Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Realty Income Second Quarter 2013 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, July 25, 2013. I would now like to turn the conference over to Tom Lewis, CEO of Realty Income. Please go ahead, sir.

Great. Thank you, Sheryl and good afternoon everyone. Welcome to the conference call and thank you for joining us. In the room with me today, I have Gary Malino, our President and Chief Operating Officer; Paul Meurer, our Executive Vice President and Chief Financial Officer; Mike Pfeiffer, our EVP, General Counsel; and Sumit Roy, our Executive Vice President, Acquisitions. And as always 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 the forward-looking statement. We will disclose in greater detail on the company’s Form 10-Q the factors that may cause such differences. And as is our custom, why don’t we start with Paul to walk through the quarter.

Thanks, Tom. As usual, I’ll comment briefly on our financial statements, provide a few highlights of our financial result for the quarter starting with the income statement. Total revenue increased 63% for the quarter. Our current revenue on an annualized basis now is approximately $765 million. And of course this increase reflects positive same-store rents of 1.1%, but more significantly it obviously reflects our growth from new acquisitions over the past year. On the expense side, depreciation and amortization expense increased significantly to $78 million in the quarter as depreciation expense has obviously increased naturally with our portfolio growth. Interest expense increased in the quarter to $39.1 million. This increase was primarily due to the $800 million of bonds that were issued last October as well as some credit facility borrowings during the past quarter. On a related note, our coverage ratios both remain strong with interest coverage at 4.1 times and fixed charge coverage at 3.3 times. General and administrative or G&A expenses in the second quarter were approximately $12 million dollars. Our G&A expenses naturally increased this past year as our acquisition activity has increased and we added some new personnel to manage a larger portfolio. Our employee base has grown from 89 employees a year ago to 104 employees at quarter end. However, our total G&A as a percentage of total revenues has decreased to only 6.5% and this compares to a historic run rate for G&A of about 7.5% to 8% of revenues. Our current projection for G&A for all of 2013 is about $58 million. Property expenses were just under $3.3 million for the quarter and our property expense estimate for all of 2013 remains about $15 million. Income taxes consist of income taxes paid to various states by the company. They were $722,000 for…

Thank you, Paul. Let me start just by saying I think in the second quarter, we continued pretty good positive momentum from the first quarter and had I think, excellent results in each facet of the business and I’ll start with the portfolio, which again generated very consistent income during the quarter pretty much across the board the tenants are doing well no issues arose with any of the tenants during the quarter and based on what we see now that should be the case during the third quarter very, very smooth. At the end of the quarter, our largest 15 tenants and they are listed in the release accounted for 43.5% of our revenue that’s down 500 basis points from the same period a year ago and up 90 from the first quarter. There may be some I think ebb and flow from quarter-to-quarter in that but our acquisition efforts continue to help us reduce concentrations pretty much throughout the portfolio. And we have made continuous progress in that over time. If you look back say five years ago to 2008, our top 15 tenants accounted for 54.3% of our business, of our revenue and today that’s 43.5%. Relative to occupancy, we ended the quarter at 98.2% with 68 properties available for lease out of the 3,681 we own that occupancy is up 50 basis points from the first quarter and up 90 basis points from the same quarter a year ago and really is a function of very good progress on leasing during the quarter. And I would say looking forward here in the third quarter, we think occupancy should remain at this level or perhaps up a bit more and overall occupancy is very strong. We reported occupancy this way for very long time, which is taking…

Thank you, sir. We will now begin the question-and-answer session (Operator Instructions) And our first question comes from the line of Juan Sanabria with Bank of America Merrill Lynch. Please go ahead. Juan Sanabria – Bank of America Merrill Lynch: Hi, good afternoon. I just had a quick question with regards to your capacity from a balance sheet perspective. How much could you debt fund out for you’d be a bit uncomfortable with your leverage ratio? And I guess the second question what I’ve got the floor is just what are your views on acquiring assets with lease terms below 10 years what sort of cap rate spreads, which you have to see relative to your traditional focal point?

Well from an overall leverage standpoint Juan, we historically have run kind of in the – I’ll give a broad range for a second, 20% to 35% leverage range, 5% to 15% preferred, when I referred to 35% debt and 15% preferred I’m referring to maximum that we’re comfortable with relative to that. So today debts around 30%, preferreds around 5%, we obviously do have capacity in both buckets and certainly stayed in concert with issuing equity as well. We would continue to have capacity in those buckets, but we view maximum levels of kind of a 35% debt, 15% preferred. And actually preferred that they be more in the 25% debt level and in the 5% to 10% preferred level. So we have an all phrase we use internally which is go equity first so to the extent that common equity is well priced and accretive that’s something we would – always keep our eye on as something we’d be more likely to take a look at before we looked at the fixed income side.

On the second question Juan, relative to shorter leases it has been very, very, very rare for us to go much inside 10 years the only time I can remember is when we bought a large portfolio on just a couple of three, four, five of the properties would be inside of that. We’re really trying to go longer up in the 14, 15, 16, 18, 20 to keep the lease duration on the portfolio long, and allow the revenue to be very stable. When you’re in the net lease market and you’re out there selling properties if you’re lease linked is 10 years or longer generally the cap rate will command, we’ll be much, much better than when it moves inside 10 years and as you get shorter down in the 6,5, 4 cap rates rise pretty dramatically. And that’s generally a function of released risk that is hard to tell on a lot of net lease assets. And when you’re out buying shorter-term leases generally those aren’t generated in a direct transaction with a retailer or a large corporate tenant generally you’re buying those out from another owner in the open market. And if you didn’t underwrite them to yourselves you may not have cash flow coverages or the profitability, the individual stores that you’re buying and that’s makes it difficult to assess the risk of whether the tenant will re-lease certainly in the case of retail, and you want to make sure you have that and if you didn’t have it then the cap rates going to rise because of the uncertainty relative to rollover. So you’d really have to be assessing what you paid per square foot and what the rent is per square foot, and what you think the market would be, but generally those command much higher cap rates and it’s very rare our strong, strong prejudice is not to go into that game. We’ve looked at that business may be 15 times over the last 20 years but really found it difficult to underwrite. So generally we’re looking up in the 12, 13, 15 to 20 year lease when we’re – acquiring properties. Juan Sanabria – Bank of America Merrill Lynch: Thank you very much.

Thank you. Our next question comes from the line of R.J. Milligan with Raymond James & Associates. Please go ahead. R.J. Milligan – Raymond James & Associates: Hey guys, good afternoon and good evening.

Hey R.J. R.J. Milligan – Raymond James & Associates: Just curious Tom, what – the volume – the $15 billion in the second quarter is that – was that a reaction to the tenure moving or was there something else driving that surge in volume?

Yes. And that was really pre the temper tantrum as somebody said at the other day, and the movement in the tenure because most of that that hit the market came in middle earlier the quarter and also came of course was structured before that in the decision to bring it to the market generally is a few months before that. And it’s a couple of things going on one is, is just there has been a growing knowledge of net lease sale and leaseback and I think that’s a function of a lot of the talk in the fourth quarter and the first quarter with bankers out calling on really Fortune 500 and – every tenant they have or every company they have about using the real estate take it up balance sheet. So just a wider knowledge of using sales and leaseback is part of the capital structure by corporations. I think also there is just been a lot of potential M&A transactions a number of those had been noted in the press and, those came to market and I think it was also representative the companies are figuring out the rates are pretty good, and it might be a good time to do it if you’re going to couple with some of the private REITs or fund business that is really the part of the cycle where they need to come to market and the confluence evolve so one time led to a lot coming on the market very quickly. A lot of that will get done, got done some of it won’t and then when the tenure moved you saw the – saw cap rates move a bit. But it was just a heavy quarter and it was all of those things coming together and I don’t think we’re going to see that this quarter and next quarter but the volume still remains very elevated over where it was a couple of years ago. R.J. Milligan – Raymond James & Associates: So, it’s slowed since the middle of May or…

Yes, I mean $15 billion is a ridiculous number. But if you go back again two, three years ago I think $5 billion a year was the number and it’s certainly running way the heck ahead of that. It’s still very strong. We saw $5 billion in the first quarter and assume you want to hazard a guess so what you think we’ll see in the third and fourth… R.J. Milligan – Raymond James & Associates: Subset of the $5 billion for the remainder of the year.

Yeah, okay. R.J. Milligan – Raymond James & Associates: Okay. Thanks.

Thank you. Our next question comes from the line of Jonathan Pong with Robert W. Baird. Please go ahead. Jonathan Pong – Robert W. Baird: Hey, good afternoon guys.

Hey, Jonathan. Jonathan Pong – Robert W. Baird: (inaudible) thoughts as you look at the potential large portfolio deals you have done on the publicly traded side and the non-traded side that might need a liquidity event over the next year or so. What says your appetite right now for those kinds of deals and all of equal and tenant quality lease duration, which says that the yields probably need to see between the portfolio deal and one-off deals that would make you more constructive in pursuing those?

Yes it’s really interesting – that’s an interesting question. Let me comment it a few ways. I said in last quarter’s call something very strange in the business right now is because of the additional institutional buyers. Traditionally, if you had a large portfolio transaction the cap rate on that would be higher than a one-off really rewarding the person for putting out a lot of capital in one fell swoop and starting about a year ago that all reversed as you had a number of institutional buyers, who were trying to put capital out and had raised funds and had difficulty putting it out and a one-off transaction would move the needlework for them. So, it’s only time in and then came in at $75 million or $100 million, $200 million, $300 million all of a sudden there were a lot of people looking at it and so cap rates really inverted where those were going trading inside a one-off of the same tenant. So, that’s unusual as long as I’ve been in the business but I think still where we are. And so if I – I said earlier that investment grade cap rates worth 6 in a quarter and 7 a quarter rate, I think a large transaction would fit in bidding that and same thing in a less than investment grade. And relative to us looking at them we’d love to do it. We’re more than happy to do it but one of the terms brought up here recently is given all the volume that came to market the odds were good but the goods were also odd. So, when you start looking at the quality of portfolio we’re trying to move more investment grade and there was a number of the things that came to market that were not and some that didn’t had a makeup in the portfolio. They didn’t fit some other characteristics rather the industry, who want to be in. And so, we’re really going to limit what we do on those unless the vast majority of the properties I said earlier kind of fit. But with that said we’re open to it. There is some floating out there and we’ll have to watch where they are. Jonathan Pong – Robert W. Baird: I guess if I look further out into that pipeline that M&A pipeline are you thinking of deals that might come to market that you are sort of holding off or are you sort of taking a more short-term view?

Yeah no I mean we’re just taking them as we come. As I said, we’re really happy Sumit Roy, who is running acquisitions and John Case our Chief Investment Officer kind of took our acquisition group and split them up into different areas earlier in the year. And we’re very happy with kind of the granular one-offs that we’re able to bring in much more than in the past. And that’s really led from the reliance I think for us on larger transactions but we’re pretty happy with the volumes coming in. So, we don’t feel compelled to go out and grab them. But we’re more trying to watch what’s really steaming up out there and what would fit. And then when those come wanting to make sure that we pursue them fairly aggressively and on the other ones not a high level of interest if it doesn’t fit, where we’re trying to take the portfolio. Jonathan Pong – Robert W. Baird: Got it. That’s helpful. Thanks a lot.

Thank you. Our next question comes from the line of Todd Stender with Wells Fargo. Please go ahead. Todd Stender – Wells Fargo: Hi, Tom since it’s a big number in Q2 that $15 billion that came in is that absolutely everything that’s being marketed or is that has been screened through you guys and then from there you break it down to see if it fits your long-term lease profile?

Yeah I’m sure that there were sort of things that we didn’t see particularly smaller but those are all of the things that came in the door that would reasonably be assumed that they would fit into categories that we would buy. And then we started screening and from there what happens is the acquisition group and they all have financial backgrounds do the initial screening, understanding our objectives. And they can start throwing things out pretty quick with just a day or two looking at them and trying to be more selective with what we then released and it goes over to research, the financial analysis are done and we get deep into it and then goes to the investment committee from there. So, that is the all-in kind of number of everything we see that is net lease that Realty Income would look at the category, look at the type of tenant that comes in the door. Todd Stender – Wells Fargo: And is it reasonable to assume that that could be a long runway for you guys its stuff you are looking at in Q2 could still be closing in Q4 and Q1 of next year should this really provide a pretty visible runway for acquisitions?

Sumit, why don’t you take that?

Sure. Most of the $15 billion that we referenced we’ve decided to pass on. Some of them we’ve already found out who the eventual buyer is. Some of it is still going through the process and I’m sure the eventual buyer will emerge over the next couple of quarters. But none of those $15 billion that we’ve referenced are portfolios that we’ve decided to pursue outside of the ones that we’ve either pursued or is in the pipeline to close and that’s a very, very small percentage less than 5%.

Yes. And the comfort level for the $1.25 billion is really taking those and the ones that we pursued and we are going to get and kind of looking at the timing and closing and that’s how we kind of jump from the $866 to $1.25. And there is a few exceptions but then you really want to start thinking that anything additional will come from what we’re looking at right now not what we look at last quarter. Todd Stender – Wells Fargo: And that’s helpful. And then Tom, you referenced the cap rate movement up about 25 basis points in the last six weeks. Is it fair to say that that was more on the low investment grade and that investment grade cap rates a little more sticky.

No, actually we believe they both moved. We’ve seen a lot of volume in it and that was the major point of our discussion a few days ago sitting there just parsing everything coming in the door. So, we’ve seen it across the board. Todd Stender – Wells Fargo: Okay. And then Paul you get pretty good color on how you are dealing the preferreds and it sounds like the preferreds at the bottom half of your range or what should expect maybe 5% to 10%. Can you just kind of go under what the current market pricing is for preferreds and tenant of your philosophy of convertible preferred would be considered?

The, as you know the preferred pricing widened over the last 45 days or so with the moving interest rates may be even more so than bonds. It kind of made a big jump and it’s taken a while for that to settle down. Current pricing for us would be in the 6.5% range call it from a coupon perspective. We suspect that will continue to tighten as things settle a bit in that preferred market and there is some demand on the horizon in that market but not at a level that it makes sense so for example to issue and takeout our existing preferred or that sort of thing but it is a bucket that we have capacity for and its reasonably priced and of course has a great maturity date if you will. So, it matches up well in our balance sheet for long-term assets and not matching with long-term liabilities. Convertible preferred is something we are open minded about. I think it would need to be done in concert with a larger strategic entity level type situation, where an equity element would be something to be considered. But as a normal ongoing corporate finance product in the balance sheet it’s not really how we choose to match fund our assets and not how we chose demand into the equity side of the balance sheet but it’s something we listen to. We’re open minded about and are knowledgeable about and we’d, never say never but it’s not something we look to in the near term or as a regular course of financing. Todd Stender – Wells Fargo: Okay. Thank you.

Thank you. This concludes the Q&A portion of Realty Income’s conference call. I’ll now turn the call over to Tom Lewis for concluding remarks.

Great. Well again thank you everybody for your patience. It was a very active quarter and we really appreciate you taking the time with us and with Sheryl I want to thank you for your help there and this will conclude my part of the call.