant is healthy. And what happened at the end of the third quarter, there was a bunch of properties that a tenant has closed about two years that was still under lease and still paying. And those all came off at once and so, we've gone back and we've looked at that list, which O exists at this very little of that this year, very little next year, but it was one little lump and I forgot, but it is an automotive service tenant I believe that was a bunch of them and then there were just a couple of others. Todd Stender – Wells Fargo Securities: Okay. Will they likely be teed up for sale?

We will tee them up for re-lease or sale both. Todd Stender – Wells Fargo Securities: Okay. And just along those same lines, could you be – say any disposition volumes increase maybe ahead of schedule, maybe where you thought you would be this time last year, just to get out in front of some of these credit issues?

That’s exactly what our plan is in terms of property sales. We have typically sold $25 million, $30 million of properties a year, but that’s mostly just working through lease roll over and occasionally tenant issue and that’s just been kind of the average, but we really do want to accelerate that kind of bid and if it’s okay, I will spend a second on it. Over the last year, we want back and undertook a very lengthy project that took about 7 to 8 months where we re-underwrote basically the majority of the portfolio. I think we picked the largest 67 tenants and they combined at about 83% of our rents. And we went through a rating of each industry, we then went through our exposures relative to how many of their units we own, how many units we own, percent of rent and then, went back to their credit ratings around their balance sheets, debt maturity schedule, usage of line of credit cash, debt after cash liquidity revenue. And then, went after their trends and looked at the margin trends and revenue trends and fixed charge coverages. And then literally remodeled each one of them once again and started running some stress tests where we move their revenues and margins and then kind of refinance their whole balance sheet over the next 5 to 7 years. And we added on 300 basis points, a higher financing cost of 600 basis points and then did some mixing of that to get a perfect storm. And we took all of that and that kind of guided us along with some themes we had, their interest rates too, how is retail going to be different that the low end consumer may have trouble coming back, the non-discretionary is going to be…

We did. We had one additional property, Diageo, it’s in the Napa Valley. It’s kind of wedged in between the other vineyards that we owned and it is one that we had looked at doing a ways back, but there were a couple of complications operationally for them on it, but we were able to do that. So, it’s a little addition to the Diageo portfolio. Todd Stender – Wells Fargo Securities: Any pricing on that, any indication what the cap rate was?

It’s relatively similar to what we did two years ago. Todd Stender – Wells Fargo Securities: Okay. Thanks guys.

Thank you. And our next question comes from the line of Anthony Paolone with JPMorgan. Please go ahead. Anthony Paolone – JPMorgan: Thanks, good afternoon. Just following up on that Tom and thanks for laying out your thoughts on dispositions. Can you give us any sense of what that magnitude might look like against the $500 million of acquisitions you are thinking about for 2012?

Yeah. There is about – well acquisitions for 2012. Again, our best guess this year is we would like to do 50 and that probably adds in 25 to 30 of this new grouping of investment properties we’d like to sell. So that’s the number there, but there is $110 million probably over the next 18 to 24 months. And then behind that as we went through and did the whole portfolio it wasn’t we need to sell these now, but these are areas we want to move out of. It is about 20% of the portfolio where you looked at, instead over the next four or five years that’s what we would want to recycle. Anthony Paolone – JPMorgan: When you say 20% of the portfolio, is that 20% of value or 20% of the buildings?

Revenue. Anthony Paolone – JPMorgan: Revenue?

Yeah. Anthony Paolone – JPMorgan: So, I mean, does that suggest there’s a lot, like a much bigger ramp in sales beyond 2012 and 2015 with that?

No, if you think of about 20% that’s 400 or 500 properties, so I think over three to five years that’s about 80 properties a year or something.

And to some extent more art than science Tony. So, for example if we – buy $1 billion worth of real estate again this year, then maybe we can do more than $50 million in sales this year, who knows. So, we will kind of manage that from an earnings run rate perspective as well.

Yeah, it’s a balancing act with acquisitions and all the other things going on in the portfolio and still hitting good numbers and raising the dividend, but we think we can move a good part of the portfolio over the next two years. Anthony Paolone – JPMorgan: Okay. And then, you talked a bit about same store revenue. I was wondering if you would give a sense of same store NOI maybe net of things like the $7.5 million of property expenses that you bear. The effect of the phase and in Friendly’s this year, just some the vacancy ticked up in the fourth quarter from some of those leases that burned off and just how that roles into a same store NOI number for 2012?

Okay, let me.

Let us work on that.

And the one thing we do, I think we do a pretty good job of giving you the specifics of how we approach same store calculation in the 10-Qs and 10-Ks, but we will have that laid out to give you exactly what we have put in it versus what’s not it, because everyone does it a little bit differently. I think what you are generally going to find and that’s why Tom tried to give you some guidance on where we get some bumps in which industries and which ones were down is that obviously, the ones that we got bumps in, it was probably a number of slightly healthier than 1% to 1.5%. But the ones, the vacancy is what really drives it down to that kind of overall run rate. So, when you are modeling for the overall portfolio that’s why we are guiding you to that 1% to 1.5% area.

Yeah, and I don’t have that number off the top of my head Tony, but if you want to e-mail what the piece of puzzle is, let us take a look at it. Anthony Paolone – JPMorgan: Sure, and I guess, what struck me and where I was coming from was even between the 1% to 2% ban being towards the lower end of that, it still seemed like not a whole lot of impact given what's happened with Buffet’s and Friendly’s and stuff. Is that like all those things?

Yeah, that’s very fair, it definitely impacts. When we talk about an 80% recovery rate that is when we get those leased up, so if you have a event happen for the 12 months after that the impact is certainly greater than the 20% that you don't recover, because that's during the period where they are vacant and aside from not gaining rent, there is also the triple net expenses and so, in a year like this and it really bans the year between Friendly’s and Buffet’s. That does have a pretty good impact, it may exceed the same-store rent for a period of time until you get those leased. Anthony Paolone – JPMorgan: But even with the impact on a top line of Friendly’s and Buffet’s, you still think you will come in that low 1s?

I am only hesitating, because I'm trying to make sure I understand what the numbers are.

Anthony Paolone – JPMorgan: Right.

Fair enough. Your question is on the projection for 2012 and I think what we are seeing is, we were expecting same-store rent to be more like 1.5% plus next year, reasonably healthy from an overall historical perspective for us. And the Buffet’s and Friendly’s vacancy is what's dragging that down closer to a 1% number, certainly for the first nine months of the year or so. Anthony Paolone – JPMorgan: Okay. Yeah, no I just wanted to make sure that was in that low 1s, because I would have actually guessed it to have had a greater negative impact in that. Great, and then, just the last thing, just curious as you thought about your strategy in the push towards a little bit more higher credit quality, a desire to go up the credit quality spectrum. Like how do you think about going higher credit quality versus perhaps maybe any other options like staying where you are on the credit spectrum and focusing more on certain MSAs or just a different product category or something like that?

Yeah, that's a very good question. I think rather than what we are doing talking about why we are doing, it's really important. And starting about four or five years ago as we were doing strategic planning, one of the things we did is, let’s look back at the last 20 years and say, it obviously went really well. And then say, okay, why did it go really well and to try and differentiate between being in the right place at the right time and then secondarily, what we did and there are kind of three themes in there that are driving it. One is looking at retail, in our business if you look at the last 20 years, you had great domestic economic growth, personal income growth, the baby boomers were peak earnings and spending years, the next one is very important, the consumer levered up. Retail spending growth rates were really high, retailers added a lot of new stores and it was the right place to be at the right time and we were. And then we said, okay, let's look forward, there is a bid of the new normal the term goes around, debt to GDP is approaching 90%, which takes something out of GDP growth and personal income growth, the baby boomers are ageing, you got the baby bus behind them. And the consumers unlikely to lever up at the same rate, because they can't and may even de-lever a bit. And so, maybe retail isn’t as – the growth rate isn’t as high as it was in the past. And then, you throw in kind of the impact of Internet on retailing and you say, it’s the difference between running downhill and the difference between running on flat ground or flat land and the first…

Thank you. And our next question comes from the line of Rich Moore with RBC Market. Please go ahead. Rich Moore – RBC Market: Yeah, hi, good afternoon guys. I was looking at the or thinking about the impact of Friendly’s. And I went back to the press release you guys had, is that what you pretty much are seeing what you put in the press release on January 18, is that still what you expect from the Friendly’s closures and then how much you recover of what's left?

Yes. Rich Moore – RBC Market: Okay, and at what point in the year did they stop, did all of this take place. I mean you said it was late in the year, but was it – how much of that fourth quarter rent I guess we see?

We received October rent and then the impact say 15 of the 19 rejections, we did not receive November or December rent. And then, the other four rejections we haven’t received January’s rent, just to kind to give you a feel. Rich Moore – RBC Market: Okay, that does. And then as far as what you will recover from the others, when did that start, the reduction?

Rich Moore – RBC Market: October was a full rent. I got you. And then for the phase, you are thinking, obviously nothing is happening. Are you thinking the same that you have in the press release, the same sort of same sort of parameters that you mentioned in here?

Rich Moore – RBC Market: Okay. And those parameters Paul as far as how much base rent you will lose and what the concessions will be on there mainly. Do you still feel comfortable about that?

Yes, we are at the same place where we were with the press release a couple weeks ago.

Yeah, absolutely. Rich Moore – RBC Market:

Correct. Rich Moore – RBC Market:

Sometimes a little.

Rich Moore – RBC Market:

Yeah, a lot of the buildings are set up for that, so it generally is and I could give you other things they would become, but it’s really anecdotal, they are restaurants. Rich Moore – RBC Market: Okay. All right, very good. Thanks, guys.

Thank you. This does conclude the question-and-answer session for the Realty Income operating results conference call. Mr. Lewis, please go ahead.

Okay. Well, listen thanks everybody for being with us today, I know it's a busy schedule and we appreciate the attention and we will talk to you in about 90 days and thank you, Diane.

Ladies and gentlemen, that does conclude today’s teleconference. Thank you for your participation. You may now disconnect.