Ladies and gentlemen, thank you for standing by. Welcome to the Realty Income First Quarter 2012 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 your questions. (Operator Instructions) Today’s conference is being recorded April 26, 2012. I would now like to turn the conference over to Tom Lewis, CEO of Realty Income. Please go ahead.

All right. Good afternoon, everybody and thank you, Elisa, and welcome to our call to talk about the first quarter. In the room with me is Gary Malino, our President and Chief Operating Officer; Paul Meurer, our Executive Vice President and Chief Financial Officer; John Case, our Executive Vice President and Chief Investment Officer and Mike Pfeiffer, our General Counsel and he is also an Executive Vice President, and Tere Miller, who is our Vice President of 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 laws. The company’s actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail on the company’s Form 10-K the factors that may cause such differences. And with that, we’ll open it up as we usually do, going over the numbers, to Paul and he will handle that.

Thank you, Tom. As usual, I will comment briefly on our financial statements, provide a few highlights of the results for the quarter and start with the income statement. Total revenue increased 17.9% in the quarter. Our revenue for the quarter was approximately $115 million or about $450 million annualized run rate. This obviously reflects the significant amount of new acquisitions over the past year. Other income was only $255,000 for the quarter. On the expense side, depreciation and amortization increased by about $8.6 million in the comparative quarterly period. Obviously depreciation expense increased as our property portfolio continues to grow. Interest expense increased by just over $3.8 million and this increase was due primarily to the June 2011 issuance of $150 million of notes in the reopening of or 2035 bonds as well as credit facility borrowings during the quarter. On a related note, our coverage ratios both remains strong with interest coverage at 3.5 times and fixed charge coverage is at 2.7 times. General and administrative or G&A expenses in the first quarter was $9.2 million. Our G&A expense has increased a bit as our acquisition activity has increased and we invested this past year in new personnel for future growth. G&A also includes the expensing of additional due diligence costs on the acquisition side, which totaled $242,000 during the quarter. Our current projection for G&A for all of 2012 is approximately $34 million, which will represent only about 7.25% of total revenue projected for the year. Property expenses were $2.5 million for the quarter. These expenses are primarily associated with the taxes, maintenance and insurance expenses which we are responsible for on properties available for lease. Our current estimate for property expenses for all of 2012 is about $9.4 million. Income taxes consist of income taxes paid…

Thanks, Paul, and I’ll kind of run through the various areas of the business. Let me start with the portfolio. The portfolio continued to generate very consistent revenue throughout the first quarter. And at the end of the quarter, our 15 largest tenants accounted for about 49.4% of our revenue. That’s down 440 basis points from the same period a year ago and 40 basis points from the fourth quarter, but the acquisition efforts and (inaudible) portfolio continue to reduce concentration. Relative to the health of the portfolio, the average cash flow coverage at the store level for those top 15 remains very high and very stable from previous quarters at about 2.4 times and so overall the operations of the tenants in those properties are doing pretty well. We ended the first quarter at occupancy of 96.6%, 90 properties available for lease out of the 2,631. That’s down about 10 basis points from the fourth quarter and down about 20 basis points for the same period a year ago. During the quarter, we had 16 new vacancies in the portfolio, eight came really from buffets and friendly leases that were rejected during the reorganizations and then the balance from the normal operations portfolio, which is (inaudible). And then we also leased or sold 13 vacant properties during the quarter and that basically gives you the reason for the movement in the asset. I mentioned last quarter that we thought that we – during the first quarter, we could see another 30 basis points or sort of occupancy decline. Obviously, we were able to do better than that. And we think throughout the year, absent anything material change that the portfolio occupancy will remain very high. Our best guess will be around 97% at the end of the second quarter,…

2% to 3% of rent, not 5%.

Excuse me, 2% to 3% of rent, but basically our concerns there are abated, quite a bit as in talking to the tenants, they have seen that their business have improved. So a bit more positive there relating to how we do the portfolio going forward this year. I would also say that leasing and sales activities is rest in the portfolio management department is in pretty good environment right now, and overall, we think the portfolio should be pretty stable going forward. And there are no new issues that have emerged over the last quarter. So a little bit more positive comp related to the portfolio. Moving on to the property acquisitions, the first quarter was obviously quiet, but second very busy, and I’ll let John Case, our Chief investment Officer comment on acquisition.

Thanks, Tom. We remain quite active on acquisitions front, we continue to see a high volume of acquisition opportunities. While we only invested 10.7 million in the first quarter, we expect to see a very active closing calendar over the next two to three months. Our quarterly closing activities typically driven by the timing of our larger portfolio of transactions of which they were none in the first quarter of this year. As we stated in our earnings release, subsequent to the end of first quarter, we have acquired or placed under contract acquired 500 to 14 million in acquisitions, which we expect to close during the second quarter. The two large portfolios transactions are driving the bulk of these activities, these acquisitions are comprised of 250 properties, leased before in the four different industries, all of which are industries were currently invested in. Virtually, all of the acquisitions of the retail properties of about 36% our investment in our tenants, we will provide more color on these acquisitions once they close. We have seen a broad range of investment possibilities, we sourced approximately 6 billion in acquisitions opportunity so far this year. Again, this is everything that is come in the door, that acquisitions team has reviewed. This activity is comprised of 1300 properties, leased to 115 tenants, and 33 industries. The majority of what we’re seeing continue to be retail and distribution property. And about half of the properties were analyzing are released to investment-grade tenants. While we are no longer evaluating the majority of these acquisitions, we continue to pursue a number of these investments. Given our level of activity to date this year, we’re raising our acquisition estimates for 2012 of 650 million from our previously announced $500 million. We currently believe our initial cap rates should average from 7.5% to 7.75% for the year. Our initial lease terms should continue to average 15 years or longer. While the acquisition market is active, it is also competitive. So investment yields remain under pressure. Our investments spreads continue to hold up very well though. Our anticipated acquisition cap rates reflect about a 175 basis point spread over our year-to-date average nominal cost of equity. This again is taking our average price year-to-date and adjusting it for the forward FFO yield and – calculating the forward FFO yield on that and grossing it up for our equity issuance cost. This spread compares favorably to our long-term average of 110 basis points and it’s just a shade of our 2011 average spread of 170 basis points. At our current share price, our expected investment spreads are in excess of 200 basis points. Tom?

Thanks. So obviously spreads remain very, very wide even on slightly lower cap rate. Obviously we’re pleased with what plan on the second quarter with the $514 million that we’ll have coming in the door during the quarter. As John mentioned, it’s 250 properties. So it’s a lot of retail properties leased to four tenants in all industries that we are in already and then the vast majority of it is retail. The other thing is it’s very typical of what we thought over the years. It has fairly high cash flow coverages that would be in line with the balance of our larger tenants and about a third of it is investment grade. So I think normal write-up, the middle of – the middle for us in terms of what we require. Normally, we would not have announced it obviously until they closed which is what we typically do, but we needed to disclose that we did have those accusations coming in because we were doing the additional preferred offering. And those transactions, some of them are part of larger transactions that tenants are undertaking and those will transpire over the next couple of months and then we’ll comment further on those after we get them done and then the tenants are able to complete the overall transactions and then we are freed up of confidentiality agreements and be able to talk a little more about them. And we believe that all of them should close in the second quarter. There could be a little leakage into the third quarter, but obviously very positive. John mentioned, we’re using $650 million in acquisitions in our numbers for now. Transaction flow is excellent. So we could exceed that, but it really is, as we’ve said for a long time, lumpy quarter-to-quarter…

Thank you. (Operator Instructions) And our first question comes from the line of Joshua Barber with Stifel Nicolaus. Please go ahead. Joshua Barber – Stifel Nicolaus: Hi, good afternoon.

Hi, Josh. Joshua Barber – Stifel Nicolaus: I’m wondering if you guys could give a little bit more comments about your two to three year outlook on sales process. I know you noted that the sales have been kind of slow in the first quarter. But this is sort of a question within a question. A, what do you expect in the sales process over the next couple of years and B, is there some right size of the enterprise that you’d like, we’ll be able to get over the next few years, just given that you guys have gotten bigger, and probably necessitates larger deals to continue growing?

I’ll start with the last part of that. I think we will continue to get bigger, notwithstanding sales because the acquisitions will outstrip them, and fortunately we have been able to do more acquisitions as the market has been, there has been at lot of product on the market. We have been very active and with good spreads and cost of capital, it’s really an nice window here to jump through, but size over time, is certainly an issue down the road. Relative to sales, talked to linked again in the last two about kind of re-rating the whole portfolio and starting to sell off some things that we don’t want to hold over the long term, and we targeted initially 106 properties out of the portfolio, a fairly small was about 114 million and asset size and really just stack that really and additional departments to do that in January and started the process, obviously these are aren’t like selling securities where you can push a button. They do take some time, but I think that initial 114 will take the balance of this year, and probably into the first quarter of next year and than what we will do is, we will probably just have another 100, 150 right behind that that we try and do over a year. So if I could targeted run rate once we get up and operating here, it will be $100 million, give or take $25 million, $50 million on each side. And that should be something that should continue, I would think, for the next three, four years based on how we’ve analyzed the portfolio. If you look at the 106 that we targeted, again, really (inaudible) in January, there is 49 of those right now where we’re out talking to…

The high yield market is on fire and that does give an alternative to tenants, but they’ve also realized that net lease is permanent financing, and we are very low interest rates and I think that some people have sat down, really thought their way through it and said, look, we have these properties on the books, let’s go out and get some very long-term financing, which I think is smart for them to do. John, you want to comment?

I can think of just a couple of transactions involving private equity firms where they opted to pursue more high yield financing than sale leaseback financing over the last three to four months. It hasn’t really been a significant impact on our business, but we’re seeing a little of it given the strength of that market right now. Joshua Barber – Stifel Nicolaus: Right. So for the triple nets, you don’t get (inaudible) at the last moment?

We try very hard to make that point when we’re doing a transaction. Joshua Barber – Stifel Nicolaus: Thanks very much. Good luck.

You bet

Thank you. Our next question comes from the line of Paula Poskon with Robert W Baird. Please go ahead. Paula Poskon – Robert W Baird: Thank you. Good afternoon, everyone.

Hi, Paula. Paula Poskon – Robert W Baird: Tom, you described the transaction flow as excellent. Does that reflect just the velocity of opportunities that you’re seeing or does that reflect the suitability of the opportunities relative to your acquisition criteria?

Yeah, I think it is, as John mentioned, that in (inaudible) acquisitions this year, about $6 billion had come in the door and for the whole year, last year, if I recall, it was about $13 billion, and then we’ll use last year numbers. Of the $13 billion, about $8 billion gets seriously analyzed and then about $3 billion goes into committee and we actually had a very high hit rate last year though we bought $1 billion. So looking at six and closing about 500 million, the numbers in terms of are pretty high and then the suitability is also very high. And a good part of it a good percentage, again, is investment grade that we’re looking at.

Yeah, about half of what we are seeing is investment grade, and what we’re invested in projected to invest in, it’s about 36%.

And it’s also across a lot of different industries and that tells us sometimes there is something going on in convenience stores or restaurants where those industries don’t have capital or there is a lot of M&A and that’s really what causes people to come into the market, but today it’s pretty broad-based across industries, which tells us, people saying, hey this is a good time while interest rates are low to go out and do something, and I think they are right and then conversely this for us too given where spreads are and we can get long-term financing. Paula Poskon – Robert W Baird: And what are some of the industries that you’d like to be in that you are not currently?

Well, in retail, we kind of got fully funded and if there you just kind of say anything in there that is non-discretionary to meddle up our income we love, and in retail if it’s going to be the kind of lower income, better be value, club stores, dollar stores, or along those lines. And then outside, it’s really kind of the Fortune 1000, we’re trying to fall in a little bit and look into those industries that’s cannot be as capital intensive and we would benefit from some of the trends going on conversely, in retail like in when the Internet retailing and transportation, we are looking in that area and we’ve been we’ve done some business with FedEx and looking at some others and so it’s kind of up the credit curve outside of retail and non-heavy equipment type businesses, service business or really Fortune 1000 type companies. Paula Poskon – Robert W Baird: That’s really helpful. And then finally, one last question, what do you think the spread is in the cap rate between what you are buying and selling at?

That’s a very interesting question. We had targeted for our modeling selling at a 10 cap and we had probably bought those assets at 8 and today they are yielding us – happen to yield us 883, those we want to sell on the sales. We only have one sale but in through looking at the LOIs and others, it’s down closer to where the cap rate spread is, it’s pretty tight I think in the four or five to date is about 9. So I think we’re going to have a better range of cap rates and some are lower than what we’re holding at so we’re doing pretty good. If you look today, it’s hard to really say, here’s what we’re buying, here is what we’re selling, we’re selling generally those tenants that we think that might be challenged in the future or in industries that we like to move away from, and we’re buying going up the credit curve, so there should be a spread there is any type of credit spreads that go on in that lease business? Paula Poskon – Robert W Baird: And I’m sorry, one last question, this is really big picture. As you sort of think about long-term really long-term about the trends of consumer spending patterns and what not, is there anything kind of emerging to you of where you definitely want to be or don’t want to be and sort of using that this next generation coming out where I’d be long (inaudible).

Right. Yeah. Very much so and will do have some very strong feelings about that, and it’s a function that we think A, retail will be tougher and then secondly, the interest rates will be something that comes in as a problem in the future. And we – it’s interesting, we kind of thought that recession was coming. We’re doing a big picture dive relative to where we were and where we kind of missed it for a couple of years in the last couple, it’s really come up front for us is dividing the consumer up to upper income, middle income and lower income and then looking at discretionary versus non-discretionary items. And saying in the upper income, you can do both the discretionary and non-discretionary, we will do very well with that money. And then when you get into middle income, it’s a little bit of a shrinking group, so you want to say with non-discretionary things, they have to buy and when you are looking at discretionary be careful. And then in the lower income, it’s a really tough going forward. Credit is tough, it’s a lot of people out of work and it’s not improving rapidly and we think we are discretionary spending, it’s going to be huge problem and so we don’t want anything that we view as discretionary spending of the low-income consumer. We made some significant investments in restaurants in 2007 and 2008, and I wish we would have looked at what we thought would be was going to happen with the economy and tied it to the consumer a couple of years earlier because a lot of that was casual dining and comes right down to the low end consumer on discretionary spending, and that’s really kind of where we don’t want to be and in retail, we want to make sure, it’s primarily the middle income, upper income consumer and then we can play in both discretionary, and non-discretionary. So if you did that and I will give you an examples, if consumer discretionary, it’s the middle and upper income, health and fitness, theatres, supplies, that was pretty good and you have to watch where you’re buying from a demographics standpoint. If it’s consumer non-discretionary kind of at the middle take, auto collision, auto service, tires, sea stores, drug stores, those look fairly attractive to us. And then kind for all demographics, those retailers could have good value propositions as kind of whole sale clothes, dollar stores, discount, volume retailers. And then, to couple it given where we think the fixed rates might go in the future by trying to go a bit up the credit curve. Paula Poskon – Robert W Baird: That’s very helpful. Thank you very much.

Thank you. Our next question comes from the line of Todd Stender with Wells Fargo Securities. Please go ahead. Todd Stender – Wells Fargo Securities: Hi. Thanks, guys. Tom, just circling back to your comments on the disposition, the real opportunity for you to sell properties on a one-off basis, I know it might be a little more time consuming, but you get that tend you really want to exchange buyer, it might not be as price sensitive, and if an urgency to close. Any color on the – if these are going to be portfolios group or maybe just the one-off?

Yeah, we will do a few – in pieces, but I think, we’ll come with the conclusion the best buyer for the – their good locations, is to the buyer in the community where the property exists, because these tend to be on main drag, people know them if they go buy, and they’re comfortable with their community and they’re comfortable with that location in their community, and that’s sold by I think the local brokering there. And since they’re fairly small asset size, they fit kind of that type of buyer. With that said, along the way, we’re getting a few calls where somebody says, we would like to do four or five. What we learned in crust though, over a number of years, if you get people coming and try and tie up four or five, and then try and work the transaction, it’s got one out here and one in there, and we’ve just been better off, unless you’re really going to discount them and do a good volume block, you will get maximum value, kind of one-off. And that is a system that we’re trying to build, as we do the sales. Todd Stender – Wells Fargo Securities: That’s helpful. And then, just a couple with that. Any geographic pockets that concern you, maybe some macro issues related to the housing market not coming back that are skewing you to sell more across the country?

That’s a great question and I have to say, a soft. No, there are some areas that are little less attractive, but we did a really interesting study, we went and studied all of the tenants last year and the industries, and we rate them, and it took a year. We undertook the same project with properties and started defining real estate characteristics to them relative to income, population, demographics, and really going through the portfolio and when it was done weighted and weighted the properties from real estate characteristics, then they could marry to the credit statistics of the tenant. And we thought it’ll be interesting the back cast was real estate characteristics. So we basically took the last couple of three bankruptcies the company have had, we took both properties and rated, and the correlation to whether we got the properties back, or they were successful is almost zero. The co-relation was almost cash flow coverage, and then there was the rating for consumer discretionary as the consumer. So we’re more focused in that area because when we backed up, it was stunting to me that you take – you’re looking at traffic flows, the traffic demographics and all the other things, and all that really matter with the cash flow coverage. Todd Stender – Wells Fargo Securities: That’s helpful. Thanks, Tom. And last question, with the new acquisition you announced the pending one that’s going to close in the second quarter. Is there any secured debt that comes along with that?

No, there is none on this one. Todd Stender – Wells Fargo Securities: Okay. Thanks, guys.

Thank you. Our next question comes from the line of Rich Moore with RBC Capital Markets. Please go ahead. Rich Moore – RBC Capital Markets: Yeah, hello, guys. Good afternoon.

Hi, Rich. Rich Moore – RBC Capital Markets: Staying with that last question for a second. Your acquisition facility, I assume it is at about zero I think, how you’re basically saying and as you add these acquisitions this quarter, that’s going to pretty much match you out. Is that about right?

Yeah, and so obviously options include the utilizing the accordion on the facility, which has $200 million that can be added to the $425 million or access in permanent capital, which whether be common preferred or bonds or all, very available at the moment and very well priced.

I’ll also say add-on to that that we have a fabulous group of banks that we have a great relationship with and have been told over time that it’s an environment where pick up the phone if you need something. So we don’t have a concern in that area. Rich Moore – RBC Capital Markets: Okay. Tom, your confidence level, I take it is high that you closed on these. So you could say you were going to equity, you could do that really at any point, right?

You could, but we have found that the best ideas to match those things up while we think there is a very, very high chance that they’re closing, given where we are on them. We generally like to make sure they are going to close and close them before we got a lot of money. Rich Moore – RBC Capital Markets: Okay. That sounds pretty intelligent. When you look at Friendly’s and Buffets, is there any more impact in the second quarter and what do you think happened beyond 2Q?

I think the impact lags throughout the year. I think same-store rents will be a little soft in the second quarter and gets a little better in the third and fourth. And I think the leasing happens over time, and obviously since we are comping off last year’s number pre-bankruptcy on both of these and some of the concessions we made on a comp basis, those will show up this year. But in terms of handling it, I’d say it gets done in the first three quarters. I think most of it could do and I know our portfolio management group is listening and now knows what we need to do. And then that will pretty much in and we’ll look forward from there. And as I mentioned earlier, there is nothing that’s jumped up we see as of right now in the portfolio above or beyond those. Rich Moore – RBC Capital Markets: Okay. Thanks. And one more thing. It looked like you – you added two stores in the quarter and it looked like you added one retail chain. And I was curious, two things, one what the retail chain was, and why you would add one store of one new retail chain?

The retail chain increases were released of a property. Rich Moore – RBC Capital Markets: Okay, I got you.

As part of the acquisition efforts. We agree, relative to the acquisition front, for the most part, you’re not going to see that sort of situation.

I was just going to say that I don’t know. Rich Moore – RBC Capital Markets: Yes, exactly. Okay, good, very good. Thank you guys.

Thank you. Ladies and gentlemen, this concludes the question-and-answer portion of the Realty Income’s conference call. I will now turn the call over to Tom Lewis for closing remarks.

Thank you. As always, we appreciate everybody’s time and look forward to talking to you again in any upcoming (inaudible) or other meetings and other than that, we’ll talk to you in about 90 days. Thank you and Elisa, thank you for your help.

Ladies and gentlemen, if you’d like to listen to a replay of today’s conference, please dial 1800-4806-7325, 4303-590-3030 and enter access code of 531986 followed by the pound sign. Thank you for your participation. You may now disconnect.