Fitch Affirms Realty Income's IDR at 'BBB+'; Assigns 'BBB+' To Unsecured Credit Facility.

NEW YORK -- Fitch has affirmed the 'BBB+' ratings for Realty Income Corporation's (Realty Income or the company) Issuer Default Rating (IDR) and senior unsecured notes. Fitch has also assigned a 'BBB+' rating to Realty Income's unsecured revolving credit facility and affirmed the 'BBB' rating for the preferred stock, which includes the company's recent offering of Monthly Income Class E Cumulative Redeemable Preferred Stock. The Rating Outlook is Stable.

The ratings reflects several positive factors including an entirely unencumbered property portfolio, solid operating performance, significant equity support for company borrowings, adequate liquidity, no debt maturities until 2008 and continued capital markets access.

Fitch estimates that the company's unencumbered assets increased to approximately $2.7 billion as of Nov. 1, 2006, the closing date of the $348 million Buffets/Ryan's restaurant properties acquisition. In addition, Fitch estimates that the unencumbered asset coverage subsequently increased to 296% as compared to 273% on Sept. 30, 2006.

Operating performance remains solid as of Sept. 30, 2006. For the nine months ended Sept. 30, 2006, Fitch notes that Realty Income's recurring EBITDA to total interest expense coverage was virtually unchanged at 4.0x, compared to 4.1x in fiscal 2005. Likewise, the company's fixed charge coverage for the nine months ended Sept. 30, 2006 was also unchanged from fiscal 2005 at 3.3x. Following the close of the Class E cumulative redeemable preferred stock on Dec. 7, 2006, Fitch's proforma leverage, measured as total debt plus preferred stock divided by undepreciated book capital, remained modest despite an increase of approximately 210 basis points (bps) to 43.9% versus 41.8% as of Sept. 30, 2006.

Fitch expects fixed charge coverage for fiscal 2007 to decline somewhat. As Realty Income continues to finance the expansion of its property portfolio through the issuance of unsecured debt and preferred equity, Fitch will continue to monitor the leverage and fixed charge coverage. However, Fitch acknowledges management's consistent use of common equity to maintain low leverage and adequate liquidity.

Realty Income continued to access the capital markets during fiscal 2006, yielding gross proceeds of $275 million of senior unsecured notes, $220 million of preferred equity, and $387.9 million resulting from multiple common equity offerings. Fitch expects capital markets interest in Realty Income's debt and equity security issuances to continue through 2007.

Realty Income is an equity real estate investment trust (REIT) that owns a diversified portfolio of primarily freestanding, single tenant commercial retail properties leased under long-term net lease agreements. As of Sept. 30, 2006, the company's portfolio consists of 1,766 properties containing over 15.0 million square feet of leaseable space with a book value of $2.0 billion and an occupancy rate of 98.8%. Realty Income's commercial properties are located in 48 states and leased to 101 regional and national retailers operating in 29 separate retail industries. Of the 1,766 properties in the portfolio, seven are multi-tenant, distribution and office properties.

As of Sept. 30, 2006, Realty Income's wholly-owned taxable REIT subsidiary, Crest Net Lease, Inc (Crest) owned 13 properties which are classified as held for sale. Crest was created to buy, own and sell properties, primarily to individual investors, many of whom are involved in tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986.

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